All Things Personal Finance

[Cushi]

 

[Cushi]

 

[Esined]

Hola investors and personal finance enthusiasts. I really need advice and I guess I am putting a lot out there. Mods, would you give me permission to delete at least part of this after a day or two?

 

I have a goal of working part-time for family/spiritual/health reasons. I made a budget and have been scouring it for ways to cut back but I can't make the numbers work!

 

One question I have--is it worth it to scale way down on saving for retirement for the next five years while it's important to be more present for my tween? What's the minimum I could put towards retirement and still have enough to retire at 65-67? And don't suggest crypto, lol!

 

I am about 18 years away from retirement and only started seriously saving for it last year, due to life circumstances. Last year I finished paying off credit card debt, built up an emergency fund and since my job did not provide retirement benefits, I opened a ROTH IRA with Fidelity and there is $12,600 in it now. It has a YTD 4.62%. I opened with the intention of investing but once I started researching, I realized I just don't have time to do all the research, monitor, and re-balance, etc. to do it in a way that makes sense--my life is very busy right now. And I just felt very nervous about making a mistake. So I am thinking about converting the whole thing to a ROTH IRA Fidelity Go account which will be managed by robo advisors. (Isn't 2024 wild? Who would have thought I'd be typing those words ten years ago.)

 

Over the last year I had to deplete my emergency fund and some credit card debt crept back in. So I reduced what I was putting into my IRA from $500/mo to $150 so that I can prioritize first paying off the cc debt, then build 3-6 months of emergency savings back up. Savings are in a high-performance savings account (3.80%) at Capital One.

 

Meanwhile, I started a job that has retirement benefits. I can make pre-tax or post-tax contributions to a 403(b)
plan up to the set IRS limits. The benefits guide says: "Upon hire, all employees are automatically enrolled in a 403(b) plan at a deferral pre-tax percentage of 2%. After one year of service, [company] will match fifty cents on the dollar for the first 4% of employee contributions."

 

I have a small pension account from being vested in a different state's retirement system from a previous job. The estimate for the monthly benefit amount is currently about $510/mo. What should I do with this account? Keep as is or roll it over somewhere?

 

Finally, right now a big spending priority is travel to see my family in FL every year, about 1 or 2x/year and as my parents get older--my mom is in her mid-70s right now--I feel it's very important go more frequently. It costs at least $2000 per visit. (Moving closer to them is not an option for me right now and they won't move closer to me).

 

I guess my question is - what is the minimum I could save for retirement right now?

 

 

[computerwiz]

14 hours ago, Esined said:

One question I have--is it worth it to scale way down on saving for retirement for the next five years while it's important to be more present for my tween? What's the minimum I could put towards retirement and still have enough to retire at 65-67?

 

You're in the US right?  Based on what I'm seeing....you better save every penny you can.  

 

While I don't think this system will last long enough for you to retire, one thing's for sure....if it does, you have to be able to take care of yourself.  The government is spending money like there's no tomorrow, and there's no guarantee social security or welfare programs will be around to help you out if you do not have enough to take care of yourself.  I know far too many that are literally living paycheck to paycheck, because all they have is what the government gives them.  And it ain't much.

 

14 hours ago, Esined said:

So I am thinking about converting the whole thing to a ROTH IRA Fidelity Go account which will be managed by robo advisors.

 

I would highly recommend opening a Wealthfront account instead.  They do rollovers.  They offer a checking account.  Etc.  It's almost a one-stop shop.  And I'm not just saying that to get a referral.  

 

You have questions on if you can retire?  Wealthfront has a whole calculation & planning thing where you can plug in all your numbers and link all your accounts (if you want to) and it will give you the full picture of all your finances & whether you will reach your goal for retirement.

 

If you're interested in seeing what this looks like, PM me and I'll send you screens from my Wealthfront.  I don't want to put my info out there publicly.

 

14 hours ago, Esined said:

So I reduced what I was putting into my IRA from $500/mo to $150 so that I can prioritize first paying off the cc debt, then build 3-6 months of emergency savings back up. Savings are in a high-performance savings account (3.80%) at Capital One.

 

Nice to see you were putting so much into it.  And you have the right idea of paying down expensive debt first + having emergency funds.  But as soon as you can, if possible...you should max out what you're contributing.  To be frank, you're late in the game...  

 

14 hours ago, Esined said:

After one year of service, [company] will match fifty cents on the dollar for the first 4% of employee contributions.

 

I would only start using the company's 401k service once this becomes available.  And only up to the amount that they contribute for.  Don't pass up that free money.

 

But I would bet you Wealthfront will make more % with your money than what they offer.  So beyond what they match, put it in Wealthfront (or whatever one you decide on that gives you the best % return).

 

 

14 hours ago, Esined said:

I have a small pension account from being vested in a different state's retirement system from a previous job. The estimate for the monthly benefit amount is currently about $510/mo. What should I do with this account? Keep as is or roll it over somewhere?

 

That much today, monthly, doesn't go very far.  What is the lump sum amount (PM me if needed)?  It is most likely much wiser to move it over into Wealthfront and start growing it.  You're literally losing money just letting it sit there.  If you could grow the lump sum by 10% a year.....18 years is enough time for it to become significant, methinks...

 

Just letting it sit there, you're letting inflation destroy it.

 

14 hours ago, Esined said:

I guess my question is - what is the minimum I could save for retirement right now?

 

This is where Wealthfront's calculation will help you.  I don't think there's enough info here (we haven't even considered your assets, like your house's value) to give you an answer on that.  Even Wealthfront doesn't cover everything, but will certainly help.

 

Just to throw out a number here, considering:

• You only have 18 years to retirement, and are just getting started.
• Assuming no help from the government in retirement.
• Assuming no debt once retired.
• Assuming 10% YTD gains on your retirement funds (I've been with Wealthfront long enough that this is a good measurement)
• Assuming cost of living is around what I am used to (Louisiana).
• Assuming you have a modest house that won't drain you with repairs or insurance.
• Assuming you take care of your health and have no major incidents that insurance doesn't cover.
• Assuming you want to live comfortably in retirement.
• NOT including your pension.  If you let me know your lump sum amount, I can adjust the number below.

I may be forgetting some things, but you're probably going to need to save $1,750 per month in your account, at this time.  Your pension funds could make this much nicer though....

 

Now the Roth IRA maxes out around $7000/year, but you can have a "regular" investment account with Wealthfront to put the rest in, and get the same 10%+ yield.  And it's all automatic (if you want it to be).

 

Sorry for the bad news, but that's why what @Cushi posted about starting early is so important...  😬

[Esined]

Um, duh! I was not planning to be in this situation. My question was because I am very aware that I am late starting due to life circumstances not fully within my control. I am VERY aware that I am in a bind. I also live in a much higher cost of living area than you do (Boston). I have a modest condo. I do take care of my health but with chronic illness my health costs are probably higher than most. I know I will need to live very modestly in retirement. Saving $1,750 a month is completely unrealistic and impossible for me right now. I am a single parent working full-time (albeit in a much better situation than many single moms), my daughter’s well-being is my priority, I won’t get the chance to do over this time, and I am just trying to figure out how to keep all the plates spinning and make it all work!

But thanks for the other tips!

Edited Monday at 04:28 PM by Esined

[Esined]

@computerwiz sorry if my response above sounded salty, I do appreciate the time you took to reply. I just am very acutely aware that it is not a financially ideal situation—so what you say is not “news,” lol. I’ve gone through my budget with a fine-toothed comb and just trying to make the best of what I’ve got. 
 

Edited Monday at 07:20 PM by Esined

[computerwiz]

2 minutes ago, Esined said:

@computerwiz sorry if my response above sounded salty, I do

appreciate the time you took to reply. I just am very acutely aware that it is not a financially ideal situation. 

 

I appreciate the apology even though I saw between the lines and figure that.  

 

I sincerely don't think the system will be around long enough to worry about it all.  But...always good to plan ahead like it will.

 

Another mindset is that we'll all be throwing our money in the street soon anyways.  So why not enjoy it (within reason)?  Save what you can, and don't worry too much.  

 

Though if you want any help with Wealthfront, lemme know.  Mine is set-it-and-forget-it.  Withdraws from my account on 1st & 15th.  Even prompts me for changes when a more ideal investing situation pops up.  Does tax-loss harvesting.  Etc etc...

[Cushi]

@Esined Great job on starting your ROTH IRA 😊 Better now than never 😁 Given your situation, it was good you opened a ROTH version of an IRA and not traditional. If I were in your shoes, I’d consider saving more than 6 months in an emergency fund for 2 reasons.

1. The older we get, the more likely we are to be hit with an expensive hospital bill.
2. The older we get, the more likely we are to face age discrimination and be out of a job for an extended period of time compared to when we were younger, should we lose our job.

 

But if you are in good health and have job security, having 3-6 months worth of expenses may be enough.

 

As far as the minimum amount you can contribute for retirement, you said you have about 18 years before then, so using bankrate.com we can come up with an estimate using a ROTH IRA calculator. I won’t assume your age so I’ll use mine instead.

 

If you invest $250 a month or $3,000 a year after paying off debt, you would have about 200K, should you get an average 10% return during those 18 years. This would provide you a decent income a year, apart from any social security or pension you may have.

 

If you maxed it out every year (not including the extra $1,000 catch up contribution you would qualify for after you turn 50, you would have about 428K. That would bring you a better income.

But you also said you want to work less to have more time for family/spiritual/health reasons. Those things are more important than money. So I would invest the most I could without leaving me very little each month.

As far as robo investors go, some investments like index funds are passively managed and don’t require robo investors. Hope this helps 😊

 

 

Edited Tuesday at 05:45 PM by Cushi

[Cushi]

On 12/9/2024 at 9:52 AM, computerwiz said:

That much today, monthly, doesn't go very far.  What is the lump sum amount (PM me if needed)?  It is most likely much wiser to move it over into Wealthfront and start growing it.  You're literally losing money just letting it sit there.  If you could grow the lump sum by 10% a year.....18 years is enough time for it to become significant, methinks...

 

Just letting it sit there, you're letting inflation destroy it.

Great advice. I didn’t know what to say about this because I don’t think I knew about rolling over pensions, although I’m set to get one myself.

[Cushi]

On 12/9/2024 at 9:52 AM, computerwiz said:

While I don't think this system will last long enough for you to retire, one thing's for sure....if it does, you have to be able to take care of yourself.

This is so true. I have 21 years before I can retire. I don’t believe this system will last that long… but at the same time, 21 years ago I was a 17 year unbaptized publisher who thought the end of this system was coming any day now. Obviously that didn’t happen. So should this system last another 21 years, I want to be able to retire early and with dignity. I’ve seen so many of the friends not plan for retirement because they thought this system would end before then and paid for it dearly.

 

On 12/9/2024 at 9:52 AM, computerwiz said:

Sorry for the bad news, but that's why what @Cushi posted about starting early is so important...  😬

I didn’t start investing until I was 37 years old. Although I’ll still hit my investment goals by the time I retire, I would be much further along, had I done it 10 years or more sooner!