Retirement. Check. What now?

[snshijuptr]

Setting aside whether your life is "boring" (because really that's kinda up to you). Here are some ideas:

1. Keep adding to retirement until it will grow and allow you to withdraw at 59 1/2 at your current spending level. (According to firecalc.com you've already done this.)
2. Put enough into taxable accounts until you have $250,000. (or 25x your income).
3. Start systematically increasing your life style and your taxable investments such that taxable investments are always 25x your expenses.
4. When you are satisfied retire or start a business knowing you can support yourself forever!

On a side note, since you are in school, make sure you have paid or have money set aside to pay off your student loans. Along the way, you can save and spend toward any small goals you have along the way.

If you really, really want to start spending more money, ask your friends how you should improve your life. They might say that you live in a crap-hole or your car is a death-trap. You usually surround yourself with like-minded people so your friends might have good advice.

[Mr Nice Guy]

Congrats Jteezie. That is a great achievement. This has been an excellent post and responses. It really made me take a look at myself as well.

I think its interesting how people want to tell you how you should live your life. As if, at 26, you don't know whats best for yourself? Or how you should spend your money. lol. I am 23 and I see where you are coming from. I, as you are, am trying to be drinking Grey Goose in my later years, not Skyy.

Peers that are my age think im crazy cause I dont want to go out 5 nights a week and get drunk. I tell em that I didnt have many brain cells to begin with, and I dont plan on expediting their decline. I am known to love the occasional brew or cocktail, but not all the time. I don't want to meet a girl in a bar, I long to meet a girl at the library reading "kiplingers" or some like periodical lol.

I also tell friends im trying to save for retirement and investing, and they just laugh at me. "c'mon dude, your only 23," friends will say. I then laugh at them, because they haven't yet discovered the miracle of compounding interest. muahahahahah!!! Just kidding.

[jteezie]

Cool. I'm glad there are others with my mindset. I really do think that front loading the savings at a time when it is easier to do so is one of the best things a person can do. And again, I'm not deprived. I feel like a poster child for this ethos...

I'm gonna focus a bit on snshijuptr's comments. Going to school is pretty much extra income for me due to tuition reimbursement, GI bill and other benefits. It's a pretty nice incentive to learn. I actually live in quite a luxurious place very close to work and I have a nice car which I never drive (and which I worry will randomly get stolen and I won't realize for weeks, lol). As far as my friends, they think I should find a new job that pays more and is more challenging. That will make the spending problem worst and probably bring about some vices which I don't particularly want to do like drinking.

As far as projections. I used firecalc too. It's a nice calculator. It also works out for earlier retirement i.e. 55 (using the 10-T rule or whatever it's called), but I hope to "retire" sooner than that.

How did you calculate the 25x ratio? Is that 25x months? Years doesn't make sense to me. What's the philosophy behind this model?

Again. Thanks for the feedback, all.

[disneysteve]

, as you are, am trying to be drinking Grey Goose in my later years, not Skyy.

Sorry, but I have to disagree with you on this point. Just because Grey Goose is more expensive doesn't make it better. Both my wife and I happen to prefer Skyy. I've consumed a lot of vodka in my life from garbage stuff in college to Smirnoff to Stoli to Absolut to Skyy to Grey Goose and many others along the way. If you open our freezer today, you'll find a couple of bottles of Skyy and a bottle of Absolut we got as a gift. You'll never find Grey Goose in our house.

[Mr Nice Guy]

Sorry, but I have to disagree with you on this point. Just because Grey Goose is more expensive doesn't make it better. Both my wife and I happen to prefer Skyy. I've consumed a lot of vodka in my life from garbage stuff in college to Smirnoff to Stoli to Absolut to Skyy to Grey Goose and many others along the way. If you open our freezer today, you'll find a couple of bottles of Skyy and a bottle of Absolut we got as a gift. You'll never find Grey Goose in our house.

I see your point. I guess it depends what you are drinking. If the vodka is to be mixed heavily with other drinks, it probably wont matter much. I do feel that I could pick Goose out in a shot-by-shot comparison. I dont really drink vodka, i just used it more as an analogy.

[jpg7n16]

How did you calculate the 25x ratio? Is that 25x months? Years doesn't make sense to me. What's the philosophy behind this model?

Not sure what he meant that 25x for - usually 25x is a rule of thumb for when you can retire. Once you have 25x your annual expenses, you have enough to essentially create a perpetual flow of inflation adjusted income. (7% gains - 3% inflation = 4% = 1/25)

The typical use is for planning a retirement goal. Say current expenses are $30k, but will keep growing over time (inflation) to a point when you hope to retire maybe your expenses are then $50k due to inflation.

In order to retire at that time, you would need around 25x yearly expenses as a conservative estimate of the level of capital needed to make it from age 60 to 100+.

So if your expenses at your retirement are expected to be around $50k, you should shoot for $1.25 million as a retirement goal.


Right now in your specific case, your $100k gives you a fantastic headstart. If you left it alone and didn't add any money, if the market returns 8% you would have $2.4 million in 40 years. If you held to a 4% withdrawal strategy (conservative withdraw estimate to make the money last a very long time), you could have an income of $95-100k in retirement. All because of your hard work so far.


But I would rather save a little too much for retirement, than a little too little. So don't stop

[MonkeyMama]

This thread is kind of all over the place - so here are a few thoughts. I apologize if I missed anything or repeat anything.

1 - I presume you are concerned about "Saving too much," as you are looking for ways to spend your money wisely. I honestly think your best bet is to keep saving. Though $100k at your age is a GREAT start to retirement, I personally would not feel that is enough. A lot can happen between now and retirement. I'd keep contributing. That said, I would put some money away into more liquid and/or more accesible accounts for when you have a better idea what to do with that money. I wouldn't spend more just to spend more.

2 - That said, while the average person is behind on their retirement, and would be best to max out retirement options, this may not be the best situation for you. You'll want to think about 2 things as far as where you put your money. Taxes and accessibility.

The more you put in a 401k, the more limited that money is. Basically, you can't access that money without penalty until you are in your 60s.

The ROTH IRA may be a better priority for you, since you can access it sooner and more easily. Presuming you are well on your way to early retirement.

The reasons to contribute to a 401k would be any employer match and for the tax breaks. You could do well to put $10k per year into your 401k and then $5k per year into your ROTH. I just throw that out because with what you have said about your income, this would probably bring you down to the 15% tax bracket. I think it's fair to assume your taxes will be higher later (higher than 15%) and that a ROTH is a good place to park money.

You may prefer just to fund your ROTH (almost 10% income) and stop funding the 401k. That is fine, but you will find you pay a lot more in taxes in that case. You are probably saving $4k per year on taxes (Fed taxes only - maybe some state taxes too) by maxing out your 401k. There is some trade-off there.

Just some things to think about.

[disneysteve]

I just thought of something. Do you have disability insurance? If not, that would be a good thing to spend money on. At your age, your most valuable asset is your ability to earn money. If something were to happen to you and you couldn't work for an extended period of time, you'd blow through 100K in no time. Get yourself a quality disability income insurance policy.

[zetta]

It seems to me you feel the need for a new goal for all the money you are saving, since you don't wish to increase your living standard or discretionary spending at this time. Here are two possibilities:

1) Seed money for starting your own business. Set aside some amount for start-up costs (equipment, classes, etc.) and two years of money to live off while getting the business off the ground.

or

2) Aim for financial freedom -- ie generating enough income from your investments that you don't need to work. Read The Complete Idiot's Guide to Getting Rich. I've summarized it here:
Booknotes: The Complete Idiot's Guide to Getting Rich: Zetta's Striving to Get Rich Slow

[jteezie]

Thanks for the suggestions Steve. I already have 10x disability. I really like that insurance is cheap for the young (and also that it's intended for the young).

MM. I've been putting money most of my money into a roth ira and 401k but am thinking of putting my bonuses and higher marginal tax income in traditional so I can use it for school and avoid the tax altogether, but honestly I am working on the generalized assumption that the roth now is better than later when taxes are higher. I'm actually pretty close to $13K already this year :/ so I definitely need to reign it in.

zetta. Thanks for the summary. My goal is definitely #5.

[disneysteve]

Thanks for the suggestions Steve. I already have 10x disability.

What do you mean by "10x disability"? You don't mean 10 times your income, do you? That's the rule of thumb for life insurance but not for disability. All you need to do for disability is replace your actual income. In fact, I don't even know that it is possible to get insurance for 10 times your actual income. That would invite all kinds of fraudulent disability claims.

[jteezie]

Oh you might be right. I think that was optional life insurance. I know i have disability though. It was too cheap to not check off on my annual benefits enrollment.

[LivingAlmostLarge]

How do you live on so little for rent etc? Also why do you say "relationship" next year like there is a time line?

Do you have any plans to buy a home or do anything ridiculously expensive?

[doxie]

I see your point. I guess it depends what you are drinking. If the vodka is to be mixed heavily with other drinks, it probably wont matter much. I do feel that I could pick Goose out in a shot-by-shot comparison. I dont really drink vodka, i just used it more as an analogy.

This reminds me of a segment I saw on 20/20 or one of those shows. They asked a bunch of people at a club what type of vodka they like, and they were all Grey Goose snobs. They did a blind taste test with several types of vodka, and most everyone picked the cheapy stuff. Several actually commented that the Grey Goose tasted weird and gross. I think of this every time I see people pay $2-$3 more per drink for that stuff.

[Mr Nice Guy]

This reminds me of a segment I saw on 20/20 or one of those shows. They asked a bunch of people at a club what type of vodka they like, and they were all Grey Goose snobs. They did a blind taste test with several types of vodka, and most everyone picked the cheapy stuff. Several actually commented that the Grey Goose tasted weird and gross. I think of this every time I see people pay $2-$3 more per drink for that stuff.

Maybe so. "A bunch of people at a club" is hardly a good sample to go off of though. In my experience with MOST things, you get what you pay for. Great smooth taste, and ultra filtered so you dont get a hangover.