having trouble making a plan

[jIM_Ohio]

Originally Posted by crabbypatty

Actually Jim, it was your blog that got me thinking about this. I am often confused by your posts but they get me thinking.

Cal me a dinosaur but the thing I don't like about the OL calculators is plugging all my info into it. It might be silly, but I don't want my financial plan "out there". I like to write it all down step by step.

I guess my small steps can be getting to 10% savings. Then max my Roth, maybe next open a Roth for DH, max his. Go from there.

Let me run thru a few things, see if this helps. If you want me to mail you my spreadsheet I can do that. I attached it to this post (it is zipped), let's see how good technology works. On the attached sheet, if you fill in blue text cells at top, the rest of sheet should populate. There are two sets of columns linked to same cells. This is for "if then" analysis, simply break equation of top cells in one group and manually type in to compare.


Here's the layout of "how much you'll have"

If you have spreadsheet, this would work best. You can do this by hand as well. You need 5 columns of lined paper and a calculator.

column A- age (A1 is present age). Add one all the way down. You need to get to age 68.
column B1-enter current amount saved
column C-enter the amount you save each year (8% of income based on earlier thread posts). This is a dollar amount.
column D, enter a rate of return (10% is my suggestion). Keep rate of return constant (10%) from now until age 68.
column E is "year end balance". Add (B1+C1)*(1+D1). The result is what you are projected to have at end of year.

B2=E1. Copy this formula all the way down.
copy column C all the way down.

The result at age 68 is a rosy picture of what you might have in retirement.
Do a check- divide age 68 "retirement amount" by 25. If this is close to your current income, you are doing enough.


The assumptions:
negative:
10% is an aggressive return. Change this to 8% for something more realistic
age 68 is an "old age" to retire. I plan for 68 as "worst case", the real goal is age 60 or earlier
10% is not a realistic return goal within 10 years of retirement.

positive
it assumes contributions based on today's savings level (if you get a 2% raise, this did not account for 8% of the 2% going into savings)
10% returns can be exceeded over short periods. This did not take into account asset allocation.

Logical follow ups to this:

What is asset allocation to get 10% returns
What is value of increasing from 8% to 10% contributions
What is value of Roth?
What is value of looking at taxes (now and later)

[jIM_Ohio]

Patty- check my blog today and see if that helps...

[bigsaver]

Besides saving, I think a good idea to invest in a disability plan. Right now, I save about 20-25% on top of the disability plan, but I also have almost no expenses.