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 Name||Interest Rate||Original Balance- May '09||Current Balance||Total Paid Off||Paid Since Last Week|
|Sallie Mae 01||5.25||$27,837.24||$23,719.92||$4,117.32||$0.00|
|Sallie Mae 02||4.75||$22,197.02||$18,604.04||$3,592.98||$0.00|
|Sallie Mae 03||7.75||$20,692.10||$0.00||$20,692.10||$0.00|
|Sallie Mae 04||5.75||$10,350.18||$4,045.23||$6,304.95||$410.45|
|Sallie Mae 05||5.25||$6,096.03||$0.00||$6,096.03||$0.00|
|Sallie Mae 06 and 07||4.75||$6,415.09||$0.00||$6,415.09||$0.00|
|Sallie Mae- DOE 01||5.25||$5,000.00||$0.00||$5,000.00||$0.00|
|Sallie Mae- DOE 02||5.25||$3,000.00||$0.00||$3,000.00||$0.00|
I hope everyone has a great week!