Author Topic: Help assess my hope for retirement!  (Read 4775 times)

greeklish

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Help assess my hope for retirement!
« on: April 26, 2012, 10:38:59 AM »
Hi, I recently found this site and like the mentality. I feel like there is no hope for me to retire. Ever.

I'd appreciate any looks at my situation and guidance on what to do:

Assets-
32K in 401k; not currently contributing (no employer match)
2002 Mazda Protege 5 paid off
about $6K cash at 0.80%

Debts-
$297K owed on 4.5% fixed mortgage ($2500/mo payment)
$11K owed on 4.45% fixed auto loan ($305/mo payment)

I make $110 per year with a wife and a kid in a not-cheap Chicago suburb. But it's worth it for the schools, public services, and nearness to family. We don't spend much on extra stuff, living fairly frugally.  But I don't see how I can ever retire.

Where should I put extra cash?  Build up savings?  Start contributing to a no-match 401k?  I am at a total loss as to where to begin, and I'm 38 years old. I feel like I can never retire... 

Any advice is appreciated in advance

AJ

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Re: Help assess my hope for retirement!
« Reply #1 on: April 26, 2012, 10:57:36 AM »
401k is good for more than the match. It reduces your taxable income. DH and I max ours for that reason alone, but then again, we don't have any Precious Little Tax Deductions running under foot, so we may need the deduction more than you do. Have you plugged it into a calculator to see how much you would save by contributing?

You might get better advice if you post your full budget. I can't even really ascertain your net income from the information provided.

chschen

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Re: Help assess my hope for retirement!
« Reply #2 on: April 26, 2012, 11:10:27 AM »
Part of your assets are in your house, too, I'm assuming. How much of the principal is paid off? Are you looking to reduce expenses or just for us to give you ideas on where you can put your savings?

arebelspy

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Re: Help assess my hope for retirement!
« Reply #3 on: April 26, 2012, 11:23:51 AM »
Need more info.

You make 110k?  Depending on your expenses you can retire anytime from 5 years from now or never.

What are your expenses?
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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velocistar237

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Re: Help assess my hope for retirement!
« Reply #4 on: April 26, 2012, 11:49:22 AM »
You make 110k?  Depending on your expenses you can retire anytime from 5 years from now or never.

This. Time to retirement is dependent only on savings rate and current net worth.
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

If you want freedom more than you want a nice house and a good school district, then you can make it happen. This is the tension you have to resolve.

smedleyb

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Re: Help assess my hope for retirement!
« Reply #5 on: April 26, 2012, 12:57:58 PM »
Greeklish, don't lose the faith!

Get out of the doldrums and get your financial house in order.  Start by ditching the car and car loan, keep the Protoge, and start getting fanatical about cutting expenses.

Endaxi?

GregK

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Re: Help assess my hope for retirement!
« Reply #6 on: April 26, 2012, 01:57:16 PM »
Greeklish-

You're actually in great shape. Here are the good things you have going for you as I see them:

1. You are driving a 10-year-old car
2. You have a high income
3. Probably most importantly, you are reading MMM and receptive to his message

The first order of business is to dump your blood-sucking second car. One car is plenty for a family of three -- you can likely get to work via biking, public transportation, or a combination thereof. If you really need a second car (and I do suggest reading some of the MMM posts on the subject -- because you almost certainly do not need a second car), you should go out and buy a used car on Craigslist. You can buy this cash, and replenish your cash cushion (a good idea) with what used to be your car payments.

Next, you're going to have to start saving money. You're already be saving over $300/month from the non-car-payments, plus savings from gas (since you're reading MMM and will start to use your car(s) less). There are plenty of other areas where you can cut spending (I won't go into specifics about how to cut expenses, as the MMM blog has nothing but these kinds of tips).

Finally (and really, this should be done at the same time as cutting expenses), you need to start investing. No employer match? Bummer. That doesn't mean you shouldn't be contributing! The only reason not to contribute to your 401(k) is if you're saving less than $10k/year (for a married couple), and you'd rather have more control over your investments -- then you should be investing in an IRA. Once you get up to $10k/year (NO PROBLEM on $100k/year -- you should be saving $5k/month! Just keep reading the blog.), the balance should go to maxing your 401(k) contribution limit. After that, you can follow the progression found in the MMM article below:

http://www.mrmoneymustache.com/2011/04/10/post-4-what-am-i-supposed-to-do-with-all-this-money/

Get the ball rolling, and you'll see how easy it is. One last word of advice -- make sure you get the fam on board (look for "The Talk" on MMM).
« Last Edit: April 26, 2012, 02:03:08 PM by GregK »

gooki

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Re: Help assess my hope for retirement!
« Reply #7 on: April 26, 2012, 03:37:34 PM »
Are you in a position to re-mortgage?

Getting it down to 3.25% will do wonders.

BenDarDunDat

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Re: Help assess my hope for retirement!
« Reply #8 on: April 27, 2012, 07:26:31 AM »
You've been dealt a full house and complaining about the size of your pile in the poker game. At $110K per year, you have advantages that 90% of the people visiting this site will never have.  You will be able to retire, you just have to work at it.

1. Aggressively track spending. I use Mint.com. I know when I've spent $20 more than last month. I know when I've spent $50 less than last year for the same month.

2. Start paying yourself by investing in a retirement account. Open a Vanguard Roth and max out at $10K per year. Then pay yourself with 4K into your 401K account, and 6K into a brokerage account with a diversified portfolio of low fee funds.

3. Add $3-400 extra to your payment for house or car to apply to principal.

++++++++++++++++++++++

If you don't have the money for these extra payments, start looking for places to trim your budget. Drop cable. Reduce your cell phone etc. We try to be frugal, but when I look at our monthly expenditures, it's always a struggle to keep them where they need to be. We eat out too much and now my wife wants to put our daughter in all these danged camps now that preschool is ending.

arebelspy

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Re: Help assess my hope for retirement!
« Reply #9 on: April 27, 2012, 09:05:26 AM »
1. Aggressively track spending. I use Mint.com. I know when I've spent $20 more than last month. I know when I've spent $50 less than last year for the same month.


I agree with tracking your spending, but don't be turned off or not do it by the crowd that takes it to the extreme track every penny level.

I know where my money goes because of Mint, but I don't know when I've spent more than last month, or less than the same month of the previous year.  I could look it up, but I don't, because I don't care.  I track it to know what I need for retirement, to know how much I spend in general, but I don't obsess over it.  I couldn't tell you how much I spend on electricity off the top of my head.  Or groceries, for that matter.

If doing that works for you, great.  If not, don't get discouraged and not do anything.  Do SOMETHING, but do what works for you.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.