Smart Couples: Retirement Basket

As part of our reading of Smart Couples Finish Rich, my wife and I discussed our retirement savings strategy. Not rocket science, but I first gave my wife an overview of what we are doing today:
1) Max out my 401k contributions (currently $15,500 for 2008)
2) Regular contributions into each of our Roth IRAs ($500/mo in 2007, planning on upping to $800/mo in 2008)
3) Max out our Roth IRAs at some point before the April 15th deadline
4) Small SEP IRA contribution as much as allowed

My wife left her job earlier this year before we were married and had never contributed to a 401(k) or 403(b) (she was contributing to a state retirement plan). I brought this up as I believe it's critical now, before we start a family, to sock away as much for retirement. I feel that by putting away the money now, we will need to save less for core retirement once we have a family and will have more flexibility to save for a vacation home, early retirement, emergencies, etc in the future.

We discussed that when we get back to the US in mid 2008, my wife is planning on teaching again for ~1 year or so before we start a family. I brought up that this would be a great way for us to sock away significantly more for retirement as we could put as much of her 1 year salary away in a 401(k) as allowed by her employer - perhaps as much as the maximum for both 2007-2008. That would be at least an extra $30,000 we could possibly sock away. Could be tight, but managable.

My wife was receptive and agreed that she should start funding a 401(k), although her preference would be at a more moderate 10% at least initially. This is certainly something we will talk about in more detail once she starts working.

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Comments (7)

Hi,
I am really curious and amazed that bringing home less than 5k, you can contribute so much money and still afford to live. Do you think you could give a breakdown of roughly what you make and how your bills add up? Like do you have a 1300mo mortgage etc? Do you eat out often? Electricity? I am really struggling on 1 income to do what you are doing and I'm really not sure how to do it.
Thanks for anything you can advise me on.
Rick

Posted by Rick | January 16, 2008 9:46 PM

Just wanted to say that I think that it is AWESOME that you guys are reading this book together...
My wife and I have monthly "business meetings" to discuss where we are going (and our goals)...
We find that these meetings help us to bond and help us to get prepared for our future...
Rock On,
NCN

Posted by NCN | January 16, 2008 10:23 PM

Interesting...for 2008 - if reading correctly - contributions are 15.5k + 19.2k = ~35k. Assuming you make somewhere around 90k - factor in a rough 30% tax rate - brings you down to about 60k...which means you are sending over half of post tax income to IRAs. How is this possible? What about other bills? Is this due to being on the IA and not having any other additional monthly expenses? Maxing out those corporate allocations? Or as some would put it "working the system"...

Also, curious how you are able to participate in an SEP IRA? Aren't those for small businesses?

Posted by Anonymous | January 17, 2008 12:20 AM

I make a little less than $100k. My wife worked for the 1st half of the year as a school teacher and we just got married in October. Our monthly expenses are significantly lower because we are on assignment -- food and gas expenses have basically gone to zero (employer provided) saving us about $800-$1,000/mo.

Posted by 2million | January 17, 2008 6:15 PM

I think 90k is probably a bit low for how much he's making ;-)

Posted by Anonymous | January 17, 2008 6:38 PM

I just want to throw out there, when we ask about your private and personal finances (household bills, how your add up) it's honestly not bc we want to be snooping. (have no clue who you are in the rw anyway). It's just that it may seem pretty easy to you but as the other poster mentioned, I don't understand "how you do it". I'm seriously struggling on 80k a year for my family. I have no credit card debt at all. 1 carpmt and 1 school payment, that's it. I am within 200 dollars every month...and thats without saving :( So just trying to learn from you and hoping what you provide us with can help us. Do you have NO cable or no eating out normally? (not talking about the new overseas assignment per se).

Posted by Rick | January 20, 2008 7:27 PM

Rick, No problem -- thats the point of this whole blog really. I love interest and discussion on how to get ahead and if you can get some ideas from reading I get a lot of satisfaction from that.

Not that I have any personal experience in managing family finances (with kids) but I can easily see that it can be a challenge on $80k/yr. Sounds like a decent income but its really dependent on a couple things such as how much your housing costs and other basic needs are.

My wife and I are currently thinking about our future and my wife's desire to be a stay at home mom. Looking at my income and our goal of being financially free hopefully in the next 10-14yrs its going to be a challenge. We are trying to save an above average down payment so we can reduce our monthly housing costs and maximize our monthly free cash. Stay tuned to see if we can pull it off.

Posted by 2million | January 20, 2008 9:18 PM