We typically suggest 6-18 months, so this is on the low-end of that range. However, that 6-18 month suggested range is generic and should be tailored to the 90th percentile job-search time for your industry, experience, education, and current salary as an EF is primarily to cover expenses if you’re unexpectedly terminated while in the accumulation phase. Subsequently, 6 months might be enough, but it might not depending on how long it’d take to find a replacement job at comparable salary.
goodheart03 wrote: Mon Oct 06, 2025 10:00 am
Debt: Mortgage (about 400K at 2.375%), Car (about 20K at 1.9%)
low-rate Mortgage debt is fine as your home is an appreciating asset. Any non-zero interest rate for a car is typically sub-optimal as that’s a depreciating asset. Try to put any extra payment bandwidth you have towards eliminating the car note. Then create a savings allocation line in your budget that is at least as big as the former car-loan payment, so you can buy your next car in cash.
goodheart03 wrote: Mon Oct 06, 2025 10:00 am
Desired Asset allocation: 75% stocks / 25% bondsDesired International allocation: 20% of stocks
Total Portfolio size: 900K
2. I should have spread my allocations (Equities vs Bonds) across my TSP/ 401K, but is currently spread within each account. What is the best way to fix this, when I am ready for re-balancing next time?
Let’s look at reallocating your portfolio first, then we’ll look at the “Can I retire @ 62” question.
Your Current layout is very close to meeting your desired allocations, but it’s a bit cluttered at 15 holdings and the cash in Taxable is not tax-friendly at the 24% Fed (nor did your AA call for a cash-pile such as 75/23/2).
The Proposed layout only uses S&P-500 for US stock in the tax-advantaged accounts, which lets you then use Schwab Total US Stock for the Taxable account; getting bonds/cash out of Taxable is in adherence with Tax-Efficient Fund Placement and not using both S&P-500 and Schwab Total US Stock in different tax-advantaged accounts clears the way to us Total US in Taxable while avoiding Wash Sales. I did swap your 401k from using Van Developed Markets to Van Total Int’l Stock, but if VTIAX is not offered in your plan or you just prefer VTMNX, that’s fine to keep as is for int’l stock exposure. I also left your 20% of bonds stake in TIPS. Vanguard’s TDFs add TIPS around “nominal” age 60, but I don’t think you need them until late-retirement (and in at age 75-85 I’d probably suggest a ladder of individual TIPS or buying an annuity like SPIA/MYGA). This layout exactly meets your desired AA of 75/25 with 20% of stocks in int’l and reduces your holdings from 15 down to 9. “Simplicity is the master key to financial success.” — John C. Bogle
A template spreadsheet (not your data) to help with asset allocation assessment and rebalance planning is linked below. Make a copy in your local GoogleSheets space to edit (or download to your local machine if you have Excel). It should only take about 10-20 minutes once a year to update your balances and plan a shuffle among funds if any deltas are off by more than ±5% (or whatever your personal rebalance threshold is).
Asset Allocation Sheet
I see your total contributions (including matching) as $63.6K/yr. I’ll note that if you have the bandwidth, you could put an extra $8K into a Spousal Roth, even if she doesn’t earn any taxable income. If he’s 53 and works to 62, contributing $63.6K/yr, and we assume those contributions keep pace with inflation due to raises of +3%/yr, then the range of projected balances looks something like this by percentile likelihood:
End-Bal Percentile
$1,889.7K 10th
$2,226.8K 20th
$3,045.9K 50th
$4,086.7K 80th
$4,797.9K 90th
That 10th percentile balance represents a bad sequence of returns, so if your plan stands up to that you’re probably good to go. She’s only going to be 57 when you start tapping the portfolio and if she lives to 95 that’s a 38y withdrawal period, so the 4% rule for 30y is adjusted down to 3.5% initial draw in year-1 to make it last for about 40 years. 3.5% of ~$1,9M is $66K, which in today’s dollars is $50.7K/yr (adjusted for inflation each subsequent year after the initial draw).
The result above is from my Accumulation Monte Carlo shown in the image immediately below.
You’re going to draw higher than than $50.7K in year-1 (around $61K), for the next 5y until until SocSec kicks in (assuming the pension is available at his age 62). I’m going to be conservative and assume a 20% cut to SocSec in 2034[1]. So your pensions & benefits projected out to her age 62 (his age 67) assuming for +3%/yr inflation probably look like this:
Other Income:
Pension @ His 62: $53.4K x (1.03)^9 = $69.7K
His SocSec @ His 67: $45.4K x 80% x (1.03)^14 = $47.4K
Her SocSec @ Her 62: $22.7K x 80% x (1.03)^14 = $23.7K
Non-Portfolio Total @ His 67 = $163.2K (assumes pension increases by +3%/yr for inflation)
Expenses:
$100K x (1.03)^9 = $130.5K
Since your non-portfolio income exceeds your inflation-adjusted expenses, your portfolio draw is entirely discretionary once you reach age 67. You can choose to spend it or not, but to avoid issues with RMDs or tax-unfriendly legacy gift to heirs, I would consider Trad->Roth Conversions with your annual withdrawal amount, that could be per the VPW Table. Alternatively, you could simply withdraw from Trad and spend some, then put the rest into stocks in a Taxable account. Roth is the most tax-friendly estate gift to your kids (tax-free!), followed by Taxable (gets a step-up in basis, but could be delayed in probate), and Trad is the worst (could potentially bump up your kids’ tax-bracket as they have to empty it in 10y).
One thing I will suggest, if you haven’t already done this, is to scrub your estimated $100k expenses. Start with @KlangFool’s formula to estimate your current expenses: Annual Expenses = Gross Income – Taxes (1040, Line 24) – Annual Savings. Then adjust that by what will change in retirement (retirement savings goes away, but savings for home repair/upgrade, new cars, gifts to children remain; principle & interest eventually go away when mortgage is paid off, but property tax & hazard insurance remain; commuting costs might go down but vacation spending might go up; term life insurance payments might go away but costs for long-term care in late retirement might go up).
The beauty of Klang’s formula is that if you take out taxes and known savings you are spending all the rest of it. We’ve seen posters that had a detailed budget in a spreadsheet or phone app and were surprised to see Klang’s formula show them as much as $50K of unaccounted spending!
[1] – Social Security Benefits Cut in 2034
The SSA is very transparent in identifying the imbalance of OASDI tax revenues vs payouts, since they’ve said that they will only be able to pay 81% of originally estimated benefits in 2034 and thereafter (see Benefit Cut One Year Sooner and The Future Financial Status of the Social Security Program at ssa.gov).
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Data and Models I use for Monte Carlo:
NYU Data Set 1928-2017 with Model Fits
Accumulation Monte Carlo <- Image above
You’ll need a MS Excel license; download to your local machine and enable macros (required for the 1,000 random trials and results aggregation).
I’m using my own model as I like to know what’s under the hood, but there are other models I like that have public facing website interfaces:
TPAW Planner (probably most comprehensive, supports ABW), <- Try this one!
Portfolio Visualizer’s Monte Carlo (also their Financial Goals model is nice),
Engaging Data: Rich, Broke, or Dead, (uses historical returns in a cycle for your retirement duration), and
FireCalc (also historical data, but lots more inputs to tailor to your situation).
Paid models sometimes cited here include Boldin (formerly NewRetirement) and Pralana Gold as well as many others (just citing these not recommending for or against on any of these).
“All models are wrong, some are useful.” – George E. P. Box
