<![CDATA[Early Retirement & Financial Independence Community - Young Dreamers]]> http://www.early-retirement.org/forums/ en Sat, 21 Nov 2009 00:06:11 GMT vBulletin 60 http://www.early-retirement.org/forums/images/early_r/misc/rss.jpg <![CDATA[Early Retirement & Financial Independence Community - Young Dreamers]]> http://www.early-retirement.org/forums/ Pension Plan http://www.early-retirement.org/forums/f30/pension-plan-47345-new-post.html Tue, 17 Nov 2009 05:12:50 GMT Hi! Just looking for a little advice. I am 29 y/o and do a fair amount of independent contracting. I have maxed out an individual 401k as well as... Hi! Just looking for a little advice. I am 29 y/o and do a fair amount of independent contracting. I have maxed out an individual 401k as well as a 457b. i still have a lot of cash i'd like to defer taxes on. I was thinking about setting up my own pension. Any one know what the process is like? Is it worth it given my age? How do I calculate how much I need to contribute to receive say $150,000/year? Any resources I should read (scoured the net but can't find anthing). Thanks so much! ]]> Young Dreamers alwaysjammin http://www.early-retirement.org/forums/f30/pension-plan-47345.html Recession Over? Fat chance... http://www.early-retirement.org/forums/f30/recession-over-fat-chance-47318-new-post.html Sun, 15 Nov 2009 18:42:39 GMT Its been pretty commonplace to call a bottom to the economy and recession the past few months and the pundits are telling us its slow/steady growth... Its been pretty commonplace to call a bottom to the economy and recession the past few months and the pundits are telling us its slow/steady growth from here. :whistling: While I don't necessarily disagree with any of the analysis, its tough to ignore some of the personal stories from close friends which tell me that we're still a long ways from a normal steady growth economy.

Last night a few of my buddies were hanging out for the Pacquaio-Cotto fight. Typical food, drinks, cigars, BS'ing from the 28-35 y/o crowd. But then the subject of the economy comes up, it gets a bit serious, and here's what we find out.

Friend A - closed his franchise food store, just last week. The store remained profitable through about mid-2008 but it had been bleeding money ever since. 15 blue-collar employees and franchisee are w/o work right now. Friend A is out about 50K liquid for startup fees, 30K negative from neg cash flow months, and is burning through legal fees to end his building lease.

Friend B - is selling her house to downsize because her loan REFI hasn't been approved as she's been getting the run around for several months from different lenders. She had originally purchased on a 5/1 ARM in 2004. The catch is, she has over 125K equity on her place in the OC, gainful employment, an 830 FICO, 6-months cash reserve. So because her bank isn't willing to play ball, she will be downsizing to either a rental (and keep the equity $$$ in the bank) or purchasing a condo. The former is more likely.

Friend C - works for the state of CA and has had his wages cut 15% or the equivalent of 3 furlough days per month. Couple this with a recent divorce and the (highly unfavorable) marriage laws in CA, and he's in a bind right now. The judge ruled that he was on the hook for over 30K of his ex-wife's CC debt due to the fact that she wasn't working at the time of the divorce. >:( Friend C is meeting with a lawyer to file Chapter 7.

From where I sit, its clear to me that 1) the economy is still shedding jobs and the supposed recovery will be a jobless one and 2) credit is still tight for prime borrowers as banks seem more concerned with balance sheets than extending credit. I know I'm stating the obvious here, but color me skeptical with some of the sanguine economic chatter these days. The bad news is hitting close to home. ]]> Young Dreamers pasadenaDC http://www.early-retirement.org/forums/f30/recession-over-fat-chance-47318.html If you were me what would you do? Asset Allocation Advice http://www.early-retirement.org/forums/f30/if-you-were-me-what-would-you-do-asset-allocation-advice-47302-new-post.html Fri, 13 Nov 2009 16:14:04 GMT Hey Guys, New to the forum but I have been lurking for a month now. I know ultimately I need to decide what the right asset management path... Hey Guys,

New to the forum but I have been lurking for a month now. I know ultimately I need to decide what the right asset management path is for me but I would love the opinion of anyone that is willing to share it.

Here is my profile…

  • Age: 27
  • Occupation: Sales
  • Income: Between $100K to $250K a year
  • Job Security: Very High
  • Average Monthly ‘Take Home’: $4k
  • Monthly Living Expenses: $3K (Fiancé also pays me $1K per month so net cost is $2K)

Assets:
  • Cash High Yield Savings: $125,000
  • Sleep at night ‘Emergency Funds’ Money Market Savings: $10,000
  • Checking Account: $5,000
  • Brokerage: $15,500 (100% stocks)
  • 401K: $68K (maxed out the last two years)
    • 100% invested into S&P 500 Index Fund

Home:
  • Home Value: $409,000
  • Home Equity: $76,000
  • Loan: $333,000 – 30 Year fixed at 5.5% Interest.
    • I am also making 1 extra payment to my principal per year.

Debt:
Credit Card Debt: $0
Student Loans: $0
Car Loans $0
(outside of my mortgage I literally have no debt)

Notes: My wedding is already paid in full so I have no foreseen near term (5 years+) needs for the savings. She has zero debt – a good, secure job – minimal savings (less than $5K) but contributes to it regularly.

This is my opinion. I am doing better than high percentage of 27 year olds in the US and I still live well below my means. My cash savings position is too high on both my checking and High Yield Savings accounts I should invest in stocks. If I just keep the path I am going I will be in good shape.

Any advice or suggestions for me to consider as build out my retire early investment strategy.

Thank you in advance,
Nick D.
]]> Young Dreamers NickVegas http://www.early-retirement.org/forums/f30/if-you-were-me-what-would-you-do-asset-allocation-advice-47302.html 403b retirement vs Student loans http://www.early-retirement.org/forums/f30/403b-retirement-vs-student-loans-47282-new-post.html Thu, 12 Nov 2009 02:30:50 GMT I have about 30k in student loans and so does my wife totaling 60k in debt. I am a Youth Pastor and she is a nurse. The plan always was for her to... I have about 30k in student loans and so does my wife totaling 60k in debt. I am a Youth Pastor and she is a nurse. The plan always was for her to work full-time for 5 years after graduating college, but our Daughter came unexpectedly early in our third year of marriage. So instead of her working full-time for 5 years to pay off debt she got pregnant the week of her final exams her senior year of college.

So I am 27 and have about 20k in my 403(b). My wife is 25 and has next to nothing in her 401(k). But even with my minuscule income if we pay off about 15k of student loans she could stay home full-time. We own the house that we live in (didn't use any of my 403b for a down payment and still owe 98k on the mortgage), but I am wondering if retroactively I can use my 403(b) to help pay for my college or my house. We are planning on downsizing back to an apartment because we want to get our debt paid off and possibly move to Mali, West Africa in the next 5 years to work for a hospital there.

So the short and sweet of my question is:
What do my options and advice would you give for me to pay down either my house or my college debt from my retirement. Without losing to big from my 403(b) to taxes or penalties.

I am not set on doing this, but just want to know my options. Thanks for your help.

-Paul ]]> Young Dreamers thecma http://www.early-retirement.org/forums/f30/403b-retirement-vs-student-loans-47282.html 31 and planning to start saving http://www.early-retirement.org/forums/f30/31-and-planning-to-start-saving-47254-new-post.html Tue, 10 Nov 2009 02:48:19 GMT hi all,

i have 2 roth ira's i was wondering what else i can do on a limited budget right now - trying to save for a house.

also how much should i be putting in the two ira's. ]]> Young Dreamers micaaronfl http://www.early-retirement.org/forums/f30/31-and-planning-to-start-saving-47254.html Can I do It? Advice Please http://www.early-retirement.org/forums/f30/can-i-do-it-advice-please-47253-new-post.html Tue, 10 Nov 2009 01:40:51 GMT Hi All - I have been thinking long and hard about this but like a lot of people on here, I am very risk averse and still don't know if I should take the plunge. About 5 years ago, I started a home based real estate rental business which has really taken off in 2009. This business currently generates approximately $10K/month after all expenses including mortgage payments but before estimating for vacancies and repairs. By the end of this year, I am anticipating adding another $6,000 to that number (again before estimating for vacancies and repairs). With the downturn in the real estate market, I've been able to pick up quite a few rentals at low enough price to get a really good return. My husband does all the property maintenance except for major electrical, heating and plumbing. If a major repairs is required (like roof replacement), we'll hire someone for that. We've not had to replace any roofs so far.

I also have a full-time job with mega corp with great benefits and a six figure income. However, there's been some layoffs last year and I have been reassigned to a very demanding position. This is an accounting role which I am not too fond off, mainly because this brings on severe migraines which affects my thinking, memory and concentration (the migraines are caused by an old injury). However, I am reluctant leave because of my concern over the cost of health insurance (my SO takes medicine for higher cholesterol and high blood pressure). I am also concerned that I would not look as attractive on paper to continue to borrow money to expand my business. If the company were to lay me off or offer a package, I would have a significant severance, almost a year of pay. If I were able to focus on the business exclusively, I can see much opportunity ahead.

We are both in our 40s (very early 40s for me) and while we have not done as well as most people on this board, we've probably done fairly well for age. Most of our networth of almost $2MM is tied up in our business (many of the houses are owned free and clear). We recently sold our house and now rent a bigger house for a fraction of what it would cost to own. We have enough cash to buy an average middle class home in a good school district outright. Our current expenses of $7,000 are quite high due to a beach front home that was bought for investment, extracurricular for our two children, and expensive organic only foods.

Please give me your thoughts. I truely paralyzed by fear of the unknown. ]]> Young Dreamers Letj http://www.early-retirement.org/forums/f30/can-i-do-it-advice-please-47253.html life is good....for her http://www.early-retirement.org/forums/f30/life-is-good-for-her-47211-new-post.html Fri, 06 Nov 2009 18:04:18 GMT I'm still 8 years away from ER at 55. But I'm getting very focused on this goal and the savings needed to achieve it. I've spoken with DW and she understands my goal but is not openly as supportive as I'd like. I do feel as though it is my goal and not hers (ours).

Years ago when our kids were born I had to convince her to quit working. She did so but now I fear I've created another problem. She loves not working and doing the things she enjoys. But our two daughters are now in college and my son is in 8th grade. The stay at home mom thing is not as critical at this point.

Bottom line. I want her to go back to work. We could sock her entire paycheck into our savings thus greatly helping the ER goal. I guess she may not be as motivated because her ER already began years ago. She seems less motivated to LBYM as well.

I know this is a communication thing and I've got to keep trying to make this a shared goal between us. Or else I'm doomed to megacorp well beyond 8 more years.

Anyone else experience this type of situation or have any advice? Anything is appreciated although I'm glad Dr. Phil is not on this forum:) ]]> Young Dreamers MuirWannabe http://www.early-retirement.org/forums/f30/life-is-good-for-her-47211.html Roth Question http://www.early-retirement.org/forums/f30/roth-question-47154-new-post.html Tue, 03 Nov 2009 21:47:01 GMT Was looking for some feedback and/or advice on Roth vs traditional investing for retirement. As it stands now, I am 100% Roth and max out both the... Was looking for some feedback and/or advice on Roth vs traditional investing for retirement. As it stands now, I am 100% Roth and max out both the 401k at 16500 and IRA at 5000. There seems to be good arguments for both sides; however, to truly determine which one is the better choice you would need information which is not obtainable. Namely, you would need to know what your portfolio would be worth during retirement and what the tax code would be. This might be somewhat predictable, although not certain, for someone very close to retirement, but for someone at 27 (my age) largely an unknown. Despite the fact that I am single and in the 25% federal tax bracket and the 5.75% state bracket, I still feel that choosing the Roth option is the best choice. Here are my best reasons:

1.) While it would be nice to pay less tax now, I don't feel that paying taxes on my contributions hinders my quality of life. Who knows what retirement may hold? This is more of an emotional reason.

2.) The Roth 401k can be rolled over to a Roth IRA thereby not requiring RMDs. Mandatory distributions during a period of steep portfolio decline could have a profound effect on how long the portfolio could last. In effect, RMDs could force you to sell low. Here is my example and anyone correct me if I am wrong.

Kevin is 72 and the IRS determines his RMD from his portfolio worth on December 31, 2053. This RMD is significantly higher than Kevin determines he needs to withdraw in order to meet yearly living expenses. The market declines drastically leaving Kevin with a 20% loss in his well allocated portfolio. The RMD, calculated from portfolio worth 20% higher, forces Kevin to sell at a loss and to further add insult to injury he must pay taxes on the distributions. Even if Kevin takes the bulk of the RMD and reinvests it, he still has less capital to invest at the lower prices and that capital will no longer grow tax deferred. Avoiding the RMD seems to be a significant advantage for the Roth IRA.

3.) I have nine years total service between the active duty Air Force and the Air National Guard. I plan to stay in for at least twenty years so I will have a small pension beginning at 60 (actually slightly before that due to rule changes affecting how deployments get factored in). More than likely within the next couple of years I will probably seek employment with the FAA which will also add another pension although in my early fifties due to the air traffic controller retirement system. Being conservative, I would estimate the combined worth of these pensions in today's dollars would be around $50,000/yr and they are both COLAd. The pensions are taxed. If, and likely when, I go into the FAA I hope the Roth TSP. I do have some money in the TSP from the my active duty days as well as plan to contribute a little more on each deployment so as to put away more money for retirement than the combined $21,500 a year I do now.


I do have a couple of question though, particularly for those knowledgeable with tax rules and regulations.

Even if the tax structure remains the same and you withdraw the same amount in retirement per year as you earned working per year, you will pay less tax in retirement due to the effective tax rate being lower in retirement. How come the amount of taxes paid on an equal amount of income would not be the same in both retirement and during working years? Just to reemphasize, we are assuming the tax structure remains exact the same pre and post retirement. If this is true, it certainly is one of the strongest arguments for traditional over Roth in terms of tax efficiency. I still would feel that Roth is a better choice for me due mostly to anticipated pensions.

In terms of state income taxes, are you taxed again on Roth withdrawals? My understanding is you are.

Lastly, I suppose you could always split contributions between traditional and Roth. Anyone have any arguments in favor of making contributions to traditional rather than Roth that I'm missing.

Note: I'm also going to post this on the bogleheads site to maximize responses. Thanks in advance to all who reply.
]]> Young Dreamers ATC KH http://www.early-retirement.org/forums/f30/roth-question-47154.html Lucy Kellaway article http://www.early-retirement.org/forums/f30/lucy-kellaway-article-47150-new-post.html Tue, 03 Nov 2009 20:27:06 GMT Lucy's latest column may be of some interest: When a longer working life is good for us all.

Quote:
to have a working life that spans five decades is better than one that lasts for three or four. Work is a bit like taking exercise. It can be boring and stressful while you are doing it (and on any given day, I’d miles rather not work than work) but it is actually preferable to not working. It gives us structure, status and money; it gives us something to think about and gets us out of the house.
I must say that she failed to convince me that postponing early retirement is desirable. I have always been resistant to the imposition of "structure", and have no particular need for "status". "Money" will come from the FI part of FIRE ... I don't plan on being a wage slave for longer than necessary. And as far as "getting out of the house" goes, I have a lot of hobbies that are far more interesting than work. ]]> Young Dreamers Milton http://www.early-retirement.org/forums/f30/lucy-kellaway-article-47150.html IRA contributions to remain at same levels for 2010 http://www.early-retirement.org/forums/f30/ira-contributions-to-remain-at-same-levels-for-2010-a-47047-new-post.html Thu, 29 Oct 2009 02:17:50 GMT 2010 Traditional and Roth...]]> fwiw.


2010 Traditional and Roth IRA Contribution Limits ]]> Young Dreamers Mill http://www.early-retirement.org/forums/f30/ira-contributions-to-remain-at-same-levels-for-2010-a-47047.html Savings Milestone 100k! http://www.early-retirement.org/forums/f30/savings-milestone-100k-47025-new-post.html Tue, 27 Oct 2009 17:24:11 GMT Aah! I just realized that I have over $100k saved - most of it in my 403b, some in a roth and some in cash savings...I can't believe it!

Thanks to you all for your great advice. I'm savoring it while it lasts, since in these times it can only last for a moment!

My AA is pretty aggressive, I'm 33 so I think I'll keep it that way a while longer...maybe consider some adjusting at 35, then 40?

Any tips appreciated.

It's great to have a group of folks who are so great at this to motivate me and give me a sense of how you made it to where you are - thanks y'all!

:greetings10: ]]> Young Dreamers bright eyed http://www.early-retirement.org/forums/f30/savings-milestone-100k-47025.html Pre-paid cell phones for UK and in other parts of continent http://www.early-retirement.org/forums/f30/pre-paid-cell-phones-for-uk-and-in-other-parts-of-continent-47000-new-post.html Sun, 25 Oct 2009 21:47:15 GMT Our DD will be in London for the spring semester 2010. Any suggestions on pre-paid cell service to use both locally around UK, in Europe for side... Our DD will be in London for the spring semester 2010. Any suggestions on pre-paid cell service to use both locally around UK, in Europe for side trips, and back to US if needed? We already all have Skype accounts but are thinking she will want a prepaid cell for perhaps both voice and text. Thanks for any suggestions. ]]> Young Dreamers MovingtotheCove http://www.early-retirement.org/forums/f30/pre-paid-cell-phones-for-uk-and-in-other-parts-of-continent-47000.html Reaching FIRE: another way to view progress http://www.early-retirement.org/forums/f30/reaching-fire-another-way-to-view-progress-46943-new-post.html Thu, 22 Oct 2009 16:11:15 GMT I ran a quick calculation in FIREcalc today. Based on the money I have saved for retirement so far, assuming _zero_ future contributions and... I ran a quick calculation in FIREcalc today.

Based on the money I have saved for retirement so far, assuming zero future contributions and zero Social Security payments, and assuming I need a FIRE stash that will last me to age 100, I will reach 100% success rate for retirement at the age of 62.

I know I could trim some fat from my budget, and I don't believe Social Security will be zero when I reach old age (although I know it will be reduced from today's values). I also (unfortunately) don't expect to live to the ripe old age of 100, and I think 80% success rate is probably enough for me when it comes time to pull the trigger on FIRE. So the calculation I made in FIREcalc was very conservative. Of course, using more realistic inputs gets my FIRE-ready age much lower, but as a baseline the conservative inputs are nice to know.

It's nice to think that even if I don't save another dime, my "traditional" retirement will be covered, even if Uncle Sam completely pulls the plug on Social Security, and even if I live way longer than the average person.

As I continue to save, I will continue to make this calculation and expect (hope) to see the FIRE age falling as my actual age rises ... and hope they will meet in the middle somewhere before long!

Sometimes I look out ahead toward FIRE so much that it's refreshing to look "backwards" like this, counting down from 62 to see how low I can get that retirement age before my actual age reaches it. ]]> Young Dreamers Lusitan http://www.early-retirement.org/forums/f30/reaching-fire-another-way-to-view-progress-46943.html