I revised our retirement goal because I got a small raise but AS made slightly less in 2015 than projected. The old goal: $486,000 in retirement assets by 2019.
The new one: $485,480 by 2019
(As a reminder, this is to get me to 3x my current salary which is now $66,625, so $199,875; NT to 3x his, which is now $57,083, so $171,249; and AS to 2x hers, which last year totaled $57,178, so $114,356)
Current balance: $265,900
March 2016 balance: $263,174
Progress: $2,726
To reach the goal by our birthdays in 2019, that's 34 months, so we'd need $6458 per month to reach it. Looking less and less likely we'll reach it, but I've got to keep trying!
Retirement goal progress
May 2nd, 2016 at 04:53 am
May 2nd, 2016 at 11:06 am 1462187168
I guess I'm curious why 3x your current salary is your retirement number. Is there a particular retirement calculator that recommended that? Seems like every time I do one of those, i come up with a somewhat different number, so I am always interested in how others arrive at their retirement goals.
May 2nd, 2016 at 03:03 pm 1462201423
I'm 42 and NT is 43, but for simplicity I'm tracking us both by my age. AS is 37 so I'm tracking her goal differently. Here's how I broke down the rule of thumb:
1x by 35
2x by 40
3x by 45
4x by 50
5x by 55
6x by 59
7x by 63
8x by 67
Since AS will be 40 and I'll be 45 in 2019, our goal is to hit 2x her income and 3x my and NT's income by our birthdays that year. (Almost certainly unreachable, but it's something to shoot for.)
May 2nd, 2016 at 03:10 pm 1462201825
May 2nd, 2016 at 04:49 pm 1462207744
8x might be a little low as a retirement number--see yourmoneyratios.com, which I believe recommends 10-12x income as a rough rule of thumb. You can get access to the bronze level (retire at 70 w/70% income replacement) calculator for free. His silver level is retire at 65 w/70% and gold is retire at 65 w/80% income replacement--and one of those two has a 12x income retirement number. I'll try to remember to look it up in the book at home--definitely a book I'd recommend.
Also on the topic--those rough rules of thumb are fine when you're at your stage (more than a decade out from retirement), but a recent study I read in the professional literature of how good those online retirement calculators are shows little agreement between websites and little agreement with the numbers proposed by professional level software--in large part because of the built-in assumptions, which are probably not accurate for YOUR situation. As someone who's recently started as a professional in the business, when introduced to our firm's software, I was told "the most important input is what you put on the assumptions page"--even more important than balances and allocations!
As you close in on five years of retirement is when professional advice can be especially valuable. There is a lot that a planner can help you do especially in the five years before and after you retire to help you reduce total taxes and properly allocate your money between taxable, tax-deferred, and tax-free accounts and plan for the appropriate sequencing of withdrawals from your different accounts.
May 2nd, 2016 at 06:56 pm 1462215417
May 2nd, 2016 at 07:38 pm 1462217931
But seriously, I'm still not sure I'm doing it right. I had a 7% rate of return and changed it to 6%. Is that still too optimistic? I'm fairly aggressive in my investing strategy.
Utilities, groceries and transportation were pretty easy because I just plugged in today's numbers (the calculator adjusts for inflation for me). Housing, healthcare, insurance and taxes I wasn't so sure about (I threw in $500, $500, $250 and $1500). But I also put a giant chunk in entertainment/discretionary/other ($3800), which I figure could be used for the other expenses instead of fun stuff.
I included my spouses' retirement accounts and percent of savings in the "other savings" section, so I've accounted for that. I can't remember how I came to my Social Security estimate; not sure if I looked up all three of our SS accounts or just looked at mine and then hazarded a guess. It's at $3715 a month for all three of us.
I suppose this is what you mean by rough rules of thumb being good enough at this age. I don't know how Social Security, healthcare, taxes etc. are going to look for me, but I will probably have a much better idea when I'm near retirement.
May 2nd, 2016 at 11:01 pm 1462230088
As for return expectations, 6% is what Jack Bogle (founder of Vanguard & the whole idea of index funds) currently expects for stocks over the next decade; his expectation is 3% for bonds. So overall 6% might be a tad optimistic, depending on your asset allocation.
And, by the way, you may be more likely to reach your 2019 goal than you think--your calculation at the beginning of the entry assumed that ALL of the increase in your retirement funds would come JUST from the contributions. But of course, you have dividends, interest, and capital gain distributions that are being reinvested into those funds. Using a 5% overall return, that would require $4,917 per month contribution at 5% APR gain, $5,224 per month at 4% APR gain, and $5,531 per month at 3% APR gain. In such a short time frame, gains are hard to predict (and it will undoubtedly be years with much bigger gains and at least one loss year in there), so I'd go with a more conservative number, but I'd still expect SOME of that increase in the value of your investments to come from the money that's already in there generating money, and not just from your salary deferrals! Just keep working on increasing those retirement plan contributions (the current "rule of thumb" on that is now generally given as 15%).
May 2nd, 2016 at 11:47 pm 1462232853
I've used several different calculators multiple times, and they mostly seem to say I need a million dollars or $1,250,000 if you factor in the the $250K they say you'll need to cover healthcare expenses. I'm not a big spender but would like to be comfortable, so somewhere around $40K a year seems about right.
May 3rd, 2016 at 12:41 am 1462236108
Oh, and I was joking about the latte.
PatientSaver, do you adjust each year for inflation off that $40K number when obtaining your number? If we did end our career with these salaries, 8x would be $1,447,088, though I doubt we'll stay at our current salaries. (Nor do I think any of us will experience any sudden increases in income, though I have a lead on a possibly high-paying job that I might apply for just to see.) That's not much more than you're planning to save, and considering that you're retiring soon and I have another 25 years of work, it does seem a bit low.
But, I'll just do what I can right now to keep improving on what we're putting a way. We've got a ways to go on that.
May 3rd, 2016 at 03:06 am 1462244781
May 3rd, 2016 at 03:20 am 1462245623
May 3rd, 2016 at 11:42 am 1462275753
A lot of people wouldn't mind terribly working past 60, but punching the 9 to 5 clock has never been my thing
The big challenge in my mind is finding a part-time job in retirement that pays more than $10 an hour and is actually enjoyable/tolerable. It would also need to be local. Having a p/t job would i think add some structure to my otherwise broadly unstructured time but more importantly, i'd like to ideally cover all my everyday expenses with that p/t job. Considering that i will stop contributing vast sums of money into my 401k/retirement, it might be possible to at least cut in half my living expenses which i know from previous expense are in the $2,000 a month range.
So even if i just made $15/hr, I'd gross $1200 a month and maybe net $900, just about half of my expected monthly expenses.
May 3rd, 2016 at 01:15 pm 1462281347
And P.S., you really should be fine with getting close to a million. Don't forget you will get Social Security too--no matter what changes they make to the system, there will be something, and the legislation, whatever it proves to be, is more likely to hit people who have more time to prepare for what they need to save harder. We've already been hit hard on our SS by the increase in retirement age and the recent elimination of the various SS strategies (which mostly affected married people, but there was one little provision that went away that was a nice little insurance buffer for singles).
May 3rd, 2016 at 02:55 pm 1462287310
May 3rd, 2016 at 03:37 pm 1462289838
May 4th, 2016 at 02:48 am 1462330133