Retirement planning . . . finally . . . and worrying!

[kristina]

Unless I inherit some money (and I can't see where it would come from!), I'll most likely be working until I keel over. I've got 13 years until full Social Security; 16 if I wait until I'm 70 for the extra $$

For 13 of the years I worked in the corporate and non-profit worlds, I did make contributions to 401(k) or 403(b) plans; the total of the regular IRA and the rollover IRA is sitting at around $30K right now and there is just no money to make any contributions. I pretty much pretend that they're not there, and after a bit of a downturn, they seem to be earning some money again.

My paychecks just about cover the rent and some groceries. My mother-in-law volunteers at her church's food pantry, and helps us out with the stuff that's at or past its "sell-by" date. She chucks it in her freezer when she gets home, and passes it along to us. I've gotten pretty creative with canned chicken, frozen ground chicken and turkey (not too bad in chili), canned veggies and other foods I would not usually buy. Sometimes they get overstocks of fresh veg as well--right now I'm working my way though 15 pounds of garnet yams and 10 pounds of carrots!

I'm better off than many, however, as my late hubby took early retirement, and his pension kicks in enough to cover the car and renter's insurance, utilities and other necessaries. Where it REALLY helps is that it gives me medical and dental insurance, and at my age and with my history, nobody would ever write me a policy I could afford.

As one friend of mine used to describe his situation, we're broke but not poor. I can't remember the last time we went out for a meal, or bought new clothes, or any one of a number of things we used to do without thinking about cost. But the rent gets paid every month, the bills are (mostly) paid on time, and we've got enough to eat and two really good thrift shops nearby!

[Gob]

Jesus, that's tough Kristina.

[oldr_n_wsr]

I've been putting the max in 401K for many years now and also putting about $1000 every 2 weeks in the bank. Also took the $100K pension settlement from my previous job rather than let it ride and get a payout each month when(if?) I do retire. Pay yourself first, be it into an IRA (traditional rather than ROTH as your tax liability will most likely be less when you retire than it is now) or just a regular savings account. When you get a bunch in there, take some (half?) out and put that into an IRA.

We always put money in the bank (even when we had next to nothing) then into an account for the kids college, then everything else got paid. Luckily, throughout my life (except for the first two years of marriage) I have made enough money to be able to pay the bills AND save. I know many who can't and I know many who could but don't. They fall into what I call the "need this now" category. They must have the new SUV every 3 years (leased so they own nothing), and must have the 2500 sqft McMansion (over paid and over mortgaged) and must have the manicured lawn (cared for by illegal aliens) and the kids must have a new car on their 18th birthday........

We live frugally and I wouldn't have it any other way.

[Gob]

In the UK the old age pension is now £84.25 per week for a single person and £134.75 for a couple. There are other allowances you can claim too;

[kristina]

I suppose so Gob, but it could be a lot worse!

My brother-in-law travels more than most humans for his job, so I get at least one ticket a year to visit my family from his frequent flyer miles (and since my family is 3,000 miles away, a ticket wouldn't be cheap).

My car is only four and a half years old, and it's paid for. (woo-hoo!)

We rent a funky, but reasonably large house just a few blocks from the center of a really nice smallish town; there's enough space to store the SO's paintings (and there are hundreds) and enough wall space to hang a few.

As for the ever-present worries like new tires for the SO's truck, the possibility of the landlord selling the house and us having to move (not likely but ya never know), or the SO getting sick (my insurance doesn't cover him), I have a way of coping. I'll burn those bridges when I get to them.

[Guinevere]

Besides, I enjoy what I do, and I work for the greatest boss in the world, so why would I want to quit?

Opens another can of worms that. I enjoy what i do greatly, would I do it if I could afford not to?

I don't think I would.

I love my job. I love my work. I love the people I work with. I love that my firm gives me the space and freedom to take on all of the other volunteer work that I do. But if I didn't have to work, I wouldn't be an employee. I would still probably do a *lot* of what I do now -- but without the client responsibilities.

[Guinevere]

I've been putting the max in 401K for many years now and also putting about $1000 every 2 weeks in the bank. Also took the $100K pension settlement from my previous job rather than let it ride and get a payout each month when(if?) I do retire. Pay yourself first, be it into an IRA (traditional rather than ROTH as your tax liability will most likely be less when you retire than it is now) or just a regular savings account. When you get a bunch in there, take some (half?) out and put that into an IRA.

We always put money in the bank (even when we had next to nothing) then into an account for the kids college, then everything else got paid. Luckily, throughout my life (except for the first two years of marriage) I have made enough money to be able to pay the bills AND save. I know many who can't and I know many who could but don't. They fall into what I call the "need this now" category. They must have the new SUV every 3 years (leased so they own nothing), and must have the 2500 sqft McMansion (over paid and over mortgaged) and must have the manicured lawn (cared for by illegal aliens) and the kids must have a new car on their 18th birthday........

We live frugally and I wouldn't have it any other way.

I'm not the most frugal person in the world, but my first boss, and several since have said "pay yourself first" and it is the best advice possible. Even if its a little amount, it does add up. Once you get used to that ltitle amount, add a few more dollars. Keep on wratcheting it up if you don't feel the pain. It gets easier and easier over time.

And there are some good little tricks to help. Like many, I pull my change and collect it. When the bag o' coin gets too heavy, I turn in into gifts cards at Coinstar -- no transaction fee, and voila -- I've funded a portion of my Christmas shopping or other gifts. I also collect $5 bills, separate them from my other cash, and put them in my savings account every time I have collected at least 10. I read an article in the Globe about a woman who saved 12K in a couple of years using that method. You have to be in a "cash" economy, and not use debit or credit cards for it too work -- I use a mix of debit and cash (I do not like having too many bills on me) -- but even so I saved enough in 14 months to make a small (but noticeable) dent in the downpayment on my house.

Finally, a good site I learned about recently -- mint.com -- which lets you see all your assets and debts in one place, at one time, and then presumably manage it better.

[Gob]

Damn, that mint site is good. Shame it's US/Canada only.

[oldr_n_wsr]

We do the change thing too. We have this large bottle (plastic) that is almost full and I can barely pick it up it's so heavy. Our bank has a free change machine we'll take it to. We also put $50 every two weeks into a Christmas Club account so Christmas is usually covered so no bills after the holidays. We do use credit cards but never have we paid interest on them, we always pay the bill in full. The trick is to not buy what you can't afford.

[BoSoxGal]

I've decided to go with the Traditional IRA, as I do expect to be in a lower tax bracket upon retirement.

I just got a modest raise in taking this new job, and after six months 'probation' will get another. I'm budgeting to live on the old salary and put all of that into private retirement. I've just lowered my living expenses by cohabitating with my partner, but after paying off my recently accumulated medical debt, I'm going to put that modest savings into a travel fund, so I can do and see some things now - because I might not live to retire.

I would prefer not to pay a financial advisor, but just to figure out how to choose a decent IRA that somebody else can invest on my behalf. It's that stuff I know nothing about, so I'm looking to educate myself.

As to student loans, rubato - I do have a massive debt still, but I participate in a repayment assistance program through my law school and I would prefer to max the amount they pay on my behalf. The interest rates are locked in at a very low rate by the consolidation I did in 2005 (3%), so I think I'm still better off investing for retirement before paying those off early. Some is being outright forgiven for my public service, and some would be forgiven upon my death should that occur - so I guess I'm being a bit selfish by wanting to spend a little salary on the travel before putting it all toward the loans. There is a pretty significant allowance for retirement savings, as they encourage us not putting that off to our 50s or beyond. At the present repayment schedule, my student loans won't be paid off until I'm 55. I will pay extra on my private loans, which have a higher interest rate.

My car is 11 years old, has 125k miles and is paid for - and in very decent shape. I plan to put another 100k miles on it before I replace it - I don't need the 'newest, shiniest' in that regard, as 'status symbol' just doesn't enter into my calculus.

I appreciate the advice and information. I also don't see myself retiring fully, as old lawyers never die - they just lose their appeal.

[loCAtek]

Jesus, that's tough Kristina.

He would know about mine, but doesn't want to hear it.

[rubato]

"...
I would prefer not to pay a financial advisor, but just to figure out how to choose a decent IRA that somebody else can invest on my behalf. It's that stuff I know nothing about, so I'm looking to educate myself. ... "
...

It sounds like you're doing all the right things. The biggest advice in selecting funds is that index funds usually make the most sense. The one number to look at first is the fees/expense ratio. The reason for this is that fees/expenses are a certain loss to you no matter what else happens; if the market goes up the fees are subtracted if it goes down they are STILL subtracted. Never pay more than 1% for anything index funds should be closer to 0.25% (since they are automatically balanced every few months by a computer program). Index funds spread risk and I would suggest spreading it further between an S&P 500, EAFE, high-yielding bond funds (PIMCO has several that return >8%/yr lifetime), emerging markets, europe. With a 25-year horizon I would also look at small-cap funds because they will drive growth.



Yrs,
rubato

[Gob]

I would prefer not to pay a financial advisor, but just to figure out how to choose a decent IRA that somebody else can invest on my behalf. It's that stuff I know nothing about, so I'm looking to educate myself.

Probably better off and safer sticking it a long term bank account.

[oldr_n_wsr]

Long term accounts (0-5yrs) are paying less than 2% right now (I am guessing that these are similar to our Certificate of Deposit, aka CD's).

If her interist on her loan is greater than what that money can earn (or be used for) then it pays to pay off some of the loan. Of course one cannot put a value on "personal pleasure" so sometimes you just go with teh flow and keep some of your money to "go wild" (however you care). But I have felt if you get less back on your investment than you pay towards a bill you should seriously consider paying the bill be it tuition, mortgage, whatever.

Now I am going against this rule myself right now with my personal savings account. I have enough in there to pay off my mortgage. My mortgage carries about a 5% interest rate yet the savings account yeilds me about 1% interest. That's a 4% loss. But with a daughter in college and the rest of my assets tied up, I need to keep this cash available.

[Gob]

You can get 6.4% here

[rubato]

You can get 6.4% here

You first.

yrs,
rubato

[Joe Guy]

I would prefer not to pay a financial advisor, but just to figure out how to choose a decent IRA that somebody else can invest on my behalf. It's that stuff I know nothing about, so I'm looking to educate myself.

The key is that you don't want anyone else to invest on your behalf. Because then you will be paying a commission to someone who has his/her own interests above yours. You can invest your money yourself.

You can start out opening an IRA with cash asap and then move it into something else -eg: no-load mutual funds - later, after you've gotten confident in your decision making ability.

Also, in my opinion you should stay away from anyone who suggests you buy an annuity. People will make them sound very desirable, but you will be contributing to their commission and you can invest in other things with less expenses and then have the ability to move your money around when you want or need to do so.

That's my free advice and worth every cent you've paid.

[rubato]

"...
Also, in my opinion you should stay away from anyone who suggests you buy an annuity. People will make them sound very desirable, but you will be contributing to their commission and you can invest in other things with less expenses and then have the ability to move your money around when you want or need to do so.

That's my free advice and worth every cent you've paid.

I had always thought poorly of annuities but after the BushCo meltdown in '08 they do look a lot more attractive. At least as a less-variable piece of the puzzle. I would not buy one from a sales person nor would I invest in one now if I were BSG (25 years to go) but closer to the day of, they provide a more certain income stream than equities. We're 9-10 years out and I'm not looking just yet either. But that is 9-10 years from "can retire" not "want to" if I still get to do creative work and its still fun, I'd keep at it.


yrs,
rubato

[rubato]

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.

It appears that you may have had a bad experience with a financial advisor.

If so, you obviously chose one of the bad ones.

Anyway, BSG is looking for ideas & suggestions.

Not arguments.

Our only professional experience has been positive but that is with our tax CPA(s) who don't accept clients who cannot benefit from their services. I have met a lot of 'certified financial planners' since they had a convention at UC Santa Cruz back in the '80s and they were as I described. Any 'financial planner' who takes money from someone with less than $250,000 to invest is stealing.

A smart educated woman like BSG can buy a couple of books and do just as well. It isn't rocket science.

yrs,
rubato

[Sean]

Hmmm...

So from what I've read Americans who don't want to give all of their money to the IRA invest in CDs.

Fair enough I suppose. My advice would be to steer clear of Justin Bieber CDS... I can't see them retaining their value somehow...