Age 50, just got done being broke, HELP!

[EchoStache]

Contemplating wether to max out Traditional or Roth IRA’s

Age 50, DI3K: MFJ, 3 kids 17/23/23 all still currently dependents.  I live in PA where I have 3% state income tax. Up until 2 years ago, my finances were out of control.  Paying the bills but spraying money in every direction with no idea where it was all going.  Since then, I have made huge strides in controlling spending, paid off $85,000 in consumer debt, have my savings in place, and now owe only my small mortgage.  Income has increased substantially and will go up even more next year.  My income and tax situation is a bit unique.

Income situation will change a lot next year so I will use those numbers.  Wife and I will both be traveling workers in the medical field with about half our total income being tax free stipends.

Therefore I will focus on what my new situation will be after the first of the year:

W2 taxable income should be about $105,000, assuming we work ten months or so.
Tax free stipends: $105,000 again assuming we only take 2 months off, so 44 weeks of pay.

401k contributions will be $47,500($27,000 for me $20,500 for wife) until she turns 50 in 2 years.  This leaves taxable income of only about $58,000 before deductions.

IRA contributions: $13,000…unsure if Roth or Traditional.  Traditional would lower taxable income to $45,000

Taxes:  FICA $8000
           FED: $2000 refund, net -4% tax rate on MAGI
          State: 3%, roughly $1500
          Total: $7500

Current expenses:
Annual lodging cost for travel $10,500(assuming $1500/month for 7 months, 3 months no lodging cost, 2 months off)
Mortgage principal/interest: $740
Taxes/Insurance: $344
Groceries: $1000 includes toilet paper, cleaning supplies, toiletries, etc.
Private health insurace: $900ish??? New employer offers health insurance, so:
Health Insurance: $840
Gasoline $500
Christmas/Birthdays $200
Eating out $200
Phone: $152 for 5 lines, this will drop to $90 soon Now down to $103.59/month as of 12/21
Car Insurance $311
Electric $140
Natural gas: $141
Clothing $120
Term Life Insurance $104
Auto maintenance $100
Spending money $100
Misc $100
Wine $80 reduced to $40 as of 12/21
Medical $80
Streaming services $80
Home maintenance $75
Internet $71
Water $67
Pet care/food $40
Sewer $28
Total $5524/Annual $66,288/$76,788 with travel lodging

Since I am just starting my FIRE journey at age 50 with almost no retirement savings, I don’t assume I will be retiring before age 60.
I would estimate ER expenses at $2800/month or $31,000 year???

Social security benefits:
Me: $1708 at 62, $2551 at 67, $3185 at 70
Wife: $920 at 62, $1429 at 67, $1987 at 70
 
Assets:
Home $180,000
401k/IRA $54,000
Savings $15,000
Checking $5,000

Liabilities:
Mortgage $101,000 @2.75% fixed.  Moving next summer and buying a new home so mortgage balance is likely to double or so.

I plan to max both our 401k’s every year starting next year. 

I plan to max IRA’s every year…unsure whether to do Roth or traditional.  At first I thought traditional since I likely won’t be able to retire before 59.5 and won’t have massive growth of funds, and use the tax savings to pay mortgage down faster.  However, I’m wondering if my federal income tax liability might be 0 due to low taxable income after deductions, therefore why not Roth?  I need to research this more.  I’m working through the spreadsheet but don’t feel confident in my numbers yet.  It seems to indicate my tax liability will be 0 due to my unusual income situation.

Edit:  I think the Roth/Traditional question is solved.  Traditional makes sense as I honestly see no way that I'll be in a high tax bracket without working like a dog until age 70+

Dependents will go from 3 to 1 sometime in the near future or couple of years as the 23 year olds move out at some point.

After maxing 401k/IRA’s, I plan to to pay down mortgage with all available extra money, then invest in after tax funds once mortgage free. ….Due to several suggestions, I think I have decided to make minimum payment on a 15 year fixed and invest all excess money into a taxed brokerage account once retirement and HSA is maxed out.  Thanks everyone!

Any help, advice, suggestions, or critique will be very welcome.  Thanks for reading!

[former player]

Congratulations on paying off your debts, knowing what your spending is and finding this community and the way of the mustache.

Your social security entitlements are going to be an important part of your retirement finances, so finding out what your entitlements are going to be is a vital part of your financial planning.

You don't say what your mortgage interest rate is?  If it's lower than the returns you can expect from investing in the stock market then it is usually financially advantageous not to pay off the mortgage but to use that capital to invest in the stock market instead.   If you are not expecting to retire for 10 years then that is the sort of time period which makes stock market investing worthwhile while also being reasonably safe.

You mention 3 kids but then 5 dependents?   You need to put your own lifejacket on first here, and prioritise yourself and your wife's retirement funds so that you don't end up as dependents of someone else in your retirement because you've spent the money that should be securing your own retirement on other people, particularly if they have options other than taking your money.

[EchoStache]

Congratulations on paying off your debts, knowing what your spending is and finding this community and the way of the mustache.

Your social security entitlements are going to be an important part of your retirement finances, so finding out what your entitlements are going to be is a vital part of your financial planning.

You don't say what your mortgage interest rate is?  If it's lower than the returns you can expect from investing in the stock market then it is usually financially advantageous not to pay off the mortgage but to use that capital to invest in the stock market instead.   If you are not expecting to retire for 10 years then that is the sort of time period which makes stock market investing worthwhile while also being reasonably safe.

You mention 3 kids but then 5 dependents?   You need to put your own lifejacket on first here, and prioritise yourself and your wife's retirement funds so that you don't end up as dependents of someone else in your retirement because you've spent the money that should be securing your own retirement on other people, particularly if they have options other than taking your money.

Thanks so much for your reply!  Very happy to have found this community, along with the FIRE movement in general. I find inspiration and ideas at every turn.

I'll edit the OP to add social security benefits.

Mortgage rate is 2.75% on 15 year fixed.  Will be selling and buying a new home after moving next summer.  Mortgage balance is likely to increase substantially, maybe double.  Will rent until we find our ideal new home.  Paying the mortgage off before retirement is an important goal….I'll have to ponder the idea of investing before paying the house off.

Household of 5, with 3 dependent children.  I'll edit for clarity.  I agree we need to put ourselves first….not being a burden on our children will be an important thing to give them as well.

[dandarc]

Is the move for the travelling medical jobs? Trying to figure out the whole scenario better because house is such a big part of the picture.

On Roth vs. Traditional, you're in that grey area where neither is the clear play. I personally go with "when in doubt" traditional, but 12 percent is a pretty low tax rate, so locking that in isn't a bad deal either.

Probably going to get a lot of answers to "not the question you asked" because the answer to Roth vs. traditional is "eh - whatever you're more comfortable with, split the difference if you want - just be sure to invest that money and not go with option C - BIG ASS VACATION."

[EchoStache]

Is the move for the travelling medical jobs? Trying to figure out the whole scenario better because house is such a big part of the picture.

On Roth vs. Traditional, you're in that grey area where neither is the clear play. I personally go with "when in doubt" traditional, but 12 percent is a pretty low tax rate, so locking that in isn't a bad deal either.

Probably going to get a lot of answers to "not the question you asked" because the answer to Roth vs. traditional is "eh - whatever you're more comfortable with, split the difference if you want - just be sure to invest that money and not go with option C - BIG ASS VACATION."

As far as the move goes, its totally independent of the job change.  We are moving to get out of a complete shit hole of a town and into a nice area that we hope will become our permanent location through retirement, and a nice area that will give our three kids opportunity if they decide to stay close.  Where we live now is a cess pool of generational poverty, declining population, zero future small town.  I'm hoping the next house will be in the 250-300k range with around 100k down, hence the 150-200k mortgage after the move.
Seems like your saying Roth vs Traditional won't be a huge deal either way in the grand scheme of things.

I'm completely fine with getting comments other than the IRA question.

Dang, forgot to add in health care premiums, which will be significant, maybe $900/month(while we have dependents)  We are going to get private insurance rather than employer so we can take extended time off when we want without worrying about losing coverage, and without being tied to a specific company or agency. 

As far as big ass vacations, one of the reasons for the change to traveling is to be able to spend 1 month/year in Germany while we work towards retirement.   Wife is German and of course vacation time is usually extremely limited for Americans.  Get a chance to get back and see wife's family before we are all too old. I've eschewed credit cards of late while we got our spending under control and out of debt.  I might look into some travel rewards cards now though in order to get the free travel/flights.  For typical American consumers, credit cards are evil and enable/encourage out of control spending even when paying them off in full each month.  But with a frugal mindset and strict control on spending, maybe I should consider taking advantage of them.

[dandarc]

I'm kind of hard-pressed to find anything you need to see here. You're moving for what sounds like very valid reasons, you're renting first, which is obviously smart - if you buy you're gonna take the mortgage, as anyone in the US who is buying a house should (renting as a long-term solution is a valid path too, but if you do decide to buy, take the mortgage) - assuming you can get standard fixed-rate terms on a US mortgage, paying minimum all the way to term is the best way to do that - maybe even look at refinancing or taking a 2nd mortgage periodically if interest rates remain favorable. Instead of sending extra to mortgage, invest it according to your target asset allocation. Over 30 years you should come out way, way ahead. Suppose it is possible interest rates will go up significantly before your purchase, but I don't know how many times recently it has seemed like "surely mortgage rates can't go lower than this" and then they do, so I'd wait until it happens to worry at all about that.

Spending for a household of 5 is actually rather impressive. Always room for more optimization, but you're doing so well already. Anything I'd have to say on this would be "do as I say not as I do" - you're doing way better than us and we only are a household of 2.

CC's can cut your travel spending significantly, albeit only if you handle them well, but this post reads like you'd handle them well.

Is that ACA insurance with the cost-savings or a top-line price? Actually seems pretty cheap to me. We will pay more than that next year - (top-line), just the two of us at 39 & 40 for a bronze plan.

Yeah - 12% is usually the bracket where things are iffy with Roth. Run some draft tax returns to see what the end result is - the 12% might not be the only thing to think about, might be some credits and other things that become clearer looking at actual numbers. You could defer that decision for 2021 until April 15th next year, or pick one way or the other right now and you can actually change your mind - this is called a recharacterization - by the same date (you can actually recharacterize up to October 15th with an extension) if it turns out later you'd have rather gone the other way.

Caveat - traditional needs to be deductible to be considered here. This reads like it probably is for you, but I can't be 100% sure on the details with the "tax-free stipends" - is that truly tax free where it won't even show up on your W-2 or 1099, or is there a possibility that it winds up in AGI? Again you don't have to know that before funding the IRAs, but certainly would want to know before filing.

Finally - being able to do a month in Germany every year sounds awesome!

[EchoStache]

I'm kind of hard-pressed to find anything you need to see here. You're moving for what sounds like very valid reasons, you're renting first, which is obviously smart - if you buy you're gonna take the mortgage, as anyone in the US who is buying a house should (renting as a long-term solution is a valid path too, but if you do decide to buy, take the mortgage) - assuming you can get standard fixed-rate terms on a US mortgage, paying minimum all the way to term is the best way to do that - maybe even look at refinancing or taking a 2nd mortgage periodically if interest rates remain favorable. Instead of sending extra to mortgage, invest it according to your target asset allocation. Over 30 years you should come out way, way ahead. Suppose it is possible interest rates will go up significantly before your purchase, but I don't know how many times recently it has seemed like "surely mortgage rates can't go lower than this" and then they do, so I'd wait until it happens to worry at all about that.

Spending for a household of 5 is actually rather impressive. Always room for more optimization, but you're doing so well already. Anything I'd have to say on this would be "do as I say not as I do" - you're doing way better than us and we only are a household of 2.

CC's can cut your travel spending significantly, albeit only if you handle them well, but this post reads like you'd handle them well.

Is that ACA insurance with the cost-savings or a top-line price? Actually seems pretty cheap to me. We will pay more than that next year - (top-line), just the two of us at 39 & 40 for a bronze plan.

Yeah - 12% is usually the bracket where things are iffy with Roth. Run some draft tax returns to see what the end result is - the 12% might not be the only thing to think about, might be some credits and other things that become clearer looking at actual numbers. You could defer that decision for 2021 until April 15th next year, or pick one way or the other right now and you can actually change your mind - this is called a recharacterization - by the same date (you can actually recharacterize up to October 15th with an extension) if it turns out later you'd have rather gone the other way.

Caveat - traditional needs to be deductible to be considered here. This reads like it probably is for you, but I can't be 100% sure on the details with the "tax-free stipends" - is that truly tax free where it won't even show up on your W-2 or 1099, or is there a possibility that it winds up in AGI? Again you don't have to know that before funding the IRAs, but certainly would want to know before filing.

Finally - being able to do a month in Germany every year sounds awesome!

Thanks for your comments in regards to our spending for a household of 5. Sometimes I look at it and think, damn, I need to trim some more, we still pay for streaming, some spending money, eating out a little, wine, Christmas birthdays, groceries etc etc. As you said so much room for improvement but on the other hand I think I have a reasonably good balance of fairly low expenses without an over the top ridiculously frugal lifestyle.

Using the spread sheet, it appears that the scenario laid out in the OP will result on zero federal income tax paid and a refund of $1800!  Roth vs Traditional lowers the refund to $300 and I think I save 3% on state taxes as well.

Regarding the tax free stipend, i haven’t filed taxes yet in this situation. On my check stub, it’s lists my W-2 wages as $50000 or so, and a tax free stipend for lodging and meals of about the same amount.

As far as private insurance which I don’t have yet, the rate is about $1900/month with ACA. This gets reduced to about $900/month given income and family size. I used 110,000 as income for the rate, not sure if retirement contributions lower this number for cost purposes??? Also not sure if I should put premiums at the top in the spreadsheet to lower taxable income??

I’ll feel more confident about everything once I file this years taxes.

[yachi]

Our budgets look quite similar.  A few things I have that I didn't see in your budgets: The PA taxes you mentioned, and planning for future replacements: 
Electronics: I'm budgeting $60 per month to replace cell phones every 5 years, and a laptop or two every 6 years.
Cars: I'm budgeting $300 per month to replace each of two vehicles every 10 years (spending $18,000 per vehicle)

Your hosing maintenance seems a little low.  I'm budgeting $250 a month, which is 1.5% of the house value per  year.

[EchoStache]

Our budgets look quite similar.  A few things I have that I didn't see in your budgets: The PA taxes you mentioned, and planning for future replacements: 
Electronics: I'm budgeting $60 per month to replace cell phones every 5 years, and a laptop or two every 6 years.
Cars: I'm budgeting $300 per month to replace each of two vehicles every 10 years (spending $18,000 per vehicle)

Your hosing maintenance seems a little low.  I'm budgeting $250 a month, which is 1.5% of the house value per  year.

Yes housing maintenance is low but actual cost over the past year or two is even lower than what I put in my budget.  Will be selling our current house and moving within 6 months so no big maintenance costs anticipated before selling.

Car budget makes sense but at this point, will probably just wait until we are almost ready to buy a car, then focus all our extra resources for 2-3 months to fund the purchase when the time comes.  My car has 5-10 years left, wife's maybe in the next 1-2 years as its a 2011 VW Passat with 125k.    Will be switching to a 45-50 mpg model, or full electric as a big maybe.

Planning to stay in PA so I do need to add PA state tax in.

[EchoStache]

Glad I made this case study even though it appears I don't have any massive or life altering levels of waste to address.  One BIG thing I have done some additional thinking on is my original game plan of maxing 401k's and IRA's, then applying ALL extra money to paying off our mortgage as fast as possible.  There were a couple of suggestions to keep the house mortgaged and invest all extra money into after tax brokerage.  At this point, I think I will somewhat split the difference.  I intend to take out a 15 year fixed rate loan next year on our new home after we move….this ensures a payoff at age 65 making minimum payments, but I will likely pay a little extra to adjust payoff to age 60, while investing most of our excess income into a brokerage account.  I figure it will only take a few years to have enough built up to pay off the house in full if I determine I really really want to.  Otherwise I can see this should build a lot more wealth over the next 10-15 years, and with my late start, I am trying to maximize every advantage I can while still living a comfortable life.  Honestly, I'll probably make a spreadsheet comparing the options to see the REAL potential difference.  Maybe I'll even toss a 30 year scenario into the mix.

I thought about making a separate thread for another idea.  When I decided to change things about two years ago, I went full bore anti-debt, anti-credit card, etc.  This was needed to get spending under control.  Now that I am being VERY intentional with all of our spending, I've decided to dip my toes into credit card churning….take advantage of the companies that take advantage of the vast majority of their users.

Here is what I have done so far.  I used one of my only remaining CC's(closed about 7-8??) to pay my first months lodging for my next travel assignment.  About $20 free cash back with 1.5%.  I should have opened a new card and could have gotten $200!!    I opened an Amazon credit card to get $150 off the purchase of a Christmas present, along with another $20 of credit for the 5% cash back.  I will probably close the Amazon card due to how difficult I found it in the past to track/budget/allocate all of our Amazon spending on a monthly basis, but I'll mull this over for a while.  I mean, I don't *feel* like I spend wastefully on Amazon, but in the back of my mind this is the hidden danger of having a credit card and an Amazon account….maybe I/we/you spend more due to having it….so the 5% is a fools return. 

I also opened another card to get a $300 sign up bonus.  Paying for lodging for the remainder of my next travel assignment (two months) will get that $300 bonus, plus $35/month in cash back for another $70, $370 total savings if I don't use it for anything else at all.

So far this will total $560 in free money.  The other thought I've been pondering is whether to just absorb this money into my regular account/budget, or take this extra free money and invest in Crypto as an experiment….likely mainly Bitcoin and Ethereum…….


Now that I've paid off all consumer debt and have my savings at a comfortable place, just took my wife's 401k contribution from 4% to 75%.  This will add $1500-$3000 to this years contribution depending how quickly the change takes place.

[Malum Prohibitum]

As far as private insurance which I don’t have yet, the rate is about $1900/month with ACA. This gets reduced to about $900/month given income and family size. I used 110,000 as income for the rate, not sure if retirement contributions lower this number for cost purposes???

Pre-tax retirement contributions lower MAGI for ACA purposes, by $47,500 in this case, so if I am reading your posts correctly it is not $110,000 that you should be using to estimate MAGI (your income for ACA purposes). 

I bet it's going to be cheaper than $900 a month given income and family size now that you are armed with this information. 

Also, if you get an HSA eligible plan, you can sock away another $7200 pretax in 2022 . . . just saying.

https://www.whitecoatinvestor.com/7-reasons-an-hsa-should-be-your-favorite-investing-account/

[EchoStache]

As far as private insurance which I don’t have yet, the rate is about $1900/month with ACA. This gets reduced to about $900/month given income and family size. I used 110,000 as income for the rate, not sure if retirement contributions lower this number for cost purposes???

Pre-tax retirement contributions lower MAGI for ACA purposes, by $47,500 in this case, so if I am reading your posts correctly it is not $110,000 that you should be using to estimate MAGI (your income for ACA purposes). 

I bet it's going to be cheaper than $900 a month given income and family size now that you are armed with this information. 

I wonder if the ACA offers any rebate for situations like this in which the program would put premiums close to zero due to income while an employer sponsored plan puts premiums at over 20% of MAGI?

Also, if you get an HSA eligible plan, you can sock away another $7200 pretax in 2022 . . . just saying.

https://www.whitecoatinvestor.com/7-reasons-an-hsa-should-be-your-favorite-investing-account/

Well, I just had the rug yanked out from under me.  Doing further research, I realized(as you pointed out) that my retirement contributions would lower my MAGI down to a point where the ACA plans would be either free, or close to free.  A plan that looked amazing was going to be $150/month, no deductible, very low yearly out of pocket max, low copays etc etc.

However, my hopes have been dashed.  The company that I will be using does offer health insurance that meets ACA guidelines, which means I cannot take ACA insurance.  The really bad news is that it looks like the premiums are $1000/month.  This makes me very sad.

Don't think they offer an HSA plan.

Well, it looks like another possible option would be for spouse and I to self insure only with employer, which is somewhat reasonably priced, and get a full price market place HSA for the kids, enabling the $7200 yearly HSA contribution.  Hmm, this might be the way to go; yearly premiums will be about the same either way.

I'll try to remember to provide *actual* details when everything falls into place. 

Changing subjects slightly, will there be any issue with claiming exempt on W2 so that no Federal taxes are taken out of paychecks since I am predicting a -5% federal tax rate for next year?

[SwordGuy]

Assuming you keep your total expenses close to current ones  (offsetting higher house cost with fewer household members), and you plough that money into investments, you'll be in great shape.   It looks like you could easily save $100k a year or more.   It doesn't take that long to build up a good nest egg at that savings rate.   You should easily be fine by 62, and likely some years sooner.

Congrats on getting your financial house in order!

[EchoStache]

It's been a while since I first posted this case study, so I thought I'd follow up with a "here's where we are now" post. 

We did move, and ended up purchasing a house instead of renting.  Rental prices were astronomical.  One of the houses we considered was going for $3k/month in rent and that was just too tough of a pill for us to swallow given our previous mortgage of just over $1k.  We started looking at houses and realized it was almost impossible to buy a house without bidding way over asking price with no inspection.  So we closed on a new construction in June that was 99% complete; the model house for a new subdivision on the outskirts of town. 4BR, 2.5 bath, 2 car garage, 2150 sq feet $415,000.  We put 20% down which almost exactly matched the proceeds from the sale of our previous house.  New mortgage is $2400/month with escrow, 30 year fixed at 4.375.  We got lucky to get this rate before things continued to skyrocket into the 6-7% range.  Still a tough pill to swallow from the 2.75% we gave up on our previous house.

Escrow will go down substantially since they initially based taxes on the purchase price.  The tax assessment came in much lower and will reduce our escrow payment $300/month.

Income:
I ended up getting some rate increases.  Our income for the year will be:
W-2: $170,000
Stipends: $91,000
Total Gross: $261,000

The move was costly, and furnishing a brand new 4 BR home was expensive.  Although this impacted our savings, here is where we are now vs first post.  Now/before:
Retirement: $105,000/$54,000
Ibonds: $30,000/0
Brokerage: $9,000/0
Cash: $30,000/$15,000
Checking: $5-6k/same

Wife has another $7k left to max her 401k for the year(she couldn't contribute until May).  We will be adding at least another $20k to brokerage for year end, putting us at $170,000 of invested assets, $30k cash for $200k total.

Off the top of my head, our savings rate this year will be roughly in the 40% range.  I wish it were higher given our income, but moving and furnishing the house were costly.  I'm happy with what we spent.  We were not wasteful or overly extravagant with our spending.  We sold almost all the furniture from our previous home as it was all 20+ years old and our style has changed.  Rough guess is that we spent around $10k to furnish the new home.  We also purged our previous home over the course of 4 months while traveling for work.  Worked M-F, drove home 5 hours Friday night, packed/purged/painted and prepped for a move every Saturday, drove back to our assignment Sunday.  We moved a household of 5 without taking a single day off work.  It was a nightmare but saved us a lot of money.

We took a 35 day break from August-September and extended for 6 months at our current assignment, so we are under contract until March.  This was an unpaid break, as is all of our time off.

Now that all the expenses of furnishing the new house are behind us, I can't wait to see where our savings rate ends up.  Still working on minimizing monthly expenses.  Switched cell service to Mint Mobile.  Cancelled Amazon Prime.  Cancelled Apple Music family plan.

I'll try to follow up with a detailed budget for comparison sake.

Oh, we bought an EV in March(?) or so...Kia Niro EV.  Sold my diesel Passat for $14k, $8250 tax credit.  Financed in full @0.9% for 60 months.

New house has natural gas heat and stove.  I'm going to look into having a heat pump installed, induction stove, and solar given the new incentives under the IRA.

So there we are in a nutshell.  Can't tell you how excited we are to be putting $100k/year into the market just while things go on sale for 25% off and likely more moving forward!!!

[zolotiyeruki]

I somehow missed your thread when you originally posted it, and I regret it.  What you have accomplished already is a remarkable turnaround.  What's the opposite of a facepunch around here?  Wiping out $85k of consumer debt and making a huge shift in spending vs savings is a huge accomplishment!

You're close enough to retirement, and your savings rate is high enough, that returns over between now and retirement will have a much smaller impact than they would for someone who is 20, 30, or 40 years from retirement.  At this point, it's probably worth taking the time to plan out your actual retirement expenses and funding.  Something like this:

Expenses in retirement: $7200/mo (your old $5500/mo plus the extra $1700/mo you're paying for mortgage) = $86400/year
Assume you retire at 62, and your retirement benefit would be $2600/mo = $31,200/year
Your savings will need to support $55,200/year of spending
25x expenses means you'll need to save up $1.4 million
If you get 7% returns, and invest $100k/year, you'll hit $1.4 million at age 59 (thanks to a simple spreadsheet)

Now, if your retirement expenses truly are $48,000/year (your old projected expenses, plus the new house payment), your investments will only need to cover about $17k/year, and you'll only need $400k saved up to retire at age 62 with SS providing the rest of your income.  That means an earlier retirement is still an option for you!  Let's say you retire at 57 with $1M invested.  You live off your taxable accounts for two years, then live off a combination of IRA/401k and taxable accounts for three years, and then live off SS, IRAs/401ks, and taxable accounts after that.  You'll want to build a spreadsheet for that.

You did a move by yourself, on the weekends, without taking time off work?  Dang, that's impressive!  Now, I feel like you *do* deserve a facepunch for tossing out $10k to furnish your new house.  That's a lot of money.  Sure, it's not going to delay your retirement by more than a few months, but good, used furniture is super cheap and plentiful.

Advice?  Well...
--Don't give in to the temptation to inflate your lifestyle.
--Automate your investing as much as possible, so you're not tempted to spend that money.
--Fill out the Case Study Worksheet
--If you can get your taxable income down within the 12% tax bracket (via 401k deductions, standard or itemized deductions, etc) before making an IRA contribution, then I'd suggest you contribute to a Roth IRA for the future tax savings.  If charitable giving is a part of your retirement plans, it may be worthwhile to explore a Donor-Advised Fund option as well.  If you're going to be in the 22% bracket no matter what, then contribute to a traditional IRA.
--If your spending in retirement really is only about $50k/year, you *definitely* want to max out tax-deferred accounts now.
--There are a number of fantastic tools to help model your retirement finances: Rich, Broke, or Dead, cFireSim, and firecalc are all quite popular.
--It seems to me that your 23-year-old kids have failed to launch. What is their plan for life?  At what point will they move out and support themselves?  Sure, you can easily afford to support them, but is that the best thing for them?

[EchoStache]

I somehow missed your thread when you originally posted it, and I regret it.  What you have accomplished already is a remarkable turnaround.  What's the opposite of a facepunch around here?  Wiping out $85k of consumer debt and making a huge shift in spending vs savings is a huge accomplishment!

You're close enough to retirement, and your savings rate is high enough, that returns over between now and retirement will have a much smaller impact than they would for someone who is 20, 30, or 40 years from retirement.  At this point, it's probably worth taking the time to plan out your actual retirement expenses and funding.  Something like this:

Expenses in retirement: $7200/mo (your old $5500/mo plus the extra $1700/mo you're paying for mortgage) = $86400/year
Assume you retire at 62, and your retirement benefit would be $2600/mo = $31,200/year
Your savings will need to support $55,200/year of spending
25x expenses means you'll need to save up $1.4 million
If you get 7% returns, and invest $100k/year, you'll hit $1.4 million at age 59 (thanks to a simple spreadsheet)

To be clear, the $2400 new mortgage payment includes escrow.  Once escrow is corrected, total monthly will be about $2130, or about $1050/month higher than the previous mortgage rather than $1700 extra.  I'm not sure if it makes sense for me to carry a big mortgage into retirement that would require nearly $500,000 of assets to cover.  So paying if off or moving/downsizing is likely.  My estimated retirement expenses will not include a mortgage.

Now, if your retirement expenses truly are $48,000/year (your old projected expenses, plus the new house payment), your investments will only need to cover about $17k/year, and you'll only need $400k saved up to retire at age 62 with SS providing the rest of your income.  That means an earlier retirement is still an option for you!  Let's say you retire at 57 with $1M invested.  You live off your taxable accounts for two years, then live off a combination of IRA/401k and taxable accounts for three years, and then live off SS, IRAs/401ks, and taxable accounts after that.  You'll want to build a spreadsheet for that.

Yes to this.  Plan is to be able to retire by age 58 or so.  It's possible we might just drop down to 6 months a year for a while, either 3 months on/3 off or 6 on/6 off.  We will have a lot of flexibility when we get close to FI as we can take contracts 13 weeks at a time.  Maybe we take this time to knock out what's left of the mortgage.   Lots of options.

You did a move by yourself, on the weekends, without taking time off work?  Dang, that's impressive!  Now, I feel like you *do* deserve a facepunch for tossing out $10k to furnish your new house.  That's a lot of money.  Sure, it's not going to delay your retirement by more than a few months, but good, used furniture is super cheap and plentiful.

We talked about this.  We actually bought a good quality table set for our breakfast nook off FB marketplace for $190.  Good quality solid hardwood 42" round table, 4 chairs, and a leaf.  Here's the thing.  This is a centerpiece of our entire first floor.  It's not our ideal style, wood color, etc.  We decided that we save so much in so many other areas, that this was an area we were willing to splurge on a bit.  We don't buy furniture often.  This is the first time in over 20 years.  Possibly/likely the last furniture we buy other than a wear item like couch.  So we have a solid hardwood(Hickory) 48" table and 5 chairs made locally.  We picked the exact style, type of wood and type of stain/finish.  You just can't get that shopping used 2nd hand furniture.  I've seen GREAT bargains.  Just not exactly what we want. The $10k includes curtains, blinds, area rugs, etc.  We went cheap/low cost in some things i.e. a few Ikea pieces, refurbished used furniture etc.  Lots of little things needed to get a brand new house livable and fully furnished.

Advice?  Well...
--Don't give in to the temptation to inflate your lifestyle.
--Automate your investing as much as possible, so you're not tempted to spend that money.
--Fill out the Case Study Worksheet
--If you can get your taxable income down within the 12% tax bracket (via 401k deductions, standard or itemized deductions, etc) before making an IRA contribution, then I'd suggest you contribute to a Roth IRA for the future tax savings.  If charitable giving is a part of your retirement plans, it may be worthwhile to explore a Donor-Advised Fund option as well.  If you're going to be in the 22% bracket no matter what, then contribute to a traditional IRA.
--If your spending in retirement really is only about $50k/year, you *definitely* want to max out tax-deferred accounts now.
--There are a number of fantastic tools to help model your retirement finances: Rich, Broke, or Dead, cFireSim, and firecalc are all quite popular.
--It seems to me that your 23-year-old kids have failed to launch. What is their plan for life?  At what point will they move out and support themselves?  Sure, you can easily afford to support them, but is that the best thing for them?

-Agree 100% on trying not to inflate lifestyle.  We aren't succeeding 100% but its an idea we try to constantly be aware of.
-Automate..agree...401k is automated of course at 50% of our W2 wages(the max our company allows), and catchup contribution is also automated over and above the 50%.  IRA and brokerage contributions are not automated but I do handle them weekly, and I have a system that works well for me for this.  On payday, I don't allow our checking balance to grow above $6k, which is about a months expenses.  So if payday puts checking up to $8000, then $2k goes where needed i.e. IRA's or brokerage if IRA's are done for the year.  I also use a zero dollar budget and track expenses closely day to day(with the help of a handy app).
-I do have that worksheet filled out.  Have to update a few things now that we've gotten through the move.
-Taxable income is within 12% bracket but does currently require some level of tIRA contributions to get us there.  It's something I'll have to monitor towards the end of each year depending on income.  I expect our retirement income to be quite low so not expecting much of a tax liability in retirement.  As you mentioned, I do find the Roth appealing if I can do so without incurring 22% tax rate.
-Failure to launch...yes definitely.  24 year olds are now paying $500/mo each room and board.  They also pay cell phones, car insurance, etc.  I'm ok with this(short term) while they get on their feet in our new location.

[EchoStache]

2 year update:
11/14/2021---->11/11/2023
Assets: then/now
Home $180,000/450,000
Retirement: $54,000/$208,600
Savings $15,000/$40,000
Brokerage: $0/$39,000
Checking $5,000/$5,000

Liabilities:
Mortgage $101,000 @2.75% fixed/$323k @ 4.375%
Student Loans: $30k, deferred/$29,600
Auto Loans: $0/$31,400
Solar Loan: $0/$25k

Net Worth: $150k/$400k


We haven't been perfect in the past two years, but the only significant financial errors have been too much spent on new cars.  On the bright side, transportation cost for the next ten years going forward will be extremely low with two EV's and solar.

Plan now is to pay off all non mortgage debt quickly(might carry the 0.9% loan to the end).

2023 summary:
Gross income:  ~$225k
Net income after taxes and insurance: ~$200k
Saved, invested, principal: ~$114k
Savings rate: 57%

Pretty good savings but at the same time,  spendy year.  Good news; room to improve.

[Malum Prohibitum]

I am heartened to finally see somebody on this web site who is in a similar situation to me (age, late start, medium/large family, good income, maxing out retirement contributions).

Out of curiosity, did those two 25 year old adults finally fly the nest?  The other is an adult now, too, right?  19 or 20?  I have four.  Two have flown the nest (19 and 22) and two are still here (9 and 7). 

Thanks for updating this over the last few years.    Your savings rate is now 57%!!!  I calculated mine for 2022 at 43%.  I think 2023 is similar (I need to look at my federal income tax reporting forms to be sure, as I am self employed).  Reading your thread has inspired me to try to get my savings rate up to half or more for 2024.

[EchoStache]

I am heartened to finally see somebody on this web site who is in a similar situation to me (age, late start, medium/large family, good income, maxing out retirement contributions).

Out of curiosity, did those two 25 year old adults finally fly the nest?  The other is an adult now, too, right?  19 or 20?  I have four.  Two have flown the nest (19 and 22) and two are still here (9 and 7). 

Thanks for updating this over the last few years.    Your savings rate is now 57%!!!  I calculated mine for 2022 at 43%.  I think 2023 is similar (I need to look at my federal income tax reporting forms to be sure, as I am self employed).  Reading your thread has inspired me to try to get my savings rate up to half or more for 2024.

Hi, glad to see you are inspired!  Good luck on ramping up that savings rate!  Be aware that I am calculating my savings rate based on income after pre-tax health insurance premiums and taxes.  So I am basing it on the money available to me that I have control over(I can't choose wether to save, invest, or spend health insurance premiums or taxes).

The three young adult children have not launched but are on improved trajectories.  All working full time, being reasonably fiscally responsible, and making progress.   They all pay for themselves in terms of cell phones, car insurance, monthly expenses(gas), clothing, health insurance, medical care, etc.  We are providing lodging, utilities, and groceries.

The 25 year olds:
1 has a very small student loan balance and is paying $500/month to live at home while making financial progress.
1 has massive student loan debt and also pays $500/month, but we apply to student loan debt as extra principal after the regular required payments are met.

19 year old is off to a very good start.  Full time job she really likes, saving in 401k, and paying her recent used car purchase off.  She is living at home for free until the car is paid in full in about a year.  Used car market is unimaginably different than in years past.  Once her car is paid off, she will live at home for the same $500/month as the other two until she is ready to move out.

I feel this is a good balance of supporting them while they get ahead without being a significant drain on our resources and ability to work on our FIRE goals.  We offer this support with the understanding that they aren't just limping along, but making rapid finical progress by keeping their living expenses low, being wise with money, and stacking cash for the future so that in a year or two, they are in great shape.

[dandarc]

Awesome update! Tripling Net Worth in a fairly flat market since 2021 is impressive!

[AMandM]

Congratulations on your turnaround!

And fwiw this internet stranger thinks your young adult kids are doing just fine. Living with parents is not the same thing as failure to launch. Living with parents can be, and in your kids' case clearly is, a prudent money management strategy at a time in life when a place of their own is not at all a necessity. Failure to launch is living without a plan, whether on their own or with parents.