Hello MMM forum! This is my first post here, I read the blog regularly but I'm curious about what other Mustachians think about my plan for retirement. My woman and I are fresh out of our parents' and entered the workforce about the end of last year.
Age:I'm 24 and she's 25
Income and assets:
Job:We make $4235 monthly, on average after taxes. Depending on how much overtime we put in.
Car:$800
Vanguard-Target retirement 2030:$6972
Liabilities:
No credit debt, no student loans, no car loan or mortgage. Feels good man.
Expenses:
Rent:$450
Utilities:
Gas:$76
Electricity:$60
Internet:$60
Total Utilities:$196
Gym:$52
Car Insurance:$50
Gasoline:$50
Groceries:$320
Cellphone:$50
Girl stuff:$300
Grand Total: $1468
The plan of action is to put whatever remains after bills and expenses into my vanguard account and stop working anywhere from 10-15 years. My concerns are the following
- Is the Target Retirement account any good for my current situation?
- How could I make my investments more efficient?
- Is there anywhere we could cut back a little more?
- Are our goals realistic?
I don't think there is much more to say. Feel free to ask if I missed anything.
Also thanks for your time!
An older woman? Nice, bro.
Haha, now to business. Btw what is "girl stuff $300"? Maybe it's not worth the battle...
Given your limited investment capital, a target retirement fund is not a bad option. You are already on a solid path with zero debt. I would continue investing in the target funds until you have ~$10k. Then, start investing in a second fund and stop contributing to the target fund. Then, start investing in a third international fund... etc. You don't have to be diversified all at once. You can work toward it over time.
In any case, you have ~$2.7k each month after expenses. That's fantastic! I don't know where you live, but I am very jealous of your rent and living costs. You could be doing a lot worse.
Questions:
Tgt retirement - It's not a bad option. With your investable cash flow, I'd just go into the individual funds; however, if you don't have an in depth understanding, the target fund is a decent option until you learn more about investing.
Efficiency - Target funds are solid. Vanguard is a great company for retail investors.
Cut back - Lady costs, maybe? It's 20% of your total expenses. You make decent income, compared to your expenses, but life will get more expensive over time, not less. Eventually you'll probably want/need to replace a car, put a down payment on a house, wedding? These things all have one thing in common. They are expensive! Biggest problem is lifestyle inflation. Be careful to not increase your expenses as quickly as your income goes up.
Reasonable goal - A general rule to retire off of is the 4% rule (multiply the income you need in retirement by 25 = 1 / .04). Since you want to retire early, you'll need your stash to last forever, so you can't use the 4% rule. You'll need to use 2.5%-3%. So, based on annual expenses when you retire of ~30k/yr (2.5k/mo in 15 yrs), you would need basically, +/- $1 - $1.2 million (I overestimated to $30k based on 3% inflation for 15 years vs $1,500 today... 1,500 * 12 * 1.03^15 is ~$30k).
Your goal is reasonable, but you'll need to save/invest aggressively and work to increase your incomes.
I think the biggest challenge will be managing early life expenses (marriage, kids, car, home, etc) which will eat into your earnings and investable assets in a big way.