Do you have a retirement savings plan? The HH and I do, through his employer. One of these days, I really hope it all pans out, so we can move back east and spend our days rocking side by side on the front porch without tons of financial worries. Until then, though, we have to just keep plugging away, putting a bit of his paycheck into the plan each month.
According to an article I read, lots of people feel like they just don’t make enough money to save for retirement, though. They are living paycheck to paycheck as it is, and the idea of spending one more penny towards retirement feels impossible.
In England at least, employers will soon be required to enroll employees in a savings program {they can opt out, if they choose, though}. The savings program starts with them putting just 2% of their pre-taxed salary away, and employers match a percentage of that. The idea is that when people are offered some free money in exchange for saving, they might be more apt to stay with it. The program is working well, with most people sticking with the monthly contributions.
I think a lot of employers have this basic plan here in the U.S., but the article made me wonder, how many people actually take advantage of it? Even more, it made me wonder, how people save when they don’t have an employer plan? I think in an ideal world, we are supposed to save with our employers AND save some on our own. But, how many people are actually able to do that?
I guess all this wonderin’ means I have to take it to the streets and ask you peeps. Do you have a similar retirement plan? If not, how do you save?
~Mavis
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Carla says
I think that one of the problems with saving for retirement is that it is hard for us when young to visualize that we will actually get old and want to retire. Until I turned about 59 I couldn’t imagine not wanting to work. Now I want to quit so bad it hurts but I didn’t save enough as a young person to be able to retire early. I have worked places that did not have a retirement plan and I did save on my own but not as much. Most companies have a 401K and the amount most companies match is .25 cents on the dollar up to a maximum. My current employer matches up to 6% of my salary so that is what I put away. Yes I should put more away but I also like to have savings that I can get to if needed without a penalty.
Aunt G says
We have 7.5% of our income in a retirement plan through my husband’s employer. We invest 7.5% more into a Roth IRA like Dave Ramsey recommends.
IMO Retirement responsibilities rest on the individual. Not on the government or employer.
In the money handling class I teach Ive found most people eat, drink, wear or drive their retirement now.
Lisa says
I agree 100% with everything you just said!!!
Love Financial Peace University by Dave Ramsey based on how he lived after having built great wealth and ultimately losing everything. We have gone back to paying with cash. It has been so liberating not having credit card bills each month (which were always paid in full) and keeps spending in check.
Dara says
My husband has a retirement plan through his job with an excellent match – 7% match on every 6% invested. We put around 13% of his salary in that plan (so 20% with the match). My job doesn’t offer a retirement savings plan so I save the maximum allowable in a traditional IRA since I need the tax deduction. It’s much harder to save on your own – not just from a willpower standpoint, but from allowable options. The maximum that I’m allowed to put in IRAs is much less than what my husband can contribute through his employer.
Brianna says
We put 20% (the maximum we can) into my husband’s 401k each paycheck. My job doesn’t have any retirement benefits since I work part time, but we are looking into doing a Roth IRA to supplement our retirement income. It’s just hard to choose between doing the Roth or paying down the house mortgage faster (like Mavis has been doing – so inspiring!) – can’t do both at once! Anyone know which is better financially in the long run, or does it just depend on specific financial circumstances?
Kristina says
All depends on your interest rate on your mortgage compared to your earnings in your IRA investments. If your mortgage money is “cheap”, i.e. low-interest, compared to your IRA’s performance (and your tax rate if you go with a regular IRA), then it might be wiser to save the money than pay off the mortgage. Every case is different though and there are a few moving parts to look at. You’d have to run the numbers for your own personal situation.
Alison says
My HH’s company has one of the best plans I’ve ever heard of, and low employee turnover to match it. They put in 2.5% automatically, then will put in an additional 8% if he puts in 4%. That’s 14.5%. We’ve always done extra in our Roth IRAs. HH hopes to retire around 60 (or at least drop to part-time).
Beth says
My company matches up to 5%, I currently put in 9% – My husband’s company only matches at 3% and that is what he puts in. We also have an IRA that we contribute to. It’s so very hard to save on the side too though, I’d rather put it in so I can’t easily take it out. My suggestion to young people (mostly my young employees that I hire) is to start off with the match or your just throwing money away and then each year you get a raise to increase it by 1% you will never feel the increase because it’s offset by your raise until you reach the max. I’ve taught my kids to put away 10% of any money they have whether as a gift or earned, hopefully they keep doing that or more for their working lives and should be good to go when time to retire.
Stephanie says
Great advise Beth! I was lucky to hear this same advise at age 21 when I started at my current company. I am now 34 and still here with a substantial 401K. My employer matches 5% so I started there for a number of years and about 5 years ago I started adding the 1% so now I contribute 10% and my employer 5% so its like 15% every paycheck. I am also saving for both myself and hubby as he is the stay at home parent (at least for now).
Heather says
HH’s current employer does not have any retirement plan options but we do invest on our own. In his field employees change companies fairly often so while he is always listening to different hiring recruiters pitch he is now asking about their retirement and matching options as we would like the next jump to help lessen the burden of doing all retirement investing on our own.
Lynne says
I am retired, one of the very lucky ones with an old fashioned pension. One thing I did in my younger days that’s been a blessing now: I had some shares of stock in quality blue chip companies that I enrolled in dividend reinvestment plans, known as DRIPS. I never missed dividends I never saw, they went into buying more shares. If I could, I’d send in some extra money every once in a while, too. Over a period of years, it added up. Worth looking into as a way to build up some assets outside of a 401(k) or IRA
Mariana says
That’s what I am doing through a Vanguard account. I couldnt believe when I received almost $1500 in dividends out of nowhere. I am reinvesting just like you did since this is the only way to make the compounding work its magic.
Stephanie says
We contribute 5% to our 401k to get the maximum 4% matching from our employer, and we try to max out a Roth IRA every year. My husband wants the option to retire early. Our ambitious goal is when he turns 55, and so far it looks like we are on track for that to work out.
JC says
The idea that saving for retirement is hard is absolutely insane to me, and I’m surprised that it is to you Mavis. As someone who spends $100/ month on groceries, doesn’t buy additional clothes and useless stuff, aside from travel where does all your money go? at 28 years old my husband and I are debating whether to retire at 45 or push it 50 and have me stay home with the kids. We do not make excessive money, like to travel travel, and have combated school loans in the past. Every financial advisor tells people to save more and open a Roth IRA maybe try some index funds, but saving reguardless. I don’t understand what’s so difficult about that.
Ashley says
Just because someone doesn’t spend much on food, clothes and ‘stuff’ doesn’t mean they have loads of money laying around. You’re forgetting mortgage, health and auto/home insurance, utilities, etc. Those are the places most people’s money goes.
JC says
I understand that, I pay those as well. I think people today push to close to the top of their budgets by getting the biggest house they can afford and brand new cars with loans, and constantly updated wardrobes. It’s just my opinion, but saving money is not hard, people have a misconception that these things are needed to live a full life, and the reality is that it’s all just stuff that you don’t need and doesn’t make you happy. Save the money instead and retirement is a no-brainer.
Kristina says
Well, that’s nice if you have a genuine surplus to work with, but many people legitimately have very little, if any, for varied reasons. You must be able to see that, or I’d say you have a pretty limited circle of acquaintance (or you’re not paying attention).
Lisa says
Well said!
Lisa says
JC…well said!!!
Mavis Butterfield says
@JC I didn’t say that I thought it was hard to save for retirement. 😉
JC says
Sorry Mavis. I interpreted incorrectly. I get a little heated about saving…..obviously.
Florence says
I am retired. I was a pharmacist at a world-famous teaching hospital. I loved being on the cutting edge of hospital pharmacy and I couldn’t imagine not working. I laughingly said I would just as soon never retire. I always contributed the max to my 403b and had other savings as well. We paid off our mortgage early. So when at 63 I developed a neuromuscular condition that progressed to where I could not work, all that saving and paying off the mortgage was a huge relief. What I am trying in a roundabout way to say is that you never know when life will happen and your plans go down the drain. Be prepared.
Mavis says
Thank you for sharing both a life well-lived and a cautionary tale! Loving what you do AND saving for a rainy day are both key!
Elizabeth Vega says
We have changed jobs quite a lot over the past few years, and so our retirement savings have not been consistent. Sometimes, we have socked away 15% with a 6% employer match, and other times… nothing. So we have more than some, and less than we “should.” I’m 2 months into a job that will provide me with a 401(k), complete with match, after a year’s employment, and then I’ll contribute the max again. Honestly, the biggest factor seems to be how easy or difficult it is to save, rather than the amount! So I think England’s plan is a great one.
Marcia says
Yes.
I’m not really sure how it all started. My parents were pretty poor. I remember at one point, we had all of $6000 in the bank for emergencies. My dad lived on Social Security of a few hundred dollars for many years, but managed to still save money. But he never owned a credit card, we didn’t vacation, grew a garden, used clothing, etc. It was normal in the country back then.
When I graduated college I was in the Navy. I had a college and Navy buddy who introduced me to the military retirement folks. The bad thing is that they had a tendency to sell you whole life insurance, and front-loaded mutual funds. I didn’t know any better. The *good* thing is that they got me saving right off the bat, on an Ensign’s salary, living in DC. I started with $150 a month into IRA and mutual funds and $50 in insurance.
I paid off my college loans during that time, and when I saved up a fair bit, I’d put it into a CD.
When I got out of the Navy 5 years later, it was natural to just sign up for the 401k at my company. I’ve almost never had a 401k match, maybe only one year out of the last 20. But I still put money in, and in the last few years have maxed out at $18k. (Once my husband finished the 7 year PhD program and started earning money).
My husband also maxes his 401k, and his company has a very generous match.
On top of that, we save a little into 529 plans for the kids’ future educational needs, and we have additional money going into IRAs and just regular mutual funds. We are both high earners now, so this has been pretty easy. We were able to save money on one income during the grad school years, and we just tried really hard to keep the same lifestyle when he graduated.
It’s not exactly the same – we went from one car to two (but still compact cars), bought a (small) house and had two kids.
I guess I have that first friend to thank for getting me on that plan. It works best for me if I never see the money. It’s auto-deducted. For people who think it’s too hard, there are probably many reasons:
– not enough income (salaries have stagnated)
– too much debt (college loans)
– high cost of housing (saving for a down payment)
– inflated lifestyle (people seem to go on a lot more vacations, have nicer cars, eat out more, have nice cell phones….I mean, cell phones didn’t really exist really when I graduated college in 1992, and I didn’t get my first smart phone until well into my 40’s)
And then there’s:
– “I don’t know how”. I mean, you can save in the 401k pretty easily. But then what? If you have a cushion, a CD can be a good place to stash money while you are saving for a downpayment. Otherwise? Well, it takes some effort. We have a financial planner. We probably don’t need one, but it’s worth it to me to have someone else do the work, and we’ve had him since we were just out of the Navy (he was originally one of the military planning guys).
Most people I know are thinking social security, and savings. They don’t think about mutual funds, Vanguard, stocks, etc. It’s not terribly hard, but it does take time to do research and set up accounts, etc.
Chris M says
I’ve always had a retirement plan through my work, but the smartest thing I did was take the money I was putting into a flexible account for my children’s brace and continue to put it into a retirement account once the braces were finished. I figured if I’d gotten by for a couple of years without it, I could continue to get by without it and put it towards retirement. Now, I put in the maximum amount allowed by law for those over 50. It has added up beyond my wildest dreams!
OneFamily says
I have a 401k plan through my employer, who matches .50 cents of each dollar, up to 6%. If we meet our sales goals, they also add an extra 3.4% of our annual salary. I wish I could contribute more than I am, but hoping that once DD graduates college and supporting herself, I can increase my contributions.
T.J. says
I have a plan thru my employer. Our company got bought out two years ago and the employer contribution went from 5% to 2%. That was a big hit that I’m trying to make up now. I’m trying to increase my contribution 1% each year. I have a huge fear of struggling when I’m older.
Katie says
I have a plan where my employer matches up to 5%. However, I put in the maximum $18,000/year pre-tax that is allowed by law. I am very fortunate to be able to afford to do that. My feeling is if I don’t see it in my paycheck, then I don’t have it to spend. One of my biggest fears is being poor in my old age, so this is my way of dealing with it.
Lisa says
Holy guacamole! That’s about $700 bi-weekly! That’s more than a third of my gross salary. You are very fortunate.
I put away the 6% that my employer matches. I’d like to save more, but my husband is grossly underemployed, so we need pretty much every cent of my paycheck.
Mavis says
That’s amazing, Katie. I am inspired! Would you mind sharing with readers whether you can put that much into retirement because you make a lot, or if you choose to live very frugally? Maybe a combination of both?
Jen Y says
Both my husband & I each have a 401k started when we were young through our employers. We both worked for the same company & they matched our contributions up to a certain percentage. When I quit work to raise our son I kept mine & it’s grown some over the years with interest but we haven’t added to it.
My husband’s has done well with him adding every week & his employer matching it. He seems confident that we’ll have enough but I worry about the cost of health. My husband is a type 1 diabetic & insulin supplies & medication are very costly without good insurance. He plans to work until he’s 70 because of insurance..he does have a very fun, fairly easy job & loves his work environment.
Andrea says
I have a savings plan through my employer, but I have only been employed here for 5 years. So for 30ish years, I’ve had no savings plan. Besides childhood, most of that time was living paycheck to paycheck. I tried to start saving, but problem after problem kept draining the little amount saved up. It is a frustrating cycle that is hard to break.
Mavis says
Keep plugging away, Andrea! Compound interest is a beautiful thing.
Marie says
I’m retired. We paid a little each month into our retirement accounts & 401s through auto deduction. Never actually “saw” the money. Now the money is returned to us each month ( with interest) FOREVER!!! To me, money in the mail is one of the happiest days in our month.
Yes, I stayed home for first few years with kids & grew veggies, shopped midnight sales, drove old cars, couponed, as well as forgoing vacations. We bought & sold houses so I could fix them up/move on. Loved it & our kids had hugs/kisses every moment of the day. They return their love to us ten fold. Yes, there were huge credit cards bills. Then eventually they were paid down when I returned to what I called “vacation work for only 8 hours per day”. I was so used to multi tasking that I wanted to install a washer/dryer next to me in the office!
Enough said.
Cheryl says
I am one of the folks that lives paycheck to paycheck. I do not regularly put anything aside as I literally do not have it to put aside. I am a federal employee and contrary to popular opinion, the 1.?% we sometimes get as a COLA, doesn’t even cover half the hike of the health insurance. I many times have less money in my pocket than the homeless begging on the streets. I may have decent benefits, but much of the time I cannot afford the co-pay and there are some places now that require you pay up front even with insurance. I don’t eat out, I haven’t seen a movie in months and months, I haven’t bought clothes in over a year. I drive a 17 year old truck, etc.
Wyoming Gal says
I currently work for a non-profit and we have a 403b with a match of 4% of pay with a match dollar for dollar. The maximum contribution is $18,000 per year for younger workers. So I don’t put in that much – more like $8,000 per year.
But I do have an IRA with a lot more from previous employer 401K plans. Even with more than $1 million saved, I can only prudently take out about $40,000 a year when I retire in a few years.
jenny says
Right now we really only have my husband’s 401K to fall back on which he pays into weekly with his pay checks. I for one am a nurse…and nurse’s don’t get to retire 😉
Linda says
I have a 401K through my work. Slowly but surely it is adding up. My husband was forced to retire at 62 but luckly he has a pension and ss so we have not had to go into his IRA until he turns 70. I am planning on working till 66 as to get full ss. My 2 children are finding it hard find money to save
Diana says
My husband and I always put the maximum in our 401K plans over the years. He was eligible for retirement at 50 based on 30 years at his job. With his vacation he had accrued he was actually 49 when he retired. He has a pension that pays 90% of his salary at the time of retirement, cost of living increases, and his medical insurance costs. His work was not part of the social security system, so he will not receive that when he is eligible. I own my business, so being self employed I have always appreciated his retirement plan. My children learned by example and are already investing the maximum in their retirement plans and savings even though they are young. It is never too early to start and a good plan really does snowball as the years go by. Being retired with enough money to live comfortably and happily is a dream well worth working towards.
Teckla says
There are many great comments here, much good advice. Bottom line, start as early as possible and contribute as much as possible every pay day! And if you have any employer match, take advantage of it!
I am a 68 year old retiree who has a very modest retirement plan started late in my 40’s, about $430 a month, and SS benefit of $1200 a month. I do my best to live on this, although I have another retirement benefit that had a 6% employer match, from which I am currently withdrawing approx. $2K a year for 10 yrs, with 8 to go including 2016. I have about $100K in an IRA, mostly funded by $20K (all the plan allowed) which I rolled over from the employer match mentioned earlier and a state plan when my husband died, which I am not touching until I have to at 70. I have a separate smaller plan with the same company which I am letting grow. I am more than grateful for the little that I have now, that I started when older.
From experience, I cannot recommend strongly enough that young people start as early as possible and contribute as much as possible, even it it’s $10 a month to start out, so that compounding will work it’s magic. It seems impossible when you are young, and so unnecessary, but those years fly by and can never be retrieved. And trust me, you WILL be sorry when you reach retirement if you aren’t proactive when young. DON’T leave it to the government, government will let you down! Be responsible for as much as you yourself can as you go along. And I highly recommend a frugal lifestyle by choice. That simply means “living within your means, at your current level,” not necessarily doing completely without! As you grow older, you will realize that what is important now in “stuff” begins to means less as you age, and relationships will begin to mean more. And as someone said, you never know when life will step in and change things in a moment. Take advantage of the time you have now, to do what you can! Oh, how I wish people could understand how important it is to take advantage of what they can, when they can!!
Nancy Klein says
If your company matches, you should try to save at least that percentage–otherwise, it’s like leaving money on the table. I know it’s hard to find that bit to put away, but I always try to pay myself first. I have a set amount ($75) that goes directly from my paycheck into two accounts each month–one account in an emergency account for any unexpected costs (hot water heater going up, anyone?) and a second to pay toward car expenses or my next car whenever that might be needed. These postings always inspire me to do better!
Cheryl says
I have to replace a furnace…..sigh.
Karina says
I am lucky to have a work 401(k) with some match that I just worked up to maxing out. I stopped contributing to my Roth to do it. My husband is self-employed so can contribute only to an IRA. Together, we save about 15% toward retirement before my match. I am saving hard to hopefully be able to spend 2-3 years at home while my kids are young. When I started thinking about this option a year ago, I began reading as much as I could. I made a plan which is in continual revision mode as I meet goals and learn more. My suggestions for anyone interested in learning more about investing and saving (and good reasons to do it) are Jim Collins’ blog (jlcollinsnh.com), Your Money or Your Life (go to your library), Bogleheads Guide to Investing, and, if you need ideas, inspiration, and a face punch now and then, Mr. Money Mustache’s blog.
Good luck to everyone! Remember the power of compounding. Math is your friend.
amy says
if your husband is self-employed he has the option of opening a Solo 401(k).
Karina says
Thanks! We have looked into the options but he has a partnership with his father, and so far, none of the available options make sense for us as I have access to a 401(k) for now. If I stop working (and he has a great year!), we may have to dig deeper to see if we can make a SEP work for us. Given the plan to keep our expenses low, and early saving, I think we can be alright with just IRA contributions. If I return to a job with a 401(k), hopefully we can reach independence/retirement that much faster!
Lynn says
Today’s retirement plans (401K and IRA) are actually experiments that have yet to play out. Traditionally, one received a pension, and this still is the best deal. A pension allows the worker to receive a set amount of money on a regular basis for the remainder of his/her life; it never runs out. Somewhere along the line–I think it was during the Reagan years–the idea was introduced that instead of pensions, it would be better for corporations (and the stock market) to offer something else. Now, only a small percentage of workers have pensions, while the rest have either nothing or the great experiment of 401k and IRA. The problem with the 401K is that it does not last forever like a pension–it is finite. I do not think Americans will have a retirement package that will last until they die. Not all is rosy on the pension side, either. Both private and public pensions are in crises. My husband has a pension (private) and we know that unless he is grandfathered in, he is likely to take a 20% haircut on his pension due to the state of the economy. He will still be better off, though, as long as he lives a long life, than if he had the newer version of a retirement package, the 401K/IRA. DISCLAIMER: I am not an investment professional, I am not a troll, I am just a reader that has been concerned about how this is going to play out in the coming years.
amy says
I contribute 27% to my 401(k), my employer matches 3%…husband puts in 15% in 401(k), his employer matches 3%, and he also puts 5% into company stock options. We pay additional on our mortgage every month with the hopes of paying our 15 year mortgage off 5 years early. We have reduced our monthly expenses so that we have to save LESS for our retirement years…we hope to retire when I turn 55 (my husband will be 50).
Karina says
Wow, congratulations! The correlation between spending less and therefore needing less in retirement is something everyone should consider. And as an added bonus, if the spending less happens while working, you get to retirement that much faster!
Alecs says
I worked before I became a stay at home mom and after 11 years with the same company I will receive a small pension when I am old enough. It’s not much but it is something. My husband worked for a small fishing company and then transferred to a company that offered a 401K. However, after a couple of years, he got sick and passed away. I was left with a small life insurance that I used to pay off all of our bills except the mortgage. I put 10k for my kids education in a CD and I invested 25K in a property that makes me almost $500/month. I returned to work and have not stopped since (it will be 5 years soon). My kids will both be in HS next year and I have hopes that they will continue to study well and earn scholarships for their education. I follow the “pay yourself first” rule and save at least $500/month and max my Roth IRA. I am very frugal and budget all of my money leaving none to waste. I don’t spend what I don’t have. I believe that it is much easier to build a monthly passive income to retire on than it is to save up “x”million + dollars and then try to retire by draining that. I read everything financial that crosses my path and I try to implement every possible new way of building up my passive income. I hope to soon move into a position at work that qualifies for benefits and a retirement plan since I am paying all of that out of my pocket. I use the social security pension my kids receive to pay the mortgage but that will all end when they turn 18, so I will have to adjust. I try to do all the right things as I have learned that you can’t really plan on anything, not living a long time, not staying healthy, not receiving social security, etc…