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10 year plan still 10 years away...19 months later
Old 07-28-2013, 08:31 PM   #1
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10 year plan still 10 years away...19 months later

Hi! Although I haven't been active posting I've enjoyed all of your stories and insights. I've learned a lot from the community. Copied below is my original post.

I realized shortly after creating my handle "10years away" that it was probably accurate (at least for the short term)...as time moves forward I'm still 10 years out. Hopefully, I'm closer to 10 years as of today. My job stress level has slightly dropped. I truly am challenged and feel like I add value to my company, but one thing remains the same: I look to financial independence as a way to buy myself more time.

Probably the biggest challenge I face is trying to gain alignment from my DW. DW is a stay at home mom and realizes I have a demanding job. But she doesn't feel the same urgency that I do. She thinks we should ease up a bit on the savings and "go with the flow" -- which I interpret as, "what's the rush, things are just fine for the majority of the family." A point I always bring up is that we still live an upper middle class lifestyle complete with many vacations, cleaning services, and plenty of other conveniences to make our lives easier. I'm hoping when our youngest reaches kindergarten in 2 years the gentle nudge to return to the corporate world will get her on the same page. Fingers crossed. Any thoughts on the topic are appreciated.

Here's the update:
Income: $255k.
Taxable investments: $329K
Tax exempt investments: $550k
529 plan (omitted in initial post - 3 kids): $68k
*AA is all in index funds: 47% S&P, 20% Int'l, 22% bonds, 6% REITS, 5% cash.
Home equity (home value is $510k): $223k
Net worth, less 529 plans: $1,102,000.

Annual investment plan:
$91,000 to invest - here is the breakdown -
*401k / small match: $21k
*Overpayment on Mortgage: $21k. Will be paid off 4/2020
*taxable accounts: $35k
*529's: $14k. Plan is for each child (3) to have 100k for college.

Once our mortgage is paid off it will allow a lot of money to be allocated to taxable accounts ($21k overpayment plus $26k in current payment).


Thanks for listening. Take Care.









36 yr old father of 3 wants to be FI in 10 years
Hi,
I'm happy to join the group and get your opinions on financial matters. I'd like to walk away from my high stress (high pay) job in 10 years and do something more fulfilling. I daydream about leaving corporate america non stop and have done so at a very young age. I'm sure people at my company would be very surprised. Am I on track and should I allocate my savings differently? Annually I have $75,000 to save or pay down my mortgage. Here's where I currently stand: $625,000 in savings (15% cash, 20% bonds, 65% stocks / index funds). About half of the money is in IRA's / 401(k)'s, but much of the new savings is going into non taxable accounts due to maxing out my 401 (k). I recently refi'd to a 15 yr (3.5%) and owe $346,000 on my mortgage. There is no other debt.

Of the $75,000 annual saving surplus I'm allocating $15,000 to overpay my mortgage. It should be paid off in 8 years. The difference in surplus ($60,000) goes to 15% cash, 20% bonds, 65% multiple index funds.
In 10 years I'm expecting my family's monthly expenses to be $5,500. My family is very happy where we live and I don't plan on moving. Our primary expenses will be property tax, all things children (tuition, activities), and somewhat maintaining my wife & kids' lifestyle which is still relatively frugal.

Any advice on where to put my additional money or thoughts on if the timeline is feasible are greatly welcome.
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Speeding things up
Old 07-28-2013, 08:42 PM   #2
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Speeding things up

I see you are paying a good bit to knock your mortgage down fast. Great technique if you have a high interest rate. However, if your rate is say, 4-5 pct, you may do better to put this money in the market. Although it may slow down your mortgage repayment, it may accelerate your ability to retire.

Also appears you have a good cash stash. May want to rebook just how much you need every year or six months...to much cash is not a good thing with inflation nibbling on it. Keep what you feel comfortable with...and we all see that differently.

Hope this is value added,
HaloFIRE
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Old 07-28-2013, 10:17 PM   #3
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You are certainly well on your way to ER. I'd say if you can really get by on 5.5K/month, you're looking at more like 5 years at your current savings rate. Your problem is going to be getting the DW on board. In my situation, DW really wanted to relocate so my ER fit right in with her plans.

Also, I have to agree with haloFIRE about the mortgage. I'm 1 month into ER and just got a mortgage for the max money they would give me. The more money I got, the higher my standard of living was going to be according to ESPlanner. So I got away with only 35% down on a 4.0% note. Being able to keep that capital amounted to an extra 5K annual spending based on my AA.
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Old 07-29-2013, 01:44 AM   #4
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This all seems quite sensible, I'd say you're in good shape! And once you go past $1M in your taxable/tax-exempt accounts and fully fund the 529s, maybe DW will perceive the situation in another light...

I would agree that there is no point keeping 5% in cash. You have quite some money aside, if an emergency would occur (I hope not!), just sell some of your securities by reverse-balancing and you'll be ok. Go down to 2% cash, this should be plenty enough. And then you can put those add'l 3% to work.

As to the mortgage, yes, you might want to do some math between a regular scenario and an accelerated scenario, and compare... Notably if you're not subject to the AMT.
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Old 07-29-2013, 06:53 AM   #5
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10yearsaway,
Figuring out how much you would need per year in your retirement would help come up with needed overall assets. I've 2.475M now and like to have 3.5M to withdraw 120K/yr by year 2020. I'll save 33K(18.5K+5K Catchup+10K Company Match) per year in my 401K and hoping for at least 6% return on my 65/35 AA will hopefully get me there, may be sooner than 2020. I'm turning 50 in Oct this year.
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Old 07-29-2013, 07:44 AM   #6
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Have you modeled your situation in Quicken Lifetime Planer or Firecalc? You seem to be well on your way.

I agree with others on the mortgage. I refi'd just before I retired while I still had income - grabbed a 3.375% rate and over the long term I expect to earn 5.5% on my investments but since I took out the mortgage I have really earned 11.89% a year so thus far I have made out like a bandit.
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Old 07-29-2013, 01:37 PM   #7
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Thanks for all of the feedback.
haloFIRE / siamond - I hear you on the 5% in cash ($45k or so). It started as an emergency fund, and I've kept it even as my net worth jumped. It doesn't make sense when I think about it. Thanks for pointing it out. I have enough safe money in bonds.

My mortgage rate is extremely low, yet I justify all of the overpayment as a way to keep me sane. Once the house is paid off in 7 years at the current rate, I can at least take a sabbatical if I'm fed up. But as always, hearing it from enough people gives me pause....
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Old 07-29-2013, 01:54 PM   #8
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Quote:
Originally Posted by pb4uski View Post
Have you modeled your situation in Quicken Lifetime Planer or Firecalc? You seem to be well on your way.
Yeah, OP seems pretty close to on his way. I modeled his situation with another calculator, assuming his kids are going to college right as he retires, and assuming no SS, his current asset allocation (65/20/15) shows a 90% success rate of retiring in 10 years. The calculator shows that if he gradually changed his AA from 2013-2023 to 75/20/5, that it'd be 95% success. Not bad.
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Old 07-29-2013, 02:01 PM   #9
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retire 2020 and pb4uski - I have used Firecalc in my planning. Great tool. To get me to the promise land I'm planning on the following:
*fully funded 529's: $300k in todays dollars
*paid off mortgage
*$2.7 - $3mm. This will give me a lower SWR and provide a buffer for extra spending

10 years at my current savings rate should hopefully get me there -- $91k savings adding in 3% each year at a return of 6.5%. If I'm not quite there I'll add more time.


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Old 07-29-2013, 02:15 PM   #10
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I'll be the person who admits to following a similar plan to yours - paying down the mortgage is a big part of my retirement planning. Yes - I could be funneling that money into investments but my plans call for low spending... no mortgage. And it's a guaranteed rate of return of my interest rate... safe as can be -(equivalent to FDIC guarantee)

It helps that I live in Calif. where prop tax increases are capped... so I have a deterministic housing number going forward. That is a biggy in my retirement planning.

If you want to start a fervent discussion on this board - paying of the mortgage early is ALWAYS a good topic to bring folks out of the wood work.

FWIW - we're in similar savings goals - hope for $100k/kid for the 529's, paid off mortgage (paying off an extra 25k/year - will be paid of next year), and maxing the 401k (with catchups). But our income is a lot lower... so our budget doesn't include cleaners/garden/multiple vacations. (We do a big vacation every 2 year, small vacations in the off years.)
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Old 07-30-2013, 11:00 AM   #11
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Rodi - congrats on having your mortgage paid off in two years and the big 529 accounts! That's a great accomplishment.

My income has doubled over the past 5 years due to a few promotions. Of course with it has come much higher expectations and more stress. But I realize how fortunate I am -- it will allow me to step away sooner. I'm trying to maintain the same lifestyle which is challenging with the total hours worked. I'm never comfortable having someone clean our house, do our landscaping, do simple handy work, but it frees up time to do what I enjoy in the non working hours, and I made the switch about 3 years ago. I'm actually looking forward to doing all of the little things again. I'm sure others experience it, but during my commute on the highway I often look at construction workers or landscapers and get envious! They're outside and can always see the fruits of their labor. I used to do that type of work during college. It's tiring yet rewarding. Also, when you're done you're done (except the sore back tends to linger, of course).
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Old 08-02-2013, 08:57 AM   #12
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Quote:
Originally Posted by pb4uski View Post
I agree with others on the mortgage. I refi'd just before I retired while I still had income - grabbed a 3.375% rate and over the long term I expect to earn 5.5% on my investments but since I took out the mortgage I have really earned 11.89% a year so thus far I have made out like a bandit.
Could you please elaborate on this plan of yours? With the ~12% a year return (how do you get it, BTW?), you assume much higher risk, don't you? This is not to bring out an argument at all. All I seek is an enlightenment for myself. I belong to a non-mortgage group of people, but would like to at least read what other people do with the borrowed money that isn't really needed. Would your plan be like a chapter from a "Leverage to build more wealth" type book?

Thanks in advance
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Old 08-02-2013, 10:28 PM   #13
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Quote:
Originally Posted by 10years away View Post

Probably the biggest challenge I face is trying to gain alignment from my DW. DW is a stay at home mom and realizes I have a demanding job. But she doesn't feel the same urgency that I do. She thinks we should ease up a bit on the savings and "go with the flow" -- which I interpret as, "what's the rush, things are just fine for the majority of the family."
I could almost copy and paste your story as it is similar to mine (except the numbers ha, ha). I am 45 1/2 y.o. and figured/hoped/planned that at 55 I would early semi retire, drop down to pt work. I started planning for this at about 43 y.o. So 2.5 years later, while I think I can still make 55 with some sacrifice, it also feels like we are spinning our wheels.
The main distraction is what you posted above. I feel like DW doesn't have the same urgency, she has commented, "what would we do?". My reply: what we do on my day off, we can do that 24/7/365! It seems like DW is already living the retirement life while I am working to keep it that way, I feel some resentment building as to why can't we enjoy this together?
I am working 6-7 days a week most weeks and 60-65 hours, why am I busting my butt to ESR early when we are treading water?

Oops seems like I have hijacked your thread

Anyhow, it looks like you are on the right track and I wish you continued sucess
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Old 08-02-2013, 10:46 PM   #14
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Originally Posted by haloFIRE View Post
I see you are paying a good bit to knock your mortgage down fast. Great technique if you have a high interest rate. However, if your rate is say, 4-5 pct, you may do better to put this money in the market. Although it may slow down your mortgage repayment, it may accelerate your ability to retire.
I have thought about this process too. I always felt that if I had a paid off house that I would have taken out the max loan I could at 3-4% when rates were that low to place in the market (I am following the dividend growth model). To generate extra returns

But I don't have a paid off house and the mortgage rate is 4.3%. Instead of paying extra I can put that into my dividend growth portfolio, but I would have to accumulate enough extra principle to generate the $30k in yearly house payments which would be about $600k based on an average 5% dividend throw off. Then in 28 more years the house payment would be gone and the money that was budgeted for the house payment would be gravy, but it might take 20 years to save that extra $600k.

I figure I can pay extra to get the mortgage down faster thus reducing expenses and needing less to draw from, or when I feel that I am about half way to the goal, refinance (if rates are favorable) to another 30 year mortgage and reduce the monthly payment to what I could realistically get from my annual draw down.
I guess I have some figures to play with.
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