No. of Recommendations: 4
Dear All,

I have just graduated with a degree in Mechanical and Aerospace Engineering. I have begun working with Johnson Controls and I would like to begin my retirement investing. I am 23 years old right now.

JCI has a 401K with a company match that I plan on using from the beginning.

My next questions are as follows:

1) How much is a good average % of income to begin saving with? I would like to get used to saving a certain amount that way I do not live above my means right now while I have very little expenses (No wife, kids, etc).

2) I would like to set up a Roth IRA to invest in as well as my company's 401K. Does anyone have any recommendations on what to invest that Roth IRA into?

3) For retirement, are these two accounts going to be enough if I continually save in them over the course of my working years? Or should I be investing in regular stocks for retirement as well (dividends, etc)? I plan on doing regular stock investing but I was not sure if I should plan on this being for retirement or other future endeavors/expenses (IE college, etc).

Thank you for all of your help!
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No. of Recommendations: 4
For the long term, the very best thing you can do for yourself and your retirement is set-up a regular saving/investing plan and stick with it. For a young person, the focus should be equities. Mutual funds, ETFs, or individual stocks can all get you there. Mutual funds and ETFs let the pros do the stock picking; individual stocks can give better returns, but take more time to manage. Pick a mix that fits your style, time available and interests.

401K and Roth IRA are an excellent place to begin. Most people have many wants to fill when they begin their careers. That makes large savings commitment difficult. But make a beginning and keep increasing your savings rate as your income increases. Ie when you get a raise or bonus, pay yourself first. Make sure part of it goes into savings.

Increasing your 401K contribution to the max can be a short or intermediate term goal. Maxing the pretax portion is stage one; maxing the after tax portion can be quite a leap.

As to how much to save, you may very well have a home to buy, children to educate, and other expenses to fund in the future. Those can be difficult to foresee this early. Keep in mind, Motley Fool wants you to accumulates investments worth 25 years of gross income to consider early retirement. Experiment with a spreadsheet program to see what it takes to get there in say 20 to 30 years. Let that be your guide.

Once your mortgage is paid off and your children are on their own, it gets easier to fund your retirement plan with larger savings amounts. But fund your plan as best you can and keep working at it. This gives you more options as time goes on.

You seem to be off to a good start.

Fool on!!
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No. of Recommendations: 5
pauleckler writes,

As to how much to save, you may very well have a home to buy, children to educate, and other expenses to fund in the future. Those can be difficult to foresee this early. Keep in mind, Motley Fool wants you to accumulates investments worth 25 years of gross income to consider early retirement. Experiment with a spreadsheet program to see what it takes to get there in say 20 to 30 years. Let that be your guide.

</snip>


Just one small correction -- it's a nest egg of 25 times your annual spending in retirement, not 25 times your gross annual income in the year before you retire.

to scwrigh2,

If you can limit your spending to a smaller fraction of your annual income, you can retire earlier. Of course, many Americans spend more than they earn.

I retired in 1994 at age 38 after working as an engineer in the oil & gas and chemical industry. I paid off my student loans by age 25 and started saving about 25% of my gross income. That slowly increased over the years until the last few years before I retired I was living on about 25% of my gross income, paying 25% in taxes, and saving 50% of my gross for retirement.

I created a website devoted to the topic which you may find useful.

http://retireearlyhomepage.com/

intercst
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No. of Recommendations: 12
Once your mortgage is paid off and your children are on their own, it gets easier to fund your retirement plan with larger savings amounts.

Having had three children and putting them through college and having a mortgage, I heartily disagree with this.

I would save the maximum that you can in whatever retirement accounts are open to you, particularly if you have any matching along the way. You are used to living like a student so if you can continue that until at least your next raise, you will be off to a great start. Then stay one raise behind.

Hoping to catch up later in life in a terrible idea, IMHO, because if you hit a bump along the way, you will never make it.
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No. of Recommendations: 0
The quickest way to retirement is a system of thirds. Live on one third, save/invest one third, and use the other third for taxes and benefits.

Early on, that is difficult. 6% is sometimes an accomplishment. Later in life, saving a third becomes more practical.

I agree, setting up a regular savings program early on is best. Waiting too often means no savings.
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Keep you investment costs DOWN. That means index funds or ETFs.
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I have just graduated with a degree in Mechanical and Aerospace Engineering.

Congrats. That took plenty of hard work, planning, and discipline. The same qualities that will work in your favor in planning for retirement. My first word of caution, do go nuts spending on toys, trips, etc., when the paychecks start rolling in. Its tempting after leading a life of relative deprivation.

Before beginning on retirement, work on two other things first. One, an emergency fund. Most suggest 3-6 months living expenses. I'd lean toward 6 months. This will help with car breaking down, roof needs fixing, illness, or waiting for disability insurance to kick in after you've been hit by a car and you're doing rehab for a year. Two, pay down/off debts, everything from credit cards to school loans. Even if you have a loan at a "good rate", debt is debt and can come back and bite you at the most inopportune time. At a minimum it gives you peace of mind, one less thing to worry about.

Plus, evaluate your disability insurance needs. Many people think of life insurance, but you are much more likely to become disabled at an early age than die.

JCI has a 401K with a company match that I plan on using from the beginning.

To take to the company match limit and no more.

How much is a good average % of income to begin saving with?

You could easily start at 10%, I'd even go 20% with no wife and kids. And another thing to consider, in the future, when you get a raise, don't just think 20% of the raise, think 50% of the raise goes to retirement.

I would like to set up a Roth IRA to invest in as well as my company's 401K. Does anyone have any recommendations on what to invest that Roth IRA into?

The simplest, easiest thing to do is index funds or ETFs, and in both cases I'd lean toward Vanguard. So VOO (S&P 500 index) is very easy. They even have a total market index. And if you feel like expanding your horizons, VEA and VWO which are international and developing market index ETFs.

For retirement, are these two accounts going to be enough if I continually save in them over the course of my working years?

It all depends on what your income does, your future needs and expenses, and what your investment returns are. Bottom line, better to save too much than not enough. Plus, it gives you more flexibility later on, if you retire "early" you don't have to worry about early with drawl limits/penalties/etc.

JLC
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No. of Recommendations: 3
The current issue of Money magazine has a short piece addressing your exact question. They say if you save 16.5% of gross pay you will be able have a retirement close to your preretirement in terms of spending. That does not mean you need provide the entire 16.5% since employer matching would reduce the amount.

Personally, we saved in the range of 15%, but did not start that way. We started with a lesser amount, but made a rule every time there was a pay increase, half the increased take home went into savings. Never, ever took any money out of the retirement pot until retirement.

Gordon
Atlanta
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No. of Recommendations: 2
I have read a number of articles that indicate or suggest that a minimum of 10% with a goal of 15% should be saved/invested for retirement. This may be difficult at times of your life but should be achievable at other times.
http://money.cnn.com/retirement/guide/basics_basics.moneymag...
I don't think I have ever heard anyone complain that they had saved too much.

Bob
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No. of Recommendations: 6
I think we get the "how much to save" conversation all backwards.

If you really want to work for your whole life until you are 70 doing something that someone else wants you to do, by all means, save 10% and spend the rest.

If you want to achieve financial freedom while you are still young, and be free to live how you want to live, the question is not "How little can I get away with", but "how can I live on less and save more?"

The less you can live on, the less you need to save, so it compounds. Take a look at someone like http://www.mrmoneymustache.com/ who was able to 'retire' at a very early age by not buying in to the rat race of consumption.

D.
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No. of Recommendations: 3
Since you have a degree in engineering, I'm going to make the assumption that you are a fairly analytical, disciplined, work-oriented person. You are likely to become more so the longer you work in your field.

In addition to the actual investing advice offered by everyone, I'd like to encourage you to, when the time comes, select your spouse carefully. We know any number of people who married someone who was strongly the artist type--a nice diversion from being surrounded by engineering types, but generally didn't work long-term. Divorce is very costly, especially when there are kids involved.

Doesn't mean you are limited to engineers; just be sure that your fundamental values and perspectives are compatible.

Kathleen
(For example: Biological son born a month later than planned because of a business trip. Second child was adopted so that, among other things, we could guarantee a girl. The careful, methodical approach works well for both of us.)
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The individual that suggested setting up your emergency fund and paying down debt is spot on.

A few points to consider:
1) Student debt has a very low chance of being discharged in bankruptcy. While nobody ever feels they may run into this, many things can happen where you may find yourself in this unenviable position. It's better to pay down a student loan at 3% than put in an investment at 10% because of this fact alone.
2) If you invest your Roth IRA using conservative investments, you can use it as your emergency fund. You are allowed to withdraw up to the amount you've contributed without penalty. So if you have contributed $5000 and that $5000 grows to $6000, you can still pull out $5000 from your Roth.
3) Money within an IRA is protected from bankruptcy. Let me repeat that. Money within an IRA is exempt from creditors in bankruptcy.
4) Many companies are now offering Roth 401ks as an option.
5) Roth retirement accounts are funded after your taxes have been deducted, but you never pay taxes on the money again.

As a new wage-earner, you are likely in a lower tax bracket than you'll be in 20 years. You definitely want to use Roth over traditional for both your 401k and your IRA. Start by funding whatever the employer match is. If they match 5%, set your allocation to be 5%. If your company offers an automatic increase of 1% a year, sign up for it. If not, be sure to change your contribution amount to increase by at least 1% every year when you get a raise. Depending on how much you have to invest per month, you'll want to probably invest half your available investment money to your Roth IRA and half to additional payments on your student loan debt. If you reach your max for the Roth IRA, put the remaining funds in a money market ETF. I personally like to have about two months of living expenses floating in my bank account to cover short term emergencies and put the rest in taxable investments and my Roth IRA. Once you get to the magical 6 to 9 months of living expenses in your Roth and bank account, put ALL your available investment money (outside of the 401k contribution) into paying down your student loan debt. Once that is paid off, you will be ready to fund your IRA again.

In the strategy I'm suggesting, I recommend only investing in low-yielding, low-risk ETFs in your Roth. If the value goes down, it won't be by a great amount. You will also want to ensure there is a buffer amount there since the prices CAN and WILL sometimes fluctuate down. I recommend 9 months instead of 6 months because of that. I also recommend ETF's because they are generally more liquid. Mutual funds often have additional fees if closed out after a short time period of opening and also generally have minimum requirements that ETFs don't have. After you have your requisite comfort-level in place, then you can start investing new money in the IRA into stocks and stock ETFs (or whatever you feel like).
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No. of Recommendations: 3
We know any number of people who married someone who was strongly the artist type--a nice diversion from being surrounded by engineering types, but generally didn't work long-term.
I know a lot of partnerships (including my own parents 53-year marriage) which is a pairing of opposites, and works brilliantly. More important than being an engineer/engineer match is to be on the same page about money. I know many artist types married to engineer types and the marriages are solid. But they are both frugal and both savers (as far as I can tell from the outside).

I think the key thing as far as savings is just to save as much as you can, and then try to hold lifestyle down when you get raises, so the incremental add goes into savings.

One cautionary note. It's often very tempting when you work for a big, solid, stable company to invest heavily in their stock (even in 401K) and to do the ESPP. I would caution against it, except for a tiny tiny % of your investing. It's the single biggest mistake I have made in my financial life. I had far too many of my eggs in one basket as far as company stock when I was young and naive. And consequently I lost a bundle on a stock that "could never go down."
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No. of Recommendations: 3
One cautionary note. It's often very tempting when you work for a big, solid, stable company to invest heavily in their stock (even in 401K) and to do the ESPP.

The exception I would make is for a stock purchase plan where you get up to a 15% discount on the stock purchase. That's just like the employer matching in a 401k - free money. Take all of it you can.

But don't keep the stock after each purchase. Sell it right away. That takes the risk out of the plan.

Yes, you will lose any tax benefits by doing that. But that's not the point. The point is to make the guaranteed return on your money.

--Peter
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> The current issue of Money magazine has a short piece addressing your exact question. They say if you save 16.5% of gross pay you will be able have a retirement close to your preretirement in terms of spending. That does not mean you need provide the entire 16.5% since employer matching would reduce the amount.



16.5%???

where the heck does that come from?

why not 16.527%
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where the heck does that come from?

From social "scientists" who don't understand the concepts of significant digits and estimates.


--Peter
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Wait a minute. 16.5% is rumored to be one half of a third or at least when you round it off to 33.0%.

It's a convenient compromise, don't you know. 17% is just too much. And 16.66666667% is much too messy.

:)
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Ditto on both of these about company stock.

I had a co-worker who fell for the propaganda and "loyalty" and moved his entire 401K into company stock in 2000 when it split 3-for-1. In 2003 it had dropped 50% and George had to delay retiring.

The stock purchase plan, at guaranteed 15% discount --- I went all-in for that. And the very day the stock hit my account I transferred it to my regular broker and sold it.
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Ditto on both of these about company stock.

I had a co-worker who fell for the propaganda and "loyalty" and moved his entire 401K into company stock in 2000 when it split 3-for-1. In 2003 it had dropped 50% and George had to delay retiring.

The stock purchase plan, at guaranteed 15% discount --- I went all-in for that. And the very day the stock hit my account I transferred it to my regular broker and sold it.



ditto
always immediately sold

but there's days I kind of wish I'd
kept the IBM i got in the 60s
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Wait a minute. 16.5% is rumored to be one half of a third or at least when you round it off to 33.0%.



ah .. so it's one sixth and they figure division is too hard?



( this works regardless how many years?
what you invest in? taxes?* inflation?




* heard a guy recently on the radio who said that
because taxes are super high but likely to go higher,
you need to save more than you might otherwise
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Check out this book.

http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Lari...

It is a very good starting book.

1) How much is a good average % of income to begin saving with? I would like to get used to saving a certain amount that way I do not live above my means right now while I have very little expenses (No wife, kids, etc).

The big thing now is to save up enough outside your retirement accounts so that you do not get into trouble with debt in an emergency and that you can eventually pay cash for all your cars. There is no hurry to buy a house(and LOTS of reasons not to at your age) but you can starting for one now so that you will have the option to buy one with 20% down later so you can avoid PMI is also worth doing. These have messed up more people than not initially saving enough.

The thing that worked for me was to commit to putting one half of any future raises or bonuses into some sort of savings. This is painless and by the time you are 30 you will be saving a high percentage of your income.

2) I would like to set up a Roth IRA to invest in as well as my company's 401K. Does anyone have any recommendations on what to invest that Roth IRA into?

If you are not maxing out the 401K and deductible IRA that you are eligible for then I would probably max those out first if you plan on using this money for retirement.

The problem is that single people get into the 25% federal tax bracket real fast so you might want to fund deductible retirement accounts at least until you get below the 25% tax bracket. If you are likely to get married, have kids, and buy a house then you will likely be in a much lower tax bracket then and that would be a better time to fund a Roth.

To start out one of the target date funds, like a 2050 fund would be a good choice since trying to fine tune your choices any more will really not get you much until you have more saved up. When you have more you can split it up into one of these simple portfolios and do just fine;

http://www.bogleheads.org/wiki/Three-fund_portfolio


3) For retirement, are these two accounts going to be enough if I continually save in them over the course of my working years? Or should I be investing in regular stocks for retirement as well (dividends, etc)? I plan on doing regular stock investing but I was not sure if I should plan on this being for retirement or other future endeavors/expenses (IE college, etc).

For money that you are sure that you will use for retirement the 401k/IRA, and Roth accounts are ideal and should be maxed out before saving retirement money in taxable accounts. Even if you retire early there are ways to get the money out of these accounts without paying a penalty so don't worry about that.

You can always take your contributions(but not earnings) out of a Roth so if you are eligible for one of these that you would not otherwise be moving then you can do some of your non-retirement saving in the Roth. Some people use a Roth as their emergency fund which can work out well.

Be cautious about thinking that you can pick individual stocks and do better than the index funds. Most professional money managers can't do that and would be in the investing hall of fame if they could be a comparable index fund but 1% over the long run.

There are really only three things you can reliably do when it comes to investing;

1) Control how much you save or spend each year.

2) Keeping investing costs low. This is critical and getting an extra fraction of a percent of return a year will make an amazing difference over the 40 years or so until you retire. Figure out what $1,000 invest at 8 and 8.5 percent will be worth in 40 years.

3) You asset allocation (the mixture of stocks/bonds/etc)
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Take a look at someone like http://www.mrmoneymustache.com/ who was able to 'retire' at a very early age by not buying in to the rat race of consumption. DolonAltekar

Thanks so much for suggesting his site, DolonAltekar. I checked it out and found a click through to Mint.com, which turned out to be just what I have been looking for: an easy financial tracker which includes all accounts, investments, and assets. And to top it off, it's free.

Thanks again!

Vivienne
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To take to the company match limit and no more.

Why no more?ive maxed out my 401k since I was a year older than the op and done quite well.

-murray
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Murray asked Why no more?

That is advice is given because the person saying so knows more about your financial situation and needs than you know. The world is full of such expert fools.

Gordon
Atlanta
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Why no more?ive maxed out my 401k since I was a year older than the op and done quite well.

I'm depending on memory but it's because after you do up to the match on the 401K, it's usually a good idea to then go for the maximum in a Roth if you qualify.
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To take to the company match limit and no more.

Why no more?ive maxed out my 401k since I was a year older than the op and done quite well.

-murray


Usually because company programs have poor/limited choices. Get the match, its free money, then contribute to your IRA and then I'd personally to a taxable brokerage account. Main reasons being unlimited choices for investments and more flexibility (especially how much and when, many company programs are too rigid and don't allow for frequent changes). Not only now, but in the future.

Now if you happen to have great choices in your company 401k, go for it, that's the exception and not the rule.

JLC
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I'm depending on memory but it's because after you do up to the match on the 401K, it's usually a good idea to then go for the maximum in a Roth if you qualify.

A couple points...

I'm a firm believer that I will pay less than 25% effective tax rates in retirement so I personally would not take money out of a tax deferred account to put into a Roth if I had to pay 25% or more in taxes. If your marginal tax rate is 15% or less, I'd agree with putting money in a Roth prior to non matched 401k.

That said, I wouldn't stop contributing to a 401k but rather put additional investments in a Roth. That's why the advice was confusing to me.

-murray
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In my case, I've changed jobs twice after about 10 years so I was able to rollover my 401ks to mitigate the poor fund choices.

Also, I'm currently deferring more than 30% in taxes and expect to pay less than 15% in retirement. I think it would be difficult to make that 15+% up in a non tax advantaged account or even a Roth.

-murray
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No. of Recommendations: 4
Why no more?ive maxed out my 401k since I was a year older than the op and done quite well.

IIRC, the theory is that upon withdrawl 410(k)s are taxed as ordinary income which is typically higher than capital gains rates, so there is benefit to investing those dollars beyond the employer match outside the 401(k). In other words, if you don't contribute to the 401(k) beyond the match and invest somewhere else, you're betting that upon withdrawl you'll get taxed at the 20% long term capital gains rate instead of the roughly 25% income tax rate you're paying right now. If that's the way it actually works out, then that's the smart thing to do.

However, IMO the ease of investing in a 401(k) is worth a lot. Savings that happen automatically are good. Plus they are pre-tax dollars, which means you have the ability to contribute more dollars than you otherwise could.

Also for planning purposes, it is a reasonable assumption (but impossible to say for sure) that your tax rate in retirement will be lower than your tax rate while working. It is entirely possible that your income tax rate will be lower than the capital gains rate. In that case, you screwed yourself by not contributing to the 401(K). So there is a bird-in-the-hand advantage to getting tax savings right now as opposed to a theoretical savings later.

My advice is max out your 401(k) and your Roth, and put as much as you can into a regular investment account. Remember how much you paid for this advice.
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However, IMO the ease of investing in a 401(k) is worth a lot. Savings that happen automatically are good. Plus t


that was the major benefit of 401(k and
crappy fund choices: FORCED me to save


and CFC mitigated by changing jobs several times
and rolling yo IRA
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I don't think I have ever heard anyone complain that they had saved too much.

That's because they died before they could spend it! :)

dozer
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I don't think I have ever heard anyone complain that they had saved too much.

That's because they died before they could spend it! :)


It would have been fine for us to save less.
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I may be a little late to the party, but I thought I would chime in on some very good points.

First, amybody who is 23 today and is asking these kinds of questions ought to be commended. I have been developing a mentor project reaching out to the 20 to 34 age group and have done a study of what makes this generation different from mine, and it is fascinating at one level, yet frightening at another The matkrs of an adult are generally onsidered to be the achievement of: (1) independent thinking, (2) accepting personal responsibility, and (3) being financially independent. Most of the 20-34's these days don't achieve that until they are around 30 - almost 10 years later than my generation. (If you want a perspective on this trend, read Gail Shehy's book entitled New Passages)

I know from informal surveys that 80% of this age group would love to have a mentor. Problem is that the above 45 age group don't see this need so there is a disconnect. I hope to make inroads on that.

For my perspective, I got married at age 21. That was 46 years ago, three children and 9 grandchildren ago (every one of them is precious, by the way). I was in law school at the time. Careers were linear - the number of times you changed jobs over a career was probably no more than 2 or 3, which now is more like 5 or 6.

Still, I didn't think about retirement then - it wasn't on my radar screen. As I went through life, though, I did set goals - some financial, some personal. My first goal was for my children - to edcuate them as far as they wanted or were willing to go. Only one of mine went to graduate school - an MBA.

Along the way, I did invest but very sparingly in equities, and when IRA's and 401k's became popular, I generally maxed out my annual contribution. For this coming generation, you can assume that social security will not provide you much, and I would certainly not plan on it being a component of your retirement years.

While some have advocated that you need to start young and not play catchup, I would generally agree with those recommendations, but once you reach 50, you are permitted to make "catch up" contributions to both IRA's and 401Ks. I don't recommend counting on those to get you to where you want to be, but I did want to point out that the opportunity exists.

The one thing that will permit me to reach my financial goals is that our family basically never made a significant change of our lifestyle over my career. We could have, but chose not to - it wasn't us. Instead of having a house at the beach, or lake, or mountains, we chose instead to travel with our kids - we went all over Europe several times. My oldest son (Otter) used that as a springboard and now has been to well over 100 countries. Now that I am not subsidizing that wanderlust, I am rooting for him to keep it up.

While this post is short on specifics, it is long on perspective - really a view from the other side of the canyon. With the able help of Motley Fool over the past 14 years, and the watchful eye of my son, I've achieved my financial retirement goals. Sadly, most boomers are not going to enjoy life in retirement. The statistics are that the average Baby Boomer has only $77,000 in their retirement nest egg, which means a heavy reliance on Social Security. I guess I would basically point out the obvious - learn from their mistakes! Most of them assumed that retirement would take care of itself, and didn't think about it when they were 23, like you.

Just my $.02.

Otterpater
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Reading the last post made me think of something else. Not widely used, and you really have to do your homework and pay close attention to the rules....

A truly self-directed IRA where you can hold real estate, make loans, and have other non-market investments--in addition to the usual stocks and bonds--is something you might want to consider. Next week (or so) I will close on a 1-acre lot with power, water, view, and green space for $11K. Based on where our market has been and where we seem to be headed, I anticipate being able to sell it in less than 24 months for $18K-$24K.

Two falls ago we bought a house for $70K where the water had been left on and the propane (heat) had been allowed to run out. Bank did all the tearing out and clean up prior to selling. We have everything pretty well lined up so that this summer/fall we will put another $30K into it and have either a $700-800/month rental or a $175K-$200K house for sale--at current, depressed, market values.

We still have a significant portion of our retirement accounts in the market, but we wanted to diversify a bit more. And real estate (in fact, bare land) has been our most successful investment vehicle over 30 years: we like it, we know a fair amount about it. Equity Trust and PENSCO are two companies that do self-directed IRA's, if you want to do some reading.

Congratulations on starting so early--keep it up, and by 50 (possibly earlier) you will probably be able to coast.

Kathleen
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by 50 (possibly earlier) you will probably be able to coast.

An excellent point.

Many professionals fail to realize how your career opportunities change when you hit 50 or so. Age discrimination tends to make it difficult to find another job if you happen to lose yours. And long term employees often find themselves in upper salary brackets, where they are easily targeted for early retirement, replacement by younger "more up to date" candidates or whatever.

Most professionals eventually go through this. Having a nice nest egg to work from gives you many more options. You can consider early retirement, or starting your own company, or teaching at say a university, consulting, etc, etc.

But if you have minimal savings, big debts, a mortgage, kids in college, etc., life can get stressful.

It's sort of like a queen-fork in chess: you are skewered and forced to put up with what ever "stuff" they send your way.
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You can consider early retirement, or starting your own company, or teaching at say a university, consulting, etc, etc.

OP might want to research working as a consultant sooner rather than later. The amount that can be funneled into retirement for self-employed is considerably greater than for employees, and you can frequently charge almost double your salary. You can, depending on the subcontract, charge for all hours worked rather than donating 5-10 hours/week throughout your career as an exempt employee.

On the chance that OP works under a JCI government contract.... Many government contractors have requirements to do a certain dollar volume with local small/minority-owned businesses. Also, subcontracts generally don't count against headcount; transferring people to a subcontract can sometimes be looked on as a reduction in headcount even though nobody has actually left.

While there certainly are risks associated with this (the primary contractor can (and will) not renew the contract when budgets get tight--like right now), the rewards can be considerable. Work up a spreadsheet with the numbers, contingencies, probabilities, etc. Since it sounds as though you have a good job, there is certainly no rush on this, but it's a good exercise regardless to understand what you are paid, what your benefits really cost, what you'd have to pay for insurance if you actually bought it yourself....

Another thought. If JCI offers a health savings account (NOT a flexible savings account!), be sure to take advantage of this. This money remains yours and can generally be controlled by you as you would an IRA/401K.

Kathleen
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Where could I go about finding out how to put real-estate into a ROTH?
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Where could I go about finding out how to put real-estate into a ROTH?

https://pensco.com/, and http://www.trustetc.com/ are the companies I am most familiar with, although there are others. A search on "self directed IRA" will turn up a number of fairly recent articles, as well as a few other custodians.

Before you try to talk to a real estate agent about purchasing something, be sure you've read a bunch and understand the forms and process for your IRA custodian. Based on my experience, it is highly unlikely that your real estate agent will have a clue what you are trying to do, and you will have to be quite proactive (i.e., tactfully demanding) in directing the process.

Kathleen
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2Bprepared: "Where could I go about finding out how to put real-estate into a ROTH?"

Contributions can only be in the form of cash, so you cannot put real estate directly into your IRA. Funds from a self-directed IRA can be used to purchase real estate, but there are a host of limitations and potential for significant tax expenses and penalties.

Google will be your friend, but from my notes (and I am not vouching for any of hte foregoing):

http://www.utsandiego.com/uniontrib/20061008/news_1b8lynn.ht...

One formidable roadblock that adventuresome investors can smack into is something called a prohibited transaction, which the IRS considers to be any improper use of an IRA by the owner or other so-called disqualified persons, which include spouses, parents and children.

While you can make yearly contributions to an IRA, you can't contribute sweat equity to the property.

Another threat that nontraditional IRA investors face is commingling outside cash with their retirement account.

http://www.iraaa.org/ground-your-retirement-fund-with-real-e...

http://www.iraaa.org/yes-you-can-buy-real-estate-with-your-i...

http://www.dol.gov/ebsa/programs/ori/advisory2000/2000-10a.h...


Regards, JAFO

DISCLAIMER - THIS IS NOT LEGAL ADVICE; IF YOU NEED LEGAL ADVICE, SEEK A LAWYER LICENSED IN YOUR JURISDICTION
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Previous postings on the subject of real estate in an IRA or Roth are collected in message 35197 on this board--

http://boards.fool.com/real-estate-in-iraroth-ira-18126356.a...
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Here's a Foolish Wiki article on the subject--

http://wiki.fool.com/Disadvantages_of_Real_Estate_in_an_IRA
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