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I know we have a wealth of knowledge on this board, so wanted to create this thread in the hopes that it might help myself and anyone else having questions about retirement finances.
I just turned 30 this year, and like a lot of 20 somethings, I've saved a total of $0 for my retirement at this point. Never been lucky enough to work at a company with a 401k, and never took the initiative to start an IRA myself. Going to change that before this year ends.
I'm nearly positive I should be opening up a Roth IRA as opposed to a traditional IRA. I've been doing some research and it seems the most important part about choosing the IRA/Mutual fund is their fees. Everything I read says to make sure I pick a fund with less than 0.5% in fees. Anything more will eat up a large chunk of your retirement.
I've always heard positive things about Vanguard from a few professors in college, and it seems Vanguard is pretty highly respected and generally has very high performing funds with low fees. Their funds typically average 0.18% in fees, so very low.
I don't have the knowledge or time to try and manage a fund myself, and Vanguard has managed funds that base your level of risk by your projected retirement date. As you get closer to the date, the fund automatically starts to shift your percentage held from stocks into more secure bonds. Think the one I'm looking at (target of 2050 retirement), starts out with close to 90% in stocks since it's so long term, and gradually lowers that as the 2050 date gets closer. Everything I look at on it seems to be pretty much what I'm needing.
I know the annual max contribution is $5500, but I won't be able to put that in before the year ends. Hoping to get maybe $2-3k in, maybe $4k if I can swing it. Then going to set up an automatic deduction to my bank account every month. Thinking somewhere around $200 a month. And then putting my tax refund straight into it, and any other time I can have a little extra cash to put in it. That way I can guarantee at least $3k going in a year (with tax refund), and will hopefully be able to max out the contribution the majority of years if my finances allow me.
So basically, I'm trying to see if I'm on the right track, or if I'm over looking something else I should be doing instead.
At this point, I know the most important thing is just getting something started. The more years you have to compound the savings, the better. It does start to grow quickly in the later years.
So any help/insight is greatly appreciated, and hopefully others can ask questions in this thread as well.
I have a Roth IRA with Woodmen of the World and have been happy with them. I didn't sync up with anything risky, though... just wanted to keep it very simple to save for the future. I've been with them about five years and no complaints so far.
Rothric, and others, you are on the right track, have plenty of time, and never stop "studying" the subject. Recommend taking, or at least reading Dave Ramsey's, tutorials, lessons, and books. I don't agree with everything he says and keep and use a credit card, but he is right on retirement planning. I retired at 56 from federal civil service with a solid annuity. I paid for my retirement and it is not an entitlement. I paid everything off in advance, including my sons college. If you plan, save and study, you should do well. I am enjoying a debt free retirement and get to music festivals, concerts and beach on a regular basis. Life is good. BS & MS Enginerring helps a lot! Paid my way to school, worked, no handouts or free rides and proud of it!
Rothric, good on ya for thinking about it. Roth v. Traditional will be a different choice for everyone, depending on many factors. It sounds like you made your choice there. The fees are the important thing; many people throw out the phrase 'average annual return on 8%', which is bullshit. Assume more like 5%, especially since you are looking at a more risky time fund heavy on growth stocks. If a fund takes 1%, that is 20% of that 5% return you made, and that 20% they took won't be able to grow with compound interest.
Aside from retirement, how are you doing on your 'rainy day' fund? I'm talking cashy money in a bank account, buried in the backyard, whatever. The last thing you want to do is pour all your savings into retirement vehicles and have no emergency cash in case of layoff or other financial emergency. If all you have to tap in that situation is 401k/IRAs, you will pay the taxes you didn't when you put the $ in, you will also pay a 10% penalty.
Also, does your health care plan offer a high deductible hsa option?
Target date funds are good, they do the managing for you based on your age. Most fund families like Vanguard have a few good ones, couple duds and a bunch of average. Find one with fees that are reasonable by comparison. Be wary of anyone pushing way to hard to get you into one specific fund/investment. They probably have a $$ incentive to get people there. Ideally you want to deal with someone who can place you in several different fund families so they can be more objective. Roth if you can imo as you never know what will happen with the tax rate in the future.
Rothric, good on ya for thinking about it. Roth v. Traditional will be a different choice for everyone, depending on many factors. It sounds like you made your choice there. The fees are the important thing; many people throw out the phrase 'average annual return on 8%', which is bullshit. Assume more like 5%, especially since you are looking at a more risky time fund heavy on growth stocks. If a fund takes 1%, that is 20% of that 5% return you made, and that 20% they took won't be able to grow with compound interest.
Aside from retirement, how are you doing on your 'rainy day' fund? I'm talking cashy money in a bank account, buried in the backyard, whatever. The last thing you want to do is pour all your savings into retirement vehicles and have no emergency cash in case of layoff or other financial emergency. If all you have to tap in that situation is 401k/IRAs, you will pay the taxes you didn't when you put the $ in, you will also pay a 10% penalty.
Also, does your health care plan offer a high deductible hsa option?
That's one of the things I liked about the Vanguard funds, it seems most are in the 0.18% range for expenses, and still have good returns.
Regarding just general savings, definitely not as high as it should be. That will be my main focus once I get some cash put into the IRA this year. Just need to get it done before the year ends so it's at least started. If I don't get it started now, no telling when I will. I'll definitely be keeping that in mind and not dumping too much into the retirement fund before securing a nice emergency savings.
As far as I know, no, I am not offered an HSA. We're given two options through my company, and that's it. But hoping I can get into a real company soon, and out of the one where I'm currently employed. I know Schlumberger is opening up a new water division soon, so really hoping I can slide in there and get out of the oil field. Actual benefits, matching retirement funds, paid days off, sounds like heaven!
Good on you for starting this. I agree with JFG that you should make a rainy day fund a priority if you have not yet done so (three to six month's salary is usually recommended). Sucks that your company doesn't offer a 401K (much less one with a company match), but you're wise to get on this as soon as possible. Depending on how disciplined you are, you might want to consider having the portion you want to contribute to your Roth deposited automatically from your paycheck. Your Roth should have its own Account and Routing numbers, and with most companies you can split a direct deposit into multiple accounts. So you have whatever percentage or dollar amount you want to contribute deducted automatically from your paycheck, and you never see the money and therefore never worry about it. Alternately you can have the amount auto-withdrawn from your bank account, but this makes it seem more like a bill to pay and can make you feel like you have more money to spend than you do, plus if you have to take off work or whatever that dollar amount will still be withdrawn, which could impact your day-to-day finances (though obviously the automatic withdrawal could be canceled in that situation - it's just another step you'd have to take).
And if anyone has any tips on how to convince an incredibly stubborn 47 y/o mother on limited income with no savings that she NEEDS NEEDS NEEDS to start planning for retirement, I'm all ears. I worry about her.
Last Edit: Nov 14, 2015 12:17:39 GMT -5 by Jaz - Back to Top
5.5/four tet, daphni b2b floating points, avalon emerson 5.12/neil young 5.19/mannequin pussy 5.21/serpentwithfeet 5.25/hozier 6.12-16/bonnaroo 6.28/goose 6.29/goose 9.17/the national + the war on drugs 9.23/sigur ros 9.27-29/making time 10.17/air
Post by potentpotables on Nov 14, 2015 12:24:28 GMT -5
Great idea for a thread, Rothric. I'm fortunate in that I have a pension (and I vested in it January 1, 2015) but I don't have a 401k and have been meaning to set one up for awhile (I cashed in my small 401k about a year ago to buy my house). My dad works for MetLife so I'm going to use them, but that's mostly because I avoid the fees altogether with my pops.
I've been thinking of starting a thread where people share what they do for a living and that way when someone has a problem, you know who to turn to for advice. Is that something I should do?
Good on you for starting this. I agree with JFG that you should make a rainy day fund a priority if you have not yet done so (three to six month's salary is usually recommended). Sucks that your company doesn't offer a 401K (much less one with a company match), but you're wise to get on this as soon as possible. Depending on how disciplined you are, you might want to consider having the portion you want to contribute to your Roth deposited automatically from your paycheck. Your Roth should have its own Account and Routing numbers, and with most companies you can split a direct deposit into multiple accounts. So you have whatever percentage or dollar amount you want to contribute deducted automatically from your paycheck, and you never see the money and therefore never worry about it. Alternately you can have the amount auto-withdrawn from your bank account, but this makes it seem more like a bill to pay and can make you feel like you have more money to spend than you do, plus if you have to take off work or whatever that dollar amount will still be withdrawn, which could impact your day-to-day finances (though obviously the automatic withdrawal could be canceled in that situation - it's just another step you'd have to take).
And if anyone has any tips on how to convince an incredibly stubborn 47 y/o mother on limited income with no savings that she NEEDS NEEDS NEEDS to start planning for retirement, I'm all ears. I worry about her.
Good call on the direct deposit to the IRA, will definitely set that up. Was planning on just having it deducted from my bank account once a month, but if I don't even see it, it'll be better. I'm not a well disciplined saver in the least. I'll just have to figure out the best way to do that, since my work schedule is so erratic. I normally work about 3 weeks straight (12 hour shifts/7 days a week), then have about 2 weeks off. We're set up on a 2 week pay period, so there are sometimes I don't work a single day in that pay period. So in situations like that, I wouldn't get the amount deposited in my IRA. But I can just make a separate withdrawal in that case.
Hopefully someone here has some suggestions to let it sink in with your Mom.
And if anyone has any tips on how to convince an incredibly stubborn 47 y/o mother on limited income with no savings that she NEEDS NEEDS NEEDS to start planning for retirement, I'm all ears. I worry about her.
I could give her my mother's phone number. You know, for like negative examples / reinforcement. Plus, then my mother would have someone else to talk to.
Seriously, nothing will work for someone who thinks it is easier to wait for the worst to happen rather than make hard choices / changes.
And if anyone has any tips on how to convince an incredibly stubborn 47 y/o mother on limited income with no savings that she NEEDS NEEDS NEEDS to start planning for retirement, I'm all ears. I worry about her.
I could give her my mother's phone number. You know, for like negative examples / reinforcement. Plus, then my mother would have someone else to talk to.
Seriously, nothing will work for someone who thinks it is easier to wait for the worst to happen rather than make hard choices / changes.
Ain't that the truth. I had to have a sit-down with her last weekend to convince her to get her car checked out. The problem? Twice in the past three months it decided that it didn't want to turn. She didn't want to go because she might, at some point in the near future, be selling it. Several years ago the family had to have an intervention-style meeting with her to get her to go to the doctor because she was throwing up every day. It turned out to be acid reflux, but the cells in her esophagus were already starting to turn pre-cancerous (which has since been reversed, thank goodness). Makes me think that trying to convince her to save for retirement is a conversation just not worth having.
5.5/four tet, daphni b2b floating points, avalon emerson 5.12/neil young 5.19/mannequin pussy 5.21/serpentwithfeet 5.25/hozier 6.12-16/bonnaroo 6.28/goose 6.29/goose 9.17/the national + the war on drugs 9.23/sigur ros 9.27-29/making time 10.17/air
I could give her my mother's phone number. You know, for like negative examples / reinforcement. Plus, then my mother would have someone else to talk to.
Seriously, nothing will work for someone who thinks it is easier to wait for the worst to happen rather than make hard choices / changes.
Ain't that the truth. I had to have a sit-down with her last weekend to convince her to get her car checked out. The problem? Twice in the past three months it decided that it didn't want to turn. She didn't want to go because she might, at some point in the near future, be selling it. Several years ago the family had to have an intervention-style meeting with her to get her to go to the doctor because she was throwing up every day. It turned out to be acid reflux, but the cells in her esophagus were already starting to turn pre-cancerous (which has since been reversed, thank goodness). Makes me think that trying to convince her to save for retirement is a conversation just not worth having.
Get her a plastic grocery bag full of wet cat food cans, mcdonalds free napkins (ersatz toilet paper), and one of those wire upright box grocery carts on wheels the old ladies use on the bus. Fill that with a goodwill blanket and decorate it with a soiled beanie baby and maybe ask RandyAnal for one of his collection of awesome cardboard hobo signs. Throw in a map to her nearest homeless shelter.
That's about how much I know about it. I'll have a pleasant surprise someday.
Not if it is comprised solely of ESOP (employee stock ownership program) stock from your company and your company's equity value does not increase apace with say...the S&P. Many companies do this form of profit sharing as a sneaky way of getting the majority rank and file of a firm to reinvest the $ where they work rather than the broader stock market, providing the company with capital; additionally they can dangle big chunks of the ESOP to hire or retain senior management so they have skin in the game.
On the flip side, if your company exceeds market performance for four decades straight the risk would pay off.
All I'm saying is have diversity in your retirement assets. Can you imagine if you worked your whole life for and invested all your life savings in Blockbuster Video? Or Noika? Or Lehman Bothers? Maybe you already are diversified, but you said you don't know. Good you have something, though. You are ahead of a lot of people.
That's about how much I know about it. I'll have a pleasant surprise someday.
Not if it is comprised solely of ESOP (employee stock ownership program) stock from your company and your company's equity value does not increase apace with say...the S&P. Many companies do this form of profit sharing as a sneaky way of getting the majority rank and file of a firm to reinvest the $ where they work rather than the broader stock market, providing the company with capital; additionally they can dangle big chunks of the ESOP to hire or retain senior management so they have skin in the game.
On the flip side, if your company exceeds market performance for four decades straight the risk would pay off.
All I'm saying is have diversity in your retirement assets. Can you imagine if you worked your whole life for and invested all your life savings in Blockbuster Video? Or Noika? Or Lehman Bothers? Maybe you already are diversified, but you said you don't know. Good you have something, though. You are ahead of a lot of people.
There is a separate program for ESOP, which I have not done.