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26, Obsessive planner, Lots of unaswerable questions but try anyways
Old 11-29-2010, 03:50 PM   #1
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26, Obsessive planner, Lots of unaswerable questions but try anyways

26, Married with a 2YO in Alabama

Background:

Both of us were raised by frugal families. The in-laws are successfully retired at 45. My parents are work-aholics, but are set for retirement in savings. DH and I are of an early retirement mindset. DH is more ambitious than I am and would prefer to be a stay-at-home dad, but I think he will need to work until 40.


Current Financial Picture:

DH and I are currently in the process of paying off our mortgage, but we are having some difficulty with the wire transfer. Keeping my fingers crossed that we will be debt-free sometime this week.

We contribute the maximum amount each year (since '07) for our Roth IRAs. I contribute for the full match at work, and contribute a small additional portion to a 457 plan. DH does not have benefits. We have a modest household income of ~$60k before taxes, and live on ~$20k/year. The rest was used to pay down our mortgage. Fully funded EF at $25k.

The Plan:

Continue to max Roth IRA contributions, raise 457 contributions to $16,500 annual limit, spend some more

Ok, so the questions:

1. Is it stupid to retire before the kid(s) are even in college?
2. Do I go for a higher paying job (longer commute, higher stress) if we are coasting along just fine at status quo?
3. What are the chances that my awesomely-laid plans are going to be f***ed up in the next 20-40 years?

Nice to meet you all!
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Old 11-29-2010, 04:07 PM   #2
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I'm sorry, I had to read this a couple of times: "DH and I are currently in the process of paying off our mortgage, but we are having some difficulty with the wire transfer. Keeping my fingers crossed that we will be debt-free sometime this week."

Congratulations on that! Wow!

Welcome to the boards--other, wiser people here will probably give you some answers to your questions, but I think anyone who's already debt-free at age 26 probably is on the right track.
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Old 11-29-2010, 04:27 PM   #3
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1. Not stupid, but having a stable income through that high-expanditure period is likely to significantly reduce your risk.
2. If you're ok, I wouldn't take the more stressfull job - you have a 2 year old, and you're doing well. Put the extra into family rather than job if you don't feel you have to have the extra money.
3. Plans don't last past the first contact with the enemy. They will be changed/evolved/screwed up/revised. That's OK. Don't sweat having to revise on the fly, but keep your general heading and you'll do fine. The better you are doing, the more flexible you'll be able to be in dealing with other crap that comes along. So - good odds at getting screwed up, small to moderate odds of going completely off the rails, and less as time goes on and you accumulate more assets.
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Old 11-29-2010, 04:28 PM   #4
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Quote:
1. Is it stupid to retire before the kid(s) are even in college?
2. Do I go for a higher paying job (longer commute, higher stress) if we are coasting along just fine at status quo?
3. What are the chances that my awesomely-laid plans are going to be f***ed up in the next 20-40 years?

1) Perhaps it is unwise unless you have lots and lots of retirement resources, pensions, and Medical coverage.

2) That's your call. Do you want what you have now or do you want to go for what's behind door number 1.

3) I would say you can almost certainly expect some big upsets along the way forward. It's called life. Nobody ever predicts exactly what lies ahead.
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Old 11-29-2010, 05:07 PM   #5
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Quote:
Originally Posted by KisKis View Post
.
Ok, so the questions:

1. Is it stupid to retire before the kid(s) are even in college?
2. Do I go for a higher paying job (longer commute, higher stress) if we are coasting along just fine at status quo?
3. What are the chances that my awesomely-laid plans are going to be f***ed up in the next 20-40 years?

Nice to meet you all!
From the background I'd say you are doing very well. You may want to include a bit of "live for today" in your lives, ER ain't everything.

Questions:
1) I waited to retire until both kids had jobs (I was well over 30 when 1st was born). Someone has to set an example that "work is required to eat".
2) Your call, I always jumped at more income but YMMV.
3) Probably about 100%. 40 years is a long time. You may not live that long long (hence the "live for today" suggestion).
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Old 11-30-2010, 08:28 AM   #6
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Welcome to the board, Kis.

Quote:
Originally Posted by KisKis View Post
The Plan:
Continue to max Roth IRA contributions, raise 457 contributions to $16,500 annual limit, spend some more
Once you pay off the mortgage and max out the IRAs/457, where are you putting the rest of the money? You seem to have a handle on expenses so the next step would be an asset-allocation plan and running your numbers through FIRECalc.

Quote:
Originally Posted by KisKis View Post
1. Is it stupid to retire before the kid(s) are even in college?
Well, you pretty much have to retire before they start college if you want to spend any quality time with them before they turn into teenagers. I'm really glad I stopped working when our kid was eight years old because the ER lifestyle afforded the time & energy for school trips, surfing, homework, taekwondo, family vacations during school breaks, and all the other parenting opportunities. It avoided a lot of school-related crisis spending, too.

Kids just want your time & company. When ours had questions about work & money we explained that we'd saved & invested our money and had a budget. Those answers got more detailed over the years but the theme is that financial independence affords choices just in case she's not doing what she loves.

One of the members of this board, Jarhead*, retired in the 1980s. Back then he felt it was necessary for his teen daughter to see him setting an example that "work is required to eat". Every weekday morning he'd appear in business attire with briefcase and depart in the car while his daughter would get on the bus. When she was out of the house he'd return home to enjoy golfing doing whatever he did all day.

When his daughter was in her 30s he shared this subterfuge with her. She thought it was hilarious. She told him that in the first place she wouldn't have cared whether or not he was working. In the second place, she was so busy being a teenager that she wouldn't have noticed.

Our kid never even thought about what we were doing while she was at school unless I happened to drive by the bus stop with the longboard strapped to the roof rack. I'm pretty sure she thought that when she went out the door, we went into suspended animation until she came home to find us baking after-school cookies in the kitchen.

Quote:
Originally Posted by KisKis View Post
2. Do I go for a higher paying job (longer commute, higher stress) if we are coasting along just fine at status quo?
So... life isn't difficult enough yet?

If you want to work then you should, and it's always good to improve your occupational skills, but don't make yourself nuts. If a profit opportunity comes your way then there'll be costs in some other area, and most of them will be in the form of obligations & schedule conflicts. Raising your stress level will just lead to a weakened immune system, poor health, fatigue-related mistakes, family disharmony, and perhaps personal burnout. If you manage to accelerate your ER by a year or two it might not be worth the consequences.

The best thing to do is to run the numbers and see what the benefits are. Decide whether you're willing to pay the cost. Then try to imagine how you'll handle all the downsides of the higher-paying job and how you'll deal with the inevitable challenges.

Quote:
Originally Posted by KisKis View Post
3. What are the chances that my awesomely-laid plans are going to be f***ed up in the next 20-40 years?
Pretty good. That's why you're working on asset allocations, a long-term plan, and financial independence. When you have the basics in place then you can deal with the surprises.

One of the ER surprises may be health-insurance costs. It's just too difficult to predict what those will be in 20-40 years.
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Old 11-30-2010, 12:31 PM   #7
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Thanks, all!

Quote:
Originally Posted by Nords View Post
Once you pay off the mortgage and max out the IRAs/457, where are you putting the rest of the money?
Good question. What would you recommend? DH and I are not enthusiastic investors (as far as time invested in research), so we have a simple portfolio of Vanguard mutual funds and bonds. We have a small non-retirement account started, but since we haven't maxed out our retirement vehicles, this account has remained untouched for the last few years. I guess we will add to it when we have the extra funds, or, depending on the financial landscape at that point, ladder CDs or something.

Quote:
Originally Posted by Nords View Post
One of the members of this board, Jarhead*, retired in the 1980s. Back then he felt it was necessary for his teen daughter to see him setting an example that "work is required to eat". Every weekday morning he'd appear in business attire with briefcase and depart in the car while his daughter would get on the bus. When she was out of the house he'd return home to enjoy golfing doing whatever he did all day.
I will have to share this with DH. Excellent plan!
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Old 11-30-2010, 10:03 PM   #8
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Quote:
Originally Posted by KisKis View Post
Good question. What would you recommend? DH and I are not enthusiastic investors (as far as time invested in research), so we have a simple portfolio of Vanguard mutual funds and bonds. We have a small non-retirement account started, but since we haven't maxed out our retirement vehicles, this account has remained untouched for the last few years. I guess we will add to it when we have the extra funds, or, depending on the financial landscape at that point, ladder CDs or something.
Nah, see, that's a trick question.

It's not what we recommend, it's what your asset allocation plan needs. If you don't already have an asset allocation plan then you should put one together. Then you'd look for low-cost tax-efficient index mutual funds or ETFs that would meet the criteria of your asset allocation plan. Then you'd buy them, and you'd sleep well at night because you put the whole thing together on your own and know the value of your efforts.

Otherwise you're just getting a bunch of darts thrown by anonymous strangers on the Internet, and you'd sell the first time the market tanked.

Not, of course, that we've ever seen that happen here before or anything.

"Four Pillars" by William Bernstein... or the Bogleheads wiki on asset allocation.
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Old 12-01-2010, 06:11 AM   #9
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3. What are the chances that my awesomely-laid plans are going to get messed up in the next 20-40 years?

"Its the economy, madame." The Fed has just started its quantitative easing (pumping billions into the economy) so the inflation rate is going to increase. The housing market is going to remain stagnant for years to come. National, state, municipal, corporate, and personal debt together is more than 350% of GDP.
Present social security and Medicare liabilities of future benefits are enough to bankrupt the country. 77 million baby boomers will be retiring up through 2030. The 9.5% unemployment may become structural (permanently fixed). The "new" stock market return is being touted at 4%. Need I go on?

Plan on reviewing your strategy annually, and revising them significantly every 3-5 years. We are living in very uncertain (and dare I say, precarious?) times.

I am nearing the end of my intended working phase, several years short of the traditional '65'; in making the transition away from my current career, I've concluded that it would be prudent to seek some remuneration / supplementary income in an area I 'enjoy' or find more significant than my current work. What I earn the next few years (especially in regard to inflation) greatly affects how big the assets will be when - assuming that I do - get into my 70s and beyond.
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Old 12-01-2010, 06:50 AM   #10
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Nords said it well.

We are in "interesting times" these days. Long range planning has to include thinking about bad luck and hard times.
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