Aiming for early 30s

[ShortInSeattle]

Hello from a fellow Washingtonian!

A few things come to mind.

1. Yup. If you can live on very little, you don't need very much. Most people would not be happy at that level of spending, but you know yourself better than we do.
2. Life is long and things can change. Priorities can change. I say this as someone who is only 35. If you retire super early and don't maintain your earning power, you may hurt your opportunities to do other things. (Marry, Move, Travel, etc.)
3. An extremely short career may hurt your future social security payouts.
4. If you are positive on the childfree thing, consider the snip. Love happens and so do accidental humans. As a guy you need to protect yourself. (I am childfree BTW - got the lady-snip at 27). Know that being CF limits your pool of potential spouses. Most people do want kids.
5. I would be hesitant to count on future timber income. Nice if it happens, but again things change.

Is what you pose possible? Probably. Does it come with risks and downsides. Yes.

For what it's worth, that is what I think. Welcome to the forum.

[scrabbler1]

Quote:

Originally Posted by Dauglos Hi, all. I’ve lurked on this site for a while – and been planning for early retirement much longer – and feel it’s finally time to come out and chat. My situation boils down to this: I’m 29, can live comfortably on very little, and hope to retire by 34 at the absolute latest. My current asset vs. debt situation isn’t all that impressive . . . . I have $135k in my private investment account, $80k in home equity, $20k in my IRA, and $3k in my 401(k) vs. $107k left on my mortgage. But I remain optimistic about retirement because my savings/investments tend to grow by about $4k per month, and, setting aside my mortgage payments, my expenses tend not to exceed $10k per year. Before I retire, I intend to build (and fully pay for) a smaller house on some land I already own, essentially trading one home for the next. Then, I’m allowing $20k per year for expenses, and assuming that in 20 years, I’ll get $100k for timber on the land (a forester actually gave me an estimate closer to $150k). All this leads me to believe that, with an annual rate of return of 6.777 percent (10 percent worse than the Nasdaq Composite), I would need only $260k if I were to retire now and die at 82. (Men in my family tend not to last so long, either.) So what am I missing, good or bad? I know I haven’t yet accounted for inflation, but I’m also ignoring Social Security, Medicare, the possibility of a reverse mortgage, and one or two other potential helpers. I’m especially interested in how a negligible income level will work with Obamacare and perhaps even federal aid guidelines. Your input would be appreciated. I’m single and may eventually marry, but will definitely remain child-free. Also, my land’s in a small Washington community called Humptulips with a low cost of living. So here's an even more specific "hi" to any other Washington folks.

I thought I had low expenses at ~$21k per year. I live in a studio apartment in a co-op with no mortgage and pretty low monthly maintenance payments despite living in a high COL area (Long Island, NY). Your childfree choice (like mine) will surely keep the expenses down although it will greatly lessen but not eliminate the chance of finding a childfree woman or something reasonably close to that.

I do suggest you build in a decent surplus, or cushion into your ER budget so you will have a good peace of mind in case unforeseen expenses arise. And make sure you have health insurance covered.

[Midpack]

Quote:

Originally Posted by mikefixac Have you ever heard of Early Retirement Extreme? I don't think it's liked on this forum, but take a look at Jacob's posts, I think you'll like it.

Some folks here thought Jacob's insights were worthwhile (I did as general info), some didn't. He used to post here, and may have shot himself in the foot more than once in the eyes of some ER members...one of those people who seemed to touch a nerve with some ER members.

[daylatedollarshort]

Quote:

Originally Posted by Midpack Some folks here thought Jacob's insights were worthwhile (I did as general info), some didn't. He used to post here, and may have shot himself in the foot more than once in the eyes of some ER members...one of those people who seemed to touch a nerve with some ER members.

I wonder how many people who buy his book on Amazon on the joys of extreme early retirement on a below poverty level budget and how free time is more important than money know he works full time as a quant these days, a field known for high salaries -

Wall Street Pays Up For Quants

I do get some good ideas on the Mr. Money Mustache forum, since most of those people are into saving money while still living, for the most part, frugal but normal middle class lifestyles. But even on there some of the people seem to go a bit over the top to save a dime here and there, like their time is worth nothing.

[Dauglos]

Thanks, everyone, I really appreciate your advice. Lots of great ideas that I’ll follow up on. To try to address some specific points (although I really am looking at everything you've written):

Keim and rodi: KFF.org estimates that I’d pay $1021 per year for my premium, and – before finding that out – I put $3000 in my retirement budget for healthcare costs. So I might whittle that down now, but I am thinking about it. Taxes shouldn’t really hit me if I’m just drawing $20k per year in capital gains.

aaronc879 and ShortInSeattle: Haha, yep, I actually have a consultation scheduled with a urologist next week. Also, yes, I’m not too happy that early retirement will cut into my Social Security payouts.

hsv_Climber: That’s part of why I’m not counting on Social Security and those other helpers I listed. But I don’t want to get too negative (3 percent returns, -5 percent returns, whatever) and doom myself to working forever.

kikechiko: Being a hermit helps. Instead of paying $100 per month for a phone plan, I pay maybe $10 per month for minutes on a prepaid phone. Not many dinners out. No movie theater visits or cable TV . . . I watch only stuff I find on the Internet (and if you look hard enough, you can find anything). Otherwise, my car’s paid for, my clothes are pretty old, and my appliances are energy-efficient. Again, too – the $10k per year isn’t counting my mortgage, and my property taxes and homeowner’s insurance are rolled into that.

Dash man: Good points, all. One nice thing about my land is that it’s in a commercial timber tax program, and property taxes come to roughly $53 per year.

[haha]

Quote:

Originally Posted by scrabbler1 Your childfree choice (like mine) will surely keep the expenses down although it will greatly lessen but not eliminate the chance of finding a childfree woman or something reasonably close to that.

Could you list what might reasonably close to a childfree woman? Close to being a woman? Close to having no children? The mind struggles trying to grasp this.

Ha

[REWahoo]

Quote:

Originally Posted by mikefixac Another thing, once you retire, it doesn't mean you won't work to make money.

On the same level as a vegetarian who still eats meat...

[scrabbler1]

Quote:

Originally Posted by haha Could you list what might reasonably close to a childfree woman? Close to being a woman? Close to having no children? The mind struggles trying to grasp this. Ha

I'll give you one. I have been in a long-term relationship with a local woman who has a grown daughter who lives out of state, hundreds of miles away. I have never met her daughter or her daughter's 3 small children from her daughter's previous marriage. I have spoken to her daughter for maybe 10 minutes on the phone in all the years I have known my ladyfriend. So, for all practical purposes, I am dating a woman who has no children, as her daughter has absolutely no role in my everyday life.

In a broader sense, if one's significant other has adult children who live far away and are not part of one's own everyday life, then that person is dating for all intents and purposes a childfree person.

[sheehs1]

Quote:

Originally Posted by Dauglos Again, too – the $10k per year isn’t counting my mortgage, and my property taxes and homeowner’s insurance are rolled into that.

So...I'm curious. What is it counting your mortgage/property taxes and homeowners? What do your utilities cost if you don't mind my asking.

I'm amazed that you can live on the $10k a year. That's pretty much the grocery budget in our house. (grocery = food, paper products, dog and cat food, eating out a couple times a week, etc.).

[Dauglos]

Lots of spikes and valleys evident in these numbers, I know. That's mostly because I used to throw all my extra cash at the mortgage company, but then realized my investments were earning higher returns. There's also a refinance in there, along with some other junk I've noted.

For 2009: $32,470 in total expenses, $9,117 w/o mortgage payments, $906 for electric, $480 for Internet, $297 for water/sewer.

For 2010: $22,341 in total expenses, $9,690 w/o mortgage payments, $951 for electric, $240 for Internet (turned it off for a while), $383 for water/sewer.

For 2011: $39,653 in total expenses (paid $15k for a new Mazda), $8,312 w/o mortgage payments and the car, $961 for electric, $545 for Internet, $437 for water/sewer.

For 2012: $68,721 in total expenses (bought my land for $38k), $8,909 w/o mortgage payments and the land, $839 for electric, $550 for Internet, $356 for water/sewer.

For 2013: $26,631 in total expenses, $10,309 w/o mortgage payments (had to get some heating and cooling work done this year), $1,005 for electric, $615 for Internet, $225 for water/sewer.

[hsv_climber]

Ok, let me be the first one to state the obvious - you are not living on $10k, since you can't discount the car value to $0, ignore insurance / property taxes, discount house maintenance to $0 even when it is performed and so on.
Of course, you don't need to spend much on car maintenance on a near brand new car, but sooner or later you will need new tires, battery, brakes, belts, and so on.
Where is the medical / dental on these numbers?

I am not trying to discourage you or bring negativity. I am just pointing out that you need to properly account expenses, including spreading the costs and/or accounting the costs for item replacements (like a car).

[Bestwifeever]

Property taxes and insurance will continue regardless of mortgage status. And property tax will increase when there is a house on the land.

[haha]

Quote:

Originally Posted by scrabbler1 I'll give you one. I have been in a long-term relationship with a local woman who has a grown daughter who lives out of state, hundreds of miles away. I have never met her daughter or her daughter's 3 small children from her daughter's previous marriage. I have spoken to her daughter for maybe 10 minutes on the phone in all the years I have known my ladyfriend. So, for all practical purposes, I am dating a woman who has no children, as her daughter has absolutely no role in my everyday life. In a broader sense, if one's significant other has adult children who live far away and are not part of one's own everyday life, then that person is dating for all intents and purposes a childfree person.

I see and agree. I think I was thinking of a young woman, who is still actively mothering her child or children and hence the man in her life might get pressed into service in one way or another.

I can't imagine objecting to a woman having any number of children, who were not currently part of her household, even if they lived across the street.

Ha

[sheehs1]

Quote:

Originally Posted by hsv_climber Ok, let me be the first one to state the obvious - you are not living on $10k, since you can't discount the car value to $0, ignore insurance / property taxes, discount house maintenance to $0 even when it is performed and so on. Of course, you don't need to spend much on car maintenance on a near brand new car, but sooner or later you will need new tires, battery, brakes, belts, and so on. Where is the medical / dental on these numbers? I am not trying to discourage you or bring negativity. I am just pointing out that you need to properly account expenses, including spreading the costs and/or accounting the costs for item replacements (like a car).

I was going to say something similar once I got out my calculator and had time to analyze my budget by discounting mortgage, insurance, property taxes, etc. but am glad hsv_climber went out on a limb to say it first!
Your electric, water etc are evidence you have cut these pretty much to the bone but I am baffled by the statement "I live on $10K" when your expenses for the last several years, regardless of the reason, clearly show much more than that.
Keep up the good work but try not to deceive yourself as you go forward. There will be other expenses that will show up...again as your expenses indicate and some things may not be as cheap when you are in your fifities, sixties..etc..

You are definitely on the right path both in thinking and action.

[W2R]

Quote:

Originally Posted by Dauglos KFF.org estimates that I’d pay $1021 per year for my premium, and – before finding that out – I put $3000 in my retirement budget for healthcare costs. So I might whittle that down now, but I am thinking about it.

It's good that you are thinking about these things. Something you might want to think about, is that you won't always be in your 20's. Health insurance costs more after you are 50 or 60. My suggestion is to check and see if a 60 year old person could get insurance for as little as your estimate; from what people have told me I doubt that would be the case, and insurance has been rising in costs at rates far exceeding inflation for several years. You will not want to head out to look for another job at age 60 after not working for a number of years. So that's just something else. Just trying to be helpful, not to shoot you down because I think it is great that you are working so hard on your retirement plans.

Once you have a detailed record of all of your spending for a year, you can go through it and make a list of the things that you will be spending less on, or more on, in retirement.

This is all a great exercise, isn't it!

[MooreBonds]

Quote:

Originally Posted by Dauglos I know I haven’t yet accounted for inflation, but I’m also ignoring Social Security, Medicare, the possibility of a reverse mortgage, and one or two other potential helpers. I’m especially interested in how a negligible income level will work with Obamacare and perhaps even federal aid guidelines.

I don't understand your comment about "ignoring Medicare". You might want to do some googling on what just Medicare premiums are, let alone the other insurance add-ons for those over 65. Don't forget that you need 40 quarters of credits to qualify for Medicare. If you don't, you're majorly screwed when you turn 65 (although methinks that you're already screwed prior to 65 given your current assumptions and budget).

Quote:

Originally Posted by Dauglos I’m mostly set with a library card, the Internet, and a dog. About the only thing I want but don’t have is the ability to not work every day.

So if your dog gets sick, are you willing to spring $1,000 for a battery of tests to find out what's wrong, and then more money on treatment? How much is in your future budget for petcare?

[daylatedollarshort]

Quote:

Originally Posted by Dauglos I’m especially interested in how a negligible income level will work with Obamacare and perhaps even federal aid guidelines.

For now, the ACA premiums are income, not asset based. Specifically your MAGI number on your taxes are what counts. If you can keep your MAGI t low enough you can qualify for Medicaid or at least highly subsidized premiums.

Most states have assorted programs for low income households. Many programs are asset tested, some are not. In California if you qualify for Medicaid, which is now not asset tested because of the ACA, in some cases this appears to qualify households automatically for other low income programs that would otherwise would have been asset tested.

In Michigan a $2M lottery winner was collecting food stamps because their program at the time was income, not asset based:

Recent $2M Michigan Lottery Winner Leroy Fick Uses Food Stamps Equivalent for Groceries; Some Aim to Disqualify Him - ABC News

[Dauglos]

Good, helpful ideas, everyone.

hsv_climber, sheehs1, MooreBonds: That sort of stuff is why I’m budgeting 20k per year for retirement, not my current 10k. There are slices for basic health insurance, additional healthcare, car maintenance, my next car purchase, and some other items. And MooreBonds, that’s a definite “yes” regarding care for my pets. I may sometimes eat store-brand “toasted oat circle thingies” instead of Cheerios, but my cat (don’t have time for a dog right now) gets Purina One.

[Hermit]

A belated Hi from Hermit. Welcome to the forum.

Quote:

Originally Posted by Dauglos ... kikechiko: Being a hermit helps. ...

Some people even like being a Hermit.

Quote:

Originally Posted by Dauglos Good, helpful ideas, everyone. hsv_climber, sheehs1, MooreBonds: That sort of stuff is why I’m budgeting 20k per year for retirement, not my current 10k. There are slices for basic health insurance, additional healthcare, car maintenance, my next car purchase, and some other items. And MooreBonds, that’s a definite “yes” regarding care for my pets. I may sometimes eat store-brand “toasted oat circle thingies” instead of Cheerios, but my cat (don’t have time for a dog right now) gets Purina One.

This Hermit likes his cars. My car insurance and maintenance budget is $10k. I busted that budget this year! Hope you can do better than me in the car department!

Hermit