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Tizookie's Path to Early Retirement
Old 11-17-2016, 12:21 PM   #1
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Tizookie's Path to Early Retirement

Hello ER!

I discovered FIRE a couple months ago and it immediately clicked with my Finance and I. We are 27 (Me) and 25 (Her) and already dread the corporate existence we were raised to be involved in. While my research has led me to great blogs like Retire by 40, Mad Fientist, and jlcolin. My hope is that by publicly getting involved in a forum will help keep me motivated and learning on my path to FIRE.
Here is a quick recap of where we currently are in our lives and our plan for FIRE, feedback is extremely welcomed and any advice will be heard with open ears.

Combined Salary is $129K (Single filers, Getting Married in 2017)

Current Debts:
Student Loans: $2K @ 6% Interest (Will be gone in 2016, was $45K in 2013)
Car: $9K @ 2% Interest (plan on paying the minimum for the life of the loan)
Total: $11K Debts

Current Savings:
Combined 401K: $19K
Savings: $6K
Total: $25K

Net worth: $14K

Our FIRE Plan going forward 2017 to 2035 (~18 Years of Saving for FIRE, Age 45)

Max out both 401K: $36K/Year
Savings to Vanguard Brokerage Account: $24K/Year
Total Savings/Year: $60K
Savings Rate: 56%

This is where we would start, we are still figuring out where to cut costs and lower bills, as we get raises/bonuses the savings will only increase. With this plan it would give us $2.2M at 45, which may be excessive ($66K/Year @ 3% Withdrawal), we may play with the age of when we retire in the future.

I am sure I will get asked why all savings after 401K will be going into a brokerage account and not an IRA, and my answer is just for the sake of having the money tangible if needed. I like the idea if storing it all there if we end up wanted to use some of it as a down payment on a house in 10 years, and to use the dividend returns from the account as well.

With that said, I have only been at this for a couple months, I am open to the wisdom and guidance any seasoned pro’s would like to throw at me, I would greatly appreciate it. I look forward to being an active member on this site.

Tizookie
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Old 11-17-2016, 12:38 PM   #2
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Welcome to the board. Use a Roth IRA. You can withdraw the basis (what you contributed) at any age without penalty or tax. If you earn too much to qualify to make Roth contribs, instead contrib to a traditional IRA and immediately convert those dollars to Roth. For you a Roth account will be almost the same as a standard investment account, except with tax free growth, a huge benefit.
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Old 11-17-2016, 01:43 PM   #3
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Welcome. Love the ambitious savings goals.


Children? Don't want to be nosy, but it's hard to underestimate the impact on saving/spending/lifestyle decisions.....
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Old 11-17-2016, 01:53 PM   #4
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It is good to have some money accessible to you outside of 401k or traditional IRA. I had quite a bit saved up outside these retirement accounts, not by choice but because we already maxed out the allowable limit. This came in really handy for ER, because we did not need to do the restrictive 72t withdrawal before reaching 59-1/2.

GrayHare's suggestion of a Roth IRA should be heeded.
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Old 11-17-2016, 02:16 PM   #5
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Welcome. Love the ambitious savings goals.


Children? Don't want to be nosy, but it's hard to underestimate the impact on saving/spending/lifestyle decisions.....
Not entirely decided, we have determined if we do have a child it would be only 1 and not until 35 (her being 33) so about 8ish years from this point.

I wonder the impact a child has one FIRE savings...
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Old 11-17-2016, 02:18 PM   #6
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GaryHare + NW-Bound,

I will look into the Roth IRA again, it would essentially be a 50/50 splits between the Roth IRA and Brokerage account so maybe that would still leave plenty liquidity when it is needed,

Thank you!
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Old 11-17-2016, 02:38 PM   #7
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it's good to have a plan and it's good to max out your savings

20 years is a very long time; you may find that you are making "too much" bank to quit w*rking in your mid 40s but ymmv - good luck
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Old 11-17-2016, 02:39 PM   #8
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I forgot that the current tax code provides for some tax-free capital gains and dividends. Therefore, depending on earned income and deductions, one can build up a bit in a brokerage account before switching over to Roth.
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Old 11-17-2016, 03:34 PM   #9
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Originally Posted by Tizookie View Post
With this plan it would give us $2.2M at 45, which may be excessive ($66K/Year @ 3% Withdrawal)
It's unlikely to be excessive, even if the modest inflation of the past three decades continues. Most of the general public thinks retiring at 55 is early. Going out at 45 means you face a retirement considerably longer than is typical, so you'll need to be a bit more conservative than the average ER.

But your saving discipline is very impressive! You are so far ahead of me at that age it's awesome. I hope you continue to be a regular presence at this forum.
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Old 11-17-2016, 04:50 PM   #10
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It's unlikely to be excessive, even if the modest inflation of the past three decades continues. Most of the general public thinks retiring at 55 is early. Going out at 45 means you face a retirement considerably longer than is typical, so you'll need to be a bit more conservative than the average ER.

But your saving discipline is very impressive! You are so far ahead of me at that age it's awesome. I hope you continue to be a regular presence at this forum.
Thanks! Right now its mostly imaginative since we only just started, I expect the allure of luxury items will come after pinching pennies for awhile, will have to see how the discipline holds up once that happens.

I didnt think about what $2.2M in ~18ish years will be versus today's standards, I will have to play around with some inflation projections to see what that will comparatively be worth.
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Old 11-17-2016, 04:59 PM   #11
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The long-term average inflation rate is such at you need about 2x every 20 years. So, the nominal $2.2M in the future is just above what $1M is worth now.

The above said, the cumulative inflation in the past 20 years, 1996-2016, has been mild. A $1 in 1996 is worth $1.53 now.

What will the next 20 years bring? More of the same? Reversion to the mean? Higher than the mean to make up? That's a $10 trillion dollar question.
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Old 11-17-2016, 05:24 PM   #12
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I highly recommend Quicken. You can manage your finances and investments on it and it has a "Lifetime Planner" that is useful for retirement planning and very easy to use and you can monitor your progress against plan.
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Old 11-17-2016, 06:01 PM   #13
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I highly recommend Quicken. You can manage your finances and investments on it and it has a "Lifetime Planner" that is useful for retirement planning and very easy to use and you can monitor your progress against plan.
I will look into Quicken, how do you like it compared to Personal Capital? So far PC is what I have been using and I really like having everything linked to one location, the fee analyzer is what actually woke me up to how high my fees were.
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Old 11-17-2016, 06:16 PM   #14
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I don't use PC but just googled it and the retirement calculator looks pretty good.
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Old 11-17-2016, 07:55 PM   #15
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Welcome and congrats on your plans and finding a fiance who shares your goals. Lots can happen over the years (kids, illness, job changes etc) and I can't predict whether you'll be ready to FIRE at 45, but I do know for sure that the amounts you save now will give you lots of options in the future. You'll never regret the amounts you save when young.
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Old 11-17-2016, 08:16 PM   #16
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Congrats you're well ahead of where I was at your age, and probably everyone here.

I'd be focusing less now on the final nut and age/date, but setting milestone goals, and readjusting every 2-3 years, based on progress. Especially given your age/status/kids? etc. A goal for 20-ish years from now will move in and out of focus, and the path there likely will not be a straight line.

Also, again because you are so young, reward yourself every now and then. Each time you hit another zero on the end, have a nice dinner out or something. It's not all about just watching the number in the bank get bigger. Gotta live along the way too.

Were I you, my first focus would be to buff up that non-retirement savings account to a good 6+ months of expenses so that you never have to tap into them when something comes up. And it will. And then add another 3 months if you make a baby.
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Old 11-18-2016, 12:52 AM   #17
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if we do have a child it would be only 1 and not until 35
If you are serious about having a child, reconsider waiting this long. Maybe everything will work as expected and as soon as you start trying you will succeed, but many people find it a lot more difficult and takes a lot more time than expected. It would be a shame to wait until you're older, then encounter problems that age you out of the window before you succeed.
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Old 11-18-2016, 02:18 AM   #18
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The replies are all about achieving the goal. However, I'd question the tolerance of "dreading the corporate existence" from such a young age for that many years. You might consider alternatives that provide an equal or lesser income but don't drive such a motivation. I changed careers and lost a lot of the drive to escape, and in the end the money was just as good.
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Old 11-18-2016, 10:12 AM   #19
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I'd be focusing less now on the final nut and age/date, but setting milestone goals, and readjusting every 2-3 years, based on progress. Especially given your age/status/kids? etc. A goal for 20-ish years from now will move in and out of focus, and the path there likely will not be a straight line.
I like this idea a lot. I guess I will make the first milestone 50K, thank you so much for your comment!
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Old 11-18-2016, 10:14 AM   #20
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If you are serious about having a child, reconsider waiting this long. Maybe everything will work as expected and as soon as you start trying you will succeed, but many people find it a lot more difficult and takes a lot more time than expected. It would be a shame to wait until you're older, then encounter problems that age you out of the window before you succeed.
Thats just it, we are not serious about the subject, we both have nieces and see the amount of work that goes into parenting it just isnt attractive right now. Maybe it will change a year or two after marriage, Ill keep it in mind.

Thanks!
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