More of a lurker than a poster here. I started reading MMM about a year ago, but didn't start reading the forums until much later. I'd like to get some opinions (and maybe validation) on how to move forward in my situation.
Mortgage:
Home Assessment: 360,000 (purchased for 246,000, 20% down in 2010)
Initial Balance: 160,000 (refinanced in Sep 2015)
Interest Rate: 2.375% for the 1st 5 years, max 2% increase yearly thereafter up to a max 7.375%
Monthly Payment: 621.84
Additional Principal: 1,500 (goal to pay off before the 1st rate increase)
Current balance: 121,000
Other savings:
401k: 1500/month with 4% employer match (On track to max)
Roth IRA: 5500 (already maxed for the year)
HSA: On track to max for the year (2,450 with 900 employer contribution)
Assets:
E-Fund: 10,000 (~3 months spending inclusive of additional principal, 5 without)
Bank: 10,000 (~600 earmarked for charity, 5,500 earmarked for next year's IRA contribution, the rest in savings at 0.75% until I transfer into my taxable account--usually wait for 5k increments.)
Taxable Accts: 24,000 (half in FSTVX, half in various stocks from old ESPP and when my parents managed the account when I was a minor that I never touched)
401K: 11,000 (2050 retirement fund)
Traditional IRA: 20,000 (12K FSGDX, 5K FSTVX, rest cash from recent rollover)
Roth IRA: 24,000 (half FSTVX, half FSRVX)
HSA: 4,200 (0.65% interest)
I-Bonds: 20,000 purchased for 15k 8-10 years ago; tentatively earmarked for mortgage pay-off before the first mortgage rate increase
Expenses:
I've tried several methods of budgeting and have used Mint for years, but no strategy seems to stick. My recurrent expenses (cell phone, utilities, insurance, etc.) are fairly constant, but my miscellaneous expenses are wildly variable depending on season and month--I am not mustachian by any means--but I have applied some mustachian principals to my life (e.g., canceling internet/cable package in favor of a cheaper internet-only package from a local provider). I am satisfied with this current lifestyle and am not particularly motivated to change it. I am paid biweekly, and I do ensure that my monthly expenses are always less than 2 paychecks. The "extra" 2 paychecks per year, plus bonuses and anything else I save each month go directly into a savings account and then transferred into a taxable investment account as i accumulate 5k increments. I am aiming to treat any future raises as "bonus" and moving them directly to savings as well, to help against lifestyle inflation.
Goals:
- FIRE by 2026 with ~35k yearly spending (875k invested)
- Be mortgage free (my only debt)
Current Plan (looking for feedback):
- Pay off mortgage before rate increase in 2020
- All former P&I payments to taxable account starting 2020 after mortgage payoff
- Reduce 401k contributions to minimum for employer match and contribute the difference to taxable account starting ~2018 (TBD depending on the balance and allowing this to grow on its own until I reach 60)
- Continue to max rIRA and HSA (my MAGI is not anywhere low enough to qualify for a deductible tIRA contribution)
- Figure out if I can roll the current tIRA into my 401k to take advantage of backdoor Roth if I need to in the future. If not, maybe do a one-time rollover to HSA.
- Purchase another home in a lower COL area for retirement and either sell or rent out current home (TBD-, currently not accounted for in FIRE plan). With current comps, I could probably sell for 360k (and invest the proceeds for a nice extra cushion) or rent out for 1600/month, but who knows what will happen in 10 years.
Given a rather involved homebrew spreadsheet, these numbers should work out assuming I only contribute to my taxable and sheltered accounts for the next 10 years per the above plan and a 7% return, NOT including raises, bonuses, etc. over the years. I know there are methods of moving moneys from a pre-tax to post-tax account,, but the more I read about them from this and other forums, the more apprehensive I am about doing something wrong and getting heavily penalized, hence the plan to reduce 401k contributions (losing the tax benefit) in favor of an accessible, taxable account in the coming years.
I am certainly face-punch worthy in regards to my spending (I'm deliberately not giving numbers), particularly from mustachian standards. That said, given my current savings plan, I am not currently motivated to reduce my monthly expenses, even though it would mean a shorter time to FIRE. My current lifestyle and hobbies brings me immense satisfaction that I am not willing to part with. I would, however, welcome thoughts on the mortgage payoff plan vs. investing strategy.
