2 working spouses, ages 29 and 28
1st baby due later this year
Recent post with approximate portfolio:
viewtopic.php?f=1&t=346742
Relevant AA:
Cash: currently up to $50k, plan to buy $20k of I bonds later this month and let cash hover around $30k for 2-tiered emergency fund
Bonds: currently none
Stocks: A bit over $400k now across various account types
Mortgage: A bit over $500k now @ 2.625% 30-year
Net Worth: About $750k now, including $300k of home a car value (I include it for convenience just because Mint does, not because I consider the car an investment)
FIRE target:
$60k annual expenses after taxes, including $25k in mortgage payments
25x expenses = $1.5m net worth target after taxes
Relocation from HCOL is likely in long term but no intentions of doing so for next 20ish years with kid(s) unless forced
Ideally would like to achieve FI some time over next decade when I turn 40
Thoughts:
I'm wondering how to prioritize between stocks and/or paying off the mortgage over the next 10 years. The way I see it, there are essentially 3 reasonable glide paths ahead of us:
- Just keep buying stocks and making minimum mortgage payments. This is obviously the high-risk/high-reward strategy.
- Start paying off the mortgage early. This is the conservative approach. I think aside from the I Bond EF tier, it doesn't really make sense to hold bonds given that paying off the mortgage gives a guaranteed higher return.
- Blend both approaches. I'm not sure what exactly the right blend would be or how to determine it, since the debt and portfolio size should move in opposite directions, so it's not quite the same as determining a stock/bond AA split.
I understand that's essentially the exact same risk we have been and are taking by being aggressive up to this point, so at this point, some of you reading are probably like, "Well, why the heck didn't you figure this out before?!" But in a way, I feel like getting near a financial goal and then having to postpone it for many years is worse than just failing and having to postpone it early on. As a young pup in my early 20s, I was at peace with the idea that it would take however long it would take, and that 30+ year careers were actually normal. However, with a kid on the way and aspirations outside of my day job, I'm feeling less willing to risk that FI milestone for lifestyle reasons, even though I would be totally comfortable taking on more risk with substantially more wealth. Does that make any sense? I feel like it might be some kind of emotion timing, almost like an ugly cousin of market timing, and maybe it has no place in Boglehead investing. But surely, there's a place for emotional changes seeing as how they are the basis for AA decisions in the first place. I feel fairly confident that 100% stocks and minimum mortgage payments is the optimal path forward in terms of total return given our flexibility to cut expenses and/or continue working, but I also know it would be pretty heart-breaking to get close and suffer a setback.
Question:
What are your thoughts on this weird FIRE glide path concept of high risk tolerance early, followed by lower risk tolerance into FI, and then high risk tolerance again if/when the portfolio grows well beyond one's needs? I guess it's not all that different from full-age retirement considerations, except that full-age retirees often don't have the option of continuing to work, whereas younger ones do, so it's kind of a roller coast versus a cliff. Is paying off the mortgage early too conservative in my case? Should I just buck up and accept that a market downturn in the next 10 years may delay our FIRE goals?