With $3 million saved and a paid-off house, I plan to retire in my late-50s – will my strategy hold up?

It takes many years to save up enough money for retirement, and one person finds himself closing in on the finish line. He’s a 54-year-old husband with a wife and two teenagers. He’s accumulated a $3.4 million nest egg, which includes 401(k)s, IRAs, and a brokerage account. This net worth doesn’t even include the paid-off house. 

The family currently spends $200k per year but aims to get it down to $120k in annual expenses by 2028. They have saved $425k for their children’s college education, so that’s covered. He plans to retire in 2029. By that time, he will be 58 years old. The wife will continue to work until 2032, when she will be 58 years old.

The couple will continue to save money in the meantime and is seeking advice as they get closer to the finish line. These are some of the suggestions from Reddit.

Set A Net Worth Goal

One commenter congratulated the couple on their progress but suggested a net worth goal. Setting goals can inspire you to be more prudent with your finances and end up exceeding your target. Luckily, the husband responded to the post by saying that they have a net worth goal of $5 million.

A $5 million net worth allows for a $500k annual withdrawal if you follow the 4% rule. The hope is that the portfolio grows at a faster rate than 4% per year, making it easier for the couple to live on their nest egg.

This retirement goal is based on when the husband turns 62. While picking up a side hustle and seeking career advancements can get them to the goal sooner, it doesn’t make as much sense for this couple. They have good finances and only have a few more years left with their teenage kids. By the time the kids are adults, they may not spend as much time with their parents. The couple has worked hard to put themselves in this position and has a clear path to the finish line. It may not make sense to be aggressive with side hustles and other income streams.

Reduce Expenses Now

The husband acknowledged that it won’t be easy to trim the annual expenses from $200k to $120k. It’s difficult to cut expenses when you have dependents in your household, but the children will be adults by the time the couple retires. 

However, the couple may want to experiment with reducing expenses now. While they won’t get down from $200k to $120k in one year, it’s worth seeking ways to save $5k to $10k this year. Moving down from $200k in annual expenses to $190k in annual expenses isn’t a monumental leap. It’s only a 5% reduction. However, lowering expenses now will make it easier in the future. Furthermore, lower costs will push them further along the journey to their net worth goal.

List Every Expense Item

The couple has put together a solid financial foundation and should be ready to retire by the time they both turn 58. It just comes down to trimming expenses now so they don’t slow you down. One Redditor asked if the couple has accounted for where the $200k goes each year. The husband responded by saying that property taxes come to $12k annually, and utilities cost another $12k.

That brings it down to $176k per year on other expenses. The couple just started mapping out their expenditures across multiple categories and is discovering opportunities to improve. Since the couple is just starting this process, they may find it easy to cut down more than $10k from their annual expenses. Any improvements will make it easier for them to achieve their financial goals, but lower expenses will also allow the nest egg to stretch further when the couple retires.

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