An Aggressive Goal

**disneysteve** · 01-07-2011, 05:02 AM

Originally posted by FrugalGirl321 View Post

What are some ideas to investing that we should start considering?

I'd say the most important thing is to make it automatic. Have the money withdrawn from your account automatically every month so that you don't have to think about it or remember to do it.

Do either of you have employer-sponsored plans? If so, are you participating in them?

**FrugalGirl321** · 01-07-2011, 05:13 AM

I'm a SAHM so the only account we contribute to for my retirement is my ROTH IRA. We're only putting $140/month in that right now while we're attacking the mortgage.

My husband is maxing out his 401K with a 5% match and we do max out his ROTH as well.

Once the mortgage is complete, I have no problem making our future investments automatic, but I just don't know how and where to diversify the money. Certainly, we'll begin my maxing out my ROTH first. How much is enough cash for an emergency fund? We have about $37K right now because we feel his job is very secure.

We've considered buying a property to use as a rental. We'd buy it on a short loan, 10 years at most. We aren't sure if that's what we want to do.

Overall, I just don't know exactly how much we should have saved if we want to retire when he's 57 and we estimate a 75% of current earnings as our withdrawal rate.

**littleroc02us** · 01-07-2011, 05:14 AM

Originally posted by FrugalGirl321 View Post

We have an aggressive goal to pay off our current 10 year mortgage by December 2012 as it is our only debt. We are a bit behind on retirement savings as we're hoping to retire when my husband is 59, or even 57. We're currently 39 and 37. Once the mortgage is gone, we'll have a sizable cash flow and no debt, hopefully ever again.

One thing I might suggest if you have all other debt paid off and a good EF fund of 6-8 months is to continue contributing 15% of your income towards retirement while paying off your mortgage. Compound interest can't be made up easily.

**FrugalGirl321** · 01-07-2011, 05:22 AM

Originally posted by littleroc02us View Post

One thing I might suggest if you have all other debt paid off and a good EF fund of 6-8 months is to continue contributing 15% of your income towards retirement while paying off your mortgage. Compound interest can't be made up easily.

Yes, we're easily doing in excess of 15%. Probably closer to 20%+.

Thank you.

**FrugalGirl321** · 01-07-2011, 05:30 AM

I should clarify from the first post that we're horrible investors in terms of having knowledge to do so, but we're great savers overall.

So I'm basically trying to find out the best ways to invest money once the mortgage is done and if we can retire when husband is 57.

Sorry for the confusion.

**littleroc02us** · 01-07-2011, 05:52 AM

I've had great success with Vanguard Index funds... 22.8% returns this past year. Also, look at Wellington funds, Bonds, etc....

**littleroc02us** · 01-07-2011, 05:52 AM

My plan is to not use a financial planner or pay huge fees until I have great wealth to have them preserve it for me when my wife and I are close to retirement.

**disneysteve** · 01-07-2011, 06:08 AM

You already have a 401k and 2 Roths. How are those invested?

Your EF should be 6 months worth of expenses.

**jpg7n16** · 01-07-2011, 06:24 AM

If you'd like an easy investing idea, invest everything in a target date fund while you study up on investing.

Choose a target date that matches when you want to retire.

So if you're 30, and want to retire at 59 then that's 29 years away. 2012 + 29 = 2041 So invest in a 2040 target date fund. It will automatically allocate for you as for a moderate investor.

VFORX Vanguard Target Retirement 2040 Inv, mutual funds, quote, price - Morningstar

And while it's doing it's thing, maybe take a class on investing. Or check out some books on investing from your local library.

**feh** · 01-07-2011, 07:56 AM

Originally posted by littleroc02us View Post

One thing I might suggest if you have all other debt paid off and a good EF fund of 6-8 months is to continue contributing 15% of your income towards retirement while paying off your mortgage. Compound interest can't be made up easily.

I was thinking the same thing. Assuming the interest rate on the mortgage isn't abnormally high, direct your extra money at retirement savings, not the mortgage.

**snshijuptr** · 01-07-2011, 09:40 AM

One of the greatest indicators of growth in a mutual fund is the expense ratio. Specifically, the lower the expense ratio, the more the investor earns. The place you'll find the lowest expense ratios are in index funds. Basically, my strategy is to determine an asset allocation (stocks vs bonds, domestic vs foreign) that I'm comfortable with and invest my money in the appropriate index fund with the lowest expense ratio.

For more complex investing advice, I like Investing for Beginners

**Mithrin** · 01-07-2011, 09:55 AM

I will add a vote to fully fund ALL of your retirement options before putting extra to the mortgage. That would mean upping your Roth contributions so that you max out, and if your husband isn't hitting the 15.5K max for his 401K, bump that up too.

It's a great goal to become debt free and get rid of the mortgage. However, retirement funds have annual limits. It's not going to help your retirement to underfund it now, and then in a few years when the mortgage is paid off, be in the situation where you have more money to put in than you're allowed. Also, mortgages are one of the cheapest ways to use the bank's money. If you have a decent rate on the mortgage, then your investments will typically earn more than the mortgage interest costs you--making it better to pay the mortgage off slower and use extra money to increase investments.

**FrugalGirl321** · 01-07-2011, 11:27 AM

To answer some of the questions:

Our savings is a full 6 months of emergency funds of bare bones expenses (get rid of all luxuries, including cable, vacations, etc). My husband's job is very stable; we're aware of the company's position financially, he's set to earn a profit sharing bonus and raise this year. We have no reason to believe he'll be let go as he's currently managing a job that is another 2 years so we feel secure long term, and even more secure for the following couple years.

Our ROTH's are with Vanguard right now. We only have a STAR fund right now because we just started his ROTH, and maxed it out, last year. We are now starting mine and should max mine this year as well. His 401K is maxed as well, the full $16,500 and we've been doing that for a few years. My husband has his portfolio diversified over equity funds available within the 401K.

So, now we're attacking the mortgage because we want that large cash flow when it's complete, hopefully by 12/2012. It's a 10 year mortgage that we just took out June 2010 at 4.385%. We've been here for 9 years, having refinanced 4 times but have always paid the same mortgage payment, or more, as the original loan so that our refinancings wouldn't cost us in the long run. So we feel that this is what we should throw our money at for 1)security that we don't have a mortgage payment in the near future and 2) we're now really putting the maximum allowable toward all our retirement accounts, despite the fact that I don't work.

I will reference the book, Investing for Beginners, as well as take a look at index funds.

We do not plan to use a financial advisor at all, and if we do, it will be closer to retirement.

Currently, we have $200K in his 401K and $5500 in ROTH's. Are we doing horrible?

**snshijuptr** · 01-07-2011, 11:35 AM

For a nifty retirement calculator, check out FIRECalc: A different kind of retirement calculator The calculator uses the past 120 years of data to tell you your % chance of NOT running out of money. You can use the tabs to input your expected retirement age, social security, etc.

You did not list your annual expenses, so it is hard to calculate your retirement needs.

An Aggressive Goal