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

[mrpaseo]

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]

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]

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]

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]

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

[mrpaseo]

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.

I have a target date investment already started (ROTH), I want to make sure I diversify my portfolio so much research is destined to happen.

Thanks,
Ray

[mrpaseo]

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.

Daughters wedding? Ahhhh, she's going to be at home forever... single.... and a virgin! We haven't planned this out... at all

We would like a boat, and we do plan on paying it off before retirement. We purchased our last vehicle with the boat in mind (Able to tow). Sound advise, thanks.

As for working a few more years, I promise I will not retire before I am financially stable. I understand some might dip out earlier than planned but I have been head strong since the age of 23... now at 37, I feel I have enough experience to not make a major mistake like retire before we are ready.

Thanks,
Ray

[LuxLiving]

When will cars need to be replaced? Are you saving now for that purchase in cash? We went three pronged here. We were putting back into 401K & Roths, paying off house AND we were saving for replacement vehicles all at the same time. NOW - we are retired and now living off a small pension & SS (no need to pull from retirement funds YET), the house is paid off, and the money for replacement vehicles in sitting in CDs.

Just remember, roofs will need to be replaced at some point, cars replaced, etc. Plan ahead & save for those as well and it looks like you'll be golden!

After payoff, I'd hurry hurry & beef up emergency savings, save for replacement vehicles and start putting as much as possible back for retirement. Meanwhile back at the ranch, spring for some travel, for pizza & a movie out occasionally. NO need to have zero fun now. I'm sure you are already doing this, but along with goal attainment, it's nice to remind ourselves that the quality of the journey is important too!

[jpg7n16]

I have a target date investment already started (ROTH), I want to make sure I diversify my portfolio so much research is destined to happen.

Thanks,
Ray

Target date funds are well diversified in and of themselves. And usually close to optimally allocated.

It's better to own 1 Target date fund, than own 100 individual stocks.


But there is no real harm in owning 2+ funds either. So it's just a personal choice.

[personalbudgetstuff]

I posted somewhere before that Silver buillion is a good investment as is undervalued right now and we are running out of it. We use it in just about every technological device these days so when it catches on it's a scarce commodity the price will start to go up. Also as Gold become price prohibitive to the average investor people will turn to Silver.

[FrugalDad123]

turning 50 years young on October 2022

MrPaseo,

Yours is a story I only wish I could have. Wow... amazing. I'm trying to picture it.

It's October 2022. You're 50. You have a pension bringing in ~$2k/month. You have your large sums of money off of which you will either comfortably "live off of the interest" or comfortably "siphon."

Hypothetically, how much cash (what amount) should you plan to have on hand as liquid (e.g. in checking and savings) on say October 1, 2022? What are your thoughts on that amount?

Regards,
FrugalDad123

[snafu]

It isn't necessary to have a whack of cash or liquid savings at retirement. It is far better to have your money continue to work for you as a senior and merely draw down as needed. Having cash available makes you vulnerable to the scammers, shysters and people who prey on senior vulnerabilities.

[FrugalDad123]

It isn't necessary to have a whack of cash or liquid savings at retirement. It is far better to have your money continue to work for you...

Thank you, snafu. So, this makes me think -- as a crude estimate -- that by the first day of one's retirement life he/she should have done and arranged the following:

1.) Verify the annual budget is up to date.
2.) Verify that arrangements with financial institutions have already been put in place to send me money (lower and upper limits defined) periodically.
3.) In order to prevent having too much liquid on hand on any given day, make sure step 2 is aligned with step 1.
4.) Loop this thinking-and-action-taking process at least every year as necessary/possible.

Wow... I'm glad I am part of this forum... trying to think ahead.

Regards,
FrugalDad123

[jIM_Ohio]

Thank you, snafu. So, this makes me think -- as a crude estimate -- that by the first day of one's retirement life he/she should have done and arranged the following:

1.) Verify the annual budget is up to date.
2.) Verify that arrangements with financial institutions have already been put in place to send me money (lower and upper limits defined) periodically.
3.) In order to prevent having too much liquid on hand on any given day, make sure step 2 is aligned with step 1.
4.) Loop this thinking-and-action-taking process at least every year as necessary/possible.

Wow... I'm glad I am part of this forum... trying to think ahead.

Regards,
FrugalDad123

FD-

You are correct that planning is needed...

here are some random variables to consider (some related, some not)

You can have an annuity pay you 1X per year, 1X per month or something else
You can have interest from a CD deposited to account every month
You can have dividends deposited every quarter
Some bond funds pay interest monthly (mine does)
Most mutual funds pay capital gains once per year (usually in December timeframe).

Depending on how you set up investments, you might have 3-5 years cash in a money market account, then as stock funds, bond funds and CDs generate interest and dividends and capital gains, deposit them into the money market account.

Nothing can replace financial discipline of the person with the money, but you can take precautions to follow the budget. Consider there will be non annual expenses in retirement which your "annual budget" will NOT cover. For example a new roof for your house, a new HVAC system, a new car 15 years later, and another one 15 years after that. So factor those expenses in too.

[FrugalDad123]

FD- You are correct that planning is needed... here are some random variables to consider ...factor those expenses in too.

Thank you so much jIM_Ohio. I will be reading this a few times to absorb it.

Thank You,
FrugalDad123