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7:09 am
April 6, 2011
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Matt Wegner
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Sheboygan, WI
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posts 210
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We focus a lot of time in our financial coaching and our podcast episodes to getting out of debt. It’s not very often that we actually talk about what to do after this point. Today I wanted to start some discussion about life after debt.
Once you’re debt free, we teach to invest 15% of your income toward retirement. It’s not a magic number that fixes everything for you. It’s a general number we use that seems to fit most situations. For some people, there’s a need to invest more.
Have you taken the time to figure out how much money you will need in your nest egg when you retire? The cost of living is increasing, inflation is likely coming with the government printing more money, and our life expectancy is increasing. Translation: you’re going to need a lot of money when you retire if you’re planning to not work after retirement age.
How much are you contributing toward retirement? How do you know that’s enough to contribute? How much do you think you’ll need to live on after you retire?
Leave a comment below and let’s discuss.
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7:57 am
April 6, 2011
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susanyong
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Malaysia
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posts 13
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Hi Matt
In Malaysia, we do not have a social security or pension. But we do have Employee Pension Fund (EPF for short). Basically if you are working, you have to deduct 9% of your gross pay out, and your employer have to pay 11% of your pay into this fund where the organization will pay you a dividend every year. It ranges from 3%-6% depending on the economy. It is almost always below inflation over here.
The funds is divided into 2 accounts, account 1 and account 2. You basically cant touch account 1 till you are 55 years old. But you can use account 2 to purchase a house or children's education or buy a computer. The ratio of the funds in account 1 and 2 is about 70:30.
That all the money you have if you dont invest yourself. We have no unemployment benefit either or free medical care ( unless you use public hospital.) They are cheaper but not free. You need to buy your own medical insurance and health care. Best to start young and pay a level term medical policy as they get more expensive as you get older.
A house in the major cities is at least (our currency) 300,000 upwards. And people tend not to stay in low cost apartments because of the poor quality and high crime rates. It is hard (next to impossible) to buy a landed property on a single income. Unless you bring in 6 figures. Depending on your education and vocation, you need at least (RM 3000 a month) to survive in the city. You need to at least double that if you are married with children. And that is really a very frugal lifestyle. That is only for renting a condo or room. If you can survive without owing a car. You do better. But the cost of living in my country (excluding the rural areas) is high.
I calculated that i need at least 750,000 by the age of 55 to retire without been a burden on anyone. And based on my calculation, i need to work beyond our retirement age of 55. Trying to improve myself so that i can work freelance and generate an income. As the companies tend not to hire people above 55 (since they can get people who are younger and cheaper) unless you are a top management (e.g. CEO, Directors, Head of departments).
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10:32 am
May 15, 2011
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Meg
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Ohio
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posts 54
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Right now, hubby and I are contributing only 5% to our retirement. I know Mr. Ramsey says to stop all investing to get out of debt, but we decided that we wanted to invest at least 5%. I was investing 10% before we started our debt snowball.
One thing with us is that my husband is 10 years older than I am, and he had nothing in his retirement account due to a divorce and living off of his retirement account while in between jobs. He is now enrolled and is accumulating money into a 401k regularly with work. I am doing the same and have been since I started my position right out of college in 2002. However, I want to stay at home or work part-time when we start a family. That being said, after our last debt is paid off (except the house,) we are going to try to live off of one income to get our Emergency Fund in place.
When our last credit card debt is paid off in mid-June and the Emergency Fund is in place, we plan on investing an additional 10% of our income into a Roth IRA. I would really like to max out my husband's Roth IRA due to the little he has saved for retirement, but my mother seems to think we need to split it equally. At any rate, I think we would be fine to retire with $750,000-$1M in the bank. People say that $1M will not go far in 25 years, but with the way we live and being completely debt free (including the house), I dont see how it wouldnt. Hubby and I arent the type that can sit around the house doing nothing for more than a few days at a time, so I dont see either of us truely retiring unless forced to. Of course, it'd be great if we could both just work part-time doing things we love and live with barely touching the retirement account.
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~M
“Buy it used, wear it out, make with do, or do without.” (Author Unknown)
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You just need a proper Financial plan in future
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I'm hoping that someone can provide some clarification on the 15% rule.
I'm looking at the deductions on my pay cheque and I'm wondering what counts towards my 15% 'retirement savings':
- Savings bonds – yes
- Company pension – yes
- Canada Pension Plan (old age security) – it is mandatory and is taken off under the 'tax' section of my pay stub – ??? Would this count towards my 15%?
I'm trying to figure out how much I already contribute so I can 'top it up' to 15%.
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9:03 am
March 15, 2012
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Matt Wegner
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Sheboygan, WI
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Admin
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posts 210
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Old age security is like Social Security in the US. We don't count it because we don't know if it will be there when we retire. If it is still there, it's a bonus for us.
Your company pension could go either way. Do you keep it if you leave the company? Do you have a say in where it's invested? If so, I would consider it to be a retirement plan and I would probably count it toward my 15%. If not (especially if you can't take it with you when you leave the company), I wouldn't count that as part of your 15% because if you leave the company, you're going to have to start over with building your retirement fund.
Savings bonds would definitely count but I would encourage you to look for more aggressive investments because bonds typically don't deliver very good returns and it will take a long time to build up enough to retire.
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