Anonymous
07/20/2018 15:06
Subject: Is it ok not to have a financial plan?
Anonymous wrote:Anonymous wrote:We don’t have a budget or track expenses either, but you need more in retirement than an employer 401k and a paid off house.
Op here. We’ve maxed out the 401k. What other retirement investment should we look into? Once we pay off the house next year, we will have some room to put toward retirement. But would appreciate advice on where/how.
IRAs for both of you. Roth if your income isn’t too high.
Anonymous
07/20/2018 14:20
Subject: Re:Is it ok not to have a financial plan?
Op here and thanks everyone for your thoughts!! Taking some advice and have already gotten a book on financial planning (ric Edelman). And will put on my to do list to check in on our balances to see where we are.
Anonymous
07/20/2018 13:41
Subject: Is it ok not to have a financial plan?
Anonymous wrote:We don’t have a budget or track expenses either, but you need more in retirement than an employer 401k and a paid off house.
Really? What if the 401k has $2M in it? $5M? $10M? It seems silly to say you need more than a 401k without knowing how much is in the 401k. Anyway, they will also have SS.
Anonymous
07/20/2018 13:29
Subject: Is it ok not to have a financial plan?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:We don’t have a budget or track expenses either, but you need more in retirement than an employer 401k and a paid off house.
Why? We'll retire in a few years with about $3 million in our combined 401k's and about $1 million home equity. How exactly will that not be enough???
Is this OP? If you're almost about to retire with $3 million and $1M he, yeah, that's probably enough.
For us with 25+ years to go, there's more uncertainty with inflation, social security, and healthcare.
No, I'm not the OP.
Even with 25+ years to go, the equation is simple. Max your tax deferred retirement savings and live within your means, and you'll be fine. I always saved at least 10% of salary from my first professional job at around 23, and moved up to max contributions around 20 years ago when the employee contribution limit was around $10k and increased it as the limit was increased. That formula is good enough for most.
We don't have a budget and consider it a somewhat meaningless exercise if you are simply living within your means. Most household expenses are somewhat fixed and/or uncontrollable. You can't exactly cut back on your mortgage payment or how much you spend on electricity, or even gasoline or auto repair. If you save off the top, and most of your expenses are somewhat fixed, just spend what's left like drunken sailors! Who cares?
Good for you. Not everyone has the means to do that at 23 and can't go back and reverse time, so some of us have to work on catching up. Good for you and everyone else that did that though. Saving is sooo easy, exactly why most of america has a secure retirement right? Let me guess, you're probably not a minority.
Anonymous
07/20/2018 13:08
Subject: Re:Is it ok not to have a financial plan?
We don't have an annual budget and also live well within our means (but out means are pretty high), and we save pretty aggressively. We do have a financial planner who manages our investments and also does periodic reviews of what our annual income will be in retirement to make sure we are on track. I'm sure I could do that myself if I tried, but they are able to run it pretty quickly and they know the right questions to ask. I find it quite helpful to make sure our savings are at the right point. It has also helped me loosen up about spending money - I know we will have enough for retirement so I am more comfortable spending a little more now.
Anonymous
07/20/2018 13:05
Subject: Is it ok not to have a financial plan?
I also think it is really helpful if two income families can meet all their monthly obligations with just one income. The other income goes to savings, daycare, vacation, private school, and anything else that could be put on hold in the event of a job loss or loss of income due to other circumstances, or even the drastic - egad! - decision that one of you wants to stay home with the kids. Just another version of living within your means. Qualifying for a mortgage on just one income is a good place to start.
Anonymous
07/20/2018 13:03
Subject: Is it ok not to have a financial plan?
I AM a financial planner, and I think you're doing pretty well. To be honest, if you are saving enough for retirement and aren't generally making poor financial decisions (credit card debt, etc.) then there isn't much a plan can do for you. Like a PP said, it's probably just a confirmation that you're on track for your goals.
You may be "missing out" on opportunity though if you have a lot of cash laying around that you aren't putting to work for you. If you are just saving it in a bank, you're not losing it but it could be growing. Not sure if that's your situation or not. Again, you don't really need a full financial planner to tell you that - it's something you can do the research on and get set up pretty easily. Just take some time to actually DO IT. That is where most people fail.
You may be "missing out" on opportunity though if you have a lot of cash laying around that you aren't putting to work for you. If you are just saving it in a bank, you're not losing it but it could be growing. Not sure if that's your situation or not. Again, you don't really need a full financial planner to tell you that - it's something you can do the research on and get set up pretty easily. Just take some time to actually DO IT. That is where most people fail.
Anonymous
07/20/2018 12:57
Subject: Is it ok not to have a financial plan?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:We don’t have a budget or track expenses either, but you need more in retirement than an employer 401k and a paid off house.
Why? We'll retire in a few years with about $3 million in our combined 401k's and about $1 million home equity. How exactly will that not be enough???
Is this OP? If you're almost about to retire with $3 million and $1M he, yeah, that's probably enough.
For us with 25+ years to go, there's more uncertainty with inflation, social security, and healthcare.
No, I'm not the OP.
Even with 25+ years to go, the equation is simple. Max your tax deferred retirement savings and live within your means, and you'll be fine. I always saved at least 10% of salary from my first professional job at around 23, and moved up to max contributions around 20 years ago when the employee contribution limit was around $10k and increased it as the limit was increased. That formula is good enough for most.
We don't have a budget and consider it a somewhat meaningless exercise if you are simply living within your means. Most household expenses are somewhat fixed and/or uncontrollable. You can't exactly cut back on your mortgage payment or how much you spend on electricity, or even gasoline or auto repair. If you save off the top, and most of your expenses are somewhat fixed, just spend what's left like drunken sailors! Who cares?
I sort of agree with this but I do think it is worthwhile to draw up a loose framework of a budget before you buy a house and include any significant upcoming expenses (i.e. we factored in that we would have one daycare payment soon and eventually two daycare payments). I think using a ratio or some quick metric for what you can afford in a home is a mistake since people have such variability with spending. At this point we don't have a budget per se as we're fairly minimal spenders.
Anonymous
07/20/2018 12:18
Subject: Is it ok not to have a financial plan?
I'm with you - we're kind of moderate spenders by nature whose incomes have grown much faster than our consumption. From my perspective, not having to think about money is the greatest luxury of being so fortunate.
When we were in our 20s, we tracked every single expenditure against a tight budget because we didn't have any room for error or else bills and tuition might not get paid. Back in the day, I even knew when which ATMs stocked $10 bills so I wouldn't walk around with a couple dollars more than I should!
At some point, it became clear that we had a generous cushion and it was a waste of time to budget and track like that. Since there isn't much relationship between our income and our spending, we stick the max in the 401ks, put 20% directly into our investment accounts, set all the bills on autopay and forget about it. Other than rebalancing the investment portfolio regularly and double checking the cash flow before writing big checks, we almost never need to think much about finances.
When we were in our 20s, we tracked every single expenditure against a tight budget because we didn't have any room for error or else bills and tuition might not get paid. Back in the day, I even knew when which ATMs stocked $10 bills so I wouldn't walk around with a couple dollars more than I should!
At some point, it became clear that we had a generous cushion and it was a waste of time to budget and track like that. Since there isn't much relationship between our income and our spending, we stick the max in the 401ks, put 20% directly into our investment accounts, set all the bills on autopay and forget about it. Other than rebalancing the investment portfolio regularly and double checking the cash flow before writing big checks, we almost never need to think much about finances.
Anonymous
07/20/2018 11:56
Subject: Is it ok not to have a financial plan?
Anonymous wrote:Anonymous wrote:Anonymous wrote:We don’t have a budget or track expenses either, but you need more in retirement than an employer 401k and a paid off house.
Why? We'll retire in a few years with about $3 million in our combined 401k's and about $1 million home equity. How exactly will that not be enough???
Is this OP? If you're almost about to retire with $3 million and $1M he, yeah, that's probably enough.
For us with 25+ years to go, there's more uncertainty with inflation, social security, and healthcare.
No, I'm not the OP.
Even with 25+ years to go, the equation is simple. Max your tax deferred retirement savings and live within your means, and you'll be fine. I always saved at least 10% of salary from my first professional job at around 23, and moved up to max contributions around 20 years ago when the employee contribution limit was around $10k and increased it as the limit was increased. That formula is good enough for most.
We don't have a budget and consider it a somewhat meaningless exercise if you are simply living within your means. Most household expenses are somewhat fixed and/or uncontrollable. You can't exactly cut back on your mortgage payment or how much you spend on electricity, or even gasoline or auto repair. If you save off the top, and most of your expenses are somewhat fixed, just spend what's left like drunken sailors! Who cares?
Anonymous
07/20/2018 11:54
Subject: Is it ok not to have a financial plan?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:We don’t have a budget or track expenses either, but you need more in retirement than an employer 401k and a paid off house.
Why? We'll retire in a few years with about $3 million in our combined 401k's and about $1 million home equity. How exactly will that not be enough???
Is this OP? If you're almost about to retire with $3 million and $1M he, yeah, that's probably enough.
For us with 25+ years to go, there's more uncertainty with inflation, social security, and healthcare.
oh, depends on your age as well. are you retiring early? How long do you need that $3M to last? what is your health like? how long did both of your parents live? those are all factors to consider. . .
That was not me, the op.
Anonymous
07/20/2018 11:53
Subject: Re:Is it ok not to have a financial plan?
Anonymous wrote:We went to an hourly fee-based financial planner about 10 years ago (actually I think it was the week that Lehman fell apart...) and there was really not much benefit from our discussion with him aside from confirmation that we were on the right track. He made a few suggestions on which funds in my 401k that he recommended because they didn't contain overlapping assets but that was about the only useful information. We were already fairly well diversified (and even more so now with a rental property in the mix).
What I have found useful over the years since has been to track for myself what our balances are in retirement, savings, college, etc. I have a spreadsheet that I update at least once a quarter. We don't have a budget beyond "we'll need a new car in x years and the house will probably need y in repairs in the next two years" and making sure that we have that available. DH hates to think about money, so he let's me handle it, but I like to check in with him every so often even if it's just to say "hey, we have $x saved in each of the kids 529s right now".
What is the rate on your DH's student loans? How long would they take to pay off after the house is paid off?
Op here and thanks. I think that’s doable and makes sense to do- the quarterly check in on balances and planning for any very large expenses. Also my mom may now need financial support, so I do think I need to do SOME planning about our finances so I can figure out our options.
He has a really low rate on the student loans. Can’t remember exactly but it’s around 2.1% or something. But we’ll be paying that off until retirement.
Anonymous
07/20/2018 11:49
Subject: Is it ok not to have a financial plan?
Anonymous wrote:Anonymous wrote:Anonymous wrote:We don’t have a budget or track expenses either, but you need more in retirement than an employer 401k and a paid off house.
Why? We'll retire in a few years with about $3 million in our combined 401k's and about $1 million home equity. How exactly will that not be enough???
Is this OP? If you're almost about to retire with $3 million and $1M he, yeah, that's probably enough.
For us with 25+ years to go, there's more uncertainty with inflation, social security, and healthcare.
oh, depends on your age as well. are you retiring early? How long do you need that $3M to last? what is your health like? how long did both of your parents live? those are all factors to consider. . .
Anonymous
07/20/2018 11:48
Subject: Is it ok not to have a financial plan?
Anonymous wrote:Anonymous wrote:We don’t have a budget or track expenses either, but you need more in retirement than an employer 401k and a paid off house.
Why? We'll retire in a few years with about $3 million in our combined 401k's and about $1 million home equity. How exactly will that not be enough???
Is this OP? If you're almost about to retire with $3 million and $1M he, yeah, that's probably enough.
For us with 25+ years to go, there's more uncertainty with inflation, social security, and healthcare.