Have I done enough to save for retirement?

Submitted by BakeSoggy t3_yheuvs in personalfinance

TL;DR I started saving late for retirement. I currently have $550k saved. I'm starting to have mental and physical health challenges. I would like to start traveling more, but to do that I would need to cut my savings rate. I'm wondering if what I have will be enough.

I'm a 51 year old professional services consultant working remotely for a software company and I earn a little over $150k per year. My spouse doesn't work except for the occasional temporary job. I didn't start putting money in my 401k until my early 30s. My spouse and I currently have around $550k in retirement savings across all our accounts, plus another $200k in home equity. We were flirting with $1 million net worth before the stock market started dropping in February. I've been maxing out my 401k and IRA contributions for 5 years and last year I was able to take advantage of the catch-up provisions for the first time. This year, I'm on track to save roughly $45k using a combination of Roth IRAs, 401k and mega-backdoor Roth.

I'm really anxious about whether we've saved enough to this point. Fidelity and others say that I should have saved over 1 million by now. OTOH, the average American only has roughly $100k saved for retirement. My spouse and I have estimated our current expenses at about $60k per year, including the mortgage. Our cars are paid for and the only debt we have is around $8k in student loans. We can get rid of things like streaming services and gym memberships to save money if we had to.

My question is this: I've got a very stressful customer-facing job. This year was the first time we've really done much vacationing. We had to postpone a couple of big trips due to COVID. But we weren't traveling much before COVID either due to my crazy work schedule. Our youngest just left for college. My company just announced a major restructuring. There has already been one round of layoffs. There'll likely be a second round after the current quarter ends on Monday, and there's a good chance I could be cut. I'm starting to suffer both physical and mental health issues due to both age and the stressful nature of my job.

My spouse has some relatives who belong to a vacation club and basically live in resorts in the Caribbean for much of the year. My spouse would like us to sign up as well. To do that, I would need to cut our retirement savings rate in half at least.

I know it basically sounds like I'm asking for permission in this post. My parents will leave me and my sister $500k each when they pass on in a few years. For a long time, I had envisioned doing something similar with my children, perhaps even adding to what my parents did to create multi-generational wealth in our family. But my physical and mental health challenges are getting to the point where I'm wondering if it's time to ease off the gas and start relaxing. If you check my profile, you could easily figure out what some of those challenges are.

I hope to get a range of responses to this post. Make them as direct, honest and brutal as possible. Thanks in advance!

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ETA: several responders assumed that I'm looking to quit my job. I'm not. I'm 100% remote and I plan to take my laptop with me most of the time. My only question here is whether I should keep saving so aggressively or whether I can afford to slow it down and maybe save $20k per year towards retirement rather than $45k.

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Rave-Unicorn-Votive t1_iudmqm6 wrote

Can you take one moderate vacation and a couple weekend trips per year while continuing to work and save until 65? Yes.

Can you retire Tuesday and start globe-hopping, spending half the year abroad? No.

A 3.5% SWR on $550k is $20k a year. Even with the inheritance, that you should in no way be counting on as a guarantee, the SWR is less than $40k.

That you're down ~40% YTD suggests you're invested very aggressively, probably too aggressively for someone wanting to retire in the next few years.

>Fidelity and others say that I should have saved over 1 million by now. OTOH, the average American only has roughly $100k saved for retirement.

And a lot of those people are going to be relying on their kids for support in retirement and we're going to see the reverse of "generational wealth".

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BakeSoggy OP t1_iudojr7 wrote

> That you're down ~40% YTD suggests you're invested very aggressively, probably too aggressively for someone wanting to retire in the next few years.

I did, but I'm not looking to retire in the next few years. I'm 100% remote and I plan to bring my laptop with me.

The question I have is whether I should keep saving so aggressively or if I can slow down and maybe save $20k per year instead of $45k.

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TywinShitsGold t1_iudpz2o wrote

You should be as aggressive.

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BakeSoggy OP t1_iudqkhz wrote

So saving $20k per year for the next 14-15 years wouldn't be enough? That sounds depressing, but I appreciate it.

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stringer4 t1_iudt0mx wrote

It will be most likely. These are random people on the internet with super conservative retire early savings plans. Sounds like you need to decide if you want those 14-15 years to be super stressed or if you can allow yourself to enjoy things a bit as you get out of prime health/body years.

Are you just talking 401k savings of that amount or are you actually spending 100% of after 401k contribution money? If your lifestyle is to spend 100% of non 401k savings on a 150,000 salary then be more careful. If not, then you’ll probably be good. It’s all about the lifestyle you want.

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BakeSoggy OP t1_iudulpf wrote

I'm currently maxing out my 401k savings ($26k this year with the catch-up contribution) and my spouse's and my Roth IRAs ($7k each) and $5k in a mega backdoor Roth, plus $1k per month in non- retirement accounts. I'm not looking to withdraw anything. I'm just considering not saving as much (ie $20k in the 401k only).

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stringer4 t1_iue1uh8 wrote

Yeah, that’s all great. But do you spend every penny of non retirement contributions or do you have a more modest lifestyle? It’s about lifestyle in retirement at this point. Not necessarily a dollar amount

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BakeSoggy OP t1_iue4euh wrote

No, we don't spend everything. We have a lot of running around money that we could be more careful with. We're currently considering downsizing further. Our original plan was to keep the house so we have enough space to host any family or friends who want to visit. We've lived here for nearly 18 months and so far, no one has come. The house feels too big with just the two of us.

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stringer4 t1_iue6ntc wrote

You are responsible and well paid and care about savings in retirement. You will have shelter and food. At this point it’s just about what lifestyle you want.

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BakeSoggy OP t1_iuemr0z wrote

Thanks! I figured posting this on r/personalfinance would bring out the "eat your veggies" crowd. But I want to hear that perspective, among others.

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Illadvisedusername t1_iudnsjo wrote

Here's a calculator, WalletBurst's "Coast FIRE" Calculator, which can help get you to an answer. Basically, you enter your age, when you want to retire, how much you have, and how much you're saving and it tells you how long you need to work before you can stop saving any more to hit your goals.

The calculator doesn't have an input field for it, but since you'll be receiving Social Security, you can reduce your "annual spending" by the amount you expect to receive from Social Security. You can check your estimated benefits online on the Social Security website.

> My parents will leave me and my sister $500k each when they pass on in a few years.

With my personal planning, I've explicitly decided to not include any potential inheritance. With elderly people, sometimes that money can go away very quickly if intensive care or retirement home scenarios come up, and I don't want to let myself ever get in a mindset where I'm letting thoughts about what might remain factor into my decision making.

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BakeSoggy OP t1_iudqt12 wrote

It's a very good point and I don't know why I mentioned it. I've been running under the assumption that I won't get an inheritance at all.

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stone_ad t1_iue8k0e wrote

This is a cool calculator. OP if you do use then know that their default setting are ultra conservative. They use 7% returns and 3% inflation.

7% is normally used as an inflation-adjusted rate. Otherwise it’s 10%. If you use their default numbers, then your are accounting for inflation twice OR assuming stock return in the future will be considerably lower than the past.

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1hotjava t1_iudnlp6 wrote

>My spouse and I currently have around $550k in retirement savings across all our accounts, plus another $200k in home equity.

You can count house in NW, but don’t count it as part of retirement savings. You can’t buy groceries with a house, well you could but you’d have to sell.

>This year, I'm on track to save roughly $45k using a combination of Roth IRAs, 401k and mega-backdoor Roth.

That’s awesome. Most people can’t get near that level of saving.

>OTOH, the average American only has roughly $100k saved for retirement.

Ignore that nonsense data. You aren’t them. You are ahead some and where they are is irrelevant.

>My spouse and I have estimated our current expenses at about $60k per year, including the mortgage.

To keep that level of spending you take that multiply by 25 and that’s what you need to not work while your money is invested. You’d need $1.5M to meet a $60k goal. (This is based on the “safe withdrawal rate” of 4%)

>My spouse has some relatives who belong to a vacation club and basically live in resorts in the Caribbean for much of the year. My spouse would like us to sign up as well. To do that, I would need to cut our retirement savings rate in half at least.

Ehhh. First off what’s is the relatives financial situation? Have they reached financial independence(“FI”)? Not trying to be a dick, but you guys haven’t reached that. You are behind in reaching a reasonable FI number for yourselves. Once you get to that FI number (the $60k/$1.5M) does it support living in another country part of the year?

>My parents will leave me and my sister $500k each when they pass on in a few years.

Don’t count on inheritances. You never know if parents need long term care which can destroy inheritances

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[deleted] t1_iudm4kc wrote

[deleted]

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BakeSoggy OP t1_iudnw74 wrote

That's a really good point, and one of the reasons why I'm on the fence. Normally it's $10k to start plus a $400 annual maintenance fee in the years when you use it. One of our relatives has offered to sell us his membership for what he still owes on it. We don't know how much that is yet.

With the quarter ending on Monday, I'm thinking that any potential layoffs would most likely happen in the next couple of weeks once they get the preliminary numbers. I'm not worried about finding another job right away, and I should be able to get some severance. Plus, we have 6 months of expenses in a savings account we can tap if we need it.

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StepOfficer t1_iudmcp8 wrote

Respectfully and in my humble opinion, $550k in retirement for two individuals (since your spouse doesn't work permanently) will not be enough to sustain both of you without returning back to the workforce.

It's also important to mention that you alone earn a very healthy income. Possibly entering your highest earning years if not we'll into your highest earning years. If you exit the workforce, depending on the length of time out of the workforce, you may not be able to return at the same pay level.

I completely understand wanting to get away and living in a Caribbean resort for the majority of the year. I can't imagine most people wouldn't want that. However, this will inevitably have a cost associated with it. Is it one time, yearly, 'X' amount up front, 'y' amount for 10 years then your costs go down? How is this payment structured. I'm concerned that having $550k plus indulging in a vacation club might quickly eat away your savings. What would you do for your time not living in the Caribbean? How much do you owe on your house? What's your monthly mortgage? Can you reasonably afford both the vacation club as well as a mortgage?

I would highly encourage you to stick it out through these next potential cuts. If you aren't let go then perhaps try to stick it out a little longer. Then have a candid conversation with your employer about going part time while remaining remote. Who says you can't be remote from an island? I met a couple last week while on vacation, the husband is remote for Microsoft and was enjoying his time on St. Kitts.

If your company isn't willing to work with you, perhaps you can seek other employment on the premise that it will be 100% remote, and less than a full time. I wouldn't fully count on the estimated $500k inheritance until it is physically in your accounts.

This may have given you more questions than answers and probably wasn't as helpful as I should have been. Others will inevitably chime in and their perspectives are usually spot on.

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BakeSoggy OP t1_iudoc9x wrote

I'm not looking to exit the workforce. I'm already 100% remote and have been for the last 15 years. Much of the time, I'd bring my laptop with me and work from the unit.

It's funny you mention St. Kitts. My wife went there last week with the relatives who are part of the club. I wasn't able to go with them due to logistics, but it sounds like they had a great time. My BiL told me he was able to get a special rate of $180 per week through the vacation club.

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CQME t1_iudn1v3 wrote

> Fidelity and others say that I should have saved over 1 million by now. OTOH, the average American only has roughly $100k saved for retirement.

What do you expect to be your spend during retirement? If your spend is lower, that target would also be lower, yes?

Also, the average American family is probably not average 50 years of age, so that may be misleading.

I saved this article a while back from the WSJ describing some successful retirements, some with fewer (projected) assets than you have.

https://www.wsj.com/articles/heres-what-a-2-million-retirement-looks-like-in-america-11661702455?mod=hp_listb_pos5

If you hit a paywall, I can DM you the contents of the article.

>My spouse has some relatives who belong to a vacation club and basically live in resorts in the Caribbean for much of the year. My spouse would like us to sign up as well. To do that, I would need to cut our retirement savings rate in half at least.

>My parents will leave me and my sister $500k each when they pass on in a few years.

I would factor this into post retirement, or at least after the estate situation is a done deal. Right now you have far too many moving parts.

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BakeSoggy OP t1_iudpgd4 wrote

> What do you expect to be your spend during retirement? If your spend is lower, that target would also be lower, yes?

I think that in large part will depend on what kinds of medical conditions we'll have as well as whether Medicaid is still available in something resembling its current form. Right now, our living expenses are $60k per year, but we could cut that down to $40k and still live comfortably before factoring in inflation.

> Also, the average American family is probably not average 50 years of age, so that may be misleading.

That is a very good point. So far I haven't seen any statistics on how many folks in my age cohort actually have $1 million saved for retirement. Do you know if that's available anywhere?

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furnacesburn t1_iue4ptb wrote

I think you need to look at your spend now, what you intend to spend in retirement (will you have a paid off house? Will your spending increase or remain about the same?), and run your (and your wife's) numbers from projected social security payments.

If you're saving 45K, that means you need to replace something more like 105K in retirement rather than your full salary if you maintain the same lifestyle, so reducing your contribution to 20K hurts you two ways (you don't have that extra 25K in your retirement account and you're used to having 130K instead of 105K). There is a bit of a gap here with your 60K spend, but possibly you're paying for kids' university?

Probably there's some happy middle, assuming you aren't planning on retiring for another decade, but I think you need to do those calculations yourself to see how your budget makes sense with your priorities.

FWIW a minimum savings of 15% (so 22.5K for you) is usually recommended for retirement. I'm not sure what your situation is exactly (it does seem like you are a bit behind), but if you're planning to save less than that, I'd spend quite a bit of time double checking your numbers/assumptions.

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BakeSoggy OP t1_iue8f79 wrote

I currently take home a little over half of my salary. My take home pay after taxes, retirement, health care, etc comes out to about $76k per year. I'm paying a lot in taxes because I have no deductions other than my mortgage and I live in a somewhat high tax state. My spouse and I are considering relocating to a state with no income tax. We eat out a lot and have a bunch of streaming services we picked up during COVID. We are also helping out our child in college.

I agree I should spend more time running the numbers.

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stone_ad t1_iue5tpj wrote

A few things…

(1) as others have said. This doesn’t have to be a binary decision. Can you save 35 (instead of 45) and go on one really nice vacation a year?

(2) it seems your wife is really pro this lifestyle, but doesn’t work (no shame btw). Would she be willing and/or able to take temp work or part time work in order to fund that lifestyle? You’re talking 20k a year - are there opportunities she would consider to get about that amount of money? Or even a portion of it? I bet there are a lot of creative ways to get that money.

(3) I don’t know the details so maybe this isn’t a concern, but health costs near end of life can be extremely expensive and drain a lot of that expected 500k you’ll get from your parents.

(4) are there other parts of your life/budget you could sacrifice for your vacation lifestyle?

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BakeSoggy OP t1_iuen8me wrote

I think all of those things are viable options. I was mainly concerned that I won't be able to save enough for retirement. I'm thinking right now, my wife and I need to figure out how much "enough" is.

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shadow_chance t1_iuf20n7 wrote

I think you're in pretty good shape. Have you gotten a social security estimate at www.ssa.gov? That alone could cover a good portion of your retirement expenses.

You mentioned cutting your retirement savings in half. So from 45K to 22500. With 500K now, adding 22500/year, in 10 years you'll be at 1.3 million. Maybe less as you shift to a less aggressive portfolio.

Is your house set to be paid off when you retire? The mortgage was included in your expenses based on how I read your post.

If the vacation club is a time share, stay the hell away.

> I'm 100% remote and I plan to take my laptop with me most of the time.

I really recommend not doing this. I do this as well sometimes for quick weekend trips, but I don't consider these vacations. I may fly in late Thursday, work Friday, then have the weekend. But if I'm going to Hawaii for a week or two, I'm not even bringing my laptop.

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BakeSoggy OP t1_iufc70u wrote

> Is your house set to be paid off when you retire? The mortgage was included in your expenses based on how I read your post.

Yes it should be. We're 2 years into a 15 year mortgage that we're paying about $200/mo extra on. We're 11 years out from me being eligible for SS. My estimated payment if I opt for starting at 62 is a little over $2200/mo. My wife would kick in an extra $500.

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