45 Replies Latest reply on Feb 24, 2015 11:11 AM by DRJJG

    What retirement planning advice would you give your younger self?

    MyR Community Manager
      This week (October 20-26) is National Save for Retirement Week. In the spirit of this event, we’d like to hear from you. What retirement planning advice would you give your younger self? With 20/20 hindsight, what would you have done differently?
        • Re: What retirement planning advice would you give your younger self?
          Butterfly56
          If possible, start saving for retirement as soon as you start working.  Always try to put away at least the minimum amount, especially if there is an employer match.    Start an IRA if your employer does not have a retirement plan.
            • Re: What retirement planning advice would you give your younger self?
              JerryD
              Better yet, contribute the max to a Roth for you and your spouse. The contribution is taxable, but any withdrawals will never be taxed to you or your beneficiaries. It also makes a no-tax consequences emergency fund in retirement.
                • Re: What retirement planning advice would you give your younger self?
                  TomB

                  Nonspouse beneficiaries are subject to Required Minimum Distributions. And as usual, failure to take them timely is subject to a penalty of 50%. A punishing amount!

                    • Re: What retirement planning advice would you give your younger self?
                      JerryD

                      I assume that your reply to me is in regards to my Roth recommendation above. Yes, Roth's inherited by non-spouses must be taken on an IRS defined distribution schedule, BUT there is no tax for them either. If the recipients are smart (and follow my advice) they will use their applicable taxable income as a basis to allow them re-invest the inheritance in their own Roth's. This strategy can be passed forward through generations using the same strategy.   :-)))

                        • Re: What retirement planning advice would you give your younger self?
                          TomB

                          Jerry,

                          Thanks for this reply, too. I had recently read an article about non-spouse inheritors of Roths and dRMDs, so just tossed it in. I remained silent on the central issue of taxability because it occurred to me that I really didn’t know about that aspect. You might prefer to add to your original post, certainly not my prerogative, but just a suggestion.

                            • Re: What retirement planning advice would you give your younger self?
                              JerryD

                              TomB, I am not sure what you are looking for regarding the "tax-ability" of my recommendation, but here is my strategy based on inheriting funds tax-free from a Roth and having taxable income.

                               

                              The IRS says:

                               

                              For 2014 and 2015, your total contributions to all of your traditional and Roth IRAs cannot be more than:

                              • $5,500 ($6,500 if you’re age 50 or older), or
                              • your taxable compensation for the year, if your compensation was less than this dollar limit.

                               

                              Let's say the kids are the beneficiaries and that they are married and between the two spouses they have at least as much job-related income that is taxed as their Roth contribution. Say that they are younger than 50 and their income is at least 2 * $5,500 = $11,000. Let's say that their Roth inheritance as dictated by the IRS distribution rules for their age is at least $11,000. They can use that Roth distribution to fund their own Roth and that of their spouse to the maximum thus sheltering it for their lifetime and depending on how they instruct their kids, their lifetimes too if they do the same things. If the spouses are over 50 then they can shelter up to $13,000 in Roth's for each spouse based on their inheritance.

                               

                              These Roth contributions have NO impact on their life style based on their own earnings. With a bit of discipline, it is gravy for them! I hope that this helps explain my thinking.  :-))))

                                • Re: What retirement planning advice would you give your younger self?
                                  Squiffy

                                  A technicality, but I believe the income needs to be "earned income" to put money in a Roth IRA?  In other words not passive income like rent, interest, etc.

                                  Anyone out there know what a beneficiary designation of "John Doe, per sirpes" means in context with easing the ability of the heir (beneficiary) John Doe being able to disclaim the inheritance and then the Roth goes to his siblings?

                                    • Re: What retirement planning advice would you give your younger self?
                                      JerryD

                                      Absolutely, Squiffy. That is why I stipulated that "between the two spouses they have job-related income that is taxed". I have changed my statement to be perfectly clear.

                                       

                                      I do not know how the term "per stirpes" can be used to let one disinherit themselves in favor of their children. We use the term in our trust for each child to insure that the grandkids get our child's share should that child die, otherwise the remaining kids might get the dead child's share. Basically it means: "When the heir in the first generation of a branch predeceased the decedent, the share that would have been given to the heir would be distributed among the heir's issue in equal shares." Here is a good example of the concept:

                                       

                                      "What this language means is that if you have two children and five grandchildren who survive you, then each of your children will receive a 1/2 share and the grandchildren will receive nothing. If, however, one of your children predeceases you and is the parent of three of the grandchildren, then the surviving child will receive a 1/2 share and each grandchild will receive a 1/6 share (in other words, the deceased child's 1/2 share will be divided equally among the three children who have survived the deceased child: 1/2 divided by 3 = 1/6 each)."

                                       

                                      I suggest that you ask a very good estate lawyer that question and discuss it in detail with him/her before you proceed.  GOOD LUCK!!!   :-)))

                                        • Re: What retirement planning advice would you give your younger self?
                                          Squiffy

                                          Sorry, I did not notice that.  Do you know anything about the "per

                                          sirpes" legal terminology as it may pertain to Roth beneficiary designation?

                                          Squiffy

                                            • Re: What retirement planning advice would you give your younger self?
                                              JerryD

                                              We use the term "per stirpes" on all of our retirement beneficiary statements, including IRA's and Roth's. I suggest that you study and understand the example I provided to get a good feel for this somewhat subtle legal terminology My Latin was quite rusty too.  :-))))  I then strongly advise that you spend a few hundred dollars (or it may even be free for a short consultation, especially if it is a trust and this lawyer wrote it) to go over your specific situation with an expert estate lawyer.

                                               

                                              Is this a situation that you are putting in place or are you possibly such a beneficiary? Note that if the person whose estate specifies you as "per stirpes" and he/she has died before you, I believe that you are already the beneficiary and your will/trust applies. On the issue of disclaiming the inheritance, I would be VERY careful to not address that without the advice of a very expert estate lawyer. The family lawyer might be as confused as you may be and even lawyers that do trusts can be quite ignorant of IRA/Roth law. We found that to be true. Also, should you be the beneficiary and this is a trust, there may be tight time IRS constraints on you.    GOOD LUCK!!!    :-)))

                            • Re: What retirement planning advice would you give your younger self?
                              gwamma
                              Even though it's HARD when you are young and raising children...pay YOURSELF first!  Every little bit helps.  You will feel sooo much better when you reach my age and look retirement square in the face if you have a nice nest egg where you socked that money aside.!
                               
                              Put it in your budget just like a power bill or a mortgage payment.  
                              • Re: What retirement planning advice would you give your younger self?
                                MISPROF
                                I would say don't get greedy. I had a large number of stock options that I cashed in gradually, but many that I was waiting to cash in because they were supposed to continue rising, and of course the market crashed before I could cash them and they never recovered to be above water again. Also, the only time when I lost money was when I tried to time the market. Whenever I just put money in good quality mutual funds and let it ride through the bad times I did better than when I tried to react to bad markets or invest in individual stocks.
                                • Re: What retirement planning advice would you give your younger self?
                                  CarrieB
                                  I wish I have the foresight to invest and save in my 20s. I look back and think we bought our first home, sold that and bought another.  If course we greatly improved on our home. We put our kids two kids through private schools.My husband and I are paying off their college educations; they both went to private universities, and we have about one year left on my daughter's loan (commenced in 2009 @ $122,000), my son's will be very close to the same amount. I don't know if I would change their education, public vs. private, but our Parent Plus loans are more than our mortgage!
                                   
                                  Monday morning quarterbacking is easier said than done.  With all of life's ups and downs, no one can predict the future and any fortune or misfortune that touches our lives.
                                   
                                  • Re: What retirement planning advice would you give your younger self?
                                    If extra money comes your way, save it for a rainy day or retirement and not spend it on stuff.

                                    • Re: What retirement planning advice would you give your younger self?
                                      smitty63
                                      This is absolutely a no-brainer; I'd start saving as soon as I was vested in whatever job I had. The job I has when I was younger (I'm  still there by the way) paid into my retirement after I was vested. So I'm thinking "I don't need to save; my job is doing it for me!" With today's economic atmosphere, I realized I should have started saving "along with my employer." However, I did finally start; but, I'd have so much more money if I had started when I was in my 20s and not my 50s.
                                      • Re: What retirement planning advice would you give your younger self?
                                        Aquinas
                                        Dear Younger Self,
                                         
                                        1.  Start as early as possible to take advantage of compounding.  Example: $100 invested at age 25 would be worth $2,175 at age 65; the same $100 invested at age 45 would be worth only $466 at age 65 (assumes an 8% annual return).
                                         
                                        2.  Use only low-cost index funds because high fees can drastically reduce returns.  High costs of, say, 2% applied over a 30 year period will eat up one-third of the original amount invested.
                                         
                                        3.  Because you have a long time horizon, don't be too conservative; put your money in a broad-based index fund (or funds) to capture the returns of the stock market as a whole (e.g., a "total stock market" fund).  Over the long haul, index funds do better than 70% of actively managed funds because (a) index funds charge lower fees and (b) funds that are "hot" now revert to the mean almost inevitably.

                                        Best,
                                        Older Self
                                         
                                        • Re: What retirement planning advice would you give your younger self?
                                          jocee
                                          I have to agree with everyone who has stated start saving earlier, even small amounts at first.  Of course when I was younger there were no IRAs or 401K/403Bs to use to save for retirement as there are now.
                                           
                                          I would add that it is also never too late to start saving for retirement.  My husband and I took advantage of all the current "make up" possibilities to bolster our retirement funds to the max the last 6 years we worked.  Not only did we save a lot, we also lived on about half our salaries which made the transition to retirement easier too.
                                          • Re: What retirement planning advice would you give your younger self?
                                            Jewel
                                            Save funds for retirement. I've not saved enough!  Get help in picking your health insurance. Take a thorough inventory of your assessments just before you retire. Go to every workshop or seminar you can on reitrement.  Ask Questions.  Ask your various doctors what health insurance they accept.  I'm having to retire at age 67- wish I could wait until 70- but personal issues have prevented me for this option. Also, have a part-time job lined up before you retire if you think you will need more income than social security and your employment retirement  package.
                                            • Re: What retirement planning advice would you give your younger self?
                                              Assuming I would listen, "don't waste your time and money getting a PhD". 2nd piece of advice would be to "save more, a lot more early, so you don't have save so much of your income in your 40s/50s." In my 20s, I wish I would have seen an illustration how saving a lot early really lets you take advantage of time--$10k for 10 years in your 20s yields the same nest egg at 67 as saving $95k for 10 years in your 50s.
                                              • Re: What retirement planning advice would you give your younger self?
                                                Sharon
                                                This is something I've thought of a lot recently. 
                                                We had no IRA or Roth or business or school savings plans when I was in my 20's or 30's or 40's.  
                                                Buying a home was the best investment we ever made.
                                                But the big mistake was not selling it to buy the next home.
                                                And ending up loosing both and starting again in our 50's.
                                                When my job finally did have savings plan, but not my husband's job, I began savings. 
                                                Ditto to all the advice out there. 
                                                I did begin young and saved lots, but then I had kids and all the money went out the window for them.
                                                Don't regret any of that but if I'd been smart about housing I could have sent them to college and they wouldn't have had to get school loans.
                                                • Re: What retirement planning advice would you give your younger self?
                                                  MyR Community Manager

                                                  It's that time of year again--National Save for Retirement Week! I'd love to get this conversation going again and hear from the rest of you. What advice would you give to your younger self? What did you do right and what would you have done differently?

                                                  • Re: What retirement planning advice would you give your younger self?
                                                    BoBraxton

                                                    Now I am 70. This is advice to my former self (age 50 and following, next14 years or so):

                                                    for 2015 the amount of voluntary retirement savings (deferred income) changes to $18,000 per year per person plus, age 50 and above, another $6,000 which means for you and spouse a total of $48,000 (equally $24,000). In addition, because your spouse has worked at least fifteen years at the same employer, she is allowed for five years another $5,000 (I believe) per year, putting the total for the two of you at $53,000 not counting your Roth IRA (each) - fully fund that as well. Think of what it will be like after more than a decade of doing this each and every year. When you retire, already you will have an _additional_ $24,000 (and she will have additional $29,000) beyond what you are accustomed to be living upon. Believe me, you will find ways to use that "extra" - which is not actual money - just money that "did not exist (disappeared)" because while you work it is being taken automatically out of paychecks (yours and paycheck / deposit directly - of spouse).

                                                    • Re: What retirement planning advice would you give your younger self?
                                                      zebrasenior

                                                      I would have paid more to reduce the remaining mortgage on my home.  Of course real estate in the northeast is higher as are other costs so it is not as though I neglected this.  But the choice of housing, a Victorian, required more maintenance and this more money.  Drops in the housing market over the years hit very hard in neighborhoods with greater social challenges.  But I do not regret the decision to purchase, I would do it again.  But I don't like facing down retirement with a mortgage.

                                                      • Re: What retirement planning advice would you give your younger self?
                                                        TroutBum

                                                        I think I'd give serious consideration to some of the things I did for fun. My wife and I actually saved and invested pretty well but when I reflect back on the good times, well, the expensive ones weren't necessarily the most memorable. Spending a week reading a book on the beach in front of a pricey beach resort doesn't bring back near the good memories as paddling white water rivers of WV in a much less expensive rubber raft. And while I wouldn't want to give up the experience of having Silver Tickets to the Pistons/Bulls game, it isn't nearly as exciting the 2nd time as it was the first. Cable Beach in the Bahamas is far more crowded than any beach on Florida's Emerald Coast but it costs a whole lot more to get there and the water isn't a bit more clear. And the list goes on. Looking back, I could have saved a lot more money for retirement and had at least as much fun along the way.

                                                        • Re: What retirement planning advice would you give your younger self?
                                                          smitty63

                                                          Upon becoming vested in my job, I would have immediately began putting money in one of our retirement investment accounts.  However, my job was putting money into retirement for me so I thought I was set.  I wasn't until I hit my early 50s that I realized I was going to need more and started investing myself.  Unfortunately, retirement is such a foreign thought for most young people; it's just like youth itself; they think it lasts forever.  It doesn't!

                                                          • Re: What retirement planning advice would you give your younger self?
                                                            GordonG

                                                            Listen to your Mother!  Back in 1965 my mother advised me to save $10.00 every payday (every two weeks) and increase that amount proportionally as your income increases.  Gosh I would be rolling in the $$$ today if I had followed her advice.

                                                            • Re: What retirement planning advice would you give your younger self?
                                                              zz029l

                                                              I am one of those that have saved 10-20% since my early 20's. Never bought a car that I could not pay cash for. (I drove a lot of $1,000.00 cars over the years.  Only one new car.)  And for the last 30 years have only had a mortgage.  We are on the eve of getting ready to retire and will be able to hopefully retire on a comfortable lifestyle.  Not rich, but comfortable.

                                                               

                                                              My advice for our children has been to save at least 20% of everything that you make and do not plan on any defined benefit retirement checks.  So far all of the kids have worked through college and paid their way through school and with our help have graduated without any debt. No one signed any loans or other debt instruments.  They get it because we have taught smart money management since they were young.. Live at a lifestyle 10-20% BELOW your income and will it will be OK.

                                                               

                                                              Not trying to brag, but for years my wife and I were criticized for your common sense/ fugal ways which are now starting to pay off with a secure planned retirement.

                                                              • Re: What retirement planning advice would you give your younger self?
                                                                TroutBum

                                                                One thought might be to look at yourself as an individual and take advantages of your personal strengths rather than follow the crowd. My situation is different than most in that I began my working career building homes. After I left that business I still had the tools and skills so I built our personal home with the plan to live in it for a few years, sell and build again. The first one was mortgaged to the extent of my credit but after one renovation and two new homes, the 3rd home was mortgage free. I was still only 50 years old and had plenty of time left to pad the retirement savings once we were debt free.

                                                                 

                                                                Not everybody can, or has the interest to build houses but most people have some sort of skill, knowledge or ability beyond their 9-5 job that can generate money. If you can live off your base income and stash away any profits from a side job, hobby or other interest, you'll find that it can add up to a substantial retirement savings account. And it can be something you enjoy.

                                                                • Re: What retirement planning advice would you give your younger self?
                                                                  Squiffy

                                                                  Have known the "Rule of 72"!  I teach and ask young people to the teach others the rule.

                                                                  • Re: What retirement planning advice would you give your younger self?

                                                                    Buy and hold does not work anymore.  You have to manage your own retirement funds and allocate to stocks and bonds funds depending on up- and down-market periods.  Life cycle funds are extremely risky.  During stock market up-market periods you have to allocate more money to stock funds and less to bond funds.  Avoid all managed stock accounts.

                                                                      • Re: What retirement planning advice would you give your younger self?
                                                                        Lonnie Blevins

                                                                        I would say buy and hold is not good for individual stocks, but not so much for broad index funds.  However, you should pick the percentage of your retirement you want in stocks and rebalance (once a year or once every 6 months maybe) so you have that percentage.   However, you will find that you actually end up BUYing more stocks in down periods and SELLing more in up periods for the stock market.  This seemingly contradictory strategy forces you to buy low and sell high.  Buying more stocks when the stock market is soaring is just the opposite of that but it is what a lot of people do.

                                                                      • Re: What retirement planning advice would you give your younger self?
                                                                        Janine Prost-Domasky

                                                                        Don't waste your time and money going to graduate school full time to get a doctorate--better to earn and start saving early, in your 20s and 30s, rather than wait until your 40s.

                                                                        • Re: What retirement planning advice would you give your younger self?
                                                                          Santhi

                                                                          1. Invest in 401k with comfortable limit or increase investment more in 401k when you have excess money in bank and looking for investing somewhere.


                                                                          2. Don't invest lump sum, invest it with a strict routine.

                                                                          • Re: What retirement planning advice would you give your younger self?
                                                                            terrybue

                                                                            Invest 100 percent of all savings in no load index funds.The market always comes back.

                                                                            • Re: What retirement planning advice would you give your younger self?
                                                                              canthony

                                                                              Purchase all the land on lakefronts as possible.

                                                                              • Re: What retirement planning advice would you give your younger self?
                                                                                DRJJG

                                                                                Don't get the "V" disease to entertain family members. The "V'" disease includes, but is not limited to  SUVs, ATVs, RVs, boats, wave runners, snow mobiles, sports cars, horses, riding lawn mowers, chain saws, etc. If you want a to have fun rent one for a day or week, or if you must have one buy a used one from a person you know that took care of it and learn how to repair them.They are really just black holes and the maintenance will drain you and your kids will get tired of them after 3 years and want to move on to the next toy and there resale value is poor.

                                                                                 

                                                                                Don't go over board for saving for retirement, rather take a vacation every 6 months. You may build up a $2 million nest egg and never have any fun, but die of cancer or heart disease at 60 and leave the money to some spoiled niece or nephew.

                                                                                 

                                                                                Contrary to what others have mentioned in this blog, getting a PhD was the best thing I ever did. Yes I put off working for a number of years and built up some dept along the way, However, my salary is 3Xs my subordinates and after 38 years, I have saved 10 times the money that they have and have traveled all over the world for free. Each of my 2 children have also earned 3 degrees and subsequent considerable dept, but studies have shown that they will live a more satisfied longer life then those who achieved less in school. They can take away your job, money, dignity and other things, but they can never take away your education. Anyway what does TIAA stand for?   

                                                                                 

                                                                                Joe