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I have recently come to realize that I am behind on my savings if I want to retire early.

Currently I contribute 18% to my 401(k), I finally started a Roth last year, and I save a little in other areas as well. I also own a sort of decent amount of stock in my last company which is not accessible to me for 4 years. The way things are going with them, I wonder if there is going to be much left. We have a 3% match in our 401(k), which goes up to 6% after you've been there 5 years. We also have profit sharing, but that amount will likely be, for me, only about 1000. That also goes into the 401(k).

Most of my investments in the Roth and 401(k) are in stock funds, about 70-80%. I am not really interested in becoming a super-active investor; I am much more interested in being able to stick the money in something and check on it every 6 months.

I don't have any significant debt except my mortgage and a small student loan; my spending is low compared to most of my peers. I am sure I don't make nearly as much as most of the people on this board; I am a single person with no kids.

Given that information, what specific recommendations would you guys make for ramping up my retirement savings? I am hoping to retire by age 57, which is 20 years from now, but would like to do it sooner if possible.

Janet
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Given that information, what specific recommendations would you guys make for ramping up my retirement savings?

Janet,

You'll probably get a lot of good advice from this board. Mine is simply that 20 years is a fairly healthy period of time to make up for any existing inadequacies in your retire early (RE) plan. You seem to understand the basics. 1) Learn to love to live as frugally as possible. That means different things to different people, but it applies generally to anyone who wants to retire early -- live below your means (LBYM). 2) Eliminate high interest debt. This applies mainly to credit card debt. 3) Take free money where you can get it. Your 6% 401K matching opportunity is pretty good. 4) Invest all you can Foolishly.

If you stay focused on getting better and better at these things over the next 20 years, you have a good chance to RE. Not many of us ever find a "magic wand" type of investment and even fewer win the lottery. For most it is simply a workhorse attitude of discipline and persistence when it comes to investing for retirement.
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Janet:

You made a good start and should feel a sense of accomplishment. Given the current market conditions, I know a number of folks are wondering if they can retire early. But, this market will improve in the long run.

Remember TTT. Things Take Time. Compounded growth, over time, has been described as a wonder. Keep doing what you are doing, LBYM, put extra cash in a stock mutual fund (from a low cost family like Vanguard), continue putting $ into your 401K, and continue to put $ into a Roth.
Putting money into a stock mutual fund is pretty much "hands-off" if that is what you want.

While I'm not a market "timer" per se, I do tend to move money from my money market accounts into stock mutual funds after major pull backs. I moved some this week. This has worked well for me since 1980 when I began investing. This can be dicey if you need the $ on a short term basis, but over a 20 year period that you are looking at, it might work for you.

I hope to read your RE story on the board down the road.

BB
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Given that information, what specific recommendations would you guys make for ramping up my retirement savings?

Hi Janet,

Welcome. I enjoy your posts on LBYM board.

Salaryguru gave you good advice. Additional recommendations:

- In order to save as much as possible, it helps to maximize your income. Is there a better-paying occupation that you get into with little to no additional education? Something related to what you do now and/or something that you've always been interested in? I think a poll was done of the make-up of this board and IIRC the majority work or have worked in a technical field, where many of the jobs pay pretty well. Technology suits an introverted person like me just fine, however I realize that is not everyone's cup of tea. An extrovert might want to try sales.

- It is easier to save when you don't live where the where the cost of living is higher than the national average. When I lived in Northern California a few years ago, I remember a local news channel referring to the area as "the best place on earth". It was beautiful, but if I had stayed, then surely the cost of living would have lenghten my trip to early retirement.

- Finally, you might want to validate your target nest egg against information contained on Intercst's Retire Early home page and by combing through past posts on this board. I did and found that I needed a smaller nest egg than I had orginally thought. You'll hear a lot about the safe withdrawal amount which means that your nest egg has to be large enough so that a 4% annual withdrawal would cover your expenses, including taxes.
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For someone who does not want to spend much time on a regular basis studying how best to invest, I'd suggest the following. After maxing out your tax defered accounts,put the remainder in a no-load TOTAL STOCK MARKET INDEX FUND like Vanguard of T ROWE PRICE. You acheive good diversification in a tax efficient manner.
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- It is easier to save when you don't live where the where the cost of living is higher than the national average. When I lived in Northern California a few years ago, I remember a local news channel referring to the area as "the best place on earth". It was beautiful, but if I had stayed, then surely the cost of living would have lenghten my trip to early retirement.

I'm not so sure that this is true. I live in the Bay Area and save a sizable fraction of my gross (almost 35%) and when I leave here and retire in hopefully 10 years I will not need as much for expenses as I do now. Yes, the Bay Area is expensive but you can often increase your income by a larger percentage than your expenses by living here if you work in the right field. Coming here to work as a book store clerk would make no sense from a FIRE perspective but coming here to work as a software engineer would. You do have to avoid the whole spend big culture that is predominant here though.

Hyperborea
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You may be a good candidate for the Couch Potatoe portfolio. Do a search for Scott Burns or Couch Potatoe. Its basically a total market fund and a bond fund equally weighted (50%/50%). He claims it takes 5 minutes a year.

Oh, and don't date poor people ;-)

nmckay
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I made some assumptions and did my own calc to see where you landed. Let's assume the following:

8.6% annual return
3.5% inflation
20 years til retirement

Annual income $50k
401k contribution 18%
Company match 3%
Company match year 5+ 6%
Total savings to date $50k
Annual Roth contribution $2k

Given this scenario, you will have $20.6k/year (today's money) to live off of in retirement. Of the starting $50k/year salary, 11k is being saved, so you're living off $39K/year. Depending on your house payment (if you can pay it off) and the reduced taxes in retirement, you could probably swing it--a little too close for my liking though. Another $500/month saving would get you about $27k/year, much more reasonable...and another $1000/month would get you to $33k/year, very reasonable.

The one thing not figured in is any bonuses or raises you might get. Those would help too.

Jimvy
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