Upgrade: I’m 33, and my fiancée and I plan to save 20% of our $195,000-a-year income — can we afford to retire before we turn 60?

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It takes a pile of money to retire in New York City.

Dear Catey,

I’m 33, have no debt and a net worth of $700,000, with $600,000 of that invested (95% in stocks and 5% in bonds), $50,000 in an emergency fund and $50,000 sitting in a bank account so I can invest it later this year if we get a selloff. My fiancée is 30, also has no debt and has a family trust worth $100,000 that’s also invested.

I earn $130,000 a year and am eligible for a $30,000 a year bonus; she earns $65,000 a year and is eligible for a $10,000 bonus. We plan to save 20% of our base salaries and half (post-tax) of any bonuses we get.

Our question is this: Will we be able to retire — in New York City, where we live now — before age 60?


Dear M.C.,

First of all, congratulations on having amassed a $700,000 net worth at the fairly young age of 33. Compared with your peers, you’re doing very well.

Add to that your hope of saving 20% a year of both your and your fiancée’s salaries, as well as half the bonus, and you’re likely to be far ahead of your contemporaries in terms of retirement savings — assuming, among many other things, that you invest the money well.

But will that be enough for you two to retire before 60 — and in pricey New York City? That depends on a number of factors, including how lavish a lifestyle you want to live in the Big Apple. Here’s what experts shared.

On paper — and if all goes according to plan — you guys likely can retire before 60 and remain in New York City, financial planners tell MarketWatch. “In the plain-vanilla projection, yes, you will get there — but that’s with no gray areas,” says certified financial planner Dennis Nolte of Seacrest Investment Services in Winter Park, Fla. “That probably isn’t realistic.”

Here’s how the math might work out for you to retire by 60, explains certified financial planner John Carbonara of NXT Phase Financial Services in Jericho, N.Y. Assuming you and your fiancée have a total of $750,000 invested (that’s everything except the emergency fund) and get a roughly 6% return on that over the next 27 years (when you hit age 60), you’d have more than $3.6 million invested the bank. Now if you add in annual savings — let’s assume you two save $65,000 a year for 27 years and earn 6% — that could add up to more than $4.1 million.

“Between the current growth of assets and the growth of future savings, there is the possibility they could accumulate $7.57 million by age 60,” explains Carbonara. “If we applied a 4% distribution rate rule to the accumulated amount, someone could draw $310,000 gross annually. Tax rates at retirement would also have to be applied to come up with a net-income number.”

Carbonara points out that this is all just hypothetical: “These are big assumptions as bonuses are not guaranteed, we don’t know his tax rate, and we don’t know whether the family could maintain that savings.”

Indeed, you have to factor real life into the equation — including taxes, such as the income tax you might pay withdrawing from your retirement fund and the tax penalties if you need to withdraw pretax retirement funds before the age of 59½, Carbonara says. Nolte notes that you should think about whether you will have kids (with, obviously, spending ramifications) and factor that in, as well as how much you will really need to live on in your New York retirement.

Certified financial planner Larry Heller, the president of Heller Wealth Management in New York, adds that housing is another factor to consider: “Will they be purchasing an apartment in NYC or will they be renting? Housing costs in NYC can be very expensive. Purchasing a home could drastically reduce their investible assets,” he explains. “Also, what will they do about health insurance until they are eligible for Medicare?”

These are just some of the things you two need to consider — you may want to talk to a financial planner to go through the details — but take heart in this: You’re in a very good spot, especially if you tweak as you go.

“They can make changes to the original assumptions along the way and continue to monitor their progress toward a future value goal,” says Carbonara.

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