So, here I am just turned 40 and only just now having a few dollars extra to put toward retirement. Still swimming in a mountain of student loan debt, but the interest is fixed at a very low rate and I'm participating in a repayment assistance program - so it seems best to start putting money toward retirement rather than paying those down early. I am trying to figure out the best way to direct my limited funds. For the past year Montana has been requiring me to contribute 6% of my salary toward a defined benefit fund which hopefully won't be bankrupt when I retire; now I'm trying to decide between a Roth or Traditional IRA, or whether I should really scrimp and try to max contributions to both.
I admit to having very little comprehension regarding investing, etc. at an early age - if I had, I would have taken out a 4k student loan I didn't need in graduate school and put it into a Roth IRA, as the growth I would have realized in the intervening 15 years on that one chunk of money is something I can never get back. I need to make the most of the next 25 years to compensate for the late start.
Just wondering where others are at in this game, how many are also latecomers like me, what are your strategies to play catch up, or do you plan to just see what life brings and live on the mercy of the Universe?
I will say that one huge aspect of my retirement plan is that I plan to spend most of my retirement living in an ex-pat community in Mexico (if political stability increases) or somewhere in Central America (Equador, Costa Rica, etc.). I can't see dealing with a US cost of living, both in terms of basic and medical care costs - and I think I'd prefer a warmer climate at that point, anyway.
Really interested in the experiences/thoughts of others on this topic.
Retirement planning . . . finally . . . and worrying!
Retirement planning . . . finally . . . and worrying!
For me, it is far better to grasp the Universe as it really is than to persist in delusion, however satisfying and reassuring.
~ Carl Sagan
~ Carl Sagan
Re: Retirement planning . . . finally . . . and worrying!
The best I can do is work on my current debt, investing has always been a big mystery to me. The good news is: I like working; I like being productive, which is why I voted- 'Who can afford to retire?' I wouldn't mind if I kept working past retirement age, I seem to be holding up physically really well compared to my peers. If I can work off my debt and pay for my home(not long now), I plan on retiring right where I am.
Re: Retirement planning . . . finally . . . and worrying!
40 isn't too late at all. That's ca 25 years to retirement and $1 saved today will double (on average) about 3 times by then to $8 and will continue to grow or provide income after that.
We didn't begin to start saving for retirement until into our 40s because my wife was in Med school and a resident until then and we were accumulating debts. We still are paying off the Med school loans. But in recent years we have maxed out 2 401ks including 'catchup contributions' and tried to save aggressively beyond that.
Starting when we bought the house I have modeled our financial future on an ongoing basis to plan for retirement and to have an idea about what goals are reasonable for us. I would do the same.
Write down all of your anticipated retirement income streams. Pensions, SSec (they have an online calculator you can use), 401ks &c. Calculate the growth of each over time (I can give you a rough method later on) and then vary the savings rates to see where you want to be. Fidelity has a retirement savings calculator you can use on their website.
I tend to view this kind of thing through the lens of personal freedom. I can increase my personal autonomy either by being more frugal in the future or more frugal today. Since the 'me' of today thinks the 'me' of the future is probably a lazy shiftless bum I have to bias my behavior towards present restraint. Another way of putting it is that the 'me' of the present knows what the personal cost of self-restraint is but he does not know what the costs of restraining my future behavior will be so I err on the side of caution.
401ks have much higher limits than IRAs so I would urge you to use one if you can. You can also use them to write loans to yourself which is a huge savings as well. We borrowed from both 401ks to refinance the house and we're paying ourselves back with 4.25% interest. You can borrow up to 50% or $50,000 from yourself (whichever is lower) for any purpose at all for up to 5 years. The self-loan feature is so important I would sacrifice to max out the 401k in the near future just as a source of cheap money.
A Roth is only worthwhile if you are going to be in a high tax bracket when you retire, or at least significantly higher than you are now. I don't see this being worth it unless you already have a lot of savings. Roth 401ks are just starting to be widely avail. (my employer just starts doing this on Jan 1st.)
Matching funds are free money! Always contribute enough to get the entire match. You can contribute after-tax and then draw it all out at the end of the year and keep the match. It is free money.
Make sure you budget to save some after-tax money as well for an 'emergency fund'.
Let me know if this is useful.
yrs,
rubato
We didn't begin to start saving for retirement until into our 40s because my wife was in Med school and a resident until then and we were accumulating debts. We still are paying off the Med school loans. But in recent years we have maxed out 2 401ks including 'catchup contributions' and tried to save aggressively beyond that.
Starting when we bought the house I have modeled our financial future on an ongoing basis to plan for retirement and to have an idea about what goals are reasonable for us. I would do the same.
Write down all of your anticipated retirement income streams. Pensions, SSec (they have an online calculator you can use), 401ks &c. Calculate the growth of each over time (I can give you a rough method later on) and then vary the savings rates to see where you want to be. Fidelity has a retirement savings calculator you can use on their website.
I tend to view this kind of thing through the lens of personal freedom. I can increase my personal autonomy either by being more frugal in the future or more frugal today. Since the 'me' of today thinks the 'me' of the future is probably a lazy shiftless bum I have to bias my behavior towards present restraint. Another way of putting it is that the 'me' of the present knows what the personal cost of self-restraint is but he does not know what the costs of restraining my future behavior will be so I err on the side of caution.
401ks have much higher limits than IRAs so I would urge you to use one if you can. You can also use them to write loans to yourself which is a huge savings as well. We borrowed from both 401ks to refinance the house and we're paying ourselves back with 4.25% interest. You can borrow up to 50% or $50,000 from yourself (whichever is lower) for any purpose at all for up to 5 years. The self-loan feature is so important I would sacrifice to max out the 401k in the near future just as a source of cheap money.
A Roth is only worthwhile if you are going to be in a high tax bracket when you retire, or at least significantly higher than you are now. I don't see this being worth it unless you already have a lot of savings. Roth 401ks are just starting to be widely avail. (my employer just starts doing this on Jan 1st.)
Matching funds are free money! Always contribute enough to get the entire match. You can contribute after-tax and then draw it all out at the end of the year and keep the match. It is free money.
Make sure you budget to save some after-tax money as well for an 'emergency fund'.
Let me know if this is useful.
yrs,
rubato
Re: Retirement planning . . . finally . . . and worrying!
Two tactics I would recommend are:
When your income goes up put most of the increase into savings. Save it before you get used to spending it in other words.
If you have un-budgeted income (bonuses, gifts, &c) after taxes divide whats left into thirds and use 1 third to pay down debt, 1 third to put into savings, and spend the rest.
yrs,
rubato
When your income goes up put most of the increase into savings. Save it before you get used to spending it in other words.
If you have un-budgeted income (bonuses, gifts, &c) after taxes divide whats left into thirds and use 1 third to pay down debt, 1 third to put into savings, and spend the rest.
yrs,
rubato
Re: Retirement planning . . . finally . . . and worrying!
We're looking forward to semi-retirement in the next 3 years.
The plan is this.
Hatch wishes to go to the UK to study for her degree. (Hen and her ex started a savings plan to pay for Hatch's education when she was born, it's now able to pay for her studies.)
Neither of us have any student loans to pay off.
If Hatch achieves Uni entry, me and Hen will return to the UK and either live in our cottage in Cornwall. or sell that and buy a place in a cheaper area of the country, probably somewhere near Dartmoor.
We will both use our "long service leave", so we will have a full wage without working for the first four months + we are there.
We will look for low stress work to extend this money as far as possible. (Supermarket work, stacking shelves etc.)
After three years or so we will sell up everything in the UK and return to Aus.
We then want to do a year of "Grey Nomading".
We will then settle down somewhere in Aus, which we will choose on our nomading to live, somewhere with a beach, cliffs and countryside at hand, and within 100 k of a decent city.
Hen, after 26 years in the public service, already has enough superannuation, (due to a clause that sees her contributing at a salary that is $60,000 more than she currently earns,) she will actually receive more in retirement than she earns now, for the rest of her days, plus a decent lump sum.
I've been paying in the max into my superannuation and already could go out on 30% of my annual wage for life + a lump sum.
We will also have the profits from the sale of our house, which will be invested.
We're both exercising and keeping as healthy as possible so we can enjoy it.
The plan is this.
Hatch wishes to go to the UK to study for her degree. (Hen and her ex started a savings plan to pay for Hatch's education when she was born, it's now able to pay for her studies.)
Neither of us have any student loans to pay off.
If Hatch achieves Uni entry, me and Hen will return to the UK and either live in our cottage in Cornwall. or sell that and buy a place in a cheaper area of the country, probably somewhere near Dartmoor.
We will both use our "long service leave", so we will have a full wage without working for the first four months + we are there.
We will look for low stress work to extend this money as far as possible. (Supermarket work, stacking shelves etc.)
After three years or so we will sell up everything in the UK and return to Aus.
We then want to do a year of "Grey Nomading".
We will then settle down somewhere in Aus, which we will choose on our nomading to live, somewhere with a beach, cliffs and countryside at hand, and within 100 k of a decent city.
Hen, after 26 years in the public service, already has enough superannuation, (due to a clause that sees her contributing at a salary that is $60,000 more than she currently earns,) she will actually receive more in retirement than she earns now, for the rest of her days, plus a decent lump sum.
I've been paying in the max into my superannuation and already could go out on 30% of my annual wage for life + a lump sum.
We will also have the profits from the sale of our house, which will be invested.
We're both exercising and keeping as healthy as possible so we can enjoy it.
“If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and weren't so lazy.”
Re: Retirement planning . . . finally . . . and worrying!
As rubato pointed out, being 40 yrs old still gives you plenty of time to save.
Your defined benefit plan is a good thing. The type of IRA you open depends on your current tax situation compared to what you expect it to be when you retire.
I would recommend that you talk to a fee-based financial advisor. In other words, someone who doesn't make a commission on any investment the he/she recommends for you. The fee is a small percentage of your portfolio, so they have a real interest in your success in the market since the more you make, the more they will get.
Or you could learn all you can about investing and then do it yourself. It depends on how much time you want to dedicate to your investments versus paying someone else to do the work.
Either way you go, the sooner you start, the better.
Your defined benefit plan is a good thing. The type of IRA you open depends on your current tax situation compared to what you expect it to be when you retire.
I would recommend that you talk to a fee-based financial advisor. In other words, someone who doesn't make a commission on any investment the he/she recommends for you. The fee is a small percentage of your portfolio, so they have a real interest in your success in the market since the more you make, the more they will get.
Or you could learn all you can about investing and then do it yourself. It depends on how much time you want to dedicate to your investments versus paying someone else to do the work.
Either way you go, the sooner you start, the better.
Re: Retirement planning . . . finally . . . and worrying!
My biggest concern is healthcare; I could probably go through a comfortable retirement absent this expense, but even with medicare and a long term care policy, I could easily see being bankrupted (or nearly bankrupted) by even a modest illness.
Re: Retirement planning . . . finally . . . and worrying!
Do your seniors not get free healthcare?
“If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and weren't so lazy.”
Re: Retirement planning . . . finally . . . and worrying!
This is not yet a civilized country in that respect.
yrs,
rubato
yrs,
rubato
Re: Retirement planning . . . finally . . . and worrying!
IMO paying for financial advice in your situation is a total waste of money. Unless you have significant investments involved (>$500.000 ) they are completely useless parasites.
yrs,
rubato
yrs,
rubato
Re: Retirement planning . . . finally . . . and worrying!
I've changed my mind.rubato wrote:IMO paying for financial advice in your situation is a total waste of money.
The best thing to do in your situation, BSG, is to get free financial advice on the internet.
Re: Retirement planning . . . finally . . . and worrying!
For paid financial advice to be a better deal the outcome has to justify the cost. If, for example, you pay $400 (not untypical) the outcome has to be greater than $400 better to make it worth while.
From the descriptions you have almost nothing invested now so they are totally a waste of time.
A monkey can go on the internet and get equal advice for free in 20 minutes.
yrs,
rubato
From the descriptions you have almost nothing invested now so they are totally a waste of time.
A monkey can go on the internet and get equal advice for free in 20 minutes.
yrs,
rubato
Re: Retirement planning . . . finally . . . and worrying!
Most financial advisors offer a free consultation. If you are correct and BSG's situation is as you've described, she would not be wasting any money but she could get worthwhile advice.
Yes, but how many monkeys do you know that have a good retirement plan?rubato wrote: A monkey can go on the internet and get equal advice for free in 20 minutes.
Re: Retirement planning . . . finally . . . and worrying!
I don't know...can't think of any monkeys that don't know where to find a good supply of bananas or that are worried about how to pay for their hip replacements 
Re: Retirement planning . . . finally . . . and worrying!
Joe Guy wrote:Most financial advisors offer a free consultation. If you are correct and BSG's situation is as you've described, she would not be wasting any money but she could get worthwhile advice.
Yes, but how many monkeys do you know that have a good retirement plan?rubato wrote: A monkey can go on the internet and get equal advice for free in 20 minutes.
So you're saying she should not pay for financial advice?
I agree.
If the benefit is less than the difference between an S&P 500 account and whatever the advice produces, it is harmful.
Most 'financial planners" are a total waste of time and money. As a group they are stupid and venial.
yrs,
rubato
Re: Retirement planning . . . finally . . . and worrying!
It appears that you may have had a bad experience with a financial advisor.rubato wrote:If the benefit is less than the difference between an S&P 500 account and whatever the advice produces, it is harmful.
Most 'financial planners" are a total waste of time and money. As a group they are stupid and venial.
If so, you obviously chose one of the bad ones.
Anyway, BSG is looking for ideas & suggestions.
Not arguments.
Re: Retirement planning . . . finally . . . and worrying!
We've got some savings, but I figure I'll be able to afford to retire when I'm about 80....
Besides, I enjoy what I do, and I work for the greatest boss in the world, so why would I want to quit?
Besides, I enjoy what I do, and I work for the greatest boss in the world, so why would I want to quit?
Re: Retirement planning . . . finally . . . and worrying!
Not completely, there are a a lot of copays and holes in the coverage (especially for drugs), and long term care (nursing care either in a facility or at your home) is only covered for a very limited period (30 days). Many people are bankrupted by healthcare costs.Gob wrote:Do your seniors not get free healthcare?
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Re: Retirement planning . . . finally . . . and worrying!
BSG: The important thing is that you get started now saving for retirement. It never hurts to get some professional advice; if you have access to a university you can try contacting profs in the finance program to ask about the basics (some may also have financial planning businesses on the side). You could probably also get good advice from the state agency running the public employees retirement program; they should have all kinds of information and recommendations on how to manage retirement savings in conjunction with your defined benefits plan, and may even do some personal financial counseling, whether formally or informally. Good luck!
GAH!
Re: Retirement planning . . . finally . . . and worrying!
Opens another can of worms that. I enjoy what i do greatly, would I do it if I could afford not to?Lord Jim wrote:
Besides, I enjoy what I do, and I work for the greatest boss in the world, so why would I want to quit?
I don't think I would.
“If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and weren't so lazy.”