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  • Late Start Earner

Investment Milestones Part 2: Steady $40K/Year

In my previous post on investment milestones, I shared my investment milestones by monthly fixed income category, such as "Subscriptions" or "Pets," and estimated the amount of investments required to sustain these fixed expenses for at least 30 years based on the 4% safe withdrawal rule. My goal behind setting investment milestones was to motivate myself to invest in the high performing stock market (albeit at higher risk) rather than simply pay down my primary mortgage. I settled on a benchmark to have at least enough in investments in my taxable investment account to be able to generate all my smaller fixed expenses -- a milestone of $189K. The main question remaining was how to develop an investment plan to reach that milestone. Here's one option.

Scenario 1: Steady investment of $40K/Year

What if I invested $40K/year in my taxable investment account over the next 15 years, on top of my $53K annual retirement contributions? Assuming an average 8% annual growth rate, this would enable me to check off a bite-sized milestone (in green) each year until 2025, during which I would surpass my "Electricity" milestone of $189K. From there, it would take 2-3 years to build up enough to support my two remaining larger household fixed expenses (HOA and Property Taxes), as well as a small-scale discretionary spending on Food and Stuff.

What I love about Scenario 1

  • The plan is simple and comfortable at my current income and budget.

  • By 2035, I would be Lean FI with my taxable investment account alone.

  • It leaves enough flexibility for me to pay off my getaway property loan within the first few years, as well as enough wiggle room for extra principal mortgage payments.

  • The consistent and steady investment strategy helps to dollar cost average over a multi-year period, easing the pain of large dips in the market.

  • In a personal emergency unrelated to economic or market downturn, having access to a healthy sum of money that is easily liquidated serves as a nice safety net.

What is left to be desired with Scenario 1

  • While easily attainable, it may not be an aggressive enough strategy given my expected income level and savings rate.

  • It ignores salary increases over time or, alternatively, reduced income over time.

  • It gives enough wiggle room to allow for lifestyle creep during my critical wealth accumulation years.

  • It feels slow!

I can't help feeling like I could reach these goals faster than 15 years. Stay tuned for an alternative scenario that allows me to reach these milestones quicker.


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