Retirement planning

[MossRoad]

The following is just my opinion, so don't take it as gospel...

When we got married, I had $50 in my pocket. We've been married for almost 30 years. Our kids have attended very good private schools K-12 and their college education is fully funded. We've paid off a couple houses, 20 acres of rural property and a slew of decent used cars. We have some toys and we've managed some nice vacations, too. We've been debt free for 15 years.... on average wages! :thumbsup: Its worked for us, it might not for you, so take it for what its worth.

We've always saved 15% per year to 401Ks and IRAs, (now both ROTH). That will get us to our magic number and beyond with enough to last us well past 100yrs old and leave a nice legacy to our heirs.

We've always planned our expenses on only one person working an average wage job and never lived beyond those means.

Anything you earn over your "living means" can be used to make double mortgage payments, double car payments, increased cash on hand, etc... For example, we were able to double our mortgage payments on our three 30 year mortgages and pay each of them off in 5 years!

Our biggest concern is not the amount of money we will have if we retire early, but how we will get affordable health insurance before medicare, etc... kicks in? There's a long time between 55 and 67. If you have a large net-worth at 55, you're probably not going to be finding any subsidized health insurance, so plan for that.

Generally, most financial planners will tell you that life insurance as an investment is NOT a good choice (unless you are an insurance salesperson). TERM life insurance is the way to go. You want enough insurance to make up for your lost income(or your spouse's lost income, since you both work) for your family to continue in the fashion they are accustomed to should you croak. Its not the lottery for them. Its just to cover your lost income. As your net-worth grows, you'll need less life insurance each year to maintain your path to your goal. Think about it... if you have a net worth of $2,000,000 dollars at retirement, why would you need another $1,000,000 after retirement age should you die? The money you spent on life insurance could have been put in your IRA, 401K or other investments like mutual funds, college savings plans, etc..., that will pay higher returns over the same amount of time than life insurance will. You'll get an argument that with life insurance investments, you'll get some back if you don't die... don't buy into it. Term is the way to go.

If you have kids, start a 529 college savings plan NOW! We have two kids, 5 years apart. We didn't start the 529s until the 2nd one was born, so 5 years difference. First child started college with half as much as the 2nd one will have. So, a 5 year delay cost 100% after 13 years. Example: $20K for one VS $40k for the other! Start the 529 as soon as they are born.

Sound like you have a good plan for a young person. Keep it up! :thumbsup:

 

[caver]

I certainly could have continued to work for many more years but I've seen so many cases of folks retiring and immediately facing health issues.

I'm in my early 50's and have seen the same thing. Guys that have been at the plant 25-35 years and they go to 62 and beyond just by the lure of more money. Several of them were dead within two years of retirement due to cancer. I'm surprised how much I have gone downhill since my 40's
One former co-worker retired at 55. That was at least 15 years ago and he's enjoyed life...still doing fine and my personal hero for not being afraid to leave at 55. Just about all that have left before 60 say they wish they had retired sooner.

If you would go in tomorrow to work for free then I would say that's what makes you happy and more power to ya. Some people are wired that way. I've yet to hear of anyone on their death bed say they wished they had worked longer.

As was mentioned the 4% rule of thumb....my finance guy leans toward the 3% rule of thumb. If I had hired him about 10 years ago I would be retired today.

Personally (I have no kids) I would make kids pay for their own college. I was reading some young woman's blog the other day and she mentioned her folks paid for a degree in which she applied toward a job she wasn't happy at. Now this woman is a fulltime work-camper earning not much over minimum wage.
It's cool what she is doing but her parents should probably hit her up for the college money. LOL

 

[jix]

I Do not know how much is enuff cash or securities to retire, but I have beer retired for 25 years. I live fairly simply with my wife and we have no dependant kids. I have full health and drug and dental ins and a pretty big mortgage to pay, plus taxes. It costs me 60,000 per year to live, with no travel holidays, by we own two new cars and we are paying them off at zero percent interest over 6 years My several pensions are equal to my annual cost of living, plus taxes. We live comfortably enough, but we do have to be a little careful and do not splurge on anything. An investment to yield my annual requirement would be about 1.5 million dollars if I did not spend any of the principal. Various Canadian taxes are really the major expense I have annually, believe it or not. Sales Tax and income tax and property taxes eat a lot. Another big bite is for home and car insurance, and for the electric bill, Gasoline is also a pretty big expense....60 grand sounds like a lot of money, but it is not, here in Canada. Scary numbers!!

 

[MossRoad]

The thing about kids and college....

Some are in the camp of making them pay for it all. Some are in the camp of paying it for them. My wife and I and most of our friends are in the camp of helping them with it for the first 4 years, but they have to have some skin in the game. They work while they are in school, summers, etc... They earn academic scholarships, too. So, they are carrying quite a bit of the financial load themselves.

I will say, a 529 plan started when your child is born and only $20 a week into it can add up to tens of thousands of dollars if invested in a good mutual fund by the time the child reaches college age. $20 is nothin, relatively speaking. Its enough to cover 4 years of local campus state schools. They can live at home for free. Work while in school. If they attend classes during the summer, they can get out in three years. They'll be debt free, a college degree, and with money in their pocket that they earned. $20 a week folks..... plan ahead!

 

[Parkanzky]

My parents had six children and we all have at least four years of college. They weren't wealthy, but they were very good to us. What they did, and what I'd have done had I had children, was as follows:

1) We got a savings account as soon as we got a social security card. Gifts from relatives all went into this account from day one.
2) When we got old enough to understand the concept of money (and wanted to spend it), half of anything we got (e.g. allowance, gifts, lemonade stand profits, or pay from our jobs) went into the savings account. They'd eventually start making me make the deposits myself.
3) When time for college rolled around, we were responsible for paying for one year and they covered the rest. They helped with fixed expenses (they paid for a car and insurance, and provided room and board while I was on campus), and I worked summers and part time during the year to pay for books, gas, eating out, and eventually my room and board when I moved off campus.

What I like about this approach is that it ingrained a mentality of saving a portion of my income early on. Later, I got a great lesson in the importance of compound interest as I watched my savings grow. Having to spend it on that first year of school made me realize the investment required for my education and helped me take school more seriously.

I disagree with the poster above on a couple points. First, I think that going away to college is an awesome transition from living at home to the full responsibility of living on your own. So while it's expensive, I think that kids should live on campus for at least a couple year. Even if they attend school locally. Second, I am against the current trend of taking a bunch of courses for college credit during high school, cramming in as many classes as possible during the semester, taking summer classes, and finishing as quickly as possible. My last year of college was one of the best times in my life. Life isn't a race, with the objective being to complete all the steps and get to the end as quickly as possible.

 

[ultrarunner]

Wish I knew what the future held...

Always been a saver, never carried debt except first mortgage and never bought new cars... that being plural.

Saved about 8x my annual wage and no pension kicking in other than Social Security.

On the other hand... Mom is 80 and retired at 62 with no pension... she has always lived frugally and only spends about half her social security... had enough for some nice trips and very generous with my nephew and nieces...

When I hear of people needing 50 to 100k per year in retirement it is difficult for me to comprehend...

Mom spends about $1,000 per month, has a nice home in the Bay Area... some land, pays all her bills, taxes, medical supplements and tithes to her church...

One more thing... isn't the whole premise of Affordable Health Care to give people options???

I know I could do much better taking the dollars my company spends and buying my own coverage... company says it averages $800 per employee monthly and this is for a 70/30 plan...

For $650 a month and can get much better coverage at less out of pocket...

 

[MossRoad]

My parents had six children and we all have at least four years of college. They weren't wealthy, but they were very good to us. What they did, and what I'd have done had I had children, was as follows:

1) We got a savings account as soon as we got a social security card. Gifts from relatives all went into this account from day one.
2) When we got old enough to understand the concept of money (and wanted to spend it), half of anything we got (e.g. allowance, gifts, lemonade stand profits, or pay from our jobs) went into the savings account. They'd eventually start making me make the deposits myself.
3) When time for college rolled around, we were responsible for paying for one year and they covered the rest. They helped with fixed expenses (they paid for a car and insurance, and provided room and board while I was on campus), and I worked summers and part time during the year to pay for books, gas, eating out, and eventually my room and board when I moved off campus.

What I like about this approach is that it ingrained a mentality of saving a portion of my income early on. Later, I got a great lesson in the importance of compound interest as I watched my savings grow. Having to spend it on that first year of school made me realize the investment required for my education and helped me take school more seriously.

I disagree with the poster above on a couple points. First, I think that going away to college is an awesome transition from living at home to the full responsibility of living on your own. So while it's expensive, I think that kids should live on campus for at least a couple year. Even if they attend school locally. Second, I am against the current trend of taking a bunch of courses for college credit during high school, cramming in as many classes as possible during the semester, taking summer classes, and finishing as quickly as possible. My last year of college was one of the best times in my life. Life isn't a race, with the objective being to complete all the steps and get to the end as quickly as possible.

The only thing I'd disagree with you on is taking college credit classes in high school. When in high school, those classes are generally Advanced Placement classes. My oldest had to take classes anyway, she couldn't take any more or any less. It was no different than taking honors classes, just more in-depth discussions and projects than standard classes. And it was excellent college prep. She said college is a cake-walk compared to the high school she attended. The credits counted in college. She started college as a second semester freshman, meaning she was already half way through her freshman year before she started. That freed up a lot of time and allowed her to get a double major and double minor in 4 years. She also spent 6 weeks in Spain studying abroad. She would have had to take a 5th year to get all that in.

 

[Parkanzky]

Different people have different lifestyles and expenses. $100k/yr wouldn't be enough for some to maintain their lifestyle in retirement. Others can't imagine how to spend that much. That is why it is best to talk about percentage of income when having this kind of discussion with an economically diverse group.

Your mother sounds a lot like mine. She turned 79 this year and lives like you describe. She is happy, but that's not the life for me. My wife and I spend more than $12k/yr on vacations, and I only expect that to increase when we retire.

 

[bajabum]

I'm 65 and retiring next spring.
Every raise in the last 25 years has gone into savings, we're pretty much living off the same takehome pay I had in 1990.
I'm putting in 25 % and the wife is putting in ~ 50% of her pay.
I'll have 2 small pensions (less than $300 each) but we have two houses, both paid for, don't owe a nickle to anyone and have enough socked away to last till we're 120...

Just so you know, a Million bucks ain't what it used to be, aim MUCH higher if you're only 32.

When I started working (Circa 1960), I thought if I ever made $10K a year, I'd be sitting pretty!
Shows what I knew...:laughing:

 

[KiotiKowboy]

One more thing... isn't the whole premise of Affordable Health Care to give people options???

ABSOLUTELY NOT!!!!

But .. getting in to this would close the thread.

Suffice it to say, the ACA is about power & control. Any lies about reducing costs have already been proven wrong by several hundred percent for most.

 

[Parkanzky]

The only thing I'd disagree with you on is taking college credit classes in high school. When in high school, those classes are generally Advanced Placement classes. My oldest had to take classes anyway, she couldn't take any more or any less. It was no different than taking honors classes, just more in-depth discussions and projects than standard classes. And it was excellent college prep. She said college is a cake-walk compared to the high school she attended. The credits counted in college. She started college as a second semester freshman, meaning she was already half way through her freshman year before she started. That freed up a lot of time and allowed her to get a double major and double minor in 4 years. She also spent 6 weeks in Spain studying abroad. She would have had to take a 5th year to get all that in.

I'm not talking about AP classes (Which I took). Nowadays, lots of high school students spend part of their day at a local college taking classes. I have at least a couple high schoolers in every section I teach at a local university. Some of my nieces and nephews are/have done it, and I personally don't like it.

What your daughter did was to get as much as she could out of her four years of undergraduate time, which is exactly what I recommend.

 

[MossRoad]

Wish I knew what the future held...

Always been a saver, never carried debt except first mortgage and never bought new cars... that being plural.

Saved about 8x my annual wage and no pension kicking in other than Social Security.

On the other hand... Mom is 80 and retired at 62 with no pension... she has always lived frugally and only spends about half her social security... had enough for some nice trips and very generous with my nephew and nieces...

When I hear of people needing 50 to 100k per year in retirement it is difficult for me to comprehend...

Mom spends about $1,000 per month, has a nice home in the Bay Area... some land, pays all her bills, taxes, medical supplements and tithes to her church...

One more thing... isn't the whole premise of Affordable Health Care to give people options???

I know I could do much better taking the dollars my company spends and buying my own coverage... company says it averages $800 per employee monthly and this is for a 70/30 plan...

For $650 a month and can get much better coverage at less out of pocket...

If someone is used to living at that level of comfort (50-100k/year) they'd like to have a similar annual income to maintain that comfort level when they retire. Its kind of a neat feeling once your money starts working for you instead of you working for your money.... or so they tell me. :laughing:

How long has your mom had that house and land? Could she purchase it from scratch today on that income level? Probably not. My parents made about $5k per year when I was born(early 60's). I was the last of 5 kids. We had a nice warm house and good food. Decent cars. Good schools. According to this inflation calculator, something that cost $5k back then would cost over $39,400 today. Inflation Calculator | Find US Dollar's Value from 1913-2014

 

[MossRoad]

I'm not talking about AP classes (Which I took). Nowadays, lots of high school students spend part of their day at a local college taking classes. I have at least a couple high schoolers in every section I teach at a local university. Some of my nieces and nephews are/have done it, and I personally don't like it.

What your daughter did was to get as much as she could out of her four years of undergraduate time, which is exactly what I recommend.

OK. I read what you're talking about. They are offering that to local public school kids here, now. Our local public high schools stink! I think they want to offer ambitious kids that don't want to waste their time there a way to get out of them ASAP.

 

[ultrarunner]

ABSOLUTELY NOT!!!!

But .. getting in to this would close the thread.

Suffice it to say, the ACA is about power & control. Any lies about reducing costs have already been proven wrong by several hundred percent for most.

Only mention it because I know several that would have loved to retired... the only thing was they had pre-existing conditions which meant they were basically uninsurable if they left before age 65.

So the ONLY reason they felt they could not retire was not having Health Insurance.

When Mom retired at age 62 she was attacked by a stray dog while she walked on a hiking trail... her COBRA from work covered her and then she found she was unable to buy any insurance because of a shoulder injury from the dog attack or it would be a total exclusion... she went almost 2 years with no insurance.

Correct me if I'm wrong... Doesn't the Affordable Health Care prohibit denial of coverage for pre-existing condition?

 

[ultrarunner]

If someone is used to living at that level of comfort (50-100k/year) they'd like to have a similar annual income to maintain that comfort level when they retire. Its kind of a neat feeling once your money starts working for you instead of you working for your money.... or so they tell me. :laughing:

How long has your mom had that house and land? Could she purchase it from scratch today on that income level? Probably not. My parents made about $5k per year when I was born(early 60's). I was the last of 5 kids. We had a nice warm house and good food. Decent cars. Good schools. According to this inflation calculator, something that cost $5k back then would cost over $39,400 today. Inflation Calculator | Find US Dollar's Value from 1913-2014

Mom and Dad paid 35k for the house in 1969... it needed work and they were able to get a break buying As-Is.

In 2012 it was worth 350k.... so in 43 years it's value increased 10 fold.

She isn't living the life of a pauper... just she doesn't need much.

Mom bought her only new car at age 68... her old 1974 model was bought used for $800 in 1982... only problem was having no power steering and a manual transmission gave her trouble from that shoulder injury/dog attack... she drove that $800 car for 30 years and sold it for $600... drove it 30 years and lost $200 when she sold it...

Even being on Social Security she was able to spend 6 weeks each year, for many years, in Salzburg Austria... biggest expense was the cost of the ticket... no cost for accommodations and food/fun cost about a $100 a week.

I realize there are people that can easily spend $200 or more for a night out... just not our style.

Other things like buying clothes/shoes really comes down to just how many shoes and clothes can one fit into their closet...

I guess if she had a cell and/or cable that could cost a couple of hundred each month too...

 

[ultrarunner]

According to this inflation calculator, something that cost $5k back then would cost over $39,400 today. Inflation Calculator | Find US Dollar's Value from 1913-2014

Let me see...

My 1913 Model T cost $500 when new... today it is worth about 10k on a good day...

So it is worth about 20x more in today's dollars.... or 2000 percent more?

Looks like my old Model T turned out to be an OK investment.

Now a 1913 $20 gold piece is $1200 +/- today and has my old Model T beat by a longshot...

 

[NY_Yankees_Fan]

Go visit a financial advisor, one that you pay for. If you go to one that does not charge believe me you are paying him via the funds he recommends. Go to this web site for certified financial planer Find a CFP Professional and interview several to see how you like them, they usually do not charge for a meeting. They will come up with a plan based on your risk tolerance and when you plan to retire. Visit them every few years to adjust your funds and make sure you are on track. Max out your 401k in 2015 that will be 24k each for you and your wife if you can. If not do as much as you can. Set up a 529 plan for the kids and contribute as much as you can. Pay yourself first and live below your means. We plan to retire in 6 months at the age of 58, counting the days, it can be done. But like everything in life it takes planning. My dad would always tell me when I told him about my raise and how much I was now making "Son do not tell me how much you make BUT tell me how much you have saved" Words I have always lived by and thankfully I married someone that has the same way of thinking. Good luck sounds like you will make it by what you have done so far AND by just asking and thinking about it.

 

[forgeblast]

Remember too PA is a good state to retire in, Pennsylvania is Better - A Tax-Friendly State for Retirement - Traditions of America
no taxs on pensions, social security, 401ks,
We are around the same age as you and we are doing a lot of retirement planning now. With our daughter, we are also planning for college. Instead of a 529 we are doing a roth 403b which can be use for college, and no big tax hit if I am of a certain age when she is in college which I will be. Since she is in Kindergarten this year I took all the day care money and moved it to the roth, we are not missing anything and shes getting a good start.

 

[wmonroe]

Wow, lots of really good stuff here. As far as college our plan is to pay for the majority but the kids will have some of the responsibility. We both had it that way in college and worked jobs while going, didn't hurt us a bit. My plan however will change based on the kids, some just have to work a lot harder to get the same grades, if one has to put in double the hours per week on school work then I would supplement more of the costs.

Going to a Roth 401k was mentioned and I need to double check but I believe that is what I have. I contribute 17% of my check, auto deducts I never see it except for the pay stub, and my employer matches 3%. My wife is around 15% but with no company match. Social security is not figured into our plan but if by some miracle it is still available it will be extra.

 

[wmonroe]

The main reason we are looking at retiring earlier than normal is we want a chance to enjoy life after work. My job is very high stress for portions of the year and every year it seems a couple people at work pass away much earlier in life than they should. We work hard, try to have fun now, save, and really live a fairly simple life.