Our Mid-Term and Long-Term Goals Explained

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If you look at the progress bars on the top right of this site, you’ll see our current progress towards our mid-term and long-term goals. I just wanted to spend a minute and discuss these goals, as I haven’t revisited them in a long time.

First of all, these were initially set over two years ago. Since then, I’ve quit a well-paying steady job, went back to school, and started doing a combination of mismatched jobs. Only recently am I about to get back on a stable income. My wife is doing incredibly well in her career, exceeding even our expectations. In other words, there’s no way we could have predicted how the last two years have turned out.

$1,000,000 Long-Term Goal… Sooner Than You Think
Many people point out that we’re going to need much more than $1,000,000 in order to retire. I totally agree – that’s why the deadline for this goal is actually set at age 45, after which we plan to keep working for another 10 years (and allow that million to keep compounding away). My goal remains to become “financially free” by age 55, meaning I don’t have to work, even though I’m sure I’ll need something to keep me occupied.

This gives me a goal that’s within 20 years from now, and a nice round number that I can wrap my head around. At the same time, we don’t want to be mercenaries – we both want meaningful jobs that won’t make the next 27 years miserable.

$100,000 Mid-term Goal… Almost Time!
Again, this goal was made based on me keeping my old job and income. Quitting put us behind (check out the dip in our net worth history chart), and it is unlikely we’ll catch up in time. Saving up $100,000 in non-retirement assets (mainly cash) for a house down payment is a lot harder than I thought. You don’t get the benefit of big stock returns, nor the time to compound them. It’s just cold reality – every dollar you spend is one less towards your goal.

Still, we try to maintain a good balance between saving and enjoying our lives, and with the housing market looking the way it is, we aren’t in a hurry to buy. If anything, our income by the end of 2007 will be higher than what we would have expected before, so it’s all good.

In the end, I’m still glad we made these goals, as it has definitely helped focus our energies. Hopefully my next post on this topic will be about the completion of this mid-term goal and the need for a new one!

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  1. $1 million not enough to retire on? Depends on where you live. I live sort of lavishly on $2,000 per month. Half a million drawing 5% interest in very boring and safe bonds and CDs means I never have to work again and when I die there will still be half-a-million to pass on.

  2. I once overheard two convenience store clerks talking about a guy who won a $1Million dollar lottery and how that wouldn’t be enough to retire on. Exactly how much do people who work minimum wage jobs their entire lives retire on? I haven’t known very many millionaires, but I’ve known lots of retirees…

  3. 2000 a month to live on might be ok today if you don’t have a house payment, but when I get to retire, I calculate that I will need 3-4 times as much (remember inflation can add a lot in 30 years).

  4. I am shooting for a $1 million net worth because I need a goal to shoot for, and $1 million sounded so much better than $987,542. All joking aside, it’s a great first goal to shoot for.

    I am for a 20% annual increase in net worth. Run an Excel spreadsheet on that, and you’ll see that you get to $1 million in no time.

    With that being said, I don’t think $1 mil is going to be enough to retire on. The bogey is……………………. health insurance. Who knows what it will cost to have coverage in 15, 20, 40 years? Many people aim for a million by age 45, thinking they’ll be able to kiss the corporate job goodbye, but you have to think about health insurance.

  5. I’m confused, weren’t you planning to get to $1Million at 45? What’s this 30-60 year stuff? 😉 Something tells me that in 30yrs, in spite of inflation, you’ll just be taking advantage of $100K 0% balance transfers, signing up for $500 sign-up bonuses, and making sure it’s all earning as much as it can. And if this blog is still around, you’ll be bringing us all deals on healthcare, annuities, and dentu-creme…

  6. 😆 at dentu-creme…. see… I’m already getting old.

  7. “$1 million not enough to retire on? Depends on where you live. I live sort of lavishly on $2,000 per month. ”

    Just to clarify, I think from previous comments geomark is an ex-pat living in Thailand. Not a bad idea, but probably won’t work for everyone 😉

  8. nathan in new mexico says

    I’m young (23) and think that the whole point of starting young with regards to proper financial managment is so that one can be “financially free” at 40-45 (not that it really is, but 55 is alot closer to the traditional retirement years than 40)

    Financial freedom asap is the goal, 55 is too far off for me…

    btw, im making good headway as far as that goal is concerned (put away ~20k last year plus zero debt, not bad for a youngin’) remember the old adage: live like a college kid, even after graduating….

    (oh, and delivering pizzas in the evening and on weekends is damn fine way to save an extra 1-2 thousand/month without responsibility, many taxes or stress after the 9-5)

  9. Yes, Jonathan, I’m retired in Thailand and it isn’t for everyone. Just a data point that where you live makes a big difference.

    The point Q made about healthcare is a big consideration. The unknowns of future healthcare costs must loom large in everybody’s mind.

    In my situation the healthcare in Thailand is world class, a fraction of the cost, and delivered with warmth and hospitality – I’m very pleased. I just had a root canal. Total cost 5,800 baht (US$166). My wife had surgery a couple years ago to remove an ovarian cyst. Total cost US$1,800 included four nights in private room. I just pay cash.

    Nathan, I was just like you. Worked hard, saved like crazy, made boring investments, max’d out my 401k, didn’t incur consumer debt, retired at 45 (I’m 50 now). I wasn’t particularly brilliant or lucky. You can do it.

  10. Geomark – you need to pay taxes and leave enough money in the account to compensate for inflation as well as raising the withdrawals over time. Taking – 5% of $500k covers your living expenses but not the other stuff.

    On early retirement – the big difference is older retirees have social security, maybe some other pensions. Most people don’t retire with $1million net worth they don’t need to. But in 30 years time $2million + will be the equivalent of $1 million today and other benefits are likely to be lower and costs such as medical rising faster than general inflation.

    So $1million I think is a very minimal goal for most people blogging today. Even with 10% returns lt alone 5%.

  11. My taxes are pretty small on $24,000 per year with dependents. Inflation isn’t such a big fear if you realize that interest rates rise with inflation so my boring 5% will climb during high inflation periods and I won’t be falling behind that fast.

    Again, it depends on where you live. 5% of $500k allows me to live rather lavishly, covering all my necessary expenses and allowing me to splurge regularly. In the future I can always choose to splurge less. And when I reach official retirement age I’ll collect social security (if it’s still around) and a retirement benefit from one of my first employers – both small payments but significant amounts where I live. Those will just be icing on the cake – I might use it to hire a full time private nurse if I have health issues – that’s about $300 a month over here.

    But I agree, most people reading this blog are living in the U.S. and $1million won’t be enough if you retire there.

  12. It’s correct that interest rates are higher when inflation is higher and vice versa. But if you spend the entire interest then they are still a percent of the original principal you started with. You need to save the amount of the interest equal to the inflation rate each year in order to maintain the buying power of your interest in the future. So for example if interest rates are 5% and inflation 3% you need to save that 3% and only spend 2% or next year your money is only worth 97% of what is was worth this year and that 5% interest is also worth 3% less than in the previous year. For a year or two this isn’t a real problem but over 10, 20 or more years it becomes a serious problem. Of course you can run down your capital, the question is how fast is safe without running out of money. With the numbers I gave your money will run in out in 25 years if you spend $25k in the first year and up it by 3% each year to compensate for inflation…

  13. I agree with your analysis. But I think I would run the numbers using my necessary expenses instead of my necesary+splurges. My splurges are frequent and are about 30% of my annual expenses at the moment. I’ve been doing that for the 5 years I’ve been retired and it’s probably time to restrain myself a little.

    So my necessary annual expenses are about $18k Cheap, eh? That’s because my house is owned free and clear and no property taxes here, all the other stuff like food, utilities, gas, insurance, clothing, healthcare, and hired help are quite inexpensive. Biggest single expense each year is a trip to visit family in the U.S.

    So starting with $18k expenditures in the first year and upping it by 3% each year while earning 5% on $500k means I run out of money in about 40 years. That assumes 3% inflation and 5% interest rate are good averages over that period of time – seems like an ok guess. It also ignores social security and pension plan income I’ll get in the future, plus some current income I have from online tinkering – I’ll just put that into my splurge fund and not count on it for living expenses but splurge whenever the checks come in.

    Sounds ok to me. What’s a good planning number for a retiree’s annual expenses in the U.S. these days?

  14. I’m glad there is someone on here that has retired outside of the U.S. I think we will be seeing that more often over the years. Hopefully not too many people do it and increase the price of land and other things in these foreign countries. I have been considering moving to Malyasia, Tailand, or Vietnam in 30 or 40 years. It depends on how much fun I will have in my future career.

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