Net Worth & Goals Update – March 2011

Net Worth Chart 2011

Oh alright, here’s another net worth update. My last snapshot was about 9 months ago. I know people like the voyeurism, but hopefully my commentary will also provide some helpful insights as to achieving our goals.

Credit Card Debt
I used to take money from credit cards at 0% APR and place it into online savings accounts, bank CDs, or savings bonds that earned 4-5% interest (yes I know, much less recently), keeping the difference as profit while taking minimal risk. (Minimal in regards that the risk was only dependent on my behavior and not outside factors.) However, given the current lack of great no fee 0% APR balance transfer offers, I am currently not playing this “game”.

Most credit cards don’t require you to pay the charges built up during a monthly cycle until after a grace period of about 14 days. This theoretically provides enough time for you to receive your statement in the mail and send back a check. As this is simply a snapshot of my finances, my credit card debt consists of just these charges. I don’t carry any balances or pay any interest charges.

Retirement and Brokerage accounts
Since my last update, the broad stock indexes have risen significantly, about 25% including dividends according to Vanguard Total World Stock Index ETF (VT) that I use as a general benchmark. Although these high valuations make me nervous, I am still a believer in stocks for the (very) long run and rebalancing your asset allocation regularly. Don’t buy high and sell low.

Here is our target asset allocation. Being heavy in stocks, our portfolio bounced back significantly as well.

Our total retirement portfolio is about $360k or on an estimated after-tax basis, $318,000. At a theoretical 4% withdrawal rate, this would provide $1,060 per month in retirement income, which brings me to 42% of my long-term goal of generating $2,500 per month. These are all really rough numbers, but helpful to measure progress and visualize living off your portfolio.

Cash Savings and Emergency Funds
We are happy to hold a year’s worth of expenses (conservatively estimated at $60,000) in our emergency fund. According to my emergency fund poll, many of you readers also have substantial savings set aside, with most having at least 4 months of expenses. Very nice.

Recently I wrote about how I maximize interest in my emergency fund, including the specific banks and institutions I use.

Home Equity
I would like my house paid off in 15-20 years at most, so I’ve been putting some extra money towards the mortgage. Note that this is only after maxing out both our 401k plans, fully funding IRAs every year, and creating a one-year emergency fund. I’d like our mortgage pay-down progress to parallel our portfolio growth so that both are ready for at least partial retirement in about 10 years.

So there you have it. Mrs. MMB and I both earned a six-figure salary again last year, which combined is in the top 5% of households. We try to save a lot of it while it stays this way. :) The future is hard to see, but we’re getting there a lot faster than we thought we could.

Comments

  1. Michael says:

    thanks for updating your networth

    there is something about seeing numbers… it is appreciated

  2. vijaianand says:

    Jonathan,

    Thats very well tracked and presented with good explanation for the auidence. I have a question on the retirement income. I know you mentioned that you want to withdraw $2500 every month from your retirement funds and you are not 42% there. But as per my CFP education, it depends on when you are planning to retire and how long is the withdrawal period and how much you are expected to earn. So you can predict them but you do rough estimation for the calcualtion. You didn’t mention anything about it.

    Vijai

  3. Homer S says:

    Are you sure the value of your home is unchanged? Like you, I don’t worry about the value of my home. I just want it paid-off before retirement. However, the info I found on sales in my area led me to take another 10% the value of the house.

  4. Jon,

    Thanks for updating this. You certainly add value apart from these updates, but this is “My Money Blog”‘s main event, if you will. Glad you finally gave in ;-).

    I’m also glad to hear things are going well for you. Looks like you’re definitely on track to be where you want to be!

    Cheers,

    -Greg

  5. Thanks for posting the update Jon. I like to see how other people manage their money between retirement funds, brokerage accounts, cash, and home equity.

    I think your asset allocation looks really good, and it is very similar to mine. However, I think you should look into adding some commodity exposure. Oil is usually the bulk of these funds, but I also like JJA and XME, as they cover agriculture and non-precious metals respectively.

  6. Congrats on all the increases! Keep up the good work.

  7. @vijaianand – It’s true that perhaps a 3% or 3.5% or 3.2343543545% withdrawal rate might be a better number. Once I get to 80% there based on a 4% withdrawal rate, then I’ll probably back off. For now, I’ll keep the ruler the same length instead of adding more complexity.

    @Homer S – Home prices are actually a bit higher in my area than before, although I don’t think prices have truly stabilized yet. Like above, I’m just going to pay this sucker off and stop paying attention to housing prices. :)

    @Mark – I think commodity exposure is probably a good idea, and I have some oil futures in my play money portfolio. Futures are tricky things. I just love simplicity in my main portfolio, but we’ll see.

  8. This type of post was one of the reasons I started reading your site. I hope you continue to keep updating us on your progress.

  9. I am just curious how much money in your Roth IRA was investment return. With the 5k limit (10k married file jointly), the total in your Roth IRA is pretty impressive…

  10. @Eric – I don’t know the ratio of return to contributions, but I do know that much of it was from rollovers.

    401k -> Traditional IRA -> Roth IRA

    Remember, no income limits for 2010 and 2011!

  11. If I want to compare you to myself should I divide your net worth in half since your wife also makes six figures.

  12. stephen says:

    Hi jon,

    You mentioned fully funding you IRA accounts yet your combined income is > 200k. I understand income limits are removed so are you funding with after tax dollars then paying tax on the conversion?

    Thanks

  13. Jonathan – thank you for the post! Impressive growth!!!

    Re: your note on no income limits for the following (401k -> Traditional IRA -> Roth IRA), I believe income limits for traditional ira rollovers to roth iras are actually lifted… period. TBD when (if?) they will reinstate them. Hallelujah for that!

    I have a couple questions, if you don’t mind:

    - curious on your thinking behind paying down the house. I know the math, and I know every financial advisor out there suggests this, but somehow between a 5% 30 year fixed rate that is deductible and what would be a 8-10% (pre-tax) growth in the market, we’ve been saving more liquid than paying down the house…. would love your insight behind the decision.

    - on the roth conversion – this is another thing I’d love your reasoning behind (for your personal decision making). I looked into it, and we’d be taxed probably close to 30% on every dollar we convert today, vs. my projected tax bracket of 15% when we retire (that assumes we continue to live off of ~$100k a year)

    as always, really appreciate the post.

    lp

  14. good stuff, good to visualize. have you written about your career/profession anywhere on your blog? i’d like to catch up since i caught it dead in the middle

  15. @mike – You can do whatever you like :)

    stephen – Yes, I am doing a “back door” Roth IRA by funding a non-deductible Traditional IRA and then immediately rolling it over into a Roth IRA. This is hard to do if you have other pre-tax Traditional IRA balances that you do not wish to roll over, because you have to roll them over proportionally. More info here:

    http://www.mymoneyblog.com/2010-non-deductible-traditional-ira-contribution-made.html

    http://www.mymoneyblog.com/2010-roth-ira-income-limits-effectively-removed.html

    @lp – I view paying down the mortgage is like buying a bond paying 5% annually for as long as you own that mortgage. If you pay down the house and sell it in 5 years, you just earned 5% for 5 years. Can any CD beat that? If you have 20 years left on your mortgage, you’re earning 5% for that long. Still better than any Treasury Bond. The market is no guaranteed 8% return, even for periods as long as 20 years, see link below:

    http://www.mymoneyblog.com/infographic-investment-returns-vary-over-the-long-run.html

    As for the Roth, as I showed above, I am rolling over from non-deductible Traditional IRA to Roth IRA, so I’m basically contributing to a Roth IRA. Our Trad -> Roth conversions with pre-tax money were made at about 25% rate.

    Tax brackets change, I don’t know about the future. But definitely if you think you can be in a lower tax bracket in retirement, then stick with pre-tax accounts.

  16. Jonathan,
    I also invest in 529s. (I have about $25000 in one for my son.)
    I wonder if this is a good idea, though.

    I’ve done a bit of research here and think that sheltering this in a Roth IRA or other retirement tool for my son might be a better idea as the universities use this against you in terms of your financial aid package.

    Thoughts here?
    thanks,
    Daniel

  17. Jon,

    Thanks for the update – I was one of the people who was interested in tracking my progress vs. yours :)

    I don’t know if I’d call it voyeurism, though, b/c I was directed to your site by money magazine, and they highlighted the fact that you did post your financial progess – so I maybe I acquired a taste for financial voyeurism as a result of visiting your site!

    Keep up the good work on the financial front, and keep the updates coming – as you can see by the large amount of comments, your updates are definitely welcomed by many!

  18. Hi Jon;
    What’s your opinion about buying LTC insurance 10 yrs payment plan at the age in early 40′s assuming paying off debts and fully contributing to retirement plan/college savings/emergency fund?
    Thanks.

  19. Nice increase! Is this just your net worth or combined with you and your wife?

  20. Your website advertises a net worth box at the top, and highlights that you track your net worth in the first paragraph, but it appears you only update it every several months – what gives?

  21. Great site and great way to calculate retirement ratios. I’m curious though about how you arrived at your estimated after-tax portfolio value. If you back out the Roth assets you’re estimated paying a little over 18% in taxes. In short how did you arrive at this number?

  22. I miss your regular Net worth and portfolio updates. Being lazy, eh?

  23. keynsian_reality says:

    dude, you can just subtract that imaginary home equity from your total. housing is about to take its next leg down.

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