All the Charts // Our Progress Toward Early Retirement

hiya, friends. we’re here with a friday post to share the clearest glimpse yet into where we are on our journey toward early retirement in money terms, along with a detailed breakdown of how we plan to fund both our early retirement and our full retirement. we’re talking percentages instead of absolute numbers (read why here, if you’re curious), but are going into a lot more detail than we ever have before. that’s right: it’s all the charts.

first up, our progress. we measure progress in four major categories:

1. primary mortgage payoff
2. taxable accounts
3. rental property mortgage payoff
4. 401(k) and ira balance

here’s how we’re doing on each major category:

primary mortgage payoff

we recently hit the crossover point on our home where we have now paid off more than we owe. and given that we bought in 2011 near the bottom of the market, and put down a hefty 20 percent down payment, what we owe now represents only about a third to a quarter of what the house is worth. that helps us sleep at night, because we know we could downsize and potentially free up a chunk of cash. that’s the backup plan, not plan a, but it’s good to have a backup option!

looking forward, we’re planning to pay off the mortgage by the time we retire at the end of 2017, and here’s the path we’re on:

paying off the mortgage by the time we pull the ripcord should be completely possible, since we just need to continue the payoff rate we’ve established in the last year. that orange payoff line is nice and smooth with no steep jumps. that equals realistic.

taxable accounts

we’ve focused like laser beams this year on boosting up our taxable accounts, and it shows. we’re now about 3/5 of the way there on what we need to sustain part 1 of our two-part retirement. these accounts are primarily vanguard index funds, but we also include our cash accounts with ally and usaa in this total. (those are our emergency fund and the pot of money that we use to dollar cost average over to vanguard.)

the projections for what we need to save and invest on the taxable front are nice and achievable, too — love those smooth lines with no steep increases! you can tell that we sold our city condo at the start of 2014, boosting up our taxable accounts for the first time, and since then we’ve been on a fast and steady march up the hill.

update: based on questions we’ve received, we added one more chart, showing our allocation of our taxable assets. enjoy!

rental mortgage

we bought our rental property in april 2014, with 20 percent down and a 15-year mortgage. the amount we’ve paid off versus what’s still owed reflects that we’ve just been making the regularly scheduled payments. paying more would slow down our investments in our taxable accounts and our primary house mortgage payoff, as well as having tax implications now and in the future, so we’re just staying the course with this one, expecting to pay it off in 2029.

tax deferred accounts

we thank our lucky stars on a regular basis that we had the good sense (we being mostly the mr. in this case) to start investing in our 401(k)s early on. the mr. maxed his out by his mid-20s, which i still think is damn impressive. he’s also gotten a more generous match for years, so his balance is about 60 percent higher than mine. that thick line in the chart represents the amount we wanted to have in our accounts at the time of our retirement, so that with even conservative rates of growth for 20ish years, we’d see double-doubling that would provide us enough to live on forever using the 4 percent rule (or even the 3 percent rule) by the time we reach age 59 1/2 and can access them without penalty. we hit that point earlier this year, and thought for a hot second about cutting way back on those contributions to speed up our taxable investment progress. while we did reduce our contributions ever-so-slightly, we decided to stay pretty close to maxing out to keep getting the full employer match we’re each entitled to, and because the tax savings ain’t nothing — we’re definitely in a way higher bracket now than we plan to be in retirement, so it’s a no-brainer. (note that the line flattens not because we reduced our contributions, but because the market cooled off. we got some pretty mega returns between 2011 and 2014! we’re projecting modest returns between now and our retirement date, since we like to avoid relying on big returns.)

also, charts can “prove” anything

just for fun, while we were making all those other charts, we made a chart that proves that you can manipulate numbers to show anything you want. the scale represents only about eight percent of our total net worth, but zoomed in that close, it sure makes 2015 look like a wild ride!

either way, we’re happy to be at a new peak. if you connect the dots between april and october, you can see that, in the end, we haven’t actually lost much progress at this point… we just rode a bit of a roller coaster in between. though of course we have no idea what the markets will do in the coming months and years…

the retirement funding plan

we’ve talked about an oversimplified version of our two-part retirement strategy: basically, living mostly off of taxable accounts for the first ~20 years, and living mostly off tax-deferred accounts for the rest of our lives after that. a few more facts about our retirement funding plan:

• we are also planning to live on rental income once that mortgage is paid off, but that won’t kick in for a while
• we aren’t planning to rely on any backdoor roth conversions, though we’re happy to have that as another backup option since our 401(k)s are in good shape (and we’ll roll them over to vanguard iras once we quit, to get them out of the high-fee hands of our companies’ fund managers!)
• we aren’t expecting to receive any social security benefits when we hit our 60s (though we wouldn’t turn ’em down!)
• we’re expecting to receive subsidized healthcare through obamacare (more on this soon) until we qualify for medicare (we are assuming some planning based on current eligibility criteria, but know it could all change, because congress)
• we are not planning to pay rent, since our house will be paid off (if we ever move, we’ll make sure we can pay cash — we don’t ever want another mortgage!)

as you’ve gathered, we have several levels of contingencies in place:

• we have a good sized house right now and could downsize to free up capital
• we could sell the rental house to free up capital (where it is located is currently booming, so we already have significant theoretical equity, though we don’t take those things too seriously)
• we could trade places with the rental — live in it and rent out the primary residence — which would fetch a higher rent
• we could rent out both our home and the rental and go full-time rv for a while to provide extra income
• we could do the backdoor roth conversion with some of our 401(k) funds

none of these backup plans require us to go back to work, which we think is ideal, given that it would be harder to find work after having a gap in our employment history, especially once we’re multiple years into retirement. of course, we’re willing to work if we have to, but don’t want to find ourselves in a situation where we need more money and can’t get a job. hence the plan b, plan c, plan d, plan e and plan f! (and i’m sure i’ll come up with a plan g soon enough… this is just how my brain works.)

so with all of those assumptions and contingencies out of the way, here’s our basic retirement funding plan, covering all of the major life transitions and changes in income source and healthcare coverage over time.

retirement funding plan by year

looking at that chart, i think we might have to call ourselves “ms obamacare” and “mr medicare” for a while. (halloween costume idea?) or maybe not. we can probably think of other things we’d be happier to be the poster children for. but i digress.

we really appreciated all the feedback a few weeks ago on our post revisiting the question of whether we should share our numbers, and were inspired by you guys to find a way to share it all in terms of concepts and percentages. so here you have it: more charts than you ever wanted, and a pretty full picture of where we are.

anything you see that we could be doing better? anything we’re not considering? anything that our charts or story are inspiring you to do? spill it all, friends! because it’s friday, and you got lots to do, but you also love commenting on blogs. (yes, i just misquoted “friday.” bet you didn’t see that one coming.) ;-) have a great weekend!