Retirement Savings -- Countup

[Randomsaver]

Kork did an excellent job on the 72t rules. With the Roth conversion ladder, you convert some money (possibly 1 year's worth) to your Roth IRA (possibly a taxable event), let it age 5 years, then withdraw with no tax or penalty. You do this annually to create a ladder of money which can be withdrawn tax and penalty free.

Thanks. It seems the Roth conversion is exactly just what it states --- it converts Traditional into Roth by paying tax upon conversion. Thanks.

[Jluke]

Here is a 72t calculator that was posted on bogleheads earlier this year.

https://www.dinkytown.net/java/72t-calculator.html

[Randomsaver]

Here is a 72t calculator that was posted on bogleheads earlier this year.

https://www.dinkytown.net/java/72t-calculator.html

Thanks Jluke. I plugged my numbers and came out the same as my providers calculation -- $1.64K/month for:
$320K
5% interest rate (given)
52 age
0 age beneficiary
Single Life Expectancy

I guess my goal now is to get that up to $2K/mo. If I would extrapolate it, I would need 320K * 2K / 1.64K = $390K.

[Randomsaver]

$2000 per month is not much here in US and I could not live off that as I eat out most times but in East Europe and Southeast Asia, where $1000 per month allows comfort, the extra $1000 allows me to live a fantastic retirement. $300 of that extra $1000 goes to a global health insurance, $200 goes as buffer for rainy days, and $500 goes for enjoyment.

What an exciting life ahead. Life Truly Begins At 52, really. I'm still working and still have a kid yet to go to High School but I can see light on the horizon. I have saved for my youngest's college already ($60K). I have an extra savings that I have not mentioned prior because I am saving it for my parents' medical bills when they need it -- let's call it Parents Fund -- where the balance as of date is $47K. This way, with kids' colleges and parents' medical help fund appropriated, I can device my future based on my separated "own" money.

I'm not a manager so my pay at work is not big but I like my work. My bosses know they are getting me for a bargain and that helps protect my employment. I preferred it this way -- getting less pay but continuous reliable regular pay. I've seen too often how executives get laid off a lot. I went for slow but steady instead, which has become my life's mantra.

.

[LivingAlmostLarge]

People who were able to retire at 50 and start enjoying life early are those who only put the match on their 401K and instead put the rest of savings in their personal brokerage. It's like Roth 401K in that it's tax-paid dollars but minus the long wait of 59 1/2 to have no penalty from using them. As an aside, generally speaking, those who retire earlier than 50, say between 40-45, do not have enough savings yet or are living very frugally until help comes at age 59 1/2 from 401K and at age 62 from SS. There are exceptions of course like those NBA players and Taylor Swift likes. For regular folks like me, 53-58 would be the ideal age to stop working and enjoy life but this can only be possible if one prioritizes personal savings accounts over age-restricted retirement accounts.

This is the lesson I learned on my own and it is something I will teach my kids early. I started on this path around 40y and that is how I was able to save and buy my beach condo which I would not be able to afford now, moreso 10 years from now as prices of these go up fast. Phase 1 is tough because this happens also along the same time 2 other things are happening in one's life -- family (college for kids) and family home mortgage. If you guys remember, I have another thread on my family home mortgage in the Debt section. While I was paying for that mortgage, I was saving also for my retirement property AND kids' colleges. REALLY REALLY TOUGH.

But the retirement property is just Phase 1 of retirement in the 53-58 range. After that purchase, the savings is zeroed out so one has to go to Phase 2 -- rebuilding savings for the retirement that would take care of years up to 60y, when help from 401K and then 62 from SS comes in. It would not say it's easy but it is less hard than Phase 1. This is because, chances are:
- Family home mortgage is done
- College savings is done or -- for those who have kids in their 40s like me - near done
- Salary has for most folks at this time have outpaced cost of living and hence extra money is put into the savings

Random I would argue against what you said. First of all anyone fortunate and disciplined enough to retire at 50 probably save like 80% of what they made. They either had a BIG shovel or are happy living super frugally. They likely maxed out their 401k, Roth IRA, after tax mega back door roth, Employee Stock Purchase plan, and THEN more into a brokerage account. The only way to get there is to SAVE and SAVE a lot. It's not because they balanced it, it's likely they just were BIG savers.

If you start early and save, look at Kork, you end up with a lot. Time is on your side. We had to supercharge our savings because we started a few years later in our late 20s. And then we were those people, max out 401k, max out roth iras, max out ESPP, and then save money into brokerage. Then ESA/College funds. Then suddenly before I knew it we are 45 and 47 and we have way more than expected. Because we lived on a budget, and maxed out every opportunity and then some.

Will buying a retirement home wipe us out? Nope. Neither will paying off our mortgage. I made more in returns last year than we worked and earned and our mortgage. I'm just saying that the only way to retire early is to save. Whether it's in a retirement account or not, having it "balanced" won't matter. The saving is what really matters.

By not using a 401k and a brokerage you would have had to SAVE more because you'd have paid taxes on the dollars invested AND you'd have to pay taxes on the annual dividends. Not true in the 401k or IRA. Deferring taxes is a big deal.

Why a 401k pretax? Because if you are with a big shovel and will retire say at 50, the chances are you are going to do tax arbitage. You are in say the 37% bracket earning but living in 24% bracket at 50. You have a lot of years to save 12% in taxes.

For us we are about 50% retirement and 50% brokerage savings. How it that is further broken down is 60% pretax retiremen and 40% Roth savings. The biggest thing we've done is just save. I can guarantee you that we've done better saving and investing and keeping our mortgage now for 23 years than having paid off our mortgages and investing it. Bought our first place in 2002 for $165k. Gosh writing that is insane! I remember thinking how expensive that was. And now that's less than a downpayment.

[srblanco7]

Random I would argue against what you said. First of all anyone fortunate and disciplined enough to retire at 50 probably save like 80% of what they made. They either had a BIG shovel or are happy living super frugally. They likely maxed out their 401k, Roth IRA, after tax mega back door roth, Employee Stock Purchase plan, and THEN more into a brokerage account. The only way to get there is to SAVE and SAVE a lot. It's not because they balanced it, it's likely they just were BIG savers.

If you start early and save, look at Kork, you end up with a lot. Time is on your side. We had to supercharge our savings because we started a few years later in our late 20s. And then we were those people, max out 401k, max out roth iras, max out ESPP, and then save money into brokerage. Then ESA/College funds. Then suddenly before I knew it we are 45 and 47 and we have way more than expected. Because we lived on a budget, and maxed out every opportunity and then some.

Time in the market, how much you save, and market returns are the key factors. You have control of two of them. Act accordingly.

[LivingAlmostLarge]

Time in the market, how much you save, and market returns are the key factors. You have control of two of them. Act accordingly.

but that's why balancing investing with debt paydown makes the most sense

[Randomsaver]

Random I would argue against what you said. First of all anyone fortunate and disciplined enough to retire at 50 probably save like 80% of what they made. They either had a BIG shovel or are happy living super frugally. They likely maxed out their 401k, Roth IRA, after tax mega back door roth, Employee Stock Purchase plan, and THEN more into a brokerage account. The only way to get there is to SAVE and SAVE a lot. It's not because they balanced it, it's likely they just were BIG savers.

If you start early and save, look at Kork, you end up with a lot. Time is on your side. We had to supercharge our savings because we started a few years later in our late 20s. And then we were those people, max out 401k, max out roth iras, max out ESPP, and then save money into brokerage. Then ESA/College funds. Then suddenly before I knew it we are 45 and 47 and we have way more than expected. Because we lived on a budget, and maxed out every opportunity and then some.

Will buying a retirement home wipe us out? Nope. Neither will paying off our mortgage. I made more in returns last year than we worked and earned and our mortgage. I'm just saying that the only way to retire early is to save. Whether it's in a retirement account or not, having it "balanced" won't matter. The saving is what really matters.

By not using a 401k and a brokerage you would have had to SAVE more because you'd have paid taxes on the dollars invested AND you'd have to pay taxes on the annual dividends. Not true in the 401k or IRA. Deferring taxes is a big deal.

Why a 401k pretax? Because if you are with a big shovel and will retire say at 50, the chances are you are going to do tax arbitage. You are in say the 37% bracket earning but living in 24% bracket at 50. You have a lot of years to save 12% in taxes.

For us we are about 50% retirement and 50% brokerage savings. How it that is further broken down is 60% pretax retiremen and 40% Roth savings. The biggest thing we've done is just save. I can guarantee you that we've done better saving and investing and keeping our mortgage now for 23 years than having paid off our mortgages and investing it. Bought our first place in 2002 for $165k. Gosh writing that is insane! I remember thinking how expensive that was. And now that's less than a downpayment.

Excellent points. It just happens for me, there is a good COL arbitrage so I can afford not to really live frugally though I do save say 25%.

[disneysteve]

Excellent points. It just happens for me, there is a good COL arbitrage so I can afford not to really live frugally though I do save say 25%.

If you are saving 25%, you are living far more frugally than the typical American. You're setting yourself up for a very comfortable retirement.

[LivingAlmostLarge]

If you are saving 25%, you are living far more frugally than the typical American. You're setting yourself up for a very comfortable retirement.

this. Most people are struggling to save anything. It's a little sad. It's also becoming more apparent that without pensions people are living on ss

[james.hendrickson]

All -still grinding towards my immediate goal of 100k

Here are the current balances:

TSP: $4,754.32
SEP IRA: $20,151.07
ROTH IRA: $18,852.66
Taxable Brokerage: $5,397.94

Total: $49,155. So, about halfway there.

[Randomsaver]

If you are saving 25%, you are living far more frugally than the typical American. You're setting yourself up for a very comfortable retirement.

But the example given by LAL was "to save 80% of what they made". I don't even know how the math works for that for a salary of $10K a month for example. That leaves only $2K a month for living. I think the person referenced was kork and I am curious how he made it to save 80%. He's got to be earning $150K annually at least.

[Randomsaver]

All -still grinding towards my immediate goal of 100k

Here are the current balances:

TSP: $4,754.32
SEP IRA: $20,151.07
ROTH IRA: $18,852.66
Taxable Brokerage: $5,397.94

Total: $49,155. So, about halfway there.

That's a nice milestone at 50% of goal, JH.

The market's tanks right now so....just go to be patient and stay the course.

[Randomsaver]

This is supposed to be a countup thread but all the numbers are down.

I like to provide status at least once per month but if numbers are down, I'll just keep the previous high counts UNTIL the numbers count up again. I'll leave it to you guys how you want yours updated here but for me, a count up should be going up or at least as is.

[LivingAlmostLarge]

But the example given by LAL was "to save 80% of what they made". I don't even know how the math works for that for a salary of $10K a month for example. That leaves only $2K a month for living. I think the person referenced was kork and I am curious how he made it to save 80%. He's got to be earning $150K annually at least.

https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

It's explained here. That being said I do think it's easier with a big shovel. But even with a small shovel living as frugally as possible makes it possible. I wouldn't personally do some of those things but others do. Just saying.