Retirement Nestegg Report November 2016

Retirement Nestegg Report November 2016

Well another all-time high for my nestegg, but another month of disappointing performance by my individual stock holdings. Overall this year my stocks have trailed the market quite significantly in part to under performance by some of my key holdings like Tesla, Chipotle, Under Armour, Netflix and others. Overall I am not too concerned but it does get frustrating watching the market beat me month after month in 2016. The good news is I have about half of my portfolio in market index funds so not all hope is lost and so far over longer periods of time I still have outperformed by quite a significant margin with my individual stocks, but this is not one of those years. Luckily though I feel as confident as ever that the aforementioned under performing stocks will greatly reward me in the future.

Taxable Account- $42,594.38 (+3.44%)
Private Stock $60,000 (+0.00%)
Traditional Rollover IRA – $30,915.37 (+9.14%)
My Roth IRA – $149,245.46 (+2.90%)
Wife Roth IRA – $81,088.55 (-1.50%)
Traditional 401k – $296,022.09 (+4.78%)

Roth/Traditional % = 35.43% (tax free)

Total Retirement Nest Egg $659,865.85(+3.20%)
Retirement Salary (4%) – $26,394

Monthly Contributions $1,371.16 (401k)
SP500 Performance +3.42%
My Monthly Investment Performance +2.99% (-0.43% vs SP500)
My Monthly Individual Stocks Performance +2.35% (-1.07% vs SP500)

Retirement Nestegg Report October 2016

Retirement Nestegg Report October 2016

Taxable Account- $41,179.18 (-5.75%)
Private Stock $60,000 (+0.00%)
Traditional Rollover IRA – $28,325.27 (-8.74%)
My Roth IRA – $145,046.18 (-1.68%)
Wife Roth IRA – $82,327.47 (+0.89%)
Traditional 401k – $282,527.68 (-2.24%)

Roth/Traditional % = 35.43% (tax free)

Total Retirement Nest Egg $639,405.78(-2.06%)
Retirement Salary (4%) – $25,576

Monthly Contributions $1,371.16 (401k)
SP500 Performance -1.94%
My Monthly Investment Performance -2.27% (-0.33% vs SP500)
My Monthly Individual Stocks Performance -2.30% (-0.36% vs SP500)

Retirement Nestegg Report September 2016

Retirement Nestegg Report September 2016

Taxable Account- $43,689.79 (-3.71%)
Private Stock $60,000 (+0.00%)
Traditional Rollover IRA – $31,038.00 (-3.99%)
My Roth IRA – $147,529.06 (-1.26%)
Wife Roth IRA – $81,598.29 (-1.29%)
Traditional 401k – $288,999.95 (+1.31%)

Roth/Traditional % = 35.43% (tax free)

Total Retirement Nest Egg $652,855.09(-0.33%)
Retirement Salary (4%) – $26,114

Monthly Contributions $1,371.16 (401k)
SP500 Performance -0.12%
My Monthly Investment Performance -0.54% (-0.42% vs SP500)
My Monthly Individual Stocks Performance -1.91% (-1.79% vs SP500)

Financial Goal Checkup: My very own basketball court

Financial Goal Checkup: My very own basketball court

About 9 years ago I posted a kind of an unique financial goal on this blog – I wanted my very own full court basketball court.

In roughly 5 years time I want to have enough money put away so that I can build a house out in the country with a full court outdoor sportcourt basketball/volleyball/tennis/etc court. — MFJ 2007

Well I am here to report on the progress of this not often mentioned financial goal I had for myself. Well the good news is that I saved quite a bit of money for that house out in the country starting in 2007. In fact I ended up saving $180k+ in cash for our move to the country, new house, and of course basketball court.

The bad news is it took us a lot longer to find the perfect land out in the country and we didn’t actually build until 2016. This also happened to be one of the greatest times to invest in the market in my lifetime so that $180k probably cost me double that, but the good news is that I can now report that we have secured 15 acres out in the country, built our dream house, and if you open the oversized garage you will find my very own basketball court.

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Now in my original post I had always envisioned an outdoor sport court type basketball court, but given the fact that I live in WI I figured the bigger bang for buck would be to move it indoors so that I can use it year round and cost constraints ended up making it a half court, but I am still very happy with how it turned out. Our garage is nearly 1500 ft and it is a great spot for the kids to play regardless of the weather.

The best part is I was able to pull this off while still accumulating a sizable nestegg despite having only one income and raising 5 young kids. I’m sure many people will view this as an extravagant expenditure that set my early retirement back years. And it is! It’s totally unnecessary and so is our mansion in the country, but it is also something that I have wanted for a long time (blog post in 2007) and something our family will enjoy for years to come. Life is about balance and we have put ourselves in great financial shape where we can afford anything we want, just not everything we want 🙂

We have five young kids and while I could have amassed a much larger nestegg or achieved Financial Independence much earlier if we had continued to live the status quo – it likely would have come at the expense of our memories we get to create with our children in the short period of time they are in our house. No sense in becoming financially independent eating rice and beans and try to get the kids to come over and play basketball with when they are 25 and I am 50 🙂

The biggest thing is we set ourselves on a very solid foundation in our early years where as I’ve said before that by setting and reaching goals in our 20s we put ourselves in such a good situation that it will be hard for us to wreck ourselves financially by wanton spending in our older years (30s & 40s). We still are spending money on things that bring us value and happiness and minimizing spending on things that do not. I still drive a typical MFJ pimp ride (wife’s used car we bought 13 years ago) and we are still saving a good portion of our income and on the path to financial independence in our early 40s. We just happen to have a basketball court in our garage 🙂

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The path forward to two commas ($1M by age 40)

The path forward to two commas ($1M by age 40)

I’m sure I’m not unique and I’m sure every financially savvy person has contemplated the day when their net worth / account balance will surpass the magical $1,000,000 mark. When I started this blog in 2005 I put together a goal of having saved $100,000 in money for retirement by age 30, because as we all know saving the money while you are young allows compound interest to kick some butt on your behalf.

Well in August 2009 the deadline for my $100,000 by Age 30 goal came and while I fell just short I had put myself in a great shape financially going forward. I immediately did the smart thing and laid out the next goal $1,000,000 by age 43 and even put a nice little tracker on my blog with the (post coming) and then proceeded to never sit down and write the post

InvestingGoals

Even before I started this blog at age 26 I had created excel spreadsheets forecasting my savings into the future and estimated returns and always seemed to come up with age 42 or 43 as to when I would cross the 1 million dollar mark. In my heart I always wanted to hit it by 40, but I never seemed to get the math to work with my then 21 year old brain which if you know a 21 year old probably wasn’t all that sharp.

Ironically when I created my little tracker for when I would hit $1M I relied on the calculations I had done even before I got my first job instead of doing the simple math and probably realizing with a little hard work $1M by 40 was probably attainable. So I probably set the bar too low and then I compounded that mistake by not putting together any meaningful plan as to how to achieve it and just figured by just using the status quo of me randomly living frugal and saving money by chance I would hit that mark.

Well today I’m going to actually look do the math and see where that status quo puts me and see what it will take for me to hit $1M by age 40.

Scenario 1 – Do nothing and let the market do the work for me.
I very recently had my retirement nest egg cross the the $600,000 mark and I have 3 years until my 40th birthday. In my last annual report I decided to include another $60,000 of private stock I own. If I were to never put another penny into the market I would need to have annualized returns of 14.86% over the next three years for my accounts to hit $1,000,000.

Odds of Success: 10%
Commentary: This would be a rather poor approach as it relies 100% on things out of my control and would rely on very unrealistic and uncharacteristic returns by the market as a whole or me to do something even more stupid and take on a idiotic amount of risk that would likely result in me putting together a new $100,000 by Age 45 post than it would welcoming me into the double comma club.

Scenario 2 – Average market returns – plus ho hum contributions.
If I expected annual returns of 10% I would need to contribute $38,000 to my retirement each of the next 3 years in order to hit the $1 million dollar mark.

Odds of Success: 40%
Commentary: The first problem with this plan is that it requires 10% annualized returns – which while that is historically an average return, the market is anything but a constant and almost never returns anything near 10% for a single year and is often much higher or lower than that.

Scenario 3 – Continue contributing as planned and hope for strong market returns
I currently have budgeted that I will contribute about 50k a year to our retirement accounts. I feel like this is very doable going forward as my 401k and employer matching account for about $29,000 per year. If I max out mine and my wife’s Roth IRAs that is another $11k and then I need to put $10k into a taxable account that will help the transition into early retirement by giving me an account with less strings attached to the money. If I were to do this I would need to achieve about 8.73% annualized returns from my investments.

Odds of Success: 60%
Commentary: I feel like this is probably the most well balanced plan. It is also ironically the path forward that I was already taking, but it gives me a little assurance that the math kind of works out.

The big question mark is what the market will do the next three years – which as anyone with any sense will tell you is that they have absolutely no idea. The market could be down all three years or it could be up significantly. Historical market average is around 10%, but almost never during a 1 year period will the average return be anywhere close to that and it doesn’t get a whole lot better in a short period of time like three years.

Ultimately this is the reason my $100,000 by 30 goal was all about contributions as it was entirely in my control, but that ship has sailed and going forward the whims of the market will be what is controlling my ship versus what I am doing.

The other item to factor in is my ability to put way $50k per year into my retirement accounts. The last two years I averaged $45k and while I’m already close to $60k this year that included a $25,000 boost from my cash savings that was a one time thing.

It certainly is possible for me to save that much money but we currently built some extravagant mansion out in the country with a $300,000 mortgage, have 5 kids, and a million home improvement projects lined up for the house so it may come down to a choice of spending like drunken sailors or hitting the $1M mark or finding ways to bring in additional income.

One wildcard with this scenario is that my wife does not currently have an income producing job as she is raising our five kids could theoretically land a teaching job in the next year or two or come up with other ways to make money which would definitely help on the income part and increase our odds.

Conclusion
It appears I am definitely on the right path and I have a couple of plausible scenarios to get me to my goal. I obviously will be targeting Scenario #3 which has the highest odds of success, but it is also apparent to me that this goal is very much out of my hands at this point. It reinforces that the real power to have drastic affect on your future wealth is achieved at a young age many years in the past. This sets the foundation and you are able to just plow through the choppy market waters and keep moving forward.

Once enough time has passed and your nest egg has grown to sufficient size you are a captain on a large ship with a tiny rudder and you are able to make less of an impact than you could 5 or 10 years ago. The only caveat to that statement is that your rudder right now is much larger than it will be 5 to 10 years down the road so while your saving habits certainly have less affect overall than they did in the past they certainly have much more than they will down the road. Which is fine because hopefully at that point I am just on the ship enjoying the view.

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Retirement Nestegg Report August 2016

Retirement Nestegg Report August 2016

Well another all-time high for my retirement nestegg and some slight out-performance by my investments. I also broke through the $600,000 mark in the middle of last month

One thing new this month is that I have finally decided to include some private stock that I own in my retirement nestegg report. Historically I have not included this for a number of reasons. First it is not a very liquid asset where I can get an updated value each month – I really only get value on it once a year at the annual stockholders meeting when I get word of recent stock transactions and the book value of the bank. It also historically was a decent chunk of my portfolio so it would have skewed my investing returns – now it is less than 10% so it would not have a very big affect on calculating my performance.

The other reason I have not included it historically is because it was a gift from my father who initially put the $10,000 into starting the bank when I was a freshman in high school and put it in my name. Part of the reason I started this blog was that I knew this journey was going to end up with be accumulating a 7 figure nestegg and I wanted to document how straightforward and simple it is to do and that anyone can do it. Not everyone is getting a $10,000 gift from their parents in high school as an investment so I didn’t want that to detract from the overall success my nestegg would have over the years so I have just pretended it didn’t exist.

That being said I am spending more and more time working out the math for when I feel I am financially independent enough to stop working and this asset will likely be a part of that equation so I have now included it as I believe the focus of this blog will change from counting up how big my nestegg has grown to counting down to the point where my nestegg can provide for all of the living expenses I and my family will need the rest of my life.

Taxable Account- $45,373.53 (-3.57%)
Private Stock $60,000 (+0.00%)
Traditional Rollover IRA – $32,328.93 (-0.34%)
My Roth IRA – $149,409.43 (+1.79%)
Wife Roth IRA – $82,656.91 (-0.92%)
Traditional 401k – $285,250.99 (+1.16%)

Roth/Traditional % = 35.43% (tax free)

Total Retirement Nest Egg $655,019.79(+10.71%)
Retirement Salary (4%) – $26,200.79

Monthly Contributions $1,371.16 (401k) $60,000 (private stock inclusion)
SP500 Performance -0.12%
My Monthly Investment Performance +0.36% (+0.48% vs SP500)
My Monthly Individual Stocks Performance +0.03% (+0.15% vs SP500)

Interim Retirement Nestegg Report – I broke $600,000

Interim Retirement Nestegg Report – I broke $600,000

Today I officially broke through the $600,000 barrier for the first time in my life. It actually took me 16 months to add another $100k onto my retirement nestegg which is longer than it took me to go from 400k to 500k and 300k to 400k, which is not exactly how this compounding this is supposed to work. That being said the market has only gained 3-4% while my nestegg has increased 20% in the same time.

This would be all great news, but the vast majority of those gains were not from investment outperformance, but from my contributions as I’ve contributed almost $85k during this period of time. So the good news is I have been able to greatly pick up my contributions in the last 16 months and the good new is that even in a flattish market my nestegg continues to grow and is supercharged waiting for the next uplift of the market to greatly increase the frequencies of these types of posts.

Taxable Account – $46,743.60
Traditional Rollover IRA – $33,088.57
My Roth IRA – $149,981.23
Wife Roth IRA – $84,937.29
Traditional 401k – $286,484.24

Total Retirement Nestegg – $601,234.93

$100,000 NestEgg Milestones

Date DOW Jones Value MFJ Nestegg
Oct 2008 10,000 $ 69,300
Oct 2009 10,000 (+0%) $100,000 (+44%)
Feb 2012 13,000 (+30%) $200,000 (+100%)
Jul 2013 15,423 (+19%) $300,000 (+50%)
Feb 2014 16,395.88 (+6.3%) $400,000 (+33%)
April 2015 18,084.48 (+10.30%) $500,000 (+25%)
August 2016 18,636.05 (+3.05%) $600,000 (+20%)