Cash Savings, Retirement Journey

Covid-19, cash savings and a retirement update.

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Photo by cottonbro on Pexels.com

The Covid-19 virus appears to have given everyone pause, both in their physical lives as well as their financial lives, whether it was voluntary or forced.

It definitely has brought me back to reality, especially in the realm of retirement.  With 30% gains in my retirement accounts over the past 18 months, then 30% losses over the past 18 days, our account is back to where it was in 2018.   There were some sleepless nights and worries, but I know we are still in good shape.

My husband is 56.  We still have time to save, readjust and rejigger our plan.  And that is exactly what we are going to do.

We’ve decided to bulk up our third ‘bucket’ more than initially planned.  We lowered our percentage that is going into the stock market, and instead are adding that percentage to our cash savings.  We won’t stop saving until we have at least 5 years’ living expenses in the form of cash.  We know that our savings account will most likely not keep up with inflation.  It will, however, offer peace of mind which, to us, is priceless.

I thought I might go back to work, but I’ve realized now is not the time.  I will wait a bit and see if things get better.  In the meantime, I’m looking into online work, virtual assistant work, and such.   Anything to add to the cash savings.

Fortunately, the cruise line cancelled our trip which means we will be getting a full refund (and not just a credit).  However, our airline tickets will only be issued as a credit.  (Don’t get me started on how crooked they are).  That money will not be put in our savings fund, but moved to a  ‘future’ trip fund.  We still want to do something special to celebrate.

And lastly, our time line for when we retire may change.  We are still at least four years out to our planned retirement, but we are now considering five or six years.  It all depends on how much we can save.  We don’t want to retire hastily, without solid cash in hand.

That’s our new plan, and hopefully we’ll be able to meet our goal.  Covid-19 slapped us back into reality, and for that I am grateful.  It may just have saved our financial lives in our retirement.

How has Covid-19 changed your financial plan?  Please share.

 

 

 

 

 

Retirement Journey, Worry

How the present is affecting our retirement future.

man and woman sitting on brown wooden bench
Photo by Monica Silvestre on Pexels.com

The present market situation has caused a bit of a pause for us as we figure out when we will retire.  In four years, or age 60 (for my hubby), we still would have a sizeable nest egg, but not nearly what we thought we would have.  We are considering and expecting a very slow recovery, and only a 3% rate of return once it does.  Once our investments come up to what they were before the crash, we plan to put almost all of our investments to conservative, non volatile funds.

Along with watching our funds in the stock market, we are assuming our cash savings in bank accounts will not earn much, if anything.  Still, we are stashing away as much as we can, and I still anticipate we will meet our cash goal in four years.

What else has changed for us?  I’m applying for a job and my husband is considering working until 62 or 63.  We are both healthy, and want to make sure we work as long as we can to save the amount of savings we feel comfortable with in retirement…without the concern of another bear market down the road.  If we save enough, we won’t have to worry about interest rates.  Period.

I know we are fortunate.  I know we have it better than a lot of people.  I’m grateful every single day for my husband and his secure job.  However, if he lost his job tomorrow, we would be okay.  We have a considerable amount of equity in our home, which we could sell immediately.  Downsizing is in our future anyway, so it wouldn’t feel like a hardship.  In the meantime, while he is working, we are saving and paying down our mortgage as quickly as we can.

That is the financial side, but how am I navigating today?

Taking time to just breathe.

Trying to help others where I can.

Remaining positive in this space.

It is scary, I know, and I’ve lived through bear markets, 911, and the snipers (which traumatized me for months) but I believe we will prevail.

Just remember we are all in unchartered territory, including our government officials.  Be patient.  Don’t blame.  Don’t hoard.  Share.  Above all, be kind.

Sending my love and prayers to all those who are suffering a loss, whether it be a loved one who lost the battle with this illness, loss of pay, or loss of savings.

We are all in this together.

 

 

Retirement, Retirement Journey, SAVINGS

The Stock Market Ups & Downs and My 5 Bucket Sources for Retirement.

grey metal case of hundred dollar bills
Photo by Pixabay on Pexels.com

Preparing for an ‘earlier’ retirement requires making sure our money lasts.  Having various ‘buckets’ of resources is how we won’t lose our minds when the stock market takes a bit of a tumble.

Before I begin, if you are worried about your money in the stockmarket, please watch this video.  You’ll feel MUCH better.

Buckets 1 & 2 – Our Retirement Accounts

We have amassed, in my opinion, a significant amount in our 401K retirement accounts.  I will always be an advocate of the stock market, as it has proven over and over again that it recovers.  Slow, steady and consistent investing will give you the money you need over time.  We are proof.

We have two retirement accounts, and consider them buckets 1 & 2.

The first bucket will have ultraconservative investments, and we will use it to get through the first 7 years of retirement.

The second bucket will be money we will let grow.  We figure we have another 12 years of growth.

Bucket 3:  CASH. 

My goal before we retire is to have $200,000 – $250,000 in cash reserves.  I believe this will be enough for us to weather a long down market.

Our cash goal is a lofty one, but one we could do.  Thanks to my husband’s career, the fact that he was never unemployed, and his hard work to get to the position he’s in, we are now able to bank 50% of his take home salary.  (Of course it doesn’t hurt that all four kiddos are off Mom & Dad’s payroll!).  If I’m diligent with our budget, this goal can be obtained in three years.  I will take the fourth year to pay off our mortgage, which is the only way my conservative husband will retire. 😉

Bucket 4:  Social Security

Of course, we will have social security (yes.we.will).  We won’t start receiving it until year 7 of our retirement.  (I’ll receive mine two years before hubby).  If we keep our expenses low,  it will cover 3/4 of our monthly expenses.

Bucket 5:  A Divorce Settlement Pension (My HealthCare Plan)

May I just say I earned every penny of this? For all those that may not know, I was married and divorced in my 20’s.  I will never go into the specifics of that, but I came out ahead  with two GORGEOUS daughters and a pension.  I will receive the pension at age 62 (the same year my husband plans to retire).  I will take it as a lump sum, then roll it into an IRA.  This should cover most of our healthcare needs before medicare kicks in.

I believe it’s imperative to have several ways to get money in retirement, and cash will play an even more important roll in the future.

How are you saving for retirement?  Or, how are you spending in retirement?  Please share in the comments.

Florida, Retirement Journey

A Move to Florida?

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Photo by Nextvoyage on Pexels.com

My husband and I have money meetings every Saturday morning to discuss our savings goals, plans for the year, etc.  Mostly we dream about the day my husband retires.  Today, instead of reflecting on the stock market losses, we started reflecting on our monthly expenses and how they would change if we moved to Florida.

We found this site that compares locations economically.  Here is how it came out.

Comparison Highlights:

– Overall, Northern Virginia is 48.0% more expensive than Sarasota, Florida
– Median Home Cost is the biggest factor in the cost of living difference.
– Median Home Cost is 108% more expensive in Northern Virginia.

Cost of Living Indexes Northern Virginia Florida Difference
Overall Index: Homeowner 152 102.7 48.0% less
Food & Groceries 114.1 106.5 7.1% less
Housing (Homeowner) 238.4 114.4 108.4% less
Income Taxes* (number reflective of what we will live on) $6,500 $0.00 $6,500 less
Home Price Average $515,000 $228,300 $286,700 (108.4% less)
Utilities 94.2 97.4 3.4% less
Transportation 127.6 90.0 40.4% less
Health 99.9 97.6 2.4% less
Sunny Days 199 257 58 more
Personal Property Tax 4.13 per $100 in value N/A 100% less
Miscellaneous – clothing, entertainment, etc. 114.2 101 13.1% less

100 = US Average. (Below 100 means cheaper than the US average. Above 100 means more expensive.)

Although Sarasota, FL is higher than the US average in most categories, it is lower than where we are living now.

Of course there are other factors that go into a move, but financially it appears that moving to Florida would  help our wallet. (The extra 58 days of sunshine doesn’t hurt either! 😉 )

And that’s a good thing.

 

 

 

 

 

 

Retirement Journey, saving money

Retirement Series: Our current savings.

blue and yellow graph on stock market monitor
Photo by energepic.com

After posting about our expenses, the next retirement nut to crack is savings.  Do we have enough?

Ah.  The million dollar question.  Literally.

We used  NewRetirement, a free retirement planning tool to figure out if we were on the right track for retirement.  After inputting all of our financial information, and with the assumption that we will continue to contribute the maximum to our retirement account over the next four years, we come out with a ‘great’ score for retirement in 4 years.

 

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Our net worth includes retirement accounts, home equity and cash savings.  This program also included our mortgage and healthcare expenses, so if we wanted to, based on the above, we could stay in our home.

Thankfully, we have weathered the stormy markets and have come out ahead.  We are more conservative investors, and have rarely averaged a 12% return in a years’ time.  Our average is closer to 8%.  But we still managed to hit the $1M mark.  After 35 years of saving in our retirement accounts, we are finally seeing the fruits of our labor. 😉

What I LOVE so much about the New Retirement site and the chart they provide, is that it lets you know when your social security starts and when you need to take RMDs (required minimum distributions) from your retirement accounts.  It also assumes a 2-3% investment growth, which, to me, is very realistic.

So, do we have enough to cover our expenses and retire in 4 years?  I believe we do.

I will follow this post up with a future post on how we managed to accumulate $1.7M in net worth.  But for now, know that it took hard work, steady investing and a bit of luck.  No inheritance.  No rich relatives.

How are you doing in retirement savings?

 

Budgeting, Retirement, Retirement Journey

Series: Retirement Preparation. The retirement budget.

grey metal case of hundred dollar bills
Photo by Pixabay

Expenses.  This is probably one of the most important of all the areas of preparedness for retirement.  Without knowing how much you will need in retirement makes saving goals for retirement a guessing game.

I have been preparing my budget now, and will be living off of our potential retirement income over the next four years, while saving the overflow in a cash liquid account.

Of course, we don’t know exactly what will happen in retirement, but we do know we will need a good amount for health care.  I am not going to nickel and dime this category  because quite frankly without health, nothing else matters.

Another line item I want to have is a significant amount in travel.  For the first 10 years of retirement, we plan on taking full advantage of our current health (good!) to blow through our travel bucket list.  (a topic for a future post!)

white cruise ship
Photo by Matthew Barra

That leaves us with the every day expenses — mortgage, utilities, cell phone, car expenses (insurance, gas, maintenance) food, eating out, gas, gifts, clothes, subscriptions, giving, personal care, blow $, household, taxes and insurance.

Mortgage.  Ultimately, we don’t want a mortgage.  Unfortunately, four years doesn’t give us enough time to pay off our current home.  Our plan is to sell our current home and downsize to a smaller home in our area.  Our children and grandchildren are here, so moving to another area doesn’t appeal to us.  However, downsizing into half the space, half the utility bills and half the taxes and insurance does. 😉 We hope to downsize in the next three years before we retire.  Potential Savings:  $30,000/year.

Cars.  We will be going down to one car.  In Virginia, there is a personal property tax on cars each year.  If you have a fairly new car (which we do), it can be as high $1,000 or more.  Going down to one car would be a HUGE savings to several line items, including car maintenance, gas, taxes and insurance.  My husband never uses his car on the weekend, and I barely use my car during the week.  When he is retired, we don’t see needing both.  Potential Savings:  $3,500.00/year.

By rejiggering just those two categories alone, we would save over $30,000 in yearly expenses.

All other expenses.

We are in a good place with other line item expenses, so I’m keeping them all the same for retirement.  By saving on the big ticket items (mortgage and cars), the other line items can remain the same.

So, where does that leave us?

Here is our preliminary REALISTIC retirement monthly budget, and one we follow now except the $2,500 is our mortgage instead of healthcare, and our taxes and insurance is $1200/mo.

  • HealthCare:   $2,500.00** (This includes insurance, co pays, medications, and concierge service for my endocrinologist )
  • Travel: $1,500.00 (5 trips a year)
  • Taxes & Insurance: $550.00
  • Utilities: $275.00
  • Cell/Cable: $200.00
  • Groceries: $500.00
  • Household: $100.00
  • Subscriptions: $25.00
  • Eating Out: $100.00
  • Home/Car Maintenance: $250.00
  • Gifts: $200.00
  • Clothing: $150.00
  • Personal Care (makeup/hair): $100
  • Blow $:  $200.00

Total:  $6,650.00

**Healthcare will go down significantly when Medicare kicks in, although I anticipate spending some money for gap insurance.

Well there you have it.  After months of agonizing over our expenses, I can honestly say the above numbers are as accurate as they can be.  I’m not going to lie, that is a high monthly nut to cover.  $400,000 for the first 5 years to be exact, then $135,000 for the next 2 years (when medicare kicks in).  However, once we start social security at age 67 (yes, we changed our minds again 😉 ) our monthly draw from personal savings will be $2,625/month or $31,500/year.

Will we have enough to retire at age 60 given the above numbers? I think so.  But stay tuned for the next post in our series, OUR CURRENT SAVINGS.

If you are retired or planning to retire, how do your expenses align with mine?  Please share!

 

 

 

 

 

 

Retirement, Retirement Journey, Social Security

The 4 Years before Retirement

lose up photo of green flower
Photo by Vraj Shah

Spoiler Alert. We now have a date.  My husband is officially retiring in 4 years and we are busy gearing up for the day when he will no longer be getting a paycheck.  My husband’s retirement age will be 60!

I guess that doesn’t qualify us for the F.I.R.E. (Financial Independence, Retire Early) movement, but it sure beats waiting until 70 or beyond to retire.

I have been reading a lot of articles on pre-retirement planning.  While I may not have anything extra to add, I thought it would be advantageous to share how we will be preparing for our retirement.  I will document our personal journey in this space as a way to keep me accountable.

For us, we have concluded that there are five things we need to consider before we retire.  In general terms, they are:

  1. Our Health – what will our anticipated well-being be when we retire – and what we will do in the next five years to make that the best it can be;
  2. Our Wealth – what we will have potentially saved in our retirement accounts, how we will navigate withdrawals and when we will be the most advantageous time to take our social security benefit;
  3. Our Expenses – what our retirement expenses will look like including medical expenses;
  4. Our home – where we will live out our retirement years and if we will move, downsize or stay put; and
  5. Our Hobbies & Interests – what we will do with all that free time.

In future posts, I will be sharing how we will be preparing and addressing each of the above five considerations.   I hope you’ll join me.

If you are thinking about retiring, how are you preparing?  If you are already retired, am I missing something?