Questions

What does the 50 signify?
I was originally going to put my age into the title of this blog, but then I thought it was more appropriate to average my age and my wonderful wife's age together. She’s been very understanding of my perspective on finances.

What is the point of this blog?
To track progress toward our retirement goal, we are a little more than ten years from our intended retirement date and that seems like an event to recognize and apply toward a better focus on retirement.

Why so many milestones and will you adjust the milestones?
My intent is to mark the milestones when they are completed, while maintaining the original projected date. The milestones are very reachable, but if I’m a bit low it shouldn’t equate to more than a years difference in my retirement plan.

Do you plan to add milestones?
Yes, I expect to add additional milestones related to the process of entering retirement, as well as breaking down how we are going to access our retirement accounts.

Why don't you list dollar amounts?
I have two reasons. First, I am not comfortable sharing that much information. Second, it isn't relevant. Retirement savings is a game of ratios, the higher your savings versus spending ratio is the less time you'll have to work.

What is the single most important area to efficiently spend my energy?
If you are interested in early retirement and want to do it with least amount of energy then I would focus on cutting expenses. This opens up additional money for savings and lowers your savings target at the same time. You don't get to kill two birds with one stone very often.

What are your opinions regarding debt?
Avoid it! Even good debt (leverage) can adversely affect your budget and I would suggest arranging for zero or nearly zero leverage by the time you are ready to retire. I hope it’s obvious by now that I am debt adverse?

How would I describe my work habits?
My habits vary between Acceptable and Above Average, depending on how motivated I am. However, I have limited tolerance for repetition. I became a computer programmer in part because it seemed to limit my need to repeat activities. Teach a computer to do something once and never have to do it again. Corporate computer programming isn’t exactly what I anticipated, and it turns out that there is a lot of repetition due to corporate policies and auditing, blah, blah, blah. I still love to program and have a few small home projects, but the corporate game has grown old.

What is a Traditional 401(k)?
The 401(k) is a tax-deferred retirement plan. This reduces your taxable income and provides a fantastic way to maximize your overall return since assets can compound without the drain of taxes. Since you deferring the tax bill the government limits how much money you can put into your 401(k). They are protecting current tax revenue. Notice that I say current tax revenue, the tax bill will be due eventually and you’ll pay income taxes on any money you withdraw from the 401(k). This is somewhat painful since some of your returns are really capital gains and would be a lower tax rate if held in a regular account. Many lucky people get free money through a funds matching program with their employer. I’m not one of the lucky people.

How about a Traditional IRA?
A similar, but more restricted version of the 401(k), how’s that for generalization. Many people would disagree with this statement, but its fact that a large percentage of employees can’t put tax-deferred money into an IRA and even if they could they would be limited to about a 1/3 of what a 401(k) allows. A recent change to the tax laws was made permanent and opened up the possibility of putting post-tax money into an IRA and then converting it to a Roth IRA, this has potential benefits that far outstrip the original IRA law.

How about the Roth versions?
The basic difference between the traditional and the Roth accounts is that a Roth is funded with post tax money. A typical first reaction is to say that you need the tax-deferred advantage of the traditional accounts and that may be true, but there are significant advantages to the Roth accounts, which I will detail in a future post.
One teaser advantage is that all money taken out of a Roth account is tax-free, even the investment gains, so in a sense you can avoid paying income taxes on some of your money. That’s certainly an idea worth exploring.

But I want to invest for early retirement?
Since you should have a signification percentage of your retirement assets in a tax-advantage account, it makes sense to look into 72(t)’s, but I haven’t had the time to learn enough about them, so you’ll need to check back later to hear my opinion. That doesn’t mean I don’t have a plan. There are no government restrictions on how much money you can save into taxable accounts and since I’ve avoided the Home ATM Syndrome I should be able to cash out my home and move to a less expensive area. As I’ll describe in a post, it helps my retirement plans to have enough money in taxable accounts to pay for the first four years of retirement.

Doesn’t finding references take a too much time?
Maybe, you’ll have to ask my family about the too much time part. But I’ve always been frustrated when people lean on statements like, “I read in a study…” Almost without fail people can’t produce the study being referenced. I won’t claim to always provide references, but that is a goal.