How are we Doing ?

[atfourty]

Guys,
Here is our situation:
My age 32,My wife's 28.
Total Annual salary:145,000.

Home Equity:153K
Business Partner shares value : 100K

Non-Retirement Investmnets + Cash = 100K

Retirement Investments=175K
Total Networth :525,000K



Yearly expenses : 35 K



[FONT=&quot] I am planning on putting away about 25K in retirement for next 8 years.
Also planning on putting away about 24K in non-retirement for next 8 Years.

Can we retire in 8 yrs when i am of age 40?

Thanks,[/FONT]

 

[aaronc879]

You say you earn $145K/yr? Take 145,000-25,000 tax deferred savings=$120,000. Subtract say 20% taxes=$96,000. Then subtract the $24,000 taxable savings=$72,000/yr. You say your expenses are only $35K/yr. Where's the other $37,000/yr going.

You seem to be off to a great start, i'm just trying to understand the numbers.

 

[heeyy_joe]

You are doing good and provided you are happy.

 

[atfourty]

You say you earn $145K/yr? Take 145,000-25,000 tax deferred savings=$120,000. Subtract say 20% taxes=$96,000. Then subtract the $24,000 taxable savings=$72,000/yr. You say your expenses are only $35K/yr. Where's the other $37,000/yr going.

You seem to be off to a great start, i'm just trying to understand the numbers.

Actually my wife might start working partime ..so that explains the 37K. and our expenses are more like 40K

 

[JoeWras]

You are doing great for your age. Most 28 or 30 year olds are wondering how to pay their next cell phone bill. Savings are a dream.

That said, you ask if you can retire at 40. I doubt it. You say expenses are 35K per year. Did you think about health insurance? 35k seems light.

I'm just guessing here. You really need to analyze your expenses carefully. My "gut feel" based on my experience and reading a whole lot here is that you will probably be shooting for somewhere between 45 and 55... not 40.

 

[bow-tie]

40 is completely achievable, but you have to put the screws to the expenses. Not doing that could force you to use a withdrawl rate that has a high risk of not lasting your lifetime.

Even in a worst case, you and/or your wife work a little bit throughout the year to cover the difference between your yearly expenses and the $ your nestegg throws off.

Perhaps a bigger question should be: do you have any youngins or plan on having any?

 

[Midpack]

You are doing well. As for when you can retire, have you plugged your numbers and assumptions into FIRECalc: A different kind of retirement calculator? It's free, and it'll show you how you would have done throughout past history back to 1871.

 

[YoungSaver]

Your income and savings numbers sound good, but your expenses sound a bit high. I assume your house is paid off, and a 153K house shouldn't have too high of property taxes.

I think if you analyze your expenses, you will be able to find some fat to trim, and make 40 a reality.

(I'm the same age, with a 150k house, but I'm just one person, and my expenses excluding mortgage are exactly half of yours.)

 

[atfourty]

40 is completely achievable, but you have to put the screws to the expenses. Not doing that could force you to use a withdrawl rate that has a high risk of not lasting your lifetime.

Even in a worst case, you and/or your wife work a little bit throughout the year to cover the difference between your yearly expenses and the $ your nestegg throws off.

Perhaps a bigger question should be: do you have any youngins or plan on having any?

Yes, my wife is 10 weeks pregnant with our first child.

 

[lrak]

Yes, my wife is 10 weeks pregnant with our first child.

Do you have trustworthy family nearby? Are you accounting for day-care or reducing to part-time employment for one of you? Have you budgeted $250k for state college plus diapers, toys, clothes, birthday parties, zoo memberships, Disney tickets, iPods, etc? I personally would cut back that expected $24k in non-retirment savings to $4k and re-run the numbers.

I was feeling great about retirement when I was 29. Then I had two kids, my wife stopped working, and the economy tanked. I now joke that I am only a million dollars short for college these days. Try to survive the next sleep deprived year, enjoy the time acting like a kid yourself with your kid(s), and don't sweat it too much. You'll be doing way better than most parents and can probably retire by 55.

 

[cons]

Guys,
Here is our situation:
My age 32,My wife's 28.
Total Annual salary:145,000.

Home Equity:153K
Business Partner shares value : 100K

Non-Retirement Investmnets + Cash = 100K

Retirement Investments=175K
Total Networth :525,000K



Yearly expenses : 35 K



[FONT=&quot] I am planning on putting away about 25K in retirement for next 8 years.
Also planning on putting away about 24K in non-retirement for next 8 Years.

Can we retire in 8 yrs when i am of age 40?

Thanks,[/FONT]

You are doing great. Being able to put away close to 50k per year is impressive. However, ER at 40, may be risky as the math won't add up (unless you somehow double your savings rate). I think 50, at the earliest, would seem possible.

As a family, I'm not sure you can lower your yearly expenses of 35k. Also, with a child on the way those expenses will slightly increase. Thus, there's not much you can do on the yearly expense.

You included a business partner shares value. Not sure how to calculate that. Is this the amount you'd get if you sold your business?

You're in the stage of paying down debt, thus, including your home equity doesn't really help your numbers. What's more important is what you have left on your mortgage and when you plan on paying it off. That may be one of your biggest expense currently.

You stated you had 100k in cash, is there a reason why you have so much on the sidelines? If you want to ER you should be investing those funds more aggressively.

I personally don't include my home equity in my NW, as it is where we live. Also, unless we plan on severely downsizing our house when we ER, it doesn't do much except artificially inflate your ER numbers. You have the right mindset but you seem overly optimistic of your ER goals. Good luck.

ETA: We are the same age and our ER goal is 46 and that's only if we keep with the aggressive savings plan. Also, have you thought about how to handle health insurance when you ER?

 

[atfourty]

You are doing great. Being able to put away close to 50k per year is impressive. However, ER at 40, may be risky as the math won't add up (unless you somehow double your savings rate). I think 50, at the earliest, would seem possible.

As a family, I'm not sure you can lower your yearly expenses of 35k. Also, with a child on the way those expenses will slightly increase. Thus, there's not much you can do on the yearly expense.

You included a business partner shares value. Not sure how to calculate that. Is this the amount you'd get if you sold your business?

You're in the stage of paying down debt, thus, including your home equity doesn't really help your numbers. What's more important is what you have left on your mortgage and when you plan on paying it off. That may be one of your biggest expense currently.

You stated you had 100k in cash, is there a reason why you have so much on the sidelines? If you want to ER you should be investing those funds more aggressively.

I personally don't include my home equity in my NW, as it is where we live. Also, unless we plan on severely downsizing our house when we ER, it doesn't do much except artificially inflate your ER numbers. You have the right mindset but you seem overly optimistic of your ER goals. Good luck.

ETA: We are the same age and our ER goal is 46 and that's only if we keep with the aggressive savings plan. Also, have you thought about how to handle health insurance when you ER?

Thanks for the respose. I was curious what your personal financial situation is ( since you are around the same age). I like your plan to ER at 46.

 

[EvrClrx311]

I'm in a similar boat (I'm 31 and DW is 29). We make about the same (slightly over 150K). We have about the same in assets, and until a couple years ago were setting aside 40-50K a year. Then we had two kids...

Now we're setting aside $30-35K a year even though our take home is significantly higher. Our yearly expenses went from 35K before kids, to about 70K range. Eating out is twice as much. Groceries are twice as much. Vacations cost more and we go on them more frequently. Started saving for their college (10K a year). Daycare and preschool (15K a year) are expensive. It all adds up.

I wouldn't change it for the world, love my kids and I don't mind that I'll probably ER around 55 instead of 45-50 like I had planned before. Just saying that one should never under-estimate how much more they'll spend when having kids. (You can read my other thread about how we're seriously considering putting another $1,000 a month into our mortgage payments to move up in house for our family - all things we'd never consider before when it was just the two of us).

You're off to a great start! Better than the other 98% that is our age (high five).

 

[GatherYeAcorns]

I'm 50% to 75% away from reaching my goal @ current age of 41. Not bad since I'm 15 years away from my goal of semi-retiring. I don't make anything close to $100k a year, but I have my pension with a mega corp. Ive got other retirement buckets that are filling up. My home is refinanced (bought foreclosed a few years ago) and my mortgage is very affortable. Its the only debt I have. Also, not including my wife's assets. That's her "stuff" Lol. God, I love her. Don't have kids yet . We're "DINKS" . Dual incomes, no kids .

Anyway, kudos to the OP. I wish I was more aggressive w/ my savings when I was in my early 30s and 20s. I wanted things when I was younger. Good luck at retiring @ 40 ( wow..I hope you have things to do at that young age).

 

[Milton]

[W]ith a child on the way those expenses will slightly increase.

YMMV, but most parents find that the additional expense of having a child is a lot more than "slight".

I anticipate that this life-changing event will most likely make retirement at 40 effectively impossible for the OP.

 

[EvrClrx311]

edited... probably a little off topic

 

[aida2003]

YMMV, but most parents find that the additional expense of having a child is a lot more than "slight".

I anticipate that this life-changing event will most likely make retirement at 40 effectively impossible for the OP.

I agree, unless the OP will get free childcare and they live in a cheap location, not a big city on the coasts.