Ask the grumpies: What to save for after debt

First Gen American asks:

When you pay off all your debt, what then? What should you save for (presuming that you are already saving for retirement and kids college and you like your profession so you’re not necessarily motivated by extreme early retirement).

Opportunity.

Just make sure to allow yourself to take some of those opportunities before you die.  Or at least make sure that money gets you into a really swanky nursing home.

20 Responses to “Ask the grumpies: What to save for after debt”

  1. Leigh Says:

    Opportunities is a great reason to save!

    And remember that just because you aren’t motivated by extreme early retirement doesn’t mean that your employer is loyal enough to keep you until YOU want to retire! How many people who are laid off in their 50s and 60s find new jobs easily? My base retirement goal (and what I tell people offline…) is that I want to be financially able to retire by age 50 because I know it’s hard to get hired in my field past your 30s/40s unless you’re higher up and then there are fewer positions available.

    Or maybe you want to save for adventures you want to have once you’re empty nesters. Or pay down your mortgage? (I can’t tell if that’s included in “all debt”.)

    • Linda Says:

      Your point about forced early retirement is a good one. I was talking with my ex-husband the other day and when we talked about his work it seems he’s in that same boat. His previous jobs were quite high paying, but the last one depended on a grant that ended. He’d been consulting (and living w/out good benefits, of course) and recently landed a full time job. While he has decent benefits now, his salary is half what it was when he was employed just 10 years ago. He chalks it up to his age. He’s doing OK, though, since he was always good at saving and investing, and he cut his expenses by moving to a cheaper apartment. But still…it was worth thinking about for me.

      • Leah Says:

        Also worth thinking about in the sense that he can pay for day to day expenses, perhaps, with his new job but not save aggressively for retirement. I didn’t make much through my 20s but wish I had put a little bit more away. I think I’m putting away enough now and am glad I’m saving in my 30s for retirement. I can’t imagine people who wait until their 50s to save and then have something happen.

      • Leigh Says:

        @Linda – Yup, my parents have had several friends get “early retirement packages” and some of them flourished with the package and some of them went back to work later. It’s an interesting lesson to watch play out. My dad has never had a desk job and thankfully he’s still able to work, but that’s always something to think about too.

        @Leah – Yeah, exactly. I am saving for retirement in my 20s and that means that I could take a lower paying job later on and still be fine since the existing retirement savings will continue compounding even if I stop contributing at some point. Compound interest FTW.

      • Contingent Cassandra Says:

        Indeed. In fact, this is one of the major problems with even non-TT full-time academic jobs: one loses the tradeoff between taking longer to enter the labor force because one is pursuing a Ph.D. and the increased likelihood of being able to stay in the labor force longer that comes with tenure (there are still no guarantees about health, of course, and there was once mandatory retirement at 70, but the chances of continued employment in a tenure-track position were/are still better than in a more physically demanding and/or insecure job). When I was in grad school, those who envisioned a non-tenure-track system (either as the “new normal” or as a parallel alternative to a continued tenure-track system) assumed that the non-TT positions would have to pay a higher wage, as a tradeoff for decreased job security. I wonder whether that will ever come to pass, at least in fields where jobs in industry pay much better than those in academia.

        I’m in no way in a position to retire now (at just over 50), or even at 65, but I am trying to arrange various things so that I have some alternatives for very cheap living over the next 15-20 years if need be, so as to conserve what retirement savings I have and maximize social security payments. While there are no guarantees about anything, I come from a very long-lived family, and I’d rather be living somewhat on the edge in my 50s and 60s than 80s or 90s.

    • nicoleandmaggie Says:

      Absolutely. The line between unemployment and not being in the labor force blurs at older ages and it takes longer to find a job when you’re older.

  2. Miser Mom Says:

    Saving for putting your money where your mouth is? Sometimes, the things we say we believe in cost more (at least up front) than the cheap and easy things. Organic food is a small example that applies to some people. For me, about 6 years ago we completely energy-sealed and insulated our house, to the tune of many many tens of thousands of dollars. Financially, this didn’t make sense (I think someone calculated that the pay-back time was 25 or 30 years). But personally/ethically/morally, I’ve never once regretted the cost — to me, it was better than spending the money on a cruise or a trinket or such.

    • Leah Says:

      And even if it is penny-wise and pound-foolish, you now have some built in cushion for the future since energy costs will be less of an issue for you.

    • Contingent Cassandra Says:

      I know someone who paid not only for a mortgage-free recently-built, well-insulated house but also for a new geothermal heating system out of a divorce settlement for much the same reason(s).

      Also, energy prices are volatile, and, notwithstanding the present probably-anomalous moment, they tend to go up. Reducing one’s dependence on fossil fuel is probably a wise as well as an ethical move in the long run — somewhat the equivalent of buying and holding in the stock market; while things will bounce around year to year, you know the overall curve is very, very likely to trend upward over time, and the longer the time period, the more likely that trend becomes.

  3. Leah Says:

    Another vote for saving for opportunities. You never know when that once in a lifetime thing comes up, and you don’t have the money sitting in the bank. Ever grateful for my savings because I rarely have something come up that I truly want to do and can’t afford. I “can’t afford” plenty, but to me, that just means it’s not big enough to justify spending out of savings.

  4. Ana Says:

    security. which is basically what Leigh & Linda discussed. To not have to worry about a job loss or any other unexpected slow down in income.

  5. SP Says:

    Opportunity is a great answer. Security and opportunity are very closely related to me. I might call it an emergency fund, but my cash savings really just is there for when I want it or reed it (within reason). Similarly, saving extra for retirement early on is a form of security, but it also gives you an opportunity to make different choices later in life.

    • nicoleandmaggie Says:

      I think they’re related for me too. For example, when DH left his job, he could do that from the perspective of opportunity rather than loss of security. Without security, opportunity is a lot harder to come by.

  6. chacha1 Says:

    I’m in a similar position to Contingent Cassandra, above – at 50, not expecting to retire before 67 (which means DH will be 73). We’re much better off squeezing where we can now so we don’t have to squeeze quite as hard when we stop working. Reason #1 for moving out of the city for retirement: our expenses then will be much lower, and our cost to build there in the first place will be much lower, which means the amount we have to save now is much lower.

    Security is a much greater concern for us than opportunity. We’ve both had enough great experiences that we’re not going to feel like we’ve missed out.

    Saving after debt is something I look forward to. :-) Right now, paying off debt = saving.

    • nicoleandmaggie Says:

      People prefer increasing consumption streams and hate decreasing ones! So consumption smoothing is good, but only if it has an upward trend to it so that the future is always a little brighter than the past was.

  7. First Gen American Says:

    I guess part of my assumption is that if you are debt free and own a home outright, you don’t necessarily have to be in a peak earning job anymore. The assumption is that the reduction in one’s fixed expenses solves some of the angst associated with late career job loss.

    The problem with savers is that no amount of money saved ever seems like enough to account for everything, but if you are too miserly, you end up missing out on living in the present.

    My uncle had a brick holding up his sofa for 40 years and tons of money in the bank. In the end, the cash was a curse when his son emptied his account on his death bed while his wife needed nursing care. The money made the last weeks of his life hell. I’d rather leave no inheritance at all if having one means my kids would fight over the money and do unethical things to get more than their fair share.

    But back to the topic at hand…having money has allowed me to live in a good town, and allow my mom to live with us in her own private space. I wasn’t able to afford doing that just 10 years ago but it’s nice to now be able to have the freedom to make choices like that without putting myself one job loss away from financial ruin.

  8. J Liedl Says:

    Saving money to support Autistic Youngest. She may develop true independence but she may not and rather than put the burden of care on her sister and social services, we are saving with hopes of setting up a trust.


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