Here we go! How are we doing? Does our logic on finances ER and post-ER age make sense?
We are a married couple (ages 35/37). Together we have a gross income of $147,000. A total of 50% of our income goes into retirement (HSA, Roth, 457b, and 401a gifts from our employer). No kids. We’ve had our money merged for over 2 years now, but I have two full years of expenditure data so far. Guessing we can ER in 11 or 13 years.
INCOME/TAXES:
Monthly Gross: $12,268
Pre-tax retirement accounts: $3,467
Taxes: $2,755
Net Monthly Income: $6,321
Not included is:
Unpredictable Monthly Side Income: $736 (this greatly varies: profit on spouse’s work trips, spouse’s bonuses, and my eBaying selling, but that is our 2 year average) Maybe I should be doing yearly average?
SPENDING: (again a 2 year average)
With our $6,321 take home here is how we spend it (we are fine with our expenditures):
Two Roth accounts: $917
Mortgage/Property Taxes/Insurance: $1301
Utils/Cable/Internet/Heat/Gas/Lights/Sewer: $338
Groceries: $515
Eating Out: $288 (oddly we bring lunches everyday to work, so this includes past vacations as well)
Alcohol: $117
Auto: $340 (two paid off cars: includes registration, oil changes, repairs, insurance, gas, everything)
Misc: $1,390 ((Note this includes a deck, a wedding and landscaping all one time things, but if those were removed from this everyday misc, it's $550/month)
Health: $103 (two HDHP which have no monthly premium)
Clothing: $153
Entertainment: $307 (2 year average, we take cheap trips often, plus families live out of state so plane tix $$$)
TOTAL EXPENDITURES: $5,769 (or $4,929 without three items mentioned above)
MONTHLY LEFT OVER: $579 (or $1,392 without three items mentioned above) Does not include surplus income
RETIREMENT SPENDING GUESS (a very low guess): $3,709
Just a really rough guess, I took out the mortgage and the Roth basically. Left the taxes/insurance. Doesn't account for health insurance yet (I haven't done research). Or extra trips out of the ordinary while we're still spry.
RETIREMENT SAVING SUMMARY TOTAL: $6,125/mo
Which consists of:
Pre-tax accounts: $3,467
Post-tax accounts: $917
Employer gift: $1,742 (not a matching, it's a gift of 14.2% of our salaries, same employer)
ASSETS:
$704k in 401a, 457b, 403b, Roth, HSA (I can break if down if needed)
$210k house (guesstimate)
DEBTS:
$166k mortgage – set to be paid off in 15 years (ages 52 and 50)
Here are a couple retirement game plans. I have no idea if I'm thinking about the math properly for the ER and post-ER portions.
Two ER scenarios:
Retire in 11 years (ages 46/48)
Retire in 13 years (ages 48/50)
For the early retirement age years:
The 457b money is the ER plan as of now (we're at a state university). There are no early withdrawal penalties; you just have to be done with your job. Subject to income taxes though.
If we keep putting $2,917/month into 457bs like we are now, in 11 years @4% we will have $870k which needs to last us 11.5 years of ER. In 13 years @4% we’ll have $1.02 mil to last us 9.5 years). This is a very conservative 4% (we invest aggressively right now). This just needs to last us until 59.5.
I did some rough annual salaries guesses (just the value at ER then divided by years it needs to last in ER) and the lowest annual salary I got was $76k gross with ER at 46/48 for the first year (which doesn’t include all the growth on the money that has not been withdrawn yet). For medical we’ll have the HSA available as well (for health insurance premiums, etc). The other guesstimates go up to 6 figure for an annual salary. Woah, I think this can work!
For the retirement age years:
We will continue to contribute $3,209/month to the other (non-457b) accounts up until ER age. Then come age 59.5 (for me really), most of other accounts will be accessible.
If we contribute to the non-457b accounts for 13 more years (with ER at 48/50), and don’t use it until age 59.5, 4% gives us $2.03 mil.
If we contribute for 11 years (with ER at 46/48), and don’t use it until age 59.5, 4% gives us $1.92 mil. That seems pretty good! And this assumes the 457b money is all used in ER.
So with that extra income that is left over each month:
We could add $100/month to our mortgage and get it paid off in 11.5 years when we are 46/48 (I used a mortgage calculator tool for this). We probably need to do this right now so it is paid off for sure by ER.
We could just let it stack up in the checking like it has been. $13k in there now, I project it to be $21k at the end of the year. Even with a few big ticket purchases per year, this is still the case.
We could start putting money into the 403b again (worth about $53k now, just sitting there). It's pre-tax contributions too.
Or any combination of these.
Emergency plan? You might notice we don't have a big chunk of regular savings in a savings account. If I lose my job, we can live off of H’s just fine (my income is half of his). Would have to stop some retirement contributions. If I lose my job, we can still live off of my income with more bare bones living and the checking $. If we both lose our jobs, we’d go to bare bones living, use the checking $ and then any Roth contributions (no penalty withdrawals at any time) or credit cards as a last resort. There are enough Roth contributions to last us a year. However, we’re diligent enough to not touch it and it would require an extremely dire situation.
I’ve ran our withdrawal scenarios through MSN Money Retirement calculators, FireCalc, etc. It all looks good so far. I think we’re going to die with too much.
What would you change? Does this retirement logic make sense? Should I use a percent higher than 4% in my calculations?
I used Dave Ramsey's Investment calculator to run the 457b money ER plan, and then the "rest of the money" plan at different growth rates. Both the other program assume all your money is accessible at the ER age you put in however.
