My youngest daughter returned from serving a mission and got her first job. She called me the first day for advice: "Dad, I'm filling out forms. How much should I put in towards retirement?"
How much CAN you put in?
"Ten percent is the max that EDS will match."
Put in ALL 10% then. You won't notice the difference up front because you haven't gotten used to a fat paycheck yet. You WILL notice it if you turn 50 and suddenly start wondering what you will do when your back won't let you do that hard stuff anymore. Ya may FEEL immortal now, but ya ain't.
She did as I suggested. How do you spell RELIEF?
We moved back as a family from a four-year tour as diplomat-scientists in Saudi Arabia, and the US Geological Survey had opened up a new retirement supplemental program for people on the system that I belonged to. It's hard enough to re-adapt to house payments and state income tax all at once, so the first year we put in just 2%. The next year we got a cost-of-living allowance of 2%, so after talking it over, we up'd the ante to 4%. As expected, we didn't really notice the difference. As each year came with a new COLA, we up'd the ante until we arrived at the maximum the USGS would permit: 11%.
When I compare my gross income with my net, I'm always amazed at how little is net: quite a bit less than half. However, a lot of the withdrawal is savings allotment, so intellectually I know that it's not as bad as it looks. Intellectually I look at it slightly differently anyway: if it wasn't for grand-kid visits to Quebec, Iowa, Utah, and Australia, the savings allotment might even increase over time. ;=)
Here's Dad's recommendation:
A. Carve out 10% for tithing immediately; it's really an investment with a higher rate of return than anything else. The taxes come to over 20% after that ("The price we pay for civilization."), then another 7% to the retirement system, then another 11% to the retirement supplement. We also have an allocation automatically deducted towards savings. I figure if I don't see a steady increase in savings, I'm not doing things right: there WILL come a time when the roof needs replacement, and not doing so will NOT be an option... your house will be ruined if you don't have this stashed in the can, waiting.
B. You don't have to jump the tiger all at once - creep up on him! Increase your savings each year by another 2%. You will be amazed what it does, even in these low-interest days.
C. ANY loan for a car, or for a roof repair, is paying a huge chunk towards that fancy bank furniture you see every time you go into your local branch. I know what Wells Fargo's CEO takes home, too, and that's another powerful incentive not to take out a car-loan. It's not that I don't care for the guy that much (I don't), it's just that I con't care to buy his yacht for him. Here's the take away: Stumpf is paying himself with penalty money from the financially-challenged (the people who say "I just have to have that new car!"... "Oh I just have to buy a Lotto ticket!").
Do YOU think John Stumpf deserves $21,300,000 each year?
D. Take pride in how far you can drive that old junker car. For one thing, no one wants to steal it. No one would even consider breaking into it for that old but perfectly good car-stereo. The jerk on the freeway in the BMW, trying to cut in front of you, will definitely be more cautious! I drove my last car till it had 209,506 on it; it had broken down once too many times on a bridge and once on a railroad track. The replacement car I bought had 40,000 miles/60,000 km on it. I don't have a warrantee, but I'm not paying 20% for the new-car aromatic chain smell either.
E. Enjoy the following:
- I can retire anytime I want.
- I can visit grandkids any time I want.
- I can continue living like I've always lived.
- I don't worry that I'm a paycheck from foreclosure.
(I watched that several times with neighbors, and it is truly awful).
- I don't have to work until I die if I don't want to. If the boss leaves and the new person has a
Jerk Coefficient above 0.5, well, I'm a member of the KMA Club.
I'll work 'til I die anyway, but that's something my kids have known forever.