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93gsxturbo
93gsxturbo SuperDork
6/18/19 1:35 p.m.

Looking for some retirement advice here guys.

Background - Married, no kids, no real plans for kids.  Me: 37 - Wife - 34

Both work professional jobs with regular salaries.

No debt besides house (6.5 years left at $1500/month), wife's student loans (making payments and leaning on loan forgiveness/nonprofit sector employment), and wife's car (2016 Kia Optima, pays around $330/month).  No credit card debt at all, use CC daily and pay off monthly.  Not looking to buy a new house in the near future, our current place will be our forever home unless something spectacular comes along.  

We have minimal mixed finances, her money is hers, my money is mine, we take turns buying groceries, house stuff or big trips come out of a joint slush fund we have ~$12k in give or take.  Mainly leftover wedding money, tax returns, refund checks for various things, and a few overpayments based on how our money goes into that account.

Right now we are maxing the 401k contributions and whatever her non-profit similar thing is called, she will get a pension as a state employee in another few months - 5 year minimum.  

Need to find something to do with the $30k of cash we have kicking around in various checking and savings accounts, and maybe a way to prevent it from getting so large.  Should we start an IRA?  I dont have one or know much about it.  Right now we have some stuff stuck in CDs but that is only earning around 2.5%.  

We both grew up poor so we both have the mindset of "cash is king".  My parents pay cash for everything even their house.  My family never grew up getting loans, I have only ever had one car loan on my Viper (paid off now) and my house.  

Would really love to have both of us retire in our early 50s, so 15-20 years.  

What I need help with is getting over the "cash is good, debt is bad, investments other than liquidity are scary" mindset.  Short of going to see an actual financial planner, which may be the right thing to do anyway, where can I start getting resources?

(not) WilD (Matt)
(not) WilD (Matt) Dork
6/18/19 1:40 p.m.

Depending on your income, your IRA contributions may be limitted since you have a retirment account through work.  It sounds like what you are looking for is a taxable brokerage account so you can earn a better return than cash but still use it for before legal retirement age.  Look at the major players, Vanguard, TDAmeritrade, etc.  Index fund ETFs are the easy button.

spitfirebill
spitfirebill MegaDork
6/18/19 2:04 p.m.

I would put some money into a Roth IRA.  

einy
einy HalfDork
6/18/19 2:12 p.m.

I'd go see a real financial planner who is a fiduciary - legally bound to put your interests first.  In your specific case, if you are looking for the best advice on a 'one time' basis from a qualified person, I'd consider hiring someone local to you that you can see face to face from the Garrett Planning Network.  No affiliation from my side, but this has been a good source for a couple of people close to me who just needed a one-time solid analysis of where they are now, what their future plans are, and a roadmap for the next couple of years.  They don't sell a product (i.e. an investment) itself, just advice, so they have no compelling reason that I know of to steer you towards a plan that does not benefit you first and foremost.  Going rate might be in the $150/hour range, but for what you're after it sounds to me like a reasonable price to pay.

I think they can do a solid job of weighing pros/cons of what you are both doing now.  If your wife is working for a non-profit and participating in their qualified plan, it is probably a 403b (vs. the more common 401k that exists in the for-profit world).  Those usually have significant administrative costs associated with this, so focusing first on a Roth IRA might be a better choice, especially for any contribution amount past a company match (if such a thing exists for her in that plan).  Just one example of the type of analysis of what these guys do for a living.

Again, not affilitated in any way on my side.

Hope this helps.

z31maniac
z31maniac MegaDork
6/18/19 2:13 p.m.
93gsxturbo said:

see an actual financial planner

This is your best bet. 

But an actual financial planner, not some kid @ franchise place that earned their Series 7 and is just looking to sell and move your money around for commissions. 

eastsideTim
eastsideTim UberDork
6/18/19 2:34 p.m.

I’ll agree with others, if you are in the income range to be able to contribute, a Roth IRA is a good place to start.  If you are under the joint income limit (189K, I think), you can each contribute $6K a year in post tax money.  If you make more than that, you may still be eligible to contribute a smaller amount.

I have one through TDAmeritrade, and have no problem with them, but don’t know enough to recommend them over anyone else, either.  I try to stick with vanguard index funds and dividend stocks, but don’t really have any advice for specific investments.

mtn
mtn MegaDork
6/18/19 2:45 p.m.
z31maniac said:
93gsxturbo said:

see an actual financial planner

This is your best bet. 

But an actual financial planner, not some kid @ franchise place that earned their Series 7 and is just looking to sell and move your money around for commissions. 

I agree here. I also agree with einy's suggestion of a fiduciary. 

 

Really though, here is my more or less universal advice, in this order: 

  1. Fund your 401k/403b/etc. up to the company match. (If you have a Roth option, look into that, but that is a case-by-case situation)
  2. Pay off any debt that is over 7% interest
  3. Max out your HSA (this will depend on individual situations, maybe you don't max it out, maybe you do, but it is tax advantaged savings that you probably will end up spending)
  4. Max out the rest of your retirement funds (meaning the rest of the 401k/403b, and starting/maxing an IRA), starting with the lowest cost options (all should probably be in a total stock market index or else an SP500 index, or similar, with some bond funds thrown in as you age)
  5. Put the rest of it in a taxable account, probably in an ETF or mutual fund with dividends reinvested. Keep some in cash for a rainy day. I recommend about 3 months of living expenses, plus another $2k-$10k for an emergency, like a really good deal on a Miata
  6. Hookers and blow

 

This is not written in stone. They're good guidelines. But I don't even follow them exactly, hell, I've never even tried hookers or blow! Mine is thrown wayyy out of whack by an ESPP that has a company match that I'd be foolish to give up. Other things, like stock options, can play funny things with this as well. Debt is not bad. If the market is returning 7% (after inflation, which is what it has been over the past 80 years or so), why in the world would I pay off my mortgage at less than 4% when I can put it in the market? 

 

As far as general savings and retirement, figure out what you'll actually need in retirement, what you spend now, how that will change, etc. The big unknown is healthcare, but everything else should be pretty easy to predict. People think you need to work to a certain age. That is stupid. You need to work to a certain number. Read this thread for more info: https://grassrootsmotorsports.com/forum/off-topic-discussion/investments/151228/page1/

NOHOME
NOHOME MegaDork
6/18/19 2:46 p.m.

In reply to z31maniac :

I myself would have zero idea of where to start looking for a qualified one of these. All I have ever met under the heading of "Financial Planner" is the mutual fund vendors ( Insurance Co or Bank affiliated)  who's mandate from their employer is to make your money their money.

mazdeuce - Seth
mazdeuce - Seth Mod Squad
6/18/19 2:53 p.m.

You need to develop a plan. How much do you think you need to retire? Why that amount? Starting with what you have now, how much do you need to be contributing to get there? What money will you need before "normal" retirement age? How does social security figure into this? Learn about IRAs, both Roth and Traditional and when you can withdraw and how. 

Once you have a grasp on that sort of thing, then you can think about investment mixes and what not. 

To start your off, the Trinity study is a fairly famous study that concluded that you can safely pull 4% (increasing for inflation) each year and it should last for a 30 year retirement. If you spend $5k a month right now, or $60k a year, you would need $1.5 million. The good news is that you don't need to save $100k a year for the next 15 years (because of growth, Social Security, other investments, etc.) but the bad news is that you probably need quite a bit more than maxing a normal 401K. 

WonkoTheSane
WonkoTheSane GRM+ Memberand SuperDork
6/18/19 2:58 p.m.
NOHOME said:

In reply to z31maniac :

I myself would have zero idea of where to start looking for a qualified one of these. All I have ever met under the heading of "Financial Planner" is the mutual fund vendors ( Insurance Co or Bank affiliated)  who's mandate from their employer is to make your money their money.

I don't know about your place of employment, but mine has an excellent informal referall network via the email group..   Ask around to the successful people and see what they recommend?  Einy has the operative word to look for, "fiduciary." 

Then hit up the https://www.reddit.com/r/financialindependence/ threads and see what you see?

z31maniac
z31maniac MegaDork
6/18/19 3:06 p.m.
NOHOME said:

In reply to z31maniac :

I myself would have zero idea of where to start looking for a qualified one of these. All I have ever met under the heading of "Financial Planner" is the mutual fund vendors ( Insurance Co or Bank affiliated)  who's mandate from their employer is to make your money their money.

From einy's post:

"In your specific case, if you are looking for the best advice on a 'one time' basis from a qualified person, I'd consider hiring someone local to you that you can see face to face from the Garrett Planning Network."

porschenut
porschenut Reader
6/18/19 3:08 p.m.

Don't knock 2.5% CDs.  Not the best return but guaranteed and a great place to keep money until you know what will return better and have a risk factor you are comfortable with.  From my experience I was much happier with this rate and researching for a year.

93gsxturbo
93gsxturbo SuperDork
6/18/19 3:34 p.m.

Thanks for the help everyone.  We are gonna go pop another 10k into another CD here this weekend the way things are looking just since 2.5% isnt a bad little ROI and I do like seeing the monthly dividend statement, but I do like the suggestion of meeting an actual financial planner.   I gotta sit down with the wife unit and go through things with an actual excel sheet to lay stuff out.  Fortunately, she is the saver and I am the spender.  

My grandparents and parents both retired early just by saving.  I am not nearly as good at saving but I am not trying to raise 5 kids on a single teacher income either.  

alfadriver
alfadriver MegaDork
6/18/19 3:57 p.m.

One easy thing I wish I really knew a long time ago- no fee index funds.  Frontline did a report about these at least 6 years ago, but looking at the data, when you factor in all of the fees, index funds out perform every single other fund over the very long term.   So if you want a set and forget fund, index funds.

We have a financial advisor, and he does a very good job, but early ones tried to sell us "stuff" which kind of sucks.   When you go to the meeting, and they try to sell you something without really seeing your situation, walk away.  

And while it's possible to get one as part of your work benefits- even those can be problems.  The one we have (which I've never used) does not do a good job.  

Good luck!

BTW, "early" is relative.  If you earn your full retirement benefits by 45, and don't have to work- that's really not early, its on time.  We planned fully on 30 and out, and it seems early based on me being 55 instead of 65.  But I 100000% encourage doing it as early as possible.  I've seen far too many death notices for people who didn't even make it.  Or passed within a year of retirement.  Life isn't about working yourself to death- unless that's just what you like to do 100% of the time.

Slippery
Slippery GRM+ Memberand SuperDork
6/18/19 5:05 p.m.
93gsxturbo said:

Thanks for the help everyone.  We are gonna go pop another 10k into another CD here this weekend the way things are looking just since 2.5% isnt a bad little ROI and I do like seeing the monthly dividend statement, but I do like the suggestion of meeting an actual financial planner.   

If 2.5% is all you want open a Wealthfront cash account. That’s how much they pay, and you are not tied in any way and can take it out as soon as you want. 

As a matter of fact, I would say open an investment account with them and put some money and play with it. It is extremely user friendly and a good way to learn how to invest. Even if you put $100 and you see how it works for you. 

Slippery
Slippery GRM+ Memberand SuperDork
6/18/19 5:06 p.m.

Its actually 2.51% interest for the cash account :)

ShawnG
ShawnG PowerDork
6/18/19 5:13 p.m.

Eat a tiny bit of cat food every day.

Then, when retirement comes, it will taste perfectly normal.

stuart in mn
stuart in mn MegaDork
6/18/19 5:22 p.m.
NOHOME said:

In reply to z31maniac :

I myself would have zero idea of where to start looking for a qualified one of these. All I have ever met under the heading of "Financial Planner" is the mutual fund vendors ( Insurance Co or Bank affiliated)  who's mandate from their employer is to make your money their money.

My retirement funds are managed by Thrivent and I've been very satisfied with their work, and the return on my money.  Like any other business it will depend on the skill and knowledge of the individual person, but I think Thrivent is pretty selective about who they hire.

STM317
STM317 UltraDork
6/18/19 5:51 p.m.

Mtn's list is on point, as are the suggestions to start from the end goal and work your way backwards. Figure out how much money you'll want/need per year and then divide that by .04 to have a ballpark figure (.03 if you want to be extra conservative for a longer than average retirement). Once you know your number, it all comes down to saving as much as you can in as many advantaged ways as possible. Max the 401k ($19k/yr currently), Max an HSA if available (7000/yr for multi person), max out an IRA for both you and your wife (6000 in each account). Those three vehicles alone would mean investing 38k per year, and each has tax advantages that will help you save more efficiently. If you have no savings at all right now, Invested that 38k each year, and saw market average returns of 7% it would be $1.5 million in 20 years. That doesn't include what you've already got saved, her 403b, any company match, social security, or pensions. And it assumes the contribution limits never increase (either on their own every few years, or when you hit the age to do "catch up" contributions.) Considering all of the extra money I just mentioned, if you could max those retirement accounts out, you'd probably hit your number in 15 years or so unless you plan on buying a racing team or something crazy in retirement that will need boatloads of money.

If there's still money left over after maxing all of the retirement accounts, do what you want with it. Pay down mortgage principle, eliminate all debt, dump it into CDs, open a taxable brokerage account, buy car parts, travel, etc.

One thing I want to bring up is her student loan forgiveness. Im not an expert on it, but from what I've heard, that's a pretty difficult process littered with hang ups. The odds of actually seeing any forgiveness are reportedly pretty slim. Make sure you know that process inside and out and plan accordingly.

M2Pilot
M2Pilot Dork
6/18/19 9:57 p.m.

There's a lot of discussion about early retirement on the Mr. Money Moustache forum.  Although at 37 you may not be able to retire early, some of the info would probably still be useful.

STM317
STM317 UltraDork
6/19/19 7:15 a.m.
Slippery said:

If 2.5% is all you want open a Wealthfront cash account. That’s how much they pay, and you are not tied in any way and can take it out as soon as you want.

Thanks for this! Didn't realize Wealthfront was doing savings accounts now, and they offer a ton of advantages over regular savings accounts and even most online savings accounts. Seems like an ideal spot to park an emergency fund.

Johnboyjjb
Johnboyjjb HalfDork
6/19/19 7:35 a.m.

In reply to M2Pilot :

The Reddit FIRE community is a bit of an echo chamber but are generally a polite and informed group.

www.reddit.com/r/financialindependence

 

pheller
pheller UltimaDork
6/19/19 11:17 a.m.

I read somewhere that based on average housing costs, healthcare costs, inflation, etc, it's virtually impossible for someone to retire early making less than $45k a year unless via a pension with covered health insurance. This analysis I think said that the worker would have started in 2000 at 25 years old, with a target early retirement of 55 (30 year mortgage). 

The whole analysis pointed out that it was all based on average house hold spending on housing, kids, healthcare, food, transportation, etc.  The point being that if you wanted to retire early, you'd need to live below average (or make good money in low cost of living area), or make more than average. 

I wish someone made a calculator where you could enter your salary, your partners salary, your current debt, your future expected debt, number of kids, etc and it would tell you what you should be saving per year to retire by a certain age. Once you get low enough in years it would say something like "sorry, you can't retire at this age at your current savings/earning rate." 

I'm curious about this for comparison sake of my against my brother-in-law. He makes six-figures in Pittsburgh, paid off his his first house, made money on the sale...but has 6 kids and a wife at home. I wonder when he'll be able to retire vs me, who's combined household income is similar, but has a single kid, and a much more expensive home. 

STM317
STM317 UltraDork
6/19/19 11:42 a.m.
pheller said:

I read somewhere that based on average housing costs, healthcare costs, inflation, etc, it's virtually impossible for someone to retire early making less than $45k a year unless via a pension with covered health insurance. This analysis I think said that the worker would have started in 2000 at 25 years old, with a target early retirement of 55 (30 year mortgage). 

The whole analysis pointed out that it was all based on average house hold spending on housing, kids, healthcare, food, transportation, etc.  The point being that if you wanted to retire early, you'd need to live below average (or make good money in low cost of living area), or make more than average.

You don't have to live below average, you just have to spend below average (or in other words save above average). The average person spends money on stupid crap all the time. Obviously higher incomes make things easier, but saving for retirement has to be a balance. On one side you've got expenses, and the other you've got income streams from savings/rental properties/etc. When they're balanced out, you can retire. The lower your total expenses are, the lower your total savings have to be to retire. The early retirement math doesn't really change, it just scales up/down depending on the numbers for a person's expenses and income. And generally, it's much easier for the average person to control/limit their expenses than control/raise their income.

This applies to everyone, regardless of income or expenses:

Image result for retirement savings rate

z31maniac
z31maniac MegaDork
6/19/19 11:45 a.m.

^I don't expect to be able to retire early, nor do I really want to. I don't want to spend the next 20 years not going out to eat, taking trips/vacations, driving fun cars, etc, just to SAVE SAVE SAVE! And I make a decent chunk above the national household average, before you include my girlfriends income. And I live in a very cheap state. 

What if I do all this and then get hit by a truck? Have a stroke? Heart attack? Diagnosed with cancer?

Current goal is to get the rest of the non-house debt paid off in the next 2 years, crank the 401k contribution to between 15-20% (add another 6% match from my employer, plus the occasional chunk of stock and such, and the ability to buy discounted stock twice a year) of my salary and have fun with the rest.

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