This is the twenty-fourth day in our 31-Day Money Challenge. Over 31 days we’ll publish 31 podcasts, each designed to help you move closer to financial freedom. Yesterday I interviewed Brandon Turner about real estate investing. Today I’m going to cover a number of reader comments and questions, and give you a simple tool to help you determine whether you are on track to retire.
- A simple way to determine if you are on track to retire.
- How much you need saved to replace 80% of your pre-retirement income.
- How to determine how much you should have saved throughout your career.
- What percentage of your income should you save, at a minimum, to be on track to retire.
- Why having no debt is an important retirement planning move.
- Why retiring early is a terrible goal.
- Vince Young files for chapter 11 bankruptcy
- U.S. Stocks take a drubbing on concern about corporate earnings. Dow slides 175 points. Nasdaq loses 0.6%–We discuss this headline from CNN and what to make of a 1% drop in the markets.
- Your Money Ratios: 8 Simple Tools for Financial Security at Every Stage of Life by Charles Farrell
- Capital to Income Ratio
- Savings Ratio
1. 25-40: 12%
2. 45-65: 15%
- Debt Ratio: No more than 2x mortgage to income ratio
Listener Questions & Comments
In this podcast I respond to several listener questions and comments:
Kenneth: I discuss Kenneth’s decision to invest his non-401k assets with Betterment.
Mark: “I’m 23 years old and just recently graduated college. I’ve been working going on 6 months. I have 4500 saved up since I graduated. The only debt that I have is the 25000 dollar school loan. My question is, do I need to concentrate on making extra payments on the school loan or should I start putting money up for a down payment on a house. Thanks for any advice you give. Huge fan of the podcast.”
Steven: “If you read this on your podcast, please do not read my last name. Thanks for your podcast. I’ve listened to all of them and they are very informative. I am in the military and my retirement pay will cover all my expenses with a little left over. Even though all my living expenses will be covered with my pension, every year I max out my ROTH IRA (through Fidelity) ($5500) and my non-matched ROTH TSP ($17,500). Toward the end of this year, I will open a regular taxable account with Fidelity (or maybe Vanguard) and will contribute (~$2000) per month. I am planning on only buying stock mutual funds (the Mr. Money Moustache approach). Do you know of any good reason why I should buy anything else (i.e. diversify)? If I keep up the current savings rate, I will make more (figuring a 4% withdrawal rate) in retirement than I do working. I would appreciate your thoughts.”
Brian: “I’m really enjoying listening to all your podcasts, just finished DR 028: How and Why to keep investing costs low…
Keep up the great work!
My overall ER: .13%
Here is my Asset Allocation:
34%-Vanguard Total Stock Market Admiral (Taxable)
15%-Vanguard Small-Cap Admiral (Taxable)
18%-Vanguard FTSE All-World xUS Large-Cap (Taxable)
08%-Vanguard FTSE All-World xUS Small-Cap (Taxable)
05%-Vanguard REIT Admiral & ETF (Roth/HSA)
10%-Vanguard Inter-Term Tax Exempt Muni (Taxable)
05%-Vanguard Total Bond Market (Roth)
David: “I recently stumbled upon your blog and have enjoyed the content as well as the podcasts. In particular, I appreciate your gracious demeanor which indicates wisdom beyond financial matters. Thanks for putting your work “out there” for the benefit of others.
I wanted to see if you could provide me with some advice. My wife and I currently have surplus income over expenses of $2,400 / mo. We’re about 4-5 months away from paying off our mortgage (which is actually in the form of a HE LOC). We have no other debt. Because of our growing family (5 children vs. 3br / 1.5ba house) we anticipate buying a larger house in the next 3-5 years. We would like to buy it with cash. Are there any investment vehicles you could recommend for generating a return on our “house savings” as they accumulate?
I do have a Discover Bank high interest savings account that I could put the funds into, but I’d like to generate better returns than 0.85%. In all honesty, I was kicking around the idea of putting the savings into Vanguard’s S&P 500 Index Fund. However, because of the relatively short duration, would it be unwise too take on the risk of principal loss for a better return?”
FYI: Here are a list of the top paying online savings accounts.
Joe: “Hi Rob- for asset allocation purposes, I’m looking to re-balance and add more bond funds. I’m sure others are in the same boat after the stock market run-up. However, I am concerned about the impact of rising interest rates on bonds in the future. Is it better to sit on the sidelines for now or take the plunge with a total bond fund or stick to short-term, or corporate or inflation protection bond funds in this environment? Also, how about international bonds?”
Day 25: A look at a sophisticated asset allocation tool