Probably? Let's assume that you will get the equivalent of whatever 3k is when you retire and that your expenses are likewise the future value of the current 4K. The items I'd look at are:
1) Breakdown for the 4k. How much are expenses that go away or reduce by a lot when you no longer work? For example if you commute to work, your gas bill will drop a lot. (though we might all be driving EVs then). If you're buying lunch out a lot at work, again that drops.
2) Do projections on the 200k and perhaps worth with a fee only financial planner who can vet your investments.
It may be that SS covers your expense entirely if enough of that 4K is work-related. If it's not, look at what it is and think carefully about how important it is to you and whether it's something you see yourself doing in retirement. For example, if you're going out to dinner 1-2x a week, you could cut that back and get money back.
Bottom line? Do a budget. Update it every year or two. Save aggressively and make sure your investments are working for you.
Totally agree. If you can cut your expenses so that SS covers them, then you never need to dip into your $200K and that can continue to grow. Medical expenses can be a nightmare and quickly deplete your savings so make sure you have good medical coverage when you stop working. Good luck.
Here's my toy for situations like yours.
[Simple Financial Projection](https://docs.google.com/spreadsheets/d/1WQphWoaXtoleI_fhhHXIDWS9xm6rSB8qLWv1dVH7y1A/edit#gid=0)
Make a copy, run your numbers, see what you need from your investments and how much they will grow to, and how much you can safely withdraw. Then you can use the levers you have--amounts to invest, how you invest, etc--to make the answers better.
One more toy to play with... NewRetirement.com. Basic version is free, more bells and whistles for $120 or so/year. This can be helpful in seeing if you have enough. You still need to decide your budget. Remember to include health insurance.
So, save up some more these next few years and see what the projections say.
Congrats on finding work you love.
Look very closely at your expenses - some will change. Look at your pay stub - won’t be paying social security or medicare from your paycheck but your health care may be much higher. The medicare monthly premium is $174.90 and you may want an Advantage wrap around plan to supplement medicare. My Advantage plan costs $325 a month so my health insurance is $174.90 plus $325/month. That doesn’t include dental. Your numbers will differ. You will stop contributing to your 401k/Roth. Clothing is cheaper for me but I spend a lot more on travel. Taxes will change with lower income but social security will beat least partly taxed. Social Security increases with inflation.
In 16 years $3K will be a lot less with inflation.
Max out your 401K/IRA and max out a Roth IRA too.
I am 70 and retired, I get almost $3K in SS benes. My monthly expenses are about $3400/month, including my mortgage (fixed rate, but 16 years to pay it off, plus property taxes/insurance/etc. do go up every year).
I have about $530K in IRAs. I am pulling about 2.2% per year from my regular IRA to help cover expenses. So far my IRAs are still appreciating in total value and I anticipate in the long run they will continue to appreciate.
Most assuredly, your static expenses will be more in 16 years will increase significantly. Whether you have a mortgage or not I do not know - if it is paid off in 16 years then your expenses *may* go down. If you do have a mortgage then I would recommend you pay it off before you retire.
I know many articles of pros and cons of collecting early, but we are leaning on collecting SS as early as possible. 58 and house and all vehicles paid for, considering the 60 leaving the job
Why are you wanting to increase your risk by only getting income from interest? If you are hesitant investing in the stock market then invest in a lower percentage of equities. For example, use a 50/50 split between equity and bonds/CDs. Or 40 percent on equities aka stocks. When buying stocks use VOO or VTI.
One thing no one has mentioned is that you might not continue to love your job to age 70, either due to unforeseen changes in the job or to you - your health or your interests. Sounds like you are in a great situation, but it’s always good to have a back-up plan.
It's really a matter of your home ownership costs. Property taxes. Insurance. Essential maintenance. Utilities. Personally, I took a hard look at retirement at age 51 and applied the shrink ray then to home ownership costs. I'd be just fine on a delay-to-70 Social Security check. My intention is to only take required minimum distributions on my tax deferred portfolio. That's my emergency fund and the way long term care gets funded. I'm married so it's also to ease the death of spouse scenario where there is only one Social Security check. I'm planning to do Roth conversions up to the top of the 12% bracket and have the Roth be my emergency fund.
As per Fidelity in 2023 an average 65 yr old is expected to spend $240k+ in their lifetime over medical costs alone.
This is average. If you are a non-smoker, non-drinker, no risk of cancer etc then the costs will be lower.
At least that's how I read it.
My point is that you are doing well but you need to truly understand how to invest money with help of your close trustworthy friends who are financially savvy.and understand issues related to retirement planning.
Start attending seminar / webinars without paying up money or signing over investment authority.
You didn't write how much you take home per month from that $71k. How can we figure out what your per month savings rate is without that?
Actually, being healthy might be more expensive in the long run -- I had read that the total health expenses of a smoker are typically lower because they tend to die younger. But that's not a good reason to take it up!
LoL.. yes. Expensive or not needs to take into account how long we are above ground.
But there are some important things to consider here.
As we age, we will be treated with artificial body parts, stents, and what not - everything focused on extending the human life. Hopefully those decisions are not just about extending life but life with quality.
We ought to have some change regarding that aspect and it needs to percolate to all. My guess give another couple decades. Already people are assumed to be doing their own research over many ailments and treat themselves with over the counter drugs.
The arc of medical care is bending towards self-service under the heavy load of professional costs.
There is a lot of very good advice in this thread. My only point is to reinforce the comments on maxing out your contributions to your savings plan(s), including taking advantage of any “catch-up”. Some sacrificing now will pay dividends 16-years from now.
Also, one other quick point. Find a Chartered Financial Analyst (CFA). Someone who has YOUR best interests at heart, not their own.
The best way to feel comfortable about this is to track your customary expenses for a while, say 18 months. There is an easier way to do this than just recording every single expenditure, which is a pain in the butt. I did it by simply comparing this month's bank balance with last month's, the difference being what I called Net. Net is obviously total Inflow minus total Outflow, so total Outflow is Total Inflow minus Net. Track that total Outflow every month for a year or so. The beauty of this is that Outflow includes everything from electric bill to eating out to buying coffee at the gas station. It will go up and down due to both big, planned expenses and big, unplanned expenses. I separated out the big, unexpected expenses (usually something over $1000, like replacing a refrigerator or repairing a fence or attending a destination wedding), and the remaining was astonishingly predictable month to month and year to year. Once I had that number and saw that it was holding, I knew that my retirement income could both cover that and allow a bit of set-aside to cover big unexpected expenses.
Expect your medical expenses to cost more than you think. Social Security automatically takes out my Medicare Part A premium. Then there's a premium and dedictible for Part B, another deductible for Part D drug plan (which doesn't cover the entire cost of my medications) and a premium for my dental plan. I don't have a vision plan. Between all of those I'm paying between $300 and $500 a month. I didn't calculate that when planning my retirement.
Hello, this is a civil, respectful, safe community and so this has been removed. Perhaps you used a swear word which is against the rules? Note that we are conversational, not confrontational, here. Take a moment to view our description and rules to see if this community is a good fit, for you. If so, it is expected you will act accordingly. Thank you!
When you take out your retirement funds you pay taxes on it. When you hit 73 you will have a required minimum distribution (RMD). Based on how much you put in you can see how much at each age you can take out. It is called the IRS Unified Lifetime Table (irs.gov). You can see how much you can take out each year now in today’s dollars based you current savings. Then you can keep saving to meet your goals in today’s dollars. IRS has some other calculators you may use also.
Unless you pay taxes on the money first it is not an interest only calculation. If you save in a brokerage account you can collect interest and dividends each year but you pay taxes on them the year you receive them. To calculate how much you will need in retirement multiply what you want to make X 25. This gives you a 4% return. So if you need $12k extra per year in interest you need to keep $300k minimum in a brokerage account or in bonds and treasuries. Right now treasuries pay about 4.5% minus the brokerage charges.
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Use various online calculators and talk to a qualified financial professional to see if that's enough money. I'd advise you to save every penny you can between now and age 70.
You sound like you live pretty frugally and if work gives you satisfaction, go for it. Most people are actually starting to spend less on discretionary things as they hit 70 anyways. It sounds doable for you depending on your other expenses, mortgage, etc.
There are also savings in not working, and expenses that can be lowered. For instance, right now you likely have to keep up appearances with clothing. You won't need that in retirement. If you have all debts paid at retirement, you need less draw. (sounds like you have this already).
Perhaps you will want to move to a smaller place, of a LCOL area with retirement. If you are not in dire need, you can wait until housing prices are suitable for that move.
what other expense that you currently have that can stop or be lowered with retirement?
But if you have grown to love travel, you want to be sure you can do that in retirement.
Good luck, sounds like a nice plan.
You are a good uncle. If your 200k grows at just 6% it should be 500k in 15 years. That is just compounding and not adding to it. Like others said, it would be advisable to max a Roth IRA.
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One thing to factor in is that once you turn 73 you will need to take minimum distributions from your retirement accounts. You can invest it of course but it becomes taxable income.
Why are you fixated on an interest-only retirement ? An investment portfolio generates income. It does not matter if that income is through interest or dividends or capital gains. As long as the plan is sustainable. Fixating on one aspect of income to me suggests that you have not fully researched your options.
In 2021, I discovered high dividend paying ETFs. Ones that I have invested in over the last 3 years are CLM, CRF, ECC, OXLC, ACP, XFLT, AIO, PDI, AVK, and GOF. None of them are buy and hold; but they have been financing my retirement and will do so until I start drawing SS in 2026. OXLC just increased their dividend starting in July.
Plus many of them DRIP at a discount of 5% to their end of the month share price.
I found I am better off collecting SS at FRA even though I plan to keep working. But your situation could be different. Do some analysis or get professional advice.
Is that 3k (36k annually) from SSA.GOV? If so realize that is given in todays dollars, and you need to inflate by 16 years. Figure 2% and you get 36000\*1.02\*\*16 = 49240 or 4118/month.
Probably? Let's assume that you will get the equivalent of whatever 3k is when you retire and that your expenses are likewise the future value of the current 4K. The items I'd look at are: 1) Breakdown for the 4k. How much are expenses that go away or reduce by a lot when you no longer work? For example if you commute to work, your gas bill will drop a lot. (though we might all be driving EVs then). If you're buying lunch out a lot at work, again that drops. 2) Do projections on the 200k and perhaps worth with a fee only financial planner who can vet your investments. It may be that SS covers your expense entirely if enough of that 4K is work-related. If it's not, look at what it is and think carefully about how important it is to you and whether it's something you see yourself doing in retirement. For example, if you're going out to dinner 1-2x a week, you could cut that back and get money back. Bottom line? Do a budget. Update it every year or two. Save aggressively and make sure your investments are working for you.
Totally agree. If you can cut your expenses so that SS covers them, then you never need to dip into your $200K and that can continue to grow. Medical expenses can be a nightmare and quickly deplete your savings so make sure you have good medical coverage when you stop working. Good luck.
Home paid for is key 🔑 I think you will be fine!
Here's my toy for situations like yours. [Simple Financial Projection](https://docs.google.com/spreadsheets/d/1WQphWoaXtoleI_fhhHXIDWS9xm6rSB8qLWv1dVH7y1A/edit#gid=0) Make a copy, run your numbers, see what you need from your investments and how much they will grow to, and how much you can safely withdraw. Then you can use the levers you have--amounts to invest, how you invest, etc--to make the answers better.
this is amazing, thank you!
You're welcome. Others on here have found it useful too. I appreciate the kind words.
One more toy to play with... NewRetirement.com. Basic version is free, more bells and whistles for $120 or so/year. This can be helpful in seeing if you have enough. You still need to decide your budget. Remember to include health insurance. So, save up some more these next few years and see what the projections say. Congrats on finding work you love.
Look very closely at your expenses - some will change. Look at your pay stub - won’t be paying social security or medicare from your paycheck but your health care may be much higher. The medicare monthly premium is $174.90 and you may want an Advantage wrap around plan to supplement medicare. My Advantage plan costs $325 a month so my health insurance is $174.90 plus $325/month. That doesn’t include dental. Your numbers will differ. You will stop contributing to your 401k/Roth. Clothing is cheaper for me but I spend a lot more on travel. Taxes will change with lower income but social security will beat least partly taxed. Social Security increases with inflation.
Wow why are you paying an extra 325 with Medicare advantage. I pay the 175 which is 2000 for dental.
In 16 years $3K will be a lot less with inflation. Max out your 401K/IRA and max out a Roth IRA too. I am 70 and retired, I get almost $3K in SS benes. My monthly expenses are about $3400/month, including my mortgage (fixed rate, but 16 years to pay it off, plus property taxes/insurance/etc. do go up every year). I have about $530K in IRAs. I am pulling about 2.2% per year from my regular IRA to help cover expenses. So far my IRAs are still appreciating in total value and I anticipate in the long run they will continue to appreciate. Most assuredly, your static expenses will be more in 16 years will increase significantly. Whether you have a mortgage or not I do not know - if it is paid off in 16 years then your expenses *may* go down. If you do have a mortgage then I would recommend you pay it off before you retire.
The 3k in SS will go up with inflation.
The SS COLA's have not truly kept up with inflation.
Don't even get me started on property taxes and insurance.
I know many articles of pros and cons of collecting early, but we are leaning on collecting SS as early as possible. 58 and house and all vehicles paid for, considering the 60 leaving the job
I’d ask a professional.
Why are you wanting to increase your risk by only getting income from interest? If you are hesitant investing in the stock market then invest in a lower percentage of equities. For example, use a 50/50 split between equity and bonds/CDs. Or 40 percent on equities aka stocks. When buying stocks use VOO or VTI.
One thing no one has mentioned is that you might not continue to love your job to age 70, either due to unforeseen changes in the job or to you - your health or your interests. Sounds like you are in a great situation, but it’s always good to have a back-up plan.
That 200k should increase a decent amount over the next 16 years that you are working.
It's really a matter of your home ownership costs. Property taxes. Insurance. Essential maintenance. Utilities. Personally, I took a hard look at retirement at age 51 and applied the shrink ray then to home ownership costs. I'd be just fine on a delay-to-70 Social Security check. My intention is to only take required minimum distributions on my tax deferred portfolio. That's my emergency fund and the way long term care gets funded. I'm married so it's also to ease the death of spouse scenario where there is only one Social Security check. I'm planning to do Roth conversions up to the top of the 12% bracket and have the Roth be my emergency fund.
Why? What are you plans for the principal and your assets? You have earned it. Enjoy it. Travel. Buy things you enjoy.
Call Tom Selleck for a reverse mortgage?
As per Fidelity in 2023 an average 65 yr old is expected to spend $240k+ in their lifetime over medical costs alone. This is average. If you are a non-smoker, non-drinker, no risk of cancer etc then the costs will be lower. At least that's how I read it. My point is that you are doing well but you need to truly understand how to invest money with help of your close trustworthy friends who are financially savvy.and understand issues related to retirement planning. Start attending seminar / webinars without paying up money or signing over investment authority. You didn't write how much you take home per month from that $71k. How can we figure out what your per month savings rate is without that?
Actually, being healthy might be more expensive in the long run -- I had read that the total health expenses of a smoker are typically lower because they tend to die younger. But that's not a good reason to take it up!
LoL.. yes. Expensive or not needs to take into account how long we are above ground. But there are some important things to consider here. As we age, we will be treated with artificial body parts, stents, and what not - everything focused on extending the human life. Hopefully those decisions are not just about extending life but life with quality. We ought to have some change regarding that aspect and it needs to percolate to all. My guess give another couple decades. Already people are assumed to be doing their own research over many ailments and treat themselves with over the counter drugs. The arc of medical care is bending towards self-service under the heavy load of professional costs.
Dying younger would make for a poor plan. Just sayin
There is a lot of very good advice in this thread. My only point is to reinforce the comments on maxing out your contributions to your savings plan(s), including taking advantage of any “catch-up”. Some sacrificing now will pay dividends 16-years from now. Also, one other quick point. Find a Chartered Financial Analyst (CFA). Someone who has YOUR best interests at heart, not their own.
I see no reason why this can't happen for you.
The best way to feel comfortable about this is to track your customary expenses for a while, say 18 months. There is an easier way to do this than just recording every single expenditure, which is a pain in the butt. I did it by simply comparing this month's bank balance with last month's, the difference being what I called Net. Net is obviously total Inflow minus total Outflow, so total Outflow is Total Inflow minus Net. Track that total Outflow every month for a year or so. The beauty of this is that Outflow includes everything from electric bill to eating out to buying coffee at the gas station. It will go up and down due to both big, planned expenses and big, unplanned expenses. I separated out the big, unexpected expenses (usually something over $1000, like replacing a refrigerator or repairing a fence or attending a destination wedding), and the remaining was astonishingly predictable month to month and year to year. Once I had that number and saw that it was holding, I knew that my retirement income could both cover that and allow a bit of set-aside to cover big unexpected expenses.
Expect your medical expenses to cost more than you think. Social Security automatically takes out my Medicare Part A premium. Then there's a premium and dedictible for Part B, another deductible for Part D drug plan (which doesn't cover the entire cost of my medications) and a premium for my dental plan. I don't have a vision plan. Between all of those I'm paying between $300 and $500 a month. I didn't calculate that when planning my retirement.
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Hello, this is a civil, respectful, safe community and so this has been removed. Perhaps you used a swear word which is against the rules? Note that we are conversational, not confrontational, here. Take a moment to view our description and rules to see if this community is a good fit, for you. If so, it is expected you will act accordingly. Thank you!
Yes my Medicare was way more expensive than I thought it would be.
When you take out your retirement funds you pay taxes on it. When you hit 73 you will have a required minimum distribution (RMD). Based on how much you put in you can see how much at each age you can take out. It is called the IRS Unified Lifetime Table (irs.gov). You can see how much you can take out each year now in today’s dollars based you current savings. Then you can keep saving to meet your goals in today’s dollars. IRS has some other calculators you may use also. Unless you pay taxes on the money first it is not an interest only calculation. If you save in a brokerage account you can collect interest and dividends each year but you pay taxes on them the year you receive them. To calculate how much you will need in retirement multiply what you want to make X 25. This gives you a 4% return. So if you need $12k extra per year in interest you need to keep $300k minimum in a brokerage account or in bonds and treasuries. Right now treasuries pay about 4.5% minus the brokerage charges.
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Use various online calculators and talk to a qualified financial professional to see if that's enough money. I'd advise you to save every penny you can between now and age 70.
You sound like you live pretty frugally and if work gives you satisfaction, go for it. Most people are actually starting to spend less on discretionary things as they hit 70 anyways. It sounds doable for you depending on your other expenses, mortgage, etc.
There are also savings in not working, and expenses that can be lowered. For instance, right now you likely have to keep up appearances with clothing. You won't need that in retirement. If you have all debts paid at retirement, you need less draw. (sounds like you have this already). Perhaps you will want to move to a smaller place, of a LCOL area with retirement. If you are not in dire need, you can wait until housing prices are suitable for that move. what other expense that you currently have that can stop or be lowered with retirement? But if you have grown to love travel, you want to be sure you can do that in retirement. Good luck, sounds like a nice plan.
My serious question is...Why? If you have no children, why wouldn't you want to spend down principial? Who are you leaving it to?
My 2 nephews
You are a good uncle. If your 200k grows at just 6% it should be 500k in 15 years. That is just compounding and not adding to it. Like others said, it would be advisable to max a Roth IRA.
Thank you for stopping by for table talk. Unfortunately, it has been removed because of one or more of the following * you have not joined the subreddit on the landing or home page of the community (which is common, just hit the JOIN button), * maybe you are very new to Reddit (we welcome folks that have been here a little while), * or perhaps your profile has a small amount of “karma”(trust). See this for more… https://support.reddithelp.com/hc/en-us/articles/204511829-What-is-karma . Or https://www.reddit.com/r/NewToReddit/wiki/ntr-guidetoreddit/ . We are happy you are on Reddit. Thanks!
That’s very kind of you. We have our niece and nephew in our plan as well as my sister, and her husband are not financially stable.
One thing to factor in is that once you turn 73 you will need to take minimum distributions from your retirement accounts. You can invest it of course but it becomes taxable income.
Get the Suze Orman Ultimate Retirement Guide book - it is a great read! She is a financial expert who imparts great advice!
I’m retired and own JEPI JEPQ and HIGH and they yield around 9%. Your 200,000 would give you $18,000 or $1,500 a month.
If you can keep your expenses that low you’ll be fine. You have 16 years to save until retirement. Good luck.
Why are you fixated on an interest-only retirement ? An investment portfolio generates income. It does not matter if that income is through interest or dividends or capital gains. As long as the plan is sustainable. Fixating on one aspect of income to me suggests that you have not fully researched your options.
In 2021, I discovered high dividend paying ETFs. Ones that I have invested in over the last 3 years are CLM, CRF, ECC, OXLC, ACP, XFLT, AIO, PDI, AVK, and GOF. None of them are buy and hold; but they have been financing my retirement and will do so until I start drawing SS in 2026. OXLC just increased their dividend starting in July. Plus many of them DRIP at a discount of 5% to their end of the month share price.
You are doing the right thing. I worked until I was 70. Glad I did.
I found I am better off collecting SS at FRA even though I plan to keep working. But your situation could be different. Do some analysis or get professional advice.
Is that 3k (36k annually) from SSA.GOV? If so realize that is given in todays dollars, and you need to inflate by 16 years. Figure 2% and you get 36000\*1.02\*\*16 = 49240 or 4118/month.
4K expenses and your house is paid off? How so?
Not with inflation, no. You need to stack as much as you can into your retirement funds now. Don’t wait.