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Posts tagged with: retirement planning

Retirement Planning

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Let’s be real, if it weren’t for the mandatory retirement required by my employer (we’re required to contribute 7%, which is matched dollar-for-dollar by my employer!), I’d probably be a ways off from any serious retirement discussion. I mean, we should all be doing it, but when you’re just trying to pay your monthly bills, you’re probably not super concerned about how you’ll be paying for your golden years.

But we should be! Especially with some hints of BIG changes on the horizon!

First, did you see the IRS’ announcement with 2018 pension plan and 401(k) contribution limits? If not, check it out here. For the time being, annual income limits are going UP for traditional IRAs, Roth IRAs, and Saver’s Credit! That’s good news to those in the stage of life to be maxing out retirement contributions!

The reason I use the verbiage here (“for the time being”) is that, right on the heels of the IRS’ announcement, talk from the Whitehouse is suggesting steep reductions in the annual limits allowed for tax-deferred retirement accounts. Check out this piece from the New York Times with more info. Some of these (rumored) reductions would be seriously dramatic.

Where are you in the retirement savings spectrum? Are you actively putting away money for retirement or still in full-on get-out-of-debt mode? I have mixed feelings about my work situation. I like that I’m being compelled to save 7% (+ the 7% employer match!), but I do wish I had the freedom to drop down my retirement contributions in an effort to get out of debt quicker!!!

I sure do hope that by the time I’m able to fully focus 100% on retirement that the investment vehicles to do so still exist! My Dad (before being diagnosed with FTD) was a financial advisor all his life. He has cautioned us for years that he felt Roth IRAs would eventually be taken away in their entirety (note – this is just his gut – no special “inside info” here). He’s urged us for years to get our financial houses in order and be in a position where we can max out our Roths since, in his view, they could end up disappearing soon!

 


Weekly Debt Update #23- Retirement Contributions Past, Present and Future

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Hey everyone! I hope you all are having a great start to your week.

After I posted last week of my after debt plans (here), there was some outcry, confusion and wonder over my retirement plan. Here’s the statement in it’s entirety:

“I’m going to decrease my 401K contribution to the minimum (4%) to get the company match. I’ll use a fairly good portion of my after tax income to fund an investment account for a, hopefully, early retirement. I’d like to do between $300-$400 a week. This is a big one, since I want to save up a pretty large nest egg, but there’s a ton I feel like I’m putting off (like home renovations) that I could do with an extra $400 a month.”

After reading your comments and looking back and this statement, I left a lot of my recent activity and thinking on the subject off the table. But before I go into depth on my present and future retirement plans, I want to give you a history of what I’ve I’ve done previously.

  • At the start of my career, in May of 2009 with the federal government (in the Dept of Veterans Affairs), I started out contributing 3% of my salary to the federal government’s form of the 401k- the Thrift Savings Plan, or TPS, for short. I knew up front that the government would match every percent to 5%, but I also felt I needed every penny to pay my rent, utilities, food and looming student loans. At least I knew enough to contribute SOMETHING. What I didn’t realize at the time (but learned sometime after) is that the government will provide 1% of your salary (w/no match) into a separate money market account as a FERS (federal employees retirement system) basic benefit.
  • After a year of service I not only got a substantial raise, but a fellow employee found out I wasn’t contributed enough to max out the government match. I got a good scolding (she was a motherly type) and increased my contributions to 5% for the remainder of my stay with the government.
  • At the point I left the government in January of 2013, I had somewhere in the neighborhood of $20,000 in the TPS account and $1,500 in the basic benefit account. When you leave the government, you can either elect to cash out the basic benefit (which was tax deferred) or leave it with the government if you plan on returning. I elected to take the money, which I used to pay down my student loans.
  • When I started with my new company, they have a policy that new employees need 6 months of service before you are eligible for their 401k program. I started at the end of January 2013, and with my six months plus some waiting time for the next enrollment period, I got into the 401k program in November of 2013. I immediately started contributing 4% to get the company match. The company match, however, is subject to vesting: you get 20% on your 2nd anniversary and an additional 20% for every year after until you are fully vested on your 6 year anniversary.
  • I was in the 401k program for 10 months when I met with a Dave Ramsey endorsed CPA in September of 2014. While I don’t agree with a lot of what he says, I do agree that he’s helped a lot of people get out of debt with his debt free program, so I used his service to find a local CPA (plus I didn’t know how else to look someone up). After giving the CPA my story and financial run down, he agreed that I should cash in my government TPS account and stop contributions to my current 401k. I immediately did both of these (well documented in my first few posts here).
  • After 7 months of not contributing anything, I elected to go back to 4% in May and having feeling this still wasn’t enough, I’m now at 10%. My current vested balance is $6,200.

So that’s my history on the subject. Recently (within the past month), I met with a retirement adviser that my company utilizes to oversee the 401k program. After telling him my history, my financial rundown and future plans (the early retirement/financial freedom) he gave me some advise to stop all but the 4% contributions and instead contribute into a non-retirement investment portfolio (one with minimal fees) once I’m debt free. His logic was that if I want to retire at or around 40 (the age I gave him when he asked) I would want to have immediate access to the money without having to worry about income taxes and penalties that are associated with 401k’s. He also suggested that I could split the investments into a Roth IRA and the investment portfolio. This would give me two pots of money, one for pre-55 and one post 55. So that pretty much sums up the rationale behind my previous post. As a few of you said, my thinking nd history on the subject appears scattered, but I would say it IS scattered. I got some amazing feedback on what to do on my last post (looking at you, Angie), but I would like more. Any help is appreciated- anecdotes, references, tips, anything on the subject would help give me some clarity.

As for my current debt balances, here you go:

Loan NameInterest RateOriginal Balance- May '09Current BalanceTotal Paid OffPaid Since Last Week
Sallie Mae 015.25$27,837.24$23,719.92$4,117.32$0.00
Sallie Mae 024.75$22,197.02$18,604.04$3,592.98$0.00
Sallie Mae 037.75$20,692.10$0.00
$20,692.10$0.00
Sallie Mae 045.75$10,350.18$4,045.23$6,304.95$410.45
Sallie Mae 055.25$6,096.03$0.00$6,096.03$0.00
Sallie Mae 06 and 074.75$6,415.09$0.00$6,415.09$0.00
Sallie Mae- DOE 015.25$5,000.00$0.00$5,000.00$0.00
Sallie Mae- DOE 025.25$3,000.00$0.00$3,000.00$0.00
AES6.8$9,000.00$0.00$9,000.00$0.00
TOTALS$110,587.66$46,369.19$64,218.47$410.45

I hope everyone has a great week!


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