Reply to I am X years old and have X saved in a retirement fund

Forum Index » Money and Finances

Reply to "I am X years old and have X saved in a retirement fund"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]37 - zero $ - does not make sense to save if you have loan/mortgage as you're "saving" with borrowed money. In the process of paying of mortgage in record speed, then will save.[/quote]

It actually does make sense because you cannot retroactively save in an IRA or 401K.  There are limits on both of those.  So if you wait until you are 45, for example, to start saving for retirement, you are going to have to put a lot away per year, but you can only put $5500 in an IRA and $17.5K in a 401K.  If you pay off the loan and save for retirement at the same time, you won't have that problem.  Also, are you giving up a free 401K match?[/quote]

Agree with you on this and have thought about that. Problem is inflation. Have a look at this:

http://www.davecoker.info/blog/wp-content/uploads/SPX-CPI-1983-2013-V1.jpg

...if it was not for inflation, I would have done as you said, but due to inflation, putting money in paper (like in the bank) or paper assets (stock), the diminishing value of ones savings is higher than any benefit I would be getting including free 401k match. Now, if was 10 years from retirement then I would be less concerned. As for the IRA/401 limits, I would have to save more outside the IRA/401 retirements vehicles when that time comes.

I know I'm going against the herd on this one but on the flip side we're paying off our 30yr mortgage in 8-9 yrs with calculated (nominal) $225k less interested paid.

Happy to hear opposing views.

[/quote]

I don't really understand your point about inflation, esp. as inflation has been next to nothing for some time now.  I can't imagine how inflation is undermining the tax deductions for retirement savings and even a company match.  If there was a lot of inflation then paying off your mortgage early is the last thing you should do, as the real value of that debt would be reduced each year.

My issue with your approach is that investing in equities over the long term can be expected to give you much better returns than your mortgage, but the shorter your time horizon the greater the variation in the returns, at least historically, plus you are foregoing the benefit of compounding returns.  So by shortening your time horizon for retirement savings you increase your risk and also likely reduce your returns. [/quote]

Thank you for your input. I see and understand the points you're making and they are valid. Yes, inflation is very low right now, but my concern is about 1) inflation in the longer term and 2) inflation impact on large saving accounts . Let's say I've been an avid saver and I've accumulated a retirement fund of $500k. Now, with just 2% inflation (which is low/average), that is $10k, go to 3-4%, its $15-20k purchasing power lost.....and that's in one year. So in my view, there is a risk in long term also. [/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics