| Looking toward retirement |
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Kenstill
Member
Cash: $ 2.15
Posts: 10
Joined: 11 Aug 2005
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| Looking toward retirement |
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Hello all.
Trying to sort through all the various threads, and determine the best plan for my retirement.
I'm a 28 year old married man, working for a very stable Fortune 500 company. My wife graduated from school about a year ago, and is a Physician Assistant. Together, we make about 110k a year. We live in the Denver area.
We own a house (owe about 230k on it, it's worth about 240k) which is where we live.
We also own a townhouse (owe about 145k on it, it's worth about 170k), which I currently rent out for a profit of about $200 a month.
My wife tallied up about $90k in student loan debt during her graduate school experience, before we were married. Because of the clinic at which she works we are eligible for (and are benefiting from) a government plan whereby her student loans are being repaid. They give us $25k a year to pay it off. Two and a half years left until her debt is gone.
I have a 401k through work with a balance of about $30,000. I'm contributing 10% of my income. The company matches 50% of your contribution, up to 6%. So effectually, I'm contributing 13%.
I opened a Roth IRA through Fidelity a few years ago, but I haven't contributed since.
For some reason, there's a part of my brain that hates the idea of owing money to banks, so the plan I've been considering has been paying off the mortgage on my house or townhouse. I am able to save about $1,500 a month, after expenses and 401k.
I'm convinced that contributing the max to a Roth IRA for both my wife and I (I believe that would be 6k, right?) is a good idea. That leaves me about 12k a year extra to invest. What do you folks suggest?
Thanks in advance for the help.
-Robb
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Thu Aug 11, 2005 7:58 pm |
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MattL
Senior Member
Cash: $ 46.85
Posts: 234
Joined: 25 Jun 2005
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| Re: Looking toward retirement |
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quote:
Originally posted by Kenstill
Hello all.
Trying to sort through all the various threads, and determine the best plan for my retirement.
I'm a 28 year old married man, working for a very stable Fortune 500 company. My wife graduated from school about a year ago, and is a Physician Assistant. Together, we make about 110k a year. We live in the Denver area.
We own a house (owe about 230k on it, it's worth about 240k) which is where we live.
We also own a townhouse (owe about 145k on it, it's worth about 170k), which I currently rent out for a profit of about $200 a month.
My wife tallied up about $90k in student loan debt during her graduate school experience, before we were married. Because of the clinic at which she works we are eligible for (and are benefiting from) a government plan whereby her student loans are being repaid. They give us $25k a year to pay it off. Two and a half years left until her debt is gone.
I have a 401k through work with a balance of about $30,000. I'm contributing 10% of my income. The company matches 50% of your contribution, up to 6%. So effectually, I'm contributing 13%.
I opened a Roth IRA through Fidelity a few years ago, but I haven't contributed since.
For some reason, there's a part of my brain that hates the idea of owing money to banks, so the plan I've been considering has been paying off the mortgage on my house or townhouse. I am able to save about $1,500 a month, after expenses and 401k.
I'm convinced that contributing the max to a Roth IRA for both my wife and I (I believe that would be 6k, right?) is a good idea. That leaves me about 12k a year extra to invest. What do you folks suggest?
Thanks in advance for the help.
-Robb
Definately max out both of your ROTH IRAs.
Save up 6 months of salary in a money market as an emergency fund.
Also check to see if her place of employed has any retirement options.
I would then open a low expense ratio, tax efficient mutual fund account.
Debt Elimination
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Thu Aug 11, 2005 8:21 pm |
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Kenstill
Member
Cash: $ 2.15
Posts: 10
Joined: 11 Aug 2005
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| Re: Looking toward retirement |
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quote:
Definately max out both of your ROTH IRAs.
Save up 6 months of salary in a money market as an emergency fund.
Also check to see if her place of employed has any retirement options.
I would then open a low expense ratio, tax efficient mutual fund account.
Will do on the Roth's. Her job does have some retirement options, but they do not require matching, so currently we're just letting them do their part, with no contribution from us.
Can you please give me some information about the mutual fund account you're talking about? In some other threads I've seen people mention Vanguard, and they've said it's low cost. In terms of "tax efficient" I don't really know what that means. Can you please enlighten me a bit more on that?
Thanks in advance.
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Thu Aug 11, 2005 9:15 pm |
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MattL
Senior Member
Cash: $ 46.85
Posts: 234
Joined: 25 Jun 2005
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| Re: Looking toward retirement |
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quote:
Originally posted by Kenstill
quote:
Definately max out both of your ROTH IRAs.
Save up 6 months of salary in a money market as an emergency fund.
Also check to see if her place of employed has any retirement options.
I would then open a low expense ratio, tax efficient mutual fund account.
Will do on the Roth's. Her job does have some retirement options, but they do not require matching, so currently we're just letting them do their part, with no contribution from us.
Can you please give me some information about the mutual fund account you're talking about? In some other threads I've seen people mention Vanguard, and they've said it's low cost. In terms of "tax efficient" I don't really know what that means. Can you please enlighten me a bit more on that?
Thanks in advance.
Yes, Vanguard is my choice. Fidelity is good also, but I like the guidance, service and material that Vanguard provides. You can learn about tax efficient funds on their site. They have a ton of good info. You can open an account directlythrough them.
If the extra money is earmarked for retirement, I would utilize your wife's plan as much as possible before going outside of tax deferred accounts.
Do you have any kids?
Debt Elimination
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Fri Aug 12, 2005 3:17 pm |
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Kenstill
Member
Cash: $ 2.15
Posts: 10
Joined: 11 Aug 2005
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We do not have any kids yet, but we're looking toward doing that in a couple years after her student loans have been repaid.
When you say that I should work through her retirement plan, what do you mean? We are currently getting their contribution already, so is there any benefit to having her put money into that 401k instead of putting it into an account with vanguard? Or just upping my own contributions?
The way I rank retirement saving priorities currently are as follows: (Please let me know if you disagree)
1. Contribute to 401k enough to get full matching benefits from the company.
2. Contribute the max to a ROTH IRA for both myself and my wife.
3. Contribute more to the 401k (up to 10%) of my salary.
4. Pay down mortgages.
5. Pay into another mutual fund account.
Up to now I have not reached 5, because number 4 is a pretty tall order. Would it be wiser for me to invest that money I've been putting away for paying off a mortgage?
Thanks again for your help.
-Robb
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Fri Aug 12, 2005 3:40 pm |
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MattL
Senior Member
Cash: $ 46.85
Posts: 234
Joined: 25 Jun 2005
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quote:
Originally posted by Kenstill
We do not have any kids yet, but we're looking toward doing that in a couple years after her student loans have been repaid.
When you say that I should work through her retirement plan, what do you mean? We are currently getting their contribution already, so is there any benefit to having her put money into that 401k instead of putting it into an account with vanguard? Or just upping my own contributions?
The way I rank retirement saving priorities currently are as follows: (Please let me know if you disagree)
1. Contribute to 401k enough to get full matching benefits from the company.
2. Contribute the max to a ROTH IRA for both myself and my wife.
3. Contribute more to the 401k (up to 10%) of my salary.
4. Pay down mortgages.
5. Pay into another mutual fund account.
Up to now I have not reached 5, because number 4 is a pretty tall order. Would it be wiser for me to invest that money I've been putting away for paying off a mortgage?
Thanks again for your help.
-Robb
That's how I would do it. Assuming this is retirement savings I would also max out her 401k even beyond any matching before contributing to a taxable account.
Your list is almost exactly like ours though, except number 5 is tax deferred contribution to my son's Education Savings Account (AKA Coverdell). It's only $2k per year but it is tax deferred upon withdrawal (for educational purposes).
Some people will tell you to not pay down your mortgage because it can be put to better use. I see nothing wrong with doing after all other savings are maxed out. I also like the thought of not having a mortgage payment. It's a personal choice.
Debt Elimination
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Fri Aug 12, 2005 4:01 pm |
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sayyes
Preferred Member
Cash: $ 11.60
Posts: 143
Joined: 02 Jul 2005
Location: Newport, RI
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Kenstill,
I'm not sure if I totally agree with the rankings of your savings priorities. I agree with MattL that it's a personal choice, but I've outlined what you *should* do on my website:
http://www.ManageYourDollars.net/SaveMore
Now, just because you *should* do something doesn't mean that it's right for you. If you'll sleep better when you have your mortgage paid off, then maybe you should. However, you'd be missing out on alot of tax breaks.
Just FYI, I talk about why you shouldn't pay down your mortgage on this page:
http://www.ManageYourDollars.net/ReduceDebt
I hope this helps!
Money Blog | Financial Goals Explained | Bargains Online | Refinance
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Fri Aug 12, 2005 7:43 pm |
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efflandt
Senior Member
Cash: $ 80.45
Posts: 401
Joined: 25 Apr 2005
Location: Elgin, IL USA
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quote:
Originally posted by Kenstill
The way I rank retirement saving priorities currently are as follows: (Please let me know if you disagree)
1. Contribute to 401k enough to get full matching benefits from the company.
2. Contribute the max to a ROTH IRA for both myself and my wife.
3. Contribute more to the 401k (up to 10%) of my salary.
4. Pay down mortgages.
5. Pay into another mutual fund account.
I would probably change #3 to "max out 401k" if you have funds that could do better than interest on your mortgage or better than other investments after taxes. I don't know how others or fairing, but with less than optimum timing of fund shuffling and a bit overweighted internationally, my 401k mix is up 6.63% YTD after Friday's drop (gained 15.25% in 2004).
And 4 & 5 might be flipped depending upon whether you have an emergency fund yet or how knowledgeable you are about investments and risk. Early payments do not forgive payments due, so if something happens (a new roof or furnace or someone loses their job) it is better to draw from savings or sell something than not making payments. I actually have a HELOC related to my fixed rate loan, but I plan on never using it.
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Sun Aug 14, 2005 5:17 pm |
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