25 year old planning for ER with Wife

[Corvette]

I have been reading this website for a month and decided that it is time to become a member! My goal is to retire in 21 to 23 years and have an annual income stream of ~100k (in today's dollars). I am a lawyer and my wife is beginning medical school this fall(we are both 25). We are conservative spenders and believe that we can begin to save 30% of my salary (30k net). Four years from now my wife will earn about 50k annually for four years. Subsequently, depending on her specialty she will earn between 180k-400k a year. My salary should increase 10 annually for the first three years and then 20 for the next 4 years. After that it is anyones guess, but I could make up to 500k. For planning purposes, I assume I will not make less than 150k and will likely make around 250k-300k in about 10 years from now. We are super determined to ER and so long as our financial goals are met, we hope to be sailing around the world in our late 40's.

We have not saved a penny yet and will begin to do so in the Fall. I welcome all of your suggestions regarding how we should invest and your thoughts on the 100k a year goal, once retired. (I would like to have annually 100k adjusted for inflation when we retire) Some years we are likely to need less.

 

[cardude]

Hey, welcome!

There is another thread started by a new poster (who is also a high income earner) that you may be interested in:

http://www.early-retirement.org/forums/f28/overwhelming-choices-50281.html

 

[MasterBlaster]

Fun with compound interest !

It's fun to dream big, but perhaps you should actually work in each of your respective professions before you decide on a retirement outcome. Sometimes lawyers either can't make the partner track or can't stand the hours/pressure and bail for a more balanced life. Similar things can happen in the medical field. Sometimes life happens and plans get derailed. Sometimes children come along and change everything.

I don't buy into the "run as fast as you can now so that you can rest later" life plan. You may look up one day to just realize that your best years have gotten behind you - and for what ? - more money ? There are many routes to early retirement.

I suspect that your views may change over your journey.

 

[Corvette]

To see if we can actually achieve the nest egg within 21-23 years is terribly difficult. I need some early planning help! We are 100% committed to ER and luckily my firm is not the typical "slave driver" many people associate with big firms. People rarely work past 6:30. For my wife, few people are truly dedicated to being a physician and helping people as her. What kind of investment strategies would you suggest?

 

[Corvette]

Thanks cardude. I read the post.

 

[MasterBlaster]

Well if you make the kind of money you post. Then if you save $100k a year and invest it at 5% net interest after inflation and taxes then you should have more than enough (your $100k/year goal) to retire in 20 years using a 4% safe withdrawal rate.

My little calculator suggests that you'd have enough at 15 years to do what you wanted.

 

[donheff]

Go for it. And welcome.

 

[Texas Proud]

Welcome and congrats... hope the income increases come as you hope... they don't always do... but you are more than likely going to keep what you have plus inflation...


The thing to do is SAVE.. not to the point of not doing things now... but don't try and keep up with your peers... I remember back when I was a low paid trustee... and one guy buys a BMW 3 series... with a 4 cyl.. then another buys the 3 with a 6... and my boss buys a 5 with an 8!!! (her husband made a lot... others did not know )

Not to say you should not splurge, but don't think that you have to trade up all the time... I finally bought a very nice car (for me) in 2003... but still have it... and plan to for the next 10 plus years (I used to only keep cars 10 years.. now trying to go for 15 or more)...

if you do save 30% .... you will accomplish what you want... even with the bumps and other things that might change over the years...

Good luck..

 

[ronocnikral]

It's fun to dream big, but perhaps you should actually work in each of your respective professions before you decide on a retirement outcome. Sometimes lawyers either can't make the partner track or can't stand the hours/pressure and bail for a more balanced life. Similar things can happen in the medical field. Sometimes life happens and plans get derailed. Sometimes children come along and change everything.

I don't buy into the "run as fast as you can now so that you can rest later" life plan. You may look up one day to just realize that your best years have gotten behind you - and for what ? - more money ? There are many routes to early retirement.

This is excellent advice. A good friend of the family married an aggressive woman who wanted a career. He busted his butt and put her through law school debt free. She got some big job in California and they had a couple of kids. He gave her everything she thought she wanted. Well...come to find out she didn't want to work anymore and our friend had no education...so a construction worker he is, while she stays home with the kids. Not to say it is bad, but it highlights MB's point.

Start saving today. If you can justify not saving today, you probably will justify not saving tomorrow.

 

[Billy]

You have a lot going for you, the #1 thing being Time Is on Your Side. You seem to have found the right partner match with common goals, so if you avoid debt, know where your money goes and stay focused that should take you where you want to go, regardless if it is Early Retirement or not.

Another important thing is to put peer pressure into perspective. Social pressure to spend can be subtle and pervasive, and it can divert you from your commitment to retire early. Just remember that it's your decision, not theirs.

Best of luck!

Akaisha
Author, The Adventurer's Guide to Early Retirement
The Adventurer's Guide to Chapala Living

 

[CuppaJoe]

Welcome. So, how does the Corvette fit into all this?

 

[RunningBum]

What kind of investment strategies would you suggest?

Step 0. Read, read, read. http://www.early-retirement.org/forums/f28/fire-recommended-reading-list-22300.html has some good recommendations. When I first started thinking about FIRE, every time I went to the library I got at least one investing book. Meanwhile...

1. Take advantage of any 401K's or tax deferred savings you can.

2. Figure out what kind of equity/bond ratio you want. Unless you think equities will never recover, I would be heavier into equities than bonds at your age.

3. Check out a low expense mutual fund company, such as Vanguard or Fidelity. Using Vanguard as an example, you can start simple,

- Vanguard Total Stock Market Index for US equities.
- Total International Stock Index for international exposure (it actually has a fairly high expense rate for a VG index fund, so once you have enough you may do your own Pacific/European/Emerging index mix, and you can add the Canadian ETF since I don't find an index for that. But the Total International is a good starter).
- For bonds, you could do the Total Bond Market Index, though with your income you'd probably be better with a tax-exempt bond fund, especially if there's one for your state.

As you learn more you might want to try other things, but a lot of us have gone back to keeping it very simple and very diversified like this. You won't hit a home run, but with your situation it's going to add up fast anyway. Set up for automatic monthly investments.

 

[Corvette]

For several years I have wanted a Z06 corvette. I won't be getting a new one for a long time(maybe never, I can't understand buying a brand new car, it depreciates so fast and a 2-4 year old car can be a much better bargain), but I wouldn't mind getting one in about 10 years, 2-3 years old!

 

[jIMOh]

30% savings rate implies every 2 years you are saving about 1 year of expenses. In 25 years retirement will be "certain" if you can make sure savings keeps pace with inflation.

The more aggressive you invest, the earlier retirement may come.

Live now, save now, go into it with a budget and be flexible when life happens (like make sure you have 6 months expenses in the bank first).