Hi, I'm tinfoil, and I'm an excel-aholic

[tinfoil5058]

Mid 30s, married, three children, own house (with big ole mortgage).

We live in a pretty high cost of living area in the rocky mountain west. Don't want to ever move. Job is not location dependent. State taxes are pretty low.

Before Tax Income
Changed jobs in 2021 and again in 2022
2021: $210,000 (dual income)
2022: $97,000 (single income)
2023: $160,000 est (single income)
2024: $220,000 est (single income)

Assets ~1M
Cash or the like: $13,000
Non-retirement investments: $17,000
Retirement investments: $310,000
Real estate value: $700,000

Debt ~400k
Mortgage: $390,000 (3.125% fixed)

Net Worth ~600k

Investments are all in Vanguard index funds except company 401k through Fidelity. Weighted expense ratio is less than 0.1%.

Roughly 65%/35% stock to bond. Had been much more aggressive but I'm feeling nervous lately. Not a market timer, but just reevaluating my current risk appetite.

My biggest weaknesses are a very small emergency fund, big mortgage, and much of my wealth wrapped up in an expensive house..

Emergency fund will begin it's replenishment phase next month as I move into a much higher pay bracket.

Mortgage is currently getting min payments since I suspect we'll likely be moving into a different house in the next few years. Out of space, too many dang kids

**I'm curious about back door Roth's. Don't really know much about them, but I see a lot of coworkers talking about them.**

My target FIRE number is about $2.5M and includes a paid off house. I'm predicting I can hit that by age 50 and possibly earlier but if life has taught me anything so far, it's something about the bets laid plans of mice and men.

Anyway, hello and happy to be here!

 

[RetiredAt49]

Welcome… you are off to a good start. Personally I think your asset allocation is way too low - especially since you’re in your 30’s. I’m in my early 50’s, retired, and my AA = 100% stocks (excluding rentals). I know many retirees can’t handle an all stock portfolio - if I didn’t have rentals I’d probably be 90/10 but I think your AA should be at least 90/10.

https://www.portfoliovisualizer.com...ond+Market+Index+Inv+(VBMFX)&allocation2_2=40

 

[TheWizard]

I would say that $2.5M in investible assets seems a bit low for age 50 retirement, unless you have a pension as well.

 

[athena53]

You say "Excel-holic" like it's a bad thing.

It sounds like you're off to a good start and I wouldn't worry about "the number" right now. From my mid-30s to now (age 70, retired at 61), I propped up an unemployed first husband for 5 years, ended up spending $48K to send my son to a military boarding school for HS (it was a great decision), changed jobs and moved to a LCOL area with my new husband and we both made big gains on the houses we sold in NJ. How do you fit that into Excel? Bottom line is that the good developments far outweighed the setbacks.

I agree with the earlier post that you could be more aggressive in your allocation. Have you factored in your kids' educations and keeping everyone covered by health insurance after your projected retirement? Is there a possibility your wife may return to work after the kids start school? A lot can happen over the next few years. And congratulations on the new, better-paying job. If I had it to do over again I would have changed jobs more often.

 

[Katiek]

Welcome. You're doing great and are on a good path. As others have mentioned, I'd focus on "doing the right thing" and saving consistently rather than focusing on a specific number for now. Lots can happen in 20 years, but the more solid your foundation, the more options you'll have no matter what happens.


I'm no expert, but my understanding is that a back door Roth is a way for someone who is otherwise above the income limits for a Roth to invest in a Roth. You'd invest in a non-deductible traditional Roth and then immediately "convert" it to a Roth. You don't get a tax benefit now, but the money grows tax free. If you do a search you'll see a lot more detailed discussion about them

 

[DrRoy]

Have a good ride.

 

[MarieIG]

Welcome to the ER forum.

Have you thought about saving for, and paying cash for, an extension to your current home? I don't know about your chances for getting another 3.125 fixed rate. Even if you decide to go for a bigger home, keep in mind steps to reduce your monthly long term overhead on that house, as that will play into your ability to RE. Also, my crystal ball sees child related / education expenses in your future.

Also - do you have a largish life insurance policy in place with the three kiddos and that big ole mortgage if you shuffle off this mortal coil early?

Some quick references are:

Some Important Questions to Answer Before Asking - Can I Retire?

FIRECalc.

 

[stephenson]

IMO you should have far more cash ... perhaps an allocation of 10% cash/CD, and 90% equities.

I would be buying something like ITOT market ETF.

 

[target2019]

tinfoil5058 you are doing fine. You must eat the elephant one bit at a time.

Ny two flew the coop a decase ago or more. Enjoy all that you can!

 

[Koolau]

I would say that $2.5M in investible assets seems a bit low for age 50 retirement, unless you have a pension as well.

Welcome to the Forum. Please come back and post often.

I'm also thinking $2.5M might be a bit low, given your current income. Adjusting from your income to roughly 4% of $2.5M might be problematic BUT, you know your self.

Can't recall that you spoke of Roths, but I highly recommend you put every dime you can into Roths (right after you snag the company match on a 401(k))

I put "too much" into 401(k) and I'm paying for it now. It might have been better for me to do more taxable investments - but that's way behind me. Just suggesting you carefully plan your investment categories while you're young. But Roth your brains out!

 

[LateToFIRE]

Welcome tinfoil5058! I'm pretty new around here myself (though closer to 60), am a fellow excel-aholic, and not quite retired yet (soon, very soon). Also, I too spent most of my working years in a VHCOL situation.

I think you've got a very good start on things - your finances look a lot like mine when I was your age - very house-heavy. Hard to avoid in these HCOL places. Just please don't refer to $390K as a "big" mortgage - you're makin me feel bad as my mortgage debt is a multiple of yours .

Anyhow, I think you've identified your weaknesses. Your emergency reserve fund needs to be an order of magnitude larger, unless you've got some other source that you did not mention. And I agree with others that your asset allocation could be a bit more aggressive given your age and still long runway to RE.

You didn't say what your expenses are expected to look like at point of FIRE, so can't comment on whether $2.5M is a good target.

Someone mentioned life insurance and I would 100% agree. You probably get that thru your employer but helps to have a portable policy as well since you seem to be in a profession where job hopping is normal and guessing you might find yourself doing independent contractor work at various points in time.

I'd also emphasize disability insurance as perhaps a mitigant to an even bigger risk at your age - again, a portable policy could make some sense. Of course, you have to weigh the costs against your potential situation. For example, if something happened would the survivors be moving in with parents, siblings, etc. or would they really be on their own.

Anyhow, some thoughts to chew on.

Best of luck.

 

[Surewhitey]

Agreed on the Roths for you and DW. You are firmly in the 22% tax bracket, so maxing your 401k is a good plan too & family HSA. Just those 3 are about $22,500+$7,750+$6,500(x2)...

$40k+ total. That x15 years appx 1.2mil with 8% returns. Plus your other funds doubling, you'll be ~2 mil + home.

2 mil + house is my goal & we're 1 year away from that. I'm coasting until DW has enough... Our NW has been doubling about every 7-8 years as we are still saving.

Definitely get the portable life insurance (I'd go with something around 25x your expenses + maybe some college assistance; 20 yr term) until your kiddos are gone & you can self insure with your portfolio.

 

[Koolau]

Welcome tinfoil5058! I'm pretty new around here myself (though closer to 60), am a fellow excel-aholic, and not quite retired yet (soon, very soon). Also, I too spent most of my working years in a VHCOL situation.

I think you've got a very good start on things - your finances look a lot like mine when I was your age - very house-heavy. Hard to avoid in these HCOL places. Just please don't refer to $390K as a "big" mortgage - you're makin me feel bad as my mortgage debt is a multiple of yours .

Anyhow, I think you've identified your weaknesses. Your emergency reserve fund needs to be an order of magnitude larger, unless you've got some other source that you did not mention. And I agree with others that your asset allocation could be a bit more aggressive given your age and still long runway to RE.

You didn't say what your expenses are expected to look like at point of FIRE, so can't comment on whether $2.5M is a good target.

Someone mentioned life insurance and I would 100% agree. You probably get that thru your employer but helps to have a portable policy as well since you seem to be in a profession where job hopping is normal and guessing you might find yourself doing independent contractor work at various points in time.

I'd also emphasize disability insurance as perhaps a mitigant to an even bigger risk at your age - again, a portable policy could make some sense. Of course, you have to weigh the costs against your potential situation. For example, if something happened would the survivors be moving in with parents, siblings, etc. or would they really be on their own.

Anyhow, some thoughts to chew on.

Best of luck.

Yeah, I forgot insurance. By the time megacorp offered term insurance (group policy) I wasn't eligible for "cheap" term on the open market so I jumped on every dollar available. BUT if you're in good shape, buy a bunch on your own. You have a lot of salary to replace.

 

[LateToFIRE]

...I put "too much" into 401(k) and I'm paying for it now. It might have been better for me to do more taxable investments - but that's way behind me. Just suggesting you carefully plan your investment categories while you're young. But Roth your brains out!

Koolau, I could be facing the same problem down the road. For 30 years, I've been contributing to pre-tax 401K's as have been (fortunate enough) to earn in very high income tax brackets, though unfortunately in a very high taxation city/state. So have now close to $2M in pre-tax accounts. The good news is I figured out that won't need to touch those funds until RMD age 75. The semi-bad news is that by that time those funds will have grown to ~$3.6M and who knows what RMD requirements will be in 15 years. I'm guessing the answer is to do as much Roth conversions as tolerable along the way.

 

[TheWizard]

Koolau, I could be facing the same problem down the road. For 30 years, I've been contributing to pre-tax 401K's as have been (fortunate enough) to earn in very high income tax brackets, though unfortunately in a very high taxation city/state. So have now close to $2M in pre-tax accounts. The good news is I figured out that won't need to touch those funds until RMD age 75. The semi-bad news is that by that time those funds will have grown to ~$3.6M and who knows what RMD requirements will be in 15 years. I'm guessing the answer is to do as much Roth conversions as tolerable along the way.

Correct, Roth conversions in the years prior to RMDs.
You don't need to convert nearly all of it, just make a decent dent in that tax-deferred balance and keep it from growing substantially.
Use a spreadsheet to levelize your AGI over the years to age 75 or so, that's what I did...

 

[pacergal]

Agree with MarieG.
Run firecalc
Answer the questions, just to see where you are now and what to do as you work towards retirement.
That is a great mortgage rate, I wouldn't be too quick to lose it if at all possible.

Welcome to the forum! Look forward to hearing more from you. This is a great place to ask questions and learn. The folks here want to see people succeed in life and retirement, so sometimes the answers may seem a little tough, but it's given with "tough love"

 

[LateToFIRE]

Correct, Roth conversions in the years prior to RMDs.
You don't need to convert nearly all of it, just make a decent dent in that tax-deferred balance and keep it from growing substantially.
Use a spreadsheet to levelize your AGI over the years to age 75 or so, that's what I did...

Thanks! Yes, just starting to learn more about the Roth conversion topic.

 

[LateToFIRE]

Agree with MarieG.
Run firecalc
Answer the questions, just to see where you are now and what to do as you work towards retirement.
That is a great mortgage rate, I wouldn't be too quick to lose it if at all possible.

Welcome to the forum! Look forward to hearing more from you. This is a great place to ask questions and learn. The folks here want to see people succeed in life and retirement, so sometimes the answers may seem a little tough, but it's given with "tough love"

+1

I've run many different calculators, including creating my own financial forecast in excel. For sure FIREcalc provides a really good sanity check, and is more rigorous and flexible than most of the calculators out there.

 

[tinfoil5058]

Welcome to the ER forum.

Have you thought about saving for, and paying cash for, an extension to your current home?

Yes, we did run through this. Where we live, a 1000 sq ft addition would be about 300-325 a sq ft. So we'd end up way over our head on equity vs what we could sell the place for.

Also - do you have a largish life insurance policy in place with the three kiddos and that big ole mortgage if you shuffle off this mortal coil early?

This has been mentioned a few times on the thread so I definitely need to look into something portable outside the company. One problem is that my job is considered high risk, so insurance can be sort of expensive!

Welcome to the Forum. Please come back and post often.

I'm also thinking $2.5M might be a bit low, given your current income. Adjusting from your income to roughly 4% of $2.5M might be problematic BUT, you know your self.

My spending is about $90-100k a year with a mortgage, about $75k without a mortgage which gives me a 1.8M number (in today's dollars).

Can't recall that you spoke of Roths, but I highly recommend you put every dime you can into Roths (right after you snag the company match on a 401(k))

I have a Roth for myself which I max each year and my 401k also allows for Roth contributions.

Thanks all

 

[Christine]

Roughly 65%/35% stock to bond. Had been much more aggressive but I'm feeling nervous lately. Not a market timer, but just reevaluating my current risk appetite.

I would like many suggested increase the stock quota. Personally I would go 100% at your age. But it's also important to avoid taking risks that keep you up at night. And you know yourself better than we do.

 

[street]

Welcome!! You have found a great place here with great advice and will give you the confidence and experiences from people that have done it.

I also will agree with posters that your AA should at 100%. I also believe with ~15 years left with your double income you should be more then 2.5M. Watch where you spend and keep plugging away and you will easily make your goal.

 

[MarieIG]

We would need your specific questions as to Roths, how your retirement accounts are currently structured, and what you hope to achieve.