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Author: HELJinCT One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Re: Fledgeling Retirement Investor Date: 11/15/2004 3:53 PM
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What age are your kids and are you saving for their education? Have you looked at a 529? Go here for more info: http://clarkhoward.com/topics/529_guide.html

Oldest is 3, youngest is 1. Not yet doing a 529, just got out of some debt and stuff. Wanted to get the retirement nest egg started and all on the right foot first.

That makes better sense. My feeling is that if you can not afford a 48 month loan, you an not afford the car; try to stick with 4 year auto loans. Good rate, however. It is not necessarily a mistake to buy a new car, just to overpay for one.

Yeah, something like that for sure. I spent $22,000 on my first vehicle. At the time it was a 2-year-old used SUV (4Runner). That was 1998. I did the 5-year finance thing at a gaudy 10% rate, which was sorta the norm at the time for a used vehicle and a guy with mediocre credit. It's now 6 years later, its been paid off for almost 2 years, and still running. It's kind of a beater now, unfortunately, and not a week goes by where I dream about a decent car.

I tend to apply any tax refund against my property taxes. I imagine the bill for your home is much bigger than my little condo.

One of the reasons I live in the town I do is because the taxes are very good. My annual taxes are around $3500 (compared to around $6000 for the same sized property in other nearby towns). I have a 4.25% 5-year ARM (and we plan to move within 5 years). So my home insurance, mortgage and taxes come to about $1600 a month total.

I recommend an ING Direct Orange Savings account to hold the money at 2.2% (no fees). With a Foolish recommendation (just reply by email if interested), you can get a $25 bonus and give the Fool a $10 bonus.

Are there any minimums or length of term requirements? Or is it a standard savings?

I think you said you had $100k equity and $220k remaining in mortgage. Is the $15k what is left after previous draws? If so, what is the amount and interest rates?

205K is on the mortgage, 29 years left, 5-year ARM at 4.25%.
15K is on the home equity line at 3.99% (based off prime rate). 15K is what is left. The original line was 30k. All 15k I took out went to pay off credit card balances with 10%+ rates. I paid the other 30K of the cards off with my own money over time. I needed some help from the equity line otherwise I'd still be in CC debt right now. I know, I lost equity, but it was part of a massive mental battle. I decided since my home actually appreciated 33% in 3 years for no reason, I didn't mind putting 15k of that found money towards the cards and eliminating them.

Is this some kind of pension fund? Are the contributions considered tax deferred or will they be a bonus taxed as income? This is 15% above your income or 15% of your income?

It's a profit sharing account. It's 15% in addition to what you make in the year (salary). Year 0 you dont get anything. Year 1 you get 15%, but only 20% of it is vested each year. If you leave the firm, you are required to take the money with you. You get a K-1 statement at end of year for it.

It is in place of a matching 401k, and since the fund tends to perform in the 5% (worst year) - 80% (best year) range each year, supposedly its a smashing success in the opinions of other employees. Since it's not really an option I didn't sweat it too much :)

I would figure out how much of your net income you want to target towards retirement.

I'm truly clueless on this. I have no relatives or family members who actually retired by choice and live off of savings. Adjusting for inflation just makes it all the more confusing.

I'd love to retire at 50, but I can see myself working forever, like my relatives :)

Add up your mandatory monthly expenses, estimate your monthly discretionary expenses based on your last 6 months, or year to end of previous month. Don't forget to add in annual and semi-annual expenses such as auto insurance.

I've budgeted myself in such a manner really:

After all expenses (mortgage, loans, spending, gas, grocery, etc), we have about $2500 a month left (after taxes). Right now $500 has been going to 401k, and 2k has been going into savings.

The real problem is that we're eager to move into a bigger home. We've been in this one for 4 years, and it was supposed to be a starter home. It only has 6 rooms. We can afford more house and loathe our small quarters, but I am leary to give up the extra cushion we have every month. Was thinking a good compromise was to stay in the hellhole we call home for another 1-2 years :)

Sounds like I should max out the Roth IRA for the wife and I since my company does not match the 401k, then look at other options second.
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