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basic advice
Old 01-05-2004, 12:44 PM   #1
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basic advice

I could hire a consultant ..... or reasearch things myself. I figured I'd start here and see how things go.

Basically I just want to be assured I am ok and doing the right things I need to do. I really don't care about retiring early or anything. I just need to retire in general someday. Maybe if I am in good enough shape I might consider it.

Basically I am 26 and have only been putting money into my 401k. I make about 56k a yr right now. I contribute 14% and the company matches 4%, so I end up w/ the max of 18% in there. Of that 18%, 10% is mixed and 8% is company stock. Overall its works out to approx. $800 a month that gets put in. Currently I have just over 30k in there.

I played w/ some calculators which determined I could retire about 60 and take home around 160k a year. This surprised me. Of course none of this factors in social security either. I don't know what to really expect from that either.

What kind of future am I setting myself up for if I just leave things as is?

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Re: basic advice
Old 01-05-2004, 01:28 PM   #2
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Re: basic advice

Hello Joe,

You don't mention which calculator you used. Some of them make rather optimistic assumptions regarding stock market returns.

Also, bear in mind that 160k after 34 years inflation will not be as valuable as 160k now.

You might want to try FIREcalc at:

In my opinion, this is a much better tool than the ones you tend to find on brokerage websites, etc.

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Re: basic advice
Old 01-05-2004, 01:31 PM   #3
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Re: basic advice


Congratualtions!! - You are on track for ER!

I did not get out of debt and start investing until I was 30 and I retired at 50.

You are in the accumulation phase right now and are basically doing all the right things. One thing I would suggest is to educate yourself on investing - read some books on Investing (If you search this forum you will see some suggestions).

Also - Stay out of debt! - If you don't increase your standard of living - you can increase your saving. Shoot for a minimum of 30% of income!

Good Luck!
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Re: basic advice
Old 01-05-2004, 01:51 PM   #4
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Re: basic advice

First, I'll say that you're doing the Right Thing. There's no better formula than keeping costs low and savings high.

However, I'll give you a short version of my cautionary tale and my hopeful tale.

I started socking money away in an IRA as soon as I started working (mid 80's). But I didn't diversify. I figured if I bought Japanese electronics and Japanese cars, I should be investing in Japanese stocks. Please take a look at a 10+ year chart of the NIKKEI to see how smart I was.

In the end, I got lucky. Bought and sold some real estate. Started and sold a business. Things turned out well enough that I retired 25 years early.

So, three morals to my story: diversify, invest in yourself, and lots of luck.
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Re: basic advice
Old 01-05-2004, 03:20 PM   #5
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Re: basic advice


Sounds like you're doing the right things. Congratulations, most folks your age aren't thinking that far in the future (although it doesn't have to be all that far).

The best advice I can give to you is SAVE, SAVE, SAVE. Every penny counts. Saving has two benefits. First it reduces your spending and gets you living below your means, and second it accumulates wealth needed for ER. Bottom line, the more you save and the earlier you start the sooner you can ER.

Good Luck

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Re: basic advice
Old 01-05-2004, 04:49 PM   #6
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Re: basic advice

Joe, Are you eligible to contribute to a Roth IRA? I like the idea of having tax free income from a Roth IRA being available at retirement.

I get paid Bi-weekly (26 times a year). This means that there are two extra paychecks a year. I use these two extra paychecks toward funding Roth IRA's (wife and I). I set my Roth IRA's up through Vanguard (Total Stock Market Index Fund). I am also several years away from retirement and can afford to take some risk.

Take care.
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Re: basic advice
Old 01-05-2004, 05:41 PM   #7
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Re: basic advice


I want to offer some specific advice on diversification. You need to reduce the amount of money you have in company stock just as soon as your plan permits. Too many people have lost their job and substantial portions of their 401k when their company fell on hard times. This is not just an Enron situation - it happened at IBM, P&G and other companies.

Post-Enron there was talk of new regs forcing plans to be more flexible regarding company stock but I'm not sure if any changes were actually put into effect. But find out just what your plan requires and lighten up when you can. If you can't lighten up, that would be a good reason to put less into the 401k and utilize the Roth as suggested earlier.


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