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Old 03-22-2016, 12:02 PM
Location: Central Massachusetts
4,800 posts, read 4,845,678 times
Reputation: 6379


Originally Posted by capitalhockey View Post
My wife and I are expecting our first child this year. We are hoping to have two kids long term. That will lower our monthly savings into the taxable account but we are still maxing out the 401k. We are also planning to use the 529 plans for college savings and contribute the max allowable when they are born until they are 18. If that is not enough, they will have to take out loans for the difference. My wife and I both paid for our college educations without any assistance.

We do live in a high cost area and hope to stay in the area for retirement to be close to family and friends. We both love to travel and have done much in the first two years of our marriage. With the kids coming, we will be scaled down. Hopefully, we can travel often again in retirement. We live in a modest 3BR townhouse that is close to our work and serve our needs. We don't plan to upgrade to a big single family home and take on more mortgage/property tax. We want to paid of current mortgage in 20 years.

I am thinking that perhaps 60% income replacement will be comfortable for us in retirement. I keep reading 80% but we are generally frugal people (no luxury car or country club membership). We are happy with a simple life and a few nice things once in a while.
Originally Posted by funisart View Post
We are retired and have only one child. We continued to travel and save with one. I don't think it would have been so easy with two. He was able to finish his education with no debt. We have not had to help him out as an adult. Many retirees are still supporting their kids. Something to consider before having a second .

First congrats on your first child. I will tell you that having children changes everything. Let that not change your savings rate. If it does need to be adjusted then do not go below what the employer needs to be matched at that max. If it is 5% to 5% then do not go below that 5%. Keep it at percentages and not a dollar amount. Percentages will grow with pay increases without any prior thought. Second only invest in your child's 529 if you have maxed out all of your other savings options. By that I mean maxing 401k and Roth and traditional IRA's. Then and only then should you worry about your children's education fund. Pay off all credit card bills monthly. Payoff all cars and even better get slightly used cars of a year old and skip the BMW unless your job requires appearances. For your children's education help them pay for it out of money then. Lots of help for that out there.

You have a good start. You found this site and very smart people. What is the most important thing is you recognize the need. You have an early start and a pension and that will be huge even if it is only 35% of your income. Live within your means. Don't not live for today though. If you skip a trip because you had to put money into a 529 fund you are missing out on today. I am not saying don't worry about tomorrow. No on the contrary I am saying stay focused. Save as much as you can but do not sacrifice the time you have on this earth. Get good term life insurance and maintain that.

Hope that all makes sense. Again congrats.


PS Friday I retire at 58.5 and not looking back.
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Old 03-22-2016, 12:14 PM
Location: Idaho
1,453 posts, read 1,153,939 times
Reputation: 5487
Not too long ago, there was a poll on what percentage of income one would like to have in retirement.

What percent of current income are you trying to achieve?

The results were pretty much a flat line. The highest percentage group is ~19% for 70-79% range.

More than 100% 18 14.52%
100% 17 13.71%
90-99% 5 4.03%
80-89% 16 12.90%
70-79% 24 19.35%
60-69% 16 12.90%
50-59% 11 8.87%
Less than 50% 17 13.71%

I found the fact that ~15% need more than 100% income and ~14% need less than 50% income very interesting. This shows that there are many variables in sources of income, spending habits, life circumstances and living philosophies.

The bottom line is that there is never one size or one number to fit all. The often recommended 80% replacement income is just a very broad guideline. One has to figure out the appropriate number for oneself.
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Old 03-22-2016, 01:01 PM
Location: Citrus countyFL
345 posts, read 255,454 times
Reputation: 466
OP, something to seriously consider:
Plan your retirement as if Medicare and Social Security won't be there when you retire, because there is a real chance it won't be.
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Old 03-22-2016, 01:26 PM
12,825 posts, read 20,135,648 times
Reputation: 10910
Plan as if you must self fund long term care, even if you have LTCI. And if you don't have LTCI, plan as if you must fund long term care x 2!
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Old 03-22-2016, 02:51 PM
Location: NC High Country
3,867 posts, read 6,657,887 times
Reputation: 3824
You've got a great start, but 25 years is a long time to assume you will still be with the same company regarding your health insurance and pension, or any other company that would provide great retirement benefits.
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Old 03-22-2016, 03:13 PM
2,038 posts, read 1,947,008 times
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Originally Posted by capitalhockey View Post
Hi all,

From an investment standpoint, we use a dividend investment strategy for our taxable investment account. We buy blue chip companies (Cola Cola, Johnson & Johnson, Apple, etc) that pays dividends which are reinvested. Once we are retired, we are hoping to use this income stream that will replace a portion of our working salaries. Our 401ks are invested in index funds for long-term growth. We are not counting on Social Security.

Thank you.
From my experience, for your taxable account, with respect to dividends, make sure they are all qualified dividends so you get long term capital gains treatment. Since you have so many years ahead of you to buy and hold, I would say a better strategy is maximize capital gains and minimize dividends by buying lowcost stock ETFs like the SPYs, QQQs and SCHB (Schwab branded no commission ETF with expense ratio lower than vanguard) so they increase substantially over the years mostly taxfree until you retire without you paying taxes on dividends that are then reinvested. Aim just for capital gains in your taxable account and buy and hold so you pay long term capital gains only in retirement.

Basically, I think you should use the same strategy in your taxable account as in your 401k, that is buy low cost stock ETFs. Buying and holding keeps the tax man away and minimizing dividends also keeps the tax man away.
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Old 03-22-2016, 03:16 PM
71,520 posts, read 71,694,121 times
Reputation: 49105
you really do not have to much control over whether dividends are qualified or not . it depends not only on your holding period but the funds too .

you can't control the fund side of things . even index funds can have a pretty big turnover . most do not own everything in the index so they jump around swapping out issues .

some s&p 500 index funds have horrible tax consequences . vanguard and fidelity seem to be the best .
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Old 03-22-2016, 04:40 PM
Location: Camano Island, WA
301 posts, read 324,936 times
Reputation: 359
The only expenses that will decrease when my wife and I retire are our annual 401K and Roth IRA contributions. $18,000/each for the 401Ks and $6,500/each for the Roths. No savings from not working. I take my lunch and my employer pays for my bus rides. House is paid for and no change in home utility costs when retired. No increase in heating costs since my wife now works at home. Probably an increase in toilet paper costs
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Old 03-22-2016, 09:25 PM
Location: Los Angeles area
14,018 posts, read 17,732,288 times
Reputation: 32304
Another way in which any percentage number can be meaningless is what salary we have that we are shooting for 80% of (just to use 80% as an example). Some of us never made much of a salary at any point in our lives, although we seem to constitute a minority here on City-Data. I was a public high school teacher for 34 years and my final year's gross salary before retiring almost 11 years ago was slighly under $60,000. No, that is not a typo. A year's gross salary of $60,000 after 34 years.

So for me 80% of that is $48,000. But for someone making, say, $125,000, 80% comes to $100,000. Quite a difference. Then if we start talking about a smaller percentage, say, 50%, I would be in a world of hurt whereas the guy earning $125,000 would be able to still live fairly well (in my opinion) on half of it.

I am not complaining, because personally I am doing fine with a pension and I am satisfied with my lifestyle. My point was the consideration of a variable (earnings/salary) which seems often to be left out of these discussions.
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Old 03-22-2016, 09:28 PM
4,649 posts, read 6,480,471 times
Reputation: 5394
Keep it simple. Live life as best as you can when young. Save as much as you can starting young. Buy a good sized life insurance policy that will be there at late age when you pass. Retire debt free.

Lastly. Remember you can have the best laid plans but life happens. Live the best you can.
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