Friday, January 4, 2013

Review of 2012 and 2013 Financial Goals

The financial markets of 2012 had a very good year. The S&P 500 had a total return (including dividends) of 16.00% for the year. Many dividend stocks increased their dividend payments in 2012 as they did in 2011 and 2010.

A few years ago I started tracking our yearly progress towards reaching our retirement goals of having $2 million in retirement assets as well as reaching $30,000 in dividend stock income. I originally wanted to complete both these goals by the time I am 60 which is 11 years from now. But with the market decline in 2008, we will have to add a couple of years to our goal and our new plan is to retire at age 62 which is in 13 years. I have been using Bloomberg's Retirement Planner on their personal finance calculators site to come up with what we will need at retirement.

Review - 2012 Retirement Goal
$624,115 2011 year end retirement asset balance
$53,049 8.5% investment return
$9,500 2012 contributions to our retirement accounts
$686,664 2012 year end retirement goal
$706,302 2012 year end actual retirement balance

Retirement Assets
In order to reach our retirement goal, we will need an average investment return of 8.5% along with a 10% contribution to our retirement plans for the next 15 years. I have used $95,000 for our annual household income that we will need in retirement. I am using 3% for inflation, 2% for expected salary increases and 8% return on investment during retirement.

We finished 2012 with retirement assets of $706,302 versus our end of year goal of $686,664. So we were $19,638 over goal for the end of 2012.
 
To calculate the amount needed for the end of 2013, I start with our 2012 year end retirement balance of $706,302 which is the balance of our retirement accounts as well as our taxable stock accounts. We then add the 8.5% investment return which is $60,035 for a total of $766,337. Next I add our retirement contributions of $9,500 which is a 10% contribution for a grand total of $775,837 in retirement assets needed at the end of 2013.

2013 Retirement Goal
$706,302 2012 year end retirement asset balance
$60,035 8.5% investment return
$9,500 2013 contributions to our retirement accounts
$775,837 2013 year end retirement goal

As part of our retirement contributions, we will make contributions to our Roth IRA's as well make 6% contributions to our 401(k) and 403(b) plan.

Review - 2012 Net Worth Goal
Assets
$686,664 2012 year end retirement goal
$205,000 House
$140,000 Condo
$30,000 Cash
$16,700 Cars
$3,000 Personal Property
$45,000 529 Accounts
Debt
$5,811 Car Loan
$107,942 Condo Mortgage

$1,012,611 Total Net Worth Goal
$1,065,301  Actual 2012 Year End Net Worth

Net Worth
We finished 2012 with an actual net worth of $1, 065,301 versus our 2012 Net Worth goal of $1,012,611 which is $52,690 over the 2012 goal.

2013 Net Worth Goal
Assets
$775,837 2013 year end retirement goal
$205,000 House
$145,000 Condo
$50,000 Cash
$13,800 Cars
$3,000 Personal Property
$55,000 529 Accounts
Debt
$0 Car Loan
$107,000 Condo Mortgage

$1,140,637 Total Net Worth Goal

Let's hope the 2013 plan goes as well as 2012. I will go over my 2012 Dividend Income Goal on Monday.