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Case Study - Retire at 50, on the right path?
The Stoic:
Hello to all! As is the case with many others, I wish I had stumbled upon this site years ago! I wanted to lay out my current situation and would greatly appreciate any feedback or advice on where I’m at. I’ve really put a concerted effort into changing our shitty spending/investing ratio over the past year and will continue to make adjustments.
I am 39, married, and have three kids who are 12, 10, and 7 who are very active in sports/activities. My goal is to retire from my current full time job in 11 years once my youngest is in college. At that point, we are planning on relocating from upstate NY to Hawaii and would likely pick up some contract part-time work to cover health insurance expenses. I like my job and am happy with where my life is at today, but looking ahead, I would love to start spending my days in a warmer climate surfing, kayaking, hiking, and fishing.
Income:
$128k, 26 paychecks per year. I budget around 2 per month which is $6400 take home pay, and the other 2 “bonus” checks are allocated to my property/school taxes. I adjust my withholdings for a target zero Fed/State Income tax liability. My wife also earns about $1k per month, but that income coves her car loan, and misc expenses for herself and the kids so I will exclude that from this study.
Expenses:
No credit card debt
Mortgage: $1200. Approx. $165k remaining @ 3.5%
HELOC: $600. Approx $9500 remaining @ 5.75%!
Home/Auto Ins: $100
Food: $1k Current focus point, includes groceries and going out to eat
Cell: $80 for 2 phones
Gas/Elec/Water: $250 average
Guitar Lessons: $100 Ending this month
Gymnastics: $75 Ending this month
Gas: $300 Looking into EV for me which would cut this in half
Pets: $50
Misc Kids Activities: $100
Betterment Contribution: $1k
Vacation Budget: $250
Misc (entertainment and anything else I can’t think of): $100
Home Expenses: $750 Tough to ballpark this one, new windows this year, roof next, landscaping, etc…
Extra gets applied towards mortgage or HELOC
Assets:
529 Plans (for kids college): $80k
IRAs: $300k
Home: $350k
401k: $48k I’m now investing 18k per year with a $7800 per year company match.
Betterment: $10k
Savings Account: $0. Been using my HELOC as needed
Short Term Strategy:
Suspend Betterment contributions to pay off HELOC and build up a $10k savings account buffer.
Curtail Food Spending
Payoff Mortgage in 6 years, once clear, extra $ will be invested.
Exchange current shitty car for EV
Long term Goal:
Aggressively targeting a $1.8M net worth by 50. Would plan on pulling $40k per year and using 800k for new home. Income supplemented by part time work.
Help pay for kids college.
Thank you again, and I’m grateful to have found such a wonderful community!
FiveSigmas:
--- Quote from: The Stoic on June 16, 2018, 07:01:26 AM ---My wife also earns about $1k per month, but that income coves her car loan, and misc expenses for herself and the kids so I will exclude that from this study.
--- End quote ---
Hi Stoic. Welcome!
Why not include your both your wife's income and the expenses it covers in the above analysis? It might add some additional pertinent information (e.g., what your car loan APR is). It also might help gain deeper insight into what your expenses will be post-retirement.
CrispKale:
Quickly calculating out the income/assets/and expenses given looks like you currently have a savings rate of about 25%(going to betterment & mortgages). I removed out the expenses that were ending this month as those no longer matter and with no further cutting or payoffs I see it will take about 7 years and a couple of months to reach 1.2 million (4% withdrawal rate, 7%annual growth). So if you are targeting 11 years and 1.8 million you are well on track to reach both your net worth goal and your retirement age. If you do wipe the mortgage payment out and cut expenses you of course will be able to reduce the time required to get there.
Just for fun motivation the graph that accompanies my expense calculator tells me that with your numbers the given amount spent on groceries is costing you almost 1.81 years of the stated 7.
reeshau:
--- Quote from: FiveSigmas on June 16, 2018, 11:18:06 AM ---
--- Quote from: The Stoic on June 16, 2018, 07:01:26 AM ---My wife also earns about $1k per month, but that income coves her car loan, and misc expenses for herself and the kids so I will exclude that from this study.
--- End quote ---
Hi Stoic. Welcome!
Why not include your both your wife's income and the expenses it covers in the above analysis? It might add some additional pertinent information (e.g., what your car loan APR is). It also might help gain deeper insight into what your expenses will be post-retirement.
--- End quote ---
This was exactly my first thought, too. Stoic, you mention you need to work on your car, but what about your wife's? And you quote $100 in miscellaneous, but really there is some multiple of that, which you attribute to your wife's income. Separating incomes and expenses is tying one arm behind your back--money is fungible; it doesn't differentiate among sources or uses.
Or, thinking on step further, is your family on board with this plan? Or is this a dream you have not shared with them? For sure, you won't be able to take such a big step unless you are all pulling together.
ixtap:
I am interested in the $40k budget with a $800k home. Even with the cheapest Hawaii taxes, you are down to 37,000, so about $3k a month. What is included there? Airline tickets for the college kid(s) to come to Hawaii? Higher cost of food in Hawaii?
Does your family not wear clothes? Regular vehicle maintenance? Internet?
How do you plan on paying for this new to you electric vehicle. Can you charge it at home?
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