Personal Finance (Retirement)

Let us try to keep this civil.

There has been a lot of talk about retirement, investing, etc. lately. Due to the closed nature of personal finance in the US It is very difficult to get an understanding of what people invest into retirement in this country. I've always wanted to talk to people who are further along on the journey than myself or who have successfully managed to self fund a retirement but again it is difficult to get them to open up about their finances.

The Simple question is How many years to retirement and what % of your Gross do you invest into self funded retirement funds (401K, IRA's, Stocks, Bonds etc. for purposes of personal future financing)? Do you have a Pension plan beyond this?

I think it's ok to include company matching as part of this %. I would not include the investment you/your employer make into Social Security. Although that is an interesting question of it's own. Do you actually factor Social Security into retirement planning?

For My wife and I we are 30, with ~25-30 years to retirement. Right now we are investing ~15%. We have been paying down debt for the last 5-6 years and have succeeded in eliminating it from our lives so we are now ready to start really focusing on financing retirement properly (hence the question).

Thanks in advance for any input you provide. I feel that a simple percentage gives me the information I need. I do not feel that anyone needs to share or imply their 401K balances, Actual Gross income or desired retirement income. I am fairly confident most people would be looking to fund a lifestyle similar to what they currently have in retirement so are targeting 90-110% of Gross adjusted for inflation at retirement age. I guess if your target is radically different then that indicating so would be nice.

We have put away the max for 401K (which tops out at $14.5K or whatever it is now) and the max for IRA's (which is up to $5K, or is it more? I forget) ever year since we started work. In addition to that we have the company match which has been between $5k and about $20K depending on the company and other circumstances. We also knew very early where we wanted to escape to when work was done so as part of retirement planning we bought and paid off a house that we use for two months in the summer and will retire to. We have also invested a couple of larger bonuses. Just doing what we're doing we hope to be able to replace 60% of income within about 10 more years. Because we invest as much as we do, that will be more than enough to live off and stay comfortable.
Additionally we put $2-4K in each of our four kids college funds every year. Not enough to pay for it all, but enough to help which is the goal.

Need to move this over to off topic....

But we've been maxing out for 20 years, not quite topped out for the two of us, but still a healthy mix. As to WHAT to invest it- while many like to do it themselves, we have a financial advisor helping. It's not free, but I'm condident that his time as made us more money than I could have.

Single guy with no kids and no debt here. I invest the max 401(k) allowed by the fed. My company puts 5% matching in company stock into my 401(k) and if I stay through the year, meaning employed from Jan 1 to Dec 31, they put in an additional 4% into my 401(k) in lieu of a pension. The big 401(k) contribution on my part is a new thing I started doing this year. I want to start adding a little into an IRA next year but if I do it will be small, like $50 a month or something.

I believe the max for 401K is 17,500 this year. I gather from other posts that you/your wife are High income earners which is why I was hoping for %. Obviously now giving that % would disclose your income so I don't really expect that information however I thank you for contributing.

I think IRA is 5,500 per person. So it sounds like your contributing ~27K (or possibly 46K if you are able to contribute to 2 401Ks). for retirement plus and additional 5k or more from employer. That's awesome. We simply could not contribute that much as maxing out 2 401k's is simply out of reach for us based on our income level at this time.
Our plan right now is to step up to ensuring we are getting all employee matching (which we are at this time), then Max out 2 IRA's and then step up our 401K contributions to our max total percentage possible at this time.

We have 2 kids in daycare which consumes 17% if our Gross at this time however as soon as they start school this money would become available for other investing.

Good catch on moving to Off Topic.. Where is a moderator when you need them..

In reply to nocones:

The 401(k) allotment is a huge percentage of my take-home, I'm doing this because I didn't start investing in retirement until I was close to 30, and I've had a year where because of changing jobs I didn't save much of anything. I'm also doing this because it shrinks my gross income; middle class welfare, er, tax break here I come.

We've always only had one 401k. For the brief time I worked my wife's plan was so much better it made sense to max hers out and forget mine. The reason I didn't put percentages down was primarily because it has been widely varying. Initially it was a high enough percentage that coming up with autocross entry fees was a real challenge. Buying cheese was a challenge. Now The percentage is smaller and we have the disposable income to do things like buy Corvettes, and cheese. All along we've lived in the same small house and aside from the money I get to spend on cars and kid costs, our expenses have stayed very similar and our expected costs of living in retirement have stayed fairly similar.

I retired at 56 and my personal savings are providing about 60% of my income, while my company pension supplies the rest. I had been maxing out my 401K for the 10 years I had lived in the US, and I had done the same with my Canadian RRSPs before that for 15-20 years. In addition ,I would put more away whenever I didn't need the money for something more pressing. When I retired I had the equivalent of 5-6 years of my final year salary put away. I prefer to look at it that way because that's the number that matters when you're 50-65 rather than 30 and starting to save. A 15% savings rate should leave you very comfortable when you get to my age.

I end up with about 25% when the match is included and my wife ends up close to 40% of her with match included. we have set a goal to alowe her to retire when the kids finish univerisity. My calculation look like it should work if the market does not fall apart again.

I'll probably die in a cube somewhere. We give up another mortgage worth to have the kids in school where we like, and until we begin homeschooling everyone in another 5 years it will be pretty ugly.

Last job I took 3% into my 401K and the company put in 6%. This job I put in 3% and they put in 1.5% but have a pension plan. I am 31 with four kids and a non working spouse.

I "invest" approx. 30% of gross. That's 401k, taxable investments, and real-estate.

I'm 30, not sure when I plan to retire. I hope to have enough income generating assets in 15 years to pursue a career change though. I'm thinking becoming a teacher when I'm in my mid 40s would be cool, then I could take off 3 months in the middle of the year and take extremely long vacations.

The #s I always reference are, if you can save:

66% of your income, you can retire in 9 years 50% of your income, you can retire in 17 years

That's with no reduction in spending, and using the 4% rule.

Nocones,

SS is your money that the gov has collected and will disburse to you at a certain age. Yes, the payments will probably decrease due to political/economic headwinds, but you will get a payout. Just like a pension...

Based on your family savings rates and age, you should be fine.

Rog

I don't know about anyone else on this forum that is my age (35) but I assume that SS will be completely and totally gone by the time I actually "need" it. I can't imagine actually planning on social security checks showing up to me in my lifetime.

I think about 25% of our gross income goes into paying off student debt. Probably another 10% into mortgage.

After all that is taken out, we invest about 10% into our 401k, and save about 10-20% a year into savings. I am looking at doing a Roth IRA next year, and maybe put 10 to 20k into an index fund if we have the savings.

No pension. Our companies match 1% and 3% into 403b. We are in our early 30s.

pres589 wrote: I don't know about anyone else on this forum that is my age (35) but I assume that SS will be completely and totally gone by the time I actually "need" it. I can't imagine actually planning on social security checks showing up to me in my lifetime.

I'm 31 and share the same opinion. Part of the reason we will have our modest home paid off by the time I'm 45 at the latest.

My %'s are jacked up now, because I'm finally in a position to get my savings up where I want so I'm throwing tons of money at it. Then when my savings is where I want I'm going to hammer out the final remaining stupid debt that I have, then when that is done, I'll likely be putting 20% in 401k/retirement and 5% in savings.

I've fluctuated around 10% into my 401k over the last 15 years or so. Now that my house is paid off, I'm planning on renovations being a major expense in 2014 and then in 2015 I'll go back to maxing out my 401k percentage.

In addition to my 401k, I also max my contribution to a HSA, which is roughly 50% more than the actual amount required to cover my deductible for a year.

I generally believe S.S. will still be there when I retire in 30 years or so. How much I'll actually get is another matter... but like the money I stand to inherit from my mother, I don't want to count on it.

DeadSkunk wrote: I retired at 56 and my personal savings are providing about 60% of my income, while my company pension supplies the rest. I had been maxing out my 401K for the 10 years I had lived in the US, and I had done the same with my Canadian RRSPs before that for 15-20 years. In addition ,I would put more away whenever I didn't need the money for something more pressing. When I retired I had the equivalent of 5-6 years of my final year salary put away. I prefer to look at it that way because that's the number that matters when you're 50-65 rather than 30 and starting to save. A 15% savings rate should leave you very comfortable when you get to my age.

I'm in exactly the same situation, even the numbers are the same. I also agree that putting 15% away each year will leave you comfortable. I didn't start until I was in my late 20's, and even then wasn't able to put much away. Once I started maxing out (18%), it made a big difference. I will be 52 next month. I plan to semi-retire in 3 years, taking the summers off, and working the winters, probably for 5 years. I should be able to make an easy $30k in the winter, and top up from my savings. I will collect full Canada pension at 65, as well as small company pension of about $750/month. I was going to completely retire at 55, but I'm not comfortable taking that much money out every year.

If you continue to putb15% away every year, you'll be able to retire early.

Man, you guys are doing way better than me in terms of getting yourselves to save. I'm putting 10% of gross into student debt and about 7% into retirement. That's it. No matching, no pension. I'm self employed, early 30s, no kids yet.

You guys are inspiring me to step it up because it is only going to get harder when we have kids...

Read this: http://www.mrmoneymustache.com/

Tons of good advice on radical savings. He takes on modern frugality, and helps you realize what passive spending and a lack of insight into your financial habits is really costing you.

My wife and I have no kids and both are employed with very good gross income. Right now we save 58% of our income and I hope for more but I can't seem to kick my racing habits. (I suppose everyone has at least one vice...) We got started a little late on this but it's paid off pretty well so far. Even with the savings, our life is very far from sparse.

Things would change a lot with kids, obviously, but it can still be done.

We max out our Roth IRAs and have been using Vanguard funds for the bulk of our investments. Safe and steady growth, no stock picking or risky activities like that. We should be in a position to retire in 7 years or so if we stick with it. We probably won't retire, but that's the definition of berkeley you money. Something goes wrong, you don't have to worry about it.

There are almost limitless ways to build a retirement nest egg, the key is to stick with the plan. Moving money around or taking breaks or giving up are the main obstacles. Keep at it and stay patient, at 15% it'll happen some day as long as you don't go blowing it on a mansion and a fleet of cars!

Thanks a lot guys this is great stuff. Please keep it coming.

I'm not sure what to do with donations? We enjoy being able to give back and do so at about 7% however I know we could accelerate future funding by reapportionment of these funds but that feels wrong. Anyone have thoughts on this?

nocones wrote: Thanks a lot guys this is great stuff. Please keep it coming. I'm not sure what to do with donations? We enjoy being able to give back and do so at about 7% however I know we could accelerate future funding by reapportionment of these funds but that feels wrong. Anyone have thoughts on this?

If you put that 7% in a separate fund for 20 years, you would then be able draw from that and donate the equivalent of 12% indefinitely.

Charity is great, and I don't think there is a wrong way to do it. Save now and donate more later...

Since I started working in the real world at age 21 I've been saving 10-11% per year in a 401k. Typically this has been 3-6% of my money and the rest company match. Currently I'm at 6% personal and 4% company, IIRC.

I recently began setting aside $50/ pay period to buy company stock. I don't work for a publicly traded company, so it's all privately held. Historically it has done well.

I'm also saving $75/ pay period into a money market fund for "rainy day" stuff.

A few thousand in savings bonds...because when I bought them the yields were pretty decent (4%)

~$100/month into a Roth IRA.

We also own a rental property, that we'll either keep until retirement (at which point it might realistically be worth 400-500k, and be paid off) or sell at some point and plow that equity into a mutual fund.

And I've got ~25 cars in the collection, which are worth at least $12,000 ;-)

I just checked our finances spreadsheet and this year (2013) we lopped 25k off of our debt load. One credit card left, about 11k on it, and about 50k in (her) student loans. The rest is mortgages. Plan is to have all debt (except mortgages) gone in 7 years, while maintaining the savings rate.

I'm 36, wife is 28. I work, she's self employed, starting her own business, basically breaking even at this point. She also helps with the rental (she's painting right now, we just had steady tenants of 6 years move out)

I've been worrying about this also. I'm about a year out of college with a starting mechanical engineering salary in a low cost-of-living area. I'm contributing 6% into my 401k with 6% employee matching. I do the calculations on maxing out my 401k and it feels like a huge chunk out of my paycheck. However, since I'm very young and very single/no kids, maybe now is the better time to be contributing as much as possible, and dial it back later when/if expenses get tighter.

My company also offers stocks for a discounted rate, and although I haven't looked that far into it, 3M seems like a safer place to invest than, say, a startup.

So I guess I'll piggyback off your thread and look for advice also.

Please do it's what it's here for