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My wife and I were recently married. Most of the investment/retirment advice we read talks about starting as soon as possible and letting time work for you. Unfortunately, due to life events over the years we haven't done that. We are coming to the game a little later now, I'm 45 and she is 40. What is our best strategy for accumulating wealth, while still being able to enjoy more than mac and cheese?
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Pay yourself first.

Live on what's left.

There's an old oil filter commercial that's says - you can pay me now or you can pay me later. Some mac n cheese now might keep you away from cat food later.

rad
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reallyalldone writes,

Some mac n cheese now might keep you away from cat food later.


Have you seen the price of cat food? Mac n cheese may be cheaper.

intercst
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Like you, I started late. After getting my kids through school -- a long story I will spare you, I finally had some money for myself and got into investing at the age of 50. I immediately made several typical beginner's mistakes: followed "hot tips" from friends of friends, took at face value what I saw posted here by enthusiasts at the Fool, and bought several things at their height, just before the bubble burst. (An old IRA I had from a previous job fell from close to 50k down to somewhere in the 20's. Now it's up to 34.8k.)

Anyway, the thing I found most helpful was the idea of "paying yourself first." (This idea already been mentioned in this thread.) I didn't have a 401(k) at the time, but soon set one up with a $200/every-two-weeks contribution -- i.e., every two weeks during the nine months of the year that I get paychecks. That was really low and just to get me started. Then I gradually upped the contributions to $725/every-two-weeks, and now I'm going to up them again because I got a raise. After DW and I got used to a certain level of living, we just gradually funded this 401(k) and I find that I don't miss the money. (And I'm not even sure how aware DW is of how much goes into it!) She's self-employed and has a SEP. In addition, we both have Roths. We've managed to max the Roths and the SEP, but (although I read about it here), I've not been able to max the 401(k). But I hope to.

The 401(k) has a couple of nice advantages: (1) Since the money goes into the account even before I see it, it makes saving easy. (2) It reduces the amount of income tax I have to pay.

Read. Think. Learn. There is no end to that. The best board I've found here at the Fool is The BWM Method: http://boards.fool.com/Messages.asp?mid=25930211&bid=116681

--SirTas
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My wife and I were recently married. Most of the investment/retirment advice we read talks about starting as soon as possible and letting time work for you. Unfortunately, due to life events over the years we haven't done that. We are coming to the game a little later now, I'm 45 and she is 40. What is our best strategy for accumulating wealth, while still being able to enjoy more than mac and cheese?
--------------

I don't have information specific to your financial situation or your level of knowledge about investing, so my suggestions are pretty generic:

1) First, and of primary importance, set your asset allocation (Stock Funds/Bond Funds/Cash) based on your age, risk tolerance, investment horizon, available funds, etc. Diversification/asset allocation is the only thing that investors have total control over and it is critical to long-term success. Keep the plan as simple as possible.

2) Only have one portfolio in your Investment Plan which includes your 401k, IRAs, Taxable Accounts, etc. Multiple portfolios are harder to manage and usually end up with a lot of overlap, excess funds, additional costs and an asset allocation plan that never gets fully executed.

3) Invest in the following order:
---- 401k up to the match to take advantage of any "Free" Money.
---- Roth IRA to take advantage of the Roths many advantages and to diversify amoung tax-deferred (401k), tax-advantaged (RIRA), and taxable accounts. This will help you stay within your asset allocation by making a larger variety of funds available to you where your 401k may be limited.
---- Return to your 401k and max it out - if it has quality, low-cost funds that you need and you have the additional funds available for investing.
---- Taxable account. This type of account can be helpful also because your tax-deferred and Roth IRA accounts need to be utilized for tax inefficient investments like Bond Funds, REITS, Stock Trading Accounts and High Yield Bonds. The Large Cap Index Funds are very tax efficient and could be used in a taxable account. Also any tax-managed accounts would do well here.

4) If all of this makes your head swim, then you may want to look at Target Retirement Funds which make investing pretty simple:

http://tinyurl.com/363o6k

5) Additionally, take a look at Vanguard's retirement planning information:

http://tinyurl.com/yrzwtj

Good luck...Bill
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...I'm 45 and she is 40....

Invest 20% of your income for the next 20 years and you should be fine.

This isn't as hard as it sounds since employers may match 3% or more, the tax savings for using things like 401's, will add another couple of percent so you are really just looking at reducing your take home pay by 10% or so. If you just went from paying for two houses or apartments this should make it an even easier goal to meet.

There were some articles recently about this strategy recently that you should be able to google. These were geared toward recent college graduates looking at retiring early but the math would work even better for you since you are older.

The key is keeping investing costs low and not being too conservative. As odd as it sounds, if the stock market gets ugly and goes down in the next year or two, this is really good news for you since you will be buying the stocks less expensively and getting more shares for your money.

Three index funds, Total stock, total international stock, and total bond index funds will be a fine starting place while you learn more.

Greg
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..There were some articles recently about this strategy recently that you should be able to google.....

Out of curiosity I tried to find this and I couldn't.

I'm not sure what assumptions that it made but I'm not sure these numbers work out or not, it might have also depended on saving part of future raises as well.

Greg
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Here are some asset allocation models. You might want to start with the simpler stuff (like #4, level 1).
http://www.geocities.com/finplan825/ModelPortfolios-Data.html

--SirTas
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Thanks for the responses.... some good information here!
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Just to add.

Track your spending in Quicken or Microsoft Money.

You may find areas that you can reduce spending (and add to savings).


buzman
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I started when I was 42 (1992) with the 401K through work. I wasn't maximizing my contributions for the first several years, but still managed to lose 60% in my 401K between 2000 and 2002. This taught me 3 very important lessons:

1. Asset Allocation
2. Asset Allocation
3. Asset Allocation

I read Bill Bernstein's "Four Pillars of Investing", and have tweaked it a bit for my individual case. Since 2002, I have invested every available penny, which works out to more than 50% of my gross income.

If everything goes as planned, I should be able to retire in 4 years (at 61).

Good luck to you and I recommend the book above,

2old
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