Retirement - Starting from Scratch

I am self employed, with no retirement savings. Hard to swallow at 39yo. I want to get started next year but I don’t really know where to begin. Let’s hear all the recommendations and advice for retirement newbies!

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  • Here's some recent info from a podcast I listen to about IRAs and SEP-IRAs. You can do a SEP because you are self-employed. It's most important just to start! 

    Reply Like 1
    • MissusTea
    • "The future belongs to those who believe in the beauty of their dreams" - Eleanor Roosevelt -
    • MissusTea
    • 1 yr ago
    • 1
    • Reported - view

    Hey  Silver !  I'm in a similar boat, 39yo but have saved but not invested well or smartly (or at all! so no growth). In the two books I've just finished reading, what the authors say about the subject is 1. Pay Yourself First 2. The best time to start saving is now and 3. 10%-15% of your paycheque should go into your retirement savings, and aim for around 6% interest to grow your savings. There are more fine details that are regional (they are Canadian authors so there's lots about auto-deposits into your RRSPs pre-tax etc.). I'm *NO* expert, just learning too, and honestly super excited about it haha! 🙌

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    • MissusTea  you should mention the resources you used on the Canadian investing thread. 

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  • We have been using Betterment. Super easy for those who don't want to mess around with stocks and do a lot of research. For a nominal fee each year, it's worth it. 

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  • IRA...Roth, if you qualify. Vanguard has some great options. I highly recommend two books; The Wealthy Barber, and The Millionaire Next Door. 

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      • rlogue06
      • rlogue06
      • 1 yr ago
      • Reported - view

      Magenta Griffin (18628981f0ee) Why do you say Roth?  I don't want to derail this thread; but I see a lot of folks recommending this over normal IRA but not sure why.  I am quite certain I'll be in the same or lower tax bracket when I retire, so I just don't quite understand the thinking.  Now... on the other hand, I actually don't qualify for tax savings on a normal IRA, so Roth would be my only choice anyway.

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    • rlogue06 There are many benefits to a Roth IRA in addition to the tax free growth.  You might want to talk to a financial advisor, or just do a quick Google search of Roth IRA benefits.

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  • A client also recommended the book “the simple path to wealth”. She’s a school teacher, and set to retire at 39. Inspiring woman. I love talking to people who are killing it!!

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    •   I've been reading a lot of books (mainly from the library) for a couple years, trying to educate myself. The Simple Path to Wealth is the only one that has really clicked for me. Of course, I hate math so if you like math a more technical book might be better.

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  • We're in a similar situation. My husband is self-employed and for many years we were just scraping by; putting money away for retirement seemed impossible. Two years ago I started YNAB and everything changed. Last year I started Betterment Roth IRA for each of us. I started with just $100 a month and after a while, I started increasing the auto deposit. We're not maxed out yet, but each of us now has several thousand dollars earning interest.

    Reply Like 3
  • I second the notion of reading, "The Simple Path to Wealth". Of all the personal finance books I have read, this one LITERALLY makes it simple: goo.gl/taUC3u

    The author, Jim Collins, has a fantastic blog. If you do decide to dabble in the dark arts (aka stocks) he has a very good series about investing: http://jlcollinsnh.com/stock-series/

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    • Sarjoo +1 to this.

      The Stock Series is what got me started when all I knew was that money is green. Couldn't recommend anything else to get you started. It took me about half a year after I started budgeting to architect my now very easy and boring investment and savings strategy which I review about twice a year.

      JenGirl912 For what it's worth, there's a lot of confusion around retirement accounts but soon you'll start to wonder why people say it's so confusing. Then you start realizing that it's made to seem just confusing enough that people who do the weekend "I'm gonna dive in, do a bunch of Googling and learn all about investing/finances/retirement savings/money/life" quickly rush back to the surface and flail their hands for help. A friendly financial planning expert (salesperson) eventually comes by and gets a nice commission.

      FYI, the book The Simple Path to Wealth is a distilled version of the Stock Series. I read the stock series myself first, then got the book for my girlfriend, then read the book before she got to it 😅

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      • MsTJ
      • Gray_Nomad_f6eeb59e1a1c
      • 1 yr ago
      • Reported - view

      Alice Blue Ink (0add6cf69a80) I like your "architect my now very easy and boring investment and saving strategy" statement.  Think I might have this worked out for myself.  Have gotten things to where I only have to adjust once or twice a month and am working toward once or twice a year.  Congratulations on your progress.  

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  • "Easy" way to retire is save 50% of your income for 10 years.  Once you can live off 4% of your savings a year you can basically live forever.  So depending if you are truly living paycheck to paycheck due to low income, or if you just spend WAY too much on things you don't actually need to, this is harder or easier.  I myself am only at about 40% due to lifestyle creep, though I make plenty where I could live on less if I truly cared to.  Put 3 months cash into a high yield savings, another 3 into a low risk Betterment or Wealthfront (I use WF).  Max the remainder into 401k, IRA, then a high risk (90/10 stock/bond) B or WF account.  Check out Mr Money Mustache.  He is a little extreme in his frugality, but he makes a really inspiring case for cutting back on expenses in the name of financial freedom.  

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • Reported - view

      The 4% rule has a near but not quite 100% success rate over 30 years... which means you don't drop to zero before the end of 30 years. The backtesting was done with a 60/40 portfolio, so doesn't apply to other asset allocations. That could be a problem if you live 30 years and a day (or more) and it could also be a problem with a more volatile or less risky portfolio.

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  • I also listen to money/consumer related podcasts while driving or doing chores around the house to learn without getting overwhelmed.  I like Money Girl (Laura Adams) and Clark Howard.

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  • I second JL Collins blog and book!  He is amazing!  We are in a similar boat as well.  My goal is to get a SEP set up, I think with Fidelity, and do all low cost index funds.  

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  •  Congrats!  You are thinking in the right direction.  I would suggest you start today.

    I see below I'm not the only one who will say this.  Here are the books and blogs I strongly suggest you should read.   Read anything and everything on Financial Independence because there is a wealth of information in that community.    The key is to spend less and then save now.   The higher your savings rate the better.    Which is why I love YNAB because it makes it so much easier.  

    My hubby and I are 38 and we have been fortune to have saved a lot early.   We are working on a few more years to be FI and then retire early.  (FIRE - Financial Independence Retire Early)   

    I wish I had learned some of this in my teens or 20s.   I learned this thanks to the YNAB community.  I'm happy to pass it on.  

    1. JL Collins - The Simple Path to Wealth - http://jlcollinsnh.com/stock-series/

    2.  Your Money or Your Life - Vicki Robins

    3.  The Little Book of Common Sense Investing - John Bogel (The founder of Vanguard and index funds) 

    4.  The Bogleheads' Guide to Investing - by Taylor Larimore (Author), Mel Lindauer (Author), Michael LeBoeuf (Author)

    5. Then dig into Bogleheads forum to learn more about investing if that interests you. - https://www.bogleheads.org/wiki/Getting_started

    6.  The Millionaire Next Door by Thomas Stanley

    7. The Richest Man in Babylon – George Clason

    8. Then dig into the blogs of Financial Independence like:

    Choose FI podcast - http://www.choosefi.com/

    Mad Fientist - http://www.madfientist.com/

    Mr. Money Mustache blog - https://www.mrmoneymustache.com/

    Good Luck and keep us posted!

    Reply Like 4
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 1 yr ago
      • 1
      • Reported - view

      Tomato Ink (b81bd051fc5e) This is an excellent list!

      I would add the Dough Roller podcast - https://www.doughroller.net/thepodcast/

      It has been instrumental for me in graduating from Betterment to Vanguard. Why pay an extra 0.25% which adds up to a whole lot over time as you will learn if you listen to these podcasts from the beginning. You will also learn how to invest holistically across all your accounts whether they are taxable or retirement savings.

      Reply Like 1
  • I know how hard it is to get beyond the paycheck-to-paycheck, feast or famine, problems of self employment. I agree with everyone - don't wait until next year. Start today. It matters less *where* you put your money or even *how much* as that you *consistently* put money *every paycheck*. Unless you have some specific ideas in mind, Vanguard or Fidelity are probably good places to go with some kind of IRA. If at all possible, set up the money to go automatically every paycheck. Or every month. Just some mechanism so you're not having to write a check/actively make the deposit. Because it's too easy to say "oh, I'll do twice as much next month" and skip this month, and then 3 years later realize you kept doing that. Good luck!

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  • Another point that might help.  Sometimes the minimums at Vanguard and Fidelity can be kind of high if you are just getting started.  You can start with only a few dollars at Betterment or WealthFront.  

    As others have already said, start today if you can.  It matters.  

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • Reported - view

      You only need to meet the minimums to buy into a fund, but you can still contribute to accounts at Vanguard or Fidelity. Once you meet the minimum you can just buy into the fund of your choosing. Vanguard's Target Retirement Date funds start at $1000, and those are good simple funds for getting started with in an IRA.

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  • I would recommend looking into cryptocurrencies such as bitcoin as a piece of the portfolio to diversify.

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  • Assuming you run payroll. set up a SIMPLE IRA.  They are NOT the best, but they are a 1 page document, can be setup in < 1 hour, and let you put away $12,500.  Set one up NOW.  Then, spend time figuring out what you want long term, but you can get the SIMPLE IRA up and running "right now" while you decide on something "better."  The main problem with the SIMPLE IRA is the "low contribution limit" -- $12,500 employee side with a fixed 3% match.  With a Solo-401K you can do cool things like match 3:1 on your 16,800 limit and put around 50k away.

    If you are 39 and have nothing, I'm going to recommend a SIMPLE IRA plus a normal IRA (if deductible), a Roth IRA (if eligible) or a non-deductible backdoor Roth.  Get yourself started, don't worry about the "best" option...  Just get going.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • Reported - view

      401k has $18,000  ($18,500 in 2018) employee side contributions and up to 20% of net self employment income as employer contributions (or if you are an S-corp with salary, then up to 25% of your W-2 wages). There is no fancy matching scheme in a one participant 401k, and you do not have to document the employer contribution scheme. It's just a max percentage as I stated.

      Now, if you want to get really fancy and manage your own plan document instead of using a prototype, then you can put away up to $54k ($55k in 2018) in all. But most one participant 401k providers require you to use their prototype document, and thus after-tax contributions are not permitted wit hthose plans. Most people don't go in that direction, as that does add complication.

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  • In a word: Vanguard.  Period.

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