retire in 8 years: update

**TBH** · 08-02-2009, 02:33 PM

Originally posted by KTP View Post

I think we are going to have to go very heavy into the stock market to reach this goal, more than I would normally be comfortable with.

Yikes. Sounds like a big gamble. I think you should stick with the investing style you feel comfortable with, even if it means you have to delay your goal or find a way to do it on less money.

**creditcardfree** · 08-02-2009, 03:02 PM

Congrats losing weight and gaining fitness. I would say the money you spent on equipment was well spent. Much more fun, than paying a doctor that money, too.

Good luck with your financial goals.

**snafu** · 08-04-2009, 06:06 AM

Good on you and spouse, money well spent on activities that give both health benefits and fun. I suggest a conservative investment plan...perhaps track the Baltic Freight Index as an unbiased indicator of the strength of the USA economy.

**jIM_Ohio** · 08-13-2009, 01:04 PM

Originally posted by KTP View Post

Hi guys,

It has been awhile since I posted. You have to enjoy the summer while it lasts here in the northwest!

Our goal is to retire in 8 years, more or less. We then plan to sell everything and buy a medium size sailboat (we are experienced sailors) and do the sail around the world thing, or sail until we find a place we fall in love with. We will both be around 45 to 47, so hopefully young enough to undertake such an adventure without too many medical issues.

Things haven't gone quite as smoothly as I had initially planned. We did just reach $50,000 in our emergency fund, which I think is enough for a year if it came to living off just that. I have also managed to invest $30,000 in spiders, which has grown to $38,000 recently with the market upturn. We spent way too much on summertime toys though, over $5000 for bikes, hiking and sailing gear. On the plus side, these toys have really gotten us off the couch and in shape. Spouse has lost over 55 pounds and I have lost 25 pounds. We now bike 30 miles a day and can hike 25 miles over a weekend with a 55 pound pack. So maybe can look at the $5000 as an investment in our future health

Still a very long way to go to reach our goals. Personally, I am aiming for $1 million in cash/stocks/bonds and a 401k balance of at least $500k by the time we set sail. I think we are going to have to go very heavy into the stock market to reach this goal, more than I would normally be comfortable with. CD's, treasuries just are not going to cut it, probably not even keeping up with inflation. If the summertime spending binge is over, then I hope we can control things to keep my inital goal of 70k a year into the market, probably through a tax managed mutual fund.

If you come up with any exciting new ways to cut costs or make lots of cash fast and legally, let me know!

Wishing you guys and gals the very best!

I remember your original post I think.

I would caution you on taking more risk to reach a time bounded goal. If you know the amount you NEED, and you know the AMOUNT, focus on those two things. Do not build a time machine asset allocation- if the time "fails" you might need 2-8 years to recover. If you take a more conservative approach, its possible only 1-2 years addition time is needed.

**cptacek** · 08-13-2009, 06:10 PM

Originally posted by KTP View Post

Spouse has lost over 55 pounds and I have lost 25 pounds. We now bike 30 miles a day and can hike 25 miles over a weekend with a 55 pound pack. So maybe can look at the $5000 as an investment in our future health

WOW! That is really great.

**KTP** · 08-16-2009, 07:55 AM

Thanks (for the congrats on the weight loss). Even though I stress about the excess money spent for those outdoor hobbies, I guess it is worth it.

Our goal is $1 million in eight years, including the equity in our house. I have calculated we can save around $70k a year for the next eight years. We currently have about 80k in cash and stocks, 170k equity in our house, and around 200k in a fully max funded 401k.

The eight years is a fixed deadline. We are definately selling the house and quitting our jobs at that time. We will however still not be too old (around 47) and might take on some contract work over the next several years depending on our location and availability. Wife is brilliant, ivy league, top in her field and could get hired anywhere, anytime. She is just a bit tired of the 8 to 6 routine and needs this deadline.

We are willing to take on a reasonable amount of risk to achieve our goals. At the very worst case we could supplement our "retirement" with contract work. I don't think CDs, savings accounts, or even most bonds represent the best risk vs reward for our situation. I don't want to bet everything on black or red, but I would like to see 8% to 10% a year on average.

**junosama** · 08-16-2009, 07:05 PM

Sounds like a great plan im shooting to be rich and working from home full time before 30.

Right now im working on paying off my truck and school loans so i can get a house easier.

**jIM_Ohio** · 08-18-2009, 07:59 PM

Originally posted by KTP View Post

Thanks (for the congrats on the weight loss). Even though I stress about the excess money spent for those outdoor hobbies, I guess it is worth it.

Our goal is $1 million in eight years, including the equity in our house. I have calculated we can save around $70k a year for the next eight years. We currently have about 80k in cash and stocks, 170k equity in our house, and around 200k in a fully max funded 401k.

The eight years is a fixed deadline. We are definately selling the house and quitting our jobs at that time. We will however still not be too old (around 47) and might take on some contract work over the next several years depending on our location and availability. Wife is brilliant, ivy league, top in her field and could get hired anywhere, anytime. She is just a bit tired of the 8 to 6 routine and needs this deadline.

We are willing to take on a reasonable amount of risk to achieve our goals. At the very worst case we could supplement our "retirement" with contract work. I don't think CDs, savings accounts, or even most bonds represent the best risk vs reward for our situation. I don't want to bet everything on black or red, but I would like to see 8% to 10% a year on average.

I would like to see 8-10% per year on average for me too...
and I think in a given 8 year period planning for an 8% annualized return is high risk. Think 2000-2008 or 1997-2005 or any other period which had the 8th year with a 20%+ drop.

if the market goes up the first 7 years then down the 8th, you are screwed in many ways (because it will take 7-8 years to recover).

what if you only get 6%...

I have not added up so here I go

70k saved per year for next 8 years
560k
that is half of what you need; biggest risk is staying employed

80k cash currently
8 years value would be about 100k (assumed 4%)

200k in 401k
in 8 years I call it 400k (assuming 9% return, doubles in 8 years)

I do not include home equity in above
I see a million in assets, with half of that pinned on working and 20% of it pinned on market giving you the 9% return you "want".

IIRC you were going to sell the house and buy a boat

I think my comment about risk you were taking in short time had merit, but appears to be covered. Because so much of the money needed is going to be saved over a short time, you are hedging employment, which is not a bad thing (most of us on the board hedge employment too- we need the income to meet our goals too).

How are you investing the money not tied into home equity and what is the liquidation/sell strategy for 8 years from now?

**eileen1** · 08-18-2009, 09:27 PM

Have you also thought of taking some sort of short sabbatical sooner. Eight years is a long time and then to make such a drastic life change would be a major step. Would it be possible to take four weeks off each year now, so you and your wife wouldn't feel burned out, and could have a longer time frame to complete FI?

**Alex_Adviser** · 08-19-2009, 12:55 AM

When retirement planning most professionals will recommend that you diversify your investments. Money can be invested in stocks, bonds, mutual funds, life insurance, precious metals, your home or other real estate -- just about anything you want. Investment opportunities that offer a high rate of return are typically accompanied by some risk of investment loss. Investment opportunities that are less risky will typically offer a lower rate of return. Depending on your goals for retirement planning, a professional can help you determine an appropriate mix of investments. While you want to maximize the rate of return on your retirement planning investments, you also want to make sure to minimize the chance that your retirement planning investments lose value.

My advice to you is that you discuss the things with a Finance Professional who can guide you through the process of investment.

**KTP** · 08-19-2009, 06:40 PM

I would rather read up on some recommended books than hire a financial adviser. I don't particularly trust them.

It seems to me Jim_Ohio is thinking that we will cash out everything in the beginning of the 9th year, which is not the case. We decided we will take a couple of years being rubber tramps after selling the house, visiting relatives and exploring the US, pulling our smaller sailboat. This will probably not be a major expensive time since we will not have a house or car payment, no utilities, etc. We might take some part time work also.

Currently I have about 20k invested in cash (cds and savings account), 30k in S&P 500, and 30k spread out evenly between five large dividend paying companies that I like (walmart, mcdonalds, philip morris, procter & gamble, and johnson & johnson). All of those companies pay over 3% annual dividend and there is very little chance they will all go out of business at the same time. So fairly low risk for the return. I consider the S&P 500 spiders to be medium risk, and the cash and cds to be ultra safe.

So we are not talking about internet startups with PE ratios of 5x10^49 here. Also, I am not directly invested in insurance or financial stocks. Obviously I could have made a tasty return buying citibank a few months ago at a buck and selling it now at $4.

My first though is to continue the investing along the same path I have taken (say out of the 70k each year saved, put 15k in safe cash type investments, 25k in S&P500, and 30k in dividend paying, stable large companies)

The employment we have is very stable and safe...really not worried at all there. We would get close to 8 months paid salary if early terminated anyway, which is plenty of time to find a similar job.

So say I keep up this investment plan, and in 8 years we have 150k in cash/cds, 350k in S&P500, 250k in ultra large caps, 250k in house equity, and 500k in our 401k (it is 200k now, and will be contributing $15k a year for the next 8 years). These don't seem very unreasonable returns...

I think I could be happy with that. If the market is down during the 7th, 8th, 9th years, we can always use some of the cash instead of liquidating the stocks right away. We should be able to leave the 401k untouched for another 15 years or so, which *should* put it over one million by itself.

Any serious flaws here?

retire in 8 years: update