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- Thread starter Nittany Ned2
- Start date
Hmmm I have 2 kids and I will have more money in my pocket each month when I retire at 62 (in 8 years) than I'm making now and will be very comfortable. SO I SAY YOU ARE 100% WRONG IN MY CASE. Oh and I didn't go to college.
Re: financial literacy. Had my 14 YO do our checkbook last week, record the deposit of my check, pay the online bills, make Ed IRA deposits, etc. He really enjoyed it and I am sure it gave him an appreciation of all of the different expenses families have.
But if you didn't have kids, you'd have more money. Just saying.
I don't think that should count as financial advice. People want to have however many kids they want to have and then within that framework THEN they want the financial advice. Of course not having kids will make you wealthier when you're older but most people want to have kids.
In that vein, I've heard that if yo have to choose between putting money into your retirement account or into you kids college fund, it's better to do the former. When you fill out college loan/grant forms, the money in your retirement accounts do not against you but the money in your kids college fund does count against you. Or so I've read.
You have a very different idea about quality of life that I do, but that's fine. I'm glad you and your family are doing well.
They shouldn't have borrowed huge amounts to attend private liberal arts schools.
Did that American Funds site subtract out the nearly 5% front end load that they and the advisor get at the time of every contribution? No one has convinced me yet that going with American Funds over time will every catch up to investing in no-load Vanguard funds. Not trying to bust completely on AF, as my office retirement account is based through them, but AF is expensive in my mind. Come to think of it, maybe I should start thinking about changing that.
Wife makes $16k/year as a reading assistant, 30/hrs a week during school year. Turned 46 last week, $1.6M saved, a little less than half non-IRA/401k, $75k of that kids' Ed IRAs. House ($449k) paid off, no car loans, credit cards zeroed every two weeks religiously, no debt at all. Plan on "retiring" at age 56 when youngest graduates college, on a 10 year sprint. I say "retire" because I will always do something, like coach more, substitute teach, part time EMT, something.
Feel blessed, of course until recently I owned one pair of jeans, take all the soaps and shampoos home with me from hotel stays, etc., for over 20 years.
That last bit is one that some people frown on that I don't understand. It's not the soaps and shampoos per se but rather more generally, if you reach a certain amount of wealth but then you continue to do whatever you want to save more money then why is that frowned upon? If you're going to a lot of trouble to save only a little money then I can see that it would be a waste of time, but if it's just a matter of grabbing the soaps and shampoos (that only you or your family have used) and taking them home (rather than letting the hotel throw them out) then why not?
When I go through the drive thru at McDonald's they put a bunch of napkins in my bag. Then I go home and eat and use 1-2 napkins and have 5-10 left over. Instead of throwing them out why not just keep them and use them as the need arises? People think that's cheap but I consider the alternative to just be wasteful.
it was just a math calculation, no more no less, it had nothing to do with AF. Now that you bring up AF, it sounds like your office has a 401k account with AF, but I cant be sure.
many 401k accounts offer Target Date funds, and many providers choose either Fidelity Freedom or Vanguard target retirement . American funds offers target date retirement funds as well. The expenses on Fidelity is 0.10%, and Vanguard is 0.16% while AF is 0.45% Many employers think they are doing their people a favor by jumping on the low expenses.
yet when you look at the returns, and M/F returns are always quoted after expensive are net out, who would you choose
Fidelity Freedom 2055 target date for the last 5 years = 10.74, for the 2050 fund = 1060, for the 2045 = 10.54 and the 2040 =10.46
Vanguard 2055 target date ror last 5 yrs = 11.60, for the 2050 fund = 11.63 for the 2045 11.64 and the 2040=11.47
Americanfunds 2055 target date ror last 5 ys= 12.60, for the 2055 fund = 12.62 for the 2045 =12.57 and the 2040= 12.45
American funds has more than low expenses.
Op2, completely agree. Haven’t bought napkins in 25+ years, every carryout place I go to stuffs napkins in like crazy. I have one drawer with those, straws, plastic-wrapped spoons from Wendy’s chili or Frosty orders, etc.
Years ago when I actually worked / travelled, I collected the soaps, shampoos, etc., would donate those to one of the local churches that overnighted the homeless.
I still go through my two Sunday paper coupon sections and not embarrassed to ask for Senior discounts or freebies (like a Senior drink at Wendy’s).
It all adds up one way or another.
They'll have to work until either they physically and/or mentally can't, or they die. And if they aren't dead when they can no longer work, they'll get medicare (or medicaid?) -- And after they blow through that "savings," they'll have welfare + social security.
There probably will be a big market for government-subsidized retirement/nursing homes.
Oh wait...
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I think American Funds typically waive front end loads for 401-k plans. I suggest looking at expense ratios in plan documents.
Here's a question for you BWI Board financial gurus... Roth 401ks.. Who is actually in a higher tax bracket in retirement than they would be currently? I see the advice to invest in Roths if that will be the case, but I guess I don't envision being in a higher bracket in retirement? Can someone help me out?
I don't know. Give them a call. https://www.americanfunds.com/individual/products/simple-ira.html
I'm not advocating American Funds. I'd personally go with Vanguard or Fidelity. I just wanted to clarify that American Funds often waive sales loads for big accounts like 401-k plans.
If you have a simple you can have your account anywhere. Just have them send the money to your new account and take it from there. If it's really a simple
Your employer in a simple cant specify your IRA custodian. It's in the rules
I did a Roth 401k for awhile and now I wish I did a regular 401k during that time because I would have had more liquid cash as a result and thus could have paid off my house faster. I'm like 10 years from retirement and about 40% of my retirement savings is non-taxable and that seems way too high, although I'd welcome others input. I'll likely spend less money per year after I retire, especially since by then I won't be paying a mortgage.
Put away 10% from your first paycheck to your last, and put away bonuses you receive. <--this is the most important.
You CAN get used to not having that money. It takes a little time to get that pinch behind you, but once you've disciplined yourself, you really won't miss it and you will start to feel good that you have a growing nest egg.
The only time you spend savings is to buy a large item, instead of taking out a loan.
Pay off credit cards monthly or don't have one.
Make extra principal payments on your house (this one is a function of interest rates but in my view, not stock market return averages). Don't frequently change houses or cars, unless you have to for some reason.
If you're serious about taking care of yourself (and family) long term it takes discipline. The first one is the most important.
You CAN get used to not having that money. It takes a little time to get that pinch behind you, but once you've disciplined yourself, you really won't miss it and you will start to feel good that you have a growing nest egg.
The only time you spend savings is to buy a large item, instead of taking out a loan.
Pay off credit cards monthly or don't have one.
Make extra principal payments on your house (this one is a function of interest rates but in my view, not stock market return averages). Don't frequently change houses or cars, unless you have to for some reason.
If you're serious about taking care of yourself (and family) long term it takes discipline. The first one is the most important.
the problem for those students is income. simply put, we as a population do not have the mix of jobs that pay the same as they did (in real $$$$) in say the 1970's. i started a chem eng job out of undergrad for $12k/yr in 1970. that same job today would pay around $60K, but if it were inflated for cpi over that timeframe it would likely pay 3X that level.
12k adjusted for inflation since 1970 would be $79k.... if I run the numbers for my starting salary with an engineering degree, today's starting salary would be about the same as in 1980
You are spot on. Late in work career I decided to teach at University of Phoenix one night a week for something to do. This was a “masters” course on Maximizing Shareholder Value. To make s long story a little shorter these were regular blue collar folks who were trying to better their lot in life. Their financial literacy was shockingly bad.
Pretty reasonable for people on this board. Also for many 2 income families even if not college graduates. Obviously not for some. Not for high school dropouts, chronically unemployed, etc.
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As landlord who rents to blue collar people, the fundamental problem that I notice is that most people in their circumstances (and almost certainly many others) think if they break even in a certain month they have done reasonably well. In fact, in any month where you have broken even, you have actually fallen behind. There is a high chance that something will go wrong in the reasonably near future that will require the payment of a big bill. (Car dies or large medical bill for instance). Unless savings is built into your way of life, you will always be dinged by irregular large expenses and will never get out of the hole.
So to me, savings is a necessity, the equivalent of paying the rent or the utility bills. The nice thing about savings is that if you save, it has a snowball effect on the rest of your finances. (Lower loan rates, better credit card offers et. cet) The plan should be to save a substantial amount of money each and every year.
So to me, savings is a necessity, the equivalent of paying the rent or the utility bills. The nice thing about savings is that if you save, it has a snowball effect on the rest of your finances. (Lower loan rates, better credit card offers et. cet) The plan should be to save a substantial amount of money each and every year.
I was administrator for several employer 401-k plans. I was amazed how many lower wage earners managed to save and how many 6 figure earners were taking 401-k loans to meet expenses. It's obviously easier for people with more discretionary income but it's also about discipline.
That's a great question. I recently attended a seminar by an acclaimed financial advisor, Jim Lange, who performs an analysis for his clients that involves evaluating potential conversion of IRA/401k money to Roth IRA money. Particularly in years between peak earnings and the beginning of social security. Funny, but I had come to that same conclusion last Fall and had made a partial conversion, utilizing the gap between our incomes (I work very part time and my wife is a non-profit speech pathologist). Another part of that strategy is delaying SS, which I also have had in my plan for some time, as I look at it as insurance against living long.
But back to the Roth conversions, Roth IRA's have significant advantage to your heirs as well, as they can be held basically forever, growing without paying taxes or with any future tax liability. Whereas traditional IRA's properly passed on revert to the aged based distribution requirements of the heirs.
During the seminar Jim Lange showed graphs, with and without Roth conversions, that show in the long run the wealth accumulation advantage (after recovering from the initial hit of paying taxes on the conversion) with the conversions is greater as time goes on, and continues to widen with your heirs. Obviously the largest advantage requires you to have the after tax money available to pay the taxes on the conversion. i.e. If possible you don't want to have to take some of your regular IRA savings (or 401K $ converted to IRA $) to pay the taxes on the conversion.
The Roth conversions are part of my plan each year at least until I take SS in 7 years. And the current reduced tax rates make the strategy that much more attractive. Conversions made under current rates will prove even more advantageous if tax rates are raised in the future.
As far as Roth IRA's for young people, I advised my oldest son to designate 100% Roth for his retirement fund where he is employed - he gets a 100% match for 8% of his income. It is a tough road to put that much away for him, and obviously the tax avoidance now would give him extra disposable $. But the current tax rates are very low and it just seems that the compounding, all tax free, will be worth it for him in the long run.
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The best advice I ever got when I started working was maximize the 401k.
Put in 6% to get the employer 3% from day one and never wavered in putting in the max, another 6%. Applied to the regular salary and all bonus checks.
Paid off my -ex in 1997, retired from the corporate world a year later at age 48.
Never looked back!
Put in 6% to get the employer 3% from day one and never wavered in putting in the max, another 6%. Applied to the regular salary and all bonus checks.
Paid off my -ex in 1997, retired from the corporate world a year later at age 48.
Never looked back!
Some people have to borrow huge amounts to go to PSU. Just saying.
Disagree with that too. I love PSU but out of state tuition is incredibly high and merit based scholarships are nil. Why run up huge debt to go there when there are less expensive options?
Reading this thread reminds me how lucky I've been. It's really hard out there, I can appreciate that.
Every year I have athletes who want to play sports in college, most are D3 players who are recruited by small private schools, though not all are liberal arts. Many of these places are 40K+ and while the kid get financial aid, its not enough so they need 10K plus in loans a year and they might not even have the major the kid really wants. I always go through the process with them that is it worth the difference in cost to play D3 lax, football, basketball, etc vs going to a state school and play club ball or community college to play for a couple years. Im not saying to not play the sports, there is something said for being on a team and you'll remember those guys for the rest of your life, but it's not always worth it.
