Does it makes sense to ask... how am I doing ?

[syracusa]

Re: Does it makes sense to ask... how am I doing ?

Well, if you are saving 23%, you are doing pretty well. I forgot that you have to pay for child care. I would suggest that you write down everything you buy in a little notebook for a month. Look at see where that $600 is going??
also, it is more important to save for your retirement now than a child's education. i know you don't want to hear that, but it is true.
You can borrow for schooling, but you can't borrow to retire.
I think it is very important that you both open roth IRA's and contribute the full $4000 each. That is $333 a month for each of you.

Very, very interesting point, I will keep it in mind, thank you.
Both my Dh and I have accounts with some retirement money from previous employers, but we can no longer contribute in those specific accounts from what I understand. I am still not very versed in the financial world - all I know is "behave yourself and do not buy with money you don't already have".
Should we open new IRA-s and roll over that money and make regular contributions?

Thank you so much again

[creditcardfree]

Re: Does it makes sense to ask... how am I doing ?

Should we open new IRA-s and roll over that money and make regular contributions?

Oh, yes! I think that idea is a good one. It consolidates your accounts and gives you a new pot to feed!!

Hey I feel better now that I know you are saving 23%!! Much better based on your income! And I did forget about the land...

[kealina]

Re: Does it makes sense to ask... how am I doing ?

And bake your own bread -- a lot cheaper than buying good bread.

i think you are doing well too... if you eat a lot of bread you might want to look into getting a bread machine, or baking your own like the squantum suggested, because it might help you save money in the long run... we don't eat that much bread so we buy our whole wheat bread cheap at the bread thrift store...

[syracusa]

Re: Does it makes sense to ask... how am I doing ?

i think you are doing well too... if you eat a lot of bread you might want to look into getting a bread machine, or baking your own like the squantum suggested, because it might help you save money in the long run... we don't eat that much bread so we buy our whole wheat bread cheap at the bread thrift store...

Arghhhh...the bread machine. I have it - and I have done bread in it but...it comes out good for only a few hours. The next day it's crumbly and hard and then we just throw a lot of it away. I gave it up at some point because I was craving better bread.

There are areas where I can't scrimp too much: the bread, the fresh fruits (I eat tons of them and they are anything but cheap) and salads (tomatoes, cucumbers, lettuce, etc).

[creditcardfree]

Re: Does it makes sense to ask... how am I doing ?

There are areas where I can't scrimp too much: the bread, the fresh fruits (I eat tons of them and they are anything but cheap) and salads (tomatoes, cucumbers, lettuce, etc).

You will definitely be healthier for eating the way you do. So probably less medical bills down the road. So really its a positive thing!

[Elgin526]

Re: Does it makes sense to ask... how am I doing ?

You sound like you're doing fine to me. Just make sure whatever you are saving is invested aggressively enough. You need to shoot for an average return of 8% or more per year to make your money grow the way it needs to. Some years you may only make 6% and other years you may make 12%, but as long as you average at 8% or more over time you'll be on track. One of the biggest mistakes people make (other than not saving enough to begin with) is investing too conservatively. People invest in safer bonds and money market funds and only make 4%, that barely keeps up with inflation!

Another point is that you shouldn't count too much on that land inheritance. Things change, you may not get the inheritance after all or it may not be worth what you think it will be worth. Plus, depending on how the will or trust is set up, you could pay a lot of taxes on it when you do inherit.

Overall though I think you're doing great. Not much debt, you sound like you don't live extravagantly and you both have very good incomes. $40,000 in a 401k is nothing to sneeze at, I started at 23 and that's what I have now at age 30. Now, I did that making only $35,000-$40,000 a year, but still. I've got another 30-35 years to retirement since I have to work to make sure DH has health insurance until Medicare kicks in (he can't qualify for insurance on his own due to a pre-existing condition) so as long as we keep saving the way we should and get that 8% return, we'll be just fine, and I think you will be too!

[BCHGRL]

Re: Does it makes sense to ask... how am I doing ?

23% is pretty good. Like IMA said, you probably want to open a ROTH to supplement DH's 401K. Speaking of 401K, are you contributing the maximum amount that your DH's employer will match?

A 20-yr-old that is worried about retirement is obviously way ahead of his or her peers. However, for most of us, we become savvy about saving occurs through a series of life lessons. If you are the hard-headed type like me, you have to experience the bad (debt) before you can appreciate the good (saving). It was the same with my love life too!

[greedy4chips]

Re: Does it makes sense to ask... how am I doing ?

I am doing my best to point my 18-21 yr old classmates in the right direction by explaining investment options to them.

One startling statistic I came across is 70% of Americans who have a 401k plan available at work do not take advantage of it!

I think you are doing very well!

Too many people seem to put off retirement savings and then wonder why they can't catch up. It is like the rabbit trying to catch the turtle. The slow and steady approach over the long haul prevails over the late burst of the rabbit who doddled through much of the race.

You are much smarter and better off then the rabbit, unfortunately the turtle did have knowledge and a longer investment life on his side.

There are millions of rabbits who haven't even started the race yet!!!

[Broken Arrow]

Re: Does it makes sense to ask... how am I doing ?

One startling statistic I came across is 70% of Americans who have a 401k plan available at work do not take advantage of it!!!

That's... insane!

One time, I was talking to the nice lady who files our 401k applications at our company. I asked her how much other people are contributing, and she said that most range from 1% to 5%. 1% if only because our company forces all of us open an account.

However, she also pointed out that some have gone as high as 20% and one person even did 40%! Mine is 25%.

[syracusa]

Re: Does it makes sense to ask... how am I doing ?

You sound like you're doing fine to me. Just make sure whatever you are saving is invested aggressively enough. You need to shoot for an average return of 8% or more per year to make your money grow the way it needs to. Some years you may only make 6% and other years you may make 12%, but as long as you average at 8% or more over time you'll be on track. One of the biggest mistakes people make (other than not saving enough to begin with) is investing too conservatively. People invest in safer bonds and money market funds and only make 4%, that barely keeps up with inflation!

Another point is that you shouldn't count too much on that land inheritance. Things change, you may not get the inheritance after all or it may not be worth what you think it will be worth. Plus, depending on how the will or trust is set up, you could pay a lot of taxes on it when you do inherit.

Overall though I think you're doing great. Not much debt, you sound like you don't live extravagantly and you both have very good incomes. $40,000 in a 401k is nothing to sneeze at, I started at 23 and that's what I have now at age 30. Now, I did that making only $35,000-$40,000 a year, but still. I've got another 30-35 years to retirement since I have to work to make sure DH has health insurance until Medicare kicks in (he can't qualify for insurance on his own due to a pre-existing condition) so as long as we keep saving the way we should and get that 8% return, we'll be just fine, and I think you will be too!

Thank you so much for your comments and suggestions. I do have one questions about the yearly return.
Yes, I do have one retirement account left over from a previous employer which currently has 4000 dollars in it and to which I have not contributed in almost two years since I quit that job. It was suggested to me to open an IRA with the same company that handles this retirement account (that is, Fidelity) and simply roll those 4000 dollars in an IRA and then contribute on my own.

I understood that and I opened the IRA account. I am afraid I still don't understand very well the difference between a basic IRA and a Roth-IRA. My husband said that Roth-IRA-s are over-rated and that an IRA is just fine (that's all I understood). Need to educate myself further on this one.

However, shamefully I am not sure where exactly I should look for to identify the return rate for each fund.
I think I found it but I am not sure that it is it.
Those 4000 dollars are distributed in four "baskets" / funds in basically equal shares (25% each). Apparently the first one is the most agressive because it says that the YTD Return is 9.51%.

The second has a 6.21% YTD return and the other two have about 4.5%.

Is this what I am looking for? Apparently the first one is OK but the other three have not been doing so well, is that correct?

Also, I keep hearing this idea that you should manage your own money and not rely on fund managers to do that. Well...not that I know much about it, but how can I do this?

Once I roll that money into the new IRA, can I manage it myself or will the fund managers from Fidelity have to have an implication anyway?
I am not sure whether you can manage your own money with Fidelity.

The Fidelity guy did ask me whether I thought about how I want to invest the money once I roll it into the IRA. What should I do from here. I am just about to roll that money into the IRA but I really need to learn what I am doing.

I truly appreciate everyone's help with these fuzzy investing matters (fuzzy to me).

[kimiko]

Re: Does it makes sense to ask... how am I doing ?

Oh, yes - one more thought. Deep thought, mind you

I am not sure I would be 100% ... let's say "jealous"... on someone who, at the age of 22, says "I HAVE TO be retired by the age of 50".
Well...that means that the person plans to, or assumes that until 50, he will probably work in a job that he will be happy to drop as soon as this becomes possible.

At the age of 22 and with so much awarness of life - wouldn't it be wiser to focus on finding a career more like a "life calling", that you would have a hard time quitting at the age of 50 simply because you love what you do so much?

That shouldn't be incompatible with financial success...but why retire at 50? Why not find something to do all this lifetime between 22 and 50, that you would hate parting with at the relatively young age of 50?...

Since I'm in my 20's and have similar goal, I think it's acceptable to answer that question

It's not that I plan on retiring at 50 and completely ignore my career path, it's just that I've seen people who retired and had to come back to work, first part time and then full time to make ends meet. They work at the same job that an unskilled student like me can get because they're aged out of their profession. To prevent that from happening to me, I plan to build a finanical standing that is stable enough so that should I choose, I can retire at 50 without any worry.

[LuxLiving]

Re: Does it makes sense to ask... how am I doing ?

Fidelity allows you to direct your money w/i certain funds. If you go w/their managed account then they do the work for you.

Something for you to look at is their age-targeted funds say if you plan to retire in 2045 then that's the year fund you look at investing in.

One good diversified fund that they have is the Four-In-One Fund that tracks four of the top indexes - The Hubster and I started with it and then have progressed from there. You get on Fidelity's website and start reading, study at some of the places that were listed in the thread on this site about good investing websites and begin learning. No one will take as good a care of your money as you will - if you get involved in learning about investments.

http://www.savingadvice.com/forums/showthread.php?t=23296

[Ima saver]

Re: Does it makes sense to ask... how am I doing ?

Putting your money in a roth ira means when you retire, you will not have to pay taxes when you draw out the money. At your young ages, you should have your money in a roth ira!

[Elgin526]

Re: Does it makes sense to ask... how am I doing ?

Thank you so much for your comments and suggestions. I do have one questions about the yearly return.
Yes, I do have one retirement account left over from a previous employer which currently has 4000 dollars in it and to which I have not contributed in almost two years since I quit that job. It was suggested to me to open an IRA with the same company that handles this retirement account (that is, Fidelity) and simply roll those 4000 dollars in an IRA and then contribute on my own.

I understood that and I opened the IRA account. I am afraid I still don't understand very well the difference between a basic IRA and a Roth-IRA. My husband said that Roth-IRA-s are over-rated and that an IRA is just fine (that's all I understood). Need to educate myself further on this one.

However, shamefully I am not sure where exactly I should look for to identify the return rate for each fund.
I think I found it but I am not sure that it is it.
Those 4000 dollars are distributed in four "baskets" / funds in basically equal shares (25% each). Apparently the first one is the most agressive because it says that the YTD Return is 9.51%.

The second has a 6.21% YTD return and the other two have about 4.5%.

Is this what I am looking for? Apparently the first one is OK but the other three have not been doing so well, is that correct?

Also, I keep hearing this idea that you should manage your own money and not rely on fund managers to do that. Well...not that I know much about it, but how can I do this?

Once I roll that money into the new IRA, can I manage it myself or will the fund managers from Fidelity have to have an implication anyway?
I am not sure whether you can manage your own money with Fidelity.

The Fidelity guy did ask me whether I thought about how I want to invest the money once I roll it into the IRA. What should I do from here. I am just about to roll that money into the IRA but I really need to learn what I am doing.

I truly appreciate everyone's help with these fuzzy investing matters (fuzzy to me).

First, the differance between a normal IRA and a Roth IRA is pretty simple. With a regular IRA, you contribute money to it tax free (meaning you don't pay taxes on any money you put in) but when you withdrawl it, you pay income taxes then. With a Roth IRA, you pay taxes on whatever money you put in right now, but when you take it out it is 100% tax free, even the capital gains (the money you make off your investments) are tax free. For the vast majority of people, Roth IRA's are the way to go. Income taxes are at historical lows, and most feel that (especially with the national debt exploding) taxes will be going up over the next decade or two. By the time we retire, the tax rates will almost certainly be higher. Roth IRA's do have income restrictions, meaning you can only have one if you make less than a certain amount of money. I can't remember what the cap was, someone else here may know.

As for how to actually manage your investments, that's a bit beyond my expertise. Since I only have a 401k myself, I haven't had to study up on actively managing my own investments (something I'll have to do rather soon since DH needs to open up an IRA himself since his pension is going bankrupt...). So what I would do in your case, is I would find a fee based financial planner. A fee based planner is the best because they do not earn commision on the products they sell, so their advice is 100% neutral. Because they want to keep you as a customer (the only way they make money is if you pay them!) they will do their best for YOU, and not just sell you whatever product is offering them the best commision, regardless if it is in your best interest. You can give them your whole picture, what you investments you have, what options your various 401k, IRA's and other retirement accounts offer you, what portion of your income you are currently investing, you projected inheritance, and tell him/her your retirement plans (moving to Europe) and he/she can then best advise you on what/how to invest so you meet or exceed your retirement goals.

[ren]

Re: Does it makes sense to ask... how am I doing ?

Syracusa, I think the best way to know if you're doing well is:

A) What are your goals?
B) Are the actions you're taking going to accomplish them?

So, looking at things, I'd say your goals are, from short to long term:
Annual family visit --> able to afford it and still save every month
Minimal debt --> only the mortgage, which is shrinking every month
Son's education --> funding 529 (you may also want to look into Coverdell savings accounts to give you another way to save for a really good education)
Retirement in Europe --> contributing regularly to retirement accounts, plus you'll be able to sell the house to help pay for things when you leave the States

Looks like you're doing great to me!