Reading recent threads has me thinking about retirement

Re: Reading recent threads has me thinking about retirement

• CuriousKiddosMama mod

  

  November 2014

  Any amount saved right now is better than nothing. I started when I was working taking out $50 of each paycheck into a 403b. For me that was before taxes, so it didn't actually make much of a difference in my check. Then every time I got a raise i increased what I set aside. A couple good raises and several years later and I was setting aside $250 a month. Because of compound interest getting started early, even with a small amount is a good idea.
  
  An Ira may be better, but the point is to get started and to keep contributing monthly. A match is a bonus, but if you don't get one, still contribute!!
  
  Career fields don't matter for retirement, you can move your account if you change jobs, so don't let that stop you either.

  

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• als1982 member

  

  November 2014 edited November 2014

  Frankly, at 27 and 30, IMO saving for retirement should come before saving for a wedding or a house. It's something you need to start now, or it'll only become more difficult as time passes.

  
  

  ETA:  I wanted to add that like others, I started small.  When I landed my first job at 23, I started with putting $150/mo into a ROTH (through Edward Jones.  Then when I bought my house a few years later that dropped to $75 a month.  After getting married, we've been able to hit our max ROTH contributions.  All of this is in addition to the 6% I contribute to my 403b (which is the nonprofit equivalent of a 401k).  

  
  

  Our personal goal is to have $100K in retirement by 35, with the thought that should life throw us something crazy, given an average rate of return, we would still have a $1M nest egg by 70, even if we were unable to contribute significant amounts after 35.

  HeartlandHustle | Personal Finance and Betterment Blog  

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• hoffse member

  

  November 2014

  Even a small amount makes a huge difference.  My mom put aside $10K in a 401(k) years ago when she first started working.  She left the job after a couple of years and took that money with her but never added to it.  Last time I talked to my dad about it, he mentioned that it is worth over $150K today.  It's had 35 years to grow, and they've invested it well.

  
  

  What happens is the growth starts small.  But then it starts to grow faster and faster as you accumulate more - not just through contributions, but through the initial growth of your earliest bit.  That's why starting early makes a big difference.  It's never convenient to start saving for retirement, it's just something you have to start doing and then your budget will adjust and accommodate those changes in your cash flow.

  
  

  When I first started, I would gain or lose maybe $20 or $30 any given day in the market.  Then it went up to $100 gained or lost any given day.  Then it went up to $200 gained or lost any given day.  You can see where I'm going with them.  People who start really early eventually get to the point where they are gaining or losing thousands of dollars each day in the market, without ever really having to change how much/what percentage they are contributing each year - and on average, the market tends to go up over time. 

  
  

  I prefer IRAs to 401(k)s when you're just starting out because you have more control over IRAs.  Usually the number of funds you can invest in is larger.  H and I keep both IRAs at Fidelity, and we have trading rights on each other's accounts.  He doesn't watch it as closely as I do, and I do trade on his account (with his permission of course) a couple times a year.  Once a year I review everything and research new funds, right around the time we're about to make our annual contribution.  I try not to trade too often because patience is really the name of the game.  I have one fund that I bought last year - it gained 30% in about 3 months, then I lost all of it plus an additional 13% in a couple months.  Then it came back and I sold it when it was up 32% again.  All of this happened in about an 11 month period. 

  
  

  We like Fidelity because we have found it easy to keep track of our other savings in the same place.  We also have a credit card that dumps 2% back into our account that we can use for investments, retirement, vacations, whatever.  Plenty of other investment banks are great.  My employer uses Vanguard for their 401(k) and I really like them too.

  
  

  Obviously if your employer gives you a match up to a certain point, then you need to do that first to get the match.  That's free money.  But if they don't match, I would start with an IRA to give yourself more control.

  
  

  Once you are maxing out your IRA - currently $5500/year - then look into the 401(k) or 403(b) option.

  
  

  

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• Xstatic3333 member

  

  November 2014

  I would go ahead and start now, even if you're starting with just a little bit and plan to raise the amount after your wedding.  I think with retirement, just getting in the habit is super important because there will always be a reason NOT to do it.  

  
  

  I was a toddler teacher for my first job, too.  I miss it sometimes!  My job offered a 403(b), with no match, and I just had them put away $50 a paycheck pretax.  Thinking back on that time I would have tried to do 10-15% if I had known what was up, because I didn't have any other debt.  Now I make a little bit more, but have debt so it is kind of a wash.  I no longer have an employer sponsored plan, but for a while I was trying to put 10% of each paycheck into my Roth IRA.  My employer cuts me a check for 5% as "retirement bonus" and I put that in the Roth too.  I've temporarily let up on that to try to  pay off my car because we have been tight on cash flow since our move, but I never stop it completely.  We also set my H's 457 contributions at a level that we are *just* uncomfortable with but can deal with.  He also has a pension, but I don't want to rely on that.

  
  

  I also put a fair amount of gift money that I got from my Grandma before she passed away in my Roth IRA.  I didn't look at it or touch it for years when I went back to grad school, but it grew and it still grows, which is fun to watch.  Like hoffse I use Fidelity, and have found it pretty user-friendly.  There are also advisors that can meet with you if you have in-person questions, although it's good to do your own research too.  

  
  

  I also can totally identify with how you feel about preschool teaching.  I loved it, but it was so tiring.  It's also really insufficient pay for the work you do, and how important it is to the children you teach.  I think if I had stayed in the field I would have either pursued becoming a center director or gotten into the Early Intervention field.  Good luck with whatever you decide and enjoy the 2 year olds!  I love the way their minds work at that age.  

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• hoffse member

  

  November 2014

  Oh and for how much to save in each paycheck... conventional wisdom says 15% of your gross income, on average.

  
  

  Keep in mind there are several factors that can change that: if you are starting later, it may need to be higher (forever) to make sure you have enough.  If you start earlier, you might be able to do 12% or even 10% forever and have enough.

  
  

  If you or your FI end up working at a company that matches, you CAN count the match in your percentage, but only if it has vested.  Many companies vest their match over a period of years. You can't count what hasn't been vested yet because you don't have a right to take it with you until that happens.

  
  

  The amount you need to save also depends on the lifestyle you want in retirement. If you plan to stay in the house you buy a youngish age, pay off your mortgage before you retire, and then pay nothing but utilities and property taxes going forward then you might not need as much (though you may have some remodeling in your future if you don't buy a house that's naturally accessible).

  
  

  On the other hand, if your retirement plan involves the $3M condo on the beach and/or living off of a cruise ship as you circumnavigate the globe, you will need more.

  
  

  The other piece of conventional wisdom is that you want to save enough so that you can live off of 4% of your nest egg per year once you hit retirement. It's an open question as to whether this number is right, but that's really the minimum you want to aim for. It's even better if you can afford to spend less. Here's an interesting article discussing the 4% rule.  Note that it was developed when bond yields were higher than they are today:
  
  

  http://www.investopedia.com/articles/personal-finance/120513/why-4-retirement-rule-no-longer-safe.asp
  

  
  

  Keep in mind that retirement is a really REALLY long time (we hope).  If you retire at 65 you might have another 30 years (or more) that you need to save for.  The other thing to keep in mind is that expenses go up as you get older.  It's not just that your lifestyle tends to get more expensive as you get older (which is true), it's that the price of things literally goes up as you get older because of inflation.  We're never going to pay $0.50 for a gallon of milk again.  So you need to be able to have enough to accommodate the increased cost of living and inflation in retirement.  And of course, medical expenses and end of life care are a huge consideration for older folks.  I think it's important to have enough set aside to live out the end of your life in dignity and comfort. 

  

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• JoanE2012 member

  

  November 2014

  We put away as much as we can for retirement.  We're not counting on social security and the pensions that our parents had are no longer offered at most companies  Healthcare is going to eat a big chunk of savings when we're retired.   I'm nervous for today's generation.  Save now, save what you can.  Each year, bump it up a percentage point.  When you get a raise, bump it up a percentage point.  Every dollar counts!

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• smerka member

  

  November 2014

  I'm in my 40's and I started saving for retirement when I got my first job making $22,005 per year. I now have $200,000 in that account. And I haven't been working for the last 5 years because I'm a SAHM. I also wanted to point out that there is something called the Savers Credit. Since you said your income wasn't huge, I'm guessing you can probably take advantage of it. http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Retirement-Savings-Contributions-Credit-(Saver’s-Credit%29. If you need an more incentive to save, how about some free money from the government? And if you're on the border of one of the income ranges, putting money into a 401k, reduces your taxable income.

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