27 year old DINK looking to FIRE by 50.

[KCScubaSteve]

Hello everyone. I came across this site after a recommendation from my dad. Below is my current situation/goals. DW is 24.

Combined Annual Income: Mid $90's + Variable Comp.

401k/IRA's: $30k (DW doesn't have a 401k at work)
Consumer Debt: $40k
Mortgage: $214k
Equity in House: $40k

Goal for 2018: Pay off remaining consumer debt.
Goal for 2019: Ramp up savings to max 401k/IRA's.
Goal for 2020: 100k in retirement savings.
Goal for 2025: House paid off and 400k in retirement savings.
Goal for 2042: FIRE w/ $5MM Nest Egg.

Look forward to the insightful discussions here.

[brokrken]

Quote:

Originally Posted by KCScubaSteve Goal for 2018: Pay off remaining consumer debt. Goal for 2019: Ramp up savings to max 401k/IRA's. Goal for 2020: 100k in retirement savings. Goal for 2025: House paid off and 400k in retirement savings. Goal for 2042: FIRE w/ $5MM Nest Egg.

Good progression of goals and I think in the right order. Don't forget to save outside of 401K once you max that out. You'll need to bridge the gap between 50 and 59.5 with taxable money. Also, 5mln in 24 years is a lofty goal. Not that it can't be done, but you'll need a heck of bull market and huge savings rate to get there. Good luck!

[aaronc879]

Quote:

Originally Posted by KCScubaSteve Hello everyone. I came across this site after a recommendation from my dad. Below is my current situation/goals. Combined Annual Income: Mid $90's + Variable Comp. 401k/IRA's: $30k (DW doesn't have a 401k at work) Consumer Debt: $40k Mortgage: $214k Equity in House: $40k Goal for 2018: Pay off remaining consumer debt. Goal for 2019: Ramp up savings to max 401k/IRA's. Goal for 2020: 100k in retirement savings. Goal for 2025: House paid off and 400k in retirement savings. Goal for 2042: FIRE w/ $5MM Nest Egg. Look forward to the insightful discussions here.

I'm confused. If you spend so little that you can pay off $214K mortgage and save that much in retirement savings in 7 years on an income of ~$100K/yr then why would you need $5MM saved to be able to retire? Also not sure how you expect to gain $4.5M in 17 years? Expecting a large pay increase?

[KCScubaSteve]

Quote:

Originally Posted by aaronc879 I'm confused. If you spend so little that you can pay off $214K mortgage and save that much in retirement savings in 7 years on an income of ~$100K/yr then why would you need $5MM saved to be able to retire? Also not sure how you expect to gain $3.5M in 17 years? Expecting a large pay increase?

$5MM is the safe goal. I realistically probably only need $2M.

As far as the large pay increase, that is where the variable comes in. I am in an ESOP and DW's commission is on large sales that only occur every 1-2 years. Depending on the sale size, could be $25k commission.. could be $500k commission.

[Bigdawg]

Goal for 2018: Pay off remaining consumer debt.--Look for a zero % transfer 12-18 months.
Goal for 2019: Ramp up savings to max 401k/IRA's.--While paying consumer debt contribute at least the min to get company match.
Goal for 2020: 100k in retirement savings.--Numerous variables here. I would just concentrate on max contributions and alternate sources of income.
Goal for 2025: House paid off and 400k in retirement savings.--Always good to pay off mortgage. Do not upsize the house.
Goal for 2042: FIRE w/ $5MM Nest Egg.--Good luck.

[Aerides]

In addition to paying off debt first, you also want to squeak in another goal in between 1 and 2: Establish a cushion/emergency/cash fund. By having a nice safety net to cover 6 months of expenses, you avoid the likelyhood you'll ever want to use debt to cover issues down the road.

[pjigar]

Keep an eye on expenses. Don't let them go up as your income goes up. If you don't move into bigger house and don't have kids then you can achieve every goal you listed. For us, getting a big house was a big mistake.

PS: Kids are expensive but they bring lot of joy in our life and I would not change a thing if I had to do it all over again!

[COcheesehead]

I was just like you. I set my sights almost from my first "real" paycheck at 22, to retire with a million by the time I was 40.

Life changes. I decided to start a business at 35 and that took money. I bought a commercial building a few years ago and that took money. International travel started to be intriguing and that took money.

Bottom line. I had my million at 40 and I knew it wasn't enough due to inflation. I am now 55 and have many millions and now I think I finally have enough. I am in the process of selling my business and will retire in about 2 years.

Set some goals, but don't forget to live your life along the way. Money isn't everything.

[brokrken]

Quote:

Originally Posted by Aerides In addition to paying off debt first, you also want to squeak in another goal in between 1 and 2: Establish a cushion/emergency/cash fund. By having a nice safety net to cover 6 months of expenses, you avoid the likelyhood you'll ever want to use debt to cover issues down the road.

Also, it gives you options. I once had a job that would have killed me by 35 if I didn't quit. Having a financial cushion allowed me to quit without having another job waiting. Looking back it was the best decision I ever made. I had many coworkers that were extremely envious because they were not in a position financially to quit.

[gamboolman]

KCSS, as you already know......Listen to Dad....

Enjoy that gift that you get to share life with a lady that you do not deserve, and hold tight to her each night you can .....
That's it......

The rest is just left overs....

Make some babies.....ha.... Ms. gamboolman at age 24 was a Mother.... and Dad was Roughnecking "Necking" in West Texas tossing a chain..... when GD West Texas Intermediate was FN-A <$9 / BBL.....tuff times....

Get rid of debt - yes

LBYM's....obviously...

Enjoy the struggle and .....

Bear Down and live it to the fullest pawdnaaahhh...and....every GD night...

Hold that gal tite to you every night.....

Don't get distracted....hang tuff..... Keep your goal in sight....Be strong enuff to hold your sight's steady for the Kill Shot ....AKA as..... FIRE...

Before you know it....40 years will have passed hombre.....

You can sleep in retardment.....Pawdnaahhhh...

gamboolman....

[EvrClrx311]

Quote:

Originally Posted by COcheesehead I was just like you. I set my sights almost from my first "real" paycheck at 22, to retire with a million by the time I was 40. Life changes. I decided to start a business at 35 and that took money. I bought a commercial building a few years ago and that took money. International travel started to be intriguing and that took money. Bottom line. I had my million at 40 and I knew it wasn't enough due to inflation. I am now 55 and have many millions and now I think I finally have enough. I am in the process of selling my business and will retire in about 2 years. Set some goals, but don't forget to live your life along the way. Money isn't everything.

+1 this is outstanding insight/advice. It's something that we don't really have an appreciation for in our 20's but learn along the way. That is, build a long term road map, but leave room to live and adjust along the way, within the bounds of that ultimate goal. I was eyeing 45 as a FIRE date and overdoing it on the saving rate (in retrospect - it can burn you out), but as I turned 30 I started to recognize just how important travel and adventure was to me along the way - experiences. Now I'm shooting for 48-50ish, because I've decided to reward my savings habits with some travel and adventure in my 30's... I'm much much happier now.

[kgtest]

Quote:

Originally Posted by KCScubaSteve $5MM is the safe goal. I realistically probably only need $2M. As far as the large pay increase, that is where the variable comes in. I am in an ESOP and DW's commission is on large sales that only occur every 1-2 years. Depending on the sale size, could be $25k commission.. could be $500k commission.

I've personally counseled a few younger folks and they always want 5million by 50 lol. That is not realistic unfortunately. If you built a spreadsheet to see what that would actually take, you'd realize assuming even 5% annual raises, and a 50% savings rate with 2% inflation and at best 7% average annual returns you would see its likely not possible without a windfall or some serious pay raises.

Even if you earn 200k for 20years, and save half that, you only have 2million + gains. If you had the entire 2million today, sure then by 20years form now when you are 47 it could be possible.

[KCScubaSteve]

Quote:

Originally Posted by kgtest If you built a spreadsheet to see what that would actually take, you'd realize assuming even 5% annual raises, and a 50% savings rate with 2% inflation and at best 7% average annual returns you would see its likely not possible without a windfall or some serious pay raises.

The spreadsheet I built does not take into account inflation. My assumptions are:

• 3% raise for me every year.
• No raise for DW.
• Max my 401k and both IRA's every year (starting in 2019).
• Additional $2k in brokerage acct once house is paid off.
• ESOP growth.

Currently has me passing the $5MM mark in 2047 (I would be 56).

[Scrapr]

Quote:

Originally Posted by KCScubaSteve The spreadsheet I built does not take into account inflation. My assumptions are: 3% raise for me every year. No raise for DW. Max my 401k and both IRA's every year (starting in 2019). Additional $2k in brokerage acct once house is paid off. ESOP growth. Currently has me passing the $5MM mark in 2047 (I would be 56).

before kids. If Mrs wants them. You both are very young. And I wish I could have been on your path so early. Kid(s) will suck up that $2k/mo pretty easily. ESOP? Who knows. Maybe a meteor will hit your company and everyone will get a fresh start. Embrace the suck. Because you never know when it's coming

Listen to gamboolman. Hold your wife as tight as you can. And enjoy the ride.

[HI Bill]

Sounds ambitious, and sounds like a great plan. But I would still say "Balance in Everything." You need to spend enough to have experiences (like travel), and to be comfortable. Not saying you need to drive a Mercedes or live in a mansion, but be sure to enjoy life along the way. You never know how long you'll be here. At 52, I can say that I'm good to go at any time (I've lived a life with experiences and diving and travel that most do not)...but I'm not really ready. Now that I'm technically FI, I look forward to 20 years of diving and world travel. Best of luck! BTW, I have assumed in my spreadsheets in the past that Earnings = Inflation. It's very conservative, and since 2008, earnings have outpaced inflation dramatically, but there's no guarantee that a historic 7% annual rate of return will continue.

[Scout]

Hi there,
I agree with the other that if your spending is moderate ~100k you simply will not need 5million. You’re coming upon some of the best years of your life. Try your best not to perseverate too much on a number. It can become an obsession. I ran your numbers through a compound interest calculator and at a 6% return starting with 30k you’ll have to put away 9k monthly to hit 5 million. If your burn rate is 100k 3 million will be perfect.
Have fun and Good luck!!

[AginMS]

Are you paying off the mortgage by putting more toward the principle each month? IOT pay off $214K in 7 years you’ll need to pay ~$2.5K/mo (plus taxes and insurance).

How much is your mortgage interest rate? If it is low, I would consider investing the extra money instead and letting those additional years work their compounding magic towards your goal of $5M.

That said, I understand those who want the satisfaction of zero debt.

[kgtest]

Quote:

Originally Posted by AginMS Are you paying off the mortgage by putting more toward the principle each month? IOT pay off $214K in 7 years you’ll need to pay ~$2.5K/mo (plus taxes and insurance). How much is your mortgage interest rate? If it is low, I would consider investing the extra money instead and letting those additional years work their compounding magic towards your goal of $5M. That said, I understand those who want the satisfaction of zero debt.

It is a tough balance. And then you need taxable income like they say to fund the years 50-55 before any IRA dividends can be taken.

My plan, 2.5mil by 50, 1mil of equity, 2 rentals producing 1/4 of my annual projected 70-100k budget.

Then, cash plus taxable brokerage money will fund me until a small raise at 65 (pension) to reduce SWR, another small raise at 70 (SSA FRA), and then my RMD which comes around 71.5.

That should last me 35years. I anticipate my years 50-71.5 (RMD) to be the best in terms of quality and getting around, then I expect a decline that will limit mobility and travel expense...likely decreasing overall SWR again. Soo, I won't hesitate to spend any less than I can to last me 35years.

Now if health declines at all, I will inversely increase spending, either on treatment or blow my dough mentality.

Adversely, if DW and I inherit stretch IRAs like we fully anticipate (both folks multi million one living off just dividends until RMD and one not even touching principle until RMD comes due to 5 passive income streams) then we will definitely look at the blow your dough some more.

Been taking regular trips out of the cold to warm places, and many cross country experiences with the family. We are fam of 4, possibly 5 so your mileage will vary and current annual budget of 100k. No debt besides a cpl mortgages.

I have 13 more years and a mortgage to payoff, taxable accounts to fund all sorts of fun. We are currently saving 50% of our combined income, and when we are done with daycare plan to increase saving near 65%, then when mortgage is done in 9/10 years push it up even more close to 75% that last 4years before we ER. Then we can spend the next year touring colleges for first kid. They have a 529 but hoping to stock up on grants, scholarships and edge towards state or CC or even trade if they are interested. Degrees can be over rated. Look at me I don't have one and earn well over 5zeros. But there will be some money there for that.

Any windfalls we get now will likely be divided equally into broker, HSA, cash in that order.

I don't know how this plan can fail. I call this my 10 legged stool.

1. Cash (for emergency fund, buy low opportunities, and gap years)
2. Income Property rents (for part of annual COL + Equity to pass along as legacy. Looking at 1031 to reset basis and depreciation
3. Taxable broker (for my gap years)
4. HSA (for our health expenses)
5. 529 (for some of the kids college)
6. IRA (dividend withdrawals to help with gap years 55-RMDs)
7. Pension (reduces SWR at 65)
8. SSA (reduces SWR at FRA 70)
9. Roth IRA (for our legacy)
10. Inherited Stretch IRA and DF income properties (5)

Pretty sure I could drink the entire bottle and still be sitting on that stool. Everyone would look attractive, but that stool will be sturdy

Just need to survive this last 3160 days of showing up to wrk!

[NgineER]

Quote:

Originally Posted by KCScubaSteve The spreadsheet I built does not take into account inflation. My assumptions are: 3% raise for me every year. No raise for DW. Max my 401k and both IRA's every year (starting in 2019). Additional $2k in brokerage acct once house is paid off. ESOP growth. Currently has me passing the $5MM mark in 2047 (I would be 56).

So your 3% salary increase is not due to inflation? I usually get 2-3% of salary increases that IMO are inflation driven, not because I am excelling. The 10-20% promotion raises are due to performance.

[MoneyIsMyHobby]

Quote:

Originally Posted by KCScubaSteve The spreadsheet I built does not take into account inflation. My assumptions are: 3% raise for me every year. No raise for DW. Max my 401k and both IRA's every year (starting in 2019). Additional $2k in brokerage acct once house is paid off. ESOP growth. Currently has me passing the $5MM mark in 2047 (I would be 56).

KCScubaSteve, I think you're in the money and I don't even think you have to figure out where that money is going to come from exactly yet. So much is going to change between now and when you're 50. If you're a professional, you're pay will definitely outpace inflation, or you'll leave your employer and go somewhere else. If all it did was follow inflation, then the 50 somethings at your office would be earning the same as the 20 somethings, and that just isn't the case in the professional world. Do you mind sharing what you and DW do?

I agree with a lot of things people have said here, including the need for flexibility in your plan. I think you should also consider your risk tolerance. I, for one, have a much higher risk tolerance pre-retirement than I will post-retirement. Right now, I want my money working hard for me to get to my goal, and I want other's money working hard for me to get to my goal. For Example...

I have a 30 year note on my home that is up in 23 more years, I pay the minimum every month so that I can put more in my investments which earn ~ twice what I pay in interest on my home.

I don't keep an emergency fund on hand, rather, I have a HELOC on my home equity for just such situations. I could live a year on the money available from my HELOC... therefore all of my money is working for me, not sitting in the bank growing cobwebs. Lastly, I decided to diversify with a rental home last year... we'll I contributed $50k to that, the other $200k the bank contributed at 5.25% interest for 20 years. Getting to your goal will be much easier with slightly more risk and more debt, if you can handle it. I know it isn't the Dave Ramsey way, but the Dave Ramsey was is what he can advise the masses all at once, not personal advice for individuals.

BTW, I would never encourage consumer debt. And if you don't have the discipline to not touch your money, then the advice above is not good. Dave Ramsey's plan works because it puts your money in hard to reach places so that you're less likely to steal from yourself... seriously.

P.S. Ditch your spreadsheet and sign up for PersonalCapital... great account aggregator and retirement feasibility evaluations. I'm not part of PC, just a huge fan.

MoneyIsMyHobby