Author Topic: where to start. how much trouble am i in  (Read 2813 times)

twinshadow

  • 5 O'Clock Shadow
  • *
  • Posts: 3
where to start. how much trouble am i in
« on: July 13, 2016, 07:21:02 PM »
I just turned 40.  my wife is a teacher with pension.  no idea what she has tucked away. I have about 120K spread between a roth401K and my 401K.   as of 2 years ago once my family little ones allowed it, I tucked 5% company match in 401K and 15% of my pay in Roth.  we have a mortgage , two cars (lease and a purchase) and only 10K in savings.  Feel comfortable enough (I'm new to moneymustache) to take the reins and start pounding away money in school funds for kids and e-savings but looking to grab some ideas on what easy changes I can start with.  An extra Vangaurd account I am reading? which one will we benefit from with a set it and forget it movement.?  We both work and make a decent sum.

Psychstache

  • Pencil Stache
  • ****
  • Posts: 920
Re: where to start. how much trouble am i in
« Reply #1 on: July 13, 2016, 07:26:33 PM »
There is a ton of missing information needed if you are looking for advice. I would recommend creating a case study if you want help specific to your situation. Here is how to do that:

http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/


DrF

  • Bristles
  • ***
  • Posts: 464
Re: where to start. how much trouble am i in
« Reply #2 on: July 14, 2016, 02:02:57 PM »
First off, I wouldn't put any money into a Roth unless:
1) you are already contributing the max ($18k) into your 401k each year
2) don't qualify for a traditional IRA for some reason

Also, how do you not know if your wife has any savings? I mean, not even a ballpark?

edit: I wouldn't set up a separate fund for your kid's college if it means you won't have money for retirement. Get your financial situation covered first before you think about theirs.
« Last Edit: July 14, 2016, 02:04:40 PM by DrFunk »

Mr. Green

  • Handlebar Stache
  • *****
  • Posts: 2129
  • Age: 36
  • Location: Wilmington, NC
Re: where to start. how much trouble am i in
« Reply #3 on: July 14, 2016, 03:36:31 PM »
I agree that a case study would certainly be helpful but honestly where you're at doesn't sound bad (as a starting point). There are certainly a whole heap of people doing a whole lot worse. I couldn't opine on whether early retirement is in the cards for you without more data but you may not even want to retire early. I'm sure just reading these forums can make you feel bad. Lots of folks on here are in their 20's and 30's and are seeing the light, but comparing yourself to them won't do anything for you. I think you're in a good spot for someone just starting to get serious about saving and investing.

twinshadow

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: where to start. how much trouble am i in
« Reply #4 on: July 15, 2016, 07:42:17 AM »
Response to: I agree that a case study would certainly be helpful but honestly where you're at doesn't sound bad (as a starting point). There are certainly a whole heap of people doing a whole lot worse. I couldn't opine on whether early retirement is in the cards for you without more data but you may not even want to retire early. I'm sure just reading these forums can make you feel bad. Lots of folks on here are in their 20's and 30's and are seeing the light, but comparing yourself to them won't do anything for you. I think you're in a good spot for someone just starting to get serious about saving and investing.

Yeah, it hurts to read all of the posts when I am new to this stuff.  I don't want to retire early, I do enjoy what I do and want to do it until about age 60 if not 65.  I just want to employ some of the great stuff I am reading that others are doing to help me be a better saver for the future.  Honestly I just want to be able to get to my sixties and continue to live as I am now (with the exception of downsizing my home which is a modest cape to begin with).  I just want to be secure later on and have my kids see what saving so that you can work and then still have a comfortable life after.  Thanks for seeing that that reading "these forums can make you feel bad"!  You nailed it.

I'll do the sheet this weekend .

twinshadow

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: where to start. how much trouble am i in
« Reply #5 on: July 15, 2016, 07:46:45 AM »
First off, I wouldn't put any money into a Roth unless:
1) you are already contributing the max ($18k) into your 401k each year
2) don't qualify for a traditional IRA for some reason

Also, how do you not know if your wife has any savings? I mean, not even a ballpark?

edit: I wouldn't set up a separate fund for your kid's college if it means you won't have money for retirement. Get your financial situation covered first before you think about theirs.


I am not sure how to tell what she has.  I am told that when she does retire she automagically gets 70% or 80% of the average of her last 3 years working.  She is at 16 years right now and has to do at least 25.  I'm working on getting more info from her.

As far as the roth, I was told it would be tax free money when I retire that is why I dump so much in it.  Pay tax now instead of later.  As far as the 401K I only put in the company match so that I can still have some take home pay.  I had no idea I (in connecticut) should have been pumping it up to the max 18K and didnt know it was the max.  I thought I was doing the max with roth but I guess I have never reached it!.  Again, not looking to retire early, just looking to learn in this fast paced world :(

CmFtns

  • Pencil Stache
  • ****
  • Posts: 583
  • Age: 29
  • Location: Melbourne, Fl
Re: where to start. how much trouble am i in
« Reply #6 on: July 15, 2016, 08:05:16 AM »
I agree that a case study would certainly be helpful but honestly where you're at doesn't sound bad (as a starting point). There are certainly a whole heap of people doing a whole lot worse. I couldn't opine on whether early retirement is in the cards for you without more data but you may not even want to retire early. I'm sure just reading these forums can make you feel bad. Lots of folks on here are in their 20's and 30's and are seeing the light, but comparing yourself to them won't do anything for you. I think you're in a good spot for someone just starting to get serious about saving and investing.

Yeah, it hurts to read all of the posts when I am new to this stuff.  I don't want to retire early, I do enjoy what I do and want to do it until about age 60 if not 65.  I just want to employ some of the great stuff I am reading that others are doing to help me be a better saver for the future.  Honestly I just want to be able to get to my sixties and continue to live as I am now (with the exception of downsizing my home which is a modest cape to begin with).  I just want to be secure later on and have my kids see what saving so that you can work and then still have a comfortable life after.  Thanks for seeing that that reading "these forums can make you feel bad"!  You nailed it.

I'll do the sheet this weekend .

I think your in great shape compared to the average new person looking for advice so to answer your topic title... you are not in trouble at all. Many people you age have major debt and negative net worth. You will easily be able to retire at 60 years old if you just implement a few of the methods you read about on these forums.

I wish you luck and maybe, after reading around, you will discover retiring even earlier than you planned might be right for you and your family.
« Last Edit: July 15, 2016, 08:09:40 AM by CmFtns »

DrF

  • Bristles
  • ***
  • Posts: 464
Re: where to start. how much trouble am i in
« Reply #7 on: July 15, 2016, 08:16:18 AM »
Where to begin...

You can contribute $18k to your 401k per year. You can contribute $5500 to your IRA per year.
Here is a great article on the differences and benefits of traditional vs roth IRAs.
http://www.madfientist.com/traditional-ira-vs-roth-ira/
Then an article on how to maximize your savings.
http://www.madfientist.com/retire-even-earlier/

You are doing well, and if you make just a few changes you could be doing even better. Best of luck!

edit: I read your OP again and see you are putting money into a roth 401k, not a roth IRA. This changes things. According to MDM, it may make sense for you to contribute to a roth 401k, but it is highly variable depending on pensions, social security, and other income you will get during retirement (since it seems like you are just aiming to retire in the normal range 60-65). http://forum.mrmoneymustache.com/taxes/allocation-to-roth-iras-and-taxable-accounts/msg1152144/#msg1152144
« Last Edit: July 15, 2016, 08:24:03 AM by DrFunk »

nereo

  • Senior Mustachian
  • ********
  • Posts: 11857
  • Location: Just south of Canada
    • Here's how you can support science today:
Re: where to start. how much trouble am i in
« Reply #8 on: July 15, 2016, 08:43:08 AM »

I am not sure how to tell what [my wife] has.  I am told that when she does retire she automagically gets 70% or 80% of the average of her last 3 years working.  She is at 16 years right now and has to do at least 25.  I'm working on getting more info from her.

As far as the roth, I was told it would be tax free money when I retire that is why I dump so much in it.  Pay tax now instead of later.  As far as the 401K I only put in the company match so that I can still have some take home pay.  I had no idea I (in connecticut) should have been pumping it up to the max 18K and didnt know it was the max.  I thought I was doing the max with roth but I guess I have never reached it!.  Again, not looking to retire early, just looking to learn in this fast paced world :(

I look forward to seeing your case-study; as others have mentioned there's a lot more info necessary for us to really be able help you.
Regarding the ROTH vs tIRA, most of the time the tIRA is the better choice for couples that earn at or above the US median household income of ~$52k/year (combined), though there are exceptions.
 For more information, read these articles:
https://www.bogleheads.org/wiki/Traditional_versus_Roth
http://www.madfientist.com/traditional-ira-vs-roth-ira/

AS for not wanting the retire early - that's fine too.  There are many of us here who do not plan to cut out entirely from the working world.  However, there's a distinction between being financially independent (FI) and early retirement (ER).  Being FI allows you an enormous amount of flexibility and freedom.  Once you become FI job loss is never a concern and you can choose to jobs/hours/projects based on what fits your life, instead of what generates the most amount of money for you.

Regarding how you can make improvements with your life and investing... for the investing side I'd read JL Collins series here.  It's an excellent primer on demystifying personal finance and covers everything from tax-advantaged accounts to dollar cost averaging.
In terms of lifestyle improvements... read the MMM blog (or at least the MMM classics).
What jumps out at me is that you have two vehicles that aren't paid for and only $10k in savings outside of your 401(k)/ROTH/pension.  You are likely wasting a great deal of money on things that don't increase your happiness very much (this is very common).  Final tip: start tracking where your spending goes (step 1) and then decide if those expenses are making you a happier, healthier human (step 2).  There's a wide variety of tools that can help you with this... I like mint.com because it is free and can auto-fill most of your expenses from your various cc purchases.