On the path to early retirement
I have several savings accounts, home equity and rental property. Am I doing everything I can to ensure a comfortable retirement at 60?
By Walter Updegrave, MONEY Magazine senior editor

NEW YORK (CNNMoney.com) - I'm 44 years old and my wife, who doesn't work outside our home, is 51. I earn $100,000 a year and put 10 percent of that salary into a non-matching 40(k). I also invest $3,600 in a Roth IRA every year. In addition to the $130,000 we have in those accounts, we also have $350,000 of equity in our home, which will be paid off when I'm 56, plus we own a rental condo, a second home and property in New Mexico. I'd like to retire when I'm 60, but I'm worried I'm not doing enough to achieve that goal. Am I on the right path?

- Nick, Chandler, Arizona

Well, you're definitely headed in the right direction, although without knowing more details - such as how your 401(k) and Roth money is invested, the value of your various properties, how much income you'll need in retirement, etc. - it's hard to tell how much more you need to do to reach your goal of retiring at 60.

One question that immediately jumps into my mind, though, is whether too much of your retirement plan depends on real estate. You've got three times as much equity in your home as you have invested in financial assets in your 401(k) and Roth. Plus you've got the rental condo, a second home and the New Mexico property.

Granted, owning all that real estate has probably worked to your advantage over the past five years or so since real estate overall has performed better than stocks and bonds. But that's a lot of money to have tied up in one asset class, especially one that's not particularly liquid.

As for improving your odds of reaching your goal, I've got a few suggestions.

It's great that in addition to your 401(k) contributions you're investing $3,600 each year in a Roth. But why not go for all the Roth gusto you can get and do the max, which is $4,000 this year?

And while we're on the subject of Roths, did you know that even though your wife doesn't have employment income, she too can contribute to a Roth IRA? Well, she can. And given her age, she can also make the extra $1,000 "catch up" contribution that's an option for people 50 and older. (For details on spousal Roths in particular and Roth eligibility rules in general, click here.

See where you stand

I also recommend that you get a better handle on where you stand relative to your retirement goal. Normally, I'd suggest that you do that by revving up an online calculator such as the Retirement Planner tool on our Web site or trying one of the online calculators that many 401(k) plans offer to participants these days.

You plug in your financial info, make some assumptions about how much income you'll need in retirement, and the calculator crunches the numbers, estimating the probability that you'll be able to retire on your schedule. Based on the answer you get, you can then try varying your assumptions - saving more, investing differently, working longer, that sort of thing.

But these calculators typically aren't set up to handle real estate investments other than mutual funds and REITs. You might be able to get around that if real estate were a small part of your holdings. But for you they're a central part of your retirement assets.

So you might consider having a session or two with a financial planner, preferably one who's experienced in dealing with real estate, who can talk to you about various options for dealing with your real estate holdings.

For example, one plan you might consider would be selling your home to take advantage of the $500,000 capital gains exclusion available to married couples, investing that money and then living in your rental condo. Or you might hold on to the condo for the income it can generate and perhaps build something on your New Mexico property.

Among the organizations that can provide referrals to planners in your area are the Financial Planning Association, the National Association of Personal Financial Advisors and the Garrett Planning Network.

Given your age, you've still got plenty of options. But you'll definitely be better off if you get a firmer grasp on how much progress you're making, and then start thinking about adjustments you might make to increase the odds of achieving your retirement goal.


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