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  1. #1
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    Retirement Contributions, late 20's. Sage advice?

    I'm 29 and thinking about trying to get more serious about saving for retirement. I have a small IRA that I've been contributing to slowly for a couple years. Have a few grand in there now.

    I'm thinking for the next step I'll open a Roth IRA, given that over a long time horizon the tax benefit down the road is far greater than any tax benefit now. I'll probably be able to put in $3-4k/yr in there at this point. For a relatively small amount does this seem like a reasonable plan?

    I have a killer amount of student loans (like a small mortgage worth), but I feel like I should still try to put a few bucks away now as well to take advantage of having time for money to compound. I should have my loans paid off in about another 9 years.

    So, when you were in your late 20's what were you doing to plan for retirement. What do you wish you'd been doing?

  2. #2
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    Quote Originally Posted by Scott B View Post
    ..thinking about trying...
    1) There is no try
    2) Set up payroll deduction to max out your contributions. Do it now. Learn to live on a bit less.
    3) Also set up a "rainy day fund" payroll deduction. It's not retirement, it's not tax sheltered, it's just savings. Put it away and don't touch it unless there is a real emergency.
    4) I was in a very similar position in my 20's and 30's, student loans, HUGE credit card debt (I mean, $70k+ at one point... more than my annual income at the time and for many years to come), mortgage, and ... 2 kids and wife at home. It can be done. Do it.
    * posted by Creakybot 2013 all rights reserved.
    * not actually waterproof.

  3. #3
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    that's a great start and something to build on as you can afford it.

    with that, I would suggest using either Fidelity or Vanguard funds...low management fees, no annual "account dues" that I know of, that sort of nonsense.

    In my late 20's I had a smallish Simple IRA through work and had just opened a Roth IRA..was very much in your same position, but was able to work off most of my student loan burden by working in Alaska for 5 years....I was also going back to graduate school to tack on more debt!

    what creaks said about monthly deductions...as much as you can do comfortably.

    I've never had CC debt...if you do, get rid of it...now.
    Not banned yet.

  4. #4
    Proud luddite
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    I'm not really informed enought to recommend one type of retirement account over another but I do have one piece of advice: don't ever, ever, ever dip into that retirement account before you retire. Down the road you might be tempted, you might run into expenses and see that as the easy way out, but don't do it. You'll be hammered with tax penalties and will quickly realize that it just isn't worth it to cash out early.

    But at your age and judging from your post, it seems like you have a good head on your shoulders and wouldn't have done that anyway. Unfortunately for me, the head on my shoulders wasn't as good...

  5. #5
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    I started a 401k when I got my first 'real' job. Put money away and never touched it. Ditto rainy day fund. Ditto pay off my credit card every month.

    The whole tax deferred thing. Increases the value of your investment and you just can't ignore that.

    It is hard. Because I live within my means, and many of my peers live (or lived) on borrowed money, I have a lower lifestyle. Small apartment, 1 car family, modest vacations (stay cations and family visits), not many gadgets, no maid, home cooked meals.

    But I have a roof over my head and 3 squares, which is better than what I grew up with.
    Ride more, whine less - HTFU.

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  6. #6
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    Quote Originally Posted by Creakyknees View Post
    1) There is no try -- Totally fair.
    2) Set up payroll deduction to max out your contributions. Do it now. Learn to live on a bit less. -- Good thought, I will do this. I pay most of my bills on auto already, so this would just be become another bill.
    3) Also set up a "rainy day fund" payroll deduction. It's not retirement, it's not tax sheltered, it's just savings. Put it away and don't touch it unless there is a real emergency. -- Doing this already. Got 9 months of living expenses in the bank.
    4) I was in a very similar position in my 20's and 30's, student loans, HUGE credit card debt (I mean, $70k+ at one point... more than my annual income at the time and for many years to come), mortgage, and ... 2 kids and wife at home. It can be done. Do it. -- I've totally dodged credit card and other consumer debt. No car payment and no mortgage (yet). Just the student loans.
    Thanks for the tips, the auto deduction is a good idea I wasn't thinking about.

  7. #7
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    Quote Originally Posted by bahueh View Post
    I've never had CC debt...if you do, get rid of it...now.
    No CC debt, the card sits in the dresser at home for the most part. I use it a couple times a month and always pay it off.

  8. #8
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    The more money you put in early, the bigger effect on the back end, due to compounding. And hopefully 401ks won't get rolled into Social Security some day.
    Tis the season for all of us not hard enough to play to belittle those not hard enough to win. We are a funny lot. - dave @ November Bicycles

  9. #9
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    Sounds like you are getting off on the right foot. The earlier you start saving for retirement, the better. I agree with others about automatic deposits as well as never touching your retirement money ahead of time. You would be amazed at the number of people who raid their retirement accounts when they switch jobs, blowing it on stuff like SUVs and motorcycles. I have been saving diligently since my early 30s, never touching the balances or selling stocks during corrections and bear markets, and it is amazing how it has grown over the years. My only regret is not starting an earlier age, but I was totally ignorant about investing as a science major in college.

    You might want to do some research on the pros and cons of Roth vs. Traditional IRAs and 401Ks. In some cases a Roth is better, in other cases not. We have some money in Roth IRAs but we funded the accounts with taxable savings.

  10. #10
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    If you have a 401(k) with an employer contribution, max that out first. The employer match is free money, plus your contributions come out of your pre-tax income. That's a double win that adds up quickly.

  11. #11
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    Quote Originally Posted by tarwheel2 View Post
    You might want to do some research on the pros and cons of Roth vs. Traditional IRAs and 401Ks. In some cases a Roth is better, in other cases not. We have some money in Roth IRAs but we funded the accounts with taxable savings.
    I've been pushing hard to build up my emergency fund, so that was the project of the last two years. Had a few months of unemployment, so that took a little longer than initially planned.

    Now switching that over towards retirement savings. It seems like the Roth is a good deal for me now given 1) a long time horizon increasing the benefit of tax exempt gains, 2) my current relatively low income and hence low tax liability for benefits from a traditional IRA. I'll have to do more looking at 401k's. Theoretically my employer will start doing a small match in 2014 - we'll see if that actually happens.

  12. #12
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    Quote Originally Posted by Scott B View Post
    I'm thinking for the next step I'll open a Roth IRA, given that over a long time horizon the tax benefit down the road is far greater than any tax benefit now.
    Roth is a good idea but not necessarily for that reason. It's really a coin flip as to if you will benefit tax wise. There's no way to predict what tax bracket you'll be in when you take the money out or what the tax rate will be. While in the this climate it might seem safe to predict tax rates will go up we all know from history you can't predict that stuff.

    It's a good idea though because it gives you a little more flexibility if you later determine you need the money for a house or emergency (5 years after opening it).

  13. #13
    I luv riding in WA
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    Quote Originally Posted by Creakyknees View Post
    1) There is no try
    2) Set up payroll deduction to max out your contributions. Do it now. Learn to live on a bit less.
    3) Also set up a "rainy day fund" payroll deduction. It's not retirement, it's not tax sheltered, it's just savings. Put it away and don't touch it unless there is a real emergency.
    4) I was in a very similar position in my 20's and 30's, student loans, HUGE credit card debt (I mean, $70k+ at one point... more than my annual income at the time and for many years to come), mortgage, and ... 2 kids and wife at home. It can be done. Do it.
    Creaky, the fact that you dug yourself out of that hole is very inspiring.

  14. #14
    Master debator.
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    I just kicked my 401k up another 5%. It sucks losing that fun money, but retiring in style is worth suffering for.
    "I felt bad because I couldn't wheelie; until I met a man with no bicycle"

  15. #15
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    I would say that retiring high interest debt is a higher priority than building savings. I'm at the point where I'm almost debt free and i just started contributing the max into my 401K, partially because i need to lower my tax liability, but now i can afford it.

  16. #16
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    Quote Originally Posted by Scott B View Post
    I'm 29 and thinking about trying to get more serious about saving for retirement......
    .... I have a killer amount of student loans (like a small mortgage worth),

    So, when you were in your late 20's what were you doing to plan for retirement. What do you wish you'd been doing?
    Keep focused... we all wish we had when we were young... you will too. Right now your focus should be on what debt you've already created... not heady future plans on the fortune you might someday save.

    Your retirement is half a century away.... your debt is today.

  17. #17
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    Quote Originally Posted by charlox5 View Post
    I would say that retiring high interest debt is a higher priority than building savings. I'm at the point where I'm almost debt free and i just started contributing the max into my 401K, partially because i need to lower my tax liability, but now i can afford it.
    I'd probably still want to put some into retirement, but probably focus at least half of that into debt.

  18. #18
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    Quote Originally Posted by Creakyknees View Post
    1) There is no try
    2) Set up payroll deduction to max out your contributions. Do it now. Learn to live on a bit less.
    3) Also set up a "rainy day fund" payroll deduction. It's not retirement, it's not tax sheltered, it's just savings. Put it away and don't touch it unless there is a real emergency.
    t.
    This is pretty close to exactly what I did. It does suck when at that age all your coworkers and friends are going out and having fun but you have to hold back because
    you're saving all that you can. But now that I'm only a few years from retirement it feels damn good knowing that I have that much put away and most of those same people have little to nothing.
    The possibility of physical and mental collapse is now very real. No sympathy for the Devil, keep that in mind. Buy the ticket, take the ride.

  19. #19
    We have met the enemy...
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    Quote Originally Posted by CalgaryDave View Post
    Creaky, the fact that you dug yourself out of that hole is very inspiring.
    "Man's capacity for justice makes democracy possible, but man's inclination to injustice makes democracy necessary." Reinhold Niebuhr

  20. #20
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    "So, when you were in your late 20's what were you doing to plan for retirement. What do you wish you'd been doing?

    (1) Bong hits


    (2) Less Bong hits.


    PS I was also paying off student loans...............(at $10 a month........things were a lot cheaper back then)
    .
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    Start kicking in 5%
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  21. #21
    Dr. Buzz Killington
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    I make good use of my company's 401k match. They give 50% of what I put in up to 6% of my gross pay. It didn't take long for that pile to stack well.

  22. #22
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    Retirement Contributions, late 20's. Sage advice?

    Look up the book "I Will Teach You To Be Rich". Despite sounding like a get rich quick scheme, it actually has a lot of good information on how to save money and does a good job of explaining different retirement plans and the best ways to use them. The author also speaks about different tactics to balance paying student loans/other debt and saving.
    I don't want to talk to you no more, you empty headed animal food trough wiper. I fart in your general direction. Your mother was a hamster and your father smelt of elderberries.

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  23. #23
    Matnlely Dregaend
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    Hookers don't age well. So I say invest it all in blow!

    I also get matched contributions from work, it's a no -brainer really to max that out every year because you're getting a guaranteed 50 or 100% immediate profit.
    "I haven't @#&$ed like that since I was an altar boy." - Hank Moody
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  24. #24
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    Quote Originally Posted by texasnewb View Post
    Look up the book "I Will Teach You To Be Rich". Despite sounding like a get rich quick scheme, it actually has a lot of good information on how to save money and does a good job of explaining different retirement plans and the best ways to use them. The author also speaks about different tactics to balance paying student loans/other debt and saving.
    Ramit Sethi? If so, I'll add it to my Amazon queue.

    I think there's a lot of things the general public does that really adds up. Very few of my coworkers brown bag it. I also know more than a few people who buy a new car right after they pay off the last one.

  25. #25
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    Quote Originally Posted by SauronHimself View Post
    I make good use of my company's 401k match. They give 50% of what I put in up to 6% of my gross pay. It didn't take long for that pile to stack well.
    I'm always amazed how quick this adds up. I'm very fortunate to work for a company that does this.

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