Advice Needed on Financial Focus

[sandrark]

So, DH and I are doing well structurally - we have savings, a solid retirement account, pay our bills promptly, but we have some debt. We have a written budget. I'm the money geek, DH likes being consulted but not involved in the details. As a result, I feel like I have to save for both of us, since he is willing to do some, but not ENOUGH, IMO.

Add to the mix - I recently got a large bump in salary - 20% - as a retention offer. I get the first paycheck at the new rate next month. So now I'm confused.

Before the bump, I was putting away 20% of my gross income into retirement. DH was putting away 13% into retirement.

My current budget has me increasing the retirement contributions to 23% of the (now larger) gross income. It also accounts for larger taxes, increased assistance to my elderly mother, and contributions to my brother's kids' 529s.

However, it doesn't accelerate the debt repayment (a car loan, with ~ $9K outstanding on it) or our CCd debt (which, at current rates, should be paid off by the end of this year).

Part of me says I'm too worried about retirement savings - but for various health reasons, it's unlikely I'll be working much past 60. Which is 14 years away.

Am I better off continuing to sock away such large sums in retirement? Or should I follow the DR advice, and pay off our debt, which sits at about 20% of our annual income?

I keep confronting the issue of DH's disinterest in saving, plus my health problems. I feel that these two shadings trump the debt we have. The debt doesn't create cash flow issues for us (and even if one of us should lose our jobs, my banked personal time would pay off the debt near-entirely)...

Advice?

[sandrark]

Artwest, thanks for your comments. But to be clear, we have a FFEF with more than 6 months of expenses in it. Since DH is self-employed, we place a high premium on keeping that cash stashed.

From our perspective, cash flow matters immensely with one of us self-employed. I'm just having a hard time declining the retirement savings, given the tax advantages (SE tax is PAINFUL!) and my likelihood of a medically-required early retirement...

[LMA]

Artwest, thanks for your comments. But to be clear, we have a FFEF with more than 6 months of expenses in it. Since DH is self-employed, we place a high premium on keeping that cash stashed.

From our perspective, cash flow matters immensely with one of us self-employed. I'm just having a hard time declining the retirement savings, given the tax advantages (SE tax is PAINFUL!) and my likelihood of a medically-required early retirement...

Having been self employed myself I agree with you 1,000%. When you are not on a steady paycheck cash is king!!

It sounds like you are already on track to pay your debt by the end of this year like you said so I would say you keep on socking as much as you can for retirement. Yes, you still have 14 years but it sounds like you have your ducks in a row so retirement for you could come sooner.

You mention self employment taxes but also remember that as a business owner you get LOTS of deductions; from miles driven to your internet connection if you have a home office, etc.

[sandrark]

Yes, we're aware of the SE deductions; we do well at itemizing.

So, from the lack of emphatic responses, I can assume we're doing things right?



FWIW, the CCd interest is 3.9% right now, and the car loan is also at 3.9%.

[Like2Plan]

So, DH and I are doing well structurally - we have savings, a solid retirement account, pay our bills promptly, but we have some debt. We have a written budget. I'm the money geek, DH likes being consulted but not involved in the details. As a result, I feel like I have to save for both of us, since he is willing to do some, but not ENOUGH, IMO.

Add to the mix - I recently got a large bump in salary - 20% - as a retention offer. I get the first paycheck at the new rate next month. So now I'm confused.

Before the bump, I was putting away 20% of my gross income into retirement. DH was putting away 13% into retirement.

My current budget has me increasing the retirement contributions to 23% of the (now larger) gross income. It also accounts for larger taxes, increased assistance to my elderly mother, and contributions to my brother's kids' 529s.

However, it doesn't accelerate the debt repayment (a car loan, with ~ $9K outstanding on it) or our CCd debt (which, at current rates, should be paid off by the end of this year).

Part of me says I'm too worried about retirement savings - but for various health reasons, it's unlikely I'll be working much past 60. Which is 14 years away.
Am I better off continuing to sock away such large sums in retirement? Or should I follow the DR advice, and pay off our debt, which sits at about 20% of our annual income?

I keep confronting the issue of DH's disinterest in saving, plus my health problems. I feel that these two shadings trump the debt we have. The debt doesn't create cash flow issues for us (and even if one of us should lose our jobs, my banked personal time would pay off the debt near-entirely)...

Advice?

sandrark;,
What happens to your retirement if you are not able to work 14 more years due to your health issues?

Had you thought of suspending the additional payments to your Mom and to your nephews 529 accounts until you have the CC debt paid off? That way you could focus debt repayment and retirement with your new windfall.

[sandrark]

Like2Plan - I'm eligible for a full retirement in another 3.75 years. So, while the monthly income would be reduced, we would (allegedly) have medical coverage (the wild card) as well as a monthly pension amount that would pay the bills.

[MonkeyMama]

I think there is not enough info here to say.

I do think people get caught up in the black/white. If it were me, and I were that concerned about retirement AND being out of debt, I'd probably be downsizing the car. Or getting an additional income. I'd think that both (retirement and no debt) would be extremely important.

But the interest rate on the credit cards may be 0% and you may have $1+ million saved for retirement. In which case, yes, you would be over-worrying!

I was also going to comment on the 529 plans - I would also put those on hold until debt is paid BUT maybe you are in some huge tax bracket and that is helping you.

So I just find it hard to answer to this in a real useful way.

[Like2Plan]

Like2Plan - I'm eligible for a full retirement in another 3.75 years. So, while the monthly income would be reduced, we would (allegedly) have medical coverage (the wild card) as well as a monthly pension amount that would pay the bills.

Your big unknown is how long you will be able to work--especially since you already have medical issues. What would happen if you had to leave before you reach you full retirment in 3.75 years? Also, in this scenario how long before you would receive monthly income?

There are things you can do right now to bolster your position if this should happen. One is to reduce the debt load. Another thing you can do is increase your cash position (unless you feel you have adequate reserves). Also, you should find out what kind of retirement you will receive if you left work right now (or at various points until you reach full retirement age)--you may need additional savings to make up for a shortfall. Also keep in mind you may not be able to (easily) draw from a retirement account without a penalty if you retire before the minimum age.

Suze Ormand had a TV show on PBS where she talked about how sometimes we don't take care of ourselves (financially) first and we put ourselves at risk by helping everyone else. Her example of the airplane safety announcement where Moms have to be told--put your oxygen mask on first before you help anyone else....

Will your nephews be going to college within the next 3.5 years? What if you set aside the windfall that you are scheduled to receive and then if it turns out you don't need it before you reach full retirement you could send the money over to your nephews college account?

Is the help you are giving your Mom for basic necessities? Will you be able to continue your support if you suddenly lost your income?

[photo]

If you've got credit card debt and car payments, then you're living beyond your means, especially with trying to also fund college accounts for relatives. Of course, those are your choices to make, but those choices are financially draining you. You sound like a very generous person, but you really need to save for you.