HisHersMoney

As we get ready for 2009 it is time to look ahead and establish our 2009 goals. The first thing I did was determine how much money we would need to live for a year and just pay our bills. No vacations, no spending, just food, rent, car, phone, etc. I was astonished when I realized that the amount was $3973 a month, $47,676 a year! This is getting rid of cable, dropping down to minimums and getting rid of all extras on cell phones, no going out, cheap food. All I can say is HOLY COW!

We really need to attack our Emergency Savings account goal this year! Our goal is to save $12k towards this number in 2009. We already have about $5k saved so this will bring us to a total of $17k which is about 60% of our total goal. That’s $1000/month. Can we do it? Really, there’s no reason why we can’t.

On a monthly basis here’s our savings plan:

1. $100 Savings towards car purchase, pay cash in about 3 years
2. $250 Vacation account, where ever, when ever
3. $50 Next year’s xmas savings
4. $1000 Emergency savings
5. $350 towards down payment fund

That’s a total of $1750 a month and $21,000 for the year. On paper it looks like January will be about $400 short of that goal. We are going on an unplanned vacation over New Years with a group of friends that we really didn’t plan or save for.

In addition to this savings we have $417/person going towards maxing out our Roth IRAs and $16,000/person going into our 401k accounts which adds another $42k towards our retirement!

We will track and post our progress through the year.

As you can tell, both Hers and I have been remiss in posting for a long time. I think we just got burned out, especially Hers. For me it was always coming up with topics to write about. I mean, there are only so many stories about using coupons that you can write! I think that I’ve come to the conclusion that we’re really not into what most would consider ‘frugal’ living. We both make above-average salaries since the median household income is currently $61,500 according to the IRS.

I’ve been reading RichSlick’s blog a lot lately. A lot of what he writes about doesn’t directly apply to us since we only invest in mutual funds in our 401k’s and IRA’s but there IS a difference in your life when you have disposable income. We’re lucky enough to be able to max out our retirement accounts while at the same time finally getting out of debt and putting money into an account for a down payment on a home. For us, budgeting means putting money aside so that we can go eat a $200 meal at one of the country’s best restaurants if we want.

Now don’t get me wrong, there are growing pains and issues. I’ve always been too much of a big spender and just now have my credit card debt under control. I have Hers to thank for that. She started being fiscally responsible right out of college and has continued down that path to this day. Early retirement is in sight, we’ll be almost debt-free this winter with only a single car loan left over, and we are going to start looking for an investment/retirement property in Colorado. Life is good. It always could be better though. So we’re going to continue this blog while we continue our life journey together. We hope you’ll join us.

In order to fund our retirement dreams we, like most people put money away each month towards our retirement. So, the question is how much? After reading Grace’s post When it Rains, It Pours, and No One Believes Us where she says “We have retirement funds that demand a whole lot more than $100 a paycheck if we’re going to have any kind of life after work.” I thought I might post exactly what we put away each month towards our retirement.

His Roth IRA: this is a new investment for Him. This year it looks like His Roth will not be fully funded as we are just starting it, but we are setting it up to take $400 a month out. Next year we will be starting in Jan and plan on continuing with $417/month

Her Roth IRA: $417/month in order to fully fund it this year.

Both His and Hers are putting $1200/month in our 401k’s for a total of $2,400/month. That gives us a grand total of $3,034 a month in retirement savings.

$500 more per month goes into our retirement home fund.

All of these amounts are automatically taken out of our paychecks and/or checking accounts so we never even have the opportunity to spend even a cent of it. Our grand total each month is $3,734 for a yearly total of $44,808. We have a financial planner who tells us how much we need and keeps us on track.

We also have monthly savings that go towards other things which I will get into in my next post, but this wraps up our automatic retirement savings.

Yesterday I covered the first three ways in the “Six Simple Ways to Retire Rich”. Thanks to automatic 401(k) plans and one-stop investing options, saving for retirement is a cinch. Editor’s note: This article is adapted from Kiplinger’s Retirement Planning 2008 guide.

I promised to cover the last three ways today so here they are!

Simple Way #4 Consider a Roth

I mentioned this quickly in the last Simple way but they give it an entire section in this article. While your 401k gives you your tax benefits up front, the Roth IRA gives you your tax benefits on the other end at withdrawal side. The new Roth 401k also offers tax-free income at retirement. The Roth IRA has contribution limits of $5000 in 2008 and does have some income limitations so a little additional research is warranted but whomever you set your account up with should be able to help you determine your eligibility and limits.

I personally max mine out each year in twelve handy little payments. Most plans will allow you to make monthly contributions directly taken out of your checking account or whatever account is most convenient for you. Again, the younger you are when you start funding this type of account the more you will benefit from the advantage of time.

Simple Way #5 Don’t Cash Out

I personally was kind of shocked by this one. Not shocked by the advice but shocked by the related statistic that they mention that nearly have of all workers cash out their 401ks when the leave their job rather then rolling it over or even just maintaining it there. If you cash the account out you get hit with both taxes and penalties and forget the whole advantage of time, you just started that clock all over!

I have rolled a 401k or two (or even more) in my time. I can’t tell you how easy they make it for you to do it. I have to believe that it actually requires more work to cash it out these days that is does to roll it over. I recently heard a commercial on the radio about a guy who rolled his old 401k over in the same about of time that his friend ate a sandwich at lunch, it really is that easy.

One benefit that I enjoy as a result of rolling all of my 401ks over into one account is that the value of that account is obviously greater that the individual accounts were so I now qualify for a higher level of service from the company who holds my money. Some of the perks are free checks, a special phone service number, fee waived accounts, etc.

Simple Way #6 Sell Company Stock

Many people have a portion of their 401k tied up in their company’s stock. While it’s great to be confited and supportive of your company, it’s not always a great strategy to put all or even half of your eggs in one basket. After the whole Enron scandal and the Pension Protection Act of 2006, employers must now allow workers to cash out their company stock within three years to diversify their 401(k) investments, and many employers now allow their employees to transfer out at any time.

It’s always best to diversify your holdings. This also something you need to look at if you have your savings and investments spread among numerous accounts. If you choose not to roll your old 401ks into one account make sure you look at the overall balance of your accounts as a whole not individually. If you do have a personal advisor than they can do this for you, if not, make sure you bring up any additional investments you have when speaking to the folks at the individual companies.

As always, I’m not a financial advisor, just an ordinary person trying to make the right choices, just like you so please do seek professional advice. I hope my comments and observations help you know what the right questions to ask are and help you make the right choices for your particular situation.

Today while surfing around the internet I came across an article called Six Simple Ways to Retire Rich.

Since everyone wants: One: To Retire Rich and two: For it to be Simple, I figured it was worth a read. While a few of the “Simple Ways” were no brainers to me I was surprised by a few of the statistics that they quote that show that obviously they aren’t to everyone. I will discuss the first three “Simple Ways” today and the last three tomorrow.

Simple Way #1: Don’t Opt Out

With this they are referring to how many companies these days are automatically enrolling employees in the 401k or retirement savings programs when they are hired in and in order to not participate you have to actually opt out.

I think this is a great idea, especially for young people who are just entering the workplace and may not really understand how the 401k works yet. The article says that 85% of adults surveyed started saving earlier as a result. This is great because as everyone knows the biggest ally that you can have when it comes to retirement savings is time.

Simple Way #2: Get Help from the Pros

Most retirement savings plans have some sort of target- date retirement fund which claims to have the appropriate mix / balance of funds in it for the timeframe you want to retire and usually if you don’t choose other wise your plan may automatically enroll you in this fund. While that may not be a horrible choice for you, it may not be the best either.

I do have a personal financial consultant and for me it has been working out pretty well and I’m happy. That doesn’t mean you need to run out and hire one yourself. If you have a 401k a good resource is to talk to someone at the company that administers it. My company recently changed plan administrators and the representatives came by and spoke to people one on one and they are available by telephone as well at no additional charge. I know a number of people in my office who have taken advantage of this free professional help.

Simple Way #3 Check Your Progress

Keep an eye one the big picture, including your insurance options, retirement savings, emergency savings, etc. It’s easy to get bogged down just looking at the percentage that you are putting into your 401k but don’t’ forget about making sure you have the correct amount of life insurance in place and make sure you have kept the beneficiary up to date as well. You don’t want your ex to be still on there from like ten years ago and your kids to get nothing! Another insurance need to consider is your long and short term disability coverage whether it’s through your employer or a private policy it’s definitely something to consider.

Another investment to consider in the mix is your Roth IRA if you are eligible to contribute and of course don’t forget your emergency savings account. It is probably worthwhile to sit down with a professional to get some solid recommendations to make sure you are covered.

I (HERS) unfortunately have to find a new financial advisor. I have been with the same guy since 2002 and I have really enjoyed working with him. Unfortunately he has received a promotion up to a leadership position within his company and won’t be directly working with clients any more. Great for him, not so great for me.

The whole thing really came as a shock to me and I really wasn’t prepared to make such a change. I am not looking to change firms at this point but I do need to find a new advisor within the company. I got an email and voicemail from the assigned replacement saying hello and introducing himself but I really wasn’t getting a great feeling from him. FIrst of all it sounded like it was just a given that I wanted him to manage my retirement without any questions asked. The last thing I want in a financial advisor is to feel like I’m talking to a used car salesman!

So, I emailed him back and said I would be more than happy to interview him and consider him as a candidate but I would also be interviewing others as well. I said he could come to my office to speak with me if he was interested. It’s amazing how his attitude changed! So, he will be coming to my office to speak with me on Thursday morning.

I’ll let everyone know how it goes!

Everyone knows that automating your savings is definitely the way to go. Right now I feel like I have my savings so disjointed because I have accounts all over the place. I took advantage of the Suze – TD Ameritrade offer where you deposit at least $50 a month for 12 months into a savings type account and they will deposit an extra $100 in at the end of the 12 months. I don’t remember what the rate is but it’s better than I’m getting at ING right now. The promotion code was 701 so you might try it and see if it still works.

I also have an ING account that I send $200 a month to and a savings account with my credit union that gets another $200 a month. So that’s $450 a month in savings. My goal is to have $15,000 in emergency funds . I was aiming towards $10,000 but my financial advisor bumped that up to $15,000 during my yearly financial check up.

I also have some retirement based investments. I fund my Roth IRA in full every year ($5000 for 2008) and my 401k in full every year ($15,500). This all adds up to a whopping $25,500 in deposits in a single year!

Today I finally took the time to properly fill out the information for my profile on NetworthIQ. As you can see from either there or my badge to the right, I have a negative net worth. This is not surprising to me as I know that I have too much debt (especially credit cards) and that I have not bothered to start saving for retirement. That last part is obviously a mistake even though I should be getting a military pension starting at age 43. Hers and I actually had a tiff about this the other night. I was trying to figure out the current ‘value’ of my retirement to include in my net worth. She was insisting that until I was fully vested, that it was worth nothing.

I now have seen the light and realize that to be the case. Until I hit my 20 years of active federal service, I get nothing at age 43. Heck, I don’t even get the partial National Guard retirement at 60 unless I complete another 7 1/2 years. Obviously I was counting my chickens before they were hatched. My plan is to continue paying down my credit card debt and building my emergency fund. Once I have that rainy day money fully in place I will open a Roth IRA and start fully funding it. Yes I could pay down debt faster instead but the compound interest will finally start working for my retirement and my highest interest rate right now is still only 9.9% on my credit card from USAA.