Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Salary has accelerated to $425,000
Old 02-17-2018, 10:45 AM   #1
Recycles dryer sheets
 
Join Date: Dec 2017
Location: Chicago
Posts: 63
Salary has accelerated to $425,000

I am a 45-year-old male with a 41-year-old wife and three kids ages 10, 8 and 5. I have $810,000 in my 401(k), $100,000 at prosper.com, $200,000 invested at Peerstreet.com, and $50,000 at a third crowdfunding site called Fundrise. I think the stock Market is overvalued currently and moved my 401(k) money into more conservative funds in January , within my 401(k).

I am fortunate that my salary has increased significantly the last few years and would expect to make between $350,000 and $450,000 at my job going forward . I think I can save around $175,000 per year for the next seven years. I would like to retire or at least have the option to retire in about seven years.

My goal is to have $3 million between my 401(k) and funds outside it, plus another $250,000 in 529 plans.

I would like to Be able to pull around $120,000 from my investment annually once retired.

Do you think this is a viable plan? Thanks for any comments and suggestions.
__________________

underwrite is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-17-2018, 12:19 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Mar 2015
Posts: 2,633
Quote:
Originally Posted by underwrite View Post
My goal is to have $3 million between my 401(k) and funds outside it, plus another $250,000 in 529 plans.

I would like to Be able to pull around $120,000 from my investment annually once retired.

Do you think this is a viable plan?
Obviously it all depends on how conservative your investments actually are.

If you meet your portfolio goal, you'll probably have enough to pull close to $120k per year from it, depending on your portfolio returns. But you won't get to $3,250,000 without bigger savings, longer savings, or some risk in your investments. Maybe you'll get really lucky with your crowdfunding investments.

And you haven't included any information about Social Security or pensions - both of which could help assure your goals.
__________________

__________________
Old enough to know better.
joeea is offline   Reply With Quote
Old 02-17-2018, 12:22 PM   #3
Full time employment: Posting here.
 
Join Date: Mar 2012
Posts: 773
Quote:
Originally Posted by joeea View Post
But you won't get to $3,250,000 without bigger savings, longer savings, or some risk in your investments.
I'd contend that the $350k in P2P lending and crowdfunding is quite/too risky.
njhowie is offline   Reply With Quote
Old 02-17-2018, 12:24 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Mar 2015
Posts: 2,633
Quote:
Originally Posted by njhowie View Post
I'd contend that the $350k in P2P lending and crowdfunding is quite/too risky.
I agree. But it's unlikely to become a significant portion of a $3M portfolio.
__________________
Old enough to know better.
joeea is offline   Reply With Quote
Old 02-17-2018, 12:32 PM   #5
Full time employment: Posting here.
 
Join Date: Mar 2012
Posts: 773
Quote:
Originally Posted by joeea View Post
I agree. But it's unlikely to become a significant portion of a $3M portfolio.
But it is a significant portion of a $1.2M portfolio today.
njhowie is offline   Reply With Quote
Old 02-17-2018, 12:50 PM   #6
Thinks s/he gets paid by the post
 
Join Date: Mar 2015
Posts: 2,633
Quote:
Originally Posted by njhowie View Post
But it is a significant portion of a $1.2M portfolio today.
I'm not sure why that matters. But then I don't know the long-term growth estimates of crowd-funding, nor how much more the OP plans to invest in it.

If only $350k is invested in crowd-funding, and the rest is in a money market account, I'm not sure I see the OP reaching the stated goals.
__________________
Old enough to know better.
joeea is offline   Reply With Quote
Old 02-17-2018, 01:22 PM   #7
Thinks s/he gets paid by the post
Dash man's Avatar
 
Join Date: Mar 2013
Location: Limerick
Posts: 2,358
You didnít mention anything about debt. Is your mortgage paid off? No credit card or car loan debt? What are your expected expenses going forward? Health coverage?
Personally I wouldnít touch crowdfunding for investments, but I admit Iím not familiar with them. I like owning stock in growing financially healthy companies and dividend pay companies also financially healthy. My safe money is in CDs, a small amount in I-Bonds and 7 and 10 year treasury notes, some gold and silver, and four homes, two of which provide income.
I think you need at least 70% in the Stock market and timing doesnít work. There will be ups and downs in the market. Own stocks in strong companies and theyíll bounce back from a downturn. If financial fundamentals change, drop the stock. Youíre too young to take too little risk and hope to retire in seven years. Inflation will eat you alive if you invest too conservatively.
Dash man is offline   Reply With Quote
Old 02-17-2018, 01:37 PM   #8
Dryer sheet wannabe
 
Join Date: Feb 2018
Location: Atlanta
Posts: 19
Dude! Rock on! My only advice is lock down the spigot so the kids learn that it’s your money, not their immunity from responsibilities. Also, my experience is getting paid like that can extract a toll on you physically. If your inner voice starts asking if you really want to do this, think it through. I had to throttle down at about 48 when I started thinking that I must be right and shut out some loved ones telling me I was running hot. Best of luck to you and your family.
ClayMore is offline   Reply With Quote
Old 02-17-2018, 03:23 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Posts: 2,237
troll?
bingybear is offline   Reply With Quote
Old 02-17-2018, 05:03 PM   #10
Full time employment: Posting here.
 
Join Date: May 2007
Posts: 753
Quote:
Originally Posted by bingybear View Post
troll?


Most certainly.
Letj is offline   Reply With Quote
Old 02-17-2018, 07:22 PM   #11
Recycles dryer sheets
 
Join Date: Dec 2017
Location: Chicago
Posts: 63
Quote:
Originally Posted by njhowie View Post
I'd contend that the $350k in P2P lending and crowdfunding is quite/too risky.
Good point. My thought process is the economy will continue to do well so consumer loans will do well. However, rates may increase and therefore stock valuations could go down. Who knows?....could be wrong, but that's what I'm going with for now.
underwrite is offline   Reply With Quote
Old 02-17-2018, 07:33 PM   #12
Recycles dryer sheets
 
Join Date: Dec 2017
Location: Chicago
Posts: 63
Quote:
Originally Posted by Dash man View Post
You didnít mention anything about debt. Is your mortgage paid off? No credit card or car loan debt? What are your expected expenses going forward? Health coverage?
Personally I wouldnít touch crowdfunding for investments, but I admit Iím not familiar with them. I like owning stock in growing financially healthy companies and dividend pay companies also financially healthy. My safe money is in CDs, a small amount in I-Bonds and 7 and 10 year treasury notes, some gold and silver, and four homes, two of which provide income.
I think you need at least 70% in the Stock market and timing doesnít work. There will be ups and downs in the market. Own stocks in strong companies and theyíll bounce back from a downturn. If financial fundamentals change, drop the stock. Youíre too young to take too little risk and hope to retire in seven years. Inflation will eat you alive if you invest too conservatively.
Thanks for pointing out the additional info. Fortunately, we have paid off all of our debt, including mortgage, cars, credit cards, etc. Guestimate of spending is around $130,000/year. Health coverage is through work. It's a high deductible plan. With 3 young kids, it's not uncommon for us to spend $15,000 - $20,000 per year on healthcare premiums plus the money to meet our deductible. I've never been much of a market timer, but I do think int rates are going to normalize and equity valuations with then normalize too. Guess we'll see. I've generally had the 401k in growth funds for most of my career up until the last month or so. Stocks went down, but have obviously recovered since then.

Part of our issue is that we had kids later in life, so if i were to retire, they'd still be in our house / just starting college. That throws a little wrench is our budget for the first few years if I do retire early.

I didn't mention that we've saved $60k in 529 plans so far.

I'd probably take Social Sec starting at 62.
underwrite is offline   Reply With Quote
Old 02-17-2018, 07:37 PM   #13
Recycles dryer sheets
 
Join Date: Dec 2017
Location: Chicago
Posts: 63
Quote:
Originally Posted by ClayMore View Post
Dude! Rock on! My only advice is lock down the spigot so the kids learn that itís your money, not their immunity from responsibilities. Also, my experience is getting paid like that can extract a toll on you physically. If your inner voice starts asking if you really want to do this, think it through. I had to throttle down at about 48 when I started thinking that I must be right and shut out some loved ones telling me I was running hot. Best of luck to you and your family.
Great advice. I need to think through the kid thing a bit more. As far as the job goes, I hear you. Fortunately, it's not much more than 45-50 hours per week, but the stress of making decisions that impact a lot of people does get to me. I kinda miss the old days when I just had to take care of myself. I think that is the main thing that's motivated me to consider early retirement.
underwrite is offline   Reply With Quote
Old 02-18-2018, 10:19 AM   #14
Recycles dryer sheets
 
Join Date: May 2015
Posts: 54
You mentioned that you felt the market is overvalued. In some ways it is overvalued. However, you pulled your money from your 401K and put it in more conservative investment and then have a bunch of it in crowdfunding.

Crowdfunding would be in the category of some the most risky investments. Essentially you are investing in someones idea that may or many not take up as a startup. Most startups fail.

Wouldn't you risk be lower if you just have kept the money in the market, kept a reasonable asset allocation and ride the wave? Historically stocks have had more good runs than bad.

175K x 10 years = 1750000 add some compounding interest and it may get to 3 million when you add your existing money.

I think you are in good shape but think you may want to rethink your strategy.
slv1 is offline   Reply With Quote
Old 02-18-2018, 11:03 AM   #15
Full time employment: Posting here.
 
Join Date: Mar 2012
Posts: 773
Thanks for the clarification on some of the posts. I was going to mention some points brought up in Dash man's reply, but thought it was getting away from what you were asking.

An additional item - be sure that you have sufficient life insurance. As a high-earner, should catastrophe strike, it would likely have a big impact on your family financially. To protect $400k annual salary, I'd normally say to get a policy for $2M-$4M. However, since you indicated that you have paid off your home and have no debts, $1M-$2M with a 20-year policy is probably sufficient. Don't overlook the need for it, or try to save the annual cost - it's not worth the risk.

I can appreciate your view on the stock market being overvalued and your logic for the P2P and alternative investments. However, just keep in mind that the folks you are lending to have chosen to get funding from you because it was an easier and less expensive route than going to a bank (in a period of loose monetary policy and all-time low interest rates), where they would likely face more intense scrutiny and have a higher probability of being denied. Also, when P2P loans go bad, understand that the platform you are investing through does not do much in the way of pursuing the borrower to get your funds back. At the end of the day, my belief is that the additional amount you (might) make on the P2P/crowdfunding on a risk adjusted basis will not be justified.

While the stock market is likely overvalued, there is still a massive chase for yield taking place. I believe those opting for P2P lending exemplify this.

Lastly, I've found that during my peak earning years, though it can be fun sitting down, playing with the numbers, and dreaming about the end game, it's much more important to focus on the near-term - just do what you can day after day to save and invest prudently. When you look to hit targets, invariably it leads to taking more risk in an attempt to juice returns to get (back) on track. Be sure you have sufficient emergency savings, insurance, etc. - having a great defense with a good offense is better than a great offense and a weak defense.
njhowie is offline   Reply With Quote
Old 02-18-2018, 03:35 PM   #16
Recycles dryer sheets
 
Join Date: Dec 2017
Location: Chicago
Posts: 63
Quote:
Originally Posted by slv1 View Post
You mentioned that you felt the market is overvalued. In some ways it is overvalued. However, you pulled your money from your 401K and put it in more conservative investment and then have a bunch of it in crowdfunding.

Crowdfunding would be in the category of some the most risky investments. Essentially you are investing in someones idea that may or many not take up as a startup. Most startups fail.

Wouldn't you risk be lower if you just have kept the money in the market, kept a reasonable asset allocation and ride the wave? Historically stocks have had more good runs than bad.

175K x 10 years = 1750000 add some compounding interest and it may get to 3 million when you add your existing money.

I think you are in good shape but think you may want to rethink your strategy.
Thanks for your comments. It will be interesting to see what happens with the market as the debt starts to explode and quantitative easing reverses this summer. Thereís always something to worry about, and perhaps Iím overreacting this time. Time will tell and I certainly wonít stay out of the market for too long.
underwrite is offline   Reply With Quote
Old 02-18-2018, 03:49 PM   #17
Administrator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 29,084
Quote:
Originally Posted by underwrite View Post
I am a 45-year-old male with a 41-year-old wife and three kids ages 10, 8 and 5. I have $810,000 in my 401(k), $100,000 at prosper.com, $200,000 invested at Peerstreet.com, and $50,000 at a third crowdfunding site called Fundrise. I think the stock Market is overvalued currently and moved my 401(k) money into more conservative funds in January , within my 401(k).

I am fortunate that my salary has increased significantly the last few years and would expect to make between $350,000 and $450,000 at my job going forward . I think I can save around $175,000 per year for the next seven years. I would like to retire or at least have the option to retire in about seven years.

My goal is to have $3 million between my 401(k) and funds outside it, plus another $250,000 in 529 plans.

I would like to Be able to pull around $120,000 from my investment annually once retired.

Do you think this is a viable plan? Thanks for any comments and suggestions.
Welcome aboard, underwrite. A few comments. If you're considering retiring in 7 years, it would be to your benefit to have a more detailed understanding of your expenses. This post may help Some Important Questions to Answer Before Asking - Can I Retire?

You might find taking SS at 62 to be a less than optimal option. Finding a way to push that date into the future could reduce the overall retirement financial risk. Finally, a $3M portfolio should support a $120K spending level, although some here might find it a bit stretched. What I don't see is how you get there with your current portfolio plus 7 years @ 175K without a fair amount of portfolio growth, which you don't feel exists right now. The math seems to lead to 10 years or so, using those numbers. No doubt, though, that you do have the ingredients here for an early retirement. Not an easy thing these days, so congrats.
MichaelB is offline   Reply With Quote
Old 02-18-2018, 04:17 PM   #18
Recycles dryer sheets
 
Join Date: Dec 2017
Location: Chicago
Posts: 63
Quote:
Originally Posted by njhowie View Post
Thanks for the clarification on some of the posts. I was going to mention some points brought up in Dash man's reply, but thought it was getting away from what you were asking.

An additional item - be sure that you have sufficient life insurance. As a high-earner, should catastrophe strike, it would likely have a big impact on your family financially. To protect $400k annual salary, I'd normally say to get a policy for $2M-$4M. However, since you indicated that you have paid off your home and have no debts, $1M-$2M with a 20-year policy is probably sufficient. Don't overlook the need for it, or try to save the annual cost - it's not worth the risk.

I can appreciate your view on the stock market being overvalued and your logic for the P2P and alternative investments. However, just keep in mind that the folks you are lending to have chosen to get funding from you because it was an easier and less expensive route than going to a bank (in a period of loose monetary policy and all-time low interest rates), where they would likely face more intense scrutiny and have a higher probability of being denied. Also, when P2P loans go bad, understand that the platform you are investing through does not do much in the way of pursuing the borrower to get your funds back. At the end of the day, my belief is that the additional amount you (might) make on the P2P/crowdfunding on a risk adjusted basis will not be justified.

While the stock market is likely overvalued, there is still a massive chase for yield taking place. I believe those opting for P2P lending exemplify this.

Lastly, I've found that during my peak earning years, though it can be fun sitting down, playing with the numbers, and dreaming about the end game, it's much more important to focus on the near-term - just do what you can day after day to save and invest prudently. When you look to hit targets, invariably it leads to taking more risk in an attempt to juice returns to get (back) on track. Be sure you have sufficient emergency savings, insurance, etc. - having a great defense with a good offense is better than a great offense and a weak defense.
I have $1 million in life insurance. Probably slightly less than I should have. Iíll feel good when the 529 plans are better funded. I really like your comments about focusing on the near term. I feel obsessed currently with looking at the long-term targets.
underwrite is offline   Reply With Quote
Old 02-18-2018, 04:36 PM   #19
Recycles dryer sheets
 
Join Date: Dec 2017
Location: Chicago
Posts: 63
Quote:
Originally Posted by MichaelB View Post
Welcome aboard, underwrite. A few comments. If you're considering retiring in 7 years, it would be to your benefit to have a more detailed understanding of your expenses. This post may help Some Important Questions to Answer Before Asking - Can I Retire?

You might find taking SS at 62 to be a less than optimal option. Finding a way to push that date into the future could reduce the overall retirement financial risk. Finally, a $3M portfolio should support a $120K spending level, although some here might find it a bit stretched. What I don't see is how you get there with your current portfolio plus 7 years @ 175K without a fair amount of portfolio growth, which you don't feel exists right now. The math seems to lead to 10 years or so, using those numbers. No doubt, though, that you do have the ingredients here for an early retirement. Not an easy thing these days, so congrats.
Thanks for that information. Yes, I think 10 years is more likely. Another option is go seven years and then get a lower key job for 3 to 5 years. Iíll check out the link you sent.
underwrite is offline   Reply With Quote
Old 02-18-2018, 04:42 PM   #20
Recycles dryer sheets
 
Join Date: Jan 2015
Location: Midwest (Not Quite The Boondocks)
Posts: 74
I have nothing to add, but do have a question. I have some money in P2P lending, and PeerStreet has been on my radar for a bit. How's PeerStreet specifically working out for you?
__________________

DROPOUT is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
10.425% withdrawal rate succeeds in FIREcalc! SecondCor521 FIRE and Money 8 07-04-2008 12:22 PM
On $20,000 Salary Parking Lot Attendant Saves and Invests Has $500,000 Portfolio haha FIRE and Money 11 09-18-2007 08:26 PM
$20,000,000,000 in Taxes. mickeyd FIRE and Money 12 11-01-2006 04:49 PM
$423,000,000,000.00 Howard Other topics 25 02-08-2006 02:59 PM
$2,000,000,000,000- Happy 55th mickeyd Other topics 12 12-28-2004 08:19 AM

» Quick Links

 
All times are GMT -6. The time now is 11:04 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.