Realistic time frame for FI for 25-year-old

[PinkFrugalRunner]

I'm a 25 year old recent law school grad with a job lined up at one of the "Big Law" law firms in NYC. I definitely don't want to do this forever, maybe not for long at all - but the money is good and it's a good jumping off point for whatever career I end up having.

I've seen some "Mustache me" posts here, so here goes:

25 years old, single, biggest expenses will be student loan/rent/food
I have a loan of $100k for law school at 0% interest (my great uncle loaned me the money, so it's better than the usual loan because I don't need to pay interest) - will need to pay back $1k/month.

Rent: $1k/month (living with family in NYC in a pretty good neighborhood, 40 minute walk to work, I wouldn't find a better rent situation anywhere else)

Food/entertainment: No idea what this will cost per month, realistically. Unfortunately most of my friends view eating out at restaurants as the only method of acceptable socialization, although I'm trying to change that it is typical for NYC, so I'll probably have a few restaurant meals each month but I try to keep it under $30 a person. I rarely drink so that helps. I have Celiacs and I tend to eat a lot of fresh produce, fish, meat etc so my grocery bill could be lower. I'd estimate spending $500/month on groceries and $100/month on restaurants. I don't know how, I just started using Mint to track it though, so that's $600/month, or $7,200/year which makes me want to slash it right away when I see the final tally.

Transport: I won't have to pay for transport other than a MetroCard which I refill probably once a month with $20. If I leave work after 8 or 9pm they'll pay for the ride home. $240 metrocard/year plus occasional cab ride, say 1x every other month at $15 is $330/year.

Clothing: I don't buy much anymore since I have a ton of clothes for work and play. I do need new running shoes every few months. I probably spend $300/year on running stuff.

Races: I spend $500/year on race registrations. I'm going to cut back next year, but I plan to run the NYC marathon which is $250 alone.

Beauty: I don't really wear makeup except chapstick. I get 2-3 pedicures per year at $30 each including tip, and one haircut, but otherwise I have a friend who's pretty good at cutting in a straight line ;) so the total for the year is probably $130.

Medical: On parents' insurance for one more year, pay my own co-pays so 1 doctor/2 dentist/1 specialist visit per year.

Salary: $160k/year
Current savings: $30k ($11k in a Roth IRA which I won't be able to do after this year, the rest is mostly in a regular Vanguard VTSMX account)

The job starts in two weeks, and I'm determined to save as much as I can from the start. I'm not sure how much my monthly expenses will be, but I know I will have $1k in rent, a loan payment of $1k/month, and then everything else. Being really conservative and saying I'll blow another $1k on food/running stuff/transport etc, that's $3k expenses per month or $36k per year.

If $160k in salary comes out to around $100k after federal/state/local taxes, I see myself as being able to save $64k per year, or more. (1) Is that crazy? (2) At that rate, how long would it take for me to reach FI?

[chasesfish]

10 Years

Keep running.  You'll want the stress relief with your new job

[MrSal]

Food/entertainment/transport: No idea what this will cost per month, realistically. Unfortunately most of my friends view eating out at restaurants as the only method of acceptable socialization, although I'm trying to change that it is typical for NYC, so I'll probably have a few restaurant meals each month but I try to keep it under $30 a person. I rarely drink so that helps. I have Celiacs and I tend to eat a lot of fresh produce, fish, meat etc so my grocery bill could be lower. I won't have to pay for transport other than a MetroCard which I refill probably once a month with $20. If I leave work after 8 or 9pm they'll pay for the ride home.


Ill give you 1 tip right here... www.restaurant.com .... use their deals!! Usuallyh you can get lots of stuff much cheaper... but wait!!! There-s more. Dont pay with debit or CC ... instead www.raise.com and buy www.restaurant.com gift cards. They are selling for 10 cents on the dollar... meaning you can get lot of certificates for pennies on the dollar.

Even last weekend I went out with the girlfriend and instead of paying 120 dollars for dinner, we ended up paying 15 dollars BOTH of us out of pocket!!!

[PinkFrugalRunner]

10 Years

Keep running.  You'll want the stress relief with your new job

Definitely plan to - I use running and cooking for myself as stress relief. A weird benefit of Celiacs is I can brown bag my lunches to work and no one can be snooty about it since it's easier not to deal with ordering out.


The other thing about 10 years is, I'm 25. I'm hoping I'll meet someone/get married/have kids in that 5-10 years out time span, so that might slow it a little, but hopefully afterwards I can get out of NYC to a lower COL, more outdoorsy area (and meet someone who thinks similarly).

[seattlecyclone]

Does your firm offer a 401(k)? High deductible health plan? Anything you can do to save money pre-tax will be a big help at your salary.

As to how long it will take for you to retire, the shockingly simple math says someone saving 65% of their income should take about 10.5 years. You can use that number as a starting point. Of course, that calculation assumes you're starting with zero net worth, when you in fact have a net worth of -$100k. It also assumes your earning and spending will stay constant throughout your career and the spending rate will continue into retirement. You won't be paying off your student loans anymore when you retire, so that will decrease your need for cash. However you may decide that you want to get your own place to live, have kids, etc., which will likely increase your expenses.

Still, 10.5 years is a reasonable ballpark guess. See how things are going after the first year or two and adjust your estimates accordingly.

[ShoulderThingThatGoesUp]

Max out your 401k from day one. You'll never miss it.

[KarefulKactus15]

Your 25, if you make FI a goal and pursue it for 10 years, then yes I think its reasonable. Also, on the not so rare chance that you do meet someone like-minded, the extra salary will make 10 years very possible.   Then presto, move somewhere with a low cost of living and enjoy doing what you want all day.

[MDM]

Lots of good advice already.

Assuming nothing changes (probably a bad assumption, but...?) it appears FI is ~12 years away.  Changing the assumptions will change that answer.  Good luck in whatever you do!

One thing: "...a Roth IRA which I won't be able to do after this year" is true as far as it goes, but you should do a backdoor Roth IRA and get the same $5500/yr addition.

Category	Monthly	Comments	Annual
Salary/Wages for person #1	$13,333		$160,000
401(k) / 403(b) / TSP / etc.	$1,500	At maximum	$18,000
Income subject to IRS tax	$11,833		$142,000
Federal Total Income	$11,833		$142,000
Federal tax	$2,335	2015 rates, S, item. ded., 1 exempt.	$28,024
State/City tax	$1,098	Guess, using 10.00% * Fed. Taxable	$13,170
Soc. Sec.	$612	Assumes 1 earner paying	$7,347
Medicare	$193		$2,320
Total income taxes	$4,238		$50,861
Income before other expenses	$7,595		$91,139
Monthly Average Expenses:
Rent	$1,000		$12,000
Beauty Shop	$11		$130
Clothing/Shoes	$25		$300
Dining (Pizza, Restaurant, etc.)	$100		$1,200
Fuel/Public Transport	$28		$330
Groceries	$600		$7,200
Medical (Doctor, Hospital, etc.)	$17		$200
Miscellaneous	$1,178		$14,136
Sports/Recreation	$42		$500
Non-mortgage total	$3,000		$35,996
Loans:
Student Loan	$1,000		$12,000
Other tax-advantaged investments:
Roth IRA	$458	Above IRS limit - backdoor ok?	$5,500
Total Expense	$4,458		$53,496
Total to invest	$3,137		$37,643
Summary:
"Gross" income	$13,333		$160,000
Income taxes	$4,238		$50,861
After-tax income	$9,095		$109,139
IRA+401k/403b/TSP/457 (Savers' credit)	$1,958		$23,500
Living expenses	$3,000		$35,996
Non-mortgage loans	$1,000		$12,000
After-tax investable	$3,137		$37,643
Time to FIRE?:
Time to FIRE	12	years
Safe Withdrawal Rate	4.00%	percent
Real return on tax-deferred investments	6.40%	percent
Real, after tax, return on taxable investments	5.44%	percent
Expected retirement total tax rate	20.00%
Current Savings
Taxable	$19,000
Roth	$11,000
Projected Savings at Retirement
Taxable	$702,601
Tax-deferred (e.g. trad. IRA/401k)	$310,846
Roth	$118,138
Total projected stash	$1,131,585
Projected Expenses in Retirement
Non-loan, non-work expenses	$35,996
Income taxes	$8,999
Total	$44,995
Stash needed for retirement @4.0% SWR	$1,124,875
	Have $6,710 extra.

Filing Status	1	1=S, 2=MFJ
# Exempt.	1
# Children <17	1
# of earners	1
Total Income	$142,000
Std. Deduct.	$6,300
Act. Deduct.	$13,170
Exemption	$4,000
AGI	$142,000
MAGI	$142,000
Taxable	$124,830
Tax	$28,024
Saver's credit	$0
Tax after n-r credit	$28,024
Child Tax Cred.	$0
EIC	$0
Net Tax	$28,024
Monthly	$2,335
State tax	$13,170	10.%
Item. Deduct.	$13,170

[MoonShadow]

In order to replicate your $36K lifestyle, using the 4% rule, you'd need a $900K nest egg.  This doesn't consider taxes, but it's a great FU cash fund target.  Even if you never earned any interest at all, you'd hit this number in 14 years.  According to Bankrate's "Save a Million" calculator, a very realistic rate of 6.5% would get you $893K in ten years.  So saving $64K per year, by whatever method possible, will get you your minimum FI stache in 10 to 14 years of work.  Anything earned after than point would just be buffer money, and with rational and reasonable frugality, you could live a single middle class lifestyle (potentially) for the rest of your life.

[2Birds1Stone]

10-12 years seems very doable even if you plan on having a family!

Seek ways to tax shelter as much of your earnings as possible. Chances are if you are starting out at $160k/yr your income will go up over the years. FI by 35 is a realistic goal, one that many would be thrilled to attain.

[muckety_muck]

A lot can change from age 25 to 35, so be open to that. Roll with it. Set a goal, but understand that some deviation may be necessary (ie. there may be an expensive year or two in there, just keep plugging along and you will get there eventually)

Also, burnout at biglaw might get you - before you make it to 10 years. It's real and it's harsh. It's ok to take a step back and take a lower paying job for the sake of saving your spirit from being crushed. Maybe you move to LA or DC or somewhere else where living in a suburb/commuting is a bit easier and cheaper than NYC.

I'm taking the 15ish year road to FI. I never entered with the goal of retiring by a certain age, but it's coming along quite nicely. Again.... LOTS can change in those crucial 10 yrs between 25 and 35. Marriage, pregnancy/kids, moving houses, career shift, illnesses, deaths in the family, etc.

[PinkFrugalRunner]

A lot can change from age 25 to 35, so be open to that. Roll with it. Set a goal, but understand that some deviation may be necessary (ie. there may be an expensive year or two in there, just keep plugging along and you will get there eventually)

Also, burnout at biglaw might get you - before you make it to 10 years. It's real and it's harsh. It's ok to take a step back and take a lower paying job for the sake of saving your spirit from being crushed. Maybe you move to LA or DC or somewhere else where living in a suburb/commuting is a bit easier and cheaper than NYC.

I'm taking the 15ish year road to FI. I never entered with the goal of retiring by a certain age, but it's coming along quite nicely. Again.... LOTS can change in those crucial 10 yrs between 25 and 35. Marriage, pregnancy/kids, moving houses, career shift, illnesses, deaths in the family, etc.

This is what I'm unsure about - I guess I didn't phrase it too clearly. I don't see myself lasting at big law for more than 5 years, most likely 2-4.

I definitely see moving to a slightly lower paying job for the work/life balance because I do want some of those things like finding a partner, having kids, etc that will throw a monkey wrench into plans. So my salary and life will be in flux - just thinking about how to start saving, right now, so I'm in the best financial position I can be when the time comes.

[Thegoblinchief]

I'd make $300 your goal for food. NYC is higher, and we don't eat out, but we spend $140/person and are by no means the most frugal around here. Socializing is fun but doesn't need to cost an arm and a leg. Entertaining at home is (IMO) a much more relaxed experience, even with the extra work.

Definitely take advantage of all the tax advantages you can get. HSA if a HDHP makes sense with your medical history, then 401(k), then an IRA, then taxable.

You have family in NYC but geographic arbitrage (moving to LCOL, which from NYC is basically anywhere) is always an option if you feel the need to escape or do a massive career downshift.

Like many have noted, 25-35 can involved lots of life changes. Keep the goal in mind, but don't make it such a rigid goal that you forget to live in the now a bit. There are way too many folks on here who think they will be bored in early retirement because they neglected all of their hobbies and social capital while saving.

[Kamzilla]

Just a tip; have you read the "Thoughts of an anonymous lawyer" blog? I like his "Advice for young lawyers" posts.

[PinkFrugalRunner]

Just a tip; have you read the "Thoughts of an anonymous lawyer" blog? I like his "Advice for young lawyers" posts.

Never heard of it, I'll check it out!

I run, cook, bake, volunteer with a group of girls in NYC, and try to spend as much time with friends/go on dates as I can, so hopefully I can do it all and save while working crazy hours. Maybe he'll have good advice.