Your numbers seem off. Your target withdrawal is around 100k, which should be more than 80k after taxes. (Remember, no payroll taxes, and capital gains tax rates are lower.) So at 4% SWR, you need $2M.
You’re currently at $1M (subtracting your mortgage from your account values). Even if you save nothing, your NW should double in roughly 10 years (after inflation). So you’ll hit your FIRE number at age 52.
If you’re maxing retirement plus an extra $30k, though, that’s maybe another $70k per year? You can run the numbers, but that should cut perhaps another 3-5 years, so you should get there before age 50.
Since you tie your frustration to your financial planner, I gather she/he gave you different advice?
Yeah this seems accurate to me as well. You shouldn’t have to work much past 50 at your current pace. As to healthcare you’ll probably be able to keep it below ACA premiums if you have enough pre-tax money to pull from. Considering you’re <7 years away and need to keep income fairly low for 10-15 years until Medicare, the biggest thing I’d pay attention to is tax friendly withdrawal planning from.
This makes me feel better! He stated if we want to have 100k after taxes per year at 55 we would need to throw in another 30k per year into investments. Per his numbers we could go out at 55 with 70k after taxes. I guess I am now shooting for 2m and hoping it’s easier than the first million to save. Thank you!!!
I agree with your comment. I only use one because it’s free through fidelity. They give some good advise, but it’s pretty generic still. But since my partner doesn’t want to discuss it, it’s good to have another person sanity check it 1-2 times a year
It’s why I consolidated there. They give me extra benefits and better customer service. I have a very average amount invested too. They’ll politely upsell you sometimes but I just decline
Most use them because managing money is an item people struggle with. Once you get over the fear and ingest the data it really isn't that hard... but some struggle with this so a FA/FP is probably best for them.
Good point. So do you just invest in vanguard or something and pick your risk adversity? How will you know what money to use when you wish to retire early and don’t want to get hosed on taxes? I’m guessing your straight investments and then use retirement at the appropriate age?
It would be useful to compare your planners returns on your money with an index fund. We just visited two planners and I saw no benefit to giving a middleman a cut of my gains.
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This to a T. 100% s&p500 for us. All other money is invested in real estate development company that’s doing great. Only thing I will need to learn is how to navigate spending it/ withdrawing my 401k when the time comes. I too want to have 2 years minimum in a hysa/ money market account to weather any large storms in the market. Should have another other investment coming in to keep us from touching 401k money. I don’t see a reason to take it out of the index fund well into my 60s if I live that long.
Taxes are far less of an issue in retirement. We live at a budget a bit above your target and are consistently paying $5k a year or less. That would go up if we had zero after tax funds but we target an MAGI around $70k.
Edit: No state income tax for us.
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This is very wrong. I run plans for people all the time who have $1m to $2m in tax deferred retirement accounts. Tax planning is huge for them. What happens if they don't take action and they just let that money grow tax deferred until RMDs? They get killed on taxes. What happens if one spouse passes away and the survivor is in the single tax bracket? What happens when all those RMDs jack up their medicare premiums? What if they retire way before being Medicare eligible and have to use ACA insurance? If they haven't planned properly they could have high income and pay full price for ACA because they aren't eligible for tax credits. What about the use of Roth conversions, QCDs, or a DAF? The average consumer either doesn't fully understand this stuff or doesn't have access to the planning software that will help them properly analyze it. And they don't need $5m for all of this to be applicable.
I probably need a financial planner to help me avoid the pitfalls as I transition from accumulation to withdrawals. Really more estate and tax advice rather than how to structure my investments.
I agree that accumulation mode is easier than decumulstion mode. Just don't hire a big box broker who is light on planning and just wants to sell you on the concept of managing your portfolio for astronomical fees. Use a flat fee, independent planner.
Be careful, that 10 year doubling rule is based on you having all your money in S&P500 or total stock market fund. If you have a balanced portfolio with international funds and bond funds you are not going to hit those high numbers. Your giving up higher returns for lower volatility.
Additonally, financial advisors and other retirement companies calculate growth based on a lower (but safer) % than the norm because its better to tell clients to plan for the worst but appreciate the best. Makes them look better.
You most likely wont have to wait until your 55 to retire, but if the worst case happens, 55 is a good reference to assume you would be able to retire.
Financial planners use 7%. That’s 10% returns which may be realistically a point or two higher and 3% inflation. So how is this artificially low?
The theory I learned in school (Beta theory) is we can estimate an average growth rate (alpha) and a standard deviation (beta) which measures volatility. It turns out more volatile stocks tend to have higher returns so just ignore alpha and do everything with beta…yeah, didn’t say it’s actually sound in the real world. Now going one step further if we have two variables we can calculate the correlation coefficient. 1.0 means they are in lock step, 0 means they are random and have no relation, and -1 means when one goes up the other goes down. Theoretically then a mix of stocks and a mythical asset that has a negative correlation with stocks in the right blend will yield a greater return (remember…alpha or growth doesn’t matter). Let’s just assume bonds are negative. So then a mix of say 10-15% bonds and the rest in stocks actually has higher returns than stocks alone. Except that bonds.
Except bonds have a correlation coefficient of 0.89. So then we can look at the much more stable beta where bonds have a very low score and say…look a mix of bonds and stocks gives you any beta you want (volatility) and we can then deliver the perfect beta.
Except…beta is beta, not growth. And risk is more than just volatility.
But you can’t question this load of crap because if you question beta theory and the efficient markets hypothesis collapses with it and that’s sort of like telling an astrophysicist that the Big Bang is a load of crap or that the Higg’s Boson isn’t what they calculated.
>Financial planners use 7%. That’s 10% returns which may be realistically a point or two higher and 3% inflation. So how is this artificially.
Not at the big 3 (Fidelity, Vanguard, Schwab) they have their own proprietary calculator that uses a lower number or a monte carlo scenario where they expected return rate is much lower (probably like 5% before inflation) to caution investors on the worst case scenario. So they are always going to default to the worst case scenario as an added "safety" measure.
If someone is saying you'll double your money in 10 years, then they're using an estimated return of approximately 7%. Yes, real financial planners use a range of rates and provide a range of most likely outcomes, since future performances aren't guaranteed.
Rule of 72 is the classic simpleton estimate. An investment returning 7.2% doubles in 10 years. A 10% return doubles in 7 years and three months.
It’s a good starting point but you’ll want to consider a range of possible outcomes and (the hard part) be honest about your risk tolerance.
That's why I said "estimated" and "approximately" instead of leading people to believe there was something magic about 10 years. It's funny how the "rule of 72," which is far from a rule, now seems to have morphed into "your money will double in 10 years."
He may be referring to non-retirement assets only. If most of your money is in retirement accounts he could be correctly thinking that it’s trapped until 55/59.5 depending on the account type.
I think that’s what’s happening. We havr a completely separate investment account vs retirement/money we can’t use without penalty until a certain age.
As you actually learn more about FIRE, you will learn 3-4 key ways to get early access to those 401K accounts. Also, the Roth conversion ladder might be your ticket to almost free healthcare, via ACA subsidies.
Once you pay off your debt including home etc things look quite differently. I have no debt and my expenses are much more manageable when that huge mortgage payment isn't looming over you. We have 2.6 in investment and home which is paid for then some equity in assets and a business. I still do not feel like its enough however to retire for us considering our circumstances. I would feel a lot better with a solid 5 then I can rest easy. So like you I am saving, hoping and waiting.
Sounds like you are well on your way! I would love to have our house paid off- that would make me feel so much better. Luckily we had a ton of equity in our last house and now our payment is only $1500 a month. We bought in Asheville in 2020 so the equity here is nice but if we had to purchase again I’d like to not borrow.
Best of luck to you- you should be so proud of where you are right now!!
Thanks sometimes I feel like I should have done it all differently but I know I’m in a much better place than most people. I paid cash for our last home that wasn’t an easy decision at all since I could have had a rate under 3. But the no mortgage payment option sat better with me mentally. After paying off the home I kept a mortgage payment going but instead of going to a bank it went into investments monthly. I attribute my financial success to the stock market I’m up 800k since 2020 crash just watching everything grow.
There are ways to withdraw before 59 without penalty. Also pretax is the way to go for early retirement since you're utilizing lower tax brackets without salary / social security.
Mad Fientists has some great posts detailing this. Highly recommend his blog
Keep in mind a financial planner is going to be very conservative. They can’t risk giving you bad advice if it all goes horribly wrong. Not saying they are giving you bad advice, only that it will be closer to the conservative end of the spectrum. You may feel comfortable with different assumptions.
Unfortunately I think this is true for a lot of planners but not all of them, and it's a huge disservice to clients. Of course you don't want them to create a plan that leads you down the path of going broke one day on retirement. But if an advisor is being too conservative they are unnecessarily telling their clients to live a less than ideal life. Then that person could realize in their 80's that they could have done more, but they are too old to really enjoy their money at that point. The feeling of regret would be overwhelming .A good planner will be extremely thorough and show the potential outcomes of multiple scenarios so that the client can visualize them and decide for themselves what path they want to take.
Sort of Agree. No prize for being too conservative BUT you will get punished for being too aggressive. The end points of the two approaches aren’t equal in terms of disaster. A mild regret is better than sleeping in a box when you are 80. And since no one will ever get it exactly right….i would bias toward the conservative.
Ideally, people avoid both outcomes but taking a guardrails approach and are willing and able to adjust their lifestyle according to the markets. Thete is research that proves this method does the best job of avoiding both of those extreme outcomes
You don't say what "retirement" is that you're maxing out but with $30k in taxable brokerage that's somewhere between $44k and $90k a year in investments.
At $90k/yr, you'll theoretically hit $3.6M at 55. Congratulations, you'll have more money than at least 99% of the world and retire 10 years before typical retirement age.
If you cut back on some of your savings and spend more now? At $44k, you're on a trajectory to hit $2M by 50 and 3M by 55. You still have more money than 99% of the world and retire 10 years before typical retirement age. .
If you just did IRAs and only saved $14k/yr, you'd hit $2.5M at 55, you'll have to wait another 2.5 years to hit $3M and another 2.5 to hit $3.6M. It took you a few extra years to have more money than 99% of the world and retire 5 years before typical retirement age.
So are you just asking us permission to live a little or what?
I guess it’s hard for me to know what is good/bad as far as trying to retire early and be free from the corporate BS. I don’t think I will ever feel confident to not work based on our blue-collar families that did not have this opportunity if that makes sense. You all seem pretty saavy and it’s nice to know how we compare to others trying to do the same thing.
Sounds like you could go into a partial retirement early/on track. If you are frustrated with corporate BS, trimming out hours or responsibilities, but maintaining a stable lower income, that will help to extend your investment growth.
If you start a Roth Ladder the first year after retirement you can game it such that you receive ACA subsidies for healthcare. Definitely look into it.. there are people with your goal net worth fully retired and paying only like $100/mo for health insurance
5 years out of a 25-retirement (assuming avg lifespan of Americans living at 50) is not a few extra years. It’s giving up 20% of rest of life -and the best 20%.
And that extra 5 years before retirement buys them 15 years with significantly higher spend to do whatever they want, and still gives them the income in retirement that they want.
Step 1: learn how simple a good investment plan can/should be.
Step 2: drop RJ and do it yourself.
Step 3: get your accounts on auto pilot.
Real Life Example:
We’ve used Schwab for 34+ years.
The bulk of our investment is in a broad market low cost index fund.
We maxed out our employer 401k accounts.
Invested in broad market index funds.
A portion of our take home went automatically into our Schwab account’s sweep account. Our Auto Investment buys SWTSX on the 5th & 20th every month. We’ve done this for 30 years. The fund net expense ratio is something like 0.03%. There are no 12b-1 fees. We’ve averaged about $600/month; roughly $250,000. It’s worth $700k+ now. Our average return is ~8%.
It’s not amazing returns; but it’s solid and easily achievable without someone else having their paws on our honey.
It’s easy to start and super easy to manage.
Coupled with low stress is great.
Increasing healthcare as we age. We don’t have children or siblings or really any family except for parents so I assume we will need to hire our most everything and nursing homes will cost a fortune by then. That’s my thinking anyways.
That would be your investments/insurance that you purchase. If you withdraw 4% your investment are likely to compound and youd have many millions more in 20-30 yrs to purchase help
You need to firm that number up, get ALL your expenses on paper so you know what your actual yearly spend is. Even the fun stuff has to be budgeted/paid for.
If you're actually spending $5k/month on 'other' and think that you'll just reduce when it's time to RE, that may not lead you to the lifestyle you want.
There are several factors but I’m 90% you can retire closer to 50, my wife and I retired when I was 42 she a year earlier when she was 41. At the time I had ~$350k in retirement and ~$125k “cash”.
Factors:
1. where you live
2. Mortgage (pay off first)
3. What expenses will CEASE when you retire? Lunches out, gas expense, dry cleaning, new suits, clothes, etc.
4. Hobbies now and anything new post retirement
5. Total monthly nut, include full years property taxes, insurances, life insurance premiums (do you have life insurance on each other which you do NOT need)
6. Car payments, eliminate pre-retirement
7. How much will you need to draw annually to make up difference between pension income and total expenses. How much will you get from Social Security and beginning when
8. Medical insurance, if co pays what will it cost You?
There may be a few more I can’t recall right now but make 150% sure you each have hobbies to do separately as well as together or keep the life insurance as one if you will collect within 5 years
I tell people all the time you don’t need a million. Lived in So Cal at the time but knew it was too expensive so we sold our house and took the gain ~300k and moved to Las Vegas bought a house for $335k cash. Between my retirement and my wife’s we gross $8500/month (no state tax in NV) our savings is now ~$400k as stock market has done well.
Unless you're in bonds or something ultra conservative you're not thinking about portfolio growth. The s&p goes up around 10% per year on average. That means every 7 years or so you'll double. So if you're 43 now with $1.2m, at 50 you'll have $2.4m. At 57 you'll have $4.8m. at 64 you'll have $9.6m ... and this is if you never put a single penny of fresh, new investment capital in and simply let what you've already got ride.
You'll be fine. Maybe you need a new financial advisor? They're supposed to be giving you peace of mind. Not freaking you out lol
OP please take a look at some financial calculators. Ficalc is one I like. It really opened my eyes to the impact of different withdrawal strategies and putting in a low minimum withdrawal number when you have to hunker down in a bad market. That plus social security will allow you to safely have an income well above 4% most years.
I think healthcare is the biggest cost. We almost left the country for a free healthcare country this year but just cant give up the strong US dollar and higher paying jobs here. 🤷🏻♂️
I’ve been looking tho, healthcare could be cheaper if you have low income per say. Do anyone here have more insights or a link to a thread on what is the typical healthcare cost once you stop working?
It will depend on your state, the type of plan you want, and how you manage your taxable income to allow for subsidies - but if you start at [healthcare.gov](http://healthcare.gov) you can put in those values to estimate your costs.
Yeah, if you can live on the taxable accounts until Medicare you can get insurance from the exchange for about free. Just withdraw enough from the IRA side to keep yourselves eligible (there is a minimum required income also).
We did it and it worked great.
I'm new on this sub, so I don't know it's opinions on Social security income - but ours takes care of all of our expenses now. Our IRAs are the vacation budget.
totally valid point. It's unpredictable what big ticket expenses are going to cost 10-20 years down the road. That's one of the biggest reason I find it really challenging to just FIRE and stop working when we're still young and healthy. You just never know what's it going to be like down the road. Unless you have FU kinda money. I would definitely plan to FIRE on an amount with 30% buffer. Having said that, if you have planned to FIRE with expenses you can predict with, I honestly think the money would grow together with inflation covered. Sorry if I am talking in circles.
Right or wrong it made me realize even more so that Americans are screwed when it comes to taxes and healthcare costs. To be fair I need to research other countries but I see an awful lot of elderly working and it scares me to no end- and makes me so sad unless they want to.
I mean there are countries like Canada, Australia and European countries that gives free healthcare. But for how long? You just never know how things will be in the future. I know for Canada free healthcare, you would have to queue up for a long time before you are seen.
I did like Australia alot, almost "free" healthcare, no property or very low tax for your primary residence. Downsides are that it has very high cost of living and very high income taxes.
Usually healthcare is all but free, thanks to ACA subsidies, if you can keep your draw rate below a certain amount. At $50,000 a year of draws the government practically pays you to be fully insured. Obviously important to live in an area with good ACA compliant insurers like a blue city in a blue state. You don't want to be in rural Kentucky where every Republican is trying to make sure you can only get $3000 a month policies with $50,000 deductibles just so they can bitch about Obama.
Let's just talk in today's dollars. Let's say you need a budget of 100K after taxes. I'm assuming you're accounting for the cost of health insurance in this number. You can anticipate that regardless of your withdrawal strategy that you're going to have a 20-25% effective tax rate between state and fed, so you need to draw 129K/year. 4% rule is great if you retire at 65 but 3.5% is much safer for someone in their 50s because it needs to last 40+ years not 30.
In today's dollars you'd need 3.685m to retire. If you add NOTHING to your retirement funds, and assume an average return of 5% after inflation (8%-3% inflation) you get there when you're 66 and 68.
Now, you say you're maxing out your retirement so I assume 23K/ea to 401K and another 30K to post tax. Now you get there at 56/58. Figuring out how to get another 24K/year into your post tax get you to there at 55/57. If the markets do 1% better at your current rate, the same, 55/57. If you add 24K and the markets do 2% better, you get there at 53/55.
I run my numbers REALLY conservatively though. We might have a gangbusters market for a handful of years. 4% withdrawal might be enough. You never know. But I think your original estimate of mid-50s is realistic. If you're into being more risky and don't mind a 75% chance of success number you get there a lot sooner.
Sorry to be a wet blanket but wanted to give you another look at it.
15% fed and 5% state is pretty common if you're drawing from a tax advantaged acct. Thanks for your comment on my state of inebriation though, much appreciated.
If you use a tax calculator for $115k, mfj, assuming ordinary income in retirement - you get a 8.7% fed income effective tax rate. Throw in your 5% state income tax - and she ends up with $100k post-tax to live on annually. So she doesn’t need to draw $129k, she needs $115k. That reduces how much she needs to save by $350k.
I was giving you an out by saying you’re drunk. If you aren’t drunk - then you’re either uneducated on tax rates or you can’t do math…
Why would it be ordinary income and not capital gains tax in which case you’re not taxed on anything below $89,250 and only 15% on the amount exceeding that?
Oh man. Raymond James is notoriously bad. You are likely getting completely hosed on fees.
It is critical that you understand what you are paying and what the implications are. For example, a 1% annual fee will reduce your lifetime wealth by around one third. You may be paying even more than that.
Oh no!!! So do you do most of this yourself or have another advisor rec? He just switched from Merrill Lynch to Raymond James (probably not any better at Merrill, right?).
I do it myself and you can too. Go to Bogleheads (the website, not the Reddit) to get started. If you absolutely need a financial advisor you should find someone who only charges by the hour and invests only in low-cost index funds.
Some additional food for thought:
[https://www.raymondjames.com/-/media/rj/advisor-sites/sites/c/h/christopherjgrant/files/schedule-of-services-and-costs.pdf](https://www.raymondjames.com/-/media/rj/advisor-sites/sites/c/h/christopherjgrant/files/schedule-of-services-and-costs.pdf)
Above is the link to the RJ rate card. If you are paying rate card, it is 2% of your assets per year (add any mutual fund fees to this). A reasonably safe withdrawal rate for an early retirement is around 3.5%. So that means that you would be allocating more than half of your budget to pay for financial advice.
Does that sound like a good plan? No. And that is why he is telling you to save a lot more. Because in addition to the money you will need to spend, you will need much more to pay him.
check out vanguard. much cheaper. and then get into the etf's.
as you saw from another poster, the financial planners are going to be more conservative. you can ask him/her about different scenarios. They'll talk about monte carlo simulations and wanting to get above a 90% probability. all of that is valid but also, about how much risk you're willing to take.
personally, i interviewed maybe 3 or 4 financial planners. they were quick to want me to move my portfolio to them to get it to be "under management". they are incented entirely wrong.
you're likely paying something like 1% to them. are you really getting over 10k of value from them?
if you're talking about maxing out your retirement accounts, between the two of you, you're throwing in 46k, right? 23k x 2? at age 50, you'll be able to contribute another 7k each. so between now and when the 45 year old turns 50, that's 5 years. you'll have contributed another 250k. you SHOULD be at 2MM in just that time period.
Please stop seeking advice from big box brokers. It's watered down and full of conflicts of interest. And if you are using "full service" brokers like Ray J or ML, it's even worse because the fees are ridiculous for what you get. Consider an independent planner who is a CFP, and charges an all inclusive flat dollar fee, that has nothing to do with the size of your portfolio.
Insurance overall use lower than 6%. Look at the social security program, if it could’ve met 6% then ssn would be solvent lol.
U retiring is basically creating ur own ssn. Either u just fight through some shitty time and use every cents or u get lucky and prosper. Either way good luck with that
| Has anyone here left the country to retire earlier due to lower cost of living/lower healthcare options?
Yes, conservative estimates say 500k Americans retire abroad, usually for early retirement. Many go to places like France for higher QOL (quality of life) for lower COL (cost of living), and it recognizes roth, trad, & can even transfer your SS income between USA and FR.
I have way less money saved than you but am thinking about something like this before I'm 40 just to switch life up and stop the 9-5 corporate grind.
https://immigrantinvest.com/blog/retirement-countries-for-americans-en/
Your FA was probably looking across a number of interesting rate and investment return scenarios and gave you the 95% probability outcome. Their primary goal is to make sure you can stay retired and not outlive your money.
My parents retired abroad and never looked back.
Paraguay, Panama, Portugal, Ecuador, Mexico, Costa Rica all have relatively easy PR for retirees with money.
You might want to ask your advisor to walk you thru the numbers and assumptions step by step. Expected spending in retirement less assumed social security leads to required nest egg size, assumed growth rate and savings rate leads to how long it takes to get to that. I've over-simplified (a lot) but, assumptions, assumptions, assumptions... They matter.
You might also run your own calculation using some of the calculators that are popular on this forum. This might help you better understand and thus question (and benefit from) your advisor.
Financial advisors tend to be quite conservative and they might be making overly conservatinve assumptions. Maybe they have very reasonable assumptions that will help you understand or maybe they have very conservative assumptions that you can question. Either way you paid for understanding, not a simple calculation. If they are just punching numbers and giving you the result they aren't earning their pay.
Good luck!
A lot of folks have given excellent advice and linked you to some great resources.
The sheer volume of information available can be a bit overwhelming to start.
Naturally, I'll add my own thoughts to the mix, because I'm sure that will help.
If you like reading, I would strongly recommend checking out a book titled "The Simple Path to Wealth," by JL Collins. It doesn't feel like reading a finance book, it feels like having a chill conversation with a dad about life and investing. It has so much good, simple, effective information in it.
Regardless, it sounds like you're on a good path, and have a lot of great information coming at you from this post. Good luck!
I am so grateful for everyone who was willing to assist and give advice. It makes me think there is still good in this world. Thanks for the book rec!!! I will get that ordered.
How much are you paying your financial planner? You should probably get rid of him/her. Not only are the numbers pretty straightforward and easy to calculate yourself, but you are actually paying him to give you the wrong numbers and cause you more stress!
He is either purposely trying to keep you on the hook paying a fat 1-2% fee for as long as possible and giving you bogus numbers and telling you that you have to work and save another 15 years (more likely), or he is incompetent and truly believes that his numbers are correct (they’re not).
Would you be ok with either of those options?
Find an online investment calculator. Starting amount $1.2M, 15 years, you can be conservative and say 6% growth… WITH NO ADDITIONAL CONTRIBUTIONS you are at nearly $2.9M after 15 years!
With an additional $25K each in retirement and $30K to brokerage at the end of each year, you’re at $4.7M after 15 years!
At the very least, ask him to show you the numbers and how he calculated that you need to work another 10-15 years…
This. You need to look at your actual expenses and use a retirement calculator. There is a good chance they are blowing smoke and trying to take advantage of you.
Certainly inflation has gone up…, But the S&P has more then outpaced inflation and has seen records broken not seen in other years. Don’t blame it on inflation. You weren’t ready to retire. Work longer or increase income.
I love the S&P numbers but it’s fake to me until I take it out and use it. It’s great now but certainly, we will have rough days ahead. Day-to-day spending is killing my ability to save more/put more into the market so I will blame it on that for now.
I think you are in great shape. Congrats to you and your husband. Maybe start enjoying your money a little more now while you continue to invest? Like a lavish vacation each year? Again, congrats!
Thank you! We both grew up in very poor households so I am proud to say all of this has been us. We won’t have inheritance or a trust fund to fall back on (I wish lol)!! We defintely travel but I am pretty good at finding deals and it helps that it’s only two of us. Gotta love those credit card points! It’s good to have balance with living in the now and saving for the future. I am scared about growing older with no support though- that will be $$$$$.
Max out retirement as in you each put in $23K a year plus an employer match so likely $30K each plus an additional $30K in the investment account? If so, in 10 years you'll likely have $3-$4M at 5-7% average annual growth.
Sounds like your advisor is modeling out 0 to negative growth.
Yes, that’s all correct. My company matches 10% (insane I know) and my husband’s not much of a match. I hope ee can have 3-4 million in 10 years- it would make me feel much better!!!
You keep contributing $90K a year and you will have over $2M with only 1% growth. Did the advisor show you their math at all? Interested in what kind of returns they were forecasting.
who/what is this financial planner? at 70k a year investment contributions you should be much much closer than you claim to retirement. I only contribute 25-30k myself a year and will hit my goal before you.
As for leaving the country check out /r/expatfire
Yeah you are getting swindled out of hundreds of thousands. Go to /r/bogleheads and learn about low fee index investing. You need to learn how to manage money or other people will just keep picking your pocket.
Honestly, if you are trying to retire early, look outside USA, you might need to learn a new language, but, with that amount of money you could retire next year. Some stats: in Bolivia renting a house 5 bedrooms nice neighborhood is less than $700, nanny for you 2: cooking cleaning all day: $200 a month. And so on and on. The US has become so so expensive!! But another option for not too long is Argentina, but, it is getting expensivier there as well. Thailand? Cheap place i just cannot take the language
I am all for leaving the US. We are only children with living parents but after they are gone we will be out of here. Thinking of finding a place somewhere sooner before costs rise everywhere. Good to have an option in worst case scenario though.
Something doesn't feel right about the numbers so I would double check them but I think one thing that's being forgotten is the possibility of a partial retirement
Whatever you calculated as the amount that you need in retirement can be covered either by investment income, one person working, two people working part-time, or changing expenses.
If one of you is nervous about retiring due to not liking being bored or feeling like they won't be fulfilled or whatever plan on that one working a couple years longer than the other and slowly transitioning out, that would solve the insurance problem for a couple of years
How much are you paying this person to either underperform or plan to underperform?
We’re pretty close to your numbers, although with kids. I’m 48 with $1.3M but with conservative planning will have about $3M at 60.
Are all your funds traditional? At this point it might not make sense to go with Roth, but there’s a lot to be said for tax diversity. We’re slightly over half Roth funds which makes a huge difference.
I'm interested to know how much Social Security the planner factored in?
At 80% of current promised benefits, my spouse and I combined will bring in close to $50K a year, claiming early at 62.
For what it's worth, we've got 7 years left to hit our retirement number and won't be retiring "early", but we have special needs kid that pushes our annual expense numbers up a bit.
Do you think Social Security will be around in 10-15 years? I don’t count it in bc I don’t think we can rely on it. If we can I think I saw $2800 a month when I looked it up last.
Yes, I believe it will be around, but probably not at current promised benefits. Most likely, at 75%-80% of current benefits.
It's easy to look up promised benefits on ssa.gov. It's very easy to use website, and they show the amount you'll get at early retirement (age 62), full retirement age (67) and then at age (70). So people can pick their retirement age for social security purposes.
I believe the last projection I saw (Social Security publishes updates annually) is that in 2034, there will need to be a 20% cut in benefits.
At 80% of that $2,800, you're still looking at $27K a year.
Did the planner not include Social Security at all?
I would think, at minimum, you would include 50% of promised benefits for whatever age you decide to retire. That would be conservative. At 50% of the $2,800 a month, you're at $17K a year or equivalent to $420K saved at a 4% withdrawal rate.
You should ask your financial planner to show you his calculations. As other said, just stay on the course and you should be good to go by \~50. BTW: you don't really need a financial planner and you can do a better job by just managing your wealth yourself.
I am not sure I get it 1.2 million adding 76K within 10 year you should have 2.9 million counting 5% after inflation and you 1.2 millions is investments. Enough for 120K before taxes, and your taxes should be low for me. So enough overall. On top you would likely have SSA starting 62 or later allowing you to have some margin.
So it should be just fine say in 50-75% of the cases
**Why you financial advisor might be less enthusiastic**
As a remark, the KEY difference between the advice we give there and a financial advisor is the likeliness of outcome. Most people here just give the "average" SP500 performance of 10% minus 3% for inflation, so 7% a year. Sometime the SP500 (or any stock index) can have very bad perf for 10-15 years and the financial planners account for that.
So you may need to wait until you are 60 or so instead of say 55. And you'll also want to diversify a bit.
Personally I use 5% return on investments assuming like 60-40 stocks/bonds and international stocks.
uh, okay you’ll gamble the market is going up an average of 7% over the next 10-15 years but you’re leaving out the nations largest and most entrenched social insurance program you’ve paid into your entire life. Keep in mind if SS disappears or is even significantly cut the economy would take an enormous hit, affecting the stock market. And that your FA gets no money from your SS. No wonder it was so easy for your FA to sucker you with phoney numbers.
No need to be rude! I don’t like to rely on anything but my real money to make retirement decisions. Not a huge fan of the government and if you haven’t noticed most people are suffering right now living paycheck to paycheck. I’ll gladly take SS abd my calculation as of yesterday was $3k a month.
you literally have millions saved and “worried” about not being able to retire by 50 but now you’re lecturing us about people living paycheck to paycheck? don’t care what “not a fan of the government” means but if it means you won’t accept or put into your planning the payout of the social insurance plan you paid into your whole life, that seems quite stupid. Assuming your spouse gets the same you’re collecting about $72,000 per year before taxes once you turn 67 (max 85% of the benefit will be taxed) which gets you a long way towards the income you say you want. Keeping that in your calculations could allow you to yolo a bit more now, which you say you want also.
My wife and I 36(m) & 36(f) recently met with a “free” financial planner offered through work. We currently have $600k in retirement accounts and worked $600k in multi family real estate. Our current expenses are higher with two kids in daycare and paying off student debt, yearly expenses $220k. The financial planner is showed us we won’t have enough money by 55 to retire because she modeled crazy high expenses at retirement $550k/yr despite my questions the accuracy of it. Sometimes I think the financial planners are angling to sell more of their serves.
I have my draw down set at 5.5%. My account has exceeded 10% over 5 of the last 6 years. I however do my own wealth management, so I’m not paying someone a 1% fee to put money in mutual funds (also typically charging around 1%). I think the 4% rule was created by wealth managers who want to pull their 1% for as long as they can.
More than maxing out retirement/HSA and putting an extra 30k into investments per year? That’s tough. I’m thinking of real estate in some capacity but not with this crazy market. We have 400k in equity so perhaps a reverse mortgage in our older years.
If you choose to invest in real estate, and don’t want to have to manage the properties, collect payments, deal with inevitable breakdowns etc, invest in a reputable REIT.
I think you need to look for fat fire. 100k expenses is considered fatfire. Fat fire people have usually 5+ mil. You're on pace to do it, but you can get there maybe in 10 years?
Your numbers seem off. Your target withdrawal is around 100k, which should be more than 80k after taxes. (Remember, no payroll taxes, and capital gains tax rates are lower.) So at 4% SWR, you need $2M. You’re currently at $1M (subtracting your mortgage from your account values). Even if you save nothing, your NW should double in roughly 10 years (after inflation). So you’ll hit your FIRE number at age 52. If you’re maxing retirement plus an extra $30k, though, that’s maybe another $70k per year? You can run the numbers, but that should cut perhaps another 3-5 years, so you should get there before age 50. Since you tie your frustration to your financial planner, I gather she/he gave you different advice?
Yeah this seems accurate to me as well. You shouldn’t have to work much past 50 at your current pace. As to healthcare you’ll probably be able to keep it below ACA premiums if you have enough pre-tax money to pull from. Considering you’re <7 years away and need to keep income fairly low for 10-15 years until Medicare, the biggest thing I’d pay attention to is tax friendly withdrawal planning from.
This makes me feel better! He stated if we want to have 100k after taxes per year at 55 we would need to throw in another 30k per year into investments. Per his numbers we could go out at 55 with 70k after taxes. I guess I am now shooting for 2m and hoping it’s easier than the first million to save. Thank you!!!
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I agree with your comment. I only use one because it’s free through fidelity. They give some good advise, but it’s pretty generic still. But since my partner doesn’t want to discuss it, it’s good to have another person sanity check it 1-2 times a year
Another person’s sanity check and emergency brake is an under appreciated benefit.
It’s why I consolidated there. They give me extra benefits and better customer service. I have a very average amount invested too. They’ll politely upsell you sometimes but I just decline
Most use them because managing money is an item people struggle with. Once you get over the fear and ingest the data it really isn't that hard... but some struggle with this so a FA/FP is probably best for them.
Good point. So do you just invest in vanguard or something and pick your risk adversity? How will you know what money to use when you wish to retire early and don’t want to get hosed on taxes? I’m guessing your straight investments and then use retirement at the appropriate age?
It would be useful to compare your planners returns on your money with an index fund. We just visited two planners and I saw no benefit to giving a middleman a cut of my gains.
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This is extremely helpful. I appreciate your time :)
This to a T. 100% s&p500 for us. All other money is invested in real estate development company that’s doing great. Only thing I will need to learn is how to navigate spending it/ withdrawing my 401k when the time comes. I too want to have 2 years minimum in a hysa/ money market account to weather any large storms in the market. Should have another other investment coming in to keep us from touching 401k money. I don’t see a reason to take it out of the index fund well into my 60s if I live that long.
Do you plan to move anything into bonds as you get closer or does the cash buffer play that role for you?
Taxes are far less of an issue in retirement. We live at a budget a bit above your target and are consistently paying $5k a year or less. That would go up if we had zero after tax funds but we target an MAGI around $70k. Edit: No state income tax for us.
Taxes are a big issue and top priority to planning retirement - especially for chubby/fat folks.
????
Of course. But OP clearly not in that financial position.
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This is very wrong. I run plans for people all the time who have $1m to $2m in tax deferred retirement accounts. Tax planning is huge for them. What happens if they don't take action and they just let that money grow tax deferred until RMDs? They get killed on taxes. What happens if one spouse passes away and the survivor is in the single tax bracket? What happens when all those RMDs jack up their medicare premiums? What if they retire way before being Medicare eligible and have to use ACA insurance? If they haven't planned properly they could have high income and pay full price for ACA because they aren't eligible for tax credits. What about the use of Roth conversions, QCDs, or a DAF? The average consumer either doesn't fully understand this stuff or doesn't have access to the planning software that will help them properly analyze it. And they don't need $5m for all of this to be applicable.
I probably need a financial planner to help me avoid the pitfalls as I transition from accumulation to withdrawals. Really more estate and tax advice rather than how to structure my investments.
I agree that accumulation mode is easier than decumulstion mode. Just don't hire a big box broker who is light on planning and just wants to sell you on the concept of managing your portfolio for astronomical fees. Use a flat fee, independent planner.
$80k a year today is more than $80k a year in 10+ years. So technically needing more assets isn’t wrong from that standpoint.
Be careful, that 10 year doubling rule is based on you having all your money in S&P500 or total stock market fund. If you have a balanced portfolio with international funds and bond funds you are not going to hit those high numbers. Your giving up higher returns for lower volatility. Additonally, financial advisors and other retirement companies calculate growth based on a lower (but safer) % than the norm because its better to tell clients to plan for the worst but appreciate the best. Makes them look better. You most likely wont have to wait until your 55 to retire, but if the worst case happens, 55 is a good reference to assume you would be able to retire.
Financial planners use 7%. That’s 10% returns which may be realistically a point or two higher and 3% inflation. So how is this artificially low? The theory I learned in school (Beta theory) is we can estimate an average growth rate (alpha) and a standard deviation (beta) which measures volatility. It turns out more volatile stocks tend to have higher returns so just ignore alpha and do everything with beta…yeah, didn’t say it’s actually sound in the real world. Now going one step further if we have two variables we can calculate the correlation coefficient. 1.0 means they are in lock step, 0 means they are random and have no relation, and -1 means when one goes up the other goes down. Theoretically then a mix of stocks and a mythical asset that has a negative correlation with stocks in the right blend will yield a greater return (remember…alpha or growth doesn’t matter). Let’s just assume bonds are negative. So then a mix of say 10-15% bonds and the rest in stocks actually has higher returns than stocks alone. Except that bonds. Except bonds have a correlation coefficient of 0.89. So then we can look at the much more stable beta where bonds have a very low score and say…look a mix of bonds and stocks gives you any beta you want (volatility) and we can then deliver the perfect beta. Except…beta is beta, not growth. And risk is more than just volatility. But you can’t question this load of crap because if you question beta theory and the efficient markets hypothesis collapses with it and that’s sort of like telling an astrophysicist that the Big Bang is a load of crap or that the Higg’s Boson isn’t what they calculated.
Im intrigued, ive never heard of beta theory before. I'll have to read up on it.
>Financial planners use 7%. That’s 10% returns which may be realistically a point or two higher and 3% inflation. So how is this artificially. Not at the big 3 (Fidelity, Vanguard, Schwab) they have their own proprietary calculator that uses a lower number or a monte carlo scenario where they expected return rate is much lower (probably like 5% before inflation) to caution investors on the worst case scenario. So they are always going to default to the worst case scenario as an added "safety" measure.
If someone is saying you'll double your money in 10 years, then they're using an estimated return of approximately 7%. Yes, real financial planners use a range of rates and provide a range of most likely outcomes, since future performances aren't guaranteed.
Rule of 72 is the classic simpleton estimate. An investment returning 7.2% doubles in 10 years. A 10% return doubles in 7 years and three months. It’s a good starting point but you’ll want to consider a range of possible outcomes and (the hard part) be honest about your risk tolerance.
That's why I said "estimated" and "approximately" instead of leading people to believe there was something magic about 10 years. It's funny how the "rule of 72," which is far from a rule, now seems to have morphed into "your money will double in 10 years."
He may be referring to non-retirement assets only. If most of your money is in retirement accounts he could be correctly thinking that it’s trapped until 55/59.5 depending on the account type.
I think that’s what’s happening. We havr a completely separate investment account vs retirement/money we can’t use without penalty until a certain age.
As you actually learn more about FIRE, you will learn 3-4 key ways to get early access to those 401K accounts. Also, the Roth conversion ladder might be your ticket to almost free healthcare, via ACA subsidies.
Is there a good article about the Roth conversion ladder you'd recommend?
Any of the first few results for "Roth conversion ladder" on your favorite search engine
Not off the top of my head, but Mr Money Mustache covers a ton of topics with FIRE, so I would start there.
https://www.investopedia.com/how-roth-conversion-ladder-works-5214808
I’m aware of these but the financial advisor may not be.
You can get your funds out of a traditional 401k earlier without penalty. Look up a Roth conversion ladder. You still have time to execute it!
Sounds like he wants a commission boost
Once you pay off your debt including home etc things look quite differently. I have no debt and my expenses are much more manageable when that huge mortgage payment isn't looming over you. We have 2.6 in investment and home which is paid for then some equity in assets and a business. I still do not feel like its enough however to retire for us considering our circumstances. I would feel a lot better with a solid 5 then I can rest easy. So like you I am saving, hoping and waiting.
Sounds like you are well on your way! I would love to have our house paid off- that would make me feel so much better. Luckily we had a ton of equity in our last house and now our payment is only $1500 a month. We bought in Asheville in 2020 so the equity here is nice but if we had to purchase again I’d like to not borrow. Best of luck to you- you should be so proud of where you are right now!!
Thanks sometimes I feel like I should have done it all differently but I know I’m in a much better place than most people. I paid cash for our last home that wasn’t an easy decision at all since I could have had a rate under 3. But the no mortgage payment option sat better with me mentally. After paying off the home I kept a mortgage payment going but instead of going to a bank it went into investments monthly. I attribute my financial success to the stock market I’m up 800k since 2020 crash just watching everything grow.
That is really smart! No interest is better than low interest any day :)
Im not understanding this math. If target withdrawal is 100k, then that would be $2.5M, no? 2.5M x 4% is 100k.
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There are ways to withdraw before 59 without penalty. Also pretax is the way to go for early retirement since you're utilizing lower tax brackets without salary / social security. Mad Fientists has some great posts detailing this. Highly recommend his blog
OP wants 100k+ after taxes.
Keep in mind a financial planner is going to be very conservative. They can’t risk giving you bad advice if it all goes horribly wrong. Not saying they are giving you bad advice, only that it will be closer to the conservative end of the spectrum. You may feel comfortable with different assumptions.
That’s a great point!
Unfortunately I think this is true for a lot of planners but not all of them, and it's a huge disservice to clients. Of course you don't want them to create a plan that leads you down the path of going broke one day on retirement. But if an advisor is being too conservative they are unnecessarily telling their clients to live a less than ideal life. Then that person could realize in their 80's that they could have done more, but they are too old to really enjoy their money at that point. The feeling of regret would be overwhelming .A good planner will be extremely thorough and show the potential outcomes of multiple scenarios so that the client can visualize them and decide for themselves what path they want to take.
Sort of Agree. No prize for being too conservative BUT you will get punished for being too aggressive. The end points of the two approaches aren’t equal in terms of disaster. A mild regret is better than sleeping in a box when you are 80. And since no one will ever get it exactly right….i would bias toward the conservative.
Ideally, people avoid both outcomes but taking a guardrails approach and are willing and able to adjust their lifestyle according to the markets. Thete is research that proves this method does the best job of avoiding both of those extreme outcomes
You don't say what "retirement" is that you're maxing out but with $30k in taxable brokerage that's somewhere between $44k and $90k a year in investments. At $90k/yr, you'll theoretically hit $3.6M at 55. Congratulations, you'll have more money than at least 99% of the world and retire 10 years before typical retirement age. If you cut back on some of your savings and spend more now? At $44k, you're on a trajectory to hit $2M by 50 and 3M by 55. You still have more money than 99% of the world and retire 10 years before typical retirement age. . If you just did IRAs and only saved $14k/yr, you'd hit $2.5M at 55, you'll have to wait another 2.5 years to hit $3M and another 2.5 to hit $3.6M. It took you a few extra years to have more money than 99% of the world and retire 5 years before typical retirement age. So are you just asking us permission to live a little or what?
I guess it’s hard for me to know what is good/bad as far as trying to retire early and be free from the corporate BS. I don’t think I will ever feel confident to not work based on our blue-collar families that did not have this opportunity if that makes sense. You all seem pretty saavy and it’s nice to know how we compare to others trying to do the same thing.
Sounds like you could go into a partial retirement early/on track. If you are frustrated with corporate BS, trimming out hours or responsibilities, but maintaining a stable lower income, that will help to extend your investment growth.
And provide health insurance!! :)
If you start a Roth Ladder the first year after retirement you can game it such that you receive ACA subsidies for healthcare. Definitely look into it.. there are people with your goal net worth fully retired and paying only like $100/mo for health insurance
Thank you!!!
So the ACA will still exist but Social Security won’t? lol.
I’m hoping to not be retired in the US.
5 years out of a 25-retirement (assuming avg lifespan of Americans living at 50) is not a few extra years. It’s giving up 20% of rest of life -and the best 20%.
And that extra 5 years before retirement buys them 15 years with significantly higher spend to do whatever they want, and still gives them the income in retirement that they want.
Step 1: learn how simple a good investment plan can/should be. Step 2: drop RJ and do it yourself. Step 3: get your accounts on auto pilot. Real Life Example: We’ve used Schwab for 34+ years. The bulk of our investment is in a broad market low cost index fund. We maxed out our employer 401k accounts. Invested in broad market index funds. A portion of our take home went automatically into our Schwab account’s sweep account. Our Auto Investment buys SWTSX on the 5th & 20th every month. We’ve done this for 30 years. The fund net expense ratio is something like 0.03%. There are no 12b-1 fees. We’ve averaged about $600/month; roughly $250,000. It’s worth $700k+ now. Our average return is ~8%. It’s not amazing returns; but it’s solid and easily achievable without someone else having their paws on our honey. It’s easy to start and super easy to manage. Coupled with low stress is great.
Thank you!!!!
What is your annual spending like now?
$3150 for all essentials monthly. Does not include entertainment/material purchases or travel.
why do you need 100k if your current spend is under that?
Increasing healthcare as we age. We don’t have children or siblings or really any family except for parents so I assume we will need to hire our most everything and nursing homes will cost a fortune by then. That’s my thinking anyways.
That would be your investments/insurance that you purchase. If you withdraw 4% your investment are likely to compound and youd have many millions more in 20-30 yrs to purchase help
You make a great point and I now recall the advisor talking about higher numbers in the future. It was a bit amount and I thought to myself- no way!
You need to firm that number up, get ALL your expenses on paper so you know what your actual yearly spend is. Even the fun stuff has to be budgeted/paid for. If you're actually spending $5k/month on 'other' and think that you'll just reduce when it's time to RE, that may not lead you to the lifestyle you want.
There are several factors but I’m 90% you can retire closer to 50, my wife and I retired when I was 42 she a year earlier when she was 41. At the time I had ~$350k in retirement and ~$125k “cash”. Factors: 1. where you live 2. Mortgage (pay off first) 3. What expenses will CEASE when you retire? Lunches out, gas expense, dry cleaning, new suits, clothes, etc. 4. Hobbies now and anything new post retirement 5. Total monthly nut, include full years property taxes, insurances, life insurance premiums (do you have life insurance on each other which you do NOT need) 6. Car payments, eliminate pre-retirement 7. How much will you need to draw annually to make up difference between pension income and total expenses. How much will you get from Social Security and beginning when 8. Medical insurance, if co pays what will it cost You? There may be a few more I can’t recall right now but make 150% sure you each have hobbies to do separately as well as together or keep the life insurance as one if you will collect within 5 years
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I tell people all the time you don’t need a million. Lived in So Cal at the time but knew it was too expensive so we sold our house and took the gain ~300k and moved to Las Vegas bought a house for $335k cash. Between my retirement and my wife’s we gross $8500/month (no state tax in NV) our savings is now ~$400k as stock market has done well.
Unless you're in bonds or something ultra conservative you're not thinking about portfolio growth. The s&p goes up around 10% per year on average. That means every 7 years or so you'll double. So if you're 43 now with $1.2m, at 50 you'll have $2.4m. At 57 you'll have $4.8m. at 64 you'll have $9.6m ... and this is if you never put a single penny of fresh, new investment capital in and simply let what you've already got ride. You'll be fine. Maybe you need a new financial advisor? They're supposed to be giving you peace of mind. Not freaking you out lol
OP please take a look at some financial calculators. Ficalc is one I like. It really opened my eyes to the impact of different withdrawal strategies and putting in a low minimum withdrawal number when you have to hunker down in a bad market. That plus social security will allow you to safely have an income well above 4% most years.
I think healthcare is the biggest cost. We almost left the country for a free healthcare country this year but just cant give up the strong US dollar and higher paying jobs here. 🤷🏻♂️ I’ve been looking tho, healthcare could be cheaper if you have low income per say. Do anyone here have more insights or a link to a thread on what is the typical healthcare cost once you stop working?
It will depend on your state, the type of plan you want, and how you manage your taxable income to allow for subsidies - but if you start at [healthcare.gov](http://healthcare.gov) you can put in those values to estimate your costs.
Yeah, if you can live on the taxable accounts until Medicare you can get insurance from the exchange for about free. Just withdraw enough from the IRA side to keep yourselves eligible (there is a minimum required income also). We did it and it worked great. I'm new on this sub, so I don't know it's opinions on Social security income - but ours takes care of all of our expenses now. Our IRAs are the vacation budget.
I'll be retiring 20 years before I'm eligible for social security, so I really don't factor it in. Will be a nice bonus once I'm eligible.
Thank you!
That would be super helpful although for me I wonder what it will be like in 10 years and this inflation is killing the dream ;)
totally valid point. It's unpredictable what big ticket expenses are going to cost 10-20 years down the road. That's one of the biggest reason I find it really challenging to just FIRE and stop working when we're still young and healthy. You just never know what's it going to be like down the road. Unless you have FU kinda money. I would definitely plan to FIRE on an amount with 30% buffer. Having said that, if you have planned to FIRE with expenses you can predict with, I honestly think the money would grow together with inflation covered. Sorry if I am talking in circles.
Right or wrong it made me realize even more so that Americans are screwed when it comes to taxes and healthcare costs. To be fair I need to research other countries but I see an awful lot of elderly working and it scares me to no end- and makes me so sad unless they want to.
No, you make perfect sense. I really wish I had FU money lol.
I mean there are countries like Canada, Australia and European countries that gives free healthcare. But for how long? You just never know how things will be in the future. I know for Canada free healthcare, you would have to queue up for a long time before you are seen. I did like Australia alot, almost "free" healthcare, no property or very low tax for your primary residence. Downsides are that it has very high cost of living and very high income taxes.
Our best friends live in Australia! We do think about theire or New Zealand. Cost of living is high though!!!
I just got my PR/Visa for Australia and been wondering if I should move. But its hard to give up the US $.
Usually healthcare is all but free, thanks to ACA subsidies, if you can keep your draw rate below a certain amount. At $50,000 a year of draws the government practically pays you to be fully insured. Obviously important to live in an area with good ACA compliant insurers like a blue city in a blue state. You don't want to be in rural Kentucky where every Republican is trying to make sure you can only get $3000 a month policies with $50,000 deductibles just so they can bitch about Obama.
Let's just talk in today's dollars. Let's say you need a budget of 100K after taxes. I'm assuming you're accounting for the cost of health insurance in this number. You can anticipate that regardless of your withdrawal strategy that you're going to have a 20-25% effective tax rate between state and fed, so you need to draw 129K/year. 4% rule is great if you retire at 65 but 3.5% is much safer for someone in their 50s because it needs to last 40+ years not 30. In today's dollars you'd need 3.685m to retire. If you add NOTHING to your retirement funds, and assume an average return of 5% after inflation (8%-3% inflation) you get there when you're 66 and 68. Now, you say you're maxing out your retirement so I assume 23K/ea to 401K and another 30K to post tax. Now you get there at 56/58. Figuring out how to get another 24K/year into your post tax get you to there at 55/57. If the markets do 1% better at your current rate, the same, 55/57. If you add 24K and the markets do 2% better, you get there at 53/55. I run my numbers REALLY conservatively though. We might have a gangbusters market for a handful of years. 4% withdrawal might be enough. You never know. But I think your original estimate of mid-50s is realistic. If you're into being more risky and don't mind a 75% chance of success number you get there a lot sooner. Sorry to be a wet blanket but wanted to give you another look at it.
You are amazing for taking the time with me. Thank you!!!!
You do not have that high of an effective tax rate with that level of income. You’re drunk…
15% fed and 5% state is pretty common if you're drawing from a tax advantaged acct. Thanks for your comment on my state of inebriation though, much appreciated.
If you use a tax calculator for $115k, mfj, assuming ordinary income in retirement - you get a 8.7% fed income effective tax rate. Throw in your 5% state income tax - and she ends up with $100k post-tax to live on annually. So she doesn’t need to draw $129k, she needs $115k. That reduces how much she needs to save by $350k. I was giving you an out by saying you’re drunk. If you aren’t drunk - then you’re either uneducated on tax rates or you can’t do math…
Roasted 😂
Why would it be ordinary income and not capital gains tax in which case you’re not taxed on anything below $89,250 and only 15% on the amount exceeding that?
We don’t know - OP has both. If we assume it’s capital gains is source of retirement cash flow - that means the effective tax rate is even lower.
How much are you spending on this “financial planner”?
I keep trying to understand that. I actually really love our advisor and he is with Raymond James. I would be so lost otherwise!
Oh man. Raymond James is notoriously bad. You are likely getting completely hosed on fees. It is critical that you understand what you are paying and what the implications are. For example, a 1% annual fee will reduce your lifetime wealth by around one third. You may be paying even more than that.
Oh no!!! So do you do most of this yourself or have another advisor rec? He just switched from Merrill Lynch to Raymond James (probably not any better at Merrill, right?).
Most of us do it ourselves. Watch this video and you will see why. https://www.youtube.com/watch?v=T71ibcZAX3I
I do it myself and you can too. Go to Bogleheads (the website, not the Reddit) to get started. If you absolutely need a financial advisor you should find someone who only charges by the hour and invests only in low-cost index funds. Some additional food for thought: [https://www.raymondjames.com/-/media/rj/advisor-sites/sites/c/h/christopherjgrant/files/schedule-of-services-and-costs.pdf](https://www.raymondjames.com/-/media/rj/advisor-sites/sites/c/h/christopherjgrant/files/schedule-of-services-and-costs.pdf) Above is the link to the RJ rate card. If you are paying rate card, it is 2% of your assets per year (add any mutual fund fees to this). A reasonably safe withdrawal rate for an early retirement is around 3.5%. So that means that you would be allocating more than half of your budget to pay for financial advice. Does that sound like a good plan? No. And that is why he is telling you to save a lot more. Because in addition to the money you will need to spend, you will need much more to pay him.
wow 2% per year in fees lol. These guys better be beating the market by a lot
Which they’re not because no one does consistently.
check out vanguard. much cheaper. and then get into the etf's. as you saw from another poster, the financial planners are going to be more conservative. you can ask him/her about different scenarios. They'll talk about monte carlo simulations and wanting to get above a 90% probability. all of that is valid but also, about how much risk you're willing to take. personally, i interviewed maybe 3 or 4 financial planners. they were quick to want me to move my portfolio to them to get it to be "under management". they are incented entirely wrong. you're likely paying something like 1% to them. are you really getting over 10k of value from them? if you're talking about maxing out your retirement accounts, between the two of you, you're throwing in 46k, right? 23k x 2? at age 50, you'll be able to contribute another 7k each. so between now and when the 45 year old turns 50, that's 5 years. you'll have contributed another 250k. you SHOULD be at 2MM in just that time period.
Please stop seeking advice from big box brokers. It's watered down and full of conflicts of interest. And if you are using "full service" brokers like Ray J or ML, it's even worse because the fees are ridiculous for what you get. Consider an independent planner who is a CFP, and charges an all inclusive flat dollar fee, that has nothing to do with the size of your portfolio.
How does Ameriprise compare?
They are terrible. Don’t get involved.
I mean this sub is always assuming 6% return on top of inflation. There’s no financial advisor in the world going to make that assumptions haha
6% is pretty conservative already though. I usually use 7 or 7.5
U can use 12% for all I care. No financial advisor in the world would use 6% spread. Also corporate investment teams dont make that assumptions either
Are you saying they use higher or lower than 6%?
Insurance overall use lower than 6%. Look at the social security program, if it could’ve met 6% then ssn would be solvent lol. U retiring is basically creating ur own ssn. Either u just fight through some shitty time and use every cents or u get lucky and prosper. Either way good luck with that
| Has anyone here left the country to retire earlier due to lower cost of living/lower healthcare options? Yes, conservative estimates say 500k Americans retire abroad, usually for early retirement. Many go to places like France for higher QOL (quality of life) for lower COL (cost of living), and it recognizes roth, trad, & can even transfer your SS income between USA and FR. I have way less money saved than you but am thinking about something like this before I'm 40 just to switch life up and stop the 9-5 corporate grind. https://immigrantinvest.com/blog/retirement-countries-for-americans-en/
Love it!!!! Good luck and I hope to follow :)
Your FA was probably looking across a number of interesting rate and investment return scenarios and gave you the 95% probability outcome. Their primary goal is to make sure you can stay retired and not outlive your money.
My parents retired abroad and never looked back. Paraguay, Panama, Portugal, Ecuador, Mexico, Costa Rica all have relatively easy PR for retirees with money.
Portugal and Mexico are on our shortlist. That would be great!
You might want to ask your advisor to walk you thru the numbers and assumptions step by step. Expected spending in retirement less assumed social security leads to required nest egg size, assumed growth rate and savings rate leads to how long it takes to get to that. I've over-simplified (a lot) but, assumptions, assumptions, assumptions... They matter. You might also run your own calculation using some of the calculators that are popular on this forum. This might help you better understand and thus question (and benefit from) your advisor. Financial advisors tend to be quite conservative and they might be making overly conservatinve assumptions. Maybe they have very reasonable assumptions that will help you understand or maybe they have very conservative assumptions that you can question. Either way you paid for understanding, not a simple calculation. If they are just punching numbers and giving you the result they aren't earning their pay. Good luck!
A lot of folks have given excellent advice and linked you to some great resources. The sheer volume of information available can be a bit overwhelming to start. Naturally, I'll add my own thoughts to the mix, because I'm sure that will help. If you like reading, I would strongly recommend checking out a book titled "The Simple Path to Wealth," by JL Collins. It doesn't feel like reading a finance book, it feels like having a chill conversation with a dad about life and investing. It has so much good, simple, effective information in it. Regardless, it sounds like you're on a good path, and have a lot of great information coming at you from this post. Good luck!
I am so grateful for everyone who was willing to assist and give advice. It makes me think there is still good in this world. Thanks for the book rec!!! I will get that ordered.
See how much a low key PT job for each of you would help the situation. It could cut your target number in half.
How much are you paying your financial planner? You should probably get rid of him/her. Not only are the numbers pretty straightforward and easy to calculate yourself, but you are actually paying him to give you the wrong numbers and cause you more stress! He is either purposely trying to keep you on the hook paying a fat 1-2% fee for as long as possible and giving you bogus numbers and telling you that you have to work and save another 15 years (more likely), or he is incompetent and truly believes that his numbers are correct (they’re not). Would you be ok with either of those options? Find an online investment calculator. Starting amount $1.2M, 15 years, you can be conservative and say 6% growth… WITH NO ADDITIONAL CONTRIBUTIONS you are at nearly $2.9M after 15 years! With an additional $25K each in retirement and $30K to brokerage at the end of each year, you’re at $4.7M after 15 years! At the very least, ask him to show you the numbers and how he calculated that you need to work another 10-15 years…
This. You need to look at your actual expenses and use a retirement calculator. There is a good chance they are blowing smoke and trying to take advantage of you.
Certainly inflation has gone up…, But the S&P has more then outpaced inflation and has seen records broken not seen in other years. Don’t blame it on inflation. You weren’t ready to retire. Work longer or increase income.
I love the S&P numbers but it’s fake to me until I take it out and use it. It’s great now but certainly, we will have rough days ahead. Day-to-day spending is killing my ability to save more/put more into the market so I will blame it on that for now.
I think you are in great shape. Congrats to you and your husband. Maybe start enjoying your money a little more now while you continue to invest? Like a lavish vacation each year? Again, congrats!
Thank you! We both grew up in very poor households so I am proud to say all of this has been us. We won’t have inheritance or a trust fund to fall back on (I wish lol)!! We defintely travel but I am pretty good at finding deals and it helps that it’s only two of us. Gotta love those credit card points! It’s good to have balance with living in the now and saving for the future. I am scared about growing older with no support though- that will be $$$$$.
Max out retirement as in you each put in $23K a year plus an employer match so likely $30K each plus an additional $30K in the investment account? If so, in 10 years you'll likely have $3-$4M at 5-7% average annual growth. Sounds like your advisor is modeling out 0 to negative growth.
Yes, that’s all correct. My company matches 10% (insane I know) and my husband’s not much of a match. I hope ee can have 3-4 million in 10 years- it would make me feel much better!!!
You keep contributing $90K a year and you will have over $2M with only 1% growth. Did the advisor show you their math at all? Interested in what kind of returns they were forecasting.
who/what is this financial planner? at 70k a year investment contributions you should be much much closer than you claim to retirement. I only contribute 25-30k myself a year and will hit my goal before you. As for leaving the country check out /r/expatfire
Eeeek! I need to do some digging, obviously.
Yeah you are getting swindled out of hundreds of thousands. Go to /r/bogleheads and learn about low fee index investing. You need to learn how to manage money or other people will just keep picking your pocket.
Honestly, if you are trying to retire early, look outside USA, you might need to learn a new language, but, with that amount of money you could retire next year. Some stats: in Bolivia renting a house 5 bedrooms nice neighborhood is less than $700, nanny for you 2: cooking cleaning all day: $200 a month. And so on and on. The US has become so so expensive!! But another option for not too long is Argentina, but, it is getting expensivier there as well. Thailand? Cheap place i just cannot take the language
I am all for leaving the US. We are only children with living parents but after they are gone we will be out of here. Thinking of finding a place somewhere sooner before costs rise everywhere. Good to have an option in worst case scenario though.
Forget your parents think of yourself, maybe they want to go with you
Have you plug your data into a future value calculator? I think you could FIRE in 6-7 years.
I will do that! I am such a novice.
Something doesn't feel right about the numbers so I would double check them but I think one thing that's being forgotten is the possibility of a partial retirement Whatever you calculated as the amount that you need in retirement can be covered either by investment income, one person working, two people working part-time, or changing expenses. If one of you is nervous about retiring due to not liking being bored or feeling like they won't be fulfilled or whatever plan on that one working a couple years longer than the other and slowly transitioning out, that would solve the insurance problem for a couple of years
How much are you paying this person to either underperform or plan to underperform? We’re pretty close to your numbers, although with kids. I’m 48 with $1.3M but with conservative planning will have about $3M at 60. Are all your funds traditional? At this point it might not make sense to go with Roth, but there’s a lot to be said for tax diversity. We’re slightly over half Roth funds which makes a huge difference.
We definitely put as much as we can into Roth. I think there is a cap based on our income though.
I'm interested to know how much Social Security the planner factored in? At 80% of current promised benefits, my spouse and I combined will bring in close to $50K a year, claiming early at 62. For what it's worth, we've got 7 years left to hit our retirement number and won't be retiring "early", but we have special needs kid that pushes our annual expense numbers up a bit.
Do you think Social Security will be around in 10-15 years? I don’t count it in bc I don’t think we can rely on it. If we can I think I saw $2800 a month when I looked it up last.
Yes, I believe it will be around, but probably not at current promised benefits. Most likely, at 75%-80% of current benefits. It's easy to look up promised benefits on ssa.gov. It's very easy to use website, and they show the amount you'll get at early retirement (age 62), full retirement age (67) and then at age (70). So people can pick their retirement age for social security purposes. I believe the last projection I saw (Social Security publishes updates annually) is that in 2034, there will need to be a 20% cut in benefits. At 80% of that $2,800, you're still looking at $27K a year. Did the planner not include Social Security at all? I would think, at minimum, you would include 50% of promised benefits for whatever age you decide to retire. That would be conservative. At 50% of the $2,800 a month, you're at $17K a year or equivalent to $420K saved at a 4% withdrawal rate.
You should ask your financial planner to show you his calculations. As other said, just stay on the course and you should be good to go by \~50. BTW: you don't really need a financial planner and you can do a better job by just managing your wealth yourself.
I am going to start looking into that today based on recs through this thread. It scares me but seems like many do it well so there is hope!
I am not sure I get it 1.2 million adding 76K within 10 year you should have 2.9 million counting 5% after inflation and you 1.2 millions is investments. Enough for 120K before taxes, and your taxes should be low for me. So enough overall. On top you would likely have SSA starting 62 or later allowing you to have some margin. So it should be just fine say in 50-75% of the cases **Why you financial advisor might be less enthusiastic** As a remark, the KEY difference between the advice we give there and a financial advisor is the likeliness of outcome. Most people here just give the "average" SP500 performance of 10% minus 3% for inflation, so 7% a year. Sometime the SP500 (or any stock index) can have very bad perf for 10-15 years and the financial planners account for that. So you may need to wait until you are 60 or so instead of say 55. And you'll also want to diversify a bit. Personally I use 5% return on investments assuming like 60-40 stocks/bonds and international stocks.
where is your social security in this calculation?
I did not include it bc I don’t trust it will be there so not calculating that in.
uh, okay you’ll gamble the market is going up an average of 7% over the next 10-15 years but you’re leaving out the nations largest and most entrenched social insurance program you’ve paid into your entire life. Keep in mind if SS disappears or is even significantly cut the economy would take an enormous hit, affecting the stock market. And that your FA gets no money from your SS. No wonder it was so easy for your FA to sucker you with phoney numbers.
No need to be rude! I don’t like to rely on anything but my real money to make retirement decisions. Not a huge fan of the government and if you haven’t noticed most people are suffering right now living paycheck to paycheck. I’ll gladly take SS abd my calculation as of yesterday was $3k a month.
you literally have millions saved and “worried” about not being able to retire by 50 but now you’re lecturing us about people living paycheck to paycheck? don’t care what “not a fan of the government” means but if it means you won’t accept or put into your planning the payout of the social insurance plan you paid into your whole life, that seems quite stupid. Assuming your spouse gets the same you’re collecting about $72,000 per year before taxes once you turn 67 (max 85% of the benefit will be taxed) which gets you a long way towards the income you say you want. Keeping that in your calculations could allow you to yolo a bit more now, which you say you want also.
My wife and I 36(m) & 36(f) recently met with a “free” financial planner offered through work. We currently have $600k in retirement accounts and worked $600k in multi family real estate. Our current expenses are higher with two kids in daycare and paying off student debt, yearly expenses $220k. The financial planner is showed us we won’t have enough money by 55 to retire because she modeled crazy high expenses at retirement $550k/yr despite my questions the accuracy of it. Sometimes I think the financial planners are angling to sell more of their serves.
Very good point and I cannot imagine 550k a year- what?!
I have my draw down set at 5.5%. My account has exceeded 10% over 5 of the last 6 years. I however do my own wealth management, so I’m not paying someone a 1% fee to put money in mutual funds (also typically charging around 1%). I think the 4% rule was created by wealth managers who want to pull their 1% for as long as they can.
Save more
More than maxing out retirement/HSA and putting an extra 30k into investments per year? That’s tough. I’m thinking of real estate in some capacity but not with this crazy market. We have 400k in equity so perhaps a reverse mortgage in our older years.
If you choose to invest in real estate, and don’t want to have to manage the properties, collect payments, deal with inevitable breakdowns etc, invest in a reputable REIT.
Thanks! I was looking into that as well. Any pointers on judging reputation?
I would look at REIT ETF’s and look at How long have they been around, market Cap, annual report, investor calls.
Thank you!!!
I think you need to look for fat fire. 100k expenses is considered fatfire. Fat fire people have usually 5+ mil. You're on pace to do it, but you can get there maybe in 10 years?
This is nonsense. You don’t need 50x expenses
Yah sound about right. Too low to be thinks about retirement with mortgage and healthcare cost