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orangehills · July 2015

Hi all, I used to post semi-regularly a few years ago. I am back now, because I need to stay straight with money issues! And this is a good place to do so

I do have one question.. we are saving for a bigger home, another kid, and a future car to replace my current one. But our retirement is SAD. I'm 31, DH is 34 and we don't have much. I will get a pension (if the state of CA doesn't crash). Would it be smart to just continue putting what we put into retirement, or put more? I feel like it makes more sense to be saving for the things we need now rather than taking away from that to stick more into retirement and then once we reach those goals start stocking away $ for retirement. But then all the money gurus seem to say otherwise, so I don't know!!

abrewer5 · July 2015

I would definitely make retirement a priority over a car and another house. If you have no credit card debt then retirement should be a top priority. You cannot make up the time lost on saving for retirement, so I would start putting 10-15% of your income away for retirement and then work the other goals.

als1982 · July 2015

orangehills said:
Hi all, I used to post semi-regularly a few years ago. I am back now, because I need to stay straight with money issues! And this is a good place to do so

I do have one question.. we are saving for a bigger home, another kid, and a future car to replace my current one. But our retirement is SAD. I'm 31, DH is 34 and we don't have much. I will get a pension (if the state of CA doesn't crash). Would it be smart to just continue putting what we put into retirement, or put more? I feel like it makes more sense to be saving for the things we need now rather than taking away from that to stick more into retirement and then once we reach those goals start stocking away $ for retirement. But then all the money gurus seem to say otherwise, so I don't know!!

I'd like to retire sooner rather than later so for me retirement is top priority. As long as you don't have any credit card debt, I'd make sure you're saving at least 15% of your take home pay for retirement. After that, you can start saving for the other stuff.

ETA: Also, when you say 'not much' how much does that really mean? Considering your answer, I might even suggest more than 15% as 35 is pretty late in the game to get started.

orangehills · July 2015

I mean, not much lol. My dh invested all of his retirement into ONE thing and lost almost all of it. Not a happy camper right now. We're meeting with a financial adviser soon. So, combined, before taxes, health insurance and retirement, our take home is $92,000. Not a whole lot for our area, but he's working on finding another job. So, we should be trying for 20% then probably?

jessica490 · July 2015

Welcome back!

hoffse · July 2015

Yes, I would be doing 20% minimum at your ages if you are way behind.

Make this a priority because the 20% target is something you will have to do for the rest of your careers to retire on time. If you delay any longer, you will need to save more than that. Time is the most valuable thing in retirement planning.

Retirement absolutely comes before a car, house, etc.

If you need to squeeze your budget, post your monthly income AFTER taxes, health insurance, and current retirement contributions. Then tell us how it is allocated to your expenses. If you live in CA, state income/property taxes are going to eat up a lot more of your take-home than what most of us experience, and your COL is probably higher too. We need to see all of it to help you figure out how to make this happen.

orangehills · July 2015

Total take home after health insurance, taxes and what we currently put into retirement is $5,125

Mortgage (includes taxes and insurance)	1280
HOA	83
Internet	72
Cable	70
Cell Phones (2)	133
Student Loan	100

electric	150
sewer/water	25
Gas	210
Food/Necessities	450
Parking for my job	100
drs/haircut/gym	100
santa saver	20
child- future savings	25
church	25
fun	200
Car Insurance/Registration/Maintenance	200
Savings	1100
daycare	706
life insurance	63

=$5112

We don't have any credit card bills, and this is our budget without my student loan and our car payment which are going to be paid off soon. And the $100 student loan will be paid off late next year. We do want another kid, and will have to have another car for that since mine isn't big enough, but that's not for another 3 years. I know the budget isn't great, so please, give advice!

brij2006 · July 2015

I would snowball the car payment and student loan payment toward the student loan that's $100/month and get that finished up before saving up for a newer home, car, or worrying about retirement. After that, I would save up 3-6 months in living expenses as an emergency fund. THEN I would put 15% of income toward retirement.

I would also stop the regular monthly savings, car savings, and saving for a new baby and put those toward the student loan instead. Assuming it would probably be finished off within a few months. Then a fully funded emergency fund only a few months after that. Then it makes your 15% toward retirement much easier.

The point of this is to focus on 1 thing at a time rather than doing 10 things at the same time and not gaining any traction. Once you have the emergency fund and are putting 15% toward retirement, then you can take that amount you were paying toward the student loan and save it up for a newer car. After that is purchased, then focus on saving for what you will need for baby #2.

Also, I see that you have a church tithe in your budget. I highly recommend Dave Ramseys' Total Money Makeover. It's a plan with steps on how to handle money, with a biblical backing.

orangehills · July 2015

So, we already have a 6 month emergency fund. Would it be smarter to drain some of the savings right now and just pay everything off? And then just rebuild the fund? Either way, we'll be at the no debt except mortgage, with a 6 month e-fund, by next spring. I'm a little nervous not having the savings for awhile if we drained it, since we do have a daughter and you never know what could happen with jobs or anything.

formerlyGDaisy09 · July 2015

your income is similar to ours.

I'd start by reducing what you're sending to general savings to be able to increase your retirement contributions. I'd also cancel cable (we've lived without cable for at least 2 years now, we don't miss it, we budget our eating out budget to go to a sports bar for big games (superbowl/world series) and besides that don't really find any other times we "miss" our cable box)

we find that $100 of "fun money" works for us (of course I'd love more, but I don't feel we suffer with $100). $50 is earmarked for joint fun then we each get $25 to do as we wish with individually.

hoffse · July 2015

There's a bit of a Dave Ramsey split on this board.

I would not touch the e-fund for debt if you're within a year or so of paying it off. That's a great safety net, and your SL payment is quite small relative to your incomes.

I also would not delay retirement any longer. Not trying to make you feel old or anything, but 35 is pretty far behind. 15% would be on the low side for starting in that age bracket, even if you were debt free. 20% is better, and you guys really need every scrap of time you can get to help it grow. For me, retirement is more important than low-interest day pay off. I would first cut from your general savings to boost retirement. Once that's to 20%, then maybe send extra money to debt if you want to (though I probably wouldn't at this point with your current time frame).

Other places you could cut:

1) Cell phones - if you aren't being reimbursed by your employers, that's high for 2 phones

2) Cable - hulu+, Netflix, Amazon prime, slingTV.... lots of options other than cable for shows that are cheap and don't tie you into a contract

3) Your internet is also pretty high (to me), but that could be because of your location. I would still shop around for that.

4) You guys don't need to have $200 of fun per month. There are lots of free or cheap things you can do as a couple or family to cut this back.

5) It's small, but for a child 3+ years away, I think I would cut the future baby category

6) Your ticker says your baby is still little. I would also cut out the santa saver. Keep birthdays/Christmas low key for now. Baby won't know any better.

brij2006 · July 2015

orangehills said:

So, we already have a 6 month emergency fund. Would it be smarter to drain some of the savings right now and just pay everything off? And then just rebuild the fund? Either way, we'll be at the no debt except mortgage, with a 6 month e-fund, by next spring. I'm a little nervous not having the savings for awhile if we drained it, since we do have a daughter and you never know what could happen with jobs or anything.

I personally would. Especially if you have the savings you've built up for the car and baby. Get the rest of the non-mortgage debt knocked out to give you the peace of mind, then re-fill the emergency fund to 3-6 months (whichever you're most comfortable with), then up retirement to 15%.

hoffse · July 2015

Some perspective - 20% of $92,000 amounts to $1533/month. That's a lot of money, and it's the reason you need to kick it into high gear so that the amount you need to save doesn't get any higher.

I like Roth accounts (which are after-tax), but if you need the tax savings to afford your contributions, you could do a 401(k) if that's offered through your employer to get a good deduction. Your current after-tax savings are $1100/month, so the pre-tax contribution might come awfully close to off-setting that $400 or so difference. Also, anything you are currently contributing would offset that a little bit.

orangehills · July 2015

LOL differing opinions on this one! I'm conflicted too. All good ideas, thanks ladies- I told my husband to prep for a money talk tonight. Also, I should say, with my pension, I get a decent payout if I stay there till 60. And I'm going to be getting quite a large inheritance come retirement age, like more than half a mil. But I know I shouldn't bank on any of that because things could change and that we need to up the savings. I think we'll start with 15% for now and then increase once we get things a little more squared away.

orangehills · July 2015

Also- I was just doing the math. If I paid off all our debt next month, we'd be back up to a 4 month emergency fund by the end of this year, and a 6 month emergency fund next June. But we'd be left with only a 2 month emergency fund for a little bit, which is what makes me nervous, because I like having a 6 month emergency fund. But I like not having debt. Hmm.

brij2006 · July 2015

orangehills said:

Also- I was just doing the math. If I paid off all our debt next month, we'd be back up to a 4 month emergency fund by the end of this year, and a 6 month emergency fund next June. But we'd be left with only a 2 month emergency fund for a little bit, which is what makes me nervous, because I like having a 6 month emergency fund. But I like not having debt. Hmm.

Keep in mind that once your debt is fully paid off, then you have an extra amount in your budget each month. If, God forbid, one of you were to lose your job in that 2 month period, without payments you could probably pay all of your set bills with just 1 income.

ETA: If it makes you insanely nervous, then cut cable, fun money, and scrimp the food budget to help rebuild it even quicker. But 2 months of still having a good savings anyways, I would pay off the debt and jump for joy.

hoffse · July 2015

orangehills said:

Also- I was just doing the math. If I paid off all our debt next month, we'd be back up to a 4 month emergency fund by the end of this year, and a 6 month emergency fund next June. But we'd be left with only a 2 month emergency fund for a little bit, which is what makes me nervous, because I like having a 6 month emergency fund. But I like not having debt. Hmm.

It's probably 6 to 1, half dozen to the other if those are the two options you are considering.

Brij and I disagree on this issue a lot, but that's ok - there are multiple ways to approach this kind of thing.

Two pieces of unsolicited advice - first, don't bank on the pension. 60 isn't that far off from a retirement savings perspective, but it's quite a long time at one job without any internal policy changes that could affect that. Second, don't bank on the inheritance. I do a decent amount of estate work in my practice, and quite often people get money who aren't expecting it and people get disinherited who are expecting it. Not saying this will happen to you, but you can never assume until it happens. Heck, I'm an only child, and I am extremely close to my parents, but H and I are not counting on them for any portion of our retirement plan. If they make me their sole heir we would be pretty set, but it's none of our business if they decide to give it away to a charity or skip us entirely and go straight to any grandkids. I also really hope they live long enough for H and I to be retired or nearly retired before they pass.

Plan for these things not to happen and if they do, then you will have a nice cushion.

als1982 · July 2015

orangehills said:
LOL differing opinions on this one! I'm conflicted too. All good ideas, thanks ladies- I told my husband to prep for a money talk tonight. Also, I should say, with my pension, I get a decent payout if I stay there till 60. And I'm going to be getting quite a large inheritance come retirement age, like more than half a mil. But I know I shouldn't bank on any of that because things could change and that we need to up the savings. I think we'll start with 15% for now and then increase once we get things a little more squared away.

I hate to say it, but half a million dollars won't provide you with a super great retirement in today's dollars, let alone after 30 years of inflation. Frankly, our goal is to have enough saved by 35 to generate a million by 65 without adding an additional dime. And this is our bare bones safety net number should something crazy happen like serious injury or illness and one of us is unable to ever work again. Ideally, we hope to save at least $3 if not closer to $5 million.

simplyelise · July 2015

I think we all agree on you guys needing to get to a point where you are contributing significantly more to retirement. You're going to be in the same place either route you take in a year or so, so it doesn't worry me too much which route you take, just that you guys pick a plan and attack it. I would definitely take that $1100/month and divert it from savings towards either accelerated debt-payoff or retirement. What you feel comfortable keeping in efund is so dependent on your circumstances.

My only advice is to really examine the "current needs" that you've been prioritizing over retirement and try to be honest about whether those are really needs. They may be, I have no idea! But do you 100% need a different vehicle for 2 children, or would it just be nice? Do you absolutely need a bigger house or could you handle it for another 10-15 years without? These are things that if you can, I'd push them off until they really are pressing needs, i.e. if you have a 2BR house, it would be reasonable for same-gender siblings to share for awhile until they're middle school age or older depending on room size.

On the pension, I'm not banking on my pension as part of my retirement plan. Since it's employer funded, I should be fine to contribute to my own plan at 10-15%. My pension is super safe and 98% pre-funded, so I do think it will be there once I vest, but I definitely wouldn't count on it in California to be honest.

hoffse · July 2015

^^ +1 to als1982. $500K isn't going to be a ton of money by then.

H and I have a goal of at least $5M and a bare bones "we must hit this number" of $3M by 60.

We have always saved 15-20% since one of us has been working, but we're likely to experience a huge reduction in debt at the same time we're experiencing a large increase in salary if everything stays on track in a few years. At that point we might hit it hard and honestly shoot for early retirement.

orangehills · July 2015

all good opinions and ideas ladies, thank you! we are meeting with a financial adviser next week too, so hopefully she can get us on track as well. DH and I are def. going to discuss tonight what we can do!

vlagrl29 · July 2015

I wouldn't bank on a pension especially in CA. I would cut the cable and any extras that aren't necessary and maybe even cut the amount of money you put in savings every month and put that in your retirement accounts. I wouldn't take money out of your E fund.

vlagrl29 · July 2015

Also I have a 2 door ford focus and plan on keeping it when we have baby #2 in the next year or so. I hate car payments! lol

Xstatic3333 · July 2015

I pretty much agree with @hoffse's advice, as well as @simplyelise's advice to examine whether a new car and house are truly necessities. I'd cut general savings contributions, shop around insurance rates, cut cable, etc. and get you're retirement going. We're not counting on H's state pension but will see it as a nice bonus if it works out.

I actually think $200 for fun is ok, provided you're meeting all your basic obligations. I'm also in a relatively HCOL area, and meeting a friend for drinks once burns through a huge chunk. H forgetting to pack lunch 2-3 times or buying batteries for something quickly knocks off most of the rest. A movie? Forget about it. We've found that cutting much below that gets us into trouble. I think I may put more items in the fun category than some other posters, however.

brij2006 · July 2015

Yeah, there's no doubt that you will want to focus on the retirement. I personally would focus on that before worrying about upgrading vehicles or home. Those are luxuries. The last thing you want is to bank on the pension being there, and it not. Which is what is happening to many people. It's getting almost just as bad as social security. I wouldn't even keep the pension in mind as part of my retirement planning. If it ends up being there, great. If not, then you've set yourself up to be able to retire without it.

Also, as far as the inheritance. My parents are worth $6mil right now. If they were to pass away tomorrow, we would be set. We know that all of this goes to us, because we've had that discussion with them. But we are not relying on a single penny for retirement. Again, if it's there when we retire, it will be an amazing asset and allow us to live better than we ever imagined. If it's not there, then that's fine too, we will have been putting aside 15% of our incomes and have a very nice nest egg of our own.

short+sassy · July 2015

The PPs make a good point about not counting on inheritances. Even sizable estates can be whittled way down by medical bills/nursing homes, etc.

Or skip a generation, like @hoffse mentioned. I know my H's parents were financially successful people and, while I don't really know what their estate was worth, the majority of it was split between the grandkids. They felt their children were already old enough to not need help and skipped them. I personally thought that was a bit odd, but their money...their business. They never made it a secret that was what they were doing, so at least none of their kids ever counted on the money.

orangehills · July 2015

Yah, I'm not going to count on the pension or inheritance. It'll be a nice bonus if it happens! So, DH and I have an appointment with a financial planner next week, and she is going to get us on track for savings and retirement. We canceled a vacation coming up so we could save $4,000. We are also selling his truck, which is a luxury truck, using the money we get from it to pay it off and buy a new car that is more useful for our family all for with what we'll get for it. So we'll save 5-10k that way as well, depending on how much we get for the truck and how much the new car is. Then we'll have only 1 student loan that is almost paid off (3000 is left) and our mortgage, and we already have $100k in equity on our house, and an extra $20k coming as a gift for a down payment. And we have our 6 month emergency fund still in tact too. This way we'll be able to put a LOT more into retirement each month to play catch up for awhile. And DH is job hunting, so hopefully he'll find something that makes more so that we can afford a bigger house one day down the road, since we won't take away from retirement saving. Some big changes going on in the last few days! I'm feeling a bit better. Next up is redoing the monthly budget to just save in normal bills like cable and phone and whatnot. Phew!

short+sassy · July 2015

orangehills said:

Yah, I'm not going to count on the pension or inheritance. It'll be a nice bonus if it happens! So, DH and I have an appointment with a financial planner next week, and she is going to get us on track for savings and retirement. We canceled a vacation coming up so we could save $4,000. We are also selling his truck, which is a luxury truck, using the money we get from it to pay it off and buy a new car that is more useful for our family all for with what we'll get for it. So we'll save 5-10k that way as well, depending on how much we get for the truck and how much the new car is. Then we'll have only 1 student loan that is almost paid off (3000 is left) and our mortgage, and we already have $100k in equity on our house, and an extra $20k coming as a gift for a down payment. And we have our 6 month emergency fund still in tact too. This way we'll be able to put a LOT more into retirement each month to play catch up for awhile. And DH is job hunting, so hopefully he'll find something that makes more so that we can afford a bigger house one day down the road, since we won't take away from retirement saving. Some big changes going on in the last few days! I'm feeling a bit better. Next up is redoing the monthly budget to just save in normal bills like cable and phone and whatnot. Phew!

Wow! It sounds like you all are making some great steps to improving your finances and bulking up your retirement. Kudos!

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