March 31, 2005
Non-Scientific Poll: Retirement Options
It's great going out on your own to become a freelancer. Many of us still do it during the early half of our life without envisioning far into the future what we are going to do when we stop. So my question is does anyone have retirement plans that involve some type of savings account or are most people just winging it and will figure things out once the time comes?
Personally, part of the reason that I moved beyond just doing web design was so that I don't hit the revenue ceiling and have the chance of retiring with a lot more money earlier in life (or quite possibly failing miserably). When I speak of a 'revenue ceiling' what I mean is that one person can only design so many sites during a year and therefore their revenue has a limit because people will only pay so much for a website. I am guessing that this is part of the reason why you see more and more web designers branching out into other areas such as book authoring and application development (ie. 37signals and Basecamp).
I also understand that many of you do it just for the love of design, but in this world you do need money so therefore I pose the question above. And for this reason I am meeting with a financial advisor next week to see what my options are. You can never start too early.
Comments
#1 | Matthew Oliphant (http://usabilityworks.org)
Retirement? While I will eventually quit dayjob, I can't imagine not working on something. I get the point of your poll, but unlike my parent's generation who usually had 1, perhaps 2 careers, my generation is going to have more than 5.
I am already on #3, and I am only 33.
#2 | Scrivs (http://9rules.com/)
Yes, I will more than likely always be working on something so I guess saying 'retirement' in this case means being able to leave whatever I am working on whenever I want without fear of how I am getting money in the future.
#3 | Bryan (http://www.majorchampionships.com)
Right now, my full time job pays the bills. I do stuff on the side to hopefully make paying the bills even easier and then eventually make enough on the side where I have play money to.
At the time, I am invested in Sirius Satellite Radio as well as I have a mutual fund setup, so hopefully both of those move up in the years to come.
I am hoping to just make enough money where it will all get stashed in a savings account and just grow.
Only time will tell.
#4 | Jeremy Flint (http://www.jeremyflint.com)
I have a 401(k) that my employer matches 100% on up to 4% and 50% up to 5%. My wife is a teacher, so she has her state pension.
If you are going it alone (freelance), look into Roth IRAs in good growth stock mutual funds. I would stay away from individual stocks, personally. If a company goes under, and you have 75% of your retirement in their stock, you are screwed. Remeber Enron and WorldCom?
You want something that will be tax free so you don't have to pay taxes on it when you go to take it out.
#5 | John Zeratsky (http://johnzeratsky.com)
Another way to avoid the revenue ceiling is to start managing designers and developers instead of being them.
#6 | Shawn (http://www.sh2.com)
Here is baseline for retirement.
If you can afford to live off of 8% of your nest egg per year, you can comfortably retire (you should be making at least 10% in returns, so this will never deplete your nest egg).
If you are planning on retiring before 59.5, make sure you have ample retirement savings in non-penalized accounts (e.g. outside of an IRA or 401k) to make up the years difference between when you retire and when you can tap your retirement accounts. Again at the same 8%.
Ideally, it is best to be debt-free, but that is another subject. Walk away from any financial advisor who doesn't agree with that statement.
#7 | Mike P. (http://www.fiftyfoureleven.com)
*ahem* make sure your sites are always up :P *ouch!*
#8 | Andrew (http://kempt.org)
I have about 50 years to just randomly run into money and that as much planning as I'll do.
#9 | Lea (http://xox.lealea.net/)
In Canada, you invest in RRSP (Registered Retirement Savings Plan) and my current employer gives me a small percentage of my earnings towards my RRSP and I contribute a set amount per month as well. Haven't done much else except put my money into high-interest savings accounts and my RRSP. Still need to contact my dad's financial advisor (yay, free consultation cause i'm family!) to get an investment plan going to get into the stock market and other things.
I hear you should try to put 25% (or more) of your gross paycheck/earnings towards savings/investments if you want to retire rich, according to several financial gurus like Suze Ormon and David Bach (who has really lucid, practical and great advice). And of course, before ANYTHING else, get rid of ALL your debt. Oh, and OWN a home if you can (I don't count mortgages are a debt, despite being a liability--I count them as investments). Get your equity up there. Also, we all know that the real estate market is pretty hot right now so, if you do everything right selling that baby in a few years can turn you a really nice profit (and more money for your retirement and other playtime).
Of course, make sure you can get as much deducted from your taxes as possible, and invest part (or all) of your returns towards savings/investments.
So far, this is working for me. And of course, start as young as you can, but it's never too late.
#10 | Jennifer Grucza (http://jennifergrucza.com)
I have a 401k through my current employer, a Roth IRA I set up myself, and a Rollover IRA from my first job's 401k. Those are my retirements savings. I also have an investment account where I'm investing in a Vanguard index mutual fund, for the shorter-term. Oh, and I have some employee stock from my first job, but it's worthless now. I agree with the person who said not to invest in individual stock - too risky. Mutual funds are better.
The Motley Fool (fool.com) is a good resource for learning about this stuff.
#11 | Scrivs (http://9rules.com/)
So this retirement thing seems pretty easy for you folks with corporate jobs. Anybody non-corporate care to chime in?
#12 | Kirk (http://www.alttags.org)
You're asking the right question at just the right time. The earlier you start planning the better off you'll be later in life. Investment experts will tell you that it's all about 'time in the market'. Even a few years can make a huge difference in the long run.
If you're self-employed you have a few options. A KEOGH or a SEP IRA would be similar to an employers 401k - except you'll be contributing all the money yourself. Find a good accountant. He/she will help you get the best tax break on your contributions.
In general, it's a good idea to sock a way as much as you can. You'll thank yourself later (when it turns out that Social Security no longer exists AND the Bush plan doesn't work out).
I'm kind of surprised by how many people missed the point of your question. We're all fortunate enough to be doing something we really love for a living. Still, it's good to have choices later on and not be forced to work forever.
I second the earlier recommendation on fool.com. It's a good starting point with a lot of information.
Oh, and because I can't stop expounding on this issue (maybe I chose the wrong career). Watch out for mutual funds. If you aren't investing in individual stocks then look into ETF's (exchange traded funds). They're like indexed funds, but the administrative expenses are generally MUCH lower. It adds up over time.
#13 | Greg (http://www.airbagindustries.com)
Invest in California real estate.
#14 | Andrew K (http://leftjustified.net/)
Besides making very healthy contributions to my super annuation fund (which my employer matches and my government adds to), my main plan is to retire with a bonsai nursery. I have been training bonsai since I was eighteen and my collection now includes some seriously valuable plants.
They're a risky investment, but incredibly rewarding along the way :)
#15 | Maxine (http://www.westciv.com/)
Yes, it is much more important to address this question if you are a "non-corporate type". Because I've never done anything really except work for myself I've always had to keep the future in mind - ie, I didn't have an employer to force me into superannuation. But I've also always had that means I'm happy with the trade off I've made between security (often so bogus in the corporate world anyway) and self determination.
You're doing exactly the right thing by seeing a finanacial planner, *but*, when you see this person make sure you've got your bullshit detector turned up to full, and don't be afraid to trust your own instincts as well. Get a recommendation from someone you trust and don't be afraid to walk out the door without siging on for anything.
#16 | skidder (http://www.scottkidder.com)
One thing I did this year was open a Roth IRA and throw fair amount of money in there, never to be touched again. I invested it all in a S&P500 index fund. While I'll never touch it again, by the time I can touch it, the magic of compound interest will have done beautiful things.
I suggest others that can do the same. Technically, you can always take out the principal tax-free, its just the capital gains you can't touch.
s
#17 | Colin D. Devroe (http://theubergeeks.net/)
I'm already retired, I just have a few hobbies.
#1 | Matthew Oliphant (http://usabilityworks.org)
Retirement? While I will eventually quit dayjob, I can't imagine not working on something. I get the point of your poll, but unlike my parent's generation who usually had 1, perhaps 2 careers, my generation is going to have more than 5.
I am already on #3, and I am only 33.