First concrete steps for retirement planning when one partner is resistant
"I would suggest you do three things: If you do all three of these, the time will come when ""2 months off to go to Italy this winter and ride bikes through wine country"" is something you both want to do, can afford to do, and have arranged your lives to make it feasible. Or whatever wow-cool thing you might dream of. Buying a vacation property. Renovating an old house. The time may also come when you can take a chance on no income for 6 months to start a business that will give you more flexibility about when and where you work. Or when you can switch from working for a pay cheque to volunteering somewhere all day every day. You (as a couple) will have the freedom to make those kinds of decisions if you have that safety net of long term savings, as long as you also have a strong and happy relationship because you didn't spend 40 years arguing about money and whether or not you can afford things." You can take a queue from any sales opportunity and position it in ways that will still appeal to someone who intends to continue working perpetually. Here are some of the points I would make: 401k matching funds are free money that you will have access to in ~20 years whether you retire or not. Long-term savings that grow in the stock market turn into residual income that will add to your standard of living whether you retire or not. There are tax advantages to deferring income if you are in a high tax bracket now. You will have flexibility to withdraw that money in future years where you might have lower earnings. (For example, in a future year, you could take a sabbatical trip to Europe for a few months without pay and draw on your savings during that time that you are not making money.) Even if you don't invest in a 401k, you and max out HSA accounts if you are eligible, and position that as money for medical expenses. If you never have medical reasons to spend that money, you can still withdraw at retirement age like a 401k or IRA. (Though it gets taxed as income if not used for qualified medical purposes at retirement time.) With an unwilling partner, it's difficult to make a lot of progress, but if you have matching funds from your employer, do make sure that you are getting at least those for yourself. Ultimately if he doesn't want to save for himself, you should for yourself. There are no guarantees in life. If he dies or leaves, you must be prepared to take care of your own needs. To answer your question: As far as what's available in addition to your 401(k) at work (most financial types will say to contribute up to the match first), you may qualify for a Roth IRA (qualification is based on income), if not, then you may have to go with a Traditional IRA.  You and your husband can each have one and contribute up to the limit each year.  After that, you could get just a straight up mutual fund, and/or contribute up to limit on your 401(k). My two cents: This may sound counter-intuitive (and I'm sure some folks will disagree), but instead of contributing to your 401(k) now, take whatever that amount is, and use it to pay extra on the car loan.  Also take the extra being paid on the mortgage and pay it on the car loan too.  Once the car loan is paid off, then set aside 15% of your gross income and use that amount to start your retirement investing.   Any additional money beyond this can then go into the mortgage.  Once it's paid off, then you can take the extra you were paying, plus the mortgage and invest that amount into mutual funds. You may want to check out Chris Hogan's Retire Inspired book or podcast as well. "I can understand your nervousness being 40 and no retirement savings.  Its understandable especially given your parents.   Before going further, I would really recommend the books and seminars on Love and Respect.  The subject matter is Christian based, but it based upon a lot of secular research from the University of Washington and some other colleges.  It sounds like to me, this is more of a relationship issue than a money issue.   For the first step I would focus on the positive.  The biggest benefit you have is:  Your husband is willing to work!  Was he lazy, there would be a whole different set of issues.  You should thank him for this.   More positives are that you don't have any credit card debt, you only have one car payment (not two), and that you are paying additional payments on each.  I'd prefer that you had no car payment.  But your situation is not horrible. So how do you improve your situation? In my opinion getting your husband on board would be the first priority.  Ask him if he would like to get the car paid off as fast as possible, or, building an emergency fund?  Pick one of those to focus on, and do it together.   Having an emergency fund of 3 to 6 months of expense is a necessary precursor to investing, anyway so you from the limited info in your post you are not ready to pour money into your 401K. Have you ever asked what his vision is for his family financially?  Something like:  ""Honey you care for us so wonderfully, what is your vision for me and our children?  Where do you see us in 5, 10 and 20 years?""     I cannot stress enough how this is a relationship issue, not a math issue.  While the problems manifests themselves in your balance sheet they are only a symptom.  Attempting to cure the symptom will likely result in resentment for both of you.  There is only one financial author that focuses on relationships and their effect on finances:  Dave Ramsey.  Pick up a copy of The Total Money Makeover, do something nice for him, and then ask him to read it.  If he does, do something else nice for him and then ask him what he thinks." I'd try to (gently) point out to your husband that what he thinks he wants to do now and what he might want to do in 20 or 30 years are not necessarily the same thing. When I was 40 I was thinking that I would work until I died. Now I'm 58 and have health problems and I'm counting down the days until I can retire. Even if your husband is absolutely certain that he will not change his mind about retiring in the next 20+ years, maybe something will happen that puts things beyond his control. Like medical problems, or simply getting too old to be able to work. Is he sure that he will be able to continue to put in 40 hour weeks when he's 80? 90? 100? Just because you put money away for retirement doesn't mean that you are required to retire. If you put money away, and when the time comes you don't want to retire, great! Now you can collect the profits on your investments in addition to collecting your salary and live very well. Or have a nice nest egg to leave to your children. Putting money away for retirement gives you options. Retirement doesn't necessarily mean sitting around the house doing nothing until you waste away and die of boredom. My parents were busier after they retired then when they were working. They spent a lot of time on charity work, visiting people in the hospital, working with their church, that sort of thing. Some people start businesses. As they have retirement income coming in, they don't have to worry about the business earning enough to provide a living, so they can do something they want to do because they think it's fun or contributes to society or whatever. Etc. Bringing your spouse on board a financial plan is key to success.  The biggest part is to have a shared dream.  Having retirement saving doesn't mean that you can't work. It does mean that you both will have some level of security as you age.   Does your husband really want you to be impoverished when he dies?  I doubt it, he probably just hasn't given it much thought.  A strong nest-egg can help you after his is gone even if you are still working. My wife and I follow Dave Ramsey's baby steps.  It has worked like a champ for us and can help you as well.  You can look up his plan, most of the materials are free.  A few highlights: So in short, don't worry about retirement until you two are out of debt.  Once you two are out of debt then save for your retirement, kids college and pay off your home early. Building a shared dream with your husband is the best way to get him onboard.  Talk about helping the kids, freedom to vacation, your parents struggle, whatever gets him to see the importance of having some savings.
Communicate. I would recommend taking a course together on effective communications, and I would also suggest taking a course on budgeting and family financial planning. You need to be able to effectively communicate your financial plans and goals, your financial actions, and learn to both be honest and open with your partner.  You also need to be certain that you come to an agreement. The first step is to draft a budget that you both agree to follow.  The following is a rough outline that you could use to begin.  There are online budgeting tools, and a spreadsheet where you can track planned versus actuals may better inform your decisions. Depending upon your agreed priorities, you may adjust the following percentages, Essentials (<50% of net income) Financial (>20%) Lifestyle (<30%) - this is your discretionary income, where you spend on the things you want Certain expense categories are large and deserve special advice. Try to limit your housing costs to 25% of your income, unless you live in a high-cost/rent area (where you might budget as high as 35%). Limit your expenses for vehicles below 10% of income. And expensive vehicle might be budgeted (partly) from Lifestyle. Limiting your auto payment to 5% of your income may be a wise choice (when possible). Some families spend $200-300/month on cable TV, and $200-300/month on cellphones. These are Lifestyle decisions, and those on constrained budgets might examine the value from those expenses against the benefit. Dining out can be a budget buster, and those on constrained budgets might consider paying less for convenience, and preparing more meals at home. An average family might spend 8-10% of their income on food. Once you have a budget, you want to handle the following steps, Many of the steps are choices based upon your specific priorities. "First, congratulations on choosing to invest in low cost passively managed plans. If you choose any one of these options and stick with it, you will already be well ahead of most individual investors. Almost all plans will allow you to re-balance between asset classes. With some companies, sales agents will encourage you to sell your overweighted assets and buy underweighted assets as this generates brokerage commissions for them, but when you only need to make minor adjustments, you can simply change the allocation of the new money going into your account until you are back to your target weights. Most plans will let you do this for free, and in general, you will only need to do this every few years at most. I don't see much reason for you to be in the Target funds. The main feature of these plans is that they gradually shift you to a more conservative asset allocation over time, and are designed to prevent people who are close to retirement from being too aggressive and risking a major loss just before retirement. It's very likely that at your age, most plans will have very similar recommendations for your allocation, with equities at 80% or more, and this is unlikely to change for the next few decades. The main benefits of betterment seems to be simplicity and ease of use, but there is one concern I would have for you with betterment. Precisely because it is so easy to tweak your allocation, I'm concerned that you might hurt your long-term results by reacting to short-term market conditions: I know I said I wanted a hands off account, but what if the stock market crashes and I want to allocate more to bonds??? One of the biggest reasons that stock returns are better than bond returns on average is that you are being paid to accept additional risk, and living with significant ups and downs is part of what it means to be in the stock market. If you are tempted to take money out of an asset class when it has been ""losing/feels dangerous"" and put more in when it is ""winning/feels safe"", my concerns is that you will end up buying high and selling low. I'd recommend taking a look at this article on the emotional cycle of investing. My point is simply that it's very likely that if you are moving money in and out of stocks based on volatility, you're much less likely to get the full market return over the long term, and might be better off putting more weight in asset classes with lower volatility. Either way, I'd recommend taking one or more risk tolerance assessments online and making sure you're committed to sticking with a long-term plan that doesn't involve more risk than you can really live with. I tend to lean toward Vanguard Life Strategy simply because Vanguard as a company has been around longer, but betterment does seem very accessible to a new investor. Best of luck with your decision!" "What percent of my salary should I save? is tightly coupled with its companion, What size “nest egg” should my husband and I have, and by what age? Interestingly, Mr.Christer's answer, 10%, is the number that plugs into the equation that I reference. Jay's 25X rule is part of this. We start with the assumption that one's required income at retirement will be 80% of their pre-retirement income. That's high by some observations, low by others. A quick look at the expenses that go away in retirement - The above can total 35-40% It would be great if it ended there, but there are costs that go up. The above extra spending is tough to nail down, after all, you knew what you spent, and what's going away, but the new items? Crapshoot. (For non-native speakers - this refers to a game with dice, meaning a random event) Again, referencing Mr Christer's answer ""financial planners whom you could pay to give you a very accurate number,"" I'm going to disagree with that soundbyte. Consider, when retirement is 30 years away, you don't know much If I can offer an analogy. I once had the pleasure of hearing Jim Lovell (The astronaut played by Tom Hanks in Apollo 13) give a speech. He said that for the first 99% of the trip to the moon, they simply aimed ahead of their target, never directly at the moon. In this manner, I suggest that with so many variables, accuracy is impossible, it's a moving target. Start young, take the 10% MrC offered, and keep saving. Every few years, stop and see if you are on target, if not, bump the number a bit.  Better to turn 50 and find that after a good decade you've reached your number and can drop your savings to a minimum, perhaps just to capture a 401(k) match, than to turn 50 and realize you've undersaved and need to bump to an unsustainable level. Imagine planning ahead in 1999. You've seen 2 great decades of returns, and even realizing that 18%/yr couldn't continue, you plan for a below average 7%, this would double your 1999 balance in 10 years. Instead you saw zero return. For a decade. In sum, when each variable has an accuracy of +/-50% you are not going to combine them all and get a number with even 10% accuracy (as if MrC were wrong, but the pro would tell you 11% is right for you?). This is as absurd as packaging up a bunch of C rated debt, and thinking that enough of this paper would yield a final product that was AAA." "First of all, one thing that is very important: Match is always better than no match.  So, you should definitely use that match on your HSA if you've already maxed out the company match on your 401(k).  In fact, for most people there won't be much reason to invest in your 401(k) above the company match at all. If, for example, your company matches only up to 5%, and you want to invest 15% of income into retirement, you ought to open an IRA instead (Roth or standard depending on your situation) and put the extra 10% in there. Beyond that, you're right, HSA's (the accounts themselves) have all the benefits of a 401(k).  I wouldn't invest there for retirement instead an IRA, though.  There is just no reason. The only built-in downside of an HSA is the HDHP attachment, which may be undesirable to some employees or in certain situations. If you want to get down to raw dollar figures and your company is offering both a standard health plan and a HDHP+HSA, the calculation will be dependent on the premiums and benefits of each and your projected costs of your health care (which is always a crystal ball estimation anyway).  Those costs and benefits can vary wildly, from a completely obvious choice on either the HDHP or standard plan, or pretty much a wash where you decide based on your comfort level with a high deductible. To illustrate... Standard plan: Your company might offer a standard plan that costs you $100 out of pocket for an individual.  That means you pay a minimum of $1200 a year for health care.  Most plans will have copays (a flat amount like $15 you pay for standard doctor consultations), a deductible (you pay 100% of fees up to this, co-pays don't count), a percentage you pay beyond the deductible (20% is typical), and a maximum (like $1000 per individual per year - beyond this, up to a ""lifetime"" maximum benefit of like $2 million, you won't be charged anything). In a standard plan where you have no expenses, you might pay $1200 a year plus a couple co-pays, for a total of $1230.  In a bad year with surgery, you might max out, so $1200 + $30 + $1000 = $2230. HDHP/HSA: These plans are very different.  You might still pay a premium, I.E. $30 a month.  They will still have a deductible and maximum, but they might be the same amount.  You will probably not have copays (I didn't when I had one, but I could be wrong), which means a standard doctor visit will cost more like $80-100. In a good year, this will mean that you pocket $500 from your company, but pay back $360 in premiums.  A couple doctor visits would mean there's only $300 left in your account at the end of the year.  But, that's still a net cost of only $60, compared to $1230.  Big win! In a bad year, you would end up out of pocket the max (say $2000) plus premiums, minus the $500, for a total of $1860.  In this case, still better than the standard plan. The important difference will come in an in-between year.  You will reach the max quicker on an HDHP than you will on a standard plan.  With a family, where all of these numbers are higher, and you have more people to be getting sick/injured this might make the standard plan a better benefit. However, since whatever you build up in an HSA account stays with you forever, while you're single and have only your own health to be concerned about, that is probably a good choice.  When you have a family, things might change and you switch to a standard plan, but you still have that war-chest to offset copays and hospital visits in future years. I was forced onto an HSA for 2 years with a smaller company.  They had a really good contribution, $2500 if I remember right, and we saved up big time. Later, when my wife was pregnant, we were on a low-deductible standard plan and paid all our fees out of the HSA.  It worked out great. I say, as long as the averaged yearly expected costs make sense after doing calculations illustrated above, go for it!" My super fund and I would say many other funds give you one free switch of strategies per year.  Some suggest you should change from high growth option to a more balance option once you are say about 10 to 15 years from retirement, and then change to a more capital guaranteed option a few years from retirement. This is a more passive approach and has benefits as well as disadvantages. The benefit is that there is not much work involved, you just change your investment option based on your life stage, 2 to 3 times during your lifetime. This allows you to take more risk when you are young to aim for higher returns, take a balanced approach with moderate risk and returns during the middle part of your working life, and take less risk with lower returns (above inflation) during the latter part of your working life. A possible disadvantage of this strategy is you may be in the higher risk/ higher growth option during a market correction and then change to a more balanced option just when the market starts to pick up again. So your funds will be hit with large losses whilst the market is in retreat and just when things look to be getting better you change to a more balanced portfolio and miss out on the big gains. A second more active approach would be to track the market and change investment option as the market changes. One approach which shouldn't take much time is to track the index such as the ASX200 (if you investment option is mainly invested in the Australian stock market) with a 200 day Simple Moving Average (SMA). The concept is that if the index crosses above the 200 day SMA the market is bullish and if it crosses below it is bearish. See the chart below:  This strategy will work well when the market is trending up or down but not very well when the market is going sideways, as you will be changing from aggressive to balanced and back too often. Possibly a more appropriate option would be a combination of the two. Use the first passive approach to change investment option from aggressive to balanced to capital guaranteed with your life stages, however use the second active approach to time the change. For example, if you were say in your late 40s now and were looking to change from aggressive to balanced in the near future, you could wait until the ASX200 crosses below the 200 day SMA before making the change. This way you could capture the majority of the uptrend (which could go on for years) before changing from the high growth/aggressive option to the balanced option. If you where after more control over your superannuation assets another option open to you is to start a SMSF, however I would recommend having at least $300K to $400K in assets before starting a SMSF, or else the annual costs would be too high as a percentage of your total super assets. As your question appears in the second half, so will my answer.  Like you, I will provide some background.  I remember buying gasoline for $1.759 per gallon.  I am so old that I remember buying gasoline for $0.759 per gallon.  I recently paid $2.759 per gallon.  You claim that your  relative is not getting a very good return.  Some would suggest that, at $2.759 per gallon, I am not getting a very good price on gasoline.  Rates, yields, returns and the price of gas are not what they once were.  It is actually difficult to get a pretty bad return relative to the current market.  I suspect your relative is no longer getting what he used to get but he is getting a fair return. About record keeping.  Your Uncle Sam benefits at your expense when you keep poor records.  There are substantial penalties for failing to report everything.  Most high school graduates can manage one checking account, one savings account, several charge cards and about 20 CDs and stocks at different institutions with little more than the following:  a) a wall calendar b) a shoe box and c) a stack of 3 by 5 cards.  Don't misplace the shoe box.  If you can use a spreadsheet, it is even easier.  Backup your data. There are a several reasons why you shouldn't consolidate all his cash and put it in a single mutual fund account and then put together a mix of investments that work well for him.  - you are doing it backwards 1st put together a mix of investments that work well for him 2nd consolidate the assets.  Your phrasing suggests a general lack of understanding  - most CDs have penalties for early withdrawal.   - while you enjoy managing your 401K in a single online account, your older relative might not be as comfortable with a lack of paper statements (see shoe box above)  Let me tell you a little about my 401K.  x% blue chip, y% small cap, z% bonds, w% foreign stock.  Once a quarter, I change my current contribution to re-balance current value towards my target percentages.  Every 30 months or so, I consider changing my asset allocation.  The allocation considers my age, my spouses age, our childrens ages, my risk tolerance and my intermediate view of the markets.  Your mileage my vary. to recap "I write software myself and was involved in a couple of start ups.  One failed, another was wildly successful, but I did not receive much in compensation. The former I received stock, but since it failed, it was worthless anyway.  There should be compensation for your time in addition to equity in a company.   Any agreement needs be in writing.  In the later situation I was told to expect about a 17%/year bonus, but nothing could be guaranteed.  Translation:  ""It will never happen.""  It didn't, but I meet my lovely wife there so I have that for a bonus. Agreements need to address the bad things can happen.  What happens if one of you is no longer interested in continuing?  What happens if one of you die, or addicted to something?  What happens if one of you gets thrown in jail or disabled?  Right now you are full of optimism and hope, but bad things happen.  Cover those things while you still like each other. It might be enough to have a good salary, and some stock options.  You man not be interested in running the day to day business. Most of all good luck, I wish you all the best!" Based on your comment that you do not itemize your deductions, I think that's probably the next step for you to consider. Many of the suggestions that we would give require that you itemize. If you are not familiar with the potential deductions it would probably be worth your while to visit with a local tax professional and discuss your expenses including what changes you could make to minimize your tax bill.  Ultimately becoming eligible for the 401(k) if possible will allow you access to the biggest avenue for reducing tax liability. It sounds like you are already prioritizing and saving for retirement through your IRA, but most earners in the 25% bracket can't put the recommended 15% into savings (with tax advantages) through an IRA.