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How Much To Save Each Month For Retirement – Have a question about your personal investment? No matter how simple or complicated it is, you can ask it here.
I know everyone’s circumstances are different; however, is there a general rule of thumb for how much you should save by age group?
How Much To Save Each Month For Retirement
Snackdog wrote: ↑Sat Mar 10, 2018 8:38 Salary x years of work is usually around ten years or so. Doesn’t this mean that you invest 100% of your salary or get a great investment return?
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If you make 100k annually and invest 50% of it, you need a compound annual growth rate of 13% to achieve your metrics.
One of my favorite pieces of advice early in my career was to save $1,000 when you’re 20; $10,000 when you are 30 years old; $100,000 when you are 40 years old, $1,000,000 when you are 50 years old; and $10,000,000 by the time you are 60 years old. The person who gave me the advice is now over 70 years old, and when I reminded him recently he laughed and pointed out that the period between 50 and 60 isn’t quite reached. But he still lives a comfortable and happy life.
Esq123 wrote: ↑Sat Mar 10, 2018 8:35 I know everyone’s situation is different; however, is there a general rule of thumb for how much you should save by age group? I am a young investor fyi (29). Thank you to all of you. I will try to save at least 20% of income. It’s better and easier if you have a higher income because besides taxes, someone who earns $500K/year can live the same lifestyle as someone who earns $50K/year.
Then make sure you choose an age-appropriate asset allocation (80-90% equity and 10-20% bonds for someone who is 29 years old).
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I know I rephrased your question without answering it directly, but I think the above is more actionable advice than trying to compare with people who are very different from you.
Sam on the Financial Samurai website has some interesting articles related to this topic, like this one: https://www.financialsamurai.com/how-mu…ed-by-age/
Esq123 wrote: ↑Sat Mar 10, 2018 8:35 I know everyone’s situation is different; however, is there a general rule of thumb for how much you should save by age group? I am a young investor fyi (29). Thank you to all of you. Take a look at the wiki. Investment Philosophy Good information. The most important thing is to get a workable plan that works for you, not for someone else. And yes, to invest for retirement, you need to set aside a “significant” portion of your income each month in order to have enough money for a comfortable retirement.
The most common figure you’ll see is 15% – 20%, meaning you should be saving this much per year. You think there’s enormous variability in this, but it’s a general range that might be relevant for a 29 year old. Note that I feel that 20% – 25% is much better, but I’m also conservative in this regard. It also talks about retirement only – and not saving for things like a house or college or whatever.
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If you ask how big your nest egg should be, that number doesn’t say much. The Fidelity article linked above (https://www.fidelity.com/viewpoints/ret … -to-retire ) is one of the few articles I’ve seen on this topic. I’m not a big fan of that article, but at least it provides some framework.
The true “how big is your nest egg” answer depends on your target income in retirement (not your income today), and your target retirement date (not your age) – with some type of built-in withdrawal assumption (4% at most). general) and several types of ‘additional contribution’ factors. Factor in inflation and returns, and it gets complicated. For example, if you want to retire with 80K income, you need to save $2M at a 4% withdrawal rate. Assuming that you are 10 years away from your retirement and saving 15K a year, you need about 900K to be on track.
Esq123 wrote: ↑Sat Mar 10, 2018 8:35 I know everyone’s situation is different; however, is there a general rule of thumb for how much you should save by age group? I am a young investor fyi (29). Thank you to all of you. No, it’s worthless.
This worked great for me, currently 73 years old, retired at 55, NW currently in 8 figures, starting at pauper level with an engineer type job:
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Save and invest 30% of your after-tax income, religiously. Principal payments in a home mortgage are calculated but not interest payments, or payments on consumables like cars, etc.
What you invest in is also important. Security in bonds? I never go there. I started in highly leveraged Real Estate at about 29 years old. When excess revenue starts flowing from it, it becomes 100% of the stock. Immediately after retirement, I sold all of my rental REs and I still own 100% of the shares and plan to stay there to the grave. NB if you started before the age of 30 it is very likely that your investment income will beat your job income in your early 40’s. Start early and you can buy silly toys like a Porsche or Maserati before you’re 45.
Msk wrote: ↑Sat Mar 10, 2018 9:26 AM Start early and you can shop for silly toys like a Porsche or Maserati before the age of 45. Agree with this too. I went through the car phase early but international business class flights must have been great in my 50s.
Many people make and save a lot of money and are not rich, or have nothing in their older years.
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There are more components involved. Think of a puzzle with moving parts and you want things to be as efficient as possible.
Make as much money (income) as possible through education, choice of profession (engineer, doctor, etc.), career, job change, etc.
Optimize and choose (yes, your choices at every step) your lifestyle so that it provides the greatest personal and financial rewards. IE: having a fulfilling lifestyle, making you happy, but without getting into the financial and personal quicksand that will “destroy” your savings, income, and sanity.
So: avoiding financial and personal (lifestyle choices) “black swans” is one of our biggest priorities along with #1.
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Combine #1 and #2 with COUNTING (this doesn’t mean cheap. . it means not wasting your time and money 24/7) It’s a way of life and thought.
* Buy this book and read it until you know all the stories by heart. Consider them “mentors”, heroes.
Crake wrote: ↑Sat Mar 10, 2018 8:45 am snackdog wrote: ↑Sat Mar 10, 2018 8:38 am Salary x years of work is usually around ten years or so. Doesn’t this mean that you invest 100% of your salary or get a great investment return? If you make 100k annually and invest 50% of it, you need a compound annual growth rate of 13% to achieve your metrics. That’s mostly impossible. Maybe after 30 years of investing in the good stock market you can earn x years salary but even that is pretty impressive. I wouldn’t mind having $3 million dollars right now in retirement
I like to add up a year of annual expenses, on average, for each year worked. With pensions and SS, it will give you 30 years of retirement after 30 years of service. Of course, someone who earns more than they spend will be in better shape than us.
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If people advance in their careers during midlife usually the ratios get screwed up because small spikes in income don’t mean savings are the same and ratios change (+fast for some like mortgages assuming you don’t move to a bigger house and -vely for retirement savings)
The rule of thumb is heavily criticized in this forum for being non-specific but isn’t that a rule of thumb: non-specific? Anyway, my rule of thumb is based on taxes. If you’ve maxed out your tax-advantaged account (HSA, 401k, Roth IRA, etc.) then you’ve saved enough. If you can’t save that much, you may have to work longer hours than someone who does.
Esq123 wrote: ↑Sat Mar 10, 2018 8:35 I know everyone’s situation is different; however, is there a general rule of thumb for how much you should save by age group? I am a young investor fyi (29). Thank you to all of you. Road maps and guides help, but there are so many factors involved. Your salary will increase gradually throughout most of your career, so adjust to your age for the first picture. It’s difficult to determine – at 29 – how much annual retirement income you’ll need 30-40 years from now, so the second figure is a wild guess for you at this point, but provides some guidance nonetheless. The third image illustrates the power of time and compounding that you have at 29 years old
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