Personal Finance (Retirement)

Hi Guys, I'm 67 and very happily retired and moderately comfortable in our finances. That being so, maybe I can offer a few suggestions of things that helped me get here.

First, whenever possible my wife and I maxed out my 401Ks. We also did all we could manage with "Roths," & standard IRAs. Some years only one of us could max. At that time we did whichever of us had the highest income to lessen the tax burden.

I never borrowed any money whose interest wasn't deductible. In other words I always kept a home improvement loan, a Small Business Loan or something else going on so every single penny I ever paid in interest was deductible. Before I owned a house almost all loan interest was deductible. But when they got taken off the list, I had to be "inventive." Every year I'd take the reduction in my taxes for deductions and use it to pay down the loan(s) faster.

NEVER EVER PAY THE MINIMUM PAYMENT ON ANY BILL IF YOU CAN AVOID IT!! THAT IS JUST DIGGING AN EVER DEEPER HOLE IN YOUR BUDGET AND RETIREMENT PLANS!

BTW: Don't get too obsessed with whether or not you'll get Social Security. After all the years I worked, over 42, & she worked 35, there still isn't enough income from Social Security to make a significant difference in our income.

32 Married no Kids. 0 Debt except mortgage. ~8% income after tax for the mortgage.
Both my wife and I max out our 401K's
No IRA/Roth due to income limits.
~45% after tax in cash/bonds/after tax accounts on purpose. (Monthly) At the end of the year I take anything in the savings above 50K and drop it into the vanguard accounts if there is excess.

OSULemon wrote: I've been worrying about this also. I'm about a year out of college.... I do the calculations on maxing out my 401k and it feels like a huge chunk out of my paycheck. However, since I'm very young and very single/no kids, maybe now is the better time to be contributing as much as possible, and dial it back later when/if expenses get tighter. My company also offers stocks for a discounted rate, and although I haven't looked that far into it, 3M seems like a safer place to invest than, say, a startup.

You should absolutely max out your 401k ($17,500 per yr currently, as others have said), unless you won't be able to make ends meet by doing it. Yes, it is a huge chunk out of your paycheck. However, your salary will increase over time and things will get easier (and you will be able to save/invest even more as you get more income).

Mr. Money Mustache is a good site; I also like this one:

financialsamurai.com

OSULemon wrote: I'm contributing 6% into my 401k with 6% employee matching. I do the calculations on maxing out my 401k and it feels like a huge chunk out of my paycheck. However, since I'm very young and very single/no kids, maybe now is the better time to be contributing as much as possible, and dial it back later when/if expenses get tighter.

DO THIS. DO IT NOW. The difference is unbelievable.

Buying company stock at a discount isn't bad. After you get it, sell it and invest in an index fund.

OSULemon wrote: I do the calculations on maxing out my 401k and it feels like a huge chunk out of my paycheck. However, since I'm very young and very single/no kids, maybe now is the better time to be contributing as much as possible, and dial it back later when/if expenses get tighter.

What I've tried to do over the years is to increase my 401k contributions at a similar rate as my pay increases (fortunately, we usually get a % or 2 every year). Then what I'm actually taking home doesn't change so much. Eventually you'll get that warm, fuzzy feeling when you look at your pay stub and your 401k deduction is more than your Federal withholding.

I would say that in general, the members on this forum are a financially conservative bunch (most of us are cheap!). Plus, I get the impression we're, on average, older than typical for an automotive forum community.

Additionally, this is one of those subjects where people in good positions are more likely to respond than those who aren't. I don't feel bad about where I'm at financially, but I know I can improve. Still, I also believe there needs to be a balance between planning for the future and enjoying life now while I'm still somewhat young.

I'm younger than most folks here at 23 (24 in January) I'm not too worried about where I am, but I am a little concerned with my lack of involvement in it.

I have a day job. I also have a night/weekend job that contributes about 15% to my income. None of the night/weekend job goes into retirement.

Now, the day job. I put 30% of my pay into the companies Roth 401k. 25% of what remains from that is diverted into a brokerage account. Every couple months or so, I'll buy a some stock. (This account was recently depleted by about 15% to pay for a rock--one time deal).

So, I put approximately 47.5% of net from my day job into "retirement". The remainder pays for rent, car stuff, fun stuff, etc. etc. I spend too much though, remember that 15% of my total income is basically going to beer.

Now, if we pool together all (both) of my retirement accounts, we get X. I have a guitar collection that is worth about 50% of X. So there is that as well, although that will probably not appreciate too much because I'm not really contributing to it anymore (I have enough guitars).

Others not included in this, my company matches my contributions up to $900 a year. They also have a very generous pension plan, that I could survive on alone. However, I will not be vested in that plan for another 3.5 years, and I would really have to get to about 10-15 years before it is worth mentioning. I'm not planning this into the situation; if it happens to still be around when I retire... Great! If not, oh well.

I'm also not planning on SS being around when I retire. I'm only 23 (almost 24), and if it is around... again, great, but I'm not counting on it.

I need to set up a vanguard account. Maybe ask my dad for a loan so I can get into the admiral shares.

I now have a Fiance as well. I need to go and set up her retirement savings, as she just started her first big girl job, and doesn't know much about finance other than don't spend what you don't have. She will be contributing to the 401k to get the maximum company match, then everything else will go to pay down her student loan debt. Hopefully we'll have that paid off by the time we're married.

Ian F wrote:

OSULemon wrote: I do the calculations on maxing out my 401k and it feels like a huge chunk out of my paycheck. However, since I'm very young and very single/no kids, maybe now is the better time to be contributing as much as possible, and dial it back later when/if expenses get tighter.

I would say that in general, the members on this forum are a financially conservative bunch (most of us are cheap!). Plus, I get the impression we're, on average, older than typical for an automotive forum community.

This board is so not the average across the US. Not cheap but I think everybody here likes to know that they can take care of themselves without external help. IE fixing our own cars, building our own homes.

The average pretax retirement account in the states is 44K at 65 years old. Which is a terrible statistic I know and it is more then likely even worse then that as the few of us that really do save can move the average up quite a bit.

volvoclearinghouse wrote: I recently began setting aside $50/ pay period to buy company stock. I don't work for a publicly traded company, so it's all privately held. Historically it has done well.

So how do you sell the stock if you want to get money out? Also, it's the company you work for, so if things go badly for your employer you may find yourself without a job and stock with no value. All eggs in one basket. I don't think I'd recommend this.

In reply to mtn:

Do you work for State Farm?

pres589 wrote:

volvoclearinghouse wrote: I recently began setting aside $50/ pay period to buy company stock. I don't work for a publicly traded company, so it's all privately held. Historically it has done well.

So how do you sell the stock if you want to get money out? Also, it's the company you work for, so if things go badly for your employer you may find yourself without a job and stock with no value. All eggs in one basket. I don't think I'd recommend this.

What I'm getting ready to do may be an idea.

Since all the company match is in there stock, but after 30 days you can "sell/transfer" into other funds. Since my company stock is up something like 20% this year, I'm about to do just that.

wearymicrobe wrote: The average pretax retirement account in the states is 44K at 65 years old. Which is a terrible statistic I know and it is more then likely even worse then that as the few of us that really do save can move the average up quite a bit.

I had not heard that statistic before. Holy cow that's depressing.

In reply to z31maniac:

My corp. does the same thing; corp. stock as the matching. I sell now and then when it seems to be at a peak (watching it pretty close now) and put the proceeds into other funds I'm holding in my 401(k).

I happily take the matching. I won't buy any with my own money. And this is really easy to deal with via Fidelity, which manages a lot of the benefits here.

some handy retirement savings comparison charts

woohoo, i'm in the top tier of my age group!

In reply to dculberson:

Depressing isn't nearly a strong enough adjective! Money you pay into a 401K is almost free money! Don't pay so much in taxes to others. Put it into your 401K and pay yourself.

I also agree with others. Company stock at a discount is a good deal. But it won't be if you don't sell a lot of it to diversify. I know many people who kept all their savings in FORD stock because they got it at a discount. They also wanted to invest in the company they worked for. However after they retired and FORD quit paying dividends and went under $10 a share for years, they had to find at least a part time job to get by.

Diversify! But I'd still rather max out my 401K first, then buy stock later. I REALLY HATE TO PAY MORE IN TAXES THAN I MUST!

Forgot to post years to retirement. Uh... I would like it to be about 25 years to a partial retirement, then 10-20 years working golf course/ice rink jobs to get out of the house. Reality might very well prove differently, who knows where my career goes, the fiance's career, how many kids (2-3), etc.

I'm 60 yrs old, single male with no children and have not worked for the past 4 1/2 years, I didn't retire I just lost my job and at my age I guess I'm not wanted by employers today. With the recovery of the stock market I don't have to work anymore. I can, but unless I find a job that makes close to what I made before I just don't feel it's worth my time. Right now I have enough in investments that I am able to live off just the dividends and interest earned. When I start collecting SS at 65-66 along with 2 annuities due me I should be very comfortable.

Late 30's, 10% into 401k, no debt outside of the house and we pay extra and are on track to have it paid off in about 5 years. About to go from DINK to SIOK, so we'll see how that new reality effects things. Would like to retire early, and a paid off house is a big part of that, but we'll see. I don't plan on anything from SS. If I get anything, it's a bonus.

I am putting 6% in my 401k (at 25) and the company matches the first 3% and half of the next 3%. I should probably up it but we are trying to save to send the wife back to get her master's (teaching). No debt. I can't imagine putting 30% in though.

The one thing I regret is not putting more into my 401k when I started out at my present job. My wife said we couldn't afford it. Finally I said berkeley you and went to 15%. I've been there for a while and see how much I should have had if I had upped it earlier.

The Roth IRAs are good if you are young. No help to me now.

pres589 wrote:

volvoclearinghouse wrote: I recently began setting aside $50/ pay period to buy company stock. I don't work for a publicly traded company, so it's all privately held. Historically it has done well.

So how do you sell the stock if you want to get money out? Also, it's the company you work for, so if things go badly for your employer you may find yourself without a job and stock with no value. All eggs in one basket. I don't think I'd recommend this.

Hardly all of my eggs. 50 bucks per pay period. My 401k and Roth contributions are many many times that. This is just a little something extra.

The way (our) privately held stock works, there are trading periods 4x per year. The share price valuation is based on an independent audit of the company. Typically those in upper management owns the maximum # of shares allowable by company policy- some % of the total # outstanding, I think it's 1%. During any of those 4 trading periods, any employee can buy or sell any # of shares, up to that maximum % of the total outstanding, or available. If you retire or otherwise leave the company, those shares are sold to cash and you pay taxes on any earnings. If we set aside $$/pay period to buy the stock, we get it at a discount- something like 10% or 15%. I also got a bonus of 5 free shares when I opened the brokerage account- about $300 worth.

My employer is also fairly (ehem) stable. Been around many, many years, fairly large, well established, conservative business model.

I get a good match from my employer, all in all 21% of my income goes in to my 401k.

I'm almost 30 and have a little bit under 2 years salary in my 401k. It is what I would consider to be a good start.

I have a finance degree, and about 90% of the investment side can be summarized in this worthwhile hour of watching on the subject:

http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

Clif Notes: Fees are everything when it comes to retirement savings, so buy the market, with the lowest fees possible, and hold it til retirement.

In reply to gofastbobby:

GOOD FOR YOU!! The more you put in early, the more it will grow. Way too many people don't start putting much in until they have a retirement date in mind. Then it's usually too late to really make a difference.

dculberson wrote:

wearymicrobe wrote: The average pretax retirement account in the states is 44K at 65 years old. Which is a terrible statistic I know and it is more then likely even worse then that as the few of us that really do save can move the average up quite a bit.

I had not heard that statistic before. Holy cow that's depressing.

wow, makes me feel a lot better about what i've got in mine at 31 (its more than 44k), but in doing some calculations yesterday i need to about double what i'm putting into it if i want to have a decent amount when i retire.

Ian F wrote:

OSULemon wrote: I do the calculations on maxing out my 401k and it feels like a huge chunk out of my paycheck. However, since I'm very young and very single/no kids, maybe now is the better time to be contributing as much as possible, and dial it back later when/if expenses get tighter.

What I've tried to do over the years is to increase my 401k contributions at a similar rate as my pay increases (fortunately, we usually get a % or 2 every year). Then what I'm actually taking home doesn't change so much. Eventually you'll get that warm, fuzzy feeling when you look at your pay stub and your 401k deduction is more than your Federal withholding. I would say that in general, the members on this forum are a financially conservative bunch (most of us are cheap!). Plus, I get the impression we're, on average, older than typical for an automotive forum community. Additionally, this is one of those subjects where people in good positions are more likely to respond than those who aren't. I don't feel bad about where I'm at financially, but I know I can improve. Still, I also believe there needs to be a balance between planning for the future and enjoying life now while I'm still somewhat young.

Thanks for the advice. I can max my 401k and be nowhere near broke, but I like my motorcycles and I gotta say, I'm afraid of wasting this point in my life where I have the freedom to live however I like. Probably not a legitimate worry, but I've seen the era of two-seaters and two-wheelers quickly pass for a lot of friends, and may not come back again for a while.

I've been saving like crazy for a car (don't believe in financing), and once I bought it, was going to divert that money into savings, investments, and other hobbies. I've built a 12 month emergency fund. Another $700 or so out of my check per month is going to sting, but...hey. It's a lesson in patience.

Of course, the responsible thing is to save for a down payment on a house someday. Guess I'd see what my situation was once I'd saved that amount.