30 Year Old Dreamers - How To Achieve It?

[thermostan]

• Wife and I are 30 years old
• No kids
• New job with 31k base, potential to double income over next couple/few years
• Wife earns $40 - $50k/yr depending on # of classes taught in stable teaching job

Our Assets:

• 32k cash

• $77k in retirement accounts (contributing ~ 15% of current income)

Our Liabilities:

• $95k left on $122k mortgage @ 4.5% on 15 year
• No other debt

Net Worth: ~ $150k - $160k

We are aggressively saving money in a savings account to pay off mortgage early, hopefully in the next 5 years, before we hit 35. We'd like to keep these saved funds in an account, in case of some kind of emergency were to occur, rather than chip away at the principal each and every month.

After our mortgage is gone, I'm thinking about finding our first rental property, pay it off as quickly as possible using the funds that used to go to our mortgage, plus the rental income. If all goes well, I'd like to do this over and over again, although I'm not sure how many etc.

While my wife loves with her j*b, I do not, and can't imagine doing it forever. I'd like to be free to chase some old dreams (gigging musician,) and would like to be able to do so in the next 10-15 years without having to worry about the income that this may or more likely, may not, provide.

Is 10-15 years a realistic possibility?

Thanks!

 

[bo_knows]

The primary thing we're missing here is your expenses. ER = Covering your expenses with your investments for X amount of years.

We need all of the variables to figure out a guess

 

[FIREd]

Hi thermostan, welcome to the forum.

Looks like you are up to a good start. Whether your goal is realistic or not depends a lot on how much of your income you save.

 

[Midpack]

As mentioned above, without annual spending no one can really answer. Anyone can retire at any time - if they reduce their spending to match their assets.

Have you tried FIRECalc: A different kind of retirement calculator?

Very rough rule of thumb for nest egg needed for someone retiring at age 45 might be

Nest egg $ = [Projected annual spending $ - Projected annual income $ (Soc Sec, pensions, rental income)] / .03
​

From there you can determine if your savings rate and returns are adequate to get you there by age 45.

You're off to a good start though, congrats...

BTW. Not sure what you've included in net worth, but for purposes of retirement planning you probably don't want to include your primary home. Rental properties maybe, though that impacts your income side for planning as well.

 

[heeyy_joe]

Use debt leverage wisely on rental properties or you may grow broke. With your savings at your age(s) you have a good start. Just continue to save and remember to have fun while LBYM.

 

[David1961]

It depends on your spending level, how much you can save in the next 10-15 years, and the return on your investments. Other factors:
are you planning on having any children?
how will your wife feel about working and you not?

 

[KiraC]

You may want to consider chipping away at that mortgage principle with some of the savings. Otherwise you'll end up paying more if you wait until the end to pay off the lump sum. Then you'll meet both goals of saving and eliminating the mortgage quickly. Good luck! No mortgage is wonderful!

 

[thermostan]

The primary thing we're missing here is your expenses. ER = Covering your expenses with your investments for X amount of years.

We need all of the variables to figure out a guess

I'm estimating that our spending is ~$45k - $50k per year, including the mortgage, although I need to get a better grasp of the details. This includes several "sinking funds."

 

[thermostan]

As mentioned above, without annual spending no one can really answer. Anyone can retire at any time - if they reduce their spending to match their assets.

Have you tried FIRECalc: A different kind of retirement calculator?

Very rough rule of thumb for nest egg needed for someone retiring at age 45 might be

Nest egg $ = [Projected annual spending $ - Projected annual income $ (Soc Sec, pensions, rental income)] / .03
​

From there you can determine if your savings rate and returns are adequate to get you there by age 45.

You're off to a good start though, congrats...

BTW. Not sure what you've included in net worth, but for purposes of retirement planning you probably don't want to include your primary home. Rental properties maybe, though that impacts your income side for planning as well.

Thanks for the info. I've glanced at the FIREcalc, although I need to get a better grasp of my yearly expenses. We've been keeping a detailed budget the past three months, but I think we are finding each month tends to be quite a bit different.

I have included our primary residence in our net worth, although I think I understand where you are coming from. I'm ideally looking for a withdraw rate from my nest egg that will cover my annual expenses without depleting my nest egg before I die...and unless using something like a reverse mortgage, the primary residence wouldn't provide any stream of income?

 

[thermostan]

Use debt leverage wisely on rental properties or you may grow broke. With your savings at your age(s) you have a good start. Just continue to save and remember to have fun while LBYM.

I don't think I have the risk appetite to get myself into too much trouble. I don't think I'll be able to take on another mortgage until we are able to get rid of our primary. Once we achieve this goal, hopefully in the next 5 years, I think I'd be comfortable taking out a smaller mortgage on a rental using our previous mortgage payment, plus the rental income, to knock it out in just a couple of years before doing so again, and again...

 

[thermostan]

It depends on your spending level, how much you can save in the next 10-15 years, and the return on your investments. Other factors:
are you planning on having any children?
how will your wife feel about working and you not?

Kids are still up in the air. We honestly could go either way at this point. We definitely aren't planning on kids anytime soon (next year or two.)

I'm not sure how to answer the wife question. She wouldn't be ok with me sitting on the couch all day watching TV, but that's not what I envision. I'd honestly like to gig around town, teach some music lessons etc. Basically, I'd pull in an income, but I don't want to have to worry about the income before making the leap, if that makes sense.

 

[bo_knows]

I'm estimating that our spending is ~$45k - $50k per year, including the mortgage, although I need to get a better grasp of the details. This includes several "sinking funds."

Well, typical back-of-the-envelope math states that someone retiring as early as you are dreaming (40-45) would want to withdraw from their nest-egg no more than 3-3.5% per year, to make it last.

Quick math says that $50k spending level = 50000 / 0.035 = $1.42M-1.66M as a nest-egg.

Wild assumptions of $150k starting nest-egg, 15 years of saving $30k/yr, no SS or pension, and a flat $50k spending level... Firecalc spits out 81% success rate if you pull the plug in 15 years.

Seems like the goal is reasonable, but when you're this far out, it's mostly a game of LBYM (live below your means), save as much as you can, and hope for the best.

Good luck!

 

[Live And Learn]

Here's what I did:

1. Kept my first home or one of similar value - did not get sucked into thinking I needed a McMansion to be happy
2. Maxed out annual retirement savings
3. Saved at least 50% of every salary increase since the time I was 26
4. Saved 100% of any bonus I got

doing that is allowing me to retire at 50. I kept alot of money in cash and not invested otherwise I may have been able to ER sooner.

 

[ronocnikral]

• Wife and I are 30 years old
• No kids
• New job with 31k base, potential to double income over next couple/few years
• Wife earns $40 - $50k/yr depending on # of classes taught in stable teaching job

Our Assets:

• 32k cash

• $77k in retirement accounts (contributing ~ 15% of current income)

Our Liabilities:

• $95k left on $122k mortgage @ 4.5% on 15 year
• No other debt

Net Worth: ~ $150k - $160k

We are aggressively saving money in a savings account to pay off mortgage early, hopefully in the next 5 years, before we hit 35. We'd like to keep these saved funds in an account, in case of some kind of emergency were to occur, rather than chip away at the principal each and every month.

After our mortgage is gone, I'm thinking about finding our first rental property, pay it off as quickly as possible using the funds that used to go to our mortgage, plus the rental income. If all goes well, I'd like to do this over and over again, although I'm not sure how many etc.

While my wife loves with her j*b, I do not, and can't imagine doing it forever. I'd like to be free to chase some old dreams (gigging musician,) and would like to be able to do so in the next 10-15 years without having to worry about the income that this may or more likely, may not, provide.

Is 10-15 years a realistic possibility?

Thanks!

Are you sure that throwing most your money going forward into real estate is a wise move?

Also, are you calculating your NW correctly? I come up with $136k, not $150-$160k.

You seem to be doing ok. My advice would be not to get your heart too set on a specific time frame. And don't make extreme "sacrifices" in the hopes of reaching that date. Good luck, and be sure to check in often to let us know how it is going.

 

[ShortInSeattle]

Welcome to the accumulation phase. This is the long hard slog where you work hard, save much, and balance having fun today with saving more dollars for the future.

I second what others have said about the numbers piece of this. Firecalc is a great resource.

Saving for retirement looks like a simple calculation but it's actually a bumpy ride. The market rises and falls in spurts. You won't really know what your retirement expenses are until you get closer. Jobs and raises can come and go. Kids happen, or they don't.

I think the best thing for us at this phase is to maximize savings, invest smartly, and enjoy life. A some point the savings/expenses math crosses over and you can retire, but so early on it is hard to estimate the year with precision.

It sounds like you plan to use a real estate investment strategy, so you might want to search the board for perspectives on that. Personally, I find real estate to be too risky. I prefer my investments not call me at 2am because someone found a meth lab in the back of my portfolio. Some folks do very well on real estate though.

Welcome.

SIS

 

[thermostan]

Are you sure that throwing most your money going forward into real estate is a wise move?

Also, are you calculating your NW correctly? I come up with $136k, not $150-$160k.

You seem to be doing ok. My advice would be not to get your heart too set on a specific time frame. And don't make extreme "sacrifices" in the hopes of reaching that date. Good luck, and be sure to check in often to let us know how it is going.

Well, I'm not sure real estate is the wisest move. But, I do live in a college town and there seems to be a decent rental market. I've had the desire to give landlording a try for several years, but I'm not ready to pull the trigger just yet. Also, our retirement funds are currently, and will continue to be thrown into the stock market. I was thinking real estate might be a good option for diversification purposes, and the money would be accessible before we hit 59 1/2 or whatever the age restrictions are these days.

I'm using my estimated home equity in my net worth calculations ( it probably accounts for the 20k difference in our calculations) and another poster pointed out it may be best not to include my home equity as part of my retirement nest egg...

 

[someguy]

Before you dive into real estate investment, make sure you understand the 50% rule. Whether they admit it or not, almost every RE investor either didn't know the rule, or did and thought they could beat it. Then both learned the hard way. I did.

I'm now in the process of working back out of RE because I can grow my net worth faster through other means.

 

[obgyn65]

I agree with this approach. Welcome to the forum, OP.

Well, typical back-of-the-envelope math states that someone retiring as early as you are dreaming (40-45) would want to withdraw from their nest-egg no more than 3-3.5% per year, to make it last.

Quick math says that $50k spending level = 50000 / 0.035 = $1.42M-1.66M as a nest-egg.

Wild assumptions of $150k starting nest-egg, 15 years of saving $30k/yr, no SS or pension, and a flat $50k spending level... Firecalc spits out 81% success rate if you pull the plug in 15 years.

Seems like the goal is reasonable, but when you're this far out, it's mostly a game of LBYM (live below your means), save as much as you can, and hope for the best.

Good luck!

 

[BigE]

It depends on your spending level, how much you can save in the next 10-15 years, and the return on your investments. Other factors:
are you planning on having any children?
how will your wife feel about working and you not?

+1, especially on having kids. This will change the plans significantly.