Retirement Archives - Page 10 of 11 - Making Sense Of Cents

Retiring Abroad?

October 18, 2012 BY Michelle Schroeder-Gardner - 30 Comments

This post may contain affiliate links. Please read my disclosure for more info.

I talk about retirement a lot on my blog, there is definitely no doubt about that. Lately, I've explored how much I want to save, possibilities of what I'd be doing in retirement, and so on. Now I'm going to explore where we could possibly live when we do decide to retire.

I've thought about retiring abroad, mainly because I love traveling so much, but for me, I don't think I would/could. I know I don't have children now, but I don't think I could willingly move away from any future family that I may have.

However, I do know that I would love to do some extended traveling. Living in a place for even a couple of months would be great, and the experience would last a lifetime.

I do want to travel after I retire, but not permanently live somewhere. I would love to have somewhere permanent to live near family. Retirement isn't for a long time for me, so some of you might think this is weird to think about. But I do like to somewhat dream of what my retirement will be like!

Reasons why I might not retire abroad:

1. Getting homesick and not being near family.

I get incredibly homesick. Even when I just leave for a couple of days, I miss my dogs. Yes, some of you are probably laughing, but I do miss them. So I can't even imagine what that would be like when I have children and grandchildren and then I have to leave them.

If I lived in another country, I'm sure I'd get bored of it eventually. I'd want to be near my friends, or to be constantly moving to other countries. Just staying in one place with no friends or families wouldn't be for me.

2. New culture, environment, languages, etc.

This one isn't really a negative, but it can be a big culture shock. They always say that it's very difficult to learn a new language when you're older. When moving to a new country, there are many things that you will have to learn. Cultures will be new, languages will need to be learnt and so on. This is something that wouldn't really prevent me from moving though, so maybe this shouldn't be here 🙂

3. Crime rates and the unexpected.

Of course not all abroad places have high crime rates, but this is something to think about. If you are in an unknown place, then you should especially be careful until you learn the ways and behaviors or the place you are in.

Yes, I realize that I don't have many negatives of moving away, and they mostly involve around having to leave my future family.

However, there are many benefits of retiring abroad as well. These include:

1. If you're going to move, you might as well go somewhere awesome.

If I were to retire abroad, I wouldn't choose a place strictly on cost. I would choose somewhere that had a nice beach, friendly environment, etc. and that is the best value. While I do love the Midwest, one thing we are missing of course is the ocean, and the oceans' nice beaches! There are so many places that are very pretty and nice, so moving closer to an exotic beach would be a no brainer for me.

2. Lower expenses and cost of living.

Not all places will have lower expenses than where you currently live, but many countries do offer that. There are a lot of countries in South America and other places where you can live comfortably for around $1,000. This is something that would definitely entice me as well.

Things that you couldn't afford where you live now can also be much cheaper if you retire abroad. You might be able to afford household help and relaxing things such as going to the spa.

In many places abroad, there are many retirement communities full of people just like you, so you don't always feel left out or alone.

3. Medical costs will most likely be lower.

One thing that many people in the U.S. complain about is extremely high medical care. In other countries that you could possibly retire to, the medical cost can be MUCH much less (such as 50% less).

Would you retire abroad?

Have you ever thought about it?

Fixed term or easy access for your savings, which is better?

September 23, 2012 BY Michelle Schroeder-Gardner - 3 Comments

This post may contain affiliate links. Please read my disclosure for more info.

Hey everyone! As I've said before, I very much believe in having a well funded emergency fund. Emergency funds serve all types of purposes: job loss(es), lower income, house repair/maintenance, and everything else.

For some, their emergency fund only covers job loss, but for our emergency fund, it pretty much covers everything, and that's why we keep it a little higher.

I do wish I could be like others and have multiple accounts for all of their different emergency savings. I've always heard that this is the way to go.

For example, you'd have a different account for your car repair fund, house repair fund, job loss fund, etc. This is so that you only take certain money out of each fund. Does anyone do this? Tell us your thoughts and experiences! Does it work well for you?

We have a almost half a year of bare expenses in it, along with one potential big house repair or replacement (such as if the furnace broke, which I've been told can be $4K or more). Quick online loans can always be used as well.

Our house is a little older (hey, it has charm!) so we are expected something to happen eventually. Hopefully nothing too crazy such as the floor caving in or something happens.

I should also mention that we save a lot of money every month (over half of our combined monthly after-tax income), so if something bigger did arise, we could most likely pay for it up front (extra debt payments to my student loans would be pushed to the back-burner, but they would be paid), as long as the fix isn't too, too expensive.

Also, right now we are slowly dwindling our emergency fund and putting some of this extra cash towards my student loans. We haven't touched our emergency fund before now, and it almost seems like a waste for it all to be sitting there and gaining hardly anything back.

Determining how much you need in your emergency fund is a little difficult. However, the question right now is, where should you keep your emergency fund savings? Should you keep it in something where you can gain quick access to it, or should it be a fixed-term investment?

There are pluses and minuses to both options, as I've listed below:

Easy access

There are many positives to having an easy access savings account. With a money account that is easy to access, you can get the money right when you need it.

So if you truly have an emergency, you can pay for it right then and there, without having to wait for the funds (as you would with a fixed-term savings account). An emergency is an EMERGENCY right? That means that you need to have the funds available immediately!

Keeping your emergency fund in your savings or checking account makes it very easy to access. However, there is likely low or no interest being accrued!

Money market accounts are another option. The interest rate is usually a little higher and is well fit for slightly longer (but still short-term) investments. Money is still easy to take out of money market accounts.

Fixed-term

However, there are also positives of having a fixed-term savings account for your emergency fund as well. Usually the fixed-term investment products have a higher interest rate, and this is the traded risk that they receive.

If you were able to take your money out immediately, then the interest rate would most likely be lower (which is a negative of an easy access investment product).

Where do you keep your back-up savings/emergency fund?

EDIT: This post didn't properly transfer over when I made the WordPress switch, so I reposted it so that it wouldn't be lost forever. Sorry guys!

My Retirement and Debt Plan

September 21, 2012 BY Michelle Schroeder-Gardner - 1 Comment

This post may contain affiliate links. Please read my disclosure for more info.

My Retirement and Debt Plan Last night, Lance was asking me about my possible retirement plans. He first wanted me to write a post about how I became so awesome, but I thought that post would be way too long (just kidding of course, it would be an empty post).

Anyways, the retirement question really made me think. I definitely think about retiring and save for it a lot. But my plan for what I want to do is still up in the air. I plan on making a post about that soon, but I want to think about it a little more and the possibilities.

I'm not going to lie, it is of course hard to think about retirement since I am only 23. There are many things that we are doing to get ahead though.

Our plan right now is to pay off my student loans. I have around $35,000 total and most of it is at what I think is a high rate of 6.8% and some is at a variable rate. I really want it paid off since they are at a fairly high rate. I haven't really started paying these yet, mainly because most are still in deferment and are not gaining anything from interest until next year. One is a private loan (the variable rate) and I am paying on that.

I plan on completely paying them off before they come out of deferment, and they will be paid off in March of 2013! I plan on just throwing the whole emergency fund towards it and then also saving for 3-4 months for the rest. Being so close to the payoff is crazy to think about. Especially since I have hardly paid anything on them.

Then after that, we plan on knocking out the mortgage a couple of years later, and then we will work on the Jeep, it's only at 0.9% so we are not too worried.

For the mortgage and the Jeep, we are honestly not as worried. These are at low rates and we would definitely be able to gain more by investing our money and working on our investments.

I know not everyone agrees with our debt payment strategies. 6.8% does not seem high to everyone, and I know some of you rather gain a higher rate back in the market. Tell me in the comments why you chose this and how it's working for you! I am very interested. I wish we were doing this, but I just hate my student loans (but then I don't mind my mortgage or car loan, which makes no sense).

Anyways, on that note, we are of course working on saving and investing currently as well. Right now we are extremely lucky with our money situation. I hate to brag, but I am just very happy. Our bills, debt payments, fun money and everything else only consist of around 30% of our after-tax monthly income.

We have come a long way from when our monthly income was only a couple hundred dollars more than what we spent. I know we don't make as much as others out there, but for the Midwest, I am pretty happy since it's fairly good!

This is the main reason why we are able to pay down our debts so fast and why I ramped up our goals.

We would like to retire young. We plan on achieving this in many ways.

1. Eliminating debt.

Don't get me wrong, I don't always think debt is bad. If you can earn a higher rate on your money elsewhere, then go for it. This is the exact reason for why we took out a car loan for the Jeep instead of just paying for the whole thing with cash.

2. Increasing our income.

This is something that we are always working on. Just 2 years ago, our income was less than a third of what we make now. Crazy! There are many things that we would like to do to ramp it up even more. The boy's new job definitely helps as well.

3. Avoiding lifestyle inflation.

We will of course buy things that we want, and we will of course eventually buy bigger things (such as a bigger house), but I also don't want us to get too ahead of ourselves to a point where it wouldn't be manageable anymore.

4. Having passive income.

We haven't really thought about what our passive income will be, but there will be something. Maybe real estate, getting involved in some sort of partnership, or something else.

Have you thought about your ideal retirement?

What steps have you taken to reach it?

What is an offshore investment?

September 1, 2012 BY Michelle Schroeder-Gardner - Leave a Comment

This post may contain affiliate links. Please read my disclosure for more info.

An offshore investment is when someone keeps their money/funds in an account or place in another country (outside of their own). There are many advantages for investing offshore and for why someone would want an offshore investment product.

Offshore investing often is seen as a bad thing for the economy and countries, but for the most part, most offshore investment products ARE legal. People are just trying to become more profitable on the money that they do have by investing outside of their home country.

Offshore investments aren't open to just those with very large accounts, many people can have these.

There are many reasons for why someone would want an offshore investment as well. Some reasons are listed below:

1. Tax advantages.
Other nations have lower tax rates, and this is very alluring for investors in countries where the tax rate is higher. These other countries have lower tax rates for many reasons, such as to gain new investors from other countries. This then brings new wealth into their country.

2. Less regulation.
There are more things that you can invest in, also with more privacy.

3. Diversification.
As stated above, there are more things that you can invest in, and therefore there is the possibility of more diversification. There are some things that certain countries do not allow investors to invest in, and with offshore investing, this makes the possibility of a portfolio to be more diversified.

Retirement Questions to Ask Yourself

July 19, 2012 BY Michelle Schroeder-Gardner - 2 Comments

This post may contain affiliate links. Please read my disclosure for more info.

There are many questions to ask yourself when thinking about retirement. When will I retire, how much money do I need to feel safe, where will I live, what will my standard of living be?

Another big thing to keep in mind when thinking about retirement is that the average life expectancy keeps increasing. Instead of retiring at 65 and having enough to last you 20 years, a good idea is to have enough for 30 plus years. What if you live until you're 105 years old, but only saved enough to last you until you're 70 years old? That obviously will not work out!

It's hard for me to think about retirement. I'm 23, so I still have a long time to go. But I do need to be constantly thinking about it, since of course retiring is a goal of mine.

This is my idea of a good retirement.

How much money will you need?
This is of course one of the biggest questions. I hope you all have somewhat of an idea of how much you need. I think last time I checked, I would need around $4.5 million in order to fully retire.

This all varies when you factor in a lot of different areas. Will your house be paid off? Do you plan on traveling extensively while in retirement? Do you have to pay for your health benefits?

Many think that they will need much less because most things will be paid off, but that's not always the case. I've heard of people just planning on using 50% of their current income as what they'll use when they retire! Usually 50% will not be enough, unless you are already only living on one salary (and it's working for you).

When do you want to retire?
I would like to retire young. In order to do this, I need to start thinking of some ways for passive income in order to sustain me until I'm older (well until I die, to put it bluntly). I want to retire young so that I can experience and do everything while I'm still able to do everything.

How do you want to live?
Most people keep their same standard of living. It would be hard to live on less than what you're used to, in order to make your money last. Will you travel to a bunch of places? Move closer to your family so that you can spend more time with them? Will you be a recluse or will you be trying a ton of new things?

Where do you want to live?
There are so many options out there. I would like to travel and live in other countries. Cost of living can be much lower in other countries, which could help you stretch your dollar much further. I know Puerto Rico isn't super far away, but when we went there on vacation last year, we met a lot of people who moved there and said that the cost of living is much cheaper, and that living on the beach there is very nice. This is something that we have definitely considered.

Do you want to travel, work part-time or relax?
I would like to say that I would retire and just stop working altogether, but I doubt that will happen. I'm sure I'll travel in the beginning, but after that I would of course want something to fill my day. If not working at least a little bit (or having some passive income) then I would want to do something.

This could be volunteering also. I would love to dedicate my time to volunteering at many places such as shelters, food pantries, animal causes, and so on.

Have you thought about how you want to retire?

When? Where?

Roth IRA vs. 401(k)

June 26, 2012 BY Michelle Schroeder-Gardner - 2 Comments

This post may contain affiliate links. Please read my disclosure for more info.

This is Part 1 of my Investing for Beginners Series. If you have any retirement/investment questions, please ask below or e-mail me so that I can make a future post. Or e-mail me to guest post on investing. I always love hearing about what others have to say.

A common question that I am asked is regarding the differences of Roth IRAs and 401(k)s. However, I don't know everything about them and all of the differences. I mainly have a Simplified Employee Pension (SEP) plan but I will go in depth on all three in order to give you a better idea.

I do have a Roth IRA account but I do not contribute enough (also, my work does not offer 401(k)s, so I don't participate in that). Yes, I know, I'm a bad personal finance blogger since I am not investing in myself nearly enough, but instead I am mainly paying off debt.

SEP Plans
SEP plans are where employers set aside money in retirement accounts for themselves and their employees. This is mainly done by smaller companies. Everyone in the company gets the same percentage in their SEP plan, and only the company puts money in.

I don't put in a dime (and I don't have the option, as with SEP plans, only the employer can put money in) and this is the main difference between the others. Also, you pay tax when you take it out. You can take money out for certain events (such as school) without paying a penalty (only taxes will have to be paid).

A SEP allows for a contribution from the employer of up to 25% of the employee’s pay and benefits. Last year I received a contribution of around 16-17% of my yearly salary (salary plus health benefits cost). And my company guarantees at least 5% of your quarterly pay will be put into the account each quarter.

SEP plans are very nice to have (at least for me). It requires no contribution from me and is not allowed. I am very grateful that my company offers this. However, unless your company offers this, you cannot participate, so I will go into more detail on Roth IRA and 401(k)s instead!

With Roth IRAs and 401(k)s, it really depends on you and what you plan on doing. There are pluses and minuses for both (as with most things in life!). The Roth IRA and the 401(k) are not tax free, as taxes are due at different times (this is the main difference).

Roth IRA

Roth IRAs are offered by company's such as Fidelity (anyone can sign up), which is another difference from 401(k)s as described below. With a Roth IRA, the tax is paid immediately once you get it. Then the money is put into your Roth account. This money is then compounded over time and is tax-free. This means whenever you do decide to withdraw funds from this account, it is not taxed. Being taxed immediately with a Roth IRA can be a good idea if you think tax rates will only go up and/or if you think you will only continually make more higher (and thus taxed at a higher rate). Read More.

In 2012, you can contribute up to $5,000 (after-tax income), or $6,000 if you are 50 or older. Similar to the SEP plan, if a person withdraws money from their Roth IRA account before they are 59½, they will get a penalty. With a SEP plan this penalty is 10%. However, similar to the SEP plan again, a person can avoid the penalty in certain instances, such as when buying a house or paying for school.

401(k)

These are offered directly by employers. Many employers provide a “match” for what you contribute (I will be talking about company matches in a post coming soon by the way). If you're company matches, sign up! This is FREE money.

Now with the 401(k), it is taxed AFTER you withdraw the money. You put money into your 401(k) account pretax, and then when you withdraw, you pay taxes.

Getting taxed afterwards isn't always a bad idea though. If you make a lot of money now and suspect that once you retire you will be making less, then it can be a good idea. This is because your tax rate will most likely be lower since you'll be making less. In 2012, the 401(k) contribution limit is $17,000. People age 50 and over can contribute $22,500 (an extra $5,500).

Find more about Roth IRAs here, and how to start one here.
Find more about 401(k)s here.

Which do you have?

Why did you choose it?

Any questions?

Side note: I highly recommend that you check out Personal Capital if you are interested in gaining control of your financial situation. Personal Capital is very similar to Mint.com, but 100 times better. Personal Capital allows you to aggregate your financial accounts so that you can easily see your financial situation. You can connect accounts such as your mortgage, bank accounts, credit card accounts, investment accounts, retirement accounts, and more, and it is FREE.

Investing for Beginners

June 14, 2012 BY Michelle Schroeder-Gardner - 1 Comment

This post may contain affiliate links. Please read my disclosure for more info.

Some of you have asked me to make a post about investing for beginners. I've decided to make this sort of like a series because of course it's way too hard to sum everything about investing into one blog post.

P.S. I am not an investing genius. I almost have my Finance MBA and I work in the financial field, but I am not an investment/financial advisor, so if you don't agree with any of this, then speak up 🙂 All advice is wanted.

I don't do a whole lot of investing, mainly because we are so focused on paying off debt. However, once my student loans are done (hopefully next summer), then I do plan on heavily investing. Right now we invest around 10% of our after-tax pay every month, but this isn't very much.

What is investing?

Investing is putting your money somewhere in expectation of some sort of return (hopefully a monetary return!). You want your money to grow for you

Warren Buffet is a great investor. I've had lots of classes on his investment strategies. He only invests in things he knows. If he doesn't understand the company or the business entirely then he doesn't invest in it. So for example, if you don't know a ton about the oil business, then you probably won't want to be investing heavily in it until you understand.

Now, of course I'm not saying that we can all be the next Warren Buffet, but I do believe that only (or mainly) investing in what you know can be extremely helpful and beneficial. This is something that I'm working on right now.

As long as you put enough effort into it and aren't just investing in anything you see, then you should see some sort of positive return.

I've talked about our retirement plan (well, a rough draft), and without compounding and returns, it would most likely be impossible to reach this amount unless we won the lottery.

Different styles for different people
There are many different methods for investing as well. You can invest in individual stocks and try to determine the risk you want to engage in.

Or you could invest in funds so that you are more diversified. It all depends on your individual risk tolerance and how risky you really want to be.

It also depends on when you plan on retiring. If you plan on retiring soon, then you most likely want to minimize your risk in your investments so that nothing bad happens. However, if you're young, then you can ride the fluctuations in the market without it hurting as much.

Eventually in this series, I'd like to talk about everything that comes along with investing: more in depth about compounding, stocks, funds, bonds, options, and so on. Hopefully I don't bore you too much, but I think it would be helpful!

P.S. If anyone wants to guest post on their investment strategies, please e-mail me or leave a comment below! I'd love to hear from others and I'm sure others would want to read it. And even if you have no experience, I would still love for you to guest post on your thoughts and why you haven't started investing yet.

What are your investment strategies, thoughts, etc?

Share any tips!

Also, what do you not understand about investing? I'll try and include it in my series!

Reasons why I might not retire abroad:

1. Getting homesick and not being near family.

2. New culture, environment, languages, etc.

3. Crime rates and the unexpected.

However, there are many benefits of retiring abroad as well. These include:

1. If you're going to move, you might as well go somewhere awesome.

2. Lower expenses and cost of living.

3. Medical costs will most likely be lower.

Would you retire abroad?

Have you ever thought about it?

Easy access

Fixed-term

Where do you keep your back-up savings/emergency fund?

1. Eliminating debt.

2. Increasing our income.

3. Avoiding lifestyle inflation.

4. Having passive income.

Have you thought about your ideal retirement?

What steps have you taken to reach it?

Subscribe Via Email