These are the kind of updates that determine if we’re on-track to retire at 62 years old. You can’t sugarcoat the results … retirement doesn’t care. You either have the assets (and income) needed to retire or you don’t.
With 5 1/2 years until retirement, falling behind the forecasted goals has consequences. If that happens, we’ve either got to get better returns or contribute more (if that’s possible). Each has consequences. Worse yet, I may have to delay retirement past 62. And for me, that is the ultimate consequence.
Getting better returns might mean I need to take more risk. I’ve already forecasted very conservative expected returns – only 3.5% in my taxable account. If we can’t make 3.5% on average then that’s trouble with a capital “T.”
And contributing more to our accounts is going to be tough. We are already squeezing so much out of my paycheck … it’s just hard to imagine a higher contribution. In fact, when I look at our 2020 contribution numbers it seems difficult to achieve. But, where there’s a will there’s a way. If necessary, I’m sure we could find a few cents hiding somewhere.
2019 Results
Remember, my goal is to retire at 62 with $1.3M in portfolio assets. We finished the year with $526,342 in portfolio assets. The 3 asset buckets are:
- Standard 401k – Since I’m considered a highly compensated person at work, I’m only allowed to contribute 6% of my pay with another 3% funded by my company. I also contribute the maximum for the catch-up contributions since I’m over 50.
- 2019 Contributions: $26,887
- Results: We forecasted $340,019 for 2019 and achieved just over $343,000.
- Non-Qualified 401k – I’m allowed to contribute up to 9% of my compensation to a taxed deferred account. At this point, I don’t feel I’ll contribute any more to the account since it’s really a “bond” to my current company. Though it’s a conservative company, I don’t want any more eggs in this basket. We should have close to $150,000 in the account by the time I retire, which will pay about $35k per year for 5 years.
- 2019 Contributions: $0
- Results: We achieved the goal of $105,541 in the account.
- Taxable Account – Stocks and cash in a Vanguard brokerage account. We started this account from basically zero, so we have a long way to go.
- 2019 Contributions: $41,850
- Results: We forecasted $66,179 in the account and achieved $77,037 by years-end.
In 2019, we finished $15,269 over our forecasted goal of $511,738. Most of this growth came from us growing our taxable account – mainly with dividend stocks. At the beginning of the year, the taxable account was $21,997 but we finished with about $77,037 in the account (nearly $11,000 over the $66,179 goal).
Taxable Account – 2019 Buys
In 2019, my taxable account increased $55,000 ($22k to $77k) in value. The most important part of 2019 was that I’m convinced of the process to create wealth and retirement income.
2018 was used to develop my process and clean-up my taxable account of crappy stocks. I also purchased AT&T and it was my first major dividend ($150 in November 2018), which was a fantastic felling and solidified my intentionality.
2019 was the first year I started to significantly purchase stocks from my Master Stock List. These are stocks that I’ll likely hold for decades and I’m reinvesting dividends for each of them at the moment. In addition to my 2018 AT&T purchase, 2019 stock purchases into my taxable account were:
- CVS Healthcare (CVS)
- Exxon Mobil (XOM)
- Royal Dutch Shell (RDS-B)
- Philip Morris International (PM)
- Molson Coors Brewing (TAP)
- Coca-Cola (KO)
- Vanguard High Yield ETF (VYM)
The commonality in all these stocks? They experienced down moments in 2019, they are profitable and solid companies, and I purchased them at decent prices. And this brings me to 2020.
2020 Expectations
I’m $15,269 above 2019 forecast, which makes it easier to achieve my 2020 goals. But that doesn’t assure anything. 2019 provided great stock market returns and who knows what happens in 2020. Meeting our contribution goals will be difficult too. Sometimes it feels like we are trying to squeeze too much out of my paycheck but we know the end goal (retirement in 5 1/2 years) is a righteous quest.
With 2019 behind us, we are still on track to retire in 5 1/2 years! We are cautiously optimistic.
I’m maxing out my 401k so that forecast is fairly solid assuming I meet my compensation forecast. My income is comprised of base salary plus two bonuses. Its hard to forecast company bonuses so we’ll have to wait and see how that plays out. And I’m not contributing any more to my NQ 401k (at least in the near term) so most of our portfolio growth will come from the taxable account.
The stock market was fantastic in 2019 and I’m not predicting a repeat performance. But we did finish 16%+ above our taxable account forecast in 2019 so I’m pretty sure we’ll be good unless the market just crashes (always possible) or we aren’t able to make out contribution goals.
But if the market does get rocked, I’ll have some cash on the sidelines and we’ll be ready to take advantage of lower stock prices. I’ve got about 10 stocks currently on my watch list. I’m always ready to pounce if some great company has a bad quarter or has some stupid headline risk.
Summary
In 2019, the taxable account grew due in multiple ways: (1) contributions ($41,850) from bonuses and bi-weekly contributions from each paycheck (which really added up), (3) dividends received ($2,252), and (4) capital appreciation ($10,942). It took every one of these mechanisms to put me over forecast and in a good position for 2020.
We are very happy with our 2019 results compared to our forecast and are on our way (so far) to achieving $1.3M in retirement assets. We have a long way to go (5 1/2 years), several competitors for our money (i.e. expenses), and we hope the stock market plays it’s part. Something tells me a curve ball will come our way in this process but we’ll do our best to deal with it.
More importantly than anything, we have a plan and we feel even more confident that we are on the right path. Buying solid dividend companies in our taxable account, funding my 401(k), and eliminating our debts is a challenge, especially when doing it all simultaneously. But that’s what we have to do to retire in 5 1/2 years.
If I had started investing earlier in my life or not made so many stupid mistakes, then my road would likely have fewer obstacles. But our plan to achieve $1.3M in retirement assets, have no debts, plus a pension and social security by age 62 is alive and well heading into 2020. What more can I ask for?
I wish everyone a happy 2020 and hope everyone achieves their personal and financial goals.
Thanks for reading!
Mr. TLR