I am in a unique position that does not involve consulting/billing rates any longer, so that helps. However I did say 'by' 55, so it could be sooner as long as chit doesn't hit the fan. 😆
. This is something I have thought about a fair amount. Being in my 20's, $26,500 post tax (roth 401K and roth IRA) per person would be a quite tough to achieve between my wife and I, but I suppose it could be done with a fairly significant change.... Exceeding employer match is quite easy for both of us and I have adopted a 1% per year contribution increase up to 20%, but that may go higher if I don't meet contribution cutoff first. Perhaps I need to work out some numbers and make 2% work. House renovations make this a little more tough. Hopefully this doesn't put me too far behind.
Agreed...humans need purpose...sitting around waiting on mail money doesn't cut it...
This is great idea. I'll have to look into this for my daughter. I'm a firm believer in set and forget it, or paying a professional to actively manage the account.
PB, congrats on making it to retirement. I literally followed your same playbook since I was about 15. I read your two recommended books when I was in my mid 20's, and they resonated clearly with me at the time.Thanks, I was clearing the home office of 15 plus years of accumulated paper copies from projects that were incredibly handy to have when I needed them but now go to the sorted mixed office recycling bin and found the disbursement letter from the bank that was holding my "Payment Reserve Fund" which was their name for an IRA in August of 1987. The total lump sum distribution was $3,055.87. It got invested in a Rowe Price Capital Reserve fund, a very conservative mutual fund with a blend of stocks and bonds, its the same acount number and I have done nothing with it except let it sit there for 35 years. The same $3K is now worth $115K even with a down market. I think I paid around 14K for my long gone Pontiac Fiero about that time. so about 20% of what my car was worth. Use the same math and I would be looking into Ferrari territory 575K now
I think the greatest gift to a kid in college is give them a Roth IRA and then once they are working make them match it so they get in the habit. Do that for several years and the account is on autopilot, no worries about if SS will still be around as 35 or 40 years of growth will make it into a pretty darn good retirement. If they want to buy a house they can even raid the Roth principle for a down payment as what they put in it has no penalties or taxes for withdrawal. With ETFs the initial Roth investment can be real low. The same can be done with folks under 18 as long as they are earning the amount of the Roth contribution.
I am conservative investor, except for some old phone company stock I bought with paper route profits and some Berkshire B, it is all in a relatively conservative collection of mutual funds and ETFs managed by Vanguard. Sure, I missed out on the big profits on high flyers but I also missed out on the big losses and hindsight is 20/20. If I play it right I will not even have to worry about RMD as much of my funds are in Roth's.
I was right on the edge of Roth 401K contributions as a single person some years. I did a big Roth conversion one year where I could spread the taxes over two years (a one time thing) it was a very down market and I got close to the low to do the rollover and that one transaction made a big difference in my Roth balances.
I have always tried to live for less than the paycheck, the only loans were for cars long ago and they got paid off early. I paid my mortgage off in less than half its term by making additional payments towards principal. Once the debts are paid off, its surprising how much can be invested. BTW, my dad in the 1950s was taking a financial course and did a presentation on how SS was unstainable in the long term. I grew up in the seventies and most financial folks on the news were telling us that SS would be gone and not to plan for it. I didnt and could live without it as I dont plan to file until 70.
Now the tough part, becoming a spender instead of a saver now that I am retired.
As with all things, I think there's a balance. My mother spent her 60's and 70's traveling the world, but could only do so by having NOT spent it all when she was young. She has friends who couldn't afford to do anything in retirement, their loss. Things are busy enough in younger life for most folks, building a career and a family, that at least for me, any lack of toys and travel is barely missed.
Working your brain doesn't have to be for the man. There are plenty of challenges at the community and non-profit level that can use your talent.
This is a good plan, and will give you a lot of flexibility in life, not having to worry about this. I have paid off each of the houses I've owned in about 10 years, and believe that if everyone chose their home based on what they could afford to pay off in that time, our country would be in a much better place in many other respects. It meant driving beater cars when friends were rushing out to take on payments on new vehicles, but it was a short-term pain for a long-term gain. The difference in rates alone on a 15 vs. 30 year mortgage can save you enormously, even before stepping up the payment plan on your own, to finish in 10 years.
I would also recommend "Your Money or Your Life" by Joel Dominguez and Vicki Robin. It is about transforming your relationship with money. This should be essential for high school senior reading. Another good book is The Seven Laws of Money by Michael Phillips.
Compare your financial advisors performance, net of fees, to the closest asset allocation set forth in Vanguard's series of Life strategy funds (they all use index funds and rebalance using cash flows). Better yet, ask them to do it and watch their reaction. 5 years isn't quite enough, 10 years is, in most environments, and at 20 years and longer, it's glaringly obvious.
