Need Help with Future Retirement Budget (coverage, raise, travel, Florida)
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With about 13 years to go before you retire, try to work on your reserves which would include an emergency fund for those unexpected expenses that may crop up. With your projected $418 in excess funds after all the bills are paid, these reserves will put you in a more comfortable financial situation.
I've come up with the monthly budget below, which is based on a few assumptions. The main assumption being that I sell my house here, and buy a condo in Florida with the equity I've built up (currently about $150k).
Expenses
Income Taxes $350.00
Florida doesn't have income taxes, at least state income taxes, and your threshold for federal taxes may not be met on 37000 dollars a year in income. Once you take out deductions, etc. So this number should go way down or away entirely.
Using your presented numbers (and smart for you to do so), I say you could save on is the condo dues. $400 per month is a bit expensive. Now I know it all depends on what you get for the $400, but it is pricey for a unit in a condo building.
Yes, I agree with whoever said to take a personal finance course. Often universities have extended education courses -- that you don't take for credit -- but are still part of the university. I know our university has one re planning for retirement. mostly for people on the verge of retiring.
With that said --
You didn't factor in clothes, haircuts, Christmas presents, birthday presents, annual car tag fees, car maintenance (I don't think you did), and did you factor in a recreation allowance (for eating out, movies, Starbucks , etc.)? I gather Misc is for housecleaning supplies, etc. (Don't put cleaning supplies and laundry soap, shampoo, etc., under groceries. Make Groceries just food.) BUT you did factor in a savings account! Good for you! Now -- project a budget, with 5% inflation, for every year between now and the time you retire. Well, at least 4%. But leave your income the same (which will probably go up before you retire -- but maybe not significantly?). THEN see what happens to your budget.
When looking ahead 12-years, the best one can deal with is developing an attitude toward saving for retirement. Nobody can anticipate an actual budget that far in advance. That "attitude" will probably include a couple of basic approaches:
1). Max-out your 401K ... particularly assuming you are getting some type of company match.
2). Live within your means before retirement ... while consistently paying-off outstanding debt.
3). Instead of spending wage increases/bonuses over the next 12 years; save or invest them (you won't miss what you don't have).
4). Start developing a retirement strategy that includes things like healthcare, insurance, investments, withdrawals, inflation, living arrangements, income risks, etc. About every 6-12 months, review/update/tweak your plan.
You will soon find yourself well prepared for retirement and have a clear picture of what it's going to take to get there.
If it's already been suggested, forgive me, but I would strongly suggest paying off all credit cards thus doing away with
the $250 you have allocated to that category. In fact, zero debt of any kind would be ideal once you retire.
In hindsight one of the best things you can do is to sit down with your current pay stub. Look at your gross and net amounts and accounts for the difference. Some items will be there in retirement others won't. Things like FICA, pension contributions, tax shelters, disability insurance etc etc are all possibilities some like disability insurance might be paid after you cash your check. You may find that a chunk of what comes out of your monthly costs won't be there in retirement as you will then be retired and won't be paying them. Could be 20 percent or more easily. Just in pension and SS could be a chunk of change etc.
Thanks eveyone for all of the excellent advice! You have helped a lot, and I feel better now about my retirement plan. I think I will take a class, and/or get some pro help along the way. And save a little more so I don't worry so much.
The 4% is ok for early planning but I would reduce to. 2 to3 %. The reason in interest rates are about O.
keep in mind the 4% withdrawal is not a given just because rates may be higher and it is dependent on other factors.
allocations,inflation,order of gains and losses and market valuations all determine whether a 4% inflation adjusted withdrawal will work regardless of where rates are.
we had many periods in time where rates where higher but real returns were negative after inflation and taxes.
in fact there were time frames that failed that contained double digit interest rates.
the 30 year period starting in 1966 comes to mind.
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