[USER]

I’m curious to get a second opinion on our financials and distance to FI. I currently have a fee-only advisor, but I’m wondering how conservative his models are.

Married late 30s
Current accounts:
$36k cash emergency fund
$130k in taxable brokerage
$600k in tax advantaged accounts
Owe $175k on $450k house. Home will be paid off in 25 years.

My husband will get a $70k/year state pension at 56 when we’d both like to fully retire.

Yearly expenses are ~$100k with mortgage included. $85k without mortgage.

Only large investment/purchases I’m accounting for is covering in-state college for two kids in 10-15 years, estimating $120k each.

Based on my model, we need about $250k additional invested before we could stop contributing to our retirement accounts and just cover expenses until 56.

Does that seem right?

[Ron]

Not sure I understand “stop contributing to retirement accounts and just cover expenses”. If your expenses don’t go up you’ll have extra savings to invest on the taxable side.

In any case, whether you put it in a retirement account or in a taxable account they both can be for retirement.

I don’t go by strict formulas but with a pension covering 2/3rds of current expense level and the prospect of expenses going down due to children becoming independent and house being paid off, you are in really good shape.

You haven’t said how much you are contributing each year, but to me about $250K and reevaluate at that time makes sense.

But even at that time, unless you stop working once you reach that amount or you increase your spending to cover what you were contributing to retirement accounts, you’ll still be accumulating for retirement even after you hit the extra $250K, future needs.
Just some random thoughts.

Best of luck!!

[Cody]

There are numerous variables to consider here (including those excluded from the post), but using financial planning software (such as Boldin – no affiliation) could help you visualize your path.

[Frank]

You are most likely already there with the pension, assuming your investments are in index funds.

[Sharon]

85k/ year in expenses seems a bit high to me in comparison to your savings.

It looks you’re relying heavily on your pensions – will those pensions be enough?

Will you also be eligible for SS at 62+?

Do you have a plan for healthcare between 56 and 65?
What are your current salaries?

[Barbara]

Is the state pension secure? Are your jobs secure?

Do you have disability insurance?

[Joel]

What is your current savings rate?
Are you really considering stopping savings?

What happens if the market doesn’t do as well as you hope?

Personally, I think a balance between spending today and saving for tomorrow is a winning strategy.

[Adam]

Does his pension have a decent cost of living adjustment? If so, and you truly do plan to live off $100k a year initially then your investments only need to cover the difference so simple math would be $30,000 x 25 = $750,000 needed to be CoastFi.

Seems like you are basically already there as long as you aren’t going into the red every month with your spending until retirement and you are saving separately for your kid’s college.

$120k each for college in 10-15 years is probably way too low of an assumption if you plan to cover them fully.

That’s about average for college today and it has historically inflated more than general inflation.

It’s likely to be closer to $200,000 in 10 years from now. Are you taking full advantage of 529 plans?

I would really look deep into your spending though before you completely throttle off the savings.

You’re potentially going to have much more expensive health insurance between 56 and 65 unless he gets a good retirement health plan you both can get access to.

You also have inflation risks if it rises more than historic averages and the market returns aren’t as high as expected.

Did you ask the advisor what assumptions he was using?

Did he not run various scenarios based on different future return assumptions?

[Joel]

You wrote, 𝑴𝒚 𝒉𝒖𝒔𝒃𝒂𝒏𝒅 𝒘𝒊𝒍𝒍 𝒈𝒆𝒕 𝒂 $70𝒌/𝒚𝒆𝒂𝒓 𝒔𝒕𝒂𝒕𝒆 𝒑𝒆𝒏𝒔𝒊𝒐𝒏 𝒂𝒕 56 𝒘𝒉𝒆𝒏 𝒘𝒆’𝒅 𝒃𝒐𝒕𝒉 𝒍𝒊𝒌𝒆 𝒕𝒐 𝒇𝒖𝒍𝒍𝒚 𝒓𝒆𝒕𝒊𝒓𝒆.
𝒀𝒆𝒂𝒓𝒍𝒚 𝒆𝒙𝒑𝒆𝒏𝒔𝒆𝒔 𝒂𝒓𝒆 ~$100𝒌 𝒘𝒊𝒕𝒉 𝒎𝒐𝒓𝒕𝒈𝒂𝒈𝒆 𝒊𝒏𝒄𝒍𝒖𝒅𝒆𝒅. $85𝒌 𝒘𝒊𝒕𝒉𝒐𝒖𝒕 𝒎𝒐𝒓𝒕𝒈𝒂𝒈𝒆.

Your husband will have $70K/year from the state pension, but what about Social Security? Do you have a pension?

The median Social Security benefit today is about $2,000/month.

If you or your husband qualify for that and the other qualifies for the spousal gross up, you will receive about $36,000/year in additional income.

That’s already more than your retirement budget even with the mortgage.

The only concerns I see are:
* Covering the gap between when the pension starts and when Social Security starts.

* Dealing with inflation, assuming the pension isn’t inflation adjusted.

* Funding the children’s college tuition.

If you need about $30K/year from your portfolio for 11 years, you could pay for that with a TIPS ladder – at least as a baseline for planning purposes.

This would require a little more than $300K in from your $766K portfolio. That leaves you with say $450K to work with.

You’ve said your kids will cost about $240K in total. Remove that from your portfolio and you have $210K uncommitted.

You could keep that money invested and use it to cover gaps created by inflation or for travel, entertainment and other retirement activities.

𝑩𝒂𝒔𝒆𝒅 𝒐𝒏 𝒎𝒚 𝒎𝒐𝒅𝒆𝒍, 𝒘𝒆 𝒏𝒆𝒆𝒅 𝒂𝒃𝒐𝒖𝒕 $250𝒌 𝒂𝒅𝒅𝒊𝒕𝒊𝒐𝒏𝒂𝒍 𝒊𝒏𝒗𝒆𝒔𝒕𝒆𝒅 𝒃𝒆𝒇𝒐𝒓𝒆 𝒘𝒆 𝒄𝒐𝒖𝒍𝒅 𝒔𝒕𝒐𝒑 𝒄𝒐𝒏𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒏𝒈 𝒕𝒐 𝒐𝒖𝒓 𝒓𝒆𝒕𝒊𝒓𝒆𝒎𝒆𝒏𝒕 𝒂𝒄𝒄𝒐𝒖𝒏𝒕𝒔 𝒂𝒏𝒅 𝒋𝒖𝒔𝒕 𝒄𝒐𝒗𝒆𝒓 𝒆𝒙𝒑𝒆𝒏𝒔𝒆𝒔 𝒖𝒏𝒕𝒊𝒍 56. 𝑫𝒐𝒆𝒔 𝒕𝒉𝒂𝒕 𝒔𝒆𝒆𝒎 𝒓𝒊𝒈𝒉𝒕?

Where do you get that number? Are you saying you won’t receive any Social Security benefits?

You said you are in your late 30s and don’t plan to return until your husband’s pension becomes available at 56.

It seems likely to me that you already have all the funds you need to meet that goal.

If you don’t think you’ll receive any Social Security benefits, I see where this is coming from. But that seems unlikely unless you are both working state governments and are not paying any Social Security taxes.

If you are paying Social Security taxes, I would at least assume you will receive 2/3rds of whatever the current Social Security estimate is for your benefits.

That’s got to be at least $24K/year between the two of you and that only leaves a gap of $6K/year to meet your goals. You can cover that will less than $250K in savings.

Would I have you just stop saving and investing? No, probably not.

But you should probably consider spending more now or … consider retiring earlier.

[Author]

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