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facmit
Joined: 21 Oct 2009
Posts: 87
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 Posted: Wed Nov 04, 2009 11:30 pm Post subject: how much do one need to save? |
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I know the simple answer will be the more, the better.
but for realistic purpose, how much does one reasonably/normally need to save, for the middle-class couple (vague concept  in different age stages, with the consideration of inflation:
30: ??
40: ??
50: ??
60: ??
65: ??
(I think the 80% of the current income is not correct. one may have 500K per year, another one may have 150k per year. I think in their retirement, about 100k should be enough provided they live in Buffet's house and drive Buffet's car ). |
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MrMatt2532
Joined: 15 Mar 2009
Posts: 207
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| Posted: Wed Nov 04, 2009 11:49 pm Post subject: |
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Depends on how much you have, what your goals are, what your time horizon is, and what your risk tolerance is.
If I got a big lump sum the day I was born I wouldn't ever have to save . 
Lots of variables here... |
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YDNAL
Joined: 10 Apr 2007
Posts: 3824
Location: Biscayne Bay
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| Posted: Thu Nov 05, 2009 12:01 am Post subject: how much do one need to save? |
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| facmit wrote: | | how much do one need to save? |
facmit,
Typically, one needs 25x (minimally) your annual consumption by retirement - net of income from other sources (Pension, SS, etc). To get you there, do you realize how many variables come into play over 4 decades (or more) in accumulation?
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Landy
“The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.” - Warren Buffett
Last edited by YDNAL on Thu Nov 05, 2009 12:54 am; edited 1 time in total |
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livesoft
Joined: 01 Mar 2007
Posts: 8015
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| Posted: Thu Nov 05, 2009 12:16 am Post subject: |
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.....
Last edited by livesoft on Thu Nov 05, 2009 1:24 am; edited 1 time in total |
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YDNAL
Joined: 10 Apr 2007
Posts: 3824
Location: Biscayne Bay
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| Posted: Thu Nov 05, 2009 12:57 am Post subject: how much do one need to save? |
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.......
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Landy
“The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.” - Warren Buffett
Last edited by YDNAL on Thu Nov 05, 2009 8:02 am; edited 1 time in total |
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norookie
Joined: 07 Jul 2009
Posts: 241
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| Posted: Thu Nov 05, 2009 3:23 am Post subject: |
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My best instruction was as much as possiable, but I'd shoot for at least 25% of net yrly. So you get 1buck you put .25cents away. JMO
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livesoft
Joined: 01 Mar 2007
Posts: 8015
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| Posted: Thu Nov 05, 2009 8:37 am Post subject: |
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This question is a hard one to answer. Prodigious savers kind of blow off thinking about this because they will save enough no matter what.
But for folks who do not have the means to save and spend, then it is a balancing act.
On one hand, you want to have enough for retirement. On the other hand, you don't want to be a miser while young and miss out on some life experiences because you think you do not have enough money for them. |
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jlq39
Joined: 16 Dec 2008
Posts: 170
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| Posted: Thu Nov 05, 2009 3:31 pm Post subject: |
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| livesoft wrote: | This question is a hard one to answer. Prodigious savers kind of blow off thinking about this because they will save enough no matter what.
But for folks who do not have the means to save and spend, then it is a balancing act.
On one hand, you want to have enough for retirement. On the other hand, you don't want to be a miser while young and miss out on some life experiences because you think you do not have enough money for them. |
I've not maxed out my 401k for this very reason. Not because I can't afford it, but when is enough, enough. Personally, it's hard finding that balance. While my wife and I have the means to max out my 401k (hers stinks although 3% gets put in without having to be matched) we don't. Not because we don't have the means, but because at what point are you saving just to save without a purpose? Right now, our retirement setup is as follows:
Max out both our ROTH's
6% in his 401k
3% in her crappy 401k (does not get matched)
I also have a guaranteed pension that alone will easily cover living expenses and then some. (about 60% of my current salary)
Throw SS in their and that's more padding.
Our savings rate is about 45% of gross income. 20% goes into our retirement portfolio and the other 25% goes into our money market fund. Could we max out my 401k, and put more in hers, sure we could. But I think we'll live just fine on what we do now being our standard of living is fairly modest. Will I bump up the percentages as we get raises and keep our standard of living the same, sure. I'm sure eventually we'll get closer to maxing out 401k's, especially when ROTH's are not available to us anymore, but are we busting our butt to save every penny now and living like misers? No way. Life is too short to skimp on everything until tomorrow.
EDIT: Also, one other point I'd like to make for those thinking 6% in one 401k, and 3% in another might be too low, our mortgage was on a 15 yr note with only 9.5 years left (and were paying early) so we'll have it paid off while in our 30's. That ought to free up enough to max things out by then without hurting our standard of living at all |
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retiredjg
Joined: 10 Jan 2008
Posts: 4180
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| Posted: Thu Nov 05, 2009 3:38 pm Post subject: |
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Well, we can all guess that 5% is probably not enough and 50% is probably too much.
I've heard 15%. I've also heard 20% Not really an answer, but maybe a ball park. Of course, if you truly have no choice but to live paycheck to paycheck, 5% may be a huge contribution.
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expat
Joined: 10 Mar 2008
Posts: 147
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| Posted: Thu Nov 05, 2009 3:41 pm Post subject: |
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| At least 10 percent according to the book Richest Man in Babylon. |
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jlq39
Joined: 16 Dec 2008
Posts: 170
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| Posted: Thu Nov 05, 2009 3:41 pm Post subject: |
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| retiredjg wrote: | Well, we can all guess that 5% is probably not enough and 50% is probably too much.
I've heard 15%. I've also heard 20% Not really an answer, but maybe a ball park. Of course, if you truly have no choice but to live paycheck to paycheck, 5% may be a huge contribution. |
I've heard 15% as a rule of thumb as well. It definitely takes getting your financial house in order for the person living paycheck to paycheck to get anywhere near say 15%. We're at 20% and happy with that percentage although we could do more. |
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jnojr
Joined: 31 Aug 2007
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Location: San Diego, CA.
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FrugalInvestor
Joined: 07 Nov 2008
Posts: 542
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| Posted: Thu Nov 05, 2009 4:39 pm Post subject: |
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| livesoft wrote: | | On one hand, you want to have enough for retirement. On the other hand, you don't want to be a miser while young and miss out on some life experiences because you think you do not have enough money for them. |
By spending and gaining the associated life experiences you miss out on the experiences you would have had otherwise. Oftentimes the experiences that require little or no money are worth much more than the ones that do.
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CaptMidnight
Joined: 15 May 2007
Posts: 483
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| Posted: Thu Nov 05, 2009 4:56 pm Post subject: Re: how much do one need to save? |
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| facmit wrote: | I know the simple answer will be the more, the better.
but for realistic purpose, how much does one reasonably/normally need to save, for the middle-class couple (vague concept :) . |
It's a mistake to approach retirement planning looking for simple heuristics like this.
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haban01
Joined: 01 Mar 2007
Posts: 389
Location: Wisconsin
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| Posted: Thu Nov 05, 2009 5:18 pm Post subject: |
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Bill McNabb brought this up in his recent podcast on vanguard.com. I think that one could do a study of the "Average American" vs. "Average Boglehead" is going to be completely different. I would say the average american is probably in the 1-4% and the normal BH probably in the 15-20%+.
The way I would look at it is to save as much as possible, but don't live completely for the future. Try to strike a balance between the two but don't have any regrets!
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AnimalCrackers
Joined: 19 Mar 2007
Posts: 133
Location: Northern Front Range, Colorado
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| Posted: Thu Nov 05, 2009 5:53 pm Post subject: |
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I have found this article helpful to establish our savings rate:
http://corporate.morningstar.c....elines.pdf
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PaulF
Joined: 06 Aug 2008
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digit8
Joined: 14 Jul 2008
Posts: 180
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| Posted: Fri Nov 06, 2009 10:30 am Post subject: |
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My favorite thought on the subject right now is from Scott Burns who said something to the effect of: you need to remember your goal is to retire comfortably, not die a millionaire.
In practice? It's a gamble, and the odds change every second. You need to define whats reasonable for you, and adjust as circumstances warrant.
Pick a rule, any rule. Figure out it's assumptions, and use it as a foundation, adjusting accordingly- i.e., if it assumes average health, but you've got a lot of cancer and heart problems in your family, save a little more. |
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Die Hard
Joined: 02 Jan 2008
Posts: 499
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| Posted: Sat Nov 07, 2009 6:27 pm Post subject: |
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| livesoft wrote: | This question is a hard one to answer. Prodigious savers kind of blow off thinking about this because they will save enough no matter what.
But for folks who do not have the means to save and spend, then it is a balancing act.
On one hand, you want to have enough for retirement. On the other hand, you don't want to be a miser while young and miss out on some life experiences because you think you do not have enough money for them. |
I'm currently reading a good book on this very subject. You may want to read it too:
Spend 'Til the End: The Revolutionary Guide to Raising Your Living Standard--Today and When You Retire by Laurence J. Kotlikoff and Scott Burns
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The best way to teach your children about money is to not have any............. |
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