how am I doing

I think you are doing everything right. But a few comments.....

1) Is 30-40K todays money or money after 23 years. (assuming inflation 3% per year) 2) Americans are living longer so how long will that 30-40K last after you retire? 3) I have not seen your excel sheets but may be your wife can work part-time to boost your income.

Hope this helps.... Good Luck

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Consider delaying 529 contributions and funding the retirement more.

the $30k - $40k/yr living expense is in today's dollar.

the numbers I used for my Excel is as follows: annual input = 14k ($8k to 401k plus $6k to our ira's. I could put in the other $2k into her ira if I want) annualized ROI = 10% of years = 23 that gives me about $1.1 mil.

these numbers don't include the extra $1k we save each month earmarked for rental/other investments. right now I just park them in a 6-month CD.

any comments are welcomed. thanks.

s o

I could not agree with Jim more. The 529 plans should take a back seat to your retirement accounts. I wouldn't fund a 529 plan until you've maxed out your 401k and IRA contributions. In fact, even then, I probably wouldn't do it. I'd invest in after-tax accounts, instead. There are lots of reasons for this. Here are some, in no particular order:

1) There's only one way to fund you're retirement: saving. There are lots of ways to pay for college. There are student loan programs, grants, scholarships... You can't take out a loan to fund you're retirement. 2) The 529 plan serves a single purpose: college. If you use it for anything else, you're slapped with a penalty. On the other hand, your retirement accounts can actually serve double duty. For example, you can withdraw your Roth contributions to help pay for college. You can also withdraw your traditional IRA dollars to pay for college without penalty (though you'll still pay taxes). 3) You've got to put your own retirement ahead of your children's education. This may sound selfish, but it's really in your children's best interest. If you don't adequately save for your own retirement, you're going to have to rely on your children to support you. That's not a situation most people want to be in.

--Bill

$35k in today's dollars is maybe $63k in twenty years when you begin drawing down. That makes your withdrawals almost 6% of your $1.1M. That's a pretty hefty drawdown if you want you money to last you through retirement. Maybe social security can reduce your withdrawal needs?

-Will

I like that the mortgage is less than 2X income. That's conservative. No other debt is also good. This year's Roth limit is $4K for each of you, I suggest trying to top it off. But that would mean saving 18% which is pushing it. You are off to a good start, even though really starting recently.

Sounds like you are an Excel guy, I'd suggest playing with the numbers, and put in 8% growth. Over 23 years, if the return is actually 8%, you will need 5 extra years to make up the difference. I started exactly 23 years ago, by coincidence, assumed 10%, and fortunately, the market averaged 13% from 1984 through 2005. Now, in the home stretch, I assume

8%. There are a multitude of factors that suggest the next two decades will not be as fortunate as the last two.

One other thought. If you are not maxing the Roths each year, consider putting money there that would otherwise go into the 529. The Roth is better both from a tax view and likely, expenses. If your kids get scholarships, you won't be stuck with money that has to be taxed.

JOE

would you mind expanding on that ? thanks.

s o

Reverse mortgage?

-- Doug

I think that's what you replied to. It was similar to one of my comments. You seem to have gotten a bit of a late start, and are making up for it with an excellent plan. But many here, including me, feel that retirement needs to take priority over college. Given the choice between the 529 and Roth, in terms of expenses and flexibility, the Roth wins on both. In a 529, there are usually few choices (compared to a Roth where you can choose nearly anything.) 529s also carry an extra layer of fees. I can invest in the S&P for .10% or less in my IRA, but over .50% in the 529. Over 20 years, that's over 8% return you just lost. I suspect jIM's comments would be similar. JOE

Can you tell me what leads you to think that? Also, can you describe your current porfolio and maybe highlight some of your past porfolio's. I'm thinking I might have to rely on emerging market to bring me the average 10% in the long run, but would like hear someone else's opinion.

thanks.

s o

A reverse mortgage is more like an immediate annuity than a loan. The only difference is instead of forking over the assets upfront, the insurance company gets the assets after you die. And they charge a hefty premium for that privilege.

--Bill

see

scroll down about 2/3 of the page to the article "waiting for average." This is the one that comes to mind.My portfolio has typically been 70% US, 20% foreign, 10% cash.The US part has always been overweighted as S&P 500, partially because my 401(k) has an expense ratio that dropped from .06% 20 years ago to a current .04%.

I don't claim the 10% is impossible, I just think that (looking at a spreadsheet I use) 10% return may offer a retirement age of 55 vs 8% 62, and it's better to be conservative, especially if you are trying to plan an early retirement. JOE

10% is the long term return of the stock market, generally considered to be S&P 500. If you look at last 5 years VFINX (Vanguard 500 index), it is returning only a fraction over 8%... if you look at 10 years it is 7.7%... so to expect 10% long term, it will be a tough pull.

There will be years higher than 10%. But the average will be closer to 8%, IMO.

Generally speaking you can borrow money for college, you cannot borrow money for retirement.

That being said, make sure retirement is fully funded (max Roths and more than minimum to 401ks) before any discussion of education savings for kids.

You mentioned additional savings for rental units? $1000/yr going to this fund? I might suggest you invest this in something more growth oriented than a CD. Maybe dividend paying stocks, maybe a conservative mutual fund (like a 30-70 type mix). This assumes it will take you 10 years to get any substantial savings at rate of 1k per year.

No... It's $1k/month. I'm getting aprox. 5% on Etrade CD. But with the current housing price in Calif(even though it's dipped somewhat), I don't think I can afford one in the near future(or something that will give me positive cash flow.) So any good funds I can park this $ for the next say 3 or 5 yrs?

s o

It's not a terrible idea to do everything in today's dollars, but that means that when you compute your growth rates, you use "real" returns, not "nominal" ones. Over the last 80 years or so, the CPI has put inflation at about 3.2%/yr (1929->2006).

That's a very optimistic ROI if it's assumed to be an *after inflation* (ie. "real") rate. For reference, a certain *very* well regarded balanced fund, invested at roughly 65/35 stock/bonds has returned a bit over 8% "nominal" (or about 5% "real") over that same '29->2006 period.

Actual return on stocks alone? Long-run over most of the last century has been closer to 6.5 or 7% real, and that includes a historical shift over that period to a much higher P/E than was typical earlier on (when folks considered stocks "riskier"). (Note that 7% is very close to your ROI of 10% - if you are working in "nominal" rather than "real" space - but then you need to grow your spending in nominal space, too, which you don't seem to have been doing)

Not to rain on your parade, but I'd rather see you use more conservative and realistic numbers in your projections.

Or, perhaps, more like a slow liquidation of existing assets. Only the assets are tied up as real estate rather than in other more liquid forms.

And that can't be repeated often enough.