Monday, January 2, 2017

Women's Money Week: Goals #wmweek17

I used to do monthly financial goals as well as New Year's Resolutions. I used to have savings targets and sinking funds and ways to help me measure and track my goals.

I've moved away from that in recent years, in large part. Partly it's that we are much more financially comfortable so I don't "need" to meet those goals in order to survive. Partly it's that we got busy with kids and so I pay less attention to my daily spending than I used to. And partly it's that our goals are boring now: retirement and college funds. It was more interesting to be saving for a house downpayment or a sunny beach vacation than it is to set my 403(b) contribution and forget it. I can review the allocations once a year but there's just not as much incentive to fully participate, and in fact, paying too much attention to the market makes me anxious and makes some people make shortsighted decisions like pulling out after a big loss and missing out on the rebound gains (I've never done that, but when the market was crashing in 2008, I really wanted to. I'm glad I didn't!).

Still, when I actually stop to think about it, the kind of retirement savings we are doing right now IS very exciting. We are past the point where we need to save for retirement (meaning, if we stopped contributing right now, we could retire on time with enough to live out our expected lifespans at a reasonable standard of living). But that means that everything extra that we save for retirement either moves our retirement date up sooner, or improves the standard of living in retirement (hello, permanent cruise life!), or creates wealth for us to pass along to our kids. Shouldn't that be more exciting than saving for one measly vacation?!?!

I hope so. We are taking steps to feel a financial pinch thanks to retirement savings in 2017. We're maxing out my 403(b) and HSA contributions (~$18,000 and $6,750 respectively) and are still going to try to max out our Roth 401(k)s as well ($5,500 each, so another $11,000). That's a total of $35,750 into retirement savings*, which is about a third of my income. We also have our regular lives to pay for and want to build up our liquid emergency funds as well. It might feel kind of tight, which is good - I think feeling that pinch is what helps me stay focused on meeting our goals.

As for college savings, right now all monetary gifts that the kids get go into 529 accounts but we're not funding them out of our own pockets. There are no loans for retirement the way there are for college! And we have lots of options right now for what our financial assistance might look like (maybe we cash-flow those payments, maybe we pull out Roth contributions, maybe they get scholarships). Once we have a sense of our maxing out retirement feels, we add a college savings goal.

How have your financial goals changed? What are your goals for 2017?

* Technically, an HSA is not a retirement account. But it is the only account that is triple-tax-advantaged (pre-tax contributions, growth is tax-free and distributions for medical expenses are tax free). If you can cash-flow your medical expenses now (when you have income) and keep the savings until retirement (when you have no more income, and medical expenses tend to rise), you can bask in that tax-free goodness.

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