Getting close to paying off the house... What then?

[mrpaseo]

I am down to $19,999.99 left on the mortgage (Yes, exactly $19,999.99, I keep track of all payments and wanted to land under 20K this month). The current goal is to have the house paid in full by 1 JAN 2011 (1 FEB 2011 the latest).

Although my mortgage payment is about $600 per month (thanks to a re-fi last year), here are the payments that I have made since January:

$4,414.13 JAN
$1,341.08 FEB
$5,935.85 MAR
$5,403.73 APR
$3,374.60 MAY
$9,063.06 JUN
$4,218.26 JUL
$4,689.55 AUG

As you can see, after the house is paid off, I will not have only the $600 mortgage payment in my pocket, I will have about $3,000 dollars extra in my pocket monthly. That said, I will be conducting some upgrades around the house and figure I will apply $1,000 of this extra income into the house which leaves me with $2,000 per month disposable income.

I will have to replenish my emergency fund (About $4000) but after that I need to save for retirement. Here is what I have now:

IRAs: $16,483.64
Mutual Funds: $0.00
College funds: $6360.24 (I will transfer my GI Bill to my only daughter)

I understand I am behind in my investments, hopefully no mortgage/vehicle payments will allow me the opportunity to catch up.

As for bills, in January: No CC, no Mortgage/Rent, no vehicle payments (I own two reliable vehicles) the only bills I will have is home taxes, and monthly bills (About $2693.50 per month).


My wife and I will celebrate our 38th Birthday in October.

I will be eligible for retirement 1 MAY 2012. Approximate income $2000 in retirement (If I take it at 20 years). Currently planning to do more than 20 but will continue to work until I am 50 years old (even if I retire from Active Duty Army at 20 years).

My goal is to be able to live off my retirement and investment income at the age of 50 (Again, currently 37 will be 38 in OCT).

I project my post retirement bills will be between $2,400 and $3,200 (Taking into account of health insurance, dental, and no additional investments) $2,400 cutting certain areas, $3,200 living the same way I am now (Again, without further investing).

Looking for opinions on what I am forgetting and what I should invest in.

Thanks,
Ray

[NJDebbie]

Ray, that's just simply awesome! If I was in your situation, I would travel with my husband and enjoy life. Again, congrats!

[FrugalDad123]

Wow! Congratulations on your unfathomably huge achievement. I am so happy for you. I am buried in a huge mortgage. Wow, I'm going to share your story with my wife. How cool is that?!? Whew!

If I was in your shoes? I'd look into the question, "What if the thing upon which I am relying just falls apart? What is my backup plan if resources for future income fail or go bankrupt?" I'd look into precious metals. Also, I (personally) would be able to afford to eat more healthily so that my retirement years would be higher quality.

Just my opinion. Wow... 37 and almost done... you are awesome.

[mrpaseo]

Thank you both, we still have a small bit to go but I do not foresee anything stopping us from meeting our goals.

[jIM_Ohio]

Originally Posted by mrpaseo

I am down to $19,999.99 left on the mortgage (Yes, exactly $19,999.99, I keep track of all payments and wanted to land under 20K this month). The current goal is to have the house paid in full by 1 JAN 2011 (1 FEB 2011 the latest).

Although my mortgage payment is about $600 per month (thanks to a re-fi last year), here are the payments that I have made since January:

$4,414.13 JAN
$1,341.08 FEB
$5,935.85 MAR
$5,403.73 APR
$3,374.60 MAY
$9,063.06 JUN
$4,218.26 JUL
$4,689.55 AUG

As you can see, after the house is paid off, I will not have only the $600 mortgage payment in my pocket, I will have about $3,000 dollars extra in my pocket monthly. That said, I will be conducting some upgrades around the house and figure I will apply $1,000 of this extra income into the house which leaves me with $2,000 per month disposable income.

I will have to replenish my emergency fund (About $4000) but after that I need to save for retirement. Here is what I have now:

IRAs: $16,483.64
Mutual Funds: $0.00
College funds: $6360.24 (I will transfer my GI Bill to my only daughter)

I understand I am behind in my investments, hopefully no mortgage/vehicle payments will allow me the opportunity to catch up.

As for bills, in January: No CC, no Mortgage/Rent, no vehicle payments (I own two reliable vehicles) the only bills I will have is home taxes, and monthly bills (About $2693.50 per month).


My wife and I will celebrate our 38th Birthday in October.

I will be eligible for retirement 1 MAY 2012. Approximate income $2000 in retirement (If I take it at 20 years). Currently planning to do more than 20 but will continue to work until I am 50 years old (even if I retire from Active Duty Army at 20 years).

My goal is to be able to live off my retirement and investment income at the age of 50 (Again, currently 37 will be 38 in OCT).

I project my post retirement bills will be between $2,400 and $3,200 (Taking into account of health insurance, dental, and no additional investments) $2,400 cutting certain areas, $3,200 living the same way I am now (Again, without further investing).

Looking for opinions on what I am forgetting and what I should invest in.

Thanks,
Ray

I read that post and think you have 12 years to invest $24k per year and expect to retire?
What are the expenses that the retirement accounts need to cover in 12 years?

[mrpaseo]

Originally Posted by jIM_Ohio

I read that post and think you have 12 years to invest $24k per year and expect to retire?
What are the expenses that the retirement accounts need to cover in 12 years?

Good question, I expect my monthly bills to amount to approximately $3,200

Minus $2,000 (Military retirement).

I would need an additional $1,200 income from an alternate source.

Althought, if I cut down my expenses, I can live on $2,400 per month...

Minus the $2,000 retirement income and I need an additional $400 from an alternate source.

Here is the breakdown:

Mortgage/Rent (Taxes): $150.00
Water: $50.00
Electric: $150.00
Cell Phone: $175.00
Charter Cable Internet: $130.00
Daughters Allowance: $100.00
Trash Monthly: $18.00
Life Ins: $21.00
Health/Dental: $300.00
Car Ins:$120.00
Netflix: $20.00
Christmas: $100.00
Vacation: $100.00
Vehicle Maintenance: $75.00
Vehicle Fuel: $150.00
House Maintenance: $100.00
Food: $600.00
Entertainment: For Month: $400.00
Clothing: $100.00
Wife spending money: $140.00
My spending money: $140.00

TOTAL: $3,139.00

What did I miss?

[adamYao]

With the extra money that you will have I would start investing on solid well established and good balance sheet companies and buy their stocks. It may sound risky, but the stock market soon or later will take its course once the unemployment improves and the market house stabilizes across the nation. Companies like McDonalds, Johnson and Johnson or Coke Cola are some of the good household brand names that people will buy, especially abroad.

[ThriftoRama]

Awesome. Good for you.
Hubby and I are 35 and 37 and paid off our house about 4 years ago. Since then, we have beefed up the EF, and continue to do so to the tune of minimum $800 a month. We also sock $350 to $600 a month into our children's college funds. We max out hubby's 401k at work, and I put $4000 to $5000 a year into my IRA. We are also fixing up the house, but more to make it more livable for us rather than resale, although I hope what we have done will help. We spend about $10,000 a year on the house. (We needed a lot of work-- roof, furnace, windows, etc. Fun stuff started this year: kitchen counters, patio, etc.)

[snafu]

Congratulations on setting goals and following through. Time is a critical component of any investment portfolio, the longer your money is working for you the better. I suggest you start tracking various mutual funds, perhaps Index and Dividend funds for DCA [dollar cost averaging]. Attend any of the free/low cost financial planning seminars in your community. Your local library will have subscriptions for several Guru type Financial Newsletters which often focus on upcoming money issues which helps you look after your money

[FrugalDad123]

Congratulations ThriftoRama! Good for you!

[FrugalDad123]

Originally Posted by mrpaseo

What did I miss?

Do you have Home Owners' insurance? Vehicle Registration?

[creditcardfree]

Are you already retirement investing? TSP or Roth's? I would definitely look to be contributing 15-20% of gross (including allowances) in retirement accounts. You have a relatively short time horizon, so the amount needs to be somewhat significant. Run retirement calculators and increase that amount as necessary.

Nice job by the way on the mortgage paydown!!

[kork13]

Just because the numbers haven't been thrown out there yet, I'll contribute... To provide $1500/mo income, you are looking at needing assets on the order of $450k-$600k (depending on expected rate of return... I'm using 3-4% above inflation). If you plan to draw down your savings toward zero as you age, you can make it on as little as $300k (taking out $500/mo more than you make in interest/dividends) and have that last approximately 25-30 years. Assuming social security is still around 10-15 years from now, you'll also have that to supplement your income.

Basically, you need to ramp up your retirement savings ASAP. Saving $2k/mo and earning ~5% above inflation (still potentially do-able, though it would take on a fair amount of risk), you'd just hit ~$450k by the time you're retiring (or shortly thereafter). However, if you can get up to $3k/mo savings, you can be safer with your money (aiming for 4% above inflation) and make it to ~$575k when you retire. You're doing good, but if you can buckle down and focus on your retirement savings, you can do great.

Disclaimer: my numbers are all approximate -- don't take it as gospel.

[jpg7n16]

I'd obv focus on retirement accounts. You don't have need of much else.

Max out 401k and Roth IRA's

I'd likely invest them in something like a target date 2020 or 2025 fund.

[snshijuptr]

Just to throw in a couple other things to think about saving for especially as an early retiree:

- Your daughter's wedding - Do you plan to help her out with this? The modern wedding can cost anywhere from $5-25k for a reasonable wedding. Check out Average Wedding Cost $19,581 - Wedding Budget vs Real Wedding Cost
- Any toys/vacations in your retirement? Do you want an RV, a boat, etc? Save up and pay cash before you retire and you income is fixed. You seem to be planning a barebones early retirement when you could work a few more years and have a much better retirement.

Saving for retirement is a great idea, but you can delay full retirement if you have other savings goals.

[mrpaseo]

Originally Posted by ThriftoRama

Awesome. Good for you.
Hubby and I are 35 and 37 and paid off our house about 4 years ago. Since then, we have beefed up the EF, and continue to do so to the tune of minimum $800 a month. We also sock $350 to $600 a month into our children's college funds. We max out hubby's 401k at work, and I put $4000 to $5000 a year into my IRA. We are also fixing up the house, but more to make it more livable for us rather than resale, although I hope what we have done will help. We spend about $10,000 a year on the house. (We needed a lot of work-- roof, furnace, windows, etc. Fun stuff started this year: kitchen counters, patio, etc.)

It looks like we will follow suit, we will beef up the EF and we have house repairs that need to be done be caught up on... we also intend to stay here for some time.

Sadly we do not have a 401k available at this time but maybe in the near future. We will probably start with our ROTH IRAs then branch into some stocks (Maybe). Our goal is to get a good foundation, then constant steady investment for as long as we work... Hopefully in the end, we'll be good

[mrpaseo]

Originally Posted by snafu

Congratulations on setting goals and following through. Time is a critical component of any investment portfolio, the longer your money is working for you the better. I suggest you start tracking various mutual funds, perhaps Index and Dividend funds for DCA [dollar cost averaging]. Attend any of the free/low cost financial planning seminars in your community. Your local library will have subscriptions for several Guru type Financial Newsletters which often focus on upcoming money issues which helps you look after your money

Agreed, that's why I started this thread, to start the research now before the money is available. I hope to have a plan before the extra (Is there really ever any "Extra" money) money comes rolling in.

Thanks,
Ray

[mrpaseo]

Originally Posted by FrugalDad123

Do you have Home Owners' insurance? Vehicle Registration?

I was hoping the 150 per month covered the insurance and taxes for the home.

The vehicle registration will be covered by the 75 per month vehicle maintenance.

[mrpaseo]

Originally Posted by creditcardfree

Are you already retirement investing? TSP or Roth's? I would definitely look to be contributing 15-20% of gross (including allowances) in retirement accounts. You have a relatively short time horizon, so the amount needs to be somewhat significant. Run retirement calculators and increase that amount as necessary.

Nice job by the way on the mortgage paydown!!

We currently have a little over 16k in ROTH IRAs. At one point we had over $50,000 in investments (Both Roth and taxable Mutual Funds)... The economy and payments on the house took most of it away.

Thanks,
Ray

[mrpaseo]

Originally Posted by kork13

Just because the numbers haven't been thrown out there yet, I'll contribute... To provide $1500/mo income, you are looking at needing assets on the order of $450k-$600k (depending on expected rate of return... I'm using 3-4% above inflation). If you plan to draw down your savings toward zero as you age, you can make it on as little as $300k (taking out $500/mo more than you make in interest/dividends) and have that last approximately 25-30 years. Assuming social security is still around 10-15 years from now, you'll also have that to supplement your income.

Basically, you need to ramp up your retirement savings ASAP. Saving $2k/mo and earning ~5% above inflation (still potentially do-able, though it would take on a fair amount of risk), you'd just hit ~$450k by the time you're retiring (or shortly thereafter). However, if you can get up to $3k/mo savings, you can be safer with your money (aiming for 4% above inflation) and make it to ~$575k when you retire. You're doing good, but if you can buckle down and focus on your retirement savings, you can do great.

Disclaimer: my numbers are all approximate -- don't take it as gospel.

Just what I like to see... The numbers! I need to finalize the numbers and develop a plan now. Thanks for your response and knowledge. Some time when winter hits I will sign back up for morningstar (Where I did most of my last investment research) and get down to the road on a plan.

Ray

Ray