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Hoping to retire by 45
Old 08-12-2012, 09:42 PM   #1
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Hoping to retire by 45

Been following this forum for a while. This is my first post. I just turned 37 and the wife and I are planning on retiring in 7 years on a budget of about $80-90k/yr.

We are currently debt free except two 10 year mortgages (one rental) which we will have paid off by our 7 year deadline.

One of the things that may throw a wrench in our plan is saving for college. We have a 2 yr old currently and I have already started putting some money in a 529 plan, but I have no idea how much college is going to set us back in 15 years.

We have about $700k in non-retirement funds currently and about $300k in a mix of IRAs and 401(k). We will also be relying on some income from our rental property.

Hope we can make it!
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Old 08-13-2012, 08:41 AM   #2
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Hi and welcome from another newbie. We're planning on retiring next year at around 40ish... there are a few of us around that age on this forum (mind you, the board skews ooold.. ha) Are you planning on retiring cold turkey or will this be more of a sabbatical thing or are you going to transition into being a landlord ?
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Old 08-13-2012, 09:09 AM   #3
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I think you need to crunch numbers more given the ambitiousness of your plan and the high level of spending. At a 3% WR, which is the most I would be comfortable with at such an early retirement age, you would need a $2.83 million nestegg at age 45 plus whatever you need for college.

I suggest that you run you plan through Quicken's Lifetime Planner (part of Quicken Deluxe and higher). You can also run what-if scenarios. Or you could give Firecalc a try.
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Old 08-13-2012, 09:14 AM   #4
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Quote:
Originally Posted by 5971 View Post
I just turned 37 and the wife and I are planning on retiring in 7 years on a budget of about $80-90k/yr.

We have about $700k in non-retirement funds currently and about $300k in a mix of IRAs and 401(k). We will also be relying on some income from our rental property.
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At a 3% WR, which is the most I would be comfortable with at such an early retirement age, you would need a $2.83 million nestegg at age 45 plus whatever you need for college.
Without knowing projected rental prop income, you plan to roughly triple your $ assets in 7 years. That's some aggressive saving & returns. Best of luck...
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Old 08-13-2012, 01:00 PM   #5
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Without knowing projected rental prop income, you plan to roughly triple your $ assets in 7 years. That's some aggressive saving & returns. Best of luck...
Thanks for replies. I just have an excel spreadsheet that I use and haven't used Quicken or FireCalc yet, but will.

I agree with the above responses. I was planning on having than 2.8 million in total assets before retiring completely.

In 7 years we should have both mortgages paid off. Total property value of just over a million. I may just sell the rental property at that point if the market rebounds. We have avoided paying the mortgages off since we have less than 10 years and both are sub 4%.

We have a combined income of about $550k currently. I don't expect that to go up much over the next seven years. We spend about $100k a year on mortgages, insurance and property taxes and about $85k on other expenses. We have saved in non-retirement funds approximately $150-$170k a year over the last two years. Hopefully we can continue that pace, which would put us close to $2 million in non-retirement funds in 7 years (if the market doesn't tank).

Also I'm able to put away $48k a year in my 401k. No employer match unfortunately and we don't qualify for IRAs anymore . That should get our retirement funds to around $700k. Not counting on any ss as I'm sure that program will be bankrupt by the time I hit 62.

A newborn and college looming some 10 years after we retire is the one variable that is throwing my calcs off. I already started a 529 plan but not sure if this is the right way to go.
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Old 08-14-2012, 03:52 PM   #6
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Trying to figure out college savings is a tough one. We have 3 kids, our oldest is starting college this year. We were barely able to save anything for a college fund as we started our family when we were young and lived on a single income.

Our daughter had several options for colleges, she could have attended two instate schools that with a combination of scholarships she recieved would have been essentially free. We opted for an out of state school as it should better prepare her for the path she's chosen. She did recieve a rather sizeable merrit based scholarship, but we're still going to have about $120k in out of pocket expenses, without the scholarship it would be over $200k

Hard to say what the economy is going to be like in 15 years, affects of inflation etc. but the way things are going figuring on having $300+k for a college fund likely won't be excessive. The question you need to answer for yourself is how much control do you want over how the funds will be spent as well as how limited do you want to be on your options to spend it, or penalties if the funds don't end up being used as planned.
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Old 12-21-2012, 09:44 PM   #7
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Just a personal end of the year update:

1. I was leery of putting more money in the market over the last several months, so cash and non retirement accounts are stuck at around $700k. If we save $150k/yr over the next 7 years at 5% interest we will make it to around $2.3 mil.

2. Retirement accounts at $325k

3. Instead of putting money in the market, I put a chunk of money towards our primary home mortgage. We will now have this house paid off in just over 5 years.

4. Our rental property is going strong. I hope our current tenant stays for several years. Still just under 7 years left on the mortgage.

5. I did start a 529 with $2500. We will plan on contributing $500 a month and see how it goes

6. Eagerly awaiting the end of the fiscal cliff and whether or not the bush tax cuts will be extended for us.
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Old 12-21-2012, 10:06 PM   #8
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If we save $150k/yr over the next 7 years at 5% interest...
Please let me know where I can get 5% interest.
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Old 12-22-2012, 10:36 AM   #9
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Very commendable net worth for age. A couple of thoughts on your post. If you and spouse are taking down 550k/yr, you are working your ass off and most people just can't do this for decades, so I commend you also for planning an exit. I would recommend a written investment plan and as noted above, become a spreadsheet ninja and track assets and spending. I have three 529 plans and one prepaid state college plan (to hedge bets on college inflation costs). I get a state tax deduction for both types of plans and the plans are actually VERY flexible in terms of shifting to other siblings, etc. Getting reimbursed is also very easy. I would look into Series I bonds for some of your taxable monies (makes even more sense with your income and subsequent big target on your back) as well as muni's. Also, the max for a 401k is up to 51k (your 401 k administrator may not tell you this) and I would contribute to a nondeductible IRA. Good luck!
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Old 12-22-2012, 07:20 PM   #10
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If you want to be sure to pay off the mortgage in 5 years, take a look at the Penfed 1.99% home equity loan. You could take out a loan for the remaining balance and use it to pay off your current mortgage.

Here it is- https://www.penfed.org/home-equity-loans-overview/
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Old 12-23-2012, 09:10 PM   #11
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Thanks to all for the comments. Our state unfortunately does not allow for 529 deductions. I have not heard of the penfed HELOC but I will take a look at it.

The goal is to get to $2 mil in Non-retirement accounts and have both mortgages paid off. If we are able to continue to save at our current rate, even at 3% annual returns we should make it (and for the last 2 years we will only have one mortgage).

Our rental currently nets us about $21k/yr. At a withdrawal rate of 3.5%, that will put us around 90k/yr. We will also have our Retirement accounts available 15 years after we ER.

I will try to update our status quarterly.
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Old 12-23-2012, 11:30 PM   #12
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Not a HELOC but a HE loan. Interest is still deductible and it's an installment loan, not an open line of credit.
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Old 12-24-2012, 07:42 AM   #13
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Our state unfortunately does not allow for 529 deductions.
Hmmmmm....may not allow the deduction at the state level, but Tennessee plan is federally tax deductible....

TN Stars 529 Program
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Old 12-24-2012, 01:09 PM   #14
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Hmmmmm....may not allow the deduction at the state level, but Tennessee plan is federally tax deductible....

TN Stars 529 Program
That's the plan that we have. Not sure what you mean here. Contributions do grow Tax deferred and distributions are not taxed at a federal level. The post that i was replying to discussed state income tax deductions. Tn does not have state income tax, just tax on distributions >$2.5k annually.

I looked into the penfed HE loan. Given our current amortization schedule and interest rate of 3.25, the closing costs would probably make it a wash at a 2% loan rate for 60 months. I am going to call them later this week to give me a better estimate. Thanks for the info, though.
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Old 12-24-2012, 01:15 PM   #15
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Please let me know where I can get 5% interest.
Apparently, you can make 5% (a month) in the FOREX market according to another post
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Old 12-24-2012, 01:25 PM   #16
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The Penfed HEL has no closing costs (they cover them) except maybe an appraisal as long as you don't pay it off earlier than 36 months, in the conditions at the bottom of the page. The loan is also simple interest so extra would go directly to principal.

See this thread, rates were higher at the time.
http://www.bogleheads.org/forum/viewtopic.php?t=81281
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Old 12-24-2012, 01:27 PM   #17
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The Penfed HEL has no closing costs (they cover them) except maybe an appraisal as long as you don't pay it off earlier than 36 months, in the conditions at the bottom of the page. The loan is also simple interest so extra would go directly to principal.

See this thread, rates were higher at the time.
Bogleheads • View topic - Sub-3% no-closing cost refis?
Ty. Will definitely call them on the 26th!
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Old 12-24-2012, 08:54 PM   #18
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1) Congrats on your savings at age 37 - impressive!

2) I use mint.com to track our expenses- everything runs on autopilot once you fill in all your account info. One thing I have noticed over the years is that when you payoff/refi a mortgage, mint has a tendency to vaporize the account (like it never existed). So now I manually enter loan values each month from an amortization table.

3) College tuition is a racket. Student loans are the next mortgage bubble, if you ask me. Go to Lynn O'Shaunessy's college solution blog to read about the right way to find a reasonable college education, THEN go and choose your savings vehicle (529's are just fine by me).

Us Gen-X'ers are definitely outnumbered on this Forum, which is strange... I don't understand why people call themselves 'Early Retired' at age 63!
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Old 12-24-2012, 10:09 PM   #19
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Us Gen-X'ers are definitely outnumbered on this Forum, which is strange... I don't understand why people call themselves 'Early Retired' at age 63!
Baby Boomer angst: age 63 is 17 four years "earlier" than the financial media would have us believe we can retire...

I suspect that a couple years after the next bull market starts roaring, you'll see a huge crowd of Gen-X'ers showing up wondering what to do with their stock options and their 401(k)s.
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Old 03-29-2013, 09:40 AM   #20
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2013 Quarter 1 update:

We spent a little more than planned around the holidays and also spent about $10K rennovating our living room and part of our kitchen. We also made a little bit less than in a typical quarter. Consequently, we saved less than we do typically .

An opportunity also came up to purchase a rental property near us and we took it. We took $175K out of our non-retirement accounts to purchase a single family home with assessed value of $200K and have renters in the property already. We did a lot of research, went back and forth for a while, and then finally took the plunge. We now have two rental properties. One paid off and one that has 6+ years left on a 10yr mortgage. I hope it works out to be a good decision for us. Right now the rental properties are bringing in about $3k/month.

At the suggestion of PennState I opened a PenFed account, and filled out an app for the 1.99% HEL to pay-off our primary home. I dragged my feet a little bit and the customer service at PenFed hasnt been the greatest. The rates are now up to 2.49% . I still think we will still do it, however, as it will probably save us close to $10K on the remainder of that loan.

Also started a Mint.com account (thanks Ejw). It has been helpful with tracking our expenses, but not as helpful with tracking our net worth as I've had to add and edit a lot of things manually.

529 plan is on autopilot at $500 a month.

I've started putting away some money for a new car in 2014/15 and a big family vacation that I promised the DW for 2014.

Still hoping for class of 2019 (early 2020), but will likely need some help from the market to get to our goal for our non-retirement accounts. The expiration of the Bush tax cuts will definitely impact us, and I think 2020 is going to be more realistic.

Summary:
RA - $370k
Non RA - $550k (cash, mutual funds, stocks)
Real Estate - $675K (estimated equity)
529 -$4k

Debt - $500K (two mortgages).
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