Confused 30 Year Old

[teej1985]

Hi all, I'm a 30 year old male and I'm struggling with formulating a long term plan other than just being a natural saver.

I don't know if I will ever get married, and I do not know if I will ever have kids. How do you plan for spending a couple decades out when there are such major unknowns in your future life?

When I was in my mid 20s, I purchased a condo at the persuasion of my parents when they had the first time homebuyer tax credit. I lived there for 3 years to satisfy the terms of the credit, and I rented it out for a couple years after that. I did not like being a landlord, so I sold that condo this year for a decent profit which is covered by the personal residence exclusion.

Currently my net worth stack up like this:
*401k: 36k (70/30 stocks/bonds - stocks are large US value and bonds are US corporates - mix of Vanguard Equity Income and Vanguard Wellesley Income)
*IRA: 50k (65/35 stocks/bonds - stocks are large US Value and bonds are US corporates - Vanguard Wellington Fund)
*Taxable Account: 165k (roughly 90/10 stocks/cash - stocks are in Betterment's 100/0 allocation, this is all index funds with an international tilt.

Considering moving away from Betterment and using Vanguard directly, but so far I've had $7500 in tax loss harvesting, yet am positive for the year, and I still have a few more months in the free trial phase...)

I currently have no debt as the mortgage was wiped out when I sold my condo and my auto was already paid off. i currently rent 1/2 of a 2 bed room apartment for $850 in California. I would guess that that If I average out my annualized spending, I spend between $2.5k and 3k per month, including travel, which is less than I earn and could be pared down, but I don't really feel the urgency to as I'm ambivalent towards my job. I've maxed out the IRA every year since 2010, but I'm very limited by what I can put into 401k due to HCE rules and management's lack of interest in implementing a Safe Harbor plan. Thanks for any input...

 

[2017ish]

You are doing great. Keep to the path you are on with high saving rate and investing mainly in equities.

Even if you "knew" what you would be doing for the next 20 years, it would probably change. Keep the financial ducks marching the way you are and you will be financially in a good position no matter what you do on the personal front. (as for the betterment / vanguard issue, I don't think it is going to make much difference. Sounds like the loss harvesting is making up for the betterment fee.)

By way of example--at 30, we had two kids, were looking to buy our final house and DW and I both loved our jobs and planned to continue with the nanny. 25 years later, I had a long stint as a SAHD, we moved states because prior state's malpractice rates skyrocketed, we lost our butts on the "final house," and I had to take the bar in a new state before starting to work full time again. None of that was according to plan, but it appears as if the constant savings/investing will have us arrive at our desired destination even after the various detours. As other posters will attest, life happens.

 

[teej1985]

My concern with Betterment is their longevity over the long term. I don't mind their stock allocation, it's probably not what I have picked on my own, but it seems good enough. I just don't know how they can be profitable for several years with their current business model.

Does not compute | The Economist

 

[2017ish]

My concern with Betterment is their longevity over the long term. I don't mind their stock allocation, it's probably not what I have picked on my own, but it seems good enough. I just don't know how they can be profitable for several years with their current business model.

...

In that case, I'd move the funds to a vanguard account at the time of your choosing. (I misunderstood the thrust of that portion of your initial post!)

 

[jon-nyc]

My gosh, that was me at the same age. I remember it like yesterday. I could never really 'plan' for retirement because I just had no idea how my life was going to unfold. Dual income no kids? Sole earner with an entire brood? Would I end up earning a lot of money or plateau at a lower level in my career? I had no idea.

So I just saved a bunch of money and lived my life. Things came into focus eventually and I was able to retire early.

 

[Gumby]

Saving assiduously and investing intelligently will always be useful traits, regardless of what the future brings.

 

[FI by 2024]

My gosh, that was me at the same age. I remember it like yesterday. I could never really 'plan' for retirement because I just had no idea how my life was going to unfold. Dual income no kids? Sole earner with an entire brood? Would I end up earning a lot of money or plateau at a lower level in my career? I had no idea.

So I just saved a bunch of money and lived my life. Things came into focus eventually and I was able to retire early.

Same here. I'm 33, single with no kids. Maybe I'll retire that way. Maybe I'll marry at 35 and suddenly have 4 step kids. No way of knowing. I do know that continuing to save will keep me on the right path. Even if I end up with a mess of dependents, having this mindset will still allow me to retire early, even if it ends up being at 50 instead of 41.


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[pb4uski]

All plans are subject to changing circumstances so don't sweat it. Have you tried Quicken Lifetime Planner? It is included in Quicken Deluxe and higher versions.

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[panacea]

All you can do is plan for what you do know. Be smart with your choices preparing for the unexpected... make sure you have enough in a rainy day fund, save aggressively for retirement, don't buy a house if you think you might move in 3 years, minimize taxes using all available investment vehicles, minimize debt. Things will change in the future, whether it be health, career, marital status, etc. but if you've done everything you can to position yourself well financially, you'll be ready for anything. Along the way, you'll create wealth and eventually be able to refine your plan as you get older.

 

[Davis65]

At 26, I sketched out a plan to retire at 52, based on projected savings rates ,paying off my mortgage, staying in my public sector employer's defined benefit plan, never getting married, and earning an 8% rate of return.

Then my life happened. I fell in love with a man in another city, moved there and switched employers, then left the public sector for the private sector, returned to the public sector, got involved in a drawn out insurance lawsuit relating to my old house, never achieved the 8% return, got promoted a few times, had my salary frozen for a bunch of years.

On Friday I told my boss that I will be finishing work in April at 50 to travel the world with my husband.

Although nothing went according to plan (back then, I couldn't have imagined that the law would be changed to allow us to get married), my original plan got me to save and invest rigorously, which made this amazing result possible.

Build a long term plan, but make it adapt as your life changes, rather than seeing it as a limitation on your life. Invested wealth gives you security and choices.

 

[MooreBonds]

At 26, I sketched out a plan to retire at 52, based on projected savings rates ,paying off my mortgage, staying in my public sector employer's defined benefit plan, never getting married, and earning an 8% rate of return.

...
switched employers, then left the public sector for the private sector, returned to the public sector, got involved in a drawn out insurance lawsuit relating to my old house, never achieved the 8% return, got promoted a few times, had my salary frozen for a bunch of years.

On Friday I told my boss that I will be finishing work in April at 50

Wow! Just out of curiosity, were you able to rejoin your original pension plan and buy years of service? Or were you just able to get a private sector salary that helped you save buku bucks to make up for no pension, and even retire 2 years earlier than your old projections?

 

[Davis65]

Leaving the federal government to join a provincial government I was able to transfer my pension by using my accrued amount to buy equivalent time in the new plan. (I had to pay extra because the provincial plan is a little richer.) When I left the provincial government, I left the money in the plan. I couldn't join the consulting firm's plan for the first year, and by the end of that year I knew I didn't want to stay. Two months later, I was able to get a job back in the provincial government. Not having an employer pension meant I had a lot more room to contribute to an RRSP (IRA in US terms), since the limits for RRSPs and employer pensions are integrated in Canada. I wasn't able to buy back those 14 months because I wasn't working for a government. The consulting pay was quite a bit more, but neither Wall Street Masters of the Universe pay, nor even enough to make up for the lack of personal fulfillment.

I won't qualify for an immediate pension when I finish work. We will draw down private savings pretty heavily until 65 when my pension and Social Security equivalents (OAS and CPP) kick in.

Husband has a defined contribution plan, so no fixed pension for him.

I should mention that by starting early, as the OP has, and living below my means, not only am I able to retire at 50, but I'm also able to bring along with me my less frugal and financially literate husband. He now realizes that he lucked out in the marriage lottery. Fortunately, I feel the same way about him, although for non-financial reasons.

 

[ERD50]

... How do you plan for spending a couple decades out when there are such major unknowns in your future life? ...

Thanks for any input...

If it makes you feel any better, even someone here who retired at 65 will be facing 'a couple decades out with major unknowns in their future life'!

Bottom line, and I think this is consistent with other advice you've received, just LBYM, save, invest simply, and be ready to adapt. There are no real guarantees in life, but you can be pretty certain that plan will put you ahead of wherever you would be if you didn't do those things.

You are on your way - keep up the good work!

-ERD50

 

[nash031]

I'm married, 38, no kids yet, still don't know what life is going to bring to us largely because of the kids variable.

We attack this by saving 40+% of our gross income and having an aggressive AA. Hopefully in four years we'll be FI for our current situation, and can carry that on to FI for any situation in short order thanks to the miracle of compounding.

At 30, I was single and had no clue where I was going to be in 2 years, let alone 20. You're in about the same financial position that I was then. Four years later, I was married, and yeah, still no idea what's going to happen over the next four years other than finishing out my time on active duty. My advice in your situation, which may not change as quickly as you'd like, is to save aggressively and maintain your aggressive allocation. The more you save now, the better off you'll be no matter what happens later. You can still afford to be aggressive because you've likely got a long investing horizon regardless of what life brings. And if you find you've saved "too much" for whatever life brings, retire early and live it up a little.

I appreciate your situation. DW and I get frustrated sometimes by the great unknown... it affects everything including seemingly simple things like which car to purchase to replace her dying small car. Such is life!

 

[Markola]

At 26, I sketched out a plan to retire at 52, based on projected savings rates ,paying off my mortgage, staying in my public sector employer's defined benefit plan, never getting married, and earning an 8% rate of return.

Then my life happened. I fell in love with a man in another city, moved there and switched employers, then left the public sector for the private sector, returned to the public sector, got involved in a drawn out insurance lawsuit relating to my old house, never achieved the 8% return, got promoted a few times, had my salary frozen for a bunch of years.

On Friday I told my boss that I will be finishing work in April at 50 to travel the world with my husband.

Although nothing went according to plan (back then, I couldn't have imagined that the law would be changed to allow us to get married), my original plan got me to save and invest rigorously, which made this amazing result possible.

Build a long term plan, but make it adapt as your life changes, rather than seeing it as a limitation on your life. Invested wealth gives you security and choices.

I am the same age as you. I, too, got serious about saving and investing in my late 20s and my stash is really starting to amount to something. Unlike you, I was not creative enough to consider retiring at 52, so my plan called for work becoming optional at 59.5. A river of surprising currents has flowed under the bridge since and a million big and small financial decisions have happened, but I am amazed to find that my wife and I are exactly on track at age 50 to retire as planned at 59.5. Oh, but if I'd thought to peg the date at 52 like you! That would have led to a different suite of conscious and unconscious decisions, like keeping our starter house and paying it off rather moving to a bigger, tonier place than we needed, with an expensive and repair-prone Volvo wagon to match the lifestyle of that block. We got out of there eventually but, oh well, some things you learn the hard way. But I am truly amazed at the power and accuracy of the original plan for it's pretty darned accurate trajectory so far.


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[Davis65]

59.5 is still a damn site better than 65 or 67 or picking tin cans out of bins to take to the recycling centre. Imagine where you would be now if you hadn't planned.

 

[teej1985]

Figured I'd update the thread on my progress.

It looks like I had a NW of $206k when I started this thread in November 2015.

Thanks to the Market Performance and a continued high savings rate,

I passed the exciting milestone of $300k with the December Rally and over 2/3 of that is in a taxable account.

Around September, I shifted 20% of my port to bonds because I decided I'm going to leave my job in February to take a "gap year" of sorts. If what I have isn't enough to take that sort of risk, then I'll probably never do it.

Surprisingly the bonds have gone down and I'd have a higher balance today if I stayed all equities like I had been for most of the past year.

I opened the bond exposure just in case there's another housing panic during my time without job income so that I can scoop up cheap real estate somewhere. Not a big deal if the bonds lose a few %.

 

[DrRoy]

All you can do is plan for what you do know. Be smart with your choices preparing for the unexpected... make sure you have enough in a rainy day fund, save aggressively for retirement, don't buy a house if you think you might move in 3 years, minimize taxes using all available investment vehicles, minimize debt. Things will change in the future, whether it be health, career, marital status, etc. but if you've done everything you can to position yourself well financially, you'll be ready for anything. Along the way, you'll create wealth and eventually be able to refine your plan as you get older.

Regarding your original post I think this covers it very well. You don't have to be able to predict the details of the future to know what would be a good strategy in the present. What are you trying to accomplish with the 'gap year'? Is there a way to do some of that without losing your income? The gap will set you back on your accumulation.

 

[teej1985]

Regarding your original post I think this covers it very well. You don't have to be able to predict the details of the future to know what would be a good strategy in the present. What are you trying to accomplish with the 'gap year'? Is there a way to do some of that without losing your income? The gap will set you back on your accumulation.

Hi Dr. Roy, sure, since my entire career so far has been working for a family member, I'm really wanting to feel some more independence in my life. I've had a wonderful starting boost but I want to take it from here. I won't be against freelancing during the gap year if it makes sense and isn't too much of a commitment.

The "gap year" is to get some extended travel out of my system to places that I might consider moving to. While this is unusual for Americans, but not unusual for young people in other developed countries. They jobs won't necessarily pay as much in the places I'm considering moving to, but I also don't need to generate as much ongoing work income if my cost of living is lower somewhere else.

I've done a 3-week trip and a 6-week trip in the past, and I recognized that i was paying for travel and rent at the same time. It seemed like a poor use of my financial resources to double up on lodging like that. For my purposes, it seems more efficient to consecutively travel and then go back to living in one spot with occasional short vacation.

This is not going to be luxury travel by any means, just living like I do at home in other places with some added sightseeing and socializing with friends who don't live here.

At the age of 31, I'm not too concerned about having a 1 year gap on my resume. And it's entirely possible that I fall in love with one of these cities and go back to work before the year is up.

 

[DrRoy]

Teej, I am 57, and at 31 I had 2 kids, a mortgage, and a Megacorp job. Your situation is different and the new info is quite relevant. I certainly understand the desire for independence and I also have a considerable travel bug. We all should do what we think is best, as long as we have properly considered the consequences. Good luck.

 

[Davis65]

Teej, good for you for doing a gap year. Travel when you're young is quite different from when you're older. We took our first big post retirement to in the fall - two months in Iceland and central Europe. It was amazing, but it was different from the travelling that I did when I was young.

I know know that the travelling I did when I was young (22-23) was huge in shaping who I was as an adult.

You're further along in your life that I was, but I think it will still make a tremendous impact on how you view the world and what you do not with your life.

So, where are you planning to go? (I broke my ankle towards the end of our trip, so I can only travel vicariously for now, but I'll be back - I haven't been everywhere yet, but it's on my list.)

 

[teej1985]

Teej, good for you for doing a gap year. Travel when you're young is quite different from when you're older. We took our first big post retirement to in the fall - two months in Iceland and central Europe. It was amazing, but it was different from the travelling that I did when I was young.

I know know that the travelling I did when I was young (22-23) was huge in shaping who I was as an adult.

You're further along in your life that I was, but I think it will still make a tremendous impact on how you view the world and what you do not with your life.

So, where are you planning to go? (I broke my ankle towards the end of our trip, so I can only travel vicariously for now, but I'll be back - I haven't been everywhere yet, but it's on my list.)

Thanks Davis, will mostly be exploring the US this time around. Think national parks, historical sights and new cities. I might do a year abroad somewhere but more likely to work a few years before doing that. It all depends on how much I end up spending while traveling. The good news is that all I need to do to match my current housing costs is spend $1k/mo on lodging, and that will be pretty easy to stay under - I have a month long room rental booked in New Mexico for like $500.

 

[teej1985]

*401k: 36k (70/30 stocks/bonds - stocks are large US value and bonds are US corporates - mix of Vanguard Equity Income and Vanguard Wellesley Income) *IRA: 50k (65/35 stocks/bonds - stocks are large US Value and bonds are US corporates - Vanguard Wellington Fund) *Taxable Account: 165k (roughly 90/10 stocks/cash - stocks are in Betterment's 100/0 allocation, this is all index funds with an international tilt.

It looks like i started this thread about four years ago. I figured I would provide an update.
I still have no clue what the future will bring. While I did stop working March 2017, I was back working by Summer/Fall 2017.
My gap year was ruined for a couple reasons. 1.) I did not enjoy solo travel and I did not have a Plan B for what to do with the time. 2.) I wasn't sure how long the money would last even though I had contingencies like X amount in cash and X amount in bonds. I found it difficult to spend money even though I planned for it.
That job from Summer 2017 wasn't for me and I was voluntarily unemployed for all of 2018.
I took a job in January 2019 to work for the TSA in Hawaii. It sounded like an adventure, but really I took it because I figured it was a good way to transition into another government agency. By the end of September 2019, I was out of TSA and into another part of the government.
As of the end of November 2020 my financial stats went from the above to: $255k in IRA/TSP/HSA $95k in Taxable Account. But I also paid cash for my current 1 BR residence in mid 2017, so it's worked out I suppose even though it didn't go exactly as planned.
I still really have no idea what I want to do with my life. For the time being, the government work is low stress and enjoyable at times. I like that there are so many different things you can do in the government, and different places you could live and contribute to the same pension. it's hard to believe I would want to keep doing it until age 57, but if I did, I would have the retiree health insurance.
If I did commit to working until 57, I would not need to save as much as I have been saving. Expenses would be lower due to subsidized health insurance and income would eventually be higher due to more SS and FERS covered earnings.
I've been saving as much as I can, because I don't really know anything else, but maybe I will want to retire early.
Ultimately, I do still want a life partner and I am beyond disappointed that it has not happened, but it feels out of my control other than continuing to put myself out there and meet people. Much harder to do in Covid times.
I apologize for the formatting.. i have tried to fix it, but the forum keeps running it all together.

 

[SnowballCamper]

Looks like you're off to a great start. I would recommend being more aggressive with your asset allocation... assuming you have the discipline not to panic sell in a downturn and continue with index investing, closer to 90% stocks... Spend your energy on your career for the greatest return at your age (over the next decade).

 

[teej1985]

Looks like you're off to a great start. I would recommend being more aggressive with your asset allocation... assuming you have the discipline not to panic sell in a downturn and continue with index investing, closer to 90% stocks... Spend your energy on your career for the greatest return at your age (over the next decade).

My retirement accounts have been 100% stock for a couple years. I have a fair amount of cash in taxable though. Not sure if I want to buy property or not in my next location.


With the spring 2020 crash, I did not sell anything, I also did not look at my balances for my typical monthly account check.