28 year's old with no retirement savings.

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dks12
Posts: 7
Joined: Sun Aug 26, 2018 12:43 am

28 year's old with no retirement savings.

Post by dks12 » Sun Aug 26, 2018 1:14 am

Bit of background:
I am single and 28 years old with no retirement savings. I just decided to open a Roth IRA through fidelity and am investing into both the new zero ER total market and international index funds. (FZILX & FZROX). I just started learning about this way of investing this past week and am trying to teach myself all I can. I unfortunately never had anyone teach me the value of money and how important this can be and its somewhat freaking me out as well as scaring me. I had some personal setbacks in my early and mid twenties that really caused me not to focus on any sort of financial planning at all and I kind of just pissed any money I made away.

As of now:
I am currently living rent free with my parents while I finish a radiology program to become an x-ray technologist. I have a year left. Living with my parents has allowed me and will allow me to finish this program debt free. I will graduate and take my boards next summer of 2019. I have no other debt and my car, though old, is completely paid off.

My job offers a 403b and matches 5% and still need to sign up for this. Although, because of school, I had to switch to part time. Only working 20 hours between Saturday and Sunday has really taken a toll on what little income I was making. I plan on working for the same company when I graduate in which I will be making more at that time. Reading through here and seeing everyone's savings has me panicking. Because I went part time my health insurance shot up to $210 a paycheck and my take home is only about $300. If i calculated everything right, once I graduate my pay will go up to around $1,900 a month after taxes and health insurance.

Questions:
How much catch up will I need to make moving on into the future? Will this catch up require me to be more aggressive in my investments. As of now I can only put around $60 a month into my Roth. How strongly should I try to hit the 5,500 of the yearly Roth contribution once I graduate next summer? Any tips for moving ahead in my future would be greatly appreciated.

NBKCF
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Joined: Wed Aug 01, 2018 6:14 pm

Re: 28 year's old with no retirement savings.

Post by NBKCF » Sun Aug 26, 2018 10:03 am

Welcome to the forum! I am new here so I will let some of the seasoned experts answer, however, some information that will help some of the board answer correctly:
Questions:
How much catch up will I need to make moving on into the future? Will this catch up require me to be more aggressive in my investments.
What's your planned retirement age? General consensus is to contribute as much as you possibly can. You aren't eligible for catch ups, so maximizing your tax-advantaged accounts now is key.
As of now I can only put around $60 a month into my Roth. How strongly should I try to hit the 5,500 of the yearly Roth contribution once I graduate next summer? Any tips for moving ahead in my future would be greatly appreciated.
Very strongly.

mbasherp
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Re: 28 year's old with no retirement savings.

Post by mbasherp » Sun Aug 26, 2018 10:14 am

No need to freak out. Age 28 is when I started to get my financial house in order, and I was starting from a negative position. You’ll be fine as long as you carry your new found focus with you for the long term. Some people have your revelation at 58, or never.

Avoid debt and save until it hurts. You’ll be shocked at what can happen in just a few short years!

Jimmie
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Re: 28 year's old with no retirement savings.

Post by Jimmie » Sun Aug 26, 2018 10:24 am

By "catch-up", I believe the OP meant to imply that he was behind in contributions, compared to where others in his age group would be. Everyone should know the 401k or 403b catchup contributions are not allowed until reaching the age of 50.

tibbitts
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Re: 28 year's old with no retirement savings.

Post by tibbitts » Sun Aug 26, 2018 10:27 am

NBKCF wrote:
Sun Aug 26, 2018 10:03 am
Welcome to the forum! I am new here so I will let some of the seasoned experts answer, however, some information that will help some of the board answer correctly:
Questions:
How much catch up will I need to make moving on into the future? Will this catch up require me to be more aggressive in my investments.
What's your planned retirement age? General consensus is to contribute as much as you possibly can. You aren't eligible for catch ups, so maximizing your tax-advantaged accounts now is key.
As of now I can only put around $60 a month into my Roth. How strongly should I try to hit the 5,500 of the yearly Roth contribution once I graduate next summer? Any tips for moving ahead in my future would be greatly appreciated.
Very strongly.
The OP is 28, and it's kind of unreasonable to have a planned retirement age at 28, except maybe in the case of the military or employers (law enforcement possibly) with similar retirement provisions. And I think the consensus most definitely isn't to save as much as you possibly can. There are too many things you can do and enjoy at 28 that you won't be able to later, and if you do them you definitely won't save as much as you possibly can. But you should definitely do them anyway.

Tdubs
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Re: 28 year's old with no retirement savings.

Post by Tdubs » Sun Aug 26, 2018 10:38 am

dks12 wrote:
Sun Aug 26, 2018 1:14 am
Bit of background:
I unfortunately never had anyone teach me the value of money and how important this can be and its somewhat freaking me out as well as scaring me. I had some personal setbacks in my early and mid twenties that really caused me not to focus on any sort of financial planning at all and I kind of just pissed any money I made away.
Accept you will be impoverished forever. It is too late. :D

Don't panic. No student loans or other debt? Sounds like your parents are wise and taught you well. Just start saving a healthy amount. You can't do worse than me. At 28, I stepped out of the working world for eight years to get a Ph.D. Significant retirement saving didn't start till I was about 38. I will be just fine, not like some folks on BH, but a comfortable retirement.

Use of your traditional/Roth 403(b) as much as possible and contribute to your Roth IRA when you can. Because of the new tax law, using the Roth side of your 403 right now might be better for you--taxes will almost certainly go up in about 7 years. So, use this window of opportunity of lower tax brackets.

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Watty
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Re: 28 year's old with no retirement savings.

Post by Watty » Sun Aug 26, 2018 10:46 am

One thing I do to track how I am doing is to calculate my net worth each year on January 1st to see how I am doing compared to the prior year. Between cards, student loans, car loans, etc a lot of 28 year olds have a significantly negative net worth. While you have not accumulated a lot yet you are a LOT better off than many 28 year olds so don't feel too bad about where you are at now.
dks12 wrote:
Sun Aug 26, 2018 1:14 am
As of now I can only put around $60 a month into my Roth. How strongly should I try to hit the 5,500 of the yearly Roth contribution once I graduate next summer?


One great thing about a Roth is that you can withdraw the money if your really need to. Some people use them as emergency funds so I would try to save as much as possible in them.

https://www.bogleheads.org/wiki/Roth_IR ... gency_fund
dks12 wrote:
Sun Aug 26, 2018 1:14 am
My job offers a 403b and matches 5% and still need to sign up for this
That is free money. Sign up for it on Monday
dks12 wrote:
Sun Aug 26, 2018 1:14 am
If i calculated everything right, once I graduate my pay will go up to around $1,900 a month after taxes and health insurance.
What would your gross pay be before taxes and what will your health insurance cost? How much can you expect to make when you have a few years experience?

You can get an estimate of your federal taxes here.

https://www.hrblock.com/tax-calculator/#/en/te/aboutYou

chevca
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Re: 28 year's old with no retirement savings.

Post by chevca » Sun Aug 26, 2018 10:51 am

"Catch up".... at age 28?? You will be fine! Good job getting started and interested in saving and investing now.

I didn't even think about this stuff, let alone start on it, until I was almost 40 years old.

Read up, develop a plan you will stick with, and save and invest.

H-Town
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Re: 28 year's old with no retirement savings.

Post by H-Town » Sun Aug 26, 2018 10:57 am

dks12 wrote:
Sun Aug 26, 2018 1:14 am

Questions:
How much catch up will I need to make moving on into the future? Will this catch up require me to be more aggressive in my investments. As of now I can only put around $60 a month into my Roth. How strongly should I try to hit the 5,500 of the yearly Roth contribution once I graduate next summer? Any tips for moving ahead in my future would be greatly appreciated.
Everyone gotta starts somewhere. Don't worry too much. If I were to give you only one advice, it would be: keep living below your means. Once you establish this financial lifestyle, savings would come easy.

Take you time to learn about investing and portfolio management. Don't do anything drastic without fully understand the consequences. The more you learn, the more you realize it's better for most individual investors to keep everything simple, i.e. 3-Fund Portfolio or Target Date Fund.

Kevin8696
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Re: 28 year's old with no retirement savings.

Post by Kevin8696 » Sun Aug 26, 2018 1:12 pm

dks12,

Welcome to the Forum ! Don't freak out... be very glad you got the wake-up call at age 28 and not at 48. Lot's of time on your side.

I'd suggest reading a great little book titled, "The Coffeehouse Investor", by Bill Schultheis (a recovering Smith Barney broker).

It's a quick and easy read (188 pages), with lots of good advice on how to build wealth and get on with your life. $15 on Amazon.

Best of luck to you,

Kevin

Nissanzx1
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Re: 28 year's old with no retirement savings.

Post by Nissanzx1 » Sun Aug 26, 2018 1:22 pm

I'd enroll in the 403b tomorrow. You are very young and have plenty of time to build for retirement.

Right now let the 403 be enough. When you hit full time add at least 10-15% in 403b and fully fund a Roth every year. I think you'll be just fine by 65 or so if you do that.

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camper
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Re: 28 year's old with no retirement savings.

Post by camper » Sun Aug 26, 2018 1:37 pm

Don't sweat it. I was in a very similar situation at your age. You have found a great resource (the Bogleheads) to learn from to be successful financially.
Some things to keep in mind...
1) Thank your parents for everything they are doing for you. Rent free is a beautiful thing.
2) Sign up for the 403b yesterday. Free 5%. I like free. You should too.
3) You can make 2018 Roth contributions until April 15, 2019.
4) It can be daunting here at Bogleheads when others talk about how much they are saving. The Bogleheads are an affluent bunch. The rest of us are striving to get there. Think about saving rate, as a percentage of what you make, instead of amounts others are posting.
5) Invest in yourself while you are young. Get the training/schooling you need to have a successful career that will make you happy and pay a decent wage. Investing becomes a bit more comfortable when you have the means to do so.
6) Bogleheads.org is kind of addictive.
7) Good luck!

cherijoh
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Re: 28 year's old with no retirement savings.

Post by cherijoh » Sun Aug 26, 2018 1:47 pm

dks12 wrote:
Sun Aug 26, 2018 1:14 am
Bit of background:
I am single and 28 years old with no retirement savings. I just decided to open a Roth IRA through fidelity and am investing into both the new zero ER total market and international index funds. (FZILX & FZROX). I just started learning about this way of investing this past week and am trying to teach myself all I can. I unfortunately never had anyone teach me the value of money and how important this can be and its somewhat freaking me out as well as scaring me. I had some personal setbacks in my early and mid twenties that really caused me not to focus on any sort of financial planning at all and I kind of just pissed any money I made away.

As of now:
I am currently living rent free with my parents while I finish a radiology program to become an x-ray technologist. I have a year left. Living with my parents has allowed me and will allow me to finish this program debt free. I will graduate and take my boards next summer of 2019. I have no other debt and my car, though old, is completely paid off.

My job offers a 403b and matches 5% and still need to sign up for this. Although, because of school, I had to switch to part time. Only working 20 hours between Saturday and Sunday has really taken a toll on what little income I was making. I plan on working for the same company when I graduate in which I will be making more at that time. Reading through here and seeing everyone's savings has me panicking. Because I went part time my health insurance shot up to $210 a paycheck and my take home is only about $300. If i calculated everything right, once I graduate my pay will go up to around $1,900 a month after taxes and health insurance.

Questions:
How much catch up will I need to make moving on into the future? Will this catch up require me to be more aggressive in my investments. As of now I can only put around $60 a month into my Roth. How strongly should I try to hit the 5,500 of the yearly Roth contribution once I graduate next summer? Any tips for moving ahead in my future would be greatly appreciated.
My suggestion would be to first focus on getting the 5% company match. Next focus on maxing out your Roth IRA. Be sure and "pay yourself first" - this is automatic with workplace retirement plans since the contribution is deducted before you see your paycheck. but it is a good idea to automate saving outside your 403b. Send some money to your Roth IRA each paycheck before you have an opportunity to spend it.

Some people get satisfaction from saving as much as possible ("save until it hurts" as someone else phrased it), but that doesn't work for everyone. Since you weren't a saver out of the gate, I'd like to suggest that you set up a budget once you graduate and set aside some money for fun stuff. Then you get to decide whether to blow it immediately by going out for a beer every night with your buddies or saving up for a few months for some larger purchase. That way you won't turn into the financial version of a yoy-yo dieter by setting up unrealistic expections followed by binge spending then followed by thoughts that you are a bad person and that it is hopeless.

It sounds like you may be a procrastinator, so you may want to look into whether your workplace plan offers an escalation feature that every time you get a raise, your contribution is increased by 1 or 2%.

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Watty
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Re: 28 year's old with no retirement savings.

Post by Watty » Sun Aug 26, 2018 3:23 pm

One more thing. If the training program you are in does not qualify you as a full time student then you may be able to get a retirement savings credit.

https://www.irs.gov/retirement-plans/pl ... ers-credit

Next year when you finish the program you may be able to get it since the income they use for determining the eligibility for this is an adjusted income after a lot of subtractions.

If the stars align just right you might be able to contribute money to the 403b and get an employers match and also qualify for at least a partial retirement savings credit.

togb
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Re: 28 year's old with no retirement savings.

Post by togb » Sun Aug 26, 2018 3:56 pm

Hey, don't panic. You can catch up.

First thing, find a way, whatever you have to do, to contribute the 5% that will be matched. Then resume normal breathing.
When you get a raise, don't plan on spending it all. Put at least half of that raise towards retirement. (so a 4% raise, at least 2% goes to retirement savings, and now you are saving 7%). Keep doing that until you are saving 20% of your earnings.

If you are in a low tax bracket, consider putting some in Roth vs before tax. You'll have to figure out the right number, but if I was paying <20% taxes, I'd be putting 1/3 of my retirement savings in Roth.

Never borrow against those retirement savings. Stay employed. If you get bonuses, put half into retirement and enjoy the other half. (Bonus/incentive pay is taxed at 40%, so typically I fund before tax savings from bonus-- just something to consider.)

I followed this plan starting when I was 24, so just 4 years sooner than you. I'm pretty sure it will work for you too.

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GerryL
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Re: 28 year's old with no retirement savings.

Post by GerryL » Sun Aug 26, 2018 3:58 pm

Agree with the advice about trying to get the 403b match -- or as much as you can manage. It's free money.

Other than that I would urge you to get into a savings habit. Start small if you have to given your current income, but make it a way of life. Promise yourself that you'll put aside even $10 a month for the future, then do it. (And don't tap it for current spending!) Every month. Increase the amount as your income changes. If someone give you a cash gift or you get a bonus, save at least half. The savings mindset is important. It's like brushing your teeth. Soon you'll be able to set goals and save toward them.

I didn't really get started socking money away for retirement until I was almost 40. I am now retired and doing very well, thank you. I was lucky because I was a natural-born saver and never had to dig out of debt.

Mr.BB
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Re: 28 year's old with no retirement savings.

Post by Mr.BB » Sun Aug 26, 2018 4:00 pm

Very simple. Save as much as you can, as early as you can. Your still way ahead of most people getting started.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

mariezzz
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Re: 28 year's old with no retirement savings.

Post by mariezzz » Sun Aug 26, 2018 4:37 pm

By living with your parents, you already made a very smart financial decision. So give yourself a pat on the back. The key is to keep living frugally, even once you're through school and working full time.
While in school, be sure to get the full employer match. An added bonus: by putting 5% into a tax-deferred retirement account, you lower your taxable income, which may help you qualify for the various school-related tax credits, etc.
Once you're working full time put as much as you can in your retirement funds - it will help you save on taxes. If you can contribute the max to 401k & IRA, do it.
Even if you can't put in the max to both IRA and 401k, once you have a full year of working full time, I'd suggest a few years of maxing out a Roth IRA at least, while you're in a fairly low-earning position (what you end up paying on taxes is less, if you're in a lower tax bracket). That can function as a sort of an emergency fund that you really don't want to tap into, but you can if you have to.
Last edited by mariezzz on Sun Aug 26, 2018 4:42 pm, edited 1 time in total.

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camillus
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Re: 28 year's old with no retirement savings.

Post by camillus » Sun Aug 26, 2018 4:41 pm

Hi dks12,

You are actually in a really great spot. You are about to experience an income boost and are realizing you need to save. You can "lock in" a personal, automatic savings rate from the beginning.

I too am trying to "catch up" after extended schooling in my 20s (college twice!). I ended up being a nurse. Thanks for what you do. I believe at 28 I had a negative net worth. My household is focusing on a saving rate around 30% to "catch up" or "front load" retirement. I believe I had quite a negative net worth at 28.

You will have to look at the numbers in your situation and see what you can make work. I'd recommend saving closer to 20% than 15% of your gross income (you can count employer match towards this number).

I'll link a few things to read:
1) Fidelity and other places have "retirement benchmarks" by age as points of reference: https://www.fidelity.com/viewpoints/ret ... -to-retire
2) Importantly, here is a little primer on investing the boglehead way, titled If You Can - https://www.etf.com/docs/IfYouCan.pdf

A few other tidbits:
1) If your place of work offers a high deductable health plan, and you are young and healthy, I would go with that along with a Health Savings Account (HSA), this will reduce your premiums. I'd put some money away per month in your HSA to pay for health needs.
2) Your take home pay as you listed is $22800/yr. This seems on the low side. I'd work on a plan to increase this.
3) At your income level, I doubt you would pay any taxes at all. Let us know if we can help you calculate this.
4) A Roth IRA, in your near zero marginal tax bracket, seems like the right investment to prioritize. This can also be used for a down payment for a home, and can serve as an extended emergency fund - contributions can be withdrawn tax & penalty free.

You are doing great!

dks12
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Re: 28 year's old with no retirement savings.

Post by dks12 » Sun Aug 26, 2018 8:00 pm

camillus wrote:
Sun Aug 26, 2018 4:41 pm
Hi dks12,

You are actually in a really great spot. You are about to experience an income boost and are realizing you need to save. You can "lock in" a personal, automatic savings rate from the beginning.

I too am trying to "catch up" after extended schooling in my 20s (college twice!). I ended up being a nurse. Thanks for what you do. I believe at 28 I had a negative net worth. My household is focusing on a saving rate around 30% to "catch up" or "front load" retirement. I believe I had quite a negative net worth at 28.

You will have to look at the numbers in your situation and see what you can make work. I'd recommend saving closer to 20% than 15% of your gross income (you can count employer match towards this number).

I'll link a few things to read:
1) Fidelity and other places have "retirement benchmarks" by age as points of reference: https://www.fidelity.com/viewpoints/ret ... -to-retire
2) Importantly, here is a little primer on investing the boglehead way, titled If You Can - https://www.etf.com/docs/IfYouCan.pdf

A few other tidbits:
1) If your place of work offers a high deductable health plan, and you are young and healthy, I would go with that along with a Health Savings Account (HSA), this will reduce your premiums. I'd put some money away per month in your HSA to pay for health needs.
2) Your take home pay as you listed is $22800/yr. This seems on the low side. I'd work on a plan to increase this.
3) At your income level, I doubt you would pay any taxes at all. Let us know if we can help you calculate this.
4) A Roth IRA, in your near zero marginal tax bracket, seems like the right investment to prioritize. This can also be used for a down payment for a home, and can serve as an extended emergency fund - contributions can be withdrawn tax & penalty free.

You are doing great!

Thanks for the tips. Yeah, my take home wont be that much. Though I do live in an area where the cost of living is pretty cheap and reasonable. One reason is so low is because the hospital I work at has cut full time down to 30 hours per week. That will be 3 days per week for me at ten hours. With four other days in the week I'll plan on looking for other part time jobs I can do and maybe just take that money and throw it all into savings. My hospital also has a monopoly on the area so they really low ball their employees in their pay. Phoenix which is the next biggest city near me I know pays an average of 5-6 dollars more per hour. Though many hospitals in that area look for at least one year of experience before they hire you.

Katietsu
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Re: 28 year's old with no retirement savings.

Post by Katietsu » Sun Aug 26, 2018 8:09 pm

Many have said this but just to be clear...Do not put any money into the Roth IRA unless you are putting enough in the 403 b to get the full match. In fact, I would even close the Roth and pull the money out if that was needed to get me closer to the 403b match.

dks12
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Re: 28 year's old with no retirement savings.

Post by dks12 » Sun Aug 26, 2018 8:18 pm

Thanks everyone for all the tips and advice you are giving me. It is not going unnoticed or falling on deaf ears. I definitely plan to educate myself more on this subject within the next year as I am going through school so I will be completely ready once I graduate. I really like how simple people keep their investing strategy here. As someone who can be new to it that makes things A LOT easier for me to understand and implement. Once again thank you all!

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camillus
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Re: 28 year's old with no retirement savings.

Post by camillus » Sun Aug 26, 2018 8:27 pm

Katietsu wrote:
Sun Aug 26, 2018 8:09 pm
Many have said this but just to be clear...Do not put any money into the Roth IRA unless you are putting enough in the 403 b to get the full match. In fact, I would even close the Roth and pull the money out if that was needed to get me closer to the 403b match.
+1, This is a golden rule. I had implicitly assumed it when writing my post.

dks12
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Re: 28 year's old with no retirement savings.

Post by dks12 » Sun Aug 26, 2018 8:28 pm

Jimmie wrote:
Sun Aug 26, 2018 10:24 am
By "catch-up", I believe the OP meant to imply that he was behind in contributions, compared to where others in his age group would be. Everyone should know the 401k or 403b catchup contributions are not allowed until reaching the age of 50.
That is what I meant.

dks12
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Re: 28 year's old with no retirement savings.

Post by dks12 » Sun Aug 26, 2018 8:30 pm

Also to everyone's messages. I have sent an e-mail to the person in charge of setting up my 403(b) so I can make an appointment with him.

guymontag
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Re: 28 year's old with no retirement savings.

Post by guymontag » Sun Aug 26, 2018 8:38 pm

dks12 wrote:
Sun Aug 26, 2018 1:14 am
I just started learning about this way of investing this past week and am trying to teach myself all I can. I unfortunately never had anyone teach me the value of money and how important this can be and its somewhat freaking me out as well as scaring me...

Any tips for moving ahead in my future would be greatly appreciated.
OP, you are not alone. I’m the same age with the same investment starting point, but I do have more financial obstacles than outlined in your situation. I wanted to chime in since you asked for tips.

Tips that have helped me:

*The concept of “pay yourself first”, every paycheck I allot the appropriate amount to expenses but also pay myself a percentage
*Investing should be simple and inexpensive - I’m working on my own adaptation of the 3 Fund Portfolio, with low ER
*Reduce your unnecessary expenses, I cook most of my meals and meal prep for work, peruse thrift stores for my comfortable clothing, etc.
*Budgeting using the envelope method
*Develop your own personal development plan along with your investment plan
*Capitalize on opportunites, like the 403 and the living at home situation, but it looks like you may have that figured out

Bonus Tips:
*I have been consistently surprised and happy with Facebook marketplace regarding certain expenditures like: toys and furniture and anything else you might think of, saved me quite a bit of coin.
*Mr. Money Mustache and Your Money or Your Life

dks12
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Re: 28 year's old with no retirement savings.

Post by dks12 » Sun Aug 26, 2018 10:07 pm

guymontag wrote:
Sun Aug 26, 2018 8:38 pm
dks12 wrote:
Sun Aug 26, 2018 1:14 am
I just started learning about this way of investing this past week and am trying to teach myself all I can. I unfortunately never had anyone teach me the value of money and how important this can be and its somewhat freaking me out as well as scaring me...

Any tips for moving ahead in my future would be greatly appreciated.
OP, you are not alone. I’m the same age with the same investment starting point, but I do have more financial obstacles than outlined in your situation. I wanted to chime in since you asked for tips.

Tips that have helped me:

*The concept of “pay yourself first”, every paycheck I allot the appropriate amount to expenses but also pay myself a percentage
*Investing should be simple and inexpensive - I’m working on my own adaptation of the 3 Fund Portfolio, with low ER
*Reduce your unnecessary expenses, I cook most of my meals and meal prep for work, peruse thrift stores for my comfortable clothing, etc.
*Budgeting using the envelope method
*Develop your own personal development plan along with your investment plan
*Capitalize on opportunites, like the 403 and the living at home situation, but it looks like you may have that figured out

Bonus Tips:
*I have been consistently surprised and happy with Facebook marketplace regarding certain expenditures like: toys and furniture and anything else you might think of, saved me quite a bit of coin.
*Mr. Money Mustache and Your Money or Your Life
Thanks for pointing out the facebook market place.. Ive been worrying about the furniture expense when i graduate and move out. Everything is so cheap on there!

likegarden
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Re: 28 year's old with no retirement savings.

Post by likegarden » Mon Aug 27, 2018 7:52 am

Nothing wrong with being 28 without retirement savings. I left college with 25, then had to buy some clothing and furniture for my apartment, a used car (at 28) and paying off a small student loan. I started on retirement savings after I married at 31 and bought first house at 34. Getting started in life after college costs money, and you have to do that first.

Darth Xanadu
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Re: 28 year's old with no retirement savings.

Post by Darth Xanadu » Mon Aug 27, 2018 12:25 pm

togb wrote:
Sun Aug 26, 2018 3:56 pm
Bonus/incentive pay is taxed at 40%, so typically I fund before tax savings from bonus-- just something to consider.
:confused
"A courageous teacher, failure is."

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GerryL
Posts: 1895
Joined: Fri Sep 20, 2013 11:40 pm

Re: 28 year's old with no retirement savings.

Post by GerryL » Mon Aug 27, 2018 12:34 pm

Darth Xanadu wrote:
Mon Aug 27, 2018 12:25 pm
togb wrote:
Sun Aug 26, 2018 3:56 pm
Bonus/incentive pay is taxed at 40%, so typically I fund before tax savings from bonus-- just something to consider.
:confused
Is it "taxed" at 40% or is withholding at 40%? Big difference.
Where I used to work the annual bonus was shrunk by the highest withholding, since the company didn't know how the amount would impact each employee's tax rate for the year. Better to have it withheld than to get hit with penalties the next April.

Flyer24
Posts: 374
Joined: Sun Apr 08, 2018 4:21 pm

Re: 28 year's old with no retirement savings.

Post by Flyer24 » Mon Aug 27, 2018 12:45 pm

togb wrote:
Sun Aug 26, 2018 3:56 pm
(Bonus/incentive pay is taxed at 40%, so typically I fund before tax savings from bonus-- just something to consider.)


Sorry but that is incorrect. It is withheld at a higher rate not taxed at a higher rate. You get back the difference based on your effective rate when you file. You are not saving anything on taxes.

togb
Posts: 135
Joined: Mon Oct 23, 2017 8:36 pm

Re: 28 year's old with no retirement savings.

Post by togb » Mon Sep 03, 2018 11:43 am

GerryL wrote:
Mon Aug 27, 2018 12:34 pm
Darth Xanadu wrote:
Mon Aug 27, 2018 12:25 pm
togb wrote:
Sun Aug 26, 2018 3:56 pm
Bonus/incentive pay is taxed at 40%, so typically I fund before tax savings from bonus-- just something to consider.
:confused
Is it "taxed" at 40% or is withholding at 40%? Big difference.
Where I used to work the annual bonus was shrunk by the highest withholding, since the company didn't know how the amount would impact each employee's tax rate for the year. Better to have it withheld than to get hit with penalties the next April.
You are correct-- it's WITHHELD at 40%, not taxed at 40%. Still worth consideration on how much of the bonus you'd like to see anytime soon :)

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