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Advice for Boomer- debt vs saving

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    Advice for Boomer- debt vs saving

    Hi, reading the thread "am I being too aggressive" got me thinking about our own situation so looking for advice here.
    I am only breadwinner, make about 120k in 2013. Just my DH and me in the HH.

    Age 52- would love to retire before age 60 if possible
    I have a pension- appx 45% of salary averaged over 5 highest earning years
    Income with raises and bonuses increases about 20% annually

    We have 150k in 401k split evenly between a balanced fund and growth fund
    Contributing 12,000 this year to 401k and plan on maxing out the IRAs with our catch up provision- our company match is quite low.
    We have two traditional IRAs with about 80k in them
    About 2k in savings

    14k HELOC at 3.25%
    14k car at 2.5%
    7k visa at 0% for another 12 months

    Current thinking- kick the debt out by end of 2013 (not worried about the cc- will have paid by time interest kicks in) then hit the 401k with all I got- but now I'm wondering should I be moving more money into maxing out the 401k since our interest rates are low on the car and the HELOC? And extending the debt payments into 2014?

    I have been really looking forward to the peace of mind associated with being debt free and kicking out the mortgage before retirement (128k balance and I am dedicated to 0 balance at retirement although there are others who do not agree that is important) but now I am also growing concerned about the following:

    Opportunity cost
    My salary reaching phase out limits that reduce the amount of money we can squirrel away.

    Thanks in advance for your advice.

    Are you maxing out the match on the 401k? If not, that should be your first priority in my opinion. I would also tackle those debts asap and take action not to add to any of them or acquire any others. The sooner you are able to do this, the more realistic that 60 year retirement year becomes.


      I hope it's ok to take a different view of retirement...

      I understand your desire to retire before 60 and wonder what your plan is for the three phases of retirement. Those expectations will drive spending and therefore income needed to fund 41 plus years retired. First you need to verify that pension sum remains at 45% taking early retirement. If you can eliminate all debt including your mortgage and live modestly that 45% of salary + 4% draw down of retirement savings should be borderline adequate presuming you max out all retirement savings. SS kicks in later but the changing numbers will likely affect your plans. You could supplement with part time work/consulting/hobby that generates income.

      Start working on improving/maintaining good health as that affects your enjoyment of phase two when you will likely be less active. A lot of retirees downsize at that point to eliminate yard work and DIY home maintenance. In all likelihood sums from selling house will be used to buy condo and associated costs.

      Phase three is the most difficult to anticipate and most expensive to fund.


        You are right - when I isolate my retirement fund from my 401k the percentages of just the retirement fund are:
        Retire at 57: 22% replacement ratio
        Retire at 60: 30%
        Retire at 62: 37%

        My plan has always been to work at another job if I leave early, doing something a bit less stressful. However, as you all are teaching me I really need to accelerate our savings to do that. Of course the things I love o do will not pay more than minimum. To make any money at all I need to say put.

        We are both healthy but do understand that can change and we need to be ready if it does.

        So the plan is- eliminate all debt other than mortgage by end of 2013. Then tackle the mortgage aggressively along with maxing out savings.

        I am changing spending habits, I am dedicated to getting out of debt. I just wanted to make sure I was not losing opportunity by maxing the 401k. We do qualify for the company match but it is not much. My DH is not the breadwinner but he is also not the spender.

        So we have about 8000 coming our way in April. Put it all towards the HELOC or move some into emergency fund?


          By the way those are replacement ratios of predicted salary not current salary- the percentages of current salary are
          57: 33%
          60: 48%
          62: 62%

          I know we would also have inflation and higher insurance costs to deal with. My associated work expenses (clothes, etc) are not high.