Greetings Fools!I am almost 25 years old with a lofty goal to be retired by the time I'm 40. I make a decent income, and I don't have any major debt (I have a car payment that I'm paying down as fast as I can). Currenltly, I have a few stocks that I have either been given as well as some that I have bought with money gained from those given to me. My current portfolio is small but I'm not starting with nothing.What are some tips and/or tricks you have about speeding up the road to retirement? Do I stick to stocks and funds, or look to other investments like real estate? Are there any books you recommend?Thank you very much in advance for your time.Spencer
What are some tips and/or tricks you have about speeding up the road to retirement? One thing I can say for sure, Spencer, is that you're very smart for thinking about this early.You may not yet even be "in the fast lane", but there's a TMF board where people are talking about how to "Move Out of the Fast Lane" -- not to fully retire and do nothing, but rather how to have enough independence at a fairly early age to be able to do exactly the kind and amount of work that you want. Here's a link to that board:http://boards.fool.com/Messages.asp?mid=17255938&bid=115974Regarding books, you owe it to yourself to at least read through "Rich Dad, Poor Dad", by Richard T. Kiyosaki. It gets mixed reviews, but it does present a perspective that's worthwhile to understand. I've also heard that "Your Money or Your Life" is good, so I'm reading that next week.
Regarding books, you owe it to yourself to at least read through "Rich Dad, Poor Dad", by Richard T. Kiyosaki. It gets mixed reviews, but it does present a perspective that's worthwhile to understand. I've also heard that "Your Money or Your Life" is good, so I'm reading that next week. Well, maybe I'm on the right track, as I have read "Rich Dad, Poor Dad" which I enjoyed and rather I agree totally with his opinions in all areas, the book is what started my thinking of changing my views on money and finance.Thank you very much for the board suggestion because even more important than "retiring" is having that independence.
Tip #1: Read this board. All the tips that you will need have already been posted to this board. :) Tip #2: How to find those tips without reading 67137+ posts: Read the FAQ, Sort the board by number of recs (click on recs and it will sort that way for you). Not all the highly rec'd posts are about RE, but that will at least give you a good idea of what some other people do. If you have a specific question, don't be afraid to look for it. If you can't find it, then post your question. Tip #3: It matters not what you make, but it does matter what percentage of your income you are able to save. In other words, you said you make a decent income and don't have major debts. The higher your savings rate, the sooner you can retire. This works two ways. One is that by reducing the amount of money you need to live on you are reducing the amount of money that you need to retire. The other is that by reducing the amount of money you need to live on, you are increasing the amount of money you can save. I'd call this playing good defense. Tip #4: There are many roads to retirement. Stocks, real estate, lotteries, etc. Until you figure out what is right for you, stick to the simple paths. For example, low cost index funds are hard to beat in terms of risk/return and time/money it takes to own them. Start there and if you want to find other investments down the road you can always use that base to grow from. Real estate usually is done with larger sums of money, $500 is generally easier to invest in an index fund than it is to invest in real estate.Tip #5: Take advantage of all the tax breaks/free money that you can. 401k matching by companies is free money. For example, a 50% match on the first 6% that you save means that if you put in 6% and that comes out to be $1000, they are putting in $500. You have gotten a 50% return on that money the first year...not even considering the tax benefits or that the stuff you invest in my grow. Roth IRAs are another great opportunity. Tip #6: Work backwards. To figure out what it takes to speed up retirement, you need to know how much money you will need to live on, how many years after you retire you are going to live, what kind of return you can expect on your money (after inflation), how much you can save now. Make your assumptions and figure it out. I think most folks on this board tend to be overly cautious on their assumptions (plan for the worst, hope for the best). So, you are better off assuming that you are going to get a 5% return on your investments than a 20% return. I think most folks would agree that it is better to assume you won't be able to retire until you are 55 and then be surprised that you can do so at 50....rather than planning on 50 and being surprised that you can't do it until 55. Tip #7: You have already read all those tips and are looking for more? Sometimes it is easier to increase your income than it is to decrease your expenses. If you are making $40k per year after taxes and living on $20k, you might find it very hard to get that 20k down to 15k. However, a few extra hours at work or a change in jobs might result in a bump to $60k and if you don't change the way you are living, you get an extra $20k towards your retirement fund every year. :) I'd call this playing good offense. Tip #8: Don't believe any of the tips that someone on a message board gives you. Think about them yourself. Look at all of them skeptically. Question all of the assumptions. Look for independent verification. For suggested reading, there are a ton of books out there. There are even book boards here at the Fool. My favorite is probably "A Random Walk Down Wall Street" by Malkiel, but there are lots of good ones out there. Trick #1: Buy a winning lottery ticket.Trick #2: Marry someone with a lot of money.Trick #3: Become a pro-athlete. Anyway, just remember that the most important thing is that you invest early and often. One thing that a lot of people do is that they build spreadsheets to track their investments, goals, costs, that kind of stuff. Try this, build a spreadsheet where you invest $1000 a month for the next 15 years at a 5% return. Now do the same thing where you invest $100 a month for 15 years at a 25% return. You should find that the $1000 a month is the better deal. Hope that helps. justpatrick
Wow, justpatrick, nice summation. Definitely worthy of a rec (I imagine you'll get many).I especially like your comment in Tip #8. This is quite often missing. Grab a few tips here, a few ideas there, then "chew on" the information to see what fits for you.As much as we would like one can't-miss, formulaic approach that works for everyone, it's not going to happen that way. I'm glad that people are willing to share so much on these boards, because you learn 2 things (among many others, of course):1. There are infinite situations, challenges & goals out there.2. There are just as many ways to success, all of them "the right one" for the person who's employing it successfully.One more fundamental Tip to add to yours: Take some time to learn the basics of the tax code: bracket boundaries, capital gains treatment, exemptions, etc. It will keep you from making some dumb mistakes.One more Trick: Buy a small, run-down house on a nice piece of land next to the highway...right where the next shopping mall is going to be built. (Hey, Spence seems to like real estate! :-))
Patrick,Thanks for an awesome reply to sgstanton, a new Fool. We especially appreciate it when more seasoned community members take the time to welcome and help the newer folks.I've extended your Fool membership an additional year, on us. That post alone was worth $30 for the people who pay attention to it :)Best,David~~~~~~~~~~~~~~~~~~~~~David ForrestTMFBogeyFool Community Manager
Anyway, just remember that the most important thing is that you invest early and often. One thing that a lot of people do is that they build spreadsheets to track their investments, goals, costs, that kind of stuff. Try this, build a spreadsheet where you invest $1000 a month for the next 15 years at a 5% return. Now do the same thing where you invest $100 a month for 15 years at a 25% return. You should find that the $1000 a month is the better deal.Right On!!! But just imagine what happens with $3000 per month at 24.3% CAGR. It turns into a BIG BUNCH of money in a hurry. Unfortunately, I waited until the last minute (13 years before retirement) before starting to build my "play money" so that's why I need the big monthly contribution (403(b), 457, Roth IRA, Non-Deductible IRA, and Taxable Account) and the rather high return I've been able to consistently manage in order to speed up that old retirement date just a few years.Imagine where I'd be if I'd started as early as possible, and maxed out all the way!!! Move over Bill Gates (don't I wish).
Hi Spencer, Welcome it seems as though u r new like me. We seem to have the same lofty goals although, I am sorry to say that I a hide or 2 older than u.I'm sure somewhere along the way we'll both come up with some more great ideas, keep reading this sight is great.Thanks againHave a great dayDale (f)
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