What was your Savings Rate in 2011?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.

What was your savings rate in 2011?

%0 - %10
19
7%
%10 - %20
46
17%
%20 - %30
76
28%
%30 - %40
41
15%
%40 - %50
40
15%
%50 - %60
30
11%
%60+
19
7%
 
Total votes : 271

Re: What was your Savings Rate in 2011?

Postby NightOwl » Tue Mar 27, 2012 4:06 am

market timer wrote:Since getting engaged, I've cut down massively on expenses and save north of 50% (not common as a renter in NYC). My goal is to be out of debt, pay for my home in cash, and have $200K in retirement accounts by the time kids come along, then I won't have to work as hard out of necessity. That will be "enjoying the finer things" for me.

Congratulations on your engagement! As a fellow NYC renter, I'm jealous of the 50%+ savings rate. Good work.

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Re: What was your Savings Rate in 2011?

Postby 555 » Tue Mar 27, 2012 4:16 am

555 wrote:
porcupine wrote:
555 wrote:68% one (5 fig) income, family of five.

Are you saying that a family of five lives for less than $32k per year? How much is the rent/mortgage?
- Porcupine

Actually that includes 6% employer contribution. Also some expenses come out of a (diminishing) bank account, so tax-sheltered savings are 62%+6%, but taxable savings are modestly negative. Maybe we live on $40k per year. Mortgage paid off ages ago. I expect to reach a seven figure portfolio on a 5 figure income sometime this decade.
MachAF wrote:More questions for the 50% + er's..
Are you counting employer 401k match and such as savings?
Do you count the $5,000 you 'saved', but later spent on a vacation/toy/anything else?
I have feeling people tend to over estimate their saving rates, just like they over estimate everything else. Being a 'better' than average investor and Personal Rate of Return for the year.

Good points. Also, I don't pay into Social Security, and instead have a compulsory 401a plan, 8%+6%, and I included that in my savings rate. On the other hand, regardless of how they're defined, savings rates on this board actually are way above average.

Ah, I forgot another crucial factor. Federal effective tax rate of about -7% (that's right, negative) helps in saving a high percentage. Of course the percentage would be lower if I used net salary instead of gross salary.
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Re: What was your Savings Rate in 2011?

Postby NightOwl » Tue Mar 27, 2012 4:28 am

goodenyou wrote:
tsfdma wrote:I love these forums. Where else can a guy save 25% of his salary, and in doing so feel like a fiscal degenerate? :D :D :D


These types of forums are fertile ground for the Lake Wobegon Effect :D

But the Lake Wobegon joke is that in any normal town, it's highly unlikely that all the children are above average. On Bogleheads, all of those responding very likely ARE (way) above average: it's a self-selecting community of Olympic-level savers. Posting a savings rate here is like posting a personal best YMCA lap pool time and getting a response from Michael Phelps. If you're even in the ballpark with the Bogleheads on savings you're doing just fine.

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Re: What was your Savings Rate in 2011?

Postby NightOwl » Tue Mar 27, 2012 4:58 am

GRT2BOUTDOORS wrote:I count my percentage of savings against gross income. If my tax rate is 40% then I multiply my net savings times the tax rate to arrive at an equivalent gross income. That total is divided by my total gross income to arrive at my total savings percentage.

HI, GRT2BOUTDOORS,
I'd really appreciate some expansion on this thought, as I think that it addresses my concern over calculating savings rate as a percentage of gross income. So let's say that you make $300k, you save $17k in a 401k, and you have no other pre-tax expenses, so we're paying tax on $283k. Let's say that you net $169,800 (40% tax rate) and you save $100k after tax, for the sake of argument. When I read these threads about gross savings rate, my assumption is that that counts for a roughly 39% savings rate (117/300, let's ignore vesting on the 401k match for the time being). When you say that you "multiply net savings by the tax rate," do you mean that you multiply the $100k by 1.4 and consider the rate to be ($140k +17K)/$ 300K for a ~52% savings rate? Can you say more about your calculations?

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Re: What was your Savings Rate in 2011?

Postby Go Blue 99 » Tue Mar 27, 2012 9:34 am

We saved 20% of gross income last year. It could have been higher but we made no effort to cut back on spending last year. We actually spent more than we ever have.
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Re: What was your Savings Rate in 2011?

Postby porcupine » Tue Mar 27, 2012 10:20 am

555 wrote:
555 wrote:
porcupine wrote:
555 wrote:68% one (5 fig) income, family of five.

Are you saying that a family of five lives for less than $32k per year? How much is the rent/mortgage?
- Porcupine

Actually that includes 6% employer contribution. Also some expenses come out of a (diminishing) bank account, so tax-sheltered savings are 62%+6%, but taxable savings are modestly negative. Maybe we live on $40k per year. Mortgage paid off ages ago. I expect to reach a seven figure portfolio on a 5 figure income sometime this decade.
MachAF wrote:More questions for the 50% + er's..
Are you counting employer 401k match and such as savings?
Do you count the $5,000 you 'saved', but later spent on a vacation/toy/anything else?
I have feeling people tend to over estimate their saving rates, just like they over estimate everything else. Being a 'better' than average investor and Personal Rate of Return for the year.

Good points. Also, I don't pay into Social Security, and instead have a compulsory 401a plan, 8%+6%, and I included that in my savings rate. On the other hand, regardless of how they're defined, savings rates on this board actually are way above average.

Ah, I forgot another crucial factor. Federal effective tax rate of about -7% (that's right, negative) helps in saving a high percentage. Of course the percentage would be lower if I used net salary instead of gross salary.

OK, based on this information, now the pendulum swings the other way! Three questions:

- how do you get the negative federal tax rate?

- how did you manage to avoid paying into Social Security?

- how do you then spend $40K a year, given that your spouse is not working, i.e., there should be no daycare costs?

I just googled and learned a bit about 401(a) plans. I guess there are 401(b) through 401(j) as well!! :oops:

- Porcupine
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Re: What was your Savings Rate in 2011?

Postby rai » Tue Mar 27, 2012 11:07 am

this is not a fair contest. If someone pays less than 10% all taxes combined vs a person who pays more than 40% all taxes combined the higher taxed person is at a serious disadvantage to saving a certain percentage of gross income.
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Re: What was your Savings Rate in 2011?

Postby CaliJim » Tue Mar 27, 2012 11:22 am

You want us old retired folks to participate and skew the results to 0, or just accumulators?
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Re: What was your Savings Rate in 2011?

Postby letsgobobby » Tue Mar 27, 2012 11:33 am

rai wrote:this is not a fair contest. If someone pays less than 10% all taxes combined vs a person who pays more than 40% all taxes combined the higher taxed person is at a serious disadvantage to saving a certain percentage of gross income.


it's not a contest.
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Re: What was your Savings Rate in 2011?

Postby porcupine » Tue Mar 27, 2012 11:37 am

letsgobobby wrote:
rai wrote:this is not a fair contest. If someone pays less than 10% all taxes combined vs a person who pays more than 40% all taxes combined the higher taxed person is at a serious disadvantage to saving a certain percentage of gross income.


it's not a contest.

+1!

Come on now, letsgobobby, of course it is! :wink: We are already not competing with the Joneses. Now you want us to not compete with the Bogleheads too. We will then have only rats to race against! Rats!!

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Re: What was your Savings Rate in 2011?

Postby kenyan » Tue Mar 27, 2012 11:45 am

Comparing oneself to the average Boglehead (when it comes to savings rate, income, wealth, etc.) tends to be an exercise in futility and depression. On the other hand, comparing oneself to the average American might lead to a false sense of security and superiority. A healthier comparison lies somewhere in the middle.
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Re: What was your Savings Rate in 2011?

Postby Grt2bOutdoors » Tue Mar 27, 2012 12:27 pm

NightOwl wrote:
GRT2BOUTDOORS wrote:I count my percentage of savings against gross income. If my tax rate is 40% then I multiply my net savings times the tax rate to arrive at an equivalent gross income. That total is divided by my total gross income to arrive at my total savings percentage.

HI, GRT2BOUTDOORS,
I'd really appreciate some expansion on this thought, as I think that it addresses my concern over calculating savings rate as a percentage of gross income. So let's say that you make $300k, you save $17k in a 401k, and you have no other pre-tax expenses, so we're paying tax on $283k. Let's say that you net $169,800 (40% tax rate) and you save $100k after tax, for the sake of argument. When I read these threads about gross savings rate, my assumption is that that counts for a roughly 39% savings rate (117/300, let's ignore vesting on the 401k match for the time being). When you say that you "multiply net savings by the tax rate," do you mean that you multiply the $100k by 1.4 and consider the rate to be ($140k +17K)/$ 300K for a ~52% savings rate? Can you say more about your calculations?

NightOwl


I take my tax rate - in your example, cumulative federal,state&local tax of 40%. I then take my net savings and gross it up by that percentage, in your example 40% to arrive at a true gross savings percentage - monies which were deferred for later consumption yet available for me to spend if I chose to. For example, you make 130K, put 17K in pre-tax, you are taxed 50% on remainder, you have net take home pay of 65K, you save 50% or 32.5K, 32.5K*1.5 = 48.75 + 17K pre-tax = 50.5% gross savings rate.
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Re: What was your Savings Rate in 2011?

Postby porcupine » Tue Mar 27, 2012 1:27 pm

GRT2BOUTDOORS wrote:
NightOwl wrote:
GRT2BOUTDOORS wrote:I count my percentage of savings against gross income. If my tax rate is 40% then I multiply my net savings times the tax rate to arrive at an equivalent gross income. That total is divided by my total gross income to arrive at my total savings percentage.

HI, GRT2BOUTDOORS,
I'd really appreciate some expansion on this thought, as I think that it addresses my concern over calculating savings rate as a percentage of gross income. So let's say that you make $300k, you save $17k in a 401k, and you have no other pre-tax expenses, so we're paying tax on $283k. Let's say that you net $169,800 (40% tax rate) and you save $100k after tax, for the sake of argument. When I read these threads about gross savings rate, my assumption is that that counts for a roughly 39% savings rate (117/300, let's ignore vesting on the 401k match for the time being). When you say that you "multiply net savings by the tax rate," do you mean that you multiply the $100k by 1.4 and consider the rate to be ($140k +17K)/$ 300K for a ~52% savings rate? Can you say more about your calculations?

NightOwl


I take my tax rate - in your example, cumulative federal,state&local tax of 40%. I then take my net savings and gross it up by that percentage, in your example 40% to arrive at a true gross savings percentage - monies which were deferred for later consumption yet available for me to spend if I chose to. For example, you make 130K, put 17K in pre-tax, you are taxed 50% on remainder, you have net take home pay of 65K, you save 50% or 32.5K, 32.5K*1.5 = 48.75 + 17K pre-tax = 50.5% gross savings rate.
I'm sure that there are many ways to skin this cat and all of them can be right from a given perspective.

That said, and with the caveat that your calculation is yours, I have a question - to me, it appears that you are trying to find an equivalent savings rate if taxes were out of the picture. But if that is what you are trying to do, should you not be dividing the savings by (1 minus tax rate) as opposed to multiplying it by (1 plus tax rate)?

In other words, similar to your above example*, if the income is 147K, putting 17K in pre-tax and getting taxed 50% on the remainder, then saving 32.5K, the calculation would be 32.5/(1-0.5) + 17k for total savings of 63k + 17k, and a gross savings rate of 80/147 = 54.4% gross savings rate. My point is that if you saved 32.5 out of 65k, you would've saved 63k out of the 130k.

- Porcupine

* = I realized that 50% of the remainder in your example would be 50% of 113k ... but that is not my calculation (but I changed mine).
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Re: What was your Savings Rate in 2011?

Postby 555 » Tue Mar 27, 2012 2:54 pm

porcupine wrote:- how do you get the negative federal tax rate?
- how did you manage to avoid paying into Social Security?


96% of workers have SS, 4% don't. Their employer must have a compulsory alternative that serves the same purpose, either a DB (pension) or DC (401a plan). See here for 401(a) (money purchase plan)
http://thefinancebuff.com/retirement-pl ... imple.html
The question is, are the contributions counted as part of savings (I counted my 401a contributions) and I think SS contributions should be counted, as long as the convention is clear.

Negative federal tax rates come from Refundable Tax Credits as opposed to Non-Refundable Tax Credits
http://thefinancebuff.com/refundable-an ... harts.html
(To get to that level from high 5 figure salary: take salary minus cafeteria plan (section 125) items (health ins, FSA (or HSA), retirement contributions e.g. 401a, 403b, 457b), maybe trad IRA contributions, then exemptions and standard deduction. Then there's retirement savers credit, child tax credit, earned income credit. The last two are refundable credits meaning you can receive them beyond the point of just zeroing out your taxes.)
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Re: What was your Savings Rate in 2011?

Postby stoptothink » Tue Mar 27, 2012 3:06 pm

[quote="555
Negative federal tax rates come from Refundable Tax Credits as opposed to Non-Refundable Tax Credits
http://thefinancebuff.com/refundable-an ... harts.html
(To get to that level from high 5 figure salary: take salary minus cafeteria plan (section 125) items (health ins, FSA (or HSA), retirement contributions e.g. 401a, 403b, 457b), maybe trad IRA contributions, then exemptions and standard deduction. Then there's retirement savers credit, child tax credit, earned income credit. The last two are refundable credits meaning you can receive them beyond the point of just zeroing out your taxes.)[/quote]

With 403b/TRS/IRA/HSA accounting for about 50% of my income, being a full-time student, and a few other credits; I as well had a negative effective tax rate in '11.
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Re: What was your Savings Rate in 2011?

Postby porcupine » Tue Mar 27, 2012 3:28 pm

555 wrote:[...]96% of workers have SS, 4% don't. Their employer must have a compulsory alternative that serves the same purpose, either a DB (pension) or DC (401a plan). See here for 401(a) (money purchase plan)
http://thefinancebuff.com/retirement-pl ... imple.html
The question is, are the contributions counted as part of savings (I counted my 401a contributions) and I think SS contributions should be counted, as long as the convention is clear.

Negative federal tax rates come from Refundable Tax Credits as opposed to Non-Refundable Tax Credits
http://thefinancebuff.com/refundable-an ... harts.html
(To get to that level from high 5 figure salary: take salary minus cafeteria plan (section 125) items (health ins, FSA (or HSA), retirement contributions e.g. 401a, 403b, 457b), maybe trad IRA contributions, then exemptions and standard deduction. Then there's retirement savers credit, child tax credit, earned income credit. The last two are refundable credits meaning you can receive them beyond the point of just zeroing out your taxes.)
Like I wrote in a previous response (not to you) on this thread, there are probably many ways the calculation can be performed, but I don't see how I could include SS contributions in that mix. There is no way I can be sure of getting anything out of SS two-three decades down the road. Who knows how solvent (or not) SS will be!! But I am sure one could rationalize including it in savings as well.

I did not see - either TFB's blog post or on the wiki references that I found from internet searches - any mention that 401(a) participants don't have to pay SS taxes. To me, that is unfair to the rest of the folks - especially those who doubt they would be getting anything back - who are forced to make the SS payments. (I am just saying, not complaining!)

After I made my previous responde, I realized that you would probably be eligible for all those credits, especially with five kids and that might take you down to negative taxes.

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Re: What was your Savings Rate in 2011?

Postby NightOwl » Tue Mar 27, 2012 3:30 pm

GRT2BOUTDOORS wrote:
NightOwl wrote:
GRT2BOUTDOORS wrote:I count my percentage of savings against gross income. If my tax rate is 40% then I multiply my net savings times the tax rate to arrive at an equivalent gross income. That total is divided by my total gross income to arrive at my total savings percentage.

HI, GRT2BOUTDOORS,
I'd really appreciate some expansion on this thought, as I think that it addresses my concern over calculating savings rate as a percentage of gross income. So let's say that you make $300k, you save $17k in a 401k, and you have no other pre-tax expenses, so we're paying tax on $283k. Let's say that you net $169,800 (40% tax rate) and you save $100k after tax, for the sake of argument. When I read these threads about gross savings rate, my assumption is that that counts for a roughly 39% savings rate (117/300, let's ignore vesting on the 401k match for the time being). When you say that you "multiply net savings by the tax rate," do you mean that you multiply the $100k by 1.4 and consider the rate to be ($140k +17K)/$ 300K for a ~52% savings rate? Can you say more about your calculations?

NightOwl


I take my tax rate - in your example, cumulative federal,state&local tax of 40%. I then take my net savings and gross it up by that percentage, in your example 40% to arrive at a true gross savings percentage - monies which were deferred for later consumption yet available for me to spend if I chose to. For example, you make 130K, put 17K in pre-tax, you are taxed 50% on remainder, you have net take home pay of 65K, you save 50% or 32.5K, 32.5K*1.5 = 48.75 + 17K pre-tax = 50.5% gross savings rate.

Interesting. That calculation method would certainly change my answer to this poll. At the end of the day, I just focus on saving as much of my net pay as I possibly can.

NightOwl
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Re: What was your Savings Rate in 2011?

Postby 555 » Tue Mar 27, 2012 3:54 pm

porcupine wrote:I did not see - either TFB's blog post or on the wiki references that I found from internet searches - any mention that 401(a) participants don't have to pay SS taxes. To me, that is unfair to the rest of the folks - especially those who doubt they would be getting anything back - who are forced to make the SS payments. (I am just saying, not complaining!)

I may be incorrectly using the term 401a and
http://thefinancebuff.com/retirement-pl ... imple.html
clarifies it. A persion in a DC plan could be worse off than with SS if their investment are bad. The real winners are those in a DB plans that are massively subsidized by the rest of us since their contributions cannot possibly provide for their benefits.
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Re: What was your Savings Rate in 2011?

Postby Default User BR » Tue Mar 27, 2012 4:38 pm

555 wrote:The question is, are the contributions counted as part of savings (I counted my 401a contributions) and I think SS contributions should be counted, as long as the convention is clear.

I would say no. I wouldn't count pensions either. To me, no non-voluntary plan is "savings". To me saving is a specific decision not to spend money, but rather to set it aside for later.


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Re: What was your Savings Rate in 2011?

Postby ofcmetz » Wed Mar 28, 2012 3:36 am

Default User BR wrote:
555 wrote:The question is, are the contributions counted as part of savings (I counted my 401a contributions) and I think SS contributions should be counted, as long as the convention is clear.

I would say no. I wouldn't count pensions either. To me, no non-voluntary plan is "savings". To me saving is a specific decision not to spend money, but rather to set it aside for later.


Brian


That is how I calculate it. I don't pay social security, but have a mandatory 9.5% contribution of my base pay towards my pension. I don't count this as savings in my number since it is not voluntary and is in place of another payroll tax. I also view saving as voluntary. Although, I'm not sure it matters that much.
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Re: What was your Savings Rate in 2011?

Postby 555 » Wed Mar 28, 2012 9:41 am

ofcmetz wrote:
Default User BR wrote:
555 wrote:The question is, are the contributions counted as part of savings (I counted my 401a contributions) and I think SS contributions should be counted, as long as the convention is clear.

I would say no. I wouldn't count pensions either. To me, no non-voluntary plan is "savings". To me saving is a specific decision not to spend money, but rather to set it aside for later.
Brian

That is how I calculate it. I don't pay social security, but have a mandatory 9.5% contribution of my base pay towards my pension. I don't count this as savings in my number since it is not voluntary and is in place of another payroll tax. I also view saving as voluntary. Although, I'm not sure it matters that much.

You are both saying it the standard way. If you read `you should save at least 10% for retirement' they always mean on top of social security. If there were no such thing as social security (or any other forced savings) then there's no way 10% would be enough by itself. So that's an okay number for baseline discretionary retirement savings, people shouldn't think it will magically grow into enough to replace their whole salary. But it will certainly make someone much better off than with SS alone.

If someone is saving 8%-12% top of social security, then they really have 20%-25% going towards retirement even if they don't notice. That percentage is more in line with what needs to be saved.
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Re: What was your Savings Rate in 2011?

Postby LH » Wed Mar 28, 2012 3:00 pm

39 percent, using:

amount saved / (W2+"401k" savings)
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Re: What was your Savings Rate in 2011?

Postby Regal 56 » Thu Mar 29, 2012 1:37 pm

Saved roughly one third of gross earnings. I'm not rich, but I'm single. That's almost like being rich, at least financially. By the way, I'm not surprised at the some of the eye-popping savings rates reported here. The Bogleheads group is somewhat self-selecting. After all, you can't invest if you don't save. And of the people who are interested enough to post here, many will have incomes and savings rates high enough to make an interest in investing worth their while. Someone who's dribbling $50 a month into his or her IRA is unlikely to be interested in the fine points of investing.
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Re: What was your Savings Rate in 2011?

Postby Doc7 » Fri Mar 30, 2012 11:29 am

I know there's a lot of questions and analysis going on here which may be making the question more complicated than it should be, but I have a question so I can benchmark myself against the various advice I've read out there.

Do employer401K matches count towards savings rate?

If so then in 2011, I did about 17%. If not, about 14%.

For 2012...thanks to my reading on this board, not only do I think I improved my AA, but I backed off on a new car purchase (which would have entailed EXTENDING my current payment because i'm upside down in the car as it is), I've sent 90% of my bonus paycheck to my current car loan, and now I am saving over $1100 a month for emergency fund after which I will pay off my car and student loans. After that the world is the limit including saving to buy future cars in cash, Dave Ramsey "Drive for Free" style.

Goal is to have an emergency fund and be debt free by the time I am 30 years old, and at that point who knows where I'll go. The toughest part of these equations are the significant other, as they probably usually are. I'm not "Saying anything" but I know she wants to be married and have a kid by 30, and that's 36 months away now. It's hard to know where my money will be going in 2 years. But for now I can stick to it and if I don't complete my goals at least I will have made some serious dents. She also doesn't seem to be 100% on board with the idea yet that I want to eradicate debt before taking on a mortgage, and that will be more difficult if I end up going to B-School and take on many more student loans...

The amount of money I have going towards emergency fund / future loan payments (treating the whole process as a "snowball") will give me a 22% - 25% savings rate (depending on if i count the 401k match). Only the 14-17% to retirement, same as this year, but the other money definitely is having "net worth" impacts!
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