Discussion: Retirement Contributions

AprilZ81 · October 2015

Most of us are working on the goal to get our retirement contributions to 15-20% of our income but I've been thinking (always dangerous)...

The "experts" have been pushing for 15-20% for the past few years when the amount used to be 10%. Some of that is inflation, some of it is to account for the projected (inevitable?) future cuts to social security and of course the increased cost of future health care.

I think that that percentage is assuming that you have a lot of debt that you will need to maintain payments on after you retire. What does the picture look like for those who are debt free early in life or who will be debt free when they retire?

Is it any different?

brij2006 · October 2015

Obviously as you can tell on my other post, we're still trying to figure this out.

But we ran some calculations and we could just leave what we already have in retirement, sit, and live the same lifestyle we currently are. However, we want to live a lot better in retirement than we do now. We want to be able to travel, spoil grandkids, retire before 65, etc.

We will also never ever take out debt again (unless something very traumatic happens). So we do not anticipate nor intend to have any debt payments to make in retirement. Which makes it so we could not contribute another penny and live just fine.

I think for us, we want to have a large enough nest egg to be able to just live off a portion of the interest each year and let the original investment grow. We are big about leaving a legacy for our children's children, and we want to set ourselves up to do exactly that.

One thing I have heard multiple times, it says something along the lines of, "the people who retire with money are the ones who put SOMETHING in." Not saying you can put $1 a month in and live lavishly. But someone at age 25 can put $100/month in and still retire a millionaire. How's that for compound interest?

I feel like our generation gets caught up in the logistics of it all and then don't put anything in. So and so tells them they need to save 20%, Joe Blow says 10%, Sallie Sue says to research fee's and only do ones with low fee's. My personal thoughts are that only plays a very small role in your retirement. Actually putting money into retirement is what will allow people to retire. Whether that's 5% starting at age 40, or 20% starting at age 20.

formerlyGDaisy09 · October 2015

we're still working up to the 15%....so we're not where I'd like to be, but progress is progress. I'm contributing 11% next year (8% of my income + 3% vested employer match). H is currently contributing 10% (8% his income + 2% vested employer match), I'm pushing him to up that to 12 or 13%, but he's not yet logged into his benefits to make that change.

As much as we know we should have Roths, we don't yet (been focused on debt-pay off). since we are expecting to get 30% of what we spent on solar and windows back (almost $9000), I'm thinking we'll probably use a lot of that to partially fund some Roths this year. (though I'm also toying with using it to pay off our highest interest SLs).

als1982 · October 2015

Right now we're contributing 22% of our gross income (while also agressively paying off debt). We've done so by avoiding lifestyle creep as our incomes have doubled in the last two years. Right now we're DINKS and I'd rather have a safety net when/if we have a family and the flexibity to ease up a little when that time comes. Plus, compounding interest.

hoffse · October 2015

We do around 18%, but we got started late due to law school. I was lucky in that my parents funded a Roth for me from "jobs" (sneeze: chores) around the house as I was growing up, and I started college with about $8,500 in my Roth. It sat there through college and law school, and then I started making contributions when I graduated from law school. I turned 26 that year.

I also was behind in my 401(k) because my old job required a year of work before they would let you contribute. 30 days after I hit my 1 year mark, the firm went under. So while I was maxing out my Roth, I wasn't able to do 15% in tax-advantaged retirement accounts until the last 18 months or so. I just turned 29.

We work backwards in terms of how much we think we will need. 18% now should get us caught up (with room to spare) by the time we are having kids. We hope we won't have to scale it back at that time, but it's possible. So we want to boost the seed money while we are still childless and can afford to do it.

For me it's all about lifestyle. I want to live a good lifestyle in retirement. I will be completely honest and say that we love to travel, and I like to stay in fancy hotels, eat at nice restaurants, get a spa treatment, and I am dying to fly business class on a long-haul flight. I feel like life is too short to fly coach if you can afford to sit up front (yes, I said it). On any given trip right now we might have one splurge, but I would really love it if we could travel in the style we really enjoy in retirement.

From that standpoint, we are estimating around 20-25% of our retirement income will go toward travel. I lurk on multiple travel boards, and that seems to be inline with what retired people spend who travel frequently. So yeah, we are overfunding our retirement so that we can live that dream.

By the way, I have every intention of kicking off retirement with a round-the-world cruise.

cbee817 · October 2015

I'm at 18.7% - (11% 401K, 1.5% from employer, and max Roth IRA each year) and DH is at is at 16.2% ($100/paycheck to 403B, no employer match, and max Roth IRA each year). We also have pensions with both of our jobs- DH is 60% of the average of the top 3 years of his salary at the school district (state funded NYSTRS pension- very stable) and mine varies depending on when I retire but I am fully vested (need 5 years and I will be there 12 years this January).

I feel like we're in good shape- when we do retire, I expect to not have a mortgage, have both girls out of college and on their own, and have other savings available. I would like to retire at 55 and DH said he will work longer since he is on a school schedule and will have more time off per year than the average worker. We're 34 (me) and 32 (DH).

jessica490 · October 2015

We are both working on increasing our percentages with every yearly raise. We are both around 8-9% for our 401K's and we plan on opening ROTH IRA's next year. We have no kids, and no debt other than a mortgage payment and 1 car lease if you count that. Since we live in HCOL, we plan to retire down south so our money will go further and the weather will be better!

brij2006 · October 2015

@hoffse Hit me up when you plan on retiring, our goal is to do a round the globe cruise as well. It's high on the retirement bucket list.

dragonstarjk · October 2015

hoffse said:

We do around 18%, but we got started late due to law school. I was lucky in that my parents funded a Roth for me from "jobs" (sneeze: chores) around the house as I was growing up, and I started college with about $8,500 in my Roth. It sat there through college and law school, and then I started making contributions when I graduated from law school. I turned 26 that year.

I also was behind in my 401(k) because my old job required a year of work before they would let you contribute. 30 days after I hit my 1 year mark, the firm went under. So while I was maxing out my Roth, I wasn't able to do 15% in tax-advantaged retirement accounts until the last 18 months or so. I just turned 29.

We work backwards in terms of how much we think we will need. 18% now should get us caught up (with room to spare) by the time we are having kids. We hope we won't have to scale it back at that time, but it's possible. So we want to boost the seed money while we are still childless and can afford to do it.

For me it's all about lifestyle. I want to live a good lifestyle in retirement. I will be completely honest and say that we love to travel, and I like to stay in fancy hotels, eat at nice restaurants, get a spa treatment, and I am dying to fly business class on a long-haul flight. I feel like life is too short to fly coach if you can afford to sit up front (yes, I said it). On any given trip right now we might have one splurge, but I would really love it if we could travel in the style we really enjoy in retirement.

From that standpoint, we are estimating around 20-25% of our retirement income will go toward travel. I lurk on multiple travel boards, and that seems to be inline with what retired people spend who travel frequently. So yeah, we are overfunding our retirement so that we can live that dream.

By the way, I have every intention of kicking off retirement with a round-the-world cruise.

Heck yes. Ditto!

dragonstarjk · October 2015

brij2006 said:

@hoffse Hit me up when you plan on retiring, our goal is to do a round the globe cruise as well. It's high on the retirement bucket list.

Count me in!

KAdams767 · October 2015

We are over 20% and will be for the foreseeable future. It has nothing to do with expecting to have debt in retirement. Our house will be paid off when we turn 60, if we don't pay it off earlier. Our only other debt are my student loans, which will be well paid off before retirement also. I contribute maximum amounts now, at ages 34 and 35, to make sure that we are ahead. I am just not comfortable contributing what experts say should be a minimum. This way, if we have an extended illness or job loss, we can cut back then if we need to. It just gives us way more flexibility down the line to save more now. If I want to scale back at work, or take a lower paying job, I would be able to do so without worrying about how I will afford to retire and still live at that time. I also worry about escalating health costs eating up retirement savings when I am older. Honestly, all of those factors combine into a general "well, you never know what could happen later on" for me, and it just makes the most sense to contribute the most we can right now.

Edited to add that DH and I each max a 401(k), with employer matching of between 3-5% for each, plus one back-door Roth IRA now that we have phased out of Roth eligibility.

dragonstarjk · October 2015

I currently contribute 12% to my 401K, with a 5% employer match. I also contribute $20/month to my Roth IRA, which is not even 1% of my income, but I plan to increase that to $100 in 2016. H currently contributes about 4% to his 401K, but that will increase to about 12% in December when his truck is paid off. He also works for an employee-owned company and gets very generous profit-sharing each year, which makes up the bulk of his retirement savings.

The reason I contribute a small amount to my Roth IRA is because of exactly what @brij decscribed. Any small amount into retirement is going to get you closer to your retirement goals. I opened my Roth IRA as a gift to myself for my 24th birthday. At the time, I made very little money and I worked for an employer that didn't offer any type of retirement plan. However, after learning about compound interest in college, I knew that's what I needed to do. So, even when I feel like I don't have any extra money, I still put something into my Roth IRA. There are times that I have set my auto contribution as low as $5 and as high as $200.

For H and I, it's not about a certain percentage. It's about finding balance between our life now and what we want our retirement to be like later. We are somewhat unique in that H is 14 years older than I am. If I work until I am 65, he will be 80. We are not going to bank on the fact that he will still be in perfect health at age 80 and be able to travel. Therefore, we are trying to plan for him to retire at 65 and me to retire at 55. We also make sure to enjoy trips and bucket list items together now whenever possible, because nobody is ever promised that time together in retirement. I know that's morbid, but I think it's really important to consider in retirement planning.

Also, our house will be paid off in about 10 years, and we are trying to get all of the home improvements we'd like to have done before H retires. We plan to stay in our home, because it is more important to us to be able to travel than it is to get a bigger, nicer house. Although if we really play our cards right, we'd like to purchase a second home in California or Hawaii once we are both retired.

orangehills · October 2015

We are at about 14% right now of our income between our IRAs and my contribution to my pension. (though who knows how much I'll get back on that...) as our income goes up, so will our contributions. We have no debt right now and just got our long term home, so our next step is working on retirement more. Our financial adviser set us up so that if we save a certain amount, invest wisely, we'd live off a certain amount each month during retirement, which to me sounds like a lot because it's what we make now! And it's not like we'd have child care or a house payment then, and there would only be two of us.. but I guess safer than sorry because inflation and health care and all and traveling would be nice though I am a homebody. Retirement is tricky stuff.

Mustard76 · October 2015

I currently contribute 8% to a traditional 401(k) and 8% to a Roth 401(k). My employer matches 1:1 on the first 5% pre-tax. This fluctuates quarterly because if I am earning incentive for the quarter, I increase my contribution. H contributes 6% traditional 401(k) and 5% Roth 401(k). He increased his contributions for his annual bonus. We're both fortunate that our employers offer Roth 401(k) options. We're also both salaried employees, so it's easy to budget our expenses. This allows any incentive/bonus income to go straight to retirement. We both also have pension plans, his will payout at 80% of his 4 best earning years x 1.5. Mine is strictly based on years of service. We don't do much right now (as far as entertainment and travel) due to schedules and work/life balance. So chances are, we'll live a lot better in retirement than we do now.

jtmh2012 · October 2015

hoffse said:

By the way, I have every intention of kicking off retirement with a round-the-world cruise.

You and I both.....:)

bmo88 · October 2015

Our situation is a bit unique because we are considered state employees (DH is a teacher and I am an executive director), so we have an individually funded account called PERA that is in lieu of Social Security. It is 8% saved that accrues 3% interest annually and it is "our money," as in I can login and see exactly how much is there. If I leave the system, I can roll it into an IRA. Additionally, there is a defined benefit pension plan that you get a percentage of your income paid out depending on how many years you serve. Once we hit 5 years vested, the PERA system will also match the 8% at a 50% rate.

In addition to that, I save 9% of my income ($5,500 in a ROTH IRA and about $2,550 in a 401k), bringing me to 17% savings before matches and the defined benefit plan. DH saves 4.5% of his income in ROTH IRA (about $2,400 a year), bringing him to 12.5% before match and defined benefit plan.

We are still paying back DH's student loans aggressively. We should have those paid off in just over a year. Once we pay those off, we will increase our retirement savings by about $1,000-$1,500 a month.

Saving for retirement has always been a priority for me. I started saving the first month of my first job out of college at 21. So I have been saving for about 6 years and I increase my contribution/percentage as my income increase. DH started about 3 years ago and is just now increasing slowly. He knows the importance, but isn't as aggressive/focused as I am about it. But he is warming up to the idea.

_____

In general, I find it quite concerning how many of my friends and co-workers are NOT saving for retirement. Many will say, "I will do that soon" or "I cannot afford it." But honestly, the majority choose to eat out, buy expensive things or spend their money carelessly. That's their choice, but they are definitely choosing not to save for retirement rather than being able to afford to save.

PurpleBookmark · October 2015

My goal is to ultimately put 15% into retirement. DH became fully vested in his pension this year, he has worked in government for 10 years. If he works 25 more years he will be able to get the highest percentage of pension benefits at only 56. At that point he wants to either continue working (he really likes his job) or get into another field for fun - culinary or tax prep (he loves accounting).

We also have a second retirement account through his job where he saves money tax free that we started when I became a stay at home mom, figuring we'd at least save something. I think we do 5% into that currently. My old 401k was rolled over into an IRA which unfortunately we haven't added to. When I go back to work I'm looking forward to starting that up again. Right now child care costs a lot more than I used to make, but as the kids start school as much as I love being with them I'm really excited to work again.

Our dream retirement is to really both have "fun" jobs. I can't imagine not working at least part time until we get to the age where it's not feasible. I want to spoil my grandkids and pets and take some vacations then (this will sound totally depressing) I want to be able to afford good assisted living and not be a financial burden on our kids.

vlagrl29 · October 2015

currently we do 5%, hoping to get up to 10% next year. We expect our income to increase after DH moves out of the studio he is renting into the studio he is building. Honestly we could put more in but I'm still trying to build up our savings account.

smerka · October 2015

I am a bit older than a lot of you (42). I became a SAHM in 2009 and had another kid in 2010. They both started full day kindergarten this year. I am telling you that because I think it is REALLY wise to funnel what you can into retirement while you are DINKS. With one kid with autism, a lot of our money goes to therapies for him. We have been able to hang on for the last six years without going into debt, but I need to start bringing in some money now that the kids are in school. I have done taxes part time while I have been home, but starting in January, I will be working a lot more hours. I have managed to funnel money into my Roth over these years and DH is a teacher so 9.2% of his income goes into his pension fund. But we are in IL and the pension fund is horribly underfunded and the state government is shut down while they argue about it. It is a hot mess.

smerka · October 2015

I agree that you justneed to start saving and worry about the technical stuff later. But those fees are no joke. This Frontline episode was excellent. http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

vlagrl29 · October 2015

I tend to worry because it seems that investing in the stock market is like gambling. How do I know that I will actually have enough to retire without SS? It makes me nervous. What if the economy tanks the year we actually want to retire like those that ended up having to go back to work instead of retire in 2008. So many unanswered thoughts I have, but I still contribute in hopes that it really will pay off. In the meantime if only I could put that money into a savings account for home updates.

AprilZ81 · October 2015

vlagrl29 said:

I tend to worry because it seems that investing in the stock market is like gambling. How do I know that I will actually have enough to retire without SS? It makes me nervous. What if the economy tanks the year we actually want to retire like those that ended up having to go back to work instead of retire in 2008. So many unanswered thoughts I have, but I still contribute in hopes that it really will pay off. In the meantime if only I could put that money into a savings account for home updates.

It is a risk, but one that can be managed to a large extent by paying attention and/or having a financial advisor helping you out. You can put your money in higher risk stocks when you are young because you can ride out the bumps and dips (or crashes). As you get older you should gradually move your money into safer, more conservative investments that are less likely to take a big loss.

It is near impossible to save enough money to retire by putting money in a savings account. The rate of return is just not there.

als1982 · October 2015

vlagrl29 said:

I tend to worry because it seems that investing in the stock market is like gambling. How do I know that I will actually have enough to retire without SS? It makes me nervous. What if the economy tanks the year we actually want to retire like those that ended up having to go back to work instead of retire in 2008. So many unanswered thoughts I have, but I still contribute in hopes that it really will pay off. In the meantime if only I could put that money into a savings account for home updates.

If you're worried about risk at or near retirement, investing in a target date fund is a good option. You pick those based on your projected date of first withdrawal or retirement. They're more agressive early on, but as you get closer to the fund target date they are invested in less risky ways.

Xstatic3333 · October 2015

als1982 said:

vlagrl29 said:

I tend to worry because it seems that investing in the stock market is like gambling. How do I know that I will actually have enough to retire without SS? It makes me nervous. What if the economy tanks the year we actually want to retire like those that ended up having to go back to work instead of retire in 2008. So many unanswered thoughts I have, but I still contribute in hopes that it really will pay off. In the meantime if only I could put that money into a savings account for home updates.

If you're worried about risk at or near retirement, investing in a target date fund is a good option. You pick those based on your projected date of first withdrawal or retirement. They're more agressive early on, but as you get closer to the fund target date they are invested in less risky ways.

Agree! I do think, however, it's important to keep an eye on what these funds are invested in and make sure you're comfortable with the level of risk. I'm told some of the people who lost money in 2008 were in a target date funds that were invested a little more aggressively then they would have preferred. You can always chose a "later" fund then your actual retirement date if you prefer a more conservative portfolio.

@vlagrl29 , I also agree about the temptation to save for home updates. This board is honestly a huge influence in my staying the course on retirement, especially without the option of a set-it-and-forget-it work plan!

vlagrl29 · October 2015

yeah I'm not insecure about my investments - even with a target fund or having it in all bonds - it just seems unreal that it will one day be more than 1 million in there. IDK - hard for me to imagine. I don't feel the need to have a financial advisor as I've had half of my money managed by a Fidelity management team and I'm out performing them so I'm slowly taking money out of their control into mine. I know my FIL had to go back to work after 9-11 because he lost quite a bit then.

I was a couple months late going over our yearly budget with DH (we do it every September). We talked today and we should have at least $1k more in our income after he makes the move and utilizes his renters income. I would be happy with $1k more because then I could put that in various accounts - savings, retirement, home improvements, travel. Just more cushion would make me happier. I'm just dying for hard wood floors ladies! 3 more years hopefully.

CuriousKiddosMama · November 2015

Being honest, I only skimmed the replies so far. I need to come back and read this later. If you include dh's match we are somewhere around 21-22%. Without his match we are right around 15%. He is fully vested though so I always consider his employer match part of what we are doing every year. He is hoping to retire early (like 60 when kids are out of school), but I'm not sure if we are going to be able to pull that out like he wants. He didn't put much away before we met, so I feel like we are a bit behind and really need to catch up. I was putting a lot (for me) away before we met, but that is penny's yet.

AprilZ81 · November 2015

CuriousKiddosMama said:

Being honest, I only skimmed the replies so far. I need to come back and read this later. If you include dh's match we are somewhere around 21-22%. Without his match we are right around 15%. He is fully vested though so I always consider his employer match part of what we are doing every year. He is hoping to retire early (like 60 when kids are out of school), but I'm not sure if we are going to be able to pull that out like he wants. He didn't put much away before we met, so I feel like we are a bit behind and really need to catch up. I was putting a lot (for me) away before we met, but that is penny's yet.

I can't remember when you can start drawing on retirement accounts penalty free (59 1/2 I think?) but if you are planning on retiring early make sure you have enough money in other investments to get you through the gap between the actual retirement date and being able to start making withdraws.

CuriousKiddosMama · November 2015

AprilZ81 said:

CuriousKiddosMama said:

Being honest, I only skimmed the replies so far. I need to come back and read this later. If you include dh's match we are somewhere around 21-22%. Without his match we are right around 15%. He is fully vested though so I always consider his employer match part of what we are doing every year. He is hoping to retire early (like 60 when kids are out of school), but I'm not sure if we are going to be able to pull that out like he wants. He didn't put much away before we met, so I feel like we are a bit behind and really need to catch up. I was putting a lot (for me) away before we met, but that is penny's yet.

I can't remember when you can start drawing on retirement accounts penalty free (59 1/2 I think?) but if you are planning on retiring early make sure you have enough money in other investments to get you through the gap between the actual retirement date and being able to start making withdraws.

It would probably be semi retirement at that age, so we can make enough for our expenses (house, groceries, etc) and only have to pull out for big purchases when necessary. We have a good age gap (9 years) so I really can't see myself retiring fully at 51.

That is something we need to keep in mind though as the time gets closer. Our emergency fund would probably cover whatever we needed if we didn't want to withdraw from the retirement account for whatever reason, but that would only last so long.

CuriousKiddosMama · November 2015

dragonstarjk said:

brij2006 said:

@hoffse Hit me up when you plan on retiring, our goal is to do a round the globe cruise as well. It's high on the retirement bucket list.

Count me in!

Us too! We can have a mm world tour- maybe we can get a discount

dragonstarjk · November 2015

Hmm, I wonder what the group rate is on an around the world cruise.....

AprilZ81 · November 2015

dragonstarjk said:

Hmm, I wonder what the group rate is on an around the world cruise.....

I know that you can get a group discount on most lines with 8 cabins.

Discussion: Retirement Contributions

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