How should I be saving for retirement?
October 14, 2013 8:11 AM Subscribe
As a lower income person, I feel like my retirement planning should be simple, but it still fills me with anxiety and uncertainty. Tell me what, if anything, I should be doing differently.
posted by anonymous to work & money (16 answers total) 12 users marked this as a favorite
I don't want to bias the responses by being too specific about my concerns, but I worry that I should obviously be saving more, or handling my student loans differently--specifically, I wonder if favoring retirement savings over loan payments will bite me in the ass if, for instance, my income becomes too high to qualify for the IBR plan before I reach 25 years of payments (and forgiveness). Otherwise, if you were in my shoes, what would you change?
1. I gross $27,000/year at my primary job, and can sometimes scrape together an extra $2,000 working part-time seasonal gigs. I get an annual cost-of-living adjustment of ~2% (but maybe not every year?), and I'm not eligible for other raises, or promotions.
2. I have $45,000 of student loans at 6.8%. They're all federal. I currently pay $165/month, which is the lowest possible payment under the IBR plan. Only about $150 per year goes toward the principal, so I am essentially only making interest payments.
3. I currently put 18% of my gross into a tax-deferred retirement account. My employer matches 3%. (And even this much, which is fairly painful, seems like a pitifully small amount.)
4. I'm in my mid-late 30s, and have approximately $11,000 in a couple of retirement accounts. Most of it is in the tax-deffered account provided by my employer, so I can't really do anything with the money without risking penalties.
5. I don't have more than a few hundred dollars of credit card debt at any time, but I occasionally owe $300-800 at 12%-16%. I only really carry a balance when an unexpected expense empties out my (small, $300-500) emergency fund.
6. The amount of money that actually makes it into my bank account (after taxes/health insurance/retirement) is <$19,000/year, so I don't have a lot of room to, for instance, make higher student loan payments without directly stealing from my retirement.