Are you saving for retirement?

[Chazumi]

I've been a huge fan of financial responsibility for a long time. When I hear about "The Mortgage Crisis" and other types of news hype regarding people failing with money it makes me cringe. I think the news media in general is targeting the corporations and money lenders instead of the individuals who are stupid enough to take part in such transactions.

I consider myself way-above-average when it comes to financial responsibility. Not as a gloating measure but as a baseline here is how I am (and have mostly always been) with money:

- 0 Debt minus my mortgage (that I've paid monthly for almost 5 years now, 30 year mortgage)
- Paid cash for all my vehicles, 0 payments (1 from a dealer, 2 from family members)
- Never had a credit card, ever, no credit, whatsoever. When I took the loan out for my house (VA Loan) I had 0 activity on my credit rating. They put me somewhere in the 750's for a credit score, offered me 350K+ loan. I took 170k loan @ 4% APR)
- I've capped my ROTH IRA (I dont get a 401k at work) since 2010. So far it's been 5,000$ limit yearly. I cap right before tax seasons the year prior.
- I have 12,000$ in an "emergency fund" (3-6 months expenses)
- I have 4,000$ in a "cash flow" fund (christmas, vacation, birthdays etc)
- I have 8,000$ in a checking account
- I have about 4,000$ in a mutual fund (seperate from my roth IRA), that I am still contributing monthly to (about 2-300 dollars a month).
- I qualify for both the Montgomery GI Bill (old military college bonuses) AND (post 9-11 GI Bill, in addition to 7,000$ a year free while I'm active duty [15 credits shy of an associates])

How are you saving for retirement? Have you thought about how much you will need once you hit 65+? How much debt do you have? Did you take out a student loan and plan on working your first 10 years to pay it off? How are you faring once you have your degree? How is your job security? What are your short term and long term goals financially?

I'd like to see where people are at when it comes to this subject. My goal is to retire as a mini millionare (1-3 million) around age 65+. I dont think it's unrealistic given my current age (26) and I dont think that will equate to as much once I am there (2040's).

How do you rate yourself as financially responsible?

 

[rugbyLEAGUEfan]

I spent ages 18 through 28 being totally irresponsible then snapped out of it . I am now 38 and anticipate retiring in 4 years time . I have no debts , no credit cards , no stock portfolio and drive a $1000 car . I have cash and property which I own .I don't enjoy working nearly enough to consider working till I am 65 .

However , this goal is totally unaffordable if I wish to live in Australia , so it's Asia here we come .

The thing is , I'm not a Uni graduate but I have no wife or kids , don't wish to be rich nor have heaps of stuff . With fairly modest requirements in regards to what I want out of retirement , it's not hard to do as long as you don't get distracted by getting all the shiny toys along the way .

 

[Chazumi]

I spent ages 18 through 28 being totally irresponsible then snapped out of it . I am now 38 and anticipate retiring in 4 years time . I have no debts , no credit cards , no stock portfolio and drive a $1000 car . I have cash and property which I own .I don't enjoy working nearly enough to consider working till I am 65 .

However , this goal is totally unaffordable if I wish to live in Australia , so it's Asia here we come .

The thing is , I'm not a Uni graduate but I have no wife or kids , don't wish to be rich nor have heaps of stuff . With fairly modest requirements in regards to what I want out of retirement , it's not hard to do as long as you don't get distracted by getting all the shiny toys along the way .

Out of curiosity, have you estimated your monthly/yearly costs of sustaining yourself, even in an asian market, and how do you plan on making an income to cover that with your current goals?

 

[wolfigor]

I spent ages 18 through 28 being totally irresponsible then snapped out of it . I am now 38 and anticipate retiring in 4 years time

Given that you plan to retire in 4 years time (pretty soon), I am curious to know what is your retirement plan (e.g. which funds you count to live on, which country, etc) especially considering you saved only in the last 10 years.


I do have about 90k US$ in savings, 5 years remaining to completely pay off my Norwegian) home, some properties in Italy, and no debt.
Pretty much that's it.

Living in Europe (Norway) I count on getting something from then state some time later in my life in form a well deserved pension, maybe sell some properties, and live in a warm and inexpensive country in my old age.

Until then, I have fun and good time with my current life and work.

 

[rugbyLEAGUEfan]

Well I have a 30 year lease with a 30 year option to renew ,on my dream block of land in Bali and I'm building a villa , but really I'm looking to build then sell the remaining years to someone richer and lazier than me then do another one. There will be pitfalls along the way (I've already been ripped off for 10k) , but my brother lives there and is building next door and has done it a few times , so I'm confident . I plan to do this often to give me something to do and provide some income .

But I've managed to save about $1000 week over the years , so the interest on $500,000 a year just in the bank goes a hell of a long way over there (roughly $750 a week which is a kings ransom since I'll have no accommodation expenses). As I get older I can start to chip away at the principal but I'm in no rush to do so .

Obviously if I start a family over there then I will have to reconsider some of the details , but the maths certainly stack up .

Edit.....by the way , the beauty of the long term lease is that it's soooo much cheaper than buying (even though you can't own freehold in Indonesia) . And heh , isn't everyone really leasing till they die ? You never really own .

 

[really]

Yes - I have a defined contribution pension.

This means that my employer commits to paying a minimum amount into a pension fund of my choice. If I contribute some from my paycheque my employer matches this.

I currently contribute the maximum and get the maximum contribution from my employer.

This is tax efficient.

My pension fund is invested in a global equities index fund.

I will also get a state pension - I don't expect this to be as good as it is today when I retire.

Besides that I am saving a significant amount of my monthly paycheque as I am facing redundancy at some point in the future and it isn't clear how long it will take to get another job.

I have a lot saved already and whatever I don't use to tide me over my unemployment will be used to buy a home in a few years time once I am reestablished in a career.

I don't have any debt and rent an apartment near where I work.

I would judge my financial literacy to be above average - I am an accountant and have an interest in personal finance.

Edit: I should also add that I expect to inherit a farm - it isn't very profitable but I don't intend to sell it or use it as security for a mortgage and will pass it on to the next generation.

 

[Mise]

I too have a defined contribution pension, but unlike Really I don't contribute the maximum, and neither does my employer. I should really start doing that this year, being as I bought a house already and don't have much else to save for.

 

[Arwon]

I guess I have superannuation so that's like forced saving

 

[Grisu]

well there's the forces saving part (AHV, first pillar, whatever it's called in other countries)
then there's another semi-compulsory second pillar part (Pensionskasse, I guess that would be 401k)
and then there's the voluntary third pillar that I pay into whenever I can. this can later be used to down-pay the mortgage as well.

atm, my liquidity is rather good, though the mortgage-burden is rather high as we just completed our home and haven't started down-paying yet.

 

[downtown]

I do, but not very much.

Unlike the rest of you guys, I have debt....Me and Mrs.DT have about 15,000 combined on our student loans, and we have a little CC debt as well (weddings are EXPENSIVE, as is moving). I have around 3 grand sitting in a state teachers retirement account somewhere, and about another grand in my company 401k. I think I can have the most odious of my debt paid down by the end of the year, and then I can start building my 401k again (or change to a company that has a much better reimbursement plan, because mine sucks).

 

[kronic]

I plan on retiring within the next 20 years (I'm 28), so I save/invest. I have no desire to spend my entire life working my ass off. But there's a very long road ahead of me and my income is rather low.

I stay away from every government-subsided private retirement plans as they, at least in Germany, bascially only make financial corporations richer while providing little flexibility (in terms of investment choices and access to savings). Obviously, I have to pay into our social insurance based pension system. I'll opt out of that system as soon as I can...but that's pretty hard to do and will most likely become harder in the future.

 

[Abegweit]

Why would anyone save? The government has pushed interest rates down to roughly zero. What's the point? Furthermore the stock market is about to take a big hit when all the baby boomers try to cash in on their 401(k)s.

My house is paid off and I am seriously considering taking out a mortgage just because interest rates are so absurdly low.

 

[Old Hippy]

Well I have a 30 year lease with a 30 year option to renew ,on my dream block of land in Bali and I'm building a villa , but really I'm looking to build then sell the remaining years to someone richer and lazier than me then do another one. There will be pitfalls along the way (I've already been ripped off for 10k) , but my brother lives there and is building next door and has done it a few times , so I'm confident . I plan to do this often to give me something to do and provide some income .
.

so your not planning to retire but become a property developer....

I do wish you all the best tho.

 

[Patroklos]

The pillars of my retirement plan, from most important/my expectation of it actually being available at retirement:

Thrift Savings Plan = 10% of my monthly income goes to TSP (been contributing this since 2003). This will probably change to some other investment mechanism when I leave the military, I intend to maintain the 10% contributions until I retire for good.

Pension - When I retire as either an O5/O6 in nine years I will recieve 50% of my base pay monthly which will be around 40K

Rental income - I bought my first home last year. Though I live in it now until I transfer I bought it specifically to rent when I leave. If things work as planned the rent will pay for at least the mortgage and I will let it sit and gain equity (if not outright profit). I plan to continue aquiring these properties ever couple years for the next decade or so so that I will have them paid off by at the latest my planned final retirement age of 60 and be pulling in at least $8K a month in rental income. Or I can just sell them and invest the cash in low risk investments to draw retirement income out of.

Conventional Investments = Both stocks and mutual funds, I raided this to pay for the down payment on my house but even now it still has a 15K value. I have only been doing this for a few years though, I add money to it when I have some laying around after expenses.

Exotic Investments - I buy hard wood tree stands in Costa Rica every year for 5K. It takes 20 years to realize full payout (there are cuttings before that to thin out weak trees for adult strong ones that offer some early payout) of 100K plus.

Additional Pension - I will retire from my military career at age 41, so there is a good chance I will qualify for some additional pension type program before I retire again. All depends though.

Social Security - They take my money and invest it worse than I could do by throwing darts at the stock ticker, but assuming it survives I might get a portion back. Even if it is less than I put it in is still money gained as I simply write off that money now with no expectation of ever seeing it again.

 

[Zelig]

I don't save for retirement, I invest to realize future investment income; I don't plan on retiring.

 

[warpus]

Chazumi, at 26 you are doing very well. I don't think I've ever met anyone that age who had so much money saved up - most people I know spend it all as soon as they get their hands on it.

I am not a big spender and usually keep a couple grand in my chequing account for emergency/vacation purposes. Some of that makes it into a saving account, but not much.

At work 2.5% of my pay gets deposited into an RRSP account (Registered Retirement Savings Plan). My employer triples that (so if I deposit $200 in there, they deposit another $400) and all that stuff gets invested in a mix of Canadian and American stocks and bonds. 2 years ago I had $6,000 in there or so (I've only been here a couple years), it should be much higher now.

So I'm not really doing much, but I go on many trips and those can be quite expensive.

weddings are EXPENSIVE

They don't have to be

 

[Chazumi]

weddings are EXPENSIVE

I think my wedding was around 400$?

-100$ for licenses/fees or whatever, + for the judge to come out to our place and say her bit.
-200$ for a sleazy hotel downtown (it looked nice online ) where my first child was conceived
-100$ on vodka/dinner/breakfast

Three days after that I was given a free ticket to Iraq courtesy of the government, haha.

8 years later we're still going strong

 

[MjM]

I've been a huge fan of financial responsibility for a long time.....

If you don't mind me asking, what do you do for a living?

 

[illram]

I have retirement plans but I am a lazy saver.

--I have (what used to be, anyway) a "high yield" ING savings account, the interest rate used to be around 3.5% in the good ol days, now it is at .8% and constantly dropping. This is just for cash emergencies, vacations, whatever. We try to put as much as we can into this account per month and from here we put it away in other savings vehicles, or just keep it there.

--I have a rollover IRA that has my old 401Ks. My wife and I are over the income threshold for deductions from our taxes so I don't do anything with that other than stash old 401k rollovers.

--I have a 401k at my current job, to which I contribute 6% monthly right now.

--I plan on opening a Roth IRA, but I am not totally sure if I really need it if I have the 401k. My only reason for having it is I would rather have the Roth IRA be my primary retirement vehicle that I use to save regardless of whether I have a 401k going or not, and due to the lack of any taxes when I get distributions, but the 401k is so far the only thing getting any money because it is automatic and, as previously mentioned, I am lazy.

--we have a college fund for our daughter that has similar returns to a well managed retirement fund.

That's it for us. I don't think debt is automatically a bad thing. I have a CC with 1.5% cash back on everything and my wife and I have all our expenses tied to it, including automatic bill payments. Instead of a bunch of payments coming out of a cash bank account at various times a month, we have one or two payments on the CC, allowing us to manage our money and regularly save. When you have 10 or more bill payments coming out of your account you have to keep a cushion of money in there and it becomes harder to manage your money and stash chunks of money away. Now, we can regularly stash chunks of money into our savings account every month once we budget our CC payments, and since we always pay the CC off every month before any interest kicks in, we are basically getting free money from the 1.5% cash back we get on the card. Win win to me.

 

[innonimatu]

But I've managed to save about $1000 week over the years , so the interest on $500,000 a year just in the bank goes a hell of a long way over there (roughly $750 a week which is a kings ransom since I'll have no accommodation expenses). As I get older I can start to chip away at the principal but I'm in no rush to do so .

So, let me see if I got this straight: your plan is to be a non-citizen resident in a country with a history of political instability, living on interest from a relatively small amount of money in an age of financial turmoil and unsustainable debt, with defaults and/or high inflation being highly likely over the next decade?

You're just some guy I know from the internet, but nevertheless this guy you only know from the internet wants to advise you to have some kind of contingency plan, because you'll probably need it a few years into retirement!
And better make that a general warning. Most people who retire early planning on living off savings seriously misjudge the mileage of the money they've saved. The great advantage of the pay-as you-go state run pension systems is that they are much more resistant to inflation and other more serious financial shocks.