Good on you sir for having the capacity to do this, and good on you for such financial forethought and discipline.
Honestly, I use a bond fund largely for the convenience - pick it on Vanguard’s web site and done. It’s got the same advantage of diversity as any mutual fund…any one bond default won’t lose your money. It does fluctuate a bit, but doesn’t seem to be nearly as volatile as stocks. I do also have a few direct-buy US treasury bonds as my “safest investment short of burying it in the backyard” backstop, just in case.
If you have the means, I would reverse that. $1,000/month now, start ramping it down once he’s 10. Granted, the market is high right now and that idea may backfire … one never knows and I think we’re due for a 2000 dot-com / 2009 crash soon.
I did put some money into 529s, but enough to cover only about one semester for each daughter at the places they’re going. We put most of our available savings into maxing out retirement accounts … 401k, IRAs and SEPs. As “they” say, you can’t take out a loan for retirement but you can for college. And we do have a low 7-figure retirement stash as a result. Ultimately a big chunk of our retirement spending will be paying off college loans once the house is paid off.
Yea, I think if you are a disciplined investor the 529 is over hyped. But that is just my opinion.
We found that a 529 made it easy for grandparents to invest in their grandchildren. They could have done it in other ways but they liked it.
I want to walk around in a velvet kaftan and a silk slip with a glass of champagne or whiskey or dry martini in a studio apartment somewhere in the world, have two cats and write books.
I’ll be spending the summers at my little vinyard in Italy, translating books.
And I’ll be traveling a lot, alone, just soaking up the world. I’ll be that completely silent lady sitting alone at cafes and restaurants.
Just 35 years to go!
You win the internet. Again.
Who, me? I wasn’t aware that I’d EVER won the internet! :)
Man I had a bad divorce that left me near penniless in 2006… I’m back and I figure I’ll be ready to retire in 7 years. I’ll be ok, my parents are wealthy but I don’t care if I never get a penny from them, I just never think of my parents as a source of anything but love. I just want enough to support my family, take a cool trip, or buy cool shit every once in awhile… I don’t want to rule the universe.
I’m 55, kid is 12. Wife is 14 years younger. Just bought our first house last year…hope to pay it down and have the value go up enough so that we can get 300K or so after selling in 10 years. That money plus SS plus the wife working and her sister who lives with us gets SS and also my wife earns money for taking care of my sister in law…all that adds up to me retiring…the problem is the kid needing college money and we need to find a way for the wife to save up enough for her retirement.
Younger wife, retirement bliss!!!
The scariest thing about retirement planning is the uncertainty of how long you’ll live. Save to buy a house? Sure, that’s a defined amount, with a slight margin. Save for college? Sure, that’s the same thing.
Save for retirement? You could be saving for 5 years of life or 35 years. Add in the extra uncertainty of planning for two people and the spread gets even crazier. That’s a huge variance! Plus, not all those years are equal—medical and other care costs skyrocket in those later years. In fact, healthcare dominates the calculus.
It’s so crazy to plan for something that might require 300K or 2M+.
Uncertainty is the key word.
Yep. What I did was set things up such that I can live pretty much off interest income, sustainable more or less indefinitely. I assumed about 2% minimum interest, which is feasible if you mix your investments right between safe (CDs and the like) and growth (stocks and such). Right now I’m well above that due to all the crazy stock growth the last few years, but it’ll probably drop back and even out at some point.
Getting your savings to the point where you can do that isn’t straightforward, I know. I’m helped by the fact that I’m only supporting myself, and that I have zero debt (home, car, etc all paid off). I also assumed that the government will give me nothing…you can mitigate part of the cost if you’re willing to assume that Social Security will help you.
Still a lot of assumptions in there…economy stays strong enough to provide interest at a reasonable level, expenses don’t skyrocket, and so on. Medical is my big worry, of course, and I’ve hedged against that with insurance and a medical savings account. It could still bite me, but I figure chances are that if I get so sick that I’m blowing through all my savings, I likely won’t live long enough for it to matter.
Still plenty of ways things could go wrong, but I feel like I’m up in the 90+% confidence level that I’m on a sustainable path.
I’m approaching retirement and have started figuring out how I’m going to work it, and in the US at least, medical costs are the biggest part of that uncertainty (current plan is to retire prior to 65 so there will be a couple of years where I have to deal with ACA or the equivalent for healhcare). But I’ve accepted the fact that you make plans, you save your money, and you move forward. I’m making plans and being prudent but I’m not sure what else you can do. Plus my wife has specific medical needs that have to be addressed (so none of this “self-insuring” or purchasing a “medical plan” from a faith-based organization). So that makes decent healthcare a mandatory thing in our planning.
That said, I don’t have any real plans for long-term care, should we require it. History says I won’t (i.e., none of my parents/grandparents were in longer term care until my wife’s grandma turned 98). But of course, each person is different.
As far as dealing with the uncertainty of not outliving your retirement savings, there have been studies on that, and there is a pretty vast resource in the blogosphere dealing with that issue, if you’re interested in finding out more (warning: this stuff gets pretty hairy pretty fast):
- the initial study that everyone references is the “Trinity study”. I believe this is the study that first proposed the “4% rule” for withdrawal from retirement savings Wikipedia entry
I also recommend a couple of good financial bloggers regarding withdrawal rates. My top two:
Michael Kitces - the site seems geared in may ways towards financial planners, but has a lot of information for financial planning that’s consumer oriented. Withdrawal rates
Early Retirement Now (referred to as ERN, and the guy who runs it as ‘Big ERN’). The Ultimate Guide To Safe Withdrawal Rates
The bogleheads forum also offers decent discussion with pretty good moderation.
a number of the people who discuss stuff like this are found on Reddit. A general description of this topic is called “Financial Independence / Early Retirement,” abbreviated “FIRE”. The germane subreddits are the personal finance, financial independence, and leanfire. Leanfire is financial independence where you live a ‘lean’ life, so it’s essentially living a simpler life so you need less to retire.
There are also a couple of calculators where you can simulate whether or not you’d outlive your retirement, based upon about a million assumptions:
- Portfolio Visualizer (under the Monte Carlo section)
- the calculator in Personal Capital (which is a personal finance monitoring app that’s free, but they periodically spam you to try to convince you to let them manage your cash. Easy enough to ignore, though). Aside from that, this is a great website/app that I find useful for getting the big picture.
We are lucky (I am lucky!) in that my girlfriend has a nice pension waiting for her. So we have guaranteed income between that and SS. We are also going to sell the house and anticipate a nice profit on that. Still, I’d like to generate a bit of revenue after retired through some kind of part-time work.
So we will live a bit like gypsies for a few years, travelling about and renting for 3-6 months in different places. Worst case scenario for Europe is we can live 90 days in the EU and then 90 in the UK and then go back to the EU again for another 90. We may be able to get a longer visa.
The thing that’s difficult about retirement planning is planning for eventual assisted living or nursing home care. None of us like to think we’ll need it, but some will. Strokes, dementia, etc., require the kind of care a partner cannot give. A few years of nursing home care can eat up all savings. In fact now the strategy a lot have is to give away everything so that medicare will pay for the nursing home. I believe you have to show you only have $1000 and then Medicare takes over and takes your SS check. Of course this is in peril if the government cuts back on this sort of aid. It may not be around when we might need it.
BTW, I have a dream of living near here at some point. I just love the idea of a town in love with books:
Thats a little under an hours drive from my families village. I love it. Beautiful village as well. And yes its like a bookstore every few houses, amazing place, highly recommended! Oh and its also within easy travel distance to Oxford in case you needed even more beauty & books.
Thanks for these links btw. I am turning 52 this year so planning is a ways out and I still enjoy work. That said it gets pretty scary looking at what no income looks like , I cant afford to retire in the bay area thats for sure. I still remember as a kid thinking being a millionaire meant you were set for life. How times have changed , now that covers maybe 4 or 5 years worth of middle class living in the bay area.
My plan is to get both my kids off to college (I will be turning 60 when they are both gone) then sell the house (hopefully bay area house prices wont have collapsed) then move to a lower cost state/country.
We thought about that, but then it meant leaving all our friends and starting over basically from scratch and my wife & I looked at each other and said “Nope”. We’re staying put. Might move into a smaller house when we’re 75 or so (whenever I can’t putter in the shop), but we’re staying where our friends are at.