Comments on: Thoughts about saving for retirement

By: The Financial Blogger » Blog Archive » Financial Ramblings

The Financial Blogger » Blog Archive » Financial Ramblings — Sat, 26 Sep 2009 20:52:40 +0000

[...] Stew at Gather Little By Little is giving some thoughts about saving for retirement. [...]

By: Scott Lovingood

Scott Lovingood — Tue, 22 Sep 2009 18:24:39 +0000

I think you will be surprised by how much being debt free will impact your retirement.

I would say that starting with a 1% contribution may not be as much as you think but will add up over time. Start a side business, work a few hours part time at another job. Do freelance work if you have the skills. Develop the skills if you don’t ;)

Start a family business so you can spend time with each other while you work on building your wealth.

Don’t get discouraged. Don’t worry about SS. It may exist it may not. I have no idea but I sure won’t depend on it. My parents are debt free and basically live off their SS checks. They don’t live lavishly but they enjoy life.

As long as you have your priorities straight, the rest will take care of itself.

Come read my post on What is wealth http://www.askthewealthsquad.com/what-is-wealth/

I think you will like it.

By: Becky@FamilyandFinances

Becky@FamilyandFinances — Tue, 22 Sep 2009 16:43:38 +0000

I think you should start with a 1% contribution. If you *really* can’t do it now, then do it at your next raise – no matter what!!! Then, at the following raise, increase your contribution to 2%. Rinse and repeat until you’re at 5%!

By: Gina

Gina — Tue, 22 Sep 2009 15:47:01 +0000

Frank, you cannot just take money out of your 401k. It is not a regular savings account. It has to be a medical emerg or someother hardship to withdraw money prior to leaving the job. The only time you can “cash in” your 401k is when you leave the job. And when you “cash it in”, you pay the 10% penalty PLUS the 32-38% (tax bracket) on the distribution as income. Are you suggesting that he withdraw $$$ at a 42-48% penalty?

By: ABCs of Investing

ABCs of Investing — Tue, 22 Sep 2009 12:42:01 +0000

Stew – you are only 35 – you have lots of time.

The important thing is to improve your overall finances, whether by increased savings, lowering debt or selling extra houses. Given your situation I’m surprised you have any retirement savings at all. Selling the old house was a great step and while you might not make a lot progress over the next couple of years, as long as you can keep the ship afloat then things will be fine when your wife goes back to work.

By: Frank

Frank — Tue, 22 Sep 2009 12:33:58 +0000

Courtney – you’re right – he didn’t say if it’s immediately 100% vested or not. Even if it didn’t vest right away he could withdraw his 5% contribution (paying taxes and the 10%), and while he’d have a *little* less take-home income, he’d still have his employer’s match in there waiting to vest.

I’ve been lucky that my last two employers have had decent matches (3% and 4%) and both vest immediately 100%.

By: Courtney

Courtney — Mon, 21 Sep 2009 21:16:14 +0000

Frank – interesting, if unconventional solution. Many workplaces vest their matching contributions over time though, to prevent people from doing exactly this.

By: Frank

Frank — Mon, 21 Sep 2009 20:08:15 +0000

Why not put in 5%, get the 5% match (10% total pre-tax), and then withdraw it all, every month, ASAP. Depending on your tax rate you’re likely still coming out ahead (you’ll pay taxes AND a 10% penalty each withdrawal). Once your debt is paid off and the emergency fund is built up, just stop taking the money out of the 401K. :)

Frank

By: Gina

Gina — Mon, 21 Sep 2009 18:11:07 +0000

Stew, Mike has your solution …

“As for retirement, try saving $25 per month with an automatic withdrawal in a balance mutual fund. It will hurt the first few months and then, you won’t even notice the transaction in your bank account.”

This is a win-win in 2 ways: 1) you will not worry as much about not contributing to your retirement, and 2) you will have more motivation to keep from eating out lunch while at work {an issue you mentioned in a prev post}. Then when you are out of debt in a few years you can play ‘catch up’ by sending what you were paying on your debt to a retirement account.

By: Dramon

Dramon — Mon, 21 Sep 2009 17:37:38 +0000

Because 401k $ are pre tax, you might be surprised at how little it really impacts your take home pay. I would recommend that you start small and see how little it is. Then if you are fortunate enough to get a raise, put 1/4 of the raise into your 401k. You lived without the raise before.

Leaving a 5% match go is giving a 5% raise away ( although I agree you get a lot more than 5% on paying down your debt).

On the whole social security discussion. People were never meant to retire JUST on social security. It is supposed to be a part of your retirement, not the whole thing. As everyone points out, there will probably be some social security. I am older and I still anticipate benefits being reduce or the years to retire being stretched.