PTFO: Status Update and Re-evaluating the Plan

It’s been a while since our last PTFO post.  Two months to be exact.  At that time I talked about initial retirement planning.  Using the 4% rule as a starting point, I estimated our magic retirement number to be $2 million.  Using an annual return rate of 5%, I figured it would take about 20 years to reach this number using just my available retirement accounts (401k, HSA, Roth IRA).  By these initial calculations, I would be able to PTFO in the year 2035 at the tender age of 57.

 

Current State of Affairs

As of today, I’m nearing the end of my student loan repayment journey.  I graduated residency in July of 2014 with about $300k in debt.  Today that total is down to about $120k with plans to make $12,500 payments per month and have it paid in full by October.  In terms of our retirement nest egg, we’re about 18% there.  Here are some other goals I’ve accomplished up to this point:

  • Learned (and still learning) about personal finance – probably the most important thing I did on this journey
  • Paid off all consumer debt – luckily I only had a credit card balance of about $5k
  • Established an emergency fund – one of the most important, yet often overlooked, components of financial planning
  • Improved my credit – knocking out my credit card debt and making regular, on-time loan payments did wonders for my credit score

 

Recalculating Our Retirement Savings Plan

My initial retirement calculations were based off of just my individual annual savings.  Now that I’ve had enough time and data to factor in my wife’s savings as well, we can now reassess our savings plan.  If you read my 2016 Financial Year in Review post, you know that we were able to save almost $110k toward retirement last year.  Based on our budget and financials, this will probably be the amount that we’ll be able to save going forward.  To make the math simpler, I’ll up that to $120k per year.  We might be able to save a bit more, but this will serve as a good baseline value to make our adjusted calculations.

Using this information and our current retirement portfolio balance, I calculated the number of years it would take to reach our $2 million goal at varying rates of returns.  I was inspired to do this by an awesome post by Physician on Fire.  While I ended up making my own spreadsheet, you can access a similar one on his site.  I divided the $120k total over the course of a year to get $10,000 per month.  The table shows how many years it would take to get to certain end values based on the annual rate of return.

$10,000.004%5%6%7%8%9%10%
$2,000,000.009.99.38.88.37.97.57.2
$2,500,000.0012.311.510.810.19.69.18.6
$3,000,000.0014.513.412.511.711.110.59.9

Using a return of 5%, it would take me about 9.3 years to reach the $2 million mark.  This means I could reach financial independence in the year 2026 at the age of 48, nine years earlier than initially expected.  What’s more, if I decide to work and save for an extra two years, I could reach a nest egg of $2.5 million.  This correlates to a more conservative 3% annual withdrawal rate.  Hot stuff!!

Once I’m finished with my student loans, I’ll have an additional monthly cash flow of up to $12,500.  What will I do then?  Will I go on a celebratory shopping spree?  Nope, that’s not how I roll.  The great thing about making such large payments for the past few years is that we’re accustomed to life without that money.  Hypothetically, if I invest an additional $10k of that money starting in 2018, bringing our monthly investment amount to $20k, I’ll be able to reach $2 million in 5.1 years using a 5% return.

$20,000.004%5%6%7%8%9%10%
$2,000,000.005.35.14.94.74.54.44.2
$2,500,000.006.86.56.26.05.75.55.3
$3,000,000.008.27.87.47.16.86.56.3

That means I’ll be able to PTFO in 2023 at the age of 45.  That’s six years from now.  That’s faster than light speed.  That’s Ludicrous Speed!!

 

So that’s were I am currently in my PTFO journey.  I’m really close to finally being student loan debt free!  And while I’m still several years away from officially PTFO-ing, it’s much sooner than initially calculated.  Kudos to me for marrying a doctor!  Anyways, thanks for reading and checking out my blog.  Until next time!!

10 thoughts on “PTFO: Status Update and Re-evaluating the Plan

  • January 12, 2017 at 11:16 am
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    Congrats on being bear the end of the student loan payoff! Those loans sound nightmarish but it’s great that you’re able to put so much towards them.

    • January 12, 2017 at 5:06 pm
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      Thanks! I can’t wait to finally be free of that student loan debt. I did graduate medical school with more than the average amount of debt, but not as bad as others. I was also fortunate not to have any other type of debts, such as credit cards or car payments, that I had to worry about. Thanks for stopping by!!

  • January 12, 2017 at 5:53 pm
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    Shaving off nine years off retirement has got to feel amazing and knowing that you only have to work two more years to reach a 3% withdraw rate is even more amazing when you had mentally thought it would take longer. Awesome job and I’m sure that made your day. Thanks for sharing and I look forward to reading about the journey!!!

    • January 12, 2017 at 6:08 pm
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      It does feel pretty good! I know I’m fortunate in that I have a dual-physician income to save at Ludicrous Speed, but it does feel great to know that this goal is attainable, especially given my late start in saving and investing. Thanks for stopping by!!

  • January 13, 2017 at 8:11 pm
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    Well done, paying off your student loans will help you tremendously. I’m sure you’ll do just fine this year. All the best for 2017

    • January 14, 2017 at 3:50 pm
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      Thanks for stopping by! Getting rid of my student loan debt has been a top priority of mine since graduating from residency, so it’s great to finally see the light at the end of the tunnel. Thanks for the comment!!

  • January 14, 2017 at 4:01 pm
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    You are SO CLOSE to paying off that student debt!! I love your numbers and analysis. Great job on taking off 9 years from your retirement plan, you will be PTFO-ing in no time!

    • January 14, 2017 at 11:41 pm
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      Yeah I can see the light at the end of the tunnel. I’ll be glad when it’s fully paid off because it will bring me one step closer to retiring early if I want. Thanks for stopping by!

  • January 26, 2017 at 7:33 pm
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    Ahhh, the $10 Million Dream calculator? Yes, that is a fascinating one. I have played with it a bunch. Blogging can provide so much clarity.

    If I just helped you drop 12 years from your working career, then I think you owe me… something. I don’t what, but it’d better be good. Or maybe just owe yourselves a pat on the back for that impressive savings rate.

    Cheers!
    -PoF

    • January 27, 2017 at 1:06 am
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      That was an awesome post and spreadsheet! Definitely provided a different perspective on the whole FI journey. I guess I do owe you. Well, I know you like beer. And I’m actually planning on taking up home brewing as a hobby. Maybe some the finest crafted concoctions from the SRGO household! Oh wait, you said something good…

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