My Journey

This year I’ve talked to four people that didn’t know you have to log into your work provided retirement account and set your initial investments. They all assumed that the companies they worked for took care of their initial investments. They have lost out on some spectacular growth over the last five years, which was the average length of time they had each been employed, for three of them. Usually your employers retirement account will default you to a certain percentage of your pay and the deposit will go into a cash holding fund that earns no interest.

The fourth had just retired after 37 years at a single company and logged in for the first time. This fourth person was lucky, in a way, that their previous company had placed all of their contributions into the company stock. They realized it was a monumental mistake not to log in earlier and choose better investments. They are now in their 70’s, informing me that a financial planner convinced them to move the money, just under 400k, to CDs. I think thats about to be a second mistake, but that’s just my opinion. The stock did ok, but not as well as an S&P 500 index fund; had they had that fund they would probably have triple the amount. The S&P 500 has averaged 10% for the life of the fund, but the last fifteen years, at the time of this post, it’s averaged 13%.

Each assumed they were saving their money and there was nothing more to do. You don’t put money into a retirement account to save it, you put it in there to invest it. Make sure that you are contributing at least enough to get any match that your employer offers. Seriously consider increasing your contributions with every raise. For example if you get a 4% raise take half of the raise and add it to your monthly contributions. This way you’re still getting a 2% raise while contributing 2% more to your retirement accounts.

Most people think that retirement is something that will work itself out. Many people believe that their employer has it under control, not realizing that more than likely their default account isn’t earning any interest. The vast majority of people will not save enough to last the twenty or more years of money that you’ll potentially need to cover your costs. I’ve helped lots of people get their retirement accounts going, recently convincing several more people to start. This post is to show you a possible solution to get there. I use 10% in my examples because I’ve averaged 14% and I was trying to be conservative with these examples. Remember that everyday that you wait, the cost to reach the same end value goes up and up so keep waiting at your own peril. 

This is the way!

If a 30 yr old invests $100 a month for 35 years and at age 65 they retire, their retirement account with an average 10% interest for that period will have $379,662.

However if they had started at 20 yrs old and invested $100 a month for 10 years and then stops at age 30. At 10% interest they will have $20,484 in their investment account. If they don’t contribute another dime for the next 35 years, that $20,484 will grow to $668,568. Its over $300k more than if they had started at 30 and made deposits for 35 years instead of only the initial 10 years. If they had continued to add $100 a month, and had not stopped, for the remaining 35 years, they would have just over $1 million. By the way if you average 12% the end result will be $2.1 million and 14% will net you $4.5 million.

If you wait till age 40 to start, you now need to contribute $800 a month to just get to that 1 million amount.  Another example of compound interest and time, if your parents had put just $500 in a trust fund at your birth and never added another dime to it, at age 65 that fund would have grown to $647,453.

That is the massive difference with the power of compound interest and time. The younger you start, the less you’ll need, it’s way easier to do, and later the more you’ll reap. $100 a month is way better than $800 a month, start early. Compound interest is when the interest that your money earns starts earning its own interest, your money is now working for you. If you can’t do $100, then do $50, or $25, or even $10. $10 will get you 104k, $25 gets you 262k.

Take one hour out of your life to learn about low cost index funds, and the Fire movement, and even about Bogleheads, and then learn how to open an investment account. Then go open a Roth IRA account with Fidelity, Schwab, or Vanguard. 

Keep in mind, don’t ever take hardship withdrawals, never take money out for a down payment on a house, never pull money out till the end. If you do withdraw money early you stop the growth of your account, the magic of compound interest stops. Using the 20yr old with $100/mo as an example. It will take 26 years to get to 100k, it’ll only take another 6 years to get to 200k, another 4 years your at 300k, 3 more years and now your at 400k, you get the picture. At 65 you now have a million. They would have only contributed $56,000 of their own money and yet they have a million dollars. None of that happens if you withdraw the money early. The first 100k is the hardest to get to, but once you’re there, each 100k after comes faster and faster, unless you pull the money out. When you leave a job, transfer the funds to your Roth IRA or an IRA and continue to let it grow.

Things to remember:

What to do if the market is crashing: keep making your monthly deposits. 

What to do if the market is at its all time high: keep making your monthly deposits.

Remember always make your monthly deposits no matter what you hear on the news. Don’t fall victim to hysteria, just keep making your monthly deposits.

I like to follow various blogs and discussions related to the FIRE movement. For those that don’t know what FIRE is, it is the Financial Independence Retire Early mantra. There are many websites that will go into the details of how it works. I really wished that I had discovered this or had the wherewithal to come across those ideas when I was a lot younger. Now I’m in my 50’s and retiring early is not an option. I do hope though that by following some of what is recommended by these groups and implementing mine, I can make up for lost time and retire with enough to not worry about money.

The vast majority of my retirement funds are in either an S&P 500 index fund or a total stock market fund. I do have about 30% in a technology sector fund, I just can’t get my self to part with it. It does have a higher fee, but it has averaged over 20% returns since I’ve owned it. Now I know most of that is due to the bull run from the markets recovery since the 2008 crash, but I’m a tech guy and I like it.

I’ve made lots of mistakes when it comes to retirement money. I’ve worked at a multitude of jobs, easily over 25 where I never vested at any of them. This has resulted in lots of lost matching contributions. My current job, fortunately has a pension, although I’ve only been there 3 years. However due to my age, I would need to stay till I’m in my upper 60’s to be able to live off of it alone. Which is why I pour money into retirement accounts.

Due to my age I can contribute catchup contributions for both my IRA and 457K, but I don’t see how people are able to do that. I still manage to dump 19% of my salary into the 457, which isn’t maxed out. My IRA, I’m hoping that I can start contributing more too.

I know that’s a lot of rambling, but I will update more later.

We always brag about how great the chefs are at Disney restaurants. On our recent trip to Disney Land (July-August), on our last day of a great trip thus far. We were going to eat breakfast, go to Downtown Disney and then catch our flight home. The unthinkable happened at the Storytellers Cafe while having breakfast. We were eating at one of the Disney Buffets, and like on many other occasions, the chef came out to write down our daughters food allergies. She is allergic to Peanuts, Tree-nuts, Eggs, and Dairy. A tall list indeed, but you have to remember that we have taken her to many Restaurants with Disney, including a Disney cruise and never had any issues.

This time however, the chef served her something that had eggs in it, even though he had written down her allergies. My poor daughter had an allergic reaction in the restaurant. It wasn’t as bad as ones that she had in the past but she was in distress and did vomit multiple times, while we were trying to give her Benadryl. Disney did send a nurse and fire fighter to the scene.

The thing that really pissed me off, was that I had asked the waitstaff if the chef could come out and explain what it was that caused this. As a parent that is always on the lookout for things that she might be allergic to that may have changed or be something new. It took sending 4 different people to the kitchen, with each one promising to return before finally a different chef came out and admitted the mistake, stating that one of the items had eggs in it.

The manager told us that our meal was on them. Thanks for putting my daughters life at risk and giving us a free breakfast, jeesh. I thought for sure, this is Disney, someone will reach out to us and Disney would somehow make things right. Well they aren’t the company that I thought they were.

As I have mentioned before, our daughter has severe food allergies. There are many challenges with seeing to her safety. One of the things that all parents of children that are allergic to peanuts knows is that a plane can be a very dangerous place for a person with peanut allergies.

Almost all airlines serve nuts, and almost all airlines could care less about anyones allergies much less them being humans that deserve a certain amount of respect. Recent events on the news highlights just how little airlines care about people. There are a number of blogs where people with peanut allergies have shared just how little airlines care about our issues. Some airlines are better than others, but almost all of them have had issues where certain flight crews didn’t follow the airlines policies.

Although our daughter has flown once, we are very aware of the dangers, and that was a very stressful situation. When you are in the air at 34,000 feet and something goes wrong, minutes matter. Most people don’t seem to realize that an EpiPen only buys you about 15 minutes of relief if it works. Severe reactions may not be stopped. So if your a parent and something goes wrong on an airline and you have two EpiPens you technically have about 30 minutes of relief should you need it. That means from the moment you inject someone, they have 30 minutes to be in an ambulance where hopefully they have more EpiPens or epinephrine. If you’ve ever flown you know that those jets take 15 minutes just to taxi down a runway, that doesn’t leave the plane much time to find an airport and land. And of course thats if you get 15 minutes, you may get way less from each EpiPen. I’ve read stories of people that had to take two back to back immediately to stop an episode.

Now I’ve read plenty of Peanut allergy sites about planes making emergency landings due to an event on the plane. And on the flip side I’ve read a number of blogs of people who fly all the time with peanut allergies. (It should be noted that peanut allergies aren’t a one size fits all issue. Some people are mildly allergic and some like our daughter are severely allergic.) There are a number of things that people do, from wiping down the seat and tray, seat and tray covers, dust masks, asking the airline to make announcements and asking if they won’t serve nuts.

On two recent flights that I took with two different airlines, I noticed that there was plenty of peanut particles all over the floor of both planes. And I believe that when people due have an issue on a plane it is most likely that they touched something rather than breathed in something. My little girl is constantly exploring and then touching her face. When she flew the first time she was in a carseat on the plane and only an infant. So it was easy to ensure that she couldn’t touch anything. Now that she’s older, not so much. We have seen what happens with her when she does hive out, a term we use to describe her having a severe allergic reaction. Its a very scary event.

Now I want to show her the world safely, but how to do it. We have driven all over the United States, due to job changes. Driving presents some issues as well, if something goes wrong you could potentially be hundreds of miles from help. But you do control the cars environment. However, trying to visit places when you live on a coast thats far from some of the major attractions (we are huge Disney fans) can be challenging. Do we take extra time off so that we can drive there and back or risk flying and the convenience of being there in just a few hours.

So far it has been a glorious couple of months for the retirement accounts. Massive amounts of growth. I cautiously have a small amount in cash thats missing the wild ride up, but for 98% of my portfolio it has been going no where but up. Wouldn’t it be nice if it could stay this way for like 15 years or longer? To retire with Multi Millions and not just a couple of million would be nice.

I’ve been contemplating some of the low fee index funds versus some of the kinda low fee funds that have better returns. I have to admit that in the time that it has taken me to get here, I initially had to go with what was offered by employer accounts and they never had the low fee funds. This is from what I’ve learned is that the wrong people sit on these retirement boards and they limit the choices available to fellow employees. I know that they feel they are doing the right thing, however having more options is what I consider to be the right path. I think I could have gotten to my current level of cash faster had I had many more options available to me. It really bugs me that employers may have an option for a brokerage type account, but you have to have some high amount of money in a retirement account to use that feature.

Having left many companies I have rolled one 401k after another into my IRAs where at last I can manage it my way.

So with the name of the domain being about saving and retirement, I probably should write about investing. Even though we are a 1 income family, I do save as much as I can.

I try to invest a minimum of 10% to my retirement accounts. At one point I was putting in 25% into my 401k. I know that there are sites where families have retired after only working 10 or so years, by saving 60 – 70 percent of their income. That would be a nice goal, but that’s not my current thing. So occasionally I plan to write about the various investments I have. Eventually I will create a page that shows my investments and what my ballpark total balance is.

I definitely should probably minimize the funds that I’m in. Currently I have investments in probably 20 different funds and maybe 5 stocks. I prefer to be extremely aggressively invested. The way I see it is that I will eventually have a small pension. This pension is what I consider my base, therefore I can go aggressive on other accounts.

About a month ago I purchased shares of Nestle, so far its done ok. Considering the whole BREXIT thing occurring, it hasn’t even phased Nestle shares. I’m not the type of person that can tell you why certain investments make more or less sense than another. I buy based on things I’ve read or how I feel. A few years back I bought into a fund called FBIOX, I was stunned at how much that fund earned in interest. This year however hasn’t been that great. But I’m in for the long haul, so we will see where it goes.

Lately I’ve been trying to come up with ways that I can put about 10k into some type of investment for my daughter. If you put 10k in an account that earns interest about 8% for 60 years (her retirement age), it would be worth $1,012,000.00 give or take. That’s without contributing another dime to it.

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