Saving for retirement? (55, pensions, physically, financial advisor)
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Hello all, I was wondering if anyone can give me a little guidance. A little background info on myself. I'm 28 yrs old, started a traditional IRA a few months ago and have contributed the full $5500 amount, in addition to enrolling in NYC pension for nurses. I have roughly 14k left in student loans and have been putting more toward the principal every month. Pre-tax income is a little over 73k. My question is, at this rate, would it be unwise to contribute a little toward my employers tax deferred annuity program? Lots of my coworkers sing it's praises, but everyone's circumstances are different and I'm not entirely sure I understand the hospital's financial advisors.
I've not been much of a saver, but with recent health concerns that have arisen in my life I'd like to take active steps in planning for my retirement or early retirement even. Should I pay my loans off first before even attempting to contribute to a TDA. Or should I pay off the loans first, start a rainy day fund that'll last a yr than start contributing toward a Tda , in addition to my traditional IRA and pension. Any input would be greatly appreciated! TIA!
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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1) What is the interest rate on your loans? My kids consolidated school loans at 2.7%, so no hurry to pay off.
If yours are 5%+, then at today's poor savings return rates, it is wise to pay off.
Be very careful about the terms of an annuity, probably not a favorable investment choice for a 28 YO. (usually better for older people, and be sure to understand fees / disbursements / surrender fee)
Tax deferred medical HSA would be good place to camp $$ if you have health concerns.
I prefer ROTHS as retirement investments for younger folks with a low current tax burden, as contributions can be withdrawn after 5 yrs. (Tho I have never had to do that)
Would be a good idea to run a few scenarios over time (considering your income / savings / taxes / primary investments / purchases).
Congrats for landing a good job, and saving early.
Be wise, enjoy the journey (spend some money on yourself / others / travel)
Since you are young you have a great start already.
Do what my dad taught me many years ago when I started working (at 16 yrs. old) and you too will be a miilionaire when you hit 50:
1. LIVE BELOW YOUR MEANS
2. Never finance a depreciating asset (cars, boats etc....ONLY houses!)
3. Save 10% EVERY YEAR no matter how much you make (the compounding really adds up over 40-50 years!)
You can do it! And I have never made more than $45K/year and live a great active lifestyle.
Always have quality booze in the cabinet too, that is also very important.
Last edited by JohnCurtisEstes; 08-24-2016 at 02:13 PM..
Congratulations on getting a great start! If you work things properly and in the right order, you will be in great shape for your retirement. But since you asked, I have a few pointers.
Make sure you have an emergency fund. $1000 in a bank for now.
Stop all retirement savings and go all out to get your debts paid off. I know that sounds sacrilege, but debt is the bane of the rich. Get out of debt and stay out of debt.
With the debts paid off, build your emergency fund to 3-6 months of expenses.
Restart your retirement savings, saving 15% of your income in tax favored investments. VERY IMPORTANT...never, ever buy any kind of an investment that you do not understand. If you can't explain it to a third grader, DON'T invest in it! I don't care how many coworkers sing its praises.
You didn't mention housing. Do you own or intend to buy a house? If so, after getting the 15% retirement investing going, start saving for a house or start getting yours paid off early.
Also important, don't forget to be giving. We all need to be helping others who are less fortunate. You want to be a saver, not a hoarder. There's a big difference.
I am not familiar with your annuity plan but I would be afraid that it has lots of fees. I think annuities will be part of most company retirement plans in the future and that they costs will go down.
For now I would avoid the annuity. You can always join latter on. My thinking is that if you need an annuity it should be an immediate annuity and you would not get that until when you retired or even a number of years after you retired.
Thank you all for your suggestions! I definitely need to sit down and figure out my finances. I come from a hardworking middle class family, but unfortunately my parents were quite the spenders, and are somewhat struggling because of it so I want to avoid that.
I'm newly married and my husband bought us a home a little over a year ago. I was not working at the time so now I get to contribute. We have a joint account and pay all our expenses from it. I think off the top of my head my expenses alone are anywhere from 1200-1500 a month, although it will be a bit more since I loaned my parents 4k, and not including shared expenses like mortgage and utilities etc. Annually, I give between 100-150 to my favorite animal rescue. Just off the top of my head I believe after paying all taxes associated with living in NY my income runs closer to under 50k. I haven't included my husbands income in the mix since the financial advisor stated there arent any joint IRA's available. I do know he has a Roth and matches his companies 401k contribution in addition to whatever investments his parents made for him when he was younger. I think collectively I need to figure this out with him since he's not able to explain the whole saving for retirement to me . God bless him, but he leaves that to his financial advisor. ��
Sorry for the lengthy post. So from everyone's responses I gather what I first need to do is switch my traditional IRA to a Roth and max that out. When I do that next yr will there be some sort of penalty? I guess my plan of action is switching my IRA to a Roth, paying off my student loan as quickly as possible and start a emergency fund, and forget about the tax deferred annuities.
And one last question if you all can be so kind as to answer, would adding a tax deferred HSA be feasible with the info I've provided? Nursing is physically demanding and I've met plenty of nurses who have become disabled in some way because of the job, and with my current medical issues I want to plan as best I can. TIA!
No, the hospital doesn't match the TDA's. The only thing we get is our pension , which has been drastically lowered and not what it use to be. Most NY city employees in the past had full pensions but not true anymore with the introduction of tier 6. I mostly stay in the public sector not for the money but a labor of love I guess you can call it. I believe in the hospitals mission to help the underserved, but according to some of my older wiser colleague s I'm young and naive 😒 I guess the only park is the job security and union.
there a match for your contributions? If so it is free money. Take free money before contributing to the IRA.
No, the hospital doesn't match the TDA's. The only thing we get is our pension , which has been drastically lowered and not what it use to be. Most NY city employees in the past had full pensions but not true anymore with the introduction of tier 6. I mostly stay in the public sector not for the money but a labor of love I guess you can call it. I believe in the hospitals mission to help the underserved, but according to some of my older wiser colleague s I'm young and naive 😒 I guess the only park is the job security and union.
OK, I will be the one to raise an ugly issue. It is something I think every woman, especially, and men too, should consider. Divorce. It happens a lot. I have seen family and friends left destitute from a divorce. Financially wrecked. As awful as it sounds, I think any wage earner needs to deep think the possibility of a divorce and also the loss of a spouse. I would factor in dual incomes and spending, debt accumulation by a spouse and the shock of "I want a divorce". You can lose so much of what you earn and save in the process.
I am sure I will get flamed for this but there it is. I always urged my wife to consider protecting her own assets (inherited money) from me. She had her own checking accounts and savings and investments. Her will left it all to me as did mine to her, but there is no accounting for stupidity and temptations.
Best to you with your health and your planning.
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