Would anyone like to participate in a 2010 Savings Challenge? (funds, pay, taxes)

[Perihelion2010]

Real simple:
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Come into this thread

State your savings goal for the end of 2010

Give an idea about how you plan to acheive it

Post into the the thread from time to time with updates, obstacles, battles won and lost and most importantly, lessons learned

Report in on December 30th whether or not you successfully reached your goal
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I'll start:

Savings goal by the end of 2010:
$12,000

How do you plan to reach this goal:
through placing 15% of my pretax monthly income into a retirement account managed by ING.

By eliminating all excessive or unecessary spending

Are you reading any books, websites or other tools you are using to reach your goal?
Currently I'm reading Dave Ramsey's The Total Money Makeover and checking out http://earlyretirementextreme.com/
I am also staying in contact with a financial advisor from ING.


Besides reaching your savings goal, what else do you want to acheive by participating in this challenge?

• I want to educate myself on ways to make my money "work for me".
• Become more ware of investment options.
• Become more efficient at managing and eliminating my debt.
• Inspire other people also want to learn more about managing their money.

Anyone else?

[user_id]

I really don't have savings goals, I save whatever I end up saving.

But, just to note. There is a difference between "savings" and saving for retirement. One should have savings before they bother to save much for retirement. You need an emergency fund, you need cash to purchase things you need (your next car, TV, etc). You can't use a retirement account for any of this without significant penalties.

[Perihelion2010]

Thank you user_id, and yes I am aware of those things
When I was evaluating how I look at money I realized that I tend not to focus on the long term and it is very likely one of the reason I don't have a significant retirement savings. This account that I will be depositing to consists of mutual funds that provide moderate to aggressive returns, so my money will have an opportunity to accumulate a 12%-13% return vs the 1.25% in my savings.

I'm also looking at the possibility that if I am laid off, I will be able to access the funds in this account with the only liability being tax, vs my mandatory retirement account which has a penalty + tax. Next years goal will be to start building the emergency fund (if I'm still in my job).

[user_id]

Originally Posted by Perihelion2010

... so my money will have an opportunity to accumulate a 12%-13% return vs the 1.25% in my savings.

You can save money in whatever account you want, it does not just need to be a traditional savings account. Regardless, getting a consistent return of 12~13% is unlikely.

Originally Posted by Perihelion2010

I'm also looking at the possibility that if I am laid off, I will be able to access the funds in this account with the only liability being tax, vs my mandatory retirement account which has a penalty + tax.

You want to treat a retirement account as an emergency fund and that makes no sense. You mentioned putting your retirement money in an aggressive fund, you realize that comes with a lot of risk right? Now over a long period of time there is less risk so this can make sense for a retirement fund if you are young. But not for money that you may need in a couple of years. You seem to think you are magically going to get 12~13% returns with no risk....

You should have an emergency fund equal to around 8~12 months of living costs before you bother with a retirement account. The fund should be liquid and in something with low risk. This is pretty much the standard advice, and for good reason.

[Waterlily]

I am saving in a credit union. I want to save about $12,000 more this year. I've already got some saved plus an emergency fund. I don't want to take too much risk with my money. I do feel a lot better having an emergency fund.

I won't be able to save much next month. I've got taxes to pay both state,and federal. I just want to get them paid and out of the way. It'll be a while before I'd have any updates. I may not be able to save quite that much or it could be more. Any extra money goes into the savings pot.

This is not really retirement money. We have pensions for that. It's just extra money for ourselves.

[Perihelion2010]

Welcome aboard Waterlily and good luck with your savings goal!

You can save money in whatever account you want, it does not just need to be a traditional savings account. Regardless, getting a consistent return of 12~13% is unlikely.

The rep from ING sent me the past 4 quarter performance sheets for the mutual funds they offer yesterday, and yeah, there is yield up to 12 -13% on the more risky portfolios. Since I already have a primary pension savings through my employer, I don't mind having a second account with a more aggressive investment goal.

I've also found out that unlike the pension account, I can make an emergency withdrawal from this ING account the case of catastrophe.

[dazzleman]

I currently owe $122,000 on my mortgage, $128,000 in investment leverage for investments that I get through my job, and have $76,000 remaining on a retirement plan that I am funding. These are my largest financial obligations and I want to eliminate them.

My plan is to eliminate all but about $40,000 of the investment leverage over the next 2 years, which I should be able to do if I stay on track with this year and the year before. Then the following year, I'll eliminate the remainder of the investment leverage, and be done with all this within 3 years.

Once this occurs, my income will be much more discretionary. I will continue to invest through work, but without leverage. My plan is to hedge my retirement strategy by buying some annuities that will guarantee me an income floor, as well as to have as substantial an investment portfolio as possible. So once these obligations are out of the way, that frees up a lot more cash to put toward my planned annuity purchase, which I want to do without taking from investments that I already have.

[user_id]

Originally Posted by Perihelion2010

The rep from ING sent me the past 4 quarter performance sheets for the mutual funds they offer yesterday, and yeah, there is yield up to 12 -13% on the more risky portfolios. Since I already have a primary pension savings through my employer, I don't mind having a second account with a more aggressive investment goal.

You do realize that the DOW and all the major indexes are up 25~28% over the last 4 quarters right? Looking at the past 4 quarters means nothing. An emergency fund should not be put in something risky like this because you never know when you'll have to use it. You seem to be under the impression that this mutual fund is going to see 12% consistently month to month. But that is not how the equity markets work, one year it may be up a lot another year it may collapse. You don't want to have to make withdraws when the market is down.

This is why you have an emergency fund in an liquid low risk investment, you can draw on it instead of being forced to use money you have in other more aggressive investments. Having an emergency fund is a requirement to proper investing and should exist before you bother investing, not having one is like trying to drive a car with a missing wheel.

Originally Posted by Perihelion2010

I can make an emergency withdrawal from this ING account the case of catastrophe.

You can make withdrawals on retirement accounts, there are just penalties when you do so. Retirement accounts are for retirement, they should not double as emergency funds, car funds or whatever else.

[ndfmnlf]

First 2 weeks of January, and we've already saved the max contribution of $10K for our nondeductible IRAs ($5K apiece). We intend to max out our contributions to my SEP-IRA ($49K) and my wife's 403B ($16.5K) for the remainder of the year, for a total of $75.5K in retirement savings. We've hit that target the last several years, and even had extra to put into taxable accounts. We would also like to put some tax sheltered money in HSAs, but I'm having a wait and see attitude until the health reform bill is signed into law before making such a move.

[Alinsky]

The market is eventually going to go belly up, no reason to keep investing in that while money is going to be worth then the paper it is printed on. I'm going to just keep piling anything extra I have into something that is going to keep it's value over time, like gold.