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My Retirement, Redefined

June 27th, 2013 at 09:18 pm

OK, so Iíve been working the new 3-day-a-week job for 3 weeks now, and Iíve gotten a few paychecks under my belt. Now that I know what kind of net income Iím dealing with, I thought I would go over my monthly income/expense scenario again, with an eye toward fine-tuning and tweaking, especially as it affects my retirement.

For a long time, my retirement goal has been, after using countless retirement calculators offered by the likes of T. Rowe Price, Kiplingerís and others, $1,250,000. That, I felt, was an accurate representation of what I would need to retire comfortably.

While knocking out the mortgage last summer was a big milestone, it certainly doesnít mean I can just relax and forget about retirement planning. Although my 3-day-a-week job may transition into 4 or 5 days a week at some point down the road, I really have no knowledge of whether or when that will occur, so Iím focusing my re-budgeting based on the 3-day-a-week scenario.

I decided that prior calculations about what kind of savings it would take to save even $1 million by age 60 would not, realistically, be something I can achieve with my current income. (Assuming a 5% interest rate, Iíd need to sock away $2,683 a month. Or $1,015 a month based on an 8% interest rate. Yeah, it would be less if I didnít have to stop working at 60, but I donít think I want to be locked into working f/t after that age.)

So I adjusted my sights downward somewhat by deciding to concentrate on a goal of saving $750,000 by age 60. Based on a modest 5% interest rate, Iíd only have to save $247 a month to accomplish that. Remember that number; weíll return to it below.

I looked at my revised ďbare minimum monthly expensesĒ once again and made the following adjustments to it:

1. I set health insurance at $589 a month, though I am sort of in limbo right now and not yet accepted into the state plan. My applicationís being processed.

2. I was happily able to adjust my monthly allocation for property taxes down to $488 a month, thanks to our recent town-wide revaluation of real estate. Thatís a savings of $62 a month, or about $750 a year! Youíd think it would be more, given that the last reval was done at the peak of the market five years ago, but hey, Iím not complaining.

3. My insurance for the new car will only increase $100, mainly because I boosted the deductible to $2,000. Iíve never filed a claim on car or home in 18 years, so why pay more each year in insurance if I donít need to?

4. The big unknown at this point is how much my car tax will be. This is a hugely unpopular tax in Connecticut which legislators recently failed to do away with, but anyway, I called the town and she said it wouldnít be due til January, so Iíll wait til then to find out.

So with these various adjustments, my bare minimum monthly expenses are actually a bit lower than before, at $1,922. Psychologically, I really like having it stay under $2,000 a month.

My net income from working 3 days will be $2,564 a month, and Iím adding an additional $200 in net income each month from my freelance work. Iím just guessing at the taxes on $300 gross. So with $2,764 in total income each month after taxes, Iíll have $842 left over each month.

I will put aside $247 of this toward my $750K retirement goal on the 1st of each month, starting in July. It represents a 9% saving rate on my NET income, not bad on p/t income, but thatís what you can do when your mortgage is paid off. That still leaves me with $595 for discretionary spending which I predict will be spent on things like home maintenance and the occasional eating out, clothes, Christmas and, hopefully not anytime soon, the vetÖ.none of those expenses are included in my ďbare minimum monthly essential expenses.Ē

In summary, I think this is a doable budget for me that allows me to save a meaningful amount toward retirement, something that has LONG been on my back-burner due to under-employment.

Iím not saying I want to retire on $750K and Iím not sure I could. It would be a fairly spartan retirement, perhaps something like my mother has. I always envisioned something more comfortable that would allow me some travel abroad etc. So while $1.25 mm is still the ultimate goal, for now, I will set my sights a little lower just so the bigger numbers donít make me throw up my hands and give up. I am definitely a goal-oriented person and I do better when I have a goal Iím working toward, provide that itís reasonable and doable. I believe this one is.
It also allows some additional funds for who-knows-what. I know this old house sucks up money like nobodyís business. In the back of my head are big capital improvements coming down the road like: new roof @ $8,000, upgraded kitchen cabinets/counters @ I wonder how much and a variety of other assorted upgrades/repairs.

8 Responses to “My Retirement, Redefined”

  1. creditcardfree Says:

    How much would you need to save to get to $1 million? Or another mark in between? Would you consider increasing your retirement savings by 1-2% of net income each year?

  2. PatientSaver Says:

    The numbers are in the post: Assuming a 5% interest rate, Iíd need to sock away $2,683 a month to reach $1 million. Or $1,015 a month based on an 8% interest rate. That's assuming about 6.5 years of saving.

  3. Single Guy Says:

    Unless you are wedded to the house and area, you could always sell the house after retirement and buy something cheaper further out and pocket the difference. That's certainly in my plans for the future.

  4. PatientSaver Says:

    For now, I am more or less "wedded" to the area,mainly because I'm committed to caring for my mother in her old age. I would like to buy a cheaper condo and yes, I would stand to pocket about $50K from doing so, but the area I may end up in is further from the new job, so I won't be moving anytime soon. Maybe not even til I retire.

  5. Jenn Says:

    Property tax on cars? Yikes!

  6. creditcardfree Says:

    @PS, I'm sorry I missed the numbers. A big difference isn't it?

  7. Petunia 100 Says:

    Are you still planning on a 4% withdrawal rate? If so, 750k will provide 30k of income the first year. Your SS benefits at age 62 will be another $15,732 per year (according to your sidebar). Almost 48k annual income and no mortgage; that is not so awful. Smile

    In the meantime, there is still the possibility of additional work days per week, plus your freelancing (in excess of $300 per month). Any additional income from either of those, I don't doubt will either be saved or invested, cuz I know that is how you roll.

    I also notice you have changed your asset allocation plan a little bit. I think you have a very sensible aa.

  8. PatientSaver Says:

    Yes, Petunia, I would plan on 4% withdrawal rate. Although I hope to delay taking SS benefits for at least 3 years, until age 65, to boost my income further. The only way to bridge the gap between age 6o and 65 would be to live on savings and whatever freelance or p/t income I might have at that point. I believe you increase your SS income by 8% for each year you delay claiming benefits after age 62, when you first become eligible.

    So living on savings and p/t income alone for 5 years could shrink my nest egg, but it would increase my eventual Social Security take-home for the rest of my life by a substantial amount.

    Yes, I did tweak my asset allocation. I figured since I paid off the mortgage, I really had no real estate exposure anymore and in the interest of diversification into asset classes that hopefully don't correlate 100% with equities, i figured the REITS was not a bad way to go, especially since I believe real estate prices are still somewhat undervalued. Gosh, what a geek I sound like.

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