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Am I Saving Enough for Retirement

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giacona
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Am I Saving Enough for Retirement  Reply with quote  

Hello

I wanted to get some advice to see if I am saving enough for retirement. I have been at my current job 1 yr 7 months. I receive a 5 % match. I get a dollar for dollar match for the first 3% and .50 cent match on the remaing 2%. I don't do anything above 5% in my 401k. I currently have a little bit under 12,000 in my 401k. I am also 100% vested here.

I also have a roth IRA with just under 25,000 in it. Right now I am investing 100 a month sometimes more. This roth IRA money came from previous employers 401K money I took when I left. I rolled it into a roth IRA and paid the taxes which I think was a smart move.

I am 33 years old and single. My Plan is to continue investing 100 a month for the rest of this year and try my best and max out my roth IRA next year and continue that going forward. I don't have any debt besides a car payment, and if all goes well I should have that paid off by March. Once the car is paid off I can go full steam ahead.

Would the 401k and the roth IRA maxed out be sufficant enough to have a successful retirement, or do I need to put more into the 401k?
Post Sat Oct 19, 2013 1:35 pm
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clydewolf
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Re: Am I Saving Enough for Retirement  Reply with quote  

quote:
Originally posted by giacona
Hello

I wanted to get some advice to see if I am saving enough for retirement. I have been at my current job 1 yr 7 months. I receive a 5 % match. I get a dollar for dollar match for the first 3% and .50 cent match on the remaing 2%. I don't do anything above 5% in my 401k. I currently have a little bit under 12,000 in my 401k. I am also 100% vested here.

I also have a roth IRA with just under 25,000 in it. Right now I am investing 100 a month sometimes more. This roth IRA money came from previous employers 401K money I took when I left. I rolled it into a roth IRA and paid the taxes which I think was a smart move.

I am 33 years old and single. My Plan is to continue investing 100 a month for the rest of this year and try my best and max out my roth IRA next year and continue that going forward. I don't have any debt besides a car payment, and if all goes well I should have that paid off by March. Once the car is paid off I can go full steam ahead.

Would the 401k and the roth IRA maxed out be sufficant enough to have a successful retirement, or do I need to put more into the 401k?

You are doing well with your savings for retirement.

Do you have an emergency fund? This should be primarily cash that would provide about 6 months of living expenses.

The advantage of contributing an additional amount to the 401k is your income tax will be lower today. Then in your retirement years you are likely to also be in a lower tax bracket as compared to today. Many states that have an income tax also exempt some or all of your retirement income from that tax.

Contributing to your ROTH IRA has some ups and downs too. Your ROTH contributions are taxed at your current tax rate but then in your retirement years distributions are tax free.

Is your current savings sufficient for your retirement? Only you can determine that.
You have 30 plus years for your savings and for growth.

Once your car debt is gone, you should begin saving some of that payment for your next car. Paying cash for the car, a depreciating asset, is always best.
Post Sat Oct 19, 2013 3:08 pm
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coaster
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I also think you're doing pretty well. If you want to put some numbers on it, you can google "retirement calculator". There are any number of them of varying complexity. This one seems to work fairly well and is relatively simple:

http://www.kiplinger.com/tool/retirement/T047-S001-retirement-savings-calculator-how-much-money-do-i/index.php

Remember, the results are entirely dependent on the assumptions. Running the same numbers through several different calculators isn't a bad idea; you can average the results. Also, keep in mind many of these calculators are offered by entities with something they want to sell you.

Best wishes and good luck Wink

~Tim~
Post Sat Oct 19, 2013 8:53 pm
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MatthewL
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You're definitely on the right track. It's nice to see that you have your ducks in a row and making a sincere effort to ensure you have enough money in retirement.

Your question is a question that keeps me up sometimes too, but at the end of the day all we can do is plan as strategically as possible based on the information we have available to us, because nothing is guaranteed. But if you fail to plan, then you plan to fail.
Post Sun Oct 27, 2013 2:57 am
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Wino
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$400 per month for 30 years (not counting the $25K already there) is about $900K at 10% average return. Including the $25K now there, that number becomes $1.5 million.

This ignores the "extra" money you can now do (I think it's up to $5500 per year now), and any increases in the amount you can invest in the future. Assuming 4% average inflation over that time, the $1.5M will have the purchasing power of $450K today.

Judge for yourself if that's enough for your retirement.
Post Mon Oct 28, 2013 5:47 am
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littleroc02us
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One question I would ask is "Are you planning on carrying a mortgage into your retirement?" Because if you are your going to need a lot of money to cover that expense. People forget that if you don't have a mortgage in retirement and no debt, that you don't need anywhere near the same amount saved to retire on.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Mon Oct 28, 2013 3:53 pm
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MrNewEngland
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Maybe I am in the minority here, but I wouldn't say you are doing that well for retirement... as of right now. I think your plan to get there is good but you have $37K saved as a 33 year old.

I don't think you're doing poorly but as of right now that's not really an impressive total. However IF you do execute your plan I think you'll be on track in no time.
Post Mon Oct 28, 2013 8:47 pm
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Paul.Ashworth
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Depends how you look at it. I bet that's a damn sight more than the majority of the US at that age but yeah, a long way to go. Not a bad start by any stretch of the imagination.

How much will you be planning on investing a month once the car is paid off?
Post Tue Oct 29, 2013 10:36 am
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giacona
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Thanks for all the great reply's. It makes me think I am on the right track


Once My car is paid off my goal is to max out my Roth IRA every year while continuing to invest me into my 401k up to the company match. I may not be able to do all of this on a monthly basis as other things may come up from time to time. However the good news is with IRA's I will have until around April 15th to make any contributions for the previous year.

I am also working on building up my emergency fund a little more while continuing to invest.
Post Sun Nov 03, 2013 3:44 pm
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oldguy
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quote:
Once My car is paid off my goal is to max out my Roth IRA every year while continuing to invest me into my 401k up to the company match.


But it's important to get your priorities. Take a look at wino's numbers - new momey into your Roth will be $900,000, your existing $25k adds almost $600,000. Ie, 'early' money has the biggest effect.
You are fixating on paying off your car first - ie, you are allocating a few $1000 to a car loan at the risk of derailing a $900,000 plan. Personally, I keep our car loans for the full term and direct our income toward making new money.
Post Thu Nov 28, 2013 6:46 pm
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jscottfinancial
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Re: Am I Saving Enough for Retirement  Reply with quote  

It's the million dollar question. Some good tips and advice from the replies so far. If you are into "rules of thumb"; which do have some use, then you might want to take a look at this article from 2012 in USA Today.

http://usatoday30.usatoday.com/money/business/story/2012/09/12/fidelity-issues-new-retirement-savings-guidelines/57756922/1

Again, there are a lot of personal factors that you need to take into account but sometimes a "rule of thumb" can help you determine if you are rowing in the right direction. I also agree with another posts that you might want to search for planning calculators which there are many out there.

My biggest piece of advice is that you should approach retirement savings personally. Meaning, you should spend some time developing a savings plan that is meaningful to you and your goals, execute on that plan, then re-visit yearly to ensure you are on track.

Good Luck! Smile
Post Tue Dec 17, 2013 7:09 pm
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Wino
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Re: Am I Saving Enough for Retirement  Reply with quote  

quote:
Originally posted by jscottfinancial
(snip) ...you might want to take a look at this article from 2012 in USA Today.

http://usatoday30.usatoday.com/money/business/story/2012/09/12/fidelity-issues-new-retirement-savings-guidelines/57756922/1

(snip)

I have some comments about this article: It talks about "savings" levels as recommended by Fidelity. How would Fidelity respond if instead of "savings" one had "other than monetary" investments? The first and easiest example that comes to mind is real estate.

Let's say I make $100K per year (easy math for the example). According to the article, I should have $600K savings at retirement. What if, instead, I have a $500K house that is paid for and $300K savings? Am I behind the curve or ahead of the curve?

Let's change that even more and say I have $100K in mutual funds/retirement accounts, a paid-for $100K house, and four $100K rental houses, averaging $XXX per month positive cash flow. Am I ahead of their curve, on their curve, or behind their curve?

It says that one needs 70% to 85% of one's income per year to maintain the same lifestyle while in retirement. This is patently false for two reasons:

1) If I'm saving for retirement, I probably am living on 85% of my income while working, so if I make 85% without work-related expenses, I'll live better in retirement than while working. I am living on much less than 85% of my income, so these numbers are meaningless for my lifestyle.

2) There is no mention of inflation. If one is not earning income, then one's income is actually gains minus inflation (assuming only funds/currency-based investments as the article's allusion tends to indicate).

I think the article is too simplistic, and frankly misleading, as I tried to illustrate above. I don't like "yardstick" measurements. Excel and future value calculations are too easy to do to rely on such simplistic measures. Someone who has $200K-plus in investments should really be able to do a simple formula on a spreadsheet, or work a financial calculator, for his own good.

I'll step off my soap box and end my mini-rant now.

Please note that I'm discussing the article, NOT demeaning anyone's input. I think the article and my response are good fodder for discussion. As I'm at least borderline Asperger, it seems when I put forward statements, the statements are often misconstrued to be "arguing" or "attacking" the statements and ideas of others. Let me state that this is not my intent in the least.

Of course, maybe the article is doing the analysis all as "savings," because that's the type of instrument that Fidelity sells, so it is in Fidelity's best interest to ignore all other-than-monetary investments. But it's not in an investor's best interest to do so.
Post Wed Dec 18, 2013 2:03 am
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