re: Retirement Outlook - Will I Ever Retire?

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then max out your ROTH each year,

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This is really application specific. For folks who are going to be practical in retirement, traditional can be a better choice than Roth. It all just depends on a bunch of different variables.

Assumptions:
Age: 31
Retirement Age: 63
Current Investment balance (401k + Roth): 55,300
Monthly Investment contributions (401k + Roth): 1690
Annual Return: 7%

Estimated Value of Portfolio at retirement: 2.9M

I used this simple calculator LINK and plugged in all the above assumptions to get $2.9M.

Depending on the calculator you are using, you may get slightly different results - the number of periods to compound interest can vary.

Current spend: 42k per year
Retirement needed in today's dollars (25 x 42k): 1,050,000
Retirement needed in 2055 dollars with 4% inflation: $3,768,000
Annual spend in Year 1 of retirement: 150,720 ($3.77M x 4%)

Dollars yielded in Year 1 of retirement from your investments: 116,000 ($2.9M x 4%)
Dollars yielded from pension: 41,500
Total Dollars to Spend in Year 1 of retirement: 157,500

Actual spend of 157,500
Budget spend of 150,720
Surplus of 6780

So, you're pretty close using your metrics, but it probably wouldn't hurt to save more than you planned. 42k for spending isn't a lot, particularly as you age.

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I know you guys get sick and tired of me saying this, but why in the world would you not just retire somewhere else that would let you retire 10, 15 if not 20 years early?

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Sorry bro most of us aren’t a bunch of milo yiannopoulos lookalikes with Peter Pan syndrome and have reasons to stay here

I will say that when the us gets rid of ownership of private property in 2028 I am gone pecan to the 3rd world

Most 3rd worlders have it better than us and their elections are fair

I would aim to max tax advantaged retirement accounts every year.

You could start an IRA for your spouse too.

General advice is usually to get full employer match then max IRA but you'll need to figure out if Roth or traditional is best in your tax bracket now vs future during drawdown.

I didnt see where you addressed medical insurance during retirement. That may increase projected expenses.

During retirement drawdown phase taxes may be lower if you have a mix of taxable, pre tax and post tax buckets to draw from. Keep in mind income tax rates are progressive so a portion of traditional balances and pension will be taxed at zero and lowest bracket at time of withdrawal. Withdrawals also aren't subject to FICA taxes like your employment income is.

Do you have full or partial survivorship benefits on spouses pension? If not full, make sure to account for loss of pension if you out live her.

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Multiply your desired yearly spend times 25. That’s your target number under the 4% rule. Assuming a 5% stock market growth rate, you can safely withdraw 4% a year forever.

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It's projected spend in today's dollars then you adjust for inflation to get a projected spend at retirement. The projected spend should also be after deducting for other income streams (pension, SS, rental income etc). Then multiply by 25 to get your target investment # based on a 60/40 equity/bond portfolio (if I recall correctly.)

The 4% SWR is based on running Monte Carlo simulations using historic returns ups and down. Not based on a 5% return. In 90+% of those cases the portfolio survives a typical retirement of I think of was 30 years tested. Even so, a small percent of cases fail meaning the investment is completely depleted and retiree would have been broke. Many cases led to vast gains above starting balance. Assuming 5% return is a vast oversimplification and could lead to over confidence in real world success. Ideally real retirees should be prepared to modify annual spending in down markets especially early in withdrawal phase to mitigate sequence of returns risk.

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Spending in retirement –

So, for our monthly bills if you take out mortgage, day care, etc. etc.(things we shouldn’t have in retirement) our remaining “bills” $1000/month to be conservative, or $12,000/year. Assuming 4% inflation, at age 63 this will be $43,800/year. (this sounds insane, maybe math is off?!)

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You will still likely have supplemental health insurance, and definitely pay taxes on SS income and $ from deferred retirement accounts (401k), and presumably dine out, go on vacations (ie, that is what retirement is about), own vehicles, auto repairs, pay insurance on cars, get a hobby (golf, fishing, UFO watching), give gifts, attend weddings, buy clothes, go to concerts, donate to charities, watch the future-equivalent of hologram television and by then travel to the moon, and own an intergalactic smart phone.

Go with PV = $10,000 per month even though it seems infathomable to you now. That way you will at least be leaning in the direction of investing / saving more for retirement and having nest egg than can handle economic down turns, if not black swan events.

Simple math, using 4% rule (ie, take 4% of nest egg to live on), and that is:

($120,000/year) / .04 = $3 million nest egg needed

Aim high with all that time value potential in front of you.

Good luck!

Whether to do traditional or Roth (you can do either in a 401k or IRA) is a matter of current tax bracket versus expected future tax rate.

It is further complicated by the fact you are comparing you top tax bracket today versus future tax rate of withdrawals that are likely to include portions of lower and higher brackets. But it basically boils down to do you think you will pay more today versus in future during withdrawal phase.

Given same rate of return and equal tax rate it wouldnt matter if you did traditional or Roth. The math is same for paying tax now versus later. But in reality your taxes likely wont be the same so you have to make an informed guess which tax rate will be higher.

By hedging your bets and putting some in various tax buckets you can optimize taxes during withdrawal by pulling from different sources to avoid higher brackets, ACA health insurance subsidy cliffs etc...

All things equal, Roth IRA is more flexible than a 401k because you can pull contributions tax and penalty free at anytime (I wouldnt except for a crisis.) IRA (Roth or traditional) is able invest in more things not limited to what is in your particular 401k offerings. And fees can be lower if you go with a low cost brokerage and invest in index funds.

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I know you guys get sick and tired of me saying this, but why in the world would you not just retire somewhere else that would let you retire 10, 15 if not 20 years early?

What holds most people back from this?

Friends? You can make new friends anywhere in the world. People do it all the time.

Family? I still see my mom and dad as much (if not more) than my siblings that live 3 hours away.


USA is a very expensive place to live and is honestly very shitty compared to many cheap retirement spots in the world.

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So you are saying that people should leave their family and friends and move to a foreign country? Sounds realistic.

OP is in MS, believe it’s 2% for 30 years and 2.5% after, but don’t quote me on this.