Saving For Retirement (How I Started)

R&S Exteriors

The recent threads on work vehicles (New vs Old) and the thread about what the future holds are very interesting and I though I’d start a new thread describing how I started seriously saving for retirement years ago.

I got to the point in 2000 that I could finally afford to buy a new truck and work it into my overhead. Although, like many self employed, I still was not seriously saving for retirement.

Instead of buying a brand new truck, with a payment of $650 or more, I decided to look for a used 4X4 that had a really nice body, but really high miles. I found a 1988 Ford f150 (a little older than I wanted but really good body). The truck actually had engine problems which was great for me because I got it even cheaper. The 4X4 was in perfect shape. I paid $1800 for the truck.

I then took it to my mechanic and had a brand new factory engine installed (3 year warranty). I had them replace everything attached to the engine (started , alternator, distributor, wires, etc). Cost me about $4,000. I then took the truck to AAMCO transmission and had a heavy duty rebuilt transmission installed ($1,500). I also had new shocks installed. Total I had in the truck was about $7,500.

Then I basically had a brand new truck, with engine & transmission warranty, for 1/4 - 1/5th the cost.

I then committed myself to paying that $600 (would be payment) every month into a retirement account. So instead of paying $36,000 (payment & interest) to the bank (5 year loan). I have saved over $52,000 (last six years with interest). My retirement account is also tax deferred so whatever I put into I take of my taxable income.

You need to start saving for retirement early because the more you save the more "compound" interest you will earn. You make most of your interest in the later years when you have a few hundred thousand in your retirement. If you start to late you won’t get the complete benefit of the compound interest.

Now if you are making enough to save for retirement and run around in a brand new truck fine, but for the small contractors like me I think it is much better to fix up an older truck and put your money towards a good retirement. Just my opinion.

Now six years later my 1988 Ford has over 100,000 on that new engine and is starting to have to fix too much rust (18 years old). So I just bought a 2002 Ford F150 4X4 (very high miles) and over the winter will have a new engine and trans installed and keep on saving that money for retirement

By the way I will be able to sell my 1988 4X4 for at least $1500 almost what I paid for it six years ago because it is a 4X4 in very good running condition.

mdshunk

My retirement plans hinges primarily on coming up with a million dollar idea sometime within the next 25 years.

Peladu

None of my retirement monies are collecting "compound" interest.
Why?
100% of my retirement fund is in the stock market.
I have a long way to go, and the market beats all other options, real estate included.
I have been saving for a long time, I think this is an excellent post.

Mike Finley

That's great to hear somebody is thinking ahead about their future.

There is actually a name for the strategy you are using R&S, it's called "paying yourself first", anybody familiar with investing and saving has probably already heard of it, so I'm not saying anything really earth shattering, but for those who aren't familiar with it. It's based on exactly what you described. The problem with most people is they pay all their bills first at the end of the month and what they have left over they end up spending. The idea is the first check you write is to yourself, like you are doing, you write a check to your retirement for $600.00, then you pay the rest of your bills and then you probably won't have any money left over at the end of the month but at least you are paying into your savings!

It's a great way to save.

Murphy

I'm on the redneck retirement plan right now I think they call it Lotto.

Hopefully in the next year or so I will be able to "pay myself first" but right now I have to many other folks that think they should get paid.
The Nerve.

R&S Exteriors

That's right Mike.

You have to find a way to pay yourself. Even if it is cutting back on the "wanna haves" but don't really "have to have".

Especially in the Contracting business. Everybody's body wears out over time and if you do not prepare you will be greeting people at walmart.

Grumpy

Excellent post. I think far too many of us self employed have no idea how we are going to retire. I have a few plans. 1) the sale of my company, which at that time will be able to operate without my day to day interference. 2) Rental properties which I can liquidate as necessary, but will also hopefully have some positive cash flow. 3) I am going to be starting an IRA before 2007 hits.

A plan is only a dream if you don't have a road map to achieve it. What am I doing to achieve my goals? 1) Building the business. I have definite goals setup there and I don't see ANY reason why I can not make it happen unless I die early of a heart attack, in which case I don't need retirement. 2) I currently have a condo which I plan to keep, and I am saving for the downpayment on my first house. 3) Starting the IRA with 5k or so of my savings. I plan to do this sometime between the holidays which is usually pretty darned slow.

When will I retire? I'm 25-30 years. But I will probably never fully retire, I'm just not that kind of person.

AtlanticWBConst

Smart, Smart, Smart guy.

Very good, and good for you...especially for your:

1.) Frugality
2.) Foresight
3.) Financial disicipline

I was fortunate to have worked for a company fresh out of HS for about 5 years and they socked away about $30K in a 401. As soon as I get caught up with my bills (Work and Personal)...it's time to start socking more away for retirement like the poster is.

Thanks for the reminder, the encouragement, and the great suggestion.

__________________
- Build Well -

Melissa

Hope this is us soon- saving for retirement that is......

steve-in-kville

R&S,

Excellent post!!

I drive older vehicles myself, for a variety of reasons.

This year I opened a Roth IRA. I can put away $4000 a year in that account. It has its benefits.

My wife and I also own some real estate. Many tax advantages there, plus benefits, but comes with a boat-load of work, too.

steve

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camaroman2125

I Started thinking about retirement when I was 20. I'm 28 now and have a pretty good head start. Heck pretty soon my Part time gig is going to be making me more than my painting business so it all works out in the end. Hopefully soon My part time gig can be full time and painting can be my part time. cause its getting hard for me to even climb ladders any more because of my knees.

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SOME PEOPLE ARE LIKE SLINKIES - NOT REALLY GOOD FOR ANYTHING BUT THEY BRING A SMILE TO YOUR FACE WHEN PUSHED DOWN THE STAIRS.

Teetorbilt

This is a great thread! For those of you that think that Uncle Sam and SS is going to bail you out, now is the time to think otherwise. It's not happening.

I've made a number of posts on controlling finances, I'm originally (partially) from Quaker stock. There are a few basic principals.

Seperate your wants from your needs.

I want a 42" plasma TV. The reality is that I only watch a few hours a week (mostly during football season) and my 25"er's doing fine.

I want to eat 'high on the hog' every night. Reality is that it's expensive and not good for you.

I don't really want a new car/truck. I'm so used to buying ones with the 'new' knocked off of them that I don't see the advantage. I sold cars for a short period of time, it loses 10% of its value the minute that it 'rolls over the curb', it's then a 'used vehicle'. Bye-bye downpayment.

Pay in paper and keep the change. Then invest it! Some guy, a few years back, accumulated over $300K this way. I do it as a habit and can put away about $50 a month X 12 = $600 per year.

Sheese, there are so many ways that people piss away money without realising it. I could write a book about it.

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You can't solve you're problems with the same level of thinking that created the problems.

Albert Einstein

R&S Exteriors

Right On.

So many people are mortgaging and financing their lives away. Add up all the mortgage, vehicle, & credit card interest in a year. Try to pay cash and control those credit cards.

You have to look out for your own retirement.

My dad worked at a factory for 27 years, broke his back on the job. They talked him into a small settlement (stupid) and now 15 years later he is old enough to draw a pension from that factory. It's a whole $155 a month. yep $1860 dollars a year for 27 years. Never saved for retirement

My father-in-law worked 44 years at York Town Cabinet Factory. They even used him in their brochures (looks like a craftsman). He retired last year. For 44 years he gets $450 a month. Never saved anything for his own retirement.

Luckily they are both getting SS. But as Teetor says it will not be there for us. Our Politicians have spent the surpluses and there will be no way to keep it funded.

dirt diggler

I spend this per day:

$3.50 - smokes
$2.75 - breakfast (donut or something)
$1.25 - something to drink
$1.56 - another drink

$9.06 --- and on bad days throw out another $3.50 for a 2nd pack of smokes

so, this is an average of $10/day on 'junk'

$3,600 per year

assuming I would retire in 30 years

ugh --- that is $108,000

now, that is the latte factor

R&S Exteriors

And that $108,00 is without interest

If you put $3600 a year in a retirement account averaging a modest 8% interest for 30 years you would have $440,445.12

Compound interest is a great thing

Teetorbilt

Dirt, that $108K isn't really going to get you too far. You have to look ahead. What is the price of ?? going to be in ????

I have some pretty solid investments/retirement plans plus being able to reverse mortgage my house (a last ditch option) and we are still socking away every penny.

Most people will need at least $1M to maintain their lifestyle without drawing on the principal.

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You can't solve you're problems with the same level of thinking that created the problems.

Albert Einstein

Melissa

Okay, you people are stressing me out!

We need to hurry up and make ends meet before putting away for retirement. We live in friggin So. Cal and haven't even bought a home yet, and might have to in January, so that means, at the very least $3,500/mo. for mortgage, not incl property tax of $500/mo (Even in the ghetto houses go for about the same! ). Or $2,000/mo to rent. I don't know what in the hell we're going to do. I guess move to Nebraska! I have friends that have moved out of state though, and they own a home now, but are still broke.

R&S Exteriors

$3,500 a month mortgage. i would either be or

WoW my mortgatge is $737 a month and I hate paying that. You guys in California and those other outragously high cost of living area must be and I have a "nice" two story house.


And $500 a month for property tax. I'd be doing this to my representatives if I was required to pay that much.

I got bent out of shape this year when mine went from $600 a year to almost $900 a year. It almost caused a lynching party around here.

My advice. MOVE

And elect politicians that don't think it is a great idea to take care of everyone cradle to grave and pay all those illegals health care, education, assistance, etc.

ProWallGuy

My retirement plan is same as my daddy's:

Get real liquored up and punch a cop.

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Wallpaper Hanger St. Louis
Digital Murals Installation

Patty

When I was rather young, maybe 23 years old, I took out an annuity that was tied to some rather hefty life insurance. I figured that when you added that to your 401(k), your savings, and any equity you might have in a home or two, you might actually be able to buy a bag of groceries when ya retire. God knows social security doesn't look all that dependable. So, in hindsight, it was a good thing I did at the time.