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.