UnThreaded | Threaded | Whole Thread (17) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308881  
Subject: Re: Balancing debt vs Investing Date: 12/31/2012 5:06 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 4
Every time I feel like I am making progress I get over whelmed by the complexity of the numbers and trying to calculate what I really need for retirement. At the point my goal is to "just have a lot". :)

That probably works well as long as you don't have a specific goal for retirement in mind, but since you do have a goal of 15 years, if you want to meet that goal, you will have a better chance if you do figure some numbers. A fairly simple way to start is to take your current annual costs from that budget you are working on over on the budgeting board, subtract any costs you don't plan on having in retirement (contributing to a 401(k), IRA or ESPP; SS & medicare taxes; mortgage P&I if you plan on having a paid off house; lower food costs because you will only be feeding 1; etc.) then add some additional costs if you think you will be traveling more, will have to pay more for medical insurance or have some other additional costs. Just use estimates of what those things might cost you now - it will still give you a starting point. You're basically looking for an estimate of how much it would cost you if you were retired today.

Then choose an inflation rate and apply it to the estimate you came up with for 15 years, and that's the income you will need when you retire. You can then multiply by 25 if you believe that a 4% withdrawal rate is reasonable, and that's your goal.

Revisit every year, and as you get closer to your 15 year goal, you should start to zero in on your estimates, and see if your goal is reasonable.

Yes, it takes some work, and yes, it deals with numbers. But if you want to successfully retire in your early or mid 50's without a lot of risk of having to go back to work, you will be better off taking these steps now.

My ESPP is with a company on the SA core so I think I am a little safe.

There were a lot of people recommending Enron, WorldCom, HealthSouth and others not that long before they tanked either. Take it from someone who has watched several companies she has worked for drop precipitously in short order - it's a risk. Go ahead and take it if you want, but realize that you are taking it.

You also mentioned that the 7% on my student loan was not "good" debt. Why is that and what would be good?

People often say that student loan debt and mortgage debt are 'good' debt. I just wanted to point out that if you are paying 7% on your student loan, and can borrow elsewhere significantly cheaper, a 7% debt is not 'good'.

AJ
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (17) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

The Story Behind the Story
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement