Posted on 02/14/2015 7:34:46 AM PST by Kaslin
How do real people save for retirement?
Sign up for the 401K, contribute the 3-6% for a company match, and since it is pre-tax money, your take home only goes down 2-4%. That’s 3-9% of your income equivalent now saved for retirement, depending on employer match.
Decide that the security of saving for retirement is worth more than the eating out, app subscriptions on the phone, premium cable, buying a new car as soon as the existing one is paid off. Put any money from those categories into saving on an automatic plan, so that you are putting it back.
As Suze Orman says, if you save after everything else, you’ll have nothing left. Pay yourself first, pay something automatically to the savings goal, and you’ll adjust the spending down.
As a lot of people learned with Enron or Bear Sterns, don’t put all your 401K contributions in company stock. If you get company stock matching, as my employer once did as the 401K match, sell it as soon as you are able.
Could not agree with you more. I've been in the market since 1982 and in the 33 years since, I've only actually sold stocks once. That was a few years ago when I sold some Apple stock to fix up my house - and I'm kicking myself for even doing that. Should have done that with an equity line. Other than that, I've socked 15-20% of my income into 401(k) and stocks over three decades and forgot about it. I encourage having that money transfer out of your check through direct deposit, that way you never really have it in hand and so you don't miss it as much (kind of like having taxes taken out).
The main advantage of long-term investing is "dollar-cost" averaging. When you are long-term investing, you actually want the market to go up and down. During down times, you are purchasing stocks at a lower rate and then riding them back up again. Because you are never selling, you never actually realize any losses when the market does have a downturn.
During this entire time, I've had to deal with "Chicken Littles" telling me I was a fool to be in the market and that it was about to crash and leave me penniless and that I would then get my "comeuppance." It seems that many people out there are very concerned about me getting a "comeuppance." I attribute that to envy.
Anyway, it's never too late to start saving for retirement. The magic number is your age times your salary divided by 10. This is what your net worth (not including home equity) should be at a given age.
So if you are 50 years old making $200,000 a year, you should have a net worth of $1,000,000.
If you are 30 years old and making $60,000 a year, you should plan to have a net worth of $180,000 by that time.
Now some people like to include home equity in their net worth. I was never a fan of that because you are always going to need a place to live. For example, I have have $800,000 equity in my home but if I sell it, I'll be homeless and will have to buy another house. Now if I then buy a $400,000 house cash, then I can add that other $400,000 to my net worth.
Opps typo. Should be ““Lie with many things”
When we were young, someone told us that if we ever got a raise we should just save it, and live as we always have done. Years later, we find we just don’t need everything our peers find “necessary” and it’s not like we miss that lifestyle because we never had it. Those kind of hints help, because if the money stays out of your checkbook, you do tend to live within your means. You can instruct your employer to direct deposit the sum right into savings.
other stocks rather than your own company
I don’t have that option in 401k. I was a bit uncomfortable about doing so, but the company is pretty solid - large non-union trucking company.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.