Betterment

I just signed up with Betterment.  It’s an investment service that gives you an instant diversified portfolio, automatic rebalancing, automatic monthly deposits/withdrawals and more.  The first 30 days and the overall fees are very low (0.35%).  Use this link to sign up and you’ll get a free $25 in your account after you’re all verified (basically makes it free for a while): http://betterment.com/invite/geoffreypearson.  I decided to set up an IRA there, but may add additional ‘goals’ in the future.

Good stuff!

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Framing the whole thing

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A quick post on framing the idea of early retirement. The quick way to state the goal is to say that you want to retire early. The better, slightly longer way to put it is that you want to be financially independent; not be forced to work for the money. You want to be able to do as you please and not have to worry about how to pay the bills. You want to be free to follow your own interests whether they end up making money or not. You may wish to learn new skills or travel or take up new hobbies. You want your ideal life, not one weighed down by HAVING to work, but wanting to work (if you so choose).  You may not end up a millionaire, but you won’t need to be and you’ll be perfectly happy with what you choose to do in life.

Down and dirty changes and plans

Debt is an emergency!

I have bunches of debt and limited income from my job that I can devote to paying that debt off.  I do have a pretty good way of coming up with money in order to make the payments on that debt that I’d like to (selling Magic cards and other things on eBay and Facebook).  Since December 2013, I’ve gotten serious about paying off my debt by substantially increasing my monthly payments and have been keeping track of my progress.  Before that point I was making normal payments for quite a while, but they were ‘only’ $300 a month.  Since starting to keep track (100%), I’ve been able to take my total debt down to nearly 74% since then.  I hope and fully expect to have one of the main debts squashed out by the end of 2014.  Doing so will leave me with around 62% of the beginning debt.  The remaining debt has low/no interest, so I will be taking two years or so to pay it off.  Also, I do have some school loans that are being paid off as well, but the interest on those is pretty much zero, so I’m in no hurry on those either (the balance is less than $2k and they’re automatically taken from my account).  After the first debt is gone, at least $100 per month will go to investments and when all of the debt is gone, everything ‘extra’ will go into investments.

I have changed my 401(k) from Roth to Traditional and increased my contribution from 7% to 10%.  This does not change my take home pay and should work out well in the long run since I should be in a much lower tax bracket when I ‘retire’ in 2029.

I have already made one decent change in our household spending in that I have eliminated cable and slightly lowered our internet speed thus lowering our bill by $15-20 per month.  I plan to switch my phone plan to Ting wireless or Republic Wireless.  With Ting, you need a phone (or can buy one from them or elsewhere), but their service uses a pay for what you use model.  Republic offers two or three phones for as little as $150 and the monthly bill can be as low as $10 to $25 depending on the plan.  Both services look to be significant savings over my current Sprint bill, but I’m part of a family plan, so getting out of it is a bit more difficult.

The goal

In order for me to hit my goal of retiring on July 1, 2029, beginning January 2015, I will have to average around $2200 invested per month (assuming an average 7% rate of return and 4% safe withdrawal rate).  Currently, I’m not on track to hit this, but this will be the goal average.  This roughly includes a two-and-a-half year payoff of the mortgage after I have hit my dollar goal for being able to retire (~$600k).  In order to do this, I will need to max out my 401(k) (currently capped at $17.5k w/o match) and also max out an IRA (curretly capped at $5.5k per year).  These figures should increase in the future, but for now this nearly matches my goal of getting $26.5k per year into investments, so I shouldn’t have to go into tax-disadvantaged accounts in order to hit my goals, but I’m fully prepared to do so if need be.

Now you see my situation and plans. If you have a plan, let me know!