Are We on Track to Retire Early?
A Deep Dive into Our Retirement Savings and Goals
Introduction
At the cusp of our mid-50s, my wife and I are eagerly looking forward to the next chapter of our lives: retirement. With meticulous planning and a dedicated savings strategy, we have accumulated a substantial investment portfolio of $2.4 million. But the burning question remains: are we on track to achieve our early retirement dream?
Assessing Our Retirement Savings
To evaluate our financial readiness, we meticulously examined our current savings and retirement accounts. Our 401(k)s have grown steadily over the years, with combined contributions exceeding $1.2 million. Additionally, we have invested $600,000 in a diversified mix of stocks and bonds within our IRAs.
Beyond our retirement accounts, we have accumulated $600,000 in cash savings and $100,000 in real estate investments. These assets provide us with financial flexibility and cushion against unexpected expenses.
Estimating Retirement Expenses
Determining our anticipated retirement expenses is crucial for assessing our financial needs. We meticulously analyzed our current living expenses and adjusted for inflation, healthcare costs, and potential lifestyle changes.
Our estimated annual retirement expenses amount to $120,000. This includes essential expenses such as housing, healthcare, and transportation, as well as discretionary expenses such as travel and entertainment.
Retirement Income Sources
To cover our retirement expenses, we anticipate drawing income from various sources. Our primary income source will be our retirement savings, which we plan to withdraw from gradually using a conservative withdrawal rate of 3.5%.
Additionally, we expect to receive Social Security benefits, which we estimate will supplement our income by $30,000 annually. We have also considered generating passive income through rental properties and potential part-time work during early retirement.
Time Horizon and Inflation
Our target retirement age is 55, giving us approximately 10 years to prepare financially. We recognize the impact of inflation on our savings and expenses, and we have factored in an average inflation rate of 2.5% into our calculations.
Conclusion
Based on our meticulous analysis, we are confident that we are on track to retire early at the age of 55. Our diversified investment portfolio, coupled with our estimated income sources, aligns with our projected retirement expenses. While our financial plan is subject to market fluctuations and unexpected events, we are confident in our ability to adapt and make adjustments as needed. We are excited to embrace the next chapter of our lives, knowing that we have laid the financial foundation for a comfortable and fulfilling early retirement.
