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A fellow employee once told me to live by these 4 rules. He talks to this day about people breaking rules 1 and 2, himself included lol.
1. Don't get married
2. Don't have kids
3. Put at least 10% into your 401k
4. Never buy anything from a TV infomercial
Quoted from SantaEatsCheese:I am still young (34), but believe in the following tenants and is my own financial strategy. My circumstances may be unique, but this is how I am proceeding and what is working for me.
Education: Get a new degree or certification every year. Keeping your skills relevant is the key to ensuring you have a skill set that will carry you into retirement. I know too many old farts in my industry who let their skills grow tepid and as a result couldn’t find a job when forced out in their 50s and started a second low paying career late in life. I have skill sets in project management and cyber security. MBA, MS, PMP, CISM, CISSP, CCSP, PMI-ACP, CSM, CSPO, Proj+, A+, Net+, Sec+, ITIL means jobs security and income. I have started saving for the kid’s college early. I could also see going back to school for another undergrad as I approach retirement age. I am a few months away from a History undergrad now.
Housing: Don’t go nuts. I believe that eliminating payments is the key to growing your wealth. No more than 25% of your income should go to rent/mortgage, and if a mortgage no more than a 15 year. If all goes according to plan will have the house paid off before kids start college.
Lifestyle: How much do you really need? I like the pinball hobby because you can get out what you put in so how expensive is it really?
Debt: Other than the house, don’t do it.
Investing: Maximize your tax differed accounts. Max out the ROTH, and the 401k at least to the employer match, if not to the max. Put your funds in aggressive ETFs and mutual funds. Do I think my funds will go up next year? Maybe. Do I think they will go up in the next 31 years… yes. I have a small (~10% of retirement) day trading fund for my risk taking. Not my whole nest egg.
Affairs: Don’t do it (can’t control everything your spouse does, but keep them happy). Happy wife happy life.
Retirement Age: As far as my “close to retirement plan” I plan to keep working as long as I can, but maybe not as many hours as I can. I happen to be one of those weird people that likes their job. I enjoyed my time in the Marine Corps, and I enjoy my time in government contracting. I have seen too many people work their entire lives to retire at 65, and then drop dead 2 months later. I have also seen folks forced out in their 50s and forced to retire early or start second careers, with detrimental financial impact (see education note).
Retirement Work Hours: In the area I’m in, what I have seen that I really like, is a few older folks that work part time here. If you have in demand skills, they will let you work less than full time. My main workmate here is 72. He started working 4 days a week when he hit 55, 3 days a week when he hit 60, and 2 days a week when he hit 65. He’s a “retired” full bird Air Force Colonel so doesn’t need to work, but likes his job, and doing this keeps him happy and healthy. I don’t plan to work until I’m 70, but if I could start taking 3 day weekends when I hit 50 or 55 I would be very happy. This would also take care of health insurance if that works the same way 30 years from now as it does today.
I would like to be in a position where I don’t have to work in my mid to late 50s, but likely will continue to do so. Easing into retirement sounds like a much better plan to me than diving in all at once if I can control that.
Disclaimer: I have been very fortunate in life. Your mileage may vary.
Beginner note: If you want basic investing/how to handle money advice, I have found the following flowchart to be excellent.
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"Housing: Don’t go nuts. I believe that eliminating payments is the key to growing your wealth. No more than 25% of your income should go to rent/mortgage, and if a mortgage no more than a 15 year"
That's a great rule to live by, I've read that from Dave Ramsey and Chris Hogan. Don't spend anymore then 25% of take home pay (after taxes and 401k deductions) on housing with a 15 year mortgage. More often not living by that rule means living in a smaller / less expensive house and to avoid the "keeping you with the joneses" lifestyle.
One of my favorite Chris Hogan clips, real rich vs fake rich.
Quoted from Elvishasleft:Oh? tell that to everyone that lost their shirt is the US in 2008 on their house.
If you bought a house in 2006 - 2007 during the peak of that era it's likely worth more today then the original purchase price. A big issue then and now is millions of Americans buy more then what they can afford. As an example if a couple qualifies for a maximum of a $600,000 30 year mortgage many go through with it versus getting a $300,000 15 year mortgage. A cousin of mine and his wife did just that recently. They sold their previous home, took a small amount of the equity from it to put down (versus a majority or all of it) and bought a significantly more expensive home with a near max 30 year mortgage. Now my cousin is talking about financing a new $50k+ luxury SUV after he sells his current vehicle that he still owes on. He also told me he puts 3% into his 401k as that's his company match, why put in more? I mentioned to him the "don't spend more then 25% of your take home pay on a 15 year mortgage" suggestion and he said "I don't see how that is possible".
Quoted from MrBally:It's best to not tell others how to spend their money. Nor tell them how to spend money they don't have. They will figure it out someday.
Agree, I don't and just listen. When we were talking about the 15 year mortgage we were just on the topic of buying houses. I know he, and many others, would say its crazy what we drop on pins lol.
Quoted from Hench4Life:Understand the mathematics of it, you get a guaranteed return of your interest rate. However, my mortgage is below 2.5% so I just don't see why I'd put extra money towards paying it off when I can buy almost any dividend stock and get better than 2.5% return...
I'm not old enough for double digit mortgage rates, but my dad always reminds me that his first mortgage was 17%..
Your last sentence reminded me of this scene from Ghostbusters lol. 17% wow, couldn't imagine.
Quoted from arcyallen:I was a financial advisor and agree 100%. I know so many people that have less than $100k saved up and they're in their 50s and 60s. If you start in earnest when you're 19 years old, things get REALLY fun in your 30s and 40s!
It's been a crazy good market for over a decade now (excluding last years Covid blip). The challenge will be the next decade - we're ripe for seeing some sort of severe correction that will challenge a lot of people's convictions. Staying the course is a winning strategy, but fear and greed often win out when things get crazy. Time will tell.
Great points, thanks for your insight. I was hoping to ask you a question if I may. As someone with a good 20 - 25 years left of work, I'm in my mid 30's, and ideally wanting to retire at 55 or 60 would you recommend staying the course with my current 401k allocations (almost all in stocks) or to move them into safer investment options before the next severe correction? In the past I've been told to stay the course with how many years I have left to work and to expect multiple corrections / recessions before I retire in hopefully 2041 - 2045. Is that still the best course of action?
Quoted from Lermods:i am finding the difficulty with retiring early is the cost/coverage of healthcare. People retiring in their 40s or 50s. what are you doing for healthcare? Healthcare from an employer is pretty affordable and has good coverage, but once you go out on your own the costs skyrocket and coverage becomes an issue. One major illness and without coverage or good coverage, you could be bankrupted. It's probably the main issue that prevents me from retiring early.
That's a tough one. From a 401k standpoint you can withdrawal penalty free as early as 55 using the "rule off 55" and therefore could use some of those funds towards health care costs which would then decrease once you reach 62 for Medicare. That's my plan, put 15% of income into 401k and then try to retire at 55.
Has anyone looked into what their 401k target date plan rate of return and fee's are? So many years ago I researched this and was surprised just how much target date plans take out in fee's and how often their returns are less then some other options (index funds). I transferred (sold) all of my 401k assets from a target date fund and dumped it all into a single low fee index fund that basically just tracks the market.
The target date fund I was in has a 3 year rate of return of 4.8%, 5 year return of 6.6%, and a 10 year return rate of 6.8%. Meanwhile the index fund has 3 year return rate of 10%, a 5 year return of 11%, and a 10 year return of 11.2%.
Expense ratios are also much lower with the index fund. Let's use a $200k 401k balance for example. With the target date fund there's a .12% expense ratio, the index fund .015%. That's $2,400 in fee's per year with the target date fund while the index fund fee's would be $300.
Quoted from rai:Americans don't know how to do math.
I made a simple mistake, it happens. May want to learn the same thing. Expense ratios are still much lower in the index fund versus target date, especially on larger accounts.
Quoted from rai:You have $2M in retirement funds?
Also you have to realize the target date funds include bonds and international stocks and you are comparing them to a us based index fund I assume. So you can’t just straight up compare their returns because they are tracking different indexes. US funds have performed much better than those other two classes lately but not always.
Why are you asking how much I have saved?
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