Ask the Grumpies: What to do 10 years before retirement?

First Gen American asks:

 Things to think about/do now when you are ~10 years from retirement…assuming the cash side is all set.

Sadly, #2 and I completely came up with a big old blank when we discussed this question. Personally, #1 has trouble thinking about next week, so a 1 year plan is out and a 10 year plan is pretty unthinkable. She realized while contemplating this question that in 10 years, her 10 year old will be 20 and will probably no longer be living at home. Crazy! And difficult to contemplate. That’s another world from now. (Kids got lots of extra hugs.) Ten years is a long time!  I also suspect that even if it’s a year before retirement I might think, “Let’s worry about what to do next, you know, after retirement. When I have time.” If I retire.

#2 also says, “keep living your life”. And, “How can you be bored if you have books?”

We came up with a lot of good ideas, but they were all about the cash side, which in this question is already set. If the money tells you it’s 10 years until retirement… keep working? Earn more money? Don’t quit? So, uh, you should read the getting the most of your social security book (or run through the software if that’s more your style), but again, that’s money stuff.

Fortunately a lot of these Early Retirement gurus spend time thinking about the non-monetary parts of retirement.  So we’re punting and linking to Our Next Life.  Here’s their . Not all 10 questions are about money. So maybe that will help?

Grumpy Nation, what better advice do you have for First Gen American?


Ask the Grumpies: TIAA-Cref vs. Vanguard Lifecycle funds

CPP asks:

Do you guys have any opinions on TIAA-CREF Lifecycle funds versus Vanguard? I am currently in the former, but I could change if it makes sense. I have this feeling you guys addressed this on-blog, but I couldn’t find the post. Happy New Year!!!

This one is pretty easy.  Vanguard lifecycle funds (aka Target date funds) are almost at-cost.  The fees are almost the same as the fees would be if you put together the already-low-cost index funds that make their lifecycle fund.   TIAA-CREF charges extra for the convenience.  Vanguard will save you hundreds if not thousands of dollars over the course of your investing career.  (IIRC, it is a factor of 10 difference if you do this in an IRA, but within your 403(b) plan you will have to look at the fees yourself.)

That said, there are some complications.

1.  TIAA-CREF will send out a representative to talk to you, fill out forms for you, etc.   If you’re unlikely to do anything without someone holding your hand, this is a reason to stick with TIAA-CREF.   I do not know if Vanguard will do this for you, as we do not have the Vanguard option at our school, but my guess is you would do things over the phone if you want help.

2.  TIAA-CREF and Vanguard have slightly different ideas about what appropriate investment paths and allocations are.  My personal belief is that I don’t know any better than either TIAA-CREF or Vanguard (and they don’t really know either).  Still, you may have strong beliefs that may or may not be correct and one or the other program may better fit these beliefs.

Additionally, TIAA-CREF is not one of the 403(b)/401(k) companies that is actively trying to rip you off.  Even though their fees are higher than those for Vanguard, they’re still among the lowest in the industry.  With new legislation about transparency, fees for the entire industry may be dropping, so it may make less of a difference what lifecycle fund you choose in the future.

It’s Christmas Eve and a random reminder to invest for retirement

Because it’s not like anybody is going to be reading our blog today anyway.  Heck, *we* won’t be reading our blog!

Next year is kind of exciting for IRA lovers because the amount you can save in an IRA is going up.   In 2012 you could invest $5000 per person.  In 2013 you can invest $5500.  How cool is that?

401(k) and 403(b) limits are also going up.  Last year, a mere $17000.  This year, a full $17500.

With time and compounding these extra $500 tax-advantaged contributions will start to add up, especially if you’re married and it’s more like $1000.

Of course, with our state-employment options there’s no way we’ll be maxing out all our tax-advantaged accounts (457 limits are also going up another $500), so getting the additional $500 room isn’t helping us because we didn’t have the $39000 ($17000 + 17000 + 5000) to put away last year, much less $40500 this year (wouldn’t it be neat if we could get raises?  hahahahahaahaaaa *sigh*), but for all you folks that don’t have access to that 457 plan, try to use that new extra room to its fullest extent!