What to do after "hitting our number?"
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What to do after "hitting our number?"
His Age: 47
Her Age: 42
Annual combined base W-2 salaries ~ $270k pre-tax (Bonus, if anything, is not included)
Average annual spending ~$45k
Total investible assets ~ $3.3M
Currently saving ~$10k/month in taxable plus maxing out 401k and HSA.
I originally had a goal of $3.3M to retire which hypothetically would give us a $100k/year budget. I further planned on an additional $200k in cash above this to build our dream retirement home on property we own.
However, there are plans to build a hog barn (CAFO) approximately 1.25 miles from the property and I am not sure that we will want to live there now. Also, my wife recently received a promotion and a significant raise. She has a defined benefit pension (not part of the assets above), that will pay her 1.5% of the average of her last 5 years salary X years of service when she retires. In 5 years that would be a pension worth $47k/year at her current salary.
We plan on working an additional 5 years to capture that pension bump as well as give time for the CAFO situation to be resolved or find a different property that we like elsewhere if necessary.
Given that, it is likely that we will be saving an even larger nest egg before we stop working. Our current asset allocation is ~60/40 stocks/bonds. We aren’t really planning on living lavishly when we retire but we do plan on maybe actually taking some vacations.
Should we just “stay the course” and continue our current trajectory? Should we “de-risk” and reduce our equity exposure further? Should we increase our equity allocation? Something else entirely?
We have no children and anything we have left over will be donated to local charities and/or potentially create a scholarship fund for local children.
I appreciate the wisdom of the B.org.
Her Age: 42
Annual combined base W-2 salaries ~ $270k pre-tax (Bonus, if anything, is not included)
Average annual spending ~$45k
Total investible assets ~ $3.3M
Currently saving ~$10k/month in taxable plus maxing out 401k and HSA.
I originally had a goal of $3.3M to retire which hypothetically would give us a $100k/year budget. I further planned on an additional $200k in cash above this to build our dream retirement home on property we own.
However, there are plans to build a hog barn (CAFO) approximately 1.25 miles from the property and I am not sure that we will want to live there now. Also, my wife recently received a promotion and a significant raise. She has a defined benefit pension (not part of the assets above), that will pay her 1.5% of the average of her last 5 years salary X years of service when she retires. In 5 years that would be a pension worth $47k/year at her current salary.
We plan on working an additional 5 years to capture that pension bump as well as give time for the CAFO situation to be resolved or find a different property that we like elsewhere if necessary.
Given that, it is likely that we will be saving an even larger nest egg before we stop working. Our current asset allocation is ~60/40 stocks/bonds. We aren’t really planning on living lavishly when we retire but we do plan on maybe actually taking some vacations.
Should we just “stay the course” and continue our current trajectory? Should we “de-risk” and reduce our equity exposure further? Should we increase our equity allocation? Something else entirely?
We have no children and anything we have left over will be donated to local charities and/or potentially create a scholarship fund for local children.
I appreciate the wisdom of the B.org.
Last edited by Crow Hunter on Wed Jun 23, 2021 2:54 pm, edited 3 times in total.
Re: What to do after "hitting our number?"
Assets provide options. You can literally do whatever you want.Crow Hunter wrote: ↑Wed Jun 23, 2021 11:47 amShould we just “stay the course” and continue our current trajectory? Should we “de-risk” and reduce our equity exposure further? Should we increase our equity allocation? Something else entirely?
And if you work another 5 years, saving $10K per month, you may have learn to to live lavishly in retirement…
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: What to do after "hitting our number?"
The easiest decision to make is after you hit your number, as you can make whatever decision.
Last edited by flyingaway on Wed Jun 23, 2021 1:59 pm, edited 1 time in total.
Re: What to do after "hitting our number?"
You're killing it. Congrats!
You seem pretty derisked to me already with the pension and plan to work longer. At this point, I think you could significantly lower your risk and move more towards bonds or other less risky assets (I wouldn't) or go the other way and increase your risk because the pension + SS + minimal withdrawals will meet your needs. Awesome that you have so many choices!
You seem pretty derisked to me already with the pension and plan to work longer. At this point, I think you could significantly lower your risk and move more towards bonds or other less risky assets (I wouldn't) or go the other way and increase your risk because the pension + SS + minimal withdrawals will meet your needs. Awesome that you have so many choices!
- anon_investor
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Re: What to do after "hitting our number?"
Have you considered maxing out I Bonds and EE Bonds annually (total $40k/yr). In 20 years, you would have an additional guaranteed income stream as EE Bonds started to double in Value and I Bonds protection against inflation.
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Re: What to do after "hitting our number?"
+++^flyingaway wrote: ↑Wed Jun 23, 2021 12:18 pm The easiest decision to make is after you hit you number, as you can make whatever decision.
60/40 is still quite conservative for your age and objectives, but if that is what helps you sleep well... that is fine! You already HAVE plenty of accumulation . More is always better, once wage income = ZERO!!! (I left employment pre age 50, single earner, hourly night shift pay = low), Our retiement savings is ~5x larger after 15+ yrs without wage income) Lots of other methods of income arrive once you aren't so busy working
Seems your plan(ning) is good, stick with it.
Consider doing RMD calculations, as you may want a Roth conversion strategy in your future 'low / no income years'. You may also want to position assets for future tax / sustainable use. (We opened a DAF in our 30's to allocate our appreciated assets for future contributions / donations during retirement years) Often have used Section 179's (Accelerated depreciation), 1031's and various other planning tools (capital gain defferals / $500k tax free gains on private residence every 24 months...) + readjusting our cost basis on LT gains / properties during low income years.
Do some significant travel / future home location evaluation while you have PAID vacation
We really love our view, quiet, pleasant environment homes, much more than pre-retirement when we could not stay home and enjoy those homes. don't settle for second best location, especially if Building your own (that is at least a year out of your precious remaining time together.)
Find the nest / home that can recharge and sustain you into chapter 1-2 of retirement. We keep a few very inexpensive homes in great USA destination areas, each are rural with big house rented FT to a very narrow selection of tenants (retirees preferred). There is also a cabin + shop + RV hook-ups + a cheap used car on each property for us to use at will. (Cash flows, equity gain, deductions = self supporting homes while we travel, sometimes a year at a time away from USA.)
We have used Guest homes world-wide for over 30 yrs and that really enhances our travel and cultural exchange. We also volunteer for months at a time at international trade schools (Free room and board and a lot of engagement with local people.)
https://wikitravel.org/en/Hospitality_exchange
All kinds of options , you have done well in your planning and preparation. Proceed with confidence and don't miss a minute of enjoyment.
Re: What to do after "hitting our number?"
Congratulations. You both are doing great. Working another five years to capture that pension is a great idea. I would continue saving until you are ready to retire. If you are like us, we are finding it difficult to spend the money in retirement on ourself. Although Roth conversions does take some of our cash. LOL
"I started with nothing and I still have most of it left."
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Re: What to do after "hitting our number?"
This is your biggest problem IMO.David Jay wrote: ↑Wed Jun 23, 2021 11:59 amyou may have learn to to live lavishly in retirement…Crow Hunter wrote: ↑Wed Jun 23, 2021 11:47 amShould we just “stay the course” and continue our current trajectory? Should we “de-risk” and reduce our equity exposure further? Should we increase our equity allocation? Something else entirely?
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Re: What to do after "hitting our number?"
I have been thinking about that instead of putting more in our taxable account. I haven't pulled the proverbial trigger on that yet though.anon_investor wrote: ↑Wed Jun 23, 2021 12:46 pm Have you considered maxing out I Bonds and EE Bonds annually (total $40k/yr). In 20 years, you would have an additional guaranteed income stream as EE Bonds started to double in Value and I Bonds protection against inflation.
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Re: What to do after "hitting our number?"
Thank you for that information. I hadn't really thought to much about any international travel and our investigating places to live would still be in my home state, preferably close to where I grew up (where we own property now). We like it here, just not too keen on living close to a CAFO.StealthRabbit wrote: ↑Wed Jun 23, 2021 1:15 pm+++^flyingaway wrote: ↑Wed Jun 23, 2021 12:18 pm The easiest decision to make is after you hit you number, as you can make whatever decision.
60/40 is still quite conservative for your age and objectives, but if that is what helps you sleep well... that is fine! You already HAVE plenty of accumulation . More is always better, once wage income = ZERO!!! (I left employment pre age 50, single earner, hourly night shift pay = low), Our retiement savings is ~5x larger after 15+ yrs without wage income) Lots of other methods of income arrive once you aren't so busy working
Seems your plan(ning) is good, stick with it.
Consider doing RMD calculations, as you may want a Roth conversion strategy in your future 'low / no income years'. You may also want to position assets for future tax / sustainable use. (We opened a DAF in our 30's to allocate our appreciated assets for future contributions / donations during retirement years) Often have used Section 179's (Accelerated depreciation), 1031's and various other planning tools (capital gain defferals / $500k tax free gains on private residence every 24 months...) + readjusting our cost basis on LT gains / properties during low income years.
Do some significant travel / future home location evaluation while you have PAID vacation
We really love our view, quiet, pleasant environment homes, much more than pre-retirement when we could not stay home and enjoy those homes. don't settle for second best location, especially if Building your own (that is at least a year out of your precious remaining time together.)
Find the nest / home that can recharge and sustain you into chapter 1-2 of retirement. We keep a few very inexpensive homes in great USA destination areas, each are rural with big house rented FT to a very narrow selection of tenants (retirees preferred). There is also a cabin + shop + RV hook-ups + a cheap used car on each property for us to use at will. (Cash flows, equity gain, deductions = self supporting homes while we travel, sometimes a year at a time away from USA.)
We have used Guest homes world-wide for over 30 yrs and that really enhances our travel and cultural exchange. We also volunteer for months at a time at international trade schools (Free room and board and a lot of engagement with local people.)
https://wikitravel.org/en/Hospitality_exchange
All kinds of options , you have done well in your planning and preparation. Proceed with confidence and don't miss a minute of enjoyment.
We don't use much vacation now. I am just randomly taking off days now to "burn" vacation so I don't lose it. I think I have something like 450 hrs of vacation built up. We just don't really "do" much. Just going home and watching a movie or walking the dog or going fishing is pretty satisfying for us.
Your lifestyle does sound interesting.
Re: What to do after "hitting our number?"
i have a more conservative view than most, born out my experience of friends forced back into the workforce at significantly lower comp points after 2008. I think the question you want to ask yourself is how will you feel if the market loses 25% or 50% of its of value? the answer to those questions led me to a more conservative asset allocation...one where we could lose 50% of our portfolio and still have a nice retirement.
personally, I'd be tempted to lower my exposure to equities now to say 30 to 40% while allocating all new investment dollars to equities until you hit your target aa.
good luck!
personally, I'd be tempted to lower my exposure to equities now to say 30 to 40% while allocating all new investment dollars to equities until you hit your target aa.
good luck!
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Re: What to do after "hitting our number?"
I would stay the course with your asset allocation. The pension alone will cover existing expenses. Then add in social security and you're probably around your $100k a year goal. The $3.3M portfolio is extra.
I think the more interesting question is, how do you want to spend your time after you retire?
I think the more interesting question is, how do you want to spend your time after you retire?
Re: What to do after "hitting our number?"
I would suggest that you consider a bit more conservative allocation e.g. 50/50 or 45/55. Asset preservation is now more important than high growth--and you will still get some growth. Also, consider making sure your fixed income has a decent allocation to "safer" assets. I have a fixed income allocation of about 50% intermediate bond funds, 25% short term bond funds and 25% FDIC products/money market funds.
It is often difficult changing from more of a growth mode to an asset preservation mode but it may be what is best especially when equities have been on a long winning streak.
It is often difficult changing from more of a growth mode to an asset preservation mode but it may be what is best especially when equities have been on a long winning streak.
- Devil's Advocate
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Re: What to do after "hitting our number?"
Clearly you are doing excellent for your stated goals.
Your asset allocation seems well reasoned based on your income expectations and needs in retirement. I think security is more important than swinging for the fences.
As far as your dream home goes the property within a mile of a hog confinement is concerning. That being said it all depends on the location of the hogs and the prevailing winds. In rural areas where you seem to want to be in there will always be a possibility of another hog confinement going up near anywhere you build.
In some of the areas I work there can be a hog smell in the town. Therefore if you live in these parts of the country you sometimes just have to deal with it. I agree I wouldn't build my dream home if a hog confinement building was a mile south of me either.
Good luck and congrats on your situation!
DA
Your asset allocation seems well reasoned based on your income expectations and needs in retirement. I think security is more important than swinging for the fences.
As far as your dream home goes the property within a mile of a hog confinement is concerning. That being said it all depends on the location of the hogs and the prevailing winds. In rural areas where you seem to want to be in there will always be a possibility of another hog confinement going up near anywhere you build.
In some of the areas I work there can be a hog smell in the town. Therefore if you live in these parts of the country you sometimes just have to deal with it. I agree I wouldn't build my dream home if a hog confinement building was a mile south of me either.
Good luck and congrats on your situation!
DA
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Re: What to do after "hitting our number?"
This one will be to the east with two wooded ridges between the planned location and the CAFO is planned to be in a low spot surrounded by trees. We are hoping to fight it off. It is being placed in a location that hasn't had any type of livestock farming ever. It has only been row crop farming since my family first settled the area in the 1830's. So it won't be covered by state "Right to Farm" laws since it is a significant change in farming practices. It was initially proposed in March of last year, building still hasn't started. We shall see.Devil's Advocate wrote: ↑Thu Jun 24, 2021 6:56 am Clearly you are doing excellent for your stated goals.
Your asset allocation seems well reasoned based on your income expectations and needs in retirement. I think security is more important than swinging for the fences.
As far as your dream home goes the property within a mile of a hog confinement is concerning. That being said it all depends on the location of the hogs and the prevailing winds. In rural areas where you seem to want to be in there will always be a possibility of another hog confinement going up near anywhere you build.
In some of the areas I work there can be a hog smell in the town. Therefore if you live in these parts of the country you sometimes just have to deal with it. I agree I wouldn't build my dream home if a hog confinement building was a mile south of me either.
Good luck and congrats on your situation!
DA
Thank you for your comment!
Last edited by Crow Hunter on Thu Jun 24, 2021 10:26 am, edited 1 time in total.
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Re: What to do after "hitting our number?"
Even with the potential of inflation taking off?Dandy wrote: ↑Thu Jun 24, 2021 6:39 am I would suggest that you consider a bit more conservative allocation e.g. 50/50 or 45/55. Asset preservation is now more important than high growth--and you will still get some growth. Also, consider making sure your fixed income has a decent allocation to "safer" assets. I have a fixed income allocation of about 50% intermediate bond funds, 25% short term bond funds and 25% FDIC products/money market funds.
It is often difficult changing from more of a growth mode to an asset preservation mode but it may be what is best especially when equities have been on a long winning streak.
I originally set my target allocation of 55/45 based on looking at the top 15 Target retirement funds allocation at retirement date and that is what they averaged out as.
Right now all my fixed income is in intermediate bond funds. Vanguard Total Bond and International Bond in my Conservative Growth Lifestrategy funds and Fidelity Intermediate Bond funds in my 401k.
I appreciate your insight.
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Re: What to do after "hitting our number?"
No one can answer the question whether you should keep working once you have enough to retire. Personal choice and different in everyone's case.
I kept working after reaching my number because I genuinely enjoyed the work - the extra money was a nice but unnecessary bonus. A few years later work was no longer fun for me, and I immediately retired. If you dislike work and have reached your number, I'd recommend quitting in any event.
As a result of the extra money, my wife and I have more flexibility on the luxury side, such as eating out and flying in 1st class. As I said, nice but not necessary.
As to investments, I always hold equities between 40-60% in retirement. Conservative, but I don't want to lose 50-60% in a down market. I still enjoy the gains.
I kept working after reaching my number because I genuinely enjoyed the work - the extra money was a nice but unnecessary bonus. A few years later work was no longer fun for me, and I immediately retired. If you dislike work and have reached your number, I'd recommend quitting in any event.
As a result of the extra money, my wife and I have more flexibility on the luxury side, such as eating out and flying in 1st class. As I said, nice but not necessary.
As to investments, I always hold equities between 40-60% in retirement. Conservative, but I don't want to lose 50-60% in a down market. I still enjoy the gains.