What should I do with $60k in order to retire early?

I live in Oklahoma. I have 10 yrs with the DOD (civil service). I am 33. I have cronic back pain and have had surgery that has helped some but I am still in constant pain. Last year I bought a house for $60k which I have invested about another $40k. We expect to sell the house in the next couple of months for a profit btwn $40k-$60k. I currently make about $65k yr. I have about $32k in my 401k. I want to retire asap. any ideas?

Public Comments

1. You don't really have enough saved yet -- the rule of thumb I use is called FTI, for Forget This Index. When you reach 1000, you can tell your boss to "Forget This!" (feel free to substitute another word beginning with F). It's Age * Net Worth / Yearly Expenses Since you're 33, you'd need your net worth to be 30x your yearly expenses before you can consider retiring. You've got about 100k saved and if you're making 65k, your expenses are probably at least 35 or 40k. So you still have a way to go. Given that you are in constant pain, you're probably going to require more medical attention, so now is not the time to be giving up your health benefits. I have scoliosis and have dealt with back pain my whole life too, so I know where you're coming from. When you sell your home, be certain to buy another. Owning your own home is a terrific way for Americans -- particularly young Americans without much money -- to generate wealth. The tax laws are set up in your favor; if you borrow money at 6%, then deduct the interest from your taxable income and get a third of it back, you're essentially borrowing money at 4% -- not much more than inflation's rate. Make a 20% down payment to avoid paying property mortgage insurance, then invest the rest. Since you're only 33, invest in stock funds. Don't try to time the market, don't try to pick winning stocks -- if you're not an expert at studying stocks (and even if you are!), it's a crap-shoot. Buy an index fund from Vanguard or Fidelity or Schwab and ride the market upwards as a whole. Look for index funds with low operating expense ratios -- if the fund is trying to match a stock index, then the fund managers don't have to do very much and don't require much compensation (which means you get to keep more of your profits). Be certain to max out your 401k, at least to the extent which the DOD matches your contribution. That's free money. I'd continue to try to maximize your contribution, right up to the $15.5k limit. You say "we expect to sell the house"; if this implies that you have a partner, then you'll want to encourage him or her to do the same, assuming you have similar goals. If you have the goal of retiring before 60 -- it certainly sounds like you have the desire -- then you'll need investments that can "bridge" you between your retirement and age 59.5, when you can start accessing your 401k funds. You can get to some of that money through the IRS "72(t)" distributions without paying a penalty -- be sure to read up on that, it's very important for early retirees. If you do the math and find that it's not enough money, then you could sell your home and move somewhere cheaper, cashing out some of the money to live on to get you to 59.5. Or you could invest money above the $15.5k limit for your 401k into non-tax-deferred funds, which you'd be able to tap immediately. Good luck to you, Doug
2. Given your age, I would normally tell you to put 100% of your money to work in a diversified portfolio of mutual funds or exchange traded funds. But a few of the details you provided suggests that you might want to be more conservative. You have some health problems, so I would recommend that you and your partner put aside the equivalent of 6 months worth of your combined income into a low risk interest-earning investment. Then consider taking the remainder and placing it in a Roth IRA account invested in stocks. I particularly like exchange traded funds (ETFs), which are mutual funds that trade like stocks and have really low management fees. Look at www.amex.com (the American Stock Exchange) and click on the ETF tab for more information. Bottom line...you need to match your investments to both your short and long-term needs.
3. The returns produced by the stocksmonthly system over the past 3, 5, 10, and 15 years make the stocksmonthly system a very viable option. Even if you invest only $10,000 to $20,000 of your capital.