If we wanted to be FI in 10 years, what would you advise we do?

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  • #85423 Reply

      We are 40 years old, have 3 kids 15 years old and younger. We are hoping to purchase our first home in the next 2 years.

      We have almost $500k cash in a basic savings account.

      Almost $250k in inherited retirement accounts.

      Not much in our own 401k, maybe around 40k?, and a little that just started in company stocks.

      Zero debt. But also zero investments of our own.

      Current salary is $180k.

      Future home would likely cost around $800k because work is in MCOL to HCOL areas.

      We know our cash amount is foolish but partner is simply afraid to put it somewhere because he is the sole provider. But he is also ready to grow our money.

      We know we want to put a chunk in index funds account-just not sure how much.

      If we wanted to be FI in 10 years, what would you advise we do? All advice is sincerely appreciated.

      #85424 Reply

        Leave enough for emergency fund. Then put down 20% for house. The rest in stock market VTI. Time to invest.

        #85425 Reply

          750k invested will double twice by the time you’re 60. Investe it now and you’re instantly Coast FI if you can live off $120,000 in todays dollars in 20 years. Then hubby can keep piling up cash to feel safe.

          If you want FI in ten years you’ll need to invest it and do additional investing.

          But you didn’t include annual expenses which is critical to any true FI calculations.

          Don’t miss: I have 40k I want to put into a rollover IRA. Can I pull that back out penalty free if it want to say, buy another duplex?

          #85426 Reply

            Tell ur hubby that ur money is losing about 4% to 6% a yr to inflation sitting in cash. Which is about $30k a yr. That should motivate him to invest.

            #85427 Reply

              I’d shift the cash to a HYSA or two (depending on fdic paranoia) to maximize interest. Should be making at least $1.6k/month in interest on that much cash.

              For a near term purchase like a home, I wouldn’t put the down payment at risk, so leave that as cash. The rest can be invested or used to cover expenses while tax shelters are maxed. A 10-year FI plan means you’re going to need to have an extraordinarily high savings rate, it’s too short of a timeframe for market returns to help much. That means a tight budget.

              #85428 Reply

                Depends on the time you want your mortgage to be paid off.

                Also start some personal investment like crude oil and solar energy.

                Also consider your annual income before and after purchasing the home.

                Lastly for FI in 10 years I’ll suggest you go more on personal external investment which generate passive income for you after you purchase the home(that’s if you purchase it).

                #85429 Reply

                  never leave that amount of cash not invested! cash value declines due to inflation. I would def try to go for a lower priced home to bulk up your retirements since you guys seem a little behind the game for your ag.

                  Explore these too: Looking for some home advice!

                  #85430 Reply
                  Leah M.

                    Start max funding your 401ks and ROTH IRAs, even if that means you need to float some from savings to get by month to month. If you have an HSA I’d also max fund that.

                    However much you plan to put down on your house plus a solid emergency fund, put in a HYSA.

                    Beyond that, the rest should be invested in a brokerage account.

                    #85431 Reply

                      So doing some back of the envelope math… the 800k house, on a mortgage with 20% down has a total monthly payment of around 5k. Presuming that the rest of your life costs as much, you’ll need 10k a month or 120k a year. For a 4% rule, this equates to 3M in investments.

                      So, can you get to 3M+ in your timeline? If not, maybe you’ll need to adjust.

                      #85432 Reply

                        At the very least you should store the $500K in HYSAs while figuring out your longer term plan. HYSAs are paying up to 5% at the moment, which means ~$2000 per month of interest on ~$500K. Who doesn’t want an extra $2000 per month risk-free?

                        You’ll have to pay tax on the interest, but free money is still free money, even if a portion goes to tax.

                        Given the large amount of savings, I’d split that up into at least two different FDIC insured banks.

                        Also, check out: Looking for some home buying advice

                        #85433 Reply

                          If your husband is worried because he is the sole earner, make sure he has proper life and long-term disability insurance.

                          If you want to be FI in 10 years, you have to figure out what your expected annual expenses are. After that, it’s a math and luck problem. The answer may require not buying an $800k house on a $180k income.

                          #85434 Reply

                            I’d suggest immediately move the 500k into Vanguard VMFXX money market account.

                            It’s low risk and yielding 5% – losing 25 thousand a year parking it in savings unless you are getting a similar return.

                            #85435 Reply

                              With 3 kids, even with that amount a cash it would be hard to retire in 10 years especially since you are putting huge chunk of money into a house.

                              I’m similar age and also want to retire in 10 years but it’s going to be super difficult even if I’m investing $7k a month. You definitely won’t retire if you don’t start investing most of that money asap. What are your monthly expenses? If you want to be more conservative, save 6 months of expenses in a liquid account for emergencies. My current emergency fund is in I bonds (they are mature enough to pull without penalty).

                              You also need to figure out how much money you need per year in retirement to have a savings goal. Will you be helping your kids with college?

                              Would you also like to explore: Renting or Selling home?

                              #85436 Reply

                                What I would do if in your shoes….

                                Since you have inherited IRA money, start maxing out your own retirement accounts and take distributions in the same amounts. You’ll basically pay no taxes because it’ll be a wash. Each year you should both max out your 401Ks. In 2023, the combined total is $45,000. Your salary is low enough to contribute to Roth IRA. The max for that in 2023 is $6500 each so total $13,000. Id do this for the next 4-5 years and the inherited ira amounts should be mostly depleted. Going forward for the next 5, I think you should continúe to max retirement.

                                You will also save thousands of dollars in taxes from doing it this way.

                                401k before brokerage accounts.

                                Realistically with 3 kids under 15 in a MCOL to HCOL area, you guys are nowhere near retirement after you purchase a home. (Especially if you plan to pay for your kids to go to college)

                                By age 40, you should have 3x your annual salary in retirement accounts. In your case that’s $540,000.

                                While you aren’t doing terrible, you have a lot of catch up to do.

                                As for the $500k? Put it into a HYSA or a CD at 5%ish. You’re losing money tsk inflation.

                                Any money you plan to use for the house do not put into stocks.

                                Before people come for me: You’re in a better position than most of america…. So bravo! But you’re still behind the game. Get on the ball!

                                #85437 Reply

                                  20% down for the house.

                                  Fund the emergency fund. Amount depends on how secure partners job is but probably 12 months of expenses since you said they didn’t want to put money into anything. Yet they want to grow the money.

                                  All of the rest of the money gets added to your taxable brokerage accounts. Any total stock fund will do/

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