Between you and me and the fence post…
From what I can gather, Diane has made some good decisions (e.g. pay cash for a car instead of a loan); get an MBA … but, hasn’t really been able to financially ‘cash in’ on it, and is now either looking for work – or, ‘semi retired’ – and currently drawing down from her retirement accounts. Have I got that right? If so, what could/should Diane do?
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Quick post to answer Adrian’s questions about our retirement accounts.
What I got ain’t much. My first retirement was a real retirement and when I resigned my position to become a SAHM, I withdrew its cash value and put it in an IRA, as well as withdrawing a thrift savings plan (more akin to a 401k I guess) and putting that in the IRA as well.
Since the cash value of what I withdrew was about $22k, plus $3k from the TSP, it wasn’t worth as much in cash as it is as a retirement plan. This is important because it was a federal government retirement. Leaving meant I could not get the exact same retirement plan if I went back to the government, but if I did get reinstated later (going back), I could “buy back the years” into a retirement plan by returning the cash. This would add the years I’d worked back into the years towards my retirement and it would be a retirement plan, not a 401k. Tho I know that’s changed a lot for the US Govt in the past decade.
This money later got used to buy my current vehicle because when my prior vehicle finally ran itself into the ground, we did not have headroom between income and expenses at that time (two young boys) for a car payment. It was a choice of paying off the house (mortgage) or buying the vehicle.
My last post should have revealed that the vehicle cost $28,100. We chose to leave the mortgage alone and pay cash for the vehicle because the rates between the two would be quite different (our mortgage was at a good rate, plus was tax-deductible.) That action probably saved my financial skin during the later divorce, actually, so let’s not try to second-guess it now. That did not wipe out the IRA either.
However, that was in the years 1999-2000, so we luckily ended up pulling out the money at a time when the market had run up quite a bit (remember the New Year’s toasts to QualComm?) and right before it semi-crashed in March/April 2000. I believe at one point the value of $13k went down to $9k, but because it was a divisible property, I didn’t really mind that it was less than it was (I figured it would go back up later, and it did.) I was investing in stocks at this time I think; perhaps some mutual funds.
Off to get the MBA and acquire a lot of debt – credit card and student loans. Received some cash from division of the house, paid off the living expenses (credit card debt) then went to work and started rebuilding a retirement, this time a 401k.
I worked some OT and because of the great support staff in our home office, was able to set up to have all my OT money put into the 401k and keep building it.
I invested in stocks of companies I was familiar with and was watching, then delved into some international funds – again where I knew something about the infrastructure and planning in those countries (international consulting in Supply Chain Management was the major focus of my MBA) as well as something about most of the companies/industries where the funds were placing their money.
I made about 33% in 2007, then watched one (a US cable company’s) stock tank as a result of a Jim Cramer episode (it was a good pick, but now it had the attention of those who are fad shoppers and he – not understanding their market position – downgraded it with telecommunications stocks, so speculators started selling out….or something.) I had dabbled a bit with REITs overseas, but wasn’t seeing a good return on that, and eventually limited it to a couple of stocks and Intl Mkt funds, then last summer when they dropped 17% in a week, and in preparation for my move to NC, moved everything into cash – about $66k? – and left it there. I didn’t have time to work the investments (keep up-to-date) and could not risk losing value at that time in my life. All told, this was only for about 4 years.
Now, I am using the IRA (all is now in IRAs again) to pay off Credit Card debt, child support payments, etc. (see prior posts on what I am covering), so it is dropping rapidly and I will make a huge withdrawal soon to pay off any remaining 2008 taxes as well as prepare for 2009 taxes. Then, who knows?
All I know is that I realized last year (2007-2008) that at age 47, saving 10% of my income with a 50% match up to 8% by my company, fully-vested from day one, I was not going to be able to save enough money – even with 33% growth each year, assuming I could assume that (which we all know I can’t) – to be able to afford to retire one day.
I still have the option of returning to work for the govt, if they hire, but where I am in NC, there is not the kind of work I used to do (cost analysis/operations research) for the government, and so I would have to move again to regain that retirement.
Needless to say, I am in a state of transition…let’s not think about the names that has been called in mythology…change is always such.
Oh, there’s also some stuff in a State Teacher’s Retirement Fund – which I should transfer somewhere else – for a year’s substitute teaching I did. Very small. — And some years (working) which took money for social security, so there may be something there for my old age. Being at the tail end of the baby boomers, I try not to think of that as a back-up plan, you know? Same goes for my xh’s retirement, which I may have already traded for less aggravation from those quarters, but it might exist; just not something I am counting on.
@ Diane – Question: what do you think that you are earning on your ‘retirement money’ [ https://www.networthiq.com/people/Diane ] post-tax?
What do you think you COULD ‘earn’ elsewhere? If more, what do you think that ‘elsewhere’ might be?