Hi trying to retire at 45 how am I looking?

[cdarbonne1]

Hello I'm chad. 34 married with 4 kids. I currently earn $165000 yr I owe about 230,000 on primary home. $129,000 on rental house. I have $70,000 invested stocks and another $70,000 in savings. I'd like to pay for some of kids college. Hope for scholarships also . I kind want them to look into business for themselves vs working for someone. My goal is to retire @45. I'm thinking I'm going to have to start saving a lot more per year than I am currently ..

 

[Gumby]

Welcome, Chad. I suspect your conclusion is correct -- you will need to up your savings. One of the crucial pieces of information lacking in your post is how much you spend now and how much you anticipate spending once you retire. That determines how much you need to save.

Let's say that you immediately start saving about 25% of your gross income or $40,000 per year, which implies that, net of taxes, you will be spending roughly $110,000 per year.

Assume you earn 6% return on your investments. At 45, you'll have roughly $864,000 in the pot. Using a 4% withdrawal rate, your nest egg will generate only $34,560 per year. Which will not be sufficient. In fact, it would require that you start saving roughly $90,000 per year and living on $65,000 per year for you to make it at 6% returns and a 4% withdrawal rate.

 

[travelover]

......... In fact, it would require that you start saving roughly $90,000 per year and living on $65,000 per year for you to make it at 6% returns and a 4% withdrawal rate.

And a 4% withdrawal rate at age 45 would be considered high my many if not most here.

 

[cdarbonne1]

Thank u for your response guys! I need to really sit down and see how much we spend a year for 1.i think it's about 70k right now. Would you guy suggest trying to pay off the smaller rental property first or keep saving, I have 14 years left to pay on that house and 28 years on primary .

 

[Fermion]

It is possible but you need to get your income up a bit or your expenses down. We started on a plan to retire at age 46 when we were age 37. At the time we had about $150,000 in a 401k, $5000 in a rollover IRA, and $30,000 in the bank. We owed $260,000 on a $300,000 house at 4.5%.

Fast forward 7 years (we are less than 2 years from ER) and we have $500,000 in the 401k, $90,000 in IRA, $400,000 in investments, and we owe $80,000 on the $300,000 house loan which was refinanced several times at no cost and is now 3.5%. Estimated funds at retirement will be $1.4 million, which will give us $42,000 a year mostly tax free at a 3% swr.

The trick was having a good income like yours but living on $40,000 a year and saving $100,000+ a year into tax deferred and taxable. At that level it really adds up over 7 to 10 years.

 

[cdarbonne1]

Hey gumby can u tell me how u got the numbers is there a calculator I can use that shows for instance I put 15000 per towards retirement at 5 or 6% how much would I have in 20 years. And can change the numbers and tweak them some? Thanks

 

[cdarbonne1]

Fermion!! That's awesome man!!!! A few questions %3swr? What's swr I assume withdraw right? Also how did u refi with no cost?? How did you pick stocks,bonds (investments?) I know we can cut way back on spending. I am using Edward jones for my investing and used the stocks he has suggested. I think, I pay 2% for it. I need to find out. Would you guys suggest a different way to invest?

 

[cdarbonne1]

Great info!!!!!

 

[Live And Learn]

Hi Chad. Welcome to the forum. There is a wealth of information here and with a bit of time and effort you will learn more than you can imagine ! Start with the Early Retirement FAQ section - great info there.

As far as picking investments, many of us are the "do it yourself" type and don't use an investor. If you look through some searches for "Vanguard" or "Fidelity" you'll pull up some great threads that will give you insite. Also google SWR for lots of good info on how to calculate how much you will need.

You should also use FIRECalc (link at the bottom of the page) to do calculations for you.

Its possible for you to retire on goal, but you'll really need to know what you are spending and if you would be comfortable cutting way back on your current lifestyle. Its ok to keep working if you enjoy the luxuries more than you enjoy working.

Best of luck

 

[cdarbonne1]

live and Learn, thank you for the info, what does SWR stand for?

 

[cdarbonne1]

oh wait think i found out Safe Withdraw rates right?

 

[Live And Learn]

oh wait think i found out Safe Withdraw rates right?

You got it ! In the FAQs there is a list of commonly used acronyms. Sorry for using that one so soon into your research !

 

[cdarbonne1]

haha it's all good, Im going to read through the faq today and learn all i can.. im excited!

 

[Hermit]

Hi Chad,

Welcome to the forum. On another note from your original post: You will need to think about what will happen if the kids don't get the scholar ships. I made too much money while I was working to qualify for assistance and had too much money in savings once I retired. Therefore, I paid every dime of tuition, books, housing, etc. for my kids. My suggestion is plan for the worst and hope for the best. That means you have to do the hard work of figuring out how much you will pay and making a plan to have that money stashed away or available from income. It can include student loans if you believe the kids should shoulder some of the cost. By the way, my plan also included life insurance to cover my share of college just in case. Good luck.

 

[cdarbonne1]

Hermit, awesome post, your right, have to plan for the worst and hope for the best.. I do feel like the should carry some of the cost, but not sure on how much.. my thought was i would pay for the first two years weather they went to a two year or 4 year and they cover the rest. but we shall see.

 

[ShortInSeattle]

Chad,

You're asking good questions! Firecalc is a good resource. For a very "quick and dirty" retirement savings goal, begin with what you estimate your annual spending will be during retirement. Then multiply that number by 25 and by 33 to get a range of dollars.

For example, I need about 75k in retirement so I need between 1.875 Mill and 2.25 Mill to retire.

The lower # represents a 4% SWR which some consider too risky for an "early" retirement, and the higher # represents a 3% SWR which is safer.

There are a lot of nuances to explore of course, and pensions can make a big difference, but it's a good starting point for your initial calculations.

Once you've got a rough sense for how much you need, start reading up on how to invest your money, that's the next learning hurdle.

Good luck!

 

[daylatedollarshort]

Hermit, awesome post, your right, have to plan for the worst and hope for the best.. I do feel like the should carry some of the cost, but not sure on how much.. my thought was i would pay for the first two years weather they went to a two year or 4 year and they cover the rest. but we shall see.

You might want to read up on financial aid formulas now. You can have a significant net worth and still get financial aid for the kids if your assets are in non-countable asset classes. For example the FAFSA does not count the value of businesses under 100 employees, retirement accounts or your residence.

According to the links below, rental property owned in the family's name would count on the FAFSA, while property owned by an incorporated business entity and run like a business, might not be a countable asset -

FAFSA frequently asked questions - Concordia University, Nebraska

FinAid | Financial Aid Applications | Small Business Exclusion

It is possible to retire early, have low taxable income, assets in non-countable asset classes and still qualify for tuition tax credits and financial aid.

Retiring early before your kids are in college is a strategy to consider, because of income based ACA tax credits, tuition tax credits, and financial aid. If they are close in age, the more kids you have in college at one time the better in terms of annual aid packages.

 

[Walt34]

I am using Edward jones for my investing and used the stocks he has suggested. I think, I pay 2% for it. I need to find out. Would you guys suggest a different way to invest?

A highly recommended book is The Millionaire Teacher. Among other things you'll read is that 2% you're paying matters. A lot.

 

[Gumby]

Hey gumby can u tell me how u got the numbers is there a calculator I can use that shows for instance I put 15000 per towards retirement at 5 or 6% how much would I have in 20 years. And can change the numbers and tweak them some? Thanks

I used this one to run the numbers.
Retirement Calculator - Bloomberg

Just remember that you'll need to account for inflation and use expected "real" return, not nominal. I also input data in thousands, because it maxes out the calculator if the numbers get too big.

 

[cdarbonne1]

WOW!!! First off I'm blown away by the great info and time you guys took out of day to post and advice!!!!
Daylateanddollarshort!! That's great info!!
Shortinseattle,I'm going to play with the calc tonight and get better figures so I know what I'm working with.. I have to get wife on board but still keep her happy . She is a great saver but we still like a trip together about every two years and a good steak as much as the next guy..
Walt34 I will see about getting that book sir..
A quote that stuck with me for a long time was by Dave Ramsey he said live like no one else right now so later you can live like no one else!! Makes sence

 

[cdarbonne1]

Makes sense I mean

 

[leonmiami]

N h

 

[38Chevy454]

Welcome and glad to see you are working to educate yourself and start doing the calculations. This site was big help for me, and hopefully my post/contributions can help others out. I'm still working, but very close to making the retirement decision.

I see your biggest limitation is you need a lot more savings. You only have 11 years to get that up to a level to support your desired lifestyle in order to retire at 45. Max out any pre-tax 401k you can, as you need the tax savings with your income. You might look into kids tax deferred college savings programs as well, help with taxes and provide for kids college expenses. Then save as much post-tax as you can.

Is the rental property self-supporting financially (ie break even or positive cash flow) or do you need to contribute each month (negative cash flow)? Assuming you are going to keep it, that can be a source for retirement income one it turns positive cash flow.

You may be stretching to make 45, but having a goal is important and you can always put retirement off for a little time if needed. If you can go with a self-directed or at least minimize your investment expenses, that has a big savings if you can do it. The site here is a big help to learn and develop the skills.

 

[cdarbonne1]

38chevy454, thank you for your response..
my company don't offer a 401K, i will be looking into college savings programs..
the rental property is self-supporting, actual earn 250per month on it(for now) i got lucky and have some really good renters in there.. I would like to keep it and hopefully have it paid for by the time im 46 to 47ish i guess. I think i really need to buckle down and like someone else said on here earlier. live on about 50K to 60K per year and i'll be saving a ton..I need to do a bunch more research on investing too. right now im using edward jones and investing in about 20 different stocks. here are some of my stocks. should i look into some index funds, mutual funds, or some bonds? ACCENTURE PLC IRELAND SHS CL A
BCE INC
BLACKROCK INC CL A
CHEVRON CORP
D R HORTON INC
EXPRESS SCRIPTS
GENERAL MILLS INC
ITC HLDGS CORP ITC
MCDONALDS CORP
NORTHEAST UTILITIES
NOVARTIS AG ADR
PRECISION CASTPARTS CORP
PROCTER & GAMBLE CO PG
REALTY INCOME CORP O
SAPUTO GROUP INC
TORONTO DOMINION BK NEW
UNION PACIFIC CORP
V F CORP

 

[panacea]

38chevy454, thank you for your response..
my company don't offer a 401K, i will be looking into college savings programs..
the rental property is self-supporting, actual earn 250per month on it(for now) i got lucky and have some really good renters in there.. I would like to keep it and hopefully have it paid for by the time im 46 to 47ish i guess. I think i really need to buckle down and like someone else said on here earlier. live on about 50K to 60K per year and i'll be saving a ton..I need to do a bunch more research on investing too. right now im using edward jones and investing in about 20 different stocks. here are some of my stocks. should i look into some index funds, mutual funds, or some bonds? ACCENTURE PLC IRELAND SHS CL A
BCE INC
BLACKROCK INC CL A
CHEVRON CORP
D R HORTON INC
EXPRESS SCRIPTS
GENERAL MILLS INC
ITC HLDGS CORP ITC
MCDONALDS CORP
NORTHEAST UTILITIES
NOVARTIS AG ADR
PRECISION CASTPARTS CORP
PROCTER & GAMBLE CO PG
REALTY INCOME CORP O
SAPUTO GROUP INC
TORONTO DOMINION BK NEW
UNION PACIFIC CORP
V F CORP

I recommend staying away from individual stocks- too hard to know when the buy and especially when to know when to sell. And the Ed Jones advisor doesn't have much insight either. Low cost mutual funds are a much better way to go... go to Vanguard, Schwab, Fidelity... anywhere where they'll give you some advice but not charge you an arm and a leg for it.