When I was in college, "college cash" was spent on beer and the resultant late night pizza deliveries.

Sportsmom -- I tend to agree with you. You're saving 10% of your salary, which is better than most people do, and you're helping with your son's college expenses, and I agree that doing right by our children comes first.

You'll probably be able to put away more for your retirement when your husband starts working again. And you won't have to pay for college forever.

Keep in mind that a lot of the "experts" work for mutual fund companies and they want us to invest as heavily as possible. The amounts their retirement calculators recommend tend to be rather enormous, and actually very few Americans are doing anywhere nearly that much. The reality of most people's lives is that they're probably not going to be able to completely retire at age 60 or 65 with plenty of money to spend. They will likely have to work part-time for awhile to supplement their incomes. In my opinion, that's a good thing. Most people are happier and healthier when they feel productive. Spending 30 idle years in retirement doesn't strike me as all that worthy a goal.

I don't mean that saving for retirement isn't important because it is. You certainly want to have enough financial security to control what happens to you in old age. But enjoying your present life is also important, just so long as you're controlling your spending and not getting deeper in debt. We all need to strive for balance.

I find your comment funny- as I work at a big mutual fund company so you can imigine why I get nervous- this is what they educate us on.
So I am going to keep on juggling the balance- I just went on a mini 3 day vacation and vowed we would do more of them and yes 5 of those could have went to my IRA- but my choice.
I agree on retirement- even if you could almost retire- who can afford not having health care?

thanks for your thoughts

sportsmom,
You bring up a lot of questions. It also comes down to what is essential, what is not. These things have changed very much in my lifetime. Think of the bills you have now that your parents did not have - cable TV, internet, cell phones, replacing VCRs and other things that our parents did not have or only had to buy once. I mean, in the 60s and 70s, you expected an appliance to last 20 years or more. I have already replaced my first DVD player!

So if we pared down our living and did none of these things that our parents never found essential, we might be able to save as we should. Do we drive our cars until they become unreliable even with regular service, or do we get a new one every few years - worse yet, lease? If you never pay off a car, never own it, you always have that bill.

One of the big unexpected expenses I have had in the past few years is helping my mom out. I had to pay to replumb her mobile home when the fifth or six leak happened and her insurance was going to be canceled. $4000. When Mom died, her insurance went to pay for my sister to pay off the mobile home they shared. I will never be repaid, and that is okay because I still have time to rebuild my savings because I am only 45. My mom used her profit sharing money to build on a huge covered entrance deck on her mobile home. Neither Mom or Sue go outside, so would they have put it on if they knew how tight money would become later? How did Mom feel, knowing that she needed me to replace her plumbing and my brother to pay her heating bill this winter? Pretty lousy. Her aunt was shocked when I told her that Mom died unable to pay her debts to medical providers and that I would never be repaid. Auntie just could not fathom needing help from your children (and she lives in a one-room apartment in assisted living and cannot pay her rent beyond this summer!)

Our savings disappeard when Mom needed help and my sister was unemployed and we paid her health insurance every month. We are not doing well at building it back up, either. We still plan on our fall vacation and we did just spend about $800 on a three day getaway, too. It is getting harder and harder to deny myself $30 here and $70 there in spending. I know exactly where you are coming from! But my tale also shows what happens when we do not save enough, when our "wants" become "needs" and we do not look toward the future. I don't know the answers beyond "buckle down and save!" and I am not sure how to do it!

I think it would really help if you and your husband sat down and decided exactly how you would like to spend your retirement and how much money you will need to support your plans. It's really hard to save for something that may never come, but not so hard to save for 1 week in Mexico per year once you are retired. You need a goal, and you need to have a plan to attain that goal. There are many variables that go into the equation as to how much money you need- is your mortgage going to be paid off, is your son's college loan going to be paid off, are you going to have a car payment, what's you SS benefit, do you have any other investments, are you going to work at all, etc. This is all stuff you need to plan for now so you won't be dissapointed later. Of course, once you start crunching the numbers, you may realize you don't need so much stuff after you retire (like vacations and new cars) so you don't have to worry so much about splurging a little now and then. Or you may realize that money is going to be very tight and you may want to cut unneeded expenses now in order to more fully enjoy your retirement. There's a lot of personal choice and preference, and nobody but you and your husband can make those decisions for you. But you do have to start thinking about what your retirement is going to cost and how you plan on paying for it. Of course, if you have already run the numbers, and want us to tell you what to do, I doubt you're going to find any takers here!

Hi all,

My ex- passed away recently.

After her death our offspring (do we call them, "children" - at about 40?) noted that, as she was 66, had she retired at the normal time, she have had about a year to enjoy it.

As she was head dietitian in a local mental hospital, as there was another about 20 miles away, several years ago when governments were cutting back, there was talk of closing one or other of them.

She thought that, though she'd worked only about 25 years, so pension credit would be reduced, it might well be wiser to retire early, taking the golden handshake - rather than waiting for a severance package, should they close her unit.

As it was - she had ten years to enjoy her retirement, including spending about three months in her motor home in the southern states most winters (she was a U.S. citizen), pursuing various hobbies and just enjoying life.

They were pleased that she had made that decision.

However - many people have a number of things that they plan to do in retirement - but when one crunches potential numbers, it doesn't look as though there's enough financial blanket to cover the bed.

The ideal is to run down to the last dollar on the lst day of life (having made provision for final costs: income tax, burial, etc.).

Problem is - it's quit difficult to do that, for most people, as we don't know what potential return their may be on their assets, how long they may live, what kind of medical costs may be incurred (less of a problem in Canada or Europe), etc.

There is one way to ascertain the date of death - it's called "suicide".

But most of us don't want to go there.

Good wishes for fruitful planning for retuirement - not just financial, but in terms of activities and interests.

Quite a number retire and soon don't know what to do with themselves.

Some even die not long after - without an apparent reason.

Again, good wishes to you and yours.

ole joyful

Over the past 5 years I've gotten out of the "juggling bills" days, but I still make very low money so I don't usually have anything significant left over after bills & groceries (still paying on student loan, plus mortgage, car, utilities, and some old debt)...but putting aside 10% shouldn't be too hurtful to me. My question is about the traditional or Roth IRAs....if you open up one with money from your paychecks, that is after-tax money; will it be taxed at any point by being invested? when you go to the bank to open an IRA, how does it work? is it just like opening a bank account, as far as paperwork, or is it bigger, like loan paperwork?

Amy, RE your questions: it's very easy to open an IRA, and it's no different than opening any other account. With a traditional IRA, the amount you contribute is not taxed, but the money and interest are taxed when you start withdrawing from the account (beginning at age 59). With a Roth IRA, the money you contribute is taxed, but neither the contributions nor the interest earned are taxed when you withdraw. According to all the experts, the Roth is the best way to go. Your income does have to be under a certain amount to contribute, and there are limits to how much you can contribute per year. Go to irs.gov and look it up.

And I should say that I'm not a financial expert -- I just have a smattering of knowledge -- so you should do a little research to verify all this.

You also declare how much you contributed to the ROTH IRA at tax time, so you pay less taxes, as it isn't considered income.

Personally I would save up some emergency money before deciding to go on vacation. If you withdraw from your 401k you are losing ALOT of money. If you skip vacation for one year you can put that money in your emergency fund and leave it until there is a REAL emergency. Not many people go on vacation every year anymore. Actually my husband and I have not gone on a vacation since 2003. This is sad however I would prefer to save up money so that when we have children I have an option to stay home instead of going back to work.

I find that just having some extra money gives me something I can't live without and that is peace of mind. I don't want to lose my house if we lose our jobs. This could happen, the job market is not stable anywhere. Get your savings in order and then take your vacation.

-renee

The last comment may be misleading: you do NOT declare Roth IRA contribution on your taxes: it is after tax money. Trad IRA, as someone said above, CAN be deducted on your taxes (with various limits, etc).

Oops sorry. You are right amoretti. I got them mixed up. thanks for correcting me!

-renee

In managing most businesses, if the manager doesn't pay the employees, they don't continue coming to work very long.

Each of us above being a toddler has a business that we run on the side.

Nice part is, our employees don't charge for their work. As a matter of fact, they pay us!

Each of those employees is called a Dollar (if you're in the U.S., it's a Bill; in Canada, a Coin, which we call a "Loonie").

If a kid sends that dollar out to buy ice cream it works for him/her once - and s/he can enjoy the "fruits" of the employee's work.

Same for Mom and Dad regarding food, rent, clothing (unless they live in a much warmer climate than in this area - Buffalo had over a foot of snow, yesterday!).

For many people in this part of the world, a car is pretty well in the category of "necessity", as well, as we have pretty well organized society around the car: many built-up areas no longer have sidewalks.

If one finds ways to hang on to some of those dollars, they'll work for that person as long as s/he hangs on to them, with one exception - if they stick them into the mattress.

Banks like to tout their guarantee that when we leave money with them, they'll pay rent on it, and guarantee to pay back every dollar that we lent them. They never mention the other guarantee - that, apart from the rent on the loan, they won't pay us one dollar more, either.

But, there's a problem: I say that, when we invest our dollars where we are guaranteed to get each back, that their number can't grow, either. And the value of each declines each year that we own it.

I say that there's two rats that eat your cheese: the income tax people want to talk to you each year about all of your earnings in that year. And they want some of it, of course. In Canada, they quite different rates of tax on varying kinds of income.

If, apart from the rent, the number of your invested dollars can't grow, you need to add some of those invested dollars to the asset each year so that your purchasing poweer doesn't shrink as the value of each of those dollars of your asset shrinks. That rat's called "inflation" and it has eroded the value of each of your saved dollars every year - since the 1930s.

With the rates of interest that borrowers are willing to pay these days, when we take out some for tax, and more to add to the saved dollars, each of which will buy less each year, often times there isn't any left.

Know what?

The rats eat first!

If there's any left, you get that.

Recently, there's none left.

Imagine - the bank (as borrower) makes more on your money than you do, quite a bit of the time!

As a matter of fact, every borrower, whether bank, corporation or individual figures that s/he can make more on the borrowed money than it costs him/her ... or they wouldn't borrow, would they?

Suppose you'd put $10,000. into the bank 15 years ago, on a 5-year certificate, and renewed it twice since.

Now, when you receive that money (apart from the rent) they'll pay you precisely what they borrowed - $10,000.

That $10,000. would have bought a decent car, 15 years ago. Not now: inflation cut its value substantially through those years.

Did inflation hurt the bank?

No, they rented that money out to someone else (actually, usually about 8 "someone"s), at a higher fee than they paid you.

Suppose I borrowed that $10,000., 15 years ago, agreeing to pay the bank the interest only monthly, and did that. How much would I owe the bank now?

Right - exactly $10,000.00. Which will buy a great deal less now than it would then.

So I gained from inflation: the guy who put his money into the bank lost ... unless the interest covered it.

Farmers like to stick one seed into the ground and have it grow into an ear of corn (maybe even a couple of ears).

Similarly, I like to invest a substantial portion of my assets into situations where I expect them to grow, given a number of years - and mine go back varying lenths of time to about 40 years.

Some grew nicely ... and several paid increasing amounts on the investment over the years. However, I haven't had to answer to the income tax people about that increase in value ... and won't, until I sell them (or die). Which gives me much of the benefit of the tax-deferral in the tax-deferred retirement accounts (but with far fewer restrictions). And when I cash them, I pay tax on the increase at half regular rate.

Some didn't pay anything, or sporadically. Some of those assets grew in value, more than enough to cover the ongoing returns that they hadn't paid (and on which I'd have had to pay tax at the time).

Some didn't pay ... and went down in value, into the bargain. As a wise person said, "You can't win 'em all!".

An investment group of about 25 that has met monthly for around ten years, that I've attended for six or seven, calls those latter experiences "tuition". In the school of learning how to manage money more effectively.

When did you last merit a free luch?

Good wishes for learning how to make your income and assets work better for you than for the other guys.

ole joyful

P.S. Actually, many of us get a "free lunch" here at Gardenweb, and various other places - for we've learned a lot, and it hasn't cost us anything but time, and internet fees, that we pay anyway.

Actually, a while ago, it cost the guys giving the advice - for one could read for free ... but the owners charged a fee for one to open his (her?) big fat yap.

Quite an imposition for us former clergy! Wouldn't you agree?

o j