Personal Retirement Funds

[redd]

Just wondering what are you guys who are in your late 30's and beyond, doing about retirement savings?

Seeing as there is no loyalty from employers, no pensions, and maybe not any social security in our future, what kinds of things are you doing to fund your retirement years?

Are you doing anything to get extra income?

 

[mar]

This is a great question.

Just wondering what are you guys who are in your late 30's and beyond, doing about retirement savings?

Seeing as there is no loyalty from employers, no pensions, and maybe not any social security in our future, what kinds of things are you doing to fund your retirement years?

Are you doing anything to get extra income?

I was considering posting this exact question myself.

To this point I've been concentrating more on reducing my short term debt rather than focusing on long term savings.

Now that I've crossed that bridge I'm finally enrolled in a 401k and trying to shift my debt burden into a more long term time frame (home ownership).

Beyond that, I have no further arrangements. Just a mindset to not live beyond my means and stay liquid.

 

[GravityHater]

My retirement plans?

"Fly til you Die."

 

[Dangerkitty]

In addition to being a pilot I am in the insurance arena and do some financial planning for customers to boot. Here are my reccomendations.

1. Before doing anything get your debt paid off first. The only debt you should have is a mortgage. No car payments, no credit card bills, no loans.

2. Then start investing in the following manner:

Invest in a 401k up to the company match. For example if the company matches up to 6% of your contributions then put in 6% into your 401k.

If you have money left over put the rest in a Roth IRA. Roth IRA's are the best thing since sliced bread and should be a big part of a sound financial plan.

If you have money left over after that put the rest in the 401k or you could also invest in an after tax IRA.

3. Only invest in solid blue chip growth stock mutual funds. Personally I advise people to invest in Index funds such as an S&P 500 Index fund. The S&P has averaged 10% growth a year since it's inception. That can't be said by 75% of the managed funds out there. 3 out of 4 managed funds cant beat the performance of an S&P 500 index fund. And since they are managed there expense ratio's are much higher.

Personally I invest in Vanguard mutual funds for my Roth IRA and my IRA's. Expense ratio's are very very low and most of there index funds have a solid track record.

Any part of a sound financial plan would be moot if you aren't properly insured. That means having TERM life insurance at 10 times your gross income. You also want to have Long Term Disability insurance that pays you cash if you can't perform the job you were hired to do. You are much more likely to become disabled than die. Especially when you are younger. How would you pay the bills if you couldn't work? LTD helps you take care of that.

 

[RockyMnt1]

Long Term Care insurance

You might want to also take a look at obtaining some long term care insurance. This insurance pays if you are laid up in a nursing home or rehab facility which can cost about $60.00 - $100.00/day.

This issue has the real potential to wipe out any nest egg that you may have accumulated. The only folks that don't need this insurance are the very rich and the very poor. Looks like this is one situation that actually applies to flight instructors, so please disregard if it applies to you.

Just to give you an idea of the costs of retirement, my folks are in an independent living facility and it costs 4K per month. There are 3 levels of care in this facility and the next level, assisted living care, goes for about 5K/month. This is probably a bit high cost wise but it gives you an idea that a fun retirement ain't free or cheap.

Those of you that are in debt up to your eyeballs had better revise your spending habits to live within your means (unlike the government) and start saving unless you want to live under a bridge. The BK laws have already been altered and time is a-ticking........Of course, there is always the lottery!!!

Good luck with this.....

 

[bafanguy]

Something I've heard reference to is a new thing for 2006 called the Roth 401K. It's going to be time limited until only 2010 or 2011, but the earnings will be tax free like a Roth IRA. Seems this would allow you to put away more money per year than an IRA. I don't think there's any upfront tax advantage, but the tax-free status at the end is worth a lot more. Not sure how many companies are offering this. Anyone know more ?

 

[RockyMnt1]

Roth 401(k)

It seems that the best approach is to have both a regualr (pre tax) 401(k) and a Roth 401(k) (after tax). Depending on what how the tax rates behave in the future you are covered. If the tax rates are reduced from current day rates you can utilize the regualr 401(k). If the tax rates increase with respect to current tax rates, then the Roth 401(k) is more attractive.

Just some thoughts...

 

[smellthejeta]

Dangerkitty,

Are you suggesting that I pay off $55000 in student loans before I start a 401(k)? Some of those rates are obscenely low (in three years 15k of that will be at 1.825%, the rest is at 6.5% give or take) and if I accelerate payments at a rate I would consider to be obscene (1,000/mo given my income) it would still take 4 to 5 years to pay off. Is the total interest I'm paying on the loan worth sacrificing the 100% company match on my 401k at this point?

 

[needapayraise]

Contrary to popular pilot belief, pensions are NOT dead. My company will be INCREASING my A plan and moving it to the manager's pension plan so if they decide to screw with it in the future they would have to screw with themselves and you and I know that aint gonna happen! I also have an 11% B plan, the percentage of which will be increased in our new contract. Those along with my personal investing in our 401K and other investments will give me a more than comfortable retirement. BTW, I'm age 39.

 

[Dangerkitty]

You might want to also take a look at obtaining some long term care insurance. This insurance pays if you are laid up in a nursing home or rehab facility which can cost about $60.00 - $100.00/day.

This issue has the real potential to wipe out any nest egg that you may have accumulated. The only folks that don't need this insurance are the very rich and the very poor. Looks like this is one situation that actually applies to flight instructors, so please disregard if it applies to you.

Just to give you an idea of the costs of retirement, my folks are in an independent living facility and it costs 4K per month. There are 3 levels of care in this facility and the next level, assisted living care, goes for about 5K/month. This is probably a bit high cost wise but it gives you an idea that a fun retirement ain't free or cheap.

Those of you that are in debt up to your eyeballs had better revise your spending habits to live within your means (unlike the government) and start saving unless you want to live under a bridge. The BK laws have already been altered and time is a-ticking........Of course, there is always the lottery!!!

Good luck with this.....

RockyMtn1,

You are correct Long Term Care insurance is very very important but I think you are wrong on a few points.

You dont need Long Term Care Insurance until you hit your late 50's or early 60's. Before that time there is just no justification to purchase something like that. I make this statement as an Insurance Agent that has sold 100's of Long Term Care Policies. LTC's are very very very important but are not needed (in my opinon) until you get closer to retirement.

Also, you state that Long Term Care pays for rehab facilities. This is 100% false. Any facility that treats conditions which are going to improve or be corrected is not covered under Long Term Care. Long Term Care only covers conditions which will never improve (unskilled nursing care) vs. conditions that will improve (skilled nursing care)

Other than that you comments are dead on.

 

[pilotyip]

wonderfull, needaraise, Good for you, but you are out of touch with rest of the real world out here. There is an element of luck and timing that has a lot more to do with your position that skill and desire.

 

[Dangerkitty]

Dangerkitty,

Are you suggesting that I pay off $55000 in student loans before I start a 401(k)? Some of those rates are obscenely low (in three years 15k of that will be at 1.825%, the rest is at 6.5% give or take) and if I accelerate payments at a rate I would consider to be obscene (1,000/mo given my income) it would still take 4 to 5 years to pay off. Is the total interest I'm paying on the loan worth sacrificing the 100% company match on my 401k at this point?

Yes, that is what I am saying. I know it sucks to miss out on company matches with 401k's but use that as your motivation to get out of debt, FOREVER.

You stated that if you make obscene payments to pay down your debt it would take you 4-5 years to pay it off. Well, what if you pay half that? Then it's going to take you 10 years to pay that off. If you pay off your debt and pay it off NOW you can then use your biggest wealth building tool (your job) to start building a financial nest egg for the future.

I dont know your situation, but if you could somehow take on a second job and bring in some extra income then you could really bust your tail to get your debt paid off. Think about it. What if you paid $1,000 a month towards your debt and got another part time job bringing in another $1,000 a month.

With $2,000 a month going towards your debt you could have that loan knocked out in just over 2 years or so. You then have nothing in your way developiing a HUGE pile of cash for your future. I know it would suck for a few years trying to get all that paid off but you will be in a much much better financial position if your do so.

Most people are resolved to the fact that the will never get out of debt. Thats why people who seem rich are actually flat broke.

Being in debt is only a scam brought on by the banking industry and the credit card agencies that have been adopted by the general public. When you are deeply in debt you have no chance getting financially secure unless you break that cycle. Being in debt only means you are getting the banks wealthy.

 

[needapayraise]

wonderfull, needaraise, Good for you, but you are out of touch with rest of the real world out here. There is an element of luck and timing that has a lot more to do with your position that skill and desire.

Luck, timing, skill or desire is irrelevant. The fact is that I'm here and there are still places where you can safely and comfortably retire on a company retirement plan alone. My personal saving and investments are just icing on the cake.

Regardless of whether you have a company retirement plan or not the old adage of pay yourself first is still generally good advice.

 

[JohnDoe]

quote:
"The fact is that I'm here and there are still places where you can safely and comfortably retire on a company retirement plan alone."



Still find it hard to believe, with everything that has happened in this industry over the last 4-5 years, that some people still think it "can't happen to me."

 

[needapayraise]

quote:
"The fact is that I'm here and there are still places where you can safely and comfortably retire on a company retirement plan alone."



Still find it hard to believe, with everything that has happened in this industry over the last 4-5 years, that some people still think it "can't happen to me."

I'm not in the same "industry" as you. I don't work for an "airline". I'm willing to "risk" that my "primary" retirement funds will come from UPS. I'm also investing and saving on my own, so that's icing on the UPS retirement cake.
Let's look at what's happened to UPS in the last 4-5 years as you stated. UPS has made record profits and has had it best years in it's history during that time frame. Once again, UPS in NOT an airline. We are not subject to the problems in the airline industry.

 

[Gulfstream 200]

Luck, timing, skill or desire is irrelevant. The fact is that I'm here and there are still places where you can safely and comfortably retire on a company retirement plan alone. My personal saving and investments are just icing on the cake.

Regardless of whether you have a company retirement plan or not the old adage of pay yourself first is still generally good advice.

he's 39 and banking on that UPS pension to be there in 30yrs

sounds like a Delta pilot to me.

scary.

 

[bafanguy]

... pension to be there in 30yrs

sounds like a Delta pilot to me.

scary.

Don't worry, we've been slapped by the first lesson with the "final" lesson to follow shortly.

 

[pilotyip]

Reminds me of when I was jumpseating in the DAL cockpit back before 911. I talking to the pilots, both had been in the reserves as pilots one USAF and one USN. They had both stopped drilling in the mid 90's after about 14 years of service. I mentioned that the military retirement at age 60 was something I was really counting on. I felt it was worth keeping in my back pocket since my spotted career had no pension. They both said it would be not much compared to their DAL retirement, and it was not worth giving up family time, and QOL to drill for another 6 years. I wonder if they are calling any guard and reserve unit right now?

 

[needapayraise]

he's 39 and banking on that UPS pension to be there in 30yrs

sounds like a Delta pilot to me.

scary.

Boy, you pax guys are sure jaded, and with good reason, about pensions, but UPS is NOT an airline! As much as I hate working here, this place has been in business almost 100yrs and is one of only a handful of AAA rated companies in the world. Our pension is going to be in the SAME plan as the managers. If they go after ours, they will be going after their own and you and I know that aint gonna happen. UPS has also been it's most profitable SINCE 9-11. I know it's hard for someone that doesn't work here to understand, but this place is a profit generating machine and I'm more that willing to stake PART of my retirement plan on having a UPS pension in 21yrs.

 

[Immelman]

I have been maxing out my 401k for a while now. If you can afford it, its great if for no other than to see the portion of your paycheck going to King George being greatly reduced. Remember, 401k contribs skim off the top, before taxes come along... so for every dollar you put into the 401k, ~70 cents or so is what comes out of your net pay.

 

[Dangerkitty]

I have been maxing out my 401k for a while now. If you can afford it, its great if for no other than to see the portion of your paycheck going to King George being greatly reduced. Remember, 401k contribs skim off the top, before taxes come along... so for every dollar you put into the 401k, ~70 cents or so is what comes out of your net pay.

If you are not investing in a Roth IRA then you are really screwing yourself.

While 401k monies grow tax defered, Roth 401k monies grow tax free.

Maxing out a 401k is great but if you are not investing in a Roth IRA you are pissing money away.

 

[JohnDoe]

Any recommendations on companies to use for the roth? I was about to start a vanguard, and noticed that as of Nov 1st., their minimum starting contribution went from $1000 to $3000. Not that big of a deal, just seeing if they were worth it.

 

[shamrock]

Any recommendations on companies to use for the roth? I was about to start a vanguard, and noticed that as of Nov 1st., their minimum starting contribution went from $1000 to $3000. Not that big of a deal, just seeing if they were worth it.

I've had good luck and been happy with T Rowe Price for my Roth. There's no minimum to start a Roth IRA as long as you sign up for automatic contributions of at least $50 per month. They tend to be a bit more expensive than Vanguard but back when I wanted to open a Roth I didn't have $1000, so I went with them. I may look into Vanguard again for some future investments but I'll most likely continue with TRP as well.

 

[PC800]

RockyMtn1,

You dont need Long Term Care Insurance until you hit your late 50's or early 60's.

Not necessarily. There are many people in skilled nursing facilities due to accidents, not old age-- and such people often end up staying in those facilities for decades. While accidents can happen to anybody, younger people are more prone to engage in high risk hobbies (motorcycling, skydiving, etc.), so they're especially at risk.

I wouldn't say that LTC insurance should be a high priority purchase for everyone, but for those interested in covering all the bases, it's a prudent move-- and relatively inexpensive for younger folks, even with inflation protection and no-limit payouts.

 

[smellthejeta]

Yes, that is what I am saying. I know it sucks to miss out on company matches with 401k's but use that as your motivation to get out of debt, FOREVER.

You stated that if you make obscene payments to pay down your debt it would take you 4-5 years to pay it off. Well, what if you pay half that? Then it's going to take you 10 years to pay that off. If you pay off your debt and pay it off NOW you can then use your biggest wealth building tool (your job) to start building a financial nest egg for the future.

I dont know your situation, but if you could somehow take on a second job and bring in some extra income then you could really bust your tail to get your debt paid off. Think about it. What if you paid $1,000 a month towards your debt and got another part time job bringing in another $1,000 a month.

With $2,000 a month going towards your debt you could have that loan knocked out in just over 2 years or so. You then have nothing in your way developiing a HUGE pile of cash for your future. I know it would suck for a few years trying to get all that paid off but you will be in a much much better financial position if your do so.

Most people are resolved to the fact that the will never get out of debt. Thats why people who seem rich are actually flat broke.

Being in debt is only a scam brought on by the banking industry and the credit card agencies that have been adopted by the general public. When you are deeply in debt you have no chance getting financially secure unless you break that cycle. Being in debt only means you are getting the banks wealthy.

Thanks for the thoughts. However, I already work two jobs and overtime at the first It just sucks that the cost of living in this area is so high that in any other part of the country I'd be "doing great." I'm trying to establish a house downpayment/rainy day/job pisses me off and I want to quit/emergency fund. My goals now are to have $10,000 in that account (it's interest bearing at 4.00% -- not huge, but does the trick, no fees, and can be liquidated for no penalty) and then I'll reeveluate what I'm doing with the money going into that account. Given my past financial position, nobody can convince me that I am better off putting that money against student loans and then living off of my credit cards if something were to happen with my current job. I did that once already, and it was NOT pretty. The current job is by no means a career job, but I'm doing what I can to make it work while I'm waiting for the career to roll around. Pending the successful resolution of a hairy medical issue, this career job should be rolling around this summer. The offer's on the table, so it's not an "I hope it'll happen" type of job.

But I am with you on the whole debt mentality. The car got paid off 1.5 years early, the credit cards are paid off, and the only thing left is student loans. I'm actually paying those

 

[pilotyip]

Pilots without college degrees do not have student debt, start their careers four years earlier, which gives them a higher of income and with no student loans a lower rate of outflow. Nice margin for investmet.

 

[Dangerkitty]

Not necessarily. There are many people in skilled nursing facilities due to accidents, not old age-- and such people often end up staying in those facilities for decades. While accidents can happen to anybody, younger people are more prone to engage in high risk hobbies (motorcycling, skydiving, etc.), so they're especially at risk.

I wouldn't say that LTC insurance should be a high priority purchase for everyone, but for those interested in covering all the bases, it's a prudent move-- and relatively inexpensive for younger folks, even with inflation protection and no-limit payouts.

I realize that. However, LTC insurance DOES NOT pay for skilled nursing care.

Thats what Medical Insurance is for.

 

[Dangerkitty]

Thanks for the thoughts. However, I already work two jobs and overtime at the first It just sucks that the cost of living in this area is so high that in any other part of the country I'd be "doing great." I'm trying to establish a house downpayment/rainy day/job pisses me off and I want to quit/emergency fund. My goals now are to have $10,000 in that account (it's interest bearing at 4.00% -- not huge, but does the trick, no fees, and can be liquidated for no penalty) and then I'll reeveluate what I'm doing with the money going into that account. Given my past financial position, nobody can convince me that I am better off putting that money against student loans and then living off of my credit cards if something were to happen with my current job. I did that once already, and it was NOT pretty. The current job is by no means a career job, but I'm doing what I can to make it work while I'm waiting for the career to roll around. Pending the successful resolution of a hairy medical issue, this career job should be rolling around this summer. The offer's on the table, so it's not an "I hope it'll happen" type of job.

But I am with you on the whole debt mentality. The car got paid off 1.5 years early, the credit cards are paid off, and the only thing left is student loans. I'm actually paying those

Smellthejeta,

I will send you a PM in a few hours. Read it when you get the time.

 

[Dangerkitty]

Pilots without college degrees do not have student debt, start their careers four years earlier, which gives them a higher of income and with no student loans a lower rate of outflow. Nice margin for investmet.

Pilots without degrees also box themselves into a corner and limit their job prospects.

Like it or not many pilot employers require a college degree for someone to work there.

If I had not had my college degree I wouldn't have been hired at American Airlines, Delta Airlines nor the one Fortune 500 Company I flew for and the Fortune 500 Company I fly for now.

If someone looses their medical that can have a huge impact on their earning potential in other lines of work. Because like it or not many employers require that employees have a college degree.

Finally it is possible to have a College Degree and not have sutdent loan debt.

What you have against College Degrees and pilots is beyond me. But to encourage someone to not get a college degree is irresponsible to say the least.

 

[PC800]

I realize that. However, LTC insurance DOES NOT pay for skilled nursing care.

Thats what Medical Insurance is for.

Uh, no, it's not.

I have a very comprehensive Blue Cross/Blue Shield medical policy, and it provides very limited coverage skilled nursing care coverage-- and only for those enrollees that have Medicare Part A. Their benefits brochure specifically states, "Note: If you do not have Medicare Part A, we do not provide benefits for skilled nursing facility care."

OTOH, skilled nursing care coverage is a benefit of my John Hancock LTC policy. This is quite common in LTC policies, and often required by state law. For instance, for LTC policies sold in the State of New York, "The home care benefit must cover skilled nursing care, home health care, personal care and assisted living care."