Miscellaneous Ramblings About Retirement

Right on, Gary. Good to see someone enjoying the fruits of all their planning and hard work. I have a few years yet to go at 43!

Any IRA that goes to zero was not diversified or was stolen. And to be successful, retirement planning requires a whole lot more than just an IRA.

Pensions have been raided - they were not a pyramid scheme, they were a good plan that then got discovered as an easy cash-out by some horrible people. Just like social security, they took what should have been an enormous pile of assets generating massive returns and replaced it with an IOU. The original fear was that the social security trust was going to be so big that it would control too much of the cash in the US. Well, they fixed that!

Market pessimists have been predicting doom and gloom for way longer than a year. There hasn't been a day that some "genius" hasn't claimed the meltdown is just around the corner, for real this time.

aircooled said:

There is always a bit of luck, good and bad, involved with everything, but you should always do your best to bend the trend line as much in your direction as possible.

It also bothers me a bit when they talk to people who are successful and their advice is you need to take a chance to really succeed.  Yeah, well they are clearly talking to someone who that worked out for, what about all those that it didn’t?  Would they have been better off taking a bit more conservative approach? (No insult intended Doc, sounds like you just had some sh#t luck in timing) I am sure all of us have run into people who seem to continually be looking for the “next big score” and never seem to find it.

People like to think they're the agent of their own fortune, especially when it's good, and have a very difficult time believing that luck plays a significant role.

I'm in my late 50's and could have retired a number of years ago. I can easily make the case that my hard work and smart decisions were the reasons for my success, but the reality is that I can also make the case that I fell ass backwards into many favourable situations, and not all of them worked out. The first one is a more compelling story . The second one is the truth.

This is a quote that really stuck with me. It says, in a little different way, what you did in your first sentence and I think it's very important to realize, but there are reasons (like in my sig) that make it difficult.

It is easy to believe that ideas that worked were good ideas, that plans that succeeded were well designed, and that ideas and plans that did not were ill conceived. And it is easy to make heroes out of the most successful and to glance with disdain at the least. But ability does not guarantee achievement, nor is achievement proportional to ability. And so it is important to always keep in mind the other term in the equation—the role of chance…What I’ve learned, above all, is to keep marching forward because the best news is that since chance does play a role, one important factor in success is under our control: the number of at bats, the number of chances taken, the number of opportunities seized.”

Save early, save often. Keep your break even low. 

And, Frenchy hasn't been in here yet, but he does have a good point (but misapplies it): You don't know what is going to happen. The correct way to apply that is to save for a rainy day, hope for the best but plan for the worst. That means that you should save as much and as early as you can, because sometimes life decides that you need to get kicked in the ass, then the balls, then it kicks your puppy. When that happened to us, we were able to drop about 45% of our income and not much changed for us except for a change to the savings rate. But because I had saved as much as I could for as long as I could, it wasn't a big impact to our overall financial picture. 

Ian F said:

spitfirebill said:

Patrick said:

In reply to Ian F :

I don't know if the place i went through was shady or what, but they said my account went to zero and closed it.  Maybe they stole my money, maybe they invested it in extremely risky stocks to show above average growth, but it's long gone

Who did you use, Bernie Madoff?  Something is definitely wrong,  I lost a bunch too at the time, but it recovered way faster and more biggly than before.  I did have it in the retirement system the ACEC uses, so it was legit.  

Agreed. Something really shady happened as that is definitely not common. The folks who lost their shirts were the ones who liquidated accounts for whatever reason when the market was at the bottom.  But my balance from that time has more than tripled since. A line-item in my account is a roll-over balance from a previous job. I use that as a sort of "quick gauge" for how the account is doing.

I've read the next recession is looming and could be a doozy, but these things are so hard to predict. Market pessimists have been predicting doom and gloom for over a year now. 

I just read an article last night or this morning suggesting the Federal Bailout for the next recession could be more than double what it was for the Great Recession.

I'm planning on pulling the plug in April.  First thing, I'm going to sleep for a year  and then when I wake up hopefully I can start enjoying retirement.

I've been contributing to my current retirement account for 8 years and at the current rate of growth, I might be able to retire sometime before the heat death of the sun...unless it tanks again...

Saving for retirement is good and smart and logical and stuff, but I don't contribute so much to it that my daily life would suffer excessively. I could get hit by a bus tomorrow, or have a pepperoni grease induced cardiac event next week. Gotta enjoy life in the present too, because tomorrow might never come.

slowbird said:

I've been contributing to my current retirement account for 8 years and at the current rate of growth, I might be able to retire sometime before the heat death of the sun...unless it tanks again...

 

Saving for retirement is good and smart and logical and stuff, but I don't contribute so much to it that my daily life would suffer excessively. I could get hit by a bus tomorrow, or have a pepperoni grease induced cardiac event next week. Gotta enjoy life in the present too, because tomorrow might never come.

All true, but I've found that my happiness and enjoyment doesn't go up with the more money I bring home whereas I am more at ease with the more I put to savings.

In reply to slowbird :

Remember yesterday. Plan for tomorrow. Live for today.

The trick is figuring out the proper balance, although it can be different for everyone.

mtn said:

slowbird said:

I've been contributing to my current retirement account for 8 years and at the current rate of growth, I might be able to retire sometime before the heat death of the sun...unless it tanks again...

 

Saving for retirement is good and smart and logical and stuff, but I don't contribute so much to it that my daily life would suffer excessively. I could get hit by a bus tomorrow, or have a pepperoni grease induced cardiac event next week. Gotta enjoy life in the present too, because tomorrow might never come.

All true, but I've found that my happiness and enjoyment doesn't go up with the more money I bring home whereas I am more at ease with the more I put to savings.

Depends on the margins. I'm more at ease when I don't have to scrape by from paycheck to paycheck. I don't make enough money to be putting aside 10% or more for retirement.

Invest as much as you can, as early and often as you can.

Notice that it takes about 1.5 years longer to amass the first 100k than it does the last 400k, and by the end nearly all of the gains are interest rather than your contributions.

slowbird said:

I've been contributing to my current retirement account for 8 years and at the current rate of growth, I might be able to retire sometime before the heat death of the sun...unless it tanks again...

 

Saving for retirement is good and smart and logical and stuff, but I don't contribute so much to it that my daily life would suffer excessively. I could get hit by a bus tomorrow, or have a pepperoni grease induced cardiac event next week. Gotta enjoy life in the present too, because tomorrow might never come.

Quick tip- assuming you have a job, next recession, and stock market tanking- buy.  Get all of the stocks when they are low.  Unless something very, very drastic changes- as in a revolution- we will remain a consumer based economy, and the stock market will recover.  It may take some time, but as long as you buy when it's down instead of selling, you will be better off.  Which is to say, if you are in the 10-20 year from retirement, and have a very secure job that will always pay out a 401k contribution, you can take a drop multiple times before you retire.  Not only take, but it will end up being good for you.

In reply to mtn :

"Hope for the best and plan for the worst" is a great motto to live by. 

In reply to alfadriver :

very timely comment, for me.  looking at my quarterly Edward Jones statement, i have $25k in "Current Cash and Money Market" that's paying 1.5-ish%.  I was thinking "dang, it's dumb to have $25k only earning 1.5%", but your comment about buying when it tanks reminds me that my EJ guy calls me every time there's a 5% drop in the market.  so instead of calling him and saying "get that $25k tied up in bonds at 3.5%," i think i'll just sit on it until the next 5% dip.

In reply to AngryCorvair :

You could also move it into a Wealthfront cash account and earn 2.5% in a regular old savings account that is FDIC insured and you can access any time to add/remove your $. And it would get you out of having to call a guy to move your stuff (for a fee).

alfadriver said:

slowbird said:

I've been contributing to my current retirement account for 8 years and at the current rate of growth, I might be able to retire sometime before the heat death of the sun...unless it tanks again...

 

Saving for retirement is good and smart and logical and stuff, but I don't contribute so much to it that my daily life would suffer excessively. I could get hit by a bus tomorrow, or have a pepperoni grease induced cardiac event next week. Gotta enjoy life in the present too, because tomorrow might never come.

Quick tip- assuming you have a job, next recession, and stock market tanking- buy.  Get all of the stocks when they are low.  Unless something very, very drastic changes- as in a revolution- we will remain a consumer based economy, and the stock market will recover.  It may take some time, but as long as you buy when it's down instead of selling, you will be better off.  Which is to say, if you are in the 10-20 year from retirement, and have a very secure job that will always pay out a 401k contribution, you can take a drop multiple times before you retire.  Not only take, but it will end up being good for you.

This. I will be knocking out a HUGE amount of debt/expenses in the next 4 months then again 4 months later. And I can't wait to really start hammering my 401k harder than I do now. Is it worth to go ahead and split my contributions between the 401k and create and IRA?

At 37, with job losses, divorce, giving up the house to make things easier in said divorce, moving, changing jobs.......I'm way behind where I should be. 

But I also want to make sure I still enjoy stuff. And if something where to happen to me early, I have great life insurance through my company so my girlfriend would be taken care of. 

Buying at the dips is less important than just buying, no matter when. The next time the market is down 5% from here might be after it goes up 8%, you just don't know.

"Time in market beats timing the market."

Even buying at the peak works out better than not buying, or buying and selling when you get nervous: https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

In reply to z31maniac :

Not sure on the 401k vs IRA- we just have a 401k, and some outside investments.  But WRT your late start- when you hit 50, all of the contribution limits go up some, as a way to make up for lost time.  So work the carreer so that you can have some extra when you turn 50 and can add more.  We are on track for retirement, but I am adding some extra.

z31maniac said:

Is it worth to go ahead and split my contributions between the 401k and create and IRA?

I think the Mr Money Mustache Investment order makes a ton of sense:

0. Establish an emergency fund to your satisfaction            
1. Contribute to your 401k up to any company match            
2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield.            
3. Max Health Savings Account (HSA) if eligible.
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level            
5. Max 401k (if
    - 401k fees are lower than available in an IRA, or
    - you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or
    - your earn too much for an IRA deduction and prefer traditional to Roth, then
    swap #4 and #5)            
6. Fund a mega backdoor Roth if applicable.         
7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield.            
8. Invest in a taxable account and/or fund a 529 with any extra. 

If it's easier to just dump it all into a 401k, (instead of contributing up to the match, then funding the IRA, then funding the 401k some more) that's still likely to be a pretty good option depending on fees, and investment options within the 401k. Anything you can do to gain tax advantages is going to help

dculberson said:

Buying at the dips is less important than just buying, no matter when. The next time the market is down 5% from here might be after it goes up 8%, you just don't know.

"Time in market beats timing the market."

Even buying at the peak works out better than not buying, or buying and selling when you get nervous: https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

 

Given that a few here seems to have actually lost money- they sold when it was low.  The important thing is to realize that it's the value that changes- the number of shares you own stays.  The only losses anyone takes during a recession is if you are selling during it- which some will have to thanks to the 401k input.  But what you don't sell will recover.  

Actual loss is only realized when you sell.  That's more the thing I'm trying to get across.

I could retire today, as long as I die next month.

Catching up on the posts I missed, I learned a new word: Biggly. Awesome. I will be sure to use it as much as I can now.

mtn is also right, life WILL kick you around. I can say I was lucky and got kicked a lot in my early 20's. Some of it was luck (4 jobs in 3 years due to silly things like plant downsizing, closures etc) and some of it was poor decision making (spending every penny I made with zero thought for tomorrow when I was making decent money with no bills). 

The flip side is luck only gets you so far (in either direction). In my bad luck had I saved even $50 a paycheck for that 2 years I made good money I would have been fine when I went 2 months without pay. Same with the good... I met people racing made friends that offered me the current job that is great (even if I am a little grumpy at times). Had I not taken that chance I'd still be miserable slinging overpriced Honda parts. 

So I agree with both viewpoints. You need some luck but you also need to be prepared to use it when it comes your way. I've seen too many people presented with good oportunities and then squander them away with poor decision making. 

the big thing with the Roth + 401k(403b) versus the 401k(403b) only is the taxes when you retire. The traditional retirement accounts like the 401k you don't pay taxes on until you retire and use it. the Roth you pay the taxes TODAY and don't get taxed when you use it. This plays 2 roles, 1.) the idea that taxes will get smaller in 10-20 years is the best joke I'll hear all month. So paying them now helps save you money then. B.) when you do retire, you won't pay as much in taxes because part of it you've already paid and is now tax free (nothings free) income. 

TL:DR or made no sense: One you dont pay taxes now, get more into retirement account and current tax deductions then pay when you use it, the other you pay taxes now, don't get as much in but don't pay taxes when you use it. Best to do both if you can

bobzilla said:

 

TL:DR or made no sense: One you dont pay taxes now, get more into retirement account and current tax deductions then pay when you use it, the other you pay taxes now, don't get as much in but don't pay taxes when you use it. Best to do both if you can

Expanding on this - assuming the tax code structure stays similar to what it is today, due to standard deductions, there will always be some income that is not taxed.  This is why it's good to have a mix of normal and Roth retirement accounts.  In theory, the ideal situation is one where you can pull out just enough from your normal account to hit any deduction limits, then draw from your Roth.  In reality, you're unlikely to hit that point exactly, but even being roughly close to it is good.  I agree with the above advice about making sure to at least hit your company's matching contribution limit before you even think of contributing to an IRA or Roth IRA.

I didn't figure out how to save properly until my early 30s.  I was on track for retirement at 40.  Now I'm probably looking at 45-50.  Divorce is fun :/

bobzilla said:

In reply to mtn :

"Hope for the best and plan for the worst" is a great motto to live by. 

Just be careful how you read this.

Too many people think "OMG the market will crash tomorrow", so planning for the worst = stuffing money in a mattress, which is a really E36 M3ty plan for all other situations.

Serious question : what do we do when we didn't start early? And have adequate jobs, but not much in savings?