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15% To Retirement (Even with Pension?)

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    15% To Retirement (Even with Pension?)

    Hey everyone! In August, my husband and I will be done paying off all of our "little debts" (cc, car, his student loans) and will be left with our home mortgage, rental property mortgage, and my 20k student loan. We're going to start paying down either the rental property mortgage or student loan right away (with an extra 1200/month for debt reduction hopefully that'll be gone fast!!), but we figure we'd like to up our retirement contributions first. I'm just looking for a little guidance on what would be best.

    I am almost 25 years old and I've been working for PennDOT for 2 years. 6.25% of my pay is deducted for my pension and I contribute another 2% currently to our 401k equivalent. I've heard varying percentage's as a goal for retirement contribution, ranging from 15-20%. Do I count the percentage that I have currently going towards my pension as retirement savings or do I count that deduction as just a "bonus"? In short, if 15% is sufficient for retirement, is my goal 8.75% to 401k (or does that 6.25% for my pension not "count" and I should contribute 15% to 401k?)

    Hopefully i didn't confuse anyone with that!

    My husbands situation is a little more cut and dry so i don't think I need to elaborate. But still, would 15% total be best for retirement or 20%? I understand it all depends on your goals for retirement, but if anyone would like to put in their 2 cents or any rules of thumb they've heard, I'm all ears! Thanks!

    #2
    At your age I would work harder on paying off debt before investing. I would start investing 15% when you reach 30 and 20+% when you reach 40. Just my opinion.

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      #3
      If you're trying to do the Dave Ramsey thing, this is what I heard him say on the podcast once--he means 15% total. In my case, 5.5% of my pay is going into my pension, so I would be saving an additional 9.5% on my own.

      Ramsey recommends 15% for everyone regardless of age, which can't be quite right, but then I'm not sure what is! HOWEVER, the main thing is--he doesn't want you to start on retirement savings until all debt (except one mortgage) is gone and you have a nice emergency savings cushion. I suppose if your rarin' to go, you could fudge it by using a Roth IRA, which is technically retirement savings; you could access your contributions in an emergency without penalty, just not your earnings.

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        #4
        DR recommends that you put 15% of your after tax income into retirement, regardless of what your employer puts in, after you become debt-free but the house. That's when your cash flow would be sufficiently high enough to fund retirement at that level without struggling. That said, it's really based on your comfort level and cash flow.

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          #5
          My company contributes 9% of my salary to my 401k regardless if I add a dime. I still contribute 15% of my pretax salary for a total of 24%

          There is no such thing as having "too much" for retirement

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            #6
            Don't think you can afford to wait to start saving for retirement. If you put $10,000 in retirement today, it will be $537,000 when you're 65. If you wait to do it until you're 35, it will be $198,000. 10 years costs you over $340,000. Is waiting to invest more now worth $34,000 a year to you?

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              #7
              I used to own a pension administration company so I'm all over saving for retirement, but you said you were 25 and married. You didn't mention kids nor savings outside of retirement. Because you mentioned "little debts", I'm going to assume you don't have much savings outside of retirement. IF that is the case, then I would structure a plan that includes some retirement savings, some emergency savings, and some debt repayment. If you aren't saving money towards replacing/repairing your cars, then you are setting yourself up to having to borrow money for those expenses. You need to have monthly savings for unexpected expenses like home/car repairs plus money for replacing big ticket items like cars, major house repairs, etc. Not to mention saving for college for kids so they don't have school loans. The bottom line is that retirement savings is great, but there are many other things to consider.

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                #8
                I think we need to distinguish two different situations.

                1. Employer contributes some percentage of your income to a retirement plan but that money DOES NOT come off your salary. I think that is what billchrz is referring to. In that case, I think you should contribute the 15% on your own in addition to what they are putting in.

                2. Employer deducts a certain percentage of your salary and puts it in a retirement plan on your behalf. I think that is what guppy is referring to. In that situation, I think a TOTAL of 15% is appropriate.

                I do agree with eliminating most debt before getting up to that 15% level. Also, build an adequate EF.
                Steve

                * Despite the high cost of living, it remains very popular.
                * Why should I pay for my daughter's education when she already knows everything?
                * There are no shortcuts to anywhere worth going.

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                  #9
                  In my country, many long-term army people are having issues with their pension.

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