Ok, the time for the next financial update – what progress has been made towards achieving Early Retirement? This update marks a whole year since I started tracking our progress. So, where do we stand after a whole year of deliberate marching towards early retirement goals we set for ourselves?
Ok, finally! The market reversed its trajectory, deciding to go up, which you will see reflected in our progress for the month of July. This still may turn out to be just a bear rally, but I will enjoy that upside for as long as I can 🙂
The gap to close shows what we need to accomplish by May 2023 to be able to retire early. With the latest market performance, the gap to close shrank to $340K, which is much better that what we’ve seen at the end of June 🙂
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 July we contributed $8.8K towards closing the gap. This month we continued putting away additional $5K towards the principal, as was the original plan.
Cumulatively, since July 2021 we reduced the mortgage gap by $131.6K, 42% of the gap. Since we have less than a year to go before we pull the plug, the question is – are we going to meet this goal by May 2023? I think we still can but even if we don’t, with the amount that will remain (I definitely think it will be less than $100K), we can cash flow the remaining mortgage over the next couple of years. Or, if the stocks appreciate well enough in the next year or so, selling some extra stocks from the brokerage account may be an option to just close that gap.
The reason we are not as aggressive with the mortgage payments as originally planned is that now that the markets are down, I believe it’s better to invest free money into stock market (buying at the discount) than to get the “guaranteed return” of 2.5% of mortgage interest. If I am right, then the money invested in the stock market will result in enough funds to pay down the mortgage plus some additional growth that will pad our brokerage accounts and make the next few years sailing smoother. That will happen sooner (next year) or later (in the next couple of years). Either way, I think it’s a better investment right now.
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 July, the value of our post-tax accounts increased by $52.8K, driven by the performance of the two companies in which we have individual stock options, as well as the semi-annual bonus that DH receives. Plus the market growth.
Pre-tax accounts
Pre-tax accounts include 401K plans with our current employers and Traditional IRAs.
In July, the value of our pre-tax accounts have increased by $102K, reversing the losses from the previous month. The contributing factors: market growth, our regular contributions in 401K (including the employer’s match) and the portion of the semi-annual bonus that was also redirected into 401K. That’s good but the pre-tax accounts are still down by ~$80K from a year ago, all because the market is still not on the level it was then. Let’s give the market a few more months to recover 🙂
Conclusion
In summary, the market rollercoaster continues. Declines in February, gains in March, declines in April/May/June and now gains in July. We continue contributing to our pre- and post-tax accounts, knowing that eventually the market will go up, just not sure when… After a whole year, we closed the gap by $183K but if/when the market fully recovers, we should see a much bigger progress towards our goals. For now this represents about 35% of the total gap we need to close. But I am positive that we’ll be in a much better place closer to the retirement date!
Stay tuned to the future updates!