Retirement

[catmanjack]

I figured I would post a thread covering retirement as we all hope to be there someday.
I have hopes of retiring early myself.
Would be interested in others plans?
Investments?
401K?

Post plans and ideas for a successful retirement.

[MickintheHam]

I crossed to the other side this year. As strange as it sounds, I am learning how to SPEND money rather than save. Put as much as you can in a 401 (k) or other retirement account. But strike a balance between a 401(k) and a Roth. Use both. I would suggest that before 59 1/2 that you maximize the 401 (k) and after that age look to roll some of the money into your Roth, paying some of the tax bill before you retire.

Investing is a personal risk tolerance test. I think of the parable of the talents. The sevant who played it safe was rewarded with the least compensation. My risk tolerance is pretty high. You only lose money on your investments if you sell, which a prudent person is not going to do in a retirement account before they retire. I believe it is important to seek reasonable returns with minimal risk. Pick a dollar goal you want to achieve. How much will come from your contributions v. The return on your money will determine how much you need to contribute. Saving more earlier in life, allows your returns to kick in and may allow you to contribute less later.

The best thing you can do is take two hours to build a spreadsheet showing your monthly contribution until retirement. Use various rates of return to determine what you will have accumulated by retirement age. Do this once a year to recalibrate the spreadsheet with actual performance. Investigate ETF’s. They are great investment vehicles for those without the time to do much research. These funds mirror widely used indicies. Such as the S&P or Russell. You can probably have enough diversification using 3 to 5 funds. You can easily track their performance on your phone. The Fidelity and Vanguard websites are a treasure of free information. You will find short articles on every retirement and investment question you would likely ever have.

Good Luck and take control of your future.

[Doc]

Im 54 and am planning on semi retiring in 1 to 2 years. Fortunately I strated planning early due to a business partner who was older and as 50/50 owners, what he did from a business retirement was matched by me. That got me a huge base early in a IRA which recently is doing very well.

Sold my beusiness 2 yrs ago and took a large chunk of the profits and invested that in the market as well, enough that I can live off the earned income when I decide to retire. Most people wont have the option of selling a business.

I also have a fairly significant inheritance coming

My wife is a federal employee and will get a pension on 2 years but is negotiating that to work longer and get a larger one. Plus she has both a Roth and a govt run IRA that will convert to a private IRA when she retires

So as you can see my retirement plan is multilayered but mostly is invested in stocks. Fortunately I got into them heavily at the right time which is EARLY. The sooner you start the better you are. Dont start planning at 50. Start planning at 25. $1,000 invested at 25 should equate to $10,000 at 55

[KSRBEvans]

I've had 2 sets of examples. Neither of my parents saved for retirement and were eventually forced to go on disability in their 50s due to health issues. They didn't have a very good post-work life. That was a cautionary tale. My in-laws saved well for retirement and were able to stop working on their own terms. They had a nice post-retirement standard of living--able to travel some, etc. That was a good example.

I'm a federal employee so I'm putting in the max I can put in to receive a match, and also contributing to a Roth IRA. I'm very cautious about investing: I follow Dave Ramsey's approach of 50% in an S&P index fund, 25% in international and 25% in small cap funds. I just leave it alone and don't look at it--I know so little about investing that I figure I'll do a bad job of timing getting in and out of stocks/mutual funds and cost myself more money than just letting it play out long-term.

I'm hopeful that between our Roths, my TSP and our pensions I can retire in about 8-10 years. Whether I'll want to is another matter--my job's relatively low stress and I enjoy the interaction with clients and colleagues. It can be a pain to slog to work and back every day, but overall I think I'd miss it. (Maybe I won't feel that way in 8-10 years. )

My big idea for the first part of retirement is to do a big hike that we can't do now because of the time commitment. The idea of hiking the Appalachian Trail or Pacific Crest Trail really appeals to me, but the length of the hike is a little daunting. Mrs. BEvans and I are thinking about doing the Camino de Santiago first and going from there. Ultimately we'd like to live someplace where it's warm in the winter, but where that is we just don't know yet.

My biggest mistake financially was waiting so long to start saving for retirement. We'll get there, but if we'd started earlier we would've had to contribute a lot less/month to do so. You young folks, start now if you haven't started already.

[KentuckyWildcat]

Working until I am 98, then I'm going to party hard for 2 years before I leave this earth.

[KentuckyWildcat]

I would suggest that before 59 1/2 that you maximize the 401 (k) and after that age look to roll some of the money into your Roth, paying some of the tax bill before you retire.

Why not let the taxable income continue to grow?

[MickintheHam]

Why not let the taxable income continue to grow?

the earnings on the roth grow tax free forever. Capital Gains and dividends in an IRA or 401(k) are taxed as ordinary income. By converting it to a Roth before you retire everything in the Roth will grow tax free, saving you come taxes in retirement. At the end of life you will have paid less tax and you are paying the tax bill while you still have earning capacity. One great myth of the 401(k) propaganda is you will be in a lower tax bracket in retirement. Most likely if you have invested wisely, you will have the same income as before retirement. Also, moving the money to a Roth will reduce your required minimum distribution when you turn 70 1/2. The RMD could be problematic in a down market.I am keeping 2 years of RMD in a liquid state to avoid selling securities in a down market. Everything else is in the markets around the world, but heavy in the US.

There are no simple formulas to follow. Investing is different for everyone. But sometimes you are better off to pay the tax while you still have itemized deductions and exemptions. I wouldn't consider transferring to an Roth before 60.

[KentuckyWildcat]

Thanks Mick

I'm 38
I have a 403b. I have to put in 5% and the college puts in 10% so I'm pretty lucky with that match. Started this at 25. I also do $50 per month on top of that.
I have a Roth that I have not really been funding but I am about to start.

Just paid off the house so most of that money will start going into our Roths/403. Should have taken more time on the house and invested more, but sometimes you just have to agree to things....

Wife is wanting to do something in our backyard now (pool, sunroom, something else), but I'm hoping I can delay that to cash flow it...and stay debt free

Wife is on about the same path as me.

At 50 I can retire with insurance (but who knows at this point), but financially I'm hoping for 60. Ideally I would like to phase out my retirement by going to an 11 month and eventually 10 month contract. Maybe starting about 55. If I could do this, I would not mind to work for a while. I don't think I'll ever completely retire, I would get bored. But maybe I can work at my own pace at some point.

Social Security at my age....If it pays the light bill and water bill I will be ecstatic....

[catmanjack]

Thanks for the response, great ideas.
I am 47 would like to retire by 57.
Have a 401k putting 6% and company matches 3%.
It's a principle 401k.
The key for me is how to retire at 57 and get a monthly income? Those are the questions i have.

[KentuckyWildcat]

Annuity to turn that into a monthly income?

[MickintheHam]

Annuity to turn that into a monthly income?

I wouldn’t touch an annuity that I didn’t completely understand and The ones I do understand look like a screw job to me.

[CitizenBBN]

I hope to win the lottery or contract a fatal fast acting disease. Either way I avoid a bad retirement.

As they saw on Tralfamadore, so it goes. I'm a big believer in Tralfamadorian philosophy.

[KentuckyWildcat]

I wouldn’t touch an annuity that I didn’t completely understand and The ones I do understand look like a screw job to me.

Are you just drawing off the interest and principal as needs?

[MickintheHam]

Are you just drawing off the interest and principal as needs?

Earnings only. So far they have exceeded my last salary.

[Darrell KSR]

I hope to win the lottery or contract a fatal fast acting disease. Either way I avoid a bad retirement.

As they saw on Tralfamadore, so it goes. I'm a big believer in Tralfamadorian philosophy.

I'm on the same retirement plan.

[KentuckyWildcat]

So Mick,

You just manually/electronically transfer what you need as you need it? Sorry, I'm picking your brain, hopefully for myself and Catmanjack.

Anyone else on here retired?

[MickintheHam]

So Mick,

You just manually/electronically transfer what you need as you need it? Sorry, I'm picking your brain, hopefully for myself and Catmanjack.

Anyone else on here retired?

Yep.

[catmanjack]

Yes I am very interested. All questions and answers are appreciated.

[CitizenBBN]

I'm on the same retirement plan.

Here here. Work till you drop dead, hope there's enough in the checking account to cover the funeral. That's my family philosophy.

[MickintheHam]

Oops! kW and CMJ, some how in my first post two sentences were somehow dropped before I hit the post button. I should have caught it on KW’s follow up post.

Relative to rolling a 401(k) or IRA over to a Roth, it should have said a minimum amount of two years’ living expenses. In doing so, you won’t be forced to sell in a down market.

I should have also added that you should have in your 401(k) or IRA liquid funds for two years of your required minimum distribution. Both of these are to avoid a forced sale of securities in a down market cycle. If you believe the down cycle would run longer go for a larger amount. Sorry for the omission.

[KentuckyWildcat]

Thanks Mick. My favorite way of learning is thru other's experiences!

[MickintheHam]

Thanks Mick. My favorite way of learning is thru other's experiences!

Well,you better. You only get one shot to do it perfectly. Alas, I didn’t and don’t want anyone to struggle.

[catmanjack]

Mick, changing jobs going to sit down and email you and pick your brain if you don't mind. Could be a few weeks.

[MickintheHam]

I'd be happy to do what I can.