Hello and how are we doing?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
sreeramk
Posts: 2
Joined: Wed Jun 21, 2017 12:59 am

Hello and how are we doing?

Post by sreeramk »

Hello

First post. Long time lurker/reader, but slowly getting serious planing towards retirement. Thanks to everyone for their contribution to the board.

About me and my wife...we are in early 40's/late 30's respectively
Location: San Jose, CA
Total Net worth: 1.46 mil
Home: Worth about 800K after sale and owe about 400K in debt.
income: Combined, we make a little over $300K/yr before taxes.
Investments/Retirement: Split between Betterment, vanguard and Wealthfront. Combined, around $600K
No debts or payments other than mortgage which is $2K /month

Rate of saving: Consistently $60K/year
Liquid cash savings: $350K. $250K in capitalone 360 with 0.9% and $100K in Ally with 1.5%.

Two kids 10 and 4 going to private schools and may continue to do so until college.
About $15K in 529's.

I know we are sitting on $350K liquid cash, but I've been saving it so we can buy a second home around 1 million sometime soon so kids can go to public schools. Not sure if that'll ever happen though. :oops:

If we don't buy another house, how are we doing? At the rate we are saving, is when is a good age we can expect to retire? We are pretty conservative in reckless spending.

Thanks
Sam
User avatar
Peter Foley
Posts: 5525
Joined: Fri Nov 23, 2007 9:34 am
Location: Lake Wobegon

Re: Hello and how are we doing?

Post by Peter Foley »

I think you are doing well. My only suggestion would be to use some of the cash to pay off some of the mortgage if the rate merits such an action. Even if you are a year or two out from buying a new house you will probably come out ahead. In addition I would use some of the cash to more fully fund the 529 plans.
You live in an expensive area. Retirement when your youngest can see the light at the end of the college tunnel might be a good goal. (mid 50's?)

Some of this depends on where your retirement savings are currently. All in tax deferred is worth less than all in Roth of course. To retire very early you will want significant taxable account savings as well.
User avatar
sapphire96
Posts: 193
Joined: Fri Jun 16, 2017 8:08 pm

Re: Hello and how are we doing?

Post by sapphire96 »

Peter Foley wrote:I think you are doing well. My only suggestion would be to use some of the cash to pay off some of the mortgage if the rate merits such an action. Even if you are a year or two out from buying a new house you will probably come out ahead. In addition I would use some of the cash to more fully fund the 529 plans.
+1 :sharebeer
Keep interest as your friend, not your foe. | Use money as a tool for bettering your life, not squandering it. | Stay the course, don’t deviate from it.
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: Hello and how are we doing?

Post by delamer »

One side of the "can we afford to retire" equation is income. The other side of the equation is expenses.

No one can give you a good estimate of when you can afford to retire without knowing both your expected income and expenses.

It is hard to project expenses out 15 or 20 years, but using your current expenses and adjusting for a paid off mortgage (if expected), decreased kid-related expenses, increased travel budget, increased heslth insurance, etc. can give you a rough idea.

Figure a sustainable 4% withdrawal rate from your portfolio plus Social Security (when available) as your income.

Then compare to get an idea of when your income will meet your expenses.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
aspiringlawyer
Posts: 48
Joined: Fri Apr 07, 2017 10:06 am

Re: Hello and how are we doing?

Post by aspiringlawyer »

What do you have your money invested in? Move to a cheaper place with a lower COA in a few years or now and you could probably already retire!
User avatar
Watty
Posts: 28813
Joined: Wed Oct 10, 2007 3:55 pm

Re: Hello and how are we doing?

Post by Watty »

sapphire96 wrote:
Peter Foley wrote:I think you are doing well. My only suggestion would be to use some of the cash to pay off some of the mortgage if the rate merits such an action. Even if you are a year or two out from buying a new house you will probably come out ahead. In addition I would use some of the cash to more fully fund the 529 plans.
+1 :sharebeer
Another +1 on using the money to pay down the mortgage. The money will be freed up when you sell your house in order to buy your next house. That would be more or less like buying a risk free CD at the same interest rate.

You can call your lender and check to see if they will "recast your mortgage"(Google this) if you make a large pre-payment. They are not required to but they likely will for a couple of hundred dollar processing fee. That way if you pay off 75%(or whatever percent) of your loan balance your required mortgage payment will be reduced by the same percentage.

Do try to keep an open mind about moving to a lower cost of living area. There are lots of very nice places where you can buy a lot of house for a half a million dollars or less. I live in Atlanta now here is an example of what type of house you can get for a half a million dollars in one of the suburbs where many of the high tech companies are located. (Some downtown areas would be more expensive.)

http://www.realtor.com/realestateandhom ... 4710-59158

Before I retired I was a software developer and my son is a software engineer so I am relatively familiar with that part of the tech job market market. My impression is unless you are in a special niche or upper management the regional differences in salary are not as large as you might think and usually not enough account for the differences in housing prices. I'm not saying that Atlanta is nirvana but if you moved someplace like Atlanta you could have a paid for house like that, about a million bucks in the bank, and still have a high paying job.

I left the Bay Area in the 1980's for more affordable housing and it was one of the best decisions that I ever made. A big benefit is that my son who is in his late 20's and doing well can easily afford to buy a house ten minutes away from me so we get to see him and our grand-kid frequently. Even back when I lived in the Bay Area I saw older coworkers who had grown kids that could not really afford to live there and that was not a good situation. With your oldest kid being ten years old you are only around ten years from when that might be an issue for you.

I also have friends who have grown kids that don't have high paying jobs because of things like dyslexia and barely graduating high school or not finishing college for other reasons. Even with a modest income their kids are still able to afford to live on their own and buy a modest small home in an OK area especially if they are married and have two incomes.
Topic Author
sreeramk
Posts: 2
Joined: Wed Jun 21, 2017 12:59 am

Re: Hello and how are we doing?

Post by sreeramk »

Thanks everyone for their feedback!! I'll make an attempt to answer everyone's question.

I will google up that 'recasting' but in the 1/2 a dozen times we've decided on re-financing, that option was never offered to us. Also, there seemed no benefit in the mortgage rate if we payed more. There was a significant difference when we brought it down under 417K and that's what we did the last time we refinanced. :happy

Each time I bring up the topic of moving to a different part of the country, the discussion just ends in more questions. After living in a place for 17 years, with friends and blood-relatives, it hard to move. I have the niche DevOps skillset with management experience and could probably score a job in Texas for close to $200K/year. We could probably very well retire if we moved to Dallas/Austin, but the bay area has simply spoiled us.

We are not big spenders, we hardly go to the mall...I buy used cars, used electronics, etc. Currently our expenses are approx $90K per year and a big chunk of it is for private school. I've come across the "4%" withdrawal. Does that simply mean, if we had a 1 million portfolio and we're at the age to withdraw, we should try to live under $40K/year?
Post Reply