Financial Picture

[scfr]

What jumps out at me are car expenses (car loan, auto fuel, auto service, auto registration, auto insurance) but I know that costs can vary widely based on geography, so it's hard to say if they are "high" or not. Do you have 3 cars?

Cable/internet also seems on the high side to me but there could be a perfectly good reason.

But overall, things look really good!

[Jluke]

What jumps out at me are car expenses (car loan, auto fuel, auto service, auto registration, auto insurance) but I know that costs can vary widely based on geography, so it's hard to say if they are "high" or not. Do you have 3 cars?

Cable/internet also seems on the high side to me but there could be a perfectly good reason.

But overall, things look really good!

Thanks!

yes, those costs are for 3 vehicles - sedan, compact SUV that are daily drivers and a large SUV.

Wife’s vehicle needed new brakes so that impacted the service category. That visit alone was around $350 if I remember right.

in 2020 I have a feeling the sedan and the large suv are going to need new tires. Probably looking at $1500 or so.

I drive 400 miles per week so that impacts fuel.

loan is for the sedan, bought new and borrowed 15k or so.

wife also has a loan on the compact SUV, 240/ month bought Certified used. I didn’t include some of her numbers in this.


cable/internet has DVR (and 3 boxes), otherwise pretty standard package (no premium channels).

i am in PA, an hour west of Philly.

[MonkeyMama]

figured I would dig this one up and post some new information, including 2019 expenses

Life Insurance
Term: 250k (20 year policy ending at age 57). $246/year
Employer: 3x salary

Not sure, because you did not include your spouse's information. But are you happy with the $250k life insurance policy if something happens to you? It's nice to have the bonus of generally cheap employer life insurance, but is nothing I would personally count on. (For reference, my dad got sick, lost his job because he was sick, lost all of his insurance, etc. Employer insurance can be useless sometimes when you actually need it).

That was the only thing that stood out at me. Admittedly, I didn't look through your expenses at all because savings rate seemed well enough.

[Jluke]

Feeling old suddenly and no real sense of how I am really doing.

As I commented on another thread I’m feeling like I won’t know if I did this saving thing right until it’s too late.

UPDATE
Age 47, 44
Family: Married (wife is SAHM), 11 year old, 4 year old
His Monthly Income (Net): $5600


His Assets
401k: $800k; Contributions: MAX at 23k
Roth: $175k; Contributions: MAX at 7k
Cash: $100k
Taxable Investments: $245k balance (college fund, ideally)
Pension: six figure lump sum or around 2000/month if I understand it.

Her Assets
retirement: 100k

Debts
Mortgage: $1000/month ($150k balance at 3.125% with 16 years remaining)

Escrow: $1000/month (manage myself)

Car loan: manageable; opened Jan 2024. 3 years 3.9%, but I always pay early so not a big deal in the grand scheme.

Any of these numbers stand out - good or bad?

im really at a loss as to whether I am overdoing it or need to change things up

[disneysteve]

You’re probably fine. What’s your gross annual income? I can’t really determine that from the numbers given. What saving, if any, is happening beyond the 401k and Roth? Are you also funding a spousal Roth? Are you regularly adding to your taxable investments or cash account? And the most important question is what is your monthly spending?

[kork13]

Steve literally asked just about every single questions I was thinking ... so I'm just gonna sit back & wait. Offhand, it seems you're doing fairly well for yourself... details will confirm. One final question beyond the others: what's your goal(s)? Retire completely at a particular age? ASAP? Never retire & merely supplement your sweet walmart greeter retirement gig?

[Jluke]

Thanks for the follow ups:

Him: 125k
Her: 12k (one day per week)

less
medical: 4800 per year
fed taxes: 16k or so
401k: 23k and 1200
other taxes

expenses per month
mortgage: 1000
TI: 1000
all else: 3000, best guess knowing what I budget and it’s usually less than the budgeted amount.

I’m usually saving the extra for the lumpy payments. Cash pile helps for that if needed.

Her Roth is at 600 per year.

I haven’t done taxable investing as much as we are feeling inflation.

in 2023 my CapitalOne account grew 30k. I did a Quick Look back. I think my 401k last year was only 14k contributed as I wanted more cash

this year I’ve added 7500 but I’m not projecting any growth in that account through end of year.

[disneysteve]

Please correct me if I misread any of this.

Income:
137,000

Expenses:
4,800 medical
17,200 taxes
12,000 mortgage
36,000 everything else
------------------------------
70,000 total

Saving:
23,000 401k
12,000 taxable investments
7,000 his Roth
600 her Roth
--------------------
42,600 total

So expenses plus saving comes to 112,600. You're earning 137,000 so there's about 24,400 of income unaccounted for, so one question is where is that money going? I realize your numbers are all rounded off but that seems like more than a rounding error. You mentioned the car loan but didn't list it in your expenses. Is that included in the 3K of everything else?

You're saving 31% of gross which is excellent. If you can keep that up as long as you can, you'll be in fantastic shape down the road. Even if every penny of that missing 24,400 is being spent, it really doesn't matter (but you still need to know where it's going). Depending on the answer to where that money is, my only possible suggestion would be to max out her Roth too, but again, at a 31% savings rate, you're fine either way. It would just be nice to take full advantage of that tax-free account.

[Jluke]

Thanks for spending the time to sort through those numbers.

I was being lazy on the expenses because I was focused on the asset side

one clarification is the 12000 is property taxes and insurance, not taxable investments.

I didn’t include state, local or the other taxes like social and Medicare or whatever they take out of each pay.

I left out some regular monthly bills that we don’t pay via credit card.


Propane: 150
electric: 200
water: 80
trash: 27
sewer: 57
preschool: 300
car payment: 550 (have only made 3 payments)
car insurance: 150 but pay in full, not monthly

[disneysteve]

one clarification is the 12000 is property taxes and insurance, not taxable investments.

I didn’t include state, local or the other taxes like social and Medicare or whatever they take out of each pay.

I left out some regular monthly bills that we don’t pay via credit card.

Propane: 150
electric: 200
water: 80
trash: 27
sewer: 57
preschool: 300
car payment: 550 (have only made 3 payments)
car insurance: 150 but pay in full, not monthly

Ah. So that's $12,000 less in savings and more in spending and also $18,168 more in spending.

Income:
137,000

Expenses:
100,168

Saving:
30,600

That means you're saving just over 22% of gross. Not as good as 31% but still a solid number. It also reduces the unaccounted for money to 6,232. A good chunk of that is those taxes you didn't include so these adjusted numbers are probably right on the mark.

Are you doing okay? I think you are. Anyone saving 22% of income should have no trouble affording a comfortable retirement when the time comes.

The only thing I'd recommend is taking a good look at the 3,000 "all else" number and figuring out where that is all going. A lot of it is probably discretionary spending. That's where I'd be looking if I wanted to trim back where possible. Even if you could knock off 100/mo from that, that could mean being able to triple her Roth contribution from 600 to 1,800. Otherwise, as I said, 22% savings rate is very respectable.

[kork13]

Okay, I will now confidently say you're definitely doing fairly well.

Your current numbers are all generally reasonable, and as Steve said, a >20% savings rate is a solid place to work from. Could be improved, but it'll get you where you need to go. I'll reiterate my question of "What's your goal?" ... But looking into the future, even if you change nothing, you should be able to replace your income within roughly 10 years, effectively free to do as you please.

By my numbers (assuming a reasonable/conservative 4-5% growth above inflation), your investments will grow to about $2.4M-$2.8M (in today's dollars) over the next 10 years -- max out your wife's Roth IRA too, and you'll be confidently on the higher end of that. But for easy numbers, call it $2.5M. You'd be 57y/o by then, so Rule of 55 would make your 401k accessible. $2.5M will comfortably provide roughly $100k/yr. So at that point, your assets are able to fully support your expenses, and you're basically set & able to retire whenever you like. Your pension (assuming its value stays up with inflation?) will add another ~$25k/yr, which is gravy. Your youngest will be starting high school in a decade, so your call on if you delay until after you're empty-nesters... But again, you'll have the commanding position of being financially independent, able to retire at will.

Standard financial maxims apply ... Lower spending & higher savings will get you there sooner and/or grow your assets higher. No guarantees. yadda yadda. But you're doing good.

[disneysteve]

I forgot to mention the pension. Obviously, that just adds to the strength of your plan. Are you and/or she also eligible for SS?

[Jluke]

Thanks again DisneySteve.

we would both be eligible for SS.

the one off expenses are hard to quantify but it’s really just part of life with family of four, a house and a dog (spent 2k recently on him - two routine surgical procedures at 18 months old; not health or emergency related).

I have 4k payment for braces coming this summer. We need a new sofa. Just had the driveway sealed.

No vacation planned for this year.

I guess I’ve been looking at what I bring home (call it 80k) vs a salary of 125k. And I still find a way to save some of the 80k net.

I’ll have to see how the rest of the year plays out. I’ll have a few paychecks where my 401k will be less so I can get the full employer match and still max out for the year so that will boost some savings.

[Jluke]

Thanks Kork

appreciate you projecting those numbers. It feels surreal to see my investments could grow to 2.5 million but I am basically half way there now.

in three years I can start to take advantage of the catch up contributions too.

my goal is to really just be prepared for that day when I am no longer fully employed - whether it is on my own terms or it’s decided for me.

retiring by 55-57 might be something I am interested in - sooner the better, really but lots of responsibilities and future unknowns that it may not be a reality for me. But something to really consider and keep in my mind and re-evaluate as time goes on.

[disneysteve]

But for easy numbers, call it $2.5M. You'd be 57y/o by then, so Rule of 55 would make your 401k accessible. $2.5M will comfortably provide roughly $100k/yr.

That's true regarding the rule of 55 but another option, since you've got 10 years to prep for it, is to accumulate enough in taxable accounts to cover you until 59.5. That could actually work to your advantage tax-wise. Every dollar you withdraw from your 401k is taxed as regular income. However, money withdrawn from your taxable accounts is different. You'd only pay taxes on capital gains/earnings, not principal since those dollars were already taxed. That could be very important particularly if you'll be using ACA insurance, allowing you to keep your taxable income lower to qualify for a higher subsidy.

We are both now over 59.5 but I don't anticipate dipping into actual retirement accounts for a while since we have a good chunk of money in our taxable accounts so I'm tapping that first.