At what age do you hope to retire/Personal Finance and Investing Thread

[nodakfan17]

My company’s CEO holds a monthly town hall conference call and reminds employees about our 401(k) match in his prepared remarks nearly every time. He once mentioned that only 85% of employees take advantage of the match.

[wallus]

My company’s CEO holds a monthly town hall conference call and reminds employees about our 401(k) match in his prepared remarks nearly every time. He once mentioned that only 85% of employees take advantage of the match.

 

Some people hate free money...

[nodakfan17]

Kids need a class that involves investing and loans. They are some of the most important things you deal with in your life.

My local state university used to offer a 1 credit Life Skills class on Wednesdays at Noon. I was invited to give a guest lecture every semester on retirement plans. It was graded on attendance only. Students just had to show up for a series of guest speakers to earn an easy A. The course was dropped due to a lack of interest. The school charged the same tuition rate for all full time students, so it wasn’t a cost issue.

[KeithStone53151]

When I got my first job out of college another girl started at the same time. She decided she was opting out of the retirement plan to save money even though she planned on living at home. So she sacrificed $1,200 in free money due to the match to have like $100 extra a month in her pocket. If historical rates continue she decided $1,200 now is better than $75,000+ for her retirement.

 

Kids need a class that involves investing and loans. They are some of the most important things you deal with in your life.

 

You'd think they could relatively easily roll that into the personal finance class referenced earlier, because you are spot on. It blows my mind how many people I know ran up big credit card debt on stupid junk like xbox games and clothes in their early 20s, taking advantage of the 0% interest for the first year and then next thing they know...their bill is $5k and they start paying interest at a 20% rate. Maybe I was just lucky that it was drilled in to me by my parents in my early-mid teens that credit cards and the interest on them is dangerous.

 

That and the whole compounding returns thing referenced above. Fortunately, going into the accounting field required me to take a lot of stats, finance, etc...it is seriously amazing looking at my total contributions to my 401k versus my current market value at the moment. I'm only 31 and my first job didn't offer a 401k, so I've been contributing for 7 years or so and my market value is almost double my actual contributions. I put 100% to various index funds, so it's not like I'm being fancy with how I invest. To me, compounding returns and such seems second nature...to the point that it surprises me that anyone would make the error you described.

[homer]

People can blame kids for not being financially literate but there are a TON of baby boomers with minimal retirement savings and a mountain of credit card debt. People in their mid 40's to mid 50's have the highest credit card balances of any age group.

 

Credit card debt appears to peak for individuals who are between 45 and 54 years old - $9,096. Some of our surveys have shown that this group tends to be among the largest credit card spenders – likely due to the budgets they are operating with. Recent studies have shown this age cohort (commonly referred to as “Baby Boomers”) controls the largest portion of America’s disposable income.

 

Millennials and individuals over 74 years old held the least credit card debt. These two groups are also among the least likely to have a credit card, which can serve as a potential explanation behind the trend we are seeing here.

 

https://www.valuepenguin.com/average-credit-card-debt#by-age

[MrTPlush]

It is a little scary when I see someone open up their wallet and they have 12+ credit cards. I mean I wouldn't even want to try and keep track of that on a consistent basis.

 

Credit cards are great if you use them properly though. Actually I don't even use my debit card at all...all my expenses go onto my credit card, which I currently choose to have just one of. I know when the debt calculation gets pulled for credit reports so I always make sure it is fairly minimal when that time of the month comes around. With no credit history it built my score from the mid-600s to 750 in 18 months or so even with a lot of student loans. The cash back is pretty generous for an entry credit card too, about $225 cash back a year.

 

I think credit cards are pretty useful if you treat them like a debit card and not using it for money you don't actually have.

[OnaBadger58]

It is a little scary when I see someone open up their wallet and they have 12+ credit cards. I mean I wouldn't even want to try and keep track of that on a consistent basis.

 

Credit cards are great if you use them properly though. Actually I don't even use my debit card at all...all my expenses go onto my credit card, which I currently choose to have just one of. I know when the debt calculation gets pulled for credit reports so I always make sure it is fairly minimal when that time of the month comes around. With no credit history it built my score from the mid-600s to 750 in 18 months or so even with a lot of student loans. The cash back is pretty generous for an entry credit card too, about $225 cash back a year.

 

I think credit cards are pretty useful if you treat them like a debit card and not using it for money you don't actually have.

 

Same boat as you. Was looking for the right credit card for a while, since my student loan debt has hurt my credit score. I have opened two credit cards (one Kwik Trip) and my credit score is up in the 720+ range in a matter of 6 months. It is really convenient to use, and I can see the dangers of it. The only plus of my student loan debt is acknowledging the true difference between want and need.

[homer]

Speaking of student loans, I refinanced a few months ago with a private lender. Cut my rate by well over 50%. Would have done it earlier but was waiting for my employment situation to solidify.

[OldSchoolSnapper]

I churn credit cards. I've had 40 open at a time before including my wife's. I never carry a balance. At current I only have a few open. Credit score moves around between 780 and 810ish month to month.

 

Typically I'm only actively using two at a time. It's a fairly intense hobby of mine. I travel basically free, as far as lodging and airfare. I've been lucky enough to see 47 countries. Do it less frequently with young kids now, but still get around far better than I would.

[MrTPlush]

What is a good card to build air/travel points? I’ve been looking to get a second card for stuff like that now that my Discover is a little less lucrative out of school as far as perks go.

[OldSchoolSnapper]

Chase Sapphire Preferred is definitely the best travel card out there especially if you get it at a time when the bonus peaks. To really game the system, so to speak, it's about having a war chest full of cards to work with rather than just one that's accumulating points. For an everyday spend, I'd still say CSP.

 

To take it on as a hobby you'd have to do a lot of research in the beginning Reddit - Churning is loaded with advice.

 

I've never actually had a CSP. Chase won't issue a card if you have opened 5 accounts in 24 months, and I was way above that by the time it came out. I had a bunch of their other products and others from other banks, so that's part of the reason right now I only have a few..waiting for my 24 month clock to reset. In the meantime I had stashed a bunch of points to tide me over. Heading to Kauai in January with wife and kids.

[JosephC]

My company’s CEO holds a monthly town hall conference call and reminds employees about our 401(k) match in his prepared remarks nearly every time. He once mentioned that only 85% of employees take advantage of the match.

 

Some people hate free money...

 

It should never be described as free money. When companies do the math and figure out what they can pay people, it's not like they just ignore the benefits aspect and pay the employee top dollar and then take it in the shorts when picking up their share of the benefit. A person's wage shouldn't be viewed as the paycheck but the paycheck plus all the benefits. That is what an individual's pay actually is. People should be told that if they are not taking advantage of a 401k match, that they are not turning down free money, but they are actually giving a percentage of their hard-earned money back to their employer for no good reason at all.

[MrTPlush]

It’s free money in the sense you would never say no to free money...there is no reason you should not be taking that match. It’s pretty unlikely you’d have a good enough job where you get such a benefit and just can’t afford it. You probably need to cut your costs in other places where you shouldn’t be spending money.

[DHonks]

When I got my first job out of college another girl started at the same time. She decided she was opting out of the retirement plan to save money even though she planned on living at home. So she sacrificed $1,200 in free money due to the match to have like $100 extra a month in her pocket. If historical rates continue she decided $1,200 now is better than $75,000+ for her retirement.

 

Kids need a class that involves investing and loans. They are some of the most important things you deal with in your life.

 

You'd think they could relatively easily roll that into the personal finance class referenced earlier, because you are spot on. It blows my mind how many people I know ran up big credit card debt on stupid junk like xbox games and clothes in their early 20s, taking advantage of the 0% interest for the first year and then next thing they know...their bill is $5k and they start paying interest at a 20% rate. Maybe I was just lucky that it was drilled in to me by my parents in my early-mid teens that credit cards and the interest on them is dangerous.

 

That and the whole compounding returns thing referenced above. Fortunately, going into the accounting field required me to take a lot of stats, finance, etc...it is seriously amazing looking at my total contributions to my 401k versus my current market value at the moment. I'm only 31 and my first job didn't offer a 401k, so I've been contributing for 7 years or so and my market value is almost double my actual contributions. I put 100% to various index funds, so it's not like I'm being fancy with how I invest. To me, compounding returns and such seems second nature...to the point that it surprises me that anyone would make the error you described.

 

We do have that. In AZ it’s a mandatory Econ class where we explore personal finance. I spend considerable time showing them spreadsheets, simulations, etc. I’ve had maybe a dozen kids open retirement accounts while in high school because they love the concept. I hope that I at least planted the seed for others, although I’m doubtful. Some are just so into the moment that big things in life aren’t worth it to them.

[homer]

What is a good card to build air/travel points? I’ve been looking to get a second card for stuff like that now that my Discover is a little less lucrative out of school as far as perks go.

 

Since we live in Chicago and it's an American hub we are looking at an American Airlines card (could do United but we don't like United). You get free baggage fees for yourself and up to four other people, preferred boarding, up to 50K bonus miles if you put $4000 on it in the first like 90 days etc. etc. It's basically like the Chase Preferred Card mentioned above but with a few more perks. Obviously can only use it for American though which is the big difference.

 

If you want the flexibility of using the card for a bunch of airlines then the Chase card is the way to go. You just won't get the baggage fee waived.

[OldSchoolSnapper]

I have ~ 600k AA miles right now as I have several of those cards too. They're not even close to the versatility of the CSP and not really comparable cards. Fine if you are going from Chicago to another major city with easy routes, but the rewards redemption availability on AA is horrendous compared to other programs. I use my AA miles but it is always very targeted use; if you are going to the same place every 6 months the card is fine, if you want to get out and explore that card stinks. The trip I mentioned to Kauai, I am actually using the AA miles, but using them is a pain; the awards chart is a mess, and they place a million restrictions on use.

 

The reason the Chase cards are the far superior cards is because those Chase UR points can be transferred to a hundred partners. Your AA miles are limited to redeeming AA flights; those Chase points can be cash back (bad redemption), but also to Hyatt, Marriott, United, and a host of others. You get WAY more versatility. Even if I lived in an AA hub, I get a CSP or CSR and simply couple it with an AA card...but I'd never waste everyday spend on AA.

 

Again though...if you don't want to get into playing the game and really scoring the type of insane deals, I get just wanting one card for simplicity's sake. But I can tell you that I haven't paid for a flight in about eight years. I rarely pay for lodging, and will usually only do it if I determine my points are more valuable elsewhere because the hotels are too cheap.

 

I'm counting this as related to retirement because it allows me to travel without sacrificing savings

[homer]

Like I said, Chase card is more flexible.

[nodakfan17]

I really dig personal finance. I considered pursuing a career in financial planning until I learned it’s more of a sales role unless you’re the JD/CPA type. My latest fascination is the Financial Independence, Retire Early (FIRE) movement. Basically, the premise is to save until it hurts so you can achieve financial independence ASAP.

 

The typical FIRE person usually earns $60-$70K right out of college and hits six figures by age 30. They delay marriage and children until their mid 30s and pretend like they’re living on a $40K salary the entire time. This allows them to funnel tens of thousands of dollars every year into low cost, equity index funds. By age 40, they have enough saved to live on the income generated from their portfolio. Their efforts have been aided greatly by the 10-year bull market. Some of their early investments have effectively tripled since 2009.

 

In any case, I see more and more FIRE bloggers popping up and am starting to grow skeptical of the number of people in their 30s who claim to be at or near financial independence. I don’t doubt financial independence is possible at that age, I just think it’s a convenient hook to earn money off a blog. ‘Look, I retired at 34 and you can too - just read my blog, subscribe to my podcast, and buy my book.’

[Jimbo]

I really dig personal finance. I considered pursuing a career in financial planning until I learned it’s more of a sales role unless you’re the JD/CPA type. My latest fascination is the Financial Independence, Retire Early (FIRE) movement. Basically, the premise is to save until it hurts so you can achieve financial independence ASAP.

 

Yeah, I saw a link to an article on my Linked In feed. It seems the only people capable of this are the ones in the Silicon Valley field. I'm an engineer, DINKs, live frugally and maybe I can retire at 62.

[wallus]

 

In any case, I see more and more FIRE bloggers popping up and am starting to grow skeptical of the number of people in their 30s who claim to be at or near financial independence. I don’t doubt financial independence is possible at that age, I just think it’s a convenient hook to earn money off a blog. ‘Look, I retired at 34 and you can too - just read my blog, subscribe to my podcast, and buy my book.’

 

It really isn't as hard as people make it out to be to retire early. For me personally, I have three jobs and no kids. I am almost 34 and could easily retire before 40 if I wanted to do that. My main strategy is get rid of debt (I have no mortgage on where I live, no student loan debt, credit card debt, etc) and buy rental properties and pay them off asap. I am really not that incredibly frugal either.

 

Now I am sure some are going to say "three jobs, why would you want to do that!". I would counter with "kids, why would you want to do that!"

[nodakfan17]

That’s awesome, Wallus. It definitely takes a different mindset, but I don’t doubt it’s possible. I guess my point in criticizing some (certainly not all) FIRE bloggers is that they’re making more money selling the shovels than digging for gold. I doubt they’ve all achieved financial independence because they can’t lay out the specific actions that helped them generate capital - sort of like Rich Dad, Poor Dad. Good story, but that guy has made way more money selling books than he ever did doing whatever it is he did (that book was extremely vague, despite its good message). I suspect some FIRE blogs (again, not all) are just a front for clicks. I also think human nature leads most of us to believe that we are self made, when in actuality anyone who is financially independent by 40 has probably caught a brilliant stroke of luck (inheritance, for example). But I know some people like yourself really grind and that’s admirable.

[MrTPlush]

The FIRE concept is pretty weak in my opinion. Living like you make $40k is a pretty crummy life all things considered. Not a whole lot you can do with that. Even looking past that the current success stories lucked into a crazy good stock market to build their wealth. Good luck have that happen to you. Lastly what happens when you hit “financial independence”? Financial independent if you want to live like you make $40k for the rest of your life? Yah, okay. Your life will be even worse paying for all that insurance out of pocket. If you have to count on the investments doing well to have an income so to speak that sounds risky.

 

If you are independent by your 30s I’m thinking you lived a poor life and would have to continue to do so into your retirement. You would have to be a person who doesn’t need money in any sort of way to enjoy life. Guessing kids would also be a big N-O for this theory to work.

[nodakfan17]

I suspect the FI is more important than the RE.

 

Financial independence is about the ability to do whatever you want, not the ability to do nothing. Once your assets hit critical mass, you can still work - but you can be more selective about the work you take on so that you maximize your well-being, not just your bank account.

 

I haven’t entered my high-earning years yet, but my wife and I have more or less capped our lifestyle at 2017 levels (when our day care bill was rediculous and we maxed out our health insurance). We don’t plan on having any more children and thus don’t think our expenses will ever be higher in real dollars than what they were that year. I don’t expect any more lifestyle inflation (just actual inflation). Our family is complete and our home is pretty nice (no concerns about upgrading). We’ll be able to start funneling our raises into capital now and that’s exciting.

[wallus]

I agree with Nodak on this one. It is about having the freedom to not work not necessarily stopping work.

[OldSchoolSnapper]

The FIRE concept is pretty weak in my opinion. Living like you make $40k is a pretty crummy life all things considered. Not a whole lot you can do with that. Even looking past that the current success stories lucked into a crazy good stock market to build their wealth. Good luck have that happen to you. Lastly what happens when you hit “financial independence”? Financial independent if you want to live like you make $40k for the rest of your life? Yah, okay. Your life will be even worse paying for all that insurance out of pocket. If you have to count on the investments doing well to have an income so to speak that sounds risky.

 

If you are independent by your 30s I’m thinking you lived a poor life and would have to continue to do so into your retirement. You would have to be a person who doesn’t need money in any sort of way to enjoy life. Guessing kids would also be a big N-O for this theory to work.

 

I'm sort of in agreement with this. I learned about FIRE a good number of years ago. I adopted it for a few years. It worked for maybe two years, but after that I got sort of miserable...I got sick of shaming myself for wanting to go out for Mexican on Friday night or not buying a new TV on Black Friday. And that is what they look down upon, if you really study the movement.

 

I'm all in favor of frugality and delayed gratification, but it got too extreme for me. What gets overlooked by the movement is that yes, you are now 35 or 40 and are independent. And you did it at the expense of the first 35 years of your life. Your relative youth. And that's a good cost to consider. A lot of the things I spent money on, I won't enjoy later on.