I am 35 with no retirement and no debt. What is the best way to accumulate enough retirement to retire at 65.

Question

I went through a nasty divorce that wrecked my financial world. As of today, I have no money in savings/retirement (401k) and now have no debt. What is the best way for me to re-accumulate enough wealth to retire at a 65. I currently make about $85,000 a year and can contribute to 401k. With my current expenses I can contribute up to $1,000 a month to company sponsored 401k. What are some other options.

Answer 1

Bank CD's that are long term.  Best thing is to put the max amount you can in to your companies 401K.

Answer 2

If your employer matches put up the amount of the matching, for example, if the employer matches up to 5% then you put 5% then; put another 10% of your gross salary in a Roth IRA.  The reason why I tell you to do this is because the 10% will be tax free money since it is deposited after taxes has been taken out of your paycheck and the 5% will be taxable (since the money was taken before tax) when you get ready to withdraw money at retirement.

Answer 3

hello -

Try to at least put away the pre tax max allowed for 401K each year.  Here are some things to think about to get there -

List out how much money you have coming in each month. List out what your fixed costs are (rent/mortgage, car payment, car insurance, phone, cable, student loans, commute costs etc.)

Then track every penny, every single one, you spend for a month. That will give you a very good idea of where your money is going. Track it by category -

retirement (401K, etc.)

home

car (payment, insurance, etc.)

gas

cable/electric/water

groceries

eating out

clothing

movies/plays (include the popcorn)

books

newspaper (if you already paid your news paper or magazine subscription, figure out the monthly cost and include that)

hanging out with friends (bar, pool etc)

non meal related drinks/snacks (Starbucks, diet coke, snacks)

other

other

(other could be alimony, whatever, things I did not list out but you have to pay)

and you will see quickly where your money is going. Then you can see if it is all the right places, or if you want to make a change and not buy so many clothes, see so many movies (or pass on the popcorn) etc.

Consider what is really important to you (saving for retirement according to your note) and what is not and spend accordingly.

Is there anyone you can commute to work with? Or maybe a different way to get there? or even working from home one day a week?  Pass on a starbucks coffee one day, or sodas in the afternoon etc.

When you decide what you will change for the upcoming month, be sure to put that money savings somewhere and not just spend it on something else. And keep tracking what you spend for at least 6 months. that will help you get into new habits and patterns.

Retirement savings are very important as you clearly know.  You dont mention if your company matches or anything like that.  I did a quick, save 12K a year for 30 years, assume 7% interest compound once a year and you would have $1.2 million.  Thats conservative, as there is no company match included, interest is usually monthly etc..  Given inflation etc you have to see if you think that will be enoigh for you to retire on.

Read one of the books by David Bach, Suze Orman etc., only need one, to understand some of the things people do after they have done the above.  Its great you have no debt.  They do things like save every boinus they get, when they get a raise they save 80-100% of that (in other words they dont keep increasing their lifestyle with thier salary) etc.  

Email me for more info if you like.

Good luck

Answer 4

Its all about saving.  Save however you can.  skip a cup of coffee, car pool, whatever, just save.  If you have a 401K that your employer will match, put as much into that as  you can.  get all of the match that they are willing to give.  Then make sure you review your investments at least quarterly.  Change strategies if you think they are necessary.  Best thing I did was take most of my money out of the market last fall, that preserves weath and allows you make greater returns.  tba

Answer 5

$1,000 a month is perfect.

--------  The advice that follows is shamelessly taken from The Dave Ramsey Show.

Before you invest one dime, make sure you have an emergency fund in place.  Six months expenses, sitting as cash in the bank, doing nothing but waiting for the next round of job layoffs.

Once that's in place, the $1,000/month is a good amount to invest.  Dave recommends 15%, so if you get a pay raise, you can increase your investments too.

Contribute into the 401K, but only as much as they will match.

Put the rest into a Roth IRA.

Within those two accounts, you should select good mutual funds, and don't touch the money for 30 years.

Good Mutual Fund = A mutual fund that has:

1) Averaged 11% per year growth (after fees & expenses)

2) Has a 10+ year track record.

If a mutual fund can do that, it will have turned $10,000 into $28,000, despite all the headaches of the last 10 years.  Everything from the dot.com crash, to september 11, to the current real estate, oil, housing mess, and all that in between.

Categories of Mutual Funds:

I suggest you put 25% into each of the following 4 categories:

1) Growth Fund (or mid-cap)

2) Growth and Income Fund (large-cap)

3) Aggressive Growth (or small-cap)

4) International Stock Mutual Fund.

At the end of 30 years, that $1,000/month will have grown into $3,000,000.

And the beauty of a Roth IRA is that, after age 59 1/2, the money can be withdrawn TAX-FREE.

Answer 6

Contribute the maximum to the 401(K) and contribute $5000. (the maximum- $416.67 monthly) until you are 65.  If you can get an average annual return of 7% you will have over 500K and if you can get 8%, you will have over 600K to go with your 401(k) money. And everything in the Roth will be tax free.