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Old 01-08-2020, 06:06 PM
 
6,283 posts, read 1,947,575 times
Reputation: 7443

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I am an employee in the telephone industry (telecom, to be exact) and love what I do. I, along with many of my peers, choose to stay in our jobs for the brotherhood that exists among linemen, engineers, whatever department you're in. We frequently stay beyond our 30-year milestones to have a social group of like-minded people with which to associate, and get paid for it. I can't imagine doing anything else.

Since reaching my current position, in which I plan on staying unless forced elsewhere. I am the sole income between my wife and I. No kids, will probably never be any due to biological reasons. We're both 30, and I have been in the industry since graduating high school at 18.

I want to get some numbers for 401(k) contributions, or any other retirement account contributions, that may be required saving for 2. My situation is as follows:

- 30 y/o male, ideally 40 more working years ahead of me
- Starting retirement savings late, due to recently having paid off consumer debt accrued during MUCH lesser earning years in entry level positions. Starting small with $36k in 401(k) right now, employer's plan is 1:1 match up to 6%, which I have been participating in since joining my most recent employer.

Since cleaning my plate, I can amp up savings into 401(k). I have made note of the following about my plan:

- 6% employer match, $1:$1
- "The combined total of BEFORE-TAX MATCHED, ROTH MATCHED, and AFTER-TAX MATCHED elections below may not exceed 6%." I may add an additional 10%, unmatched.
- However, my plan's guidelines state: "Total contribution limit: 16% per pay period, up to your plan's yearly limit."

- Employer allows the 6% match (in whole or in part) to be allocated in any combination of the following:

- Fidelity 401(k)
- Fidelity Roth

Received a huge pay bump in my most recent role, I'm hourly with opportunities for overtime.

Base $91k
Bonus $9k (10%)
Shift diff $9k (10%)
Overtime $40k (last year)

Total W2 income $150k roughly.
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Old 01-08-2020, 06:12 PM
 
22,090 posts, read 16,094,115 times
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Employer matching is done pretax. I’ve never seen it done post tax as that would make zero sense from the companies standpoint

401k up yo the match pre or post tax is your call
HSA
Roth IRA
Back to 401k if you have the availability
Then to taxable accounts

I’d caveat that with you should have a solid emergency fund first
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Old 01-08-2020, 06:30 PM
 
6,283 posts, read 1,947,575 times
Reputation: 7443
Quote:
Originally Posted by Lowexpectations View Post
Employer matching is done pretax. I’ve never seen it done post tax as that would make zero sense from the companies standpoint

401k up yo the match pre or post tax is your call
HSA
Roth IRA
Back to 401k if you have the availability
Then to taxable accounts

I’d caveat that with you should have a solid emergency fund first
Responding line by line:

- 401(k) I can adjust to the max right now (adding another 10%, taking me to 16% my dollars, 6% their dollars, for a 22% contribution.

- A true HSA is only available to us if we subscribe to the HDHP. We have 3 healthcare options: EPN at 90/10, PPO at 80/20, HDHP at 80/20. Deductible on HDHP is at least $5000, and premium is exactly the same as the low-deductible PPO, both roughly $2000 a year to cover the both of us. I am currently subscribed to the EPN for the low deductible ($400), low OOP ($1000) without too much of a penalty in premium ($3000/yr for employee + 1 vs. $2000).

- That said, we do have an FSA option into which we can allocate up to $3000 per year. We can easily hit that between medical, dental, vision for two people.

- Forgot to mention, my wife does currently hold $15,000 in a regular cash savings account.

My initial thought was to go with 20% to retirement, 10% to cash until we reach one full year of top-line income (or we'll say $100,000) in cash, then reallocate that to all 30% to retirement. But on second thought, would you suggest waiting to max out my contributions, unmatched, until we have a fully funded emergency fund?
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Old 01-08-2020, 06:42 PM
 
Location: Florida
5,337 posts, read 4,788,617 times
Reputation: 5624
Plan on retiring at 62 or FRA as a cushion. If you can work to 70 so much the better.

I would try and contribute at least 15% of your gross pay to retirement accounts. If you have a HSA account part of the 15% could go into it with the idea that you will try and not touch it until retirement but it is their for a medical emergency.

Just to show you the magatitude of your problem. Lets say you will spend 100,000 at retirement for 30 years. That is 3,000,000.

Lest say you save 15,000 per year for 35 years. That gives you 540,000.

Now I did skip earnings on your investment and inflation. Real rough your account at 65 will be between 2 and 4 million.

Find a couple of on line brokers and they should have software that will help you develop your own realistic estimates.
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Old 01-08-2020, 06:49 PM
 
6,283 posts, read 1,947,575 times
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Quote:
Originally Posted by rjm1cc View Post
Plan on retiring at 62 or FRA as a cushion. If you can work to 70 so much the better.

I would try and contribute at least 15% of your gross pay to retirement accounts. If you have a HSA account part of the 15% could go into it with the idea that you will try and not touch it until retirement but it is their for a medical emergency.

Just to show you the magatitude of your problem. Lets say you will spend 100,000 at retirement for 30 years. That is 3,000,000.

Lest say you save 15,000 per year for 35 years. That gives you 540,000.

Now I did skip earnings on your investment and inflation. Real rough your account at 65 will be between 2 and 4 million.

Find a couple of on line brokers and they should have software that will help you develop your own realistic estimates.
Thank you!

One of the biggest unknowns for me is making the best educated guess at what inflation will do to my dollars THAT far down the road. Part of the reason I want to keep earning. If nothing else, I'll at least be getting paid current dollars on my wage income.

Using a historical inflation calculator, what has been less than 15 years since graduating high school, a $60,000 salary in 2006 would now have to be $90,000 to have the same purchasing power. Scary stuff!

I'll poke around on the calculators and paste my results for the thread.
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Old 01-08-2020, 07:06 PM
 
6,283 posts, read 1,947,575 times
Reputation: 7443
Results Summary
Current 401(k) balance $36,000
Years to invest 40
Annual rate of return 7%
Annual salary $91,000
Expected annual salary increase 3%
Percent to contribute 16%
Your 401(k) contribution* $14,560.00 per year
Your employer's 401(k) match $5,460.00 per year
This is a 100% employer matchup to a maximum of 6% of your annual salary.
Total you will contribute $834,912.41
Total your employer will contribute $424,041.61
Total at age 70 $5,997,186
Total without employer match $4,338,448
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Old 01-08-2020, 07:24 PM
 
Location: Florida -
9,862 posts, read 12,403,721 times
Reputation: 20501
So, your thread title says, "I DON'T want to retire early. Let's discuss numbers, and discuss why." - Your post says you love your work ... and you are currently only 30-years old, with potentially another 40-years to work.

So, What is your question? -- Are you asking if/when you should retire?; When you could afford to retire?; If early/late retirement seems realistic? ... or Can you be forced to retire early if you don't want to?
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Old 01-08-2020, 07:37 PM
 
6,283 posts, read 1,947,575 times
Reputation: 7443
Quote:
Originally Posted by jghorton View Post
So, your thread title says, "I DON'T want to retire early. Let's discuss numbers, and discuss why." - Your post says you love your work ... and you are currently only 30-years old, with potentially another 40-years to work.

So, What is your question? -- Are you asking if/when you should retire?; When you could afford to retire?; If early/late retirement seems realistic? ... or Can you be forced to retire early if you don't want to?
- Sometimes health retires people before they want to, I need to consider that.
- Also, if my industry changes some time late in the game for me, will I enjoy something else as much? Maybe not, maybe I'd consider retirement then.

I'd like to dig deep into these numbers and find out:

- What type of annual income I'd be looking at, theoretically retiring at 70, without eating away at my principal.
- What figures should I plug into a spend-down calculator (namely annual % to withdraw and projected interest rate on this account, once actually in retirement) to realistically gauge another figure I had my sights set on:

If at some point I do / must retire, I want to have a substantial nest egg, such that, I could (if I wanted to) continue to draw my full working top-line income without eating into my principal. Tall order, I know.

Of course, I'd only withdraw what I must, or what I need. But that's the figure i want to work toward.
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Old 01-08-2020, 08:03 PM
 
30,525 posts, read 36,905,475 times
Reputation: 41301
Quote:
Originally Posted by ddm2k View Post
Responding line by line:

- That said, we do have an FSA option into which we can allocate up to $3000 per year. We can easily hit that between medical, dental, vision for two people.
Do you have health/dental issues? That's a LOT, for two 30-somethings.
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Old 01-08-2020, 08:27 PM
 
22,090 posts, read 16,094,115 times
Reputation: 17140
Quote:
Originally Posted by ddm2k View Post
Results Summary
Current 401(k) balance $36,000
Years to invest 40
Annual rate of return 7%
Annual salary $91,000
Expected annual salary increase 3%
Percent to contribute 16%
Your 401(k) contribution* $14,560.00 per year
Your employer's 401(k) match $5,460.00 per year
This is a 100% employer matchup to a maximum of 6% of your annual salary.
Total you will contribute $834,912.41
Total your employer will contribute $424,041.61
Total at age 70 $5,997,186
Total without employer match $4,338,448


More and more people find themselves out of work well before they expect it. I think that’s the biggest risk to a plan where you model working and saving up to 70 years old. For reference a 3% raise annually would put you just under 300k in annual salary at age 70 years old
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