24 and want to retire ASAP

[xynny]

Hey everyone,

I've been reading these forums for a while and I think a lot of these posts are really inspirational and intelligent. I would like to introduce myself. I am three years out of college and I'm currently an engineer in the Silicon Valley. I just got married last year and my husband and I save around $6000 to $7000 a month in our 401ks and regular investment account. We also spend around $4000 a month including donations. Before I got married I saved around $130k and now we have a combined networth of $250k or so. Around $50k is in Vanguard Money Markets and Ibonds and the rest are in a variety of different funds and stocks. Lately I have been favoring some of the Vanguard international index funds. I am still learning about investing and so far I think I have been fairly conservative so I haven't actually lost money.

We don't have kids yet and we don't have a mortgage, but those things may change. I am hoping to grow our portfolio to over 1 million in 6 years or so but that may not be enough for me to retire yet. I have a little bit of stock options that are supposedly worth 30 to 50k, too. Anyway, I am glad to find so many people that live below their means and want to retire early here. You guys give me hope.

Anyway, I'd love any general advice from you guys. Thanks for listening to me ramble!

 

[Donzo]

What an incredible start - It took me about 23 years to get to FI - but you are saving so much more than I was until I was in my late 30s (inflation corrected). If you keep this zeal to be done early and the market performs at an average rate ... you will be done early/very early. Nail down your expenses to really get a solid #$ you will need to be FI.Good for you! I wish that I had been so focused at this young age - I had 0 $ when I got out of college....had some debt tho.....

 

[kevin92610]

What you have accomplished so far is amazing!! Especially considering your location in silicon valley. Your initial strategy is pretty sound. If you are looking to retire early then I think you are going to find that you need to save more than your $1M target...however, it is a great starting goal. Use the tools on this site to help you get a better target projection.

Being in Silicon Valley you probably are already clued into this one but where ever you are working make sure you are getting stock options... nothing short of the lottery can provide the type of net-worth multiplier that a buy-out or IPO can generate for you.

Second, While a 401K is a solid investment vehicle for retirement purposes, if you are trying to ER it does present some challenges if you are trying to use those funds to retire before you reach your 60's.

Third, I would start thinking about a home purchase in the next few years if you think you are going to want to own a home. Living in CA you have seen the dramatic price drops in the past year and the good thing about CA is you know they are going to bounce back just as big, so if you can swing a purchase as the market starts to turn back positive then you should be able to put a significant POP in your net worth that way as well.

Regards, Kevin

 

[xynny]

Cool, thanks for the replies. Right now the hubby and I are renting because a mortgage is just too expensive. I live in San Mateo, which is one of the most expensive counties here. I did some calculations and the cost of owning is approximately 2 times of renting. I am watching it fall, though. I even have a blog to track it here: San Mateo Home Sellers in Trouble - Bay Area Real Estate Bubble Updates

As to stock options, I am definitely not banking on it. I wrote a post as to why here: California Dreamin’ — Incentive Stock Options and the Silicon Valley Workerbee — The Baglady

Seriously, I'd be happy with the current supposed value of 30 to 50k on my vested options. The one thing I think could throw a wrench in my plans is kids, but I think I'll deal with it when I come to that point. The hubby and I want at most 2 kids, but who knows what will happen. He says I over-plan everything and act like an old lady. Oh well, I'm fine with it!

 

[laurence]

Are you williing to leave the area when you retire? If so you are on track to retire by 30! It's been mentioned here before that it's possibly a good plan to live in a high rent/high pay area while working then moving to the sticks for RE. Nice job so far, I'm 33 and DW and I have a NW no greater than ~$350k. San Diego is a little cheaper, though. We have to kids and we have been pleasantly surprised at how little it affected the finances, even with DW staying home. She now consults 20-25 hours a week from home and brings in almost as much as she did working full time, meanwhile my pay has gone up enough that we are now maxing her SEP IRA and maxing my 401k match, paying down the house early, etc.

 

[xynny]

I'm not sure we'd move away since pretty much all of our family is in the Bay Area right now. I know that this is one of the most expensive places to live in the country, but yeah, family is kinda important. My sister in law lives in San Diego actually, and housing is quite a bit cheaper there. We may move down to SoCal, but everything is sorta up in the air so all I can do is save as much as we can. The hubby is pretty adamant that he is not willing to leave California because it has been his home for his entire life, but there are plenty of places in CA cheaper than San Mateo. Heck, even the East Bay is cheaper, and that's where my parents live.

 

[chinaco]

Welcome.


Your desire to FIRE will only grow. I did not even begin thinking of retirement until I hit 40.

 

[kevin92610]

In general I agree with your posting on stock options, especially companies where the majority of the new companies are started using venture capital money. In those cases the only way you are going to make money is if it is the next google because of the lock-out of profits from the "preferred shareholders".

However, two comments:

1) not all companies are started with VC funding. Companies that have been bootstrapped tend to have more stock available for employees (at all levels)... they do exist they are just not the most commonplace.

2) Have you ever thought of building towards starting your own company? The one data point that has stuck in my mind since my early 30's was the statistical breakdown of U.S millionaires in the book, The Millionaire Next Door. It showed that 75% of the millionaires in the U.S. got that way by owning their own business and LBYM.

It is a shame that eventually leaving CA is not an option for you. I spent 10 years in CA and left a year ago for CO. I am close enough to visit (2hr flight), climate is similar to CA. The views are amazing! Quality of life is much better, costs are much lower, the people are just so damn friendly and it is a great place to raise a family.

regards, Kevin

 

[Meadbh]

The one thing I think could throw a wrench in my plans is kids, but I think I'll deal with it when I come to that point. The hubby and I want at most 2 kids, but who knows what will happen.

Yeah, that's what these people thought.....
Jon and Kate Plus 8 : TLC

 

[xynny]

ah..I've seen that show on TLC. That couple used fertility treatments, and that's why they got 8. They put too many eggs in one basket!

 

[Coach]

Great job, xynny! I think of your terrific savings rate as buying options -- you'll have choices available far sooner than most people. That's a wonderful thing!

Coach

 

[plex]

Your blog is fascinating, it is well-organized, contains a nice level of depth, and many of the stories are very on-point for a frugal Gen-Y looking to retire early. Your situation is especially interesting since you are the same age as I am (24), have the same educational background (EE?), have the same financial views and most of the same hobbies in life. Amazing job so far for someone only a few years out of school, I hope you can hit your ultimate early retirement or at least early semi-retirement planned date. Good luck!

 

[Milton]

Hello, and welcome to the forum.

my husband and I save around $6000 to $7000 a month in our 401ks and regular investment account.... now we have a combined networth of $250k or so.... We don't have kids yet and we don't have a mortgage, but those things may change. I am hoping to grow our portfolio to over 1 million in 6 years or so

Nothing is impossible. However, given your $250,000 starting point, your intention to have at least one child within the next two or three years, and your anticipation that "once I have a child my pay may decrease quite significantly", I suspect that you will need a lot of luck to reach your target on time.

You're sure not going to get to > $1 million in six years using conservative investments like money market and bond funds, anyway.

 

[xynny]

well, actually 80% of my portfolio is in stock funds so it has been growing quite well the last few years. I'm just not sure what will happen in the next few years, but if we keep our savings rate as it is now we will contribute over 500k into our nest egg so our portfolio needs to grow around 250k to reach the 1 million mark. I think that is doable over 6 years.

 

[Milton]

I'm just not sure what will happen in the next few years, but if we keep our savings rate as it is now we will contribute over 500k into our nest egg so our portfolio needs to grow around 250k to reach the 1 million mark. I think that is doable over 6 years.

$6,000 / $7,000 a month = average anual savings of $78,000. Multiply by six and you get future contributions totalling only $468,000.

 

[xynny]

well, it's about a 50% savings rate, so our income is still going up right now. So it could possibly be over $500k.

 

[Milton]

As I said before, nothing is impossible. But if you are going to plan on a certain amount, you'd probably be better off working with known facts, rather than fudging the math and banking on future raises that may or may not occur.

If you do want to bank on possible future contingencies, be sure and allow for the negative ones. You are reportedly determined to have at least one child within a couple of years, which will increase your expenses and probably decrease your earnings, at least temporarily. And there are no guarantees that your family's health will be good, or that your parents won't require substantial assistance, or that you and/or your husband won't be involuntarily terminated at work. Many things can happen.

 

[xynny]

Well, the thing about the future is that there are many unknowns. I think that's true of any situation in general. I acknowledge that any plan has a chance of failure, but I don't think I am fudging the numbers because even with our present savings rate and even if we contribute $468k in six years it is possible to reach 1 million in six years. Anyway, we'll see in six years where I am at.

 

[Milton]

Anyway, we'll see in six years where I am at.

You will be better off than if you'd saved nothing, that's for sure.

 

[Milton]

If you agree that taxes are probably going to be higher in the future than they are now, invest some time to learn about the new 7702 rule in the IRC. You can also find a lot of great information, tables comparisons etc of a 7702 Private Plan to a 401k, 403b, SEP, Roth or KEOGH qualified plan in "Last Chance Retirement" by Brett Anderson. I have a web page that touches on this as well 7702 Private Plan.

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