by Hope
I am still rolling my plan around in my head. Balancing debt pay off, savings and possibly retirement planning. I appreciate the well thought out responses to my post about looking toward the future.
I realize that debt payoff is my number one goal. There should be no doubt about that. But I am wondering, as I mentioned, if I should at least start a retirement account. I won’t do that until my EF is full funded, but that should be done by the new year.
But this is essentially what I am considering as I make a plan. With a goal of starting it by the end of October.
So I’m here today to ask if anyone has set “retirement goals” as far as a set amount saved? And if so, how did you come up with that amount? Have you thought out a budget for your retirement years? Do you know of any resources for researching these types of numbers?
Hope is a creative, solutions-focused business manager helping clients grow their business and work more efficiently by leveraging expertise in project management, digital marketing, & tech solutions. She’s recently become an empty nester as her 5 foster/adoptive kids have spread their wings. She lives with her 5 dogs in a small town in NE Georgia and prefers the mountains to the beaches any day. She struggles with the travel bug and is doing her best to help each of her kids as their finish schooling and become independent (but it’s hard!) She has run her own consulting company for almost twenty years! Hope began sharing her journey with the BAD community in the Spring of 2015 and feels like she has finally in a place to really focus on making wise financial decisions.
There are a lot of calculators online. But at your stage of life and in your financial situation, it think you should just plan on saving as much as possible. You will need to invest several hundred (a thousand would be even better) per month to build up a nest egg. I think you are going to be shocked at what those online calculators tell you. But don’t be discouraged. ANY savings will be helpful. They might tell you you need to invest several thousand per month to build up a million dollar retirement account. But even $500,000 would be a great help. I actually think you should ignore the retirement calculators for now because they might bog you down. I think you will be better off just committing to investing as much as you can possibly afford. And re-evaluate in another year or so once you actually have a start on retirement investment.
I agree with Margann34 above – don’t give up because you read that you HAVE to have a million-dollar nest egg. Millions of people don’t. You just don’t want to be one of the people who have nothing. I would start now with, say, an IRA.
For now, put that side hustle and other “found” money into an IRA and leave it at that. Go to Vanguard and open an IR with
I would stay focused on debt payoff with your regular income…and a big part of that is NOT TAKING ON ANY NEW DEBT.
Once you have eliminated all debt, all that money you were putting toward debt repayment can go into retirement investment. Until then, getting rid of debt is your best investment in your future.
I think you need to keep it simple, in a way that has proven to be difficult over the years. It all comes down to saving money. For retirement, it turns out to be a bigger number than for most goals, but you need to first demonstrate the ability to get to the intermediate steps.
Over the years, I’ve suggested many times that after getting rid of high interest debt, you should try saving something like $10-15K (that you don’t touch). That first step is intended to secure a strong stable base of security from which you can start thinking about your goals in the medium to long term, rather than the repeated short term zigs and zags that you are used to.
Saving is hard and takes discipline. You need to focus on the first 1K, then 5K, then 10K, and so forth. Eventually it feels second nature to be saving larger blocks of money quickly. This is because when you realize how difficult it is to save that first $10K, one naturally tries as hard as possible to not let it disappear. Frugal and disciplined spending begins to feel more and more natural.
In terms of retirement, by all means open an account. But especially at the early stages the compounding benefits from saving in retirement accounts are pretty minimal. So don’t expect it to be a magic bullet to cure any underlying difficulties with savings.
As you amass the beginnings of a real retirement portfolio, you will be tempted to repurpose that money for other purposes. For instance, I can easily see a post in your future about whether you should take your $50K of retirement savings to use for a house purchase instead. In that scenario, which I think would be a positive development as you will have saved up $50K, I would say that you should decide right NOW what is more important to you. In other words, make sure that if you decide that retirement savings are where you want to focus your efforts, that decision is made in the context of all the longer term goals that you can foresee. (House, college, etc).
I started saving for retirement at the age of 21 at the urging of my parents. I had just gotten a job with a public utility that had an amazing 401K plan match. Thankfully I kept saving, never borrowed, and always lived below my means. Retired at 48. Good luck to those of you who have put off or continue to put off saving. I understood compound interest at a young age, thankfully.
The accepted number is 25x your annual spending. Eg: If you need $30000 a year to live on you should have $750000 in your retirement funds. Read Mr money mustache and jlcollinsnh blogs from the beginning. They explain how that number is derived but basically it is based on studies which show that if you withdraw 4% of your funds a year you will never run out.
Jean Chatzky has some great tools.
https://www.jeanchatzky.com/tools/helpful-organizations/
I think it would be overwhelming and counterproductive for you to focus on the total amount you need to save. The overall number is likely to say you need 1-2 million or something that appears to be completely unobtainable when you’re first starting out from $0.
I think you’d do very well by making your savings automatic and not have to make a conscious choice to save or spend. I would first concentrate on diverting your already “invisible” income like your side gigs. On top of that commit to yourself to save a percent of your income to start (say 15-20%). Then as your expenses decrease and your income increases you can increase this percentage and you won’t even notice it. Once you have something automatic set up and collect a little nest egg you can start to work on projections and targets.