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Old 11-13-2014, 01:43 AM   #1
Confused about dryer sheets
 
Join Date: Nov 2014
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1st time poster/looking for feedback:)

Hello all!

I admit, I've been lurking for quit some time now. I've learned a lot of great things so far and find this forum motivating to say the least! I hope I can contribute somehow. Anyways, let's get down to business.

I'm curious how I compare to others in my age group, I'm in a high stress job and would love to become FI ASAP. My wife and I both work full time (no kids) We have been married for 4 years, the first 2 years were spent paying off about 60k in debt. Our income has increased about 80% the last 2 years, so the last 2 years we have been able to establish our financial foundation.

Heres the stats: Me=31/DW=30 (age)

Income=220k (combined)

401k/403b
-80k

Roth IRA
-24k

Emergency fund
-25k

After-tax brokerage account
-32k

Total=161k

We currently save approximately 90k annually. Thanks in advance for your input!


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Old 11-13-2014, 02:54 AM   #2
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Welcome to the forum! It looks as if you're off to a very good start, and congratulations on burying that debt. There will be others with much more helpful and detailed advice than I can give you, but my advice would be to -

1) Save, save, save!
2) Have some fun along the way
3) Actually, have a bit more fun than that, so you have some good memories and stories to tell
4) Don't worry too much about exactly what funds your IRA and 401K money is invested in (assuming you indeed are in funds), as long as you have an approximate AA that matches your risk tolerance, and as long as you're not giving away too much in fees. Putting as much away as possible (within reason) is more important at this stage than precisely what it is invested in
5) While you're doing the above, you'll have some time to think about how much you need before you pull the plug and at some point, you'll want to think about withdrawal strategies too. First things first though - the first 3 in the above list are the most important right now.

PS - For the after tax account, you'll either want a specific strategy for individual stocks, or a tax efficient fund, in order to minimize the effect of taxes.
PPS - You have way more than I had at your age.
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Old 11-13-2014, 03:24 AM   #3
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As I'm sure you know, statistically you are doing very well, especially given the debt you've already retired. And your current savings rate is laudable. Congrats, you're doing great!
Quote:
According to CNN Money 2014, the average net worth for the following ages are: $9,000 for ages 25-34, $52,000 for ages 35-44, $100,000 for ages 45-54, $180,000 for ages 55-64, and $232,000+ for 65+.
But you have to decide how above average you want to target. Needless to say, you don't reach FI (early) by being average, and I doubt many here settled for average. Here's a benchmark that may be better suited to reaching FI (trajectory at least, more than actual $).

The Average Net Worth For The Above Average Person | Financial Samurai
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Old 11-13-2014, 07:15 AM   #4
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You're doing great. I suggest that you get Quicken Lifetime Planner to plot out how your savings will grow and when it will be sufficient to cut back on working or stop working.

While you are prodigious savers, make sure to have some fun along the way. Life is too short. An uncle of mine scrimped and saved and sacrificed for his "retirement" and dropped dead 6 months later and never got to enjoy the fruits of his saving.
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Old 11-13-2014, 08:08 AM   #5
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In my best Darth Vader voice:

"Most Impressive".

Seriously - you and your wife have done a stellar job in starting yourselves towards FI. You are way way ahead of where I was at your age. I like Major Tom's advice to factor fun into the mix... if you don't have fun along the way - you can't maintain it forever. One of my husbands friends faced this - and it resulted in divorce because his then wife was tired of saving every penny for retirement with NO fun. You need to find balance while saving for your goals.

Welcome to the forum!!!
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Old 11-13-2014, 08:56 AM   #6
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If you haven't already, start purchasing stocks on a monthly or quarterly basis (DCA) into index funds.

Apart from that, just keep on trucking

It seems also you are somewhat above 50% savings rate. This means you'll be FI in less than 15 years. The Shockingly Simple Math Behind Early Retirement
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Old 11-13-2014, 09:19 AM   #7
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Quote:
Originally Posted by Totoro View Post
If you haven't already, start purchasing stocks on a monthly or quarterly basis (DCA) into index funds.

Apart from that, just keep on trucking

It seems also you are somewhat above 50% savings rate. This means you'll be FI in less than 15 years. The Shockingly Simple Math Behind Early Retirement
+1 Every young person should be exposed to the graph in the above post before they receive their first paycheck and develop subsequent spending habits.

It gives a high level overview of how long you will need to work until you can be financially independent for the rest of your life. The horizontal axis is the ratio of yearly savings divided by yearly income and the vertical axis is years needed to work.

-gauss
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Old 11-13-2014, 09:23 AM   #8
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Welcome to the forum ! You are doing great. Congrats on the excellent savings rate ! Thats amazing. As others have said, do remember to have some fun along the way.

My "rule" as my career progressed was that we would save half of any salary increases and spend the other half. That allowed us to continue to live below our means, yet increase our "standard of living" and enjoy the fruit of our labor.

All bonuses went straight to savings except for 2 years that we used to buy a boat (sold shortly thereafter - what a money pit !) and take a bucket list vacation.
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Old 11-13-2014, 09:26 AM   #9
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As others have pointed out you are doing great and if you continue on the same path you should be just fine. I'm more concern about your "high stress" job and the damage it may do to your mental & physical heath over time. You are still young so the stress is probably not showing its harmful affects yet. In my experience there is both good and bad stress that comes with having a high paying job. Good stress will motivate you to perform better then your peers and improve your professional situation. Bad stress will slowing eat away at you. Signs of bad stress for me was waking up every night thinking about the job, dreading going in every day, feeling like I lost control and the work I was doing did not make me feel like I was really accomplishing anything. The big pay check was the only reason I stayed as long as I did at my Megacorp job. I wish I would have made better career choices early on and found what made me happy vs. just getting a big paycheck. It is kind-of a catch-22. High paying jobs tend to be very stressful which allows most people to be able to ER if they can live below their means. Everyone handles stress differently and you just need to decide if the big paycheck is worth it to reach your ER goal or would it be better to change jobs now while you are still young for a less stressful job. Every year after 40 will make it more difficult to change careers. Once you reach 50 it is almost impossible. Not an easy decision my no means, but one worth thinking about since you are only 31 years old... You have found a good site with lots of good advice... Welcome to the party....
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Old 11-13-2014, 01:16 PM   #10
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Welcome to the forum. No particular advice because your savings rate is great. You didn't discuss much how you're investing, and that would be the next step. Make sure you identify an asset allocation that is right for you, and pay attention to fund fees along the way.
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Old 11-13-2014, 11:04 PM   #11
Confused about dryer sheets
 
Join Date: Nov 2014
Posts: 4
Thank you all for the encouragement and thoughtful advice!


My annual savings allocation is as follows.

401k/403b
-37k (including company match)

Roth IRA
-11k/yr (possible back door max out this yr too)

After tax brokerage fund
-52k (2k auto sweep every other week) invested in diverse ETF/individual stocks of my choice.

One thing thats been on my mind is tax. Given our income and lack of tax write offs (no kids, no mortgage) should I contribute my $ to my traditional or Roth 401k? (Currently-16% to traditional/6% to Roth) my DW doesn't have a Roth option so all of hers is tax deferred. Should I max out my Roth 401k before contributing too my Roth IRA? Should I sock away as much into Roth retirement accounts as possible or try to lower my current taxable income?

Thanks again!


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Old 11-13-2014, 11:10 PM   #12
Confused about dryer sheets
 
Join Date: Nov 2014
Posts: 4
Quote:
Originally Posted by Major Tom View Post
Welcome to the forum! It looks as if you're off to a very good start, and congratulations on burying that debt. There will be others with much more helpful and detailed advice than I can give you, but my advice would be to -

1) Save, save, save!
2) Have some fun along the way
3) Actually, have a bit more fun than that, so you have some good memories and stories to tell
4) Don't worry too much about exactly what funds your IRA and 401K money is invested in (assuming you indeed are in funds), as long as you have an approximate AA that matches your risk tolerance, and as long as you're not giving away too much in fees. Putting as much away as possible (within reason) is more important at this stage than precisely what it is invested in
5) While you're doing the above, you'll have some time to think about how much you need before you pull the plug and at some point, you'll want to think about withdrawal strategies too. First things first though - the first 3 in the above list are the most important right now.

PS - For the after tax account, you'll either want a specific strategy for individual stocks, or a tax efficient fund, in order to minimize the effect of taxes.
PPS - You have way more than I had at your age.

I can't agree with you more Major Tom, I sometimes focus to much on saving and forget about enjoying my youth with my wife! It's a balancing act for sure!


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Old 11-13-2014, 11:13 PM   #13
Confused about dryer sheets
 
Join Date: Nov 2014
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Originally Posted by Midpack View Post
As I'm sure you know, statistically you are doing very well, especially given the debt you've already retired. And your current savings rate is laudable. Congrats, you're doing great!
But you have to decide how above average you want to target. Needless to say, you don't reach FI (early) by being average, and I doubt many here settled for average. Here's a benchmark that may be better suited to reaching FI (trajectory at least, more than actual $).

The Average Net Worth For The Above Average Person | Financial Samurai

These statistics are depressing, but all to real. Great article!


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