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Middle class folks, how did you play it? (Retirement/housing/fun money)

Discussion in 'Bad Dog Cafe' started by naveed211, Apr 7, 2021.

  1. black_doug

    black_doug Friend of Leo's Silver Supporter

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    It seldom goes according to plan. I have no advice except what's been said. Try to avoid credit card debt. I wish I'd listened to my mother.

    We had two kids in the '90s. I had been putting money into retirement/mutual funds while renting. We both had FT jobs so there's daycare on top of everything else. By 2005 though that all had to be withdrawn after a lay-off and two years of unemployment. Then bankruptcy.

    I retired this year and thank God every day that my parent's estate will provide the inheritance needed.
     
  2. DesmoDog

    DesmoDog Tele-Afflicted

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    I've heard it said that the best time to plant a tree was 20 years ago. The second best time is today. Same could be said for starting to save for retirement.

    All through high school and college and even a couple years after, I worked for a family owned Schwinn bicycle shop. Most of that was part time. But when I left, they gave me a profit sharing check for about $6k. I didn't realize they did that for employees, but there it was. I found out if I didn't put it into some sort of retirement plan I'd lose a big part of it to penalties and/or taxes, so I started some self managed investment fund with it. My dad was an individual investor and gave me some guidance.

    Over the years I neglected to spend much time managing it. I bought stocks at first. Multiple companies, NEVER all my eggs in one basket. Made out pretty well on some, lost it all on others. Eventually I started buying funds and let them worry about managing it.

    I'm planning to retire next month at 58 years old. That $6k that I didn't really pay enough attention to is worth somewhere between $250-$300k now. Invest early, invest often... The choices you make at a young age can have a HUGE effect on where you end up when you're 55. That account isn't my only retirement account by the way, it's not even my main account, it's just my "Schwinn account" that has always been almost an afterthought.

    Rough numbers... putting $6000 away at age 25 and then just working with that has brought me to the same point I'd be at if I had started putting $600/month away at age 38. Time is your friend.

    As already mentioned, take advantage of any retirement plan you can right now. 401ks are like free money if the employer matches it. And anything you can put away when you're young can make a huge difference over time. Yes, it may be easier to save $500/month when you're older, but $100/month plus time can be more lucrative. Time really is your friend here. Start now. Invest what you can. Don't put it off thinking you'll make up for it later. You won't.

    One thing I'm realizing now that I'm serious about retiring is my "number" is lower than I thought. It won't take as much to comfortably retire as I had thought, which may say more about my expectations than anything but that seems to be a common theme. A lot of friends/relatives have retired somewhat recently, and when I bring this up it seems pretty universal that the real number you need to live off of isn't as high as what they first expected.

    All of which is meant to inspire people to save now and don't be intimidated by what may seem like an unreachable amount of money.
     
  3. jondanger

    jondanger Poster Extraordinaire Silver Supporter

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    Please keep in mind that any advice that someone who is close to retirement now gives you is from a world that doesn’t exist anymore. Might as well learn Latin to prepare for a move to France. Some general principles might apply, but specific advice is bound to be obsolete.
     
  4. 4pickupguy

    4pickupguy Doctor of Teleocity

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    I’m winning the lottery, I don’t know what the rest of you are going to do...

    Good luck!
     
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  5. drumtime

    drumtime Tele-Holic

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    Saving for retirement is like losing weight. The only way to do that is to eat less food. The only way to become financially independent is to spend less money. I've known plenty of people who made 6 figure incomes for most of their adult lives, and couldn't retire because they spent too much without saving enough. Wealth is how much money you keep, not how much you make.

    Understand that financial independence is the number one goal, no matter what your job is, no matter what your income. Lots of good advice here on how to do that. Also, consider that there's no reason you have to work until you're a certain age if you can sock away enough to get out sooner.
     
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  6. markal

    markal Tele-Holic

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    It’s such a krap shoot! Obviously, save what you can, but each person has to decide what is an appropriate trade off between enjoying life now and guarding against risk later.

    My wife and I chose not to have kids. So that makes our situation a lot different than most middle-aged friends we have (I’m 46, if that matters). We work pretty hard, and save a lot, but we’ve also been very, very lucky, too (right time, right place for new job opportunities, that kind of thing). It’s hard to plan for luck. We also choose to live a house that is well below what we can “afford.” That makes a big difference. When we bought our current place, both our agent and our lender were hinting that we should go higher, but neither of us wanted to borrow that much money at this stage in our lives. I’m pretty sure some of my colleagues look down their noses at where we live (a pretty dull suburb), but I don’t care.

    At the same time, we spend a lot of money (although a lot less during COVID). We’re well aware that if we buckled down, maybe we could retire really early. But we like having fun, so screw that!
     
  7. Wrighty

    Wrighty Friend of Leo's

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    When I was around 20, my boss, a family friend, pushed me to start a private pension fund. Kept it up in one form or another for 40+ years. Just got used to paying it. For the last three years I’ve thanked him every day. I was made redundant and the fund I’d accrued has made the difference between struggling and enjoying retirement. Enjoy life now with an eye to saving what you can afford towards the future. All you can do.
     
    Last edited: Apr 7, 2021
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  8. Dacious

    Dacious Poster Extraordinaire

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    Here in Aus part of your wages and conditions is 9.5% goes into compulsory Superannuation. Contributions and earnings in the scheme are taxed at 50% of what you'd normally pay. Most schemes are nonprofit industry based, but you can choose your scheme.

    Wife and I paid off our home last year.We'll leave here for health reasons or can no longer climb the stairs. I salary sacrificed a significant amount into my Super. That only reduced my take home pay to what it would have been had I paid tax on the gross anyway. As a result of that plus a redundancy from my job last month rolled into my Super, I'm semi retiring on a tax free income stream.

    Earnings in the scheme are not taxed in pension mode.

    My superannuation should last 25 years and at that point if I'm still alive my wife's public service pension will still be paying her an indexed pension equal to her wages when she retired plus I will qualify for the aged pension.

    I won't be taking overseas trips every year or buying new cars all the time but my income stream will allow me to maintain my car, bike, guitars and help pay our bills.

    That's the Oz system. Aged pension which is below the poverty line or you earn compound interest on your Super and retire as partly or wholly self-funded. The government encourages you with carrot and stick to do the latter. As aged pension is 10% of the government social welfare budget it's smart policy.

    Albert Einstein said “Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn't, pays it.”

    That's what retirement savings are. The Australian Superannuation industry is worth $US2 Trillion - it's one of the biggest blocs of private investors bar none. That's people's retirement savings.
     
    Last edited: Apr 7, 2021
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  9. 1 21 gigawatts

    1 21 gigawatts Tele-Holic

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    Live within your means instead of trying to keep up with the Jonses. Max out your companies 401k early (in your 20s and 30s). Waiting till later to plan for retirement is too late. Compounding interest is the biggest builder of wealth.

    Never finance a depreciating asset. Figure out a way to never have a car payment. It is not a necessary expense which a lot of people have become comfortable thinking about it as. Drive a beater while saving the money that you would be spending on a car payment. It won't take long before you can buy a nicer used car with the cash saved. Rinse and repeat and you will be driving nice used cars without a car payment in no time.

    Don't pay rent unless your location is temporary. A mortgage is often cheaper than rent. Might as well build equity instead of building it for someone else.
     
    Last edited: Apr 7, 2021
  10. bgmacaw

    bgmacaw Poster Extraordinaire

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    Just don't buy a 2000 dollar 1000 dollar car.

     
  11. Cpb2020

    Cpb2020 Tele-Meister Silver Supporter

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    I started thinking about it seriously about 10 years ago, in my late 30s. I wish I had known in my early 20s what I know now (such is life). But I’m glad for what I learned along the way.

    Heavily immerse yourself in the Choose FI podcasts for several hours a week for 6 months and Mr. Money Mustache. Read a Simple Path to Wealth by JL Collins. You will thank me later. At a minimum, you’ll learn a ton.

    I always maxed out my 401k (with no contributions by any of my employers), but about 10 years ago started more heavily investing beyond that in 529s (we’ve got 3 kids), index funds and an HSA with whatever excess funds we’ve had. The contributions automatically get taken out of my checking account.

    In part, the index funds were our “rainy day” fund as I work in a very unpredictable field that, if it went away, would be difficult to replicate. I always have to have a “plan B”.

    Some things that have definitely helped us along the way:
    - I went to undergrad on a full scholarship and graduated with no college debt, as I worked 20-30 hrs / week during college
    - buying cars and keeping them for 10-15 years
    - maintaining a steady, modest standard of living, even as our income has gone up
    - never having a running balance on a credit card
    - keeping recurring costs like subscriptions to a minimum (we recently cut the cord to cable)
    - never carrying debt generally other than a mortgage
    - not upgrading cell phones and computers unnecessarily
    - doing most home repairs myself

    And all of those things will also make it much easier to transition to retirement, whenever that should be, as we won’t feel like we’re “downgrading” our lifestyles (although we intend to downsize our house and move to a lower cost of living area). For what it is worth, we don’t feel like our lifestyles are subpar, as we never had the keep up with the Jones’s mentality.

    I now happily serve as a financial resource for my work colleagues. I try to educate them that we spend thousands of hours making our clients’ lives better each year, the least we could do is spend 100 hours charting our own course in life over the next decade.

    And yes, kids cost a ton. How much remains to be seen as my kids are not yet in college . . .
     
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  12. mark53

    mark53 Tele-Meister

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    Lots of great advice here. I did it by starting with 10 percent in my 401k and increased it when I got raises. Put it aside in investments and forget it. Over the years it grows like magic. I made about 65k a year and retired with 1.2 mil. Some sacrifice is required of course but its not that bad. Albert Einstein said " The most powerful force in the universe is compound interest"!
     
  13. Obsessed

    Obsessed Telefied Silver Supporter

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    Yawn. The internet and 401K have created a bunch of zombies. Forget all of that crap. Live your passion fully and authentically. There are no guarantees in life, so live everyday like it is your last. Don't spend time worrying about turning 80 with no money. It won't matter by then anyway.
     
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  14. PhoenixBill

    PhoenixBill Tele-Meister

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    Dave Ramsey does offer some very sound advice. My approach is fairly simple: I live within my means, I bought a house when I was in my 20’s and every month I paid extra towards the principal. I don’t max out credit cards—I use one but pay it off in full every month. I buy modest cars and keep them for 10 or 12 years. I have no debt. Now, I am living in a paid-off house with money in the bank, so soon I will buy another car. With cash.

    At the same time, though, it’s important to have some “fun money” budgeted...key word, budget.
     
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  15. deytookerjaabs

    deytookerjaabs Friend of Leo's

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    I have no advice, I'm the same age as you with zero ****ing clue.


    However, my pops paid into a fat pension for decades. When he was later disabled the cancer bug built up until he could get medicair/aid/whatever. It was too late by then. I was his only heir and the union pension that he put mountains of money into ended up paying me like 14K over the period of 5 years, lol. I almost didn't want to take it.

    My Stepdad, he might retire but I doubt it. My Mother, she'll keep trucking until she can't as well. Some people can't stop, "retirement" isn't a thing for them. Mom has the family anxiety/crazy in her and not working is a bad thing.

    My Grandpa had a hot shot union gig with a big ole pension going way back, he died right at retirement age. Grandma then got dementia right around the same time. So much for all their hard work, if anything was left after her care facility bills my already wealthy uncle kept it as he controlled the estate.

    Grandpa on my Mom's side was a big VP at a Chicago bank before the age of 40. He had it all planned out, they lived in nice suburb (Glen Ellyn) in a big house. He had an aneurysm around 40 and the family fell apart. Grandma did odd jobs, they moved to California and relied on disability & veteran benefits until the end.

    Father in law was two years out from his retirement, passed from COVID last June.




    I guess it would be nice to make it 70 years, if lucky, and after that just hope you won't need to pay rent or a mortgage.
     
    Last edited: Apr 7, 2021
  16. 1293

    1293 Poster Extraordinaire

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    Maxed out my 401k starting when I was making $8.75/hr. Retired at 46.
     
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  17. Warren Pederson

    Warren Pederson Friend of Leo's Silver Supporter

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    I thought I'd be dead a long time ago
     
  18. Mechanic

    Mechanic Friend of Leo's

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    I turned wrenches for 50 years in public transit. Made a decent wage and had access to a 457k. Same thing as a 401 bit government protected/guided. Then there was a pension on top. I managed to Max it out working as much OT as I could. Great gig, I enjoyed the work so long as I didn’t have to deal with the public, but that’s another story. Leave it to say I left cashed out both pension and 457 and made investments in several mutual funds that I had access to from the job. Left with a little over $800k and paid off mortgage.
    Plan ahead save, invest wisely. Stay healthy. I’m now retired but still work for fun. Wife and I run a little deli and grill in a small burn. I work 3 days a week and build VW engines for fun. And play a lot of guitar.
     
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  19. Toto'sDad

    Toto'sDad Telefied Ad Free Member

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    Well you could get in on the ground floor of the Obsessed brand of life in the slow lane.

    [​IMG]
     
  20. Bob M

    Bob M Friend of Leo's Silver Supporter

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    All kinds of great advice here. I worked at a company that offered a 401k match of up to 6%. If your employer offers a match you should fully fund the match. Find a good Financial Planner. They can put you on a proper plan for retirement.

    I retired in June of 2019. Earlier that year my wife was diagnosed with pancreatic cancer. She passed in February of this year. I only bring this up because no matter how you plan reality can get in the way. I’m in the process of downsizing and will be able to buy my next house cash. I will be able to live on Social Security. My investment money will be there for emergency. You are doing the right thing by addressing this now. Good luck on your future.
     
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