House Paid, zero debt, recently hit retirement savings milestone

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Topic Author
FrontRangeShane
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Joined: Sat Apr 17, 2010 1:12 pm

House Paid, zero debt, recently hit retirement savings milestone

Post by FrontRangeShane »

Good morning,
It's been a while since I've been here, but I have a question on retirement planning. A few stats about me first:

54 years old
100% debt free (mortgage paid off 2018). No credit card bills, no car payments, again no debt.
Just hit the $1 million mark in retirement savings.
Salary $84K/year
An assortment of Vanguard index fund investments
(this does not include my wife's retirement savings. Wife is an RN)
When the mortgage was paid I started putting in 32% of my salary into the company 401K plan which includes Vanguard index funds.

Should I continue to fund 32% of my salary into my 401K or should I live a little? I find myself wanting a career change yet I appreciate the amount of money I'm saving and investing. The more I invest now, the more I will enjoy retirement. But is this true?

Thanks for the input.

FRS
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by Jack FFR1846 »

Going by the Trinity study, that million will give you a $40k income for 30 years. I don't see what your current spending is or when you plan to retire or what your expected number of retirement years might be. How much you spend and how much you save determine when you can comfortable.
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Topic Author
FrontRangeShane
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by FrontRangeShane »

Thanks Jack. I don't spend much, $1000/month tops (if that). I should also add my wife has about $300K in her 401K invested in various index funds (very similar to me). Three books that influenced my investing strategy are Common Sense on Mutual Funds, The Intelligent Investor, and the Millionaire Next Door. The $1,000,000 mark does not include the worth of my home which has recently risen above $500,000.
vtsnowdin
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by vtsnowdin »

I'm not one of the experts here so just my thoughts. First congratulations with house paid for and 1M in the portfolio.
Assuming the index funds don't suddenly stop growing at all You can probably withdraw the $57,120/year you are living off of indefinitely so you are free to go at this station. I would consider that at age 54 you can do and enjoy some active things now that might not be fun or possible at age 67 so what you want to do while retired is a big factor today. Also your DW's wishes and plans need to mesh with yours .
A nice problem to have
. Good luck.
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markjk
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by markjk »

FrontRangeShane wrote: Mon Jan 17, 2022 6:23 am Should I continue to fund 32% of my salary into my 401K or should I live a little?
It's all about your goals, objectives, and the various trade-offs necessary to meet them. In addition, you have factors that can impact you in the future that you can't know right now such as market conditions, inflation, personal health, etc. There is always some level of risk in any decision.

You have to take where you are now on the goals path and determine what trade-offs you are comfortable with and decide. This is really a personal thing and depends on so many factors. But, based on what you've said, I think you are in good shape and if you desire to use some of that savings money today for discretionary means, it seems reasonable.
FrontRangeShane wrote: Mon Jan 17, 2022 6:23 am I find myself wanting a career change yet I appreciate the amount of money I'm saving and investing.
As far as the career goes, if you are in good shape on savings, you could be in a good position to make a career change to something that you are more passionate about. I'm assuming since you are asking, the career change would result in less income and savings. But, you've saved to this point and stayed out of debt so you have options. Not just retirement options, but career options.
FrontRangeShane wrote: Mon Jan 17, 2022 6:23 am The more I invest now, the more I will enjoy retirement. But is this true?
In reality, if you have enough money in retirement to do the things you want to do, then any money above that amount will have minimal to no impact on your enjoyment. So again, it goes back to your goals.
lasp506
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by lasp506 »

Rough outline of how to think about this kind of situation

1/ figure out your expected annual expense during retirement.

2/ see if you have (or will have) enough assets to fund those expenses when you retire. ..,... People often use the 4% rule for this. If you retire right now with your $1m , you can spend around $40k per year (plus social security and other pensions you may have). If you are risk averse, you can use a 3.5% or even 3% withdraw rate, which lowers it to $35k or $30k respectively. If you don't plan retiring now, project how much you think you will have when you retire and use these withdraw percentages to calculate your expected spending ability.

3/ if the number in steps 2/ is higher than step 1/ you can (theoretically) increase your current spending (or, equivalently lower your savings)
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vanbogle59
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by vanbogle59 »

vtsnowdin wrote: Mon Jan 17, 2022 6:48 am You can probably withdraw the $57,120/year
How did you get that number?
KlangFool
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by KlangFool »

FrontRangeShane wrote: Mon Jan 17, 2022 6:42 am Thanks Jack. I don't spend much, $1000/month tops (if that). I should also add my wife has about $300K in her 401K invested in various index funds (very similar to me). Three books that influenced my investing strategy are Common Sense on Mutual Funds, The Intelligent Investor, and the Millionaire Next Door. The $1,000,000 mark does not include the worth of my home which has recently risen above $500,000.
OP,

That number cannot be correct. If that's true, you should save more than 32% of your income.

At 32% of savings, you can spend about 20K to 28K per year. Why do you need to cut your savings in order to spend more?

KlangFool
Last edited by KlangFool on Mon Jan 17, 2022 7:01 am, edited 1 time in total.
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Sandtrap
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by Sandtrap »

FrontRangeShane wrote: Mon Jan 17, 2022 6:23 am Good morning,
It's been a while since I've been here, but I have a question on retirement planning. A few stats about me first:

54 years old
100% debt free (mortgage paid off 2018). No credit card bills, no car payments, again no debt.
Just hit the $1 million mark in retirement savings.
Salary $84K/year
An assortment of Vanguard index fund investments
(this does not include my wife's retirement savings. Wife is an RN)
When the mortgage was paid I started putting in 32% of my salary into the company 401K plan which includes Vanguard index funds.

Should I continue to fund 32% of my salary into my 401K or should I live a little? I find myself wanting a career change yet I appreciate the amount of money I'm saving and investing. The more I invest now, the more I will enjoy retirement. But is this true?

Thanks for the input.

FRS
You might get more comprehensive and contextual (for you) suggestions by inputting missing data and editing your original lst post to this format using the pencil icon.

Portfolio Review Request
https://www.bogleheads.org/forum/viewt ... =1&t=6212
Annual expenses in retirement? At what age expected? and so forth.

Otherwise, suggestions have to make a lot of assumptions non specific to you.

j :D
Wiki Bogleheads Wiki: Everything You Need to Know
vtsnowdin
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by vtsnowdin »

vanbogle59 wrote: Mon Jan 17, 2022 6:53 am
vtsnowdin wrote: Mon Jan 17, 2022 6:48 am You can probably withdraw the $57,120/year
How did you get that number?
His stated income minus his stated savings per year.
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vanbogle59
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by vanbogle59 »

vtsnowdin wrote: Mon Jan 17, 2022 7:06 am
vanbogle59 wrote: Mon Jan 17, 2022 6:53 am
vtsnowdin wrote: Mon Jan 17, 2022 6:48 am You can probably withdraw the $57,120/year
How did you get that number?
His stated income minus his stated savings per year.
gotcha. ty.
Topic Author
FrontRangeShane
Posts: 24
Joined: Sat Apr 17, 2010 1:12 pm

Re: House Paid, zero debt, recently hit retirement savings milestone

Post by FrontRangeShane »

KlangFool wrote: Mon Jan 17, 2022 6:56 am
FrontRangeShane wrote: Mon Jan 17, 2022 6:42 am Thanks Jack. I don't spend much, $1000/month tops (if that). I should also add my wife has about $300K in her 401K invested in various index funds (very similar to me). Three books that influenced my investing strategy are Common Sense on Mutual Funds, The Intelligent Investor, and the Millionaire Next Door. The $1,000,000 mark does not include the worth of my home which has recently risen above $500,000.
OP,

That number cannot be correct. If that's true, you should save more than 32% of your income.

At 32% of savings, you can spend about 20K to 28K per year. Why do you need to cut your savings in order to spend more?

KlangFool
Those numbers are indeed correct. Why would you think otherwise? I also have a savings account that I contribute to. I am puzzled by your comment...
KlangFool
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by KlangFool »

FrontRangeShane wrote: Mon Jan 17, 2022 7:24 am
KlangFool wrote: Mon Jan 17, 2022 6:56 am
FrontRangeShane wrote: Mon Jan 17, 2022 6:42 am Thanks Jack. I don't spend much, $1000/month tops (if that). I should also add my wife has about $300K in her 401K invested in various index funds (very similar to me). Three books that influenced my investing strategy are Common Sense on Mutual Funds, The Intelligent Investor, and the Millionaire Next Door. The $1,000,000 mark does not include the worth of my home which has recently risen above $500,000.
OP,

That number cannot be correct. If that's true, you should save more than 32% of your income.

At 32% of savings, you can spend about 20K to 28K per year. Why do you need to cut your savings in order to spend more?

KlangFool
Those numbers are indeed correct. Why would you think otherwise? I also have a savings account that I contribute to. I am puzzled by your comment...
FrontRangeShane,

Your salary = 84K per year.
32% of that = 27K
Expense = 12K per year

Taxes = 84K - 39K = 45K per year? 54%?

Gross income = Annual Expense + Annual savings + Taxes

KlangFool
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makingmistakes
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by makingmistakes »

FrontRangeShane wrote: Mon Jan 17, 2022 7:24 am
KlangFool wrote: Mon Jan 17, 2022 6:56 am
FrontRangeShane wrote: Mon Jan 17, 2022 6:42 am Thanks Jack. I don't spend much, $1000/month tops (if that). I should also add my wife has about $300K in her 401K invested in various index funds (very similar to me). Three books that influenced my investing strategy are Common Sense on Mutual Funds, The Intelligent Investor, and the Millionaire Next Door. The $1,000,000 mark does not include the worth of my home which has recently risen above $500,000.
OP,

That number cannot be correct. If that's true, you should save more than 32% of your income.

At 32% of savings, you can spend about 20K to 28K per year. Why do you need to cut your savings in order to spend more?

KlangFool
Those numbers are indeed correct. Why would you think otherwise? I also have a savings account that I contribute to. I am puzzled by your comment...
Property taxes, car expenses, groceries, utilities, phone, charitable contributions, …. all included in that $1000/month tops?
Topic Author
FrontRangeShane
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by FrontRangeShane »

KlangFool wrote: Mon Jan 17, 2022 7:39 am
FrontRangeShane wrote: Mon Jan 17, 2022 7:24 am
KlangFool wrote: Mon Jan 17, 2022 6:56 am
FrontRangeShane wrote: Mon Jan 17, 2022 6:42 am Thanks Jack. I don't spend much, $1000/month tops (if that). I should also add my wife has about $300K in her 401K invested in various index funds (very similar to me). Three books that influenced my investing strategy are Common Sense on Mutual Funds, The Intelligent Investor, and the Millionaire Next Door. The $1,000,000 mark does not include the worth of my home which has recently risen above $500,000.
OP,

That number cannot be correct. If that's true, you should save more than 32% of your income.

At 32% of savings, you can spend about 20K to 28K per year. Why do you need to cut your savings in order to spend more?

KlangFool
Those numbers are indeed correct. Why would you think otherwise? I also have a savings account that I contribute to. I am puzzled by your comment...
FrontRangeShane,

Your salary = 84K per year.
32% of that = 27K
Expense = 12K per year

Taxes = 84K - 39K = 45K per year? 54%?

Gross income = Annual Expense + Annual savings + Taxes

KlangFool
I make 84K per year, invest 32%, and spend approximately $1000/month. I have zero debt. I fail to understand your point.
vtsnowdin
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by vtsnowdin »

KlangFool wrote: Mon Jan 17, 2022 7:39 am

FrontRangeShane,

Your salary = 84K per year.
32% of that = 27K
Expense = 12K per year

Taxes = 84K - 39K = 45K per year? 54%?

Gross income = Annual Expense + Annual savings + Taxes

KlangFool
I consider taxes as included in annual expense.
Shall we assume the OP's index funds return just 5% going forward. On 1M that is $50K a year so he would need to withdraw $7120 plus enough to pay the taxes due in his tax bracket so $10,000 in round figures. After twenty years he would still have $800,000 in his portfolio and might very well have gained in good stock years and not depleted his balance at all.
vtsnowdin
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by vtsnowdin »

FrontRangeShane wrote: Mon Jan 17, 2022 7:47 am

I make 84K per year, invest 32%, and spend approximately $1000/month. I have zero debt. I fail to understand your point.
84,000 - 12,000 - 26,880= 45,120 un accounted for. What did you do with that money?
KlangFool
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by KlangFool »

FrontRangeShane wrote: Mon Jan 17, 2022 7:47 am
KlangFool wrote: Mon Jan 17, 2022 7:39 am
FrontRangeShane wrote: Mon Jan 17, 2022 7:24 am
KlangFool wrote: Mon Jan 17, 2022 6:56 am
FrontRangeShane wrote: Mon Jan 17, 2022 6:42 am Thanks Jack. I don't spend much, $1000/month tops (if that). I should also add my wife has about $300K in her 401K invested in various index funds (very similar to me). Three books that influenced my investing strategy are Common Sense on Mutual Funds, The Intelligent Investor, and the Millionaire Next Door. The $1,000,000 mark does not include the worth of my home which has recently risen above $500,000.
OP,

That number cannot be correct. If that's true, you should save more than 32% of your income.

At 32% of savings, you can spend about 20K to 28K per year. Why do you need to cut your savings in order to spend more?

KlangFool
Those numbers are indeed correct. Why would you think otherwise? I also have a savings account that I contribute to. I am puzzled by your comment...
FrontRangeShane,

Your salary = 84K per year.
32% of that = 27K
Expense = 12K per year

Taxes = 84K - 39K = 45K per year? 54%?

Gross income = Annual Expense + Annual savings + Taxes

KlangFool
I make 84K per year, invest 32%, and spend approximately $1000/month. I have zero debt. I fail to understand your point.
You make 84K per year. You invest 27K and spend 12K per year. So, where is the rest of the 45K per year? It has to go somewhere. It cannot be all taxes.

KlangFool
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JoeRetire
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by JoeRetire »

FrontRangeShane wrote: Mon Jan 17, 2022 6:23 am Should I continue to fund 32% of my salary into my 401K or should I live a little?
If you haven't been living all along due to funding your 401k, you've been doing it wrong.
I find myself wanting a career change yet I appreciate the amount of money I'm saving and investing. The more I invest now, the more I will enjoy retirement. But is this true?
For most that is not true.

You will have more money if you invest more. Whether that leads to increased enjoyment depends on what you enjoy and how much additional money you would need to fund it (if any).
Last edited by JoeRetire on Mon Jan 17, 2022 8:05 am, edited 1 time in total.
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BrooklynInvest
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by BrooklynInvest »

Well done OP!

This sounds facetious but it's not meant to be - what do you want to do?

You're in a good spot. Your diligence has bought you some flexibility. Question is how do you want to allocate that valuable resource. Does a career change mean less money/savings and so more years until retirement? Not a problem if you enjoy this new direction. Or are you eager to pull the plug completely and don't mind the current gig?

As others have mentioned, what's your plan for retirement? How much do you think you'll need and how close are you to that? Your expenses are pretty low so that's great but travel, more hobbies etc. etc. are questions.

Don't know what you do, but is doing LESS of it an option? Me, I don't wanna work any more than I have to but that's me.

Importantly, what's your wife think???

Good luck OP - and again, good job on getting where you are.
Dave55
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by Dave55 »

FrontRangeShane wrote: Mon Jan 17, 2022 6:23 am Good morning,
It's been a while since I've been here, but I have a question on retirement planning. A few stats about me first:

54 years old
100% debt free (mortgage paid off 2018). No credit card bills, no car payments, again no debt.
Just hit the $1 million mark in retirement savings.
Salary $84K/year
An assortment of Vanguard index fund investments
(this does not include my wife's retirement savings. Wife is an RN)
When the mortgage was paid I started putting in 32% of my salary into the company 401K plan which includes Vanguard index funds.

Should I continue to fund 32% of my salary into my 401K or should I live a little? I find myself wanting a career change yet I appreciate the amount of money I'm saving and investing. The more I invest now, the more I will enjoy retirement. But is this true?

Thanks for the input.

FRS
It's a balance between saving and "living a little". That balance is different for everyone. If you have been "depriving yourself" with your saving rate, then I would live a little.

Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
Topic Author
FrontRangeShane
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Joined: Sat Apr 17, 2010 1:12 pm

Re: House Paid, zero debt, recently hit retirement savings milestone

Post by FrontRangeShane »

Thanks for the thoughtful replies! I want to continue snowboarding as much as I can and buy a camper van to live my days snowboarding. And my wife wants a camper van too :happy . That said, we live rather simply but we do live. I've always been a penny pincher and saver. I've always funded my 401K, made extra payments against my mortgage, and I've always had used cars I paid cash for (except the new car my deceased grandmother bought me in my inheritance in 1991). I have never had a car payment and have been quite happy with that aspect. My friends and neighbors are financed to the hilt, and, I'm like an anomaly as I am debt free and happy. There are those who cannot grasp that concept. As for car expenses mentioned above...well, I put $15.00 of gas into my car every weekend to go snowboarding. In fact I have two used cars...a Subaru and Mazda which get great gas mileage. And my wife drives a used car. And I ride the bus and light rail into work. The money I saved from a car payment went against my mortgage as did the sale of my rental property (I hated being a land lord as lucrative as it was). The question I needed help with was do I need to continue to contribute 32% into my 401K even though I am debt free and have funded my retirement (almost). The feeling I get from the positive responses is 'yes'.

Thank you!
59Gibson
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by 59Gibson »

makingmistakes wrote: Mon Jan 17, 2022 7:44 am
FrontRangeShane wrote: Mon Jan 17, 2022 7:24 am
KlangFool wrote: Mon Jan 17, 2022 6:56 am
FrontRangeShane wrote: Mon Jan 17, 2022 6:42 am Thanks Jack. I don't spend much, $1000/month tops (if that). I should also add my wife has about $300K in her 401K invested in various index funds (very similar to me). Three books that influenced my investing strategy are Common Sense on Mutual Funds, The Intelligent Investor, and the Millionaire Next Door. The $1,000,000 mark does not include the worth of my home which has recently risen above $500,000.
OP,

That number cannot be correct. If that's true, you should save more than 32% of your income.

At 32% of savings, you can spend about 20K to 28K per year. Why do you need to cut your savings in order to spend more?

KlangFool
Those numbers are indeed correct. Why would you think otherwise? I also have a savings account that I contribute to. I am puzzled by your comment...
Property taxes, car expenses, groceries, utilities, phone, charitable contributions, …. all included in that $1000/month tops?
OP, you spend a total of $1,000/mo while owning/carrying a $500k house? Where? How? I think you're mistaken
Topic Author
FrontRangeShane
Posts: 24
Joined: Sat Apr 17, 2010 1:12 pm

Re: House Paid, zero debt, recently hit retirement savings milestone

Post by FrontRangeShane »

59Gibson wrote: Mon Jan 17, 2022 2:01 pm
makingmistakes wrote: Mon Jan 17, 2022 7:44 am
FrontRangeShane wrote: Mon Jan 17, 2022 7:24 am
KlangFool wrote: Mon Jan 17, 2022 6:56 am
FrontRangeShane wrote: Mon Jan 17, 2022 6:42 am Thanks Jack. I don't spend much, $1000/month tops (if that). I should also add my wife has about $300K in her 401K invested in various index funds (very similar to me). Three books that influenced my investing strategy are Common Sense on Mutual Funds, The Intelligent Investor, and the Millionaire Next Door. The $1,000,000 mark does not include the worth of my home which has recently risen above $500,000.
OP,

That number cannot be correct. If that's true, you should save more than 32% of your income.

At 32% of savings, you can spend about 20K to 28K per year. Why do you need to cut your savings in order to spend more?

KlangFool
Those numbers are indeed correct. Why would you think otherwise? I also have a savings account that I contribute to. I am puzzled by your comment...
Property taxes, car expenses, groceries, utilities, phone, charitable contributions, …. all included in that $1000/month tops?
OP, you spend a total of $1,000/mo while owning/carrying a $500k house? Where? How? I think you're mistaken
The house is paid and has been paid for since 2018. Nope, not mistaken, just debt free and happy!
Topic Author
FrontRangeShane
Posts: 24
Joined: Sat Apr 17, 2010 1:12 pm

Re: House Paid, zero debt, recently hit retirement savings milestone

Post by FrontRangeShane »

FrontRangeShane wrote: Mon Jan 17, 2022 3:14 pm
59Gibson wrote: Mon Jan 17, 2022 2:01 pm
makingmistakes wrote: Mon Jan 17, 2022 7:44 am
FrontRangeShane wrote: Mon Jan 17, 2022 7:24 am
KlangFool wrote: Mon Jan 17, 2022 6:56 am

OP,

That number cannot be correct. If that's true, you should save more than 32% of your income.

At 32% of savings, you can spend about 20K to 28K per year. Why do you need to cut your savings in order to spend more?

KlangFool
Those numbers are indeed correct. Why would you think otherwise? I also have a savings account that I contribute to. I am puzzled by your comment...
Property taxes, car expenses, groceries, utilities, phone, charitable contributions, …. all included in that $1000/month tops?
OP, you spend a total of $1,000/mo while owning/carrying a $500k house? Where? How? I think you're mistaken
The house is paid and has been paid for since 2018. Nope, not mistaken, just debt free and happy!
The house was worth less when I bought it over a decade ago. The property has risen in value. Get it?
vtsnowdin
Posts: 244
Joined: Thu Dec 30, 2021 2:54 pm

Re: House Paid, zero debt, recently hit retirement savings milestone

Post by vtsnowdin »

59Gibson wrote: Mon Jan 17, 2022 2:01 pm

OP, you spend a total of $1,000/mo while owning/carrying a $500k house? Where? How? I think you're mistaken
Good point. A $500K house probably has property taxes of $1000/ month and insurance and utility bills of another $1000/m.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: House Paid, zero debt, recently hit retirement savings milestone

Post by KlangFool »

FrontRangeShane wrote: Mon Jan 17, 2022 3:15 pm
FrontRangeShane wrote: Mon Jan 17, 2022 3:14 pm
59Gibson wrote: Mon Jan 17, 2022 2:01 pm
makingmistakes wrote: Mon Jan 17, 2022 7:44 am
FrontRangeShane wrote: Mon Jan 17, 2022 7:24 am

Those numbers are indeed correct. Why would you think otherwise? I also have a savings account that I contribute to. I am puzzled by your comment...
Property taxes, car expenses, groceries, utilities, phone, charitable contributions, …. all included in that $1000/month tops?
OP, you spend a total of $1,000/mo while owning/carrying a $500k house? Where? How? I think you're mistaken
The house is paid and has been paid for since 2018. Nope, not mistaken, just debt free and happy!
The house was worth less when I bought it over a decade ago. The property has risen in value. Get it?
Your gross income is 84K per year. You save 27K per year and spend 12K per year. So, where are the other 45K goes?

<<The property has risen in value.>>

At 1% property tax rate, the annual property tax is about 4K to 5K per year.

KlangFool
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vtsnowdin
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by vtsnowdin »

KlangFool wrote: Mon Jan 17, 2022 3:20 pm
At 1% property tax rate, the annual property tax is about 4K to 5K per year.

KlangFool
location location location.
The house I'm living in has a tax rate of 2.44% and raw land in the next town cost me 2.1 %.
Jack FFR1846
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by Jack FFR1846 »

I think it's cool that you hit that $1M mark. You should celebrate that. I do think there are a lot of skeptics who doubt that $1000 a month number unless you're passing some big expenses over to your wife. My mortgage was paid off in 2002 and I owe nothing to anyone. But my property tax plus insurance hits $1000 a month all by itself.

Something I think would be worthwhile for you is to literally write down and document every single penny you spend for one full year. That includes your wife and if you have kids, what they spend (unless they're 25 and able to pay their own way).

The other thing to be careful about it thinking that your paid off house helps you with your spending number. Unless you're planning to sell that house and buy a known, less expensive one, it does nothing to increase your spending. I mean, if you need a chunk of money, unless you've got a HELOC, you're not going to be pulling the porch off and selling it on craigslist go get some spare cash. Right?

Perhaps because I'm about to retire, I've got a list already of my expenses in retirement ready. It includes more money for health care and more money for travel. I'm a big "safety net" guy and have a big net ready for retirement, holding over 50 times that retirement spending list in liquid assets. I plan to never sell my house, so for me, that's easy to not consider as part of my assets for retirement spending.
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KlangFool
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by KlangFool »

vtsnowdin wrote: Mon Jan 17, 2022 3:35 pm
KlangFool wrote: Mon Jan 17, 2022 3:20 pm
At 1% property tax rate, the annual property tax is about 4K to 5K per year.

KlangFool
location location location.
The house I'm living in has a tax rate of 2.44% and raw land in the next town cost me 2.1 %.
I am quoting a low number. Aka, even at 1%, it is 4K to 5K per year.

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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by sailaway »

The reason we are confused is, why would you pull back in tax sheltered savings rather than taxable savings? You asked if you should pull back on 401k and live a little, but you also claim to have a pretty large taxable savings rate you could be spending. Why do you want to pull back in the 401k?

If it is a future tax concern, do you have a cess to Roth 401k?

Basically, with the information you have given, the question doesn't make sense and many of your answers confuse the issue more.
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by vtsnowdin »

KlangFool wrote: Mon Jan 17, 2022 3:39 pm

I am quoting a low number. Aka, even at 1%, it is 4K to 5K per year.

KlangFool
OK just wanted to defend my number a bit.
Ollie123
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by Ollie123 »

OP, folks are right that your math doesn't quite add up. You are either spending more than you think you are OR saving more than you report saving here. Even if I make some extremely liberal assumptions about your effective tax rate and pre-tax expenses (e.g. health insurance), you should have at least another 20k you don't mention. Are you stuffing a savings account? Your paychecks are assuredly higher than 1k/month - what happens to the rest?

I think that's what folks are wondering as it matters in these situations.
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by Malum Prohibitum »

FrontRangeShane wrote: Mon Jan 17, 2022 6:42 am Thanks Jack. I don't spend much, $1000/month tops (if that). I should also add my wife has about $300K in her 401K invested in various index funds (very similar to me). Three books that influenced my investing strategy are Common Sense on Mutual Funds, The Intelligent Investor, and the Millionaire Next Door. The $1,000,000 mark does not include the worth of my home which has recently risen above $500,000.
What does it cost each month to heat that half million home in snow board country?
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by wetgear »

FrontRangeShane wrote: Mon Jan 17, 2022 7:47 am
KlangFool wrote: Mon Jan 17, 2022 7:39 am
FrontRangeShane wrote: Mon Jan 17, 2022 7:24 am
KlangFool wrote: Mon Jan 17, 2022 6:56 am
FrontRangeShane wrote: Mon Jan 17, 2022 6:42 am Thanks Jack. I don't spend much, $1000/month tops (if that). I should also add my wife has about $300K in her 401K invested in various index funds (very similar to me). Three books that influenced my investing strategy are Common Sense on Mutual Funds, The Intelligent Investor, and the Millionaire Next Door. The $1,000,000 mark does not include the worth of my home which has recently risen above $500,000.
OP,

That number cannot be correct. If that's true, you should save more than 32% of your income.

At 32% of savings, you can spend about 20K to 28K per year. Why do you need to cut your savings in order to spend more?

KlangFool
Those numbers are indeed correct. Why would you think otherwise? I also have a savings account that I contribute to. I am puzzled by your comment...
FrontRangeShane,

Your salary = 84K per year.
32% of that = 27K
Expense = 12K per year

Taxes = 84K - 39K = 45K per year? 54%?

Gross income = Annual Expense + Annual savings + Taxes

KlangFool
I make 84K per year, invest 32%, and spend approximately $1000/month. I have zero debt. I fail to understand your point.
I think the point he’s trying to make is that your math doesn’t add up so you might be spending considerably more money than you think. This would likely change the advice you will get and the comfort of your retirement. If you aren’t spending more than you think where is it going? Do you have a budget you can double check against? Investing obviously has a lot of math involved so it’s important to get it right.
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by Shackleton »

vtsnowdin wrote: Mon Jan 17, 2022 3:20 pm
59Gibson wrote: Mon Jan 17, 2022 2:01 pm

OP, you spend a total of $1,000/mo while owning/carrying a $500k house? Where? How? I think you're mistaken
Good point. A $500K house probably has property taxes of $1000/ month and insurance and utility bills of another $1000/m.
He’s probably in CO (“FrontRange”) and property taxes here are much lower. My old house that was purchased for $550k had property taxes of $4500/yr, and they were only that high because it was in a special mill levy district. Another house that sold for $750k had property taxes of $2800/yr. And my current house, purchased for $825k in 2019 and now easily worth $1.3m just got reassessed last year and my taxes went up to $3600/yr. Before that they were $2800. I can’t imagine living in one of those high property tax states.
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by Shackleton »

KlangFool wrote: Mon Jan 17, 2022 3:39 pm
vtsnowdin wrote: Mon Jan 17, 2022 3:35 pm
KlangFool wrote: Mon Jan 17, 2022 3:20 pm
At 1% property tax rate, the annual property tax is about 4K to 5K per year.

KlangFool
location location location.
The house I'm living in has a tax rate of 2.44% and raw land in the next town cost me 2.1 %.
I am quoting a low number. Aka, even at 1%, it is 4K to 5K per year.

KlangFool
From my perspective, 1% is a high property tax amount. See my post above for examples of property taxes in CO, where the OP most likely lives.
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by LilyFleur »

Congratulations on entering the two comma club! And on paying off your home and living debt-free. :sharebeer

I view my net worth like this: the equity in my paid-for home is something that I use to live in. My portfolio is what I will spend in retirement.

Will you or your wife have pensions in retirement? That is definitely a factor in planning.
Last edited by LilyFleur on Mon Jan 17, 2022 7:14 pm, edited 1 time in total.
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MrBobcat
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by MrBobcat »

FrontRangeShane wrote: Mon Jan 17, 2022 6:23 am Good morning,
It's been a while since I've been here, but I have a question on retirement planning. A few stats about me first:

54 years old
100% debt free (mortgage paid off 2018). No credit card bills, no car payments, again no debt.
Just hit the $1 million mark in retirement savings.
Salary $84K/year
An assortment of Vanguard index fund investments
(this does not include my wife's retirement savings. Wife is an RN)
When the mortgage was paid I started putting in 32% of my salary into the company 401K plan which includes Vanguard index funds.

Should I continue to fund 32% of my salary into my 401K or should I live a little? I find myself wanting a career change yet I appreciate the amount of money I'm saving and investing. The more I invest now, the more I will enjoy retirement. But is this true?

Thanks for the input.

FRS
We're in almost the exact same financial situation but we're 55/56. I'm going full bore on the savings for the next few years and then will probably pull the plug on retiring. I'm saving for more years of retirement rather than a higher lifestyle in retirement.
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MrBobcat
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by MrBobcat »

FrontRangeShane wrote: Mon Jan 17, 2022 6:42 am Thanks Jack. I don't spend much, $1000/month tops (if that). I should also add my wife has about $300K in her 401K invested in various index funds (very similar to me). Three books that influenced my investing strategy are Common Sense on Mutual Funds, The Intelligent Investor, and the Millionaire Next Door. The $1,000,000 mark does not include the worth of my home which has recently risen above $500,000.
Is that household budget or just your portion?

Anyway look really hard at your household expenses. Tying them down is really important when figuring out how much you might need in retirement.

I consider us fairly frugal on day to day living expenses. Our household average the last 2 years has been about $3,500/month excluding big ticket items such as income tax and health insurance. Our property tax and home insurance are pretty minor too, $2200/year RE Tax and $925/year home insurance.
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by JDSwim3 »

OP,

If you are truly living on $1000/month, I suggest you write a book, start a blog, create a youtube channel, etc... explaining how that is possible.

Until you truly have an idea of your current expenses, you really cannot establish a proposed retirement budget, which will determine whether you need to continue investing.

At best your marginal tax rate is 12%, but let's set that aside.

I think we all would be interested to hear your family's monthly expenses for the following items at $1000/month.
- Property tax (pro-rated monthly)
- Property insurance (pro-rated monthly)
- Automobile insurance (pro-rated monthly)
- Utilities (Electric, Gas, Sewer, Refuse Disposal)
- Groceries / dining out
- Gasoline
- Home maintenance
- Transportation maintenance
- Entertainment
- Internet Service Provider
- Cell phone service
- Home furnishings
- Clothing
- Vacations
- Gifts, Holiday Giving, Charity
- Medical insurance premiums, co-pays
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MikeWillRetire
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by MikeWillRetire »

I'm also skeptical of the $12k expenses, so I will ignore that.
You say you save 32% of your $84k salary, so I assume you spend $57k.
So let's say you want $60k in retirement. Your current $1 million savings could generate $40k for a 30 year retirement. Combine that with social security, and you will likely be ok. So, as long as you continue working until you turn 62, you can cut back your savings rate.
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FrontRangeShane
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by FrontRangeShane »

JDSwim3 wrote: Mon Jan 17, 2022 5:43 pm OP,

If you are truly living on $1000/month, I suggest you write a book, start a blog, create a youtube channel, etc... explaining how that is possible.

Until you truly have an idea of your current expenses, you really cannot establish a proposed retirement budget, which will determine whether you need to continue investing.

At best your marginal tax rate is 12%, but let's set that aside.

I think we all would be interested to hear your family's monthly expenses for the following items at $1000/month.
- Property tax (pro-rated monthly)
- Property insurance (pro-rated monthly)
- Automobile insurance (pro-rated monthly)
- Utilities (Electric, Gas, Sewer, Refuse Disposal)
- Groceries / dining out
- Gasoline
- Home maintenance
- Transportation maintenance
- Entertainment
- Internet Service Provider
- Cell phone service
- Home furnishings
- Clothing
- Vacations
- Gifts, Holiday Giving, Charity
- Medical insurance premiums, co-pays
$400/month insurance (home/car/life). Cars insured liability only
I put $175/month towards property insurance
Wife and I split utilities ($100/month average). No cable (we’re not that stupid)
$15/week gasoline (I ride public transportation which my company pays)
Home maintenance expenses vary, sometimes I go over my monthly ‘allotment’ of $1000
I exercise for entertainment
Internet service provider (whatever Xfinity charges for basic service as we split)
Cell phone service covered by company
Home furnishings are paid for 100% (why are you asking about this?)
Clothing?I wear t-shirts and jeans. (I have no idea on how much I spend on this)
Vacations – a few camping trips a year local
Gifts (end of year bonuses)
Company paid medical insurance plus my share

No need to write a book or blog, it’s quite easy actually.

What are your monthly expenses? I’d love to hear about your mortgage payment(s)…..
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FrontRangeShane
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by FrontRangeShane »

MikeWillRetire wrote: Mon Jan 17, 2022 6:30 pm I'm also skeptical of the $12k expenses, so I will ignore that.
You say you save 32% of your $84k salary, so I assume you spend $57k.
So let's say you want $60k in retirement. Your current $1 million savings could generate $40k for a 30 year retirement. Combine that with social security, and you will likely be ok. So, as long as you continue working until you turn 62, you can cut back your savings rate.
Thanks for the insight, much appreciated!
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by Doc7 »

How does one split expenses with one’s wife and also disregard their retirement savings? What happens if one of you runs out of money in retirement?
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AnnetteLouisan
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by AnnetteLouisan »

My guess, OP manages a restaurant and gets all meals free.
But seriously, it sounds like a fun and happy life so you get a gold star from me.
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FrontRangeShane
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by FrontRangeShane »

Doc7 wrote: Mon Jan 17, 2022 7:08 pm How does one split expenses with one’s wife and also disregard their retirement savings? What happens if one of you runs out of money in retirement?
We're not disregarding each other's retirement savings. In fact, we support each other financially. What's your point??
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FrontRangeShane
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by FrontRangeShane »

AnnetteLouisan wrote: Mon Jan 17, 2022 7:09 pm My guess, OP manages a restaurant and gets all meals free.
But seriously, it sounds like a fun and happy life so you get a gold star from me.
Thanks but I worked food service when I was younger. :happy Frugality is the key to happiness. Let the others have their high expenses!

Cheers!
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AnnetteLouisan
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by AnnetteLouisan »

FrontRangeShane wrote: Mon Jan 17, 2022 7:21 pm
AnnetteLouisan wrote: Mon Jan 17, 2022 7:09 pm My guess, OP manages a restaurant and gets all meals free.
But seriously, it sounds like a fun and happy life so you get a gold star from me.
Thanks but I worked food service when I was younger. :happy Frugality is the key to happiness. Let the others have their high expenses!

Cheers!
Im your age and have like 5x the salary but 1/50th of the happiness. And I’ve never once been snowboarding (can’t anyways due to cold air induced asthma). rock on!!
Last edited by AnnetteLouisan on Mon Jan 17, 2022 7:46 pm, edited 3 times in total.
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FrontRangeShane
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Re: House Paid, zero debt, recently hit retirement savings milestone

Post by FrontRangeShane »

LilyFleur wrote: Mon Jan 17, 2022 4:35 pm Congratulations on entering the two comma club! And on paying off your home and living debt-free. :sharebeer

I view my net worth like this: the equity in my paid-for home is something that I use to live in. My portfolio is what I will spend in retirement.

Will you or your wife have pensions in retirement? That is definitely a factor in planning.
Well said, and thank you. We will have multiple income streams.

Cheers
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