32 and wanting to retire in a few years

[needtoretireearly]

I am so happy to have found this board.

Anyone who can help steer me in a good direction please feel free!!!  Here is a little background:

I am 32, never married, female (not that that matters!) and have been saving for some time now.  My ultimate goal is retirement.  I have about $70000 saved in my 401K (maxed out each year since it started), Roth IRA (maxed out), and other mutual funds and savings accounts so far.  This doesn't include all my assets on paper which would add up to about $100000 at most, including the $70000.

I own a condo worth $90000 (little equity in it) which I no longer enjoy living in.  I've owned it five years and plan to put 20% downpayment on a house in the $200000 range.  I am looking for a house now but in no huge hurry, though I plan to buy within the next six months. I will either sell the condo or rent it out if necessary, since they are hard to sell in this area.

I have filled out so many calculators and they all give me different answers.  Most discouraging are the ones which say I must have over 3 million to retire by age 40. 

I did this site's calculator and it actually said if I have $650000 and lived modestly ($25,000 a year) I could retire right now. 

To me this makes sense as you figure 5% of $650000 is over $32000 interest. 

I am fairly knowledgable about the stock market and investing, having been a liscenced stockbroker for 6 months after graduating college several years ago.

But I am no "expert" by any means. 

I would love to not have to work any more and I would not get bored at all....I know this for certain about myself!!

The people I work with do not think at all like I do and they have NO interest in saving for retirement.  They can not picture themselves retired early.  Even the ones who are much older than I am.

I make around $70K per year but I am in sales so my pay typically increases each year.  Sometimes by a lot, depending on my accounts.  It is unlikely it will decrease so long as I keep working my standard 40 hour week, with my business.  Not impossible, but very unlikely, so I am not worried about it. 

I am extremely frugal with my money.  Status is unimportant to me.

I do want a house simply because I enjoy having guests over and my current place is very small.  I also would like the backyard for my two dogs to run free in.  $200000 is a low to average amount to spend for a modest house in this area.  The house I buy will likely increase in value unlike my condo because houses in my area normally do.  But I plan on living there for a long time anyway.

I can save at least $30K per year, and hopefully more if my sales increase.  I put most of the money in mutual funds like vanguard index funds.  I also own several stocks which have all gone up, from a little to a lot.  I put some money in a money market paying 3.5% as it will go to the house downpayment. I have little equity in my condo since the value has, despite my upgrades, decreased due to several uncontrollable factors I won't get into here.

Who knows maybe renting this condo will help a little too, if I don't sell it.

I am so worried I'm going to be working when I'm 50 years old. 

I wonder is there anyway I can retire at age 40 or around there??

I am trying to sell more as I work on 100% commission.  This way I make more.  But it is a stressful job and I do not wish to work more than a 40 hour week.  I have worked multiple jobs in the past but am not willing to do that now.

Other than my hobby which is searching for freebies on the internet, which nets me a few hundred dollars a year.

Any suggestions or support would be appreciated.  I look forward to reading some good info on this board!!!!

 

[wildcat]

I am 32, never married, female (not that that matters!)

Ha!! It will matter around this board just wait....

Few general comments ----

Big problem with retiring so early is of course health benefits, something you should really consider. P-T work could really bridge the gap with insurance and help preserve your egg. If I really wanted out I will def consider P-T work.

650k is probably the low end of the range but it is def possible. Withdraw enough to enjoy your retirement.

You don't need 3 mil. That's absurd. FIREcalc is pretty accurate.

Keep saving like crazy if you want to clock out before 50 or even in a few years. It may be more difficult to do if the markets are flat/down for a long period of time. Just means you will have to save that much more to pull it off.

And I don't think I would get bored either

 

[just_hatched]

I am so happy to have found this board.

Welcome!

I have about $70000 saved in my 401K (maxed out each year since it started), Roth IRA (maxed out), and other mutual funds and savings accounts so far. This doesn't include all my assets on paper which would add up to about $100000 at most, including the $70000.

So this means you have around $30k in money market, etc?
It will also matter how much is in retirement accounts vs. taxable accounts as to what is available to you before age 59 painlessly.

I own a condo worth $90000 (little equity in it) which I no longer enjoy living in. I've owned it five years and plan to put 20% downpayment on a house in the $200000 range. I am looking for a house now but in no huge hurry, though I plan to buy within the next six months.

So I assume $10-15k of your next $30k annual savings will go towards the house downpayment?

I have filled out so many calculators and they all give me different answers. Most discouraging are the ones which say I must have over 3 million to retire by age 40.

Sounds kinda high.

I did this site's calculator and it actually said if I have $650000 and lived modestly ($25,000 a year) I could retire right now.
To me this makes sense as you figure 5% of $650000 is over $32000 interest.

Your $25k expenses includes the mortgage on $160k plus property taxes?
Are you trying to hit $650k by age 40? Does the $30k/year savings include your 401k and Roth savings?

Personally, I count home equity towards net worth, but not towards interest income, so I'm not sure if you're counting home equtiy towards the $650k or not.

I make around $70K per year but I am in sales so my pay typically increases each year.
I can save at least $30K per year, and hopefully more if my sales increase. I put most of the money in mutual funds like vanguard index funds. I also own several stocks which have all gone up, from a little to a lot. I put some money in a money market paying 3.5% as it will go to the house downpayment.

Sounds like a good income, savings rate, and investment strategy. I guess you just work the numbers to see when you might reach that $650k goal.

As for renting the condo, I'm really not any expert at all there.

It may take longer than you want, but it sounds like you're well on your way.

 

[ProfHaroldHill]

Regarding health care -- for some people, mainly those who are presently quite healthy, getting an individual Blue Cross policy at an early age and keeping it until Medicare may be a better idea than relying on P-T work to provide access to an employeer's group policy.  Suppose the following -- you go with the policy from P-T work, develop a chronic medical condition, then want to stop working (or go in a layoff, and can't find another job), and use-up COBRA.  At that point, you're really stuck.  Maybe you can find an individual policy at that time, and maybe not, and maybe if you can it will cost a bloody fortune because of your preexisting medical condition.  Once you're rated for BC, your cost does not go up based on your individual claim experience, although the across-the-board rate goes up every year.

HH

 

[Dawg52]

Regarding health care -- for some people, mainly those who are presently quite healthy, getting an individual Blue Cross policy at an early age and keeping it until Medicare may be a better idea than relying on P-T work to provide access to an employeer's group policy.  Suppose the following -- you go with the policy from P-T work, develop a chronic medical condition, then want to stop working (or go in a layoff, and can't find another job), and use-up COBRA.  At that point, you're really stuck.  Maybe you can find an individual policy at that time, and maybe not, and maybe if you can it will cost a bloody fortune because of your preexisting medical condition.  Once you're rated for BC, your cost does not go up based on your individual claim experience, although the across-the-board rate goes up every year.

HH

I just received my BCBS rate increase for 2006 and it was 8.5%. So you need to carry a pretty healthy allowance for future health premiums if you retire at 40.

Save like crazy. Retirement at 40 was not in the picture for me, but I'm sure it can be done. Stay focused! As Wildcat said, run your numbers through the FIRE calculator. Good luck!

 

[Martha]

Regarding health care -- for some people, mainly those who are presently quite healthy, getting an individual Blue Cross policy at an early age and keeping it until Medicare may be a better idea than relying on P-T work to provide access to an employeer's group policy. Suppose the following -- you go with the policy from P-T work, develop a chronic medical condition, then want to stop working (or go in a layoff, and can't find another job), and use-up COBRA. At that point, you're really stuck. Maybe you can find an individual policy at that time, and maybe not, and maybe if you can it will cost a bloody fortune because of your preexisting medical condition. Once you're rated for BC, your cost does not go up based on your individual claim experience, although the across-the-board rate goes up every year.

HH

I think there is a lot of sense in buying individual health insurance policies while you are healthy. Federal law (HIPAA) requires guaranteed renewability of individual health plans (though the insurer can cancel the plan for everyone). However, HIPAA is silent on premium increases. A number of states do not prohibit insurers in the individual market from increasing rates based on claims or age of covered individuals. Some other states require community rating of health insurance premiums. In those states, no policyholder can be charged more than any other based on health status, health history, or other risk factors. Yet other states require modified community rating with adjustments permitted for age, but not health status. And yet other states impose rating bands that limit how much premiums can vary based on health status, age, and other factors.

 

[maddythebeagle]

I am about the same age and situation and think it is very possible to retire in your late 30's or early 40s. I think that you will need at least moderate returns to get there from here. I guess you dont know what they will be until you get there.

 

[chris2008]

A lot of likeminded frugal people also enjoy www.slnet.com and its forums. It is based on the book "Your money or your life".
I understand that your current job is extremely stressful. Instead of retiring completely at the age of 40 you might explore also other options that could contribute to your income after retirement.

 

[wildcat]

So a quick question on the health care issue.  Do you feel it would be wise to buy an individual policy as a full-time employee and prior to any ER plans?  For example, I have 3 yrs to go until I can FIRE at a young age say 40.  I could get insurance through my current employer (supposed this is your full-time career and not a P-T job) or start an individual policy and pay for it out of pocket.  Good idea or bad idea?  Or does it all depend on whether or not you are healthy with no pre conditions?

 

[Andre1969]

One of my friends has a policy with BCBS, which he pays the full thing. In 2004-2005 it was $179 per month, but when it renewed this summer, it jumped to $199 per month. That doesn't sound like alot, but doing the math it comes out to 11%. Fortunately, he's now eligible for health insurance through his employer, so that's one monthly cost that will go down. He's still pretty young, around 32-33.

 

[Martha]

So a quick question on the health care issue. Do you feel it would be wise to buy an individual policy as a full-time employee and prior to any ER plans? For example, I have 3 yrs to go until I can FIRE at a young age say 40. I could get insurance through my current employer (supposed this is your full-time career and not a P-T job) or start an individual policy and pay for it out of pocket. Good idea or bad idea? Or does it all depend on whether or not you are healthy with no pre conditions?

What I would do would depend on what state I live in and whether I had any plans to move. I think DOG51 has purchased individual health insurance even though covered through his job.

If you are healthy and can buy an individual plan from a solid company inexpensively, and your state's rules limit the ability of the insurer to raise rates based on claims or age, it may be a good idea. Especially if you think you are going to retire soon. There are so many variables to consider though. What are your state's laws? (see www.healthinsuranceinfo.net).
What is the cost of a policy now? Do you think you will have a hard time getting insurance later? What are your odds of developing an illness that may exclude you from coverage or cause the price to increase? Etc.

EDIT: I think that anyone who plans on ER and who does not have employer provided health insurance should have a good understanding of how health insurance works in their home state. The web site www.healthinsuranceinfo.net is the best resource I have seen with guides to each state and its health insurance system.

 

[Dawg52]

So a quick question on the health care issue.  Do you feel it would be wise to buy an individual policy as a full-time employee and prior to any ER plans?  For example, I have 3 yrs to go until I can FIRE at a young age say 40.  I could get insurance through my current employer (supposed this is your full-time career and not a P-T job) or start an individual policy and pay for it out of pocket.  Good idea or bad idea?  Or does it all depend on whether or not you are healthy with no pre conditions?

Yes, I purchased mine at age 50, 2 full years before retirement. It's very important to buy it while your are healthy. You can be denied for the slightest burp on your record. So yes, buy it while you are fairly young and healthy.

 

[ProfHaroldHill]

One of my friends has a policy with BCBS, which he pays the full thing.  In 2004-2005 it was $179 per month, but when it renewed this summer, it jumped to $199 per month.  That doesn't sound like alot, but doing the math it comes out to 11%.  Fortunately, he's now eligible for health insurance through his employer, so that's one monthly cost that will go down.  He's still pretty young, around 32-33.

It's not the cost now for your friend.  Rather, it's the cost later if he/she loses the job (and the employer's insurance) after developing a chronic health problem, and then REALLY gets hosed for an individual policy to bridge to Medicare.  Caveat -- As Martha said, there are lots of factors to consider beyond this; nevertheless, this can be a show stopper for ERs . . . .

HH

 

[justin]

Just got the notice of rate change for my BCBS insurance for my daughter. It dropped by $4!!! This is after my wife's insurance dropped by 10-15% in July! Same coverage and everything, but at least for me, the ridiculous health insurance inflation has come to an end. This year at least.

 

[laurence]

As you can see, needtoretireearly, health care is the big x factor in everyone's mind here.

I second WC's comments, especially about gender being an issue, just ask cube_rat about the constant harrassment she recieves! We tend to be more respectful to Martha, being a lawyer and all.

On a broader note, it sounds like you are chugging along well, but how sure are you about how your life is going to play out? You are still very young (I'm a year younger, so no condescension here, I swear), might you get married? Desire to have a child or children? I know people who don't want either and are very happy that way, just asking.

 

[Mountain_Mike]

I wanted to retire in my 40s, I did things backward. Got married first, then went back to school. Then had kids. I didn't start to make good money until my late 30s. Going my way, ER will not be possible until my early 50s.

Make no mistake, kids are expensive (but worth it) and your spouse may not have your same frugal tendencies.

This said, I think you are definitely on the right track, and it looks to me like ER would be do-able.

 

[Dry Socks]

I'd like to second (or 4th or 5th) the comments about medical insurance. In our case, the BS premium for a family of 4 is more than $1200 per month. We do have a somewhat recent medical condition in the family. But, even without that I'm sure it would be quite high. What's weird is that I feel lucky we can even get insurance. So, $1200 per month is actually a good thing

I recommend getting an insurance policy asap that isn't through your work. If we hadn't done that years ago (by luck), we would be in deep doo doo now.

 

[justin]

I'm not clear on some of the advice here. Is anyone saying to get a private insurance policy not through work as soon as possible just in case something comes up later? I understand getting it a year before you pull the trigger and ER so you know it will be in place. But getting a private policy more than a few years in advance of needing the private policy seems overly conservative (and expensive).

On a related note, would it be possible to get high deductible ($5000 deductible) for a fews years before ER, then switch it to something lower deductible upon ER-ing and needing it? Or is this considered getting a new policy and getting rid of the old policy?

 

[wildcat]

I understand getting it a year before you pull the trigger and ER so you know it will be in place. But getting a private policy more than a few years in advance of needing the private policy seems overly conservative (and expensive).

I think the point is to consider getting one prior to pulling the trigger (few years away) & also the importance of having it as health problems w/o insurance can foil even the best ER plans. Could be wrong but that is how I read it.

Maybe we should get back on the topic of helping or welcoming needstoretireearly (not one our strong points)

 

[ProfHaroldHill]

I'm not clear on some of the advice here.  Is anyone saying to get a private insurance policy not through work as soon as possible just in case something comes up later?  I understand getting it a year before you pull the trigger and ER so you know it will be in place.  But getting a private policy more than a few years in advance of needing the private policy seems overly conservative (and expensive). 

My thought was getting an individual policy rather than depending on med coverage provided by haphazard participation in the P-T labor market for someone nearing Medicare. Should be a different story for a young, FT worker . . .

HH

 

[justin]

Thanks for the clarification. I tend to agree with you HH. If you're truly FIRE, why go back to work just to get health insurance. It may be you didn't have enough saved in the first place to RE.

I have considered enrolling in college to get cheap guaranteed health insurance if I was ever denied reasonable individual coverage. That's the back-up plan. I'm inclined to think a 3 credit hr class of your choosing once a year would be infinitely more fun than a part time job for health bennies.

 

[wildcat]

I said consider P-T work if you can't stand your current job any longer and have an amount that is at the bottom end of the RE range, especially given the very long time horizon if a person were to retire @ 40. Just a safety net and to allow more time for the egg to grow. Maybe suggesting that one could use a P-T job for insurance was a bad idea but the income could certainly help a very long ER.

 

[retire@40]

I said consider P-T work if you can't stand your current job any longer and have an amount that is at the bottom end of the RE range, especially given the very long time horizon if a person were to retire @ 40.  Just a safety net and to allow more time for the egg to grow.  Maybe suggesting that one could use a P-T job for insurance was a bad idea but the income could certainly help a very long ER.

PT work isn't a bad idea at all, especially if it's something you enjoy doing.  It could even work if you jump from job to job as you get tired of each job.

PT work can help you semi-retire which is the next best thing to full retirement.

Every $1000 that you earn at your PT job is the equivalent of $25,000 of savings.  For those willing to go PT and earn an average of $1000 a month, it will give the same revenue stream that $300,000 in savings would generate.

 

[justin]

I think cutting back to part time work is a great idea, and if it comes with health ins. bennies, great! I just wouldn't personally recommend including "working a PT job forever for health insurance benefits" in my RE plan. There's a good chance I'll go PT for a while (and get health insurance) when the time comes to ER. But working PT seems like a big sacrifice just to get the health ins. I guess you do what you have to do. Half time work is only 1/4 as bad as full time (assuming disutility = (time spent working)^2 ).

Just be honest with yourself about it and don't say "I'm ER'd, but still working for the health insurance benefits".

 

[SteveR]

Do you guys see companies that employ PT help actually offering health insurance? I don't see much of it at all. Maybe it is a geographical thing.