For Flagpole wrote:
Investment Help
Age 35
Salary 60,000
Credit Card Debt 0
Credit Score Very good
Rent 450/utilities included
Savings in Bank 50,000
Retirement 25,000 6% and 6 % matched
Car Payment 0 Payed cash for new car, car is 2007
College Debt 0
Goals: To buy a House or Condo and play catch up on retirement
Any advice would be appreciated
1) Salary sounds good, but if you're in a high cost of living area it might not be -- though the rent points at NOT a high cost of living area.
2) Savings in Bank -- $50,000. If you actually mean a bank account gaining little or no interest, you've got to move that. Since you are saving up to buy a house or condo, keep it liquid. I would put it in a Money Market Account, and I would do it with Vanguard (www.vanguard.com).
3) Retirement. This means you have $25,000 in there now and that you put in 6% of your own salary and your company matches 6% (100% or just 50 cents on the dollar)? If 100% then you have $7,200 a year going toward retirement. That equals 12%. Since you are saving up for a home, that's enough for now.
4) You have NO DEBT. That is where you want to be. Baby that new car of yours and drive it for at least 10 years.
Math time:
With $25,000 invested now, and $7,200 a year additional starting when you are 36 and ending at age 60 (this means you get NO RAISES which likely won't happen), that ends up being $818,223.46. Take 5% of that initially and that's $40,911.17 a year. That's probably a LITTLE low for continuing your lifestyle. You want to have about 80% of what you were making when you retire MINIMUM.
My suggestions:
1) Take $40,000 and use it as a down payment on a house and keep $10,000 in an emergency fund.
2) When you buy a home or condo, don't just get whatever the lender says you will qualify for. Plan to spend no more 25% of your TAKEHOME pay on the mortgage and taxes and insurance, and buy a house that fits that.
3) Once you are in the house for a year, then assess your income and investing and try to up your 6% contribution to be even more. Nice that you have that 6% match, but if you can get YOUR contribution up to at least 10% that would be ideal. Do that, and then with raises you will have over a million dollars when you hit 60. If you start putting 10% of your own money away when you're 40, with NO raises ever, you will now have $952,058.34 at age 60 ($47,602.91). Want more than a million and either get some raises (which you will) or work just one more year ($1,048,207.59 at age 61), or put in more than 10%, OR do 10% before age 40 -- or a combination of all of that.
You are in a good starting position. Lots of people are where you are and decide to just spend all they make. If you don't do that you will have some decent retirement income beginning at age 60. You will also get Social Security beginning at age 62 if you want, and that will help.
You won't be super rich with the plan laid out above, but you will not be living in poverty. You are way better off right now at age 35 than most Americans are at age 45 (most with only $25,000 in savings and $5,000 or more in credit card debt as well as car debt, etc.