Check my math?

[FLBiker]

I've had 1.2 million in my head as a target for FIRE, thinking we currently live on about $40K.

I recently re-read the MMM article about how much is too much in a 403b, and he had a simple calculation.  I want to make sure I did it right.

I'm 40.  DW is 37, but this is just back of napkin so I'm using my age.  So I took our current savings in retirement (403b, IRA) and multiplied it by 1.05^20 (my years til 60, assuming 5% over inflation).  That gets me to $1,247,899.  We're currently at $470,320 in retirement.

Did I do that right?  If so, it seems like we can basically just break even for the next 20 years, and then we're fine (especially since I'm not factoring in Social Security).  It also seems like we absolutely should be prioritizing our 457s over retirement, although we were doing that anyways.

Thanks!

[dandarc]

That is about right.  1.2 million is probably more than you need, particularly if you're waiting until 60 to retire, but that's details.

One caveat - if your income stays the same, but you start breaking even with it on spending, then you're going to be spending much more over these next 20 years.  That would imply you need a larger number, unless you're sure you'll be able to back down to $40K when the time comes.

[FLBiker]

One caveat - if your income stays the same, but you start breaking even with it on spending, then you're going to be spending much more over these next 20 years.  That would imply you need a larger number, unless you're sure you'll be able to back down to $40K when the time comes.

Ha, that's true.  I wasn't intending to break even by increasing our spending. :)

Really, it's just a hypothetical question at this point.  I'm planning to keep working for a least a couple more years, and keeping our savings rate about the same.  We'll have daycare in the mix once my wife goes back, but it should be otherwise unchanged.  And I'll max out our 457s, and then I'm not sure what I'll do beyond that (in terms of taxable vs 403b).  After a few years, we might shift gears into something that pays more at a break even level (like working overseas, working part-time, etc.).  Thanks!

[Saskatchewstachian]

The math looks good which means, CONGRATULATIONS! Even if you don't save another dollar you can still retire "early". Well earlier than the normal 65. All the savings between now and then will just continue to bring that date in even more.

I often calculate my coasting number for 55, 60 and 65. It's a fun milestone to know that if something was to happen today and bring my income down to exactly what I spend then I could still have a comfortable retirement when I get there.

[dandarc]

And I'll max out our 457s, and then I'm not sure what I'll do beyond that (in terms of taxable vs 403b).

That's easy.  Do the 403b too.  And tIRA.  If you are already at a low marginal tax rate or can't deduct the tIRA, then you go Roth - 403B may or may not offer this.  Remember to factor in the saver's tax credit if your AGI gets to where you think you're at a low tax rate - your marginal rate might be higher than you think. 

Particularly with a substantial 457 in the mix, you don't necessarily need any taxable account investments to retire early.  Only once you've maxed out all tax advantaged accounts should you move on to the taxable account.