phil5185
Junior Associate
Joined: Dec 26, 2010 15:45:49 GMT -5
Posts: 6,410
|
Post by phil5185 on May 13, 2011 15:14:39 GMT -5
I am willing to pay that price in 30 years when I get there. As of now, my priority is to credit card debt. Nothing else matters. LOL - the "I want it NOW" generation. First you want lots of stuff NOW so you use loans to buy it. And then you want the loans gone NOW so you make that the focus. As for paying the price in 30 yrs - that reasoning is why we see so many financial failures in the Boomer generation - ie, failure to 'start'. If you tell a 20-yr old that they will be a millionaire at 50 by putting away $5000/yr they say 'who cares'. Tell them again at at age 30 - a millionaire at 60? Too far to think about. And then again at 40 - who wants to be a millionaire at 70, too old to enjoy it. The end game? They become 70 in either case and never have wealth because they could never push the 'start' button.
|
|
RoadToRiches
Familiar Member
Formerly "indebt"
Joined: Jan 4, 2011 11:08:00 GMT -5
Posts: 965
|
Post by RoadToRiches on May 13, 2011 15:32:34 GMT -5
I think you are missing the point ![:)](//storage.proboards.com/forum/images/smiley/smiley.png) It's not that I think "who cares" or "too far to think about", etc. I do. That's why I am getting out of debt FIRST. I guess that is the price I have to pay for my past stupidity and careless money "management", if you even want to call it that lol. I am past "I want it NOW" when it comes to "stuff". I used to be like that. I want new bedroom set. I actually NEED new bed. But I am waiting until I have everything paid off and suffer through it until then. You are right though... I want the loans gone NOW and I am making it a focus. If I didn't have focus on it, I wouldn't change my ways. Like I said Phil. Being responsible person with money like you are, you will never understand it. For me to start paying off my debt, start saving in 401k, setup emergency fund of 6-12 months, save up for replacement car when I need one all at one time would be like person who smokes, drinks, is overweight, never workouts and eats fast food everyday, waking up one morning and stop smoking, stop drinking, hit the gym, get on a strict diet all at once in a same day. Good luck with that. Perfect plan for failure very very soon. Baby steps.. one thing at a time. This is all about behavior change. I didn't get into this mess overnight, so what I am doing with my money will not change overnight. Not everyone lives in Phil's world right away.
|
|
Sum Dum Gai
Senior Associate
Joined: Aug 15, 2011 15:39:24 GMT -5
Posts: 19,892
|
Post by Sum Dum Gai on May 13, 2011 15:37:29 GMT -5
Classic example of emotions and math not mixing. For people with no emotional hang ups about money or spending finances are all simple math problems. For people with emotional hang ups though, there are other variables in the financial math that make the simple mathematically correct answer the wrong one. The extreme is people who let their emotional baggage completely override the math, and then we get great train wreck threads.
|
|
achelois
Well-Known Member
Joined: Dec 19, 2010 9:55:44 GMT -5
Posts: 1,479
|
Post by achelois on May 13, 2011 16:11:44 GMT -5
14% of my base salary contributes the max allowable, including the catch up 5k since I am over 50.
My employer then puts in10k per year.
Then I put in 3k per month in taxable accts. At vanguard. Also about 6k per year in I bonds.
I have baglady fears I am trying to avert. Having been homeless for a time when young, I have no desire to repeat the experience when old.
|
|
cronewitch
Junior Associate
Joined: Dec 20, 2010 21:44:20 GMT -5
Posts: 5,976
|
Post by cronewitch on May 13, 2011 16:23:26 GMT -5
I gave it up last year, I was putting in 22,000 plus 6,000 to the ROTH but last year and this year will not do that. I would put in up to 50% or so since I was making 54,400 when saving 28,000 it was too much. This year I put in 6K to ROTH and 6K to 401K but will stop the 401K when it gets around 17K this year. I increased the amount saved in taxable investments to make up the shortfall in retirement savings.
|
|
midjd
Administrator
Your Money Admin
Joined: Dec 18, 2010 14:09:23 GMT -5
Posts: 17,719
|
Post by midjd on May 13, 2011 18:06:09 GMT -5
I save 10% to my 457 and 10% to the state employee plan - the state plan has a 10% match, but I don't vest for another 4 years, so I don't really think about it. I've maxed the ROTH for 2010 and 2011... DH graduates in mid-2012 so hopefully we'll have some discretionary income by the end of the year. The total comes to about 27% of my income.
I am like Cawaiu, I wanted to max it at a young age so that I get used to living on this salary (in case I have to cut back contributions later).
|
|
lurkyloo
Junior Associate
“Time means nothing now,” said Toad. “It is just the thing that happens between snacks.”
Joined: Jan 8, 2011 11:26:56 GMT -5
Posts: 5,782
|
Post by lurkyloo on May 13, 2011 20:22:50 GMT -5
Maxing the 401k is important to me because it's roughly a 40% savings in upfront taxes on that amount, in an above-the-line deduction. Also because I only started saving for retirement at the age of nearly 30, and I've got some catching up to do! That said, this is the first year I will officially max it (I think last year's total was 15.6K or so); I've gradually worked up from 7% to 18%. 18% is going to hit 16.5K a little early this year, so I'm also expecting a slightly larger paycheck at the end of the year--just in time for christmas ![:)](//storage.proboards.com/forum/images/smiley/smiley.png) I struggle with restraining my urge to shop, especially for other people, and I probably lean a little too far to the austerity side. It gets a little frustrating looking at my gross pay and then what I actually take home. My roughly-half of the mortgage payment is direct-deposited into DH's checking account, so what goes into my checking account comes out at about 1/3 of gross...and I restrict my spending to 1/2 or so of that. Phil: I think indebt's APR rates on his credit cards were mostly much higher than even your traditional 11% return mutual funds. Don't forget to include that in your calculation!
|
|
dancinmama
Senior Associate
LIVIN' THE DREAM!!
Joined: Dec 18, 2010 20:49:45 GMT -5
Posts: 10,659
|
Post by dancinmama on May 13, 2011 20:49:29 GMT -5
I think you are a few years younger than me, cawiau (I'm 32) - are you sure you need to be maxing your 401k contribution? You and your wife have long careers ahead of you. That may be the right figure to target for savings and investments - but you may want to have some of it be more liquid for your pre-retirement savings goals. (But that's a Phil question - it is distinctly possible that I am just trying to make myself feel better about not contributing more) We are both 26. And my logic behind it was to get used living on less since it is harder to cut back later on (as we are painfully aware now since we have to downsize). Since we are both contributing 25% now, as our income grows we can just totally ignore the 401k and just roll with it until we max it and need to reduce the percentage. Kinda just get it out of the way once and for all and forget about it kinda thing. 25% represent about 22K/year for both of us , so per our calculations if we were to do nothing else for retirement, just with the 401K we would be set. cawiau: I think you've got the right idea. Once you max it out, you will adjust to the lower income and then be on automatic pilot (as far as contributions go) until you retire.
|
|
saveinla
Junior Associate
Joined: Dec 19, 2010 2:00:29 GMT -5
Posts: 5,254
|
Post by saveinla on May 13, 2011 21:05:40 GMT -5
Maxing the 401k is important to me because it's roughly a 40% savings in upfront taxes on that amount, in an above-the-line deduction. Also because I only started saving for retirement at the age of nearly 30, and I've got some catching up to do! That said, this is the first year I will officially max it (I think last year's total was 15.6K or so); I've gradually worked up from 7% to 18%. 18% is going to hit 16.5K a little early this year, so I'm also expecting a slightly larger paycheck at the end of the year--just in time for christmas ![:)](//storage.proboards.com/forum/images/smiley/smiley.png) I struggle with restraining my urge to shop, especially for other people, and I probably lean a little too far to the austerity side. It gets a little frustrating looking at my gross pay and then what I actually take home. My roughly-half of the mortgage payment is direct-deposited into DH's checking account, so what goes into my checking account comes out at about 1/3 of gross...and I restrict my spending to 1/2 or so of that. Phil: I think indebt's APR rates on his credit cards were mostly much higher than even your traditional 11% return mutual funds. Don't forget to include that in your calculation! lurkyloo, In case you get a company match, once you stop contributing when you hit the max, the company contribution will also stop. So it will be better to calculate the 16,500 to be distributed evenly throughout the year to get the company match. HTH
|
|
Baby Fawkes
Familiar Member
Joined: Mar 6, 2011 15:39:53 GMT -5
Posts: 812
|
Post by Baby Fawkes on May 14, 2011 0:09:14 GMT -5
lurkyloo, In case you get a company match, once you stop contributing when you hit the max, the company contribution will also stop. So it will be better to calculate the 16,500 to be distributed evenly throughout the year to get the company match. HTH savenia, that's not necessarily true as it depends on the employer. At my company as long as we keep the payroll deduction set to at least the maximum match % then we still get the match. I max out my 401(K) before the end of the year, but I get matching $ every paycheck. It's definitely something to check out so that you don't miss out though.
|
|
schildi
Well-Known Member
3718 and no text
Joined: Jan 14, 2011 1:38:58 GMT -5
Posts: 1,816
|
Post by schildi on May 14, 2011 0:12:41 GMT -5
Well, it is important to me and I intent to fully fund (16.5k) in 2012. Right now, this year, I put $0. I know mathematically it's bad, but this is more than math for me. Hmmm - $16,500 invested in 2011 would typically be $378,000 when you are age 65. So diverting $12,000 to service your revolving consumer debt this yr is going to cost you dearly. (BTW, you get about a $4000 tax break, so it doesn't really cost $16,500 out-of-pocket, only about $12,500.) This would depend on the interest rate of that consumer debt, no?
|
|
schildi
Well-Known Member
3718 and no text
Joined: Jan 14, 2011 1:38:58 GMT -5
Posts: 1,816
|
Post by schildi on May 14, 2011 0:16:52 GMT -5
Classic example of emotions and math not mixing. For people with no emotional hang ups about money or spending finances are all simple math problems. For people with emotional hang ups though, there are other variables in the financial math that make the simple mathematically correct answer the wrong one. The extreme is people who let their emotional baggage completely override the math, and then we get great train wreck threads. No, I think there is more to the equation than emotions vs. math. There is risk, and risk tolerance. Phil assumes 12% as a given, I'd be careful with that.
|
|
saveinla
Junior Associate
Joined: Dec 19, 2010 2:00:29 GMT -5
Posts: 5,254
|
Post by saveinla on May 14, 2011 0:53:54 GMT -5
lurkyloo, In case you get a company match, once you stop contributing when you hit the max, the company contribution will also stop. So it will be better to calculate the 16,500 to be distributed evenly throughout the year to get the company match. HTH savenia, that's not necessarily true as it depends on the employer. At my company as long as we keep the payroll deduction set to at least the maximum match % then we still get the match. I max out my 401(K) before the end of the year, but I get matching $ every paycheck. It's definitely something to check out so that you don't miss out though. babybean, I agree. It may vary from company to company. My employer does not contribute any further if we hit the limit and stop contributing, so it may be something to check out to see what the policy is. I just wanted them to be aware that it may happen.
|
|
Deleted
Joined: Jun 21, 2024 15:18:59 GMT -5
Posts: 0
|
Post by Deleted on May 14, 2011 1:07:04 GMT -5
cawiau: I think you've got the right idea. Once you max it out, you will adjust to the lower income and then be on automatic pilot (as far as contributions go) until you retire. That is the idea a) we get used to living on less money (from the get go less 25%) b) as income increases we can divert the extra toward maxing ROTH, savings and investing in other taxable accounts I will add that since at my job I am limited to 25% I am stuck at that percentage till I make a salary that will allow me to max my 401K at 25% or below. But my wife, as she get raises, we will increase her 401K contributions percentage. So if she gets a raise in september, we will increase her 401K to a percentage that will keep her net to about the same as now.
|
|
dancinmama
Senior Associate
LIVIN' THE DREAM!!
Joined: Dec 18, 2010 20:49:45 GMT -5
Posts: 10,659
|
Post by dancinmama on May 14, 2011 1:29:16 GMT -5
cawiau: I think you've got the right idea. Once you max it out, you will adjust to the lower income and then be on automatic pilot (as far as contributions go) until you retire. That is the idea a) we get used to living on less money (from the get go less 25%) b) as income increases we can divert the extra toward maxing ROTH, savings and investing in other taxable accounts I will add that since at my job I am limited to 25% I am stuck at that percentage till I make a salary that will allow me to max my 401K at 25% or below. But my wife, as she get raises, we will increase her 401K contributions percentage. So if she gets a raise in september, we will increase her 401K to a percentage that will keep her net to about the same as now. EXCELLENT PLAN!! ![](http://us.social.s-msn.com/s/images/emoticons/thumbs_up.gif) I have to commend you on paying so much attention to what is going on not only with your current finances, but your future financial health as well. If you want to have some sense of financial stability and financial freedom throughout your lives, it is EXTREMELY IMPORTANT to build a SOLID financial base BEFORE you decide to start having babies (i.e. max out 401k, get into a house, and have 3-6 months of living expenses stashed - preferably 6 - in an EF). Keep plugging along, don't get discouraged, and keep your wife away from internet shoe sites. ![](http://boards.msn.com/Themes/default/emoticons/tongue_smile.gif)
|
|
lurkyloo
Junior Associate
“Time means nothing now,” said Toad. “It is just the thing that happens between snacks.”
Joined: Jan 8, 2011 11:26:56 GMT -5
Posts: 5,782
|
Post by lurkyloo on May 14, 2011 1:43:59 GMT -5
saveinla: DH actually got hit with that year--he'd bumped his % up towards the end of 2009 to max it out, then didn't remember to lower it before he got his bonus in march 2010. That was kind of a pisser; he missed some company match that year. You're right that at some point I ought to lower it back down to 17%...but if I did that all year it wouldn't max out. Hmph.
indebt: the company match is actually a good point! Do you get any company match? Because if so, it probably actually is worth at least contributing up to the match point to your 401k before you throw the remainder at your credit cards--a 50% return right off the bat is not to be sneezed at.
|
|
Deleted
Joined: Jun 21, 2024 15:18:59 GMT -5
Posts: 0
|
Post by Deleted on May 14, 2011 1:49:21 GMT -5
That is the idea a) we get used to living on less money (from the get go less 25%) b) as income increases we can divert the extra toward maxing ROTH, savings and investing in other taxable accounts I will add that since at my job I am limited to 25% I am stuck at that percentage till I make a salary that will allow me to max my 401K at 25% or below. But my wife, as she get raises, we will increase her 401K contributions percentage. So if she gets a raise in september, we will increase her 401K to a percentage that will keep her net to about the same as now. EXCELLENT PLAN!! ![](http://us.social.s-msn.com/s/images/emoticons/thumbs_up.gif) I have to commend you on paying so much attention to what is going on not only with your current finances, but your future financial health as well. If you want to have some sense of financial stability and financial freedom throughout your lives, it is EXTREMELY IMPORTANT to build a SOLID financial base BEFORE you decide to start having babies (i.e. max out 401k, get into a house, and have 3-6 months of living expenses stashed - preferably 6 - in an EF). Keep plugging along, don't get discouraged, and keep your wife away from internet shoe sites. ![](http://boards.msn.com/Themes/default/emoticons/tongue_smile.gif) Thank you and appreciate it. As for my wife... it is still a work in progress, one step at a time. baby: not for another 3 years and by then I would hope we are - maxing 401K - maxing Roth - have 6 months EF House? Depend on my work situation, but currently the timeline is 2 years.
|
|
endofera
Junior Member
Joined: Dec 31, 2010 10:05:39 GMT -5
Posts: 236
|
Post by endofera on May 14, 2011 10:29:17 GMT -5
This is very true.
Some Plans calculate the match on a "per pay" basis. In this case, the employer contributions would stop when your deferral stops. So if your deferral stops early in the year, you end up with less match.
Some Plans calculate the match on a "per pay" basis and then also have a "true up" after year end where they go back and do an actual annual dollar for dollar match calculation and make an additional contribution after year end to exactly match the total deferral. Usually these Plans require you to still be employed there on Dec 31 in order to get the "true-up"
Some Plans don't have any match through the year and only put in the match after year end, so that anyone who quits before the 31st doesn't get a match for that year.
There are many, many different Plan set-ups and everyone should get a summary plan description when they sign up plus whenever the plan changes significantly so that they know how their Plan works.
In debt - Great job on paying down your debt. It is fun to follow your progress. In your case, the future isn't as clear cut as $378,000 in the future vs. zero in the future. You will get started on your wealth-building soon enough and will have a LOT more options once your credit card debt is paid off.
|
|
saveinla
Junior Associate
Joined: Dec 19, 2010 2:00:29 GMT -5
Posts: 5,254
|
Post by saveinla on May 14, 2011 11:04:30 GMT -5
saveinla: DH actually got hit with that year--he'd bumped his % up towards the end of 2009 to max it out, then didn't remember to lower it before he got his bonus in march 2010. That was kind of a pisser; he missed some company match that year. You're right that at some point I ought to lower it back down to 17%...but if I did that all year it wouldn't max out. Hmph. indebt: the company match is actually a good point! Do you get any company match? Because if so, it probably actually is worth at least contributing up to the match point to your 401k before you throw the remainder at your credit cards--a 50% return right off the bat is not to be sneezed at. lurkyloo, That's what almost happened to me. Luckily I caught it just in time, so that I could lower the contribution for last year to hit the max exactly on my last paycheck. This year I have set it to 17% and have reminders on my calendar every quarter to evaluate if I need to raise or lower it. If I get a raise or bonus, I will adjust it.
|
|
TrixAre4Kids
Familiar Member
'Not all those who wander are lost' - J. R. R. Tolkien
Joined: Dec 22, 2010 22:33:15 GMT -5
Posts: 877
|
Post by TrixAre4Kids on May 14, 2011 12:46:14 GMT -5
I am in my mid 50's. Contributing the maximum to my 401k is my top priority. I put in $22,000/year and the match will be about $3100 in 2011. I've been maxing out the basic 401k for years and added the catchup contributions in mid-2007, instead of my Roth. I also have rental income and like the tax break. The 22k represents about 33% of my pay, which is a struggle. No iphone or much dining out for me. However, with my additional rental and roommate income it's do-able. It is after all, about priorities... ![;)](//storage.proboards.com/forum/images/smiley/wink.png) New shoes or leisure, new shoes or leisure?...
|
|
garion2003
Familiar Member
Joined: Feb 20, 2011 15:48:25 GMT -5
Posts: 757
|
Post by garion2003 on May 14, 2011 19:54:24 GMT -5
I'm with Minnesota, maxing right now would take a good chunk of my net. I am putting away 14% and fully funding a Roth. Any raises I get will go toward increasing my 401k contribution.
|
|
runewell
Established Member
Joined: Jan 3, 2011 15:37:33 GMT -5
Posts: 395
|
Post by runewell on May 15, 2011 8:03:21 GMT -5
Maxing the 401k is important to me because it's roughly a 40% savings in upfront taxes on that amount, in an above-the-line deduction. How do you come up with 40%? By the way all you are getting from the 401k is a tax deferral, not a break. If you are in the 15% tax bracket I think you are better off stashing your money in a Roth IRA.
|
|
|
Post by crystal1588 on May 15, 2011 11:45:23 GMT -5
DH and I contribute 15% into a Roth 401(k). Our company matches 25% of whatever we put in, up to the federal max. Including the match, both of our contributions are about 17.8k. For us to max, DH would have to put around 25% (plus match) and I would need to put in around 32% (plus match). We are 23 and 24, and every time we get a raise we up our percentage. We'll get there eventually, but we also realize it's a good idea to build liquid savings. We are currently trying to get pregnant (1st month!! ![:))](//storage.proboards.com/forum/images/smiley/cheesy.png) , so we want to make sure we have liquid savings to cover the expenses of the next year. Life's all about balance..
|
|
DVM gone riding
Senior Member
Joined: Dec 20, 2010 23:04:13 GMT -5
Posts: 3,383
Favorite Drink: Coffee!!
|
Post by DVM gone riding on May 15, 2011 12:54:53 GMT -5
Maxing the Roth is a priority for me. It will be a while before I max the work acct (which actually for me is a "simple IRA" so it maxes at 12500)
Right now the plan is to leave it mostly alone until SL#1 and the Car are paid off and then to increase the percent every year until I reach 10% plus the match. My calculations show that even at the more modest number of 8% gains per year that is more then sufficient for my needs.
|
|
lurkyloo
Junior Associate
“Time means nothing now,” said Toad. “It is just the thing that happens between snacks.”
Joined: Jan 8, 2011 11:26:56 GMT -5
Posts: 5,782
|
Post by lurkyloo on May 15, 2011 14:59:17 GMT -5
rune: 40% comes from 33% marginal tax rate and 9.25% CA state income tax. It's not perfectly additive, since we deduct CA income tax on our federal return...but then we're into AMT territory and they also reduce the amount of deductions we're allowed to take by 1% or something. Quick back of the envelope calc suggests we save just over 1500 in CA tax and another not quite 5000 in federal income tax on the amount reduced by CA tax (16500-1500), for a total tax reduction of 6500. 6500/16500 ~ 39%.
I do throw about 2.5K/year into my Roth IRA (technically, I contribute to a nondeductible and then convert) as well. I'm mildly skeptical that the govt is going to follow through on their promises about not taxing the earnings on those; I think it entirely possible that they'll stick in some kind of means-testing. So I'm hedging my bets and not maxing it just yet.
|
|
runewell
Established Member
Joined: Jan 3, 2011 15:37:33 GMT -5
Posts: 395
|
Post by runewell on May 15, 2011 17:33:35 GMT -5
rune: 40% comes from 33% marginal tax rate and 9.25% CA state income tax. I see, high tax bracket. Nice problem to have ![:)](//storage.proboards.com/forum/images/smiley/smiley.png) I make low six figures but remain in the 15% tax bracket so I'm on the other end of the spectrum.
|
|
azphx1972
Familiar Member
Joined: Mar 2, 2011 22:08:36 GMT -5
Posts: 809
|
Post by azphx1972 on May 16, 2011 14:07:51 GMT -5
I'm lucky that I am currently able to max out my 401k and ROTH IRA, but it was more important to me to do that early on in my career due to the power of compounding. Those early dollars are going to make the biggest difference when I retire. I'd rather cut back on my lifestyle rather than reduce my retirement contributions during those critical years.
|
|
Deleted
Joined: Jun 21, 2024 15:18:59 GMT -5
Posts: 0
|
Post by Deleted on May 16, 2011 14:31:31 GMT -5
My wife and I both max and I feel it is very important to maintain that level. When we did the math on purchasing our new house and keeping/renting the old one, I made sure we could still max our 401k's..
For me, my employer matches up to the IRS max. For my wife, only up to 6% of her salary, but earn too much to do a Roth IRA, so into her 401k it goes.
|
|
cael
Junior Associate
Joined: Dec 20, 2010 9:12:36 GMT -5
Posts: 5,745
|
Post by cael on May 16, 2011 14:36:16 GMT -5
When DF finally gets laid off in 2 or 3 months, and I roll his 401k into an IRA, you bet your butt I will be maxing it if we're able. He will probably be waitering while he goes to school so he won't have an opportunity to have an employer retirement plan of any sort for a while, so I'm going to make damn sure we put as much as we can into the IRA for him. He has probably about $15k in the 401k right now so he'll have a decent amount to start the IRA off with. (I have a pension through work that I have a mandatory 11% going into)
Oh, and right now DF has 6% going into the 401k I think. Employer matches up to 3 I believe.
|
|