RECENTLY, WE WERE SUBJECTED to a bit of good-natured teasing from a colleague at work regarding our personal economy. This colleague, who is a Baby Boomer, gleefully informed us that we would suffer grievous harm from paying the costs of his old-age medical care, and so on. Some might say this was particularly uncharitable, but we would disagree. After all, we knew the flip side to this argument: that if we do end up paying for our colleague's care, it will be because the cost of it first bankrupted him. Further, since skilled nursing home care costs between $40,000 and $100,000 per annum if one has assets to pay for it, it will bankrupt most of his generation.
So we were glad to have this conversation, because it got us thinking about our own personal economy once again. As we do not relish the cheapest option for our later years -- that is, to conveniently die in our late sixties -- we realized that we had best start planning for the future something fierce. The questions facing us deals with how to do this.
Now, as an American, we know that should things not go as we expected, our social-safety net will ensure that we enjoy a subsistence-level exsistence. That would not be a fun life, but it does beat lying in a gutter and starving to death. Our goal, though, is to have fun in our golden years while ensuring our eventual children do OK for themselves too.
This clearly means we will work for the rest of our lives, but as we enjoy what we do, we don't see any difficulty with that. Mr and Mrs Kepple, although "retired," live active and healthy and productive lives which pretty much ensure they will live to 110 years of age. So if they can do it, we can too. Besides, the whole retirement thing seems old-fashioned, unless one works in heavy industry. So as a young person, we can appreciate that people operate that way -- different generations think differently, after all -- but it's just not our thing. (Additional things that are not ours include golf, vacation cruises, annuities, and whole life insurance).
So assuming we work until the age of sixty full-time, and then proceed to an active but "semi-retired" lifestyle, how can we assure we have a great deal of fun and live in our neat modern house out in the desert, where we will enjoy the sun and mild winters free of sinus troubles?
Well, saving. Saving a lot. Not spending money on fancy vacations and plasma television sets and expensive doodads and luxury items. Ensuring we always have a positive cash flow. That's for starters, and we already do a lot of that. However, our conversation today made us realize that we have to take a more pro-active stance on this.
So we've decided to do a few things.
The first is to ensure that we attempt to maintain our current standard of living as long as possible. By that, we mean that as our income grows in future, we plan to touch as little of it as possible. So on the day we get our next raise, we are going to march straight into the Human Resources office of our employer and demand -- yes, demand -- a revised 401(k) application form, increasing our contributions to take in ALL of the wage increase. That way, we will a) prevent the Government from taking some of our wage hike in tax and b) save more, because we won't even see it. If we do this enough, we'll eventually max out on the bloody thing and enjoy a wicked amount of tax-free growth.
The second thing we will do is start saving more out of our own pocket. We know that when we have money, we are prone to spending it, so we plan to establish a Roth IRA (finally) with direct deposit. This way, we can save our allowable $3,000 per annum and not miss a cent -- and more importantly, we won't be able to get at it without an amazing amount of hassle and annoyance. And that's just one method of savings where it is easy to put money into something, but a pain in the ass to get it out.
So, basically, we plan to save ourselves from ... well, ourselves. We do believe there is something to that whole idea.Posted by Benjamin Kepple at July 20, 2004 01:04 AM | TrackBack