Ask HN: Are you saving for retirement?

[dustyreagan]

This is for all the self employed hackers. Are you saving for retirement?

We don't have company 401(k) options, so what are you doing to save/invest?

I opened a Roth-IRA and just learned about Solo 401(k)s and SEP-IRAs. I think I'll keep contributing to the Roth, but look into other options as well.

Where are you putting your money?

[sgoraya]

I subscribe to the John Bogle school of passive index fund investing (Rebalancing once a year) - Currently have a 401k that I max out using Vanguard funds. I'm also working on saving a 12-month 'emergency' fund. When the emergency fund is complete, I'll move on to adding more funds to my taxable account that I have with Scottrade.

For whatever it worth, my current asset allocation is:

Vanguard Institutional Index VINIX 25%

Vanguard Extended Market Idx Instl VIEIX 15%

Vanguard FTSE All-World ex-US Index Inst VFWSX 35%

Vanguard Inst Total Bond Market Index VBMPX 25%

I use the following site and forums for my investing questions and info:

http://www.bogleheads.org/

I've found it to be very informative and the forum participants to be helpful.

[jgershen]

Also worth a look is FutureAdvisor (disclaimer: YC S10). Bo and Jon are working on helping people answer these questions - they're both very smart guys who really know what they're talking about (the latter is a surprisingly rare quality in both the financial and startup communities, in my experience).

[GBKS]

I take the same approach of a diversified, low-cost ETF portfolio, but a different allocation than you have. Googling for "lazy portfolio" is a good starting point to find out more about this.

In general, I prefer to think about "saving for the future" instead of "saving for retirement". You never know what's around the corner and what you might need, so having a buffer when you need it can make your life a ton easier.

[iworkforthem]

A fairly financially sound hacker! Nice work! I have some what similar portfolio like yrs, I take on a bit more risk. I also have one small portion to kiva.org .. I have my own property, so that's taken care too. You could look at real estate too.

[rubashov]

You are all bonds and equities. This is betting on the previous 30 years of financial history going forward. You will be wiped out in a deflationary environment or in a very high commodities inflationary environment.

Harry Browne's "Permanent Portfolio" is a wiser mix. You need at least some precious metals and commodities specific exposure.

Personally, I've been thinking a couple acres of black walnut saplings might be one of the best long term investments.

[mattchew]

I'm skeptical of the Roth IRA.

I think many people will get along on a lowered income in retirement and will be paying taxes in a lower bracket than they do as working people. This is an argument against the Roth (compared to a traditional IRA).

Tax rates are likely to go up in the next few decades, which is an argument for the Roth. On the other hand, if the tax burden shifts from income taxes to a VAT or a national sales tax, then the Roth might come out equal or a loser compared to a traditional IRA. I think a VAT is likely.

There's also the possibility of retirement accounts being regulated in terms of what investments are allowed. For example, requiring a certain percentage of your account to be in U.S. government bonds. These ideas have been floated around Washington a little bit. This is a minus for both the Roth and the traditional IRA.

I still invest in my SEP-IRA (which is hella good if you want to really sock it away) and a little bit in my Roth (hedging), but I don't max either of them out any more.

[byoung2]

I think many people will get along on a lowered income in retirement and will be paying taxes in a lower bracket than they do as working people.

You're right about that...most people will work for 40 years and then retire, cutting off their main source of income and dropping to a lower tax bracket. My parents, on the other hand, have made more money since retiring 5 years ago than they made in the 30 years prior (mainly through real estate investments). I think entrepreneurial types will likely fall into this category, where they continue to make more year after year, even into retirement, and so the Roth IRA makes sense at least for now.

I'm predicting a VAT within the next 15 years, but hopefully there will be some grandfather (pun intended) clause that phases it gradually for IRAs opened now.

[mistermann]

I'm 39 now. I saved obsessively (single, crap apartment, very little days off, no vacations) between 2001 and 2007, buying almost exclusively gold stocks. It seemed to me that gold being at <$300 / ounce was a no brainer (which it was), but I decided to invest in mostly junior explorers.

All went well for a while, I had amassed a net worth of aprox $1 Million, and then the bottom fell out in 2008....all my stocks dropped on average 80%. (I'm not joking, 80% was performance for the index).

Meanwhile, gold itself did a little headfake for a few months, and continued to resume hitting new highs. Stocks didn't follow, although they are finally getting a bit better, Maybe someday I'll break even! :)

Anyways, this is just my story to the OP. I had been ranting about the unsustainability of the system for years, but when the shtf, it was my stocks that got creamed, and I went from net worth 1 million to literally 0 (because I had some leverage.

Oh well, thats how she goes. So, let it be a lesson to use a financial advisor, even if they don't know what they're talking about (which they probably won't).

[golgo13]

When you say you bought gold, did you actually buy coins and such? Or just paper? Just wondering since I don't know much about precious metals, aside from jewelry stores.

[viggity]

why not just buy gold then?

[jaxn]

No.

I lost the retirement account in the divorce.

Then again, I kept the businesses.

So, I am planning for retirement by creating businesses with recurring passive income.

[callmeed]

I'm curious–how old are you? And ... how confident are you that you'll have enough recurring revenue to cover living expenses at your preferred retirement age?

I ask because I'm considering options myself.

[cparedes]

No.

I put as much money as I possibly can into my student loans, and I leave everything else in my checking account. If I carry a balance from one month to the other, then I win. If not, then I try again next month.

Eventually, I'll dump my excess income into my savings account, and once I'm done with paying off my loans, I'll start dumping the money I used to dump into my loans back into my savings.

[gonepostal]

Disclaimer I am a Canuck I have chosen to invest most my saving in income generating Real Estate. This is counter to what a lot my peers in my generation are doing.

I invest in residential properties either suited bungalows or condo townhouses. Even with the economic downturn they have been doing quite well for me.

I plan to grow this portfolio as a side project of sorts while I hack on software during the day. Over time it should be a solid source of "passive income"(investing in real estate is rarely ever truly passive).

[lem72]

I am also a Canuck and luckily bought a 2 bedroom condo in 2004 and have recently started renting it out with a small bit of profit. I know nothing really about being a Land Barron, but hope I can continue doing this and have other people pay off a couple condos/houses for me.

[mistermann]

What city do you buy in? Can you actually buy something today that is cash flow positive. or do you put some work into them to pretty them up after buying before you rent them out?

[dotBen]

I'd like to ask the question "when do you intend to retire?".

My father is 64 and although he's had an era of poor health a few years ago (since recovered) he has no interest in retiring (he's a highly sought after executive consultant in his field).

He's probably the first generation to actually question the whole notion of stopping work at 65 and quietly going off to die. Like most of us on HN, he is able to work in a career he enjoys that isn't labor intensive (thus capable for older people)

The WorldBank says the average life expectancy in USA is 78 (http://data.worldbank.org/indicator/SP.DYN.LE00.IN?cid=GPD_1...) so if you finally gave up work at 73 that's only an average of 5 years you need to live without an income - and that for most successful professional workers this is probably manageable through savings and/or reverse mortgage on a reasonable sized house.

The pension industry hasn't really changed in 50 years yet the way we live, work, and end our lives has changed (and continues to change rapidly). If the shift is towards us working longer that means we need them less, so there is no reason for them to adapt.

[donaldc]

so if you finally gave up work at 73 that's only an average of 5 years you need to live without an income

Not necessarily. A couple of reasons:

* Life expectancy in developed countries has been increasing by well over a year every decade.

* Life expectancy for someone at age 73 is notably higher; remember that the average of 78 includes everyone who has died before age 73.

Personally, I come from comparatively long-lived ancestors. I have no desire to find out when I'm 78 that I'm likely to live to 90 or 100, but have no money left.

[jonp]

The figure quoted of 78 is what's known as "period" life expectancy. It's life expectancy from birth based on mortality rates in 2008, without any future improvements.

In practice death rates are expected to continue falling over time. Looking at "cohort" life expectancy which allows for expected future improvements can give a considerably higher life expectancy.

Also, it's not enough to look at the average. If life expectancy is 85 then you shouldn't plan to die at 85. It's more like rolling a die and having an age of death of any of 66, 77, 82, 88, 92, or 100 [1]. Maybe you need no savings, maybe you need lots. It's hard to plan for this without an annuity.

[1] worked out a while ago so that it has the same mean, variance and four higher moments as life expectancy for a UK mortality table.

[gamble]

None of my grandparents were in a position to work after 70. If you're able to live independently at that age and not in a home, you're doing pretty well. I'm not going to plan on being healthy enough to work.

[jambalaya]

Likewise my Dad is 74 and is in a similar position. Quite frankly, he's super excited about what he does.

[tocomment]

The singularity is my retirement plan. It sounds risky but I really can't think of any scenario where it hasn't arrived by 2040.

[gwern]

I'm wondering how serious you are about this. You really can't think of a single scenario where it hasn't?

Moore's law shutting down tomorrow, the whole Western world going into a Japan-style Lost Decade, an asteroid strike in the Pacific causing a tsunami wiping out the West Coast, Japan, Korea, and part of China - or just the Big One hitting California* - a demographic apocalypse choking off all major investment, a limited biotech/nanotech plague, limited nuclear exchanges (touched off by Russian adventurism into Georgia, North Korea, Iran...) etc...

Heck, I'm not even trying here. There are tons of scenarios in which no Singularity of any kind has hit by 2040. (Good quip, though.)

* do you live in those areas and expect to not survive any major disaster? then rewrite them to take out the East Coast, England, etc.

[gojomo]

I don't know if "the singularity is my retirement plan" is a wise strategy, but it'd make an awesome t-shirt. Especially for a baby or small child.

[lsc]

Personally, I'm re-investing everything in to my company. It's high risk, sure, but eh, I'm still under 30, there's time for me to try this several times.

Also, I don't really buy the idea of retirement. Yeah, having enough money would be pretty nice, but I have enough money now. I like working, and I don't really see the point of depriving myself of working capital just to set myself up to live the last years of my life in a nursing home.

[iworkforthem]

I think it's quite alright to put aside around 10-20% for raining days in a investment acct/fund/etf. If you need it any time, you could cash out.

[jimbokun]

I've been saving 20% of after tax income into a savings account until I get to 5 months living expenses.

After that, my corporate IRA match will have kicked in (just started a new job a couple months ago) and plan to save 15% overall into retirement accounts, with the other 5% to put into paying down the mortgage and/or starting education funds for the kids.

I'm following the Dave Ramsey "baby steps", by the way.

[patrickgzill]

I would stay away from IRAs of any form at this point.

It is quite clear that even if you manage to hold on to your money, there will be additional sales taxes which will be imposed.

As well, the times that people I know have cashed in or taken a distribution were times that they were not earning much and thus they didn't avoid a high tax rate.

I am saving for retirement in the form of actual physical items such as silver and other property I can hold (and possibly some real estate later), and my emergency fund is a number of $100 boxes of nickels - tough to steal, immediately liquid, but just difficult enough to cash in that it forces you to only use it if you have to.

A business can serve as a great way to prepare for retirement, which is what I am focused on at the moment.

[blackguardx]

How many boxes of nickels does it take to make rent for a few months?

[byoung2]

I started working full time in 2004 and I put money in the company's 401k back when they matched, but since I change jobs roughly every 15 months (see http://news.ycombinator.com/item?id=1706920) it gets annoying having to roll it over into a new 401k. That, plus the fact that companies have stopped matching these days, made me decide to go the Roth IRA route. I think the Roth IRA is the way to go for young people because you put in after tax money (at a lower rate because your salary is lower early in your career), and you take it out tax free (a savings, since we'll all be in a higher tax bracket by then, right?).

[rubashov]

I have a tough time trusting the 401k and Roth concept. It's kind of your money, but it's also under the control of the government. You just have to trust them.

If you're in your 20s, trusting 401ks/IRAs means having faith there won't be a fiscal crisis and/or a crazy government at any point in the next 45 years. Seems like a somewhat dicey bet to me.

[chuhnk]

I zero out at the end of the month so for the time being no. I'm 25 and with my next salary most likely from a job move I'll start saving then. However its more like that the money will be used towards funding my own business. I am an entrepreneur at heart and do not take the thought of a bootstrapped business lightly. The romantic nature in which viral startups are portrayed do appeal to me but I am a realist and understand that I'll need to do something that charges from day one.

To those who are responsible and do put away a bit of money every month. Smart, very smart.

[brc]

You should really set up an account and get an automatic transfer going, even if it's only $50 a month. While the amount isn't important, the habit is vitally important now while you're still young.

Believe it or not, the period of life you're in right now is when you have the most surplus income. Things will get a lot tougher at some point.

Everyone can take a 10% trim on their disposable income without too much pain, and it's a good habit to get into. Just make sure you can't get at the money without having to go in somewhere and fill out forms. Otherwise it will get spent on something you have to do or have. And in ten years you'll regret both the wasted money and failure to build a habit.

[dangrossman]

Yes, though no retirement accounts yet.

- Deposited to a high interest savings account until FDIC limit

- 8% of savings held in physical gold and silver

- Rest of savings invested in large, old companies that issue good dividends (DuPont, Johnson & Johnson, Excelon, GE...). Many of them bought at very low points, making the dividend yields over 5% per year.

I've only had an income since 2004 (25 y/o), but I lived frugally and used what I made to pay for college and save rather than buy fancy cars, a big house, etc. I have a savings target I'd like to reach, before swit

[lsc]

> - 8% of savings held in physical gold and silver

It sounds like a good idea to me, but if I had that much untraceable wealth laying about, I'd be real quiet-like about it. Maybe keep the bulk of it in insured safe-deposit boxes or the like. I know that this increases the chance of government confiscation, but to me, that risk seems smaller than the risk of sitting on hundreds of thousands of dollars worth of completely untraceable assets.

[onedognight]

I started with a SEP-IRA years ago since the limits are much higher (~20% or 25%) than with a regular IRA ($5k). When the Solo 401k came out I got one of those as well as the limits are even higher than with the SEP (100%). The main catch with the Solo 401(k) is that you have create it before the end of the calendar year whereas with the SEP-IRA you can create it up until April 15th.

[JoeAltmaier]

Put away college money for the kids with the Dell buyout. Put the proceeds from the Silicon Valley house sale into a farm in Iowa. Worth about $1M if it doesn't turn into a swamp or desert (pick your global-warming scenario).

Money in the retirement acct never did anything for 15 years, should have put it into gold, buried in a mason jar in the back yard, for all the good the stock market ever did me.

[tmcneal]

I've been contributing to a Roth and 401k since I graduated from college. I'm invested in mostly index funds and bonds, along with one or two emerging markets mutual funds. I figure that if the stock market totally tanks and never recovers in 40 years, then I'll have much bigger problems than an unperforming retirement account.

The rest of my savings goes to an online savings account.

[catshirt]

no. i spend all my money. not because i am incapable of saving, but because i like taking advantage of what resources i have while i'm relatively young (22). i'm confident i can defer saving until i'm at least 24 without feeling wasteful.

i know this is irresponsible, but i'm making up for my years of passing on irresponsibility in high school. just kidding. kind of.

[donw]

I'm twenty-nine, and regret doing this when I was younger. I spent far more than I earned up until I turned 21 or so, and it took me a few years to pay things off.

What are you spending money on? If you're buying experiences and knowledge, through travel, education, and maybe your own startup, then you're doing it (mostly) right.

If you drive a Mercedes and have a 60" TV, you're doing it wrong.

Even if you're spending wisely, you really want to be stashing money aside in a rainy day fund. Aim for about $10k USD in liquid cash that you can tap at any time. It's enough to cover your car suddenly exploding, or an unexpected medical expense, or even to just support yourself for a year if you have to, as long as you're frugal.

[maxawaytoolong]

I put $10K a month into a savings account until it reached the FDIC limit, then I opened another savings account.

[mikeryan]

First 10K a month! Impressive.

Second why a savings account? Are you actually getting an interest rate that outpaces inflation? I'm curious why this route with that kind of income.

[joshfinnie]

Why do you put it in low interest savings accounts? If you are hitting the FDIC limit, there are money markets that will be as safe and give you a better return.

[sjtgraham]

No, I'm betting on my future performance. If I'm broke then so be it. I've been broke before and I'm still here!

[epynonymous]

careful, being broke is fine, but being broke and sick is miserable.