Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I think Dave Ramsey's 7 Baby Steps are a good blueprint:
1. Save $1000 for a starter emergency fund. Check. You've got 71k in cash. Good job.
2. Pay off all consumer debt except mortgage. You didn't mention any debt, so it sounds like you've done that.
3. Save 3-6 months' worth of living expenses in a savings or money market account. It sounds like you probably have that much, but you'll have to check your monthly expenses to see. Since you're conservative, you'll probably want 6 months' worth of living expenses in cash, maybe a little more. So for the sake of this exercise, I'll assume you have 6 months' worth in cash.
4. Put 15% of salary toward retirement savings. This shouldn't be that hard as you're already contributing something and you just got a raise.
5. Save for children's college fund.
6. Pay off house early.
7. Build wealth (i.e. save even more) and give (give something to church/charity/favorite causes...and at this point, it should be a significant % of income, maybe 10%, but do less if 10% doesn't seem feasible)
And don't worry about the people who have 500k in their 401ks. They're a minority. Truth be told, most people in their 60s never amass a total net worth (including home equity) of 500k. Net worth tends to peak at around 200k to 300k. I would certainly agree this is one area of life where you want to be far above average. And while there's certainly room for improvement, it appears you're doing at least a bit better than average already.
Well, you should. But most people prioritize their lifestyle over saving. I did a time value calculation right out of college and knew each dollar I put in would be worth $4 when I retired. That was what motivated me to shove as much as possible into retirement and investment accounts and drive an old crappy car, and live in a starter home.
Now, in our later 30's, we can coast.
I also started reaching 'coasting' status in my early 40s. Couldn't quit working, but could cut down on retirement savings if I wanted to. Now in my late 40s, I could probably semi-retire in a cheaper COL area if I wanted to and am now considering a major life change.
I have no idea what it was invested in. A fidelity 401k account.
That means nothing. Fidelity has a large number of funds to choose from.
You need to learn the basics of investing. What is a stock? What is a bond? What is a mutual fund? What type of long term returns do stocks get? What type of long term returns do bonds get? Etc.
If you're clueless and your eyes glaze over at the thought of learning this stuff, then put it in a target date or balanced fund (sometimes called moderate allocation funds).
I also started reaching 'coasting' status in my early 40s. Couldn't quit working, but could cut down on retirement savings if I wanted to. Now in my late 40s, I could probably semi-retire in a cheaper COL area if I wanted to and am now considering a major life change.
What is the definition of coasting and how do you know if you've reached it?
Thanks everyone. I think in my 20's and 30's I didn't think about this too much. I'm glad I still contributed something...but now of course i wish had done more...and my parents told me I would wish i had. Now that I'm 40 I'm mad at myself. But again i am not someone who was making loads of money either so I'm not sure how much more I could have easily contributed really.
Forget about easy. It's never easy, just worth it.
do people use 401ks towards college for their kids?
i didn't get married until i was 35 and my 401k is separate from DH's.
They might but it's generally a horrible idea because taking money out early results in huge taxes and penalties. College funding is not what 401ks were designed for.
What is the definition of coasting and how do you know if you've reached it?
Well that is a good question.
And the answer is that all of these things sort of exist on a spectrum.
For me, it was having more than 100k in retirement accounts, plus some money in non-retirement accounts (savings, savings bonds, a small amount in mutual funds in taxable accounts)
It meant I could stop saving and just let the money grow and probably be ok by my mid 50s (largely because I can collect a pension at 55. I realize most other people won't have that option).
Of course, I didn't stop saving. I kept it up at a moderately intense pace until a year and a half ago, where I've 'only' been saving a Dave Ramsey-like 15% to 20% of gross income. Now in my late 40s, I could be "lean FIRE" if I wanted to move to a cheaper area. I am seriously considering it, along with other major lifestyle changes (i.e. I'm working on retiring 'to' something, not just 'away from' something).
By the way, I like these blog posts on the subject:
you got to look at things positively, you have $71k although you need to put that in investments ASAP otherwise you are bleeding money to inflation... also you have $90k which is very respectable for your age. In addition you're only 40 which means you have a 25+ years to retirement and that is a huge amount of compounding time. You can start being more diligent now and still have huge payoffs in 10-15 years.
There are people who are 65 and have zero, now that is scary!
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
