bobzilla said: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.
Bob... prepare to be shocked. I agree with you 100% on this.
bobzilla said: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
Yeah, I guess I deleted that part when I rewrote it. But yes, the idea was that I'd take the tax hit now on some of it, as a hedge against the future tax rates. Because like you, I suspect with the debt the US has and it's addiction to running huge defecits we will see tax hikes in the future.
Appleseed said:Serious question : what do we do when we didn't start early? And have adequate jobs, but not much in savings?
You're not that old. Plenty of people have zero savings going into their 50s. I started saving in earnest in my late 30s. Just start saving, open a Roth IRA with Vanguard and pick a nice Vanguard fund to put your money in. You'll need $1000 to start a Roth IRA with Vanguard. If you can't do that, start putting some money in a savings account each month until you do.
Appleseed said:Serious question : what do we do when we didn't start early? And have adequate jobs, but not much in savings?
Would you rather live off SS, or live off SS + X? Something is better than nothing.
Start an account and start saving. 401k, IRA, HSA, etc.
I don't know how old you are or what % of income you can save, but I assure you it can make a pretty meaningful difference in your life.
dculberson said:bobzilla said: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.
Bob... prepare to be shocked. I agree with you 100% on this.
That's been happening a lot lately. Are you feeling OK? I'm worried about you.
ProDarwin said: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.
that's where the first part comes in "Hope for the best". If you have hope, you don't automatically jump to the stuffing money in mattress and believing the world is ending.
ProDarwin said: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.
Yeah, what I meant by "plan for the worst" is "Plan on Social Security and any pensions and inheritances you're expecting not to be there, which means that you need to plan to save as much as you possibly can in intelligent, well thought out places such as index funds in your 401k/IRA, HSA, 529, etc."
If I were to lose my job tomorrow and not get another for a 3 years, I would have to take the penalties for early and unapproved withdrawals from my 401k, IRAs, and 529 plans.... And yet I still wouldn't be in debt. That is my worst case scenario that I can plan for. Worst case is worse than that, but that is what I can plan for so that is what I am doing.
ProDarwin said:Appleseed said:Serious question : what do we do when we didn't start early? And have adequate jobs, but not much in savings?
Would you rather live off SS, or live off SS + X? Something is better than nothing.
Start an account and start saving. 401k, IRA, HSA, etc.
I don't know how old you are or what % of income you can save, but I assure you it can make a pretty meaningful difference in your life.
Actually Appleseed, with your diabetes you should be putting everything you spend on insulin into an HSA. Tax deductible!
mtn said:ProDarwin said:Appleseed said:Serious question : what do we do when we didn't start early? And have adequate jobs, but not much in savings?
Would you rather live off SS, or live off SS + X? Something is better than nothing.
Start an account and start saving. 401k, IRA, HSA, etc.
I don't know how old you are or what % of income you can save, but I assure you it can make a pretty meaningful difference in your life.
Actually Appleseed, with your diabetes you should be putting everything you spend on insulin into an HSA. Tax deductible!
Excellent point- since an HSA can act very much like a 401k. You can take out what you don't use, and it can be invested.
The honest truth is I don't expect to see 65.
HSA is what again?
Appleseed said:The honest truth is I don't expect to see 65.
HSA is what again?
EDIT: It stands for Health Savings Account.
Think of it like a retirement account, except it is for healthcare expenses. Everything from drugs to doctors visits to eyeglasses.
To qualify for one, you need to meet 3 requirements:
You must be covered under a high deductible health plan (HDHP)
You have no other health coverage except what is permitted by the IRS (see IRS Publication 969)
You are not enrolled in Medicare
After that, you basically just put as much as you can in it (I think like $3,500 annually for an individual) and it (a) lowers your taxable income, it can be invested in stocks/bonds and those earnings grow tax free, and the distributions are tax free as well. I should have been saving to it at 22 when I graduated college, but I didn't understand how expensive everything is and also that I would need it because despite my insurance, I still had to meet deductibles.
Pete Gossett said:In reply to SVreX :
I wish we had a spare $10k to invest annually. I mean, I suppose if we lived off ramen & lived in a trailer in the woods we might be able to. Hell, I just wish I could have afforded to start investing in my early-20’s.
Truthfully though I’m just thankful we finally got past living paycheck-to-paycheck. That’s such a struggle for so many people.
I understand. $10K is a lot of money.
I haven’t been able to do it. But the truth is, we COULD have. It would have meant my wife would have had to work, and she didn’t.
I realize it’s not possible for everyone, but I believe most people could if they really thought it was a priority. It might mean a 2nd job, or fewer toys, or a spouse working, or driving an older car, or switching to a better paying job. It might also mean a job that was less fun. But if it was a priority, an awful lot of people could.
Its about the choices we make. The choices my wife and I made did not allow for it. But we were wrong, and now we are just lucky.
alfadriver saidGiven 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.
The last time I met with my financial advisor she reminded me of this fact, it's a good thing to remember.
As for sayings to live by, mine would be "spend less than you earn." 
It's pretty simplistic, but it's worked pretty well for me.
The closer I get to retirement (I'm 57) the more I kinda want to keep working. These are the best income years and my jobs gotten easier although still stressful. Just keep banking all I can at this time until it's not possible I guess.
I’m In reply to SVreX :
And choices. How many people pay for unlimited cell phone plans and monthly phone payments? And high speed Internet at home. And cable? I know a couple that complain about not having money but spend $250 a month on cel phones and another $120 on cable and Internet. Both drive 1 year old cars that they pay payments on. They bought a house that was at the upper end of their limit. All are not wise financial choices.
Flip side wife and I have used iPhone 6 we paid cash for. We pay $71 a month for a 1g shared plan that slows down once we cross the line. Haven’t had a car payment in years because we drive older vehicles. In comparison we cut almost a grand per month from the budget over what they do. That’s $12000 a year they could put to other uses.
I can pension out of my current job in 13 years, when I'm 52. It should cover 80% of my bills. I can work much closer to home making half what I do now, and hopefully pursuing an aerospace career until I can actually retire for good.
I'm 54 and DW is 56 (18 months older than I am). We're both college educated and have been working full time since our early 20s (1990 or so). We both had student loans that were significant for their day. We got married, bought a house, had 2 kids (and the related daycare, braces, martial arts lessons, beater cars, college educations, etc), fixed up some parts of the house; in general, lived a life.
Through it all we've tried at all times to live well within our means. We're not pikers (like my pathological tightwad brother-in-law). We know the value of nice things, and buy them when it makes sense to - but not when it doesn't. We keep using stuff a long time and try to buy durable goods and tools at a level that they will not wear out or go obsolete quickly, and we avoid trendiness.
SPEND LESS THAN YOU EARN. It doesn't get any simpler than that. I recognize that is not always feasible. But at all times, keep doing that to the greatest extent possible, even if it is only a little. Like I said in the WSJ car payment thread, "want" and "need" are two different things and all it takes is some self control to learn which is which. Sometimes a real legitimate need will use up all your available resources. E36 M3 happens. But when E36 M3 doesn't happen, that's not a license to indulge yourself to excess. Sorry.
Our wedding wasn't lavish or large. We haven't been on a ton of vacations. We don't live in a huge fancy house in a swanky neighborhood, and we only have the one house. But it's been paid off twice (we refinanced to do some major renovations in 2009) and has been ours free and clear for 2 years now.
We've been fortunate in that no one has suffered a catastrophic illness or injury. We have fairly normal medical expenses. I admit that's largely luck and not entirely in anyone's control, for better or worse.
OUT OF SIGHT, OUT OF MIND. First and foremost we put retirement money away by direct payroll deduction so that we never see it in the liquid cash accounts. The money is there, and we monitor it, but it's an abstract concept, not a temptation. We started a little late, in the first half of our 30s. We started small, at whatever level our employers would match, like 3%-5%. We set the deduction rate to ramp up 1% each year. While the kids were in college (back to back, fortunately) we held steady at 10% for me and 15% for DW, but since they've been out, we've jacked that up to almost 20% each. DW pays for our health insurance and HSA through her employer; mine does not offer insurance benefits. Again, that's money that never appears as take-home pay so we just budget around what does make it home. It has the added benefit of being before-tax withholding, reducing our taxable income. And since it is tax-free, those HSA dollars are effectively worth about $1.20 in purchasing power.
In 2004 we financed the TSX through DW's credit union. We put about 50% down and borrowed the rest on a 48 month note at a good interest rate. That payment was automatically deducted, and when the car was paid off in 2008 we just kept contributing the same monthly amount to a credit union savings account. It was already budgeted for, so rather than see that as a windfall, we just paid ourselves instead of the loan. Then we kept driving it and paying ourselves for 9 more years instead of trading it in on something shiny and new. When we finally replaced the TSX in 2017, we had enough in that fund to pay cash for DW's S60. Volvo made that unnecessary by giving us 0% financing, but that strategic plan worked perfectly.
PLAY THE LONG GAME. DW found a job that was not entirely what she wanted, but it offered good insurance benefits and (at the time) a pension. She's stuck it out for 30 years now, because while it is not everything she hoped for, it is of huge value to our lifestyle and future. Her magic number in the age / service calculation comes up when she's 58, and from that point forward (thanks to all the above) she's on 'berk you' time, meaning she can retire whenever she feels like it. I'm encouraging her to get out sooner rather than later.
I am a little younger, and my career field is a little more temperamental. A typical job stay is 3-4 years, but I have only changed jobs for strategic reasons or due to necessity. I've been 12 years at my current employer, and I will stay here until I retire in 4-5 years.
We're still in the same house we bought 26 years ago - we stuck it out in a decent place in a decent location, even if it isn't perfect. We're carefully considering whether to just stay in this house forever (only place we've ever lived as real adults) or sell it outright and start the next phase somewhere else. We've put away some resources so we've got some options - not private island options, but options.
We are by no means financial experts in any way. We've moved our retirement investments around, but we've never taken a penny out of them. We've held our nerve through the various crashes, hiccups, and recessions. We have a diverse mix of annuities, funds, and straight investments. We have both traditional and Roth IRAs, plus 401(k)s through our employers. We're still riding on the more aggressive side, but beginning to rein in a little as we're in the 5-year end phase before we're both fully retired.
I am aware that we have traded variety of experience for financial security. After a lifetime of being fairly conservative. we're actually having to tell ourselves it's OK to spend a little extra and indulge here and there. I don't mean to imply we've been living in self-denial - clearly we have not been. But we've also not been living in self-indulgence, either. If most goes according to plan - and so far it has been - we should both be retired before 60, live as long as we can at the same comfort level we currently enjoy (or better), and still leave the kids a decent amount to build on.
Sorry, this ended up long on miscellaneous ramblings and short on detailed advice. Thanks for reading. Hope it helps.
Congrats Gary! A little sacrifice * a lot of time truly can equal a nice retirement. I'm hoping to experience the same in about ten years. Hopefully the stress from work doesn't kill me first.
I started saving ten percent of income at age 21, in a company 401k plan. For the longest time it seemed like a pittance but now at age 48 there is a pretty decent reserve growing. Over time I increased the percentage up to the maximum allowable contribution - but like Duke described.. it never came home in a check so I wasn't tempted to spend it.
I don't know E36 M3 about investing and I do wonder if I would be better off doing some self directed stuff rather than only investing via the 401k plan (and IRA for previous employer plans)... but it's the easy button for me.
Resisting the urge to try to keep up with the Jones' has been the single biggest factor in being able to live within our means.
In reply to OHSCrifle :
WRT the actual investments- I've read too many times that the balance between fees and performance means that the very very low fee index funds are the best bet. Which actually is even more a set and forget investment.
In reply to Duke :
Well put. I could add something else here, possibly waiting until later to have children could help with the retirement. Money invested early is worth more at point X in the future than money invested later. Kids are expensive (I know; I have 2 now, at 42). But I waited until I was 36 to start having kids. So, for 15 years of my employment, I was able to save decent sized chunks of money that I might have otherwise needed to pay for kids. All that saved in my 20's is now compounding interest. As my kids get older we'll want to spend more on vacations and stuff, so the retirement savings might dip, but hopefully the money saved in those first 15 years will keep growing.
Concrete numbers: Let's say you save 10K per year, on average, including interest, from the time you're 25 to the time you're 35, so you have 100K in the bank at 35. Then you have kids, and can save nothing for 25 years. At the end of those 25 years, at 6% compounded returns, you have $450,000, at 60 years old.
Now, assume you have kids at 25, can save nothing for 25 years, but begin saving at 50. When you're 60, at 6% compounded returns, you'd have to have saved $38,000 per year to end up with $450,000 at the end of 10 years. Granted, most people make more when they're 50 than when they're 25, but that's still a hefty yearly contribution in comparison.
alfadriver said:In reply to OHSCrifle :
WRT the actual investments- I've read too many times that the balance between fees and performance means that the very very low fee index funds are the best bet. Which actually is even more a set and forget investment.
Good point. That's a LOT like all the houses I've bought, lived in and subsequently sold. 11 of them in 23 years of marriage. Even without a realtor many times... the transaction costs were huge I should have stayed put.
After the last meltdown, I packed my parachute to live on 1% returns. Not gonna live in the lap of luxury, but should be able to buy the good cat food and not worry unless we hit hyperinflation. Then we is all berkeleyed.
Pete
Well, I'm loving this thread, mainly because I started it. We've seen a lot of posts about how folks invest their retirement money. Great advice all around. I love all of it. Thank you all. But to you young folks, just invest your money in the future. Put money aside. Do your research ... like I did forty years ago. Just don't spend more than you earn. Invest, invest, invest. Do this, and you will be happy.
In reply to Gary :
Plan for the future, Hope for the best, Don't ever give up!
I too spent conservatively, lived well inside my income. My hobby and passion paid for itself and actually supported me twice, then saved me. I put away matching retirement and a major portion of big commission checks in either the 401K or IRA
What you cannot control is events.
2008 came along and 5 years from retirement I was one of 22 million unemployed. In spite of a very impressive resume my age worked against me.
On the rare occasions when I actually got an interview no matter how perfectly qualified I was.Or how well the interview actually went , I could read body language well enough to see it was no before I even sat down!
I'm determined and very hard working. So it wasn't for lack of effort. Or net working, or not following up. A few actually messed up and made references to age. Maybe even enough to get a lawyer. But all that would have resulted was enough that the lawyer got paid and I would have a few bucks for my trouble but still no real job.
During that my wife of 34 years was diagnosed with cancer. A rare cancer not previously ever seen in white women. The diagnoses was at least 10-15 years with an annoying but not painful skin irritation before death. Yet every treatment was like pouring gasoline on a fire. 3 years later I was broke and she was dead. At least taking her to and from treatments and caring for her kept me busy.
Following her passing I again searched desperately for employment. Finally finding a commission only job( no Expenses) selling a long lead product. (6 months typical from 1 st contact to paycheck. Big wind generators. I sold not one but two in a two week period. Returning to the office with deposit checks in hand I was stopped at the door by the state attorney General who closed up the company for non-performance. I called my customers told them the news shredded ones check and mailed back the other. Then I sold my Black Jack special.
Now past desperate I took a car salesman's job. One of 22 salesmen. Relying on floor traffic rather than family or friends. Did Ok, landed mid pack first month. #11 volume, #12 GP. 6 % up to close ratio
Second month I got as high as #4 but missed the last day due to a cold. Monday returned to work to find I was fired for missing work.
Finally found work driving a school bus.
And the AngryCorvair prophecy is fulfilled.
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