I originally posted this in the "case studies" section with very little response. I figured it was more appropriate in this section.
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Questions:
1) After reading my situation below, can you please weigh in on whether I've properly allocated my assets?
2) And do you agree that the amount I have in my IRA account will grow to be more than enough to live off for the rest of my life once I reach the retirement age of 59.5?
Any tips, warnings, red flags, etc., would be much appreciated. I'm posting here so that I don't need to pay hard-earned money for a financial advisor. My goal is to keep my financial situation as simple as possible. Thank you all so very much!
My Situation: I'm a doctor currently nearing FI. I live and work in California. I don't loathe my job, but it is incredibly stressful and emotionally taxing. The reason I'm still in it is because the pay is outrageous given my workload in comparison with other jobs in my specialty. If I've properly done the math, I expect that I will be able to put in my notice at the end of 2024, work another 2-3 months, and move on to different, less stressful pastures of my choosing (officially reach financial independence!). At that point I will be 38 years old. I've read The Simple Path to Wealth by JL Collins and modeled my game plan primarily after this book. I'm single, no kids, in good health, and have limited living expenses. I work as an independent contractor, so I take care of all my own benefits such as health insurance and investment accounts. I have a brokerage account which has only VTSAX. I also have a SEP-IRA which carries VTSAX (stocks) and a smaller percentage in VBTLX (bonds). My asset allocation when considering both the brokerage account plus the IRA in total is 80% VTSAX and 20% VBTLX.
My numbers as calculated to the end of 2024 (Predicted FI D-Day):
Annual Living Expenses: ~$40K
Total Net Worth: $1,167,706
Brokerage VTSAX: ~$400K
SEP-IRA: ~$312K
Savings/Cash: ~$200K
High Interest CD: ~$200K
My current thought process as explanation for this asset allocation: What I'm most concerned about is bridging the gap from now until age 59.5. Using compound interest calculators, I predict that my SEP-IRA retirement fund will be more than enough, especially when combined with social security distributions, to live out the rest of my life from age 59.5 onward. That leaves me 21 years upon my age 38 retirement to live off some combination of the Vanguard brokerage account (VTSAX), savings, and a CD. My thought is not touching the $400K invested in the VTSAX brokerage account for the first 10 years and letting it grow. During that time I can invest a large chunk of the rest in a high-interest 4.5% CD for 5 years, and prior to touching the CD utilize the ~$200K in savings. My initial plan was to have everything except for about $100K in savings in the brokerage account, but I want to protect myself from wild market swings and take a more conservative approach. I don't necessarily need the 'gap year' money to grow a great amount. I just need it to last me until I hit age 59.5.
I'd love to hear thoughts on my more conservative approach vs the more aggressive reliance on VTSAX and any other ideas in between. Do you agree that my SEP-IRA will likely grow to over $1 million by the time I hit the 59.5 retirement age? It's very exciting that I'm getting so close that I actually have to put practical real-life steps in place to utilize in the next 1.5 years. The reality, as MMM frequently discusses, is that I will likely generate income during the gap years. I'm a creative person with an entrepreneurial spirit, but I do want to plan to have at least enough to get me through even if I don't make another dime in my life.
Thanks in advance to anyone who takes the time to help me out!! I'm brand new to this forum and am very happy to be here. :))
