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Author: determinedmom Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308782  
Subject: Re: Should I make 401k contributions? Date: 9/9/2006 1:03 AM
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Rosietomato - you are very much asking the questions that I ask. I have spent a lot of time thinking about all these issues lately.

...we can have a million dollars in 10 years (assuming 8% ROI). This won't get us as flush in money in retirement but we are both passionate people and plan on working part time in early retirement doing the things we love, teaching. And gosh this sounds terrible but we have our fingers crossed that the rest of our retirement will be 'ok' at that level.

I've been thinking about that lately. I know that everyone seems to say that you need 80% of pre-retirement income during retirement and if you had a high income pre-retirment well that is a lot of money. but, I look at my mother and see her happily living on, oh, about 5% of my current income. And, when I run my post-retirement numbers they are a lot less than many of the projections that I see here. I think a lot of it just depends on how you want to spend your retirement.

I only (hahahahahaha still that is a LOT of money since I have a lot of expenses/needs and that includes $10K for SS college, where we're paying out of state tuition) have $10K in CC debt and 6 years left in my mortgage. My property is worth 5x my mortgage but it is my 'forever home' and we will never sell it so its value is worth nothing in our financial book, and will remain a liability to keep it up. Thus we need to make sure that we have enough to take care of our 'forever house' as well as our medical and regular living.

The getting your house paid off will be a great benefit to you. As, I think everyone here must know, we plan to build a house. I know the pitfalls and have analyzed it. The good news is that I actually think we could fairly easily pay off the house within 8 years of building it. However, there is a catch. We can do that by cutting our retirement savings. So, I debate whether to (after credit cards are paid) to aggressively attack the mortgage at the expense of the retirement or aggressively found retirement at expense of mortgage or to try to sort of split the baby (which I am sort of leaning to...once credit cards and car loan are gone contribute the max we can to 401k - currently $20k counting catch up contributions then put the excess over that to setting a schedule to pay off the mortage in roughly 8 to 10 years...still need to do so more number crunching though)

Concern that you really need to max your retirement accounts NOW because right now or you will be working until the two of you are in your late 70s! And since I don't know what sector you guys are working in, I don't know how long your employers will allow you to actually work at your salary level.

Well, DH won't want to work until his late 70s. We wants to retire at or around 65 or 66. I actually work in a field where it is common to work past retirement age although one may slow down a bit. That said, I would prefer to not do so if I don't have to. But I have a lot of competing demands so I'll work as long as I need to in order to meet them...

You have children that are rapidly approaching college age. You will have to deal with paying or paying part for college. Right now you have really got a great handle on your budget (horray!). You plan on taking care of your mom when she needs it(horray!). Your CC debt may be able to be covered with your bonuses (yes!!!), but your income bracket makes it much more prudent to sock pay increase money away in your retirement accounts instead of spending it. IMO costing 28% less in federal taxes is better than any CC finance charges, but please someone enlighten me if I'm wrong!

I am in the 33% tax bracket so that may impact the issue of whether it makes sense for me to do more 401k contributions even if it slows down the credit card payoff somewhat. The college issue is a big one. I am thankful that my son's actually want to attend state universities that are not that expensive. OTOH, I expect to have two in college at the same time. On still another hand, however, one of them won't be getting anything from me for college if he doesn't stop misappropriating our money.


determinedmom, you are a saint in my books. I wish I was as adept as you in budgeting your finances.

Thanks...but I feel just the opposite about myself. I am capable of budgeting. I am well educated and knowledgeable.

And I am the biggest idiot in the whole wide world.

I am so furious at myself for not handling all this better. Yes, life has thrown a few curves at me (mostly kid related). And, when I started work 401k plans didn't exist and my early jobs had no retirement savings of any kind. Yet, I spent money like I had an endless supply. I thought of credit limits or credit cards as cash. I can remember thinking when I would get a credit limit increase that I now had more money to spend. Wasn't that idiotic? Rationally, I knew better. But, I think I felt I had to have....X and I couldn't wait. I would get it now and, if I paid interest, so what.

Of course, I knew that retirement would loom someday. I didn't marry until my late 30s and thought I would be responsible for myself. I guess I thought that I could catch up later. I was going to save...next year or the year after or maybe that year next decade.

But, then I got married and decided to have children. My bio son was born right after I turned 40 years old. And, I loved being a mom. So we adopted two more children. And, I'm not sorry but I really think I didn't think it out from a financial point of view.

When my son was born and I was 40, we were in relatively good financial shape. A little debt but nothing major. New house that was well within our budget. It never occurred to me that this newborn child might result in extraordinary expenses (that is, beyond those of most children). I was at a point when I really needed to focus on two things ... saving for retirement and saving for college. Had we simply done that during the last 12 years then we would be fine now. But, we didn't. We adopted two more children, resulting in huge expenses some of which were anticipated and others were not. And, since then, we've been on a treadmill and making little headway.

So, while I thought I could catch up I really haven't been able to do so at least not to the extent I wanted to, intended to.

And, I rightfully blame myself the most. Yes, I've gotten with the program now. Suddenly (it seems) I woke up to the fact that I am in my 50s and DH is pushing 60. And college is looming very quickly. And the time is fast running out. So, it is easy to focus on all this now. Fear will do that.
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