Mid-40s Wanna-be Mustachian

[October]

As I've been reading MMM's blog and the responses of all his readers, I notice a pattern of 20 and early 30-somethings, many with 50k+ incomes, and I think "Sure, it will be easy for you to retire early. Look how young you still are and you are already flexing your frugality muscle."

It has taken me almost 30 working years to get my head out of my ass and seriously look at how I'm going to retire.  Social Security may not be there when I'm 65 (or 70, or 75, or whatever they decide to raise it to).  I get discouraged, but I'm keeping an open mind and I'm posting here to read your suggestions about what I and my partner can do to become financially independent, or nearly so, and if we're doing the right things to get us there.

We are both in our mid 40s, with a combined take-home of about $41,500.  We have a new mortgage (moved in January 2011) and a little debt - some student loans and a mini-van lease that we can't get out of.  I have a 401k with only $58,000 saved up after 12 years.

Our debt, sans mortgage, is scheduled to be eliminated by April of 2013, possibly a few months sooner.  *Maybe* by the end of this year if we can really bust ass.

After the debt is paid we will have about half of our monthly income to save/invest - $1700 or so.  We do want to move to the southwest after the debt is paid and after we can build a down payment.  We are looking in the $75,000 range for a new, small home where we will likely retire when we are able.  Until then, we will continue working.

My main question is one of mathematics (I hate math).  Is it possible to become financially independent on our income and savings before age 65?  I'm 43 and my partner is 44.  If we can live on $1500 a month, how long will it take and what will we need to do to make it happen?  How much will we need to invest to get the dividends that will give us that income?

[arebelspy]

As I've been reading MMM's blog and the responses of all his readers, I notice a pattern of 20 and early 30-somethings, many with 50k+ incomes, and I think "Sure, it will be easy for you to retire early. Look how young you still are and you are already flexing your frugality muscle."

It has taken me almost 30 working years to get my head out of my ass and seriously look at how I'm going to retire.  Social Security may not be there when I'm 65 (or 70, or 75, or whatever they decide to raise it to).  I get discouraged, but I'm keeping an open mind and I'm posting here to read your suggestions about what I and my partner can do to become financially independent, or nearly so, and if we're doing the right things to get us there.

We are both in our mid 40s, with a combined take-home of about $41,500.  We have a new mortgage (moved in January 2011) and a little debt - some student loans and a mini-van lease that we can't get out of.  I have a 401k with only $58,000 saved up after 12 years.

Our debt, sans mortgage, is scheduled to be eliminated by April of 2013, possibly a few months sooner.  *Maybe* by the end of this year if we can really bust ass.

After the debt is paid we will have about half of our monthly income to save/invest - $1700 or so.  We do want to move to the southwest after the debt is paid and after we can build a down payment.  We are looking in the $75,000 range for a new, small home where we will likely retire when we are able.  Until then, we will continue working.

My main question is one of mathematics (I hate math).  Is it possible to become financially independent on our income and savings before age 65?  I'm 43 and my partner is 44.  If we can live on $1500 a month, how long will it take and what will we need to do to make it happen?  How much will we need to invest to get the dividends that will give us that income?

Absolutely you can!

The math behind early retirement is surprisingly simple.

MMM did a post about it here:
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

Nords has a similar post here:
http://the-military-guide.com/2011/01/03/how-many-years-does-it-take-to-become-financially-independent-2/

In your circumstance, you're actually doing quite well, if this is true: "After the debt is paid we will have about half of our monthly income to save/invest"

Using the spreadsheet linked to at the bottom of Nord's post, with these assumptions: 5% return on your money, saving 50% of your income and spending 50%, and a 4% SWR, you will be able to retire in 16.6 years.

So if you're in your mid 40s, you should be able to retire around age 60.  Not a super early retirement, but still 5 years before age 65, which was your question.

And, of course, you can improve on that by reducing your spending even more and/or increasing your income.  But you're already on the right path to retire at 60!

[Landor n Stella]

Is there any chance of looking for new jobs that might increase your take-home?

[palvar]

Or can you reduce your expenses?  Is New Mexico an area which is easy to go car free?

[October]

I guess 60 is better than 65 and we won't have to worry about SS not being there, so thanks for the encouragement!

I'm not sure what "4% SWR" is.  What does SWR stand for? I looked it up! :)

When we do move to NM it will be with an eye toward being able to bike to work/store, and there will be new jobs involved of course, but I'm not sure I would be making as much money as I do now.  Although I will certainly try. :)

I have a super-cushy job currently with great healthcare, a lot of free time (to read MMM), weekends and paid holidays off, plus almost 4 weeks of vacation on top of that, so I'm loathe to leave it until we move.  Also, we are in a hard-hit area of Michigan, and the last time my partner was looking for a job, it took her over a year to find one.

We have already cut cable and most of our eating out.  We use VoIP for our phone.  We've sold some books and things and are starting to rack-dry our clothes (we have an outside line for the summer).  Once we get the (leased-ugh!) minivan paid off, we will sell that for whatever it's worth, which will reduce insurance and tags costs.  Our main car is a Kia Rio5 and is paid off.

I'm sure if we take a hard look at things we can find more ways to save.

Thank you for the responses!  Any more advice is welcome!

[Landor n Stella]

Also, congratulations on your commitment to still work towards Mustachianism, even if it's a bit later than is ideal. That is probably the hardest part- figuring out what you want out of life.

If you have student loan debt, then I'm guessing one or both of you have some kind of degree? Try to find the organization for your field of work (for me, in Higher Ed, there is a website called Higher Ed Jobs) and find their jobs board. Then look through the jobs posted, and apply for every one that you think you meet 3/4 of the requirements. All of the ones you apply for will be a stretch, and you never know what will happen.

Last year I applied for a job that was just beyond my skill set, and I got a job offer for more than double my salary at the time. That offer allowed me to go to my current employer and ask for a raise. Which got me $20k more per year plus they are funding my master's degree for me. The point is, stretch yourself and apply for jobs that look to be just outside of your skill set. You might be surprised at the result.

[Landor n Stella]

Oh, Michigan. Great state, not so good times economically in recent years. I grew up there (Kazoo), I now live in Indiana!

[October]

I should add that we could probably live on $1000 per month or less without a mortgage.  Currently we're paying $560 a month, but like I said, we plan on moving and selling our house and buying a similarly priced one in NM.

[arebelspy]

I guess 60 is better than 65 and we won't have to worry about SS not being there, so thanks for the encouragement!

Yeah, not only will you be retiring 5 years early, without worrying about social security, but that's on your present course.

As you get more Mustachian and save over 50% of your income, your early retirement will get even earlier!