When you start to get to a point where you think about retirement, it’s only right that you do a deep dive into your current financial portfolio. It’s best to do this while you are still working rather than to review everything post-retirement, only to realize you didn’t account for some expenses.
One way to do this is to follow the same formula as this Redditor with a post in r/ChubbyFIRE. This individual is smartly taking a 10,000-foot view of their entire financial breakdown to see where they stand so they know when they can retire, file for Social Security, and whether or not to make any big financial adjustments ahead of retirement.
Current Financial Status
From this Redditor’s post, we know this individual is married and both he and his spouse are in their mid-50s with one college-age kid graduating this summer. The child may go on to get their master’s, but either way, no education loans need to be considered so a 529 account isn’t a concern.
The original poster hasn’t worked for a few years, and his wife, who currently makes around $200,000 annually or $12,000 monthly after taxes, is considering going part-time in the next few months. They both have mostly good health, and while the Redditor has access to the VA, they must go on private insurance once the wife leaves their work.
Out of their $4.8 million portfolio, he offers a pretty expansive breakdown highlighting $100,000 in cash, $1 million in an individual stock account, and $2 million in a 401(k). His wife has an additional $1.7 million in a 401(k), but the real kicker here is all about the dividends. Based on their current portfolio, they are making a combined $160,000 in dividends every year, and while some of the stocks are not big growers, they have kept hold of their shares because of the dividends.
The family has a pretty reasonable home loan with only $300,000 left on a $2 million home, which amounts to around $3,200 per month left over. They also have three more years of car payments for around $700 per month, and that’s about it for debts, as they pay off every credit card monthly.
Lastly, he plans on taking Social Security at around 62, while his wife wants to wait until 65 so she can earn a little more. They both expect to hit the max primary insurance amount for this age, which would be around $2,831 per month for him and $4,018 monthly for the wife at 65, based on 2025 benefits per the Social Security Administration.
What Are They Missing?
Even after an exhaustive breakdown of their finances, the original poster still questions what they might be missing. If you ignore Social Security for the moment and any potential equity that could be reinvested from the home if he decides to downsize, there is still $4.88 million to utilize for retirement.
At a safe withdrawal rate of 4%, this is around $195,000 in pre-tax income, which sounds like it would be more than enough for the couple. Of course, this also assumes zero growth in the next few years, which isn’t likely the case, so there is no reason to believe this number won’t grow a little more, potentially passing the $5 million mark or even beyond that.
Altogether, you have the $195,000 as a safe withdrawal rate plus the dividend earnings of $160,000, which means a total of $355,000 per year to live on. If we could give any advice to this Redditor, it’s that not only do they have enough money to live on after taxes, but they likely have enough money to reinvest so the principal continues to grow while retired.
This gets more true when you consider that he will earn approximately $33,972 in Social Security annually while his wife brings in $48,216, for a combined $82,188. This ultimately means that in the next 10 years or so, the family will have more than enough money to live on and enjoy things like traveling and maybe even a splurge or two.
Have A Great Retirement
The bottom line is that this Redditor is in a great position to retire, and even if the dividend stocks aren’t significantly growing their principal, they are worth hanging on to for the dividends alone. Dividends are a foolproof passive income strategy, but they are cash flow generators, so holding them helps this Redditor retire in a far better financial position than expected.
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