For me, this was the deciding factor in how big a priority paying off the 5th wheel loan needs to be.
If I were to retire NOW, I calculate that I could draw $1,456 per month from my nest egg. Here is how that budget would look:
Everything I need, but not much fun. Without the 5th wheel loan payment, I could increase those sinking fund contributions and have more discretionary dollars. In short, my financial situation would be greatly improved.
Plus, I intend to cancel my life insurance policy once the 5th wheel loan is paid in full, freeing up a few dollars there as well. No one depends on my income any longer. However, in the event of my death, I would want SB to be able to have the 5th wheel free and clear. My children are both self-supporting and will inherit my investment and bank accounts.
So, I am happy with this plan. It makes sense to me.
Viewing the 'retirement savings' Category
For me, this was the deciding factor in how big a priority paying off the 5th wheel loan needs to be.
Last week, my final employee match was made to my Simple IRA, in the amount of $1070.00. I plan to roll it into my Roth IRA and pay the tax. It will be nice to have a bit of new money in there.
I booked our cruise on Saturday and paid an $800 deposit. Princess was having a special promotion, which is still going on I think, no gratuities. I hope that doesn't mean the crew forego their share of the gratuity, but rather that Princess pays it. That saves me $675, my mom $270 and SB $135.
The balance is due Oct 24, my late brother's birthday.
Looking at my income tax situation for 2015, I estimate that I will owe $446 to the federal govt and receive a refund of $88 from the state. So, not a bad job estimating withholding.
It is very possible that 2015 is the last year I will be able to file head of household and claim J as a dependent.
In 2015, I had a small amount of income taxed at 25% federal and 8% state. In 2016, it is very possible I will have much more of my income taxed at those rates.
Therefore, in 2016 I will be contributing solely to my tax-deferred accounts and skipping Roth contributions.
After I relocate to Reno, I will no longer be paying state income tax. If I am earning less (which is a distinct possibility), I may not be in the 25% bracket any longer. It will make more sense to continue Roth contributions then; at the very least I will revisit the issue.
My 2015 gross wages should come in at $55,168.95. I aim to contribute 15% of that to retirement accounts, and I do include matching. That means my target is $8,275.35.
By year end, I will have contributed 3.6k to my Simple, 2k to my Roth, and 1k to my traditional. My employer contributed another $1,623.00 to my Simple. Those contributions total $8,223.00, which is $52.35 short. I will contribute another $100 to my traditional by the end of the year and consider this goal met.
Including 2015, I have now contributed a grand total of 19.5k to my Roth. I like to keep track of this number, as Roth IRA contributions can be withdrawn at any time for any reason, no tax or penalty. The rest is earnings and must be left alone until I reach age 59.5. It's shocking how close that time is drawing!
I'm really hoping to break 200k in tax-deferred in 2016. Let's see if Mr. Market cooperates.
I love to browse on realtor.com. I have spotted several condos in Reno which might suit me fine.
Here is one:
This place is in Sparks. Sparks is just east of Reno and the two cities have grown into each other. It is a 2 br. 2 bath with 1088 sq. ft. and has a 1 car garage. The asking price is 95k. If I were to purchase it at 95k with 20% down and took a 15 year mortgage, my PI payments would be $526 (according to the calculator on realtor.com). The HOA dues are another $195. There is still property taxes and insurance to pay. But still, total housing should be under 1k per month, with a big drop when the mortgage is paid in full.
If I can land a job paying at least $15 an hour, something like this should be doable. Not a lot of wiggle room, but worth it I think at my age to be done with the mortgage in 15 years. If I have to stop saving for retirement, the money already saved will continue to grow, and I should still end up in OK shape.
Hopefully, I will be able to earn more than that and will continue to save. I am trying to be realistic. I am approaching age 50 and will not have any business contacts in the area. I have to be prepared for the possibility of a significantly lower income.
At this point, I am planning to move with BF. If we are sharing living space, we will also share expenses. That will provide a bit of budgetary wiggle room too. However, I only want a mortgage I can afford completely on my own.
In other news, tax season is mercifully over. Between my overtime and my bonus, I cleared an extra 4k. I have sent off 1k to my traditional IRA, $500 extra to my car loan, $300 extra to emergency fund, and $200 extra to Roth. The other 2k I needed for expenses. J's car got new brakes and a major tune up (120k miles), and I paid the IRS $987. Additionally, my annual matching of $1632 was sent off to my Simple IRA. Looking forward to seeing those account balances rise a bit on 4/30. Of course, will just have to see if Mr. Market cooperates.
Mrs. M180 and I are planning a 3 day weekend in Seattle. We were able to get airfare for $156 each. We will stay one night with my childhood friend (who stayed with me last September), and two nights on Vashon Island visiting my birth mother, her sister, and the sister's new husband. On the final day, we are hoping to spend some time with my niece who lives in Tacoma. She is only 5 years younger than me, so is actually more like my baby sister.
Here's another overdue entry, nest egg projections based on my end-of-the-year balances.
I take my tax-deferred balance, then compound it at different interest rates until I am age 65, and see how it turns out. If I assume 6k per year of new money, it's OK. If I work until age 67, my Social Security full retirement age, it gets even better.
I'm really hoping to hit 600k, as that will replace about half of my current income. If I do better than 600k, well, I'll just have to find a way to live with that. If I have less than 600k, I will really have to think hard about whether or not I can afford to retire.
And here's the Roth. I intend to use my Roth solely for funding large, irregular expenses. Think new roof or new (to me) car. The idea is to pay for what I need without taking on debt or raiding tax-deferred (thus permanently reducing my monthly income). I had been shooting for 150k. Now that I am nearly 100% certain I want to buy a small condo as my final home, I think 100k will be more than sufficient.
I have been saving 3k annually in my Roth, but for this projection I used 2k for my "current savings rate". Beginning in 2015, that is my contribution plan.
So all in all, I feel that I am in OK shape. Not fantabulous, but OK.
I have decided to sell my Reits, Tips, and Small Value and stick with the three fund portfolio.
As I have shared before, my goals for my nest egg are 600k in tax-deferred and 150k in my Roth.
At the end of the year, I like to take my balance and project what I may have at retirement, assuming different rates of return. On the left side are estimates showing how my portfolio may grow with no new money. On the right side are estimates showing how my portfolio may grow if I continue contributing at my current rate.
There are no guarantees of course, but the projections are encouraging. That 9% sure is pretty, but I am more concerned with the 5%.
Looking at my YTD on my paystub from yesterday, and looking ahead on the calendar, I see I am on track to gross $51,102.25 this year. This includes my seasonal OT and tax season bonus. It does not include my Christmas bonus, child support, or my PT job income.
If I want to continue socking away 15% of my gross pay towards retirement, I need to save $7,665.34. By the time the year ends, I will have contributed $2,550 into my Simple IRA and $3,000 into my Roth. I will receive $1,533.07 in matching funds from my employer. That leaves an additional $582.27 still to be coughed up, we can just call it $600.
(I made a 1k contribution to my traditional IRA in February, but that was for 2012).
I believe I can easily contribute $600 from my Christmas bonus, and I believe I will. I will also need to pay for gifts for my kiddos, and hope to make a mortgage chip and stash a bit into savings. We will just have to wait and see how good I have been this year. Perhaps I was more naughty than nice and can only look forward to coal.
I've been daydreaming lately, looking at nice little condos in various locations online. I've been calculating the size of my nest egg under different scenarios. The more I contemplate my situation, the more I think that the biggest obstacle to my dreams is my negative home equity.
I've decided to increase my Simple IRA contributions to $250 per month, which is 3k per year. My employer's contribution will be another 1.5k. Together, that is approximately 9% of my annual gross (my gross including overtime and bonus).
I will continue my automatic monthly Roth contribution of $150 per month (1.8k per year), which is a bit more than 3% of my annual gross.
If I were to continue along at that rate until age 65, and assuming I enjoy 5% annual growth, I would end up with enough to live comfortably (though frugally) in my little condo, even with a small mortgage. If I enjoy a return greater than 5%, the picture only gets brighter.
So for now, that is all I will contribute. When I receive my annual overtime, tax season bonus, and Christmas bonus, none of it will go to retirement savings. Instead, I will focus on cash savings and my mortgage. I want to be in a position where I can sell my house whenever I decide the time seems right (without touching retirement savings). I have a long, long way to go to be in that position. So, wish me luck.
I have also recently decided to trim my cash allowance from $60 per pay period to $20. Too much of that money was being spent grabbing a sandwich or a latte. It wasn't good for my bottom line or my waistline. So, I have gotten back in the habit of keeping lunch foods at work.
I received $1.50 from Hausernet yesterday, and have already turned it into a mortgage chip.
So here is a little thing I like to do at the end of the year. I take my retirement savings and project what they will be when I am 65 and 67. (My SS full-retirement age is 67. If it is possible, I will retire at 65.) I assume different average rates of return and see what I will have if I keep saving at my current rate, and if I stop saving.
Here are the results for my tax-deferred accounts:
And here are the results for my Roth:
What these tell me is that if I continue at my current savings rate and enjoy 7% returns, I will hit my targets of 600k tax-deferred and 150k Roth. If I don't earn 7%, or if I don't keep saving at my current rate, I will fall short.
My current savings rate is 2.4k into my Simple plus 1.4k of company match, and 3k into my Roth.