24 and I want to retire early

[whitepepper]

Hello everyone.

I'm 24 years old. I graduated college in August and I already want to retire. Haha.

Currently, I am set to deposit ~$7000 per year into a 401K. That amount will probably increase by 2-3% per year, but I can't say for sure.

Also, I'm saving ~$200/month to invest separately from my 401K.

I would like to retire after 20 years in the workforce, but I don't think this will be enough money to do so.

How much more should I be investing per month?

Thanks for all the help.

Also, my current 401k is with T. Rowe Price. Here is the allocation of my investments. I need help with this because I am a beginner.

Capital Appreciation Fund (PRWCX) - %20
Growth Stock Fund (PRGFX) - %30
International Growth and Income - %10
New Horizons Fund (PRHNX) - %10
Retirement 2045 (TRRKX) - %30

Other funds that I can choose from are:

New Income Fund (PRCIX)
Retirement Income Fund (TRRIX)
Short-Term Bond Fund (PRWBX)
Summit Cash Reserves Fund (TSCXX)
Value Fund (TRVLX)

There are several other funds set to your expected retirement date (e.g. Retirement 2045, which I am in already).

What changes should I make?

 

[eridanus]

Somewhere out there, there's an article that has the math for retiring in 20 years. It's something like, "Save 20% each year and you'll be able to retire in 20 years."

As for how much additional you should save, it all comes down to how much you spend now and how much you plan to spend.

Don't forget to have some fun. Save some each month for an exciting vacation.

 

[SecondCor521]

Somewhere out there, there's an article that has the math for retiring in 20 years. It's something like, "Save 20% each year and you'll be able to retire in 20 years."

Here's one version:

Millennium Edition Generation-X Retirement Calculator.

2Cor521

 

[brewer12345]

pepper, I think you have reasonable funds for your age. I don't have a lot of good choices in my 401k, so I put all my contributions into T Rowe Price Capital Appreciation, which has an enviable track record.

At your age, I wouldn't get hung up on a specific date. There ae so many unknowns ahead of you that all you can do is save as much as you can without ruining your standard of living andtrust to providence. You've no way of knowing what your returns will be, how quickly your earnings will increase, whether youwill getmarried and have kids (which are expensive), etc. You also do not want to miss out on life while you are saving. After all, you could get hit by a bus next year. What if you never went to Europe/Asia/Galapagos/Topeka because you were saving for retirement? What if you never got the chance to sky dive/hike the Appalachian Trail/smoke crack because you were saving for retirement? So Ithink the best way to go about all of this is to set a budget, stick to it so that you cansave, and enjoy your life.

You will no doubt get all kinds of stories from the old salts here if you ask or search, but a bit of perspective: I started saving when I was your age, starting out with zippo and a couple of car loans. At age 34, I am looking at the prospect of being able to retire somewhere between age 40 and 45 even though I am the sole breadwinner for a family of 4 and my investing lifetime included one of the biggest equity market crashes in US history (tech bubble popping) and the biggest real estate downturn since the Depression. So save your pennies, enjoy life, and you will get there sooner than you expect.

 

[Nords]

What changes should I make?

Welcome to the board, WP, and here's some suggestions:

1. Educate yourself (more than you already have). Read this board's "Best of" and the FAQs for an overview, and then dig into something like Bob Clyatt's "Work Less, Live More" or Bernstein's "Four Pillars" or "The Boglehead's Guide" or another of this board's recommendations.

2. Have you run FIRECalc on your spending and your portfolio?

3. Have you examined your spending to see what gives you value and what doesn't give you so much of it? It's easier to reduce your spending than to raise your income, but it's also important to make the reductions in a way that encourages your progress instead of crossing the line from "frugality" to "deprivation".

After you've done the above then you can develop your preferred asset allocation, analyze the best funds available for meeting that AA, and, incidentally, fully fund your Roth IRA.

 

[Dawg52]

Capital Appreciation Fund (PRWCX) - %20
Growth Stock Fund (PRGFX) - %30
International Growth and Income - %10
New Horizons Fund (PRHNX) - %10
Retirement 2045 (TRRKX) - %30

Other funds that I can choose from are:

New Income Fund (PRCIX)
Retirement Income Fund (TRRIX)
Short-Term Bond Fund (PRWBX)
Summit Cash Reserves Fund (TSCXX)
Value Fund (TRVLX)

There are several other funds set to your expected retirement date (e.g. Retirement 2045, which I am in already).

What changes should I make?

The biggest chunk of my IRA is in PRWCX. Great track record. But at your age, why not just go with Retirement 2045? An all in one fund that will become more conservative as you age.

T. Rowe Price

 

[whitepepper]

Thanks for the responses. I will definitely be reading up the FAQs and threads on this board.

Dawg52, I was thinking about doing that to keep things simple. That fund would probably cover my after 62 retirement income. It is more the before 62 retirement income that I'm worried about.

 

[jIMOh]

Hello everyone.

I'm 24 years old. I graduated college in August and I already want to retire. Haha.

Currently, I am set to deposit ~$7000 per year into a 401K. That amount will probably increase by 2-3% per year, but I can't say for sure.

Also, I'm saving ~$200/month to invest separately from my 401K.

I would like to retire after 20 years in the workforce, but I don't think this will be enough money to do so.

How much more should I be investing per month?

Thanks for all the help.

Also, my current 401k is with T. Rowe Price. Here is the allocation of my investments. I need help with this because I am a beginner.

Capital Appreciation Fund (PRWCX) - %20
Growth Stock Fund (PRGFX) - %30
International Growth and Income - %10
New Horizons Fund (PRHNX) - %10
Retirement 2045 (TRRKX) - %30

Other funds that I can choose from are:

New Income Fund (PRCIX)
Retirement Income Fund (TRRIX)
Short-Term Bond Fund (PRWBX)
Summit Cash Reserves Fund (TSCXX)
Value Fund (TRVLX)

There are several other funds set to your expected retirement date (e.g. Retirement 2045, which I am in already).

What changes should I make?

My IRA is with T Rowe. I question why you would use 2045 and other funds. Here is what I would do-

Learn about asset allocation. I only see 10% in international investments. T Rowe International Growth and Income is a good (solid) foreign fund. Consider increasing international exposure.

You have 100% equities, other than what the target date fund has, that is a good move.

I would consider adding Value, as that is a solid fund too. IMO it might be better than capital appreciation. FYI PRWCX has undergone two managerial changes, and the new managers are not the ones responsible for the past performance. I sold this fund Jan 1 because I did not like where it was headed.

7000 per year to 401k is excellent. Is there a match with this?

7k growing at 10% per year for 20 years is $440,000. That is a good start.

$2400/year into an IRA (or other investment) growing at 10% per year is another $151,000.

$9400 per year into savings (investments) is a good start. What % of your income is $9400? If around 20%, you are doing well. $9400 is 20% of 47k. $590,000 in 20 years only replaces half of that 47k (replaces 24k).

20 years for you is age 44. If you increase the "time" factor, you can probably retire around age 51 or 55 with this savings rate.

To retire earlier you could
a) save more
b) learn to live on much less than you earn now (try to live on only 24k, for example)
c) invest better than a 10% annual return (not likely, but OK to try).