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Retirement Plan - I have no clue where to begin - HELP!

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Island Girl
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Retirement Plan - I have no clue where to begin - HELP!  Reply with quote  

Hi Everyone,

I'm new here, first my apologies for the very long post. I'll be 37 on Tuesday and have been thinking about retirement very heavily for the past few months. I do not have ANYTHING saved for my retirement at all - $0.00. I am beginning to get very stressed about this and I have no idea where to start. I make $60,000 a year and I'm in serious debt - $36,000. I have a part time job at a hotel so I can work faster to pay off the cards but for the 18 months I've been there, I am not seeing the results as something keeps coming up.

My main job does not offer any benefits - I'm a contract employee. I'm going to school to finish my business degree (should be finished Dec. 2015) and would like to move into HR. This will hurt me some as I have no experience so I know I will have to take a drastic pay cut and start from the ground up. This is the main reason starting next month I'm on a mission to pay off all my cards and a few other bills by Dec. 31, 2015.

My hubby works part time for the Federal Government and has been interviewing for another job at which will also go towards paying down the credit cards. With that said we have 2 kids - one is in college she's doing well on her own and our son is in his last year of high school. We have a mortgage and one car payment. My part time job offers 401k which I do not contribute and so does hubby - he also does not contribute because we want the $$$ to pay our bills. But is this a bad idea? I have no idea where to begin at my age I should have something and I have nothing saved. I know I have to work on the debt and it WILL be all gone by Dec. 2015. I can envision what I'd like... but I have no idea how to begin getting there. I saw on old post below by oldguy and I love his advice but have no idea where to start. Any advice would certainly be welcome and greatly appreciated.

I did what Rich did only it was 50 yrs ago.

Back then there were no on-line companies, no index funds, no ETFs, no 401k's no IRA;s, no Roth's - that was all invented later (mostly after 1980). So we had to buy stocks or managed mutual funds from full-service (high fee) stock brokers. And, if you did it well, it worked.

But it is way easier now - eg, target funds are a recent product, they are a one-stop-shop, they are diversified, they auto-allocate to match your age, and the are sold by the major no-load mutual fund companies (low fees). If I was a young 30-yr-old, I would buy a Target2050 Fund from a company such as Vanguard, and put it in all 3 account types - ie, your posttax account, your pretax acoount, and your taxable account.

To give you an idea what to expect - $10,000/yr at 11%/yr for 30 yrs is about $2.2M. If you max the 401k limit (that's what I did) it will be about $3.6M. And if you take the ~$5000 tax break that you get from contributing $16,500/yr, and apply it to your Roth, you'll have $1.1M in that account (for free). And then it's a good idea to fund a taxable account so that you have some instantly available, pre-59 1/2 money for early retirement, for rental houses, cars, kid's college, etc.
Post Sun Sep 21, 2014 11:19 am
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Wino
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Re: Retirement Plan - I have no clue where to begin - HELP!  Reply with quote  

quote:
Originally posted by Island Girl
I saw on old post below by oldguy and I love his advice but have no idea where to start. Any advice would certainly be welcome and greatly appreciated.

You are 37 years old. Conservatively, you have 30 years until retirement, and probably more. That's more than enough time to develop a retirement fund. I would suggest you continue paying down your debt as quickly as possible. Once you have zero debt, you can easily invest $10K per year into retirement. Assuming nothing by the $10K, that's $300K. Assuming even 8% returns, that's $1.24 million in thirty years. That would most likely be about $900K or so in today's dollars. Withdrawing that at 4% per year, you'd be able to pull out $3K per month. You should be making approximately $6K per month (again, at 8%), so you could reasonably withdraw $5K per month, without touching your principle.

You have plenty of time. I suggest you start with something like the S&P 500 fund at Vanguard, and once you have enough to go admiralty shares, shift to something else that's more in line with your proclivities (more heavily in bonds if you're conservative; more heavily in small caps if you're less risk averse).

The main thing is to start the account now, and forget about it (except to purchase more shares every month).
Post Sun Sep 21, 2014 12:17 pm
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oldguy
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It sounds like your family income is well above average the US average - your main job pays $60k, and your hubby's jobs & your 2nd job probably add another $40k.

You apparently have a spending problem rather than an income problem - can you identify to yourselves where you are spending $36,000 more than you make? You'll need to find and solve that issue first. Also, did you buy anything substantial with the $36,000 loans - ie, something that can be sold? Boats, extra cars, motorcycles, ATVs.

As for more education - the reason to educate yourself is to qualify for better jobs - if your goal is to qualify for a lower paying job (HR), you might want to rethink that.

The main reason so many people fail at wealth building is simply that they never start. It takes over 30 yrs so you need to give yourself 30 yrs - if you postpone the start you cannot catch up. Compound interest is amazing IN BOTH directions - if you use it backwards it puts you deeply in debt at an alarming rate - and if you use if forwards, you'll have a million or two. So if you want $2M in 30 yrs, you must invest $10,000/yr, no other way - unless you hit the lottery. Smile
Post Sun Sep 21, 2014 4:10 pm
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RetirementER
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First off, Happy Birthday! Second, congratulations for being one of the ones who has woken up before retirement planning becomes an extremely difficult and creative challenge.

My colleagues are right that you have time to get a plan in place but it does take a plan. Decide that you will control the spending, get out of debt and start on the path that you want.

As for the debt, have you considered consolidating your debt into one (hopefully) lower interest payment and getting rid of the cards? If you're not in a position to get a consolidation loan, then pay the minimum payment on all debts except the highest interest rate card or loan. Put all of your excess debt money towards that debt until it's clear, then retire the card. Once that's done, attack the next highest rate debt and repeat until they're all gone. Not sexy but it works.

Go for it now while you still have time.
Post Wed Sep 24, 2014 3:01 am
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Island Girl
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I have not considered consolidating the debt.. we are just going to pay it all off in a year. This includes 3 credit cards and one car payment... no bad spending habits but about 6 years ago I used the card to pay my school tuition. I am paying them off based on the snow ball effect - I'm paying the one with the highest interest rate off first then on to the next. I'm definitely on a mission and will absolutely do so by the end of next year and will be watching this board like a hawk. Thanks to all who took the time to give me advice.
Post Wed Oct 08, 2014 7:17 pm
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louiefrias
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The No. One thing you can do for your retirement is...  Reply with quote  

Don't get anywhere NEAR the governmental sponsored retirement plans. They're not designed for you. They're designed for Uncle Sam.

1. BUY "Tax free retirement" by Patrick Kelly.
2. Read it.
Post Wed Oct 05, 2016 9:01 pm
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