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Old 07-01-2009, 03:29 PM   #1
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28 Year old new to the board !

Hey there, I am a 28 year old I have always wanted to retire as early as possible. I am eager to learn as much as I can and hopefully find a way to retire by my early 40's. I currently reside in Pennsylvania and just purchased my first home. Definatly looking for advice on paying it off as soon as possible.
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Old 07-01-2009, 03:36 PM   #2
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Originally Posted by Leo10033 View Post
Hey there, I am a 28 year old I have always wanted to retire as early as possible. I am eager to learn as much as I can and hopefully find a way to retire by my early 40's. I currently reside in Pennsylvania and just purchased my first home. Definatly looking for advice on paying it off as soon as possible.
Welcome to the boards! This hits home, as I am in my early 40s and still very much w*rking...

As for your call for advice about paying off your home as soon as possible, it really comes down to two main things: increasing your earning power and living below your means. (That is, earn more and spend less!) Everything else is in the noise level or just details.

Most people aren't thinking much about wealth building in their 20s, so you'll have a jump on most of your peers...
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Old 07-01-2009, 03:38 PM   #3
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Paying off mortgages is definitely a "hot" topic around here.

Welcome to the forum Leo.
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Old 07-01-2009, 04:00 PM   #4
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Welcome Leo. I agree with paying off the mortgage asap, and you can if your interest rate is relatively low, as it should be if you recently bought, and if your income continues to rise nicely. My advice would be to focus on the 401k, roth, and IRAs, plus investing in a taxable acct right now rather than focusing too much on the mortgage, as we are (probably) still in the bargain basement for equities. Invest in them now while the prices are low, while just making regular mortgage payments. As stock valuations go up and stocks get more expensive, keep up the 401k and roth, but begin to add more to your mortgage payoff plan.

Honestly speaking, I wish I knew more about investing when I was your age. This place is a great place to get lots of information and insight, but ultimately you know your financial situation and goals better than any of us, so only you can make the decisions, but I have to say that I would be a much richer man had insights on investing and saving been more easily available to me when I was your age.

Good luck, and welcome!

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Old 07-01-2009, 05:13 PM   #5
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Leo, Welcome to the board. Maximize your savings by living below your income and by maximizing that income (if feasible--keep a long-term view). Regarding the priorities of your investments, I'd second the ideas that Rambler mentioned. There may be better options out there than rushing to repay your mortgage. Mortgage rates are at near-historic lows, and having a 5-6% mortgage will feel pretty good if/when inflation rears its head (that is, you'll be money ahead by paying off your 6% mortgage with money that decreases in value by more than that every year).

The only things I'd add (things that worked for me):
-- Put as much as possible on autopilot--the investements in your IRA, 401)k), after-tax accounts should come out of your paycheck automatically, before you get it, if possible.
-- Learn about investing, but don't think about it too much or fiddle around with your investments too often. Find an asset allocation you can live with, rebalance once per year, and live your life. The $$ grows faster if unmolested and if you don't obsess over it.
-- Keep your investing costs low. "Low" (in my opinion) means that you pay no more than 0.5% in total fees and expenses for your total stash. If you get into the wrong funds or pay someone for advice, you can easily pay 1-2% per year in expenses.

1% extra cost may not sound like a lot, but it is.

If you invest $5000 per year for 25 years and get a 7% return on your money (after fees), you'll have $338,382 at the end of that time.

If you pay an extra 1% in fees and expenses, you'll have just $290,782. That missing $47,600 would buy a lot of beer and pizza, even after inflation.
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Old 07-01-2009, 06:05 PM   #6
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Welcome. I'm 29 and bought my first home at age 28 like you. I obtained a 15 year mortgage with bi-weekly payments so it'll be paid off in about 12 years without any extra payments. If you got a conventional 30-yr then you will need to make extra payments but I would hold off on that right now. I'd contribute enough to your 401K to get full company match then max ROTH(if eligible) then start a taxable account. If you want to retire in early 40's you'll need substantial $$ in taxable accounts unless you want to use 72t. If you aren't familiar with 72t, google it. Many people like it but I don't plan to use. I hope to retire at age 49 and live off my taxable savings for 10 years. Live below your means. Use future raises to increase your savings or pay extra on your mortgage, not as an excuse to waste more money, and you should be fine.
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Old 07-01-2009, 06:45 PM   #7
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Thanks for the response guys...I was able to secure a 15 year mortgage for 4.9 percent. I currently work for the government and after taxes and retirement deductions I clear 1800 every other week. I currently have about 4000 dollars left on a car loan and 8 grand on a student loan. My mortgage is 1150. I was planning on putting an extra thousand dollars on my mortgage every year at income tax time. At this time I have about 25000 in investments however As of the last few months I have been slacking on my investments, mainly because I have been stashing most of my savings away for a down payment on the house. What are your opinions on gold and silver as an inflation hedge? Over the last few years I began purchasing both precious metals.
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Old 07-01-2009, 07:03 PM   #8
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So you make 70K+ and w*rk for the government? That's very impressive for a 28 yr old. Will you be w*rking long enough to get a pension? Health benefits? Both of those would put you at an incredible advantage in retirement. I know nothing about gold and silver as investments. I stick to equities and fixed income myself but i'm sure someone will have something to say about those. If you have a 15 yr mortgage and plan to retire in 12+ years then I don't see any need to pre-pay it at this time. Focus on your TSP and taxable accounts. If you're paying more than 5 or 6% on the car loan you may want to pay that off first. Make sure you have an emergency fund also. I'd recommend at least 6 months living expenses in a money market account.
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Old 07-01-2009, 07:32 PM   #9
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I was fortunate to get a job with a government law enforcement agency right out of college at 22. We are eligible to retire at 20 years of service at 65 percent of your highest 4 quarters or at 25 years with a pension of 75 percent of your highest 4 quarters. I will keep my health benifits after I retire. So retirement can come early if I play my cards right however I have yet to see one of my coworkers retire and be able to travel the world and just relax. It seems like most of them make the wrong decisions and end up going into another career to make ends meet once they retire. When this career is done I would like to play golf, travel the world and live life right for what I hope will be many years.
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Old 07-01-2009, 07:59 PM   #10
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I was fortunate to get a job with a government law enforcement agency right out of college at 22. We are eligible to retire at 20 years of service at 65 percent of your highest 4 quarters or at 25 years with a pension of 75 percent of your highest 4 quarters. I will keep my health benifits after I retire. So retirement can come early if I play my cards right however I have yet to see one of my coworkers retire and be able to travel the world and just relax. It seems like most of them make the wrong decisions and end up going into another career to make ends meet once they retire. When this career is done I would like to play golf, travel the world and live life right for what I hope will be many years.
Based on what you said above, it looks like retiring at 42 should be no problem. Just make sure you are debt free by the time you retire and you should easily be able to get by on 65% of your final pay. Anything you save is extra that you can use for luxuries/travel. Having benefits like those takes nearly all the financial worries away. Just get thru the 20 years and your home free.
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Old 07-02-2009, 06:59 AM   #11
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Welcome to the forum

This article may be of interest to you regarding your student loans.
Federal Forgiveness (7/2/09) -- www.GovernmentExecutive.com
It may be just for new hires, but it is worth checking out.

I read Government Exec "Retirement Planning" and "Pay & Benefits" newsletters for the 18 years I was a fed.
Good info and always up to date.

My best advice is to max out your TSP.
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Old 07-02-2009, 09:21 AM   #12
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I currently have about 4000 dollars left on a car loan and 8 grand on a student loan.
What are the rates on those loans? If you feel it is best to pay off debt, definitely pay off the highest interest rate stuff first.

It's good to see that you have received some solid, "unheated" advice on some of the pros/cons of pre-paying a 4.9% mortgage. I personally think that doing it, or not doing it is one of the least important decisions affecting an early retirement. The most important thing is to start planning, and the earlier the better - you are way ahead of the game - congrats! You've received a lot of good advice on the other important stuff - you should do well.

-ERD50
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Old 07-02-2009, 11:12 AM   #13
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Welcome to the boards--and remember to enjoy the next 20 years of your life in addition to planning for your life after 42! Your plans sound great and well-thought-out, much like aaron's.
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