I am putting 9% of my income into a 403B. Should I go up to 11%?

Question

Currently I have $51K in my Lincoln financial 403B. I contribute 9% of my income. My last child just moved out, and Im amazed at how cheap I can live without the kids here. I am divorced since 1989, and could not really afford to contribute more money into my 403B until now. I am 42 yrs old and would like to retire when I am about 63 if possible. Depends on how well I hold up. I have some I bonds and about $14K in another retirement account. I would like to start contributing 20% to my 403B in 3 yrs. Do you think this is a good start? I am in high risk investments. How is this looking right now? Any thing you could tell me about my investments and future will be helpful. I own my own home free and clear and expect to make a lot more money in the next 5 yrs. Currently I make about $70K a year.

FYI: You would not believe how hard it is to raise 2 children without child support. I live in Illinois and never recieved money for the support of my children. Child support enforcement in this state is pathetic. For those of you who brag on how much money you have socked away along with your wife or husband, just remember, if you get divorced, your partner gets 1/2. Hope you feel pretty friggin snug. It could all be lost before you even know what hit you. Affairs happen and people get greedy.

Answer 1

good for you...from what you tell me i can tell you are probably a good teacher or nurse...nice...put in as much as you can...and remember, you can always lessen your contribution iof things get sticky later on...i did just that for about a year...then went back to my original investing.

by the way, since yoiu are in your early 40s you may want to put a portion of your 403b into bonds

also, to maximize your returns, dump lincoln financial as they charge about 6% per year and go over to vanguard or fidelity

Answer 2

First of all, since this is just Yahoo! Answers, take this for what it's worth. You will get much better personalized advice by seeing an advisor. If you were in the Columbus, OH area, I could help you.

Anyway, here would be my recommendation:

If you make $70K per year and own your home free and clear, you should really contribute much more to your 403b. You currently have no tax advantage since you have no interest to deduct. By investing 20% of $70K, that would be $14K, which is just under the maximum allowable contribution per year. Your taxable income would then only be $56K and would get you into a lower bracket. With only $51K in your account, you would need to contribute more to retire at age 63.

At 42 years of age, you do have time to recover from a market downturn but I would shift a little from those high risk investments into large cap funds. This would get you away from such a concentrated position. Depending on how much you have in bonds, this will diversify your investments. If the additional retirement account is a Roth IRA, keep that going to spread your retirement income around (Roth distributions are tax free upon retirement compared to taxable distributions from your 403b).

The worst that could happen is you realize that putting 20% into your account is too much and you decrease it to a comfortable level. Since you have so few financial responsibilities, you are in a perfect position to stuff tons of money away for earlier retirement.

Good Luck!

Ron, ChFC

Answer 3

Your finances are in good shape, considering your personal situation. But still, save as much as you can. Since you're on your own, there's really no level of saving that's too high. If you end up with a lot of retirement savings, you'll have more ice cream and cake in your golden years. What a shame.

Think about investing in a lifecycle or target date mutual fund. The managers of these funds put your money into a diversified portfolio, so you don't have to do the money management. In particular, they keep the risk levels fairly moderate. At your age, you should start to lower the risk levels of your investments. A lifecycle or target date fund would be an easy way to do that.

Answer 4

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Answer 5

If I were in your position, I would be putting a lot more in.

I am 38 and have about $150K in retirement savings. My wife has another $50K. I would think you are pretty far behind.

The good news is that it sounds like you have very few debts and therefore have lots of extra money to invest.

Good luck.

Answer 6

good job on saving.

dave ramsey recommends investing 15% of income in Roth IRAs and pre-tax retirement... so sure, 11% can't hurt.