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I’m going to start by saying no one ever gave me a speech on retirement and I wish I had started earlier in life. So I am now hastily trying to catch up to what I believe is where I should be for my family and so I can enjoy a somewhat peaceful retirement. I have read many stories where 32 or 33 yrs olds should be at 100,000 or 120,000. This will be hard to catch up to.
Facts of my position.
32 yrs old. And have about 50,000 in a 403b which I have contributed to for the past 3 years by living very frugally. I make about 70-83,000 a year depending on OT. I recently began contributing 2% of my pay to a Roth IRA as well. My % into my 403b varies based on how much OT I make that period bc I attempt to dump all the OT and more into the 403b to counter higher taxs. I have not met the 18,500 limit of the 403b yet. I feel I need and should be doing that and I am afraid I will regret not doing so during retirement. I am currently been paying 4.5 yrs in my 30 yr mortgage. Only debt is 20,000 total for two vehicles purchased new in 2016 and my House. After retirement I plan on having a part time job.
My thoughts are in 33 years I will more than likely have to pay a higher income tax than I do currently so I believe a Roth IRA is wise thing to max. But since I already have a decent amount in the 403b, it would be counter productive since the compounding interest on the 403b will be higher.
Goal:
My goal is to live very comfortable in retirement and to leave my wife and children something.
My extreme goal is to have enough to live on just the interest but that would be a hard goal to reach.
My questions:
1.How do I look for retirement?
2.Should I lower the 403b contributions and hit the Roth IRA max or should I continue to strive for hiring the 403b max, or continue contributing as I am to the 403b and placing 2% into the Roth?
All advice and suggestions are welcome. Thanks for checking out my first thread.
I would not pay extra towards the mortgage at this time but would try to increase my Retirement contributions and payoff the car loans. Being young, I would not buy NEW cars and I would avoid debt as much as possible. I'd buy good used cars with cash.
My contributions at your age did not seem like much either but now after 35 years of contributions and compounding I am where you want to be.
Best advice... Live simply, No debt, No divorce and save as much as you can.
And.. at your age Invest your money aggressively. No need to be ultra conservative. It needs to grow. Wish I had paid more attention to my financials when I was your age.
If you have not, go to an online stock broker or mutual fund and use their retirement calculator.
As a general statement that is ok at your age you can spend 4% of your assets in retirement and probably get through a 30 year retirement. The 4% is adjusted for inflation. Thus at 65 if you had 1 million you could spend 40,000 (plus inflation) for 30 years. I think this rule will tell you are not in good shape but I think you can get their as you are addressing the problem now.
In general I would say max out your ROTH as long as you put enough in the 401k to get the match. I would try and live on your base pay and put the OT into the ROTH.
Truthfully, you need to go to a certified financial planner. Sit down with him/her, and between the two of you, map out what you should do. And expect every 5 or so years to do it again as things change. A good one will work with you, and give you the correct information you need to make an informed decision. The opinions here are good, but use them for questions to ask a professional.
Congratulations on getting this figured out at a younger age. Not many do, and suffer for it.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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At 32, you have about 33 more years to accumulate wealth by age 65. There is no guarantee that Social Security will still be available in 2051. Without a defined benefit pension, relying on just the 403B, or that plus a 401K and/or IRA means you will be subject to the ups and downs of the stock market over that time. Currently people talk about having $1 million to retire, in 33 years that could well be 2-3 times as much with costs of everything going up. About 33 years ago, for example, a home in my area was running $160,000, now about $800,000. Car prices have about doubled in that time. Wileykid has good advice, you will have to constantly monitor and modify your retirement funding over your working years.
At 33, you are essentially rowing across an ocean and barely out of sight of land, yet, asking "How am I doing?" It's a good thing to think about and plan for retirement early -- and stick with it! It's unlikely you will 'save too much' or 'more than you can spend in retirement.'
Perhaps if you put some specific $numbers to the lifestyle you envision living in retirement, you will be able to better see where you are now, relative to the end game. (Otherwise, how you are doing relative to current retirees, your peers, etc., is irrelevant). There are many variables you will need to consider, which is what you are asking others to do for you: ie; inflation rate, value of then-year dollars, tax rates, social security situation, lifestyle objectives 30-years from now, family needs then versus now, etc..
A couple of keys to achieving a successful, but, distant retirement are: (1) Living within your means now and not getting saddled with excessive debt; (2) Save regularly and increase your savings to at least match inflation; (3) Consider price versus long-term cost --- and cost versus value, when making significant purchases; (4) Don't let others make your lifestyle, financial and savings decisions for you; (5) Hope for the best, but, plan for the worst.
Rakin gave you the best information and it is even better said early on. Put as much as you can in your 403b and continue to fund Roth. One question, you are with a non-profit or government agency, will you get a pension? If so is it a state pension or something else? Outside of that I don't think your position is all that precarious. It is best to have started earlier but alas you are ahead of 90% of your peers without mention of a pension. I didn't have much more than that but I have two pensions to supplement.
You also have plenty of time so don't strain yourself. Do not take fun out of living because you are not guaranteed tomorrow.
I completely disagree with Wileykid about getting a FA. You can interview one but I wouldn't hire him. You don't have enough assets for him to do a good job for. You will learn some stuff but honestly you will get better info here if you just ask. Don't be afraid to put real numbers. Just leave off the PII (personally identifiable information). But you can give us specific questions. Most of the answers are Googleable If we give you an answer and why you can bet it will have come from somewhere out in the internet someplace. But Wileykid is right you are well ahead of your peers in figuring this out.
jghorton is right at this point in time your post here is like a cry from out across the ocean. Very hard for us to see how really good or bad you are doing.
My suggestion to you is tell us what mutual funds you have to invest in at work in your 403b. Then we can point you in a better direction as to earnings.
You are better off than most at your age. Feel good about that. Max the Roth, continue the 403b for the match, but be aware of the fund choices. Many 403b fund choices just plain suck. Once you get the match, it may be far better return on the Roth. There is zero net tax gain to be had dumping it all tax deferred in to a 403b vs paying taxes now and using a Roth IF (big if) you expect to have the same tax rate in retirement. If you expect to be in a lower tax rate, then a Roth is a losing vehicle. Of course, the problem is...who knows. I expected to be in a lower rate (everyone told me I would) so I ignored Roths the first few years. That was a mistake on my part. Now I have to perform back door conversions to avoid paying higher taxes on the money in retirement that I had deferred 20 years ago.
the first thing I would do would be to pay the house up as fast as possible. Then you could pour that money being spent now into maxing out your other ira's. Once you don't have a mortgage, your expenses will go way down.
As you get close to retirement age, if you are so inclined, sell the house, downsize to whatever location you like, and try to minimize things like HOA fees, outdoor maintenance, car insurance, etc.
Another good way of saving money is to minimize life insurance if your other assets will cover you.
Try to maintain employee provided health insurance as much as possible, since that's another big chunk of money.
I would not pay extra towards the mortgage at this time but would try to increase my Retirement contributions and payoff the car loans. Being young, I would not buy NEW cars and I would avoid debt as much as possible. I'd buy good used cars with cash.
My contributions at your age did not seem like much either but now after 35 years of contributions and compounding I am where you want to be.
Best advice... Live simply, No debt, No divorce and save as much as you can.
And.. at your age Invest your money aggressively. No need to be ultra conservative. It needs to grow. Wish I had paid more attention to my financials when I was your age.
agree with Rakin
but would add to consider seriously the cost/value of long term care insurance vice self funded in your elder years and how that will 'spend down' any hoped financial legacy to your spouse and children.
good luck.
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