Well Heeled Blog > twentysomething

401K Maxed Out!

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My biggest financial news for June is that I’ve hit $16,500 in contributions to the 401K.  I am happy that I’ve done so, but for the most part I don’t really feel much difference in my net pay. Once I maxed out the 401K, I zeroed out my W-4 deductions and set up automatic deposits from my checking account to my Roth IRA. Basically, I need to keep as little money as I need to live on in my actual checking account.

To celebrate, I did pick up a few pieces of clothing from a sample sale site. Most of the time, though, I’ve been feeling a little like Hi That’s My Bike. So many questions right now – about life, career, purpose, meaning, how do I get from point A to point B if I am not really sure what point B is and how do I enjoy the journey between point A and point B if I am so worried on figuring out what point B should be. I suspect there is no magic answer rabbit that I can pull out of the proverbial hat. Unfortunately.

Wedding planning, even for 20 people, is getting a wee bit annoying. I suppose I care more than I thought but not so much to really put so much money and effort into it. All of this translates to: we don’t even have a date. Eloping is look so tempting right now.

It’s times like these when I so wish I can just strap on a pair of tango shoes and hit the dance floor. But I’ve been battling an ankle injury for over six months now, and while I am healing it’s still very frustrating that it’s not 100%. So no tango for a while, which adds to my malaise.

Back to the 401K. It’s great. But it’s no answer for the Question That Is Life.

2x Income = Retirement Goal by 30?

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I looked at an old post of mine from August 2007, when I had $11,400 saved for retirement. I was so excited that my fund balance broke into the “five digits”!

Now, I am aiming for my retirement accounts to break into the six figures by the middle of next year. My current balance is somewhere in the neighborhood of mid-$70,000, so I have some work to do, but if the markets hold steady and I max out every retirement vehicle I can, I have a shot. I was feeling pretty good about my progress, until I stumbled upon a 2006 CBS News article that said:

According to a number of experts and a recently released study by Fidelity Investments, assuming you are looking to retire at age 65 and earn an average income, by the time you are age 30, you should have accumulated 1 to 2 times your annual pay in retirement savings…

Ay ya aye! I have a few more years until I hit the big 3-0, but I don’t think the 2x annual income goal is going to happen for me.

Question From a Reader: Where and When to go to Graduate School?

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One of my readers, “Em,” is thinking about going back to graduate school so she can transition in a career in Human Resources.  I thought I’d open her question up to all of you.

why graduate school 300x297 Question From a Reader: Where and When to go to Graduate School?I am in a bit of a career rut.  I received my BA in 2006, and have since been working in assistant/office manager/receptionist-type roles.  I am 26, and have been thinking it’s time to start thinking seriously about my career and the steps I need to take so that I can start down an official Career Path.  I know there are no typical, proven, Total Success Guaranteed ways to approach the elusive Career Path, that different careers have different requirements, and that people find their dream jobs in multitudes of ways.  However, I am finding myself stuck in this rut, and not sure how to move forward.

I would like to pursue a carer in Human Resources, specifically in the area of employee onboarding/training and learning and development programs.  In this job market, I’m finding that you need previous HR experience even for the most entry-level jobs in the field, and because I cannot figure out how one gains experience in a position that requires the experience to be hired (which came first, the chicken or the egg?!), I’m thinking about going back to school.

However, school costs money.  I do not want to stay at my current job long enough to take advantage of their education reimbursement program (I’d be required to stay at least another two-three years, if I even qualify for it, which I might not, since it is hard to justify how an HR program is important to my role as a receptionist in a company that doesn’t even have an actual HR department), but I have been thinking about my options, and trying to see what is worth the investment.

There are a few Human Resource Management Certification programs that I’ve been looking into, ranging in cost from $1500-$6000.  The higher cost comes with the UC Berkeley (extension) label, better classes, and a (somewhat) closer proximity to where I live (though it’s still about a half hour.  The lower cost comes with a California State school label, less interesting-sounding classes, and a location that I might not even be able to get to (I would likely be attending these classes at night after work).  The other option is a strictly online university, but I’m not sure that would carry the same weight as even a state school.

The other option that I have just started thinking about is some sort of Masters program, though I haven’t begun to research programs, schools or costs yet.  I always said I would only go back to school if it was necessary for furthering my career, and I’m starting to think that it’s time, but we’re talking about a lot of money here! Although the other side of me says “$1500?  That’s like one, nice vacation.  Or my portion of two month’s rent.  It’s not THAT much, if it means doors opening to a new career.”

How do you decide when a higher degree is a necessity for career advancement, and then how do you decide how much money is worth it to spend?

image source: studentbranding.com

Will Social Security Be There When I Retire?

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social security retirement age Will Social Security Be There When I Retire?Will social security be there when I retire? Probably, but with caveats

One common refrain I’ve heard is that today’s young adults don’t (or can’t) expect Social Security (the combined Old-Age, Survivors, and Disability Insurance Trust Funds) to be there when we’re older. I understand that sentiment. There are very serious issues facing Social Security. Unless changes are made, we can’t keep paying out benefits the way we have been. (See this CNN Money series that explains the system).

But I don’t believe in the knee-jerk response that Social Security is dead! or that we are only going to get a few pennies when we reach our dotage. Government retirement / disability insurance is a valuable safety net for the disabled and seniors, even though I am still 40 years away from retirement age, I expect some form of Social Security payment to be there when I retire.

Safety net, not the whole kit and caboodle

Expecting some form of Social Security, however, doesn’t mean that I expect 100% of my benefits nor do I expect the government retirement insurance to be my only source of income in retirement. In fact, the Social Security Statement (an annual statement that is mailed about 3 months before your birthday) that I received last year tells it pretty much like it is:

…Social Security was never intended to be your only source of income when you retire. You also will need other savings, investments, pensions or retirement accounts to make sure you have enough money to live comfortably when you retire.

…the Social Security system is facing serious financial problems, and action is needed soon to make sure the system will be sound when today’s young workers are ready for retirement. In 2017 we will begin paying more in benefits than we collect in taxes. Without changes, by 2041 the Social Security Trust Fund will be exhausted and there will be enough money to pay only about 78 cents for each dollar of scheduled benefits.

These are sobering facts. Still, 3/4 payout of scheduled benefits (or even 1/2 payout) is a far cry from the dire prediction of absolutely zero benefits. Of course, many things can happen in the next 30 to 40 years, but I think it’s more likely that Congress will enact changes, such as means-testing for benefits, increasing eligibility age, lowering benefits, increasing the income that can be taxed under Social Security, etc. than allowing the entire system to go “bankrupt.”

What you can learn from your Social Security Statement

Looking through my Statement was quite interesting – it detailed the years I worked and my taxed earnings, the basis for which my future benefits will be calculated. According to my statement, I do not qualify for retirement benefits or Medicare benefits (although I have qualified for disability benefits) because I’ve only been working for a few years. You need 40 credits to get retirement benefits – a maximum of 4 credits per year. Every year, the income needed to get each credit changes – for example, in 2009 you would earn 1 credit for each $1,090 of income. That means if you’ve earned $4,360, you will have earned the full 4 credits.

Apparently, I only have 17 credits, but of course as I work more I expect to very quickly reach retirement payment eligibility. Now I understand why people who have stepped away from full-time work are penalized under the system – not only are Social Security benefits calculated from your total income, your own eligibility is determined by the number of years you’ve worked.

My bottom line on Social Security

Nobody knows what today’s 25-year-olds will get in terms of Social Security in 40 years, just like nobody knows if any one particular 25-year-old will live to retirement age. But I feel comfortable expecting something (both in terms of getting some Social Security, and living long enough for that to be a concern to me!). It’s too soon for me to incorporate estimated benefits into my planning, however. As I come closer to retirement I will take Social Security payments in account, but for right now I will continue to save as aggressively as I can for retirement.

Do you expect Social Security when you retire?

image source: socialsecurityretirementincome.com

Working Through the “Off” Days

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I’ve been dancing the tango consistently for about 2 months. I enjoy it. A couple of weeks ago, however, I felt a little “off” – my turns weren’t quite as compact, my follow not quite as responsive. I felt tired, discouraged.

So this week, instead of going to tango 4 times a week, I’ve cut back to only once. I gave myself (and my feet!) a break, went to my favorite class, and got back into the groove. Those “off” days were uncomfortable, but I didn’t let them deter me from working towards my longer term goal: to become really, really good at Argentine tango.

In personal finance, I’ve had “off” days, weeks, and months. But the important thing, I have learned am still learning, is not to let momentary obstacles become permanent roadblocks.

On the other hand, keeping up a certain level of intensity continually is unrealistic. So maybe you’re focused on saving for retirement, and try to put $500 in your 401K every month. Well one month you had a really bad time – you got a traffic ticket, or you went on a shopping spree, or you ate out at a swanky restaurant every week.

That doesn’t mean you should give up on your goal of saving in the 401K, but it also doesn’t mean you should eat cheese and crackers for the next three months to make it up. One, you probably can’t do it. Two, you will feel guilty that you can’t do it, or feel discouraged and throw in the towel on the whole goal.

This is what I’m learning during this stint with unemployment. Many times I do feel frustrated that I am not moving forward on my financial goals, or that I’m not progressing in my career as I had envisioned. I had really wanted to be able to max out my 401K this year (and you know, every year after that until I retire).

But sometimes, in order to continue working towards a goal in the long run, we have to be able to forgive ourselves for, and move on from, our transgressions in the short run.

Freedom Fund – It Gives Me Freedom (or, How I Really Feel)

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A long-timer commenter, Onegirl, asked some insightful questions on my previous post. I imagine other readers might have similar questions, so I wanted to offer my thoughts on the subject.

It seems that all of your posts lately have been talking about spending money or remaining on a budget. Are you sad you don’t have a job? Are you trying to remain positive for your readers? I’m sure some days you are feeling bad or sad, but I’m not really getting that vibe. Do you not want to share that with us? Just curious. How is your freedom fund coming along? Is unemployment enough to keep you happy for now? Are your parents helping you especially since you just moved into the cool new place?

Everyone deals with not having a job differently. Here’s how I chose to respond to my situation: I gave myself 3 days of “free-for-all”: sleep in until noon, mope around if I wish, watch TV online, eat whatever I want. Then, the free-for-all is over. I’m not going to feel so bad or anxious that I impede myself from the next goal, the next opportunity.

Financially, I am not worried about the next 9 months (I sincerely hope my job search doesn’t extend that long – I’m working on a few opportunities that I hope will bear fruit before then. One involves living overseas). Unemployment benefits cover all of my day-to-day expenses, and I have cash savings that will go quite a ways, especially if I move back home. My parents treat me to dim sum more often, but other than that they don’t give me any money (although knowing that I have their support is invaluable). 

I said before that the uncertainty is unnerving, but the possibilities are exciting. I stand by that. Don’t get me wrong, I don’t want to be rah-rah earning no income is great - I want to be progressing in my career and making money. But here’s where having a Freedom Fund is so wonderful – it allows me the opportunity to conduct my job search aggressively, not desperately (I don’t write about interviews because they fall into the no-blog-about-work policy). If I need to travel to hold informational or formal interviews, I can afford the gas or the plane ticket. If I want to take advantage of my free time by taking classes that will be personally and professionally enriching, I can do so. It gives me peace of mind.

So, do I feel bad or sad sometimes? Yes, I have my moments. But they are just that - moments. They don’t overwhelm me nor stop me from doing what I need to do. Do I want a job? Of course. Am I enjoying the chance to do things that I haven’t had time to do before (travel, dance lessons, etc.)? Well… yes. Does having a Freedom Fund, being young, and having the emotional support of my parents make me feel eager and ready to embrace what might come tomorrow? Heck yes. icon smile Freedom Fund It Gives Me Freedom (or, How I Really Feel) I’m determined to take advantage of this time the best I can so that when I look back on it, I can say, wow, I really did something cool, and not, wow, I had all that time and did nothing.

Things I Wish I Would’ve Known in My Twenties

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Writing about Future Me has gotten me thinking… what would she want me to know? This is where the perspective and advice of those who have come before me is invaluable.

I don’t have a crystal ball, but I figured I have the next best thing: I can reach out to all of my readers who have survived their twenties and ask you: what are your answers to the title of this post?

Imagine that you can travel back in time and have a 2-hour conversation with your 25 (or 26, or 27, or 28)-year-old self – what do you want him/her to know about love, relationships, money, career, children, health, education, etc?

What mistakes do you want to caution him/her against? What adventures do you encourage him/her to undertake? Who was the one that got away? What kind of life is a well-examined life? Is the well-examined life the happiest?

Please leave a comment or send me an email with your thoughts. You can be as public or as anonymous as you’d like. It would be helpful if you can give your age or an age range (30-35, etc.) and a brief biographical sketch.

Thank you to everyone who contributes! I know the twentysomethings who read this blog (and me!!) will appreciate this.

Edit: Thanks to everyone who’ve commented. Please keep the comments coming! All life advice will be appreciate, doesn’t have to be limited to personal finance. icon smile Things I Wish I Wouldve Known in My Twenties

My Plans for Friday Night

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Dinner with a dear old friend whom I haven’t seen in a YEAR.

Then, settle in with CB and this book, and enjoy milk and cookies.

Sometimes I worry that when I’m 30 or 40 I’ll regret not hitting the clubs in my 20s, but other times I’m struck by how perfectly, blissfully happy I am with very simple ingredients for low-key night: CB, friends, a good book, and food!

Still a Kid at Heart

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The Wolves of Willoughby Chase, it is!

A special thank-you to Karen and English Major for solving the question that has been bugging me for the past decade.

So I requested the book from the library, and I am so excited about reading it. I love young adult books – I feel all nostalgic when I read them, and the print all appear so large to me and the books feel so short now.

Does this mean that we’re growing up?

So in the spirit of sharing, here are some of my all-time favorites. Chime in with your own in the comments!

- The Book of Three by Lloyd Alexander
- A Day When No Pigs Will Die
- Where the Red Fern Grows (I love Old Dan and Little Ann)
- Hating Alison Ashley (also requested this book from the library)
- The Little House series
- Willy Wonka and the Chocolate Factory
- The Boxcar Children series

As I “graduated” from childhood, I began reading Fear Street by R.L. Stein, all the Lois Duncan books (one of my favorite? Locked In Time).

And here is my favorite young adult “romance” of all time: The Witch of the Blackbird Pond (Oh, Kit and Nat… even accusations of witchcraft can’t tear these two apart).

Into the Looking Glass

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A very good friend recently told me that I seem to have things figured out. She said to me, “you keep up with current events, manage your finances, live on your own and have a ‘together’ wardrobe”.

I didn’t know whether she said that because she’s an awesome girl who thinks highly of her friends (i.e., me) or whether she really feels that I have such a charmed life…

Then I thought, isn’t this part of the noise of the roaring twenties? How we are doing vs. how we expected to be doing vs. how we think our peers are doing? I wonder how many people look at my friend, and think she has the charmed life… after all, why wouldn’t they? She is smart and friendly, pretty and slim. She has shiny hair and a cute boyfriend and her graduate studies. Are those superficial things? I don’t know… but it can be hard to figure out what’s really going on, even in the lives of our closest friends.

I rarely talk about the questions or issues I have in my relationship because all my girl friends appear so secure in their relationships (or single-hood). When I was questioning whether my first job out of college was the right direction for me, I hesitated to talk to any peers because I felt like a failure. After I changed jobs, 2 or 3 more friends did the same. One friend, when we met up at a holiday party, expressed her frustration and loneliness with her feeling of having “failed” to find the ideal job in the first get-go. I listened and thought, wow, I wish we would’ve talked.

So as I catch glimpses of the lives of friends and peers, I remind myself that this looking glass is like the fun house mirrors at fairs and carnivals. There’s some truth in the reflection, sure, but many times it’s so distorted that I can’t figure out what exactly I’m looking at.

In-betweeners

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Thank you for bearing with me as I ruminate on things that are both far more complicated and infinitely less controllable than personal finance.

So I’ll get back to you when I have it figured out (in 50 years, when all computers will be implanted in our heads and we can write our blogs by PROJECTING OUR THOUGHTS). In the meantime, it’s really nice to hear feedback from so many people that I don’t even know (virtual wave: hi!). I love writing this blog, and 90% of the reason is because I have such awesome readers (yeah, you guys) who take the time out of his/her (mostly her, it seems) day to comment and share.

So… thanks. I mean it. I guess I feel like I’m in an “in-between” state – can’t go back to being a kid, but I feel like I should have more things in order before I can properly feel like an adult.

Things that make me feel like a kid:
1. Going to Disneyland, eating funnel cakes before riding Space Mountain
2. Going home to do laundry
3. Taking Mom’s leftovers
4. Reading my favorite young adult books: Witch of the Blackbird Pond, The Little House Series, True Confessions of Charlotte Doyle***
5. Having sorbet, and only sorbet, for dinner (actually, maybe this should be classified as a privilege of adulthood… what do you think?)
6. Eating cake. Lots and lots of delicious cake with chocolate and cream frosting and fruit filling
7. Watching Sailor Moon, DuckTales, and Capitan Planet clips on YouTube***
8. Leaving work at 4:30 on a slow day. Feels like school is letting out early
9. Cartwheels

Things that make me feel old:
1. Talking to my high school friends and realizing that I’ve known them for over EIGHT years
2. Taking the SAT when it was on the 1600 scale instead of the current 2400 scale
3. Having guides on asset allocation and negotiations on my bedside table
4. ***Realizing that I first read those books and watched those shows OVER A DECADE ago
5. People talking about “the 90s.” When did it stop being “a couple years ago” and become “the 90s”?!
6. Working on weekends
7. Getting stuck in traffic with road-raging drivers as we all try (but fail) to make our way down the parking lot formerly known as a freeway
8. Going to get an annual physical and actually worry that there may be something wrong
9. Seeing the complete set of Encyclopedia Britannica in my parents’ living room

What’s on your list?

P.S. How could I have forgotten about MINESWEEPER?!?! It is the best game ever (along with Solitaire & Hearts & Oregon Trail).

The Roaring Twenties

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I’m smack dab in the middle of Generation Y. From speaking to my friends, reading books, articles, and blogs and hearing the stories of readers, it seems that many 20-somethings struggle with expectations and challenges of growing up, from relationships to the workplace and everything in between.

On one hand, it helps to know that I am not alone in this. On the other, I hoped that such feelings would magically be resolved in a couple years. But that doesn’t seem to be the case…

So, I have a bit of a Type-A personality. And all the not-knowing-ness associated with the 20-something years (what’s my passion? will I get married? can I be successful and happy? will I be satisfied with where I am in 10 years?) isn’t sitting well with me. That is probably why I read so much on asset allocation, pour over my budget, and blog endlessly about my finances. Not because I value money above all else, but because managing my money anchors me. I won’t go so far as to say that personal finance is meditation, but it makes me feel less adrift in the great waves we call the “twenties”.

And that’s also why:

1. I’m beginning to study for the GMAT even though I don’t plan to go to business school anytime soon. Studying makes me feel like a student again. Sure, we’re all “life-long students,” but I find that sitting down at my desk and really study, even for an hour, makes me feel productive in my off-work hours. The test doesn’t care how good you are at other aspects of life. It’s just you and the test. Mano a mano. (Or, mano a examinacion). That kind of simplicity can be really, really nice.

2. I have plans to volunteer at a couple of nonprofit organizations this fall, not because I’m such a wonderful person who want to make the world a better place (I mean, I do want to do good, but that’s not the only reason), but because when I don’t have things planned, I would just sit alone in my room and several hours would pass. I’m not sure, however, if that’s a symptom of 20-something malaise or just a sign of laziness.

So, in conclusion to this very inconclusive post, plans are good. Feeling like a student once in a while is good. Channeling my need to control in an uncontrollable world to areas that will benefit me (i.e. personal financial management) is good.

But I’m also working to be at peace with feelings that I don’t like. Loneliness, uncertainty, sadness. There are a lot of things that I can do to bid my time until those feelings go away. I can pick up a good book, I can cook a nice meal, I can just accept the fact that bad feelings are a fact of life, and wait until they pass. I pray. It kind of helps.

So, I’m not the only one right? Anyone else feeling the way I do?