Saturday, July 19, 2014

Operation Retirement in Fourteen... Errrrr.... Fifteen Years Maybe?

I'm already changing my mind about the timing of my retirement.  I was pretty convinced that I would retire in fourteen years once I paid off my mortgage.  I was thinking I could fulfill two dreams at once:  burning my mortgage documents and quitting via cake.

But the more I thought about it, I think the better plan would be to retire in fifteen.  I think I need the final year as a "test-run" to see what my true cost of living sans old major expenses would be and to plan for new major expense (e.g., health insurance, long term care insurance).  I did some rudimentary math to see what my anticipated cost of living (assuming 4%/year inflation) might be compared to now.

My monthly expenses currently run around $4,600/month.

 Credit Card
 $     520.00
 Cable + Cell + Massage
 $     319.00
 Monthly Living Expenses - Food, Gas, Entertainment, Misc.
 $     800.00
 DOE (Student Loans)
 $     360.00
 $   1,289.00
HOA I - Subdivision
 $     290.00
HOA II - Master Assoc
 $       30.00
Bank of Mom
 $     225.00
Prop Tax
 $     375.00
Gas & Electric
 $       55.00
 Life Insurance
 $       48.00
 Auto Home/Insurance
 $     185.00
 $     100.00
  TOTAL (Monthly)
 $   4,596.00
 TOTAL (Annual)
 $ 55,152.00

In 2029, I'm expecting my monthly expense will run about $5,290.91/month.  It's a bit hard to foresee what other expenses I might have then that I don't have now.  Hence, why I think an additional year in the workforce would be helpful.

Anticipated Expenses
 $     742.85
 Cable + Cell + Massage
 $     571.01
Living Expenses
 $   1,432.00
 $     644.40
HOA I - Subdivision
 $     519.10
HOA II - Master Assoc
 $       53.70
Prop Tax
 $     671.25
Gas & Electric
 $       98.45
Life Ins
 $       48.00
Auto/Home Ins
 $     331.15
 $     179.00
  TOTAL (Monthly)
 $   5,290.91
 TOTAL (Annual)
 $ 63,490.92

My exercise above was to see whether I can live just of off the dividends I earn in my 401k, Roth IRA and traditional IRA.  Assuming a 2% dividend yield (pretty much what I'm earning now) and an projected balance in my 401k of $1.4 million, I'll run out of funds in my 401k when I'm about 85 years old (taking into account I claim Social Security at age 72).  If the dividend yield goes up to 3%, I'm golden indefinitely.

This is a wake-up call that I need to get more serious about increasing my savings rates.  ... And not getting fired in the mean time.