Taking Stock - The Financial Front

If there's one thing theists and nontheists have in common, it's the need to make a living and save enough for retirement.

I'm presently 41 and my wife is 47. We have two children aged 9 and 7. We are at an age where we can measure how far we have come towards reaching our financial goals and how far we still have to go.

While the news over the past year has been dominated by stories about the dismal state of the American economy and the high unemployment rate, I have been fortunate that my family's financial situation significantly improved by the end of 2010.

One development that greatly benefited us was the decline in mortgage rates. Going into the summer, my wife and I had about 11 and a half years left on our 20 year mortgage with a 6.88% rate. We took advantage of the lower rates to refinance to a 10 year mortgage at 4.125%. Thus, in one fell swoop we reduced the balance on our mortgage from about $205,000 to about $180,000. While our monthly payments were only reduced by a little less than eight dollars, we reduced the amount of time left to pay off the mortgage by a year and four months. It was, as the old saying goes, a "no brainer." At the time of the writing of this post, we have nine years and seven months left to go on our mortgage, though I anticipate paying it off a year early.

On the retirement savings front, my decision to boost my 401(k) contribution to 20% of my salary was well-timed to benefit from the gains posted by the major stock indexes. My 401(k) balance increased by roughly $25,000 from the previous year and crossed the psychologically important milestone of $100,000. The gains might have been greater if I had a more aggressive portfolio. But I have no complaints.

The combined balance of all of the retirement funds held by my wife and I increased by nearly $50,000 to approximately a quarter of a million dollars. While I suppose that is not bad for a couple of forty somethings, it is still far short of what we will need to fund our retirement.

To get an idea of how we are doing, I tried out a retirement calculator on the CNN Money web site. Based on the information I provided, if my wife and I continue to earn our current salaries and continue to contribute to our retirements savings as we have been doing, we are on track to amass over a million dollars. Of course, this assumes that the markets don't collapse in the next decade or so.

However, as important as it is to save for retirement, I strongly believe we must also not forget the here and the now. The job situation in this country is still cloudy, and in spite of signs of improvement in our economy in recent months, things can still take a turn for the worse. Furthermore, I don't want to wait until I am 65 before I retire. I want to be able to enjoy life while I am still relatively young and fit. In order to do that, one must also amass a nonretirement savings portfolio.

The financial experts will say that everyone should have a rainy day fund to cover anywhere from 6 to 12 months worth of expenses. I decided to take it even further and make it a goal of having at least $100,000 in nonretirement savings. There was a period of time a few years ago where I had actually achieved this goal, but for a variety of reasons, I ultimately was not able to hold the line. At one point in 2009, our nonretirement savings had declined to about $70,000.

Since late 2009, I have managed to sock away enough to claw our way back to $90,000. The last time I had amassed $100,000, stocks comprised a large portion of the porfolio. On the one hand, when they went up, it made it a lot easier to attain my goal. But the downside was that when the stocks went down, so did the balance. This time my nonretirement portfolio is much more conservative, so that while the gains are small, they are also irreversible in the absence of a need to tap the savings.

There are a number of reasons why it might become necessary to tap our nonretirement savings in the near future. Both my wife and I drive older model cars. While we have not had a lot of repair issues with them, I know that this will not last forever and eventually we will have to buy new vehicles. Our house is also going to require remodeling and repair work, including a problem we have with sagging floors. The money for this will have to come from somewhere. For now, I am deferring on much of this in order to build our savings.

The other dark cloud looming on the horizon is college expenses for my children, which will come rolling in conveniently as the mortgage is winding down. I have to confess that I have not set aside any money in any college savings vehicles, focusing instead on building a general nonretirement savings portfolio. One reason I have not done so is that I am reluctant to have a large portion of my nonretirement savings invested in funds that can only be withdrawn for educational purposes.

In summary, we have made a lot of progress and I suppose for our age, my wife and I are in decent shape, but we still have a long way to go to get to that promised land of financial security.