It’s been a while since I’ve written on here because I’ve been so busy lately. Which is a good thing. I’m working a full-time job, spending some time on a side project, and not spending all that much money. All in all, I’m doing “good.” Heck, I’m doing amazing right now in relation to how I’ve done at any point in my life before – financially, personally, etc.
I’ve been thinking a lot lately about the concept of early retirement. From reading blogs like Early Retirement Extreme and Free at 45 I’ve begun thinking about the true meaning of life. Not from an existential standpoint, which I’ve already thought about long and hard, but from a view of what every waking moment of my day is worth from now until my death.
My parents and their friends are getting old now. By old, I mean they’re in their late 50’s and they are really starting to look old. My dad is dying of cancer so he looks even older. When I was a kid, I thought, well, I want to live forever. I never wanted to be young forever. I guess your late 20s is when that thought pops into your head. I don’t really want to be “young” forever. I feel like one’s 30s are the perfect mix of being young and old. And the 40s aren’t bad either. But once you hit 50 your body does start to seriously age. You can definitely work hard at keeping up your body through physical exercise, eating right, etc, but the years take their toll on every body.
When I think about early retirement, I don’t have a dream of retiring to some desolate island and relaxing on a beach. I dream of working hard but doing what I want, when I want. I want to get to a point where working freelance or part-time on my own hours won’t kill my bank account, where my savings are large enough that the long-term stock market gains will provide a substantial portion of my income.
So over the next few weeks, I’m going to work on calculating exactly what all this means from a financial standpoint. What year could I “retire” from 9-5? How much do I need to earn now and in upcoming years to obtain this goal? How much do I need to save? And when exactly can I retire “early?”
My current plan is to try to save $6,000 per month while I’m fortunate enough to have a job that pays well and low living costs. I’m not sure if this is maintainable over the long term. I’ll update in the near future with some further calculations to determine how much I will need to save each month to meet my early “retirement” goals.
What would be the correct metaphor here? I don’t even know. My parents are way worse than I am when it comes to finances and both of them are in massive denial over their spending problems. It doesn’t help that my dad likes to blame my mom for everything and sees no fault in his own actions. Ever. Trying to get them to agree on a serious budget is like… impossible.
Towards the end of 2008, I made my mom sign up for a Mint.com account so I could see exactly what they were both spending all the money on. My father would never let me spend time on his Quickbooks, where he says he carefully tracks all the finances. When I visited home recently, I sat down with my mom to review their 2009 spending. What I saw didn’t shock me, but it scared me a little.
In my last post, an anonymous user advised that I should put all of my income into a business account and pay myself a set salary out of that account. While that is not a terrible idea, I believe it is not the best approach in my situation. Mr. or Ms. anonymous, I would like more information on why you feel this is a good idea, based on the following information. And for the rest of you, I’d love to hear your opinion in a comment about if this concept would make any sense.
Since both of you left such great comments on my last entry, I thought I’d follow up in another entry to clarify, while still being vague enough to hopefully keep anyone who finds my blog from knowing who I am. (It’s getting tougher and tougher to do that while being 100% honest on my earnings!)
This year has been full of fiscal ups and downs. After making a solid salary at a full-time job, I was laid off in February and ended up picking up part-time gigs which, while paying great by the hour, didn’t cover enough hours to meet my prior salary. And then I interviewed for a bunch of jobs and got a few offers. In the end, I landed a six-month contract with very strong hourly pay.
I’ve been obsessed with the idea of applying to / going to grad school lately. Not for the earning potential post graduation, but for the chance to focus on an area of study and build up my skills so I feel like an expert in an area (at least until those skills are out of date.) But then I wonder… financially speaking, is grad school worth it?
Lots of my readers think I’m a spoiled brat with a spending addiction, and occasionally I get a comment along those lines. Part of the reason I started this blog is that I agree with that statement and I’m trying to be smarter about my finances. Without the PF world I probably would be in debt by now instead of having $45k in savings. Yes, I have a shopping addiction. Yes, I need to stop making excuses for buying expensive clothes. Yes, I need to focus on saving more. But my biggest problem is not knowing where to save. It’s not the best excuse, but it’s true.
I can easily put away $5k per year in my Roth IRA because I always save up that much the year before (I overestimate on my taxes and pretend that money doesn’t exist) but beyond that I am not sure where to put my savings. Spending the money is, sadly, a lot easier than figuring that out. Again, an excuse, but I really don’t know where to put my money. With no 401k at work, I’m not sure where I should save. Do any of you have ideas for me?
I have some automatic transfers set up. $100 / month to ING Direct liquid emergency fund, $50 / month to Sharebuilder, $50 / month to my 529 plan. I’m not really sure how to save for retirement beyond my 401k or if I even should be saving more than that right now specifically for retirement. If I could figure out HOW MUCH I should be saving and WHERE I should be saving it, believe me, it would be a lot easier to save it.
My current accounts…
Basic Savings Account: $301
CD / Emergency Fund: $8,073.49
ING Direct Savings / Liquid Emergency Fund: $3000
Roth IRA: $14,482
Sharebuilder Stocks & ETFs: $9,801.43
Vanguard Index Fund: $4113.69
Vanguard 529 College Plan: $890.44
Lending Club: $555.95
Where on earth should I be putting my savings and how much should I really try to save each year?
Since I don’t have a 401k, I’m always paranoid about not having enough saved for retirement. I know they advise workers to put at least the % match in their 401k above and beyond their Roth, but without a 401k, I’m still at a loss for where to save my money. Also, with grad school in the future (2-5 years away) I don’t know how much to save for retirement vs. that. Oy.
To be honest, beyond my Roth IRA, which I max out at $5000 each year, I don’t keep great track of what money goes into my other savings accounts. I save, I probably save quite a bit all things considered, but I haven’t really looked at what that means until today.
This year, so far, I’ve put $4850 in my Roth IRA. I have invested $5000 in ETFs and stock purchases in my Sharebuilder account. Plus, there’s about $600 in my 529 plan. Ok, so I think I stashed away $10k this year, or more. That’s not too bad. Then again, I know people who are saving 30% or more of their after-tax income. Which would be probably more like $20k.
Granted, I lie to my net worth spreadsheet and tell it to deduct more taxes then I will need to in order to have a fiscal boost come April 15. But that usually goes straight to next year’s Roth IRA. I always like to start it out with a $3000 one-time investment in April, then add in for the rest of the year until I hit the $5000.
I really wish I could buy a house right now, but besides not having the money to do that (I only have $30k saved, and much of it is in retirement accounts) it just wouldn’t make sense. So I’ll keep throwing away $600/month on rent. I was at my friend’s house yesterday — the one she bought with her engineer fiancee — and I’ll admit, I’m a bit jealous. But then I remember I don’t NEED a house right now. What would I do with a giant house besides pay a lot in bills and make a mess of it?
With a mix of a morbid stock market and American’s not understanding just how much money is needed for retirement, the country is filled with people who may never get to enjoy a retirement.
A study that came out today from ING Direct reports that 40% of Americans expect to retire much later on or not at all. Americans will be chained to their jobs longer than ever before just to keep up with their bills and ensure food is on the kitchen table. The survey results also noted that over 60 percent of Americans are significantly more concerned about saving enough money for retirement and having the right type of retirement plan than they were six months ago.
Some other interesting stats from the survey:
· Nearly half of all Americans (47 percent) have “no clue” how much money they need to retire;
· Despite nearly two years of economic turmoil, 65 percent of Americans have not adjusted their retirement investments;
· One in five Americans (19 percent) are still banking on Social Security to be their main source of retirement income; and
· One-fifth (21 percent) of Americans are contributing less to retirement than they were last year
This is pretty scary stuff. The only thing that I go on is that retirement is maybe not a necessity. Well, at some point when I can no longer move or think I’ll want to retire, but I hope I’m well into my 80s at that point. I enjoy working, and can’t imagine enjoying retirement. I’d be bored silly. Maybe my mind will change by then, but still — my biggest fear is not having enough money to take longer vacations and travel in between being professionally productive. I’m definitely not banking on social security to be my main source of retirement income.
The national online survey of 1,223 adults was conducted by Harris Interactive on behalf of ING DIRECT between February 18-19, 2009.