Hi from MD! I'm hoping I'm on the right track..

[bldgengineer]

Hi, I'm Chris from MD and I'm a building engineer working in Washington DC. I'm looking forward to retiring at the age of 50. I'm 26 years old and got a late start but retiring at 50 is my ultimate goal. I started last year by with an IRA and I will be maxing that out this and every year. The union I belong to has a pension plan that pays out 3% a month of your total contribution for the rest of your life. By my calculations if I stay at my current wages and my company's current contributions(this is a taft-hartley pension plan. I am not allowed to contribute to this pension and whatever company I work for is the only contributor) I will receive around $5000/mo and my spouse will receive 2500/mo after I die. Right now I am maxing out my IRA and I am also contributing another $2000 split between 3 mutual funds(10% of my gross salary).

My co-workers and I are right now negotiating our contract with our company to try to raise our pension rate from 11% to 12-13% of our hourly wage. We also average about a 3.5% rate hike per year as well.

What I would like to know is am I on the right track to be able to retire at 50 or is there something else I should be doing right now?

I plan on making more of a contribution once my $9300 cc debt is paid off but until then I'm stuck where I'm at.

Right now I make $60,000/year and have a 1300/mo mortgage(incl utils), 580/mo car payment(dont ask very, VERY long story. this is with an 5.9% rate), 110/mo car ins, 200/mo cc payment(at 0%)

 

[Coach]

Hey Chris, and welcome! You may think you're getting a late start, but you're probably 20 years ahead of the average American in retirement planning. Good move!

Ballpark, I think you're on the right track. But spend some quality time with FIREcalc and find out for sure.

You won't get into that position with credit cards ever again, right?

Coach

 

[ats5g]

Hey Chris,

Good to see some other young blood from MD. Are you in PG or MG country? I’m in AA.

First off, 26 is not a late start by any means. You’re most likely among the youngest even thinking about retirement. And only $1,300/month in mortgate & util? Man, that’s awesome for DC area. Good work.

Are you using a Roth IRA or traditional deductible IRA? In case you didn’t already know, you can probably put away more money using a Roth IRA b/c that money is post tax, while the traditional deductible IRA money is pre-tax.

If you haven’t already, you might consider paying down the debt with the highest interest rate, then the next highest, then the next, etc., before investing in the taxable account. Paying of the car [5.9%] and cc is essentially a risk free return [5.9% for the car]. This is what we’re doing until my wife’s splurges our debts are paid off.

One thing to watch out for with the taxable money in the three mutual funds is tax efficiency. Do the funds have high turnover [over 20-30%]? Do they distribute a lot of capital gains each year, both short term and long term? Bonds and bond funds are usually better located in IRAs and 401(k)’s, with taxable account reserved for tax efficient equities and tax efficient mutual funds/etfs.

What I would like to know is am I on the right track to be able to retire at 50 or is there something else I should be doing right now?

That depends on (1) how big your portfolio needs to be by age 50, (2) how much you’re saving now, (3) how your investment are allocated [hopefully low cost funds?], and (4) how much you’ve got saved now. See Rick Ferri’s The Asset Allocation Question for a quick, back of the envelope calculation.

- Alec

 

[TromboneAl]

Good start. Next step, become an expert on investing by reading the books recommended on this forum. But avoid the trap of young investors of trying to beat the market.

 

[SecondCor521]

For trying to figure if you're on track to retire at a certain age, I would take a look at:

Millennium Edition Generation-X Retirement Calculator.

where you'll find rough tables as well as a downloadable Excel spreadsheet that you can play with. Personally I use my own version I developed so I could understand it myself.

FIREcalc, mentioned previously, is better suited for figuring out how long your money will last, what kind of asset allocation provides you with the best survivability, and how safe your retirement is given your current assets and spending rates. It can also tell you if you should pay off your mortgage in retirement as well, but that's really advanced usage.

2Cor521

 

[bldgengineer]

Thanks alot guys! sorry it took me so long to respond.

ats5g, I live in QA county and make the dc commute every day.

 

[ats5g]

Thanks alot guys! sorry it took me so long to respond.

ats5g, I live in QA county and make the dc commute every day.

Holy c**p!! I hope you leave for work really, really early.

 

[bldgengineer]

Actually, it takes me the same amount of time to go from here to DC as when it did when I lived in Odenton(living in AA county I assume you know where that is ), approx. one hour

 

[ats5g]

Actually, it takes me the same amount of time to go from here to DC as when it did when I lived in Odenton(living in AA county I assume you know where that is ), approx. one hour

I live in Gambrills, so I'm "familiar" with Odenton.

 

[bldgengineer]

LOL
I'm originally from Gambrills.O0

 

[Darryl]

Chris, sounds like a nice pension.

I'd dump the car in a heartbeat. If you get focused on this you could knock out the CC debt in 6 months. With no car or CC debt you could start talking about retiring at 40 or 45 instead of 50.

 

[mountaintosea]

I'm amazed at the number of posters in their 20s posting on this board. Starting late?? Not by a long shot! In my late 20s I was back at school rethinking my career! Welcome.

 

[Bill T]

Add some Real Estate

Add some real estate to your portfollio, Rent out the one your in and buy another one while there is still a buyers market. Stocks are good, but real estate is something else. Good luck.

Bill T