tallguy
Senior Associate
Joined: Apr 2, 2011 19:21:59 GMT -5
Posts: 14,137
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Post by tallguy on Mar 5, 2021 19:45:21 GMT -5
I would go the other way. You HAVE $4300 per month. You may be diverting $1000 of it with the intent of not using it until a later date, but you still have $4300. It is a choice, not a requirement or obligation. Basically an accounting manuever with no real effect. If it lets you see things more clearly to handle it this way, then fine. Up to you, but there is no real difference between that and just holding the money all in one account with the same intent not to spend it. It does muddy things up though to say that money you are diverting to other needs should not be counted when comparing to someone paying for those same needs who does it all from one amount. Apples to oranges. I think it depends on how resolute you are in banking that money. Your method would say someone has $5000 a month even though out of that $5000 he/she is putting x into retirement and has to pay x for a flex account or even a HSA. It doesn't feel like $5000, though, since those are requirements to that poster. These come off the top for me so they aren't discretionary. I feel as if I have $3300 a month to live on. If it muddies your waters, it helps mine. Apples to oranges works for me. Doesn't matter to me. I'm not in those waters. The comparison was with and by another poster, who presumably still has to cover or account for those same expenses out of just the one pot of money. That is where the comparison has to be. Whatever mental tricks you use for yourself don't matter to anyone but you. If you compare or are compared with another poster, however, the comparison has to be based on the same set of facts. That's all. I would not, by the way, include such things as pretax contributions to a 401k, for example. Making that choice makes it a requirement, since you then don't receive that money in the first place.
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phil5185
Junior Associate
Joined: Dec 26, 2010 15:45:49 GMT -5
Posts: 6,409
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Post by phil5185 on Mar 5, 2021 19:50:25 GMT -5
Once EF is where I want it, I will add extra to principle. Two comments - (1) I would never prepay 2.875% long-term money. Retain the use of that money and use it to build wealth. (2) I would not keep $25k of 'dead' money in an EF, $10k is plenty. Remember, in a real emergency, the other $200k is also available, it is just harder to get to.
The investments that you have selected typically have a long-term return of over 10%/yr - so you are likely to exceed your projected 7%. Retirement at age 62 should be easily met.
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Lizard Queen
Senior Associate
103/2024
Joined: Jan 17, 2011 22:19:13 GMT -5
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Post by Lizard Queen on Mar 6, 2021 11:42:35 GMT -5
I agree with Phil. All of it.
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giramomma
Distinguished Associate
Joined: Feb 3, 2011 11:25:27 GMT -5
Posts: 21,293
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Post by giramomma on Mar 7, 2021 16:14:23 GMT -5
Is your house basically new?<br>
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beccazan
Initiate Member
Joined: Nov 12, 2015 15:19:34 GMT -5
Posts: 89
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Post by beccazan on Mar 9, 2021 15:00:15 GMT -5
The $1500 I estimate I will need per month does include utilities. Hoping the EF can handle any appliance replacement and other household expenses.Thank you for the reminder to save property and school taxes once house is paid off. since I was already using pension for mortgage, i will be able to use it for taxes also. I have been researching options to switch from accumulation to withdrawal. It will be a little scary to take that leap but I am SO ready for it! How will you refill the EF after you are 62 (if you use it to buy a car at 63? and then need a roof at 64?) Are you figuring these expenses into the "total amount you need in your retirement accounts"? if don't have a monthly line item for them in the your spending plan? That's what I'm going at... You'll need some part of the income from your retirement money to cover those kinds of big expenses and pulling 20K (for your year expenses - and then another 10K for the once in a while house or car expense might mess with your retirement numbers...) . I'm not sure how to write what I'm talking about... I think I understand what you mean. I figure that the mortgage will be just about paid off when I retire so I can stop adding extra to the principle to replenish EF if need be. Then once mortgage is paid off, I will continue to save for taxes but will have about $500/month I can add to EF to account for any unforseen expenses like appliance replacement, major home repairs, etc.
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beccazan
Initiate Member
Joined: Nov 12, 2015 15:19:34 GMT -5
Posts: 89
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Post by beccazan on Mar 9, 2021 15:04:13 GMT -5
Once EF is where I want it, I will add extra to principle. Two comments - (1) I would never prepay 2.875% long-term money. Retain the use of that money and use it to build wealth. (2) I would not keep $25k of 'dead' money in an EF, $10k is plenty. Remember, in a real emergency, the other $200k is also available, it is just harder to get to.
The investments that you have selected typically have a long-term return of over 10%/yr - so you are likely to exceed your projected 7%. Retirement at age 62 should be easily met.
I currently have $12K in HYSA which based on my monthly expenses is about 8 months worth. If I don't continue to add to the EF and don't pre-pay mortgage, what do you suggest I do with monthly excess? I thought it was recommended to have little to no debt when you retire which was my thinking behind paying down mortgage. Thank you for your comments!
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beccazan
Initiate Member
Joined: Nov 12, 2015 15:19:34 GMT -5
Posts: 89
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Post by beccazan on Mar 9, 2021 15:05:04 GMT -5
Is your house basically new? Kind of. I bought the property and had a modular home built on it in 2007.
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Post by minnesotapaintlady on Mar 9, 2021 15:09:27 GMT -5
Once EF is where I want it, I will add extra to principle. Two comments - (1) I would never prepay 2.875% long-term money. Retain the use of that money and use it to build wealth. (2) I would not keep $25k of 'dead' money in an EF, $10k is plenty. Remember, in a real emergency, the other $200k is also available, it is just harder to get to.
The investments that you have selected typically have a long-term return of over 10%/yr - so you are likely to exceed your projected 7%. Retirement at age 62 should be easily met.
I currently have $12K in HYSA which based on my monthly expenses is about 8 months worth. If I don't continue to add to the EF and don't pre-pay mortgage, what do you suggest I do with monthly excess? I thought it was recommended to have little to no debt when you retire which was my thinking behind paying down mortgage. Thank you for your comments! It's Phil. Every dime you can possibly scrape together including borrowing as much as possible against real estate should go in the S&P 500.
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justme
Senior Associate
Joined: Feb 10, 2012 13:12:47 GMT -5
Posts: 14,618
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Post by justme on Mar 9, 2021 15:14:03 GMT -5
MPL is correct, but another choice is to put the money you'd pay down the mortgage into a taxable brokerage account and let it grow. Then when you retire you can decide whether you want to pay of the mortgage or keep the money invested.
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beccazan
Initiate Member
Joined: Nov 12, 2015 15:19:34 GMT -5
Posts: 89
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Post by beccazan on Mar 9, 2021 15:14:27 GMT -5
Are you planning on this house for your retirement? If so, what is the status of the roof and HVAC, or other expensive repairs? Is it set up such that you can live in it if you need walking aids? Is the outside property easily manageable? What if you can’t maintain your yard, what will that cost? Are you near a place where you can get decent medical care? Does your spouse receive survivor’s benefits, or is the military pension just you? I don't have any plans to move out of the house before retirement. I currently have a neighbor that plows my driveway and mows the yard. I don't have any meticulous landscaping to worry about. It is considered a ranch but there's a garage/basement underneath with access either through front door (up some stone steps) which isn't used very often or up the stairs from the garage. If I become physically incapable of going up/down the stairs, I could either sell it or use LTC insurance to find a CCRC. choice would also depend on if my sister is still renting the basement apartment. I'm aware that these scenarios could happen, but not entirely sure how to prepare for them aside from the LTC insurance I already have. Thank you!
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