Hello

[BristolBane]

I am a long time lurker to ER sites. I think I first encountered the idea at Motley Fool in the Retire Early Home Page message board maybe four or five years ago? Not sure... I don't subscribe to Motley Fool anymore so I've been popping in here every once in a while. Thought I'd finally say "hi".

I am 33 years old and I've been working in IT for 10 years now. I do database work for an insurance company. I'm married with no kids (yet). I have so far to go until FIRE that it's kind of depressing. A target age of 55 seems slightly optimistic

Anyway, I'll be plugging along with the rest of the worker bees and trying to squirrel some extra money away. Only 22 more years to go!

 

[laurence]

Welcome, first off let me grill you for some details!

Own your own home? What kind of mortgage (term, interest rate)

Other debt that you carry? interest rate on that?

How much are you saving per month currently?

I bet we can make 55 seem like a worst case scenario!

 

[BristolBane]

Hi laurencewill Thanks for asking.

Let's see about those details..

We just bought our house last September so we are in Year 1 of a 30 year fixed mortgage @5.875%. We plan to stay in this house until retirement.

We have a second mortgage at 7.2% because we only put down 5% and had to borrow the other 15% of the "down payment". This loan is amortized for 30 years but a balloon payment for the balance is due after 15 years.

We have no other debt besides these two loans. Both cars are paid for and the credit cards are paid off every month.

We both work and contribute 6% to our 401ks so that we receive the maximum match of 3%. So we've got 9% of gross saved off the bat. Our 401ks are pretty much our only savings. We have a little over $100,000 combined.

After expenses we have about $2500/month to save or spend.

We have just started making additional principal payments on the second mortgage and hope to wipe that out by the end of 2006. After that, the wife will quit work to raise kids. She's about 40% of the income so our savings rate will take a big hit when this happens. Not to mention the additional expenses for kids.

I figure I'll only be able to put away 10k a year (401k and everything else) after she quits. I want about $30,000 net in my retirement days (today's dollars).

How's it look to you?

 

[laurence]

Hi laurencewill Thanks for asking.

Let's see about those details..

We just bought our house last September so we are in Year 1 of a 30 year fixed mortgage @5.875%. We plan to stay in this house until retirement.

We have a second mortgage at 7.2% because we only put down 5% and had to borrow the other 15% of the "down payment". This loan is amortized for 30 years but a balloon payment for the balance is due after 15 years.

We have no other debt besides these two loans. Both cars are paid for and the credit cards are paid off every month.

We both work and contribute 6% to our 401ks so that we receive the maximum match of 3%. So we've got 9% of gross saved off the bat. Our 401ks are pretty much our only savings. We have a little over $100,000 combined.

After expenses we have about $2500/month to save or spend.

We have just started making additional principal payments on the second mortgage and hope to wipe that out by the end of 2006. After that, the wife will quit work to raise kids. She's about 40% of the income so our savings rate will take a big hit when this happens. Not to mention the additional expenses for kids.

I figure I'll only be able to put away 10k a year (401k and everything else) after she quits. I want about $30,000 net in my retirement days (today's dollars).

How's it look to you?

It sounds like you've done a lot, I'm thirty and have about 100k in savings/investments and have been in my house for a few years, refied to a twenty year loan less than a year ago. You will find a lot of people here have discipline and willpower of Titans, so some may take issue with what I have to say next, but have you thought of going to the half payment every two weeks on the house? This will cause you to make an extra payment every year without it feeling too painful and knock about 8 years off the mortgage (don't sign up for the service, you can set up the payment schedule without paying anybody).

I calculate based on 9% return that you'll have at age 55: 675k in today's dollars throwing off about 27k a year with a 4% SWR. But once you get the savings bug, you find ways to increase what you save each year, I bet you'll find you can increase that 10k per year quite a bit as time goes on. In addition, I don't know if you've read the prevailing opinion on this board, but most feel putting in the 401(k) up to the match, then Roth IRA, then pick your pleasure increasing 401(k) or after tax investments.

So this plan makes retiring at 55 with a paid off house very doable. Take each raise and put at least half in investments, you'll do better. Have you read Your money or your life? 4 pillars of investing? Millionaire next door? I recommend them in that order.