Personal Investments • Please help me retire at 55

1) Am I saving enough?

With $1.2M initial balance, invested at 100/0, assuming an avg ER of 0.10%, annual contributions of $35K/yr with +3%/yr for wage increases/inflation, I see a range of outcomes for 5th percentile to 95th percentile aggregated from 1,000 Monte Carlo trials at age 55 like this:
$1,495.7K5th
$2,555.2K25th
$3,736.3K50th
$5,132.8K75th
$8,380.0K95th

If you use the 5th percentile as a conservative outcome (95% chance of a higher balance at age 55), then that supports an annual withdrawal of about $60K/yr in future dollars (about $44.5K/yr in today's dollars). If you're spending $145K/yr now and in retirement, that other $100K/yr has to come from other sources and Social Security won't be enough (significantly reduced benefit at age 62, which you still couldn't claim for 7 years if you retire at 55).

2) Is there anything I should be doing differently?

a) Save more.

b) Work longer, if saving more isn't an option.

c) Spend less in retirement (scrub mandatory expenses vs discretionary ones).

If you're really going to start tapping funds within five years reduce the volatility of your portfolio. 100/0 is the kind of portfolio you use in the early phase of accumulation and is likely too volatile if your retirement date is only 5-7 years away. That same Monte Carlo at 70/30 looks like:
$1,932.7K5th
$2,680.8K25th
$3,399.5K50th
$4,303.4K75th
$6,014.4K95th

With 100/0 there's more upside potential ($8.4M vs $6M) but also more downside potential ($1.5M vs $2M), when compared to something less aggressive over a shorter time-frame (10 years in this case). You could also stay 100/0 for 5 years and then step down to 80/20, then step down to 60/40 another 5 years after retirement; up to you but 100/0 all along is probably going to be too volatilie.

3) I started working and contributing to Social Security at age 23. (I'm an immigrant.) Should I work until 58 so I don't have any of the SS 35 years with $0 contributions? Does working part-time count for the 35 years?

You could try and run the numbers yourself on https://opensocialsecurity.com, or likely get a more accurate prediction from the Social Security Administration directly by opening an online account and looking at your estimated benefit at 62 for the cases where you stop working at 55 or 58.

Statistics: Posted by bonesly — Thu Feb 08, 2024 12:30 pm — Replies 9 — Views 705

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