How am I doing?

[viajera]

Hi! I was referred to this site over at the Simple Living Network and am getting some great information from this forum.

I just wanted to get some feedback on my own situation and desire for FIRE.

Age: 30
Salary: $34,000
I want to retire at age 45. I now save 54.5% of my income.
Cash: 22% a year, Total: $34,000 (CDs, MMA)
401k: 12% a year with 3% match. Total: $11,300 (small caps, large caps, international funds)
IRA: 0% a year, Total: $7,500 (balanced fund)
ROTH: 3.5% a year, Total: $2,500 (international and bond funds)
House fund: 17% a year, Total: $8,500 (matched every month by husband)
T-Bills/Bonds: $1,400
No credit card, mortgage, car loan or school debt.

Total Net Worth: $65,200

My husband is on his own path to ER with a state pension that he is paying into to withdrawal at age 55. He is six years older than me.

My husband and I live in my mom's very large house (worth about $500,000) which I will inherit. We live here to help her take care of it. She will not leave and it will fall apart without our time, money and effort. A big job and we don't own any part of it. A concern for us.

The best books I have read on ER are Your Money or Your Life, the Armchair Millionaire, the Terhorst's book and the Ferstenou's book and have implemented several points from each.

How am I doing? What could I do better?

 

[John Galt]

I think you are doing great as long as your Mom doesn't decide to leave her house to PETA

John Galt

 

[Austin_Explorer]

I would certainly recommend bumping up the Roth IRA to the max ($3000 this year, I think $4000 next year). You can always get to the contributions if you want that for emergency money. I'd also max out the 401k since you seem to have savings to spare, though maybe you're trying to increase your emergency fund, which is understandable.

Overall though, things look great!

 

[azanon]

The moment your mom dies, sell the house. I imagine the upkeep on a 500K dollar house and the pressures of the neighborhood its in would not be condusive to maintaining ER. Also the cash from the difference between the value of that house, and the value of a smaller replacement house would also be helpful towards maintaining ER.

 

[Nords]

The moment your mom dies, sell the house.

Well, sure, but...

If the "For Sale" sign goes up as the funeral procession passes by, it'll bring out every sleazebag low-balling buyer for miles. (Including me.) Serious offers will only happen in an overheated market. Otherwise everyone will be hoping to bottom-fish a grieving, distracted inheritor.

I'm not sure which is the concern-- having to maintain the house or having to do so without an equity stake.

If you can tolerate the home maintenance, life will be traumatic enough for the next few months to make it worth avoiding such a significant decision. Even for a fairly straightforward estate, executor duties are difficult enough without having to get a lawyer's letter every time a buyer makes an offer. (I've been there.) If you decide to sell, there's plenty of time to sell when you're ready to do so and you may be glad you waited until you're more on balance.

OTOH if you're dreading the maintenance burden, perhaps you'd be able to discuss the details with your mother now. Who knows, she may be feeling for you the same way you are. Many times those conversations don't get started because neither side knows how to (or is comfortably able to) broach the subject...

 

[Brat]

It sounds to me that viajera is depending on inheriting the house. We don't know how old her mother is, or the status of the mother's health. If Mom is 60-ish she could easily live another 25 years, and change her mind at her last breath about who gets the house. I have the impression that Mom is emotionally attached to the house.

Perhaps she could approach her mother about gifting ~$11,000 per year of value in the house. I know that that may be just a nibble of it's total value but it would help insure that the home would stay in the family and she has the posibility of appreciation. This type of agreement should be drawn up by a lawyer.

 

[retire@40]

It sounds to me that viajera is depending on inheriting the house.  We don't know how old her mother is, or the status of the mother's health.  If Mom is 60-ish she could easily live another 25 years, and change her mind at her last breath about who gets the house.  I have the impression that Mom is emotionally attached to the house.  

Perhaps she could approach her mother about gifting ~$11,000 per year of value in the house.  I know that that may be just a nibble of it's total value but it would help insure that the home would stay in the family and she has the posibility of appreciation.  This type of agreement should be drawn up by a lawyer.  

Have you thought of the tax consequences of your gifting strategy? Won't she miss out on the step up in basis upon death of her mother? The original poster said she WILL inherit the house. Wouldn't it make more sense to put the house in an irrevocable trust to avoid probate, protect it from nursing homes and creditors, and solidify the inheritance which would be at the stepped up basis?