Retirement Planning Month 5 of 78

 

      Did you have a good Halloween yesterday? We had a good  group about 5:5, then a big trickle just a few here and there. We live towards the end of a cul de sac and looking down the street, the first  two houses on both sides were dark, so I'm guessing a lot of kids skipped walking down our block to our end of the circle, so half what we've had in more recent years, not counting last year where I just set candy out and kept refilling, with a total of 23. I remember back when my older kids were young, we easily had 75-100, There were a lot of community events this year as well, so maybe Trick or Treating has lost the appeal.  Back to my retirement progress and to recap, my target date is November 26, 2027, give or take a month. If timing is as planned, I'll be exactly 62 at retirement following my husband who should retire four years earlier. My intent is be to post this on the last Monday of each month to November 29th, 2027.Back in June, I figured out if life goes to plan, I am 78 months from retiring. Now, 74. I missed an update in September-well technically missed October, but am fitting this in even though it is the first Monday of November, not last one of October.

     Without going into details as we are all different in terms of income now, income needed, and priorities, I'll note where  we are for at this point for the month as 

• On Track
• Increased Investment Target
• Below Target
• Maintenance
• No Effort

401K: On Track, and both DH and I have met the maximum we can contribute. This should help us maximize cash savings. 

Roth:  No Effort-But is on track with what has been put away. We tend to put into this in a lump sum inthe spring. I need to not to count twice with Savings when we make this shift. .

Pension: On Track

Social Security: Maintenance-as a reminder, we are not counting on social security as part of our plan, so anything we do get will be a bonus to a comfortable retirement. 

Medical Account:  (added category) I contribute automatically 1% of my salary to a Health Savings Account. I also put $1,200 in a medical flex account for pre-tax payment of out of pocket expenses. I'll point out, the Roth account is earmarked for medical expenses between my retirement date, and the date when I have reached my full pension eligibility. I'm researching what other  HSA options might be out there, but so far, what I've uncovered is that the max allowable in a Roth seems to apply inclusively to a personal HSA savings accounts. 

Cash:  Increased Investment close to what we were aiming for, though September and October was a combined deposit. On  a positive note, DH is on board with resetting our 2022 budget to see if we can live 100% on my income alone. He had some ideas of where to plug holes as well.

     These are all still goals for the next few years, but with trying to plan to live on just my income, I've highlighted the areas that are secure/banked. While my goal is that we have 12 months of living expenses banked in liquid funds, technically that is accounted for elsewhere. We'll still try and  do better with liquid cash savings. I tweaked this a bit since originally created in June. 

• Four semesters of college for DD2 (including a study abroad semester though she has earned those added costs herself)
• Bathroom remodel-upstairs
• Bathroom retouch-downstairs
• Bedroom redecorate
• new flooring-upstairs (carpet likely, but I'd love to do hardwood)
• Office redecorate-we did this for no money so far. I still want to paint and pull the old gross carpet. 
• Pull old deck, patio pour, furniture, backyard landscaping
• Supporting wedding costs for three kids
• Two cross country road trips and or 1 plus a cruise
• At least one European vacation
• Mini vacations on years not doing the road trips or Europe 
• Replace my car (though we pay ourselves each month and that would come out of a different account like the boat)

     The mini-vacations will be part of the annual budget, but two cross country and a Europe trip, unlikely unless we determine we will use DH's income. That would be OK though since not a necessity, it would still fit my challenge to see if we can live off just my salary. (Yeah-I know, stretching the challenge a bit as usual.) However, there is a possibility I will be getting a raise-accumulated over the next six years, would be about enough to cover those three major vacations. That's not money in the bank yet, if we want to feed the Roth both this and next April, so won't go on a spreadsheet. That's my wrap up as I move into November, and close to reaching the official 6 year mark.  

     

Retirement Planning- Month 3 of 78

 

     Back in June, I figured out if life goes to plan, I am 78 months from retiring. Now, 76. To recap, my target date is  November 26, 2027, give or take a month.  I would be exactly 62 following my husband who should retire four years earlier.  My intent will be to post this on the last Monday of each month to November 29th, 2027.

Without going into details as we are all different in terms of income now, income needed, and priorities, I'll note where  we are for at this point for the month as 

• On Track
• Increased Investment Target
• Below Target
• Maintenance
• No Effort

401K: On Track

Roth:  No Effort-We tend to put into this in a lump Sum. I need to not to count twice with Savings when we make this shift. .

Pension: On Track

Social Security: Maintenance-as a reminder, we are not counting on social security as part of our plan, so anything we do get will be a bonus to a comfortable retirement. 

Cash:  Increased Investment, by $1,000 more than target. With DD2 in an apartment and meal plan/grocery savings and her books being less than we planned, we spent less and could apply more towards savings.

     My goal is that we have 12 months of living expenses banked in liquid funds, and complete the spending/expenses as listed below as earmarked or with a placeholder in our cash flow for:

• Four semesters of college for DD2 (including a study abroad semester though she has earned those added costs herself)
• Bathroom remodel-upstairs
• Bathroom retouch-downstairs
• Bedroom redecorate
• Office redecorate
• Pull old deck, patio pour, furniture, backyard landscaping
• Supporting wedding costs for three kids
• Two cross country road trips
• At least one European vacation
• Mini vacations on years not doing the road trips or Europe 
• Replace my car (though we pay ourselves each month and that would come out of a different account like the boat)

     I count that we had a mini vacation in August since we took time off and had multiple outings. It was nice to feel like we're on track. While all three summer month were, higher savings than the average per month goal,  I need to be cautious, hence September will be a month of fiscal discipline. That's where I am-and now, 76 months away from retirement goals. 

     

Retirement Goals: Month 1 of 78

     

Warning-long and tediously detailed post is ahead, but if you like number crunching, money management, and to laugh at others financial naivety, this post might be for you.  This will be the start of roughly, fingers crossed, 78 monthly posts documenting my financial preparedness to retiring on November 26, 2027, give or take a month.  I would be exactly 62, and  if planned right, following my husband who should retire four years earlier. As this is month one, I'm dumping all the assets we will be able to draw from in text as a starting reference. My intent will be to post this on the last Monday of each month to November 29th, 2027.

401K:This is the where my deferred compensation has been going since I was 31, when I went back to work full time and both of our kids we had at the time, were in school full time. I started small, and each year whatever I received as a percent raise, I increased the same into the account. This first account was 19 years in the making and is holding tight. My second one has about 1/3 the value of the first, an dis the one I am currently putting the max in each years. Combined, it is at 58% of my long term savings target. 

DH has both a 401 K and a profit sharing account from a previous employer that  acts lie a 401K. He was smart in that he converted the original format profit sharing while it was still earning-the company has since folded. Had he not converted, he would have lost those funds. Since he will only be putting in another two years plus a few months, he is about 66% of the target to my retirement date. 

Roth: While we might be able to make nominal additions to this after DH retires, likely we'll only have two more deposits to this after tax account. Currently we can put $14,000 per year as we are both over age 50. This is the account we will use to  cover health insurance once I am no longer working until we reach Medicare age, and then will use for wrap around coverage. What's nice about this account is since we funded with after tax money, unlike the 401K, we'll withdraw principal and interest tax free. Here's my embarrassment. I don't have an accurrate one place tracking for the Roth accounts so that's a must action.

Pension: I have a small pension from a job 30 years ago. It has a tiny value comparably, but it just sort of sits and accrues interest each year, and will be a nice little top off for things like gifts or an annual vacation. I forget I have it when once a year I get a statement. I have a pension with my current employer, but started later in my career, so while it will be nice, it won't cover much of our living expenses. I plan to retire early, but leave it sit  until I reach age 66 so I do not incur any penalties. 

Social Security: While we both according to the  federal government will be eligible to start drawing down at age 62 in a reduced benefit, and 67 in full, I'm leery of putting faith there. DH is still researching if long term would he be better drawing at 62 regardless of whether we need it to cover any expenses. If it goes belly up before we hit 67, we'd have some benefit, but will not be part of our calculator. 

Cash: We have a target of cash that needs to be in our savings when I retire that includes not 3, not 6, but 12 months of living expenses in todays dollars. Some could be in CD's, but not long term-needs to be liquidable. That alone is  risky as inflation will make living expenses higher each year no doubt. The plan for that much is to ride out any dips in the stock market. We have a whole lot more research  to do on how much we are required to withdraw. We have several untouched savings accounts between the two of us that will cover at least six months, so the other needs to be in our cash flow. If we had no priorities to spend on between now and November 2027, I'd claim victory now, but that is not the case. Here's the list of things we are earmarking/have placeholders in our cash flow for:

• Four semesters of college for DD2 (including a study abroad semester though she has earned those added costs herself)
• Bathroom remodel-upstairs
• Bathroom retouch-downstairs
• Bedroom redecorate
• Office redecorate
• Pull old deck, patio pour, furniture, back yard landscaping
• Supporting wedding costs for three kids
• Two cross country road trips
• At least one European vacation
• Mini vacations on years not doing the road trips or Europe 
• Replace my car (though we pay ourselves each month and that would come out of a different account like the boat)

     I think you get the picture-a lot of cash will be going out the door in massive chunks over the next 6 1/2 years. For monthly updates, I'll likely track where we are above or under  target for cash savings, not including outputs on the above life priorities. As we spend in those areas, I'll update as to when complete and if we stayed on , under, or over budget. This plan requires us to save in all areas, 52% of our income. Granted, some is pretax and some is after, but in general, that's what is required. 

     Our plans are not to be filthy rich nor is it to scrape by on pennies to afford to retire early, but basically live the same as we do now, but with much more flexibility to our days, health willing. I feel l need to reiterate this is our plan and no one else should compare theirs to ours. We all have different priorities and goals. While I'm happy to have comments and shared journey's and experiences, I'll likely take any advice with a grain of salt, so please don't be on the offensive or offended! Welcome to my retirement goals! 

How Much is Enough?

     Do others find themselves asking the questions, how much is enough, more often than you used to? I find I am examining the answer to that question in everything from emergency fund reserves to toilet paper to  washable masks these days. Take for instance moving our daughter back to school.  Her medical kit was to include three reusable, washable face mask, of which the school is providing one. Well, she went back with at least a weeks worth, knowing one may be left behind somewhere, as well as making sure she regularly has a clean one ready to go. I admit that while not doing panic buying on  items like toilet paper, I am making sure I have at least a two multi-pack reserve. Sure it has been available regularly now, if not a great brand selection; But after the insanity of spring that got me down to four rolls before my daughter bought me a pack on her rare Walmart trips, I won't be caught off guard this fall. I find TP commercials  right extremely annoying now-as if we have a choice of brands!

     The old adage of having three months of living expenses morphed into having six months long before the Covid19 crisis. After  seeing that we have passed the six month mark of the pandemic in the US, six months seems too little. Yet, this is so far away from making it a reality, for most families and individuals. I continue to question every non-essential purchase, and even the essential ones like food and clothing, for why I bought what I did. I am starting to truly ask these three questions. Do I need it? If I need it, is there a less expensive and less wasteful version? If I don't need it, will it bring me incredible joy? If I don"t need it now, will it save me resources in the long run? I have had varying degrees of success. Packing our own snacks for the road, a good choice. Ordering take out sandwiches, an expensive choice that added waste. Getting a take out coffee, might give me joy in supporting an extended family members coffee house and meeting up with a friend, but using a non-recyclable coffee cup, entirely wasteful.

     I had an expensive August. The water heater element went out and we either could replace the element/repair for $1400 with no guarantee, or replace the water heater and have a warranty for the life of living in this house. We went with new, but was that wasteful-both financially and  environmentally? We had a leak this week that cost us $700! We had additional items for our daughters move. These things in life still happen, and because they don't come at convenient times, I feel like more than ever I can't let our fiscal guard down. 

     With the exception of disinfectant wipes which I can just use cleaning product and paper towels or rags, I am not too worried about the supply chain this fall. Still I want to replace items in the pantry and freezer as they are used.While Covid was not here yet, though DH seemed to have all the symptoms, I remember how sick he was for four weeks. Should we both get sick at the same time, we won't be going anywhere, and would rather not put anyone at risk, bringing us supplies. Even if only one of us gets sick, the other should stay put as well. I am not stock piling, but I am creating reserves. I want to add dry chick peas and powdered milk to my pantry as a couple staples for so many recipes

     DH's retirement for January 2024 is still on target, and mine as well. if  choose, for July 2028.  We though are a long ways away from the safety net I would like for DH to retire next March comfortably, though I think our quality of life would dramatically improve. Maybe we can make it work sometime earlier than 2024, if not as early as next spring.  I just don't think we have met our personal answer to the question, how much is enough. 

Making Work-Work for the Long Haul

Working in a gallery-an option.

The year I had my second child, DD#2, I was teaching preschool and returned post maternity leave after the Christmas break. I didn't carry the health benefits in my family because then, employers were allowed to reimburse employees for the out of pocket insurance costs if the employee used a spouses. That is what we did, giving us no cost health insurance. Other than free lunches (sometimes, as I was often too busy to actually eat tending to my group of 8 three year olds) and the insurance financial boon, and my net salary, minus child care, commuting costs, and miscellaneous other costs probably resulted in a loss. There were other things I got from my job such as professional development opportunities paid for that helped build my resume and pure work experience. Because cash flow wise, it netted very little, I left teaching the end of the school year with intentions of getting licensed to do child care at my home. A moratorium on new licenses due to back logs prevented that, but then I got an opportunity for a part time job, that was the impetus for what became a fulfilling, and moderately well paid career.

Deciding to and where to work and for what salary and benefits are a challenge. While sometimes taking any job to pay the bills is what needs to be done, sometime there are intangibles to consider. The school I taught in was part of a prestigious 100 year old non-profit organization with a partnership with a college. These two features helped me craft my resume for opportunities beyond the classroom. Had I stayed at the very first private, for profit, preschool I worked at, I don't think I would have landed that first part time job post teaching.

I struggled too long before I changed jobs last year, looking too much just at the tangible, salary and longevity, and not enough at the intangibles. Even now, I sometimes glance at my paycheck stub and wince. Then I remember all the intangibles, no more 60 hour work weeks, and the things that eventually will be tangible, added retirement pension and health savings account, and I take a breath. 

I learned of an acquaintance that bought a home a few years back and has recently taken a second job in a home fashion store for extra income. The extra income, plus the nice employee discount will allow her to still put money towards travel and furnishing her home, but not derail her long term plans. Currently single and without children, this is a work-life strategy that works for her becasue she can maintain the standard of living she wants now, but not sacrifice long term savings, while doing enjoyable part time work. I've begun thinking about the years between DD#2 going off to college and the years before I retire and how I might spend them. While I could add more or different volunteer options, working a little part time job, particularly if I could work similar hours that DH works anyway, might be a good way to sock a little more cash away before retirement. 

It isn't a cut and dry decision. The tax bite needs to be factored in. I'd need to be careful that the extra earnings isn't just eaten up through taxes, and even worse, pushing all our earnings into another tax bracket. I could try other means to pad the budget like the 30 minute survey I did by phone Friday resulting in a $25 target gift card. That's a tax free $50 per hour earning. How have you made work, work for you? Is anyone else considering adding additional work to help build up savings for retirement, or kept working part time, perhaps in another area, to supplement retirement? I'd love to hear your plans or experience. 

Indulging my passion for coffee-another option.

Living for Now, Planning for Future

I've developed friendships or minimally friendly relations with many coworkers that I keep in touch with over the 29 years of being in the adult workforce. Some have been younger, particularly as the years moved on, but many are a decade to two older. Many of the latter have either retired in recent years,or would like to very soon. Some have had to push back retirement by 3 or more years, pushing what they thought would be 65 to now closer to 70. The recession really sucked, didn't it, and I wonder if we really ever will be completely out.

I'm completely rubbish at understanding how the market works, and understanding where to hedge your bets and move assets around. I can understand simple compound interest, and have set my goals based on average rates of return that lean to the conservative side. I put as much in tax deferred options and after tax accounts that will be tax free in retirement that we can. My husband wants to get into investment property, but I know how we operate life, and with his job, that doesn't seem to be a realistic option.  His parents did it, but his mom did not work a regular job outside of the home and handled showings, collecting checks, bookkeeping, and coordinating work. In the real estate area, keeping our housing expenses low, and eventually downsizing will be our only real estate strategy. However, when we do downsize, it will be to something below market that we invest elbow grease in, as we did our first house, in order to bank a substantial amount of what we sell this place for.

Where was I going with both of these ramblings? A sad series of real life anecdotes about so many of my older friends has me thinking hard on DH and my retirement strategy. I shared last year about a recently retired colleague that had a stroke and died at 67, within a year of retirement. A colleague from my last job has been on  family medical leave for over a month out of state after his younger wife, had a debilitating stroke while on vacation. They are getting ready to move her back here, and outfitting their house for all the modifications required, rather than adding more travel to their schedule. He was getting ready to retire next year at at 68, but who knows if this changes their plans. I hear what happens to so many people who have worked so hard, and in some cases longer than they wanted, only to have another sucker punch push plans yet further away. I have so many plans for my future post work life, I want to do everything I can do to preserve my dreams, but am a little wigged out that it seems a little luck of the draw sometimes, and I don't want to look back, or have my kids look back, and wish i had done more in my younger years.

First, I don't think all travel, hobbies, entertainment, and relaxation should be put off until retirement. However, I have insurance to carry for my family through my work, a child at home and to put through college,  so neither DH or I are in a positions to reduce work, so need to fit in things when we can. Second, as much as financial needs are critical, as much and maybe even more so for that future is to have healthy body's in retirement. DH had a TIA shortly after his 50th birthday four years ago. That knocked us into reality that if something didn't change in his diet and exercise, he might not see his kids graduate college let alone see retirement. When my health issues surfaced, I was so good for so long following the regimen of physical therapy and diet, but  have become undisciplined. This will not do, and part of the blog is to help me keep focused on leading an active and healthy life through diet, exercise, and  mental health breaks.So while I can save money buying really cheap groceries that fill up bodies to save money, I need to ensure optimal nutrition is purchased with those grocery dollars, hence my move towards more economical and meatless. yet delicious and healthy meals. On the flip side, investing in a gym membership for me would be a waste of money when walking and light weights and resistance is really the only exercise I do (when I do exercise), and I have a free wellness center at my office and can buy a $14 annual walking pass for the indoor track at the high school. 

No one's ever accused me of not putting deep thought into a subject. Some days I am confident in our retirement plans, and other days, I think I will be like my friends that have pushed retirement out later. So many readers are also bloggers I follow so I have a good range of different plans, or different experiences for retirement, and learning more keeps me grounded but not naive. While you can't control for the totally unexpected, even the investment ignorant can do things to hedge our bets. I just need to make sure it is in both the financial and health areas.

What Could I Really Live On?

I often have a good think on my long drive home, about how little we could comfortably live on in a manner that was healthy and socially partaking.  I am the first to recognize how really fortunate I am. I know circumstances can change in an instant, but through a  combination of being mostly gainfully employed, purchasing a small fixer upper at the right time and selling at the right time, a little inheritance money, and a less than glam lifestyle means we have tended to both short and long term savings. There were many lean years when there were bouts of unemployment and under employment, high medical bills, two kids in diapers and childcare, and a decade later kid three in diapers and childcare,and the years of two kids in college. Those were times when my thrifty mind went into implementation mode.

In college, I paid tuition, housing, food and all personal spending money from a 20 hour per week waitress job. Granted, I had care packages from my mom's pantry when I was home on weekends, and that did help the grocery budget a bit. In hindsight, that was easy.  No growing kids to replace clothing for; no springing leaks in the dishwasher line to worry about.  A night out was quarter beer night on Wednesday's,or if really needing  a night out but even more broke than usual, Tuesday night  dime beer night, but you had to put up with country music. No offense intended, but not my music then or now. I don't think I had any new clothes, other than a gift or two from parents, and walked as much as possible to avoid putting gas in the car.  All my friends were in the same financial place.

Now with DD# 2 in her last 4 years at home before college, we really are in our last decade, fingers crossed, of supporting people other than our selves.  My ponders on the way home are starting to take real more shape.  Even with the job chnage, I am starting to crave more time to do as I please.  I want to write more, play more, rest more, and visit more.  I want to set out for days with no agenda, pack a couple PBJ's in a container, and see where the wind blows me.

The biggest obstacle for a vagabond, earn and live off the minimum amount I can, seems to be health care.  I have always had employer sponsored health care, so purchasing similar coverage independently would be completely foreign to me. I estimate that could be well over $1,000 out of pocket, and that with high deductible and copay.  We would always need to have the deductible for DH and I ready in the bank. Transportation would be our next big expenses, unless we moved to a much more urban area and could get by without a car.  That is on the list to consider, but desirable neighborhoods with good transportation or extremely walkable are expensive in any city.  I would be happy going super small in living space, but not unsafe. Oh the days when four college girls shared a 700 square foot apartment for $100 in rent a piece. We could go with a rural town, but with a thriving business community.  I picture a couple around us now, but interestingly, the only grocery stores are miles away from the downtown areas.  Not convenient in our Minnesota winters. 

Not counting long term retirement, which in my commuting plan, goes by the wayside, assuming what we currently have will be enough if we keep earning along the way to full retirement, health care and transportation are empty nester Sam's biggest expenses.  Try as I may, I can't think how we could live  much cheaper than we do now once health care is factored in. We could cut to the bone everywhere else, and start with minimally having to bring home over $12,000 year just to have major medical protection.  Makes me think who I am a servant to.