Healthy Financial Habits: Retirement
Ready to start a budget but don't know where to begin? Candice talks about the best retirement options and when to start saving for a retirement plan.
Hey, you! It's Thursday at 10 am. You know what time it is – it's Coffee Chats with Candice. Grab a cup of coffee or beverage of your choice, no judgement here, and that includes your finances, and let's chat about “Retirement.”
For those of you who don't know me, my name is Candice Montgomery. I am the founder of “Monetize Your Dream” a course for new and aspiring women, entrepreneurs to master business basics, and “Beginner's Guide to Budgeting.” I help everyday people (like you) learn to budget so that they can pay off their debt, save money, and experience financial confidence. If you're new to me, I own three businesses. The first one, my husband, and I started in 1996 and now we're in our 27th year. We paid off over $450,000 in 7 years time, and since 2022, we've been completely debt-free in our personal and business lives. I'm passionate about business and budgeting and sharing that with you. Alright, so let's get started today - we're talking about “Retirement.”
A Guide to Early Retirement Planning
So, if you don't have a retirement, you are going to live in a van down by the river – I need some laughter. Oh, I don't have a sound effect. I do, but I don't have turned on. Anyway. So I love this skit, “down by the river.” It's one of my favorite SNL skits. And my husband and I say it all the time. I used to say that if we didn't have a retirement, we were gonna live in a cardboard box, but I like this one better, because it's quite funny. Anyway, contrary to popular belief, Social Security is not expected to take care of you in retirement. It's meant to be a supplement. A lot of people think that their social security is going to take care of them, and that is not the case, because some people didn't earn enough money. Some people won't receive enough, they could be disabled early. There's so many things that can come into play, but it is not meant to take care of you – It's meant to supplement you. That's why you need your retirement in place. There's a lot of options when it comes to retirement, but you need to start now, don't put it off any longer. I used to say that to my husband all the time. Every year, I'm like, “We need to do this, we need to do this, we need to do this.” And we didn't ever do it, and I used to work corporate and and I had a retirement, but I wasn't fully vested when I left there, and we became self employed, so I lost a substantial amount of money when I left because I wasn't fully vested. And then I never contributed to it. We just kind of left it there because we were building our business and it’s just wasn't on my radar. Now it's really important for me teach you or to inform you. It's to help you understand that you need to start putting that in the forefront of your mind so that you can take care of it, because the sooner you can do it, the more that you can make based on compound interest. I know I sound really smart because of that, but I'm not; I don't do compound interest, but I know that it's really important and I know that it allows you to be able to put less money in and make more money over time. So if that helps you out. [ But math is not my strong suit, it never has been. So all right.] Disclaimer, I'm not a wealth advisor, a certified financial planner, CPA, or accountant. I suggest that you meet with someone that can help you in that department. I'm just here to give you some information to make you start thinking about it, and just start asking questions.
Your income is your biggest wealth builder. If you have debt, you're going to need to eliminate all the debt before you start working on your retirement plan, because you're slowing down the process if you're having to pay debt, and you're putting into retirement. If you take all the money, put it to your debt, pay off all your debt and be done, then you can put all that money to your retirement and have twice as much or three times as much that you were going to be spending on your debt into your retirement. More than what you would be contributing normally, if you have no debt, so if you're currently making contributions to your retirement at your work, or otherwise, you should strongly consider pausing your contributions to pay off your debt and then start back. Then once you start back, you can go full force using those debt payments to send to your retirement. That way, it’ll gain more money quickly, and if you're putting all of your money towards your debt, then you're going to pay that off quicker as well, and you just have to get really focused and disciplined on doing that.
Dave Ramsey suggests that once you're debt-free, contribute 15% of your household income to your retirement. If your employer matches, you want to put in up to the match, and if that is less than your 15%, you want to get Roth IRAs. Roth IRAs, the difference between an employer contribution or an employee plan and a Roth is that, say, a 401(k), I'll give that as an example, because there are multiple things out there, and I don't know all of them. But 401(k) is typical. If you have a 401(k), that money that's going in, there is pre taxed money, so it comes out of your paycheck, it's pre taxed, it goes into your IRA, and as it earns, then you earn money that grows, well, when you gotta take it out, you have to pay taxes on that money, because you didn't pay tax on it previously, with a Roth IRA. And again, not a wealth advisor, not a Certified Financial Planner. This is just what I have learned, but with a Roth IRA, that is after tax dollars, meaning that you get paid, and then you put money in from the net pay of your paycheck, and that money grows tax free, and when you retire,you can take that money out, and you don't have to pay taxes on it, because you've already paid taxes on it, whenever you put the money in there before. So if there's still money left over; if there's still a percentage of your income left over, I'm gonna recap that.
If your employer matches, you're gonna put in up to that match. And then if that is less than your 15%, so for example, we'll just use 5%. Your employer matches 5%, so you're gonna put in 5% of your income. Well, that leaves you with 10% that you need to put off your total income, so then you can go to your Roth IRA and you can max that out. And when you max out, because you're only allowed to put so much in per year, I can't remember off the top of my head what the dollar amount is for this. I'm going to do a quick math. It's 7500 for this year, and that's for people 50 and older, because you get to do a catch up once a year. Once you hit 50, you can do, I think it's an extra $1,000 a year that you can do, otherwise you have to put in less, so I know that's kind of, I feel like I'm kind of like, well, anyway, so your Roth IRA, if you max that out, and you still have leftover, so let's say, for example, that we put 5% in for our 401(k), and let's say we put 12% off the rest of our income, we can put 12% in our Roth IRA, and that maxes it out. Then we still have 3% of our income that we need to do something with, so you can either go back to your 401(k), or your wealth advisor, who I strongly suggest that you contact. They will be able to recommend the best place for you to contribute. My husband and I, because we're self employed, we have our Roth's maxed out, and because I turned 50 this year, I got to do the catchup payment. We both get to contribute the same amount before, he got to contribute more because he's a little bit older than me, and then now I can catch up. After our Roth's were maxed out, then we have a brokerage account, so we contribute to that after we contribute to a Roth so that we continue to put in, we pay more than 15% now because we're debt free. [ Oh, someone's watching online and gave me a thumbs up! Say “Hello!” I'm so excited. ] Anyway, we didn't start our retirement until 2019. After we had paid-off our mortgage, we opened the brokerage account.
That's all that I have for today, and we'll see if any comments are there. No comments. So, that's all I have for today. And now that we've made it to the fourth quarter, I'm gonna start talking about, starting through next week. And through the end of the year, I'm going to be talking about starting a business, having a business, a new business. Have you ever considered starting a business or know someone who wants to? Well, tune in next week to hear more or you can also send them my way; you can share my video with them. Because if you found value in my video, I would love for you to share it, like it comment, so that my message gets out to more people like you, and we can all be debt-free and have retirement and not live in a van down by the river. Anyway, we don't want to live in a van down by the river, but thank you for taking the time to watch my live today and I will see you here next week, same time, same place for Coffee Chats with Candice and have a fabulous Thursday and a fabulous weekend.