[Franki]

Hi All. I am new to FV and not sure if this post is in the right place. If not, I apologize. I was wondering how much everyone is planning for retirement (Or how much one should plan for retirement, given that SS will probably not benefit us by the time we are ready to stop working). DH and I just turned 30 and it has occurred to me that if we don't start planning now, saving will be more difficult in the future.

He currently has $6,000 in 401k and his employer contributes $3,000 a year. I have nothing, as I have been a SAHM since I got out of the military 7 years ago. I am starting a new federal sub-contracting business for IT. I am hoping that it will off-set the many years I have been unemployed.

We have an extra $1,300 a month after bills, food, gas, and play money are set aside. I feel that we have managed this money poorly for a while. We only have $2,000 in savings. The only debt we have is two vehicles and our mortgage (which only has about $10,000 equity after the housing crisis). One vehicle will be paid off next month, and the other sometime this year. I guess the question is should I put the extra money towards our retirement (and if so how should we invest) or should we put the money in savings or an MMA in case everything caves in on us?

Also, DH has been hinting towards buying some land. Should we consider that in the investment category? BTW my DS and DD's college is already taken care of, so that is not a factor.

Any advice is appreciated...My parents are in quite the bind. DH and I are trying to help them, but avoid the challenges they are facing in the future.

Thanks is advance. Your wisdom is appreciated!!!

 

[Hurricane0884]

Some thoughts are to max out your 401k contributions and then set up a roth IRA and max that out too, if possible. You should be saving between ten and fifteen percent of your salary in some way for retirement. Land is a good investment right now. Two questions though. Do you plan on doing anything with the land or just holding it? Are you paying cash or financing the land? If you are planning on financing it I would be cautious because do you want to put that much money at risk if your DH were to lose a job could you keep paying for it? If not than the "investment" would just be foreclosed on and all the money would disappear which would not be a good investment. On the other hand if you have a house on it and rent it or use it for farming or something and make the land useful it would be a better investment. There are many good funds that can be invested in and a little research on morningstar or other investment research websites. Also if you were in the military have you looked into a bank called USAA? They provide banking and insurance for military (retired or active) personel and free financial counseling and advising maybe they have some good ideas for you.

 

[Franki]

Thanks for your input! We do bank with USAA and they are amazing! I have used their online calculators to determine an amount for retirement. I'm just not sure its realistic. Many of their tools predict a 10% interest rate and I know that is probably not always the case, although DH's 401K did have an 8% yield in 2010. I forgot to add the we have mutual funds already set up as automatic withdrawal. It's just not in the amount suggested by USAA. That will change soon.

Now we are looking at our options to invest more or purchase land as an investment (given the low interest rates and availability of foreclosure property to bid on) DH wants to purchase land (via VA property loan) that has a small home or trailer on it so that we can rent it out. The future plan is to build our retirement home on it after we sell the house we are in. Of course there is no guarantee that we could find a renter...

My concern is not having the money available if/when we need it. I know we can access the money in the investment accounts but would face a heavy penalty. Land will not provide immediate financial security but could produce a long term gain. So I think, going forward, the plan is to save and put about 15 thousand into an MMA. That way it is out of reach, but still available if we need it. We are going to keep an eye out for foreclosure land. If we find a great deal we will invest. We are also going to start maxing out his 401K. Hopefully this will put us in a comfortable position by the time we are ready to retire. Wish we would have started saving sooner.
Thanks again for your advice!!

 

[Hurricane0884]

Sounds like a good plan to me! With the vast amount of foreclosures at least where I live many houses that are put up for rent are rented with in a month so it is a possiblity. You could most likely find a renter for cost of the land at least. It is good to start now and not put it off any longer! They say not to count on SSI and other things but if it is still there you will most likely be ok even though you started "late." Dont worry about it and just start where you are and dont look back. Do some more research and find a fund with higher returns than 8% over a fifteen year period. USAA emerging market fund is averaging over 10% the past fifteen years and the precious metal fund is up over 30% but that is a really bumpy ride. Try some financial websites and hopefull there is a fund available in the 401k that is doing a little better if not 8% is still really good!