This week, Shane and I want to sit down and figure out how we want to allocate our retirement accounts. We have his new traditional 401k at work and we each have Roth IRAs through Vanguard. It’s important that we figure out a few things:
- Our target retirement age. Do we want to be able to use the funds at age 59.5, or later?
- How much we foresee needing in retirement.
- How much we need to invest each year to hit that target, with assumptions on our income levels and other things
- How to allocate those investments to maximize our return.
Shane had quite a bit of paperwork to mess with to roll his old Roth 401k over. It was a Roth for his deposits, but it was traditional for the company match. Different! The funds have rolled and are taking up their new residence in IRAs. We need to allocate how that money should be invested.
Since we’re both 26, we have at least 33 years before we can start making unpenalized withdrawals on our retirement accounts, but we’ll possibly let them sit tight for a few years beyond that. Hard telling. That’s more than double my lifetime away and it’s hard for me to even think of life a year from now, yet alone 33.
Still. We have to figure some of this stuff out now, while we still have a lot of years ahead. Gotta maximize that compound interest and all.
Shane does get a company match for his 401k, though it will take four years of employment there to be fully vested in that match. It’s matched up to 6% of is gross annual salary, and the match is 50% of that amount. Put another way, that’s basically like getting an extra 3% of his gross income toward his retirement account. We put in 6%, they add another 3%.
He is indeed putting 6% into that account right now. We aren’t about to turn away free money! He was automatically enrolled in 2% when he started his job, so he did have to fill out some paperwork to bump it up.
We’ll still want to contribute more of our own funds toward our Roth IRAs, because I don’t think 9% will be quite enough.
If I can offer any take-away point in this post: Do something about your retirement planning. If you have a 401k available to you at work, be certain you are contributing. If there is a match, do what you can to get the full match, at minimum. Beyond that, consider opening an IRA, or just bumping up your 401k contributions if you don’t want to deal with that right now. Make it a point to “deal with it” in the near future, though!
Saving for retirement can be an overwhelming thing. I’m sorta overwhelmed, so I’m taking it slowly. But I’m tackling it. I think that’s the most important thing — don’t ignore it, because the longer you wait, the less money you’ll have to jingle in your pockets in retirement.
Older Kacie will thank 26yo Kacie for dealing with this now.