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roadmap to retirement in 20 years,any real life example here?
Old 01-29-2008, 04:18 PM   #1
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roadmap to retirement in 20 years,any real life example here?

Hi, I am a newbie to this forum and followed the suggestion of the admin to say hello to everyone here. Here is something that I've been thinking/researching for a while but still puzzled.

My wife and I are both 35, have combined income before tax $150K/year, 2 kids(3 yrs and 1yr old girls), a 30yr, 5.625% fixed rate $300K mortgage($2500 monthly payment including property tax and insurance), no other debts, using credit card for the sake of convinience and pay the bill in full every month.

we max out our 401K from this year($15K for each starting in 2008) with combined balance of $90K(80% stock 20%bond), started a Roth IRA in 2005 and max out each year(combined balance of $32K), started 529plan this year for both kids and contribute $500 to each of them monthly. and after all the spending, we manage to save about $1500 every month. Oh, we also have the emergency fund of 4 months of spending in a CD.

our goal is to retire in 20 years at age of 55 and pay for both kids' colleage. (wedding is on their own, for now )

so my question is:
1. Is this something doable by just earning paychecks and save? any real life example or story here?
2. Do we need to start a side business to boost earning power? what kind of side business worked for you? if it applies.
3. what investment strategy we should follow? any investment portfolio example?

I still have tons of questions to ask but like to get started from high level viewpoint. sorry for the long posting. hope I provide enough information for you to evaluate our situation and give targeted suggestions.


Jack from New Hampshire
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Old 01-29-2008, 05:40 PM   #2
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There are many people on this board who saved and invested and retired early; also many who ran businesses.

I'm sure they will chime in with the nitty gritty.

Welcome aboard!

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Old 01-29-2008, 05:55 PM   #3
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Welcome to the forum, Jack from New Hampshire!
It's good to see that you are thinking about retirement, and are putting a fair bit of money away each year. It looks like maybe $60K a year? In 20 years, that would be 1.2 million, and with the benefit of compound interest should make a nice little nest egg for retirement. It could be more, since your income will probably rise over time, and you'll be able to put even more away. But, whether that is enough depends on how much you want to live on. Have you given any thought to the sort of retirement you'd like? The type of retirement you want will dictate the amount of money you'll need to save. Will you want to travel? Or have any expensive hobbies? It's pretty near impossible to project expenses 20 years in the future, but I think any estimate is better than none.
Spend some time looking over the FAQ section. "How much is enough?" is a very common question--and once you know that, you'll be able to see if your savings rate will generate the money needed. I believe with your desire and savings discipline, retirement in 20 years should be possible. Many on this forum have retired with a lot less than 1.2 million, (me included) but I live a simple life and don't need a ton of money.
Good luck with your retirement planning--we look forward to hearing more from you on this forum!
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Old 01-29-2008, 06:15 PM   #4
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Hi Jack and welcome aboard.

Sure, it's doable. Are you saving enough to do it? That's a harder answer. How much do you want to be able to spend in retirement? How long are you going to be retired? These are some of the questions you need to consider. Check out FIRECalc -- there's a link right at the top of the page. It will help you work on the answers to those and other questions, and then tell you what the chances you'll succeed might be.

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Old 01-29-2008, 08:16 PM   #5
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The question is what do you want to live on? If it's 150,000/yr. then according to many, you would need to save about 3.75 mil. I think many have been able to retire by saving only.
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Old 01-30-2008, 12:42 AM   #6
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Hi Jack, welcome to the forums. Take a look around and by all means use the Search function to find answers to some of your questions. Also see the FAQ section as there are a growing number of threads being put into that area for posters to review.

Can you ER in 20 years? Most likely based on your current plan. Many have done it on less. Be glad you started as early as you have; some of us were not that lucky. Real life example: Me.

I had a negative networth (NW) at age 40 after my divorce. I "got" all the credit card (CC) debt; was given the previledge of paying alimony and child support while being a single father myself. I manged to pay off the six figure debt, save some money and started investing in both my 401k and outside of it. I later remarried and my new wife shared my desire to ER so we made a good team. We both socked away the max in our 401ks and also saved over $1500/month to invest in other areas; real estate, house upgrades, mutual funds, Beanie Babies (don't ask ). By the time I was 50 we had enough for both of us to ER.

Our mix of investments were very very limited in our 401ks so after we retired we rolled them over and they are much more diversified. My aftertax portfolio is slowly being sold off to fund our early years of ER and to rebalance from 100% equities to a mix.

We did well on some land. Did very well on a second home we sold last year before the big drop in prices. We are about to sell our house which has many other house sales' equity rolled into it.

Anyway, yes it can be done and you sure seem on the right track. Early investing makes a huge difference over a 20+ year window. God bless compounding.
Work? I don't have time to work....I'm retired.
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Old 01-30-2008, 07:03 AM   #7
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Using the following inputs:

gross income: 150K / yr
savings: 58k / yr (15k 401(k) + 15k 401 (k) + 5k roth + 5k roth + 1.5k /mo)
current spending plus taxes: 150k - 58k = 92k /yr
current portfolio: 132k

and the following quick-n-dirty calculations:

58k / yr invested with increases equaling the rate of inflation for 20 years with a real return of 5% / yr = a real (current dollar purchasing power) total of $1,300k

132k invested for 20 years with a real return of 5% / yr = $350k

total nest egg = $1,650,000 in today's dollars.

4% SWR (safe withdrawal rate): $1,650k * 0.04 = $66k / yr

Assuming your house is paid off at the end of 20 years and drops your expenses by $2k / mo, future expenses: $92k - $24k = $68k /yr.

Conclusion: you're about right on track for retirement in 20 years by continuing to do what you're doing!
TickTock Rule Of Finance - heavily discount any promises of money/benefits to be paid to you in the future

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Old 01-30-2008, 07:07 AM   #8
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Just a couple ideas/comments

1. Did you comment on health care at 55 on? Will your current employer have a plan you can carry into retirement? -- If not that is a big unknown

2. You are doing really well and your planning seems right on track .. I want you to think realllly hard about trying a side business --- You mention you have 2 young children ... This is your HERE AND NOW --- Continue with your savings as you described --- Put yourself on cruise control in that respect -- Now pour/invest your time and energies into your kids --- Statistically a business can melt away your time and energy and RIGHT NOW your family needs that -- You MAY get to 55 and retirement but you will want to be able to look back on the memories you had with your family and not your efforts trying to attain a more secure future. IMHO

I think you should continue what your doing and try to continue living at the same standard of living that you are now at --- Commit to investing further promotions and raises to savings and I bet you will be set at 55.
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Old 01-30-2008, 03:54 PM   #9
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--- You mention you have 2 young children ... This is your HERE AND NOW --- Continue with your savings as you described --- Put yourself on cruise control in that respect -- Now pour/invest your time and energies into your kids --- Statistically a business can melt away your time and energy and RIGHT NOW your family needs that -- You MAY get to 55 and retirement but you will want to be able to look back on the memories you had with your family and not your efforts trying to attain a more secure future. IMHO

militaryman -

Great advice, IMHO.
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Old 01-30-2008, 10:15 PM   #10
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your numbers are very close to ours. Wife and I are 33, we earn a slightly lower income and save about the same amount as you do. We have no doubt that we will be able to retire in 20 years (we don't plan on having kids though). Actually we are looking at an even earlier retirement (at our current lifestyle level), possibly in 9-12 years depending on the whims of the market. Neither wife nor I would be great entrepreneurs I think, and unless we hit the jackpot with our stock options, the bulk of our money will have come from saving a substantial portion of each one of our paychecks. So my answer to you is yes, I believe it can be done! But only time will tell...
47 years old, single, no kids. Exited the job market in 2010 (age 36). Have lived solely off my investments since 2015 (age 41). No pensions.
Current AA: real estate 64% / equities 10% / fixed income 16% / cash 10%
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Old 01-31-2008, 07:23 AM   #11
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You're on the right track, Jack.

TickTock's post says it pretty well. I did it another way, looking for the future value of your investments, assuming you continue on the same path, additional annual investments rise at the same pace as inflation (3% in my model) and a 7% return on the 401k, the Roth, and the taxable account. I know it will be different, given taxes and your own allocation preferences and changes over time (I agree with 80/20 stock/bond at your age). I came up with approx 3.36m, and subtracted an extimated remaining mortgage balance of 100k, netting 3.26m.

Then I WAGged (Wild A$$ guessed) your post-tax expenses (you didn't really give us a good idea) at about 35.5k per year without the mortgage. I added 12k per year for medical, in case you won't have it. Then adjusted for 20 years' inflation at 3%. This gives you a post-tax expense requirement of about 80k, or a pre-tax expense WAG of 100k at the time of retirement. That turns out to be a SWR of about 3.1%. TickTock used a 4% SWR, safe by most accounts, and this variation of the calculation shows an even safer scenario.

My advice is to keep doing what you are doing and you should be fine, but: 1) try FIREcalc for yourself. You know your variables better than we do. And 2) don't start a side business if 55 is your target and what you see here and in FIREcalc can get you there. Time with your kids is too precious to waste...I only have 18 months left and my baby girl flies the coop. Luckily, we are great buddies, even though I'm her Daddy.

Good luck, hope this helps in some small way.

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Thanks and more question!
Old 01-31-2008, 03:16 PM   #12
Confused about dryer sheets
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Thanks and more question!

Thanks to everybody that replied!
I fully agree with Militaryman that time with my kids is priceless!
Also appreciate Ticktock's calculation for assurance with numbers.
I particularly like his conservative use of return rate on investment.
Thanks to SteveR for sharing his real life experience with all of us.

Here come my question related to this subject but in a more specific manner:

I am thinking of building a portfolio in our Roth IRA using purely index fund.
any suggestions? real life example/experience will be greatly appreciated.

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