Retirement. Check. What now?

[jteezie]

I'm a little upset that this site doesn't let you hit the "back" button and recover a failed attempt to post. Well here's my post again (less some details):

I recently passed a 100k savings goal (100% self earned). I'm 26 years old and feel rather confident in my retirement. Now that I've reached this goal, what do I do now?

A lot of this savings came from a 50% contribution rate to my 401k. Should I lower my contribution down to 10%? I would like the extra liquidity from more take home pay and am willing to give up the ROTHs' tax free growth, but is it logical financially? I'm actually not sure what to do with my money (it will go to something capital preserving, but I am not sure if I will actually find ways to use it). I'm looking at about 3x my present take home. I'm a minimalist in terms of materialism, but by no means am I a penny pincher nor frugal. I know money isn't meant to be saved for the sake of having money.

Thank you for your thoughts.

[littleroc02us]

Originally Posted by jteezie

I'm a little upset that this site doesn't let you hit the "back" button and recover a failed attempt to post. Well here's my post again (less some details):

I recently passed a 100k savings goal (100% self earned). I'm 26 years old and feel rather confident in my retirement. Now that I've reached this goal, what do I do now?

A lot of this savings came from a 50% contribution rate to my 401k. Should I lower my contribution down to 10%? I would like the extra liquidity from more take home pay and am willing to give up the ROTHs' tax free growth, but is it logical financially? I'm actually not sure what to do with my money (it will go to something capital preserving, but I am not sure if I will actually find ways to use it). I'm looking at about 3x my present take home. I'm a minimalist in terms of materialism, but by no means am I a penny pincher nor frugal. I know money isn't meant to be saved for the sake of having money.

Thank you for your thoughts.

Why not donate 10% of your montly disposable income to a church or charity. You will feel much satisfaction from helping others then yourself.

[disneysteve]

I'd suggest sitting down and making a list of your life goals - short term (under 5 years), mid term (5-15 years) and long term (beyond 15 years). Then, make sure you are saving appropriate amounts in appropriate places to fund those goals. For example, if you have a goal of replacing your car in the next 3-4 years, you don't want that money tied up in your 401k. You want it in a money market account or CD. If you have a goal of sending your parents on a Caribbean cruise for their 60th birthdays in 10 years, you need to set aside that money and with a 10-year time line, might be willing to take some market risk with that money in a mutual fund.

I'm guessing from the tone of your post that you are currently single. Keep in mind that things may change considerably if you meet that special someone, get married, buy a house and start having children.

You didn't say how much you earn, but knowing that you've been putting 50% in your 401k tells us you are earning no more than $33,000 since the maximum contribution is $16,500/year. I must say I'm curious how you are living on that little take home pay. Do you rent or own a home? Do you have a car? 16.5K/year (or less) minus taxes is not very much money at all.

[jpg7n16]

Originally Posted by jteezie

I'm a little upset that this site doesn't let you hit the "back" button and recover a failed attempt to post. Well here's my post again (less some details):

Many times before I post, especially on the longer posts, I like to highlight cut and paste my entire post before hitting submit. This helps me avoid the situation you describe.

If you hold Ctrl and then hit A X V (in that order), it will copy your whole post. Then if the leprechauns of saving advice steal your post, you're okay cause you made a copy!

I recently passed a 100k savings goal (100% self earned). I'm 26 years old and feel rather confident in my retirement. Now that I've reached this goal, what do I do now?

Celebrate! Have you done anything to reward yourself for meeting your goal yet??

I'm not talking blow all the money you just saved up, but you should treat yourself to something. Maybe ask for a Friday off and do whatever you want all day as a reward. Buy some new clothes you've been eyeing. Go to a sports game you've been hoping to see. (basketball playoffs are coming up, and march madness is about to begin!)

Just something to let yourself know that you've accomplished something pretty amazing

A lot of this savings came from a 50% contribution rate to my 401k. Should I lower my contribution down to 10%? I would like the extra liquidity from more take home pay and am willing to give up the ROTHs' tax free growth, but is it logical financially?

Maybe not to 10%, but if you're used to 50% try 20%. This will still give you 60% more take home each paycheck (each $1000 at 50% contributions = maybe 400 take home after tax, $1000 at 20% = maybe $640 takehome after taxes)

That would free up cash for liquidity, let you have cash to invest in the Roth, and still keep you on great pace to wealth during retirement.

I'm actually not sure what to do with my money (it will go to something capital preserving, but I am not sure if I will actually find ways to use it).

Well why do you want money in the first place?

This is a great question for people to begin looking into. Some people want to be rich to help the world through donating to the less fortunate. Others want to be rich to leave a good inheritance to their kids one day. Others, to never worry about money ever again. Others, just because they want more money for the sake of having more money (not the most virtuous of goals, but at least honest).

For me, I want enough saved away that my family (one day) won't have to worry about not having enough to make it through retirement. I don't really care about the money itself, I only care that it would protect the family I hope to have one day, and provide for us as long as possible. But on the same note, I always tell myself if I were super rich, that I'd give a lot of money to the church and to people starving in India or Africa.

So given my goals- it's easy for me to decide what to do with the money. Save up a little more for retirement, and give a little away.


What are your goals? Why do you want money in the first place?

Start there, and the answer becomes much easier. And until you answer that question, you'll be forever wandering around.

From: Alice in Wonderland
"Would you tell me, please, which way I ought to go from here?"
"That depends a good deal on where you want to get to," said the Cat.
"I don’t much care where--" said Alice.
"Then it doesn’t matter which way you go," said the Cat.

[jteezie]

Thanks everyone.

Adjusting for everything, I make from 50-55k a year. It's actually fluctuated over the last few years, but the base is 40k-ish (The differences ares not from commissions or anything like that.) When I say I put 50% in, I should actually say that I try to max my Roth IRA and Roth 401k. This is just an estimate, but I live off about 10k a year.

Donations:
I already donate responsibly and I donate more than most people. I don't actually think much about it, but it is around 10% of take home. I generally lump all my recurring outflows together (i.e. phone, internet, donations, 401k contributions. Hmm pretty bad metrics.)

Expenses:
I don't foresee any major expenses in the near future because of 2 things. I drive very little and do not expect to need a new car over the next 5 years (I have 68k miles on it, and drive about 3-4k a year). Similarly, I don't see any major clothing expenses. I unknowingly awarded myself by buying $10k worth of clothes. I feel great about having a fantastic wardrobe. This was a much needed upgrade from my "high school" mishmash of sub-par fitting clothes.
Luckily, I don't have interest in high expense things like tickets to sports games, concerts, travel, materialism, etc. Most of my entertainment is inexpensive (learning which gets subsidized), news (which is free), pc games (which have high reuse value). This is probably the biggest cost savings in my life (if I were to compare to others' expenses).
I am planning on spending more eating out (but I see it as buying bad health, so I'll limit this a little)

My goals.
I have a fairly long term perspective. I don't think one can save so heavily without discounting the present with an optimistic long term. I have given it thought:
Money offers freedom. I am not tied to a paycheck which allows me to work for fun. My short term goal is to develop skills in particular areas which will raise my chances of success with my long term goal of being an entrepreneur (hopefully social entrepreneur).

Unexpected events:
I have the appropriate insurances and other things in place and have above average health which mitigates some of the big unexpected issues.
I said this in another post, but I do not plan on buying a house anytime soon. For me, it's a liability and goes against my "money as freedom" philosophy. Related to this, I will make sure any potential future wife understands this and shares a similar view.

[disneysteve]

Originally Posted by jteezie

Adjusting for everything, I make from 50-55k a year.

When I say I put 50% in, I should actually say that I try to max my Roth IRA and Roth 401k.

Just to be clear, you earn 50-55K, you max your 401k ($16,500) and your Roth IRA ($5,000). Is that correct? If so, you are investing about 39% of your gross for retirement. Not 50% but still way more than most people.

If you are content with your lifestyle and you aren't reusing dental floss or sitting in the dark to avoid using electricity or any other dysfunctional stuff to keep from spending money, good for you.

What would I suggest? I would reduce the savings rate a bit to give you a little more flexibility in your spending. I'd also reduce the percentage going to retirement accounts and put some in a regular taxable account that would be more liquid and more easily accessible to you without penalty. So maybe (and I'm just picking numbers here) do 25% to retirement accounts, 5% to a taxable account and give yourself a 9% increase in take home pay. Tweak the numbers as you see appropriate. If you find you don't need the 9% bump in pay, put more into the taxable account. That way, at least if something arises, like a new car or vacation or special gift for someone, the money is there. If not, you can still end up using that money in retirement. I have a taxable account that is earmarked for retirement. I put the most I can in tax-sheltered accounts but still want/need to save more for retirement so it goes in the taxable account.

[DebbieL]

It sounds like you've got the whole saving thing down pat, but I might suggest that you actually start to live a little more today. I'm a fairly conservative person when it comes to money (accountant), and even I got a little depressed reading your post. You are only going to be young once, and while I don't advocate recklessly blowing through your cash, there is a great big world out there. Go explore some of it, and have fun It wouldn't hurt to save a little less aggressively and develope some other interests. You're only 26.

PS - How did you "unknowingly" reward yourself with a $10K wardrobe? That sentence confused me a little, lol. Good for you though - it sounds like the only somewhat "less serious/responsible" thing you've ever done

[jteezie]

Alright. I changed my contribution to about 20%. I actually had to reduce my contribution down to 10% at the end of last year (I like to weight my contributions toward the start of the year), so I know how much to expect in take home. It's honestly a lot -_-.)

Debbie. Why do you think my life's depressing? A fair number of people tell me this, but I don't understand it (I mean, I do, but it's not logical). I enjoy life plenty, go out and spend money whenever I please.

As for the clothes. I planned to get a new wardrobe and searched for a while. I finally found a good place that met my requirements so I bought a months worth of year round clothes + winter clothes. $300+ shoes, ~$80+ shirts, $500+ coats add up really quickly.

[DebbieL]

Hi,

Since you've asked, I'll try to formulate an answer - but I'm not sure how my words will come across so hopefully I'm not offensive (or minimally so anyways, lol). I'm not telling you how to feel, but I found it depressing that you seem to only be interested in things that keep you in the house (playing computer games, watching news, etc). No interest whatsoever in travel or exploring the larger world around you. No interest in concerts, or seemingly much else. Nothing that sounds like what most people would consider "fun" or make one an interesting person to be around (for all I know you may be interesting, but your range of interests seems quite limiting). I think it might be good for you to explore other activities, and leave your comfort zone a little. It just seems like you've really limited yourself with your interests. It'll make you well-off, since nothing you want to do costs much, but what's the point in being well-off if you don't like to do anything much anyways? Just something to think about. In the end, like I said, you'll only be young once. Do a little bit of living - that's my advice anyways.

[Shewillbemine]

Whom do you live with and how is your romantic life? You've done a wonderful job saving/hoarding your money but if you're sitting on a pile of cash at 26 and not sure what to do next, you DO need to see the world as another poster stated. Here are some completely random ideas for you (and I emphasize random):

1. Get a girlfriend/boyfriend
2. Buy a pet
3. Exercise
4. Learn a new dance
5. Try a random act of financial kindness
6. Write a book
7. Skydive
8. Swim with sharks
9. Send money to Japan
10. Join the Red Cross
11. Get a higher degree
12. Start a business
13. Go to a rave

At 26, you are to be commended for reaching your financial and retirement goals. However, I haven't met a 26 year old who didn't know what to do/buy with excess money at that age. That part you kinda need to work on.

[DebbieL]

Excellent post Shewillbemine. Just what I was trying to get at.

[disneysteve]

Shewillbemine and DebbieL, I totally understand your point, but I think we all need to remember that we are all different. We don't all like the same things. We don't all have the same goals in life. Personally, I love to travel, but for me to tell others that they need to travel in order to be happy in their lives just doesn't work. I know people who have spent their entire lives within 100 miles of home (maybe less).

I realize Shewillbemine's list is just suggestions, but personally I have no interest or intent on ever doing at least 7 of those 13 items.

There are times when I envy the minimalist. Our lives have gotten much too complicated and busy. A simpler life would be nice. The problem is it is very difficult to go back once you've had more. It is far easier to never get more. That way you don't know what you are missing.

It is all very philosophical but I don't think I can judge what will, can or should make someone else happy in life. While I may not be happy living the way they do, that doesn't mean that they aren't happy living that way.

[MonkeyMama]

Originally Posted by jteezie

Debbie. Why do you think my life's depressing? A fair number of people tell me this, but I don't understand it (I mean, I do, but it's not logical). I enjoy life plenty, go out and spend money whenever I please.

If you are happy, take the comments with a grain of salt.

If you understand that you don't have to spend a lot of money to enjoy life, you will fare well.

Anyway, I don't see anything depressing about your posts, and there are hundreds (thousands?) of different ways to lead a happy and fulfilling life. I've had that reaction to a glimpse on the outside of my own life, and all I Can do is roll my eyes. We live an extraordinarily leisurely life - I have no problems with it. Likewise, have always had plenty of money for a rainy day - which makes life far more simple and less stressful. You have to take it with a grain of salt when others think newer cars, designer goods, and extravagant vacations will make your life better. Shewillbemine mentioned a lot of things that are extremely low cost or free, so no idea why anyone would presume you aren't doing anything to "live life." Who said you weren't doing anything that YOU enjoy??? Just because you don't spend more money?

[DebbieL]

I based my comments on the fact he seems to only want to watch news and play computer games, etc. I don't think life is all about designer clothes and extravagant purchases. I think there are some people who could possibly benefit from seeing a bit more of the world than their computer screen at home. I already said he's done well about the saving thing - but life is very short. Save some for sure, but there are other things in life too. That was the part I found depressing.

[jteezie]

I appreciate the different perspectives. I really do think that I'm more happy now than if I were trying to spend money. In fact I'm stressing about ways to spend more money. Just bought a whole bunch of books to give as gifts, researching hdtv's to buy, trying to spent $5 day eating out, identifying magazines to subscribe to, etc. I know, many people would love to have my "problem", but that's not the point.

Anyways to respond more directly to shewillbemine:
1. Get a girlfriend/boyfriend. I'm not that interested in a relationship currently though I intend on having one next year.
2. Buy a pet. I have plants.
3. Exercise. I run to work daily (my building has free gym and showers).
4. Learn a new dance. I'm fine just going to clubs.
5. Try a random act of financial kindness. Just gave a bunch of gifts.
6. Write a book. How does this cost money? I'd received this suggestion before and I will write a book one day after I decide what I want to portray to the world.
7. Skydive. Already done.
8. Swim with sharks. ?
9. Send money to Japan. This might sound heartless, but I feel my contributions are marginally less useful than to other areas which have now lost money because people are diverting contributions to Japan. Just an economic view. I've also traveled to Japan.
10. Join the Red Cross. I served in the military.
11. Get a higher degree. I'm working on a masters and plan to get a second. (these are not online degrees either)
12. Start a business. That's my long term goal. Entrepreneurship and hopefully social entrepreneurship.
13. Go to a rave. I'm not a fan of clubs, but I go to them bi-weekly.

Hopefully this dispels the notion that saving money equates to an experience deprived life. In fact I think that some of my experiences are what put me where I am now.

[snshijuptr]

Setting aside whether your life is "boring" (because really that's kinda up to you). Here are some ideas:

1. Keep adding to retirement until it will grow and allow you to withdraw at 59 1/2 at your current spending level. (According to firecalc.com you've already done this.)
2. Put enough into taxable accounts until you have $250,000. (or 25x your income).
3. Start systematically increasing your life style and your taxable investments such that taxable investments are always 25x your expenses.
4. When you are satisfied retire or start a business knowing you can support yourself forever!

On a side note, since you are in school, make sure you have paid or have money set aside to pay off your student loans. Along the way, you can save and spend toward any small goals you have along the way.

If you really, really want to start spending more money, ask your friends how you should improve your life. They might say that you live in a crap-hole or your car is a death-trap. You usually surround yourself with like-minded people so your friends might have good advice.

[Mr Nice Guy]

Congrats Jteezie. That is a great achievement. This has been an excellent post and responses. It really made me take a look at myself as well.

I think its interesting how people want to tell you how you should live your life. As if, at 26, you don't know whats best for yourself? Or how you should spend your money. lol. I am 23 and I see where you are coming from. I, as you are, am trying to be drinking Grey Goose in my later years, not Skyy.

Peers that are my age think im crazy cause I dont want to go out 5 nights a week and get drunk. I tell em that I didnt have many brain cells to begin with, and I dont plan on expediting their decline. I am known to love the occasional brew or cocktail, but not all the time. I don't want to meet a girl in a bar, I long to meet a girl at the library reading "kiplingers" or some like periodical lol.

I also tell friends im trying to save for retirement and investing, and they just laugh at me. "c'mon dude, your only 23," friends will say. I then laugh at them, because they haven't yet discovered the miracle of compounding interest. muahahahahah!!! Just kidding.

[jteezie]

Cool. I'm glad there are others with my mindset. I really do think that front loading the savings at a time when it is easier to do so is one of the best things a person can do. And again, I'm not deprived. I feel like a poster child for this ethos...

I'm gonna focus a bit on snshijuptr's comments. Going to school is pretty much extra income for me due to tuition reimbursement, GI bill and other benefits. It's a pretty nice incentive to learn. I actually live in quite a luxurious place very close to work and I have a nice car which I never drive (and which I worry will randomly get stolen and I won't realize for weeks, lol). As far as my friends, they think I should find a new job that pays more and is more challenging. That will make the spending problem worst and probably bring about some vices which I don't particularly want to do like drinking.

As far as projections. I used firecalc too. It's a nice calculator. It also works out for earlier retirement i.e. 55 (using the 10-T rule or whatever it's called), but I hope to "retire" sooner than that.

How did you calculate the 25x ratio? Is that 25x months? Years doesn't make sense to me. What's the philosophy behind this model?

Again. Thanks for the feedback, all.

[disneysteve]

Originally Posted by Mr Nice Guy

, as you are, am trying to be drinking Grey Goose in my later years, not Skyy.

Sorry, but I have to disagree with you on this point. Just because Grey Goose is more expensive doesn't make it better. Both my wife and I happen to prefer Skyy. I've consumed a lot of vodka in my life from garbage stuff in college to Smirnoff to Stoli to Absolut to Skyy to Grey Goose and many others along the way. If you open our freezer today, you'll find a couple of bottles of Skyy and a bottle of Absolut we got as a gift. You'll never find Grey Goose in our house.

[Mr Nice Guy]

Originally Posted by disneysteve

Sorry, but I have to disagree with you on this point. Just because Grey Goose is more expensive doesn't make it better. Both my wife and I happen to prefer Skyy. I've consumed a lot of vodka in my life from garbage stuff in college to Smirnoff to Stoli to Absolut to Skyy to Grey Goose and many others along the way. If you open our freezer today, you'll find a couple of bottles of Skyy and a bottle of Absolut we got as a gift. You'll never find Grey Goose in our house.

I see your point. I guess it depends what you are drinking. If the vodka is to be mixed heavily with other drinks, it probably wont matter much. I do feel that I could pick Goose out in a shot-by-shot comparison. I dont really drink vodka, i just used it more as an analogy.