Woah, We’re Quarter Way There

Woah, We’re Quarter Way There

Woot! It seems like this day would never come. We are officially a quarter of a millionaires!

Yes, I know we have a long way to go but it is still pretty exciting. Our assets minus liabilities, for now, are worth about $250k. I wanted to take this milestone to join the ranks of the J Money’s Million Dollar Club.

Over at Budgets are Sexy, J. started the Million Dollar Club in order to push himself and others to that big milestone. For us, a million dollars means being financially independent and very close to early retirement. I have been changing and tweaking my early retirement spreadsheet for a few months now to lock down our tentative date and plan.

Max All the Things!

We plan to reach a millionaire status by following our goals:

  1. Maxing out Ms. Blue Ribbon’s Roth
    • Check
  2. Max out my Roth
    • ⅕ the way there
  3. Max out my 401k
    • only a few years left
  4. Throw lots of money into brokerage accounts
  5. Pay off the house

What about Ms. Blue Ribbons 401k you ask? Well, that’s a tricky subject. I’ve looked at her options and they aren’t good and since we don’t know what her job prospects are over the next year I’m hesitant to start it up. Especially with her starting up a side hustle we could open up a self-employed IRA. By maxing out her Roth she is contributing 15%-ish of her income to retirement. I also don’t want to be overloaded on pre-tax money (hence the brokerage account too). After the kiddos move out of daycare we can start supercharging our brokerage accounts or start adding to a pre-tax account for her.

how we plan to get to a million

Math is hard

If you look in the upper right-hand corner you see the little box of “Target Rate of Return.” Yes, I am using a 6% rate for my estimates. I know it isn’t very low but it is the lower side of average. Like many things, it is sometimes better to set low expectations and then exceed them. I’d rather plan on my estimated FI date to be when I’m 43 than plan for it to be when I’m 40 and be very wrong.

Not to mention the other leaps of faith these projections are assuming. I have my property value increasing at 3% each year and the cars depreciating at $2500. I can almost guarantee we won’t be driving the same cars in 10 years (they will be hover cars!) and I likely will have another one (or two) for the kiddos. Finally, if you hadn’t heard we are toying with the notion that we will sell this house and move to another.

Ahead of the Pack

Finances are always in a state of flux (much like the capacitors you find in some hover cars #backToTheFuture). All I can say is this is the best guess I can make for figuring out when our FI date is. Are there flaws, DUH, will we get there, HECK YES.

Just by thinking about this makes our household all the more likely to get to that million mark and I can only assume that if you are reading this you also are a person thinking towards the future.

Are you in the Million Dollar Club? What are you doing to get to that milestone?

13 thoughts on “Woah, We’re Quarter Way There

  1. Great progress so far!

    I’m still toying with how I want to allocate $$ between 401(k)’s, Roth IRA’s, and brokerage accounts – knowing we probably can’t max 401(k)’s and Roth’s AND still have significant money left-over for brokerage.

    For now my plan is to focus on the 401(k)’s because it’s a nice marginal tax rate deduction (vs an average tax rate in retirement benefit that you get from Roth) and there are ways to access that money early if needed. I think realistically though in the next couple of years I’ll have to start doing some better planning on how we’ve got everything sliced up.
    Dave @ Married with Money recently posted…What It’s Like As a One Car Family With a 26-Mile Work Commute

    1. I know we’re going to have to figure out our draw down strategy at some point which force us to rethink our contributions. For now we have other things in flux we need to focus on (jobs, housing, etc)

  2. Awww yeah loving this!! Maxing out the retirement accounts are literally the ONLY main thing I force myself to do every year! Even if you do nothing else outside of that you’ll be a millionaire over the years 🙂 Welcome to the club.

  3. Awesome job! Congrats on the reaching the Quarter Million Dollar Club!

    Regardless of your net worth, the fact that you are having these conversations and working on a plan puts you light years ahead of most average people. You will definitely be millionaires one day.

    Like Dave @ Married with Money, we focus on maxing out our 401k, getting all the pre-tax goodness we can soak up (plus the instant 100% return on the company match!), then everything else goes to our taxable brokerage.

    We don’t even focus on our Roth IRA’s anymore. We’ve primed the pump on those, but now was have strategies to shift our 401k money over to those accounts after we reach FI.

    Keep up the awesome work!

  4. Congrats on the progress. I’m currently maxing my 401k because I get a 100% employer match so it’s a no-brainer. My current debate is whether to contribute to a regular brokerage account or make non-deductible contributions to an IRA. I don’t like the restrictions on the IRA but the ability to compound tax free (even if I have to pay taxes in retirement) in the interim could be a powerful advantage. Even at the lower long-term capital gains rate those taxes will hurt returns.

    Out of curiosity are you planning on paying for college for your kids? You mention $1M being your FI goal and close to early retirement. My biggest concern with early retirement is school expenses. According to Vanguard’s handy 529 calculator it is going to cost $649,000 to send my kid to MIT for 4 years when he is 18. I might be able to retire on my own with my wealth in my 40’s but as long as I have kids in college (which I will until I’m into my 50’s) I just don’t see how that’s going to feasible without closer to 8 figures at a 3.5% withdrawal rate.

    1. We do have 529 accounts for both kids but don’t expect that money to pay for everything. Between that, cash and scholarships we hope to pay for as much as we can.

      I think it is important for the kids to be price conscious when looking for colleges.

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