Hey everyone Long time investor into my work's retirement account but first time thinker on what I need to do in the next step. I currently have about 21k in a Public Education retirement account and another 8k that is in my wife's 401k. So, as of right now I feel like we're ahead of the game since we survived the great recession and came out of it with jobs, paid off cars and the ability to save for a house that we bought a year ago. So, really how much do I aim for? How do I get more there, I know there's the obvious add more to her 401k and get an IRA, but is there other strategies then that? What's some things you all suggest. Thanks!
There are a lot of strategies and you need to find the right one for you. So if I understood this right, you've got 29k in retirement funds and a mortgage of how much? How long will you be paying the mortgage? How old are you? On the financial side others can offer advice, but as for your personal goals: only you can set those. And how much money (and in what kind of investments) you should have depends quite a bit on those goals.
My wife and I are both 30. We have a mortgage of 135k over the next 29 years, though like any good financially minded person, we don't plan on holding the mortgage for that long. Our goal is to have the ability to pull 65k per year from age 60 on even if we chose to continue to work or not. There's lots of things we haven't thought about, so I'm doing lots of research on what we do or where we go from here.
You have to crunch a lot of numbers and take into account periods where you may not be working. At the end of the day, plan on saving less than you realistically can and you should stay ahead of the curve.
You should plan to have approx $1.6 mil or so by that time in order to pull out $65k a year more or less indefinitely. If you invest that tax-deferred $29k in a manner that will average the same or better than the approx 10% that the S&P has averaged over the last 50 years, AND you contribute a combined $10k a year to those plans, you'll have that and probably a few hundred grand more in 30 years, assuming your plans don't have very high fees attached to them. IF you can max out each plan and max out IRA contributions every year, you should easily be able to retire VERY comfortably in 30 years. Make sure you have health insurance, work to be debt-free, and hopefully any children you have or will have will be independent by then. Consider Roth IRA plans if your income is under the limit. They are great for building tax-free income with after tax dollars for people in households with incomes under $200k or so. Tax-deferred variable annuities and certain tax-free variable life insurance policies can also be considered, but they tend to be expensive - pretty high fees, and generally less than spectacular investment choices within them. These are generally better for larger lump sum amounts of money and people in higher tax brackets. You probably don't want to fool with these unless you ever come into a large lump sum of money suddenly.
Thanks a lot JR. I always kind of wanted to say that too. That's some awesome advice and it actually makes sense. I'm undergoing a change in income, hopefully for the better, so its going to give us a fighting chance to retire even earlier if I have anything do with it. This working everyday thing is way over rated. I'd rather not do it!
The best advice that I can give is to find a great advisor or financial planner and, focus on what will best benefit throughout your entire retirement. JR pretty much hit the nail on the head and, said everything that I was planning on telling you till I saw he had. I am just grateful you got to get some great legit advice. And, not just advice from some crackpots that post just to post. Best of luck to you.
Well, it all depends on what you want to aim for. You seem to have that covered however, that being that you want to be able to pull around about 65K a year. Now you have to work out if that's a good goal;is it possible with your current income to have that much money saved up by the time you need it, and for it to be a sustainable amount? Plan ahead also. You don't seem to have children-unless I missed it-but are you plannning to have some in the future? Is it possible that you will change your minds? What if your plans go awry due to medical costs/illness? However, it seems like JR has given you some great advice already, so now you just have to put it all into practice!
