Ok, the time for the next financial update – what progress has been made towards achieving Early Retirement?
December was not the best month, again, and looks like not much progress had been made, even with the semi-annual bonus that DH received in that month:
The gap to close shows what we need to accomplish by May 2023 to be able to retire early. In December we “lost” $32.7K, which made the cumulative impact of $205K, with $318K to go… Sigh… We are still retiring in April, as I believe the market will turn around in 2023/2024 and will erase the remaining gap for us, especially since I am getting close on the post-tax account goal, which is what we would be relying on in the short term!
Mortgage
This is the largest item in the table above. We want to retire without any debt, and the vacation house mortgage is the last debt item we have.
As of July 2021, we had $315,827 in principal due to the bank. In December we contributed $3.9K towards closing the gap. I continue saving money as cash instead of paying extra mortgage (for now) to build enough emergency funds to cover us through 1.5 years since the market is doing what it is doing these days…
Cumulatively, since July 2021 we reduced the mortgage gap by $151K, 48% of the gap. As I mentioned before, I pivoted my savings towards building cash reserve rather than aggressively paying down the remaining mortgage, and we won’t close the mortgage gap comes April 2023. I anticipate having about $149K left, which we can pay down on the normal remaining schedule over the next five years. If some time in the next year or two the stock markets soars, I would be happy to pay it out with the appreciated stocks. As of now, that’s not such a high priority for me.
Post-tax accounts
Post-Tax accounts include cash and stock we own in our Brokerage Fidelity accounts. They also include the value of contributions I am making towards ESPP purchases.
In December, the value of our post-tax accounts increased by $12.7K, with the semi-annual bonus and an extra paycheck. But the value of those additions was reduced by the market performance. Again, I am piling some cash, so that I don’t have to sell stocks while in recession, which may happen during 2023.
Pre-tax accounts
Pre-tax accounts include 401K plans with our current employers and Traditional IRAs.
In December, the value of our pre-tax accounts have declined by $49K, making the paper losses YTD more pronounced. On the other hand, I am not so worried about theoretical losses in the pre-tax accounts – we won’t be able to use these money for at least five years, which means I am very certain that by the time we get to use that money there will be a significant growth in those accounts. Without those paper losses in the retirement accounts, we are at 62% of gap closure.
Conclusion
In summary, the market rollercoaster continues. 2022 was NOT a good year for investors (including us). Let’s see what the remaining months look like, we have about four months to go. We continue contributing to our pre- and post-tax accounts, but with the main focus on building cash reserve with the only stock purchases through the tax savings and discount programs, such as 401K contributions and ESPP purchases… I am positive that we’ll be in a good place closer to the retirement date!
Stay tuned to the future updates!