30 yr old Atlanta young professional looking to retire abroad at 55

[bmd_dreamchaser]

My name is Chris and I have been waiting to find a community such as this! I just finished my MBA last May and have a great job making $93k salary + ~7k bonuses and free travel benefits. Currently, I save 20% of my take home pay ($1000/mo, not including roughly $500/mo employer match fully vested after 3 years) just for retirement. I have $20k in roth ira, $7k roth 401k, $3k 401k, totaling $30k portfolio. My goal is to (combined with my future wife) save $25k/year for retirement and accumulate $1.25M - $1.5M nest egg and live off $50k per year. Our debt includes $210k student loans ($80k of which is mines) and $15k combined car loans. Cars will be paid off by next summer. Student loans we plan to tackle at $2k/mo for a estimated payoff in 2029 (payments start late 2016 when she finishes school). My girlfriend and I also have a 3year budget plan to save $85k to cover engagement, modest destination wedding, house downpayment, and 6mo income emergency fund (aside from continued retirement savings at $1000/mo). I'm 6 months into a serious relationship (she's 25 currently not saving but paying for a portion her PhD) and will probably be getting married Fall 2015 and plans to start a family 2 years after. Plan now is to have 2 kids by age 37 so that I can retire at 55 (her 50) with the last just finishing high school, freeing up the opportunity to live abroad, particularly whatever South America is the present day equivalent to Panama or Costa Rica. Age 50-55 I want to "test the waters" living on a fixed retirement income. Interested in any advice or encouragement to get me there!

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[papadad111]

You're pretty far in the hole with respect to debt today with the ridiculous level of student loan debt that you are carrying. If you are going to start living your dream of retiring at 55, you and potential future dear wife had better begin now by living within your means and getting those loans paid off. 210K debt for college education? Crazy in my opinion... How do you get the student loans paid off ASAP so you can get climb out of the huge hole....get to zero debt... THEN start saving for retirement....buying a house...paying for kids.....and all that good stuff.

I think you're 4 -5 years from being debt free at current income if you hit it as hard as you can.... maybe you can get there in 3 years if you do the simple elope/no big wedding thing...live within your means...dont live with Sally Mae in the spare bedroom til 2029....

That would put you at 33 or 34 years old being debt free. About the time the kids come along...the wife asks for a bigger house....the wife dumps her career to raise the kids....etc etc etc....


Get out of debt...that should be goal #1
Get out of debt
Get out of debt

 

[bmd_dreamchaser]

I agree crazy...but it's where we are now. Had no family help and nothing but dreams and student loans matched with no personal finance skills. I'm a Dave Ramsey fan and I know he preaches the same to get out of debt first, but I also know psychology and behavior play a big roll. At this point in time I love seeing high interest returns and figure its best to place my money there as opposed to paying off low interest debt. The other thing is that I will NOT be able to convince her to live that lifestyle needed to pay off in 5 years, and frankly Im a little hesitant. Im addicted to watching my savings grow and feel as though now is the time to save early and let compounding work paired with a high market return environment fund our future. Is there a better way to look at this?

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[papadad111]

Yep. Being totally honest, pick a different future mrs Chris. Sounds like the future spouse has a mountain of debt and getting a PhD only to stop work and start a family and live beyond her means. Are you SURE you are compatible financially ? 6 months is hardly even a test drive. Hate to have you 5 years later in a situation that's worse than now. The big D can be a huge (some say number 1) financial error toward missing FIRE...

It's a pity that so many go into such high debt for what amounts to a common sense degree. Unless it's Harvard Wharton Michigan Indiana or Stanford then you could probably have done the same for half what you paid for that sheepskin. That said, now that you have a fancy degree, your other choice is to get the income up to knock out the debt ...

I would be surprised if you can get returns that are higher than paying down student loan debt. I would plow that 30 k portfolio into reducing the loans.

Dave Ramsey fan ? His logic is a little flawed and preachy at times but I like the fact that he gets people out of debt. That's a key step to early retirement... and building wealth is really the goal. You do that by increasing assets not increasing liabilities.

Focus on debt reduction.

 

[bmd_dreamchaser]

I totally understand and respect your opinion on the debt reduction goal as #1. For clarity, she works now FT making about 50k and would be at roughly $100k level when she graduates. She will definitely be working (in fact I plan to stop at 50 while she pulls out the final 5yr stretch). We have family support for kids, so no need for her to be at home. But I'm looking at the end goal, whether or not I carry the debt isnt important if the end goal is the same and I can somewhat enjoy these next 5 yrs without living on beans and rice...we have the income to not have to do so Id think. I may be reading this wrong, but if mutual funds are returning 10%+ lately, isnt it smarter to put discretionary money there vs at a debt at 6%. I figure compounding on either end is a washout, or is there something Im neglecting?

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[Sarah in SC]

Welcome! And I do think that the debt should be a priority for you, but I'd hold off on the marriage and kids plan for at least a year or so. Financial compatibility is such a critical part of a successful marriage, and you want to be *really* sure that you are both on the same page at the same time.

Long-married folk will tell you that plans and priorities do change along the way, but as long as you both change together, you'll have an easier time of it.

FWIW, I dated my DH for 4 years, got married at 23, and he's enjoying a very well-deserved sabbatical at 51 that we worked extremely hard to plan for, together. No kids.

I wish you the best, God but that student loan debt terrifies the life out of me. We did Dave Ramsey for a long time and successfully paid off our house a few years ago.

 

[ShortInSeattle]

Hey there!

It's great that you are thinking and saving for your future! Here are some things to think about:

1) As others have said, your debts are tremendous. think of it like this - you've basically got a 30 year mortgage payment with no house to show for it. I hope that your GF will get a hefty salary in exchange for her big outlay. If ER is a goal, just realize that you're starting "in the hole" and it's going to be a challenge to climb out. Not impossible but hard.

2) Don't forget the impact of inflation. Even if inflation is a modest 2% 50k saved today will be worth only 33k in 20 years. You may need more saved than you think.

3) If retiring early is important to you, finding a spouse who has the same mindset is very important. A destination wedding, a nice house, financed cars, a couple of kids.... These are all very expensive things. You can have them, sure, but you probably can't have them *all* plus 200k in student debt and still retire early. What sacrifices are you both willing to make?

4) Retiring cheaply abroad is a cool idea, just remember that it's hard to know now what you'll want in 20-30 years. As we get closer to ER, uprooting sounds less appealing.

You're thinking - which puts you ahead of most of your peers. Now you can work on getting realistic about what it's gonna take. That being said, ER is possible! and it's great that you are starting out early.

Welcome.

SIS

 

[Calico]

"The other thing is that I will NOT be able to convince her to live that lifestyle needed to pay off in 5 years......."

This is a huge red flag, IMHO, which does not inspire confidence in your overall plan. If your future DW isn't willing to make the necessary sacrifices now, you can rest assured that she will be even less likely to be willing to make them after the children come along, when your (child related) expenses will increase exponentially. Incidentally, in 40 years of working, I have seen dozens of women who swore they were going to return to work after six weeks of maternity leave discover that they preferred to stay home with the children. This is not a judgement of anyone's choice - I think raising children is one of the hardest jobs out there. It is merely a cautionary note to say that even the best laid plans don't always come to fruition, and you would be wise to have a Plan B which takes into account that your future family may actually be a one-income family.

Best of luck to you. I strongly second the earlier advice to take this relationship slowly until you are sure your financial goals/expectations are on the same page. A mistake in choosing a spouse can be one of the most costly mistakes there is.

 

[NYEXPAT]

Plan now is to have 2 kids by age 37 so that I can retire at 55 (her 50) with the last just finishing high school, freeing up the opportunity to live abroad, particularly whatever South America is the present day equivalent to Panama or Costa Rica. Age 50-55 I want to "test the waters" living on a fixed retirement income. Interested in any advice or encouragement to get me there!

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Present day equivalent in what respect? I live in a large SA american city now and the cost of living is higher than Atlanta (Mercer survey's). Currently, San Jose and Panama City are a bit higher still. If you are talking about climate or Quality of life issues, than I can understand, but as the middle class continues to shrink in the US and grow in SA, future COL comparisons may look very different in 20-30 years.

Having said that, Our current plan (60 y/o,32 y/o spouse, 9 year old son and newborn 2015) are looking seriously at the Atlanta area to move to in 3 years.

Besides educating our children in a top school district and availing ourselves of in-state tuition at GT or UGA, my wife will get her citizenship and earn a larger salary. When she turns 50, ( me 78) she plans to retire and we will move back to Peru.

We will keep our Oceanfront penthouse here as a hedge against future appreciation, US inflation, currency debasement, etc.

 

[bmd_dreamchaser]

Thank you all for the feedback, I'll definitely be taking my time! @shortinseattle thank you for point #2! I assumed FireCalc wanted your retirement spending in todays dollars and its adjusted for inflation, but it sounds like thats not the case...great to know!
@nyexpat You may be a great resource then. On my initial research I kept hearing how a retiree can live off $2k-$3k per month, admittingly not in the major capital cities however. The big things being cheap, but high quality healthcare at around $100/mo for a couple...or cheap market food, especially fruits and veggies...and cheap manual labor around the house...entertainment being a lot cheaper due to the natural habitat and retiree discounts their governments provide. I do understand that those markets will change, just anticipating another "hot spot" will emerge in its place

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[daylatedollarshort]

I'm 6 months into a serious relationship (she's 25 currently not saving but paying for a portion her PhD) and will probably be getting married Fall 2015 and plans to start a family 2 years after. Plan now is to have 2 kids by age 37 so that I can retire at 55 (her 50) with the last just finishing high school, freeing up the opportunity to live abroad, particularly whatever South America is the present day equivalent to Panama or Costa Rica.

I have spent more than 6 months deciding which pair of shoes to buy. Just sayin'.

I don't think your priority should be to pay off low interest loans, but it should be to have a positive net worth. You are in a negative net worth emergency status. That debt is crazy high. Focus on your NW before you dig yourself deeper into debt with a big wedding to someone with huge amounts of debt and incompatible savings habits.

If you want to retire early and live abroad you have to think, act, save and spend more like the posters here than the general public. You have received a lot of good advice in this thread. I hope you consider it.

 

[bmd_dreamchaser]

Isnt the average around 3 years to get married? We'd be close to 2.5 yrs by that time Fall 2015. Nothings a guarantee, but I can say that living together the majority of that time has accelerated our understanding of each other compared to someone not living together who may see each other 3 days a week. We have already began to learn how to "live" with each other. In regards to the NW its high on the list. $7k is our limit on a small family wedding (which is like 20% of the cost of an avg wedding while making 2.5 times the salary of an avg family...I would think certainly thats not "splurging". I look at the $2k student loans as maybe $1500 more per month than average, or the equivalent of what itd cost to raise 1 child till age 12, or a person in the same situation wanting 3 kids. Maybe ill pick up a PT consulting job later? For now Im starting a partime job bringing in $900/mo after tax in April to help accelerate these goals. I have no problem with working. Desk jobs dont require much.

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[NYEXPAT]

@nyexpat You may be a great resource then. On my initial research I kept hearing how a retiree can live off $2k-$3k per month, admittingly not in the major capital cities however. The big things being cheap, but high quality healthcare at around $100/mo for a couple...or cheap market food, especially fruits and veggies...and cheap manual labor around the house...entertainment being a lot cheaper due to the natural habitat and retiree discounts their governments provide. I do understand that those markets will change, just anticipating another "hot spot" will emerge in its place

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Today, a retired couple could live on that easily by doing what you propose. In the past it was much cheaper to own then to rent, but that has reversed itself and a nice 1 bedroom apt in the most luxurious parts of the city will only set you back $600.00/mth. Quality healthcare/medical is only available in the major cities as well as dining/entertainment/cultural options. Other advantages are no need for a car/gas/insurance, depending on the city no heating or cooling costs, my family pisses electricity and it only costs $40/mth.

Forget about quality healthcare for $100.00/mth for an elderly couple. It is available but only covers routine costs. At age 60 a couple would pay $4,000.00/ year for a $0 deductible major health insurance policy accepted by the best private clinics in the country which you can purchase if you start before age 65.

 

[FinanceDude]

You have a lot of dreams and plans, which is good. However, it seems to me that YOU seem to have all the plans, and she is "going along with it" at this time. make sure she is totally on board will these plans, or your life will become miserable real quick.

Number one priority is get those student loans paid off quick. I don't care about the interest rate, you'll feel so much better with that albatross gone.........

best of luck!

 

[papadad111]

I would take paying off the 6 pct student loan debt over a possible return of 10 percent in the stock market and here is why:

That 6 percent is a guaranteed return
Stock market gain of 10 percent is not

Stock market can just as easily fall 10 ..20..30...50 percent. Seeing that 30 k drop to 15 k will make you realize the 6 percent was looking pretty good

Even if you tell me that you are a wizard and can time the market to get in for a few months, make your 10 percent gains and get out, I will remind you that the 10 percent gain is taxed at short term cap gains rates meaning your real return is probably no better than 6 percent .... And a hell of a lot riskier strategy than just paying off the loans.

You are also not realistically considering all angles on retirement as an expat. I have been expat for 25 years off and on and even I have my doubts about growing old abroad. It's not the cost, it's the trade offs needed at a later stage of life that are not always worth it. Part time maybe, full time not so sure. Seen it many times with other older expats wanting to live low cost ... Priorities shift as ones own Parents get old, kids grow up, grand kids come along, health or physical issues make travel difficult, medical care- even the best care may be cheaper but not necessarily as advanced as in USA. ( stem cell treatment a possible exception...but I digress) - long flights back to home country are costly ...Etc etc all this make living abroad a reasonable early retirement option, say age 45-65 but after that many...no. Make that most... tend to circle the wagons to play out the final years closer to the ones they love....

You are young and intelligent... Do your homework. Lots of good advice. Read and plan. Be aligned - you and your spouse. Get out of debt !!!

 

[retire2020]

Pay off student loans and any debt you may have should be your plan A. Your plan of future retirement will automatically fall into place if you lbym and save as much as you can. Market returns can hurt you big time too(Have been carrying over 500K capital loss from 2000/2008 Crash…Yikes). What will happen to your savings if market crashes like that? 6% on loan is too high…get rid of it. Only borrowed three times in my life - 1) Student Loan….about 20K, 2) First Car and 3) House. I paid off my student loan in three years(1994), car in five years and then house in three years. After first car, I saved money for new car and always bought it in cash.

 

[38Chevy454]

Hey there!

It's great that you are thinking and saving for your future! Here are some things to think about:

1) As others have said, your debts are tremendous. think of it like this - you've basically got a 30 year mortgage payment with no house to show for it. I hope that your GF will get a hefty salary in exchange for her big outlay. If ER is a goal, just realize that you're starting "in the hole" and it's going to be a challenge to climb out. Not impossible but hard.

2) Don't forget the impact of inflation. Even if inflation is a modest 2% 50k saved today will be worth only 33k in 20 years. You may need more saved than you think.

3) If retiring early is important to you, finding a spouse who has the same mindset is very important. A destination wedding, a nice house, financed cars, a couple of kids.... These are all very expensive things. You can have them, sure, but you probably can't have them *all* plus 200k in student debt and still retire early. What sacrifices are you both willing to make?

4) Retiring cheaply abroad is a cool idea, just remember that it's hard to know now what you'll want in 20-30 years. As we get closer to ER, uprooting sounds less appealing.

You're thinking - which puts you ahead of most of your peers. Now you can work on getting realistic about what it's gonna take. That being said, ER is possible! and it's great that you are starting out early.

Welcome.

SIS

Have to agree with this summary. You have an uphill battle to have enough savings to make the goal. Think of it this way, 25 years from now you have to save approx $1.5-1.8M in total, to net $1.2-1.5M. Even going with the low end $1.5M, that is in simple terms $60K/year. Yes, you will have some compounding and the actual number to save each year is probably around $45K, you can do the specific math to be exact. That $45K/year savings is not unreasonable, but does require dedicated effort. How much sacrifice will your future wife put up with? How much money will she make? Is her PhD in a field that can actually hope to pay back the $130K in loans? To me that figure is crazy accumulation of debt.

Add in a couple kids expenses (not insignificant), wife wanting to keep up with the neighbors as far as house and vehicles, periods of no income from wife staying home with kids, and you may be struggling to save that $45K. Where you live the cost of living can have big effects.

I can only repeat what others have said, pay off debt first. College debt is bad debt. It is not debt that is enabling you to use other people's money to leverage your own (such as mortgage).

 

[panacea]

Welcome to the forum bmd! I'm not sure I can add much more than what others have said. You have a lot of challenges ahead of you so you'll need to make careful financial choices and be prepared to live waaaay beneath your means to meet your goals of reducing debt and saving for retirement.

To answer your question about what an average engagement period is... no idea! I was engaged after 6 months (although we were engaged for 2 years while we finished up college and got our finances in better order). We just celebrated 20 happy years last summer so I guess we're one of the lucky couples. In my mind 2+ years should be long enough to learn whether you are a good match and have the same values. Just don't be afraid to confront the important issues head on... better to hash out the finances now rather than after you're married.