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retirement savings at 36 years old

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Money Talk > Retirement Planning

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Wino
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I think that formula would work if it was for retirement savings, but for net worth? I don't think so.

Less than 20% of my paycheck is payments, and that's only because the wife wanted a new car when she moved back to the US. In about a year, I should have zero debt.
Post Thu Sep 19, 2013 3:18 am
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Publius
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Wino, check out the book littleroc is talking about. I think there is even an online version. It is a very interesting case study of the save made millionare. That calculation is just a very small piece of the information presented. I never really liked that formula either because it seemed to be very aggressive for young workers and then shift to too conservative as one gets older.

For instance, someone making 50k at 30 having a net worth of 150k is doing very well, but if they are still making 50k at50 and have amassed only another 100k in 20 years, they seemed to have slipped to me.
Post Thu Sep 19, 2013 11:33 am
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MrNewEngland
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I'm a 35 year old that makes roughly $73K. Acccording to that formula I should have a net worth around $255,500. I am less than that (in the $230K range) but think I am doing pretty well - although I will admit I could be doing better.

I used the example being 25 earlier and how I had a negative or close to zero net worth. Conversely I would like to retire at 59 or 60. If I am making $75K (todays dollars) the formula would like me to be worth $450K. I would not feel comfortable or able to retire at that point, and I hope I can generate more than $200K (present day dollars) in the next 25 years.

Now I do realize that I should be furthering my career and making more by the time I retire, but I'd like to think I can plan for the worst. What if I need to make a career change and actually take a pay cut?
Post Fri Sep 20, 2013 5:39 pm
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littleroc02us
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quote:
Originally posted by MrNewEngland
I'm a 35 year old that makes roughly $73K. Acccording to that formula I should have a net worth around $255,500. I am less than that (in the $230K range) but think I am doing pretty well - although I will admit I could be doing better.

I used the example being 25 earlier and how I had a negative or close to zero net worth. Conversely I would like to retire at 59 or 60. If I am making $75K (todays dollars) the formula would like me to be worth $450K. I would not feel comfortable or able to retire at that point, and I hope I can generate more than $200K (present day dollars) in the next 25 years.

Now I do realize that I should be furthering my career and making more by the time I retire, but I'd like to think I can plan for the worst. What if I need to make a career change and actually take a pay cut?


It's just like buying and holding realestate, you can do calculations in many ways to help figure out what is a good investment like: cap rate, cash on cash return, vacancies, expenses, etc.. When trying to decide how much and how well your doing for retirement you can use many tools to see what your net worth is, but you could also use a compound interest calculator which would help you understand how much you could have in investments in 25 years when you say you want to retire. To me when you calculate networth it makes you realize how many liabilities you have vs. how many assets you have and your assets should be a much larger sum IMO to live with less risk and still achieve great wealth.

You mentioned that you have 230k in networth, but let's say that 100k of that is, if you calculate that investing 15% of your 75k salary a year for 25 years with an ROI of 8% after fees and inflation then you'd have 1.5 million. So remember to use many tools and use them to make good analysis of your portfolio.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Fri Sep 20, 2013 8:10 pm
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coaster
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quote:
Originally posted by MrNewEngland
What if I need to make a career change and actually take a pay cut?

If you have to make a choice, choose to do something you're very good at that you just enjoy the heck out of. That beats being rich any day in my book.

That being said, it's almost always possible to live on less. That part might suck, but you're going to be enjoying your new career so much that it won't hurt so much. Smile

~Tim~
Post Sat Sep 21, 2013 5:33 am
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nh70
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36 years old--planning for retirement  Reply with quote  

Hi there,

I am trying to get on track at age 36 for a retirement down the road, My assets are as follows: $7,500 in checking/savings, $4000 in a 403B with $160 total going in a month, and $5,500 in Roth and standard IRAs (star fund). My question is this: Should I be putting all of my extra money into my checking/savings account as it is a goal to build that to $12,000 as an emergency fund, or should I put extra assets into my IRAs? How much should i target as a goal to put into my IRAs? Thank you so much for all of your advice. I appreciate your support and help! Razz
Post Sat Sep 28, 2013 9:52 pm
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oldguy
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quote:
Should I be putting all of my extra money into my checking/savings account as it is a goal to build that to $12,000 as an emergency fund, or should I put extra assets into my IRAs? How much should i target as a goal to put into my IRAs?


We cap our EF at about $5000, I would avoid having $12,000 of "dead" money sitting idle - if you keep it in a 1% savings accountr it is losing buying power every year. But if you keep it in an 11%/yr Index fund it would double about every 6 to 7 yrs. And it is accessible immediately for emergencies.
So I would quit funding the savings account and start funding a Taxable ndex Fund - but bump up the age 59 1/2 accounts also if you can.
Post Sat Sep 28, 2013 11:26 pm
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nh70
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THanks, "Old guy". I recall you replied to my first posting, so i really appreciate your wise words. i understand to cut off the ef at $5000, but i was confused regarding your reply as to what i should do with the surplus. Should i continue funding the IRA star accounts with as much as possible, or is there a lump sum that I should budget to put into the iras? Should i invest elsewhere besides the iras? Sorry for not demonstrating more 'know how'. Obviously, finances aren't my forte, but thanks again. Very Happy
Post Sun Sep 29, 2013 12:20 am
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oldguy
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quote:
Should i invest elsewhere besides the iras?


We use the Vanguard SP500 Index Fund for our taxable account, it is immediately accessible as a fallback EF - and it has returned about 11%/yr over the past 30+ yrs for us.
Post Mon Sep 30, 2013 3:18 pm
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MatthewL
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That formula actually makes a lot of sense and while it may set a slightly high target for people to aim toward, isn't that better than setting one too low?

I'm not quite there yet, but found that I'm quite close, which at 27 I think is a good thing!
Post Sun Oct 27, 2013 3:15 am
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Wino
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quote:
Originally posted by oldguy
We cap our EF at about $5000, I would avoid having $12,000 of "dead" money sitting idle - if you keep it in a 1% savings account, it is losing buying power every year. But if you keep it in an 11%/yr Index fund it would double about every 6 to 7 yrs. And it is accessible immediately for emergencies.
So I would quit funding the savings account and start funding a Taxable Index Fund - but bump up the age 59 1/2 accounts also if you can.


I keep a few thousand in checking in case of emergencies, but I have no savings account at all. Why? "Free checking" is paying nearly as much and it is much more readily accessible. If I have an emergency, I have credit cards to get me through until I can cash out some mutual funds, plus I can float almost any normal emergency one can imagine.

I don't understand those who say to keep 6 months worth of cash on hand. You are guaranteeing about 4% per year loss, to hedge a possible 20% loss if you MUST sell during a down market. If you don't have at least one fund with some bond holdings - which should maintain much of its value as your equity funds fall - then you're not diversified enough. So, if your stock funds are down 40% (2008, anyone?), sell your bond-hedged funds during your emergency.
Post Mon Oct 28, 2013 3:55 am
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coaster
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For most people who aren't as financially "savvy" as our regular members are, the wiser and more prudent course of action is keep three - six months' worth of living expenses in ready cash for the unknown. The several percentage points a year lost to inflation is a reasonable price to pay for the feeling of security it gives them to go about their other financial activities; the most important one being that they aren't going to be nearly as tempted to panic-sell their retirement funds when the market crashes. (I've seen it happen, and I told her she was going to regret it, but she cashed in her 401(k) anyway during the 9/11 crash)

~Tim~
Post Mon Oct 28, 2013 5:02 am
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Wino
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I'm forced to have a lot of my investments in taxable accounts due to various factors. Since I don't get any tax advantage, I also don't pay any penalties on withdrawal. For those who do get tax advantages from their investments, keeping a larger emergency fund does make comparative sense if your only other option is to withdraw from a retirement account.
Post Mon Oct 28, 2013 5:37 am
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Paul.Ashworth
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“Learn from yesterday, live for today, look to tomorrow, rest this afternoon.”
- Charles M. Schulz

Smile

I pretty much follow this philosophy. Certainly plan ahead by all means but don't let it spoil your "today"! You shouldn't be in a job to solely get enough money for your retirement, you have a whole life to live, not just the final years of it.
Post Tue Oct 29, 2013 10:22 am
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