Quarterly Financial Scorecard: Q2 2017

Early Retirement
Could early retirement really be just four years away? We still have a lot of work to do!

Last week, I outlined how I plan to measure our progress during our quest for financial independence and early retirement.

Today, we’ll open the curtain into our finances for the first time, and share where we stand in relation to our Net Worth, 529 Account Funding, and Passive Income goals as of June 30, 2017 – just four years before our target FIRE date of Friday, July 2, 2021.

I. Net Worth: 73.1% of Goal

Our net worth declined by 1.0% during Q2 2017. On the surface, this was a poor performance, as the S&P 500 was up 2.6% during the quarter. Not all of our assets are in the stock market, so the comparison is a bit unfair, but we’d still normally expect our net worth to rise with a strong stock market bolstered by additional savings and investments.

We had a couple of large, hopefully one-time, expenses during Q2 that dinged our net worth, namely, purchasing our home solar energy system in June, and a bigger than expected Federal income tax bill in April, driven by our growing dividend and interest income. Fortunately, now that we’ve added solar power, next April we will be able to claim the solar investment tax credit, which should mean a significant reduction in what we’ll have to pay to the IRS in Q2 2018, even if we do continue increasing our passive income.

II. 529 Account Funding: 33.5% of Goal

We made good progress towards our early retirement funding target for our children’s 529 accounts during Q2. The total value of their accounts climbed by 10% during the quarter, driven by both additional contributions and market appreciation. New contributions accounted for the majority of the increase, but appreciation on invested assets was 3.1%, a good result relative to the S&P’s performance during the quarter.

We still have a long way to go in these accounts, however. Even with the strong investment performance and our purchases of additional shares, we improved our 529 funded status by just 310 basis points, to 33.5% of our target, from 30.4% at the beginning of the quarter. We will need many more quarters with both strong investment performance and additional contributions to achieve our goals. Fortunately, our home state offers a state income tax credit on a portion of our contributions, so we remain incentivized to continue funding our college savings plans.

III. Passive Income: 23.3% of Goal

As I mentioned last week, our passive income target is our “stretch goal” on our path to FIRE. I don’t think there is any way we will be able to fund our anticipated early retirement lifestyle solely through passive income by 2021, particularly since we’re not even a quarter of the way to our goal yet. We’d have to increase our net worth by an insane amount over the next four years, and invest most of that money into dividend stocks, bonds, and cash flow positive real estate, to have any chance at achieving this goal. That said, it’s still something I want to track, since passive income is a great thing!

Both dividend increases on stocks we already own, plus additional purchases of stocks and bonds, helped us increase our expected annualized passive income by 9.4% during Q2. As with our 529 account funding goal, however, we have a very long way to go here. All of that effort improved our funded status by just 210 basis points during Q2, to 23.3% of our target, from 21.2% as of April 1st. It’s great we’re moving in the right direction, but with just 16 quarters between now and early retirement, the math is not on our side to achieve this goal.

IV. Target FIRE Date – Friday, July 2, 2021

Our first quarter of tracking our financial performance for Retiring On My Terms is in the books, and we have four years left before our Target FIRE Date!

If I were a betting man, I’d wager we can reach our Net Worth Goal in 2020, and our 529 Account Funding Goal by our Target FIRE Date in mid-2021. Math tells me our Passive Income Goal is not achievable within four years, but that doesn’t mean we aren’t going to try!

2 Comments

  • Sorry to see that your portfolio decreased a bit, but still awesome that you are where you are! Keep it up and FIRE will be here in no time!

    Reply
    • ROMT

      July 10, 2017

      Thanks for the comment. Hopefully our net worth will move in the right direction this quarter!

      Reply

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