My Pocket Change

Amidst all the constant talk about the housing bubble deflating these days, I’ve been asking myself the following question:  is it easier or harder for my generation to buy a house than my parents’ generation?  The sneak peak answer is yes, a lot harder!  To answer this question, I found some historical average housing price data for the last 50 years.  Let’s see what secrets are revealed.  Continue Reading »

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I recently finished posting the three steps in my path to retirement where we determine how much money we need to put away each month.  Hopefully the steps aren’t too hard to follow, but I thought running a few examples would be helpful and also allow me to highlight some of the more interesting issues.

I am going to explore two very different scenarios.  First, we will look at a young professional just starting his (or her) career.  In a later post, we will also look at someone near the opposite end the spectrum.  Let’s take someone in their 50s who needs to reevaluate his (or her…) retirement planning.   Continue Reading »

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It’s time for the final step in our retirement planning. With a little more math, we can answer:

How much money do I need to put away each month in order to reach my nest egg?

To briefly recap, we’ve been using a real value approach to model the first two steps required to determine our necessary monthly retirement contributions.  First, we estimated how much money we’d need to provide ourselves annually while in our golden years.  Second, we determined what size nest egg would be necessary to give us that money.  In this third and final step, we’ll calculate how much money we’ll need to put away each month to reach that desired nest egg.   Continue Reading »

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Onwards to step two of our retirement planning (warning, we’ll need some math):

How big do I need to make my nest egg?

In part one, we found the amount of real valued money we’d need to supply to ourselves annually during our retirement years.  This effectively is the amount of money we’ll need to remove from our nest egg (and put into our checking account) each year so that we can live the lifestyle we wish to live.  This money along with social security, pensions, rental incomes, and other secondary incomes will make up our total income during retirement.

With that number, we can now figure out exactly how much real valued money we’d need in our nest egg in order to retire.  To be clear, this is the total amount of money we’d like in our retirement accounts entering into retirement.  There are two methods to do this 1) living off interest and 2) depleting your funds when you pass away.     Continue Reading »

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It seems like most people aren’t getting overly excited about this last week’s market drop, which is good.  To be honest, this is really the first significant drop I’ve experienced first hand.  I’ve had 401K/IRA accounts for a while, but always just let those grow in the background.  It was right after last May’s drop that I actually bought my shares outside a retirement account.  I bought shares of Fidelity’s total market index fund (FSTMX).  And as you probably know, the second half of last year did pretty darn well!  So how did I react to this recent drop?

Well, I’ve gotten overly excited (ut oh)… and I’m going to act on it (ut oh!), but it’s not what you think!  I’m going to buy more.  I remember some study somewhere (we’ve all heard that one…) saying this is a good strategy, if you can stomach it.  It goes back to the counter-intuitive strategy of “buying losers” that makes rebalancing work so well.  Buy when market takes a tumble, and just hold when it takes a big gain.

Anyway, that’s my plan.  Is the right thing to do?  Come on, we know we can’t answer that question.  Only time will tell!

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Here’s the first step in our retirement plan:

How much money do I want per year while in retirement? 

When you retire, how much real valued annual income would you like?  Ideally, I bet we’ll all answer… a million dollars!  And if all goes according to plan, maybe we’ll all get there!  But in the mean time, here we are hoping to establish a baseline plan for retirement — a minimum, if you will.  Back to the question, how much?

One way to answer this question is to simply come up with what seems like a reasonable number.  $40k?  $100k?  This is obviously a highly subjective question.  But let’s tackle the question with a little more rigor.   Continue Reading »

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