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34 and already dreaming about retirement
Old 01-04-2013, 06:35 PM   #1
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34 and already dreaming about retirement

I am so excited I found this forum and hope that I can get inspirations from people who have or will be retiring early. Since I am new to the forum, I will try to give as much info as I can. DH and I are 34 and are hoping to retire by 50 at the very latest, 45 if I have my choice. Here is what we currently have:

Retirement: $330k
Profit-sharing: $52k
Cash: 120k
Investments: 50k
529s: $45k
Debt: Debts we have are our mortgages and my student loan. Mortgage #1 $410k (just purchased), 30 year at 3.75%. We have a rental home with mortgage $270k, 4.5%. Plan is to sell rental when market picks back up. Student loan is $145k at 1.625%

We have 2 kids, 5 and 2. May add one more kid in the picture, not sure yet. We both work FT and both make decent income. We usually participate max in DH's 401k, both of our IRAs and my profit-sharing plan (usually 10% of my income). We are starting to invest my bonuses outside of the retirement vehicles (hopefully $50k a year). Our current expenses are sort of high. Probably $9k a month, but includes mortgages and FT childcare for 2 kids so likely 50% less in retirement. We are looking to pay off mortgage to our home in 10 years. Thought about paying more into my student loans as well, but rate is so low. We are not the fancy type. We plan on driving our cars until they break (may be soon) and are relatively frugal. We do like to splurge on vacations though because there needs to be some type of splurge to make life worthwhile, right?

I feel we have done ok so far if we plan to retire at 65, but not sure where we are if we want to retire in 10-15 years. Any input, advice, inspirations are definitely welcome!
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Old 01-04-2013, 08:05 PM   #2
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Welcome darly!

It seems that your net worth is currently negative. Your first step should be trying to reverse that. Your expenses are higher than most on the forum, even accounting for two children. Is there a way to reduce them? (Expenses, not children!)

Meadbh
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Old 01-04-2013, 08:33 PM   #3
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Meadbh, thanks so much for your reply. I guess I may be calculating my net worth incorrectly. If I take in the market value of my homes, would that not make my net worth positive? Do you not calculate the value of your homes into your net worth? I think I may have miscalculated the percentage needed for retirement as well. Of the $9, $4k is to the mortgages, $700 to student loans, $2k for childcare fulltime. So, maybe our retirement expenses would be $3K to $4k per month.

We hope to put in at least $50k into retirement accounts annually (depends on how much I am allowed to put into my profit sharing plan each year). I also plan to put most of my bonuses (rest will be used to pay off mortgage# 1 early) to other forms of investments, which hopefully will be $50k annually.

We are trying to reduce food costs and limiting our unnecessary expenses right now. We have been eating out more because of our busy schedules. Finally got DH on board, so I think he is more open to saving more money as well. Mortgages will be what they are until we sell the other house, which is a rental. Childcare won't change too much since we both have to work.

Like I said, we are just starting to be more serious about retiring as early as we can, so thanks so much for your input!
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Old 01-04-2013, 08:48 PM   #4
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My apologies. I made a judgment without having all the necessary information. Can you share the values of your properties and any other assets so that we can more accurately assess your net worth?

You may also wish to enter your data in FireCalc (link at the bottom of the page).
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Old 01-04-2013, 09:07 PM   #5
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Hi there! I'm also 34 by the way, so highfive.

Yes, you do get to count your home equity in your net worth. 500k home value with 300k mortgage is technically 200k positive.

This is a great forum so definitely do some poking around, including old threads and the recommended reading list.

If you are living below your means, you get the fun job of allocating where you put that money.

Do you pay down your debt? (Your student loan debt is a horrifying number. I hope you got a shiny high paying job or two out of it!)
Do you save for retirement? If so, in which accounts?
Do you save for your children's college?

Then come the other questions:
1) Are your expenses reasonable?
2) do you have adequate emergency funds and insurance?
3) how will you invest your money?

Then come the "strategies" for early retirement.
- keeping your fixed costs low
- being debt free (some folks do retain a home mortgage)
- low cost investing
- giving up wasteful spending.

No one does it the exact same way, but in finding the answers to these questions you can build a good plan for yourself.

SIS
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Old 01-04-2013, 09:30 PM   #6
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It sounds like you hope to retire while the kids are still living at home but there's no mention of health insurance after you retire. Health insurance for 4(maybe 5) will probably cost at least as much as you're paying for child care so you should take that into consideration when figuring your retirement expenses. Because your debt numbers are so high and you're not sure if you're going to have another kid or not, it's hard to say if you're on track for retirement before age 50.
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Old 01-05-2013, 06:12 AM   #7
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Welcome to the forum, darly2004.
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Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
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Old 01-05-2013, 02:28 PM   #8
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Thanks, everyone, for the welcome and for the thought-provoking inputs.

Quote:
Originally Posted by Meadbh View Post
My apologies. I made a judgment without having all the necessary information. Can you share the values of your properties and any other assets so that we can more accurately assess your net worth?

You may also wish to enter your data in FireCalc (link at the bottom of the page).
It's ok. Just wanted to make sure I am calculating my net worth accurately. For our house# 1, current market value is probably what we paid for it $510,000, so $100k positive which was our down payment. We hope it would go up in value since this community used to be $1.5 million+ but not holding our breath. We want to stay in this house forever, so reselling is a moot point unless we can get great money from it. Our rental is probably around $230-240k. We were >$100k upside down previously. Hopefully market is turning around so we can sell in a couple years.

Thanks for pointing me to the FireCalc and it is telling me we need $2.5-$3 million before retirement. I am hopeful we can get to that plus pay off house in 10-15 years if things go according to plan. If they don't (which may happen), we'll just have to adjust accordingly.

Quote:
Originally Posted by ShortInSeattle View Post
Hi there! I'm also 34 by the way, so highfive.

Yes, you do get to count your home equity in your net worth. 500k home value with 300k mortgage is technically 200k positive.

This is a great forum so definitely do some poking around, including old threads and the recommended reading list.

If you are living below your means, you get the fun job of allocating where you put that money.

Do you pay down your debt? (Your student loan debt is a horrifying number. I hope you got a shiny high paying job or two out of it!)
Do you save for retirement? If so, in which accounts?
Do you save for your children's college?

Then come the other questions:
1) Are your expenses reasonable?
2) do you have adequate emergency funds and insurance?
3) how will you invest your money?

Then come the "strategies" for early retirement.
- keeping your fixed costs low
- being debt free (some folks do retain a home mortgage)
- low cost investing
- giving up wasteful spending.

No one does it the exact same way, but in finding the answers to these questions you can build a good plan for yourself.

SIS
Thanks for the input and questions! Really helped with evaluating what we need to do. We do live below our means. No real debt other than mentioned above. We don't buy things we can't pay off all at once. Yes, my student loan is ridiculously high. I used to joke with DH that he must really loved me to marry someone with that much of a negative net worth. It was for a graduate degree. Luckily, it has paid off so far. Hopefully, it will continue to. His college was paid for and he has a decent job as well. We always save max for retirement, which is the typical 401k for him and IRA for both of us. My work has a profit sharing plan with a fluctuating max each year and I try to put in the max. This past year, it was $25k. We have 529 plans for both our kids as well.

As far as our expenses, we can probably do better. Since we have been so busy at work, I have not been as good at keeping track of our budget I need to get back on it this year now that we have made a major life decision. We decided to not move back home to CA, so that we can reach our goals faster. Believe it or not, we would have had a higher mortgage if we had done so. This is our dream home, so no more moving after this. We are definitely serious about paying this off in the next 10 years. Our emergency fund is pretty much our cash, so we have enough for about a year's expenses or a little longer.

Your last question about investment, we have been thinking about it more recently. We now have a surplus outside of our retirement accounts yearly. I am still learning the ropes on investing (especially tax efficient investments), so I think this forum will serve as a great tool. I hear index funds would be a good place to put our money. Still working on fine tuning that area, so any advice is appreciated.

Quote:
Originally Posted by aaronc879 View Post
It sounds like you hope to retire while the kids are still living at home but there's no mention of health insurance after you retire. Health insurance for 4(maybe 5) will probably cost at least as much as you're paying for child care so you should take that into consideration when figuring your retirement expenses. Because your debt numbers are so high and you're not sure if you're going to have another kid or not, it's hard to say if you're on track for retirement before age 50.
Ok, how did I forget about that I guess in my initial calculations, I had included for the 2 of us, but did not include kids. I will need to refigure that one out. Hopefully it does not derail us much. Thanks for keeping me on my toes! I do realize that our expenses are probably higher than most and we are trying to work on that. I hope I don't come off as living an extremely extravagant lifestyle because we sure don't. A lot of our expenses are due to mortgages, student loan and childcare. Hopefully paying off mortgage and possibly student loan (and finishing up with childcare) would reduce that significantly. One question: I guess in my initial calculation, I also thought about the possibility of long term care insurance. Is that recommended in our 50s?

Quote:
Originally Posted by obgyn65 View Post
Welcome to the forum, darly2004.
Thanks for the welcome!
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Old 01-05-2013, 03:41 PM   #9
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Quote:
Originally Posted by darly2004
As far as our expenses, we can probably do better. Since we have been so busy at work, I have not been as good at keeping track of our budget I need to get back on it this year now that we have made a major life decision.
You're not alone there! DH and I have always been good savers, but we also work a lot and have tended to eat out waaay too much as a matter of convenience. We recently discovered we had been spending about 1K per month on food, just for the two of us! Eek! So yeah, we're working on it.

We recently switched to Mint.com for our budget tracking. We're still getting used to the way it categorizes stuff, but the real-time data is pretty nice.

SIS
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Old 01-07-2013, 02:04 PM   #10
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Not just mortgages are higher in CA - I found childcare was double in CA, compared to PA (where we lived when my oldest was born.)

Depending on the childcare solution you're using... that expense goes down as the kids get older... if you're at a daycare center. I found that when my youngest turned 3 the price dropped dramatically. It had to do with staff ratio's required for younger kids. (We were at a high end daycare - but the rules were the same for any licensed center in California.) And after school programs are MUCH cheaper than full time daycare.

I couldn't max out the 401k savings and make extra principal payments on the mortgage until the kids were in school. There just wasn't enough bandwidth. Now they're in 4th and 6th grade - and my savings/paydown have grown exponentially.

Vacations are good. I'm a big fan. But you can have a very high quality vacation on a budget. My kids have been to Europe twice (and all over the US). For us the lightbulb went off when we discovered the slow travel school of thought... get a 2 bedroom vacation rental - cook some (especially breakfast) meals at "home" - and your quality of life on vacation is better and it's cheaper than hotels. With an apartment, you can put the kids to bed or down for a nap - and not have to go to bed yourself. You can cook breakfast without having to go to a hotel restaurant. A much nicer experience... and as I said - a LOT cheaper per day.
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