I’m incredibly pleased to report that I actually saved about 12% of my gross income last year. That is a true first for me. 38 Years old and I’ve finally started doing what I should have been doing since I was twenty. Oh well, that’s water under the bridge. The important thing is that I did it, and I didn’t really miss the money.

OK, I did miss the money, but not as bad as I thought I would.

Now, I’m changing jobs May 1, so I have a bunch of financial moves to make. These are pretty interesting ones I think. Lots of options open up during a job change. I’m planning to open a new self-directed IRA for the 401K money from my current employer. I favor Roth IRAs for regular saving, but this is already tax-deferred and I’m going to leave it that way. I’ll invest it in a couple funds for this purpose. Unlike many, I do think individual investors can do very well hand-picking stocks (and I’ve done very well doing just that), but I like to buy and hold in my retirement accounts. Currently I plan to use UDPIX (Ultra DOW 30, leveraged for double-DOW returns … or losses) and DODFX (a stellar international fund) to grow this money.

I’ll be making about 20% more at the new job, which I’m going to split 50/50, allocating 10% of the increase to max out my Roths and to get the max company match in the new 401K. The other 10% will go to accelerated pay-down of my remaining debt. In the last year I’ve paid-off five credit cards, and only have one remaining balance. I plan to retire that debt within six months.

Technorati Tags: retirement planning, investment, udpix, dodfx

Basically, it worked out to approximately $12,000, state and federal combined. That is a tax credit, not just a wimpy old write-off. Every dollar of that $12,000 was a dollar we didn’t have to pay in income taxes. Even better, it rolls forward (for up to six years) until it is all used up. For my family, that meant we did not pay a dime in federal or state taxes last year.

This year we’ll pay a little, but still get to take back several thousand remaining in the roll-over.
TurboTax handled it all, which surprised and pleased me. In fact, I’ve already ordered my copy of the software this year, since all the roll-over calcs are already done for me based on last year’s remainders. If it weren’t for that, I’d definitely be using TaxBrain, which is an inexpensive online tax service I’ve been hearing great things about.

Technorati Tags: taxes, adoption, adoption credit, tax software, turbotax, 2005 taxes

The debate about private accounts proposed by the Republicans may be dead, but the essential problem is the same. With the current (negative) rate of savings in the U.S., it is difficult to see how we will grow the economy to the booming levels we’ll need to support the increasingly older and retired population. As I discussed before, I refuse to get all worked up about this issue, since I believe that I can’t personally do much to change society as a whole. What I can do is personally save, and teach my children to do the same. The article puts it very well:

There’s not much we can do about dictating the work habits of people in 2020. They’ll choose their own work habits, and they’ll pass their own laws to try to influence each others’ work habits. That means the only thing we can do now to address the underlying crisis is to encourage saving, because saving means investment, and investment means that when 2020 comes around we and our descendants will have more and better machines and factories to produce more and better food and aspirin and television sets.

In other words: If you want to address the Social Security crisis of the future, you must adopt laws that encourage saving in the present. There’s nothing else you can do.

This article has changed my thinking to realize that my personal committment to saving is not selfish at all, and in fact is a net good for society. That makes it a two-time win, and you can never have enough of those.

Link: Save and Save and Then Save Some More (Slate)

Technorati Tags: Retirement, Social Security