As we’re getting closer to paying off our non-mortgage debt, I’m plotting how and when we’re going to retire early. My goal is to replace our current expenses minus mortgage (but not insurance and taxes) and daycare plus 20%. We currently do not pay health insurance premiums (100% covered by my employer), and we’ll expect to be paying for those in retirement. I also want to travel more, since we’ll have more time. I figure 20% gives us a lot of wiggle room to reduce expenses if we need to.
I want to grow our investable assets to $1.6million, which gives us a safe withdrawal of $48,000 (at a 3% rate) – $64,000 (at a 4% rate), which will cover essential expenses plus some. At 6% interest, when we have that kind of nest egg, the interest/increases alone can cover our current costs (with mortgage).
Inspired by Mr 1500, I’ve made some estimates on what our goals are for contributions and interest accumulation and spread it out over the next few years. I used an assumed 6% interest rate, which is moderate, and may be too aggressive depending on who you ask. Also, there’s no inflation accounted for in this plan, mostly because I suck at doing interest rate calculations when they involve inflation.
I’m hoping my contribution numbers are kinda low, 60,000 is only 32% of our gross income, which is a pretty dismal savings rate. But these are the numbers I feel are realistic given our current situation and plans. If we happen to contribute more, that’s great, but these are the minimums I’d like to see. Seeing the information in table form like this will help make sure we’re on track or if we need to revise our plans (for better or worse). This table only includes our invested assets, not our savings accounts, nor our house, so it’s already a bit conservative, but Dad’s a bit conservative as well, and we’d rather not have to return to the workforce if we don’t want to.
Nice – we’ve got a similar spreadsheet, though our current aim is about 1.2MM in investable assets. Maybe more… we’ll see since for us it feels more like “FI” money instead of “ER” money as we’re pretty sure we’ll do something to make an income, just maybe not a sizable one. =)
Are you guys planning on paying for college for the kiddos? Is that in a separate fund or included in your total? (Always curious how people with kids do things differently in case we ever have one…)
We are planning to be able to pay for in state college for the kiddo, and that’s in a separate bucket (although in a stock index fund as well). Our goal for that is about 120k which should cover an in-state school in Virginia.
Yikes! How old are your kids? Ours are 2 and 4 and I am terrified of how much college may cost in 13-15 years when they are ready. We have been saving since they are babies and plan on using our rental property income to pay their tuition while they’re in school as well. I hope it’s enough!
Daughter Person just turned 3 in January, Virginia has a lot of different schools that are considered “state” schools. William and Mary is a state school, but much more expensive than say Virginia Tech. Current prices for one year at Virginia Tech (tuition, room and board) is just under 20k (http://www.admiss.vt.edu/cost/). With 15 more years to go, I expect those prices to rise to at least 30-40k/year based on declining state and federal aid and overall increasing tuition costs. 120k is our goal, but if we’re a little short, I’m not going to struggle with it, she can get a part time job or take out loans.
Oh, I just love the detailed chart you have there. I did a similar one a while back, but have already deviated significantly from the plan. Such is life, right?
I especially like the conservative nature of the plan. If you end up contributing more over time, or if your investments beat 6%, then you’ll just hit the finish line faster!
It wasn’t my idea – I got it from 1500 days – it just finally made sense for me to create one for us. I’ll have a decent idea of how well my estimating was at the end of the year – at least for contributions, and I may adjust the contributions up once I see our cash flow after debt repayment.
It’s great you have such a plan and have it all laid out! We have similar spreadsheets and tables, and find that is not only helps us to see where we are at (ie if we need to save more, etc), but it is very motivating for us, wanting to hit those target goals! Good luck!
At some point, I am going to post my retirement plan on my site. I hope to pass the 1M in investment assets this summer. I already have more than that in RE equity, but am not quite ready to ‘pull the plug’. Once I retire, I am not coming back…
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