Should I be saving for retirement?

**am_vanquish** · 03-25-2010, 01:31 AM

Originally posted by Andrew Jackson View Post

I turn 26 in six short days so I feel I still do have time on my side with regards to retirement.

That line of thought has to stop ... quick! First, if you keep that up, you won't start until you're 35. Second, the amount of money you're losing in compound interest is more than you realize. Even the difference in starting to save at age 25 vs. age 30 is quite large when carried forward 40-45 years to retirement age (with LOTS of interest).

I hope this doesn't sound "mightier-than-thou", but I turned 23 two weeks ago and I've got $15k in retirement savings. Hopefully that provides some perspective that just because most people in their early/mid-twenties aren't saving for retirement doesn't mean that you can/should really wait to start.

Some one else can chime in and correct me if I'm wrong, but I'm pretty sure tax-sheltered savings accounts (401k and IRA) are also safe from creditors. This would be an important feature if you own your own business.

**creditcardfree** · 03-25-2010, 03:59 AM

Originally posted by am_vanquish View Post

Some one else can chime in and correct me if I'm wrong, but I'm pretty sure tax-sheltered savings accounts (401k and IRA) are also safe from creditors. This would be an important feature if you own your own business.

This is correct.

I agree you have to start funding your retirement along with your other savings goals. It might mean you need to work an additional job to bring in more income for the pizza plan.

Do not wait start saving for retirement today. You will not regret. No one one ever says...I wish I started saving much later in my life.

**jIM_Ohio** · 03-25-2010, 04:33 AM

Originally posted by Andrew Jackson View Post

I'd like to start saving for retirement. The younger you start the better. However, I'm not sure it is the most responsible thing I could do right now. I turn 26 in six short days so I feel I still do have time on my side with regards to retirement. My long term goal as a career for myself is to open my own pizza place. I figure that the kind of place I want to open would need about $40 to $60 thousand. I've been in the pizza business for the last seven and a half years and despite getting my BS in Biology in Dec of 08 I seem to love pizza more than biology. I really enjoy the business. So basically, my thinking is that it is most important for me to save up as much as I possibly can to go towards the opening of my pizza place and the start of my career.

If it doesn't work out I guess I can fall back on my degree.

If a long term goal (retirement) is underfunded in place of short term goals (owning own business) what will happen when the long term goal is no longer long term (like in 20 years).

ALWAYS fund long term goals first. Retirement should be what you fall back on, not your degree (your degree is plan B).

Try this, set aside 10% of gross pay to retirement funds (now)
set aside 10% of gross pay to short term goals (owning own restaurant).

If you really want the goal, do a 10%-20% split (for example), but fund retirement with no less than 10% of gross pay while someone else is taking on risk of owning business.

The first 5 years you own the restaurant, you will probably not make enough to contribute to retirement accounts... so get retirement accounts started before you run your own business.

In addition, when you are self employed, or owning the business, it would be a good idea if your liquid savings had about 2 years of expenses in it, in addition to retirement savings. Helps the personal balance sheet if you do not need to worry about where the mortgage payment will come from next month.

**swanson719** · 03-25-2010, 04:35 AM

You ought to start saving now - compound interest is a huge factor.

Another thing to consider is taking in a silent partner for the pizza endeavor. Are you going to be a franchisee or open an independent shop? Restaurants have a high turnover rate, meaning they fail quite often. Not to say yours will, but be aware that saving up $60K and putting it in something with a high risk track record might not be the best thing to do. Having a silent partner(s) lowers the risk, while keeping it quite clear who runs the place. You spread out profits, or loss, over the short run, and then when you make enough down the road, you buy out the partners. Or if you end up going belly up, it's not all on you. Risk management is all I'm saying.

Make sure your personal finances are in order before you seriously consider opening a business. Meaning no debt other than a mortgage, a big emergency fund (minimum of $10,000) funding kids college, 15% towards retirement, and a plan to pay down your mortgage. Once you have all that in order, then I would say you can think about a business.

**Andrew Jackson** · 03-25-2010, 09:16 AM

Thanks guys. Just needed some re-assuring. It's only a max of $5,000 a year anyway, so as long as I am frugal with the rest of my money it shouldn't kill my dream of owning my own pizza place. My next question is, I recently opened, as in 8 days ago, a Vanguard S&P index fund but as a general savings fund. Can I easily switch that over to a Roth IRA account with Vanguard. Guess I will have to check with their website.

**am_vanquish** · 03-25-2010, 11:30 AM

Originally posted by Andrew Jackson View Post

Thanks guys. Just needed some re-assuring. It's only a max of $5,000 a year anyway, so as long as I am frugal with the rest of my money it shouldn't kill my dream of owning my own pizza place. My next question is, I recently opened, as in 8 days ago, a Vanguard S&P index fund but as a general savings fund. Can I easily switch that over to a Roth IRA account with Vanguard. Guess I will have to check with their website.

That's an excellent plan & it shouldn't be too involved. You'll probably have to set up another account with Vanguard and have them move it. I'm not entirely sure about the transfer: Because Roth's are generally considered post-tax, you may have to sell the index fund in your taxable account, accept the capital gains on the 8 days' worth of gains/losses, transfer the cash from your sale into the IRA, then buy back into the same fund within the IRA. I'll let someone else weigh in on it to confirm ... could be wrong.

Also, note that having equity index funds like the S&P 500 are actually better in tax-sheltered accounts like Roth IRAs than they are in individual taxable accounts (that is, you're making a double-smart move).

**jIM_Ohio** · 03-25-2010, 01:32 PM

Originally posted by Andrew Jackson View Post

Thanks guys. Just needed some re-assuring. It's only a max of $5,000 a year anyway, so as long as I am frugal with the rest of my money it shouldn't kill my dream of owning my own pizza place. My next question is, I recently opened, as in 8 days ago, a Vanguard S&P index fund but as a general savings fund. Can I easily switch that over to a Roth IRA account with Vanguard. Guess I will have to check with their website.

You should not limit yourself to just an IRA ($5k). If you make more than 50k per year, you will want to set aside more than just the IRA limit... focus on percentage of income- 10% is a decent place to start.

**isralexba** · 03-25-2010, 02:21 PM

I completely agree that you should save from the earliest possible age. DO note that as you are fairly young you can invest the retirement funds in a more profitable channel (and less conservative) as the investment is for a long time. in essence- you can have a very high ratio of stocks in the retirement saving account.
good luck

**Andrew Jackson** · 03-25-2010, 02:23 PM

Originally posted by jIM_Ohio View Post

You should not limit yourself to just an IRA ($5k). If you make more than 50k per year, you will want to set aside more than just the IRA limit... focus on percentage of income- 10% is a decent place to start.

I made $28K last year so as of now $5K would be a huge chunk of my gross pay. I'm thinking of just investing $3K a year until I start to make more than $40K.

**Andrew Jackson** · 03-25-2010, 02:27 PM

Originally posted by isralexba View Post

DO note that as you are fairly young you can invest the retirement funds in a more profitable channel (and less conservative) as the investment is for a long time. in essence- you can have a very high ratio of stocks in the retirement saving account.
good luck

Yeah I'd probably put it in a stock index fund until I'm 30 and then and then check my situation and change as needed.

**coach2wealth** · 03-26-2010, 08:58 AM

Just remember, 75% of American increase their spending with their income. 70% of Americans live paycheck to paycheck. 75% of the Baby Boomer generation that started retiring in 2007 is underfunded for retirement.

Don't be normal!

**kenyant** · 03-30-2010, 06:44 AM

i also started a business and i am concentrating ALL my my time and money on it. i think that building a strong business is one of the best assets that you can have, i am thinking that when i start running my business fulltime, i wont ever go back to formal employment so it figures, that if that is the road i want to take, why not start now?? all the people with successful businesses always say that starting the business in the first place was one of the best things that they did (not hijacking this thread- it just interested me)

**Andrew Jackson** · 03-30-2010, 06:58 AM

Originally posted by kenyant View Post

i also started a business and i am concentrating ALL my my time and money on it. i think that building a strong business is one of the best assets that you can have, i am thinking that when i start running my business fulltime, i wont ever go back to formal employment so it figures, that if that is the road i want to take, why not start now?? all the people with successful businesses always say that starting the business in the first place was one of the best things that they did (not hijacking this thread- it just interested me)

Thanks for the post kenyant. I want to start saving for retirement. If I keep putting it off then who knows when I will actually start saving for it? But obviously the business is really important and the sooner it gets going the sooner I can make a lot more cash to put towards retirement savings. So I wont be breaking the bank to save for retirement right now.

**MonkeyMama** · 03-30-2010, 08:54 AM

I would get in the habit of always putting 10% away, minimum. Of course, the more you put away now, the less you should have to later. Middle ground is fine - but I don't see why you wouldn't contribute to retirement. You are not getting any younger...

Should I be saving for retirement?