Advice -two sons, When/ How to start to savings for retirement?

[5j404]

My two sons have just come to me for advice on where to put some of that extra money Each with a different senario
Son 1 Out of College a year and 1/2 , (23 yrs old ) Out on his own has a total of about 10,000.00 saved. Loves his job but currently basicly just making ends his meet, No need to dip into savings but not adding to them. no retirement plan at work, small amout towards a health plan but expects promotions with this small business as it is expanding. (savings are from when he spent time at home before getting moving out to shared digs) He's not sure if and how much he can afford to put away in an Ira this year, and if he can whether it should be a roth or regular. Other info-Small $5000 school loan@ about 2% .no cc debt, Sometimes talks about grad school. Has an older car but commutes only 5 miles.

Son two - has just graduated mid year (22) and will start a job in a month that will have good health and retirement benifits (Will be working for a municpality), He has a small stash of about $2500 from work during college and no loans or cc debt. Will live at home for a couple of months but I doubt we'll be able to keep him here for a year. Has an older truck but his biggest wants/ need is to save to be able to pay cash for a 4 wheel drive before the winter to be sure he can get to work. Loved the idea of never getting into car loan cycle. Will have a 30 mile commute from here.

I'm torn on advice to give them, Proud of them both. Both are in much better shape then I was at that time. How much do I suggest them to save for the long run while they are trying to get thier feet on the ground? For Son One - any recomendations on roth vs reg ira before he files taxes this year? And how much he needs to start squeezing out of his monthly budjet to save for long run?

[newyorklady]

I am not here to offer advice but congratulations. Most kids don't even think about such things. Good job on parenting. Once you get some responses to your question I do hope that you can offer other parents (or people like me just thinking of reproducinng) advice on how to raise such responsible children.

[5j404]

Thanks for the kind words. I try hard not to offer advice on parenting , as I still have two more - One freshman in college and a Highschooler left to get out on solid footing - or (screw up) -

[jdw_fire]

Quote:

Originally Posted by 5j404 Son 1 Out of College a year and 1/2 , (23 yrs old ) Out on his own has a total of about 10,000.00 saved. Loves his job but currently basicly just making ends his meet, No need to dip into savings but not adding to them. no retirement plan at work, small amout towards a health plan but expects promotions with this small business as it is expanding. (savings are from when he spent time at home before getting moving out to shared digs) He's not sure if and how much he can afford to put away in an Ira this year, and if he can whether it should be a roth or regular. Other info-Small $5000 school loan@ about 2% .no cc debt, Sometimes talks about grad school. Has an older car but commutes only 5 miles.

I would strongly suggest that he max out his Roth IRA. This will get him started on retirement savings and at the it same time can be used as an emergency fund if he really needs it (Roth contributions can be withdrawn w/o penalty). When it comes to saving out of his income, the more the better but at a minimum 10% of the gross. After he maxes out his IRA the savings for retirement should be put in an after tax account specifically held for retirement.

Quote:

Originally Posted by 5j404 Son two - has just graduated mid year (22) and will start a job in a month that will have good health and retirement benifits (Will be working for a municpality), He has a small stash of about $2500 from work during college and no loans or cc debt. Will live at home for a couple of months but I doubt we'll be able to keep him here for a year. Has an older truck but his biggest wants/ need is to save to be able to pay cash for a 4 wheel drive before the winter to be sure he can get to work. Loved the idea of never getting into car loan cycle. Will have a 30 mile commute from here.

As he is living at home I would suggest the he build an emergency fund, max out his 401k (if he has one) and save as much as he can given his financial situation. Saving for the 4x4 should be over and above the emergency fund and the 401k. His total retirement savings should be at least 10% of his gross but given his living arrangements he should try for more than that.

If you need help convincing them to save when they are young do a searh of this site for the word compounding and share one of the examples in the thread that specifically talks about it.

[saluki9]

Great job on having two motivated kids with jobs after college. You have done better than a lot of parents!

I started saving for retirement when I was 12 I believe. I opened my first Schwab account when I was 14-15. So, it's never too soon to start.

[Corporateburnout]

My daughter's situation is the exact replica of your first son. She is 23, been working for 1 1/2 years, moved out in June and has 10k in a savings account. The only difference is she is contributing 5% to a 401K with a 5% employer match.

I advised her to open a Roth account and put 4k of her savings in it and keep the balance as an emergency fund.