Hello from cold Michigan

[Youngblood]

Hi, I just found this site a week ago and I'm totally addicted! I look forward to learning as much as I can from everyone here.

I'm 36 years old and I've been working on my savings for almost 10 years. I have approximately 140k in my 401k and approximately 30k in my Roth. I want to begin to invest in something I can use to bridge the gap from 52 to 55 (tap into the 401K), so I hope I can get some good recommendations on this site.

The only problem I have now, is how to stretch my money further. I'm a budget guy (spreadsheets and graphs), so I know where every penny is going, but with the 401k and Roth both maxed out, I just don't have anything else to spare. I'm thinking about reducing the 401k contribution and give myself 2-3k to invest in other funds (any thoughts??)

My dream is to retire at 52, with about 1.5 million. I just bought a home (175k) and I plan on having it paid off in 15 years (before I retire). I'm only counting my investments/savings for the 1.5 million, and not my home.
As of right now, I'm not married and have no children, so that really helps with my savings.

I guess that's enough for now I just wanted to introduce myself and give a few data points. I look forward to hearing from everyone.

 

[Koolau]

Welcome to the forum. It sounds like you are already on your way to goal. My only suggestion (as one who has been there - or IS there) be certain you know the consequences of deferring taxes via tIRAs and 401(k)s, etc. It's not a "bad" thing to do, it's just that it may have consequences when you do retire. Personally, I've converted a significant amount of my tax deferred accounts to Roth IRAs. I want to avoid huge RMDs at age 70 1/2.

As always, YMMV. Best of luck.

 

[haha]

My dream is to retire at 52, with about 1.5 million. I just bought a home (175k) and I plan on having it paid off in 15 years (before I retire).

I wonder, is this figure real, such that when you reach your retirement in 15 years it may be $2.xmm, or $3mm in the dollar of that date?

I see this kind of statement, and I have never asked, what dollar are you using to make this goal? You can't answer for others, but I would be interested in your answer.

Ha

 

[tinlizzy]

Tax refund (if you get a refund)?

You could use this money to invest in a low cost index fund or I bonds.

 

[Youngblood]

Ha,

Thank you for the insight. Like I said, those are my goals, but it's true, with inflation, I might need additional funds. I still plan on working , but I hope it will only be part time.

tinlizzy,

Yes, I could use my tax refund for that and I might. I didn't mention that I need to save for a new car as well. Nothing fancy, but I want to be able to just pay cash for it and avoid the payment.

 

[jclarksnakes]

Welcome to the forum. 15 year mortgage or 30 year mortgage. If it is a 30 year mortgage you could invest some outside the deferred accounts rather than trying to pay the mortgage off in 15 years. Paying a mortage off as soon as possible is often a good idea but if doing so keeps you from having enough for other investments then it is something to consider. If it is a 15 year mortgage?......then, nevermind.

 

[obgyn65]

Welcome to the board.

 

[Midpack]

As of right now, I'm not married and have no children, so that really helps with my savings.

This will make a huge difference in your plan. Retiring single at 52 with $1.5M is significantly different than retiring married with children at the same age/funds of course. That said, being married is definitely worth it IMO even if you have to work longer, spend less (now & in retirement), etc. Hopefully (my) DW would agree...

Welcome to ER.org!

And it was 1°F at my house this morning too, not a fun time of the year for Yankees. But we 'get even' when summer rolls around.

 

[Omalley]

Since you plan on retiring before you can access 401k type accounts penalty free, you could consider reducing your current 401k allocation if you are already contributing above any match your company may provide. I reduced my 401k contribution a few years ago in an effort to build my taxable accounts faster for use by age 45/46.

 

[Youngblood]

jclarksnakes,

It's a 30 year loan (3.25%), so I could just pay less and invest in a taxable account, however, I just like the thought of not having a mortgage payment when I retire. I've seen good arguments on both sides, but I really just want to pay off that debt.

Omalley,

Yes, that's what I was thinking of too, and I will probably end up going that route. If you don't mind me asking, how much did you reduce your 401k contribution by? I was thinking about reducing mine by about 3k, but after taxes, that would give me about 2k to invest.

Thank you to everyone for the kind words and advice!

 

[Candy83]

jclarksnakes,

It's a 30 year loan (3.25%), so I could just pay less and invest in a taxable account, however,

You will want your house paid off before you retire.

You can build and build that nest egg; but if you're wanting to retire in your 50s (and first half of your 50s), you won't want mortgage payments hanging around.

 

[ERD50]

It's a 30 year loan (3.25%), so I could just pay less and invest in a taxable account, however, I just like the thought of not having a mortgage payment when I retire. I've seen good arguments on both sides, but I really just want to pay off that debt.

First off, congrats on recognizing what you want and taking the steps to get there. That puts you so, so, so, so, so very far ahead of the average guy/gal.

You probably know what they say about predictions and the future, but I predict that a 3.25% loan is going to look GOLDEN over the 30 year period. GOLDEN.

You will want your house paid off before you retire.

You mean I have to go back to work?

Seriously, that is one opinion. A number of us retirees have mortgages, and it isn't a do-or die situation. And at 3.25%, like I said, that will likely be GOLDEN. If not, it sure won't be make/break.

-ERD50

 

[Omalley]

May not work for everyone, but I reduced my 401k from the max to only 5 percent (full company match) once we focused on RE. Luckily, my spouse still contributes the max to their plan. All extra funds now go to a brokerage account monthly.

 

[SecretlyFI]

Would your schedule allow time for a second job? Not anything too heavy duty, but I figure if you're looking for just a few thousand dollars (and maybe this would provide more than that), it might give you an income stream that you could ear-mark just for after-tax savings. Not having kids, you hopefully have alot of flexibilty in how to handle your free time.

 

[Candy83]

First off, congrats on recognizing what you want and taking the steps to get there. That puts you so, so, so, so, so very far ahead of the average guy/gal.

You probably know what they say about predictions and the future, but I predict that a 3.25% loan is going to look GOLDEN over the 30 year period. GOLDEN.



You mean I have to go back to work?

Seriously, that is one opinion. A number of us retirees have mortgages, and it isn't a do-or die situation. And at 3.25%, like I said, that will likely be GOLDEN. If not, it sure won't be make/break.

-ERD50

There are people who retired while still not having their house paid off. But when one retires, there is less income coming in, of course, and to still have mortgage payments — no matter how appealing the rate [3.25%, 2.25%, 1.25%] — is not advisable. It would be better to not have any mortgage payments.

 

[ERD50]

There are people who retired while still not having their house paid off.

Yes, plenty of both.

But when one retires, there is less income coming in, of course, and to still have mortgage payments — no matter how appealing the rate [3.25%, 2.25%, 1.25%] — is not advisable. It would be better to not have any mortgage payments.

Who is giving this 'advise', and on what basis?

As usual, this kind of approach only looks at one side of the equation - the mortgage payment. But the other side is that there is more money in the portfolio with the mortgage. To ignore that just isn't a complete analysis.

And I would not 'advise' anyone either way. But I think they should realize it is unlikely to make a large difference. It isn't a cut/dried positive/negative.

-ERD50

 

[Tgancarz]

Youngblood, I have this same issue. Refinanced into 15 yr at 4.375 three yrs ago and find myself wanting to refi into 30 yr and at 3.25. Then invest remainder of 15 yr payment hoping for 6% long term return. Did math both ways using 10 yrs as goal. Don't really get too far ahead either way when you take cap gains into consideration. At least for a 10 year time horizon anyway.

 

[Tgancarz]

I have also started to draw back tax deferred contributions starting to beef up taxable to allow me to retire at 52....barring any disaster. Smart move....in my opinion.

 

[walkinwood]

Your ROTH is after-tax investments - not just tax deferred like the 401K

Why not just put any future increases in salary into after-tax investments? Your salary will hopefully increase faster than the max 401K or ROTH allowance.

 

[Tgancarz]

Roth = 59 1/2...already maxed.

 

[UserRequested]

. That said, being married is definitely worth it IMO even if you have to work longer, spend less (now & in retirement), etc. )

Sometimes being married means you don't have to work longer, coz the other half drives you to your grave sooner !

 

[oldtrig]

There are people who retired while still not having their house paid off. But when one retires, there is less income coming in, of course, and to still have mortgage payments — no matter how appealing the rate [3.25%, 2.25%, 1.25%] — is not advisable. It would be better to not have any mortgage payments.

Best advice anyone could give on this post.
Have no debt before you make the move. It takes knowledge, skill and LUCK to be able to retire.

 

[ERD50]

Originally Posted by Candy83
There are people who retired while still not having their house paid off. But when one retires, there is less income coming in, of course, and to still have mortgage payments — no matter how appealing the rate [3.25%, 2.25%, 1.25%] — is not advisable. It would be better to not have any mortgage payments.

Best advice anyone could give on this post.
Have no debt before you make the move. ...

This is getting tiring, even for me

There is just no evidence I've seen that shows that a low interest rate mortgage is a hindrance to retirement. If you don't care to have a mortgage, fine. But to call it good/bad advice is simply not borne out by the facts. To consider it to be 'important' to retirement, well, it just ain't so - either way.

Someone with $750,000 portfolio and a low interest $100,000 mortgage is NOT going to be at any huge disadvantage (or huge advantage) to the same person who paid off the mortgage, and now has a $650,000 portfolio.

But they are very likely to come out somewhat ahead over 30 years, by holding a low interest rate mortgage.

I did a FIRECALC run using $35,000 spend on $1,000,000 (3.5% WR) for easy math - this just gets you to 100% success for 30 years, with all other defaults. You can see the very bottom line, and FIRECALC reports you end with $87,138 remaining. This worked out to a cumulative 0.8% real return for the single very worst period out of the 111 tested (the second worst appears to have ~ double the remaining balance, taking the real return to ~ 1.1%).

Another source, only goes from 1946 to 2005, but it shows inflation over any of those 30 year periods to range from 3.43% to 5.44%. So a 3.5% mortgage sounds like it would have been a winner at practically any time in the past, even if low nominal portfolio returns coincided with a period of low inflation. Surely, it can't be that risky as to derail a retirement? I fail to see how. Can you explain?

Again, someone may choose not to have a mortgage, but to 'advise' others that it is important to FIRE? I don't get it.

-ERD50

 

[Youngblood]

Hey everyone, here is a quick update on how things are going. Currently, I'm 41 years old now and still not married....and no kids! In reviewing my assets, I found that when I included my equity (I'm know I shouldn't, but I couldn't resist) I was over 500K!


I'm still investing heavily into the 401K and Roth, but I have begun to put away some cash for a taxable account. Essentially, any new raises (plus bonuses) I get will be put into this account to help bridge the gap to 59 1/2 or if I decide to do a Roth conversion.


My goal is still to retire by 52, but I'm hoping to be closer to 2 million by that time. If not, I'll probably need to work a little longer.


Anyways, I just wanted to give an update on my progress. Have a good weekend everyone!

 

[aja8888]

Hey everyone, here is a quick update on how things are going. Currently, I'm 41 years old now and still not married....and no kids! In reviewing my assets, I found that when I included my equity (I'm know I shouldn't, but I couldn't resist) I was over 500K!


I'm still investing heavily into the 401K and Roth, but I have begun to put away some cash for a taxable account. Essentially, any new raises (plus bonuses) I get will be put into this account to help bridge the gap to 59 1/2 or if I decide to do a Roth conversion.


My goal is still to retire by 52, but I'm hoping to be closer to 2 million by that time. If not, I'll probably need to work a little longer.


Anyways, I just wanted to give an update on my progress. Have a good weekend everyone!

Wonderful news! Keep up the good work and check in occasionally!