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Hi, I have no idea what I'm doing!
Old 05-05-2008, 10:36 PM   #1
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Hi, I have no idea what I'm doing!

That's not entirely true, but mostly.

I was directed to this board by a friend of mine who is about the same age as I am and was able to retire recently. He told me that this is a fun forum chock full of helpful advice for those planning for accelerated retirement.

I'm 38 and I'd like to retire in the next 5 years. There, I said it.

My financial situation at the moment is neither here nor there. I've got ~80K saved up in various places, but most of that is tied up in 401K/IRA plans that I can't touch unless I pay unspeakable penalties and taxes. I own my home and I've don't have any debt to speak of other than my large, SF-Bay-Area-Sized mortgage. I could get ~60K out of the house if I had to sell it today.

My special situation is that my wife is 20 years older than I am. She will be retiring at 62-65 and I don't want to get left behind. I haven't yet got a plan to get there, so here I am.

I've got an idea of what I want my retirement to look like on a lifestyle level (hint: not extravagant), and my wife and I are synced up on this. I'd like to go into it with a plan that I feel has a reasonable chance of success.

So where do I start? Here's what I think I need to do, in no particular order. Please correct me where I've gone astray.

1. Figure out how much income I will need after retirement.
2. Figure out where my income is going now.
3. Figure out how much income I can reasonably save now (budget!).
4. Start saving it!
5. Figure out how much savings I will need.
6.
7. Retire!

Thanks for all the great advice and inspiration that's already here on the boards, and also for that which is to come.

Cheers,

--Jeff
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Old 05-06-2008, 07:49 AM   #2
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Welcome, Jeff.

The very act of setting your retirement goal and knowing where your money is now constitutes the biggest step toward early retirement. I suggest you read through the FAQs here, and get a couple of the recommended books for further background. You should also check out FIRECalc, one of the better planning tools (click here).

As a rule of thumb, a nestegg in the range of 20-25 times your annual retirement expenses is required for a long, inflation-adjusted and secure retirement. Pensions and other considerations affect that, to be sure, but taxes need to be accounted for in those numbers as well.

Now that you've picked yourself up off the floor after digesting the above number, read on, ask questions and enjoy the board.
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As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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Old 05-06-2008, 10:36 AM   #3
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Jeff,
I'm 47 and thinking of RE very very soon. I started planning very late in the game, and one thing I wish I had been doing for the past several years is tracking all of my expenses. I'm doing that now with a piece of software called Moneydance - similar to Quicken if you're familiar with that. The software connects to my bank and checking accounts, and downloads transactions which I then categorize as restaurant, electric bill, taxes, etc. Since I pay for almost everything with credit card or check, it's easy to know where my money is going. I also started tracking my cash expenses and those $10 lunches really do add up. This should help with your point #2 "Figure out where my income is going now".

Along with saving more, make sure you're investing it wisely. That was something I was never good at, but after following advice on this board, and reading the book "The Bogleheads Guide to Investing", I finally realize that it's actually pretty simple to manage your own finances. And I feel a lot better knowing that I can do it myself rather than relying on the advice of a paid financial advisor (which I had done before and was probably the biggest investment mistake I've made).

Once you know how much $$ you need to live on, play around with the numbers in FireCalc and you can get a pretty good idea of how much you need to retire and when you do it.

Suggestion for your point #6: Take a deep breath.
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Old 05-06-2008, 11:02 AM   #4
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Hello Jeff, and welcome.

Your post suggests that you have $140,000 total assets; but $60,000 can't be realized without selling your house (which might be a valid option), and the balance is essentially untouchable for quite a few years. So, you're essentially starting from zero. Don't despair, that's still better than many people who have a negative net worth.

I suspect that you will have a very difficult time accumulating enough assets to retire within five years, unless your wife's post-retirement income (not identified in your post) will be sufficient to cover both of your living expenses. But whatever progress you can make will be much better than nothing.

I always recommend the book Your Money or Your Life, which should be available at your local library. There are also free study groups that you can join: see Introduction To The Study Groups - Your Money Or Your Life.

Good luck!
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Old 05-06-2008, 01:26 PM   #5
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Thanks for the welcomes everyone! I've been reading over some of the posts in the FAQ and the archive and there is sure some great info there. I don't have the time during the day, but I'll try out FIRECalc tonight.

Milton - You're right, I'm basicaly starting form $0. However, selling the house is definitely in the cards, since we want to move up to the CA Gold Country in the next two years. It's just a matter of timing and when the market turns around. Also, my wife has some 401k/IRA money, so that will be accessible after she retires.

As far as my wife's post-retirement income goes, I'll use her SS benefit as a baseline and anything else will be gravy. I also expect to work some after her retirement, just not full-time and on a contract or for-hire basis. For planning purposes, I'm estimating my income to be ~30% of what it is now.
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Old 05-06-2008, 01:52 PM   #6
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Quote:
Originally Posted by jeff_grimshaw View Post
I also expect to work some after her retirement, just not full-time and on a contract or for-hire basis. For planning purposes, I'm estimating my income to be ~30% of what it is now.
That should make a big difference.
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