Case Study: How Two 30-Somethings Can Create $200k+/Year Tax-Free in Retirement

Keep up to date with the latest news

Case Study: How Two 30-Somethings Can Create $200k+/Year Tax-Free in Retirement

by | Read full article at

I talk to a lot of 30-somethings, and most of ’em have a few things in common. They’re making nice money at work. They’re married, and their spouse also gets paid pretty well. They bought their first home. They both give generously to their respective work-related 401k plans. They live below their means. They’re savers. They’ve seen in real-time how their parents’ retirement or looming retirement isn’t anywhere near what was anticipated.

Let’s take a composite couple from my own files in this age group and financial status, see where they are today and where they might be at around 60 years old. Again, I’m purposefully ensuring this composite couple represents who I work with much of the time—speaking of that specific age group for this post—not some amazing couple making half a million a year, with a million each already in their 401k accounts. For the record, the age range of 90% of my clientele is roughly 25-57 years old. Likely the biggest group’s members are in their 40s.

Today’s Reality: A Financial Snapshot

Doyle and Marian (how are those for old school names?) are 37 and 35 years old. He works as an engineer in the private sector whose contracts are largely with the military, earning around $120,000 annually plus small bonuses. She’s a buyer’s agent for a local stud real estate agent’s team. The team leader allows her to work very flexible hours and days due to having a couple kids, 5 and 9.

She also has a Masters Degree in Computer Science, an industry she had to leave due to the hours involved. After getting her feet wet in real estate, she averages about 1.5 sales monthly, with an average sales price of about $350,000 or so. The last three years, she’s averaged just over $75,000 in pretax income. Working in an office with over 350 agents, she also started a small company that troubleshoots and fixes computers for agents, not to mention keeping her team leader’s computers healthy and well maintained for free. So far this year, she’s made almost $20,000 doing that. Let’s assume that results in a computer income of around $30,000 yearly.

  • Total annual pretax income: $120,000 + $5,000 bonus + $75,000 + $30,000 = $230,000.
  • After-tax income: $160,000 more or less.
  • Total cash required yearly to live, including everything we can imagine: $80,000.
  • Money available for retirement investing: $50,000+ per year.
  • Money they’ve managed to save in the last few years due to their wise budgeting: $130,000

Doyle’s been maxing out on his firm’s 401k plan, at around $18,000 a year. His current balance is $150k or so. He’s put an end to that recently due to his well founded anticipation of an overdue downturn and the fact he can do far better with less risk elsewhere. Less invested cash than the after tax version of that will be redirected to an EIUL, which will be structured to begin paying out when Marian hits 60 and will continue paying ’til she’s 90.

by  | Read full article at