I promise me to never be poor again.

[ReadyAimFired]

Hey you guys and gals. I am J. Yes, I know what it's like to be poor. No car, no food, no electricity, no running water,....no hope. I have slept on the floor, battled roaches, and wore dirty clothes. This may be great for homesteaders but not growing up in the city. I grew up poor in the projects of Louisiana and I promised myself I will never go back. So instead, I worry. I worry about money, well, about having enough money. So I have lurked on this forum for quite some time and finally gathered enough courage to open up to you and see what I can do better. So here goes my financial situation. I got out of my situation by joining the military and have never looked back.


Me, 38, and significant other, 33, live in Texas. We keep our finances separate other than paying jointly on monthly bills like electric, cellphones, and cable. (yeah I know, I know but it's my vice.)


Me- Hope to retire at 53, and work for a local city government.
I can draw a monthly check from TMRS at 53, for $3300 a month. Can continue health insurance from city upon retirement.

TMRS- $3300 at age 53 (I put in 7% and city puts in $14%) Taxable
457 Roth (thru city)- $105K currently putting 18.1% yearly of salary of $68k- in 100% stocks but diversified to my taste
Roth IRA- $40K- max out every year in T Rowe 2040 Retirement
Rental House-1/2 duplex Value 60k owe 40K pay extra $200 month principle will be paid off in 8 years
Cash on hand- $30k
Other assets-$15k



SO-Hopes to retire when I do. Just got really serious about early retirement. Makes about $55k but varies to $65k with commissions

401K-18K just started maxing out this year. Gets 3% match from company- Fidelity 2040 Retirement
Roth IRA-$15k maxing out T rowe 2040 Retirment
Mutual Fund-$8k unsure what allocation is
Cash on Hand-$15k



We have NO debt other than my 1/2 duplex. Both of our cars are paid off. No student loans. We live in an apt for free due to myself providing security. We are saving for a house upon retirement at a rate of $1k a month combined ($18k current balance), so we hope to have approximately $230k by the time we get to retirement. We will stay in Texas because property taxes are low and there is no state income tax. I live on less than $20k a year and my SO is about the same. I know expenses will go up with a home so I am considering that.


I just want to make sure that we are on the right track. Where can I park the house saving money that is safe? It may be the place I put my emergency cash fund also.


Our plan is to live off my 457 and TMRS and her 401k the first few years and not to touch either of our Roths until it is mandatory. Her mutual fund is up in the air as to when we will access it. Oh, I was in the military for 5 years so I will have some social security but not much because my currently employer does not contribute. I "bought back" all the military time I could so it counts toward my time at the city. I can technically retire in 2017 but won't. SO will also get social security, but we have not figured those numbers into our equations for retirement. Thanks for your patience folks and any advice will not go unstudied.

 

[Disappointed]

Great story, wish more people were like you. Best of luck.

 

[Ed_The_Gypsy]

If you are going to need the money in less than ten years, put it in the bank (CDs or savings). Do not trust the stock market for less than 10 years.

By the way, well done. You will not be poor again.

And thanks for your service. I am glad you were able to escape to a better life that way.

 

[Animorph]

Great job so far. I didn't run any numbers, but I am thinking you probably don't want to tap the 457(?) and 401k at age 53 and younger and pay a 10% early withdrawal penalty. Although you can find ways to do it if you must. You have enough time to save enough taxable dollars to avoid tapping the retirement accounts before age 59.5 I would think. TMRS and Roth accounts should make a pretty decent combo at tax time.

 

[ReadyAimFired]

Thanks for the responses folks I appreciate the encouragement! I was told that I could withdraw from the 457 plan without a penalty as long as I was retired. I also forgot to mention that the $3300 from TMRS does not include a $50k lump sum and they also buy back 750 sick hours for another $30k. I could stretch those to help me get to 59.5 if I had to. You guys are just so full of knowledge I am excited to get your input.

 

[omni550]

Welcome aboard, RAF and thanks for your sevice!

omni

 

[timo2]

Thanks for the responses folks I appreciate the encouragement! I was told that I could withdraw from the 457 plan without a penalty as long as I was retired. I also forgot to mention that the $3300 from TMRS does not include a $50k lump sum and they also buy back 750 sick hours for another $30k. I could stretch those to help me get to 59.5 if I had to. You guys are just so full of knowledge I am excited to get your input.

AFAIK, you can take out of the 457 without penalty even if you just leave your employer, and not even retire. You still owe taxes on it, of course. and if you rolled over any other type of investment into the 457, that portion would have penalties. Check with your plan admin. to be certain.

 

[ReadyAimFired]

The money that I am putting in there is after tax it's a Roth 457, so why would I be taxed?

 

[timo2]

The money that I am putting in there is after tax it's a Roth 457, so why would I be taxed?

in that case, only the interest would be taxed, I would imagine. But I'm not a tax person, so I would have to look it up or ask someone.

 

[ReadyAimFired]

Anyone else see any glaring problems? I will be opening an Ally savings very soon at a rate of .84% with a good portion of my emergency fund and the house fund.

 

[tnj2tnj2]

If it is a Roth 457, earnings will be tax free as well.

 

[Rothman]

Without qualifying exception i believe the earnings are taxed as regular income and 10% penalty applies on earnings as well. Alternative to start equal withdraws avoids problem but must be continued for 5 yrs or 59 1/2 age.

Although I shed a tear when I see tax free growth stopped with someone so young, cause opportunity lost. I'd prefer taxable account funds when possible.

 

[timo2]

Without qualifying exception i believe the earnings are taxed as regular income and 10% penalty applies on earnings as well. Alternative to start equal withdraws avoids problem but must be continued for 5 yrs or 59 1/2 age.

Although I shed a tear when I see tax free growth stopped with someone so young, cause opportunity lost. I'd prefer taxable account funds when possible.

457 is not a qualified plan, so does not get the 10% penalty, as long as you are no longer employed by the place you had the 457 with. But you still need to have the plan a minimum five years to get the Roth benefits.

 

[ReadyAimFired]

Thanks you guys I did not realize I had to wait to 59 1/2 to do Roth withdrawals I thought I only needed to be retired from my employment. I guess I will start putting more money in my emergency fund to help bridge the gap since I don't want to touch my regular Roth until 65 or after. My pension which is very very secure will provide for most of my income and will cover my expenses but I do want to travel some. I will also be selling my rental once I retire so that's at least 50k more. I can make it work. I have made it this far and I am not looking back.