how to plan for retirement?

Question

I'm 30, hubbie is 39. Combined income is 70 before taxes. We put about 500 a month into his company retirement- some sort of IRA.

We goofed off and saved nothing for years, travelling and all that. The past three years all of our savings have gone towards our house and his parents' retirement.

We own a house, have about 40K more to pay on the mortgage, but also will need to get a new roof and basic repair work, so probably you should think of it as 50K.

We have no other debt at all. We are in good health, have good insurance through my husband.

I have no retirement income through my job. So our only retirement income right now is through my husbands job- the 500 a month.

No other bills. All of our spare income goes towards paying off the house. We should be done with that in about 2 years.

So, what should we do when the house is paid? Good book recommendations? We can live on his income, so we will have about 20K a year to play with to put towards retirement.

Oh, a little piece of info- we have finished paying for his parents' retirement (at least for quite a while). They do not live in the US, so there was no other option. They live in a country where there are not pensions or retirement plans. His siblings helped a lot too, and his parents are basically set now for the rest of their lives unless some terrible unforeseen thing happens.

We don't have kids and don't want them. I have no expectations or plans or chance of living to 120. That's way too long to be that old. I'm guessing I'll die in my 80s, which is fine with me. Life is wonderful, but I'd off myself long before 120 just because being feeble and sick and constantly needing medical care is a drag.

Answer 1

I think that you are doing the right things but I question whether paying off the house is the best idea for you or not. It depends on what other deductions you have and what the interest rate is on your loan. It might or might not be better to keep the house loan for a deduction so that you pay less in income taxes and use that extra money to invest in your retirement.
I believe that everyone should put the maximum in their company 401(k) or 403(b), at least to get the company match (after all, why pass up free money?). Plus it will lower your Adjusted Gross Income and can lower your income taxes as well. If I were you, I would speak to a good financial planner who will take into account not only planning for your retirement but your tax situation as well.
The fact that you have no debt other than your house is absolutely fantastic! I started reading up on investing for my future years ago and of the many books I've read the one that impressed me the most was Buckets of Money by Ray Lucia. It made sense to me even if the title is a little cheesy. It was easy to read and it really explained abut taxes and investing.
A Roth Ira sounds like a really good thing for you both also.
Talk with a real certified financial planner so that you can get good advice that will help you over the long term.

Answer 2

You definitely need a Roth IRA since you have no other retirement. He can start one, too. They are a very good deal for retirement.

You need to learn more about his company plan. If its a 401k and his company matches money you put in, you need to max out whatever the match is - otherwise its like turning down free money.

Most experts say 12-15% of your income should go towards retirement savings. This would include any money his employer puts towards his retirement.

Sounds like otherwise you are doing well - no debt, owe very little on the house. If you are making extra payments on your mortgage I think I'd stop that for the time being to raise money for other things like the roof, if they are urgent needs. But if the roof and other fixes can wait for two years, then wait and use the money you were using to pay the mortgage and use it for the roof, etc.

I'm a little concerned you are helping his parents with retirment. I hope it isn't a big chunk of your monthly savings. If so you need to scale that back.

But you certainly need a Roth IRA, before you do anything else. As secure as your marriage may be, over half of marriages end in divorce - YOU need a retirment plan.

Answer 3

Both paying down your mortgage and saving for retirement accomplish the same thing: increasing your overall net worth. This is important because retirement is essentially a cash flow equation. My guess is that you are well ahead of the average family since you owe so little on your mortgage. If you can put $20,000 per year toward retirement then it's likely you will be able to retire early and continue to live the lifestyle in which you have become accustomed.

Answer 4

You can each start ROTH IRAs.

You can buy non-guaranteed stocks.

You alone can start a traditional IRA because your work doesn't offer you a 401k.

You can also invest a bit of the money that you're currently paying extra on your mortgage. True, may take a bit longer to pay off the house but you'll be missing a few years of compounding on your retirement savings.

I know you love the parents but you can stop paying for their retirement and save for your own.

Answer 5

Keep your checkbook in the kitchen drawer, and let your fingers do the walking. You won't need to buy any books, or pay for any consultants; if you remember one thing. Your children will work in jobs that we haven't invented yet. You and your husband should also plan on living to be 120-130. Stem cell reproduction is wiping the old age maximums off the map.
You have any friends in politics? How about running for office yourself? You will need someone to change the laws so that you can continue working until you are 85. While your friend is changing the government, have them look into why social security is going to be bankrupt by 2026.
For now? Put everything you have into your house, and get it paid off. EXCEPT for any personal donations to retirement that are equally matched by an employer, or government agency. That's just free money that you can't turn down. A lot of 401's and Superannuations will only match dollar for dollar up to the first $1000/ year. Check your husbands 401 details for the maximum they will match dollar for dollar. Do not donate a penny more. That money can best be used to reduce the interest you are paying on your house or other loans right now.
Once your house is paid off, buy another property; and use one of your homes as a rental unit. This rental unit can be used to offset any future raises to your property taxes...and they WILL go up dramatically. Housing will be at critical levels in your children's future, because people will be living much longer; meaning more housing will be necessary.
Speaking of living to 120...do you still have that friend in politics? You need to wipe out the health care system, and re-do it so that it is available to everyone. Right now, the insurance companies own everything in the health business, and they're not going to give it up without a fight. They own it, they make you pay for it. You need to make health care a federal program, not a state one.
Or...move to Australia.
Because of the close ties between the USA and Australia, you will be allowed to keep your American home, and buy a second home in Australia. Once establishing residency in Australia, you will be allowed to go see a doctor any time you like...for free. No more health care bills. Plus, you get the added bonus of your rental property providing income that can continue to bild your retirement account...while you are retired.
If you plan to stay in the USA, though, and can't get any friends into office to provide you with free health care, then you will need to set aside about three times what you thought you were going to need for health care. Living to 120 will be eventful, and the later years will be the most expensive.
Start now by ridding yourself of all debt. Highest interest rate first. Any expenditure that doesn't earn you more interest than what you pay for your house or car loan needs to be funneled into the house. Pay off the house, provide a nest egg to pay for the upkeep and taxes associated with the house, buy an income producing property, and then get to work on securing your health care for when you're finally too old to pay for it with work.

Answer 6

A great magazine subscription I have is Money Magazine. It has tips for people in your situation on what steps need to be taken care of nd if you want you can even apply for the Money Makeover where they have anaysts and a financial planner sit down with you to go over in detail what steps you need to take.

Hope this helps.