Author Topic: Will we have enough?  (Read 3144 times)

LivingOnLess

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Will we have enough?
« on: April 27, 2013, 12:59:34 PM »
I am new to the forum, and coming out of lurking.  I've sat by on the sidelines and lapped up as much information as I can and try to apply it to my own circumstances.

My question is will approximately $400K be enough for two folks to retire on. I'm eyeing 2018 as the year, I transition to doing something part time.  We live uber frugally. Barring any major medical expense or the loss of our jobs, I am hoping that we will be able to continue to live well and well below our means as we do now.

Housing:  Paid off in 5 years

Assets:
Current Savings/Investments total:  $145,000 spread out as follows
TIAA CREF     $32,000
401K (Roth)   $34,000
403B             $10,000
Pension 1*     $44,000 *today's value as I plan to continue working - funding at 8% of salary
Pension 2       $ 4,000
Savings         $21,000 

Each year from here until 2018, I plan on contributing 51% of my salary to my 457 and 403.
Employer auto deducts 8% pretax- from my salary to contribute to my pension. $42,000. 
This lowers me to a tax rate of 15%.  **which is kinda worrisome**  Am I putting too
much effort in pretax savings to only get hit later when I'm older on a fixed income and
how can I get around that.  One consideration is not living in the state where I incurred
the pension, but moving to a cheaper state.  We currently reside in CA.

This pension also provides a medical coverage and pays me a monthly amount based on
60% of the average of my 3 highest salaries. Which right now the projected monthly
payment is $1575.

The Roth is part of a corporate pension, that also provides medical insurance. 

Teachers don't contribute to SS, however I had worked prior to becoming a
teacher so there is an offset I will have to deal with when looking at collecting a teacher's
pension.  My estimated benefit at age 67 is $1318.

Expenses: 

1 Student loan current balance $11,000 (I'm going to eliminate this by year end 2014)

My partner pays the mortgage and all the housing related expenses.  I do all the food shopping.

Since I have very little debt in comparison to him, we agreed to have me put the bulk of my salary
into savings for us, meanwhile he whittles away at his obligations.  Currently, he has his kids student loans in the amount of $40K, and expenses related to paying his adult child's medical insurance, car insurance, and cell phone bill that he pays each month.

Household expenses we are looking to cut/trim:

1.  Dish       $80/mo
2.  Verizon $120/mo - on my dumbphone (face punch)
3.  Food     $400/mo
4.  AT&T     $100/mo - landline for internet

Transportation:
We have 2 10 year old trucks that are paid for- with no intentions of exchanging them. 
I only drive mine on the weekends - I currently commute to work on transit.  $70/mo transit pass.

My partner has no pension.  He does have a 401K with his company that has $50,000 in it.
Based on the estimates when he retires - he is supposed to collect $2500 in Social Security -
although we aren't 100% banking on that. However, that won't be until he is 65.

We rarely eat out.  Our only large expense per se together is travel.  We take one overseas trip per year and during the year, he often has to travel for business so I go along, if it doesn't involve incurring flight expenses for me.

We will both probably do something to generate additional income when we retire as we'd both
like to stay active.

Your thoughts?  I know I'm going to get some face punches.....I've got my ice packets on standby.

Thanks!
LivingOnLess

RewardTraveler

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Re: Will we have enough?
« Reply #1 on: April 29, 2013, 08:23:17 AM »
I think more detail is needed.  How long do you have until the two of you hit your pension/SS payments?  What are your total household expenses.  If you broadly apply the 4% rule, it would suggest you should plan on living on no more than $16k.  Considering current Cable/phone/internet expense is $3600 a year (I know it is being targeted, but that would represent 22.5% of a $16k/year budget), I'm guessing other expenses may be high.

sheepstache

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Re: Will we have enough?
« Reply #2 on: April 29, 2013, 09:40:11 AM »
So once you're collecting pensions and SS, your monthly budget will be $5393, ~$65K annually?  Frankly if you've been used to living on 16k/year prior to that, being in the 25% bracket sounds like a good problem to have.  How far below the 25% bracket does your current pre-tax savings take you right now?

I'm a little surprised at how much your partner's obligations consist of "obligations" to his kids.  The kid's student loans?  Isn't the student supposed to pay those?  Car insurance and cell phone bill?  How much longer is he planning on paying those?  These are personal choices, of course, so it's more a question of curiousity than a face punch.

LivingOnLess

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Re: Will we have enough?
« Reply #3 on: April 29, 2013, 08:05:30 PM »
I think more detail is needed.  How long do you have until the two of you hit your pension/SS payments?  What are your total household expenses.  If you broadly apply the 4% rule, it would suggest you should plan on living on no more than $16k.  Considering current Cable/phone/internet expense is $3600 a year (I know it is being targeted, but that would represent 22.5% of a $16k/year budget), I'm guessing other expenses may be high.

I agree, I guess I didn't give a whole lot of detail. 

He has 11 years until he can collect Social Security - he wants to work until he is 67.

I have 4 years until I can collect my pension @55 but I'm going to work for an additional 2, and then another 10 years until I'm 67 and social security kicks in. 

Expenses:
Mortgage                     1540   / mo - House will be paid off in 5 years
Water/Power    -             150  /mo
Electricity         -             60 / mo
Taxes              -         3,000 / yr
Property Ins.                 300 / yr
Maintenance/Repair     2,000 / yr
Kids Student Loans,
medical insurance,
cell phone, car ins          700 / mo
Gasoline - his                 400/mo - too out of the way for transit - he deducts his mileage.
Car Repairs                 $1,500/yr - two cars
Medical Expenses             $10 co-pay - fully funded medical plan by employer

While we won't be retiring early, (He wants to work until he is 67,  I don't want to work beyond 5 more years if that is feasible) we certainly want to be able to afford retirement and not have to scrape by.  As it is we live very frugally.  The majority of our clothes come from the thrift store, everything in the house that needs to be replaced i.e. - furniture, we either get from Craigslist or the thrift store.  We rarely eat out, our only major expense which we do frugally is travel.  While my plan is to try to retire after I have put away enough cash, I certainly won't frown on working part time as I plan on doing other ventures in the educational arena to bring in additional money - such as consulting.

I hope this helps to add some clarity.

Thanks!
LivingOnLess



LivingOnLess

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Re: Will we have enough?
« Reply #4 on: April 29, 2013, 08:25:14 PM »
So once you're collecting pensions and SS, your monthly budget will be $5393, ~$65K annually?  Frankly if you've been used to living on 16k/year prior to that, being in the 25% bracket sounds like a good problem to have.  How far below the 25% bracket does your current pre-tax savings take you right now?

I'm a little surprised at how much your partner's obligations consist of "obligations" to his kids.  The kid's student loans?  Isn't the student supposed to pay those?  Car insurance and cell phone bill?  How much longer is he planning on paying those?  These are personal choices, of course, so it's more a question of curiousity than a face punch.

I typed this whole response to only have it disappear *face punch*. 

Okay, so let's try this again.  Contributing as much as I do to my 403/457 accounts is taking me down to a 15% tax bracket...I would normally be in the 25% bracket.  Which is part of my concern for the future, I'm forgoing paying the taxes now only to be rear ended later with a huge tax chunk coming out of my pensions.  While my pensions are not stellar - $437/mo corp pension + $1575 - teacher's pension, but what I think is part of their savings grace is the fact that they come with medical insurance attached.  Funny thing is though that I've worked a lot less years as a teacher than I did in corp USA, and yet my pension is almost 4 times better....go figure.  Add to that the percentage of offset - which I have yet to figure out - how much of my estimated benefit of $1318 of SS I will get.  I wish there was some clarity on what the exact offset amount is...I somehow don't remember being told that I was being given an offset on SS tax when I was being taxed way back when...so yes, I'd like every cent back please...not likely.

About the obligations to his kids, on the student loans he has another 10-11 years.  On the other items, cellphone, medical insurance, car insurance...he is hoping that his kid will land a job that will pay them enough to cover these expenses.  I can respect what he does, but I don't have to agree necessarily because I was self-sufficient at 18.  With that being said, it is part of the complexity of planning for retirement which makes the whole process a challenge as to determining when to pull the plug from work, and have I saved enough for the two of us. 

Living on "a lot" Less