Retirement Savings Just Passed $70,000

Our retirement accounts balance (401k, Roth IRA, and Traditional IRA) just passed $70,000! As of this morning, our total retirement savings is $70,169.27. Still a long way to go to early retirement, but we're on our way.

Target Retirement Date Update

It’s been a half a year since we first started down the path towards our goal of early retirement. While our goal of retiring in 2027 may still be a stretch, I’m more optimistic than ever. We have enjoyed great success thus far in growing our net worth, while having fun along the way.

There are still many years and major events between now and the possibility of early retirement. We would like to purchase a house and have kids in the next few years, both of which will impact our goal. We hope to offset these costs by increasing our earning potential and investing more each year. Oh, and it would be great if the housing market turns around and we can sell our condo in a few years for a profit.

Maybe I should say that we’re cautiously optimistic.

Net Worth Milestones

To achieve our net worth goal of $1.5M in 20 years, we need a plan. Below are our net worth goals for each year (click on spreadsheet to enlarge). This plan assumes an average annual return of 8%, and our ability to increase our investments as our careers develop.

As you can see, if we are able to hit our targets, we are still almost $300K short of our $1.5M goal. I guess that’s why they call them "stretch" goals.

Stong Financial Foundation

Simple ideas for a strong financial foundation:

Live below your means
I believe this is one of the most important steps to a strong financial foundation and, for me, one of the hardest. If you try to keep up with your rich looking friends and associates, you may end up like most of them: lots of nice stuff, but a low net worth. Every dollar that you save is worth more than an extra dollar earned because the extra dollar earned is taxed.

Start an emergency fund
Job loss, health issues, and expenisve repairs are financial blows that can affect us all. Open a high yeild savings account (Emigrant Direct, ING, etc.) and start saving for the unexpected.

Aviod credit card debt
Credit card debt is the path to financial ruin. Been there, done that. Believe me when I tell you that digging the hole is very, very easy and climbing out is often a long, hard fought battle. The only thing we use credit cards for now are monthly bills because we get cash back from our Citi credit card. Don’t do this if can’t pay off the balance in full each month.

Track spending / create a budget
It’s easy to overspend if you don’t know what you’re spending. Track spending for a few months and use this information to create a budget. The budget will help keep you on track and hopefully help you find areas where you can reduce spending.

Learn all you can about investing
Most financial planners are more interested in their commission, rather than what is in your best interest. If you educate yourself, you can save A LOT of money and probably do just as good a job, if not better.

Invest at least 10% of your gross income
The future is coming whether you want it to our not. The magic of compound interest can make your consistent contributions grow into a large nest egg. Take advantage of tax sheltered retirement account such as a 401(k) and/or Roth IRA. If your employer offers a 401(k) with a company match, take advantage of the free money.

Target Retirement Date

Our ideal target retirement date is 2027, twenty years from now, when I am 52 and my wife is 43. Realistically, this goal is going to be a stretch, but we have a long enough time frame that I think it is possible under favorable conditions.

If we believe that we can live on $60,000/year when we retire, then using a 4% Safe Withdrawal Rate (SWR), our nest egg goal is $1.5M. However, with inflation averaging 3.43% annually, our nest egg may need to be substantially larger.

We will refine and better define our plans/goal as time goes on. Some other challenges in reaching our goal include being able to purchase (and pay off) a home and finding affordable long term health care. Our desire to have children will also affect our saving/investing rate, but won’t stop us from having them.

I guess if I have to work until 53, I could live with that.

First, some background information

My amazing wife and I have been married for one year. When we met over two years ago, I was in bad shape financially. I owed $27,000+ in credit card debit and $4,000 to my parents. My problem was that I always spent more than I earned, and figured that I’d just catch up later. Unfortunately, later never seemed to arrive. My wife (girlfriend at the time) woke me up to the fact that I was in over my head, and I needed to change my ways and pay off my debt.

Substantial progress was made (another post, another time) and I am happy to report that we were able to by a one bedroom condo last year. As a new home owner, I began doing more financial research online, and stumbled across an early retirement forum that got me hooked on the idea of financial independence. From that point, I began scouring the web for tips and tricks on how to get ahead and have our money work for us. I plan to share with you what I’ve learned thru long nights glued to my laptop. Believe me though, it is an education in progress. Thankfully, my wife is completely onboard and, in a lot of ways, leading the way for us.