Retirement planning

[NY_Yankees_Fan]

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.

The 529 plan can be shared among the kids, so if the 1st child does not use all of the funds the 2nd child can. Look for a plan that has the lowest expenses, we used Utah, NY was also cheaper. If your state has a fund it may have benefits to go with the state you live in. NJ did not so we did not use it. Utah was great to work with, they always answered the phone with a live person. It was painless, we got the bill from the college they cut the check and sent it to the college, 2 kids and no problems. When the child turned 18 they moved the funds into all bonds automatically so you did not loose your funds in the market. As you know the 529 plan grows tax free.

I do not know where you have your funds but check out Vanguard they have the lowest fees and offer many funds. Great place for your $$ outside of your 401k plan. https://investor.vanguard.com/home/

Interesting article about those fees you can pay for an advisor that works for free. Well not really, look at the fine print.....

http://www.fool.com/how-to-invest/b...irement.aspx?source=isesitlnk0000001&mrr=1.00

 

[NY_Yankees_Fan]

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.

Yep that is where we are going PA, much cheaper than NJ and besides that is where the kids live. We are headed to West Chester to live in the city and walk to everything. Down side the Kubota is staying in NJ.

 

[riptides]

Interesting topic.

I retired two years ago, way early. I cannot draw on anything until 62, hence my bridge money is slowly evaporating with carry costs for colleges, and quickly evaporating due to unforeseen health care costs.

I think a better plan would have paid off ALL debt, so the only thing to worry about would be taxes and insurance until your real magic number kicks in and your benefits become available.

 

[NY_Yankees_Fan]

Interesting topic. I retired two years ago, way early. I cannot draw on anything until 62, hence my bridge money is slowly evaporating with carry costs for colleges, and quickly evaporating due to unforeseen health care costs. I think a better plan would have paid off ALL debt, so the only thing to worry about would be taxes and insurance until your real magic number kicks in and your benefits become available.

Rip

Agree 100% no debt is the way to go.

Not sure why you can not withdraw before 62 but if you have an IRA or 401K you can withdraw at 59.5 with no penalty.

 

[Gary Fowler]

I retired at 61.5 just shy of SS age and no insurance till 65 which was a real gamble but insurance costs would have eroded my savings a lot. Luckily I am in pretty good health and actual healthcare costs always were much less than even my insurance cost when I was working. I used 10% of my gross salary as my 401K contributions from age 24 till last few years of working. I quit contributing to the 401K(it was not making any money anyway) at age 60 and instead used that money to buy all the things I needed for retirement (a couple tractors, land, storage building, new retirement home and pay off any debt) When I retired, I was 100% debt free, had a new house, new shop, 2 new tractors with equipment, 2 new ZTR, a new car for the wife and over 100K in the bank + almost $1million in my 401K. I think I am set for a modest lifestyle and don't have any money worries at present. I am now on Medicare so most medical bills will be paid which was the biggest fear of early retirement.

I too wanted to start getting my money back from SS as soon as possible which was my goal for retirement. Life was good for the last 10 years of work due to working overseas all of that time and grossing about $300K per year. This allowed me to put money aside for all the things I mentioned above and still live well.
The biggest thing to prepare for retirement is to decide how much you want to spend on "extras" after retirement. Everyone will have the standard costs of living, i.e. taxes, utilities, food, insurance and recreation expenses. Most of the first 4 items wont vary a lot between average Joe retirement folks but recreation expense could vary by $1000's or even $10's of thousands depending on what you want to do when you retire. I live a pretty simple life with not much desire to travel since I spent 10 years traveling and living abroad so my entertainment costs are pretty low. I just bought a Goldwing motorcycle which takes care of most of my entertainment items.

Don't forget that inflation needs to be considered in how much you need for retirement income. Just like in the past when a new car (model T) cost $500, in 30 or more years that $50K car today might cost over $150K. Retirement location is also something that should be considered if possible and if possible buy your land for retirement as early as possible as cost of land is not going to go down.

 

[TomSeller]

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...
.

$1000 a month wouldn't even cover my property taxes.

 

[Citydude]

Put the max amount allowed in your 401k. With 23 years before you retire, you can be in aggressive funds that have opportunity to earn more however have risks. Monitor the funds and compare the performance to the S&P at least quarterly. And, your doing the right thing by asking for advice. Making choices on lifestyles when young determines how your lifestyle will be when you retire. Good Luck!

 

[randy41]

interesting how the stats for how much you need to put away for retirement are generated by the same folks who want you to send them your money to invest. just saying.

 

[dmccarty]

...

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.

For most people, paying into a ROTH 401K while working and at the expense of paying into a tax deferred 401K plan would be a mistake. Right now you are likely paying more in income taxes than you will in retirement. By putting money in a ROTH, you are paying taxes on your income prior to putting money into the ROTH. If you are in a 10% tax bracket, you could be putting 10% MORE into a tax deferred 401K.

There is no way to know what the tax rates will be when one retires years in the future but it is a safe bet that a retiree's income tax, if any, will be much lower than what one was paying while working.

Having ROTH's are a good idea but there is no way I would put money into a ROTH over a tax deferred 401K unless I was maxed out on my tax deferred plans.

When you retire, your tax bracket should be much lower, and you can, or should be able to take money out of a tax deferred 401K and move it into a ROTH. You would have to pay taxes on the money movement since it would be considered income but if your tax bracket is low it might not be an issue. This might work real well, if you do retire in your late 50's, because the ROTH would have time to grow for later use.

I had long planned to retire at 55-60 but life changed my plans. However, we have started thinking about selling everything and moving onto a boat. :shocked: One benefit for this is that we could live overseas very cheaply and retire around 60. While our families are long lived and rather healthy into their 70's retiring at 60 does not give one a lot of healthy years before things start to fall apart. Even then, a bolt out of the blue can take you or a family member out and one's plans are now out the window. The odds of this happening increase as you get older. I have known two friends who have died young because of various illness that popped up. Another friend's just about died with a freaky internal issue that put him in the hospital for TWO months. He sat down from dinner and then passed out. No hint of a problem but off he went to the ER and an extended hospital stay. Just prior his wife had issues and is now not able to walk. :shocked:

The company managing your retirement funds likely has retirement information you can access. Last time I looked Vanguard had quite a bit of retirement information that was open to anyone to read irregardless if one was a member of one of their funds. One of my work benefits is to a financial adviser at no cost to me. Maybe your company does the same?

Later,
Dan

 

[Gary Fowler]

One of my work benefits is to a financial adviser at no cost to me. Maybe your company does the same?

Later,
Dan

This is not entirely true, while financial advice is not directly charged to an employee, all company R&S plans have a cost of running which the financial managing company deducts from the overall fund. Look on your yearly statement to find cost of running the plan, some of which are pretty high so they can afford to send in a rep to talk to you whenever you or any other employee needs to talk about retirement planning.