mid-40s, risk averse, low-ish income, way behind you guys

[shorn]

hello,

i've been going through the forums looking for a "where do i even begin?" faq. i thought i was doing pretty well compared to most Americans and vs. most of my friends, but you people seem to be doing amazingly well.

our house is paid off, worth $150-175k? no debt, no kids, 13 year-old car, 3-yr expenses cash emergency fund @ ~1%, DW & i have work pensions that won't kick in for 10-20 years depending on if either of us quit now vs. reaching basic retirement in 10 years. have only around 80k in 401k/roth ira. got started late on all things financial. i plan to leave the job i'm sick of to start online business selling our collections as we're borderline hoarders and have put a lot of our money into them and don't want to be too tied to them. wife will continue to work and she makes more than me, so she'll be eligible for pension sooner than me.

if SS won't kick in until around 2035 if ever, pension for me not until 2033, 401k/ira not eligible for unpenalized withdrawals till 2027; what's your recommendation for a kind of account i can put money into that will not have too much risk, but at least be likely to keep up with inflation that we can withdraw from earlier that age 59.5?

i thought we could live pretty frugally, but again, you guys seem like superheroes of saving/earning. of course i worry about health insurance costs when we leave our jobs as health insurance is already our biggest annual expense even though we're fairly healthy.

i've read what feels like quite a few personal finance books: Your Money or Your Life, Tyson's Personal Finance for Dummies, Tobias' Only Investment Guide You'll Ever Need, Millionaire Next Door, Rich Dad Poor Dad, etc., but investing still feels Greek to me. i wish things were as simple as in the original edition of YMoYL. i would appreciate any advice and links you might suggest. my parents were really bad with money so i felt like i had no context for this.

thanks and take care

 

[Midpack]

Welcome aboard. I suspect you're well ahead of your peers, on a good track to FI...and your reading list should be helpful.

 

[Sarah in SC]

This is a good place to make you feel average instead of exceptional. Just look at the 30-somethings around here who dust most "normal" folks in their 50s in savings and savvy.
Welcome, from another not-quite MID 40er!

 

[aaronc879]

This is a good place to make you feel average instead of exceptional. Just look at the 30-somethings around here who dust most "normal" folks in their 50s in savings and savvy.
Welcome, from another not-quite MID 40er!

Income has a lot to do with it. It's easy to max your 401k and IRA if you make $90K/yr, not so easy with a more "normal" $40K/yr. Expenses are very important as well. High income doesn't do much good for FIRE if you spend all of it. This forum has a lot of high earners(many who don't think they are) who save a fairly high percentage.

 

[Sarah in SC]

Yes, I'm on the low end for income, but live in a low cost area, LBYM mostly, and a saver by nature, aaronc. I like being somewhere where I need to work to catch up with the "average" folks!

 

[1986pacecar]

You cite one the reasons I haven't posted here since my first post. Initially I thought I too had a decent retirement plan but it seems everyone one here has a net worth approaching seven figures. I've worked for 36 years years and have contributed to my 401k for over 30 of those years and don't have half of what they do. This place makes me feel mighty poor.

 

[Midpack]

Welcome to Lake Wobegon...

Seriously, almost all of us can literally find millions who are doing better, and millions who are doing (much) worse. It's all in how you look at it. We all look like pauper-slackers compared to Gates, Buffett, Ellison... but who cares?

 

[aaronc879]

You cite one the reasons I haven't posted here since my first post. Initially I thought I too had a decent retirement plan but it seems everyone one here has a net worth approaching seven figures. I've worked for 36 years years and have contributed to my 401k for over 30 of those years and don't have half of what they do. This place makes me feel mighty poor.

Don't look at it based on the dollar amount. Look at it based on the number of years worth of expenses you have saved. When you reach 25X expenses(maybe 33X if retiring really early) you should be able to retire. 25X expenses could be <$500K or $2.5MM+. I would never work long enough to hit seven-figures because I don't need that much money. YMMV

 

[pb4uski]

Welcome to Lake Wobegon...

Seriously, almost all of us can literally find millions who are doing better, and millions who are doing (much) worse. It's all in how you look at it. We all look like pauper-slackers compared to Gates, Buffett, Ellison... but who cares?

+1 While I think we have done quite well to retire comfortably at 56, there are many who leave us in the dust and we have done well compared to most. I long ago decided that no matter what I did that was the way it would be and I accepted it. It is what it is. I suppose that I could be much wealthier than I am but long ago I made a conscious decision to step off the Fortune 500 hamster wheel and have a life.

 

[ER Eddie]

shorn, I just joined the forum recently, and I had a similar reaction. I was astonished at how well off many of the people here are. Some of them even sweat whether they're ready, which is doubly surprising. If you're not careful -- if you take this place to be the norm, or people's net worth here to be an indicator of what you need to retire -- I think you're getting yourself in trouble. Don't assume you need what they have, to retire comfortably. Don't assume you need to slash expenses to the bare bones, to retire comfortably. Do your numbers yourself. Retirements come in all shapes and sizes.

This forum seems to be populated by a lot of people who are very well off. It is a selected subsample of the retirement population, not a representative one. I think there's a lot of wisdom and good information here, but there's also a risk. If you take this place as a standard to measure your own financial situation or readiness against, I think it can heighten your insecurity and contribute to a belief that you are not ready.

 

[rodi]

shorn and 1986pacecar.

Like you guys - I was intimidated by the apparent size of some the portfolios around here.

But I was also impressed by the folks who can squeeze a penny till it turns to dust...

And they tend NOT to be the same people. There's more variety on this board than you'd think at first glance.

the "live below your means" thing seems to be a common thread... but applied to varying degrees. Those with higher income, generated larger nest eggs, without significantly cutting back on lifestyle.

Another thing that isn't obvious to a lot of new readers... there are a whole group of folks who have relatively small nest eggs- but VERY good pensions.

Everyone's retirement plan is different. Everyone's risk tolerance is difference. Glean what you can from the people who's situation is closest to your own plan.

For example - a lot of folks plan to sell their homes in a high expense area, move to a lower cost area and bank the difference in their nest egg. That's a great plan for those folks... Me... not so much... so I ignore that strategy. I love my area and house... so my goal is to get it paid off - so it doesn't cost much to carry it... and live on the cheap in a high cost of living area. Others talk about asset allocation, lazy portfolios, etc... I read those avidly, and have learned a lot. So those are the posts I focus on.

 

[vttlarry]

Aaron and Shorn: not everyone is super wealthy on this board. The key is do the best you can and learn to improve. I would say having your house paid off in your 40's is a great start.

I retired at 58 and my wife a year later at 57. We have what would be considered a very modest portfolio by most standards (225k), but I have a pension, 2 years of expenses in cash, paid for health care and SS coming in 18 months.

Think what your 401k would be like in 10 years if you continued to make your old mortgage payment into the 401k each month.

Keep up the good work.

Larry

 

[Midpack]

I'm a little surprised by the impressions of some of the newbies, but they are what they are, sincere.

LBYM and saving & investing undoubtedly make this group different from the general population, but I didn't conclude that 'a lot of people here were very well off.' Some certainly are (though I didn't even notice for quite a while), others have successfully retired with much less, and everything in between. Some have accumulated large nest eggs, others have worked for largish pensions and HC benefits, and everything in between. Most wanted something other than a gold watch at 65.

My focus was/is always on using the knowledge here (most of it applies whether you're handling $100K, $1M or more) to best advantage within our $ scope, not whether we were poorer or better off than others.

This is an anonymous forum, there's no reason to be reluctant to participate - I'd take advantage regardless of age or relative $, and have. YMMV

 

[Milton]

There's more variety on this board than you'd think at first glance.

the "live below your means" thing seems to be a common thread... but applied to varying degrees. Those with higher income, generated larger nest eggs, without significantly cutting back on lifestyle

+1 to both of the above points.

There is no need for anyone to be intimidated by the sizes of other members' reported net worth. I have been contributing and following for almost six years now, and while I certainly do not agree with all posts - not does everyone agree with mine! - I don't recall ever seeing any condescension towards those who have modest savings.

With rare if any exceptions, the spirit here is supportive, not competitive.

 

[REWahoo]

It's not the size of your portfolio, it's how you use it that matters...

 

[Ready]

I work with a lot of high net worth individuals, and I rarely find one who is happy and pleasant to be around. If you have your health, family, friends, and hobbies you enjoy, you are already much richer than many of the super wealthy folks out there. Don't compare your net worth to others and draw conclusions. Money is just a small part of life, not the main goal.

 

[jclarksnakes]

I am totally impressed with people who make large incomes and save and invest and build giant portfolios. I am just as impressed with people who make much much less and are still able to save and invest so that they can retire early. I learn alot from ALL the people who post here.

 

[ER Eddie]

I'm a little surprised by the impressions of some of the newbies, but they are what they are, sincere.

LBYM and saving & investing undoubtedly make this group different from the general population, but I didn't conclude that 'a lot of people here were very well off.'

Hm, well maybe it's selective attention, because I certainly noticed it right away, along with a post or two saying the group seems skewed to the upper income range.

I agree with the rest of what you said and what others are saying -- money is certainly not the be-all, end-all of retirement. I just didn't want shorn to feel behind the curve.

 

[Midpack]

From just a few months ago, 244 ER.org members. FWIW...

http://www.early-retirement.org/forums/f28/poll-how-much-do-you-actually-spend-each-year-63780.html

 

[BigE]

Welcome shorn. You also have to remember that this is an early retirement forum and a large number of members have arrived here by living below their means AND saving for a long time (ie, starting early). In your post you mention "risk averse", "got started late on all things financial", and the issue of buying shxt you don't need, "borderline hoarders". Generally these things are obstacles to ER, but not deal breakers. You have your house paid off and that's quite an accomplishment, but as DINKs I would think you could take a long hard look at your budget and start saving more. Just my thoughts.

 

[nun]

Income has a lot to do with it. It's easy to max your 401k and IRA if you make $90K/yr, not so easy with a more "normal" $40K/yr. Expenses are very important as well. High income doesn't do much good for FIRE if you spend all of it. This forum has a lot of high earners(many who don't think they are) who save a fairly high percentage.

High income and low spending or being ex military or Government and getting a decent pension are the ways to ER.

The folks on here are outliners in the American demographic. Me I'm single with no kids so I have none of those expenses. I earn 3 or 4 times the median US income and probably spend way less than most.

 

[ER Eddie]

From just a few months ago, 244 ER.org members. FWIW...

http://www.early-retirement.org/forums/f28/poll-how-much-do-you-actually-spend-each-year-63780.html

Cool, I'm in the bottom 6%.

 

[Karloff]

Hi Shorn, welcome to the forum! I do not contribute much around here, but visit this site multiple times a day. You'll find invaluable advise on these pages. I know it is invaluable to me.

Just wanted to chime in and say that you are not alone when it comes to the "low income / high expectations" equation. I am 35 myself and up until recently my salary was low $30K's... My very first year in the US (I'm originally from South America) I made $18K... and I saved half of it! Pretty proud of that, if I may say so. We make a little better salaries now, but not by much. As has been said so many times, it's not what you make but what you spend. We try to not spend much and live off one salary and save the other. It doesn't always work that way, of course, but we try to keep that goal on a monthly basis. I'm sure life will keep throwing curves at us, though. We also have no debt, no kids, and the house paid off, and are well above the "median" net worth referenced in that graphic elsewhere.

Again, welcome!

 

[shorn]

thanks for your replies guys. i'll just be digging through the forums and reading books to get more of a grip on things. it is intimidating, especially the investing part for me because i am very distrustful of the stock market. it feels like a rigged game. but like others have said before, if you don't play, you can't win.

BigE, what i'm working on now is figuring out where to put additional savings. other than our emergency fund, all of our $ will be in things we can't touch till age 59.5 and we may need to get into some of it sooner. i'm guessing a Vanguard, non-dividend producing index fund or something. i need to figure out what municipal bonds are available and how to invest in them. figure out if any of these Greek terms like TIPS, ETFs, I-Bonds, and Pen Fed CDs are things that will work for me. still trying to find the best newbie posts.

a memory i have from my teenage years is a woman down the street who retired at 65, bought a fur coat, and died within six months. also, although my health is generally good, i had heart surgery years ago and that gives one a philosophical view of the future.

thanks again

 

[Milton]

our house is paid off, worth $150-175k? no debt, no kids, 13 year-old car, 3-yr expenses cash emergency fund @ ~1%, DW & i have work pensions that won't kick in for 10-20 years depending on if either of us quit now vs. reaching basic retirement in 10 years. have only around 80k in 401k/roth ira.

I believe you already know this, but just to be sure I will expressly confirm that unless your expenses are exceptionally low, you are not currently in a financial position to retire.

i plan to leave the job i'm sick of ...

I know how it feels to be in a job you're tired of; but given the above I would not recommend that you quit until you have other employment to go to. It is a tough job market out there for most folks.

... to start online business selling our collections as we're borderline hoarders and have put a lot of our money into them and don't want to be too tied to them.

For several reasons, that doesn't strike me as a realistic/sustainable alternate income stream.

In any case, I would strongly suggest setting up your proposed on-line small businessbefore quitting your job, so that you can test the waters without taking the plunge. You may also find that the on-line stuff doesn't really take much time and that you are accordingly able to keep your day job - and, more importantly, the income it provides - while still reaping the benefits of purging your hoard.