Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
28 looking for advice... late start
Old 07-24-2013, 06:20 PM   #1
Dryer sheet aficionado
 
Join Date: Jul 2013
Posts: 33
28 looking for advice... late start

Hello everyone. I been feeling old lately and I been thinking about retirement . I haven't made good choices with my money before and is time to start thinking about my future. I am looking for any input and advice from members of this wonderful site.

My goal is to retire at the age of 45. We are shooting for $30,000 per year during retirement; in our area we can live well with that money.
Currently 28 and will be 29 in January. I am married and have two cats. We are planning on having kids within two years... no more than two .

Currently we have the following assets:
14k cash
1K my 401K
1K her 401K
100-120K home equity

Debt
80k mortgage

No car payments or student loans.

Our current income is of about 116K. I currently make 67k and the wife 49k. We are sending about 3k extra to the mortgage and we are going to start sending 4k on top of the mortgage payment in about 3 months. We are trying to pay off the house as soon as possible and it should be paid of by December of 2014.

My 401k contribution is 4% and my company matches 50% up to 6%. My wife's contribution is 4% and her company matches 50% up to 4%. I also have 1000 shares of a stock option that could be valued at around 25k if the company goes public.

Any advice?

Thanks
__________________

__________________
kikechico 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 07-24-2013, 06:56 PM   #2
Full time employment: Posting here.
Al in Ohio's Avatar
 
Join Date: Jun 2013
Location: Columbus OH
Posts: 688
How is it that you each have only $1,000 in you 401k's when your employers match more than that? You need to be slamming those hard each year and getting the maximum match from day 1. Then get up to 15% or more yourself in as few years as possible.
__________________

__________________
Ohio INTJ ENG ER Hopeful
Al in Ohio is offline   Reply With Quote
Old 07-24-2013, 07:12 PM   #3
Dryer sheet aficionado
 
Join Date: Jul 2013
Posts: 33
Quote:
Originally Posted by Al in Ohio View Post
How is it that you each have only $1,000 in you 401k's when your employers match more than that? You need to be slamming those hard each year and getting the maximum match from day 1. Then get up to 15% or more yourself in as few years as possible.
The wife just finished her PHD so she just started working and I was eligible for 401K just a few months ago.

thanks
__________________
kikechico is offline   Reply With Quote
Old 07-24-2013, 07:15 PM   #4
Full time employment: Posting here.
Jack_Pine's Avatar
 
Join Date: Apr 2013
Posts: 834
You will get a lot of good advise here. Welcome and good luck.

For me, I would at least contribute the max that the employers matches into 401. I did not do that until I was in my low 30's...mistake on my part IMHO.
__________________
The Constitution. It's not just a good idea...it's the law.
Jack_Pine is offline   Reply With Quote
Old 07-24-2013, 07:20 PM   #5
Full time employment: Posting here.
Al in Ohio's Avatar
 
Join Date: Jun 2013
Location: Columbus OH
Posts: 688
My path worked pretty well. Start out at say 6% on your end and increase 2% each year thereafter. I was at the legal max in my late twenties, then by 30 I was maxing the Roth as well. The sooner the better. Don't even get used to a full raise. I'd convert half my raises and bonus into investments before Ii could possibly experience the change in after tax income.
__________________
Ohio INTJ ENG ER Hopeful
Al in Ohio is offline   Reply With Quote
Old 07-24-2013, 07:26 PM   #6
Thinks s/he gets paid by the post
 
Join Date: Nov 2011
Posts: 2,356
If the rate on your mortgage is about 4% or less, don't prepay, rather extend it as long as possible: remember you repay with inflated (devalued) dollars. If inflation runs 3%, a 4% mortgage is costing you only 1%, and you can probably earn more than that by investing elsewhere.

Fund your 401k up to the match. A Roth IRA might be worth doing too. $30k/year expenses sounds like you are not planning to fund college for your children.
__________________
GrayHare is online now   Reply With Quote
Old 07-24-2013, 08:03 PM   #7
Dryer sheet aficionado
 
Join Date: Jul 2013
Posts: 33
Quote:
Originally Posted by Al in Ohio View Post
My path worked pretty well. Start out at say 6% on your end and increase 2% each year thereafter. I was at the legal max in my late twenties, then by 30 I was maxing the Roth as well. The sooner the better. Don't even get used to a full raise. I'd convert half my raises and bonus into investments before Ii could possibly experience the change in after tax income.
I just raised my contribution to 6%.

Thanks

Quote:
Originally Posted by GrayHare View Post
If the rate on your mortgage is about 4% or less, don't prepay, rather extend it as long as possible: remember you repay with inflated (devalued) dollars. If inflation runs 3%, a 4% mortgage is costing you only 1%, and you can probably earn more than that by investing elsewhere.

Fund your 401k up to the match. A Roth IRA might be worth doing too. $30k/year expenses sounds like you are not planning to fund college for your children.
I understand but I just want to have no debt. Like I said it will be paid off next year so I will only miss one year of maxing out my 401K. After I pay my house I will go all in.

An for my kids college, I will pay for a year of college and they can pay the rest. They can do what I did; 2 years of cheap community college and 2 years at the university. The wife got everything paid by scholarships even her PHD.
__________________
kikechico is offline   Reply With Quote
Old 07-24-2013, 08:11 PM   #8
Thinks s/he gets paid by the post
jollystomper's Avatar
 
Join Date: Apr 2012
Posts: 1,355
Quote:
Originally Posted by kikechico View Post
I understand but I just want to have no debt. Like I said it will be paid off next year so I will only miss one year of maxing out my 401K. After I pay my house I will go all in.
Remember the power of compounding. IMHO you don't want to miss out a year of maxing out your 401K when you are so young. That year will have many years for it to grow. It may not seem like a big deal but I think an extra year of 401K max will benefit you more than delaying paying down the mortgage for a year will hurt you (and you are also getting a tax break on the mortgage).

Also, does your 30K target for retirement account for both the cost of kids and inflation over the next 17 years?
__________________
Current target FIRE date: Under negotiation, can happen anytime.
jollystomper is online now   Reply With Quote
Old 07-24-2013, 08:51 PM   #9
Recycles dryer sheets
chasesfish's Avatar
 
Join Date: Feb 2013
Location: Marietta, GA
Posts: 124
You know, I used to have the same opinion that you do, wanted nothing more than to pay my house off. I then realized how little interest is due monthly on a 150k mortgage and see started maxing our 401ks, You can reduce your taxable income by $34,000, which is significant with you and your wife both working.
__________________
chasesfish is offline   Reply With Quote
Old 07-24-2013, 09:12 PM   #10
Dryer sheet aficionado
 
Join Date: Jul 2013
Posts: 33
Quote:
Originally Posted by jollystomper View Post
Remember the power of compounding. IMHO you don't want to miss out a year of maxing out your 401K when you are so young. That year will have many years for it to grow. It may not seem like a big deal but I think an extra year of 401K max will benefit you more than delaying paying down the mortgage for a year will hurt you (and you are also getting a tax break on the mortgage).

Also, does your 30K target for retirement account for both the cost of kids and inflation over the next 17 years?
I meant 30k cash today money at retirement, whatever that is in the future....

We probably can live well with 25k

Quote:
Originally Posted by chasesfish View Post
You know, I used to have the same opinion that you do, wanted nothing more than to pay my house off. I then realized how little interest is due monthly on a 150k mortgage and see started maxing our 401ks, You can reduce your taxable income by $34,000, which is significant with you and your wife both working.
Understand thanks.
__________________
kikechico is offline   Reply With Quote
Old 07-24-2013, 10:28 PM   #11
Recycles dryer sheets
Rothman's Avatar
 
Join Date: Apr 2013
Posts: 249
Your $30k goal would require a fund of about $1M to provide. Congrats on recognizing goal and wanting effort to achieve. If I read correctly you want that in only 15 years so your savings would have to be extraordinary. I agree taking all the match starting tomorrow, max out 401k as soon as possible after. Then back door Roth IRAs to max. If then you still fail and retire at 50 I guess you won't feel too bad, right?
__________________
Rothman is offline   Reply With Quote
Old 07-24-2013, 10:37 PM   #12
Full time employment: Posting here.
Al in Ohio's Avatar
 
Join Date: Jun 2013
Location: Columbus OH
Posts: 688
Quote:
Originally Posted by chasesfish View Post
You know, I used to have the same opinion that you do, wanted nothing more than to pay my house off. I then realized how little interest is due monthly on a 150k mortgage and see started maxing our 401ks, You can reduce your taxable income by $34,000, which is significant with you and your wife both working.
I had a 20 year mortgage at 9.5% and it was still more important to max my 401k than to speed up the mortgage payoff. That's when interest earnings were higher. You want both that mi tax credit and to tax defer as much of your income as possible while building early investment wealth that will compound.
__________________
Ohio INTJ ENG ER Hopeful
Al in Ohio is offline   Reply With Quote
Old 07-25-2013, 12:52 AM   #13
Recycles dryer sheets
Larro Darro's Avatar
 
Join Date: Jul 2013
Location: Altha
Posts: 161
Welcome. It has been said, but I will say it again. Max out your 401K's. The mortgage will still be there waiting on you. Anyway, the time to pay extra is at the beginning. Your money will have much more effect then than near the end.

And 28 is younger than most start planning for retirement. You can do it. Maybe not at 45, but still early. Good luck.
__________________
Make good money, five dollars a day.
Made anymore, I might move away.
Larro Darro is offline   Reply With Quote
Old 07-25-2013, 06:05 AM   #14
Recycles dryer sheets
chasesfish's Avatar
 
Join Date: Feb 2013
Location: Marietta, GA
Posts: 124
Just to be clear, you're doing a better job than 95% of people your age, The idea of having a home paid off at 30 is awesome and having a free and clear home is as much of a financial decision as it is a psychological decision.

At $80,000, your interest is probably $3,200/year.

At a 30% marginal income tax rate (25 fed, 5 state), you can defer paying $10,200 in taxes.


I am a couple years older than you, but my compromise was to put my remaining balance on a seven year loan at below 3%. I also have just enough in a regular taxable account to payoff the house if I got a wild hair tomorrow.
__________________
chasesfish is offline   Reply With Quote
Old 07-25-2013, 06:25 AM   #15
Dryer sheet aficionado
 
Join Date: Jul 2013
Posts: 33
Quote:
Originally Posted by Rothman View Post
Your $30k goal would require a fund of about $1M to provide. Congrats on recognizing goal and wanting effort to achieve. If I read correctly you want that in only 15 years so your savings would have to be extraordinary. I agree taking all the match starting tomorrow, max out 401k as soon as possible after. Then back door Roth IRAs to max. If then you still fail and retire at 50 I guess you won't feel too bad, right?
Thank you. Yes we want a 30k combined income. I will be fine working to 50 if I have to.

Quote:
Originally Posted by Larro Darro View Post
Welcome. It has been said, but I will say it again. Max out your 401K's. The mortgage will still be there waiting on you. Anyway, the time to pay extra is at the beginning. Your money will have much more effect then than near the end.

And 28 is younger than most start planning for retirement. You can do it. Maybe not at 45, but still early. Good luck.
Thanks

Quote:
Originally Posted by chasesfish View Post
Just to be clear, you're doing a better job than 95% of people your age, The idea of having a home paid off at 30 is awesome and having a free and clear home is as much of a financial decision as it is a psychological decision.

At $80,000, your interest is probably $3,200/year.

At a 30% marginal income tax rate (25 fed, 5 state), you can defer paying $10,200 in taxes.


I am a couple years older than you, but my compromise was to put my remaining balance on a seven year loan at below 3%. I also have just enough in a regular taxable account to payoff the house if I got a wild hair tomorrow.
I agree 100%. Most of the people that I know around my age do not have a cent. No home equity, huge student loans, no 401k and no savings at all. The people on this site are very blessed and IMO represent a really small percentage of my population.

I decided to max out my 401k and my wife's 401k next year and sent the rest of the money to my mortgage. If I do that by December of 2014 I should have a mortgage of 30k.

Oh and our current mortgage rate is 3.75 for 30 years.
__________________
kikechico is offline   Reply With Quote
Old 07-27-2013, 12:23 AM   #16
Full time employment: Posting here.
mountaintosea's Avatar
 
Join Date: Aug 2006
Posts: 553
Hey you can do it! In my early 40s I had around 80k. It occurred to me I might want to save for retirement even though I would receive a pension. By the time I was 55 I retired with 1m. So it took about 15 years. I tracked my expenses. Co-workers teased me because they thought I was miserly. But hey I retired at 55 quite suddenly because I was tired of the politics at work. I walked out never to look back. You can do it!
__________________
mountaintosea is offline   Reply With Quote
Old 07-27-2013, 04:54 PM   #17
Dryer sheet aficionado
 
Join Date: Jun 2008
Posts: 44
This is from a kidless person, so take it with a grain of salt, but if you reconsider having children you could probably significantly increase your chances of making it out by 45.

That's obviously a very personal decision and I'm not suggesting you don't have kids, just throwing it out there as food for thought.
__________________
intent is offline   Reply With Quote
Old 07-27-2013, 05:07 PM   #18
Thinks s/he gets paid by the post
Milton's Avatar
 
Join Date: Apr 2007
Posts: 2,062
Quote:
Originally Posted by kikechico View Post
The people on this site are very blessed and IMO represent a really small percentage of my population.
Luck is very important; but making the decision to become FIRE and accepting the necessary trade offs of LBYM is equally significant. Ultimately we all make choices (see Intent's post immediately above).
__________________
"To know what you prefer, instead of humbly saying Amen to what the world tells you you ought to prefer, is to have kept your soul alive". Robert Louis Stevenson, An Inland Voyage (1878)
Milton is online now   Reply With Quote
Old 07-27-2013, 06:30 PM   #19
Thinks s/he gets paid by the post
nash031's Avatar
 
Join Date: Jun 2013
Location: Coronado
Posts: 1,485
Quote:
Originally Posted by kikechico View Post
I just raised my contribution to 6%.

I understand but I just want to have no debt. Like I said it will be paid off next year so I will only miss one year of maxing out my 401K. After I pay my house I will go all in.
This is a mistake, IMO. Your first goal should be to build a rainy day fund in the event of a job loss, major medical expense, etc. The second goal should be to max your 401Ks. Then if you want to get debt free, that's an honorable goal. Doing steps two and three in reverse is going to cost you money, and the peace of mind isn't worth it in your late 20's. You can't double your savings rate into the tax-deferred account to make up for it and you won't ever get the compounding effect back.

All that said, I wouldn't say you're off to a late start. The bulk of people ten years younger than me don't have the first clue about retirement savings, and many don't own a home. You have more than you think! If you lay out a plan to retire by 45, I bet you can accomplish it!
__________________
nash031 is offline   Reply With Quote
Old 07-28-2013, 07:06 AM   #20
Recycles dryer sheets
chasesfish's Avatar
 
Join Date: Feb 2013
Location: Marietta, GA
Posts: 124
I forgot to add that I think it's entirely possibles you can retire in 15 years. The biggest choice you'll make then is what your spending levels will be relative to the cost of working an additional year,

You've received a lot of advice, but you're already most of the way there - you're living on 30-40% less than you make. Congratulations
__________________

__________________
chasesfish 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
Percentage of Salary to Save Based on Age You Start EvrClrx311 Young Dreamers 32 12-15-2012 01:46 PM
How Did You Get There and When Did You Start cscott711 FIRE and Money 51 01-05-2012 10:53 AM
Tenant late with rent? Aiming_4_55 Other topics 12 11-13-2011 03:07 AM
An intro is better late than never?? panacea Hi, I am... 19 10-06-2011 12:59 PM
When to start the goals? dawkins Young Dreamers 21 09-15-2011 12:57 PM

 

 
All times are GMT -6. The time now is 11:16 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.