40, how am I doing?

[froogle]

I'm a single man, 40, no kids, with gross wages of about $85k/year. Occasionally I have consulting income, which can be anywhere from 0 to $20k in a given year. Right now the assets are around $25k in cash, $250k in other investable assets in tax-advantaged accounts, and a house/mortgage (10% equity, 30 yrs @ 4.5%) but no other debt. Currently I contribute a (mandatory) 10% to a 401a; my employer contributes another 11%. I also max out my Roth IRA and governmental 457b each year. Any extra goes to a 403b. I have a self-employed Roth 401k for income from consulting work. As of this year I'm eligible for additional contributions to the 403b under the 15-year rule (extra ~$3k/year) but don't currently have the extra income to do anything about it. All told I'm investing about 35-40% of gross, not including the employer contributions.

As far as asset allocation, according to Vanguard's portfolio analysis right now about 7% is in bonds (BND, BNDX), 48% in large cap stocks (VTI, FUSVX), 15% in mid and small cap stocks (VTI, FSEVX, VNQ), 29% in international stocks (VXUS, FSIVX), and 1% is in cash (VMMXX). I'm more or less tracking VTIVX (Vanguard Target 2045) at a lower expense ratio, with some additional real estate exposure from VNQ. I've been rebalancing once per year. The $25k e-fund cash is a mix of I-bonds now returning 1.94% and checking returning essentially nothing (0.2%).

I have a fairly secure position in an academic setting (but not tenured faculty). It's mostly self-directed and for the most part my time at the office is spent doing interesting things that I enjoy. A decade from now I'd like to have an inflation-adjusted $1MM in investable assets (a nice round number that turns out to be 25X current annual spending), which would allow some flexibility if I'm less happy with my work at that time. Otherwise, though, I'd be happy doing what I'm doing for another 20 years. With my current rate of savings I'd need a real rate of return of about 6% to pull this off, which is probably optimistic. 2024 isn't a hard deadline for ER, more of a milestone goal, and I could end up below my goal at that time but still be on target for a very comfortable retirement in 2034 or 2044.

My balances have benefited from the 2009-present bull market but all I really did was throw as much money as I could into index funds after the crash. I think I'm doing OK, but then, what do I know? My question is a two-parter, and not very specific: what am I doing right, and what am I doing wrong?

[38Chevy454]

Doing right: saving a high percentage of your gross, living on a modest amount, AA is mostly stocks, extra consulting income for increased savings, want to become FI by 50.

Could do better: not much house equity (10%), not much available savings ($25K).

Overall you are kind of in catch-up mode and you can probably meet your goal if nothing crazy happens to your job or the stock market. While low return on after tax cash is a bit tough to have vs the market fund invested assets, it is kind of low if you have a big emergency. Most all of your savings is pre-tax and while it can be used, the penalty sucks. Do you have SS for 62+ that can kick in and supplement your nestegg, not sure being you work in academics.

If you can keep healthy and employed it seems you are good.

[MooreBonds]

Quote:

Originally Posted by froogle what am I doing right?

You have some pretty good fund selections. Personally, I like a higher degree in international than others, so your 29% is an excellent amount. It sounds like your intestinal fortitude through 2008/2009 was excellent, so 29% international holdings shouldn't really cause you any undue grief from price swings down the road.

Quote:

Originally Posted by froogle what am I doing wrong?

The only thing that kind of stands out to me:

1. PMI

Quote:

Originally Posted by froogle a house/mortgage (10% equity, 30 yrs @ 4.5%) but no other debt.

With just 10% equity, I assume you are paying PMI each month? Look If so, look through your mortgage documentation to see how soon after you reach 20% equity that you can have the PMI removed. Some mortgage contracts require a minimum of X months or some other metric before you can have PMI removed. That could be a sizable amount each month. See how much it would take to pay it up to 20% equity.

[froogle]

Quote:

Originally Posted by 38Chevy454 Overall you are kind of in catch-up mode and you can probably meet your goal if nothing crazy happens to your job or the stock market. While low return on after tax cash is a bit tough to have vs the market fund invested assets, it is kind of low if you have a big emergency. Most all of your savings is pre-tax and while it can be used, the penalty sucks. Do you have SS for 62+ that can kick in and supplement your nestegg, not sure being you work in academics.

Thanks for the response! The cash is my 9-month emergency fund and the house maintenance fund. If it came down to it, $130k of the investments are in Roth accounts (which I probably should have mentioned, sorry) so I could pull contributions without penalty. You're right that since returns on cash are appalling I've been holding onto the bare minimum. I was thinking that 9 months of expenses for the e-fund and 1% of home value/year for house maintenance was OK. What's typical around here?

I do contribute to SS but am more interested in FI than RE, so the plan is not to touch it prior to age 70.

[froogle]

Quote:

Originally Posted by MooreBonds You have some pretty good fund selections. Personally, I like a higher degree in international than others, so your 29% is an excellent amount. It sounds like your intestinal fortitude through 2008/2009 was excellent, so 29% international holdings shouldn't really cause you any undue grief from price swings down the road.

Go me. I can't take too much credit for that, it's just a shade more than VTIVX's 27%.

Quote:

Originally Posted by MooreBonds 1. PMI

Yes, there was PMI, which I paid up front as a single premium. It was about half the cost of paying monthly PMI until I hit 20% equity. Whether it was a better idea than putting 20% down remains an open question. The good news, though, is that I don't have to ask the bank to remove it.