Planning for Freedom!

[Scots]

Hello all!

New to the forum, but looking forward to interacting with you all and talking future.

My wife and I are both 32, and we’ve got 2 little girls, 3 and 1. I work full time, my wife part time from home. We’ve got a goal of being free to slow down work to doing what we want at 50, and being totally independent at 55 (though I’ll probably always be doing something).

Our information is as follows:

Net worth: approximately 400k

Pretax Income: 129k
Take home pay monthly: $7,550

House: Worth 375k, owe 225k
Cash: 32k
Liquid mutual funds: 48k
401Ks: 116k
Roth IRAs: 11k
529s: 5k
HSA: 4k
Cars: 18k and 12k
Other various things...

No debt outside the house.

I’ve currently got about $1,500 a month going straight to retirement and $300 to 529s. Beyond that, we’re still planning to bank another $1,500 -$2,000 per month that will go to savings for things like next cars, some to mutual funds, etc.

Have a sizable inheritance coming in the future (1M+), but of course I don’t want to factor that into my planning too much. We want to be able to pull 100k/year throughout our life.

Great to be here and would welcome any thoughts on our portfolio or plan!

 

[ERD50]

Welcome. The most important thing is that you are planning at this age. That puts you far ahead of many. Congrats.

It's hard to say if a plan can work out by age 50, but it sure isn't likely to work if you aren't trying, so that is way in your favor. You just need to keep monitoring and adapt.

Save as much as you can (offhand you seem to be doing well), but also have fun and live life and enjoy that family.

What are the investments? At your age, it makes sense to be pretty aggressive. Broad based index, no-load, low ER funds/ETFs are your best bet.

And you are wise to ignore any future inheritance. That can go 'poof' in a million different ways. Then if becomes reality, it's icing on the cake.

Oh, and I responded in another thread about that Dave guy. Get past that, he will hold you back, You are better than that.

-ERD50

 

[Dtail]

Welcome to our wonderful forum. Sounds like you are moving along great.
Down the road a little, you should think about how you will pay for medical between 50 and 65 y.o. although in 20 yrs who knows what the healthcare system will look like.
Some balance between 401k, Roth and Taxable accounts can be helpful to have more flexibility later on.

 

[HI Bill]

Welcome! Looks like you've got a good start...but looking only at retirement assets (excluding the house, 529, cars..), I calculated only $211K in retirement assets. For this forum, most of us care about net invested assets. To throw off $100K per year, at 4%, you'll need $2.5MM minimum...so, you may need to increase your income, or work longer, unless the inheritance is a surety (irrevocable trust?). Best of luck!

 

[Scots]

Welcome! Looks like you've got a good start...but looking only at retirement assets (excluding the house, 529, cars..), I calculated only $211K in retirement assets. For this forum, most of us care about net invested assets. To throw off $100K per year, at 4%, you'll need $2.5MM minimum...so, you may need to increase your income, or work longer, unless the inheritance is a surety (irrevocable trust?). Best of luck!

Thanks to you and others for your responses. Good to have some fresh input.

A couple of responses to the things you point out.

1. I don't plan to not do anything at all at 55. Just want to be able to do what I want to do. I'll have plenty of skills from my work for things like consulting at that time that I plan to always be doing as it's convenient and attractive to me. So, I plan to have at least a bit of supplemental income stream well after 55.

2. I hope to do much better than 4% over the next 23 years, and I believe this to be realistic based on market history. I'm aiming at 6-7% as a goal.

3. I plan to save more and more as income grows and the years go by. The $1,500 is my baseline, but even now it's more like $2,000 - $2,500 a month including what I'm putting into mutual funds.

4. The inheritance is not in a trust, but it's pretty much as solid as it can be without that being the case. Folks are coming up on 65 right now. Hopefully I don't see the money for a long, long time!!!

If I take the 211k, and use 6% as a number from now until 55, and use $2,250 as a monthly addition, I get approximately $2,150,000. Not quite the $2.5M you mentioned, but I'm getting into the ballpark. I also aim to increase the household income substantially between now and then, which will hopefully take that monthly contribution figure even higher.

 

[HI Bill]

Thanks to you and others for your responses. Good to have some fresh input.

A couple of responses to the things you point out.

1. I don't plan to not do anything at all at 55. Just want to be able to do what I want to do. I'll have plenty of skills from my work for things like consulting at that time that I plan to always be doing as it's convenient and attractive to me. So, I plan to have at least a bit of supplemental income stream well after 55.

2. I hope to do much better than 4% over the next 23 years, and I believe this to be realistic based on market history. I'm aiming at 6-7% as a goal.

3. I plan to save more and more as income grows and the years go by. The $1,500 is my baseline, but even now it's more like $2,000 - $2,500 a month including what I'm putting into mutual funds.

4. The inheritance is not in a trust, but it's pretty much as solid as it can be without that being the case. Folks are coming up on 65 right now. Hopefully I don't see the money for a long, long time!!!

If I take the 211k, and use 6% as a number from now until 55, and use $2,250 as a monthly addition, I get approximately $2,150,000. Not quite the $2.5M you mentioned, but I'm getting into the ballpark. I also aim to increase the household income substantially between now and then, which will hopefully take that monthly contribution figure even higher.

Great that you have a plan...from you initial post, it sounded like most of your extra money was being saved for cars/spending. Hope it works out for you! Sequence of returns risk will make the road bumpy, but you'll get there!

 

[Scots]

Thanks HNL Bill. Essentially, I plan to make it the focus for the next 10-20 years to maintain modest spending as income goes up, and put the increases toward the future instead. I know it'll pay off in the years to come.

 

[HI Bill]

Thanks HNL Bill. Essentially, I plan to make it the focus for the next 10-20 years to maintain modest spending as income goes up, and put the increases toward the future instead. I know it'll pay off in the years to come.

20 years ago, I had about $70K in retirement accounts, and less than $10K in cash. Along the way, I lost some money ($60K) selling during 2008, made some money in real estate ($140K), and was very lucky to join a company with an employee stock ownership plan (ESOP, now worth ~$500K). I've been saving 47% of my income, while still doing some travel.
This year, I received a modest inheritance (15% of current assets). Today, I'm just north of $2MM in retirement assets, with do debt...it can be done!

One quick note...in 20 years, $100,000 will have the spending power of less than $50K in today's dollars...be sure to try to structure your investments so that the gains outpace inflation by 6% or so (need overall gains closer to 9%).

 

[brokrken]

oh, and i responded in another thread about that dave guy. Get past that, he will hold you back, you are better than that.
-erd50

+1000000000000