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  • How much do we really need for retirement?

    Hi WCI community! My wife is finishing fellowship and I am a newly minted attending. We are aiming for FIRE in the next 10-15 years and wanted to see how much to save for this. Traditional retirement calculators don't paint a very optimistic picture, and so we are hoping for your advice.

    Info about us:

    We are both in very highly compensated specialties. I make around 600K now and we expect my wife to make ~400-500K after she finishes fellowship in 2 years. We are both in our early 30s. No student loan debt for me. Wife has 400K in debt and we are on track for PSLF after 1-2 years of her being an attending.

    We are now making max contributions to our 401Ks and backdoor Roth IRAs and have about ~180K combined in 401K and Roth IRAs. We have just built up an emergency savings fund. Other debt is about 25K at 4% interest, which are not too keen on paying off right now given the lowish interest rate.

    We have maxed this year's Series I bond contribution of 20K. We have $0 in taxable retirement accounts or any other investments. Neither of us have an HSA because the thought of a high deductible insurance plan scares us (although we are both healthy and rarely go to the doctor). Hope to buy a nice-ish house (~6-800K) in next few years.

    The retirement calculators that we are using assume that we will need 50-80% of our current income in retirement, which makes the early retirement plan seem impossible. Our actual expenses are around 10K/month including rent in a VHCOL area (no house yet).

    We are looking to have kids (hopefully two) in the next 1-2 years and save enough for their college and grad school education. Besides the additional costs associated with children and homeownership, we don't expect any further lifestyle inflation but realize the costs of daycare/schooling/etc. may be quite significant.

    With this in mind, how much money do we really need for retirement, and what are the next best steps?

    Do the traditional retirement calculators really apply at very high income levels?
    Last edited by badbunny; 04-24-2022, 12:34 PM. Reason: Added more details about financial goals.

  • #2
    I'd just save aggressively for now and see where you are in 5 years. Without knowing your housing costs and how many kids, what their health is like etc it's pretty hard to give any numbers at this stage. But you'll have a lot more flexibility with a good chunk saved before the house and kids come along.

    Comment


    • #3
      I keep hearing about FIRE and I think the FI part is great but it just doesn't make sense to spend 12 or more years from starting college to practice then RE after another 10 years. But the nice part is if you get to FI you have greater choice about your work and how much time you devote to it. I'm mid 60s and still work. I left clinical practice four years ago but still work part time consulting and outside gig. It's on my terms and I enjoy it. You are making a great income just save a minimum of 20% for retirement and you can probably save even more. Have kids, buy a house, continue to save and invest to at least match the market. You will be fine. Don't lose sight that the journey is everything. Don't work so much that you miss your kids growing up. I currently live on less than half of what I was earning and want for nothing. When you aren't paying a mortgage, stop saving for college and retirement and your tax burden is lower you can live on much less.

      Comment


      • #4
        Yeah, just save as much as you can.

        10-15 years is a long time and a lot can happen. You will never get it right exactly and you will not regret saving too much early in the deal.

        If you really want a number, then I would use 3.3%

        You are correct in assuming that the silly retirement calculator you are looking at that only looks at income is irrelevant.

        What you are asking is: how much will we need in retirement ?

        The answer depends on one simple question: How much do you need each year? (a hard question to answer now when 15 years away but here goes)

        If you use 3.3% (instead of 4%, which I think is too much ) and you save say 5M you could spend 3.3% x 5M = 165k per year.

        So if you have 5,000,000 and only spend 165,000 per year you will likely never ever run out. (a guess, very conservative)

        Too conservative? try 4%: If you spend 4% (0.04 x 5M) you can spend 200k per year and probably never run out. (less conservative)

        Reality is some place in between. Many variables. Being flexible helps.

        What will your spending be in 15 years? A better question: what is it now and how can you save more.

        The bigger that EGG the more you can spend.

        The less you spend the smaller the Egg can be and the earlier you can FIRE.

        My last bit of advice is as follows:

        1. make your work life as fun and rewarding as possible so you can try for the FI part and postpone the RE part

        2. save like crazy (live like a resident) while you are young and give that money time. Time to compound = magic. A dollar saved early is more like 1000 saved later.

        3. Enjoy the small things that don't cost a lot of money.


        What you are asking is about safe withdrawl rate:

        There are pages and pages and pages on this by Big ERN:

        https://earlyretirementnow.com/safe-...l-rate-series/

        Comment


        • #5
          Welcome to the forum
          start with basic plan and work backwards. Since you're just starting it's hard to tell what budgeting truly going to be for typical spend.

          Have to determine the kids and income impact on your two work or nanny/childcare srrangements with that when that happens along with the choice of home and education for them.

          Personal capital is a simple walk through these scenarios to track as the years go.

          Right now. Save save save. Make hay while dink status

          Comment


          • #6
            Originally posted by badbunny View Post
            Hi WCI community! My wife is finishing fellowship and I am a newly minted attending. We are aiming for FIRE in the next 10-15 years and wanted to see how much to save for this. Traditional retirement calculators don't paint a very optimistic picture, and so we are hoping for your advice.

            Info about us:

            We are both in very highly compensated specialties. I make around 600K now and we expect my wife to make ~400-500K after she finishes fellowship in 2 years. We are both in our early 30s. No student loan debt for me. Wife has 400K in debt and we are on track for PSLF after 1-2 years of her being an attending.

            We are now making max contributions to our 401Ks and backdoor Roth IRAs and have about ~180K combined in 401K and Roth IRAs. We have just built up an emergency savings fund. Other debt is about 25K at 4% interest, which are not too keen on paying off right now given the lowish interest rate.

            We have maxed this year's Series I bond contribution of 20K. We have $0 in taxable retirement accounts or any other investments. Neither of us have an HSA because the thought of a high deductible insurance plan scares us (although we are both healthy and rarely go to the doctor). Hope to buy a nice-ish house (~6-800K) in next few years.

            The retirement calculators that we are using assume that we will need 50-80% of our current income in retirement, which makes the early retirement plan seem impossible. Our actual expenses are around 10K/month including rent in a VHCOL area (no house yet).

            We are looking to have kids (hopefully two) in the next 1-2 years and save enough for their college and grad school education. Besides the additional costs associated with children and homeownership, we don't expect any further lifestyle inflation but realize the costs of daycare/schooling/etc. may be quite significant.

            With this in mind, how much money do we really need for retirement, and what are the next best steps?

            Do the traditional retirement calculators really apply at very high income levels?
            For a long retirement, 30-33* expenses. $120k per year so $4 million in today's dollars.

            But you have enormous upcoming child expenses. Daycare, private school, undergrad and grad school. Probably a part time nanny given your busy lives. I think your expenses will be $200k per year for a while.

            Undergrad plus grad school, $1 million in today's dollars for 2 kids.

            Comment


            • #7
              For just starting out it seems a better question is how much should I be saving for retirement?
              No taxable designated for retirement? You aren’t paying yourself first.
              Comp - taxes (~28.7%) - retirement (~20%-30%) = spending.
              Spending includes debt payments and house down payment and everything else.
              https://www.physicianonfire.com/tale-of-4-physicians/
              You are already behind on the retirement. You would have needed a taxable.
              (Employee +employer )/ (Gross + employer) = retirement savings rate.

              The more you save the sooner you are FI.
              In 5 years you will have a better idea what you spend and how you like practicing medicine.
              Plug in your numbers and update if you wish.
              I don’t care what you spend now, I care what the taxes and retirement savings are. You should too.

              Comment


              • #8
                Save as much as you can now, max out your IRAs and try to build up a large taxable account and live life. Worrying about retiring now seems kind of silly considering you just spent your entire life trying to get where you are now, and you really have not even started.

                Comment


                • #9
                  i would argue this is almost impossible to answer.

                  i think what 95% of people are doing here is just trying to save a ton and then sticking a wet finger in the wind at some point.

                  your number will grow and it still won't seem like enough. you'll hit $1M NW and then $2M and then $5M and still probably won't retire.

                  you have to justify high spending but you never have to justify aggressive savings.

                  shove as much in there as you can before you have kids and just see where life takes you.

                  we are not FI and honestly i don't know if i'll RE, but we saved aggressively in our early careers and it has dramatically changed out relationships with work.

                  7-8 years ago it was work as much as we can and hustle, now it's don't pick up extra and try to spend time with young kids, because we can.

                  Comment


                  • #10
                    Originally posted by MPMD View Post
                    i would argue this is almost impossible to answer.

                    i think what 95% of people are doing here is just trying to save a ton and then sticking a wet finger in the wind at some point.

                    your number will grow and it still won't seem like enough. you'll hit $1M NW and then $2M and then $5M and still probably won't retire.

                    you have to justify high spending but you never have to justify aggressive savings.

                    shove as much in there as you can before you have kids and just see where life takes you.

                    we are not FI and honestly i don't know if i'll RE, but we saved aggressively in our early careers and it has dramatically changed out relationships with work.

                    7-8 years ago it was work as much as we can and hustle, now it's don't pick up extra and try to spend time with young kids, because we can.
                    And then spending time with older “kids” and “grand kids” and where you hunt, fish, travel or experiences. Life is a journey, money gives you choices between all good choices. Much easier than “best of bad choices”.

                    Comment


                    • #11
                      Originally posted by badbunny View Post
                      Hope to buy a nice-ish house (~6-800K) in next few years.

                      The retirement calculators that we are using assume that we will need 50-80% of our current income in retirement, which makes the early retirement plan seem impossible. Our actual expenses are around 10K/month including rent in a VHCOL area (no house yet).

                      We are looking to have kids (hopefully two) in the next 1-2 years and save enough for their college and grad school education. Besides the additional costs associated with children and homeownership, we don't expect any further lifestyle inflation but realize the costs of daycare/schooling/etc. may be quite significant.

                      With this in mind, how much money do we really need for retirement, and what are the next best steps?

                      Do the traditional retirement calculators really apply at very high income levels?
                      You are too early in your careers and you don't have a house or the kids, the two biggest expenses.

                      Over the next 10 years your expenses will go up. You income might remain the same. Better to save aggressively now when those two expenses don't reduce your investment %. The long compounding will work in your favor.

                      At around age 50-55 you will have a good idea on your expenses and savings and if you have 25X the projected expense saved at that time, you are set.

                      Comment


                      • #12
                        You have a lot of living to do before talking about retirement. Life throws lots of curveballs. Your worldview and life plan might change in 5 years and then change again five years after that. Now is the time to focus on your careers, starting your family, and putting down some roots. If you are looking for a goal for retirement, think about $10M in the back of your mind, and when you start to close in on that number, there will be opportunity to adjust and fine tune your planning.

                        Comment


                        • #13
                          Originally posted by Kamban View Post

                          You are too early in your careers and you don't have a house or the kids, the two biggest expenses.
                          Over the next 10 years your expenses will go up. You income might remain the same. Better to save aggressively now when those two expenses don't reduce your investment %. The long compounding will work in your favor.
                          At around age 50-55 you will have a good idea on your expenses and savings and if you have 25X the projected expense saved at that time, you are set.
                          Rule of thumb of 25x is another way of using the 4% withdrawal rate. It sounds easy to say you are set. It is tough to accept based on a spreadsheet.
                          With 2 big shovels, you won't have a problem if you just start off right.

                          Comment


                          • #14
                            Making that kind of money definitely opens up the possibility of FIRE but not without sacrifices. You will need to keep expenses low and the market will also need to cooperate. If you really want it you could do it but think hard about what you may have to give up and see if you both are ok with that.

                            I don’t hear this suggestion enough but how about simply aiming to work part-time? It seems all that gets suggested is either giving up work entirely or continuing to work full-time until traditional retirement age. If you guys saved aggressively for 10 years there’s a good chance you could both go to half-time, still make a ton of money AND have plenty of time to spend with kids. You could live a very luxurious life with low stress.

                            To me that’s a pretty awesome financial outcome and one that I wish I could have. Alas I don’t have anywhere near the income you two have so I shall continue to toil.

                            Comment


                            • #15
                              Originally posted by Ghostface Killah View Post
                              Making that kind of money definitely opens up the possibility of FIRE but not without sacrifices. You will need to keep expenses low and the market will also need to cooperate. If you really want it you could do it but think hard about what you may have to give up and see if you both are ok with that.

                              I don’t hear this suggestion enough but how about simply aiming to work part-time? It seems all that gets suggested is either giving up work entirely or continuing to work full-time until traditional retirement age. If you guys saved aggressively for 10 years there’s a good chance you could both go to half-time, still make a ton of money AND have plenty of time to spend with kids. You could live a very luxurious life with low stress.

                              To me that’s a pretty awesome financial outcome and one that I wish I could have. Alas I don’t have anywhere near the income you two have so I shall continue to toil.
                              with that kind of income there isn't much sacrificing that needs to happen to accumulate a huge amount of money. if you save and invest half you end up wealthy with minimal "sacrifice".

                              Comment

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