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Devaluation of the dollar VS my retirement savings

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Devaluation of the dollar VS my retirement savings

Old 06-10-2019, 05:43 PM
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Default Devaluation of the dollar VS my retirement savings

Hello all, Iím 22 years old and wondering about retirement. Where I work now, my retirement age is set at 60 years old to receive a full company pension, and 60 years old to collect Railroad Retirement, I have also decided to fund my own deferred compensation plan (457.)

I do not pay into social security, so I will not be able to collect, but will collect Railroad retirement, a company pension, and my self funded 457b deferred compensation plan. I contribute 10% of every paycheck to this plan, pre tax. So far this year I have saved 3,000 in this plan, 10% of the 30k I have made so far. Iíve been doing research and considering the inflation over the last 40 years, how ďworth itĒ is it for me to be saving for my retirement right now? For example $100 in 1980 is worth about $290 in 2016.

What will my $3000 be worth in 2060 when itís time for me to retire? I know I will save much much more as I begin to make more money yearly and as I move up the ladder at work, but am I paddling upriver right now by saving money?

If anyone has any input I appreciate it.
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Old 06-10-2019, 05:49 PM
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Very few people wish they had saved less money early on in their careers.

aside from the leveraged to the hilt THT crew that borrows money on everything in sight because they consistently earn double digits inthe market year after year, decade after decade.
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Old 06-10-2019, 05:51 PM
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I'm not an expert but my dad had a postal pension and worked post retirement to get social security. Can you get medicare with you pension? Healthcare is the key to retirement for me.

As far as saving, yes that money will add up if invested right. I also had a pension on top a 401K, I couldn't control it so I didn't worry about it, figured if I was lucky I get 20 or 30 K. Company was bought out and pension was over 100k and rolled into a 401. I was happily shocked.
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Old 06-10-2019, 05:54 PM
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$3,000 with average annual return of 7% will be worth ~$48,000 in today’s dollars.( ~$21,000 w/2% inflation)
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Old 06-10-2019, 05:54 PM
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Stock market return has averaged 10% year for the past 100 years. The fed tries to keep inflation around 2% add in compound interest and you will be fine.

If you are asking this question you should be researching compound interest, inflation rate and market returnes.
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Old 06-10-2019, 05:55 PM
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Investing a little early is much, much, much more important than anything you can invest later. Keep doing what you are right now and put any pay raises to bump your 10% until you are at 15%.

If you can work that up to 20% by your later 20's that would be even better.
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Old 06-10-2019, 06:10 PM
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Originally Posted by Jace1022 View Post
Hello all, Iím 22 years old and wondering about retirement. Where I work now, my retirement age is set at 60 years old to receive a full company pension, and 60 years old to collect Railroad Retirement, I have also decided to fund my own deferred compensation plan (457.)

I do not pay into social security, so I will not be able to collect, but will collect Railroad retirement, a company pension, and my self funded 457b deferred compensation plan. I contribute 10% of every paycheck to this plan, pre tax. So far this year I have saved 3,000 in this plan, 10% of the 30k I have made so far. Iíve been doing research and considering the inflation over the last 40 years, how ďworth itĒ is it for me to be saving for my retirement right now? For example $100 in 1980 is worth about $290 in 2016.

What will my $3000 be worth in 2060 when itís time for me to retire? I know I will save much much more as I begin to make more money yearly and as I move up the ladder at work, but am I paddling upriver right now by saving money?

If anyone has any input I appreciate it.
A few things come to mind, you can never tell what inflation will do in the coming years, so banking/counting on a set figure is going to be tough given you've got so many years ahead of you. Let them all of a sudden decide to try paying that defect off and they tap into your savings account like they did with Greece, or not pay it off and the dollar gets further devalued.

What Railroad do you work for and in what capacity? Can your position be outsourced? Is it a passenger rail or freight? RR's like most companies are looking to cut costs and personal are some of the biggest costs they have. I don't know of any RR's near Manahawkin, NJ so I can only guess it's NJT, Amtrak or CSX unless you commute to Philadelphia or Northern NJ.
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Old 06-10-2019, 06:26 PM
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If the future looks anything like the last 100 years, you're money will grow faster than the dollar shrinks. Invest in boring old index funds and you should be able to get 10% minimum per year. Some years will be good, some will be bad but over the next 40 years, you'll do well. Inflation is around 3%, your growth will be at least 10%. That means your inflation adjusted growth is at least 7%.

Rule of 72: divide 72 by the inflation rate and that tells you how many years it takes for your money to double. Using the "inflation adjusted" 7%, your inflation adjusted money doubles about every 10 years or 4 times in the next 40 years. $1 x 2 = 2, 2 x 2 = 4, 4 x 2 = 8, 8 x 2 = 16. Every dollar invested today is worth $16 in 40 years. And remember, that's the inflation adjusted value. You'll actually have much much more than $16, but adjusting for inflation it's going to be only worth $16. But that's still pretty darn good!

So, the moral of my boring story? Invest as much as you can now when you're young. The doubling ins't worth as much as you get closer to retirement because you have less times for your money to double.

And...NEVER., NEVER, NEVER take money out of your investments. Have an emergency and need $1,000 for a car repair? That repair is going to cost you $16,000 if you pull it from your retirement savings.
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Old 06-10-2019, 06:37 PM
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Start reading Bogelheads forum. Very informative.

Sounds like you have a good start. The only thing that I will add is to think outside the box with something inflation protected like rental properties. Some people hate them, some love them but I would think of something tangible that will provide income down the road or the ability to sell.

I also like owning a home as it is a forced saving plan if you do it correctly.

Cheer and best wishes.
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Old 06-10-2019, 06:45 PM
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It's much harder to save money when you are younger. Kudos to you if you can.

I suggest a goal of getting debt free in retirement. Your pension and outside investments should serve you well then. If no medicare, get supplemental insurance now cheap, for use later.
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Old 06-10-2019, 06:52 PM
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Invest as much as you can as early as you can. Here is a simple example of compound interest from one of Dave Ramseyís books me ex sent to our daughter so she can start investing at 18.



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Old 06-10-2019, 07:03 PM
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Predictions made by financial experts of where inflation and the general economy will be next year are iffy at best.

38 years from now, who the heck knows.
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Old 06-10-2019, 07:19 PM
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Originally Posted by Jace1022 View Post
I do not pay into social security, so I will not be able to collect,
Why not?
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Old 06-10-2019, 07:25 PM
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Originally Posted by Jace1022 View Post
Hello all, Iím 22 years old and wondering about retirement..
Good for you. The fact that you are planning for retirement at your age suggests you will be financially successful in the long term.
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Old 06-11-2019, 04:11 AM
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A tougher decision maybe saving pre or post tax dollars....if your in a very low tax bracket now, I would seriously consider a post tax investment account

kudos for even thinking about this....
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Old 06-11-2019, 04:17 AM
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Originally Posted by Jace1022 View Post
Hello all, Iím 22 years old and wondering about retirement. Where I work now, my retirement age is set at 60 years old to receive a full company pension, and 60 years old to collect Railroad Retirement, I have also decided to fund my own deferred compensation plan (457.)

I do not pay into social security, so I will not be able to collect, but will collect Railroad retirement, a company pension, and my self funded 457b deferred compensation plan. I contribute 10% of every paycheck to this plan, pre tax. So far this year I have saved 3,000 in this plan, 10% of the 30k I have made so far. Iíve been doing research and considering the inflation over the last 40 years, how ďworth itĒ is it for me to be saving for my retirement right now? For example $100 in 1980 is worth about $290 in 2016.

What will my $3000 be worth in 2060 when itís time for me to retire? I know I will save much much more as I begin to make more money yearly and as I move up the ladder at work, but am I paddling upriver right now by saving money?

If anyone has any input I appreciate it.
How do you "not pay into social security?" I thought the exemptions were foreigners, religious, students and income level?

And, btw I think that's a bad idea. At 22 you have no idea what the future holds; many people with "secure" pensions are bagging groceries in their seventies. SS contributions are so small you can still have plenty of $ to play the market.
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Old 06-11-2019, 04:22 AM
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Originally Posted by nicecast View Post
How do you "not pay into social security?" I thought the exemptions were foreigners, religious, students and income level?

And, btw I think that's a bad idea. At 22 you have no idea what the future holds; many people with "secure" pensions are bagging groceries in their seventies. SS contributions are so small you can still have plenty of $ to play the market.
And teachers with public pensions and workers under the railroad benefit system. I believe priests/other religious figures can opt in or out also.
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Old 06-11-2019, 04:36 AM
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Originally Posted by GaryDoug View Post
Why not?
Railroad Retirement is a government-run retirement system for railroad workers, parallel to the Social Security system. In any one job, you will pay into one or the other but not both. People eligible for Railroad Retirement are still eligible for Medicare, as I understand.
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Old 06-11-2019, 05:04 AM
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Originally Posted by Lorne Greene View Post
Stock market return has averaged 10% year for the past 100 years. The fed tries to keep inflation around 2% add in compound interest and you will be fine.
If you are asking this question you should be researching compound interest, inflation rate and market returnes.
It would help if you concentrated on the post depression era from 1941-2019. In that period, the stock market has averaged, with reinvestment, 8% returns and the inflation rate has averaged just over 4% (from 1966 to 1991 (25 years), the inflation rate was at or below 3.0% only once (1986)), the average return of the stock market excess of inflation since WWII has been 4%, and that is the figure to use when calculating long term growth.
For the OP, the RR retirement takes the place of Social Security and the 457 is like a private 401k. You should be able to grow your 457 at about 2x the rate of inflation on the 40 years you have until retirement.
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Old 06-11-2019, 05:07 AM
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how “worth it” is it for me to be saving for my retirement right now? For example $100 in 1980 is worth about $290 in 2016.
Keep doing it. Sooner is better. The one variable you cannot recapture or fix is the loss of time. The time value of the money invested.
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