retirement advice

[mistysue]

What percentage of income do you think most adults should be putting toward retirement?
I'm trying to figure out where we should be so I can get on track. We are 30 now, the last thing I want to do is look back in 10 or 20 years and regret my lack of funding. I wish I didn't have to pay daycare- that would be an extra ~$1300/month!

 

[QVCshopper]

Well, my personal theory is to save as much as possible while younger. My husband maxes out his 401k, and I work part-time and save 50% of my income in the 401k. Plus, he gets a 4% match and I get a 6% match; he also gets a company contribution of 10%. And, we fully max out our Roths (another $5k per year for each of us). And, no, we are not wealthy, but we save A LOT. I don't think Social Security will be there for us, and we have everything we need right now. I don't think we'll always be able to save at this rate, especially once the kids hit college. But, by saving when we're in our 20s and 30s, we get all of those years of compounding on our side.

For your question, I suggest a retirement calculator. I know Vanguard.com had some good ones.

 

[silmarg]

Well, my personal theory is to save as much as possible while younger. My husband maxes out his 401k, and I work part-time and save 50% of my income in the 401k. Plus, he gets a 4% match and I get a 6% match; he also gets a company contribution of 10%. And, we fully max out our Roths (another $5k per year for each of us). And, no, we are not wealthy, but we save A LOT. I don't think Social Security will be there for us, and we have everything we need right now. I don't think we'll always be able to save at this rate, especially once the kids hit college. But, by saving when we're in our 20s and 30s, we get all of those years of compounding on our side.

For your question, I suggest a retirement calculator. I know Vanguard.com had some good ones.

Good advice here from QVC. I would recommend in this order:

• Contribute to a 401k the amount needed to max the match
• Contribute to a Roth IRA or Traditional IRA
• Contribute the remaining 401k amount to get you to the federal max

If you do all the above then also contribute to a 529 plan for the kids college education.

 

[mistysue]

I totally feel like a slacker now... I've been trying to set aside about 10%, which doesn't cap anything out.

At least the one thing to make it easier is we don't plan to save for the kids' college because DH is a professor. I have no interest in saving money toward it if they can go free or at a discount... we might lose some of the money plus we would probably just pay tuition OOP.

 

[QVCshopper]

I totally feel like a slacker now... I've been trying to set aside about 10%, which doesn't cap anything out.

At least the one thing to make it easier is we don't plan to save for the kids' college because DH is a professor. I have no interest in saving money toward it if they can go free or at a discount... we might lose some of the money plus we would probably just pay tuition OOP.

You're not a slacker. I'm just nuts about savings. Grew up broke, learned a lot; long story short, I just love to save! (Plus, I worked at a mutual fund company that taught me a lot.) I think we are the exception.

We have to save for college, too, but I don't think we'll ever be able to save enough for three kids. The prices are so high--I'm thinking about really trying to get a job at a college one day. Do you also get room and board for free? Or just tuition? No need to answer, but you might need to save for room and board. Otherwise, you're super lucky!

 

[silmarg]

I totally feel like a slacker now... I've been trying to set aside about 10%, which doesn't cap anything out.

At least the one thing to make it easier is we don't plan to save for the kids' college because DH is a professor. I have no interest in saving money toward it if they can go free or at a discount... we might lose some of the money plus we would probably just pay tuition OOP.

three kids. 30 years old. saving 10% for retirement. that is not so bad. Give yourself more credit...

 

[MAD4EEYORE]

My suggestion is to talk to a fee only financial planner. My Mom just retired and really learned alot from talking to one. She wishes she did this years ago. They opened her eyes (and mine) to the future. They talked to her about health insurance, life insurance, a will, as well as retirement. With you having small children they will also help you with college savings. She has meet with 2 differnent planners and has picked the one that was best for her. Check at your bank they may have one. Just make sure it's fee only and not one that earns a percent of your money.

10% is a great start. Don't feel bad about that at all.

 

[GrumpyOne]

10% is nothing to sneeze at and sometimes people think that "oh, I can't save much so I won't save anything". I agree with the order presented by silmarg. And remember that while you can money for tuition can be borrowed but it's difficult to get a loan for retirement.

 

[crjack]

Also, remember that as your income changes you can increase your amount as well so at some point if daycare goes down you can route more money into various accounts.

(I also lived the daycare bill so I understand your pain. Mine was the same as my mortgage at one point)

The most important thing is to start and continue to add to it. Make it a direct withdrawal and let it grow. The earlier you start the further ahead you will be.

Fidelity and Vanguard both have some very user friendly sites with calculators.

 

[lost*in*cyberspace]

My suggestion is to talk to a fee only financial planner. My Mom just retired and really learned alot from talking to one.

I completely agree. This will serve you much better than advice on an online discussion board.

 

[trinchick]

DH and I are 39 and have two kids. We max out the Roths (10K between us). Plus we do about 19% to our 401Ks (no company match for either of us). Also DH is a state employee and contributes to a pension system that either goes with him when he moves (though it makes like 1% a year) or pays out 80% of his salary if he retires from the state. This sounds like overkill, but we're planning to use the Roth contributions to fund college, if necessary (just the initial contributions, not the growth, so no penalties).

Like a PP, we're nowhere near wealthy, but I grew up with less and it's important to me to save.

I would love to take an earlier poster's advice about talking to a financial planner. When we looked into this, however, the fee was crazy - like $2000. I'm pretty frugal, so I balked and have not moved forward with talking to an advisor. For those who have bitten the bullet and worked with an advisor, do you think you've got your money's worth out of it?

 

[lisaross]

Thats a hard question as everyone has different priorities.

I worked for about 10 years before staying home with the kids and i always contributed between 5 and 10% to my 401K and the company did match.

My husband also has been contriubuting for about 15+ years - company also matches 6%. He has also been contributing between 6 and 10%. We now do 6% to get the match and then contribute about 200 a month into a Roth!

I don't have an exact "goal" to have saved - we are in our mid 40's

 

[mistysue]

We have to save for college, too, but I don't think we'll ever be able to save enough for three kids. The prices are so high--I'm thinking about really trying to get a job at a college one day. Do you also get room and board for free? Or just tuition? No need to answer, but you might need to save for room and board. Otherwise, you're super lucky!

The perks of working at a university depend on both where you work and what you do.
The way I look at it is that my kids will have some options but they need to go to an in-state school. There is a serious sticker shock if you try to add up every possible expense for an entire 4 years, but there are always ways to make it work. A state university here including dorm, meal plan and 15 credits is not that much more than I pay in daycare. Once we stop paying daycare that money will probably just funnel into some sort of general savings or investment so if we need it for college I will give it up if I need to.

 

[MrsPete]

I'll echo QVCShopper in saying that it's important to save from a young age. Compound interest is magic stuff: Magical in the way it makes your retirement money grow if you're contributing regularly, magical in the way it depletes your resources if you're paying it out to the credit card company. And the stuff that makes compount interest works is TIME.

Another big hint on making saving easier: Do it from your very first paycheck out of school. Start out assuming you have 80-90% of your paycheck to live upon. On the other hand, if you start out spending 100%, it's hard to cut back.

I put 15% in to a 401K. In addition to that, the state takes a portion of my paycheck (can't remember the percentage) for my pension.

My husband puts 20% into his 401K, and he has no pension.

Also, Social Security is retirement money . . . though none of us know what to expect by the time we're old enough to collect that poor investment.

 

[MrsPete]

. A state university here including dorm, meal plan and 15 credits is not that much more than I pay in daycare. Once we stop paying daycare that money will probably just funnel into some sort of general savings or investment so if we need it for college I will give it up if I need to.

My grandmother did something wonderful for us years ago: She kept our oldest child for free while I worked, and she asked that we deposit into a college savings account what we would've paid in daycare expenses. It satisfied everyone and gave us a big jump on college savings, but eventually she couldn't continue for health reasons.

If my girls stay in this area, I'll definitely offer them the same deal one day.

 

[mistysue]

My grandmother did something wonderful for us years ago: She kept our oldest child for free while I worked, and she asked that we deposit into a college savings account what we would've paid in daycare expenses. It satisfied everyone and gave us a big jump on college savings, but eventually she couldn't continue for health reasons.

If my girls stay in this area, I'll definitely offer them the same deal one day.

I wish somebody could have done that for me! We had to keep DD in half day daycare for 2 years of kindergarten on top of the full day daycare through age 5. I was talking to DH the other day and realized that I could have my house nearly paid off by now if I had had that money. (for the last 7 years I've put everything extra I had left at the end of the month toward the mortgage) I would have an extra 23 years of my life with no mortgage!
My next Disney trip would be so much more awesome in that world.

 

[disneysteve]

The general advice is to save 15% for retirement. That is 15% of your gross annual income, not counting any company match. Now when you are young and starting out, have little kids in daycare, etc., that may not be possible, but that should be the goal. What you should do is each time you get a raise, immediately increase the percentage going to savings so that you never miss that money. Get a 2% raise - increase retirement by 1%.

Another thing that we've always done is that at least once each year, we up the percentage going to savings (retirement and other). I'm now up to 23% and haven't felt any squeeze from it yet. January 1 I'll probably up it to 24% and see what happens. Just keep raising it until you find things a bit too tight and then back off a percent.