Let's Talk Retirement

>> 4.05.2011

Fun fact about me: Every year I try to give up something for Lent. This year, with the encouragement of Nate, I gave up real estate- talking about it, looking up houses, and tracking prices. I hadn't even finished 15 out of my 40 days when Nate told me he knew what I should give up next year: retirement. Don't worry everyone, I'll still be allowed to contribute, but apparently I've become a bit obsessive about planning for it. I'll blame the wedding on my new future-planning obsession (he's lucky I'm not stuck on babies yet!).

Since I'm still allowed to obsess, I figured I'd bring the discussion over to the blog. I'm no financial expert, but there are a few things I've picked up over the past few years.

Three things I know about retirement:

1. There's almost always a little extra that can go to retirement savings. Two years ago, when I was about to buy my first house, I almost lowered my retirement contribution in order to have a little extra money free for home improvements and little emergencies. Wow, would that have been a bad move! Now, I've managed to maintain my house and have thousands of dollars added to my retirement account by rearranging my priorities a little bit.

2. Skipping a company match is one of the craziest things you can do. I like to think of it not as free money, but as vacation days- it's all a part of your company benefits package. Now, how crazy would it be to skip out on vacation days!?

3. Compound interest is your friend- start as early as possible! Many people think that they can just wait 5-10-20 years before starting retirement savings and catch up as needed with higher paying jobs or larger contributions. Unfortunately, because of compound interest, that original $30,000 skipped could have been double or triple the size and impossible to build up in addition to the normal contributions necessary for retirement. Play around with this calculator and really see how much a small amount can grow untouched over the years. If you have a working teenager, imagine the head start you could give them by helping to set up an Roth IRA!

If I were an expert on a retirement savings, I'd probably know more than three things... but since I am a blogger and I'm sure some of you are curious as to what I'm doing I'll share my personal retirement savings plan:

*I contribute 10% to a Roth 401(k) (not all companies offer this) and an additional 5% company match goes into a 401(k). I like using my Roth 401(k) instead of a Roth IRA because I'm able to contribute more than the maximum for an IRA. I'm 26 so I have my investments in a mix of slightly higher than moderate risk. As I get older and closer to retirement, I'll adjust the risk level. 

*As I get bonuses and raises, I increase my retirement contributions. I'm also looking into ways to diversify my savings more.

*We plan on buying the next house to pay off and stay in mortgage-free through retirement rather than climbing the property ladder.

*I treat Social Security as a bonus and plan on not receiving any benefits.

*I'm going to have at least four kids and make sure that they all get high-paying jobs in business and medicine (kidding!).

If I was really set on retiring early or going on a spending spree in my 80's, I'd probably work at saving even more aggressively right now, but my big goal is to live a balanced life and retire at a decent age.

What do your retirement savings and goals look like?


Steph @ Crafting in the Rain April 5, 2011 at 12:18 PM  

To be honest, I don't know a whole lot about our retirement, except that hubby has been totally on top of it since we started working (and we got married just after he graduated college and had started working) Since I'm a stay at home mom, I don't have a 401k, but we have set up an IRA in my name and regularly contribute to both his and mine.

Hannah April 5, 2011 at 12:27 PM  

haha, I feel your pain on this one as my significant other loves to roll his eyes at all the retirement planning I do (at the ripe age of 23). I do 6% into my 401(k) (my employer only fully matches the first three percent and then half of the next 3%, so I'm taking full of advantage of what they'll match) and about another 4% goes into a savings account in the form of my "emergency savings" (some of which I'm moving into a mutual fund this summer to set aside to eventually saving up for a house down payment if I move somewhere where it makes more sense to buy). The one thing I try to stick to with the 401(k) is just to NOT touch it. I had a colleague that was forever messing with hers trying to chase the market. Since I can't touch the money for over 40 years anyway, I plan on just letting it do its things for the next few years (barring major economic changes, etc.) rather than drive myself crazy trying to get another dollar here or there.

emily @ the happy home April 5, 2011 at 12:49 PM  

i don't mean to be rude, but there isn't *always* something extra to put away. i manage to get $10 a week into a basic savings account, and after that? all my cash goes to rent, student loans, food, gas, and paying off my credit card. retirement is really a lofty dream for some, who can't even afford the now.

Jenna Scott April 5, 2011 at 1:14 PM  

I'm with Emily on this one. I am still a student in college, so retirement isn't an option for me! I put aside money, but it's my cushion money, not exactly retirement. I'm a home owner (at the young age of 22), full time student, and only have one small loan out, so right now, there's no such thing as retirement!

Kasey @ Thrifty Little Blog April 5, 2011 at 1:35 PM  

@Emily & Jenna~ I agree! Scroll back up and you'll see that I wrote "almost always." I was thinking more of an average budget that includes wiggle room for things like movies and dinner out. In those cases, there's almost always room for retirement. When it comes to fun stuff vs. retirement, I think it's worth stretching a little more to add to retirement first. Obviously the thousands of people right now with $0 income and no job in site do not have anything to put into retirement.

Amanda- Hip House Girl April 5, 2011 at 4:21 PM  

I agree with the *almost*, Kasey. Back in the day (college) there really wasn't extra room for retirement. But now there is. When I got my first raise (and only raise, as I'm a State employee and we are on a raise-freeze) my boss advised me to continue living on what I had been living on and increase my retirement contribution. Awesome advice. Sure, it would be nice to have that extra percentage for fun extras and home improvement (and to you know, actually SEE my raise!!), but the idea of compound interest and starting young keeps me on track. Those little calculators really are a ball to play with!

Also, if you don't think you have the room but would like to at least get started, try 1% at a time. See how it goes. If you live with 1% less for two months and you survive, maybe try adding another 1%. Starting somewhere is better than starting nowhere!

And to be completely honest, I wouldn't be able to do it if the money was accessible (ie in a savings account). Contribute to a retirement account, and forget about even thinking about touching it.

I'm curious about what kind of financial books you've read. You've probably mentioned it somewhere... Rich Dad Poor Dad? The Millionaire Next Door? (I know you love Suze, haha.) I'd love to hear your faves!

Kasey@ Thrifty Little Blog April 5, 2011 at 4:32 PM  

@Amanda~ I do like Suze... but I'm also a fan of a lot of blogs and magazines that are online (Get Rich Slowly, Smart Money, MSN Money...). I'm still a bit nervous about trusting any once source or piece of advice so I'm just learning as much as I can as I go.

Oh, and I can't agree with you more about forgetting about touching it. I swear, if I hadn't had my retirement automatically taken out, I'd probably dip into it for stupid house stuff.

Layla April 5, 2011 at 5:23 PM  

I am reading a book now called "Aging Gracefully: Ideas to Improve Retirement Security in America." It's a collection of essays (one by Peter Orszag- special assistant to the president for economic policy during the Clinton administration) that gives ideas for promoting greater retirement savings among Americans. It has some great suggestions! You (and your readers) should check it out!

Rachel April 5, 2011 at 7:47 PM  

Great ideas! That is something we are working on too...it's hard though when your spouse isn't totally with you on the whole saving-for-the-future thing. I think I've finally convinced our grown daughter that not contributing to her company-matched 401k is throwing money away. Why would you do that!? We have finally found the house we want to grow old in, so I am pretty excited about that!!

k + b April 5, 2011 at 11:19 PM  

Great topic Kasey, we actually just met with a financial planner to get everything in order to retire as early as possible. I recommend it to anyone... it was such an eye opener! It's not about being "rich" or having spare money lying around to throw into your retirement, it's about freeing up money you have elsewhere. For example, when you pay off that credit card, put that same amount towards your retirement account each month going forward. Or make extra payments to pay off your mortgage in 10 years to free THAT money up to go towards retirement. (not to mention all the front end interest we were saving holy cow) We were amazed at what small decisions could have HUGE impact on us later in life. It feels like it's light years away (for some of us) but when it comes time, we can NOT wait to have financial freedom.

Tobe | Because It's Awesome April 6, 2011 at 8:33 AM  

makes my heart skip to see so many ladies with great input about being financially responsible! my people! :)

many of my friends just look at me like i'm crazy when i talk about how important this is to our futures. great to see it as a topic on your blog, kacey.

the book smart women finish rich was what got me started (a college graduation gift), but, like you, kacey, i am constantly perusing new sources. i've been subscribed to several finance magazines for some time now, and love that a few dollars a year have kept me on track with those monthly reminders.

kudos to all of you!

Anonymous,  April 6, 2011 at 12:53 PM  

I also think that investing in your health is wise for retirement. So for those who can't save actual dollars, by taking care of their health, you can save thousands of dollars in future health costs. Afterall, what good is the money you do have if you are too sick to use it?


Conner Financial Coaching April 6, 2011 at 1:47 PM  

Sounds like you have the right idea to me - expert or not. It's key to take advantage of the employer match and start as soon as possible.

A rudimentary way to calc is to think about how much money you need annually to live and multiply that by 30 - 35 (assuming retirement @65). Now ask yourself - how much do I have to invest annually to reach this number?

I'm enjoying reading your blog - especially the house post - lovely! You make ME want to re-decorate!

Tanja @ Postmodern Hostess April 11, 2011 at 5:58 PM  

Bravo for addressing this topic! So many blogs are just about spending money, and even the thrifty ones are still espousing the "spend to save" credo. (Mine included, admittedly!)

We are not planning to have kids, and want to retire in our early 50s (~20 years from now), so we are saving aggressively, and planning to buy our next house with a 15-year mortgage that we pay off ASAP. When I say "retire," it's really more like "work part-time in fun jobs instead of full-time in well-paid jobs." But having the house paid off and taking our living expenses down to a bare minimum will really give us a lot more flexibility!

postmodern hostess

DESIGNLAND April 12, 2011 at 7:52 AM  

Thanks so much for posting this. It came right on time for me :-)

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