2011 Financial Goals

Where are you and where are you going?
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starshard0
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Post by starshard0 »

Hey everyone. I don't post very often, but I'm so excited about 2011 that I just had to post about it.
This is the year that my net worth will hit $100k
I'm going to max out my Roth IRA contributions again this year
I'm considering upping the amount I'm putting towards the TSP (federal employee retirement plan) from 15% to something higher.
I'm going to continue investing outside of retirement accounts, probably on the order of about $2000 a month.
I didn't have to pay taxes for the majority of this year (I'm deployed to Afghanistan), so I should get a decent tax return (right?).
I have to get and furnish an apartment, something I'd like to do on the cheap (preferably free).
I think that's about it for this year. If I think up anything new I'll make sure to add it in an edit.


DividendGuy
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Post by DividendGuy »

Congrats on the big year coming up for you! It feels great to hit certain financial milestones. Keep it up!


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TheWanderingScholar
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Post by TheWanderingScholar »

I hope to have at least five hundred saved up in my bank account, so a summer job is more than likely in order. Also need to open a stock account with any excess.


JoeNCA
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Post by JoeNCA »

Starshard0, congratulations, what an achievement! I can just see you adding another "0" at the end of there and I'm betting that that day will be soon. :)


M
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Post by M »

Hi Starshard,
Congrats! I am also planning on hitting 100k by the end of the year. If I continue at my current expense level I should hit around 101k by december 31st, which will be cutting it very close. If we both hit 100k we'll have to go celebrate by doing something free. :)


AlexOliver
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Post by AlexOliver »

I would urge you to take a look into your estimated needs in retirement. More than 15% is a lot to put away in deferred accounts, that might be better used before age 65.


starshard0
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Post by starshard0 »

@M I'm totally down with doing something free to celebrate. Maybe I'll take a staycation and do some reading.
@AlexOliver You're probably right about the 15% thing, the contributions are kind of a vestigial thing from before I discovered ERE and I never really thought twice about it. Would you recommend ditching the contributions altogether?


aquadump
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Post by aquadump »

starshard0, I take free money. I maximize my deferred accounts to get the most match. A common industry practice is 50% match on 401k contributions up to a 6% of pre-tax pay. In this case, I would contribute 6% into that account.


starshard0
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Post by starshard0 »

@rePete I don't get a match at all, so the only real benefit is the tax deffered-ness and the funds that are offered are all pretty solid.


BennKar
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Post by BennKar »

To the OP: Before you change how you are allocating savings amounts, consider this. The rules regarding when you can access your retirement savings penalty free can be different between different plan types. The rule of 65 years old applies to 401k plans, but you have a TSP (not a 401k) - the rule with that may be different. For example I have a "457" plan - with this I can acess the money tax free as soon as I leave employment for any reason. Its possible the same holds true for you. Check with your HR representative at work, and do research online before you make any decisions.


AlexOliver
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Post by AlexOliver »

I wouldn't ditch the contributions, but looking at what you'll need in retirement. Then working backwards from that... like, let's say you have expenses of $12k a year and therefore need $300k in retirement. Working backwards, if you don't work for 20 years before you reach the age where you can pull it out...what amount would take 20 years to compound to $300k? About $50k. So if you plan to retire early/stop working in five years, save $10k a year. If you think it'll take ten years, save $5k/year.
Basically so you have a backup if all your money from the taxable accounts is gone, or much less than you thought it would be.
But I would definitely take up to the match if you have one.


jerry
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Post by jerry »

Maxing out IRA's is most likely a good idea even with planned early retirement. In an ERE retirement, you are living off of savings which will be growing tax free in IRA. Even if you will be tapping IRA early, you will only pay penalty on the amount you withdraw. If you need this money, it probably means you have a very low taxable income even if you have a large amount of tax deferred income. The 10% penalty on the small (relative) amount you withdraw in a single year will be far less than the taxes you would otherwise have to pay in typical ERE situations.
You would always spend non IRA money first. Even if all of your money is tax deferred, you are only taking out about 3% so penalty is .3% and you are still paying no tax on remaining 97%.
Large purchases such as a house could screw this up but only if you manage to put most of your savings in a tax deffered account which is something that would be really hard to do in ERE mode.


mikeBOS
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Post by mikeBOS »

There are also exceptions for pulling some money out of tax-deferred accounts early if you are paying for health care, education or buying a house. Plus there's the 72t rule for IRA's that lets you pull money out tax-free if you're retiring early. Just something to be mindful of, no need to completely disregard tax-savings accounts just because you want to retire very early.


starshard0
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Post by starshard0 »

According to the website, I can pull some or all of my money out of the TSP once I separate from federal service. The minimum to pull out per month is $25, so if I wanted to pull out $25 indefinitely I would need at least $7500 right?


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