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Due to many events and circumstances in my life, I find that I am now 51 with barely a start on my retirement planning. I am trying to design a strategy that will allow me to retire in 10 years or less and would like to here any thoughts and suggestions on ways to do so.

I am fairly new to investing and would welcome any thoughts or tips on how others, who started late, have are successfully building for their retirement.

I am making around $90k+/year but at this time I have only $8,000 in my 401k. I just increased monthly additions to about $900/month. $1500 in savings and am paying down my credit card balance of $15k by about $1000 per month.

Any advice will be welcome.
Thanks
Jim


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Hi Jim,

I would check out www.vanguard.com for low cost index funds. It takes a lot of time and talent to pick individual stocks that can beat the index. The key to investing in mutual funds is keeping the costs low.

Good luck,

-helen

PS - Have you checked out the retire early board ?
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You have a nice income, and you are starting to save, so I'll let the experts on investing weigh in on that -- sounds like you are on the right track. Don't feel overwhelmed; many people cannot start saving until middle age because of the cost of buying a home, starting a family, putting the kids through college.

The main investment I would recommend to you is knowledge of how to live on much lower expenses. It sounds like you have already gathered quite a bit of this information already, since you are now paying $1000 a month toward your debt and still accumulating savings -- excellent! Many people with higher incomes don't get anywhere because they haven't any clue, or any support among their peers, for cutting back expenses. Yet with an income as high as yours, if you invest in such things as reading a few books on savings, reviewing the On Topic posts and FAQ of the Living Below Your Means board, etc. you can quickly become a saver instead of a debtor.

Also, I don't know where you live, but my philosophy was to not consider myself out of debt until I had a paid-off house in a safe neighborhood where I am not assessed property tax. Some areas have property tax on all homes, so you can't do anything about that, and other areas have such high prices on homes that your best bet might be to accept that, when you retire, you will have to sell the home, get your equity out of it, and re-locate to someplace cheaper. Keep an open mind, and consider it. You don't have to do it just because you consider it. But once you don't have to work, you have a world of options open to you that are not open if you have to live in an area that provides jobs. For instance, my area is beautiful and has a very low cost of living but the job market is poor.

OK, I'll quit rambling now because I am anxious to read other suggestions, which I think will be a bit more technical!
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Due to many events and circumstances in my life, I find that I am now 51 with barely a start on my retirement planning. I am trying to design a strategy that will allow me to retire in 10 years or less and would like to here any thoughts and suggestions on ways to do so.

I am fairly new to investing and would welcome any thoughts or tips on how others, who started late, have are successfully building for their retirement.

I am making around $90k+/year but at this time I have only $8,000 in my 401k. I just increased monthly additions to about $900/month. $1500 in savings and am paying down my credit card balance of $15k by about $1000 per month.



Sounds like you are off to a good start.

- A rule of thumb is that you can retire when you savings grow to 25 times your expenses.

- One advantage you have over younger people is that you will be eligible for any pensions or SS sooner. So you can take that into account in your planning, if you choose.

- Here's a suggestion that worked for me: after you pay off your CC debt then keep making the "payments" to your savings.


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Sorry, that PS should have said Have you checked out the Living Below Your Means board ? They share a lot of times on living frugally.
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pekinrobin:
Also, I don't know where you live, but my philosophy was to not consider myself out of debt until I had a paid-off house in a safe neighborhood where I am not assessed property tax. Some areas have property tax on all homes, so you can't do anything about that, and other areas have such high prices on homes that your best bet might be to accept that, when you retire, you will have to sell the home, get your equity out of it, and re-locate to someplace cheaper.

Is this in the US? If I'm reading your post right, you don't pay any property tax! I did not know this was possible in America.

decath
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1HappyCamper writes:

Due to many events and circumstances in my life, I find that I am now 51 with barely a start on my retirement planning. I am trying to design a strategy that will allow me to retire in 10 years or less and would like to here any thoughts and suggestions on ways to do so.

Good for you! The secret is to be committed to this goal. I suggest you start by reading extensively from intercst's website. Here's a nice page to start from:

http://www.retireearlyhomepage.com/chronidx.html


I am fairly new to investing and would welcome any thoughts or tips on how others, who started late, have are successfully building for their retirement.

My best tip would be to lower your expectations for retirement. That is controversial, but it worked for me. As soon as I stopped "needing" a house in a really nice neighborhood, etc., I found I could retire much quicker. Since then, I've been working on ways to increase the comfort and enjoyment I can get from a frugal lifestyle.


I am making around $90k+/year but at this time I have only $8,000 in my 401k. I just increased monthly additions to about $900/month. $1500 in savings and am paying down my credit card balance of $15k by about $1000 per month.

You're off to a great start! Do this:

1. Pay off all debts, and don't acquire any more.
2. Save as much as you can. As soon as you are finished paying off the CC debt, start putting that sum into investments.
3. Start tracking your expenses now. Write down every penny you spend. This does two things for you. The first is absolutely essential. You have to know how much money you need to live comfortably before you can know how big of a portfolio you need. Secondly, when you track your spending, you start to find ways to reduce that spending. It's hard not to when it stares you in the face. Don't keep ANYTHING off the books.


Right now, you just need to focus on the above steps. (I'm sure other people will address the issue of how to invest.) In a few years, you will need to start figuring out how to get at your investments. intercst's website has a bunch of information on that.

Good luck, and ask lots of questions.

- tmeri
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Also, I don't know where you live, but my philosophy was to not consider myself out of debt until I had a paid-off house in a safe neighborhood where I am not assessed property tax. Some areas have property tax on all homes, so you can't do anything about that, and other areas have such high prices on homes that your best bet might be to accept that, when you retire, you will have to sell the home, get your equity out of it, and re-locate to someplace cheaper.

I wouldn't consider property tax a debt. Sure its an obligation, but so is buying food. Are you not out of debt until you have all the food you will eat for the rest of your life? Or all the heating oil? Property taxes are generally paying the local government for services they are providing to you.

There are places in the country where you don't have to pay property taxes. For example, if you are a member of one of the tribes here in california that was in the news last week. They kicked out 100 or so people as not being members of the tribe. Why? They couldn't prove ancestory and they were getting $10,000 a month each in revenue from the casino on the reservation. Odds are none of them needed to pay local property taxes...
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decath writes,

<<pekinrobin:
Also, I don't know where you live, but my philosophy was to not consider myself out of debt until I had a paid-off house in a safe neighborhood where I am not assessed property tax. Some areas have property tax on all homes, so you can't do anything about that, and other areas have such high prices on homes that your best bet might be to accept that, when you retire, you will have to sell the home, get your equity out of it, and re-locate to someplace cheaper.>>

Is this in the US? If I'm reading your post right, you don't pay any property tax! I did not know this was possible in America.


I think pekinrobin lives in Louisiana. Real estate there is cheap and they have a relatively large homestead exemption. I'm pretty sure that you'd pay little or no taxes on a $50,000 home.

Of course, the gov't has to get money from somewhere. Louisiana has an income tax and in New Orleans the sales tax is more than 10% on some items.

intercst
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I think pekinrobin lives in Louisiana. Real estate there is cheap and they have a relatively large homestead exemption. I'm pretty sure that you'd pay little or no taxes on a $50,000 home.

Of course, the gov't has to get money from somewhere. Louisiana has an income tax and in New Orleans the sales tax is more than 10% on some items.
-----------------------------------------------------------------------

Are there places where they have no property tax that are next door to a state that has no sales tax? That would be a good place to call home.

2828
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2828 asks,

Are there places where they have no property tax that are next door to a state that has no sales tax? That would be a good place to call home.

I don't know about that, but Washington State has no income tax and Oregon has no sales tax. You could live in Vancouver, WA and do your shopping across the border in Oregon.

intercst
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Are there places where they have no property tax that are next door to a state that has no sales tax? That would be a good place to call home.

2828


I believe that in OR you can stop paying property taxes when you are 65 years old. The state takes the money owed out of the proceeds from the sale of the house when you sell it or croak. Not 100% sure of this, but I recall reading it, so you can check it out.

And there's no sales tax here.

--fleg
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intercst:
I don't know about that, but Washington State has no income tax and Oregon has no sales tax. You could live in Vancouver, WA and do your shopping across the border in Oregon.

Some states seem to be trying to clamp down on this kind of cross border shopping. California on this year's state tax forms asked for the value of goods bought out of state and wanted sales tax for them. You could, of course, say zero dollars but then if that's not true you've just committed perjury. Will they find out? Not too likely right now.

Hyperborea
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Some states seem to be trying to clamp down on this kind of cross border shopping. California on this year's state tax forms asked for the value of goods bought out of state and wanted sales tax for them. You could, of course, say zero dollars but then if that's not true you've just committed perjury. Will they find out? Not too likely right now.
-----------------------------------------------------------------------

Why bother. That has about as good a chance of working as a border guard asking someone if he's a terrorist and the guy saying, "yepper, i sure am, you think i'm bluffing check out my luggage".

2828
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Due to many events and circumstances in my life, I find that I am now 51 with barely a start on my retirement planning. I am trying to design a strategy that will allow me to retire in 10 years or less and would like to here any thoughts and suggestions on ways to do so.

At the risk of sounding like a broken record to the majority of posters here, let me suggest that you check out the possibility of living in a Latin American or other low-cost foreign country.

Your local bookstore should have books about retiring in other countries that estimate costs and give you some of the plusses and minuses of various places.

--fleg
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I think pekinrobin lives in Louisiana. Real estate there is cheap and they have a relatively large homestead exemption. I'm pretty sure that you'd pay little or no taxes on a $50,000 home.

Of course, the gov't has to get money from somewhere. Louisiana has an income tax and in New Orleans the sales tax is more than 10% on some items.
-----------------------------------------------------------------------

Are there places where they have no property tax that are next door to a state that has no sales tax? That would be a good place to call home.

2828
*********************

I don't know about sales tax, but as I recall, they have some pretty good strip clubs in Biloxi, MS which is just over a bridge from N.O.
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intercst:
I think pekinrobin lives in Louisiana. Real estate there is cheap and they have a relatively large homestead exemption. I'm pretty sure that you'd pay little or no taxes on a $50,000 home.

Wow! $50k exemption!!! The exemption in Texas has been 15k since as long as I can remember. My 1st house cost 58k and I got a 15k exemption back in 86. I'm in my 3rd home with an eval at 250k and I still get the 15k exempt. However, tax rates have climbed in my locality substantially. I paid $6,100 last year alone and have for that reason alone, am considering moving after my son grads from HS. I love the home and area but paying 6,100 is way too high IMHO.

decath
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However, tax rates have climbed in my locality substantially. I paid $6,100 last year alone and have for that reason alone, am considering moving after my son grads from HS. I love the home and area but paying 6,100 is way too high IMHO.

I don't pay much more than that in annual rent. So much for the old "you are throwing your money away by renting" canard that the real estate zealots like to recite.

sydsydsyd
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decath writes,

<<intercst:
I think pekinrobin lives in Louisiana. Real estate there is cheap and they have a relatively large homestead exemption. I'm pretty sure that you'd pay little or no taxes on a $50,000 home.>>

Wow! $50k exemption!!! The exemption in Texas has been 15k since as long as I can remember. My 1st house cost 58k and I got a 15k exemption back in 86. I'm in my 3rd home with an eval at 250k and I still get the 15k exempt. However, tax rates have climbed in my locality substantially. I paid $6,100 last year alone and have for that reason alone, am considering moving after my son grads from HS. I love the home and area but paying 6,100 is way too high IMHO.


Here's a link to the Baton Rouge tax assesor's home page. The Homestead Exemption is $75,000. A $75,000 house in Baton Rouge would have a lot more room than I need.

http://www.ebrpa.org/yourhome.html

The homestead exemption doesn't exempt municipal taxes if you live within the city limits. As I remember, in the City of Baton Rouge you'd owe about $40 in annual municipal taxes on a $50,000 home.

intercst
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Yes, Louisiana is still a homestead state. Are there no others left? Property tax is on homes assessed at above $75,000, and there are lots of nice homes left below that valuation.
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Thanks for all the links, intercst. You know, I'm starting to feel bad I said anything...we have too much traffic already. For some reason, I thought there were a few other states like this left. Some of the counties in Mississippi reduced their property tax because of casino income -- Harrison springs to mind -- but I'm not sure if they did away with it altogether.

Don't forget, people, sales tax is almost 10 percent in my parish so go someplace else!!! Especially if you like to shop. :-)
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I wouldn't consider property tax a debt. Sure its an obligation, but so is buying food. Are you not out of debt until you have all the food you will eat for the rest of your life? Or all the heating oil? Property taxes are generally paying the local government for services they are providing to you.


Well, I have an irregular income so I need to keep recurring expenses down as much as possible. It may be a mind-game but there it is. Another poster said they were paying $6,000 a year in property tax -- my entire house note with insurance was less than $6,000 a year and I bought in the early 1990s not the 1950s. Heating oil is not an issue, I'm not even sure what you would use it for or how it would get in your house. This is the (sub)tropics! You know, that place where birds fly to in the winter? This is one of them. :-)

We have sales tax and inventory tax to pay local gov't for services. And people with McMansions do pay property tax. As do landlords. Only the home you live in is exempt. It seems fair to me. Do you want to encourage low income people to develop stability and buy homes, or do you not? I think a homestead exemption is a very good way to promote stability. Where the people do not own their homes or have a hope of owning their homes, it can get pretty ugly.
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I just increased monthly additions to about $900/month. $1500 in savings and am paying down my credit card balance of $15k by about $1000 per month.

If you are paying high interest rates (over 10%) on those credit cards, you might want to use all available monies to pay them off right now instead of contributing to your 401K. Also, start by paying the most against the highest interest credit card, while paying minimums on the others. When the highest one is paid off, proceed to the second highest interest rate card, etc.

When your cc debt is gone, max out your contribution to your 401K. Here are the annual maximums for those over 50:

2004 $16K
2005 $18K
2006 $20K

In addition to the above, contribute $3000 each year to a Roth, since you appear to qualify from an income perspective (under $110K/year)--not only does the money grow tax-free, but the withdrawals in retirement are also tax-free.

As others have suggested, keep track of all your expenditures, even for coffee. Cut out all/almost all that are unnecessary (only you can determine what's necessary). Visit the "Living Below Your Means" Board.

After tracking expenses for about six months, you should know what your necessary expenses are each month. You can plug that number into a retirement calculator, along with the numbers of your retirement savings to date, and it will tell you how much you will need to save each year NOW in order to retire in 10 years:

http://www.fool.com/calcs/calculators.htm?source=LN

2old

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<<2828 asks,

Are there places where they have no property tax that are next door to a state that has no sales tax? That would be a good place to call home.

I don't know about that, but Washington State has no income tax and Oregon has no sales tax. You could live in Vancouver, WA and do your shopping across the border in Oregon.

intercst
>>


All true, intercst. In addition, property taxes on homes usually amount to a little less than 1% of fair market value per year in Washington State. No sales taxes on food or drugs.

Voters in counties around Seattle seem willing to vote for any tax increase the politicians care to put up for a vote, but ther is also an active anti tax group that submits state wide initiatives to cut taxes at every general election --- this year the proposal is to cut local property taxes (other than schools) by 30%. This comes as a result of an 800% increase in tax revenue from these local property taxes over the past twenty years.

In addition, Washington has a knife edge balance between Republicans and Democrats which tends to keep state government reasonably honest and competetive, and taxes low.

So if you stay out of the Seattle area, Washington State can be pretty tax friendly compared to many.



Seattle Pioneer
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Where the people do not own their homes or have a hope of owning their homes, it can get pretty ugly.

**************************

You mean places like Manhattan?
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Yet with an income as high as yours, if you invest in such things as reading a few books on savings

I just want to point out that while this necessarily requires that you invest some TIME, it doesn't have to require MONEY.

There's this lovely thing called the public library.

Not that the cost of a couple well-chosen books - even hardbound - would be a huge obstacle to you, but every little bit helps.
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Are there places where they have no property tax that are next door to a state that has no sales tax? That would be a good place to call home.

2828

------

I'm living there - property tax isn't ZERO, but you'd pay about $370 a YEAR on a $150,000 house. Once the house is paid for, you could afford that being a greeter at Wal-Mart... 8->

I belive my brother, in Michigan, pays, literally TEN TIMES the property tax that I do. Add a zero....

My weathers' nicer, too....

I don't think there's such a thing as no sales tax...do you mean State tax? It's high here, but I'm 30 minutes from the border where it's much lower.

My state: Alabama, north end.
Neighboring state with no state income taxes: Tennessee

(Live here...work there....)

(Yeah, we keep up the red-neck-dueling-banjos image just to keep the population sparse... 8-> Truth is I'm surrounded by geeks and NASA engineers....)


StockGoddess
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First off, I would like to thank each of you who took the time to respond to my question. You've all provided me with a great start and also a little peace of mind.

The common theme in responses seemed to be that I am generally on the right track already but need to:
1. Track and watch expenses.
2. Pay down the CC debt like I'm doing..or maybe a little faster.
3. Pay my CC payments into my savings once the CC debt is gone.
4. Research saving and how to live frugally.
... plus maybe other States or Countries with lower expenses.
5. Start a Roth
6. and did I say ...track and watch expenses!!


...and Pekinrobin seems to not want a rush of new neighbors... :)

All good points and I will check out the various recommended web sites and bookstores.

Thanks all
Jim

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Without knowing anything about the "events and circumstances" you mention, it's futile for anyone to offer advice. I do wonder, however, with a $90+k income how you managed to incur a $15k credit card balance.
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>------
Without knowing anything about the "events and circumstances" you mention, it's futile for anyone to offer advice. I do wonder, however, with a $90+k income how you managed to incur a $15k credit card balance.
<------

Well, I didn't always have this income. I've had ups and downs over the course of my life. Most recent and worst down was that in 1994 I qualified for and recieved ADC (welfare).

Here's a brief income/salary history..
1994 $ 4,400 - on ADC
1996 $13,400
1998 $38,417
2000 $54,800
2002 $75,900
2003 $89,100
2004 $94,000

It's been a steady uphill climb as I established myself and moved to other companies as opportunities presented themselves. I work in finance/collections and significant income increases only occur if you jump companies, which I've done.

My CC debt was at about $25,000 not all that long ago. Plus instead of paying that off, 2 years ago, I paid cash for a significant portion of my only sons 1st 2 years of college education at an out-of-state school. I am still paying his living expenses for another year or two if he keeps his grade point up.

So that's why CC debt is still at $15k. But at my current rate of payback, it should be down to zero within a year.

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