Find Your Balance continued…
In our retirement plan, over the last few years, I have consistently adjusted the desired annual income up. The retirement income goal has gone from $125,000 to $150,000 to $200,000. Why have I been adjusting the income goal up the last few years? There are multiple reasons: increased household income, stellar market returns, and increased estimates of what we will be receiving from our various pensions.
So why I am now reducing the desired annual retirement income goal?
Over the last six months the wife and I have been tracking every penny we spend and we know exactly what our monthly expenses are. When we subtract the mortgage from that number (the house will be paid for before we go into retirement), we feel pretty comfortable at making a guess at what our monthly expenses will be when we retire in 11 – 13 years.
That number is $5,000. Multiply that times 12 and you get $60,000 annually. Because I like to figure conservatively when it comes to retirement planning, I added 50% to that number, giving us $90,000.
We are very fortunate in that we will have five pensions between us in retirement. My current projection of our income from those five pensions is $122,000 annually. As you can see, even without our retirement accounts (TSP [the 401(k) comparable defined contribution plan for Federal employees] and IRA), we are $62,000 ahead of our projected need and $32,000 ahead of the inflated goal.
As I noted, I plan conservatively with respect to my retirement and I am working on the assumption that something negative – beyond my control – is likely to happen to one or more of our sources of retirement income (look no further than the mess in Detroit [here and here] and the Federal government’s short experimentation with reducing COLA for military retirees as examples).
With that thought in mind, I have taken that $90,000 number, doubled it, which gives us a new annual income retirement goal of $180,000.
What does that mean in the near-term? Nothing really. We plan to continue maximizing contributions to each of our retirement plans and we have no plans to go out and spend a large chunk of money on a major purchase.
However, in the long-term it means that we will not be looking for additional ways to invest more money. Our foundation is solid and our plan clearly shows that we are ahead of pace and doing the things we need to do. It also means that as we earn pay increases or otherwise come across ‘extra’ money, it can be spent a little more frivolously. Perhaps more gadgets around the house (audio, video home automation and technology is my other passion) are in my future.
While I do not believe we were too far out of balance with the way we approach living today and saving/investing for tomorrow, there was the possibility. I tend to focus pretty intently on a goal and with the success we have had the last few years, it is not out of the realm of possibilities that I could continually adjust the goal up if I don’t keep myself in check. While I want to unequivocally ensure that we have enough money to enjoy our retirement years, I do not want my life to be about how much money I can accrue. At the end of the day, I do recognize that you can’t take it with you.
I believe our new goal is appropriate for the retirement lifestyle we want to lead without taking away from our enjoyment of life today.
And you SavvyReader. Have you found your balance?