Author Topic: Reader case study-45 years old, new job, FIRE in 5-8 years?  (Read 2054 times)

flagdude

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So here is my situation: I am 45 years old. I've just moved into a new job where my income is going to substantially increase and I've recently begun thinking about retiring in the next 5-8 years. Sooner would be better. I am currently an OR technician and will continue to do that part time for the next few months until I start to get income from my new business. I started working as a surgical assistant three months ago. In the past I've made ~ $37,500/yr. Going forward I anticipate making ~ 144k/yr. That number is not certain because it will depend on how many surgeries I do monthly, variable payments from insurance companies, etc.
I live with my girlfriend who has two kids (6 and 13 y/o). She is 33 and is on board with early retirement. She makes about $41k/yr. We live in a house that we rent from her mother who wants to sell it to us at a price that is probably 10% below market value. Purchase price would be roughly $300k. I plan on putting 20% down to eliminate mortgage insurance and get the best rate possible. She has a car payment for another couple of months. At that point other than my student loan, we will have no debt.
I have savings of $3,700. I have $13k in a Roth IRA. My expenses are as follows:
Rent  900
Car Ins 50
Car Maint 100
Child activities 50
Xmas/holidays 30
Clothing 20
College savings 100
Dining 50
Entertainment 20
Gas 125
Groceries 125
Lunches 50
Medical 20
Medical Ins 550
Misc 100
Phone 120
Travel 100
Work fees 1,040
Taxes 3,600

Total=$7,150
Income=$12,000             6850 @ 3.38%

So here are the things I'd like to get some help prioritizing:

1. Save an emergency stache ($10,000)
2. Saving money to retire.
     I currently contribute 5% of income into a Roth at my old job with 4% match from the company. This will last another couple of months.
     I will soon be self employed. Can I do a 401k self employed? I plan on making any future contributions into a standard IRA, not Roth.
     I will soon be paying for my own insurance. Can I do an HSA self employed?
3. Saving money for college for my 10 year old son. I plan on $1200/yr invested.
4. Saving money for and buying a house in the next year or two.
5. Paying off a student loan (payments start in October. I owe $6,850 at 3.38%).


I guess in addition to the questions above, how should I prioritize saving for a house vs saving for retirement? Should I try to pay off my student loan which has a relatively low interest rate or max out my savings and just pay the minimum on the loan? What else should I be thinking about or doing? Should I be doing anything differently?

Thanks-Joel




« Last Edit: July 30, 2015, 06:59:51 PM by flagdude »

MDM

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Re: Reader case study-45 years old, new job, FIRE in 5-8 years?
« Reply #1 on: July 30, 2015, 09:22:01 PM »
In the past I've made ~ $37,500/yr. Going forward I anticipate making ~ 144k/yr.
Holy income increase Batman!  Good for you; hope it holds true.

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I live with my girlfriend...in a house...her mother...wants to sell...to us....
Be very careful about (some would even say "you shouldn't be") buying a house together with someone to whom you aren't married....

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So here are the things I'd like to get some help prioritizing:
1. Save an emergency stache ($10,000)
Good start.

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2. Saving money to retire.
...
     I will soon be self employed. Can I do a 401k self employed? I plan on making any future contributions into a standard IRA, not Roth.
Good plan, and yes.  E.g., see https://investor.vanguard.com/what-we-offer/small-business/individual-401k

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I will soon be paying for my own insurance. Can I do an HSA self employed?
Yes, if you have a qualifying High Deductible Health Plan.  See http://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204025

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3. Saving money for college for my 10 year old son. I plan on $1200/yr invested.
4. Saving money for and buying a house in the next year or two.
5. Paying off a student loan (payments start in October. I owe $6,850 at 3.38%).
Those look fine for now.

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I guess in addition to the questions above, how should I prioritize saving for a house vs saving for retirement?
Depends on which you want more.

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Should I try to pay off my student loan which has a relatively low interest rate or max out my savings and just pay the minimum on the loan?
Pay the minimum.

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What else should I be thinking about or doing? Should I be doing anything differently?
Think about tax planning.  You could start with http://forum.mrmoneymustache.com/taxes/the-mustache-tax-guide-%28u-s-version%29/.  As a small business owner, you might benefit from a CPA, at least after the dust settles enough in the new role for you (and the CPA) to see things clearly enough.

Good luck!

flagdude

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Re: Reader case study-45 years old, new job, FIRE in 5-8 years?
« Reply #2 on: August 01, 2015, 04:29:27 PM »
MDM,

Thanks for the response.

Joel