32 y/o teacher checking in...early retirement possible?
Posted: Fri Jan 08, 2021 12:10 pm
Hello!
I posted a portfolio for review 4 years ago and got some great advice, but am now motivated to move up my retirement age from 58 to 43, which requires some shifting of my investment strategies. I'm not sure I will retire if I'm able to at 43, but I want to have the option. I'm sure that if I do retire, I will find some sort of enjoyable pastime that earns me some money (maybe flipping houses). Anyway, I'd love to have y'all take a look at my current standing and plan and let me know what you think:
Emergency funds: Usually 3-5 mos. expenses in checking
Debt: ~$110k Mortgage, 7 years remaining, 2.79%
Tax Filing Status: Single
Tax Rate: 22% Federal, 5% State
State of Residence: CT
Age: 32
Income: $71k/yr salary, ~$21k yr rental income
Current Portfolio:
-$105k in IRA (67% Roth, 33% Traditional)
--54% in FZROX (Fidelity Total Market)
--28% in FZILX (Fidelity International)
--18% in FXNAX (Fidelity US Bond)
-$75k in 403b (60% Roth, 40% Pre-tax)
--55% in VIIIX (Vanguard S&P 500)
--28% in RERGX (American Funds EuroPacific Growth)
--17% in VBTIX (Vanguard Total Bond)
-$60k in taxable Fidelity account (should be increasing to $190k soon with house sale)
--20% in cash
--80% in individual stocks
-$620k in real estate (should be decreasing to $485k soon with house sale)
--$190k primary residence ($110k mortgage balance on this one)
--$160k 2-family rental, generating ~$18k/yr net income
--$135k single family rental, generating $9k/yr net income
--$135k previous residence, pending sale
Net worth roughly $750k
Current Contributions:
-Max 403b at $19.5k/yr (100% Pre-tax, may adjust to get income to top of 12% tax bracket)
-Max 457 at $19.5k/yr (100% Pre-Tax)
-Max Roth IRA at $6k/yr
Total Savings Rate: $45k/yr
Current Expenses:
-$20k/yr for mortgage/taxes (7 years remaining)
-$20k/yr for car/food/personal
Expenses roughly $40k/yr
Additional Potentially Relevant Information:
-I am contributing to a teacher’s pension, which assuming I work until age 43 (20 yrs service) and begin collecting at age 60, will pay 40% of my top 3 years. For now, assuming 40% of 90k, I expect this to provide $36k/yr once I reach age 60.
-I will be able to purchase health care through my school after retiring at the rate they pay, if no other options are available at that point.
-My house is fairly small and recently renovated (new roof, solar panels, new kitchen, new bathroom), so I am anticipating no significant expenses in the short term, but it has a well/septic so I want to be prepared for replacement costs if necessary. I also can do most work myself so any expenses incurred should be minor.
-My car is relatively new and owned outright (2017 Chevy Bolt), so I anticipate very low cost of ownership for the short term, and expect to replace it with a similar used, electric car upon its demise.
-I intend to sell the 1-family rental when the current lease expires and purchase another 2-4 family rental, which may require an additional $50-$100k from my taxable account
-My house will be paid off in 7 years, which should reduce my annual expenses to ~$25k/yr.
-My goal by age 43 is to have at least $500k in 403b+IRA combined, at least $500k in taxable+457 combined, and at least $500k in real estate both housing me and generating income.
-I currently have a girlfriend who out-earns me and is also financially stable, so if any family changes happen in the near future, I expect that the financial impact will be relatively easily absorbed with a second income.
-I intend to have 2 redundant sources of income between ages 43-60: Gains on my taxable+457 accounts (intending to avoid drawing it down), and rental income. The goal will be to use the rental income as my primary source of revenue, but the investment gains can provide a safety net in the case of vacancy or unexpected expenses.
Questions:
1. Do you have any advice, critique, or feedback related to my investment allocation or contribution strategy?
2. Am I overlooking anything that may require altering this plan?
3. What, if anything, would you do differently in my position?
I posted a portfolio for review 4 years ago and got some great advice, but am now motivated to move up my retirement age from 58 to 43, which requires some shifting of my investment strategies. I'm not sure I will retire if I'm able to at 43, but I want to have the option. I'm sure that if I do retire, I will find some sort of enjoyable pastime that earns me some money (maybe flipping houses). Anyway, I'd love to have y'all take a look at my current standing and plan and let me know what you think:
Emergency funds: Usually 3-5 mos. expenses in checking
Debt: ~$110k Mortgage, 7 years remaining, 2.79%
Tax Filing Status: Single
Tax Rate: 22% Federal, 5% State
State of Residence: CT
Age: 32
Income: $71k/yr salary, ~$21k yr rental income
Current Portfolio:
-$105k in IRA (67% Roth, 33% Traditional)
--54% in FZROX (Fidelity Total Market)
--28% in FZILX (Fidelity International)
--18% in FXNAX (Fidelity US Bond)
-$75k in 403b (60% Roth, 40% Pre-tax)
--55% in VIIIX (Vanguard S&P 500)
--28% in RERGX (American Funds EuroPacific Growth)
--17% in VBTIX (Vanguard Total Bond)
-$60k in taxable Fidelity account (should be increasing to $190k soon with house sale)
--20% in cash
--80% in individual stocks
-$620k in real estate (should be decreasing to $485k soon with house sale)
--$190k primary residence ($110k mortgage balance on this one)
--$160k 2-family rental, generating ~$18k/yr net income
--$135k single family rental, generating $9k/yr net income
--$135k previous residence, pending sale
Net worth roughly $750k
Current Contributions:
-Max 403b at $19.5k/yr (100% Pre-tax, may adjust to get income to top of 12% tax bracket)
-Max 457 at $19.5k/yr (100% Pre-Tax)
-Max Roth IRA at $6k/yr
Total Savings Rate: $45k/yr
Current Expenses:
-$20k/yr for mortgage/taxes (7 years remaining)
-$20k/yr for car/food/personal
Expenses roughly $40k/yr
Additional Potentially Relevant Information:
-I am contributing to a teacher’s pension, which assuming I work until age 43 (20 yrs service) and begin collecting at age 60, will pay 40% of my top 3 years. For now, assuming 40% of 90k, I expect this to provide $36k/yr once I reach age 60.
-I will be able to purchase health care through my school after retiring at the rate they pay, if no other options are available at that point.
-My house is fairly small and recently renovated (new roof, solar panels, new kitchen, new bathroom), so I am anticipating no significant expenses in the short term, but it has a well/septic so I want to be prepared for replacement costs if necessary. I also can do most work myself so any expenses incurred should be minor.
-My car is relatively new and owned outright (2017 Chevy Bolt), so I anticipate very low cost of ownership for the short term, and expect to replace it with a similar used, electric car upon its demise.
-I intend to sell the 1-family rental when the current lease expires and purchase another 2-4 family rental, which may require an additional $50-$100k from my taxable account
-My house will be paid off in 7 years, which should reduce my annual expenses to ~$25k/yr.
-My goal by age 43 is to have at least $500k in 403b+IRA combined, at least $500k in taxable+457 combined, and at least $500k in real estate both housing me and generating income.
-I currently have a girlfriend who out-earns me and is also financially stable, so if any family changes happen in the near future, I expect that the financial impact will be relatively easily absorbed with a second income.
-I intend to have 2 redundant sources of income between ages 43-60: Gains on my taxable+457 accounts (intending to avoid drawing it down), and rental income. The goal will be to use the rental income as my primary source of revenue, but the investment gains can provide a safety net in the case of vacancy or unexpected expenses.
Questions:
1. Do you have any advice, critique, or feedback related to my investment allocation or contribution strategy?
2. Am I overlooking anything that may require altering this plan?
3. What, if anything, would you do differently in my position?