Posted: 10/12/2010 7:26:09 AM EDT
|
Okay, the backstory....
Three kids (9,7,4), wife and I are 34, small business owner. Wife and I opened Roths (mutual funds by Janus and others at different times)soon after we got married (Dec 1999). We have both worked for small biz our entire careers so no fund matches, etc. She has been at home since Mar 2001 with kids. We have contributed $100/mo to each IRA and paid pre-paid tuition for each of the three kids. Of course, anyone can look at the marker since Dec '99 and see that for all practical purposes our Roths have slid back to starting value a couple of times. I don't plan on retiring completely, partly because of SS/econ future/etc, and partly because I like my job and it's not physically tasking. I would love to work most of the day on T/W/Th and my job would allow that so scheudle won't be an issue. I do, however, want to PLAN as if full retirement is an option-so where should I go from here? |
|
Quoted:
I do, however, want to PLAN as if full retirement is an option-so where should I go from here? it is actually pretty simple to make a first order estimate: 1) what income will you need, post retirement, to sustain your lifestyle or at least make sure you are reasonably content? 2) do you have any family factors which may dramatically shorten (or lengthen!) your lifespan? "experts" have calculated that post-retirement (age 65) you can withdraw *about* 4% of your nest egg per year and not outlive your savings. let's say you have $1M in the bank at retirement, earning nominal interest via bonds and laddered CD's. with this in place, you can withdraw *about* $40K/year and that money should last you the rest of your life. reversing this equation, if you take your income determined in item (1) above and divide it by 0.04, that will give you an approximation of the savings you will need at retirement. you may be surprised at the number. (!) this 4% rule-of-thumb does have some external factors which may push it one way or the other. for example, you may have somewhat less savings but be "house rich" –– that is, you own your house outright. at this point you could elect to take a reverse mortgage (in essence, slowly selling the house back to the bank) or you could sell the house and either buy a smaller house or rent. as you can see there are a number of situations that may cause you to have to change what you think you will be doing, but as a general starting point the 4% "safe withdrawal rate" rule-of-thumb is a good estimator. e.g., you want $80K/yr in income, you will need a nest egg of $2M. ps: the ARFCOM equivalent for this subject is the FIRE website and forums: http://www.early-retirement.org/forums/ you may initially be interested in the FAQ forum, which has some good info to address the questions swirling around in your head: http://www.early-retirement.org/forums/f47/ the go to the "Hi, I am" forum and introduce yourself, or just browse the posts for situations like yours. ar-jedi |
|
A ROTH is typically not enough for one to retire on since you can only contribute $5,000 per year. With a spouse, you are better off, but putting $10,000 a year away will not allow you a "rock star" retirement either.
If you are serious, you should look into starting a SEP or Solo401k (assuming that you and your wife are the only employees). Those account can actually be funded to a point where you can retire on them and some of the contributions can come right from the company. |
|
Quoted:
A ROTH is typically not enough for one to retire on since you can only contribute $5,000 per year. With a spouse, you are better off, but putting $10,000 a year away will not allow you a "rock star" retirement either. If you are serious, you should look into starting a SEP or Solo401k (assuming that you and your wife are the only employees). Those account can actually be funded to a point where you can retire on them and some of the contributions can come right from the company. Maybe you haven't seen the constrcution industry lately 
This is something we started to look into a couple of years ago, but since things went south the focus has been on eating, not saving for thirty years in the future. |
|
Quoted:
Quoted:
I do, however, want to PLAN as if full retirement is an option-so where should I go from here? it is actually pretty simple to make a first order estimate: 1) what income will you need, post retirement, to sustain your lifestyle or at least make sure you are reasonably content? 2) do you have any family factors which may dramatically shorten (or lengthen!) your lifespan? "experts" have calculated that post-retirement (age 65) you can withdraw *about* 4% of your nest egg per year and not outlive your savings. let's say you have $1M in the bank at retirement, earning nominal interest via bonds and laddered CD's. with this in place, you can withdraw *about* $40K/year and that money should last you the rest of your life. reversing this equation, if you take your income determined in item (1) above and divide it by 0.04, that will give you an approximation of the savings you will need at retirement. you may be surprised at the number. (!) this 4% rule-of-thumb does have some external factors which may push it one way or the other. for example, you may have somewhat less savings but be "house rich" –– that is, you own your house outright. at this point you could elect to take a reverse mortgage (in essence, slowly selling the house back to the bank) or you could sell the house and either buy a smaller house or rent. as you can see there are a number of situations that may cause you to have to change what you think you will be doing, but as a general starting point the 4% "safe withdrawal rate" rule-of-thumb is a good estimator. e.g., you want $80K/yr in income, you will need a nest egg of $2M. ps: the ARFCOM equivalent for this subject is the FIRE website and forums: http://www.early-retirement.org/forums/ you may initially be interested in the FAQ forum, which has some good info to address the questions swirling around in your head: http://www.early-retirement.org/forums/f47/ the go to the "Hi, I am" forum and introduce yourself, or just browse the posts for situations like yours. ar-jedi Roger, should have been more clear in my final question (although the retirement income cals are appreciated)... What investment options should I be looking at in terms of general growth? The way I look at it, I've got 35-ish years left and not much to show for the last eleven due to market issues. What options give me a chance to make up ground and have a viable fund at the end of that time (yes, I know that an actual number would require me to have a goal of $XX,000/yr retirement income). |