When I’m Sixty-Four

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Alack and alas, the time has come for us to broach the subject of retirement accounts–an important topic, cause it’s gonna let me re-visit Machu Picchu as a wizened old bird with my kids and grandkids and let you do, well, whatever you want. I’m starting to move beyond my level of personal comfort and experience here, but I think it’s still important to start thinking and talking about this issue, and hopefully we can muddle through together to some greater group clarity. I especially want to bring this up since it’s open enrollment for many people, and this is when people tend to make changes to their benefits (though at my company, and maybe elsewhere (?), you can change your retirement account contribution at any time throughout the year).

The main point I think I want to drive home here, one I wish I had been better about, is that once you have started working full-time, whether you’re self-employed or in a traditionally employed position, you need to start contributing a retirement account. (Full-time students should focus on keeping educational debt low and credit card debt zero, and revisit this topic once they’re in the work force). I was blissfully unaware of how much I should be saving, so when I started out working I just made the minimum contribution to get my employee match, which was 3% (6% with employee match) of my salary. You should at a bare minimimum be saving 10% to 15% of your income for retirement from the day you start making money. But obviously, the more you save, the sooner you are financially independent and able to quit work and live off the interest of your nest egg. And there is an immediate advantage to saving for retirement now, as well, in that it lowers your tax burden for the year. In the beginning I struggled to know whether to start putting money in my retirement account or aggressively paying down debt, and discussed this with a financial advisor who recommended I do both bit by bit, but recommended that I do not delay saving for retirement.

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So here’s my challenge for those of you that have retirement accounts–do you know what your asset allocation is? What percentage of your money is in stocks versus bonds versus a multi-asset allocation (whatever that is)? What specific bonds and stocks is your account money invested in? I have two retirement accounts from previous jobs, as well as a Roth IRA I opened up independently with Fidelity, and my current 403(b) is through Transamerica. Check out the deets below:

My current 403(b):

  • 95% in stocks
  • 5% in bonds
  • 0% in Multi-Asset (Other)

More specifically, here’s the breakdown:

  • Short Bonds:Vanguard Federal Money Market Inv
  • Interm/Long Term Bonds: Baird Aggregate Bond Instl
  • Aggressive Bonds: Transamerica Partners Instl Hi Yld Bd
  • Large Cap Stocks: Dodge & Cox, Steward Lrge Cap Enhanced, Vanguard Institutional Index, Principal LargeCap Growth
  • Small/Mid-Cap Stocks: Transamerica Partners Instl Mid value, Harbor Mid Cap Growth Instl, DFA US Targeted Value I, Vanguard Small Cap Index Instl Plus, Hartford SmallCap Growth HLS IA
  • International Stocks: American Funds Europacfici, DFA International Small Company I

Now my challenge is to start talking to others and asking around to figure out if these particular investments are right for me and my money. Never fear, guys, I’ll keep you updated.

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P.S. Here ya go.

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Author: Diana Boss

I am a resident physician in dermatology, living with my husband and our two little ones in the southern USA.

4 thoughts on “When I’m Sixty-Four”

  1. I have two questions for the group:
    1) As of January I will have two debts left and both have >4% interest rate. Have you seen any article/info etc the suggestions not paying off those debts, but rather continuing to make the monthly payment and put extra money in investments instead since the rate of return would likely be more than 4%? Part B of the question) I think mathematically that makes sense, but physiologically to have that debt bothers me. Any advice?

    2) Right now we fall in the 25% tax bracket. In which priority order should I fund a Roth IRA, Roth 401K, 401K, HSA or investment account? Can anyone confirm my logic that if our first priority was to both contribute the max allowance of $18,000 towards our 401K this year that would be best since that would drop us back down to the 15% tax bracket? I love you Dianita for pushing me to think more about this really confusing stuff 🙂

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    1. 1) Everything I’ve read from a variety of sources and comments would probably support putting extra money in investments (like stocks with a high rate of return) since you’re right, you’ll be making more money investing that money than using it to pay off debt. BUT, I think there is no price you can put on the feeling of being debt-free, and that’s a real and tangible benefit in terms of stress and mental happiness, too. Of course the answer is easy if you’re talking about high-interest debt like a credit card, but low-interest student loan debt is another story. Do you have a 3 month emergency fund set aside? I might do that first and put it in an online bank like Ally or Capital One 360 that will give you a higher interest rate on that money than a regular checking account. We have a Capital One 360 account that earns 1% (versus our Chase accounts which earn nothing).

      2) I think this is a really complicated question that I might not answer very well and would love to know what other people think. But I’ll give my two cents, just keep in mind I may not have the whole story with my answer. What type of retirement account do you have through work, and are you maxing it out yet? The Roth IRA and Roth 401K are both accounts that won’t change your tax burden–those are by definition post-tax retirement accounts, so these in particular are great deals for people who are in a low tax bracket right now, but expect to be in a higher tax bracket when they retire (because you pay taxes now, but not at withdrawal). I’d probably suggest that you max out your work retirement account (18k/year) and your HSA (6,550/year for married couples) to maximize your tax savings. The HSA is something I want to talk about on the blog, later, but is such an amazing entity because it is the only triple tax-protected savings account. Your money goes in tax free, it grows the same as a retirement acount and that interest is tax-free, and you can withdraw it tax free in retirement for medical expenses. For my work HSA you have to have a minimum balance of 1k before you can start to invest it in mutual funds. Our plan with our HSA is to save as much as we can and pay for medical expenses out of pocket to use that as essentially a stealth retirement account. Here is a great reviewof different types of retirement accounts that might also help shed some light on this question (although this is written for doctors who may be self-employed, so may be less relevant): http://whitecoatinvestor.com/comparing-retirement-accounts/

      Anybody else have any thoughts?

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  2. I’m not sure if this is good or bad, but everything you wrote in your answer is what I was thinking. Maybe we are both on track (or off) hahaha! I have put in enough to my 401K to get my employer match right away in my career and I love how you emphasized that point in your post! I have my money going to a Roth 401K because I was assuming that when I retired my income would put me in a higher tax bracket, but now if I FIRE my tax bracket would be similar or less so changing this back to a 401K seems to be the best option. My plan for 2017 does also include maxing my HSA for all the awesome reasons you mention above. How are you going to keep track of your medical receipts (this is not a strength of mine)? Maybe this will be answered in your HSA post. Thanks for the feedback.

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