The first thing I'd do in your situation is read this: https://forum.mrmoneymustache.com/investor-alley/investment-order/
Then I'd search these forums for ways you can legally access your 401k and HSA money before full retirement age without penalty under certain circumstances that you'll likely be in with similar spending in the future.
Read up on accessing your accounts earlier than 59.5. For example, you can withdraw the principle from a Roth IRA at any time. You can use this to rollover 401k funds, plus there are other loopholes for 401k.
I would really recommend that you max 401k and HSA before looking for other vehicles. After that, continue to build the brokerage account until you think you are ready to purchase that rental property.
Category | Monthly | Comments | Annual |
Salary/Wages for earner #1 | $7,750 | $93,000 | |
Pretax Health Ins. | $200 | Guess | $2,400 |
Employer-sponsored HSA | $158 | Room to increase? | $1,900 |
FICA base salary/wages | $7,392 | $88,700 | |
401(k) / 403(b) / TSP / etc. | $1,500 | At maximum | $18,000 |
Employer Match | $745 | $8,940 | |
Subtotal 1 | $5,892 | $70,700 | |
Federal Total Income (for IRS tax) | $5,892 | $70,700 | |
Federal tax | $870 | 2017 rates, S, item. ded., 1 exempt. | $10,440 |
State/City tax | $0 | Guess, using 0.00% * (AGI - Exempt'n) | $0 |
Soc. Sec. tax | $458 | Assumes 1 earner paying | $5,499 |
Medicare tax | $107 | $1,286 | |
Total income taxes | $1,435 | $17,226 | |
Income before other expenses | $4,456 | $53,474 | |
Monthly Average Expenses: | |||
Mortgage | $625 | Input to Itemized Deductions | $7,500 |
Property Tax | $225 | Input to Itemized Deductions | $2,700 |
Home/Rent Insurance | $50 | $600 | |
Car Insurance | $115 | $1,380 | |
Car Maintenance, Registration, etc. | $35 | $420 | |
Charitable contributions | $50 | Input to Itemized Deductions | $600 |
Dining (Lunch/Dinner/Etc.) | $200 | $2,400 | |
Electricity | $150 | $1,800 | |
Entertainment | $100 | $1,200 | |
Fuel/Public Transport | $100 | $1,200 | |
Groceries | $250 | $3,000 | |
Household; Maintenance | $50 | $600 | |
Travel/Vacation | $100 | $1,200 | |
Non-mortgage total | $1,425 | $17,100 | |
Other tax-advantaged investments: | |||
Roth IRA | $458 | At maximum | $5,500 |
Total Expense | $2,508 | $30,100 | |
Total to invest | $1,948 | $23,374 | |
Additional Mortgage Principal | $375 | $4,500 | |
Available for taxable investment: | $1,573 | $18,874 | |
Summary: | |||
"Gross" income | $7,750 | $93,000 | |
Income taxes | $1,435 | $17,226 | |
After-tax income | $6,315 | $75,774 | |
IRA+401k/403b/TSP/457 | $1,958 | $23,500 | |
HSA | $158 | $1,900 | |
Living expenses | $2,250 | $27,000 | |
After-tax investable | $1,948 | $23,374 | |
Time to FI?: | |||
Time to FIRE | 6 | years | |
Safe Withdrawal Rate | 4.00% | percent | |
Real return on tax-deferred investments | 5.00% | percent | |
Real, after tax, return on taxable investments | 4.25% | percent | |
Current Savings | |||
Taxable stocks & bonds | $29,500 | ||
Tax-deferred (e.g. trad. IRA/401k) | $25,000 | ||
Roth + HSA | $28,000 | ||
Projected Savings at Retirement | |||
Taxable | $163,850 | ||
Tax-deferred (e.g. trad. IRA/401k) | $216,746 | ||
Roth + HSA | $87,857 | ||
Total projected stash | $468,453 | ||
Projected Expenses in Retirement | |||
Non-loan, non-work expenses | $17,100 | ||
Annual non-tax retirement expense | $17,100 | ||
Total | $17,100 | ||
Total loan principal due at FI | $51,068 | ||
Stash needed for retirement @4.0% SWR | $478,568 | ||
Need $10,115 more. |
Filing Status | 1 | 1=S, 2=MFJ, 3=HOH | |
# Exemptions | 1 | ||
Adult #1 | |||
Age | 26 | ||
# of earners | 1 | ||
Total Income | $70,700 | ||
Std. Deduct. | $6,350 | ||
Act. Deduct. | $7,844 | ||
Exemption | $4,050 | ||
AGI | $70,700 | ||
MAGI | $70,700 | ||
Taxable | $58,806 | ||
1040 Tax | $10,440 | ||
Tax after n-r credit | $10,440 | ||
Education Credit | $0 | ||
Net Tax | $10,440 | ||
Mtg. Int. (approx.) | $4,544 | ||
Prop tax | $2,700 | ||
Charity | $600 | ||
Item. Deduct. | $7,844 | ||
Version | V9.03 |
Loans: | Orig. Prin. | Orig. Length | Curr. Prin. | Yrs left | Rate |
Mortgage | $123,350 | 30 | $102,000 | 11 | 4.500% |
@icyappraiser that's an impressive run! I did something similar about 10 years ago.
I like your $40k-ish annual spend. Care to share a bit about your lifestyle, e.g.
-Area where you live, LCOL or HCOL?
-Car choices
-Housing choices (e.g. size of house)
That *is* an impressive run. Good for you guys! Nearly tripling your household income while keeping expenses reasonable. Nice!
Do you have your assets arranged so that you can do a Roth Conversion Pipeline, i.e. 5x expenses in Roth contributions and taxable accounts?
Having a kid might make your 900 sq ft feel cozy, especially if you have another. Do you have a plan for a potential move? How does that tie into your ER plans?
Either way, we have a lot of flexibility and options which I feel pretty good about. That's the whole point of this FIRE thing, right? ;)