I’ve Paid For This Twice Already…

Archive for the ‘retirement’ Category

The “quick and dirty says just what I feared” conservative estimate edition.

We don’t have a lot saved for retirement yet. I’m the first to admit that. We each have an IRA (mine Roth, his not) that have not seen contributions in several years. And 4% of my spouse’s salary (with a 20% match of that 4%) goes to a 401K. The match maxes out at the 6% contribution level, which we are going to go up to…. soon. I don’t know exactly when. But anyway. I know we need to save more for retirement, but the debt reduction is the focus first. We’re both 33, and I assume plan to start taking benefits at 65. So I did some quick and dirty number crunching for my part 1 of figuring out retirement.

I did a conservative estimate using us retiring at 65, living to 90, replacing 100% of my spouse’s salary, and receiving no social security. I used two different calculators that were recommended on Free Money Finance, the ballpark estimate and Fidelity’s My Plan. I started doing FMF’s own very detailed and complex but unendingly thorough calculation and I got a little lost so I decided to try that one again another day when I’ve gotten the hang of thinking about this more. This runthrough is quick and dirty after all, for now. Surprisingly (or not so surprisingly) I got about the same estimates from both calculators. We need to save about $2 million dollars by retirement in ~32 years, and to do that we should a bit over 20% of my spouse’s salary. Maybe 20% doesn’t sound like a huge amount, but that is of his actual salary. If we are talking *take home*, it is more like 33% of my spouse and my *combined* take home after taxes and health insurance are taken out. I know the 401K is taken out pretax, and we already contribute 4% so it would “only” be 16% additional to that in total retirement contributions but… yikes. Basically the quick and dirty estimate gave me the same numbers as what I basically was assuming all along. We need to bump the 401K up to 6% to capture the full 20% match, and then just about max out the IRAs for both of us every year to be in a good place come age 65.

When I told my spouse he snickered and said “That’ll happen” and then told our son he needed to get rich to support his parents in their old age. Kidding! But still.

I know we’re behind the eight ball on this. Our Pudding Score (how you measure up compared to where you “should” be, 100 is average, lower is bad) is 39. I know we’re behind. It just seems unlimitedly daunting to catch up, and just about impossible to imagine. But we will try. Once we knock out the debt. We’ve got time on our side (somewhat) at least.

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Here’s another good reason to get out of debt as soon as possible - when the market keeps falling I can invest more in my IRA.  I always thought I was risk-adverse but really, I was just uninformed.  I was scared of risk because I didn’t know enough about the risk.  The stock market just seemed terrifying to me.  It is fine to be risk-adverse if that is your personal comfort level but it is not good to just be ignorant, and I was definitely ignorant.  Now I’m just semi-ignorant.

In fact, it seems I like a little risk.  My retirement fund is a pretty aggressive portfolio right now, and I keep thinking as the market falls… hmm, too bad I don’t have any extra money to throw in there right now.

As people keep saying… Stocks on sale!  When stuff is on sale at the store I stock up… it is the hoarder in me.  This might be a beneficial side to a hoarder personality.  I’ll have to wait to find out for a few more years though.  Right now it is all hypothetical, my little buying frenzy.  And retirement is a ways off so I can be mellow about whatever is going on.

Speaking of the market and economy, I’m just glad I don’t have a subprime mortgage.  Even with our being in some debt we got a 30 year fixed rate mortgage with a very competitive rate.  I guess the great credit score was good for something.  You don’t need money just a random high number attached to your credit!   Heh.

~J

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My transaction is complete and I am now invested with Vanguard.  So it didn’t take that long at all, nowhere near the November date Vanguard warned me it could take up to.  I now have a little over 362 shares of Vanguard Target Retirement 2040 Fund.  So now you know approximately how old I am and how much money I’m worth.  Too old and not much.  But at least it is only 2007. 
I’m proud of my investment.  I did research, I weighed options, I thought carefully, and I acted.  Nothing like when I first opened this Roth IRA in grad school.  Then I just knew I should be saving for retirement so I went to the first financial planner that mailed me an ad.  Direct mail worked for someone!  And seriously, I knew more than that planner did and that’s not a good thing ;).  But she took my money and invested it in what I chose from the options she gave me, and it has done okay.  That little company was bought by a bigger company that was eventually bought by Wachovia and a few years of horrid customer service later, here we are.  Bye bye Wachovia!  I don’t miss you already.

~J

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A few days ago I got a statement from Wachovia that they had sold my retirement assets at my request (I am transferring them to Vanguard).  I knew the approximate value of my portfolio at the time I requested the transfer, and when I scanned the statement outlining what was sold, I looked at the final value and immediately panicked.  The value shown on the sheet was about $1700 less than the value my portfolio had only 3 weeks before that.  I knew I had unwittingly picked a bad time to move assets but I wasn’t prepared for it to be *that* bad.  $1700 represented roughly 15% of my portfolio value… all in one fell swoop.

Well… after a few minutes of panicking I settled down and tried to make sure I wasn’t missing anything obvious.  After comparing the sheet to my most recent brokerage statement, I realized that (of course) my money market account which was also being transferred wasn’t listed, which has about $1300 in it.  (Why I had a money market in a retirement account is a long story and also part of why I should pay more attention but anyhow.  I don’t any more!  Vanguard Target 2040 all the way!  )

So in actuality my portfolio was only down $400 and not $1700.  Still not a nice thing but it didn’t make me feel ill inside.  And now it is sold and being transferred to Vanguard.  Hopefully that all happens really soon and then I can just watch it grow.  And start contributing more to it eventually.

~J

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As I’ve talked about before, I am transferring my Roth IRA from Wachovia to Vanguard.  I initiated this transfer before the stock market hoopla in the past week, and now I wonder… did I make an idiotic decision?

On the one hand, maybe I’ll be able to buy a few more shares of the Target Retirement fund I picked (I haven’t checked on the fund’s movement in the past week at all so I honestly don’t know if it has gone down any).  On the other hand, maybe my portfolio is worth a lot less than it was when I originally applied for the transfer.  Ugh.

My old portfolio was on the conservative side so I am hoping that it didn’t suffer *too* badly.  Add that to the list of things I should probably check up on in the coming days… just to know.

I thought money was fun. 
~J

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