29 Replies Latest reply on Mar 12, 2014 2:42 PM by Topsey

    Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?

    cyber888
      I turn 50 yrs old in 3 months.  I will have around $273,000 in my 403B and $77,000 in CDs/Savings/cash, or around $350,000 total savings.   I am contributing around $25,200 pre-tax per year till I retire (including my employer's contribution). Am I doing Ok?

      I plan to retire around 57 - 58 yrs old, and hope I'll have $850K by then ($650K in 403B and $200K in cash, savings, CDs). 
      With my expenses,  I could live with $40,000/year during retirement.
       
      I plan to take my Social Security at 62 :)
       
       
        • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
          KateS
          From what I have read, what you will need depends on what percentage of your present income you will need and for what period of time (life-span.) This would take into consideration your debt (what you will need in retirement) and living expenses and your anticipated life span. Additionally, do you plan on doing any income producing work in retirement?
           
          Hope this helps!
           
          • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
            MISPROF
            A rule of thumb to use is that you can expect to withdraw about 4% of your total principal each year without touching the principal. Using that number you would need $1 million to meet your $40K annual need. Of course, that is just a rule of thumb. The amount you could withdraw could be higher or lower depending on your investments and financial markets. I would say that your goals seem reasonable, but you may want to plan to or have to work for a couple more years to achieve the financial objectives you have set.
              • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                JerryD
                That's a good point. We, however, did "retire" early and used a strategy of spending down the taxable savings until we reach both Social Security and Required Minimum Distributions. With a good budget and discipline, it does work. With $200k in savings, investing wisely in higher interest securities like possibly preferred stock ETF's, he should be able to go about 5 years if he can live on $40k/year. Meanwhile his retirement savings should increase due to both additional contributions until he retires and after when it stays tax-sheltered.
                 
                I do think that his retirement savings are a bit light and he should escalate contributions to the maximum possible to provide some head room. Doing some part time work after retiring and putting it directly into both his and his spouses Roth to the maximum allowed would also add some cushion.
                • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                  BAC
                  4% is a very dated rule of thumb.  New research recommends 2-3%, especially for young retirees.  Ultimately, what you need is determined by what you need/want to spend.  See a financial planner who charges a fee and has no vested interest in selling you instruments.  The answer is too important to take advice from the general public.
                    • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                      JerryD
                      We have had a budget for years, well before retiring. We haven't increased the budgeted amount for years so any assumed percent increase in spending due to inflation is NOT a given.
                       
                      We have a concept of on-budget and off-budget funds that are really things we can't plan for or are discretionary. If you budget realistically and control off-budget spending as much as possible increasing one's budget annually is NOT a given.
                       
                      One thing that we do and strongly recommend is to shop until you drop on mandatory items.  This doesn't mean that you have to settle for less either. Since my time is now "free", I use it to optimize spending. One of my favorite ways to motivate myself is to divide the savings by my estimate of time spent to get an "hourly wage". It puts some fun in the process and can amaze you what your time is worth. How does $50/hour sound? This is not unrealistic.
                       
                      For instance, every year one gets an opportunity to reset Medicare Part D costs by just putting in one's drugs and selecting the low cost alternative. This can mean $100's. Another option if you are healthy is to very carefully select Medicare supplemental plans. This year in our state Plan G was a bargain over Plan F with just the difference in having to pay the Medicare deductible. If you have no serious Medicare costs the savings are great and even if you exceed the deductible the savings are significant.

                      Just some ideas. One of my very pet peeves are assumptions that are put out that in many situations are WRONG! Look at your own circumstances and optimize your spending. Medicare costs can be one of those opportunities to avoid automatic inflation adjustments to you spending.
                  • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                    Aquinas
                    The $350,000 you've already saved might grow to about $600,000 by the time you reach 58 (assuming a 7% annual return--which may be overly generous).  Further savings during the next few years will increase that amount.  With social security and a modest lifestyle and low inflation, you might be okay.  But if there is another 2008-like stock market event or you live to be 90 or social security payments are reduced, you could be in trouble. 
                     
                    For greater security, there are three options: 1.  work longer, 2.  save more, 3.  get superior investment results.  The first of these will help most; even working a few extra years can make a big difference.  The second option depends on how much you make and how frugally you can live.  The third option is a very long shot, at best.
                     
                    • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                      Sharon
                      If you own your home and are living frugally you should be fine. Just depends on how you want to live.
                      All the comments are good advice if possible to keep working part time, but with the economy the way it has been these last 7 years, there may be no jobs out there. 
                      From my experience...keep working as long as you can!
                        • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                          cyber888
                          Thanks everyone. This has been very helpfu.
                           
                          There was something erroneous with my calculation and I think I can grow my 403B to $750,000 - $800,000 at 57 yrs old (not $650,000).   Plus cash ($200K), I shoud have close to $1 million.  Will of course add more to retirement 3 yrs before 57. 
                            • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                              jkom51

                              Please do not ignore your healthcare costs. So many Boomers have gotten a shock at finding what healthcare actually costs when it is not subsidized by either an employer or the government!

                               

                              When we were your age, we had about the same in savings as you have now. But we had the additional security of my spouse being eligible for a generous pension and retiree medical benefits. Without that, we would never been able to take the early retirement we planned.

                               

                              One severe illness or critical injury can ruin an optimistic plan. When you are doing your own financial planning it is CRUCIAL that you consider all the scenarios, including the bad ones. Despite the market upheavals in 2008-2010, we were fine because we had always planned for the worst, not the best.

                               

                              Many of our friends & family ridiculed us for buying LTC insurance in our mid-40's. But twenty years later they're all envious that we have that back-up security so the disability of one partner will not impoverish the other. My DH had a serious stroke only four years after we bought the insurance, so obviously we are big believers in buying it sooner rather than later, LOL.

                               

                                • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                  cyber888
                                  Thanks for the heads up.  I'm sorry to hear about your DH.
                                  I'd like to ask how much it cost monthly for the LTC insurance, and how old are you now (if you don't mind) :).   Thanks.
                                   
                                   
                                  jkom51 said...

                                  Please do not ignore your healthcare costs. So many Boomers have gotten a shock at finding what healthcare actually costs when it is not subsidized by either an employer or the government!

                                   

                                  When we were your age, we had about the same in savings as you have now. But we had the additional security of my spouse being eligible for a generous pension and retiree medical benefits. Without that, we would never been able to take the early retirement we planned.

                                   

                                  One severe illness or critical injury can ruin an optimistic plan. When you are doing your own financial planning it is CRUCIAL that you consider all the scenarios, including the bad ones. Despite the market upheavals in 2008-2010, we were fine because we had always planned for the worst, not the best.

                                   

                                  Many of our friends & family ridiculed us for buying LTC insurance in our mid-40's. But twenty years later they're all envious that we have that back-up security so the disability of one partner will not impoverish the other. My DH had a serious stroke only four years after we bought the insurance, so obviously we are big believers in buying it sooner rather than later, LOL.

                                   

                                    • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                      jkom51
                                      Actually, I have covered this before in LTC discussions, but it's buried somewhere from many months ago.
                                       
                                      I'm 62 and my DH just turned 60. I'm a big believer in risk mitigation, and LTC is a major part of that on the financial side, just as homeowners insurance is applicable to the RE side.
                                       
                                      LTC is extremely expensive and the underwriting is so "tight" that very few people under 55 could qualify for premium rates. Although I have NOT investigated the new hybrid life/LTC or annuity/LTC policies, they may be a better bet, if only because the underwriting is less rigorous and it soothes the feelings of those who think "why am I wasting all this money if I never use it? It's a crapshoot" attitude.
                                       
                                      To us, LTC is just as essential as homeowners and car insurance. No, I do not get my $$ back. I get peace of mind and the security of knowing that we are prepared for the worst, as best we can. As we watch parents and friends age, some with great physical and/or financial difficulties, we know we don't want to end up in that kind of situation.
                                       
                                      I worked in insurance, banking, consulting, and financial services, so I learned how to do risk assessment in an informal but educated way. Both I and my DH have high health risks based on genetics and current health. We're childless. We never made or saved big sums of money. Therefore, the disability of one spouse, which is highly likely, would seriously impoverish the survivor.
                                       
                                      If both of us became disabled, current facility costs would wipe out our nest egg within less than five years. As we just put my MIL in an asst. living retirement care center 2 weeks ago after doing much research into the nearby facilities, we have "real time" numbers that confirm the above.
                                       
                                      Everybody's situation is different. My objection to the oft-expressed "Learn to do your own investing/financial planning" mantra, is that so many people do it poorly. And as WWII and older Boomers are finding, if you can't do something well, you would be a lot better off finding someone competent who can help you. You can be an excellent investor but a lousy planner (or vice versa), which will only increase your chances of failure.
                                       
                                      Everybody has risk in their life, and as you get older your risk factors increase. You might be, like me and others, able to competently evaluate that risk and take suitable cost-effective steps to lessen your risk/increase your chances of success. But to be honest, I have found that most people are not good at evaluating the degree of their personal risk factors. And good planning involves the ability to comprehend ALL risk, not just stock market risk.
                                       
                                    • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                      smaneck
                                      jkom51 said...

                                      Please do not ignore your healthcare costs. So many Boomers have gotten a shock at finding what healthcare actually costs when it is not subsidized by either an employer or the government!

                                       

                                       

                                       If he is able to keep his income below 45K he will be eligible for ObamaCare. That's going to allow a lot of us to retire early. 
                                • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                  sktn77a
                                  Frankly, if you expect to live a normal lifespan, I'd wait until you are 60-62.  Unless you have a (very) favorable and guaranteed employer-sponsored retiree health care plan, you'll lose a substantial chunk of your after-tax retirement income on health insurance.  And with the way the goverment has been printing money for the last 5 years (and look like continuig) inflation could be a killer in the future.  The 4% rule doesn't take into account atypical inflation. 
                                  • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                    yanushkevich
                                    Hi, my philosophy is whatever you have when you retire, is whatever will be available, the variable is your standard of living and of course any severe health issues for your family.

                                    Being single with $250K at age 50, I worked until age 55 and making good money, I socked around $40k annually into Tiaa-Cref and personal investments for the next five years.

                                    I retired at 55 in 1990 and took my social security out at 62 and did OK, because the Market did fabulously in the 90's.

                                    What I want to leave with you is this:  I quit because it just was no longer worth it for me (financially) to keep on working, mostly due to taxes (I had sold my house, so I rented and did not have any deductions). 
                                     
                                    Actually two weeks after I resigned my job, I regretted it.  Since then however, I picked up several new hobbies and traveled a lot.  Life is good.
                                    FYI, I have been virtually ALWAYS 95% invested in equities, I never listened to the gurus recommending a balanced portfolio.  It has worked for me and continues to do so and for my heirs.
                                     
                                    I survived two crashes and just spent less during those lean years.  Since age 70, I have been taking only mandatory distributions, so I expect my Tiaa-Cref to outlive me by a lot.
                                      • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                        cyber888
                                        Thanks Guys!   I'm encouraged by yanushkevich.   This is my plan (to be in 90% stock with my portfolio).  
                                         
                                        3 months ago, I estimated i'll have $350K by  end of the year.  I'm happy to say my 403B went up to $286K  +  my $77K cash =  $363K.   I'm $13K over my target. 
                                         
                                        I'm planning to sock away $30K in my 403B  and $35K in after-tax savings, for the next 5 years.
                                         
                                        I hope to pay off my house before retiring.  If I'm not able to pay off my mortgage, I will have to sell and downsize. 
                                         
                                        yanushkevich said...
                                        Hi, my philosophy is whatever you have when you retire, is whatever will be available, the variable is your standard of living and of course any severe health issues for your family.

                                        Being single with $250K at age 50, I worked until age 55 and making good money, I socked around $40k annually into Tiaa-Cref and personal investments for the next five years.

                                        I retired at 55 in 1990 and took my social security out at 62 and did OK, because the Market did fabulously in the 90's.

                                        What I want to leave with you is this:  I quit because it just was no longer worth it for me (financially) to keep on working, mostly due to taxes (I had sold my house, so I rented and did not have any deductions). 
                                         
                                        Actually two weeks after I resigned my job, I regretted it.  Since then however, I picked up several new hobbies and traveled a lot.  Life is good.
                                        FYI, I have been virtually ALWAYS 95% invested in equities, I never listened to the gurus recommending a balanced portfolio.  It has worked for me and continues to do so and for my heirs.
                                         
                                        I survived two crashes and just spent less during those lean years.  Since age 70, I have been taking only mandatory distributions, so I expect my Tiaa-Cref to outlive me by a lot.
                                      • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                        smaneck
                                        You realize that if you retire before you are 59 1/2 you are limited in the amount you can take out of your 403B. I would carefully investigate how much that is likely to be. If I were you I would try and live off of moneys outside of my retirement funds  until I reach 59 1/2. Also, if your portfolio is big enough and the market doing well you might consider putting off collecting Social Security until much later. The amount you receive at 70 will likely be double from what it will be if you take it out at 62. For all the criticism of Social Security it is still the best and most secure annuity out there! 
                                        • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                          Celsa
                                          I have no where what you have and want to retire in 2014 (age 66).  Reading all the replies to your question, it would seem that I can NEVER retire.  So, all of those comments have not helped me a bit...in fact they have made me quite depressed.Insert thecryingemoticon.
                                          • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                            cromuggin
                                            Have read the posts, reasonable advice.  Your amounts will grow but there are a few points I will add.  [1]- Expense & Debt management.   You can live quite well when you have no debt.   [2]-Track you expenses.  My wife and I are going into retirement in two years, we used this year for expenses to see if we can spend at the same level with our income. [3]  Medical expenses, things like long term health care, what is your plan. [4] Remember, 403B (like 401K) pay taxes at withdrawal, the money you have is yours minus the tax rate.  Add as much to the 403B as practical for your life.  [5] Who manages your funds, and what is the "Plan", and what are the management costs?
                                             
                                            I am no expert.  We used our average age in conservative investments, rest floated as our tolerance to risk -- we could sleep at night, except for 2008.  For example, I am 61 and my wife 64, so our conservative percentage of investments is around 60-62%.  Rest is blended index funds in the stock market.  We adjust the ratio once a year, watch the results and plan for what we are going to do.  A third of our investments are managed, the other 2/3 I manage because I have to.  My wife works for the Feds (TSP) where you choose from five funds.
                                             
                                            I retired at 55 -- my wife will at 66 (I married well). 
                                             
                                            Last comment -- if you know your expenses, estimate your income from SocSec and pensions (if any), add income  based on a withdraw percentage (I use 4%) from the 403B -- If your expenses are less than your income, sleep well. 

                                             
                                            • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                              canthony
                                              Don't forget to plan moving to a no income tax state as early as you can.  Start exploring early and maybe even purchase a place you can rent out easily just to cover expenses.  Also best increase your health insurance projected costs by 5 or 6 times.   
                                               
                                                • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                                  JerryD
                                                  Moving to a state solely to avoid income taxes may not be an acceptable strategy for many. But moving to a lower cost state that has retiree benefits opens the door a bit further on choices. We sold a really nice house in a large urban area and moved to a southern state. We got a house bigger than our nice home and put a chunk of money in the pocket, real estate taxes of about 33-40%, RE tax rates frozen when one of us reached 65, no income taxes on Social Security and each get a $6,000 exemption on any retirement income.
                                                   
                                                  So, yes, moving can have a serious impact on one's living expenses. And like us, you may be able to replace the old place with one that you couldn't even dream of in an expensive area. I kid others that we got a larger house (didn't need it but wanted the property), got acreage and have a creek in the back with a rural setting only 10 minutes from the mall and university and when I state that I probably couldn't have even afforded the property without the house in the urban area even if I sold everything that we owned.
                                                • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                                  Canoejh
                                                  Retiring before 66 is a very nice goal, but requires a retirement nest egg to carry your to age 90.  Others have suggested a 4 % withdrawal rate from your pension funds and that is current thinking although a recent analysis suggests the number should be closer to 3%.  If you live in a high cost of living area, such as the Northeast, your will need an amount that higher covers expenses.  The amount depends on your debt, and needs. Do you want to travel, eat out?  The leisure things that make retirement fun cost money and if you like them you need to provide for them. Also, how much are you going to have to pay for health insurance?  Many organizations are shifting as much as 50% of the annual cost on to the individual.  If you are employed by a company that is doing this , medical insurance cost should be factored into you annual income need, and they are not trivial.
                                                  • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                                    When I was 50 (Now 71), I had $350,000 with everything invested in various TIAA-CREF mutual funds.  So, clearly I was in the same ball park as you are now. However, taking inflation into account (usinflation calculator.com) my $350,000 would be worth $550,000 in today's terms. So, sorry to say, your $350,000 is worth about $200,000 less than was my $350,000. I still have all my investments, now 1.8 million, in TIAA-CREF.  Of that amount, 1.25 mil is in TIAA traditional.  The remaining $555.000 is invested in a Cref Managed Account.  If you retire at age 70 as I did your $350,000 will depend entirely on how your investments perform.  Fortunately, I watched the market daily and did not lose much during the down turns-maybe a total of 10% during the drop of the early 2000s and the ones in 2007-2008.  I live in upstate NY (Buffalo) where the cost of living, apart from taxes, is low.  If you live in a high cost area like my daughter (Princeton, NJ), you're behind.
                                                      • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                                        JerryD
                                                        How much you need depends on a lot of things: where you live, own your house, how often you buy a new car or maybe you have public transportation, your taxes, how often you eat out, travel, and on and on. Then there's: at what age will you retire, have a pension, Social Security, other savings, etc. You need to develop a budget for your current expenses and then a hypothetical one for retirement - at age 50 probably premature.
                                                         
                                                        I just read in a respected investment journal (AAII - American Association of Individual Investors, October 2012) some interesting statements made by Fidelity Investments on how much you should have in retirement savings given your age based on you salary and reducing your spending to 85% of current at retirement (more on this later):
                                                         
                                                        - 35, one times salary
                                                        - 45, three times
                                                        - 55, five times
                                                        - At retirement (67 per Fidelity), at least eight times
                                                         
                                                        One needs to take all such general statements in context. For instance, we moved out of a high price area with high real estate taxes to a much lower cost area.  We don't buy cars very often. We have a generally modest lifestyle. So our minimum expenses come in at well under 85% of the last highest salary (whatever that was due to in/out of jobs).
                                                         
                                                        If one looks at your minimum expenses as the bottom line and all else as discretionary/unplanned, then the amount needed can be controlled according to what you need to live pretty good and what you can defer. I am not advocating living like a hermit. It's just that this approach makes the minimum need much lower and what you get more dependent on good planning and selective spending. Just remember that when you were working you were always thinking about how you could increase your income. Now that you are retired you need to think about how you can reduce spending. It's amazing how much you can reduce costs when you have all of the time in the world to shop until you drop for the best item and price (i.e. do you care if the new car is new this month or that you got $3,000 off to buy later and that you intend to keep it for 10+ years).

                                                        I can't say it enough. I good spreadsheet budget, although it takes some work initially, is a fantastic tool to do what-ifs and to refine as actual expenses come up over time. No more hopeful guessing. Just update the spreadsheet and you'll be surprised how well you can predict and control your financial life.

                                                          • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                                            cyber888
                                                            Jerry, that's true.  The other side of the equation is expenses.  I think my retirement can be 2 stages - one in the US and one abroad.  My wife and I have the option of retiring in the Philippines, because we have relatives there.  This is just a backup plan.  My social security calculation says - even with social security alone, we can live very comfy in the Philippines.   

                                                            But I will keep on adding more to my retirement account as I have turned 50 now.  
                                                          • Re: Turning 50 in 3 months - have around $350,000 - am I doing ok or behind ?
                                                            cyber888
                                                            Thanks Tomb42.  I live in a very low-cost area in North Carolina.  Buffalo is definitely a more expensive area, compared to where I am.  My wife and I can live comfortable with $2000 a month, excluding health insurance/expenses.