Counting My Pennies » retirement

Check one off the list!

Megan — Mon, 20 Jun 2011 00:30:57 +0000

I had a pretty lazy weekend this weekend. Well, as lazy as one can be when starting the weekend with a ten mile race. But with Saturday’s race, my spring racing season has come to an end, and now I have time to really work on my house again.

And one thing I got done this weekend wasn’t a house-related thing. I finally set up my Roth IRA contributions for the year! Yes, I realize that the year is almost half over. The whole house buying thing sort of threw me off track and I didn’t set anything up. But I am okay with that. As I have mentioned, I use Vanguard, and they have $3000 minimums for some of their funds. I’m happy with the funds I’m currently using, but after a bit of research, I found another fund I wanted to add. Which meant a $3000 minimum. I always contribute the maximum ($5000), and was ready for this $3000, so all is good. Now let’s hope my research was solid.

Of course, I’m not going to need this money for somewhere between 30 and 35 years, so there’s plenty of time!

Bad Finance Blogger

Megan — Tue, 03 May 2011 12:30:39 +0000

So I’ve been a bad Personal Finance Blogger as of late.

And not just because I’ve not been posting (blame the new house!). But because I haven’t done the one thing that I always tell people to do.

I haven’t set up my Roth IRA contributions for the year. And it’s May.

Do you have a Roth IRA? If not, why not? It’s a great way to save for retirement. Sure, there aren’t tax benefits now, but there will be tax benefits later.

I know that I still have time to set up my Roth for this year. And I’m thinking that I may add a fund to my account. I use Vanguard, which I am really happy with, but some of their funds require a minimum buy-in. So I might need to put out $3000 at once. Not a big deal, just requires a bit more planning. And hey, since I haven’t started my funding yet, maybe this is the year that I add a fund.

It’s hard to think about retirement when I know I’ve got at least another 30 years of working. But every penny counts.

Time flies

Megan — Fri, 02 Jul 2010 12:57:29 +0000

Hey! Where did June go? I haven’t even put together my net worth update! I did remember to pay my rent though. That’s a good thing.

Today, one of my favorite coworkers is retiring. We had a party for him earlier in the week because so many people are off today due to the holiday weekend. So it’s a bit of a quiet day. He has been talking about all of his retirement plans, and I have to say, I’m a little jealous.

He has been very good with his money over the years. Even with helping his kids with school, he’s still got a nice chunk of cash stored away that along with his continued income from his part-time job, he and his partner will be able to travel and enjoy the rest of their lives. He’s talking about all the different trips they plan to take and what he wants to do with his time. It’s really inspirational to listen to him talk, and it makes me want to work harder at saving for retirement! One coworker was inspired to finally start contributing to his retirement account. It’s made me think about increasing my contribution a bit. I currently contribute 7%, with a match on 5%. Maybe it’s time to get up to 10%. Retirement is a long way off, but every dollar counts.

Set it and forget it. No really!

Megan — Tue, 04 Aug 2009 10:00:44 +0000

While updating my monthly net worth, I was delighted to see that my TSP (Government employee 401(k) program, for those of you new to the blog) had grown a surprising amount. Now, if you’ve been following the news, you know that July was an excellent month in terms of the market, so it’s no surprise that my retirement account grew. In addition, I’m still contributing 7%, with a 5% match (with the goal of contributing 10% next year).

So I shouldn’t be surprised that my TSP hit a small financial milestone this month. In fact, I shouldn’t pay it much attention at all, since even with contributions, it might drop in August. Plus it’s not like I’m going to need or be able to access these funds anytime soon.

But the important thing here? The contributions have been painless. Sure, my take-home pay could be more. But I don’t think about it. I see that deposit in my bank account every two weeks and I don’t think about what happened to the money before it got there. I don’t think about taxes or health insurance, because those things are not optional. Somehow, planning for retirement has also landed in that “things that are not optional” category. It’s just something that I have to do.

Set it and forget it. And watch your savings grow. It’s something you hear personal finance gurus say all the time. Have money taken from your paycheck and put into a savings account or into retirement. That way, you don’t have to think about it, and it’s harder to second guess those decisions or borrrow from yourself.

I have always prided myself on knowing where my money goes, so the fact that my retirement accounts are growing so much does surprise me a bit. But I guess when I do think about it, it’s not big picture. It’s $X every paycheck, and that’s okay, because in the end, the result is exactly what it should be.

So if you’ve been looking for a way to save, either for a big purchase or for the ultimate purchase – retirement, then maybe try this trick. It’s something I should have figured out long ago, but it was just this weekend that I realized just how well the trick worked on me.

Don’t give up on retirement!

Megan — Wed, 08 Jul 2009 10:00:31 +0000

This article about being able to retire well caught my eye yesterday for a number of reasons. The first, of course, being the idea that people are panicked about the state of their retirement accounts, but they shouldn’t worry – they can still have a good retirement. I shouldn’t be one to worry, with 30+ years til retirement, but I like to plan ahead. The second thing that caught my eye was this quote:

“One of my daughters in her 20s said, ‘If I put it in the market I’m going to lose it, and if I put it in the bank I won’t make any money, so I might as well spend it.”

Clearly not the best plan, yet I know that it’s a plan many of my friends and co-workers are following. While I am putting money into my TSP and my Roth IRA, mentally, it’s difficult to do, especially when the accounts are falling. 2008 was a hard year to invest, but I did it anyway because I know that 30 years down the road, I will be glad I did it. For the most part, I try to not think about my retirement accounts. I won’t need them for years and years, so I should just keep socking money away and not think about what’s going on with the money. Of course, you can’t just invest blindly, but I know that my money is in good solid funds, so I need to just trust that things will turn out. And if the status of the funds I have invested in starts to change, then I will have to rethink my plan.

I admit, I’m a little obsessed with retirement calculators. I want to know what that magical number is and what I need to do to get there. And then, as soon as I find out what that number really is, I panic. How in the world am I ever supposed to save that much money? This article addressed that as well.

“To begin with, stop making a fetish of The Number — that fearsome string of digits some online calculator or investment adviser said you need to retire comfortably. Retirement is not an all-or-nothing contest like a basketball game, where losing by one is just as bad as losing by 40.”

That’s something we should all remember. While we all want to save as much as possible so that we never have to worry in retirement and possibly even leave some money for our heirs, you do what you can. If you come up short, you’ll make it work. Just don’t come up too short.

I’ve gotten better about not checking the status of my retirement accounts every day. I might glance at them once a week, just to see the general movement. If it goes up, great. If it goes down, oh well, things will improve later. Besides, I still have a lot of years to work. Might as well focus on the present and not the distant, distant future.

Retirement is the word of the day

Megan — Tue, 23 Jun 2009 10:00:01 +0000

As many people know, the big issue with government employment right now is the high number of people who are nearing retirement age. Which should be great for youngsters like me, just getting into government service. Lots of room for growth. And for the most part, that is true, though a lot of the potential retirees have decided to hang on for a few more years thanks to the state of the economy and the shrinking of their retirement accounts. That’s okay – I have a lot that I can learn from them.

Every day though, it seems like someone is talking about retirement and how they’re eligible already or will be eligible very soon. It’s amazing the joy you see in someone’s eyes when they say “It’s just nice to know that any day, I can decide ‘I’m done with this’ and retire and go on my merry way.”

What is impressive is the people who can and do retire as soon as they hit their minimum retirement age. Because of changing rules for federal employees, for some people, that’s as early as 55 years old. (I’ll be eligible at 57 if I stay with the government.) It impresses me that they have managed to save so well that at 55, they can retire and be set for the rest of their lives.

I asked a few of them what they did to be sure that they were in a good position. The main answer is “I work for the government.” Okay, yes, government retirement benefits are pretty good. But you can’t just rely on them. I did a quick calculation, and with very little work on my part, at 57, I could have a monthly income of a little less than half of what I am bringing home when I retire. Depending on how much I make at that point, it’s not a bad number. But looking at it in today’s numbers, a little less than half of my monthly income today might be tough to live on. Doable, sure, though not in my current housing situation, and also not a lot of room for fun in that estimate.

So to have a good, solid retirement, I need to plan. When my 57th birthday rolls around, I want to be one of those who are joyously looking at the calendar and knowing that I can retire at any time (even if I plan to wait until my mid-60′s to actually retire). I don’t want to be one of the people walking around in a panic, wondering how much longer I have to work and how much I can save over the next few years to that I can finally retire.

But what if you can’t save any more than you already are? What if you would like to put the max into your 401(k) but just can’t afford it? In my opinion, if you’re eligible for a match, do everything you can to put in the money up to the maximum match. It’s free money. Beyond that, do what you can. Every dollar helps.

Saving For Later

Megan — Fri, 19 Jun 2009 10:00:25 +0000

I am officially impressed by J. Money. One of his goals each year is to max out his 401(k) and for varying reasons which he describes, this meant that he had 90% of his last paycheck taken out. 90%! That seems like crazy talk. But I’m definitely impressed. Nice work, J.

After much pondering, I recently upped my retirement contributions. I had been contributing 5%, plus the max to my Roth IRA. I upped to a whopping 7%. Clearly, nowhere near the max. The other day, I did some math to see if I wanted to up my contribution all the way to 10%, but decided against it for now. Until I know whether or not my roommate is moving out and if I will be able to find someone to take her spot, I need to have a bit of extra cash on hand to cover rent.

I know that I should increase my contributions. I should be saving for retirement. It’s just a tough step to make. So rather than force myself into it now, I’ve decided that I’m going to make that a goal for next year. That’s right, my first 2010 goal. By the end of January 2010, I want to have upped my retirement contribution to 10%. Still nowhere near the max. But it’s something. In preparation, I’m going to continue to tighten up my budget so that I’m ready when the time comes. It never hurts to save.

Benefits to upping my retirement contributions

Megan — Fri, 12 Jun 2009 10:00:29 +0000

After much internal debate, I decided to up my TSP contributions a few weeks ago (for those new to the blog, since I’m a federal employee, I have a TSP rather than a 401(k) – but they’re similar). I had been contributing 5%, enough to get the full match, but hadn’t done more than that. After my most recent promotion, I decided it was prudent to increase my numbers a bit. I did the math and decided to up my contribution by around $65. I knew that this would reduce my taxable income, but I really hadn’t put much thought into it. With the question of whether or not my roommate is staying, I didn’t want to contribute too much and then realize that I need that money later. I can always up my contribution in a few months.

Recently, I got my first paycheck with the new retirement numbers. It was much higher than I expected. My combined federal and state taxes dropped by almost $25! Suddenly, the $65ish I expected to be pulled from my paycheck is closer to $40. Now, I have to admit, I’m a little suspicious of these numbers and wonder what it will mean when I do my taxes next spring, but for now, it’s a great surprise. I’m thinking about bumping my contribution up even more.

So for those of you holding back on bumping up your 401(k) contributions, it might be a good idea to look into it. You might not be reducing your net pay as much as you think.

Not totally unexpected

Megan — Thu, 14 May 2009 10:00:43 +0000

It comes as no surprise to me that Social Security and Medicare are projected to run out sooner than originally thought. At some point during my education, probably in high school, I remember a teacher telling us that Social Security probably wouldn’t be available by the time people my age were eligible, so I don’t think I ever really believed that I would be getting any sort of Social Security benefits upon retirement. Blame the Baby Boomers. Or rather, blame their parents.

On some level, it’s frustrating. I pay in all this money with the promise that I will benefit from it later. But at the same time, I pay in this money so my grandparents and in a few years, my parents benefit. Social Security helps me by helping them, because it means that I’m that much less likely to have to help support my parents upon retirement.

I’ve heard a number of people joke that Social Security is just a big Ponzi scheme, which makes me laugh, but I see the argument. The money being paid in with the promise of returns later is instead being used directly to pay out to those who have been in the program longer.

Clearly, the bigger issue here is Medicare, and I’m not sure what the solution is. It’s sad that all of these problems will end up falling on the elderly, people who should be respected and cared for and thanked for all they have done for the younger generations. I’m young enough that I can make changes in my retirement plans to hopefully still have enough set aside when I do finally retire. Many people don’t have that luxury.

Checking out my retirement accounts

Megan — Wed, 29 Apr 2009 10:00:08 +0000

Since receiving my raise, I’ve been pondering increasing my contributions into my TSP. I was chatting with a co-worker about this, and she commented that she puts in the max. I’m impressed, but I’m not sure that’s the plan for me. Right now, I want to keep setting aside money for a house, though I do put in 5% (enough to get the full match). I’m considering putting in up to another 5%, but haven’t made a final decision yet. I’m not sure what’s holding me back, as I can change it anytime, and it’s a pretty quick switch – I can decide to put in 10% for a month and then decide that no, I’d rather put in only 8%, and that change is easy enough to make.

Over the weekend, I started to look into the historical data of the funds I invest in. I use a Target Retirement Date plan for my TSP, mainly because I’ve had trouble researching the individual funds to my satisfaction. Personally, I just want to stick it all into the “G Fund.” The G Fund is simply government securities, with no risk of loss, but not a whole lot of gain either. I know that’s not the best way to look at my retirement, which is at least 30 years off.

In 2008, my TSP account tanked. In actuality, I’m still doing okay, since I’ve been getting a match on all my contributions, so my account is worth more than the money I personally put into it. But it’s starting to look better, which makes the idea of investing more kind of appealing.

In 2008, the fund lost 31%. In 2009, it’s down another 2%. I know, that doesn’t sound good. But March and April have shown positive returns. It’s going to take a while to get all those percents back, but I’m not going to think about that. (Plus buying low isn’t a bad thing.) I just like that the little graph is moving in a good direction. Sure, it might not stay this way, but I’ll take my positive signs where I can find them.