Ive Been a Bad Bad Boy

[MXR Dad]

Introduction should be easy. I have had my head up my !&^* and have just started my 401 and IRA. I am 47 yrs old and have approx $7,000.00 in 401K and I just started a new IRA for the first time ever. (I literaly just started IRA 2 days ago with $5,000.00).

My kids are grown and its just my DW of 21 years. Our house will be paid in 15 years if we just pay monthly notes. I am finally in a time now where I can focus on putting approx $1,000.00 per month somewhere for my retirement. This is above my 401K which I put approx $700.00 per month into it.

I have no idea where to start. I am reading all the threads and FAQ's I can. I signed up with VG for assistance on the IRA. I have a lot to learn in a short period but, I will learn. I have printed several (almost 100 pages) of the threads I feel is learning material so I can have it to read when not in front of computer.

You know, I'm sure all of us can come up with a million excuses why we didnt do it earlier, or why we are not doing it now for that matter, but the bottom line is I couldve done SOMETHING earlier. Maybe not much, but at least something. While I know I'm getting a late start, thers no sense in beating myself up for something I shouldve done. Too late for that. Although I have beat myself pretty good though haha.

I will be loitering and looking for tips / advice. I guess my first question would be this:

If you just started with a new account of $5,000.00 for IRA, wheres a good start?

Hard road ahead, but I will be focused and determined to do what I can so I can have fresh diapers in my old age!!! Come in the world wearing diapers and go out wearing diapers!!! Aint it great?

 

[Marquette]

You know, we should have a list of what to read sorted by level... sort of like a college syllabus.

I would start with : Amazon.com: The Bogleheads' Guide to Investing: Taylor Larimore, Mel Lindauer, Michael LeBoeuf, John C. Bogle: Books

It's a very straightforward look at investing.

After that, go through the book list here: Investment Books

For a fun, light read, you could check out: Amazon.com: The Ultimate Cheapskate's Road Map to True Riches: A Practical (and Fun) Guide to Enjoying Life More by Spending Less: Jeff Yeager: Books

For the 'now what' phase, once you're on your way and starting to plan out your transition, then I would recommend: Amazon.com: Work Less, Live More: The Way to Semi-Retirement: Bob Clyatt: Books

You should also read through the Bogleheads wiki: Main Page - Bogleheads, especially the section on asset allocation and then the subsection on portfolios: More Lazy Portfolios - Bogleheads. It'll help you sort of connect the dots while you're reading the rest... you don't need to follow one of those portfolios as your own, but it always helps see what other examples look like.

Starting late is better than not starting at all. Look at it this way. You've been married for 21 years, and got some kids grown and out on their own... and that's a pretty big accomplishment on it's own.

Now, the tough news is that you might not be looking at early retirement. But, that really comes down to what choices and compromises you and your wife want to make along the way. That said, you can be looking at a great base to either be comfortable during retirement or to give you a great launching pad into semi-retirement... again, one of those tradeoffs, you could look at checking out of full-time work early in exchange for working doing something you love that isn't as lucrative or will give you more free time along the way.

 

[REWahoo]

Come in the world wearing diapers...

Wasn't that pretty tough on your mom? <rimshot>

Welcome to the forum. Better to start at 47 than at 57...or never. And you're putting money into a market that many of us think is a bargain, so from that aspect, your timing is excellent.

You'll likely get lots of opinions on where to invest your $5k, but if it were me I'd put it in Vanguard's S&P 500 index fund. Best of luck on your savings an investment future.

 

[kcowan]

Welcome to our financial freedom train! You need to come up with a budget that you can stick to. Then you will be investing another $1000 each and every month. I would put it into a money market for the next year. Then consider what you will have learned by then and make some decisions. Pay attention to MERs and sales charges.

Don't be in a hurry to jump into investments until you have gained confidence in what you are doing.

 

[jclarksnakes]

Try tracking all your expenses to get an idea of how much you will need when you finally do retire. For many of us tracking expenses shows us where we can make adjustments and save more along the way.

 

[FIREd]

Welcome to the board MXR Dad,

Better late than never. Now that you have a goal, the next step is to come up with a plan. At this point, you need to determine how much you can save per month, what you could potentially cut out of your budget to increase your savings, where and how to invest your money. You will find plenty of advice on this board on how to do all these things.

Personally I am a big fan of Vanguard and I would put my $5K either in their S&P 500 fund (as REWahoo suggested), or in their total stock market index (which I prefer because it has a bit more exposure to small companies).

 

[Moemg]

Welcome , There are a few on the board who started late so you are not alone .

 

[laurence]

Welcome!

When do you want to retire by? 47 is later to get started, but if your goal is say, 62, you may still be in great shape. House will be paid off, and you could have 800k in retirement accounts supplementing Social Security. Any pensions? .8 mil can throw off 35k+ safely in income per year.

 

[Milton]

Welcome. As others have said, better late than never.

While I don't see early retirement as viable (unless you are prepared to accept a very low standard of living, or work part-time in retirement), with diligent saving and investing you should certainly be able to afford retirement eventually. Sadly, that is more than many people can say.

.8 mil can throw off 35k+ safely in income per year.

That works out to a withdrawal rate of 4.375% plus: which is arguably on the aggressive side. I'd suggest that it would be more prudent to figure on annual investment income of $30,000, assuming the same $800,000 nest egg.

 

[MXR Dad]

That was funny REWahoo and pretty much the truth. It should read; came in this world naked and if I'm not careful, will go out the same way!
Well, that wasnt too bad. I was thinking gloom and despair starting at my age but the responses are up-lifting.

My retire date is somewhere around 63 the Good Lord Willing. And even if I can retire from the Rat Race, I still want to find something else either part time (or fun time) to keep me busy.

If I can have .8 at 63 ish, I can make that work, although more would certainly not hurt. I have no pensions other than 401K and IRA. Of course SS, but thats it.

I do want to open IRA for my wife, that is our next move. I was waiting to get a little more informed instead of jumping in like I did with mine. Maybe a ROTH IRA? I have read enough to know the basics, but I have no idea if my tax rate will be the same or higher at age 63 ish. I assume it would be lower since we are Seniors at that age

 

[samclem]

Welcome aboard. Yes, starting earlier would have been nice, but you're doing right to focus on the present and the future. Every buck you squirrel away now is like a little robot that will be producing income for you from here on out.

I'm sure you've been tothe FAQ forum, there's a lot of good stuff there.

You've already jumped three big hurdles:
1) You've decided to save
2) You've decided to educate yourself about investing rather than depend on someone else
3) You've decided to go with Vanguard. A smart choice.

My personal choice for a single mutual fund for your situation would be the Vanguard Target retirement Fund--and you might want to select a target year somewhat later than your actual planned retirement date in order to be a little more aggressive (more stocks, fewer bonds). But, you won't go wrong with either the Vanguard S&P 500 fund or the Extended Market portfolio. My personal recommended reading is William Bernstein's "Four Pillars of Investing." As REWahoo said, this downturn in the market could prove to be a big boon for you, as you'll be getting your stocks "on sale." The down market is your friend--scrimp a little now and take full advantage of it.

 

[laurence]

Welcome. As others have said, better late than never.

While I don't see early retirement as viable (unless you are prepared to accept a very low standard of living, or work part-time in retirement), with diligent saving and investing you should certainly be able to afford retirement eventually. Sadly, that is more than many people can say.

That works out to a withdrawal rate of 4.375% plus: which is arguably on the aggressive side. I'd suggest that it would be more prudent to figure on annual investment income of $30,000, assuming the same $800,000 nest egg.

Weeell, it's 100% historically viable for 20 years, and only falls into the 80-something% range as you approach 30. Plus I figure the equity in his house is worth something, so you'd want to be a little aggressive with the liquid portfolio. Worst case, he's the one cycle that fails after 21 years and he's now 83 years old with a paid off house and social security and medicare. He can always reverse mortgage to supplement. I think a vacation to Hawaii is more fun at 65 than 85.

MXR, there are a lot of different opinions on this board on my above paragraph, but as you read here you'll start to form your own conculsions and figure out what you are comfortable with.

 

[73ss454]

Welcome MXR, I also didn't start till 47 and retired at 57. It can be done so read and learn and you'll be fine.

 

[Ultimate Cheapskate]

Welcome aboard. Sorry you've been a Bad Boy (but I'll refrain from the spanking jokes, since you're new).

Stay Cheap!
-Jeff Yeager

 

[Vinnyfrombrooklyn]

Welcome aboard - I enjoyed your initial post. I just started here myself and look forward to seeing your success.

Not that I know what I am doing I chose a roth ira for myself since I dont know what the taxes are going to be like when I am 59 1/2. I am 40 now.

I am thinking you should open one for the wife but I would like to have the wisdom here chime in on that subject.

 

[Texarkandy]

My retire date is somewhere around 63 the Good Lord Willing. And even if I can retire from the Rat Race, I still want to find something else either part time (or fun time) to keep me busy.

Well, the "Good Lord" may not have much to do with it - it's pretty much all on you. (and if "The Good Lord" does exist I expect he/she might be a little more focused on other priorities! )

Seriously though, you need to define what various retirement scenarios (A, B, or C) are acceptable to you - then look at the sacrifices you will need to make to acheive each - then decide how much you are willing to sacrifice to acheive Retirement A, B, or C.

Things will be much clearer then (assuming you are relatively debt-free at the moment, which if you are not is the "first step" - all the other planning comes after that).

There are many, many (self-included) who could have retired from the rat-race years ago if all they wanted was to "live in house by the side of the road & be a friend to man" in a Bilbo-Baggins-esque kind of way. Some of us have decided though that we want a little more (like my trip to Hawaii next week - where everything will probably be overpriced & overrated in terms of bang for my buck).

Ask yourself. How much is enough? (in terms of lifestyle)

 

[militaryman]

As you move forward in your savings plan consider that the more you are able to curb your lifestyle now (get used to living with less of your paycheck) the easier and earlier retirement will become.

Here's on thing to think about ---- your house -- I know that right now my 3000 sq. ft house is far more than I will need in retirement for two --(kids about 4 yrs from independence)

If I sell and cut my sq footage to 1800 sq ft then my utilities will cut by a good chunk, my property tax will decrease some and my home owners insurance will follow suit. Possible that you could make some moves like this?

 

[MXR Dad]

Militaryman, good point there. I am gald that I decided to do exacly that a couple years back. I downsized although I still had one left in the nest. My house is about 1,500 sf, 3bdr, 2 bath with garage. I knew we would be a little tight for a couple of years but I also knew when my Son moved out, (his wings are getting stronger every day) it would leave just DW and myself.

So luckily, I did think about that when purchasing this house a few years ago. I'm glad I did too!!!! He's still living with us at the moment but he is working and fixing to go to either college or trade school. He's even thinking the Military. Dad is encouraging the Military. Oh yeah, speaking of that, based on your name here, I believe a THANK YOU is in order here.

All of this is good stuff. Thanks for the replys and keep em comin. I am fixing to open IRA for my wife here in the very near future. I am wondering if opening her a ROTH IRA would be a good move

 

[laurence]

As with anything, it depends. The bet you are making with a Roth is that your tax bracket/burden is lower now than it will be in retirement. Since you are planning on having no mortgage in retirement you may not need to pull that much out of accounts to fund your lifestyle, keeping your tax bracket low, making a traditional IRA attractive.

Roth takes away uncertainty, however, in future tax rates. If we go Euro and have 50%+ tax rates in your retirement, you are (more) protected.

 

[MXR Dad]

Yeah, I think I have talked myselk into IRA (Not ROTH). I think its safe to assume taxes will be lower when we are Seniors. At least that sounds reasonable.

 

[OAG]

Yeah, I think I have talked myselk into IRA (Not ROTH). I think its safe to assume taxes will be lower when we are Seniors. At least that sounds reasonable.

Frankly, we have not found that to be true. If I were you I would head for the ROTH. We am facing RMD's in T-IRA accounts and it is going to push us into the top of the 15% bracket if not the bottom of the 25% bracket. Ages 70 and 68. And BTW spend all that taxable money before you reach RMD time.

 

[laurence]

Frankly, we have not found that to be true. If I were you I would head for the ROTH. We am facing RMD's in T-IRA accounts and it is going to push us into the top of the 15% bracket if not the bottom of the 25% bracket. Ages 70 and 68. And BTW spend all that taxable money before you reach RMD time.

What was your tax bracket during the working years? I'm in the 28% bracket now so 15% sounds awesome to me. As with everything it depends.

 

[harley]

Yeah, I think I have talked myselk into IRA (Not ROTH). I think its safe to assume taxes will be lower when we are Seniors. At least that sounds reasonable.

Not a good assumption, IMHO. If the tax brackets stay the same, maybe. But I suspect they will get raised. And this isn't a Barack or Dem bashing post. I just don't see how things will get paid for without raising taxes.

So anyway, don't disregard the Roth. Maybe you could do 50/50.

Harley

 

[samclem]

Just so somebody says it: The Roth is tax free today. It's not a sure bet that the laws won't change in the future. Government is taking on more and more expenses (that is apparently what the public wants), and these Roths, in the hands of "millonaires," will be very tempting sources for increased funding. It seems unlikely today (and I converted all my Traditional IRAs to Roths long ago, so obviosly I don't think it is likely), but the possibility can't be ruled out.

 

[MXR Dad]

I replied to this but I dont know where it went. Hope it doesnt Double Post.

Well, to further prove my statement from original thread, :Head up the $#$, I will add to it........ I dont know what my current tax rate is. I will have to do some research on that one. I am in Texas if that lends a hand.
I will be back after I leartn what my rate is. (Feeling pretty ignorant right now, but thats ok) I WILL GET THIS DOWN IN DUE TIME