Ok, the time for the next financial update – what progress has been made towards achieving Early Retirement?
August was a typical month – no bonuses, two paychecks, no additional benefits (like ESPP purchases). That’s what we should expect to happen in seven out of twelve months (we get DH’s semi-annual bonuses in July and December, my bonus and RSU vesting in February, ESPP stock purchases in April and October).
The gap to close shows what we need to accomplish by May 2023 to be able to retire early. Obviously, this is not ALL the resources we have, but closing the gap above will be the final stretch to round up our financial situation and provide us with the piece of mind needed for the early retirement.
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 August we were able to put $7,162 towards closing the gap. Cumulatively, since July 2021 we reduced the mortgage gap by $47,739.
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 (the money is being taken from of my paychecks and accumulated in a separate account, out of which twice a year my company’s shares are purchased at 15% discount and then placed into my brokerage account).
As of July 2021, we needed to add another $102K by May 2023. In August post-tax accounts increased by $7,899. While ESPP contributions increased by $1,860, the rest of growth was driven by market.
Cumulatively, since July 2021 we reduced the gap in post-tax accounts by $24,529.
Pre-tax accounts
Pre-tax accounts include 401K plans with our current employers and Traditional IRAs, into which we converted our previous employers’ 401K plans.
Note that the gap to close for post-tax accounts was $0. That’s right, we already have enough funds in the tax-advantaged accounts and don’t need to actively grow them as much. However, we continue maxing out our 401K contributions to reduce taxes and to take advantage of company’s match.
In August our pre-tax accounts have grown by $42,219, $4,073 of which were 401K contributions/employers’ match, and the rest – market growth.
College costs
We need to cash flow the first two years of college for our eldest son, who just started college in this year. Since the chosen college is out of state and our income is high, unfortunately, the college costs are also high, even with receiving some scholarship.
The college starts in the fall, so the payments for college will start in September/October. No payments have been made so far, I am very anxious to see how we will manage the college costs. I will provide an update next time.
Conclusion
In summary, August was a typical month in terms of paycheck income, but great in market growth, and so we added $57,280 towards the early retirement goal (~$15K if we don’t count pre-tax accounts). All in all, making a good progress!
Stay tuned to the future updates!