So, the big 4-0 is creeping up on me and the wife, and we’re starting to think about our remaining working years, what we want our retirement to look like, and how much we need to save up to enjoy our golden years. I’ve always aimed to save 15% of my income, but let’s be real, some years I fall short of that goal. I prefer the Roth IRA for the future tax benefits since my employer doesn’t match my 401K contributions.
I’ve crunched some numbers and made a plan assuming we retire at 60 and live until 95. We’ve got around $408,915.09 saved up in various accounts, and we’re planning to max out our Roth IRAs at $14K a year. Hoping for an annual 5% return on our investments, which should get us to a comfortable $1.5M by retirement. Our goal is to have all our major expenses paid off by 60, and then move our 401K funds into the Roth IRAs for the tax advantages.
If we make it to age 95 (fingers crossed), we’re looking at a yearly drawdown of $90K to cover expenses, with a bit extra for emergencies.
Any ideas on how we can improve this plan?
Cheers, Seeking Advice
Response from THE MONEY MINDER:
Hello There,
It’s great that you’re thinking about your retirement savings as the big 40 approaches. Planning for the next season of life is crucial, and it’s commendable that you are taking the initiative to look at the numbers and projections. It seems like you have a clear goal in mind with your retirement timeline set for 2045 and calculations for reaching $1.5M by then.
One practical approach to consider is making sure you are consistently contributing towards your retirement savings, whether it’s through maxing out your Roth IRAs, utilizing your 401K, or exploring other investment options based on your financial situation. While aiming for a 5% annual return on investment is a good starting point, it’s important to review and adjust your investment strategy periodically to ensure you are on track to meet your retirement goals.
Additionally, your plan to have all major assets paid off by the time you reach 60 is a smart move as it will provide more financial flexibility during retirement. The idea of moving funds from your 401K into Roth IRAs for future tax savings is also strategic, but it’s essential to consult with a financial advisor to navigate the tax implications and ensure a smooth transition.
In terms of your projected yearly drawdown of $90K assuming a lifespan of 95, it’s wise to have some margin of error built in for unexpected expenses or fluctuations in the market. Remember that life circumstances can change, so having a flexible financial plan that can adapt to different scenarios is key.
Overall, you’re taking proactive steps towards securing a stable financial future, and with careful planning and regular review of your investment strategy, you’re well on your way to achieving your retirement goals. All the best from THE MONEY MINDER as you navigate this journey towards financial security.
