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surf rock posted:My retirement planning is pretty much on auto-pilot, and I want to do a sanity check that that's OK. I'll be turning 33 this summer and have been with the same employer my whole career. My salary history looks like this: The long answer: Assumptions: 100% stock during your saving period A 75/25 stock/bond split after retirement From historical data, if and are withdrawing about 3.3% of your initial amount (adjusted inflation each year), then there are no years in the history of the stock market where you wouldn't be able to live infinite years with it. You can go with higher withdrawal rates, but you are putting either a timeline on your amount, adding a modest risk of running out, or both. So, let's do some calculations: Current Roth savings: $110k Current non-roth savings: $72k Total current savings: $182k Then, we will assume you put in $30,000 each year for the next 30 years. Then we will assume, during your saving years, a 2.5% interest rate above inflation (which would make it the worst 30-year interest rate in stock market history). Then, when you turn 63, you will have about 1.8 million dollars saved, and be able to withdraw, in 2024 dollars, around $60,000 every year for the rest of your life (a decent chunk of it untaxable), even if humans get clinical immortality. Remember, this is assuming the stock market is tied for the worst ever in your saving period. Being less pessimistic, and instead using the expected value of a 30-year stock market run, you would have about 4 million saved, and could withdraw about $130k a year. So, I would say, if your income ever hits 30x what you want to have every year, then maybe retire early on that year. MegaZeroX fucked around with this message at 18:17 on May 5, 2024 |
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May 5, 2024 18:05
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surf rock posted:My retirement planning is pretty much on auto-pilot, and I want to do a sanity check that that's OK. I'll be turning 33 this summer and have been with the same employer my whole career. My salary history looks like this: How much money do you spend each year, excluding mortgage but including property taxes and insurance?
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May 5, 2024 18:36
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Thank you all! This is a very helpful way to look at it.CubicalSucrose posted:How much money do you spend each year, excluding mortgage but including property taxes and insurance? Tallying it up in 2023 comes out to $58k. There were a few large unusual expenses in there (like a surprise $12k HVAC system replacement), but life's always going to bring a few unusual expenses. Still, I'm on track to be at about $47k this year, so I do think last year was a bit on the high side. Overall, my approach has been to max the Roth + 401k and keep about $30k either liquid (savings) or semi-liquid (mutual funds) in case of emergencies, then to have fun with the rest. edit: realized I forgot to include a detail in the first post, I average about $10k in bonuses each year. surf rock fucked around with this message at 19:22 on May 5, 2024 |
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May 5, 2024 19:18
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If you're hoping to retire early, you should consider building some investments in a normal brokerage account to live on before you can start using your retirement accounts. You'll be paying for solo insurance during that time, so it might be your most costly years (until you're in assisted living). Don't stop having fun; I know people who saved all their money to travel after retirement and then weren't physically able to follow their plans.
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May 5, 2024 20:47
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Tricky Ed posted:Don't stop having fun; I know people who saved all their money to travel after retirement and then weren't physically able to follow their plans. I got that same advice from my maternal grandparents. They did some travel in their 50s and early 60s, but not as much as they had hoped before big trips became too much for them. I'll always remember a story they told me about going to Switzerland as their first big trip after hitting 50. A lot of the tour group was a decade or two older and couldn't keep up with the pace, so they had to cut their trips short or stay behind in towns along the way. My grandparents realized then that they would be in the same boat soon and had to triage their list of dream trips. Last year, I did two big and very different trips. The first was unplanned; I was invited early in the year to go on a two-week Mediterranean cruise last June. A couple I'm friends with was going, along with three other couples (basically, it was group of four childhood friends and their partners). It was loving awesome, I've become friends with all of them, and I actually officiated the wedding of one couple last fall. Then last September, I went on a two-week Tokyo solo trip that I'd been planning since 2019. Also incredible! All my travel this year is domestic and should cost a combined total of <$2k, but I'm hoping to do an international trip every odd year until I'm no longer up to it.
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May 5, 2024 21:06
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surf rock posted:As long as I keep the Roth and 401k maxed each year, can I continue not worrying about retirement? As other posters have said you'll be in safe spot even under bad economic scenarios but the only thing I would potentially suggest is maybe opening or looking into an HSA as well. The way I budget my life is maxing out all three then whatever I have leftover after a little saving is my play money.
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May 6, 2024 00:35
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Gucci Loafers posted:As other posters have said you'll be in safe spot even under bad economic scenarios but the only thing I would potentially suggest is maybe opening or looking into an HSA as well. The way I budget my life is maxing out all three then whatever I have leftover after a little saving is my play money. Oh, I think I looked into that a couple of years ago! I remember finding that because I have PPO insurance, I'm not eligible for an HSA? I'm not 100% certain that's right, or what all the rules are about that (like, if I switched to the kind of insurance that would allow me to start an HSA, what would happen to my HSA account if I decided to switch back to a PPO a decade later).
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May 6, 2024 00:41
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surf rock posted:Oh, I think I looked into that a couple of years ago! I remember finding that because I have PPO insurance, I'm not eligible for an HSA? I'm not 100% certain that's right, or what all the rules are about that (like, if I switched to the kind of insurance that would allow me to start an HSA, what would happen to my HSA account if I decided to switch back to a PPO a decade later).
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May 6, 2024 01:28
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surf rock posted:like, if I switched to the kind of insurance that would allow me to start an HSA, what would happen to my HSA account if I decided to switch back to a PPO a decade later. Your HSA is yours forever, and you can roll it over or withdraw from it whenever you want. The only thing insurance will affect is whether you can put money into it.
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May 6, 2024 01:37
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Went to visit my brother-in-law and sister-in-law this weekend. They have a financial advisor that their neighbor recommended to them. Of course they didn't do any checking up on him so I'm curious about the advice he gave. They're in their upper 50s and they are looking to retire early. The advisor said that if they run out of money during retirement they can just get a reverse mortgage. That feels like a red flag to me because I've heard bad things about reverse mortgages but is there a good neutral source that actually explains the pros and cons of a reverse mortgage?
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May 6, 2024 12:32
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Generally, a "reverse mortgage" is just you very slowly selling your house to the bank. That can be a pro, or a con, depending on the situation. Each one is different though. jokes fucked around with this message at 16:10 on May 6, 2024 |
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May 6, 2024 16:08
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They aren't necessarily bad, but are often marketed in a pretty predatory manner.
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May 6, 2024 16:13
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I think one of the worst aspects of a reverse mortgage is that it'll be finished in 15-30 years and they're marketed to people in their 50s/60s, so these people will lose their house when they're, like, super old. There's not really a payout at the end in any appreciable way so if someone doesn't have any money except for their house and are resorting to tapping into their house to get money, odds are they're not going to prepare for what happens when they're 80 and lose their house. They don't prepare for the future, that's probably why they have a reverse mortgage. Ideally, they die before that happens but if they don't, then they're super old, homeless, and have no money which is generally not a good place to be. Like life insurance, it can be good or bad depending on the situation and the parties involved. The fact that they're heavily marketed is usually a good indication it's not in the best interests of the mark. jokes fucked around with this message at 16:18 on May 6, 2024 |
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May 6, 2024 16:14
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reverse mortgages seem like an excellent tool for the bank to keep the younger generations stuggling
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May 6, 2024 16:53
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Serious_Cyclone posted:reverse mortgages seem like an excellent tool for the bank to keep the younger generations stuggling This is the vibe I get as well.
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May 6, 2024 17:18
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One of the big things about reverse mortgages is the occupant still has to pay property taxes+insurance. In the states with high ptax like Illinois or New Jersey, that's 10k+ a year for many modest homes. A lot of people who take them out simply don't understand that and the initial cash infusion doesn't go nearly as far as they think it will.
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May 6, 2024 17:26
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Edit: late reply and probably confused about the different between reverse mortgage and HELOC
DNK fucked around with this message at 18:08 on May 6, 2024 |
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May 6, 2024 18:06
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jokes posted:I think one of the worst aspects of a reverse mortgage is that it'll be finished in 15-30 years and they're marketed to people in their 50s/60s, so these people will lose their house when they're, like, super old.
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May 6, 2024 22:04
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I feel like I've read horror stories about people receiving notices to vacate because of their reverse mortgages, but I'm beginning to wonder if it's one of those "the BANK is STEALING my HOUSE" and they fail to mention that it's because they didn't pay their last 3 years of mortgage payments or whatever because jet skis. Looking into it, it seems there are residency requirements to keep it-- like, you can't leave it for more than a few months or something-- and if you fail to pay certain things they can ding you. Also, they expanded protections in 2014 and 2021. I would imagine a reverse mortgage is (like life insurance) one of those 'maybe a good idea but every situation is wildly different' and it's hard to just write them off entirely.
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May 6, 2024 22:14
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I also thought that one of the selling points of the RM was that you don't get kicked out, you just eventually start living in the bank's house if you don't die soon enough.
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May 6, 2024 23:17
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Houses have accumulated so much value over the last half century or more that tons of retirees have a huge proportion of their total net worth, as home equity. It makes sense that part of retirement planning is figuring out how to tap into that equity, and a reverse mortgage is just one way. Another is to sell the house, move to a much less expensive location, buy a much cheaper house, and pocket the difference. For a married couple, the first $500k in cap gains is tax free, too. Moving to a low cost of living area is also a good idea if you are running low on retirement funds anyway. If you already live in a low cost of living area, then uhh. Maybe that $200k in your house is something you need... you can sell the house and rent something after that, I suppose. But in that situation a reverse mortgage might be the best option.
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May 6, 2024 23:41
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surf rock posted:Oh, I think I looked into that a couple of years ago! I remember finding that because I have PPO insurance, I'm not eligible for an HSA? I'm not 100% certain that's right, or what all the rules are about that (like, if I switched to the kind of insurance that would allow me to start an HSA, what would happen to my HSA account if I decided to switch back to a PPO a decade later). It depends, I know you don't get an HSA if you have a High Deductible Plan. You also need an employer and a State that allows for it too and some aren't as good as others. My last employer matched it and there was no way I was leaving free money on the table. Overall, 401k + Roth IRA + HSA is a great way to ensure a stable retirement. You probably don't need all of them but my view is that economy goes up and down so if you are in position where you can get it they money in you might as well.
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May 7, 2024 01:00
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Gucci Loafers posted:It depends, I know you don't get an HSA if you have a High Deductible Plan. What? You have that backward; they're ONLY available to be opened or contributed into when on high deductible health plans (HDHP).
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May 7, 2024 03:26
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You can also open an HSA independent of your employer and state as well. The HSA your employer opens for you has the benefit of being able to deposit untaxed money via payroll but you're also able to just open a HSA with your custodian of choice and throw after tax dollars into it as long as you stay under the limit. The thing with the states is some states are not tax friendly towards HSAs but I don't think any states forbid you from having one.
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May 7, 2024 03:33
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SpelledBackwards posted:What? You have that backward; they're ONLY available to be opened or contributed into when on high deductible health plans (HDHP). Whoops. This is right, good point.
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May 7, 2024 05:04
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You must have a qualified High Deductible plan to contribute to an HSA. If you no longer have a qualified plan, you may keep or spend any HSA funds you already have, but you can't contribute more.
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May 7, 2024 15:38
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Looking into the options of setting up long-term investments for my nephews/children, are there better options than custodial roth IRAs or 529 plans?
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May 9, 2024 17:48
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Moonshine Rhyme posted:Looking into the options of setting up long-term investments for my nephews/children, are there better options than custodial roth IRAs or 529 plans? Potentially UTMA/UGMAs.
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May 9, 2024 18:02
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Hitching a ride on the prior question, I'm curious if there's a preferred investment vehicle for someone in retirement. My mother is far closer to destitute than she is willing to believe, and came into a $40k inheritance a few years ago. It has been sitting in a savings account making basically nothing since then, but now she is deciding to blow it on unnecessary purchases. I'd like to try to convince her to save at least $30k of it for investing. Is a basic brokerage account through e.g. Fidelity the most reasonable option, or are there any tax advantaged accounts that can be leveraged by someone in retirement? She has no earned income, just SS and an annuity from my deceased father.
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May 9, 2024 19:19
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Serious_Cyclone posted:Hitching a ride on the prior question, I'm curious if there's a preferred investment vehicle for someone in retirement. My mother is far closer to destitute than she is willing to believe, and came into a $40k inheritance a few years ago. It has been sitting in a savings account making basically nothing since then, but now she is deciding to blow it on unnecessary purchases. I'd like to try to convince her to save at least $30k of it for investing. Is a basic brokerage account through e.g. Fidelity the most reasonable option, or are there any tax advantaged accounts that can be leveraged by someone in retirement? She has no earned income, just SS and an annuity from my deceased father. This is really, really context dependent. I would think SPIA (single premium immediate annuity) if they're expected to live for a while. Or "blow the money on unnecessary luxuries" if they're not expected to live for a while. Neither of these are good from a generational wealth / inheritance perspective, but given "close to destitute" I'm not expecting that to be a material consideration anyway.
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May 9, 2024 19:29
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Without earned income or a job her only real option is a taxable brokerage account as far as I know. All of the tax advantaged spaces are designed to be built up when you are young and working and then drained when you are retired. Once you are retired or otherwise unable to work you can't take advantage of them any more. Even if she could she (probably) doesn't have decades to let compounding work its magic. On the plus side qualified dividends and long term capital gains are taxed at more favorable rates than ordinary income. Treasury bonds are exempt from state income taxes and muni bonds are tax free at the federal level and sometimes at the state level as well depending on <factors>. Edit: Yeah I suppose a SPIA might make sense. A SPIA is really a bet with the insurance company on how long you are going to live. If you live longer than they expect then you win the bet. If you don't then they win. Antillie fucked around with this message at 19:34 on May 9, 2024 |
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May 9, 2024 19:31
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CubicalSucrose posted:Potentially UTMA/UGMAs. I've thought about this before, but one of the issues in my opinion is that the minor gets ownership at 18/21 depending on the state. If it's just a little money that's probably fine, but I personally would not have done well with a large pile of cash at age 21.
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May 9, 2024 19:31
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$40k in a high yield savings account at 5% interest will add $2000 in interest income the first year, which is not nothing. Would your mom do better with $167 more to spend each month, vs. spending the 40k? Or maybe bump that up to like $200 or even $300 a month as a somewhat reasonable drawdown rate depending on her age? As far as I know there's no tax-advantaged option here without earned income, but the taxes on the income from a reasonably invested $40k aren't going to be ruinous and regardless they'll just be a fraction of the earnings e.g. there has to be earnings for there to be taxes and having earnings is always better than not having earnings.
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May 9, 2024 19:34
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CubicalSucrose posted:Neither of these are good from a generational wealth / inheritance perspective, but given "close to destitute" I'm not expecting that to be a material consideration anyway. Correct, I'm not expecting anything from her. I'd like to give her an option that is a better steward of her money than spending it from a savings account until it's gone. I figure she could invest it and draw off of it over a, say, 10-year period at $250/mo (equaling her initial investment amount) with a better chance of having money left over at that point.
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May 9, 2024 19:34
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KYOON GRIFFEY JR posted:I've thought about this before, but one of the issues in my opinion is that the minor gets ownership at 18/21 depending on the state. If it's just a little money that's probably fine, but I personally would not have done well with a large pile of cash at age 21. You can always do what my parents did and forget to tell the kid about it. (They actually literally forgot, which is why I find it funny and not maddening.)
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May 9, 2024 19:35
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Leperflesh posted:$40k in a high yield savings account at 5% interest will add $2000 in interest income the first year, which is not nothing. Would your mom do better with $167 more to spend each month, vs. spending the 40k? Yeah, this is the kind of argument I'd like to present to her. A HYSA is probably the easiest option, brokerage account would not be terribly difficult. I was just curious if there was a tax-advantaged vehicle available.
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May 9, 2024 19:35
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Serious_Cyclone posted:Correct, I'm not expecting anything from her. I'd like to give her an option that is a better steward of her money than spending it from a savings account until it's gone. I figure she could invest it and draw off of it over a, say, 10-year period at $250/mo (equaling her initial investment amount) with a better chance of having money left over at that point. I agree, although it's important to understand that generating income above the "risk-free" rate (currently soemthing like 5%) entails risk, and so she needs to be prepared for example for a market downturn that sees her $40k shrink to $30k in the space of a few months as a potential thing that could happen to her invested money if it's invested in stocks. The current asset allocation of a 2020 target date fund from Vanguard (VTWNX) is: Vanguard Total Bond Market II Index Fund 33.40% Vanguard Total Stock Market Index Fund Institutional Plus Shares 23.50% Vanguard Total International Stock Index Fund Investor Shares 16.00% Vanguard Total International Bond II Index Fund 14.90% Vanguard Short-Term Inflation-Protected Securities Index Fund Admiral Shares 12.20% So about 40% stocks, 48% normal (domestic + international) bonds, and 12% short-term inflation-protected bonds (functionally equivalent to a money market account or HYSA at current rates, so you can consider this a "cash" portion of the portfolio). If you did something that roughly mirrored that allocation with her cash - note I am not suggesting holding a target date retirement fund in a brokerage account - but if you build a similar porfolio directly with index funds, sold the short-term stuff for cash for draw-down and rebalanced annually, she could probably pull out a couple thousand a year forever but would need to be ready for at least the stock portion to drop and rise with significant volatility.
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May 9, 2024 19:47
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Leperflesh posted:I agree, although it's important to understand that generating income above the "risk-free" rate (currently soemthing like 5%) entails risk, and so she needs to be prepared for example for a market downturn that sees her $40k shrink to $30k in the space of a few months as a potential thing that could happen to her invested money if it's invested in stocks. Yeah, that's something to consider. It could be that HYSA and/or a CD ladder might be the best option to keep her out of the risk-zone of panicking about a market downturn, since panicking is sort of her brand.
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May 9, 2024 19:53
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Sure. That'd at least more or less keep up with inflation. Cash in a checking account loses to inflation constantly.
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May 9, 2024 19:56
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Serious_Cyclone posted:Yeah, that's something to consider. It could be that HYSA and/or a CD ladder might be the best option to keep her out of the risk-zone of panicking about a market downturn, since panicking is sort of her brand. Yeah a CD ladder or some sort of bond ladder might make sense then. CDs can be illiquid which can be good if it keeps her from blowing the money but it can also be bad if she suddenly needs the money for something.
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May 9, 2024 19:59
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