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Old 06-08-2014, 08:19 PM
 
Location: Ohio
229 posts, read 276,534 times
Reputation: 450

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I'm a bit older, in my early 40s so more conservative perhaps, but I'm using 4% as a long term return calculation. I reckon that 6-7% is a solid long term bet, so I deduct 2-3% for inflation and fees, so I can keep all the numbers in today's dollars for easy working.

I have a lovely lifetime spreadsheet, showing projected income, expenditure and savings until hubby and I are 100. We're planning to be early retired within 10 years, and are saving aggressively (c50% of income) to make that happen.

A spreadsheet like this is a wonderful tool. Recently hubby's been muttering about wanting to build an RV garage/ workshop on the side of the house; this would cost an estimated $40-50k. That's fine, he can absolutely choose do that - but only if he also chooses to work an additional year or so and retire at 54, not 53. It's a stark reminder of the consequences of life choices. I wish I'd started a spreadsheet like this years ago (I've only had it a couple of years), because it's so fascinating plugging in scenarios about savings rates, size of house to buy or whether to downsize, etc, and seeing it spool out over time.

Edit: and don't worry too much - even thinking these matters, saving, and hanging out on a retirement forum in your 20s/early 30s means you'll almost certainly be fine
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Old 06-08-2014, 08:23 PM
 
Location: Sacramento
13,784 posts, read 23,832,033 times
Reputation: 6195
Quote:
Originally Posted by CSRSJim View Post
I hope you don't mean that the way it sounds. The govt shouldn't be taking people's money and giving it to others, that is punishing success and rewarding failure. A bad idea also know as "moral hazard". It leads to no incentive to work hard and reduces the total economic output. This "sharing of the pie" results in a smaller pie instead of a growing pie that everybody has the oppurtunity to benefit from. A $10/hr job is better than a $10/hr govt hand out. But it causes people to not work for $10/hr when they can get the same money for doing nothing. Less productivity, smaller pie, death sprial of the economy.
They do it all the time.

Ever take a look at the Social Security benefit computation formula, or have you taken a look at the premiums at various income levels for ObamaCare?
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Old 06-08-2014, 08:47 PM
 
Location: Ohio
229 posts, read 276,534 times
Reputation: 450
Quote:
Originally Posted by NewToCA View Post
They do it all the time.

Ever take a look at the Social Security benefit computation formula, or have you taken a look at the premiums at various income levels for ObamaCare?
Nah, the Obamacare subsidies are a total gift for those who've been hard-working and frugal! As early retirees with a paid-for house, no debt, no car leases, etc, and large balances in both taxable and tax-deferred investment, we'll have enormous freedom to manage our income so as to qualify for really cheap health insurance. Which we hopefully won't use much as we're guarding our health in the same way that we're guarding our finances.
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Old 06-08-2014, 09:02 PM
 
48,516 posts, read 84,056,192 times
Reputation: 18051
Quote:
Originally Posted by catlovr8 View Post
Yes, I would love to max out those numbers ASAP.

My mom has this weird fear though that our 401k's are all going to be taken from us by the government. She gets more into conspiracy theories as she gets older (she's 68).
Likely she remembers the 70's recession then 80's. A whole generation of retail investors did not renneter the markets for a entire decade. We still look at money on sidelines don't know if that will again occur altho with fewer pensions it like people have to invest some where. But the numbers now are not good even so. my guess if they could get guaranteed 3% in savings they look even worse. Remember a lot had investments in CD's for decades before crash. and FED actions.
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Old 06-09-2014, 01:24 AM
 
6,876 posts, read 3,892,813 times
Reputation: 15660
I agree with CSRSJim. I would also point out that stock funds give better returns than bond funds. If you want to invest in bonds, it is best to buy an individual bond and hold it until maturity. The bond fund managers often have to sell bonds before maturity ( as people pull money from the fund) and in so doing a lot of the profit is lost. Best of luck!
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Old 06-09-2014, 02:13 AM
 
71,971 posts, read 71,997,171 times
Reputation: 49554
that is a myth about buying individual bonds. a bond fund vs an individual bond is like pulling the band aid off quickly or pulling it off slowly.

the bond fund adjusts to rising rates and rising inflation daily. old bonds are sold or replaced with higher paying bonds.

on the other hand getting paid back 15-30 years from now will have you losing 1/2 your money in purchasing power with an individual bond. in real return there is little difference between the two.

an individual bond has a fixed rate forever no matter how high rates rise but a bond fund gets a drop in value and the interest rates are always changing so if rates rise you get an increase.

do not believe one is safer than the other. a loss is a loss . it is no different than the band aid analogy.
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Old 06-09-2014, 02:17 AM
 
71,971 posts, read 71,997,171 times
Reputation: 49554
why does anyone think only retirement accounts are subject to this taking . didn't they just increase the capital gains tax ? thinking if they do something that your taxable account will be safe is silly thinking .

so you may as well pick the one most advantagous to you .

certainly the prospect of never paying taxes like a roth or deferring taxes and growing more money on the tax money is a better option then just forking the taxes over.

my feeling is odds are you will be wrong when it comes to the on the fringe thinking so plan around what benefits you the most.

Last edited by mathjak107; 06-09-2014 at 03:44 AM..
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Old 06-09-2014, 03:47 AM
 
3,757 posts, read 9,619,027 times
Reputation: 7063
The best thing you can do is this:

Stop and sit down with your husband for several long meetings. Talk about your history, goals and what you want to do to get to those goals. Talk about short term and long term. Write all this down and set up a plan to meet the goals. We started monthly to set up budgets and spending and then the yearly summary talk. We have records for over 25 years of these in our "Life Book". We included education, jobs, savings, spending, vacations, etc.

We also follow a balance rule about life and that includes savings. No one knows the future so we invested in both tax deferred and taxable accounts. Because we had goals and knew why we were saving, we were able to make rational decisions about where to put money and each time we got some extra, like a bonus, we discussed our current situtation and often used a allocation of 1/3 savings, spending and paying down debt.

Read the Millionaire Next Door and study successful families. We did it and you can to.

Note: be wise and run away from those who try to sell you high return investments unless you know what you are doing. Way more scammers out there trying to find suckers and remember that 80% of money managers dont manage to exceed the return of index funds. I worked for the IRS and during my career saw thousands of people who lost everything chasing a return.
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Old 06-09-2014, 07:42 PM
 
158 posts, read 215,357 times
Reputation: 201
Thanks everyone

I have a 401k which has automatic funds, but I also want to invest in my IRA. I opened up a generic one at scottrade but I can't figure out how to buy index funds.

Anyway, I'm sure I will figure it out. I know I worry too much about this kind of stuff, but the thing is I work in health care and so I meet with retirees everyday who DIDN'T plan well in their youth and I see the consequences of their actions. That's why I am so proactive, I suppose.
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Old 06-10-2014, 10:22 AM
 
741 posts, read 642,971 times
Reputation: 576
Quote:
Originally Posted by catlovr8 View Post
I 've talked to several financial planners but they all say the same thing : "it depends on market conditions, etc.". I just want to know if what I'm doing is enough.
At your ages, 6% annually ... deposited by each of you into 401k accounts ... should provide you with an excellent retirement income.

The growth/appreciation of 401k plan investments is dependant on market conditions. That's why financial advisors urge us to diversify our investments. Not all in stocks. Not all in bonds. Back in the day ... we were told to invest in a home or other real estate (people who made such recommendations seem to be hinding under a rock these days, living in denial!).

For various reasons I started-over with my 401k plan about 15 years ago. The growth/appreciation of the monies I've invested has been at about the 8% average per annum rate ... just as my financial advisor suggested it would when I started over.
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