Welcome to the first new blog post of the 2016 year – the annual edition of our plan for how to achieve financial independence and retire early (aka F.I.R.E.)! Every year at least once, I take everything I’ve learned about money to date about money management, tax strategies, etc., and then I use that information to improve our financial freedom plan; a creation you will often hear me refer to as my “money design”. Why do I do this? For both my benefit and yours, of course! Obviously I want to achieve financial independence for myself and my family. By finding new strategies and changing up my plan every year, I can make it so that I’ll be able to get there sooner or have more money available to cover my living expenses. My … [Read more...] about Our Plan for How to Achieve Financial Freedom – January 2016
Retirement
Average Retirement Savings Statistics – Really Scary Stuff!
Though there may not be a zombie apocalypse any time soon, there is one crisis that more and more people are starting to become concerned about: Saving for retirement. For almost 100 years when American Express established the first pension system in 1875, employers used to take care of their workers by making them contribute a small amount and then guaranteeing them income for life after they had given a certain number of years of service. However, over the past two decades, the burden and risk of preparing for retirement has shifted from employer to employee. Companies started offering 401(k) plans and doing away with pensions. What was once supposed to be a supplement, the 401(k) has now become the primary method (and … [Read more...] about Average Retirement Savings Statistics – Really Scary Stuff!
Should I Rollover My 401(k) Into an IRA? – Absolutely!
One of the biggest financial questions working people like you and I face when we change jobs is the question of should I rollover my 401(k) into an IRA or not? It’s a BIG decision, and not one to be taken lightly! The answer could result in missed opportunity of hundreds of thousands of dollars later on down the road. Or worse … make the wrong move and you could end up owing the IRS tens of thousands of dollars in taxes that you’re not prepared to pay for. Yikes!!! I was recently faced with this decision now that I’ve made some new life changes and decided to switch jobs. I’m not going to be shy – my 401(k) balance was pretty substantial! 12 years of saving and earning tons of employee matches results in a pretty healthy … [Read more...] about Should I Rollover My 401(k) Into an IRA? – Absolutely!
The Best Retirement Payout Calculator I’ve Ever Seen
I love playing around with online retirement calculators. But unfortunately most of them leave me disappointed. How many times have you plugged some numbers into one of those calculators only to receive some magical savings goal, and then said to yourself, okay … now what? It just leaves you hanging with so many un-answered questions! What happens if I really do hit that BIG number? Will life be all peaches? Will my money last me forever and ever? What if the market does really poorly? What’s the probability? Over time, how will my savings look then? What if that “magic number” the calculator spits out is too conservative, and I could do just fine by saving less money? What about Social Security? How will that affect my … [Read more...] about The Best Retirement Payout Calculator I’ve Ever Seen
What If You Stopped Saving Money for Retirement?
Here’s a fun little game to try on yourself and see how your finances are coming along. (… Depending on the answer, it might also make you feel really good about your savings efforts so far!) Suppose you were suddenly let go from your job. You find a new place to work, but it doesn’t pay as well. So in order to maintain your standard of living you decide you’re going to cut corners and completely STOP saving money for retirement. The big question: Would you still be able to comfortably retire when you want to? My Answer … (... Kind of a funny question to ask on a personal finance blog, right? ...) I tried this little experiment on our current retirement savings, and you want to know what I found out? We’d … [Read more...] about What If You Stopped Saving Money for Retirement?
What is the Best Safe Withdrawal Rate for Retirement?
The 4 percent rule… It’s arguably one of the most highly debated figures in retirement planning. Since its inception in 1994 by Bill Bengen, it seems as though you can find just as many people who love it as those who hate it. Why so much fuss over one tiny, little number? Because of what it stands for! Planning your nest egg size using the right safe withdrawal rate figure can mean the difference between playing with fire during retirement or having 100% confidence that you’ll never run out of money. But if you pick a number that is too conservative, it can also mean the difference between trying to save up for a $2 million dollar nest egg instead of a $1 million dollar one. Obviously it would be great if we didn't have to … [Read more...] about What is the Best Safe Withdrawal Rate for Retirement?
How Much Do I Need to Save for Retirement? Probably Much, Much Less Than You Think!
When it comes to your retirement savings, how do you know when enough is enough? According to an article from CNBC, a global investment management firm surveyed investors and you know what they came up with? An average retirement nest egg of $2.5 million! That’s how much they believe it will take to have the same quality of life they’re enjoying today. As I found out first hand at a lunch outing with a friend, this sort of belief is all too common! But what if it’s not at all true? What if you really sat down and actually figured out how much do I need to save for retirement and concluded … … it could be much, much less! Perhaps you’re already a lot closer than you think! Here’s my lunch story … You Think … [Read more...] about How Much Do I Need to Save for Retirement? Probably Much, Much Less Than You Think!
How a Backdoor Roth IRA Conversion Could Help Your Early Retirement Strategy
In the past I’ve talked before about how a 72t is a key part of my early retirement strategy. In case you’re not aware of what that is, a 72t is a special exception in the IRS rules that allows you to take money out from your 401k or IRA before age 59-1/2 and without facing that stiff 10% penalty (we’ve got a whole post about it here). For anyone looking to retire early, that’s a massive win! While that’s all fine and good, one of the things I like to make sure of when it comes to my money strategy is to always be searching for something better. Maybe an option with less rules or something that’s easier on your taxes? Lately as I was poking around the Early Retirement forum, I came across one such strategy that I felt is … [Read more...] about How a Backdoor Roth IRA Conversion Could Help Your Early Retirement Strategy