This is a guest post from Woman With a Plan about her goal to reach a net worth of $1M and retire 5 years from now. You can follow her quest in more detail on her blog, Change the Race.

Our path to financial independence started with a book – Dave Ramsey’s Total Money Makeover. Once my husband and I became debt free (mortgage and all) in 2010, we felt the burden of having to work 8-5 jobs until our 60s lifted off our shoulders.

After we paid off our mortgage, I started doing the math on how fast we could retire (if we wanted to) based on how much of our incomes we saved. With no debt, a frugal lifestyle, solid incomes, and an intensive investment regimen, I realized that we could “retire” by the age of 40 with relative comfort. And that included five years of my husband pursuing a PhD with a small stipend coming in.

My husband doesn’t want to retire early since he would do the same thing in retirement (read, write, teach) as he would if he were working. So that leaves me as the main factor in our early retirement equation. We’ll have his income in the future (estimating at least $60k to start with) and can definitely live on that as a family of four (estimating necessary expenses of $30k a year before charitable donations and investments), we decided that I could retire when we have $1 million in assets, including (ideally) five rental properties. By my calculations, that should be accomplishable when I hit 35.

The one caveat to becoming financially independent at 35 is finding cheaper housing. We currently live in one of the top 5 most expensive rental markets in the U.S. and our family is expanding next year. We need to find a cheaper rental option to add some breathing room to our investment goals. We don’t want to buy a property because we can’t afford anything without taking out a mortgage and we don’t want to be tied down to our current city given our plans to move in less than five years. So moving to a suburb is almost a guarantee for next year.

Why $1 million? Because I want to be a millionaire when I retire. Simple as that. I know that many ERE readers don’t need or have that much saved for their retirement and live just fine off of what they have, but there is an emotional component to this for me in that $1 million is my mark for “making it” and feeling comfortable with not working. Plus, it should be attainable within a few years and I really like my current career so I don’t feel an urge to retire earlier.

Why five rental properties? Owning five properties (outright, no mortgages) will allow us to net about $45,000 a year after all expenses. That will be money we can use for further investments, travel, and general fun money. We plan to retire to our hometown after grad school is over and already own one rental property there. The local economy and housing market has been strong for the last 10 years and shows no signs of slowing down in its growth. That doesn’t mean there can’t be a downturn, but we are willing to bet that rental housing will be a solid investment in that market over the long-run. We are still investing heavily in Roth IRAs and a 403(b) that my employer provides a nice match for so as to have diversification through other types of investments.

So how close are we to the $1 million mark and five rental properties? We are this_close to breaking $700k in total net worth (we have ZERO liabilities) and I expect we will hit that point within the next month.  We are also in the middle of a hunt to buy a duplex, which I would count as two rental properties because of the two separate rents, which would bring us to three properties.

I’ve mapped out where I expect us to be over the next 4.5 years and it’s exciting to see where we could end up (barring major macro or micro financial crises, of course). There are many assumptions of course, but the biggest ones are that we can reduce our monthly rent by $770 starting in August 2014 (which is doable), that we achieve an average annual return of 10% on our investments, that our expenses don’t increase, our incomes don’t increase, and the amount we invest each month doesn’t increase either.  I’ve tried to keep things simple by not introducing a lot of variables to my model and sticking as much as possible with what is known today.

Our monthly income is about $9,700 (before 403(b) and other pre-tax deductions) and our expenses after we move in August will be about $6,700. Our biggest expenses are housing, childcare, and charitable giving; these account for 67% of our expenses (!!). Thus we have $3,000 left for investing.

Our investments include IRAs (mostly Roth and some in a SEP), a variable annuity, my employer’s 403(b) plan, my husband’s old 403(b) plan, and non-retirement investments. Our property values are made up of two rental properties valued at $160k each, assuming we complete our second purchase by the end of 2013. Rents (after expenses) are accounted for in the monthly addition to the investments category as I don’t want to presume what the values of future property purchases will be. And then we have emergency savings and some pre-allocated savings; I’m not relying on any growth in those via interest rates.

Category Start Dec. 2013 May 2014 May 2015 May 2016 May 2017 May 2018
Investments @10% + $3,000 invested/month 320,500 354,499 422,933 504,916 595,484 695,536
Property values @3% (inflation rate) 320,000 323,965 334,642 344,820 355,308 366,155
Emergency savings @0% 41,100 41,100 41,100 41,100 41,100 41,100
Totals $681,600* $719,564 $798,675 $890,836 $991,892 $1,102,791

**This number is lower than what I have on my blog for the start of December. This is due to some rounding and an exclusion of some discretionary funds we expect to spend down soon.

Wow. $1.1 million by May 2018. That’s a bit mind-boggling. If I’m only half-right about the growth of our assets, we would have $892,000 by May 2018. Of course, I’m hoping that markets will continue their upswing and we won’t lose money over the next few years.

If you are wondering about our asset allocations aside from rental property, we have a very simple strategy that is driven by low-cost stock mutual funds available through Vanguard. We try to keep as close to these percentages as possible.

U.S. large-cap

U.S. mid-cap/small-cap

International stocks


I blog semi-regularly about my race to early retirement (check it out at as a means to keep my eye on the prize and to hopefully inspire others to pursue their dreams for financial independence. I still have moments where I wonder if I’m living in a fantasy world in which my calculations and assumptions are completely off-base, but I think that is just a by-product of being surrounded by a society that constantly lives in the moment and doesn’t plan for long-term success.