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Elle Martinez

Setting Up Your Retirement with the Right Tools

happy couple retirement

This post is a part of #RetireeNextDoor movement, where bloggers are sharing stories and advice from those who have successfully retired. If you enjoy today’s post, please check out the others at Retiree Next Door.

Retirement can seem intimidating to some couples as the choices seem vast. Today I want to review some retirement tools you can use to build your portfolio and I’ll interview Doug Nord, a successful retiree, on how he create a plan that worked for him. This post is designed to get you off just planning for your retirement and into building the retirement plan you two have always wanted.

Retirement Tools to Build Your Portfolio

One of the biggest advantage of getting your retirement started is the amount of choices you have. There are great tax advantaged accounts like 401(k)s and IRAs that give you a chance to stash and grow your money. However, which tools are right for you?

Like much in finances, it depends on your goals and investment styles. While I can’t give you absolute rules for retirement, I can offer information that has helped others make the transition into retirement. MoneyTips recently ran a survey that examined how sucessful retirees reach their goals. One of the questions looked into the retirement tools they used and here’s what they found:
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  • Traditional IRA
  • 401(k)
  • Defined Benefit Plan
  • Roth IRA
  • Tax Sheltered Annuities
  • SEP IRA
  • Rental Properties
  • 403(b)
  • Other
  • Health Savings Account

As you may have noticed, there are quite a bit of different tools to use when saving and investing for retirement. If you’re not familiar with the tools themselves, I’ve included links to more detailed articles on them.

Where Should I Start for Retirement?

Assuming that you’ve gotten out of high interest debt, now’s the time to contribute and grow your money.  As a general rule of thumb, you want to start with the account that will give you the biggest bang for your money. As time passes that advantage snowballs in your favor, another reason for you to start now rather than later.

I’m going to use as an example someone who  works for a company that offers a 401(k) and whose income also allows them to have a Roth IRA. Both accounts can be incredibly powerful when used correctly, but with your contributions limited for now, you want to optimize them. Which do you start off with? Here’s what I would do and why:

  • 401(k) up to the employer’s match
  • Roth IRA up to the year contribution limit
  • Rest into 401(k)

That 401(k) offers you some free money that over time will help you get to your retirement goal quicker. Once you have that match, though, the freedom Roth IRAs and the tax free withdrawals when you retire can offer you is something you can use to your long term benefit. If your employer doesn’t offer a match, then you may want to contribute your money to the Roth IRA’s maximum and then any additional to your 401(k).

If you have a unique situation or you want to bounce ideas with a financial professional, I’d suggest finding a a fee-only, independent financial advisor through an organization such as The National Association of Personal Financial Advisors (NAPFA) to help you come up with a practical and affordable  game-plan.

Who Should I Invest With?

The good news is that there are plenty of options when it comes to opening an IRA. Banks, brokerages, and credit unions typically offer them as a part of their services. Some charge a flat fee for the year, some take a fee for each transaction made, others can take a percentage, and some do all of this.

Our personal choices for our Roth IRAs have been Vanguard and Betterment. Both offer low cost index funds that allows us to passive invest our money and keep expenses much lower than with other providers. It’s an investment strategy that we have looked into and fit our financial philosophy.

Vanguard is known for having great customer service and being a valuable resource when it comes to investing.  I currently use them for my Roth IRA and I’ve been quite happy. Being with Vanguard means I can buy their ETFs free. Since I already buy these it would save me some money. If you’re interested, you can sign up for a new account at Vanguard.

Betterment fits my husband’s investment style -his contributions are automatically invested and re-allocated to make sure he stays on target to the growth plan selected. If you’re interested, you can sign up for a new account at Betterment here.

I definitely like Vanguard and Betterment as places to invest your IRA contributions. They are both some great no hassle, low cost options that make it simple to invest in your future.

Managing All Your Accounts Easily

Now that you have a plan and you’ve sign-up for your contributions, your job is making sure your investments are working for you. If you’re looking for a way to track all of your bank accounts and watch your retirement portfolios, Personal Capital offers a free portfolio check-up.

To me, Personal Capital is like Mint (easy to set up and use), but on steroids (more features).  I believe Mint is more suited for general purposes and Personal Capital is focused on investments and growing your portfolio.  Personal Capital does have cash flow report and there are some wonderfully useful tools that can help you optimize your investments such as a 401(k) fee analyzer and asset allocation examiner.

Personal-Capital-Portfolio-Allocation

How to Start Your Retirement and Finish Early

I’m also excited to share how couples can succeed together with their financial goals. Today, I’m proud to share Doug Nordman’s story about retiring early, what tools did they use to invest, and what lessons has he learned and wants to pass on to his daughter and others?

Doug  was kind enough to talk to me this week about how he successfully retired at 41 after serving 20 years in the U.S. Navy. Now he’s helping others plan for early retirement through his blog The Military Guide and book The Military Guide To Financial Independence & Early Retirement (All royalties are donated to military charities including Wounded Warrior).

Doug, when did you start investing for retirement? What retirement accounts did you use and why?

Doug is enjoying his retirement

Doug is enjoying his retirement

When I finished college and started my Navy service, I had very little free time.  I was frugal and kept a tight budget, but I had no idea what to do with the money.  I eventually stumbled across a nice young broker from Paine Webber (whose tag line in 1982 was “Thank You, Paine Webber”) and ended up in a nice bond fund.  Interest rates had just hit a peak so that turned out to be a sensible recommendation, but I had no idea what I was doing and I was paying hefty fees.  This went on for four years until I finished my sea duty, married, and started shore duty.

(Note: The Thrift Savings Plan had been just a recent development, so when Doug retired from the service he only had accrued about 5 months of savings. His wife, who also served, accumulated about 6 years. )

When my spouse and I consolidated our finances in 1986, she had equity mutual funds.  (She’d learned much more about investing from her parents than I had from mine.)  My Dad suggested a copy of Business Week’s annual mutual funds guide and said that he’d been happy with Fidelity.

After a few weeks of phone calls and mailed forms, we were finally with Fidelity and 20th Century (they later became American Century). Back then you paid a 2% sales charge to buy Fidelity mutual funds– and if it was a popular fund then you paid 3%.  But they had great customer service, they were an easy answer, and I had other interests.  Every two weeks I’d write out a few checks and deposit slips, stamp the envelopes, and drop them in the mail.

I’m drawing a military pension now, which includes an annual cost of living adjustment.  We’re still frugal and that pension covers half of our expenses.  We acquired a rental property along the way, and that finally has cash flow.  Because those two assets cover the majority of our spending, the rest of our savings is aggressively invested in equities– over 90%.  (The rest is in a money market and CDs to cover two years of spending for bear markets.)

We have exchange-traded funds in domestic dividend stocks, international dividend stocks, and small-cap value stocks.  We also have a portion of our portfolio in Berkshire Hathaway “B” shares.  There are no more sales charges, of course, and our overall portfolio expense ratio is about 0.23%.

What were some of your biggest challenges? How did you overcome them?

My biggest obstacle back then was ignorance– I’d never been raised with investing skills and I didn’t really take the time to learn them until the 1990s.  If I was starting over today then I’d read about investing from books like the Boglehead Guides or Rick Ferri or William Bernstein.

As parents, what knowledge have you passed to your daughter?

Our daughter just finished college in May and started her own Navy career.  She has no free time either but as you can imagine, she’s had quite a bit of investing education during her life.  She’s turned out to be at least as frugal as her parents, and she keeps a budget too.  However she started out with the military’s Thrift Savings Plan, which has expenses as low as 0.02% (lower than Vanguard).
She maximizes her contributions to that and then maximizes her contributions to her Roth IRA.  That’s invested in Fidelity’s Spartan index funds– the U.S. extended market index, an international fund, and a dividend fund.  She’s investing even more of her money in taxable accounts with Fidelity in the same funds.  She’s set up all of this online and it’s automatically deducted from her pay (and her checking account).
She knows that if she wants to be financially independent in her 40s then she needs to save at least 40% of her gross pay for 15-20 years.  She’s set up her budget, chosen her asset allocation in passive index funds, and put all of the decisions in autopilot.
She knows that every year she’ll try to maximize her TSP and IRA contributions and then do the rest of her savings in taxable accounts.  Her biggest decisions will be remembering to boost her contributions whenever she gets a pay raise, and to occasionally rebalance.
(Doug and I wholeheartedly agree that automating your contributions makes things so much easier and can help you stay on track for your retirement.)
When she becomes part of a couple, she already understands the basic investing concepts.  If she wants more then I’d point her toward the books & websites.  We’d spend more of our time talking about investor behavioral psychology, too.  But I think most of our time will be spent showing her (them) how to sort through all the information to arrive at a few choices, make a decision, and automate it.

Thoughts on Retiring as a Couple

I hope Doug’s story and tips help you two to create a retirement plan that you want. As Doug showed, you don’t have to have a perfect building to finish early. You just have to get started and be willing to learn as you go.

I’d love to hear about your progress so far, whether you’re new or a long time reader. How far along are the two of you with retirement?

How to Build Up Your Debt Payments

build debt payments with snowflakes

Big wins are important and for most people it’s what gets them motivated. I highly recommend that you start off with the big stuff because I know from personal experience how seeing that cash in your account pumps you up.

Your heard earned money is staying with you, not going towards some nebulous cloud of bills. Imagine when you are debt free and all the payments you’re making now will instead be used to grow your savings, pay for your vacations, build your retirement portfolio, or even be used to fund the business you’ve always wanted to start.

Becoming debt free can help achieve those dreams.

Paying Off Debt Faster with Snowflakes

I think after the initial thrill of starting the debt free journey and making some big wins, couples naturally find themselves at a plateau where they ask ‘What now?’ when reviewing their budget. They have cut out needless luxuries that weren’t making them significantly happier and they negotiated with their cable, insurance, and credit card companies. All the low hanging fruit has been picked and while they have made some great progress with their payments, it still seems like being debt free is still years away.

Welcome to the solution of debt snowflakes.

What are Debt Snowflakes?

Debt snowflakes are smaller, more frequent amounts of money that can be used to whittle down your debt. That money can grow your debt snowball so you be debt free quicker.

The big take away with the snowflakes is that no amount is too small to include. You have to be willing to use that extra $5, $10 towards your debt.

Debt snowflakes have the power to speed up your debt snowball or avalanche not because of their size individually (I consider a snowflake $20 or less), but because of what they represent – the ability to adjust your money habits in small yet meaningful ways.

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Pick and Choose Your Adventure

I think sometimes the hardest part with snowflakes is getting started. One big tip I can give you is look at your own talents, gifts, and interests and see if there is a way for the two of you to enjoy that once more. Sometimes we let our paycheck job take up so much our energy and thoughts we lose sights of others ways to earn and save money.

Spend Less

Cutting back doesn’t mean depriving yourself of fun. You two can find ways to enjoy your time together without forking over a lot of money.

  • Cook more at home. Spruce up your culinary skills and invite friends over for nights in at the house.
  • Know your town. Become local experts and discover some of the free and low cost events in your area such as concerts and festivals.
  • Play again. You don’t have to be the next tennis great to enjoy a good game. Pick up a racket or whatever sport you love and start a weekly get together with friends. You’ll have a great time and get in shape.

Earn More

For some couples, earning more money is both more appealing and practical than trimming their expenses. Here are a few ways you two can pump up your income.

  • Start a side business. Many of us have talents beyond what we receive a paycheck for. Set aside a few hours each week and handle a project or a client for money.
  • Quick jobs: Take care of household errands for others by signing up and using sites like TaskRabbit. You can also wor from home and use your talents with Fiverr.
  • Sell your old tech. Upgraded your phone or tablet? Consider using eBay or Craigslist to sell your old stuff.
  • Start a blog. I have to include this one :) You may not become rich with this one, but sharing your expertise can help you earn some money on the side while helping others.

Here’s the kicker: Only pick the ones you’re interested in. Hate couponing? Then don’t clip. Worried about selling your stuff on Craigslist, then skip it. You decide what works for the both of you.

Automate Your Payments

Don’t forget that your snowflakes only help you when you put them to use. Go ahead and set up transfers so your extra money gets directed towards the debt you’re attacking. If you decide to do regular gigs on side side for sites like TaskRabbit and Fiverr, go ahead and start automating a monthly deposit. It’ll save you time and help you become debt free that much faster.

Thoughts on Building

I hope these suggestions helps you brainstorm your debt free plan. I’d love to hear from you. What tips do you have on bumping up your debt payments?

Photo Credit

Couple Money’s 5th Anniversary Giveaway

nexus-7-tablet

Running Couple Money has been a fantastic ride so far. In the past five years since I began this site, so much has happened both online and offline, including:

I hope we get to share more in the next few years. One of my favorites parts about the site is publishing a new post and hearing from you, both in the comments and emails. You have motivated me to continue and I’ve learned quite a bit on how to optimize our own finances. Thank you so much much for giving your time; I really appreciate it!

Learning and Growing with Couple Money

I started writing here to have a place to discuss working together to build their finances. There are a lot of stories out there about how money can divide couples so I wanted a place to encourage couples to use money to bring them together and how they can reach their goals.

If you look at some of my first posts, there  had some good advice, but I soon realized that managing money is more than just the numbers. As went through several changes and as you shared your stories, my posts started to reflect what I was learning – that open and honest communication was vital, but it can be tricky for those starting out.

When Couple Money celebrated its first year, I hosted a giveaway and it’s become a tradition.  I wanted to make sure this year’s was bigger and better for the community.

5th Anniversary Cash and Tablet Giveaway

To prepare for this year, I asked readers like you to give me their thoughts on what prizes they’d like to see for the giveaway. It was close, but the majority asked to have a cash prize and so for the fifth anniversary, I’m giving away $250 (through Paypal) and a tablet!

One of my favorite tablets is the Nexus 7 so I’m giving away one! For those not familiar with the Nexus 7, here are some features:

  • Vibrant 1080p HD: You can read text that’s sharper than the printed page, see images more vivid than the highest quality photo magazine, and watch videos come to life.
  • Lightweight and Mobile: At just 0.64lbs (290g), the all-new Nexus 7 is light enough to take anywhere you need to go.
  • Long Battery Life: With up to 9 hours of HD video playback and 10 hours of web browsing or e-reading.

I know that some of you are looking for ways to expand your income with a paying hobby or side business so I hope you can use the tablet to stay on top of that.

How to Enter the Couple Money Giveaway

If you’re currently a subscriber to the Couple Money newsletter, then you already received an entry for both prizes. Thank you for your support!

If you haven’t signed up, please join the community and subscribe  Couple Money’s Newsletter. You can decide if you want to get posts as soon as they’re published or you can get the weekly edition. It’s an easy way to receive  free tips on cutting expenses, building your net worth, and get free goodies through out the year.

Cash and Tablet

The cash prize is only for newsletter subscribers. I write here for you as much as for us and I know personally that it is a commitment to keep up with the posts, so I want to have a specific prize for community members. I hope you use the money to take care some of the goals we talk about here on Couple Money – paying down debt, saving, starting a side business, or investing. How you use the money is completely up to you, so just have fun.

The tablet is a more wider contest. Besides newsletter subscribers receiving an entry, there are several ways you can  boost your chances of winning it I love to share what money topics matter to you the most, so I thought the tablet entries can be a handy way to have some fun with the contest. All you have to do is:

  • Follow me on Twitter and send a tweet out with your favorite post on Couple Money
  • Become a Couple Money Fan on Facebook and share your favorite Couple Money post with your friends
  • Pin your favorite Couple Money post on Pinterest

You receive one entry for following Couple Money on each of the sites. For every tweet and share, you also receive get a entry (once per day). Please use the Rafflecopter widget below so I can track all of your entries (and I can contact the winners quickly).

a Rafflecopter giveaway

Contest Rules

I hate having disclaimers and rules, so I tried to keep it simple with this giveaway. Please keep in mind:

  • You need to sign up with Couple Money’s Newsletter to be entered for the giveaway.
  • You must be at least 18 years old to enter.
  • Only US and Canada residents are able to win.
  • Cash prize ($250 USD) will be distributed through Paypal only. If the tablet winner is from Canada, I will send the value of the Nexus 7 ($229 USD) through Paypal.
  • Use the Rafflecopter widget on this page to track your entries.
  • Read and follow the instructions carefully. Incomplete entries will be disqualified.

The contest ends Saturday October 4, 2014; no entries will be accepted afterwards. I’ll be drawing the winners on Monday October 6, 2014. The winners have 48 hours to contact me so I can have their prize sent to them.

Thank you again for being a reader and member of the community!

Photo Credit: Google

Which Debt Payoff Method Is Right for You?

money and scrabble

The Pay off Your Debt Faster continues with the next step – figuring out the best debt payoff method as couple. By now you two have a clear idea of how much debt you’re in (and how you got there) and you two have read up on the basics of paying off debt. Now it’s time to make a choice – decide on how you’re going to pay debt and get started right away.

Getting Rid of Debt: Numbers vs Emotions

Last week I mentioned that most debt pay off method boil down to arranging your debts and either attacking them by  their interest rate or by debt amount. While very similar in appearance – you’re tackling debts one by one and building up your payments as you plow through them – there is a different reasoning behind them and that can make all the difference between your success or failure.

With the debt avalanche, you are interested in paying off your debt as fast as possible. You’re motivated by the numbers and are determined to make sure that your lenders don’t a penny extra from you than necessary.

How to Pay off Debt Faster: Finding the Best Strategy for You http://ctt.ec/16ICs+ @Elle_CM #money #yakezie

The debt snowball offers a behaviorally motivating set up as you get wins quicker towards the beginning. As each debt fall off your list, you two build momentum to tackle the next debt. You’re more concerned with crossing the finishing line rather than the speed in which you get there. Being debt free is a goal you can’t afford to miss and you know that personal finance is more than just numbers with the two of you.

Which Time-Frame Works for You Two?

I believe for many couples one of the big factors in deciding what works for them is how quickly they can get out of debt.  That means looking at both methods head to head and see the numbers and time-frame.

There are several ways you can do this; for me I love using spreadsheets. If you feel the same way, Vertex has an awesome debt snowball spreadsheet template that you can use as is or modify for your own plans. You simply plug in the numbers and you can easily see how fast your debt can be destroyed.

For those inclined towards a higher tech solution, you can use Mint, Quicken, or ReadyForZero. ReadyforZero and Mint are free to use and can help you get a good idea of how to pay down your debts.

What Fits Your Financial Personality?

The other huge factor in deciding what method to use is how closely aligned the process is to your own financial personality. I hope the two of you want to reach your goals and to do so, it’s important that you work with a plan that is sustainable.

Just starting on your journey and not sure what your financial personality is? Then start by looking at how you acquired your debt. Has this debt slowly accumulated, perhaps as a result of lifestyle inflation through the years? Or have you been spending beyond your means for various reasons? Depending on your answers, you may find yourself gravitating towards the debt avalanche or snowball.

Get Started on Paying Down Debt Faster

It’s now time to leave the talk and get ready to walk. If you haven’t already, go ahead and automate all of your payments. You can bypass a lot of mistakes and relapses if you automate your credit card payments with online bill pay. Most banks and credit unions offer this feature for free. (If your bank doesn’t then it’s time to make the switch to a better one.)

Get the minimum payments set up for the secondary debts and put the maximum you can towards the first debt on your list. Give yourself a small boost and call up your credit card company and see if you can lower your interest rate that works for you and your family and get it in writing.

Switching from Debt Avalanche to Snowball

Don’t feel bad if you decide to change mid game. In fact, if you two feel like switching methods would be a better fit than go for it now rather than later.That actually happened to me when I was engaged and determined to be free of credit card debt before I got married. Looking at the numbers, I went with paying down based on interest rate.

However I soon found that it lacked the motivating wins of the debt snowball so I shifted gears and went by balance. It worked for me and I was happy to get rid of the credit card debt and that’s the point – getting OUT of debt. Don’t let anyone make you feel bad that it took a little bit longer to reach your goal, just celebrate that the fact that you’re debt free. That’s something to be proud of both from the finances, but also as a personal accomplishment as a couple.

Thoughts on Getting Rid of Debt Faster

For those starting their debt free journey, I hope the two of you find a system that works for both of you. Next in the series, I’ll be share ways you two can pump up your debt debt payments so you can be debt free faster. For couples who have paid off their debts and are working hard at it now, could you share your personal methods?

Photo Credit: 401K

Managing Your Family’s Finances as CEO

Julie The Family CEO

As a member of the personal finance community, I’m amazed at how many people are a part of it. Unfortunately that often means that I can’t always keep up with everyone. It’s a shame because there are some wonderful bloggers with their stories and advice on handling finances responsibly and with fun.

To counteract that and get the word out on other sites, I’m interviewing bloggers in the community. So happy Julie from The Family CEO shared her story this week!

Since you’ve hired yourself years ago as your family’s CEO, what have been some of your favorite successes? What lessons have you learned along the way?

We really changed the way we looked at debt and that resulted in two big successes: 1. We paid off all debt except for the mortgage and one car payment. 2. We put our oldest through college using cash and are hoping to do the same for our youngest, who started college last month.

We’ve learned that little things really do make a big difference. And it’s not so much about deprivation as it is about choices. When you approach things that way it’s much more liberating. We skimp on the things we don’t care as much about so that we can spend on the things that are important to us.

Besides discussing family finances on your site, you also cover cooking, travel, and organizing. Have you noticed any parallels between these topics?

Definitely with the organizing or, more specifically, simplifying. Decluttering is a great tool to see what you’ve been spending money on in the past that ended up in a drawer or box in the basement or garage. You see what you really don’t value and you tend to quit spending on that. I did, anyway.

For instance I really, really wanted one of those steam mops. The commercials made them look so appealing. One of my best friends told me not to do it; that it wouldn’t get used. I did it anyway and guess what needs to go with my next decluttering effort? So I still slip up at times but I spend way differently.

You’ve mentioned hating to follow budgets, a sentiment that I’ve heard from others. How does your family manage its money?

I do hate to follow budgets. I love making them (I’m a numbers nerd) but I hate following them.

We stumbled on o a strategy called found money, where we take little bits of money and give them a job to do. For instance, anything extra that comes in to our bank account or wallets (gifts, rebates, Craigslist sales) used to go toward paying off debt and now goes to building up our emergency fund.

And the extra money that I make through bookkeeping and blogging goes toward offsetting college expenses. Every dollar that comes in has a place to go and that strategy has worked wonders with our finances.

I know that some personal finance bloggers have strong feelings about credit cards? How do credit cards fit in your family’s finances? How do you keep them under control?

While we were paying off debt we switched to debit only but now we use our main credit card for almost everything and pay it off every month. The cash back (about $500 last year) is one of our found money sources.

We haven’t had a problem keeping the credit card spending under control. I think the fact that we paid off so much debt and our monthly expenses are lower helps with that. Also, carrying a balance just isn’t an option any more. The alternative is dipping into savings to pay off the card and I hate the thought of that so that keeps things in check.

Giving seems to be an important topic to you. What tips or ideas do you have for couples and families who want to give more, but don’t have a ton of money right now?

Good question. I would say the act of giving is more important than the amount. Start with something, no matter how small. And there’s always the gift of your time, as well.

If you haven’t already, please check out Julie’s story at The Family CEO