I’ve been a pretty passive retirement investor but am ready to get aggressive so my wife and I can retire early. Here’s a quick snap shot of where we are:
• Married with 2 kids (2 and 4), both 32. Got started late in life with investing.
• My 401k = $45,000. My wife does not have any 401k (school teacher that worked at a charter school because teaching jobs are hard to get). Wife is a stay-at-home mom and will be until the youngest starts school in 3 years. She wants to go back to work.
• House just refi’d at 2.75% for 15yr. Appraised at $160k, we owe $110k.
• My pay = $75,000. I take home around $48,000 after medical and a 6% company 401k match.
• Car payment of $450/month for 34 more months (PenFed 1.99% for 48 months).
• Checking and savings total about $15,000
• We have paid off all student loans, credit cards etc. No debt other than house/car.
We’ve been spending about $10,000/year for the last few years paying off student loans, my car and fixing up our house which should be done now so we’ll have a bunch of extra money. Our current liabilities for everything (house, car, insurance, gas, electric etc, food, entertainment etc.) is about $2500/month. That leaves us with $1500/month excess or $18,000/year, after taxes. So, here’s my plan:
Open up a Vanguard Roth IRA for both my wife and myself (separate accounts, right?) and put $5000 in each before the end of 2012. That will leave us with $5000 in checking and savings, which will be fine as the checks are still coming in and that will increase quickly since we aren’t spending nearly as much now. My employer matches 100% up to 6%, which I’m currently doing. I would like to increase my contribution to 14% to make an effective 20% 401k. That will decrease my take home pay by about $4000/year. Then, in 2013, start an automatic contribution into our Roths to hit the $5500 max in each. That will be a total of $15,000/year extra contributed into retirement accounts and should leave us with $3000/year in excess a year that can go into savings/checking. Total effective retirement addition will be around $19,000/year.
How does this sound?