Setting money aside for my retirement has always been my number one financial priority. Before saving up for a house, before paying off my credit cards, before buying cute clothes, I have saved for retirement first. Why? Because I don’t like working.
In fact, I hate working so much that I have worked extra hard for many years to advance and get raises so that I can stop working sooner than the standard 62 years old. I’ve always been a eat-my-vegetables-first kind of girl to get it out of the way and get on to the good stuff. Retirement is the same way: get all the work done while I am young so that I can get to retirement as quickly as I can.
Also, I’m lazy. I need to get to no-forced-work before my laziness overtakes my effectiveness.
So here’s why and when to start savings for retirement:
Why save for retirement?
So that you can retire. Duh.
No, seriously, no one else is going to do it for you. You’ll probably get social security, but how much heavy lifting do you want that word “probably” to do for you? And in the likelihood that you do get social security in retirement, you might not like the amount. Today’s retirees receive an average of $1360 per month. Not bad. Also – not enough. Sorry, bud, but $1360 ain’t paying for your healthcare, your property taxes, house and car insurance, groceries, electricity, gas, and an occasional car trip. And if that is enough for you, then God bless.
When should you start savings for retirement?
Now. Right this very minute. I don’t care how old you are, do it now. I’m looking at you, 45-year-old; I’m looking at you, 20-year-old; and, yes, I’m even looking at you, 16-year-old.
The younger you start saving for retirement, the sooner you can stop working.
I look at it this way: a portion of every paycheck you earn does not belong to you. You are not entitled to all of it. You’re not. You are legally obligated to give a portion of your work rewards (money) to your community and country via taxes whether you like it or not. Why not look at your future self the same way? Dedicate a portion of your work performed now to your future self… as money you are not entitled to right now. This should be a lifelong attitude, and it should start with your very first job.
And for all the mommies & daddies out there: you know what’s more fun than crappy plastic toy birthday presents? A $500 per year contribution to your kiddo’s Roth IRA. If you did that for just 18 years, assuming a pessimistic 5% growth would give junior $136,681 when she is 62…all for just $9,000 of your money.
My next post will detail the basic types of retirement plans and how much you should save. But for now, if you haven’t already started saving, do it and do it now!
After long consideration of the pros and cons of investing vs paying off my mortgage, or buying rental property vs paying it off, I made my decision 3 years ago and have been attacking that motherfucker diligently. If I stick to my plan, I’ll have it paid off 2 years from now exactly.
After 3 years, I can tell you definitively: it’s boring. Not much happens except that I send the same amount to the bank month after month after month.
Every month, I watch my principle go down, and my end date get closer. I get a little thrill, and then….nothing. Until the next month.
So I stick to the plan…and wait.
When I first got my finances in order, there was something exciting all the time.
I made a budget, and then I mastered it. I made a debt repayment plan, and tweaked my budget to squeeze more and more and more. And then my debts were gone, and it felt great!
I calculated how to max out my 401k, and then I figured out how to do the same with my Roth IRA. Heck, even figuring out what a Roth IRA is took some research, and then I had to figure out where to open one and what to do with it once I put some money in it. It was fun!
I saved and bought a car in cash. I learned about and opened an HSA. I built my emergency fund – that was loads of fun, strategizing where to put it, how much I should have in it. I mapped out CD ladders, researched the highest interest savings accounts.
All of this took years. Researching, brainstorming, strategizing, doing, succeeding.
But all of those things are now set and automated. I tweak periodically, but mostly, they just happen. There’s nothing to decide – I’ve already decided.
So now I put send my check to the mortgage every month, and I sit and I wait.
I check my budget to see if I can squeeze any more out of it, and I confirm that I can’t (won’t). I recalculate my mortgage end date and confirm that my previous 3 years of calculations are correct.
It’s so boooring.
Here’s how I motivate myself to stick with it:
1. I read personal finance blogs and I comment on them. It helps to have a conversation with people about things I’ve learned and done. The most helpful and motivating blogs are ones that either describe the poster’s own journey and feelings and viewpoints. Reading what motivates others motivates me. It reminds me of the thrill of discovering that you can get out of debt, you can learn how to invest.
2. I learn. I continue to pick up stock investing books and read about real estate strategies. I experiment with investment methodologies in my Roth IRA. I research rental real estate prices and daydream about how I will go about it once I’ve paid off my mortgage.
3. I find like-minded people to discuss finances with. Mostly my Dad. He’s interested in anything I have to say (poor Dad).
4. I give my dollars a name. When I am tempted to go off track and buy something superfluous, my only option is to dip into the dollars that are named Mortgage. It helps me to remember that that money is not available for anything other than its destiny: the mortgage. (Sounds funny, but it really helps!)
5. I find other interests and hobbies. I need a distraction while the slow, slow process of paying off my mortgage slowly winds its way down. I garden, I go to meet ups, I play board games, I walk. It helps to engage my mind in an activity where I can see more immediate rewards than waiting around for another 2 years for something to happen.
Last week I wrote about why I hate EE Savings Bonds. I hate them because of how people use them – they use them wrong and I explain why here. Objectively, though, I love them. Here’s why:
1. They are totally tax-free when used for education. Kidding, I don’t give a shit about this. I don’t have kids, and I’m not gonna be that mothball-smelling aunt that gives the kid a $50 EE Savings Bond to “contribute to her education”. Fuck that, I’m buying Astronaut Barbie for my niece. If you have kids or are a killjoy, then read up on it here.
Bonus: if you do buy your kid EE Savings Bonds for her college fund, you can totally pay taxes on the interest annually before the bonds mature and/or are cashed in. Your 5 year old kid is probably in the 10% federal income tax bracket, so that’d be a cool way to pay super low taxes on the interest. *Note: there’s a no-backsies rule on this – once you decide to do this, you can’t change your mind. Alternatively, you can let your kid pay the taxes upon its maturity when he’s probably around 18 – fuck him, he needs to learn responsibility at some point, right?
The huge drawback of using EE Savings Bonds as college savings is that you really shouldn’t cash them in in less than 20 years unless in an emergency. So either start buying these when you’re thinking about getting pregnant, or make your kid wait until the bonds mature to face value. Otherwise, look at 529s instead.
2. They are totally state & local tax free. A-ha. Now we’re getting somewhere. While the interest earned on EE Savings Bonds are subject to federal income taxes (with some exceptions like education and disasters), states and local governments – ahem: NYC – cannot touch them. If you live in a high tax state or city *cough NYC cough*, this makes up for the relatively low interest you earn. Californians and New Yorkers, take notice. Floridians & Texans: fuck you with your perpetual sunshine and state tax-free incomes!
3. Guaranteed 3.6-ish% interest rate. Let’s face it: the interest rate on these bonds are shit. It’s 0.10%. That’s crap, you can make more just parking your money in an Ally Savings account. BUT if you hang onto the bond for at least 20 years, you double your money. It doesn’t matter what interest rate you get before then, once the bond hits 20 years old, the US Treasury guarantees to bring up the value of the bond to face value. That’s double. Doubling in 20 years is a 3.6% interest rate.
Tack on whatever you save from your state & local tax exemption (I’m looking at you, Hawaiians), and you’re looking at a pretty decent guaranteed return. That’s almost the same kind of return you get by paying off your mortgage early. Alaskans and Washingtonians: again, fuck you with your state tax-free incomes!
4. They’re tax-deferred. Hey, the whole reason you invest in your 401k is because the taxes are deferred, right? That’s worth something, otherwise you’d just invest in your taxable accounts all the time. But 401ks, and other tax-advantaged accounts like Roth IRAs, have annual limits. When you hit those limits (and my opinion is that you should), the next place to look for tax advantages in your investments can include EE Savings Bonds (and munis, but that’s a conversation for another time).
5. #4 used to be the end of my list, but I ran across this interesting idea of parking your emergency fund in EE Savings Bonds.My initial reaction was noooooooooo! because emergency funds should be liquid, easy to get to. After all, in an emergency, you need your cold, hard cash to get you out of a jam. But the more I thought about it, the more I like it.
And if you do have an emergency, well, then EE Savings Bonds are plenty liquid. As long as you’ve had them for over a year, just cash them in. You lose some interest, but, hey, it’s an emergency, right?
Most people hate EE Savings Bonds. Those people are right.
There are many finance blogs extolling the virtues of these things – they’re totally tax-free when used for college, perfect little baby birthday gifts, they’re guaranteed to double in 20 years (something like 3ish% interest) – but I hate them.
I hate them because most of those baby gift bonds are face value $50 or something stupid. Sorry, grandma, but $50 ain’t even buying a textbook.
I hate them because the only way EE Savings Bonds are useful is if you have a shit ton of them. Let’s face it – if grandma gave you a face value $10,000 bond as a baby gift…..and repeated that each year for 18 years, you’d have plenty of tax-free college funds.
But people don’t do that. They think the bonds are cute, and they feel good about “contributing to your education” instead of just giving you the fucking Lego set you wanted.
EE Savings Bonds are fabulous for the 1%. It’s an excellent way to stuff at least $10k a year into a pretty good tax savings vehicle at a guaranteed 3ish% (if holding onto them for 20 years). And, to be fair, if you’ve maxed out your 401k and your Roth IRA, it’s not a terrible idea to stash away a few grand a year for your retirement.
But again, people don’t use EE Savings Bonds that way. They’re too cute, they’re too low-denomination, they make people feel like they’re doing something good by buying a $50 one, when really what they need to do is stash away piles and piles of them. They let people off the hook.
I got the idea for this bento box from a Weight Watchers app beginner meal suggestion. WW placed these simple ingredients on a platter, but I like putting it in a bento box for one reason: (1) the salad and the roasted peppers seep liquid, making things messy (and ruining the bread). I also put the hummus in a silicone cup to prevent the juice from the pepper from turning it into pepper-hummus soup!
I replaced WW’s suggestion of a hard boiled egg with smoked salmon because it’s prettier and because who doesn’t love smoked salmon! It not only adds a lovely color to the ensemble, but it adds a nice salty, smoky balance to the tanginess of the acidic salad.
I added the roasted peppers to WW’s suggestion because it melds with the flavor of hummus beautifully, plus it adds more vegetables to my day.
1/2 pita wrapped in cling wrap to prevent sogginess
Roasted bell peppers
Middle Eastern salad: 2 tomatoes, 1 cucumber, a bunch of cilantro, juice from 1 lime, salt & pepper
Pro-tip for WW users: the only items in this platter that have points are the hummus and the pita bread!
Money may not buy you love, but it sure helps you to escape when love affairs die.
I once lived with a raging alcoholic. He wasn’t violent or abusive or mean. He was just a regular, pass out on the floor, piss in the bed drunk. He drank six days a week, and spent the seventh day recovering his hangover.
I lasted almost a year. And the only reason I lasted that long is because on that seventh day of sober hangover, he was sweet…and incredibly sexy.
But a single day a week of sweet and sexy, watching TV in bed all day does not a fun relationship make. I spent that year fantasizing the different ways I could leave. My fantasies got pretty detailed – I’d pack up just my necessities and drive away in the middle of the night (or afternoon) while he was laying in a pool of his own piss. I’d drive south toward the warm weather, and park when I got to, say, Louisiana. Maybe New Orleans. I’d find a cozy little studio and not tell anyone where I was (except work). I had my emergency fund, and that would be enough for a first-and-last deposit on an apartment, as well as gas money to get all the way south. It would be easy, really.
That situation eventually resolved itself. But as life does, I continue to have flashes of stress and every once in a while I revive my running-away fantasy. I keep my emergency fund healthy – not just because the personal finance blogs say so, but also for my own secret escape reasons.
Sometimes I stop and let myself fully feel gratitude course though my body: I can escape if I want to. I could have when escape was a more likely outcome. I had and have the money to leave. Leaving would be insanely simple for me. I don’t have kids, no lingering bills to split. I don’t rely on anyone for anything material. A lot of people, a lot of women, aren’t so lucky. For a lot of women, whose partner problems are more dangerous than a mattress soggy with piss, escape is prohibitively expensive. Escape is possible only via shelters, or friends, or family, and even then, that may not be far enough away to escape the problem.
When Thanksgiving rolls around each year, at whoever’s table I am at, when it becomes my turn to say what I’m grateful for, what I say out loud and what I say in my head are two different things. Out loud, I’ll say something earnest, like I’m grateful to be with my host, or I’ll say something funny, like I’m grateful for chocolate. But in my head, I admit what I’m actually grateful for: I am grateful for my ability to earn my own money and support myself, I am grateful for my emergency fund, and my ability to build one, I am grateful for having the money to be fully autonomous. I am grateful for being in my situations because I want to be, not because I need to be.
PS. I’ve known women who have needed to escape dangerous relationships when they didn’t have money. I’m thinking fondly of them today, and providing links for others who might be in that same situation
I got my first credit card in college because I wanted the free coffee mug. I didn’t even drink coffee. And I didn’t want a credit card. But I signed up because it was free, and as a poor college student in a world where nothing is free, free felt good. Also, in my mind, all I was doing was signing a piece of paper. I had no intention of using the card.
Of course, I started using it in short order. A textbook here, a pack of cigarettes there (this was the 90s, sue me).
Fast forward 8 years to me in my first job paying $29k and my first job skirt suits and pumps (again, it was the 90s), my first computer, were all bought on credit. Before I knew it, I was thousands in debt.
Think about this for a second. Credit card companies are sitting on campus, offering literal junk in exchange for teenagers to get their first hit of credit. They know that after that first hit, you’re hooked. And they start you young too, so that as you begin your adulthood financed on credit, you probably won’t know how to live without it. You’ll have never experienced being an adult living on the cash you have.
Credit card companies are pigs. They’re pushers and dealers. They don’t care about you – all you are is a carcass to pick at. They don’t like you, they don’t hate you, they just want your money.
I eventually one day sat down and added up the balances of all my credit cards. Forty thousand dollars.
Forty. Thousand. Dollars.
I was 25 years old. I wasn’t even making thirty thousand. The whole reason I did this was because I was beginning to not be able to handle the minimum payments. I remember feeling a sudden and deep seated anger that on the same day I got paid and paid my bills, I had nothing left. I vividly remember wondering why I looked forward to payday, since after paying my bills, it was just like all my other days – poor.
It struck me in a moment of stark clarity that if I didn’t have to pay these minimum payments, I would actually have money for the things I’d been purchasing on the credit cards….instead of having to put them on the credit cards. See? It’s a fucking cycle: you don’t have money because you’re paying the credit cards, and since you don’t have money, you buy things using the credit cards.
Yeah, it’s true that credit card holders need to take personal responsibility – stop buying things on credit cards. I certainly hold myself responsible….now. But what sticks with me is that figuring out HOW the credit card is a trap, and HOW to get off that merry-go-round was literally a series of A-HA moments. This strikes me as strange – we get conditioned to rely on cards to the point that we barely question it, and not doing that is a learning process. It’s fucking backwards.
I calculated that if I continued to just pay the minimum on each of my cards, I would be done with them at age 42. (I calculated because this was the days before Elizabeth Warren and the law that requires credit card companies to tell you when the principal would be paid – you had to do that shit yourself…..if you even thought to do it, and if you figured out how compounding interest worked). I felt sick. I would never not be broke. I would never be free.
I wallowed in self-pity for a few days, and a funny thing happened: any time I pulled out my card, I thought about the fact that using it would push my end date from age 42 to something older than 42. And it made me mad. I was pissed! Man, that was the kick in the ass I needed. After a few days, I sat down and made my first ever budget. Those credit card companies raped me for years, and I was going to kick their ass. Money sure was tight, but I could scrimp here and there and throw extra dollars and extra pennies towards my debt.
Years later, I would discover that I used the debt snowball method without knowing it was a method or that it had a name. Whatever. It worked. Every time I had an extra $20 or more, I sent a check to the card and tracked it in my spreadsheet. Each time the end date moved from age 42 to earlier and earlier in my life, the better I felt. I treated each dollar like it was a rogue warrior soldier stabbing and kicking my debt with no mercy. I pictured my debt as a living blob thing, getting it’s fucking ass kicked, and I loved it. I could do this! Fuck you debt!!!!! Here! Here’s another dollar! Stick it up your ASS!!! (I was very angry, if you can’t tell).
I honestly don’t remember how long it took me to pay it all off, but I did. Along the way, I got raises (some were substantial) and all of it went to my debt. Again, I didn’t know lifestyle inflation had a name, but in my gut I knew I would rather be free from my rapists than get more square footage living space or whatever – I’d been poor for a long time, what’s another few years when you have some serious asses to kick?
And that was it for credit cards for me for a long time. I went cash only. Sometimes freestyle because I was making plenty of money at the time, sometimes on an envelope system when I wanted to save up for something big. But no plastic. If the dollars were not in my wallet, they weren’t getting spent.
Until about 5 years ago. I stumbled across Frequent Miler, a travel miles & points hacker who basically travels for free by raping the rapists. I discovered the world of fucking the credit card companies by buying everything on credit….and then paying it off in it’s entirety every monthand walking away with the credit card rewards. Whoa!
I’ll leave my credit-card-fucking strategies for another time, but suffice it to say, that that feeling of satisfaction of choking my tormentors that I felt years ago has never left. Every time I redeem my points for a free flight, I give the finger to these fuckers and whisper, in the dark of my living room, by the light of my computer screen….Fuck you, Credit Card Company. Who’s your daddy now, motherfucker? Fuck. You.