Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Help a noob
Old 09-12-2008, 07:08 PM   #1
Confused about dryer sheets
Join Date: Sep 2008
Posts: 2
Help a noob

I am new on this forum. I hope I can find people to advise me on how I can reach FIRE. Here is my situation:

I am 32 with
Cash: 35k
Real Estate: 240k
Emergency Fund: 45k
Student Loan: -25.8K
Mortgage Debt: -120k
Therefore NW = 174k

Monthly income = 6.6k
Monthly expenses = 3.6k
Monthly savings = 3k

When do you think I can reach FIRE? How much do I need to FIRE?

I am not sure how to invest my cash and future savings. Friends tell me to put 15k per year in 401k, it is my first year working in the US, so I am discovering that possibility. But I also want to have available cash in case I find a good real estate or business opportunities.

Thanks for commenting

Hope 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 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 09-12-2008, 08:18 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
Join Date: Mar 2007
Posts: 8,490
Welcome. Have you used an online retirement calculator? I find the free one available at Fidelity to be convenient. A calculator should give you a ballpark idea of how much you need to save. Roughly speaking, you need 25 times the annual amount you intend to withdraw annually, before taxes. Naturally you'll need to project inflation to the date when you 'll retire.

As far as investments, make sure that you at least contribute enough to get any employer match in your 401(k). You can also contribute to a Roth IRA and withdraw any investment, penalty free at any time. Earnings need to be left until you are 59 1/2 unless you jump through some hoops.

A Target Retirement fund makes a decent choice if you do not want to get too deeply involved in asset allocation decisions. Since you are saving $36K a year, you'll need to also save in a taxable account. Avoid owning bonds or a managed stock fund in a taxable account. A total stock market index fund works well in a taxable account because it does not generate much capital gains and when you sell, the capital gains are taxed at a lower rate (at least now).

Yes, I have achieved work / life balance.
travelover is online now   Reply With Quote
Old 09-13-2008, 04:07 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Feb 2007
Posts: 5,075
Welcome Hope. There is no simple answer. You will need to educate yourself.

Asking the question is the first step!

I would advise you to better understand your expenses if you ERd. Your current expenses are not adequate. You will drop some expenses and gain some (Health insurance for one). That will help you understand how much money you need to support yourself (and perhaps family) for the remainder of your life.

If I were to take a wild guess. Assuming you are a working stiff and continue done that path. I would say you might be able to prepare yourself by the time you hit 55 if you diligently LBYM, Save and invest properly.

Start with 55 and do some projections.
chinaco is offline   Reply With Quote
Old 09-13-2008, 05:52 AM   #4
Recycles dryer sheets
Join Date: Sep 2007
Posts: 458
Here's the formula I use.

Your monthly expenses, excluding retirement savings, are $3,600. Let's assume you want to retire at 55. That's 23 years from now, so assuming 3% inflation, you'll need $7,100/month to equal your current monthly expenses, or $85,200/year, after taxes. That works out to roughly $120,000 in pre-tax income. At a 4% SWR, you'd need $3,000,000 in investment assets to generate that much income.

So how to get there from here? You currently have $80,000 in investment assets (the cash and your emergency fund), and you're investing $3,000/month. Assuming you earn an average return of 7%, then by my projections, that will grow to $2.4 million. You'll fall a little short, but I wouldn't worry about it. There are several factors that can change this dramatically:

1. I included your mortgage in your monthly expenses. Most likely, it will be paid off by the time you retire, thus your monthly expenses will actually be less than $7,100.
2. I didn't account for any other sources of income at all. While it's true you can't start collecting Social Security at 55, it will eventually kick in later on, taking some of the pressure off your portfolio.
3. I used a pessimistic rate of return. I like to use 7% in my calculations to allow for some wiggle room, but it's possible the market could in fact outperform this estimate, as it has historically.
4. If you wait 3 more years (to age 58 ), or increase your monthly contributions by 3% per year, you'll get your $3 million.
5. I didn't account for any windfalls. I didn't know if you stood to inherit any additional assets or not.
6. Inflation could grow at less than 3%. This lessens the amount you'd need in order to retire, but it could also spell a drag on your portfolio performance.

Hope this helps.
kombat is offline   Reply With Quote
Old 09-13-2008, 07:49 AM   #5
Confused about dryer sheets
Join Date: Sep 2008
Posts: 2
Thank you for all your helpful answers.

My monthly expenses would drop to $1200 per month as I would live rent free outside of the USA. Therefore, according to kombatís logic I need $1,000,000 to FIRE. Assuming a 7% rate of return on my portfolio and 50K of savings per year (include my 14K year end bonus), I should FIRE at 45 with $1,000,000.

However, I would prefer to invest in Cash Flow generating assets. If I can use the $80K to create a business that would bring me a monthly net cash flow of $1200, I could FIRE immediately. Even if I fail, I could try again and again with my 50K saving per year.

Am I being realistic or am I dreaming?
Hope is offline   Reply With Quote

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
Advice for a Noob? kevman Young Dreamers 10 09-04-2008 04:58 PM
Noob strategy question Sonflower FIRE and Money 6 08-19-2008 08:34 AM
Don't Call Me Noob!! Sinny Hi, I am... 15 08-17-2008 06:55 PM
Advice for a noob QuikStang03Mach Young Dreamers 17 08-11-2008 12:13 AM
27yo noob boostah Hi, I am... 6 01-15-2006 12:16 PM


All times are GMT -6. The time now is 12:05 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.