Jon99 said:
After reading the post about retirement savings my wife and I started talking, we are both 38 years old and we have almost ZERO saved, though we did just start a Roth and plan on investing a few hundred dollars a month...
No, its not THAT bad..
We are both teachers, this year we will make about $120K, when we retire our pension will pay us 75% of our highest earning years, plus a 3% COL increase.. On top of that, we have inherited 80 acres of farmland that will bring us about $12K a year in revenue (that income currently goes to my parents)...
Is this pretty sound strategy? Or are we missing the boat?
I'm a teacher too, and I think our pensions are about as stable as anything is today; however, that's NO guarantee, and I don't want to base my future on something that could possibly change! I agree with the people who say it's risky to have all your eggs in one basket. My random comments:
You're just a few years younger than I am. Your future pension benefits, of course, are based upon you working probably 15 or so more years. Since teaching isn't so much a physical job (like construction), it's unlikely that health concerns would prevent you from completing your remaining years. However, it's wise to have disability insurance in place in case your work years must be interrupted for any reason.
If you're like me, you'll complete your 30 years of teaching at around age 55, but your social security won't kick in until -- what? -- 67 or so? You'll still be young. Will your pension be enough? Will you work part-time at a different job? Your pension plan might have something called "social security leveling". That means that you agree to accept a smaller amount of pension -- for life. From 55 (or whatever age you retire) to 67, the state pays that reduced amount, PLUS the amount you'll eventually receive from SS. Then at at 67, the state continues to pay you the reduced amount of pension and the feds kick in your SS. These are decisions to make once retirement is closer and you know better the state of your health, etc.; however, it's a good idea to have a plan in mind.
What plans do you have for the farmland? What does it cost you to own it? My family owns farm land too, and it's pretty much a break-even deal; the taxes and the income are pretty close. Is this an asset you could sell, if necessary?
Do you have any outstanding debts? Credit cards, etc.? If so, you need to pay them off as soon as possible. They're taking away from your future earnings.
Do you currently own a home? If so, that's another big asset in your favor. Where do you intend to live during retirement?
Along with your pensions, will you receive state health care for life? I ask because that's part of my pension plan -- I'll get basic health coverage, and I can buy basic health coverage for my husband. In addition, I expect to buy a supplemental insurance plan and long-term care insurance. Health care is the biggest question mark in retirement planning. It's hard to predict or control those costs.
The Roth is a good start, but you should do more -- and soon so that the magic of compound interest can work for you. If you have long-term savings, a pension, social security (though it is something of a question mark), health insurance, and a paid-for house by the time you retire, you'll be pretty well set. Your holdings will be diversified so that if one part of the puzzle should disappear, you might feel the pinch, but you won't be lost.
Finally, I personally dislike the idea of saying you need to replace a certain percentage of your income for retirement -- it just doesn't make sense to me. I think it is more sensible to consider the lifestyle you intend to lead during retirement and make sure you can fund it. Let me explain: Right now my husband and I have two young children, and we spend a great deal on them! We're looking at a set of braces for each one, we're saving for their educations, soon we'll be paying car insurance for them, plus we're saving for our retirement -- something we'll stop doing once we retire . . . we have a lot of expenses that will be gone by the time we retire!
So we could enjoy the same lifestyle we do now, but we could spend less money. We also intend to sell our large house and buy a condo on the lake (our house is paid for, so hopefully that'll be something of an even trade), and we want to travel a great deal during our retirement years. Once we're both retired, we intend to cut back to one car, which will be a huge savings. I expect to spend more on insurance as we age. So, our expenses will be different -- it makes sense to me to be specific about your wants rather than to aim for a random percentage.
