studbucket
Recycles dryer sheets
We just submitted over $18,000 in payments to pay off our remaining student and auto loan debt, leaving us with only our mortgage as debt. I originally planned to have all this debt paid off by January, but I did better at work than I was planning for ("Don't confuse hope for a plan", right? ), and we were able to pay everything off easily this month.
Given that, it means it's time for us to fully begin investing in our retirement fund. I wanted to lay out our step-by-step plan below and get any feedback you may have for me. Anything you're concerned about or disagree with? Why?
Background Threads
http://www.early-retirement.org/forums/f26/25-married-a-kid-and-optimistic-55271.html
http://www.early-retirement.org/forums/f30/feedback-on-my-allocation-and-direction-55742.html
http://www.early-retirement.org/forums/f30/401k-ira-72t-sepp-vs-roth-ira-55809.html
http://www.early-retirement.org/for...l-assets-for-ultimate-buy-and-hold-56148.html
Our Plan
Given that, it means it's time for us to fully begin investing in our retirement fund. I wanted to lay out our step-by-step plan below and get any feedback you may have for me. Anything you're concerned about or disagree with? Why?
Background Threads
http://www.early-retirement.org/forums/f26/25-married-a-kid-and-optimistic-55271.html
http://www.early-retirement.org/forums/f30/feedback-on-my-allocation-and-direction-55742.html
http://www.early-retirement.org/forums/f30/401k-ira-72t-sepp-vs-roth-ira-55809.html
http://www.early-retirement.org/for...l-assets-for-ultimate-buy-and-hold-56148.html
Our Plan
- I will begin putting the maximum amount of money into the ESPP at work. This should equal to about $1250/month for 3 months, and I will get $225-300 extra when cashing out (after taxes). So, I reduce my cashflow by about $1250/month, but will get it all back plus an extra $75-100/month every 3rd month.
- On average, we will be saving about $2500/month, but because of ESPP, I actually think of it in 3 month chunks. So we'll be saving at least $7500 every 3 months in addition to the ~$700/month that goes into my 401(k).
- Each time that I cash out my ESPP, that means it's investment time. I'm using a modified "Ultimate Buy & Hold" strategy and will currently have an AA of approximately 75/25. My assets and funds will be as follows:
- Short-Term Bonds: VBSSX / VCSH (Inside 401k / Vanguard)
- Intermediate Bonds/Total Bond Market: PTTRX / BND (Inside 401k / Vanguard)
- Total Stock Market: VTI
- International Small/Mid: VSS
- Total International: VXUS
- Small Value: VBR
- My 401k will consist completely of Bonds (VBSSX/PTTRX), and if any additional bonds are needed to hit the 25/75 AA, I will buy those in my Vanguard account (VCSH/BND) during rebalancing time.
- The first $5000 I invest each and every year will go into a Roth IRA. After that it all goes into taxable accounts. (Once my wife gets a job, make that the first $10000)
- Since most of my bonds are part of my 401k, and I'm investing every 3 months, I view myself as being on a 15-month cycle of investing then re-balancing. This is my current schedule for the next year:
- Oct 11: Total Stock Market
- Jan 12: International Small/Mid
- Apr 12: Total International
- July 12: Small Value
- Oct 12: Rebalance
- Jan 13: Start again
- With a bit of luck (assuming similar historical returns, not getting fired, etc) I should be able to save up $2mm-2.5mm by the time I'm 45. That's ~$65k/year as my starting SWR in 2031.
- None of these savings or calculations include stock awards, bonuses, or my spouse's potential income. Any of those factors will be invested just like all the other cash, but I haven't included it in my retirement calculations.
- I don't know everything, and will obviously have a much better feel for my possible expenses and what my SWR will be closer to retirement, but I'm 20 years away.
- We'll also be putting $325/extra a month on our mortgage. Enough to get it to be paid off approximately 9 years early, and to get our PMI paid off in ~4 years (I know, yuck, I've learned).
- We also have $16k of emergency savings, but would like to increase to $30-35k, and we'll be putting ~$200/month into that, so it will slowly increase.
- I have about $7000 in Sharebuilder/ING accounts in various good or bad stocks that I know nothing about (made 65% in 2 years on WTW and ETH, but have lost on plenty of others). I think I will cash out these stocks when the time seems opportune and play around with dividend growth stocks, see if I can't learn something and make some money that way.