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?