Retirement planning

GreenheadRecycle · Dec 20, 2014

Said before, get out of a regular 401k and go with a Roth 401k. Less taxes later when you can't afford them... I went at 53 with pension and now work for myself. I have a better boss now. Great to see you are thinking of this. I believe that the next generation (yours) will be the poorest ever as they age because most traditional pensions are now extinct. Most can't save for kids collage (more student loans today than home and car loans combined) let alone their own retirement. Seems if someone else doesn't do it for you (pensions) people won't do it for themselves (see student loan debts). Just saying. You can always have your spouse work a few more years for the insurance...

nc redneck · Dec 20, 2014

reb said:
Something to consider for early retirement--Medicare does not kick in until age 65. That means you would have to fund health insurance for a few years. Health costs increase with increasing age, so insurance is more important that at your age.

Another thought--raising children is expensive. Last figures I saw put the cost of raising a child in five figures. Your numbers put the second child in college near your retirement goal. You will want to keep that in mind in your planning.

Good luck.

Well stated and excellent advise. I am looking at the same. 250 K true cost for 4 year degree with car and expenses. I think kids coming out of college will face a tough international job market in the next 5 to 10 years. Not easy street like many of us experienced. Last thing they need is a bunch of college debt. Health costs will not go down only up for kids and parents.

Fi-Q · Dec 20, 2014

Retirement....... My last job of 10 years did not have pension plan, no kind of any saving at all.... Within these past 10 years I pay off my student loan, bought a bunch of land, build a house, bought a few toys, got married and had 3 kids..... My personnal saving varied A LOT from year to year, but I was able to put 1x my annual salary away within 10 years... Plus a very good cash down on the house..... My wife is a home stay mom for now, so I am trying to save for 2.

I just got a new job with a pretty decent pension plan, If I spend my career there I can retired at 62 with no penality ( I am 33 now) but still...... I am trying to put away as much as I can while still having a life.....

Fidler4 · Dec 20, 2014

Here is a good forum to read if you are interested in retirement planning:

Early Retirement & Financial Independence Community

Also the Boglehead forum is a good one for free retirement planning advise.

dave1949 · Dec 20, 2014

I think you are doing the most important thing now--planning ahead while you have earning and saving years ahead of you.

You could figure backwards. What lifestyle and where do you see yourselves at age 55/58? What does that cost today? What will it cost when you retire assuming a range of annual average inflation of 3% to 5%? You can break that future budget down into two categories: how much is needed for the basic necessities (housing, utilities, food, medical, insurance, vehicle maintenance & replacement, etc.), how much is needed for optional spending (world cruise, 2nd home, Porsche :laughing

?

The numbers will not be exact but you should be able to get to +/-20% accuracy. Re-calc each year and refine your estimates comparing that to your estimated income at retirement. The closer you get to 55, the more accurate you will be because there will be less guessing in the numbers. You can live on comparatively little income in retirement or you can spend a lot. It depends on what you want and what you can afford.

I think your greatest unknowns are the pension plans and child-rearing expenses. Plus you will be 10-15 years away from receiving SS and Medicare benefits if you retire at 55. If your pension plan(s) is still kicking then, and it is a decent plan, you may get health insurance coverage at affordable rates. I would say those are big IFs for many defined benefit plans. The trends are not in your favor.

I have arranged our retirement such that we can cover all our basic needs plus I spend some supporting my Mom, on SS and pension payments. We are debt free, our kids are on their own, and we live a fairly simple life. Optional spending comes from the retirement nest egg and the nest egg grows by more than we decide to spend. We are tight wads.

Scrambler82 · Dec 20, 2014

It is hard to plan in the volitaile financial market you face.
My savings into Fidelity Retirement Managed Account was 20% of my income put in pre tax to lower my taxes.
I found 6% to start is good but go to 12 as soon as you feel your income is up to it.

I start at 6% when I was 27, each raise I got, half of it went to the IRA and the total percentage I stopped at was the 20% I mentioned.

Plan an amount and pay youself first, adjust spending and additional saving according to your income.

I retired at 60, took Social Security at 62, (not letting the Government have MY money any longer than I need to), and I have not looked back, it's been great. I moved to SoCal, in Wine country, bought 10 acres, go toactivities in the Wineries at least twice a week. Go to Country Concerts all the time and sometime we go to a local Blues Theather, drink wine, eat some really great SoCal Eats.

I also have a new tractor, buying some new attachments, just plain having a ball.
i will start opening my IRAs soon, just have been having so much fun I need to make an appointment with myself to talk over the IRAs.

Now, a lot of the guys like myself were in these Retirment Accounts during some of the highest earnings ever recorded, I was seeing 20 to 30% growth, big gains compared to now-a-days.

Contact a local financial manager, hard to find one you feel good with because you are laying so much on the line and you want the best results, go by their advise, they usually have good experience and can help you out. Problem is if you get one you don't like it can be a problem in accepting what they are offering.
You may need to do some homework, check out the company reviews.

KiotiKowboy · Dec 20, 2014

Just a few thoughts ....

I think a safe rule for a retirement nest egg is about 7 or 8 times your income at age 65. If you were to retire younger, that would need to be substantially higher.

I did not need to build a retirement nest egg per se - because I was in a Defined Benefit retirement plan. This ensures me of an income for life. I did sock away a few hundred K in a traditional IRA, just as mad money.

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. Leaving early was the name of the game for me. My target was 55 but I decided to stay 2 more years just to pump up the benefit check a bit. At 57 I was out the door. At 62, I will begin taking SS (assuming it is still there). Yes, I could have substantially boosted both my retirement check by working longer - and boost the SS by waiting longer to claim. To me, neither is/was worth the trade of time.

I am not rich but neither am I poor. I have never missed a meal, and lack for nothing of consequence. A lot of your planning depends upon your lifestyle choices.

kco · Dec 20, 2014

I retired in 2003 at age 60. I was laid-off from a 27 year career in 1994 with a small(but fair) severance/pension. I contracted in IT until my main customer decided on no more contractors--only employees. Our retirement goal never changed--it was always to retire in a QUIET rural setting. So we moved from west of Calgary(which was getting too busy) to the BC interior. We had to make the move while still young enough to build a new life in a different place. People should consider what really makes them happy and plan accordingly.

Wmonroe, It looks like you have a good plan and good fiscal discipline that will serve you well. One thing that was drilled into me by parents who came through the depression was to never buy everyday things with debt. Plan purchases and save ahead of time. When you buy a new car, start saving for the next one. Never carry credit card debt(they weren't even invented when I was starting out.

Also, diversify your savings in other assets. My brother talked me into buying an aunt's quarter section south of Calgary in 1974. We put off buying our first house a few years for that(my wife agreed to it). It worked out well. It was farmland and earned a modest income until we sold it for about a 17x value(to our farmer renter) 30 years later.

We learned this from my parents. My dad bought a 1/4 section in Manitoba soon after my parents married. People kidded him about it thinking he was crazy. But he bought it with the crop in and got most of his money back the first year. He rented it out to a farmer and later his son, and they were great friends. He sold one acre to each of us 3 kids (around 1955 for $50 I think) and we received our proportion of the crop each year. Those were pre-fertilizer days so we had a different crop each year(barley, oats, wheat or flax) and summer fallow($0.00) every fourth year. We joked that Mom's land rotated with the summer fallow. Dad would take us out (it is just bare farmland) a couple of times through the spring and summer and then in late summer to estimate how many bushels we might get.

We three siblings inherited that 1/4 in 1989 (valued at $56,000). We received a modest rental ever since and agreed to sell this fall(to our farmer) to simplify estate planning, receiving $550,000. My wife and I already have plans to use some of our share(1/3) to make some changes here that will make it easier to cope with winter and allow us to remain here longer. The changes mainly improve safety additions such as a roof over the deck/stairs to the carport to minimize danger due to ice/snow. We will also move the water heater and pressure tank and modify the deck so we can install an outside wood chute instead of carting it down 12 cement stairs.

My sister's two kids share 1/3. They have good jobs and plan well for retirement. But I will suggest to them to look at farmland or bare land as an alternative to financial investments. There's something special in being able to go out and just enjoy the land. I think land is a good long-term alternative. You might even consider buying a bare acreage in the area you hope to retire. You may be able to rent it out as a vacation lot.

There is an interesting book, Rich Dad-Poor Dad, that I think younger people should read. I don't agree with a lot of it because I don't believe in saving with an aim to be rich. However, he does show how many people waste money just because they don't think things through. People often buy expensive toys they seldom use. They may be better off renting. Or buy the thing but rent it out(and write it off) as a business.

That's not to say we should be totally practical. Our great money-pit for years were horses, which we wouldn't have missed for the world. Now we enjoy the neighbour's horses. We're looking after five of them for the next couple of weeks while they're vacationing in Belize.

I think the main thing is to live within your means, keep out of debt, and plan for a lifestyle that matches your interests. For many of us that will involve country/outdoor pursuits.

newbury · Dec 20, 2014

sam5570 said:
I sure hope some of the people here from the age of 62 to 70 reply this should be very interesting. I hope I have time to follow the thread.

Replying
Too many variable so I'll describe SWMBO's and mine situation.

Plan for the worst, hope for the best.

When young we chose to go to work for the Federal Government in professional jobs.

"My fellow Americans, ask not what your country can do for you, ask what you can do for your country."

Both of us could have made more money "on the outside" and had offers but chose a federal career with a guaranteed CSRS retirement plan.
Both of us are so spendthrift that we can't understand much of the American greed for things.
But anyways we plugged along and were on the way to retire at age 65 or so with about 70% of our preretirement pay as annuities.

We socked lots of money into land in Mississippi. We hadn't planned on wanting to "travel" after we retired because we traveled extensively for our jobs.

And then SWMBO had 2 strokes, one which was severe and life threatening. Luckily she pretty much recovered after two years. We retired about as soon as she ran out of leave. This is the part of "plan for the worst". It cut back our annuities by about 10% off the top.

But because we had scrimped and saved we had plenty of money in the bank and were able to jump on a house with 5,500 square feet of shops and 70 acres of land which I brag about a lot on TBN. This was also helped greatly by the real estate crash, we held onto our two houses in Northern Virginia (which are now above pre-crash prices) and were able to snap up two in Mississippi.

Some things need to be emphasized -
How much will you NEED versus WANT?
Cover your medical/dental/vision.
Where are you going to retire TO?
What's the median income and cost of living where you are retiring? In Fairfax County I make 3/4 of the annual median household income, in northeast Mississippi my retirement is twice the annual median household income. Major things like cars, tractors, etc. cost the same but food, gas, hired labor is a lot less. Some of my former coworkers are retiring to foreign countries where their annuities will let them live like royalty.

Use a cost of living calculator - Cost of Living Calculator: Compare the Cost of Living in Two Cities - CNNMoney to nail things down.

Many of my coworkers were not as frugal and enjoyed new cars every three or four years and vacations to fancy places, and they have a lot less money but maybe more memories.

I think the most important thing was to find jobs which we enjoyed, so often it didn't feel like a "job".