Refining My Goals

22 Nov 2018 12:17

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2018 is rolling up to be a nice planning year and never have I had more visibility to where I need to be to meet my goal of retiring at age 60.

The first major event was finally becoming fully invested with all of my rollovers at the end of February 2018. It took just over two years to fully invest but once I did I gained visibility into my forward annual passive dividend and how it will play into my retirement goals. In March I ran the numbers based on current expenses using an inflation rate of 3% and going out 10 years. It looked like I was on track with no issues as long as my annual dividend growth rate was 7.5%. Sounds pretty easy when you factor in dividend growth, dividend reinvestment, and added contributions of new funds. In other words, just stick to the current program and everything will be fine


The second major event occurred by accident when I was trying to determine how much emergency cash I would need during retirement (see blog post This is 3x Worse Than a Market Crash) by analyzing how my portfolio would have done in a crash using the 2009 great recession as a data point and later a supplemental analysis of how my portfolio would perform in a long sideways trading market with high inflation using the 1970’s as a data point. What resulted was that I was off on my original goals and needed not to replace 100% of annual expenses with passive income but it needed to be 115% of annual expenses and I needed at least the equivalent of 9 months of expenses as emergency cash. Note, when I calculated passive income I am using a 20% tax rate so my pre-tax passive income is even greater. This threw me a slight curveball and suddenly it was not as an easy goal as I thought in last March. Now my modified goal requires an annual dividend growth rate of 12.5% and I need to save an additional $2,000 annually in cash for emergency money during retirement. The 12.5% growth rate might be achievable but an additional $2K may be a challenge.


The third major event is I started to track my monthly dividend income in September. At first it was to demonstrate what a lifetime of saving and investing can achieve. Now it will become a tool to monitor my growth rate to stay on the 12.5% growth path. I cannot wait for December’s report as it will show my first quarter of quarter growth (Sept vs. Dec). I have also began setting up tracking for portfolio growth based on dividend increases, DRIP’s, and new contributions which I will start tracking in detail come January 2019. I realize most DGi investors have been tracking their income in this manor all along but the bulk of my wealth used to be tied up in mutual funds via a 401K making visualization of an income stream difficult. But that all changed when I rolled the funds into an IRA so for me it is a a new and improved metric :)

After all of this, I now have refined long term retirement goals for age 60 and annual goals for 12.5% growth & $2K cash. With this I decided to add an interim 3 year goal (by age 53) to have after-tax passive income equivalent to 57% of expenses. Using Google Sheets “Gauge” chart and here is the end product.


Truth be told, planning for long term goals (20+ years) is not an exact science. The further we go out in time and try to predict something the greater chance of miscalculations. I have always planned on retiring at 60 but my financial goal targets for age 60 continuously changed. Now that my long term goal has turned into a mid-term goal (10 years), my ability to plan more precise financial goals is coming into play and getting me excited as I have the possibility to achieve what I have worked long and hard for.

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