The end of each year is the best time for reflection, to see how you’ve done for your health, wealth, and relationships, and what pivoting actions need to be taken in order to be successful for the new year. You are your own free agent, you are the CEO of your own business entity. It is crucial that you review past performance to ensure future performance will guide you to where you want to be.
Where am I at now?
| Item | Value |
| Retirement (Combined) | $160,000 |
| Home Value | $385,000 |
| Savings (Combined) | $82,000 |
| Student Loans | ($60,000) |
| Mortgage (3%) | ($179,000) |
We have a positive net worth of $388,000 after removing the student loans and remaining mortgage. My wife’s student loans will be written off in about 3 more years, so that will help increase net worth by another $60,000.
Monthly Cashflow Statement
| Income (After Retirement/HSA Contributions/Taxes) | $8,000 |
| Expenses | $5,425 |
| Retained Earnings | $2,575 |
We have $2,575 in retained earnings each month. We can use this in other investment opportunities:
- I-Bonds
- Prepaying bills using discounted virtual visa gift cards from giftcards.com (There are promo codes for 5-10% off throughout the year)
- Open up credit cards for sign up bonuses and prepay bills. (Sign up bonuses 10-20% of spend requirements)
- Consider investment in real estate or a business
- Backdoor Roth Conversion with employer
- 529 plan to cover college education for kids
Current Retirement Contributions
| My Roth401k Contributions (19%) | $22,500 |
| Employer 401K contributions (8%) | $9,120 |
| Wife Roth 403B contributions (10%) | $7,000 |
| Total | $38,620 |
My wife should be getting another $25K+ over her contract raises over the course of her career as a school social worker. We will be utilizing that money to increase her 403B contributions eventually until maxed out and also maxing out her HSA contributions each year.
Investment Growth
| Total 5% Growth | Total 8% Growth | |
| No more investment | $0.4M | $0.544M |
| 20 years | $1.498M | $1.837M |
| 30 years | $2.456M | $3.139M |
Over the past 20 years (2002 to 2022), the average annualized return on the S&P 500 is 8.19%. Your money should be doubling every 12.5 years based on that average rate of return. Some say that with the number of people retiring in the future, that the 8% growth is not sustainable. Due to that I’ve included numbers for both a 5% growth rate and an 8% growth rate.
Retirement Requirements
| Item | 3% Withdrawal Requirement | 4% Withdrawal Requirement |
| Current Expenses $65,000 | $2.167M | $1.625M |
| Less Mortgage $52,400 | $1.747M | $1.310M |
| Less Pension $22,400 | $0.746M | $0.560M |
The trinity study showed that in most cases, a 4% withdrawal rate would support retirement. With the higher amount of inflation, many are using a 3% withdrawal rate versus a 4% withdrawal rate to be safe.
If the pension is stable, we should have more than enough money to retire in 20 years.
If the pension is not stable, then we may have enough money to retire in 20 years, but 30 years would be safe.
Table below would show the calculations assuming a 30 year towards retirement with an annualized return of both 5% and 8%.
Accomplishments for 2022
- Obtained a new job in a different company with a 21% increase base pay.
- Income increased from $90,000 to $114,000 (Delta $24,000)
- Target Bonus Increase from 12% to 13% (Delta $4,000)
- Payout of bonus from new company is higher than peers due to better financials.
- Target Bonus was paid 200% in 2021 versus 160% of next highest competitor
- Signing Bonus $5,000
- Typical 2-3% merit raises planned every year versus none in old role
- Closer to top end of salary for roles/responsibilities/skillsets
- Increase in net worth by $29K
- Current Assets (Cash/Cash Equivalents/Prepaid Bills) increased by ($12K)
- Housing value increase $377K to $386K ($9K)
- Mortgage decrease from $187K to $180K ($7K)
- My 401K increase from $148K to $149K ($1K)
- S&P is down 19%, increase is simply from contributions from myself and employer
- No debt other than mortgage @ 3% and wife’s student loans
Commentary
Changing companies and getting more towards top end of pay of roles and responsibilities was huge for career and finances. This allowed the following strategies for 2022
- Significant increases in 401k contributions versus contributing 10%.
- Max out $10K I-Bond 2022 contribution to utilize as long-term emergency fund
- Purchase discounted virtual visa giftcards from giftcards.com to prepay bills at a 5-10% discount
- $600 in credit card sign up bonuses (3 cards)
The dog we adopted in December 2021, did end up having more of an impact on budget that previously forecasted or about $3,600 a year.
- Food/treats $100/month
- Heart medication $100/month
- Vet appointments/testing $100/month
No other significant lifestyle creep or costs from previous years. Meal prepping and eating out less at expensive restaurants would be next opportunity to attack. Car costs/maintenance will be increasing as I will be working from the office 3x a week versus remote.
Strategies for 2023
- Max out Roth 401k contribution 2023
- Using discounted visa gift cards
- Investigate prepaying property taxes
- Investigate prepaying association fees
- Investigate ability to prepay mortgage payments
- Prepaying federal taxes thru pay1040.com, payusatax.com and acipayments.com for 6 total payments each quarter
- Contribute another $10K in I-Bonds and possibly more with tax refunds
- Investigate manufactured spend using Amex Serve and Bluebird
- Learn skills that are expensive to hire out
- Utilize Bank Account Sign Up Bonuses that can be repeated every 1-2 years
- About $1K in taxable income each year
- Build skillsets to maintain career
- Build skillsets to start a side business/blog/Youtube channel