Life Situation: Married couple (I am 25, husband is 37) - DINKs, no plans for kids - would like to retire myself around the time my husband is able to retire with his pension in 15 years, so not insanely early. Luckily, we both have jobs that we're passionate about and enjoy - but we also don't want to die in our offices. We live in a low cost midwestern city.
Gross Salary/Wages:
Me: $75,000
Husband: $64,500
Total Gross: $139,000 (total bonus between both of us is often around $9,500, but we don't count on this and I'm ignoring it for purposes of this case study)
Retirement Plans and Investments
Pretax: My 401k: Balance of $5,000, contributing $6,750/year including 3% match
Pretax: His 401k: Balance of $5,000, contributing $6,750/year (no match)
Post tax:Joint Brokerage Account: Balance of $10,000 - contributing $9,000/year
Extra Mortgage Payment: $1500 monthly (major question is whether we should continue this - goal was to make extra payments until PMI is eliminated once we hit $188,000 owed - and then begin investing this amount in our brokerage account - PMI is only $76.28/month so although I've done a few calculators that show a good return on paying this down early, I am interested in outside opinions)
Total Net after taxes and above investments: $5728.29
Current expenses (monthly):
Mortgage: $1436 (Owe $220,000 on home worth $240,000 - paid $235k - 4% on the mortgage, 30 year fixed, 29 years remaining)
Vehicles (two): $840 - one will be paid off in two years, the other in five
Car Insurance: $121.04
Electricity: $100
Gas: $65
Internet: $60
Water/Trash/etc: $108
Recurring Subscriptions: $47.96
Cell Phones: $145
Apple Upgrade Plan: $40.76
Food: $500
Vacation: $300 (approximately $3600/year)
Entertainment: $120
Clothing: $300
My Student Loan: $218.82 (1 year into 10 years of Public Service Loan Forgiveness...Owe $54,000 altogether for undergrad and graduate degree --- income based repayment will go up slightly next year)
Total: $4,402.58 ($52,830.96)
Emergency Fund/Checking Accounts (all earning 1.49%): $25,000
Expected ER expenses:
Husband's pension kicks in in 15 years. We would both like to retire at that point (he will be 52, I will be 40) without changing our lifestyle substantially. My student loan should be eliminated via PSLF by that point, we anticipate monthly expenses won't include two car payments or the extra mortgage payment either... Still, we would like to budget for increased travel and of course health care costs at that stage. We anticipate needing approximately $75,000 annually. His pension should cover $50,000 of this.
One other note: I also have a pension, which will not kick in until I turn 60 - if I quit working in 15 years, it will add about $24,000 to our income.
If you consider our extra mortgage payment part of our overall investment plan (which it is - and after PMI is eliminated, will go to our brokerage acct), we're investing $40,500/year. Just a quick investment return calculator shows me that with 6% returns, we should be approaching $1 million in 15 years (we invest bonuses as well - and incomes will likely increase slightly in that time frame as well). So, I'm thinking - looking ahead, a 4% draw from that - along with his pension - should put us at around $90k/year. Ignoring, of course, things that will kick in further down the road like my pension and social security.
So a few questions:
1. Overall, are we on the right track to make this happen? Any recommendations? I know we could be more frugal - but we're not looking to retire asap, just at a specific point 15 years down the road.
2. Are we doing the right thing paying down the mortgage to eliminate PMI and THEN putting that money towards our investments?
3. Am I doing the right thing by counting on PSLF for my student loan and making the minimum payment for ten years? I plan to remain in eligible employment throughout that period...