Posts filed under ‘retirement’

How Much Money Do You Need to Feel Content and Secure?


When I first started working I remember thinking, “If only I could save $50,000, then I’d feel relatively content and secure.” When the bank account reached $50,000 the number in my mind jumped to $100,000, but when I hit that $100,000 mark the figure in my head continued to grow.

I saved the maximum amount in my 401(k) each year and watched the numbers climb higher and higher, but each time I hit a specified target I decided it wasn’t nearly enough. $100,000? $200,000? $300,000? I began looking forward to the future and thinking that might be enough for today, but it surely wouldn’t be enough to last me through retirement.

How much did I need to feel content and secure? $1,000,000? $2,000,000? When I reach those numbers would I finally be satisfied or does having more money make you dream of having even more?

Over the years our net worth has grown by leaps and bounds, but as I look at the total of all of our accounts I still think the final figure should be larger than ever. I am extremely concerned by the future of our health care system and the price that my husband and I may need to pay as we get older.

My parents and in-laws both carry supplemental insurance covered by their previous employers. At 60+ years old they pay only a few hundred dollars per month for quality care while my husband whose is self employed pays over $1000 per month for our family of three. I ran a hypothetical calculation on premiums in our fifties and found the figure to be twice our current cost. Rather than paying $1000 for three of us we’d pay $2000 for just my husband and I!

That’s $24,000 a month in premiums in an HSA plan, which also requires us to pay $3000 in deductibles before insurance even kicks in and God knows how high premiums and deductibles will rise in the future! We are currently saving money in our HSA but with limits of $6,650 per year and significant fees it’s difficult to believe this money will grow significantly enough to cover our future medical expenses.

The worst part about insurance is feeling like you are paying something for nothing. Imagine paying $24,000 in premiums and only going to the doctor once a year for a physical. That’s a whole lot of money that could have been used for other purposes.

When I look at my bank accounts I feel ridiculously secure with the amount of money we’ve saved to date. I know it would last us ten or fifteen years without any trouble, but when I project forward I’m not quite as certain.

How much money do I need to feel content and secure? I’m afraid as the money grows so does my fear that it may not be enough.

What about you? Do you have a specific figure in mind?

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October 2, 2014 at 8:27 AM 2 comments

How Can I Reach Retirement Faster?

Back when I was working, (I now stay at home with my 16 month old son), I spent half of my daily commute dreaming about retirement. Traffic in the Washington, DC area is among the worst in the country and every day as I sat sandwiched between thousands of cars on the beltway I would dream about the morning when I woke up and no longer had to go to work.

I thought of all of the exotic places I’d love to visit. How I could waste the days away reading my favorite books and volunteering at the local elementary school. As I sat behind the steering wheel of my twelve year old Toyota Camry I would dream of a life without a daily commute.

During those three hour drives, (one and a half hours each way), I actually tried to calculate how long I needed to continue working. What could I do to reach that goal faster?

I contributed the maximum amount to my Roth 401(k) and also set money aside in non-deductible IRAs. My husband and I earned too much to contribute to Roth IRAs but we knew that the tax code would change in 2010 so we opened new accounts and waited for the day when we could roll them. We also invested heavily in stocks. At 35 years of age we can ride out the markets. It’s been painful to watch them fall at times, but hopefully with time on our sides the risk will be worth the reward.

We repeatedly refinanced our mortgage to lower both the rate and the term. Our mortgage is our biggest monthly bill and the rest pale in comparison. I figured once our house was paid off we could live on a much smaller income.

I stopped buying unnecessary stuff. I started to limit the number of times I stepped inside a clothing store and greatly limited my purchases. When I took a hard look at my closet I realized I was only wearing a subset of these items anyway. I stopped buying household items that weren’t necessities. This saved us money and freed up time and space for us to be together.

I also sold stuff we no longer needed. I registered for a bunch of kitchen appliances we rarely used and received gifts I never wanted in the first place. I listed these all on eBay and moved the money I earned straight to the bank. I used to feel guilty about getting rid of gifts others bought me, but I no longer let these feelings burden me.

I also turned to the Internet and read every article I could find on the subject. There is a lot of good information out there with tips and tricks to help you reach your goals faster. CNNMoney recently published 10 things you need to know as you plan for retirement.

I agree wholeheartedly with tip #2: set realistic goals. Start tracking your monthly expenses to get a better idea of just how much you spend each month. The fixed expenses, like electricity and natural gas are the most important, but don’t forget to track those expenses that change from month to month.

One day, a few years from now, when my son starts preschool or first grade I will return to work. Hopefully this time around I’ll be able to find a more enjoyable job, but even if I don’t I hope that the steps I take now will lead to a closer retirement date.

February 20, 2013 at 12:56 PM 2 comments

$600 Richer

As I mentioned a few days ago I am currently in the process of rolling my 401(k) into an IRA. My employer instituted a Roth 401(k) a few years ago, so some money will roll into a Roth IRA and the rest will roll into a traditional IRA. To be more precise roughly $100,000 will move into the Roth and $175,000 will move into the traditional account.

I planned to move the money to Charles Schwab, because that’s where my husband and I keep all of our accounts. In fact, we gave me up traditional banking years ago and haven’t looked back once since.

Well it just so happens that Schwab is offering a bonus to anyone who rolls a 401(k) into a new or existing IRA from now until April 17th. The bonus amount paid is tied to the amount of money you plan to roll over.

In my case since both accounts will be over $100,000 Schwab will deposit an additional $300 into each account. Given the amount of money I’m rolling over it’s certainly not much, but since I’m moving the money anyway it certainly doesn’t hurt.

January 26, 2012 at 4:10 AM 2 comments

$1 Million By the Time I’m Ready to Retire?

My job officially ended with my former company in November of last year. In early December I received my last paycheck and on the last day of 2011 I received my severance payout. As each of these events transpire I feel the book officially closing on my previous employment.

I believe yesterday marked the final chapter as I withdrew the money in my retirement plan in preparation for a 401(k) rollover. After twelve years of saving my final tally borders $275,000.

Better market conditions may have resulted in a larger sum, but I still think that’s a pretty decent chunk of change. It proves two things to me. First, that I didn’t miss the money that was automatically deposited into my 401(k) each month and second that saving small amounts of money month after month really adds up.

Seeing this number in black and white makes me a little more confident about my (possible) decision to stay home for a couple of years. I won’t add more money, (or at least not a significant amount), to my retirement accounts while I’m out of work, but the money that is already in my account can certainly grow. I also have money in a Roth IRA that I opened the year after I graduated from college.

In fact, based on a few quick calculations at a 4% rate of return my investments could be worth as much as $1 million by the time I’m ready to retire at age 60. That’s $1 million without saving another dime. Of course, I don’t plan to be out of the workforce forever, so I would certainly start saving again at some point in the not so distant future.

I haven’t made any final decisions about returning to work, but reviewing the numbers makes me feel much more confident about the possibility of staying home. One of my fears is that today’s decisions will impact tomorrow’s goals. Looking at these numbers I feel more confident that one decision will not dramatically impact another.

January 21, 2012 at 9:25 PM 4 comments

Maxing Out My 401(k) to the tune of $155,758.87

I started contributing to my 401(k) in 1999 with my very first paycheck at my very first job straight out of college. Of course, I made such a teeny, tiny salary when I first began working that I couldn’t max out my contributions, but in 2002 and 2003 I got really close and in 2004 I finally reached my goal.

• 1999 — Limit $10,000 — My Contribution $898.49
• 2000 — Limit $10,000 — My Contribution $4042.65
• 2001 — Limit $10,500 — My Contribution $6521.03
• 2002 — Limit $11,000 — My Contribution $10,452.81
• 2003 — Limit $12,000 — My Contribution $11,843.89
• 2004 — Limit $13,000 — My Contribution $13,000.00
• 2005 — Limit $14,000 — My Contribution $14,000.00
• 2006 — LImit $15,000 — My Contribution $15,000.00
• 2007 — Limit $15,500 — My Contribution $15,500.00
• 2008 — Limit $15,500 — My Contribution $15,500.00
• 2009 — LImit $16,000 — My Contribution $16,000.00
• 2010 — Limit $16,500 — My Contribution $16,500.00
• 2011 — Limit $16,500 — My Contribution $16,500.00

When I added up the numbers I was amazed to see a total of $155,758.87 in savings! I think this is one of the reasons automatic savings is so valuable. You start out small and increase the percentage ever so slightly with every raise and wham twelve years later you wind up with a large chunk of change!

December 11, 2011 at 4:55 AM 4 comments

Sometimes Financial Decisions Are Not About the Money

Yesterday I wrote about my impending layoff and my desire to plan and prepare so we can keep a nice little nest egg in the bank while I transition from full time employee to temporary stay-at-home mom. One thing I failed to mention was my desire to fully fund my 401(k). Given the fact that I have no idea how long I’ll be out of work, it certainly doesn’t make a lot of sense to put money away for retirement. After all, I’m pinching pennies all over the place to make certain we have accessible money to spare.

In fact, if you were in a similar predicament and asked me if you should continue to fund your 401(k) I would probably say ‘hell no.’ I would tell you to decrease your contribution to the minimum amount that your company would match or 0% if you didn’t have a solid emergency fund. The more time you think you’ll be out of work, the more money you should have on hand in your checking and savings accounts. If you find yourself in dire straits you certainly don’t want your money bound up in retirement accounts that you can’t access.

So why am I choosing to fund my 401(k)? Well it’s a completely emotional reason. I have been contributing the maximum amount permitted since 2004 and despite losing my job I don’t want to save less this year.

I graduated from college in 1999 and if I made more money I would’ve started saving the maximum amount that very first year. Of course, on my initial salary that was absolutely impossible! I barely made enough to pay for food and rent, but I pinched my budget just enough to set aside the minimum amount required to receive a full company match. Of course, as the years went on I began to earn more and more and therefore had more to set aside. In 2003 I was a few hundred dollars short of hitting the limit. In 2004 I hit the limit for the very first time!

I get a huge sense of accomplishment from watching my 401(k) build and grow. Despite facing a layoff I feel no differently about meeting my goal this year. If I were in dire need of the money I would certainly decrease my contribution to 0% or at least to the minimum amount the company will match, but I’m very close to reaching the yearly limit and don’t want to end the year without seeing a $16,500 contribution!

Is it a little crazy to put money away for something so far in advance when bigger things may loom in the immediate future. Of course it is. Will I change my mind and decide not to fund my 401(k), I don’t think so.

July 29, 2011 at 6:00 PM 3 comments

Mothers and Money

I came across this article on the Internet earlier today, but of course I can’t seem to find the original URL in order to give it credit. With babies on the brain I thought this was an interesting topic.

Because two out of three mothers ages 25 to 44 work fewer than 40 hours a week, according to demographic research conducted by American University’s WorkLife Law program, women who have children in their 20s have the most to lose financially over the course of their lifetimes. When you factor in lost wages, benefits, and opportunities for advancement,the cost of motherhood can easily be more than $1 million for a college-educated American woman, says journalist Ann Crittenden, Washington, DC-based author of the book The Price of Motherhood and co-founder of the grassroots organization MOTHERS (Mothers Ought to Have Equal Rights).

Women in their 20s have the most years ahead of them to earn compounded interest on their savings — but don’t have as much disposable income to invest once they have kids because of the expense of childrearing, says Crittenden. As a result, they tend to have less money than women who’ve been able to use those years to save and make their wealth grow.

Women who delay childbearing until their 30s often have a financial edge over younger moms. “They’re usually more established in their careers, earning more income, and have started retirement saving,” says Ruth L. Hayden, a financial educator and author of Start Where You Are: Retirement Planning in a Changing World. “They often have a financial foundation in place that is a little more solid.”

Many parents in their 30s and 40s are better able to balance their work and family lives. “Older mothers — and fathers in particular — are more relaxed, says Armin Brott, author of Father for Life: A Journey of Joy, Challenge, and Change. “Parenthood at this age is often more planned, and these fathers have thought about what they want. They’re a little more settled in their careers, and they’re not as worried about missing a promotion if it means more time with their child.”

I definitely feel like I’m in the older crowd of mothers. I’ve been saving in my 401(k) since I started working 11 and a half years ago. The market knocked my nest egg back a bit, but I continue to contribute the maximum allowed each year as does my husband. I’ll continue to do that for at least another six months.

I plan to go back to work full time after the baby is born, but if the mood sways me to work fewer hours then I’m not opposed to looking for a new position or a new job. I would love to find something that would allow me to work part time or at least reduced hours.

I know this could have an impact on my future financial well being, but the fact that I have nearly 12 years worth of money growing certainly helps ease any financial fears.

I always thought that my husband and I would spend the months leading up to a baby saving like crazy, but instead I find myself shelling out more and more money for home upgrades and repairs. After all, it seems a lot easier to remodel the bathrooms now then wait until our baby arrives.

Because my husband and I have been financially prudent all these years I’m actually not worried about the finances. I might change my mind as we start buying things and paying for daycare, but for now I feel that our previous discipline puts us in a good place.

Let’s see if I’m singing the same tune this time next year!

May 3, 2011 at 2:45 AM 3 comments

Rounding out 2009 with Large Retirement Contributions

Remarkably my husband and I finished 2009 with nearly $79,000 in retirement contributions. This included savings to both 401k(s) and non-deductible IRAs. Our companies provide substantial 401(k) matching, which really bumped us well past the amount we could have contributed alone.

This year we’ll need to decide whether or not to take advantage of the 2010 Roth conversion window. With the rise in the federal deficit I certainly believe tax rates are headed higher, though I’m not sure exactly how high I think they might go. In my opinion our non-deductibles are a no-brainer, but my husband and I have a couple of rollover IRAs to consider as well.

Besides the tax issue I like the flexibility the Roth IRA provides. I certainly want to retire early or at a minimum decrease my hours as time progresses. I love the flexibility of tapping Roth contributions if necessary or leaving the money alone if I’m lucky enough to never need it.

Of course, there are a ton of factors to consider before making a decision and to be honest I haven’t spent too much time looking into all of them. I have a feeling we won’t convert the rollovers. I hate the idea of paying a significant amount in taxes today and losing out on all of the growth that those dollars could have earned.

January 9, 2010 at 4:50 AM 4 comments

How Often Do You Review Your Retirement Portfolios?

In January a friend of my husband’s asked his employer, (a very small company with less than ten employees), to increase his personal 401(k) contribution from 5% to 10%. Now the friend assumed that the employer made the change and went about his business for the next six months. In fact, he assumed everything was perfectly fine until a few days ago when he logged into his 401(k) account and realized the company failed to make the change.

He was annoyed and angry and contacted his employer in search of retribution. He believes the company owes him money, because the market has been rebounding ever so slightly and without increased contributions he feels he missed out on the rise.

While my husband felt sorry for his friend, I must admit that I thought his friend was as much at fault as his employer. After all, his friend could have logged on to his 401(k) at any point over the last few months to check his contribution level. If he had taken just one minute in the last seven months he could have logged in, looked at his balance, checked his contribution level and realized the employer’s mistake.

Instead, he waited seven months to review his account and then blamed his employer for failing to make the change he requested. While I agree that the employer should have made the change, I believe the employee is equally responsible in verifying that the change actually occurred.

I typically peek in on my 401(k) every few weeks just to check the balance, so I certainly would’ve caught an error like this one by the second pay period. But this scenario definitely got me thinking: Is it unusual for an employee to check his or her balance so often? How often do most retirement contributors review their holdings?

When I asked around the office a couple of coworkers told me they’ve never logged into their 401(k) accounts. A few others haven’t logged in for so long that they can’t remember how to log in and a few of those who could remember didn’t know their passwords.

One friend told my husband he completely lost track of his 401(k). He worked for a company during the dot-com era that no longer exists. With the company out of business he can’t contact the HR department and he can’t remember which investment firm managed his 401(k). He remembers opening and investigating in that account, but he has no idea which firm held his money. For the time being he’s written off that money, because he has no idea how to get a hold of it.

So what about you? How often do you review your retirement portfolios? How long would it take before you recognized an error like this one?

July 23, 2009 at 3:55 AM 9 comments

When it’s time for retirement will your friends be ready?

A friend of mine seems to keep the whole city employed. On a weekly basis she pays for a dog walker, a housekeeper and a personal trainer. Not to mention the financial advisor and accountant who she pays on a semi-annual or annual basis. She and her husband have recently purchased new cars and made major home improvements. In the mean time my husband and I mow our own grass, clean our own house, and file our own taxes. We drive cars manufactured in 1994 and 1999, and try to stash away every other, if not every extra penny.

I am not one to compare myself with the Jones’, but I know that in the future there will be comparisons. Of course, future comparisons won’t be about how large our home is or what kind of cars we drive. In twenty years, the question will be, how much money have our friends saved for retirement? When my husband and I begin contemplating retirement or starting second careers, where will our friends be?

At the growing rate I imagine that most of our friends will need to continue working for a very long time. For now we have conversations about the trips they take, the clothes they’ve purchased and the furniture they buy. But I look forward to the future, and wonder, will they be shocked when we initiate conversations about quitting our jobs, cutting back hours, and spending more time pursuing our passions?

December 20, 2006 at 3:37 AM 2 comments

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