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Hello everyone!
Old 03-28-2006, 12:52 PM   #1
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Hello everyone!

I am 31 yrs old and would like to retire in 20 years.* Here's my current financial situation:

Income: $132k/yr

1. No debt
2. Both cars paid off
3. 401k Plan-$31k/$15k a year (FPA Capital Fund, Inc, Janus Enterprise Fund,and
Julius Baer International Equity Fund)*
4. ROTH IRA-$8k/$8k a year
5. Money Market Account- $20k
5. Savings-$3k (Emigrant Direct)
6. Yearly savings-$24k

Also, I just purchased a home and I'm planning to contribute 2 extra mortgage payments a year in order to repay my loan in 21 years instead of 30.

I would like some opinions as far as putting away $24k/yr in other type of investments.* Any suggestions?



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Re: Hello everyone!
Old 03-28-2006, 03:01 PM   #2
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Re: Hello everyone!

Quote:
Originally Posted by xmanz3
I am 31 yrs old and would like to retire in 20 years.* Here's my current financial situation:

Income: $132k/yr

1. No debt
2. Both cars paid off
3. 401k Plan-$31k/$15k a year (FPA Capital Fund, Inc, Janus Enterprise Fund,and
Julius Baer International Equity Fund)*
4. ROTH IRA-$8k/$8k a year
5. Money Market Account- $20k
5. Savings-$3k (Emigrant Direct)
6. Yearly savings-$24k

Also, I just purchased a home and I'm planning to contribute 2 extra mortgage payments a year in order to repay my loan in 21 years instead of 30.

I would like some opinions as far as putting away $24k/yr in other type of investments.* Any suggestions?
Welcome to the board. Looks like you are well on your way. You make a very good salary for someone your age and you doing well with saving.

BTW, most of us would consider mortgages as debt so you are not really at zero debt if you have a mortgage.

As far as where to put your other savings.......there are hundreds of places and the experts here will be better able to guide you into specific accounts but I will say that Vanguard equity funds that match your investment horizion and personal comfort level would be a very good choice. It all depends on how much you want to play with it or just set it and forget it.

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Re: Hello everyone!
Old 03-28-2006, 03:48 PM   #3
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Re: Hello everyone!

While $24,000 sounds like a lot of money to invest per year, it equals $1,227,842.87 in 20 years growing at 9%. If you bring that back at a 4% inflation rate it would be $560,371.46. Using a safe rate of 4% you could expect to draw $22,414 for ever. You might want to check my figures as I did the in a hurry. Just something to think about. Inflation is the real killer of early retirement.
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Re: Hello everyone!
Old 03-28-2006, 04:08 PM   #4
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Re: Hello everyone!

Thanks for taking the time and calculate how much money would I have available to retire, but I have a quick question: are you taking into consideration my 401K as well as the ROTH IRA? I will continue maxing out both of them until age 59 1/2.
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Re: Hello everyone!
Old 03-28-2006, 04:58 PM   #5
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Re: Hello everyone!

Welcome to the board, xman.

I think you're asking where to put the torrent of savings, but the answer to that is an asset-allocation issue. One of the better books for that is Bernstein's "Four Pillars", usually available at a local library. Once you've gone over the issues it raises (including your tolerance for volatility) you'll be able to put together your own asset allocation and continue down your own ER road.

Low cost mutual funds & perhaps ETFs is all you need. Vanguard and/or Fidelity are the biggest & lowest-cost providers but there are many different roads to the goal.
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Re: Hello everyone!
Old 03-28-2006, 05:04 PM   #6
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Re: Hello everyone!

Xman,
Only looked at the $24,000. I also did not consider the fact that as inflation takes it toll over the next 20 years you will most likely increase your savings. Also you should be getting pay raises and could/should increase your savings rather than increasing your standard of living. $24,000 is a great start, jut thought I would point out what inflation does to you. Many folks quote how much money they will have at some future time without factoring in the buying power. In my case my expenses are now $48,000 a year, they could be in excess of $200,000 in 30 years or so.
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Re: Hello everyone!
Old 03-28-2006, 06:21 PM   #7
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Re: Hello everyone!

Welcomd xman,

First Nords gives good advice regarding Weinstein's book and Vanguard and Fidelity funds. The normally recommended steps to formulate an investment plan are:

(1) Determine your risk tolerance
(2) Decide on your asset allocation
(3) An only then decide on individual investments such as fund selections

You don't want to short circuit the first two steps.

About everything you really need to know about investing is in Weinstein's book and it will point you straight towards Vanguard (and Fidelity) index funds. (After deciding on your asset allocation of course.)

It looks like you already have some actively managed funds in your 401k. That is ok. Putting actively managed funds, especially those that trade a lot like many Janus funds, in tax deferred accounts and putting index funds in after taxable accounts is a good tax minimization strategy.

After reading Berstein's you'll probably also start to think about bonds and REIT, etc. allocations and where they should go. Again it is preferable to put taxable bonds and REITs in tax deferred accounts. With your income munis may be best for taxable accounts.

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Re: Hello everyone!
Old 03-28-2006, 08:00 PM   #8
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Re: Hello everyone!

Thanks for the advise!* I am definitely going to read the "Four Pillars" book.* I have always heard that Vanguard and Fidelity are very good funds to have your money invested in.

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Re: Hello everyone!
Old 03-29-2006, 04:35 AM   #9
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Re: Hello everyone!

I forgot to mention that I only work 6 months out of the year, and I'm really looking at doing something during my off time.* Any ideas?

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Re: Hello everyone!
Old 03-29-2006, 09:21 AM   #10
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Re: Hello everyone!

Quote:
Originally Posted by xmanz3
I forgot to mention that I only work 6 months out of the year, and I'm really looking at doing something during my off time.* Any ideas?
Do you mean other than learning about asset allocation and implementing your plan? Along with the administrivia of daily living, working through Four Pillars (plus whatever other reading it leads you to) and then moving the money around could take at least a couple weeks. Is there something more important that you'd rather be doing?

With a six-month job paying $132K/year, what needs to be done during your off time? You could enjoy your ER in six-month chunks...
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Re: Hello everyone!
Old 03-29-2006, 09:35 AM   #11
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Re: Hello everyone!

Full disclosure: I have no financial credentials or expertise.

If it were me, I'd move almost everything to a strategy fund like Target Retirement 2020 in Vanguard. I'd continue your impressively disciplined saving habits and make all tranfers automatic.

Then I would take a pill and not look at it for 15 years or so, and enjoy your life in the meantime. You will succeed.

General observation (not referring to you individually): there is a risk of premature obsession with things like this at your age that you need to watch out for - it can mar your life and relations. Just set it up smart, do it, and then forget it (well, OK, keep an eye on it, but don't fuss over it too much).

Your awareness and discipline are pretty impressive to me. You have won half the battle already.

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Re: Hello everyone!
Old 03-29-2006, 11:18 AM   #12
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Re: Hello everyone!

Ok ok, now I'm really curious. What do you do for 6 months out of the year at age 31 that gives you that high of a salary? I'm trying to imagine, but I can't figure out anything that makes sense.

As long as you don't get used to spending a ton of money, you'll be just fine for a 20 year ahead retirement. Save as much as possible (I'd suggest more index funds as opposed to managed funds, but that's just me). The only two enemies of retirement are: low income and high spending. Your income is just great, so you just need to worry about spending. It's the only thing that would likely hurt your retirement plans.
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Re: Hello everyone!
Old 03-29-2006, 12:07 PM   #13
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Re: Hello everyone!

Some sample portfolios that might be of interest:
http://www.fundadvice.com/
http://tinyurl.com/rkzjw



EDIT: Shortened URL
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Re: Hello everyone!
Old 03-29-2006, 03:56 PM   #14
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Re: Hello everyone!

Quote:
Originally Posted by Ceberon
Ok ok, now I'm really curious.* What do you do for 6 months out of the year at age 31 that gives you that high of a salary?*
Wait, wait, don't tell me...he's an x-man who drives a Z3!
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Re: Hello everyone!
Old 03-29-2006, 05:34 PM   #15
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Re: Hello everyone!

I work for the government 8), nickname X-MAN and drive a Z3!

It seems that the best way to go is to put my money away on index funds(Vanguard or Fidelity).* What you guys think about getting into real estate (rental properties)?
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Re: Hello everyone!
Old 03-30-2006, 10:02 AM   #16
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Re: Hello everyone!

Quote:
Originally Posted by xmanz3
It seems that the best way to go is to put my money away on index funds(Vanguard or Fidelity).* What you guys think about getting into real estate (rental properties)?
If you're talking about buying a REIT, knock yourself out. It's part of diversification.

If you're thinking about landlording, you have a lot of thinking to do. Search for the "landlord" keyword here, read the posts, and read the following:
(1) Investing in Real Estate, 4th edition or later, by Andrew McLean & Gary W. Eldred (who's taken over the new editions) and
(2) Landlording by Leigh Robinson (7th edition or later).

(Boilerplate warning-- for those of you who've been here a while, I've posted that text a half-dozen times already.)
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