Author Topic: You your own planner or paid for help?  (Read 1508 times)

Bigjones

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You your own planner or paid for help?
« on: January 07, 2020, 11:36:35 AM »
Good afternoon everyone,

Ive been a lurker here on this site for awhile and currently debt free outside of my mortgage (however i owe 59k on that and trying to pay it off in short order).  Anyhow, my question is based around what suggestions everyone could offer in regards to planning for an unconventional early retirement.  I say that with a bit of trepidation only because this site is alot about FIRE and other types of movements in this regard however im honestly very nervous and scared about what seems like endless chances of failure in a time period of my life that i wont be able to possibly recover from.

Ok so the soup and nuts of what im trying to pull off. We gross roughly 140k a year. We are currently living on one income ($3600 a month) while using the other to pay down our mortgage in the 12 months.  We are currently contributing only 6% to 401k to get 4% match. This ratio was MUCH higher previous to our conscious decision to want to be 100% debt free (please.....i don't care to argue the merits of pay off mortgage or invest here). 

We currently have 176k in 401k/traditional IRAs combined. Im 49 and my wife is 46, and we are interested in a plan of retiring around 59\56ish.  What i struggle with is trying to figure out how much I will need to save because i wont have access to SSI untill at least 62 and trying to think about healthcare.  And then figuring out the ratio of what i would need and does it change my number of what i need in savings after i begin to collect SSI as part of my monthly figure etc.

Im sorry if this post is all over the map, my head is always all of the map when it comes to this stuff.  I believe we can pull this off, however i just need help with a solid fundamental roadmap to make it happy and ease my mind.  Do you guys pay for help and is there someone i could use even if not local but online that would help with all the calculations, someone that is truely on the FIRE side of financial people?

secondcor521

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Re: You your own planner or paid for help?
« Reply #1 on: January 07, 2020, 11:45:41 AM »
I paid off my mortgage too.  It simplifies things and reduces stress.  It also can create some interesting tax opportunities in early retirement because you can maintain a very low taxable income.

To figure out how much to save and to help with being nervous, there are at least two methods:

1.  Take how much you spend per year and multiply by 25.  This is the 4% rule.  You can read up on that.

2.  Slightly more sophisticated, because you can pick how long you want your money to last, and can include your SS, you can go to cfiresim.com or firecalc.com and put in your numbers and see historically how often your plan would work.

As for health care, you can go to your ACA marketplace and plug in your projected taxable income (you can use your annual spending as an approximation if you want) and your projected ages, and you'll see what your subsidized premium would be.  I pay about $250 a month to cover 50-year-old me and my 18 year old daughter and have a good Silver PPO plan with reasonable deductibles and a reasonable network.  But it does vary *a lot* around the country, so you should look into your own particular situation.

Xlar

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Re: You your own planner or paid for help?
« Reply #2 on: January 07, 2020, 01:05:19 PM »
So far I have not paid anyone to help with my planning. But I cannot really say that I've done it completely by myself either, hahaha. I've asked lots of questions here, read lots of threads on the forum, read all MMM, Mad Fientist, and the JL Collins Stock Series. Basically no one cares as much about your situation or knows as much of your specifics as you do!

AMandM

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Re: You your own planner or paid for help?
« Reply #3 on: January 07, 2020, 01:54:34 PM »
We have never paid for a financial planner. Like any other service, I would only pay for if I thought they could do a better job than I can, they have access that I don't to necessary tools, etc. Since I usually suspect that they will give advice based on assumptions about consumer habits that don't apply to me, I don't think they'll earn their keep. I have gotten way more useful ideas from reading the MMM blog, this forum, JLCollins.

Fishindude

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Re: You your own planner or paid for help?
« Reply #4 on: January 07, 2020, 02:05:41 PM »
First order of business is to do a very detailed budget to calculate exactly how much $$ you spend annually.
You can't tap into a 401K till 59-1/2 and you won't get SS till 62, so you've got around ten years where you will strictly need to live off your (non 401k) investments and savings.
Do you have enough investments and savings to support your budget?

Chris @ Saturday Financial

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Re: You your own planner or paid for help?
« Reply #5 on: January 07, 2020, 02:13:09 PM »
I recommend taking the time to fill out the case study spreadsheet and post a case study in that section of the forum. You can get a lot of personalized advice after you've listed out specifics there. Plus the exercise of filling it out and posting will help you get a tangible grasp on your situation.

If you're truly living on $3,600 a month, that's $43,200 a year. That should leave $96,800 per year for 401k contributions, taxes, and extra mortgage payoff. I highly recommend that you max out your retirement accounts, and then pay extra on your mortgage if that's what you'd like to do. With your stated income, monthly expenses, and mortgage balance, you should be able to pay off your mortgage in less than two years even while maxing your retirement accounts/not paying any unnecessary taxes.
« Last Edit: January 07, 2020, 02:15:23 PM by Chris @ Saturday Financial »

Bigjones

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Re: You your own planner or paid for help?
« Reply #6 on: January 08, 2020, 10:00:41 AM »
thats 3600 take home on one check , the other is 4200 a month

secondcor521

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Re: You your own planner or paid for help?
« Reply #7 on: January 08, 2020, 12:01:08 PM »
I forgot to say in my first post that I don't pay for help for a couple of reasons.

First, retiring early and high savings rates and paid off mortgages are not typical.  Therefore, there are not that many advisers who can give reasonable advice, because they are not trained to handle people like us.

Second, those people typically are not fee-for-service.  They want an ongoing relationship and want to charge a percentage of assets.  This cost is relatively high, even after taking into consideration the risk of making mistakes.

Third, with enough reading and research, you can learn all of this stuff just as well as any expert.

Fourth, nobody cares as much about your future and your finances as you do.

My personality is to want to DIY, so I do have a bias that way.

Chris @ Saturday Financial

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Re: You your own planner or paid for help?
« Reply #8 on: January 08, 2020, 12:18:34 PM »
thats 3600 take home on one check , the other is 4200 a month

If you're living on that $3,600 a month, that's $43,200 a year of spending. If you gross about $140,000 per year, you have $96,800 left for 401k contributions, taxes, and extra mortgage payoff. In other words, you have plenty of money left over to max your retirement accounts AND pay extra on your mortgage.

If you choose not to max out your retirement accounts to pay your mortgage off in one year instead of two years, you'll be choosing to pay extra taxes just for the satisfaction of having the mortgage gone about one year earlier. If that's worth it to you, it's your choice to make. Just know that 99% of people here are going to advocate that you max your retirement accounts before paying anything extra on a mortgage. The "pay off your mortgage vs. invest" debate is a debate about what to do with your money after you've maxed out your retirement accounts.
« Last Edit: January 08, 2020, 12:22:05 PM by Chris @ Saturday Financial »

Chris @ Saturday Financial

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Re: You your own planner or paid for help?
« Reply #9 on: January 08, 2020, 12:20:29 PM »
Here is the optimal investment order for most situations:

(Quoted from https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153)
 
0. Establish an emergency fund to your satisfaction           
1. Contribute to your 401k up to any company match           
2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield.           
3. Max Health Savings Account (HSA) if eligible.
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level           
5. Max 401k (if
    - 401k fees are lower than available in an IRA, or
    - you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or
    - your earn too much for an IRA deduction and prefer traditional to Roth, then
    swap #4 and #5)           
6. Fund a mega backdoor Roth if applicable.         
7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield.           
8. Invest in a taxable account and/or fund a 529 with any extra.   

bacchi

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Re: You your own planner or paid for help?
« Reply #10 on: January 08, 2020, 12:52:02 PM »
Have you estimated your SS, at 75% payout, yet? At ages 62 and 67 and 70?

Xlar

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Re: You your own planner or paid for help?
« Reply #11 on: January 08, 2020, 02:23:30 PM »
First order of business is to do a very detailed budget to calculate exactly how much $$ you spend annually.
You can't tap into a 401K till 59-1/2 and you won't get SS till 62, so you've got around ten years where you will strictly need to live off your (non 401k) investments and savings.
Do you have enough investments and savings to support your budget?

You can access before 59-1/2, here is a good article that details several of the methods: https://www.madfientist.com/how-to-access-retirement-funds-early/ After you read through how the options work, I found the comparison section very interesting.

Chris @ Saturday Financial

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Re: You your own planner or paid for help?
« Reply #12 on: January 08, 2020, 02:29:45 PM »
First order of business is to do a very detailed budget to calculate exactly how much $$ you spend annually.
You can't tap into a 401K till 59-1/2 and you won't get SS till 62, so you've got around ten years where you will strictly need to live off your (non 401k) investments and savings.
Do you have enough investments and savings to support your budget?

You can access before 59-1/2, here is a good article that details several of the methods: https://www.madfientist.com/how-to-access-retirement-funds-early/ After you read through how the options work, I found the comparison section very interesting.

+1

Additionally, the OP plans to retire at 59ish, so the gap to cover before being able to access 401k funds will be very short.

Davnasty

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Re: You your own planner or paid for help?
« Reply #13 on: January 08, 2020, 02:51:24 PM »
I'm not really adding any advice but I wanted to second these two points:

First, retiring early and high savings rates and paid off mortgages are not typical.  Therefore, there are not that many advisers who can give reasonable advice, because they are not trained to handle people like us.

I recommend taking the time to fill out the case study spreadsheet and post a case study in that section of the forum.

Folks on this forum will likely give more relevant answers to your questions and they'll do it for free.