Hi everyone.
Growing up, I never had a job that would allow me enough money to save for retirement. I’ve always either worked jobs without benefits or freelanced. Now that I own my own business and am finally starting to earn a decent income, I’ve been putting away for retirement. I’m worried that I am far behind.
Currently, I do this:
– Max out my Roth IRA. Betterment’s goal forecaster says the average outcome by 2058 will be
– Invest $600 monthly with Betterment using their aggressive/high risk tolerance portfolio. Betterment’s goal forecaster says the average outcome by 2058 will be $998,740.
Should I be doing more? I’m attending law school within the next two years and will prioritize joining a firm with a 401(k).
Does Betterment charge a fee for their service? If so, you might consider going with a brokerage like Fidelity and contributing to a taxable investment account that does not charge fees.
As you are self employed, you can open a Solo 401k.
I would stuff it with as much as possible with Traditional funds.
I would convert traditional to Roth during my law school years when I am having minimal/no income.
If you own your own company (and are profitable) could look into a Solo 401k. That would allow you to save substantially more money than the 6k annual limit in a Roth IRA (continue to do that as well).
Better late than never. There are plenty of people much older that haven’t even started so you aren’t in a horrible position. Make it consistent and automatic and you’ll be fine.
That depends mostly on your spending. In general you want to have around 25x your annual spending ($40k spending = $1 mill retirement goal) upon retirement, though this number is for early retirees. If you retire normally at around 65, you’ll need less money due to Social Security and shorter length of retirement.
Use the networthify calculator below to see how long it’ll take for you to reach your retirement goal at your current level income, spending, and saving. Adjust your plans accordingly. Since you’re starting late, you likely need a higher savings rate.
https://networthify.com/calculator/earlyretirement?income=50000&initialBalance=0&expenses=20000&annualPct=5&withdrawalRate=4
I too never really know where I stand compared to others. But then I remember, others are NOT funding my retirement.
I generally max my 401k, IRA and save for emergency fund and then another 5-7% of annual earnings.
Start small and each time you get an increase, allocate more to the savings and NOT the spending.
If you’re comfortable where you’re at now – don’t go to law school unless you are getting a full ride or are attending a top 10/14 school. Or you really want to be a public defender making $45k or something.
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Don’t believe what investment companies tell you (like Betterment). They have a financial motive to get ahold of your money.
Law firms typically do not offer an employer match on 401ks until you make partner (big if) that can take like 7-10 years. You often get tax benefits from the 401k but not the match.
Good luck!
Just remember that you can only put $6k a year in. So what does betterment say with lowering that monthly contribution to $500?
I think investing in yourself (law school) is a good move. 32 is missing out on some good growth years but better late than never, so definitely keep investing in the market as well.
There is definately a lot to know about this issue. I really like all of the points you have
made.