The Intersection of FIRE and Disney

[Hoosier John]

mgarbowski has good points. I questioned a couple of his points, but this Investopedia article backs him up.

There will be benefits to you in the future with some Roth 401k, but in my mind I think adding more Roth IRA would be easiest (but not at the expense of losing company 401k match). Then ask your HR department about how you would roll your Roth 401k into a Roth IRA at retirement.

Gifting your unneeded Roth IRAs to heirs (I think?) is far better than gifting traditional IRAs, because there will be no tax on the Roth NOR its earnings which will have maybe 3 decades of growth to go. Gifting to charity can be done with traditional IRAs, because they face no tax implications.

All this is my current understanding, and I am far from an expert.

ETA: I think most agree that we are currently paying lower taxes now than historically. And with recent increased spending, I expect taxes in the future will begin to increase. If both are true, paying taxes now (in either/both Roth accounts) is a good deal. Also the Investopedia link above mentions that in retirement people typically lose some of the deductions that currently reduce their tax bracket (traditional 401k, for instance), possibly making your future taxes higher.

 

[mgarbowski]

mgarbowski has good points. I questioned a couple of his points, but this Investopedia article backs him up.

Some of these rules are very non-intuitive. There should not be any reason to treat Roth 401k distributions differently from Roth IRAs, and then allow you to roll over to avoid the discrepancy. For that matter, having an income cap on Roth IRA contributions but allowing people to sidestep it by making regular IRA contributions and doing annual rollovers is also extremely silly.

 

[Samantha*belle]

I endorse this enthusiastically. When my oldest started high school, DH and I decided that we were going to take some big, international trips as a family before DS left for college. We ended up taking one big trip pretty much every year for the next 12 or so years, and now that all of the kids are out of the house and I haven't been able to make a trip work for all of us at the same time for a few years, I value those trips much more than I could have imagined I would. I will say that DH and I both like our jobs most days and are in no hurry to retire, so we are more FI than RE. And we drive Toyotas until they fall apart, and a fancy date night for us is Chipotle (take-out now, of course).

I love this! I swear travel is the only reason I'm working a side gig. My kids are really young right now so I'm far off from this. Did you all do an international trip every year? Did you plan something on your own or go with a group/tour company?

 

[hsmamato2]

I endorse this enthusiastically. When my oldest started high school, DH and I decided that we were going to take some big, international trips as a family before DS left for college. We ended up taking one big trip pretty much every year for the next 12 or so years, and now that all of the kids are out of the house and I haven't been able to make a trip work for all of us at the same time for a few years, I value those trips much more than I could have imagined I would. I will say that DH and I both like our jobs most days and are in no hurry to retire, so we are more FI than RE. And we drive Toyotas until they fall apart, and a fancy date night for us is Chipotle (take-out now, of course).

Samesamesame My kids were young teens when we started traveling intentionally.... I wish I had started earlier (more than just a yearly trip to Disney I mean) we had a good 8-9 years of travel together...I wouldn't trade those memories for anything! I can't WAIT for travel to become less risky than it currently is... However my goal of paying off the house is going along at about 3x the pace I expected when I started thinking about it earlier in the year,and I'm happy about that.... I will continue that (at least double the payments) till it's done (between 1.5-3 years ) but I'm also itching to spend some on travel again. (DH and I) we are 'old car' people in fact DH recently bought a 2008 jeep as a 2nd car.... so even our new cars are too old for most people! (he enjoys working on cars)

 

[Frwinkley]

I'd love to hear some opinions.

DH (59) wants out of his job. High stress, IT, data analysis and his brain is fried. He'll most likely pick up a part-time job doing something he likes. I manage the money and want to be able to give him the ok. He was so supportive when I wanted to work part-time when my DD was young and than when I made a complete career change (which cost us some money since I returned to school even though I had a 4 year degree).

I am the same age and will continue to work until age 63. I am a teacher, started my career late, but will walk away with a roughly $4200 per month pension.

We've already downsized to a newer home, no mortgage, no debt, one car loan with 0% interest (no real rush to pay it off). Our monthly expenses are about $5500 per month. More than 1/2 of that is designated for savings (not counting 401k contributions). I am a big saver and try to account for every single expense throughout the course of a year.

Assets include the following:

600K in 401k
120K in taxable brokerage account
30K in cash (this is where I'm continuing the save the most).

Our health insurance will be covered through my employer until we are Medicare eligible. Cost for this is minimal. Once we hit 65, we'll need to pick up a supplemental med plan. I've already investigated and have been saving for this expenses as well.

We purchased an LTC policy many years ago and will cover any excess expenses through savings, etc.

If he quits working tomorrow, we'll be perfectly fine. I alone can cover our expenses and continue saving, 401K, etc. (of course, not nearly as much)j.

So my plan going forward is this:
Do not collect SS until at least 67 (that's our full retirement age).
Continue cash savings and 401k contributions.
Use cash savings to bridge gap between pension and expenses until SS.
Do not touch 401k until RMD time and just let the money sit.

Is this reasonable?

Right now, we only travel once per year since that's all we can manage time wise at this point. We have no desire for a second home or anything like that, but will do more traveling (maybe 3 times a year) once I am retired.

We have one child, married, on her own. We paid for her undergrad college education and her wedding.

We've had job loss/career change, etc. but managed to pay off house and keep expenses to a minimum.

I've looked at many calculators and it seems doable, mostly because of my pension. Yes, I realize this isn't a guarantee, but I feel fairly confident that it will exist.

Thanks in advance.

 

[Mome Rath]

I am the same age and will continue to work until age 63. I am a teacher, started my career late, but will walk away with a roughly $4200 per month pension.

We've already downsized to a newer home, no mortgage, no debt, one car loan with 0% interest (no real rush to pay it off). Our monthly expenses are about $5500 per month. More than 1/2 of that is designated for savings (not counting 401k contributions). I am a big saver and try to account for every single expense throughout the course of a year.

So, you're saying your actual total expenses (savings doesn't usually count as an expense) come to less than $2750 a month? Just trying to clarify in case I misunderstood something.

ETA: If that is right, then I think you would be fine, especially since your calculations don't seem to include his (hypothetical) new income off of a part-time job, side hustle, or gig. That's one of the other main points to make sure you guys discuss and maybe have a little more concrete idea on; what does he do when he quits?

 

[Frwinkley]

Just took a look again at our monthly expenses as they are right now. More like close to $4K per month and that's on the high side.

Yes--the conversation about what to do when he quits is one we've had many times. He's got lots of ideas. I have a feeling he'll stick it out for a while yet (maybe another 6-8 months). Just knowing he can go at any time may be motivation enough to stay!

I'm perfectly fine with continuing to work--I really still like my job.

 

[RamblingMad]

Rambling mad, you make a good point about bond yields. We are treating our mortgage as a negative bond that’s returning our mortgage rate for some part of our non equity holdings, and using total bond index and CD ladder for the rest for now. But, I have the same question you do as to what to do with bonds.

Still don’t think a % AUM advisor is going to make me more than 1.5% more than I’d get otherwise, and they’d likely have a part of our assets in bonds too. I’d be willing to pay an hourly rate advisor for answers to the bond question if a larger % of our portfolio was in bonds or we were closer to retirement though,

I don’t think an advisor is going to beat the market to cover their AUM fees over a low cost index fund.

I’m almost a hundred percent in equities now as I’m afraid of interest rate risk in long bonds. The best scenario seems to be that we follow Japan and have low long term rates for a long time, meaning I’ll earn a negative real yield on that portion of the portfolio. I won’t get as much negative correlation either, so I won’t reduce my volatility by much either. Tough decisions going into 2021.

I still haven’t figured out a bond replacement.

 

[georgina]

I don’t think an advisor is going to beat the market to cover their AUM fees over a low cost index fund.

I’m almost a hundred percent in equities now as I’m afraid of interest rate risk in long bonds. The best scenario seems to be that we follow Japan and have low long term rates for a long time, meaning I’ll earn a negative real yield on that portion of the portfolio. I won’t get as much negative correlation either, so I won’t reduce my volatility by much either. Tough decisions going into 2021.

I still haven’t figured out a bond replacement.

I'm pretty sure you are younger than us, but we put much of our bond money into annuities a few years ago. The rest of our investments are equities. The annuities earned between 3.7-5% last year. One of them is just a 5 year contract at 3.7% interest per year. Besides the zero loss factor, they have the advantage of being tax free until we take money out, which is good because I am working on converting DH's IRA's to Roth before he starts taking his SS. Obviously not a strategy for everyone, but we are already retired and they are our safety net should the equities tank.

 

[RamblingMad]

I'm pretty sure you are younger than us, but we put much of our bond money into annuities a few years ago. The rest of our investments are equities. The annuities earned between 3.7-5% last year. One of them is just a 5 year contract at 3.7% interest per year. Besides the zero loss factor, they have the advantage of being tax free until we take money out, which is good because I am working on converting DH's IRA's to Roth before he starts taking his SS. Obviously not a strategy for everyone, but we are already retired and they are our safety net should the equities tank.

I don’t like how annuities are sold. They are a high commission product, so advisors make a lot of money selling them.

I’m in my 40s.

 

[dclpluto]

I'd love to hear some opinions.

DH (59) wants out of his job. High stress, IT, data analysis and his brain is fried. He'll most likely pick up a part-time job doing something he likes. I manage the money and want to be able to give him the ok. He was so supportive when I wanted to work part-time when my DD was young and than when I made a complete career change (which cost us some money since I returned to school even though I had a 4 year degree).

I am the same age and will continue to work until age 63. I am a teacher, started my career late, but will walk away with a roughly $4200 per month pension.

We've already downsized to a newer home, no mortgage, no debt, one car loan with 0% interest (no real rush to pay it off). Our monthly expenses are about $5500 per month. More than 1/2 of that is designated for savings (not counting 401k contributions). I am a big saver and try to account for every single expense throughout the course of a year.

Assets include the following:

600K in 401k
120K in taxable brokerage account
30K in cash (this is where I'm continuing the save the most).

Our health insurance will be covered through my employer until we are Medicare eligible. Cost for this is minimal. Once we hit 65, we'll need to pick up a supplemental med plan. I've already investigated and have been saving for this expenses as well.

We purchased an LTC policy many years ago and will cover any excess expenses through savings, etc.

If he quits working tomorrow, we'll be perfectly fine. I alone can cover our expenses and continue saving, 401K, etc. (of course, not nearly as much)j.

So my plan going forward is this:
Do not collect SS until at least 67 (that's our full retirement age).
Continue cash savings and 401k contributions.
Use cash savings to bridge gap between pension and expenses until SS.
Do not touch 401k until RMD time and just let the money sit.

Is this reasonable?

Right now, we only travel once per year since that's all we can manage time wise at this point. We have no desire for a second home or anything like that, but will do more traveling (maybe 3 times a year) once I am retired.

We have one child, married, on her own. We paid for her undergrad college education and her wedding.

We've had job loss/career change, etc. but managed to pay off house and keep expenses to a minimum.

I've looked at many calculators and it seems doable, mostly because of my pension. Yes, I realize this isn't a guarantee, but I feel fairly confident that it will exist.

Thanks in advance.

your in great shape because of your pension. For what you two make and your age your 401k and other retirement is a little low. But with your pension I’m guessing thats why you wasn’t putting a lot into retirement. You are now but guessing in the past you wasn’t. I’m 8 years younger we make a lot less than you two but we do we have more in our 401k because we don’t have a pension like you do. I will trade with you in a heartbeat.

 

[Frwinkley]

Thanks for the reply.

We had job loss/career change so had to suspend 401k contributions for awhile. DH and I both went back to school to pursue Master's degrees and didn't want to have any student loan debt (especially with very little income). I'm happy with where we are, but agree, we could have more in our 401ks.

The pension really makes such a difference. We'll have no need to touch our 401k until RMD.

 

[SouthFayetteFan]

Best spreadsheet day of the year coming up tomorrow (or Friday depending on when you update things). YAY!!!!

...yes I'm a sick individual sometimes

 

[dclpluto]

If your getting a pay raise add it toward your 401k.

 

[dclpluto]

My husband (who is already retired at 74) and I should have enough saved with retirement funds (401K's and IRA's and Annuities) plus Social Security to allow me to not touch the Roth IRA but I guess my question is that I would only be contributing for the next 3-5 years so would it be worth it to do this and I am leaning on the side of yes, it would be worth it to do this! Thanks for the insight.

When people ask for advice about their 401k and they are only putting in 7 percent. I would advise them to put in 15 percent minimum. But in your case I’m going to do the complete opposite. Your husband is 74 you should serious think about retiring soon. If your going to stay working let’s get your 401k up. Good
Luck

 

[AmyAnne]

I love this! I swear travel is the only reason I'm working a side gig. My kids are really young right now so I'm far off from this. Did you all do an international trip every year? Did you plan something on your own or go with a group/tour company?

We did an international trip every year for about a dozen years. We were lucky that we were usually able to travel in mid to late May, so we missed the peak travel times. We started with cruises--DCL did its first Med cruise about the time I was thinking about our first trip, so that was our first international trip too. For us, cruises were an ideal way to travel internationally--unpack only once (or a few times, as we usually added a few days in the departure city before the cruise), plus limited need for independent planning (we mostly stuck to cruise excursions or hired private tour guides, which were easily found thanks to various message boards). We mostly stuck with cruises for the first five or six years, and then when my kids were in college, they all studied or worked abroad--and mostly in Asia--so cruises were not as useful. Then I did a mix of independent planning and tour guides. Travelling with your kids really is an amazing experience--enjoy it!

 

[Starport Seven-Five]

Best spreadsheet day of the year coming up tomorrow (or Friday depending on when you update things). YAY!!!!

...yes I'm a sick individual sometimes

Already starting on it. I hate when the end of the quarter falls on a weekday though because we have to wait for the markets to close to get accurate numbers.

If your getting a pay raise add it toward your 401k.

I have to do the opposite.

 

[BridgetBordeaux]

Ahhhhh.......January 1st.

Time to crunch those Dec 31st numbers.

I already know it a has been a very good year for most investments.

We hope to spend some of that growth in 2021 while doing a bit of traveling.................to Disney and other places.

 

[Starport Seven-Five]

I was excited to run the EOY numbers as I had tentatively punched in a few accounts and knew we were in good shape. Didn't realize it would be like this though:
+36% total NW
Every category we track (NW, NW w/o house, investments only) were up by an amount that exceeds our gross income. This was a first for us.
We had thrown out a stretch goal at the beginning of last year for end of 2023. We ran a projection at that time regarding what we would have to do at each quarter to hit that goal and it seemed feasible... and then immediately saw our NW plummet through the Covid pullback. We're now 6 months ahead on that same projection.

Sitting down today to go over next year's budget. Initial thinking is to keep the savings rate constant but we're also looking towards 5/10/20 year plans. Very much feels like we're on the downhill portion towards FIRE at this point so we probably don't need to be quite as intense on savings.

 

[SouthFayetteFan]

...+36% total NW...
...Very much feels like we're on the downhill portion towards FIRE at this point so we probably don't need to be quite as intense on savings.

Both of these resonated with me. I hadn't really ever looked at NW increase that way before. 28% here - wow! That's impressive and more than I'd have thought.

On the 2nd statement - I feel like I'm there too now. My goal isn't to have $10MM, so it's time to make sure I'm not missing any opportunities to live life and make things better now. We aren't going to go out and buy a brand new Lexus, but we are looking to spend money for enjoyment and improved QOL now!