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. This month, the participants and experts are discussing, among other things, retirement. Read this introduction to learn more about the series.
Kathleen is thirty-one years old, single, and living in Portland, Oregon. She loves her job, even if it isn’t very lucrative. With her $33,000 income last year, she’s looking to make more money from “side hustles” this year, such as her blog, Frugal Portland. To learn more about Kathleen, read her bio here. Kathleen is on Team Sara, with Certified Financial Planner Sara Stanich.
Kathleen’s report this month, below, includes Kathleen’s progress over the three months leading up to the end of May 2013. Following Kathleen’s own self-analysis, Sara Stanich will offer thoughts from her perspective.
Sara Stanich, CFP appears courtesy of Stanich Group and Cultivating Wealth.
Comments and analysis from Kathleen
You’ll see that I’m “completely debt free*” (heavy emphasis on the asterisk). It’s just that, well, I paid my car off, and my first mortgage payment isn’t due until July 1, so with a bit of fuzzy accounting (think Arthur Anderson would hire me?) I owe nothing except the high amounts due on my credit cards, which, I feel compelled to mention again, are always paid in full, and I never carry a balance.
This month’s theme is retirement, and I feel like I’m ill-prepared to retire. I work for a very small company that will likely never open up a 401(K) for its employees, let alone match it. 2012 was the first year I’ve ever maxed out my IRA, and though I’m on pace to max it out this year (even with the $500 annual increase!) I’m 31 years old and have less than $25,000 saved for retirement.
I have at least 35 more years of work ahead of me, so I have time on my side still (even though sometimes it doesn’t feel like it). My plan is to always max out my IRA, start thinking about switching into a career that will provide more options for retirement, and pay off my housing before I consider quitting work. I’m also hoping that some of my side hustles will provide income for a long time.
Feedback from Sara Stanich, CFP
Cool stuff, Kathleen. It’s great to see your progress over these last months.
You are maxing out your IRA these days, which is great, but I would like to see you saving more. A future job with a workplace retirement plan could give you the opportunity to save much more for retirement (and would hopefully include a match too).
In the meantime, I know you have some consulting/freelance or “side hustle” income. Is that side business profitable from an income tax perspective?
If so, you may want to consider a retirement savings account associated with that business, such as a SEP IRA. This would allow you to save more for retirement (than in an IRA alone) and could potentially reduce your tax liability. Even if it doesn’t make sense this year, it could a few years down the road. Consult your tax adviser.
PS. I hope you are loving your new home!
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Updated June 22, 2016 and originally published June 27, 2013.
{ 3 comments… read them below or add one }
YAY for no more student or car loan! That’s a big deal and you should do a happy dance. How much were your minimum payments for both? Because now, they’re gone-zo.
You don’t *have* to work for 35 more years. That just might be when you can make withdrawals from your retirement accounts without penalty. Or Social Security checks might start rolling in.
But anyway, you are doing great!
Kathleen,
It looks to me that you’re doing well! Don’t fret the fact that you “only” have $25k in retirement savings. From research that I have seen, a reasonable goal is to have one times your income in savings by age 35. You have a few more years, and you’re very close. Of course, finding opportunities to increase your income and increase your retirement savings as Sara has recommended will help tremendously!
Thanks, Sara — although I’m not sure about qualifying for a SEP IRA yet. I’d love to look into that, but I may have to wait until next year.