Retirement Blueprint – Part II
In Part I of this series I recapped my goals of retirement by the age of 35. In this post I will go into the specifics of the assets I will have by the age of 35 in order to attain that goal.
Now as previously mentioned, the main assets I will have are going to be in these four categories: real estate properties, retirement accounts, savings, and stocks.
Here is the breakdown of the asset values at the age of 35 and the corresponding details for each category:
Real Estate:
- Per a prior post, I was able to project that each of the mortgages for the three real estate properties will be paid off by the time I am 35 years old.
- I used conservative estimates in keeping the real estate market prices in seven (7) years the same as they are today (they have recently been assessed at 500,000 and 480,000 each). I believe this is conservative because most likely the current soft real estate market should start seeing some recovery in seven years.
Retirement Accounts:
- Per another prior post, I was able to project the balances of the retirement accounts by the time I am 35 years old.
- I had used a conservative 5% growth for all accounts.
Savings:
- For the accounts Checking, Savings, and Internet Savings I had used the current balances.
- 1st year of savings is based on the latter six months left in this year times the amount of 660 saved per month as previously budgeted.
- 2nd – 7th year of savings is based on the high likelihood that I will no longer be renting House #3 to Bae after the 1st year is over and thus will have an additional 500 to save every month once I can rent at the market price of 1,200. Thus, it is calculated as: 6 years * 12 months/year * (660 original savings + 500 additional savings) = 83,520 total
- This estimate is conservative because I know that I can save at least 660 per month and often it is even more. In addition, this does not take into account any promotions, salary increases, or COLA increases at work for the next seven years, which would then increase savings. It also does not take into account any interest generated from savings over the next seven years.
Stocks:
- This amount is the current balance I have in my stock market account.
- It is a conservative estimate since I do not project any gains in the stock market over a period of seven years.
Overall, please note that these are rough estimates as it can be hard to predict all the factors that might affect the future. As a result, I am trying to conservatively project what my total asset value should be by the time I am 35 years old.
In the next post I will see how this total asset value can help me generate my retirement income by tweaking it with various interest rates.
Related posts:
A strong believer in the lifestyle goals you set out in this blog, and the planning approach. However, judging by pure numbers alone I think you portray a very misleading picture of how you might really attain this freedom, and I’d be interested in your response. It seems that the vast majority of your retirement funds come directly from your parents already accumulated wealth, not your own current or projected savings/ gains. Of course you’re taking the decisions to use it wisely rather than blow it whilst engaging in consumerist, salary-slave pointlessness, but it really impacts how relevant your scenario is to those less vastly fortunate if my interpretation is even close to correct.
Of the $1.45m total, $1.13m is real estate. Of that, $980k is Houses 1 and 2, which are nearly paid off already (£186k outstanding according to your other post).
So, c.$800k of the ultimate projected retirement fund is already there – today – in real estate net worth. Given your early post-graduation contribution to this $800k vs. the lifetime of your parents contribution to it, also whilst you were establishing your earning potential and indeed the rest of this plan, I would assume your share is a small minority.
Thus, even if we say that a generous $100k is already down to you, that leaves half your ultimate retirement fund at 35 ultimately being inheritance of real estate assets already in existence from your folks. Given the power of compound wealth generation over time, this is a HUGE factor in your projected freedom.
Doesn’t make what your doing any less correct or worthy, but it seems a very material factor for the blog that’s not mentioned at all! (Apologies if I missed it haven’t read the entire site).
FYI I’m 32 and starting literally from scratch I’m at a NW of about $700k (not US based so depends on currency rates etc.), may not make it by 35 but hopefully not too far behind!
A genuine question and I may have misunderstood somewhere – apologies if so.
You’re right that a large part of my retire by 35 plan does depend on inheritance. Whenever I discuss my asset base I don’t hide that a big part is from two real estate properties my parents have accumulated (I only contributed about 50k for those two — can you believe the original prices for the two properties were 350k?). I think everybody’s path towards retirement is different. For mine it is through savings, investing, and inheritance. For others it can be through entrepeneurship, marriage, or even sports deals.
But I do believe that a key component of retiring early is having a plan and ultimately, saving more than you spend. How many people have loads of money (trust funds, lottery winners, rock stars, movie stars, etc…) only to end up broke in a few years? Having money is only half the equation, the other half is what you do with it.
In this blog I mostly talk about my goals for the future, how I budget my money, and forever evolving ways of utilizing that money to roll into larger doughs of cash. Although the circumstances of my early retirement is unique to me, the techniques I utilize to create/save/invest into more cash is not, and that is what I try to mostly focus and blog about.
Thanks for the considered response. After posting I did actually stumble across another entry where you do discuss inheritance openly and clearly, and I certainly didn’t mean to question the validity or undoubted interest of the blog focus. Also, I’d accept that your main focus is practical and action-oriented rather than the ‘look at me, I’m so great’ tone that some early retirement focused articles seem to have!
Much as I’d like to fund it out of marriage or sports deals, I guess I’m stuck on the slower, more mundane savings & investment path too! Anyway – good luck on progressing towards your goals, however you get there…