Zeno

Retirement for me seems like a long way off, 20 yrs and a couple of months(I'll be just over 57) but I am trying to plan ahead. Luckily my work offers a pension...a convuluted formula of 3 highest earned years X a percent and X years of service so thats ok..not great money but not bad either. They also have a 401K(we call it Thrift Savings Plan--we can contribute 15%--I contribute 10%, they match the first 5%) but I just saw an article in Time magazine saying 401K's should go away for the benefit of the employees. Not sure what to think about that to be honest, my wife and I did lose a lot in the past few years but we hope the market bounces back eventually. I also have a money market Roth IRA but its only a year old and I max that out ($5000). Then I buy $300 of Savings Bonds every month...guaranteed not to lose money but it doesn't make a whole lot either(for instance a $50 bond I bought over 5 years ago has only made $12.12 so far).

I don't feel like I can count on Social Security as an option so I don't even include that in any retirement calculators I look at.

What does everyone else do? Any ideas of ways to better invest for the future? The first thing I'd change is the Savings Bonds, if I could invest that $300 a month in to something better I would...I've never really done any self investing, whether it be stocks or mutual funds or whatever so I am a little reluctant.

When I retire I want to be sure I don't have to worry about much.

82CardsGrad

Most people who claim that 401K's should "go away" say so because they see so many employees dump that money into their own company stock within the 401K.
It's been my experience that if you invest prudently within a 401K, meaning you diversify as much as practical, it's a great way to save. Your company match is a very nice, healthy match and it's hard to argue with getting free money at that level (5% of your own contributions is sweet).

I would definitely get out of the savings bond game! You're way too young to be sticking $3,600 into something that only nets you a 2% return!
Not sure if you have any kids Zeno? If you don't, and don't plan to, it sure looks to me like you are well on your way to creating a very comfy retirement life. Between your 401K and company Pension Plan alone, I'd say you should be very well positioned... But you've added a Roth and are still able to dump another $300 a month into bonds (I'd move out of that vehicle asap). Very nice indeed...

Zeno

Thanks, makes me feel better. My wife is in a similar retirement plan too...she doesn't make quite as much but she has a year in service on me and more invested in her 401K but she doesn't sitck as much in her Roth.

No, no kids and no plans to have any.

Still looking at other options for my bond money...I knew it wasn't the best way to make money but I wanted to do something with my money rather than let it sit.

Thanks again.

nathan

Small correction. With your TSP you're allowed to contribute $16,500 annually not just 15%.

I agree with 82 about the bonds. EE bonds are pulling down less than 1% and I bonds are pulling down 0% with the variable rate going negative due to deflation.

With FERS and your TSP you should be doing quite well when you retire.

Zeno

They changed our retirement system last year. So I have 12 yr creditable with FERS under the old system (1% I think) and when I retire will have 21 yrs creditable under the new law enforcement system (1.7%)--its still FERS though just a different designation.

We got good news recently that our journeyman level was increased from GS-11 to GS-12, thats about a $6K annual raise for me. This will help with both TSP and Retirement (my high 3) and I am sure before I retire I will occupy a positon at a greater pay grade.

I have been trying to do some research on where to stick that bond money, would opening a traditional IRA make sense? I can have both a Roth and a traditional IRA right?

I am lucky in that my job is secure in this economy and that I live in TN, where its relatively cheap to live with no state income tax.

Russ Smith

You can have multiple IRA's. When I got laid off after being acquired I couldn't keep my 401k because the company was bought out and closed the 401k. So I rolled it into an IRA, but I couldnt' combine it with my existing IRA so now I have 2. I'm debating rolling one into a Roth.

I have about 25% of one IRA in a money market and the rest in varying degrees of stock risks. My other IRA is in one of those Fidelity Targeted retirement funds, you tell them what year you figure you'll retire and they pick the best balance of funds. So far the percentages are fairly close.

Of course there's always more risk with stocks but over the long haul short of real estate it's been the best way to get good returns and of course real estate is an even bigger risk right now.

Sounds like you've got a great head start on it though and as long as you have matching 401K you should always take advantage of the free money as you are.

No state income tax is another big advantage you definitely seem to be in a very nice situation to build for retirement.

__________________
“Your expectations always exceed outside expectations. I feel like you just can’t stop working, can’t stop getting better, because I’ll be a failure in my eyes before I’m a failure in someone else’s eyes.” -- Arron Afflalo

CaptTurbo

Dump the bonds, buy CD's.

Count on SS, youll be the last generation to get it.

DWKB

No, 401k plans are not proving to be the end all be all, but they are our best options right now.

The time magazine article touched on many things, those who invested too much into their company stock was one of them, but also the increasingly exposed risk to market fluctuations as you go on later in life when you're not contributing.

__________________
"[Rock Chalk Jayhawk] is the greatest college cheer ever devised" --Teddy Roosevelt

Zeno

CDs don't pay crap...like 2%, thats barely better than the bonds. I'd like to find something better than that.

Anyone have any annuities? Or have any experience with them?

I'm even considering purchasing land as a long term investment, I just have to find the right place to buy it.

I'll be shocked if I get social security, if it happens it'll just be a bonus because as I plan ahead it is not something I count on.

mattyboy

Moving from a traditional IRA to a Roth is not the same as a rollover. You will likely have to "convert" the funds and this a taxable event.

82CardsGrad

Zeno, you're young enough and are extremely diversified with respect to your retirement savings programs, such that you absolutely should use the $$ you are currently placing into the bonds and seek higher returns - albeit with the associated higher risks.
Annuities are a vehicle you should seriously consider. Anytime you can sock away a portion of your retirement savings into something that can guarantee you a return of 5% or greater, you should jump on it. Again, particularly since you are well situated with the other forms of savings available to you...
Here's one that I know of from Prudential Financial, however I know that MassMutual and other insurance companies offer similar annuity products:

http://www.prudential.com/media/mana....pdf?siteID=25

Zeno

Thanks a lot, I appreciate that info, the little I know of annuities I've read on money.cnn.com and some other site, that prudential document really spells it out well for me. Looks like it worthwhile and if I read it correctly I can make additional deposits in the future (like when my Bonds each reach 5 yrs old and I can cash them in without penalty, I only have like 15 that are "of age" currently).

jefftheshark

Have you considered some kind of hedge against inflation (as you are aware, your gains from either CDs, annuities, and non-inflation accounted bonds could be wiped out if the government keeps the printing presses in overdrive)?

There are precious metals ETFs, TIPS, and even some companies that will allow you to hold physical gold (in their safe) within an IRA or 401k.

JTS

Zeno

ETF & TIPS? Sigh, yet another thing I have to look up, I honestly have no idea what those are. I'm a total novice.

I appreciate everyones advice...I plan to be prepared and really want to start now while I have 20 yrs to save & invest, my wife will be a contributor too, she is also a Federal Employee, between our 2 pensions, TSP's & IRA's we should be ok, but I want to be more than just OK. We want to enjoy our retirement and not worry about finances if we can help it.

Russ Smith

Yeah there's several online calculators that tell whether it's a good idea or not to do this. If I did it I would make sure the conversion was for 2010 taxes. I'm still not convinced it's actually the right move for me, some of the calculators tell me it's not, some say it is. I actually intend to ask Fidelity more about that.

But that is a good point to make, even in my situation I could not have rolled it into a Roth tax free, it would have to have been converted and taxed at that time.

__________________
“Your expectations always exceed outside expectations. I feel like you just can’t stop working, can’t stop getting better, because I’ll be a failure in my eyes before I’m a failure in someone else’s eyes.” -- Arron Afflalo