25-Year-Old Teacher, My Road to Early Retirement... On Track?

[MarieIG]

Great start SteelNate.

I agree with getting your Master's Degree. Try to do so keeping expense in mind, i.e. is a State or local school less - will your employer pay some of all of the tuition?

I would build up the emergency fund a bit more - although you could take some of your Roth contributions out (not growth) in case of emergency. BTW, I am not recommending that you remove funds from your Roth - I love Roths especially for young people.

No, I would not be concerned that you are saving too much for retirement. That money you are putting in now - and the match - has more time to grow now than it ever will in the future.

I don't know the situation with the tuition vis-a-vis the Master's - but if it will be at a lower interest rate than your current outstanding loans, I would look at paying of the two or three loans with the highest interest rates after you have built up your emergency fund.

When you look to buy a house - don't buy too much house.

If there comes a time you decide you want marry - I would recommend that you approach this very carefully. In addition to deciding on how you would handle the typical major life issues/ choices, I would also recommend that your potential life partner (should you choose to have one) be fiscally responsible.

 

[marymom]

In my daughter's school district, if you teach at a Title 1 school for 5 years, your student loans are forgiven. Something to check out?

 

[Ramen]

My 2 cents here might not be popular, but I say don't rush to buy a house. I know the allure is strong, but there is nothing wrong with renting and keeping your options wide open, especially when you are so young.

If you marry, you'll want to pick the house together anyway. Plus a house is just more debt. Don't fall for the "It's an investment" line. Maybe it is, maybe it isn't.

I bought my first home at 29 and the next (and last) at 36. They were fun during the honeymoon years (about four) and then quickly became albatrosses, big fat weights to shed when the winds of life blew me in other directions. Opportunity cost adds up fast, and I would have been better off and much less stressed without those homes.

Now that I'm 55 and retired (at 52), it would make more sense to buy since I'm feeling much more settled. Yet guess what! Now I rent by choice!

Big cheers to you for starting your FIRE path so young. I started with $10K in mutual funds in 1990 at age 22 not even knowing the term. I found Wealth Without Risk at the library and took it from there.

Then I made all kinds of dumb moves yet still succeeded because 22 gave me a huge margin for error. You will have this margin too, so take any advice with some salt and don't forget to enjoy life while you are young. Make a few mistakes and learn from them!

 

[matjung]

I hope my questions can help me plan for the next 10-15 years in this profession as I truly enjoy teaching as well as coaching high school football.

Maybe, you are able to progress from high school football to a subject with better pay checks.
Given, your plan to buy a home.
In a lot of countries, you don't have enough money for that.
Is it an option that your parents contribute to your home buying plans?
You may achieve 1.5M, but 1.5M now is not the same thing as 1.5 in 30 years time. I would suggest year by year you adjust 1.5M by reported inflation.



What return on investment do you expect from Amazon?
Given that you are teacher, do you see value in stuff like Udemy, Coursera, Skillsoft or 2U?

 

[chris2008]

This blog might also be interesting:
http://www.millionaireeducator.com/


Enjoy the ride.

 

[msanniee]

If you do work summers, yes you will pay into FICA. However the likelihood that you will collect anything from social security is slim.

Under the WEP, your earnings must be at a certain level to count toward social security benefits.

I was never able to make enough during the summer to hit the threshold as defunded in the windfall provision.

Good luck in your teaching career.

 

[rothlev]

Thank you for the advice. The only thing I am not a fan of is our school's 403(b) as it has high expense ratio fees and I have looked into other venders and I could not find one that just did a simple S&P 500 Index Fund.

Any advice on this?

mine offered a list of options , one was fidelity , the rest were insurance companies with annuities. Double check a you should have more than one choice. choose the self directed option , ie fidelity, vanguard or t Rowe are commonly offered.

 

[Gumby]

If you do work summers, yes you will pay into FICA. However the likelihood that you will collect anything from social security is slim.

Under the WEP, your earnings must be at a certain level to count toward social security benefits.

I was never able to make enough during the summer to hit the threshold as defunded in the windfall provision.

Good luck in your teaching career.

Not exactly. If you are eligible for social security because you have 40 credits from a job or jobs in which you paid in to social security (which currently would require working summers for ten years and earning >$6560 each year), then WEP will reduce your own social security benefit, but it cannot eliminate it entirely. You will still get social security of at least 40% of your average indexed monthly earnings (from the non-teaching job). See https://www.ssa.gov/policy/docs/program-explainers/windfall-elimination-provision.html and https://www.ssa.gov/pubs/EN-05-10045.pdf So, for example, suppose you made $7000 every summer for 35 years. Your AIME would be $583 (7000/12). You would not have a year that qualified for "substantial earnings", but your monthly benefit would still be $583 x 0.4 = $233. (all numbers adjusted for future years by inflation).

msanniee, you might want to talk to your local Social Security office rather than just assume you can't get any. You might be pleasantly surprised.

 

[youbet]

Not exactly. If you are eligible for social security because you have 40 credits from a job or jobs in which you paid in to social security (which currently would require working summers for ten years and earning >$6560 each year), then WEP will reduce your own social security benefit, but it cannot eliminate it entirely. You will still get social security of at least 40% of your average indexed monthly earnings (from the non-teaching job). See https://www.ssa.gov/policy/docs/program-explainers/windfall-elimination-provision.html and https://www.ssa.gov/pubs/EN-05-10045.pdf So, for example, suppose you made $7000 every summer for 35 years. Your AIME would be $583 (7000/12). You would not have a year that qualified for "substantial earnings", but your monthly benefit would still be $583 x 0.4 = $233. (all numbers adjusted for future years by inflation).

msanniee, you might want to talk to your local Social Security office rather than just assume you can't get any. You might be pleasantly surprised.

+1

It sounds like msanniee might be confusing "substantial earnings" with "FICA earnings."

Msanniee, Gumby's post is right on and you should review your situation. If you have 40 quarters under FICA, you'll get something more than zero. My DW gets about $90 a month, not much, but not zero.
She never had a year that qualified as "substantial earnings."

 

[Gumby]

The young wife did not become a teacher until she was 28 and she didn't work summers at all, so she only has social security credits for the jobs she had before she became a teacher, which total less than 40. So she gets no social security of her own, and no spousal benefit due to the GPO.

 

[youbet]

The young wife did not become a teacher until she was 28 and she didn't work summers at all, so she only has social security credits for the jobs she had before she became a teacher, which total less than 40. So she gets no social security of her own, and no spousal benefit due to the GPO.

It looked like my DW would also miss getting 40 credits for similar reasons, but near career end she taught on the adjunct faculty of a local college for a few years and made it. That got her Medicare Part A based on her own earnings (instead of mine) and the whopping $90/mo.

I think the toughest situation is folks who get in nearly 40 credits and then wind up getting zero, not even a refund of what they paid in. If that is what happened to your young DW, it just doesn't seem right. Just as GPO doesn't seem right in the way it treats folks like you and me.

 

[SteelNate7]

This blog might also be interesting:
http://www.millionaireeducator.com/


Enjoy the ride.

Response:

Thank you for the link to this blog. I truly appreciate it. I have been reading some of the articles and it is terrific.

 

[SteelNate7]

Maybe, you are able to progress from high school football to a subject with better pay checks.
Given, your plan to buy a home.
In a lot of countries, you don't have enough money for that.
Is it an option that your parents contribute to your home buying plans?
You may achieve 1.5M, but 1.5M now is not the same thing as 1.5 in 30 years time. I would suggest year by year you adjust 1.5M by reported inflation.

What return on investment do you expect from Amazon?
Given that you are teacher, do you see value in stuff like Udemy, Coursera, Skillsoft or 2U?

Response:

Hi, thank you for the response. You're extremely correct about inflation with my calculations, I am just giving myself a FIRE number now; however, I know that I will go above and beyond to reach that number due to my time horizon and the amount of investments I will continue to contribute. I do appreciate you bringing this up again as I sometimes do forget to calculate this.

As for the return on investment from Amazon, I like the company and it is the only single stock that I will purchase. I understand that my S&P 500 index fund has Amazon in it and it is sort of double dipping so to speak, but I just like the company and want to own some shares and will keep them for the long haul.

Lastly, that is a good question regarding parents helping fund the future home. I never did think to ask them about a small amount to help out. Is this something that is considered taboo?

Thank you for your response!

 

[SteelNate7]

My 2 cents here might not be popular, but I say don't rush to buy a house. I know the allure is strong, but there is nothing wrong with renting and keeping your options wide open, especially when you are so young.

If you marry, you'll want to pick the house together anyway. Plus a house is just more debt. Don't fall for the "It's an investment" line. Maybe it is, maybe it isn't.

I bought my first home at 29 and the next (and last) at 36. They were fun during the honeymoon years (about four) and then quickly became albatrosses, big fat weights to shed when the winds of life blew me in other directions. Opportunity cost adds up fast, and I would have been better off and much less stressed without those homes.

Now that I'm 55 and retired (at 52), it would make more sense to buy since I'm feeling much more settled. Yet guess what! Now I rent by choice!

Big cheers to you for starting your FIRE path so young. I started with $10K in mutual funds in 1990 at age 22 not even knowing the term. I found Wealth Without Risk at the library and took it from there.

Then I made all kinds of dumb moves yet still succeeded because 22 gave me a huge margin for error. You will have this margin too, so take any advice with some salt and don't forget to enjoy life while you are young. Make a few mistakes and learn from them!

Response:

When I was 20 years old I made some investments in the crypto space that I honestly regretted and lost some money. I learned from that and now only invest in index funds and the US stock market, which I know has over the years been proven.

I really like reading this comment about how you have margin for error early in your life because I made that mistake and how I am at a better place currently than I was when I did that crypto blunder.

Lastly, renting is something that I have stuck in my head seeing my aunt over the years pay rent and if she would have bought a house, she not only could have paid it off, she may have another one as well. I do not want to be like her with that and so I really when the time is right want to purchase a home so that my payments go toward the house itself that I will once own without the debt.

Hope this makes sense.

Thank you for your time and response. Much appreciated.

 

[SteelNate7]

You're doing good things. Make hay while the sun shines...

By your statements I hear future M.B.A., and that is a great choice. Will you have additional loans when that happens?

The cheap loans, one way or another, will be replaced by home loan, future car loan (maybe), etc.

So, how is the present living arrangment? When you move out, your expenses will go way up. Life gets more complicated for sure, and I'm sure you've planned out moving and M.B.A. too.

Good Luck on your journey.

Response:

No additional loans when that happens as I plan on paying for it with cash. Future M.B.A is funny since my next goal is a master's in finance. I just really enjoy the investing world.

The present living arrangement is very lucky and I am fortunate. However, when I start to move out and live on my own, I will have to find a way to save money while paying for my expenses that will definitely as you stated, "go way up".

Thanks for your response.

 

[SteelNate7]

Update for All:

Hi, I just recently moved my 403(b) plan to the Ohio457 where I am going to invest in a fund that has an extremely low expense ratio of 0.01%. Yay!! I also am starting to fund my 457b with just $50 a paycheck ($100 a month).

I am $1,000 away from maxing out the Roth IRA for 2023! Super excited about that. Once that occurs, I will most likely increase the 457b funding for several months until I can start to fund that 2024 Roth IRA. I really over the next few months after this Roth IRA is maxed out, am going to build up my emergency fund along with my future home fund (for a down payment).

So my plan is working for this year, it is just a matter of continuing to execute. I appreciate the information about the 457b as I am now super stoked about being in a fund that has an expense ratio of 0.01%, something I am used to seeing rather than my previous 403b that had a extremely high 0.50% + expense ratio.

Thank you for all of your help. Have a great weekend/ week ahead!

Nate

 

[MarieIG]

Great job Nate!

 

[matjung]

Response:

Hi, thank you for the response. You're extremely correct about inflation with my calculations, I am just giving myself a FIRE number now; however, I know that I will go above and beyond to reach that number due to my time horizon and the amount of investments I will continue to contribute. I do appreciate you bringing this up again as I sometimes do forget to calculate this.

As for the return on investment from Amazon, I like the company and it is the only single stock that I will purchase. I understand that my S&P 500 index fund has Amazon in it and it is sort of double dipping so to speak, but I just like the company and want to own some shares and will keep them for the long haul.
Lastly, that is a good question regarding parents helping fund the future home. I never did think to ask them about a small amount to help out. Is this something that is considered taboo?
Thank you for your response!

Asking parents/relatives for funding is something that Aristocrats are doing for 500 years.
When you pay your parents/relatives 2 or 3% interest it creates a Win Win situation. Just don't ask the parents of girlfriends for funding.

The challenge for you will be to find out, when is the best time to exit from Amazon. Its market capitalization and growth may not be sustainable.
You can also think about Nasdaq index funds.