Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series. This month, the participants and experts will be discussing retirement as part of their analyses.
Anonymous S is a 24-year-old engineer earning $67,000 a year plus bonus. He also builds websites on the side for an hourly fee of $20 to $35. Read his bio here. Anonymous S is on Team Roger, with Certified Financial Planner Roger Wohlner.
Last month, Anonymous S described his progress as of April 2013. You can also catch up on his net worth history through 2012 by reading his first Naked With Cash monthly entry. Keep reading to see his net worth report for May 2013.
Following the analysis from Anonymous S., Roger Wohlner will offer his own thoughts and guidance.
Roger Wohlner, CFP appears courtesy of The Chicago Financial Planner.
Analysis from Anonymous S
May was the last month I lived without a kitchen. I also had to put down a sizable amount of cash for my new apartment, the first month’s rent plus the equivalent of two months for the security deposit. I was debating whether or not to list the security deposit as an asset, but decided to list it and isolate the amount so I don’t rely on it later.
In May, I completed the rollover of my previous employer’s 401k into my Vanguard IRA. Since I had a Roth 401k with matching contributions from my employer, this wasn’t completely straightforward. I had to set up a traditional IRA for the employer contributions, since those were pre-tax. One disadvantage is that the employer contributions didn’t amount to more than $3,000, so I didn’t have much choice of funds at Vanguard. I decided to just go with the Target Retirement 2055 fund, which has a lower minimum of $1,000.
I’ve mentioned this before, but since I already maxed out my 2013 Roth IRA contribution, I’m not sure what the next step for saving for retirement is. Right now my savings are just going into a separate taxable account at Vanguard, but I wish there was some tax-advantaged way to invest (besides I-Bonds).
Since I am so far from retirement, I feel pretty comfortable with my position, both now and in the future. Although I’m not sure what I’d do in the future if I didn’t need to work, I’d love the feeling of being “financially independent.”
Living in New York City is definitely a challenge, financially and in every other way. However, at the same time it is a great experience, almost priceless at this stage in my life. While others may not agree necessarily from a rational point of view, I wouldn’t trade any amount of money for these experiences.
While saving money can sometimes be a challenge, I have great hopes for the rest of the year. I plan on cooking at home as much as possible, while still trying to fit in an active social life. Since many of my friends don’t have the same financial goals as me, there will probably be a lot of compromises.
Finally, my girlfriend’s birthday is in June, which will probably increase discretionary spending.
Feedback from Roger Wohlner, CFP
Overall for someone your age you are doing quite well. While it is unfortunate that you do not have a company retirement plan available to you there is no reason that you shouldn’t continue to invest and save for retirement in taxable accounts. At your age growth is important so I’m not sure that I bonds are a good choice even with any tax-advantages they offer.
At the very least continue to fund an IRA each year. If your company does at some point offer a 401(k) or similar plan you’ll want to contribute, likewise should you at some point in the future start a side-gig that generates self-employment income this would allow you to start a retirement plan such as a SEP-IRA or a Solo 401(k).
You are in the good position that are due to good spending and saving habits. While a place like NYC is clearly an adventure for anyone, but especially someone your age, it is important that you maintain these good habits for your future.