I’ve grown my net worth to nearly $3 million – what risks or blind spots should we be considering?

A Reddit user has grown his net worth to almost $3 million, and he’s hoping to achieve early retirement. He’s 34 right now and wants to stop working between the ages of 45 and 50. However, he also has some other goals as well, including having two more kids and having his wife stop working to stay at home with their three-year-old daughter and future children.

He wants to find out what risks or blind spots he should be considering as he makes these plans for the future and tries to prepare for the day that he will leave work. 

Taking a look at the numbers comes first

The Reddit user seems like he’s well on his way to financial success, but it’s always important to take a detailed look at the numbers before making any big financial decisions.

As he explained, his current net worth is $2.88 million, not including real estate and a 529 for his daughter. He has $37,000 in cash, $620,000 in pre-tax accounts, $70K in an HSA, $762K in Roth retirement plans, and $1.355 million in a taxable brokerage account. 

The family also has a home valued at $700K with a $560,000 mortgage at 6.5% interest, a rental property that generates $1,350 per month in profit, and he earns $240,000 right now while his wife makes $50K as a teacher. They want to cover their children’s college education without making them take out loans, and he is Ok with being relatively frugal, although the family is spending $120,000 per year currently and he doesn’t think they can reduce that spending too much, given the plan to have more kids. 

So, will he be ready, or is there anything he’s overlooking? 

Will early retirement be possible?

The key factor that’s going to determine if the poster is ready to retire or not is going to be whether he can support his family at a safe withdrawal rate. With his current $2.88 million and the recommended withdrawal rate of 3.7%, he’d be at $106,560 in income. So, he’s obviously not quite ready to retire just yet.

The good news is, he’s 34 and his target age is 45 to 50, so there’s plenty of time to grow his wealth. As our compound interest calculator shows, his $2.88 million should turn into $6,715,120.31 over the next 11 years, assuming an 8% average rate of return and even without additional contributions. By the time the poster is 45 years old, his nest egg should produce $248,459 at a safe withdrawal rate even if he were to stop investing today — which he likely won’t. 

Based on these numbers, even when factoring in a few extra kids and the cost of paying for private health insurance for a family of five, the poster should have more than enough, to live on from his nest egg, given that the amount it will produce is more than double the amount he is currently spending. He will, however, want to make sure he contributes to both his own retirement accounts and his wife’s if she’s going to stay at home, so she has financial security too.

While the poster seems to be on track, it could still be a good idea to talk with a financial advisor. An advisor can do a full assessment of his current financial situation and future goals and provide advice on things like deciding what accounts to invest in, determining what assets to buy, and helping him to use his large nest egg as wisely as possible to make his early retirement dreams a reality. 

The post I’ve grown my net worth to nearly $3 million – what risks or blind spots should we be considering? appeared first on 24/7 Wall St..