Want to retire ASAP! Any pointers?

[visinery]

Hi, I'm new here and trying out the forum. I have a bit of an unorthodox backstory. I'm a single woman without children. I wait tables for a living and I don't have a 401k. I live in an apartment and only have $2300 of debt (credit card). And over the last 8.5 years, I have saved $81,500 cash money. I have an extreme budget which only requires $12,000 yearly in present day dollars for me to function. I am wondering if there are any agressive investments out there that any of you may know of that could yield 12k annually from an 81.5k investment?? Or something close to this. I really want to retire soon even if it is only until inflation catches up to my budget. Any suggestions? Thanks


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[REWahoo]

Hi, I'm new here and trying out the forum. I have a bit of an unorthodox backstory. I'm a single woman without children. I wait tables for a living and I don't have a 401k. I live in an apartment and only have $2300 of debt (credit card). And over the last 8.5 years, I have saved $81,500 cash money. I have an extreme budget which only requires $12,000 yearly in present day dollars for me to function. I am wondering if there are any agressive investments out there that any of you may know of that could yield 12k annually from an 81.5k investment?? Or something close to this. I really want to retire soon even if it is only until inflation catches up to my budget. Any suggestions? Thanks

Sorry, there are no investments that offer a 15% return - at least not consistently and not without far greater risk than a prudent person would be comfortable with. The term "aggressive investment" is far too often another way of saying "get rich quick scheme" and a great way to lose what money you've managed to save. Your savings and your living expenses are impressive and you are to be congratulated for having the self-discipline to do what you've done.

You didn't say anything about your age. When will you be eligible to collect Social Security?

 

[visinery]

I am 33. I've got some decades before social security. I have an advisor at one of my banks and he was able to find some corporate bonds and such with up to an 8% yield but nothing higher than that...


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[heeyy_joe]

Invest in toilet paper companies, PG,KMB, TIS.

 

[REWahoo]

Careful with those corporate bonds. 8% seems very high in today's financial environment and they may not be as safe as you might think. They definitely aren't covered by FDIC insurance against loss.

Unfortunately, I seriously doubt you'll be able to retire anytime soon with your current savings level. Studies have shown drawing more than 4% from your nest egg annually results in depleting it in less than 30 years.

 

[Bestwifeever]

Congratulations on saving that much money in ten years.

Are you talking about retiring or taking a break?

If you want to take a break: Pay off the credit card debt asap (skip the nest egg savings if you need to, just til it is paid off) and then put the amount you were paying the cc company into a separate little account for vacation money. Keep adding to it til it will pay for your break.

If you want to retire (do this even if you really just want a vacation): some suggest you need at least 25 times your annual expenses, so keep working til your nest egg is at least that much (if you put it in a target retirement fund it will most likely keep growing on its own besides the amount you will continue to add to it).

Good luck--you are smart to be thinking of this now.

 

[Ready]

8% corporate bonds sound like junk bonds. I would be very careful. No companies with good credit need to pay anywhere close to 8% in today's environment when they issue bonds to raise cash.

 

[Fermion]

If this is a real post and not a troll (although I haven't met any troll waitresses) I would suggest that you keep at what you are doing if you are happy in your job, otherwise perhaps look into night school to train for a higher paying job.

Your savings are quite good actually for your age (33). I assume you have been working for no more than 15 years.

I hope you are taking advantage of things like the saver's credit. $1000 instantly to you when you invest $2000 or more in a IRA (Roth or Traditional deductible....in your case I would recommend deductible IRA to lower any taxes you pay to zero since you will be living on $12,000 in the future and don't really need the tax benefits of a Roth). You can always convert the deductible to a Roth after you retire, making it a deductible Roth.

So...you are putting $6,500 a year into a IRA, right? If you keep doing that for 10 more years, coupled with the money you currently have, you should be very close to having $300,000 by 2024 if not a bit more, in 2024 dollars (assuming 4% real return). 4% of $300,000 is $12,000, right where you want to be.

That is my recommendation. Shoot for $300,000 saved up by age 43. Or expand your employment options by taking some night classes.

 

[UnrealizedPotential]

First of all welcome to the forum, congratulations on the amount you have amassed so far. As far as retiring on that amount, no way. As I see it you have two choices: You can work longer to save up to $275k-300k to make your plan work with your current job, or you can find another job that will be more comfortable for you long term and continue to save. You may find investments out there that pay out big, but beware the very high risk associated with them. You would be much better served to find a way to save more.

 

[visinery]

The 8% was some offerings I took advantage of in 2011...but only a few thousand. Last I checked with him the rates were lower, yes


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[daylatedollarshort]

Your expenses are already pretty low. Good for you on that front. I agree with Fermion that if you want to retire sooner, max out on your tax advantages savings and consider community college classes for a higher paying career in order to save more, since it would be pretty hard to spend less.

 

[visinery]

Also, I am extremely unfamiliar with what an IRA is. I always considered it something people who have salaried jobs use. Can I buy one independently from association with the company I work for? I don't plan on getting a degree because I already have one but I did not enjoy the work (industrial purchasing). Plus it only paid me 12.50 an hour to start ( in 2004). I do better than that working in restaurants


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[Lisa99]

Have you thought about doing what you're doing but from a really cool place?

We travel quite a bit and I've met women and men all over the world who wait tables in exotic locales.

We've met Americans in Bora Bora, Tahiti and most recently in Maui... maybe take a break by making a change of scenery?

 

[Senator]

Pay off the credit card debt. That will get you 18%+.

Then keep saving. You must make a lot of cash. Be sure to sock away as much as you can. A $12K budget is a bit light, and may increase significantly, considering housing expenses.

Figure out ways to make more money during your off hours will help the path to FIRE.

 

[Fermion]

Also, I am extremely unfamiliar with what an IRA is. I always considered it something people who have salaried jobs use. Can I buy one independently from association with the company I work for? I don't plan on getting a degree because I already have one but I did not enjoy the work (industrial purchasing). Plus it only paid me 12.50 an hour to start ( in 2004). I do better than that working in restaurants


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Any American worker can open an IRA and fund it with $5500 a year from their work earnings. You can open it for free at places like Vanguard (an excellent choice btw). The savers credit I mentioned is something Uncle Sam gives to lower earners to help encourage them to save for retirement.

I agree with the other suggestion if you don't want to change careers...how about changing locations just to add some spice and a different environment? This might allow you to tolerate working 10 or so more years until you have a comfortable next egg to withdraw your $12,000 a year from.

Waiting tables in the Florida Keys sounds kind of nice to me...

 

[visinery]

Hmm now there's an idea. Tax credits and independent IRAs were something I did not think was an option before. Something I'll look into. Since I got the 8% bonds 3 years ago I got discouraged that the rates fell from there and laid off attempting to invest further cash...but the $5500 IRA investment limit that was mentioned is only about half of what I save a year. What are some things you diversify with that's had success?


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[Fermion]

If you save $11,000 a year, then you are going to be so happy in 10 years.

Definitely do the $5500 into a Roth or deductible IRA and grab your $1000 savers credit (that is like a almost 20% return right there!). You should be doing this like yesterday! You can still do it for 2014 until April!

You should have at least 60% of your money in the stock market. Broad index funds that cover a range of companies. You can buy these for free on Vanguards site when you set up your account. I would recommend Vanguard total stock market. I would actually say put more than 60% in there since you want growth.

$12,000 a year at a 8% return with 3% inflation (5% real) coupled with your already saved $81,500 would be $287,000 in 10 years. If you get lucky and get the historical 9% return with 3% inflation, you will have $308,000 in 10 years. (I am calculating based on future dollars to give you an idea of what your buying power would look like in 10 years. Your actual balance would be much higher than $308,000 but you will have the buying power of $308,000 if inflation measures around 3%)

 

[ERhoosier]

I am 33. I've got some decades before social security. I have an advisor at one of my banks and he was able to find some corporate bonds and such with up to an 8% yield but nothing higher than that...


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Keep in mind that Social Security benefit generally requires years of w#rk to qualify for benefits. ER too soon and your SS will be less $$.
Also- Bonds yielding 8% today are quite speculative ("junk" bonds). Even long term investment grade bonds are only yielding about half that.
Composite Bond Rates: Bonds Center - Yahoo! Finance

 

[Walt34]

Welcome to the forum and congratulations on saving that amount so soon. You are way ahead of where I was at your age.

A recommendation: The Millionaire Teacher. It is an excellent book for new investors. You should be able to get it at your local library or they can order it from another library if they don't have it on the shelf. As a last resort, buy it, it is well worth it.

The other suggestions made here are good ones. You are well on your way to being able to retire.

 

[unno2002]

[FONT=&quot]An example of a rental home we have, bought in 2013 for $77,500, rented for $805/month, after expenses putting in our pocket (ignoring tax write off's) a consistent $583/month. ($[/FONT][FONT=&quot]6996 per year) [/FONT][FONT=&quot]This is a 9% "annuity", from an appreciating asset that can be left to the spouse, kids, etc.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]With your "cost of living" our example would mean you need around twice what you currently have invested in such rental properties. [/FONT]
[FONT=&quot] [/FONT]

 

[Patagonia]

[FONT=&quot]An example of a rental home we have, bought in 2013 for $77,500, rented for $805/month, after expenses putting in our pocket (ignoring tax write off's) a consistent $583/month. ($[/FONT][FONT=&quot]6996 per year) [/FONT][FONT=&quot]This is a 9% "annuity", from an appreciating asset that can be left to the spouse, kids, etc.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]With your "cost of living" our example would mean you need around twice what you currently have invested in such rental properties. [/FONT]
[FONT=&quot] [/FONT]

This is a great suggestion for the OP! Rentals such as this have the ability to earn a higher % payout without the risk of junk bonds.

 

[Dreaming of Freedom]

As others have said, look into real estate investing. Heck, maybe even look into getting your real estate license if you want a change. I wish I would have bought a duplex years ago, living in one side, and renting the other side out. Theoretically, you want to get a good enough deal that the renters in one unit pay all of the mortgage, taxes, and insurance so that you can live rent free in the other unit while building up equity in the duplex.

There are lots of books and websites out there to learn from. I don't know if I can mention any sites names without getting in trouble with the moderators, but try googling investment property education if you want to learn more.

As with any path you decide to take, educate yourself as much as possible before making any big changes.

 

[mikelish]

there is a website that lets you loan money to random people on the internet.


you can choose high risk people and charge them 15% but they might never pay you back. worth looking into


I would pay off that credit card debt ASAP and put $5,500 in a roth IRA every year.