SkillBuilderDad

Disclaimer: We here at skillbuilderdad.com are neither financial advisors nor professionals. This article expresses the opinions from the personnel at skillbuilderdad.com, and is for inspirational and educational purposes only. The investment decisions you choose to make are 100% YOUR responsibility. Investing of any kind involves risk. It is recommend that you consult a financial advisor before making any trades or investments.

How much do I start with?

The simple answer is: Zero dollars. If you do not have any money in a 401(k), don’t beat yourself up. For the first four years after college, I did not put money into a 401(k) either. Why, you might ask? It was all about the match. Since my employer did not contribute to the account with my contributions, I decided it was best to opt out of the plan, and save money in my own account. I opened up a brokerage account with Scottrade at the time (now TD Ameritrade), and purchased stocks in companies instead.

When I started working for a different company after four years, things changed. My new employer offered a match, so I decided to sign up and contribute enough money to obtain the match. After all, it is free money right? Here I was, 4-years into my professional career and I had zero dollars in a 401(k) account. Since the match only required about 5% of my income in order to obtain the full match, I continued saving any extra amount of money in my (after-tax) brokerage account.

There are people such as Dave Ramsey that recommend saving 15% in retirement funds, with the first portion going to the match in the 401(k) and the remainder into a Roth IRA. Dave has been teaching his methods for many years, and is a professional at what he does. I still tune into his podcasts from time to time, picking up nuggets of knowledge from him and his team.

How much should I plan to save?

There are many schools of thought on this. The most common I have heard is the 4% rule. If we divide our yearly expenses by 4% (or .04), then this is how much we will need to retire comfortably. Hypothetical example if If I expect my yearly expenses when I retire to be $60,000 which equates to $5,000/month:

$60,000/.04=$1,500,000

The 4% comes from some financial guru(s) stating that one can make 4% on their money every year. If I had $1.5 million dollars and was able to make a 4% return, that would pay my $60,000 yearly “salary” I needed per year. Of course this does not account for inflation, family health issues, wars, corporate 401(k) clawbacks, acts of God, etc. Many of us millennials want to live the Financial Independence Retire Early (FIRE) lifestyle where we make a million or two, then we can sit on our couches and watch Netflix and chill. That does not sound like my cup of coffee, so for now I’ll keep working, saving, investing, loving on family, helping others, and overall living the good life that our Creator has intended for us.

“For what is your life? It is even a vapor that appeareth for a little time, and afterward vanisheth away.” James 4:14 (Geneva 1599)