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2010 Progress Update

retire by 40 progress update

flickr - AJC1

Previously on Retire By 40, I wrote about my Exit Strategy and Financial Goals and now I’ll conduct a little progress review.

1 Million dollars combined net worth (not counting principle residence)

  • Grade: A-. We are doing pretty well this year due to the stock market recovery and additional contribution through out the year.

additional 100k invested in yield-producing portfolio to help with expenses

  • Grade: Incomplete. Not started yet. I’ll need to open this account in 2011 and move some investments over.

additional 50k seed money for when opportunity comes knocking.

  • Grade: Incomplete. Just started in 2010 and only have about 7k in this account currently.

Even cash flow so we do not have to draw on net worth unless there is a big emergency.

  • Grade: C-. Work in progress. We’ll need to increase rental income, yield income, and side income. Holding a garage sale will help, but that’s not a long term solution. How to yard sale in the winter? Nah, let’s wait until summer.

More detail on investment properties:

Debts estimated value mortgage equity monthly contribution to net worth
rental home 280k 92k 188k 720
50% rental condo 171k 103k 34k -30
rental condo in Thailand 60k 0 60k rental income goes to mom & dad cost of living

I didn’t list primary residence or auto above because I don’t think they should be included in the net worth. Our primary residence is not worth that much anyway because of the real estate market crash, but at least we are not under water.

The Backup plan

When I leave my corporate job, our biggest income stream will dry up, but if all goes according to plan we should be all right. However, if Michelle is laid off or something else happens, we would need a fallback plan. I really don’t think this would happen because her job is very secure, she is great at her job, and everybody loves her. In any case, the backup plan is to cut expense drastically. Our biggest expense is our primary residence and we can cut this out by selling the place and moving back to rental home #1. That mortgage will be paid off in 2017. The move would cut our monthly expenses by a large amount and will give us a good head start on reducing expenses.

2nd backup plan. We can move to Thailand and our expense would be just a fraction of our current expense. I also qualify for public health care in Thailand and can go to private health care for serious issues. Michelle does not like either of the backup options so she will just have to not get fired. πŸ˜‰

See any problems? Most of our net worth are illiquid. I’m not really sure if I should be concerned about this. I’m also trying to move more money toward real estate in the next few years so the overall investment will become less and less liquid. Another experiment I’m running in the next two days is that I’m not going to promote this post and see what the results look like.

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, he hated the corporate BS. He left his engineering career behind to become a stay-at-home dad/blogger at 38. At Retire by 40, Joe focuses on financial independence, early retirement, investing, saving, and passive income.

For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.

Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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{ 55 comments… add one }
  • BeatingTheIndex December 29, 2010, 5:23 am

    You’re not that far from your goals RB40. The biggest variable here is your corporate job, keep it for a few more years and you’re set!

    • retirebyforty December 29, 2010, 9:22 am

      The corporate job is really great for the cash flow, but I’m also losing interest rapidly. I’ll just have to tough it out a while longer.

  • Everyday Tips December 29, 2010, 7:34 am

    You are doing fantastic!! How exciting to be so close to your goal.

    I agree with Beating the Index, just keep working a few more years and you will definitely be set.

    • retirebyforty December 29, 2010, 9:23 am

      Thanks! It’s almost like the senior year in HS. πŸ™‚

  • MoneyCone December 29, 2010, 8:24 am

    Hey, good job on the progress! Keep at it, you’ll get there! I’m having a lot of hopes for 2011!

    • retirebyforty December 29, 2010, 9:24 am

      I’m also hoping for a great 2011, it might shorten my target date a bit if we have a good year.

  • krantcents December 29, 2010, 8:43 am

    This a great way of reviewing your goals! Has it altered your 2011 goals? I constantly review my progress (daily, weekly, monthly) and readjust accordingly. It works for me. Good luck.

    • retirebyforty December 29, 2010, 9:27 am

      Yes, I know what we have to work on next year. The toughest part in my mind is to get even cash flow. I’ll need to work on the rental income and yield income next year. I’m not too worried about side income and Michelle income. Those shouldn’t be a big problem. The side income can be work on after I leave the corporate job. Michelle income is probably very close to the target when she gets more tax deductions.

  • Little House December 29, 2010, 10:41 am

    You’re making fantastic progress on your goals. Looks like you really will be retired by 40. Keep up the terrific progress!

    • retirebyforty December 29, 2010, 11:42 am

      Thanks for the encouragement. It looks pretty good now because of the recent recovery. It was very discouraging for a while in 08 and 09. It was a good thing that I learned to stick with the asset allocation and rode out the down turn.

  • Financial Samurai December 29, 2010, 11:43 am

    Nice work! Might as well round up to $1 million!

    Can you share with us more details on your retirement account at $488K? That is very impressive for someone 35-37. In addition to the 401K, what else does it consist of?

    For the rental property value, that’s your assessed equity after mortgage right?

    • retirebyforty December 29, 2010, 1:18 pm

      Thanks Sam.
      The retirement accounts are all standard accounts, nothing funny. listed from high to low.
      Joe 401k
      Michelle 401k
      Michelle roll over IRA
      Michelle Roth IRA
      Joe Roth IRA

      Yes, equity is just the estimated value minus mortgage debt.

      • Financial Samurai December 29, 2010, 9:36 pm

        Wow, that’s large man. Can you break down your 401k vs. IRA? I haven’t been able to contribute to the IRA EVER, which sucks.

        But even if I did, it’s only $5,000 a year, so after 15 years that’s $75,000, and let’s say you made 50% in that time, it’s still only $110,000.

        I guess I just realized you are combining both your wife and yours, so it makes sense now.

        Cheers, Sam

        • retirebyforty December 29, 2010, 10:42 pm

          Ooops, you’re right. My editor let that one slipped. This is combined net worth. πŸ™‚ It completely slipped my mind to explicitly state it.
          I’ll put in % of retirement portfolio, probably easier to see that way.
          Joe – traditional 401k (47%), Roth 401k (13%), Roth IRA (4%)
          Michelle traditional – 401k (15%), roll over IRA (14%), Roth IRA (6%)

          We didn’t do too well with the Roth IRA. I took too much risk with my Roth IRA and lost money and never really recover. We haven’t been able to contribute to Roth IRA during the down turn and that’s too bad. (hit limit)

          • Financial Samurai December 30, 2010, 9:36 pm

            Cool. The government doesn’t allow certain people to contribute to an IRA after a certain income level, which I find extremely discriminatory.

            I’m VERY against a ROTH IRA. Pls have a read and feel free to delete the link afterwards if you wish: http://www.financialsamurai.com/2010/01/11/be-a-sloth-and-dont-roth/

            Joe Tax Payer makes some awesome statements in the comments too.

          • retirebyforty December 30, 2010, 10:56 pm

            I agree with not converting to ROTH. We would get hit with a hugemongous tax bill. No Thanks. I like the 5k Roth IRA contribution though. I like not paying tax when I sell stocks. The Roth account is the perfect place for short term holdings.

  • Aloysa December 29, 2010, 12:23 pm

    I am impressed! I am speechless! And I want to know what is in your retirement plan. Because I want it too! LOL

    • retirebyforty December 29, 2010, 1:24 pm

      There is no secret. I maxed out 401k contribution within a few years of starting work. Michelle started working a few years after I did and she maxed out right away for every year that she worked. The return is really not that great because the last 10 years overall was not a good period to invest in mutual funds. right? The key for us was to max out the contribution early on.

  • The Passive Income Earner December 29, 2010, 5:22 pm

    Well done on you progress! I agree with Financial Samurai that 488K in retirement account by 36 is amazing!!!

    If you can kick start your yield portfolio, you should be able to earn some good income from it. I was able to make 3700$ in dividends this year with just around 50K$. I am hoping to get that as high as I can to use for retirement.

    • retirebyforty December 29, 2010, 9:05 pm

      Don’t forget it’s combined net worth so it wasn’t just me. The yield portfolio is the one I’m working on next. $3,700 for 50k is really good, I would love that kind of yield income.

  • 101 Centavos December 30, 2010, 4:52 am

    Well done indeed on the net worth, and also on the rental income. Making your assets produce for you is key to long-term wealth, isn’t it?

    • retirebyforty December 30, 2010, 8:27 am

      Thanks! Lately, I’m thinking rental income is the way to go in the long run so I will try to acquire one more property in the coming years.

      • The Passive Income Earner December 31, 2010, 8:24 am

        I am interested in rental income too but Vancouver is just out of my price. I need to go further out of town and probably use a management company … so I have not dipped my toes yet.

        • retirebyforty December 31, 2010, 11:26 pm

          We dipped our toes when we moved and rented out our old house. It is working out pretty well so I want more. πŸ™‚
          We use a management property, I can’t really handle tenants and work full time.

        • Sandy @ yesiamcheap January 1, 2011, 8:34 pm

          Make sure you read my rule son being a landlord. I’m making a whole series of it.

          • retirebyforty January 2, 2011, 10:24 am

            Yeap, I read your first post about being a landlord and will keep checking.

  • Forest December 30, 2010, 5:40 am

    Wow you are going at this really strong and will be set very very soon! Big congratulations and very inspiring.

  • Jessica07 December 30, 2010, 8:54 am

    Wow. Seeing your numbers laid out like that is very inspirational! Great job.

  • The Everyday Minimalist December 30, 2010, 9:47 am

    *laughing* @ “Michelle doesn’t like either option so she’ll just have to not get fired. πŸ˜‰ “

  • Nicole December 30, 2010, 10:05 am

    Very impressive! Forced me to quickly calculate up my retirement accounts to see if we could get where you are by age 36 if we continue doing what we’re doing in that one arena alone. Answer: Not unless the stock market really appreciates.

  • Christa December 30, 2010, 12:48 pm

    Wow — your numbers are awesome! Looks like you’re really close to your goal — keep up the great work!

  • Buck December 30, 2010, 4:45 pm

    Impressive numbers, looks like you will be hitting your goal of retiring by 40! πŸ™‚ The most eye popping is your retirement accounts. What did you get into, super aggressive stock funds? Whatever you’re doing, keep it up! πŸ™‚

    • retirebyforty December 30, 2010, 10:57 pm

      The market has to do well in the next couple of years. I’m really optimistic though. Thanks!

  • Money Reasons December 30, 2010, 9:18 pm

    Wow, sounds like you are pretty set, just put in the time, and ride the wave πŸ™‚

    I’m sure you’ll make it!!!

    • retirebyforty December 30, 2010, 10:56 pm

      Thanks! If the market do well in the next couple of years, we’ll be in great shape.

  • youngandthrifty December 31, 2010, 12:17 am

    Rental Condo in Thailand! Great idea! Tell Michele your idea is approved by another PF blogger LOL.

    Next time I’m in Thailand and if you’re still renting, I’ll be sure to be rent from you πŸ™‚

    How is the health care though in Thailand? Would you be eligible for the Expat type hospitals though?

    And dang, 1 million net worth? I would love to be where you are. I only have 10 years to do that though! πŸ™

    • retirebyforty December 31, 2010, 6:24 am

      Thanks! My parent live in that same complex and they collect the rent. I’m also a citizen of Thailand and can get public health care there. I don’t know why American hate public health care so much. Health care is going to be more and more difficult to deal with in the next few decades.

  • Sandy @ yesiamcheap January 1, 2011, 8:34 pm

    If the goal is to actually retire and not have XX amount of assets them don’t you need a massive amount of liquid funds? Are you planning on retiring to Thailand? The cost of living is much lower so maybe that takes care of most of the liquidity issue.

    • retirebyforty January 2, 2011, 10:28 am

      Liquid funds are nice for when you see an investment opportunity. I saw a house for sale in a really great area for 550k and would love to jump on that if I have more liquidity. The house next door is also on sale for 915k. πŸ™‚
      I am no planning to retire to Thailand. I wouldn’t mind living there for a few years though.

  • Khaleef @ KNS Financial January 2, 2011, 4:19 pm

    Joe, you’ve made some great progress toward your goals. It’s wonderful to see someone pushing along to retire early. Everyone has it as a “goal”, but very few actually know and do what it takes to make it a reality!

  • Evan January 3, 2011, 7:51 am

    Holy Sh!t Joe, Fantastic work!

    I’d love to hear about or email me a link to what this yield account is going to consist of. Is this like the dividend account I am trying to build or something a little different?

    P.S. You have to install subscribe to comments plug in!

    • retirebyforty January 3, 2011, 8:54 pm

      I’m still working on the yield account so I don’t know what will be in it yet. It sounds like a similar account to what you are trying to build. I will probably start with one of the higher dividend paying stock on the Dow like AT&T or McDonald as a base. Then go from there.

      Thanks for the tip, I just installed the subscribe to comment plug in.

  • retirebyforty January 4, 2011, 8:42 am

    I’m not too worried about it being too illiquid. I’m just wondering if there are some downside that I don’t know about. Having a lot of cash is not my style, I usually just roll anything over my e fund into my stock account. I think stock account is liquid enough. Thanks for stopping by!

  • Jessica07 January 17, 2011, 9:14 am

    Maybe the side income can come from monetizing something you learned from this blogging experience πŸ˜‰

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