The $5 Million Retirement Plan

Focusing On A Positive Net Worth Is Leading The Thomas Family To Early Retirement

Like so many couples in their mid-30s, Stephen and Rachel Thomas have their financial dreams. Their primary goal is to retire early, and 10 years from now, when they will both be 45, they hope to have a combined net worth of $2.5 million. A decade after that, they want their net worth to be $5 million. Stephen says the couple could live comfortably off the interest payments from $2.5 million in assets, and working toward $5 million would help them keep pace with inflation through their retirement.

Why the focus on net worth? “For me, net worth is all that’s ever really mattered,” says Stephen. “Your assets don’t matter if you have a huge amount of debt, so I’ve always intuitively focused on what my net worth is.”

His wife, Rachel, is cut from the same cloth. Both are not only committed to becoming millionaires before retirement age, but they understand that getting to millionaire status requires a sound financial plan, fiscal discipline, and financial investments that can build wealth year after year.

“Whether you’re earning $100,000 or $25,000 a year, you’re not going to have a [positive] net worth if you don’t set a goal, and you’re not going to attain your financial goals if you’re not disciplined,” Rachel asserts.

The couple is well on their way to reaching their goals. Stephen, a vice president at Federal Home Loan Bank of Chicago, and Rachel, an account executive at JPMorgan Chase Home Finance, have a household income of $300,000 and accumulated assets of more than $1 million. They figure their net worth is currently about $500,000. Stephen and Rachel believe that a great deal of their financial success is due to practicing DOFE principle No. 5: to measure my personal wealth by net worth, not income.

It took sacrifice to get to where they are today. Stephen grew up in a household where money was tight, so he accepted a four-year Navy ROTC scholarship to pay for his B.A. in economics from the University of Pennsylvania. He was assigned to the USS Reuben James between 1993 and 1994, while it was stationed in Pearl Harbor for an overhaul. “We had a lot of down time. … I worked as a mortgage broker at night because I wanted to know more about the mortgage industry.”

During the decade that followed, Stephen worked for financial institutions on Wall Street in the mortgage-backed securities area. He quickly advanced up the corporate ladder in title and pay, earning a six-figure salary.

Now a mortgage industry expert, Stephen buys and sells his own real estate. In 1999, he put a 10% down payment on a $100,000 condo in Washington, D.C., and sold it six months later for $125,000.

In the meantime, Rachel has been forging her own career path in the mortgage industry. After leaving UCLA with a B.A. in economics, her first job was as a loan originator at ABN AMRO. She earned $60,000 with an $18,000 base salary, making up the rest in commissions. At ABN AMRO, Rachel opened

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