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Well, I only have about $30K saved up in a 401k, but I am contributing 18% of my gross income to my 401k (about $1,050 a month). I've been doing this all year long. I am also expected to receive $2,244 per month during retirement from Social Security at age 67. But if i am going to retire earlier than 67, it's VERY hard to save up for those years, because there's no SS available for those years unless I opt to collect as early as 62, but I dont like that idea.
One very important thing to remember. For liquidity, you MUST have a substantial emergency fund in addition to a 401(k). Too many people forget about this, and then when disaster strikes, withdraw 401(k) assets early, which produces major penalties. It's also likely after a job loss, which is likely in a recession, when investment assets in the 401(k) are worth quite a bit less, the absolute worst time to sell. It's a cascade of issues, that make an eventual retirement even more out of reach. Don't think it can't happen to you.
One very important thing to remember. For liquidity, you MUST have a substantial emergency fund in addition to a 401(k). Too many people forget about this, and then when disaster strikes, withdraw 401(k) assets early, which produces major penalties. It's also likely after a job loss, which is likely in a recession, when investment assets in the 401(k) are worth quite a bit less, the absolute worst time to sell. It's a cascade of issues, that make an eventual retirement even more out of reach. Don't think it can't happen to you.
Excellent advice. Don't want to be in a position to have to cash out investments when the market is down to cover some unexpected event. 3 to 6 months of expenses should be in a money market account just for emergencies.
Well, I only have about $30K saved up in a 401k, but I am contributing 18% of my gross income to my 401k (about $1,050 a month). I've been doing this all year long. I am also expected to receive $2,244 per month during retirement from Social Security at age 67. But if i am going to retire earlier than 67, it's VERY hard to save up for those years, because there's no SS available for those years unless I opt to collect as early as 62, but I dont like that idea.
If you assume an optimistic 4% after inflation return on your retirement portfolio, you'll have $830K in 2016 dollars by the time you hit age 62. That's about $35K/year in 401(k) distributions you can safely pull out of it and you have to pay tax on that. You're looking at a 50% cut in income and you'll have no employer giving you corporate group health insurance. Assuming you have a paid-for house, you might be able to limp along with that. Somebody age 32 is likely to see a Social Security change where their full retirement age is bumped up to 69. That will really nail you if you want to retire at age 62.
If you want to retire early, you need to have some other kind of investment or source of income. It's tough to do it just on $1050/month 401(k) unless the stars really align on the performance of your retirement portfolio.
Well of course, I will have a liquid cash emergency fund. I have one now. It's $10,000 of pure liquid cash that I never touch.
Are you at least getting some interest on it? I'm a lot older than you are so mine is a lot bigger since I face a big gap between jobs if I'm ever unemployed. I get 1% at Ally Bank and have a slice of it in laddered CDs. It's still awful return on the money but better than my local brick & mortar bank offers.
Are you at least getting some interest on it? I'm a lot older than you are so mine is a lot bigger since I face a big gap between jobs if I'm ever unemployed. I get 1% at Ally Bank and have a slice of it in laddered CDs. It's still awful return on the money but better than my local brick & mortar bank offers.
Yeah it's in a savings account that accrues interest of about 0.2% per year at best. But I get cash rewards of about $700 per year by maintaining at least $50K in combined cash balances. The cash rewards alone is like having an interest rate of 1.4% anyway. But I'm not nitpicky when it comes to things like interest and inflation.
Yeah it's in a savings account that accrues interest of about 0.2% per year at best. But I get cash rewards of about $700 per year by maintaining at least $50K in combined cash balances.
Would a CD count as a cash balance in they eyes of your bank? Because if it would, you could build a CD ladder and get 1% or better plus that $700/year bonus.
You should prepare to retire early, about 40-45. If you get to work pass that then it's bonus. Also I didn't plan to retire at 65 either. The window for me and my husband is 45-65. So thats how I planned. It's hard to go den to details, what year and months 30 yeas out.
OP, it sounds to me as if you're doing remarkably well thus far. And the absolute truth is that no one here has a crystal ball for 30-40 years down the road.
Just keep apprised of what's happening around you, save what you can, learn investment strategies – but, LIVE YOUR LIFE. Worrying constantly about the what-ifs will steal your joy.
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