Will I Be Able To Retire Before 60?

[F.I.R.E User]

Will I Be Able To Retire Before Age 60?

Expenses in retirement: $60k minimum to the max 4% SWR. Whatever that maybe?

Here is a complete picture of my financial profile so far:

**Emergency funds**: **$3.000** earning 5.30% APY at online VIO Bank.

Checking account: **$100** daily balance.

**Debt**: **$0.**

**Tax Filing Status**: Single.

**Tax Rate**: Up to 12% Federal, 0% State.

**State of Residence**: Texas.

**Age**: 46.

**Gender**: Male.

Kid(s): None. No plans on having any.

**Desired Asset allocation**: 100% Stocks.

***Net Worth: $825,600*** which is my all-time high today!

Annual Salary: About **$70K** with 3% increase every year expected.

Current retirement assets:

Taxable:

**$51,664.82** -> Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX), Expense Ratio: 0.04% at Vanguard.

ESPP: **$5,303.72 ->** Megacorp (2% of paycheck), 1 year holding period before selling required, 15% per share discount. Using the profits to invest in VTSAX taxable account at Vanguard.

Traditional 401k: **$556,101.10 ->** SP 500 Index PL CE F, ER (Unknown) 85% AND Small Cap Index, ER (Unknown), 15%
6% Company Match $1 to $1. I took the allocation advice from Bogleheads forums and this is what was recommended to mimic VTSAX.

Contributing $23k with True Up option available.

Roth IRA at Fidelity: **$207,887** -> Fidelity ZERO Total Market Index Fund (FZROX), Expense Ratio: 0.00%. Contribution: $7k.

Pension at Fidelity: $0, Company merged into what it is today. employed for 1 year and 3+ months (Not sure if I will get any pension).

Employer has Roth 401K option.

Asset: 2016 Ford Fusion SE, paid off.

Never owned Real Estate. Always rented. I am paying at my highest rent in history which is now stands at **$613**

Mother (82) lives with me. She gets SSI, SNAP, Medicare/Caid. Family sends me the following funds every month:

Brother A: **$500**
Brother B: **$300**
Mother: **$120**

I prefer to F.I.R.E at an expense of $60-$75k per year living in Texas (Not my main choice) (rough future estimate).

Credit score 800+.

Game plan moving forward:

Continue to contribute the maximum allowed by law into traditional 401k and Roth IRA.

Company also offers a after tax up to $10k into 401k with in Roth conversion and I am not sure if I use should be using that instead of VTSAX taxable at Vanguard?

Leftovers to VTSAX taxable (varies)

Overall yearly contributions would be at least $40k counting the 401k match.

When should I plan to take SS? I am aiming for age 70.

Health: Fairly good health so far.

When should my investments have some Bonds exposure? What if the market tanks near and/or in retirement?

 

[Sunset]

Seems like you are on a good path.
You are young enough to hope the market tanks soon, so you can buy more shares on sale.

Maybe in ~10 year's when the stock market is high, I'd sell some in the 401K/IRA and buy CD's/bonds as I like to have ~ 3->5 years of spending in non-stock, so I can outlast most if not all stock recessions.

Since you are 100% stock, expect to see values drop a lot at some time, when earning I remember when I lost $200K due to the market decline... felt pretty bad, but kept buying stock and didn't sell. It was a good decision.

 

[Sunset]

Why does family send you money, is it to help out with Mother's costs ?

 

[F.I.R.E User]

Seems like you are on a good path.
You are young enough to hope the market tanks soon, so you can buy more shares on sale.

Maybe in ~10 year's when the stock market is high, I'd sell some in the 401K/IRA and buy CD's/bonds as I like to have ~ 3->5 years of spending in non-stock, so I can outlast most if not all stock recessions.

Since you are 100% stock, expect to see values drop a lot at some time, when earning I remember when I lost $200K due to the market decline... felt pretty bad, but kept buying stock and didn't sell. It was a good decision.

I can only sell from retirement account if I use the Rule of 55 otherwise penalty.

I don’t care about drops now. Started in 2007 and saw 2008-09 and 2020.

Family sends money to help out with mother’s cost and it also benefits me and I am taking care of her.

 

[FREE866]

You're definitely on the right path and if we just have average market returns, even less than average, you'll probably be set to retire sooner than 60.

 

[F.I.R.E User]

You're definitely on the right path and if we just have average market returns, even less than average, you'll probably be set to retire sooner than 60.

Average is 10% right? Or is it 7%?

 

[Dtail]

Average is 10% right? Or is it 7%?

The average SP500 return is 10% with a 3% average inflation for a net 7% real return.

 

[F.I.R.E User]

The average SP500 return is 10% with a 3% average inflation for a net 7% real return.

So use 10% in my calculations?

 

[FREE866]

Average is 10% right? Or is it 7%?

Over the last 100 years its 10%, BUT it's not linear so buckle your seat as the ride is always bumpy. That volatility is the "price" you pay for those returns. There's no guarantee , but I'm a believer the future will mirror the past.

 

[F.I.R.E User]

Over the last 100 years its 10%, BUT it's not linear so buckle your seat as the ride is always bumpy. That volatility is the "price" you pay for those returns. There's no guarantee , but I'm a believer the future will mirror the past.

I don’t care about big drops now. My concern is near and/or in retirement.

 

[Dtail]

So use 10% in my calculations?

Since it is an average return, it does not address SORR, thus I personally like using an historical sequencing calculator (FIRECALC) along with a Monte Carlo calculator (FIDELITY) vs using a gross average return concept.

 

[F.I.R.E User]

Since it is an average return, it does not address SORR, thus I personally like using an historical sequencing calculator (FIRECALC) along with a Monte Carlo calculator (FIDELITY) vs using a gross average return concept.

Which one is the most accurate?

 

[F.I.R.E User]

@pb4uski Please advice. You are one of the experts here.

 

[Dtail]

Which one is the most accurate?

They are both good. Firecalc mimics the actual historical returns in a sequential fashion. Monte Carlo calculators use a random return sequencing from actual returns but not in a sequence which has necessarily happened before.
Thus it can use 4 really bad sequential years which has not historically taken place. Like losses from 2000 to 2002 followed by the loss in 2008. These are called "tails" in the concept and thus Fidelity typically produces a more conservative result than Firecalc.

 

[F.I.R.E User]

They are both good. Firecalc mimics the actual historical returns in a sequential fashion. Monte Carlo calculators use a random return sequencing from actual returns but not in a sequence which has necessarily happened before.
Thus it can use 4 really bad sequential years which has not historically taken place. Like losses from 2000 to 2002 followed by the loss in 2008. These are called "tails" in the concept and thus Fidelity typically produces a more conservative result than Firecalc.

Do you have any suggestions on the type of funds I am invested in?

 

[Dtail]

Do you have any suggestions on the type of funds I am invested in?

Tough question. You can get many different responses for this question. Many folks are fully vested in equities many years before retirement but start moving some balances to Fixed Income as retirement gets closer.
That's all I got on this one.

 

[F.I.R.E User]

Tough question. You can get many different responses for this question. Many folks are fully vested in equities many years before retirement but start moving some balances to Fixed Income as retirement gets closer.
That's all I got on this one.

What do you think of my selections now?

When should I not be 100% stocks?

 

[Dtail]

What do you think of my selections now?

When should I not be 100% stocks?

If I was over 10 years from retirement, then I also would be 100% equities. As for types of funds, as I mentioned there are many different opinions on this one, with more agreement as not paying high fund fees.

 

[F.I.R.E User]

If I was over 10 years from retirement, then I also would be 100% equities. As for types of funds, as I mentioned there are many different opinions on this one, with more agreement as not paying high fund fees.

All my funds are low fees.

 

[N02L84ER]

Maybe in ~10 year's when the stock market is high, I'd sell some in the 401K/IRA and buy CD's/bonds as I like to have ~ 3->5 years of spending in non-stock, so I can outlast most if not all stock recessions.

I can only sell from retirement account if I use the Rule of 55 otherwise penalty.

Sunset is saying to rebalance your asset allocation by selling stock funds and buying bond/fixed income funds in your 401K/IRA - basically doing an exchange of funds which has no penalty. He is not saying to sell from the 401K/IRA and buy in a taxable account.

 

[F.I.R.E User]

Sunset is saying to rebalance your asset allocation by selling stock funds and buying bond/fixed income funds in your 401K/IRA - basically doing an exchange of funds which has no penalty. He is not saying to sell from the 401K/IRA and buy in a taxable account.

That means a 2 or 3 fund portfolio in my 401k?

 

[N02L84ER]

That means a 2 or 3 fund portfolio in my 401k?

Yes. Then, when you retire and start withdrawing from your taxable account, you can rebalance your 401K by exchanging the bond fund money for more total stock which means you are initially living on the bond/fixed income money.

 

[street]

I think you are doing fine and stay on course and keep saving. The power of compounding is huge and the longer you can stash and grow the stronger your odds get to ER.
Keep up what you are doing.

 

[Ronstar]

Retiring early depends on 3 things. Making enough money while working to save for early retirement, investing well, and keeping spending low.

You're 14 years from proposed retirement. Track expenses to the nth degree. Build a good model of proposed retirement spending based on at least 10 years of spending data. Account for inflation in calculating expenses several years. Don't forget an allowance for capital expenditures.

I would start off now at 46 yo with an AA of around 80/20 (I'm more conservative than most here) and move gradually toward 70/30 at 60 years old. Track your investments and create portfolio and spending projections. Goal is a max of 4% WR. (probably should be lower at 60 years old. Maybe 3% at 60? So shoot for a nest egg of 33 times yours projected spending at 60. And keep re-projecting. You need to monitor this.

That said, I'm sure you'll achieve your goal if you invest well, spend little, track spending, and make logical financial projections.

ETA - And I agree with the 2 or 3 fund portfolio in your 401k as mentioned above.

 

[F.I.R.E User]

I am unable to multi quote so I will use a tag if that is ok?

@N02L84ER Always start with taxable account to withdraw, why? When do I add Bonds in my overall portfolio?

@street What age did you retire?

@Ronstar I want to spend more in retirement than I am now/past/future.

I am not conservative at all so what is the point of 20% Bonds now? Aren’t I giving up the max gains?

Many say have a 2 year cash reserve in retirement and be all stocks. When market tanks use the cash reserve.