Author Topic: Stupid ?; Where to put money for early retirement  (Read 1302 times)

crunchy_mama

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Stupid ?; Where to put money for early retirement
« on: July 09, 2017, 04:57:56 PM »
I know this has got to be the stupidest question, please be easy with the face punches.
We have no debt, we own our home and cars. Dh is 41 and the sole breadwinner and I'm 38 at home with kiddos.

So far we've only invested in our 401k and although I've been interested in early retirement I've not been able to get dh on board to even think about it, he's been saying he's going to work until he's 70 and there's no way we could afford for him to quit any sooner. However, I think he may be coming around. Poking around MMM's site I saw his article about how much is enough for a 401k and putting in our numbers it seems we have/will have enough "old people money."

Now, I'm trying to calculate how much earlier than 60 could he retire and am getting excited crunching numbers. What I'm not certain about is where to put that money to be used before 60. I see the Vanguard Funds recommended but I'm not sure if that is still worthwhile when it will be a (relatively) short time until it is needed, especially with having to shuffle things around to be able to withdraw it. Realistically I think the earliest we might be able to retire is 9 yrs, I'm hoping that we are ready by 14 yrs. So, we need these funds to be pretty secure or there goes our shot. Do we need 5 yrs in living expenses liquid/semi-liquid?

I know this info must be here but I guess I'm utterly blind because I can't find it and I'm also a total beginner on investing. If there is some article that goes over this kind of scenario please point me in that direction, TIA~

Frankies Girl

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Re: Stupid ?; Where to put money for early retirement
« Reply #1 on: July 09, 2017, 05:33:38 PM »
Not a stupid question. :)


https://forum.mrmoneymustache.com/investor-alley/investment-order/
^this tells you which "buckets" to put money into in order.

A slight clarification: you don't have a jointly owned 401k. Investment accounts are almost always individually owned, so as you do not work at all, the 401k belongs to your husband (but you'd inherit it if something happened to him). For instance, IRA stands for "individual retirement account," but I do think you can jointly hold a taxable brokerage account.

Your husband can have an IRA (either traditional or Roth - or both depending on circumstances) and so can you. As a spouse, you can open and IRA as long as your working spouse makes enough in earned income to cover any contributions made. You are both allowed up to $5,500 limit (it is a bit more if you're over 55 I think) each, so that means you could put away $11,000 a year total across both accounts as long as one of you earned at least that much income, in whichever IRA (traditional or Roth) works best for your situation.

As far as a "how all this stuff works" primer that is easy to understand and kind of a fun read, you can't go wrong with Jim Collins' "The Simple Path To Wealth" - available as a book, but you could read his website as well as that is where he wrote all this before being published. I literally went from not getting any of this stuff and being scared of it all, to being 100% confident and managing my own and a relative's portfolio now.  http://jlcollinsnh.com/stock-series/

The general idea is to either have a large enough portfolio along with lower (4% or less) expenses, so that you take from your portfolio and it rebuilds. Some folks like having a few years of expenses in cash, usually stashed in either a high interest savings or laddered CDs so the money is not losing value due to inflation but very stable and not subject to short term market volatility. In good market years, you pull from your investments because it will just refill due to market growth. In bad market years, you would go to cash reserves to allow your portfolio time to recover an sharp losses. There are pros and cons for using both methods (and of course a ton of little details like Roth pipelines, whether you and husband end up making a profit from a hobby, etc.)

But the big thing to realize is that investing isn't for a few years, or even decades. You won't be pulling every penny out the first year of retirement (or the second or the 10th). You have to understand that investing means putting your money to work to make more money, so the more money you leave working, the larger it will grow over your lifetime.

Definitely keep asking questions - never be worried about asking on here - we all had to start somewhere!
« Last Edit: July 09, 2017, 05:37:42 PM by Frankies Girl »
I frequently have no idea what I'm talking about. Like now.

FIREd as of: March 6th, 2015!

crunchy_mama

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Re: Stupid ?; Where to put money for early retirement
« Reply #2 on: July 10, 2017, 07:42:45 AM »
Frankie's girl, thanks for taking the time to type all of that up. I appreciate your wisdom and patience.

I should have been more precise, yes the 401k is in dh's name, with me as the beneficiary.

I appreciate the link to Collin's site, I'd just seen another rec. for him so I will be reading through his investor info and hopefully, that will clarify investing for me.

I've read about the 4% rule, I get that about the 401k, just not exactly wrapping my brain around it for our years pre 60, when we have a relatively short time to save. I'm not getting how that will work. I started reading on the investment order page but am still deciphering it(I don't know all the acronyms just yet).

According to the investment order we need to get our EFund built back up (it is puny right now) and an HSA. We get some in a HSA from his employer each year but we've never funded anything over what they give us. We need to look at building that up more and should have already did that. I also need to figure out which is right for us a Roth or a Traditional IRA, I'd thought from what I'd read before that for sure we should get a Roth but now I'm not for sure.

I guess I'm worried about the fact that we've got a relatively short period of time to get build money to live off of before 60 and I so want dh to be able to quit well before then. We've started to explore some ways to bring in more money but haven't got anything consistent yet.

MDM

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Re: Stupid ?; Where to put money for early retirement
« Reply #3 on: July 10, 2017, 09:04:12 PM »
I've read about the 4% rule, I get that about the 401k, just not exactly wrapping my brain around it for our years pre 60, when we have a relatively short time to save. I'm not getting how that will work. I started reading on the investment order page but am still deciphering it(I don't know all the acronyms just yet).

According to the investment order we need to get our EFund built back up (it is puny right now) and an HSA. We get some in a HSA from his employer each year but we've never funded anything over what they give us. We need to look at building that up more and should have already did that. I also need to figure out which is right for us a Roth or a Traditional IRA, I'd thought from what I'd read before that for sure we should get a Roth but now I'm not for sure.

I guess I'm worried about the fact that we've got a relatively short period of time to get build money to live off of before 60 and I so want dh to be able to quit well before then. We've started to explore some ways to bring in more money but haven't got anything consistent yet.
Consider How To: Write a "Case Study" Topic.  Whether you choose to post yours or not, going through the effort of collecting the information, entering in the spreadsheet, etc., and looking at what that tells you can be very helpful.

SeattleCPA

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Re: Stupid ?; Where to put money for early retirement
« Reply #4 on: July 11, 2017, 11:05:08 AM »
CrunchyMama, you might also like the very short (50pp) free e-book we give away at our blog... it's gotten some great reviews from other, well-known authors...

http://evergreensmallbusiness.com/the-thirteen-word-retirement-plan/
My blog Evergreen Small Business
My free downloadable ebook: Thirteen Word Retirement Plan

crunchy_mama

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Re: Stupid ?; Where to put money for early retirement
« Reply #5 on: July 12, 2017, 04:44:43 PM »

Consider How To: Write a "Case Study" Topic.  Whether you choose to post yours or not, going through the effort of collecting the information, entering in the spreadsheet, etc., and looking at what that tells you can be very helpful.

Thank you for your thoughts. I've been looking at that spreadsheet and examing our info.

I've read most of Collin's retirement series, over on Mad Fientist, and various other info.

Running numbers, talking goals, etc with dh

dess1313

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Re: Stupid ?; Where to put money for early retirement
« Reply #6 on: July 13, 2017, 01:48:36 AM »
some other good books would be the boglehead guide to investing, as well as the boglehead guide to retirement.  both very well written. 

Part of also retiring is dropping down into a different (usually much lower) tax bracket.  Some other costs are lower as well.  transportation.  work clothes.  professional fees. 

Have you done any really detailed budget outlines to see where your $$ is going?  how much are you saving every month? anywhere to cut back?  how much would you actually need to live comfortably but still have some cushion built in?
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