goal: zero to retirement in 7 years?

[KTP]

No, we do not have kids. I probably wouldn't know how to change their litterbox or whatever anyway.

[LivingAlmostLarge]

KTP, I bonds pay fixed rate of 0.70% and inflation of 2.46%. How are you going to get 5% from them before after taxes? I don't see the fixed portion getting up anytime soon, though they are due to reset.

[snafu]

If you plan on sailing to ports outside USA you will discover your costs are considerably lower than you are accustomed to paying. For example medical insurance rates in USA are the highest world-wide.

While you are traveling, I presume you will be drawing a similar amount each month. You will not be cashing out of your entire portfolio. Likewise you will be careful to avoid Ponzi -Madoff schemes.

What is your plan after sailing, will you return to USA and perhaps a condo? How will that be funded. We are intriqued with the idea of moving to Phillipines for the winter months due to language, medical care, cost of condo etc. We've rejected a condo in USA due to the cost of medical care should it ever be needed and litigious culture.

[noppenbd]

KTP, I bonds pay fixed rate of 0.70% and inflation of 2.46%. How are you going to get 5% from them before after taxes? I don't see the fixed portion getting up anytime soon, though they are due to reset.

I bonds & treasuries are at or near zero right now. I would not buy I-bonds until the fixed portion gets up around 2%. It will probably happen by the end of 2010, so for 2009 and 2010 I would stick with mid-term CDs until the rate environment improves.

[KTP]

Hey, neat. I had forgotten about this thread and it is interesting to update it after 5 years.

We managed to save significantly more than $70,000 a year and the market was very nice from 2009 to 2014.

Our investment portfolio has exceeded $1,000,000 and we still plan to sell our house and travel in a RV (custom built by us) and then sail around the world a few years later.

My current projections of a increase in our portfolio of 10% between now and fall of 2015 plus selling the house at 20% below market and adding $150,000 of saving between now and then put us at $1,400,000 in our investment portfolio. A 3.5% SWR then gives us $49,000 a year which is more than we should need.



Some of my expectations were spot on. The market indeed recovered to 2007 levels as I suspected it might:


"I think I will stick to the current plan of 70% into the S&P500 and 30% into Series I bonds and cross my fingers for the market to muddle around for a few years then shoot back up to 2007 levels as we approach the end of 7 years. Worst case, we continue working for another 2 to 4 years to bring us up to a liveable income. I guess 48 or 49 isn't too much different than 45 agewise"

[Petunia 100]

I think your plans are awesome. Congrats to you and your dw for achieving your goals.

[LivingAlmostLarge]

Congrats! How much did you end up saving a year? And how did you get past $1M in taxable account that you were only planning on getting to $490? Or was it more savings that got you there? And is the $1.4M combined 401k and other stuff?

[KTP]

Congrats! How much did you end up saving a year? And how did you get past $1M in taxable account that you were only planning on getting to $490? Or was it more savings that got you there? And is the $1.4M combined 401k and other stuff?

We ended up saving around $120,000 to $130,000 a year which is quite a bit more than I had outlined in 2009. I stopped buying stupid stuff, no more eating out every day, lattes, cell phones (I pay about $30 a year for a prepaid phone and don't text).

We don't have 1M in taxable, it is 1M in taxable, IRA, 401K, Roth. About 40% in taxable. The house plus things we are going to sell gets us to $1.25m and another year of saving plus market growth should get us to $1.4m. Things could go sour in the market but the house and assets are somewhat like cash to buffer that.

I would say it was mostly deciding to save and invest in 2009 that got us here. When you are putting $120,000 a year into a market that values Microsoft at $24, Apple at $280, and Exxon at $62, it really takes off. Those $120,000 chunks in 2009 and 2010 have likely doubled.

[autoxer]

Hey, neat. I had forgotten about this thread and it is interesting to update it after 5 years.

Thanks for updating this thread! It is very cool to see a long term strategy like yours materialize.

[snafu]

KTP, thank you for the update and congratulations for your diligence and success in not only carrying out your plan. but exceeding it by significant amounts. You've left me with the impression that it was easier than yo anticipated. What suggestion can you pass on to others who face similar problems?

[JulieAlbright]

What a fantastic update! Congrats on this huge accomplishment and thanks for sharing the success story with us.


I need to clap for you. Here ----->>>>

[KTP]

KTP, thank you for the update and congratulations for your diligence and success in not only carrying out your plan. but exceeding it by significant amounts. You've left me with the impression that it was easier than yo anticipated. What suggestion can you pass on to others who face similar problems?

It did seem easier than all of us had suspected when I wrote this thread. I was more of a noob five years ago than I am now. If you look, you will see that I didn't even know there was a maximum contribution to a 401K, now I am doing backdoor Roths and even contributing extra after tax to a 401K and doing in service rollover to Roth 401K...very advanced stuff.

The market returns have halped a LOT. I went fairly heavy in stock because bond returns just looked like they were not going to get us there and the risk paid off (last year the market returned 30%).

I would suggest setting a goal, even it is 7, 10, 15 years out. A long term goal lets you make important decisions. Short term goals are important (pay off a credit card in 6 months, stuff like that), but a long term goal like a early retirement date lets you see the forest through the trees.

[jIM_Ohio]

My wife and I decided we want to get out of the rat race in 7 years. Ok, so we are not at zero exactly. No credit card debt, always pay them off every month but I do use them a lot to get cashback.

I have gone over our finances and I think we can manage to save about $70,000 a year for the next seven years if we live a lot simpler than we have been. Probably could save a bit more but wife unwilling to live without heat and cable tv I humor her because she makes 5x what I do.

So...we will be about ~45 in 7 years and have a separate 401k account which got creamed by the stock market crash recently but hopefully will provide all of our income from age 62 till death.

The plan is to turn the 70k a year x 7 years plus whatever we will get for selling our house and goods into enough cash to live on our sailboat from age 45 to 62. Sail around the world a few times and all of that

Figure the sailboat is going to eat about 20k a year or so (more in some years when you need new sails, rigging, bottom paint, etc., hopefully less in others). I figure we need another 30k a year to live for food, medical, entertainment, and insurance if we can get it. I hope that isn't too low.

So we need a income of 50k. Since our tax rate will go from absurd to almost zero, I am thinking the best investment plan would be something that is somewhat tax defered. The two things that come to mind are spiders (S&P500 index shares purchased like stocks SPY) and inflation indexed 30 year US I-bills. I think you can only purchase 10k a year per person in I-bills, so that would be 20k total for that and then the remainder 50k a year put into spiders. The I-bills do not pay out the interest until you cash them in, so tax defered, and the spiders are sort of tax defered since you will not realize any gain other than dividends until you sell them. This seems better than a mutual fund which might have to distribute gains several times a year.

Can we do it? I mean, assuming we manage to cut spending and actually save 70k a year, will the above strategy net us 50k a year from age 45 to 62? I guess aside from the I-bills, a lot would depend on the stock market recovering over the next 10 years. Although ideally it would wallow around at low levels for the first few years while we are dollar cost averaging into it. Any other saving or investment strategy that might be a better way to go?

Alternative strategy: win lottery, find rich uncle.

deleted

[snafu]

KTP, thank you for the update and congratulations for your diligence and success in not only carrying out your plan. but exceeding it by significant amounts. You've left me with the impression that it was easier than yo anticipated. What suggestion can you pass on to others who face similar problems?

[KTP]

Long time since I have been on. Currently in our home built RV in North Dakota writing this during a heck of a thunderstorm.

We did retire in 2015 as projected but just sold our house this spring and now full time in a RV we designed and built. No more taxes of anything but sales tax (not even that in Montana last month when we sailed Flathead Lake)!

The RV is two removable "pods" on a Isuzu NRR Flathead truck. The front pod is our living area and the rear pod is a garage/workshop which holds our motorcycles and bikes. We tow our 17 foot Montgomery sailboat. 1100 watts of solar and all standard appliances means we can spend weeks in remote (free!) areas before coming to a town to restock. This week on Lake Sagawawita has cost us only about $80 in food.

Anyway, hope you guys are doing well. I will leave you with some pics of our setup.