What percentage of your income are you saving?

VictoriaF · Post by **VictoriaF** » Thu Dec 12, 2013 4:45 pm

Over 50%. But these are my highest earning years.

Victoria

brian2013 · Post by **brian2013** » Thu Dec 12, 2013 4:49 pm

Thanks everyone for the great feedback, I appreciate the responses, very helpful!

brian2013 · Post by **brian2013** » Thu Dec 12, 2013 4:57 pm

stoptothink wrote:
letsgobobby wrote:One thing that has come up in the past is how intimidating it is to new forum members, lower income earners, and just your average person trying to save a few bucks when they read that everyone here is saving 20%, 40%, 60% of their gross household income. It might send the wrong message that you can't be a successful investor if you aren't an ubersaver.
Post of the day. I've heard this exact statement from numerous people I've referred to this board. I make a comfortable income and my net worth is above the 90th percentile for my age group, yet these threads always end up making me feel like a total slacker. Getting creative with the accounting ruins any purpose these threads may possibly have.

This is one of the things i really like about this forum, that folks on here want to encourage others, so i hear ya. I'm actually a "new forum member" and it gives me some helpful perspective, but it's not particularly intimidating to me. But for anyone discouraged by this thread, just a couple of years ago we were barely saving at all for retirement. I lived at home with my parents at 27.

I'm not sure what the creative accounting reference is to in particular, but the "percentage of gross income" was just a rough, random way to compare apples to apples, without getting CPAs involved to give us some exact numbers.

bigred77 · Post by **bigred77** » Thu Dec 12, 2013 5:02 pm

28 years old.

My wife and I save a shade over 25% of gross income into tax advantaged retirement accounts.

The rest of my "savings" go to pay down debt.

Majormajor78 · Post by **Majormajor78** » Thu Dec 12, 2013 5:07 pm

35 years old and saving about 27% of income.

I didn't notice anybody posting a links to Wade D. Pfau's article on Safe Savings Rates. It's a great resource for people who ask this question and let's face it; every one of us has asked it at least once when we were getting started.

http://www.fpanet.org/journal/CurrentIs ... ingsRates/

stoptothink · Post by **stoptothink** » Thu Dec 12, 2013 5:07 pm

brian2013 wrote:
stoptothink wrote:
letsgobobby wrote:One thing that has come up in the past is how intimidating it is to new forum members, lower income earners, and just your average person trying to save a few bucks when they read that everyone here is saving 20%, 40%, 60% of their gross household income. It might send the wrong message that you can't be a successful investor if you aren't an ubersaver.
Post of the day. I've heard this exact statement from numerous people I've referred to this board. I make a comfortable income and my net worth is above the 90th percentile for my age group, yet these threads always end up making me feel like a total slacker. Getting creative with the accounting ruins any purpose these threads may possibly have.
I'm not sure what the creative accounting reference is to in particular

People including mortgage payments, student loan payments, etc. It was done by several posters.

bhsince87 · Post by **bhsince87** » Thu Dec 12, 2013 5:09 pm

It’s hard for me to believe there are people reading this board who can’t comprehend something as simple as the fact that a higher income can allow a higher saving percentage.

But I’ll admit, I’ve only been following the board for a year or so. Maybe I’m missing something.

letsgobobby · Post by **letsgobobby** » Thu Dec 12, 2013 5:17 pm

What's wonderful about BHs is the accessibility - free to anyone, no marketing, no ulterior motive - and the lack of exclusivity.

The people who need the help we offer are not only those making six figures. Or seven figures. We have a disproportionate share of both on this board.

The people who need the most help are those making $40k and supporting a family of 4; who have never saved anything or not much; who aren't prone to becoming hypereducated about financial minutiae; who don't want to or aren't able to run a spreadsheet or a Monte Carlo analysis or even a Firecalc analysis; who can't cost-effectively access an objective financial adviser. They just need to know how to utilize their 401k to their best advantage. We can help them, but they can't be scared off before we reach them.

I'm guilty of having participated in these threads in the past and, being an ubersaver myself, get a rise out of them. Especially the college savings threads. So I'm not casting stones at anyone - I'm just not going to participate in them any more unless there is a specific reason that my specific answer would be helpful to someone (for example, docs coming out of residency wanting to know how to save more of their income, etc).

bhsince87 · Post by **bhsince87** » Thu Dec 12, 2013 5:30 pm

stoptothink wrote:
brian2013 wrote:
stoptothink wrote:
letsgobobby wrote:One thing that has come up in the past is how intimidating it is to new forum members, lower income earners, and just your average person trying to save a few bucks when they read that everyone here is saving 20%, 40%, 60% of their gross household income. It might send the wrong message that you can't be a successful investor if you aren't an ubersaver.
Post of the day. I've heard this exact statement from numerous people I've referred to this board. I make a comfortable income and my net worth is above the 90th percentile for my age group, yet these threads always end up making me feel like a total slacker. Getting creative with the accounting ruins any purpose these threads may possibly have.
I'm not sure what the creative accounting reference is to in particular
People including mortgage payments, student loan payments, etc. It was done by several posters.

I think that’s open for debate. Many folks call a mortgage “forced savings”, and I see a lot of ads for reverse mortgages too. Might not be good advice, but it happens.

Student loans (or ANY loans) may be a bit fuzzier. But IMO, if you’re paying 6 or 7% on a loan, maybe you shouldn’t be saving ANYTHING for retirement until you pay that loan off.

And in a case like that, I think it should actually make people feel better, or more encouraged, if they include that number in their “retirement savings” total.

The money sent to pay off the loan might not go directly into a bucket labeled “retirement”, but that doesn’t mean it’s not the best financial move they can make right now to help them eventually achieve a better retirement.

stoptothink · Post by **stoptothink** » Thu Dec 12, 2013 5:38 pm

bhsince87 wrote:
stoptothink wrote: People including mortgage payments, student loan payments, etc. It was done by several posters.
I think that’s open for debate. Many folks call a mortgage “forced savings”, and I see a lot of ads for reverse mortgages too. Might not be good advice, but it happens.

Student loans (or ANY loans) may be a bit fuzzier. But IMO, if you’re paying 6 or 7% on a loan, maybe you shouldn’t be saving ANYTHING for retirement until you pay that loan off.

And in a case like that, I think it should actually make people feel better, or more encouraged, if they include that number in their “retirement savings” total.

The money sent to pay off the loan might not go directly into a bucket labeled “retirement”, but that doesn’t mean it’s not the best financial move they can make right now to help them eventually achieve a better retirement.

The title of the thread is "what percentage of your income are you saving," pretty straightforward. Not sure how anybody concluded that paying off debt should be concluded in that number, but I guess I am the crazy one. Why not include car payments, car/health/life insurance as well then?

technovelist · Post by **technovelist** » Thu Dec 12, 2013 5:43 pm

I normally save 20% or so but haven't been saving much of anything for the past two years, as my living expenses are abnormally high at the moment due to a new job that requires me to have a second living location.

I expect this to change in another year or so when I start collecting SS, which I will stuff directly into savings; I can't collect it at present due to being below FRA and making too much money.

IlliniDave · Post by **IlliniDave** » Thu Dec 12, 2013 5:51 pm

brian2013 wrote:
stoptothink wrote:
letsgobobby wrote:One thing that has come up in the past is how intimidating it is to new forum members, lower income earners, and just your average person trying to save a few bucks when they read that everyone here is saving 20%, 40%, 60% of their gross household income. It might send the wrong message that you can't be a successful investor if you aren't an ubersaver.
Post of the day. I've heard this exact statement from numerous people I've referred to this board. I make a comfortable income and my net worth is above the 90th percentile for my age group, yet these threads always end up making me feel like a total slacker. Getting creative with the accounting ruins any purpose these threads may possibly have.
This is one of the things i really like about this forum, that folks on here want to encourage others, so i hear ya. I'm actually a "new forum member" and it gives me some helpful perspective, but it's not particularly intimidating to me. But for anyone discouraged by this thread, just a couple of years ago we were barely saving at all for retirement. I lived at home with my parents at 27. I'm not sure what the creative accounting reference is to in particular, but the "percentage of gross income" was just a rough, random way to compare apples to apples, without getting CPAs involved to give us some exact numbers.

I can see letsgobobby's concern, but at the same time bogleheads as a group are high achievers and understanding that it makes a bit more than contributing the minimum to get the company match on your 401k and putting it in an index fund to retire early and wealthy is important too. I often have the same reaction as stoptothink despite having top quintile income and maybe net worth for my age demographic (but sub par among bogleheads), but part of life is learning to do the best we can while accepting that we may not be anywhere near close to the top of the heap. I'm happy the culture here is helpful and non intimidating to you. This isn't about "beating" the other guy, just doing the best we can with the balancing act of having a good life now and a good life in the future. A popular saying here is (paraphrased), "There are many roads that lead to Dublin."

bhsince87 · Post by **bhsince87** » Thu Dec 12, 2013 5:59 pm

stoptothink wrote:
bhsince87 wrote:
stoptothink wrote: People including mortgage payments, student loan payments, etc. It was done by several posters.
I think that’s open for debate. Many folks call a mortgage “forced savings”, and I see a lot of ads for reverse mortgages too. Might not be good advice, but it happens.

Student loans (or ANY loans) may be a bit fuzzier. But IMO, if you’re paying 6 or 7% on a loan, maybe you shouldn’t be saving ANYTHING for retirement until you pay that loan off.

And in a case like that, I think it should actually make people feel better, or more encouraged, if they include that number in their “retirement savings” total.

The money sent to pay off the loan might not go directly into a bucket labeled “retirement”, but that doesn’t mean it’s not the best financial move they can make right now to help them eventually achieve a better retirement.
The title of the thread is "what percentage of your income are you saving," pretty straightforward. Not sure how anybody concluded that paying off debt should be concluded in that number, but I guess I am the crazy one. Why not include car payments, car/health/life insurance as well then?

I agree it’s fuzzy, in case you missed my first post above.

But some people feel guilty or discouraged that they aren’t saving enough for retirement. While in reality, if they truly want to ensure themselves a good retirement, saving ZERO percent of their income into an account labeled “retirement” might be their very best financial move right now.

bhsince87 · Post by **bhsince87** » Thu Dec 12, 2013 6:00 pm

I should also add that I don’t consider “What percentage of my income should I save for retirement” to be an investment question.

It’s a philosophical question.

leonard · Post by **leonard** » Thu Dec 12, 2013 6:16 pm

bhsince87 wrote:
stoptothink wrote:
bhsince87 wrote:
stoptothink wrote: People including mortgage payments, student loan payments, etc. It was done by several posters.
I think that’s open for debate. Many folks call a mortgage “forced savings”, and I see a lot of ads for reverse mortgages too. Might not be good advice, but it happens.

Student loans (or ANY loans) may be a bit fuzzier. But IMO, if you’re paying 6 or 7% on a loan, maybe you shouldn’t be saving ANYTHING for retirement until you pay that loan off.

And in a case like that, I think it should actually make people feel better, or more encouraged, if they include that number in their “retirement savings” total.

The money sent to pay off the loan might not go directly into a bucket labeled “retirement”, but that doesn’t mean it’s not the best financial move they can make right now to help them eventually achieve a better retirement.
The title of the thread is "what percentage of your income are you saving," pretty straightforward. Not sure how anybody concluded that paying off debt should be concluded in that number, but I guess I am the crazy one. Why not include car payments, car/health/life insurance as well then?
I agree it’s fuzzy, in case you missed my first post above.

But some people feel guilty or discouraged that they aren’t saving enough for retirement. While in reality, if they truly want to ensure themselves a good retirement, saving ZERO percent of their income into an account labeled “retirement” might be their very best financial move right now.

It's only fuzzy if we allow it to be - saving for retirement is dollars saved for retirement. Not paying of mortage, car or anything else. Including those things is changing the definition - and it makes no sense for us to redefine a well known and understood concept.

origami · Post by **origami** » Thu Dec 12, 2013 6:29 pm

http://www.bogleheads.org/forum/viewtop ... 0&t=110538

MoonOrb · Post by **MoonOrb** » Thu Dec 12, 2013 7:04 pm

My wife and I are 38.

We save approximately 37.5% of pre-tax household income.

stoptothink · Post by **stoptothink** » Thu Dec 12, 2013 7:17 pm

leonard wrote:
It's only fuzzy if we allow it to be - saving for retirement is dollars saved for retirement. Not paying of mortage, car or anything else. Including those things is changing the definition - and it makes no sense for us to redefine a well known and understood concept.

Exactly, I am confused how any of this is fuzzy. If you are going to use that arbitrary of a definition, why stop at mortgage and student loan payments? How are they more of a "savings" than health/car/life insurance? Why aren't books for my 2yr old considered savings? I am planning on those books helping her get a scholarship so I save on her college costs. Subjectively changing the definition makes all of the posts pretty pointless. Correct me if I am wrong, but I am fairly certain when the OP said "what percentage of you income are you saving" that they actually meant "what percentage of your income are you saving".

market timer · Post by **market timer** » Thu Dec 12, 2013 7:18 pm

Uncertainty about job stability in finance keeps us saving a high percentage, currently 55% of gross household income. If I were a physician earning the same salary, we'd probably save less than 30%.

Sunny Sarkar · Post by **Sunny Sarkar** » Thu Dec 12, 2013 7:20 pm

Just a thought - a financial goal should defined first and be the primary focus, not the savings rate - the savings rate should simply be a resultant of the goal. It's probably better to enjoy life with the rest instead of bumping up the savings rate. Frugal is better than scattergood, of course, but there's a difference between being financially responsible and being a miser.

wander · Post by **wander** » Thu Dec 12, 2013 7:37 pm

About 20%.

goblue100 · Post by **goblue100** » Thu Dec 12, 2013 7:50 pm

From my 20's to my mid 40's I saved probably close to 10% of my salary plus the 3% company 401k match. For the past 5 years it has been closer to 30%. A part of me wishes that I would have saved a little more when I was younger, but I think my wife and I are doing ok, and we had some fun along the way.
Has anyone read Spend til the end by Scott Burns? The idea is to find a medium between saving and spending so that you have a level life style your adult life. For the people saving 80% of their income, I hope they don't regret saving so much while they are relatively young and healthy and they don't end up with a pile of money that they can't enjoy. Moderation in all things, including moderation.

I think that is Mark Twain.

Colorado13 · Post by **Colorado13** » Thu Dec 12, 2013 8:06 pm

A very timely question as I'm doing my monthly review of financial information right now (or "right now" with the exception of when I'm reading BHs.)

Save: 48% (trying to make up for lost time/low salaries that I've earned in the past)
Income taxes: 11%
Property taxes: 2%
Spend: 39%

indian86 · Post by **indian86** » Thu Dec 12, 2013 8:37 pm

Save about 10% and in late 40s. I probably don't fit what is called the "boglehead lifestyle." kids are 15 and 12 and I intend to live it up a bit with them. Not sure about crimping now so one can live it up when retired - can never take life or health for granted. And I could save alot more but I also think it is very important to give money to those less fortunate. I like working and really don't have an interest in retiring early. Seems alittle backwards to me, when one is in their 30s and preoccupied with saving for 30 years away. I'm not being stupid with money but want to enjoy life and make no mistake. But I will buy a new honda accord every 5-7 years instead of shopping around for a used one. I do believe in saving enough that I won't be a financial burden on my kids or society. I have 600k in liquid and 500k in not so liquid assets and plan to double it in the next 15--17 years. I have no debt.

HornedToad · Post by **HornedToad** » Thu Dec 12, 2013 9:38 pm

stoptothink wrote:
leonard wrote:
It's only fuzzy if we allow it to be - saving for retirement is dollars saved for retirement. Not paying of mortage, car or anything else. Including those things is changing the definition - and it makes no sense for us to redefine a well known and understood concept.
Exactly, I am confused how any of this is fuzzy. If you are going to use that arbitrary of a definition, why stop at mortgage and student loan payments? How are they more of a "savings" than health/car/life insurance? Why aren't books for my 2yr old considered savings? I am planning on those books helping her get a scholarship so I save on her college costs. Subjectively changing the definition makes all of the posts pretty pointless. Correct me if I am wrong, but I am fairly certain when the OP said "what percentage of you income are you saving" that they actually meant "what percentage of your income are you saving".

Perhaps because the question did not ask how much are you saving for retirement. That has a straightforward definition. Savings in general is much more fuzzier and leads to different definitions. If I save 2k/month but then buy a car out of savings, what was I saving for the year? What if instead I got an interest free loan. I buy a house for cash and then save alot to recoup my emergency fund vs. I put 20% down and "save" less but have a large portion that goes to my mortgage principle each year. Does paying extra on the mortgage count? What about 15 year vs. 30 year mortgage. What about gross versus net savings? etc etc.

That's why I prefer controllable networth increase as what I look at for savings (assuming the question is not specific to retirement savings). Net 401k savings+match+taxable saving (net) +principal paydown over total income + match.

leonard · Post by **leonard** » Thu Dec 12, 2013 9:47 pm

HornedToad wrote:
stoptothink wrote:
leonard wrote:
It's only fuzzy if we allow it to be - saving for retirement is dollars saved for retirement. Not paying of mortage, car or anything else. Including those things is changing the definition - and it makes no sense for us to redefine a well known and understood concept.
Exactly, I am confused how any of this is fuzzy. If you are going to use that arbitrary of a definition, why stop at mortgage and student loan payments? How are they more of a "savings" than health/car/life insurance? Why aren't books for my 2yr old considered savings? I am planning on those books helping her get a scholarship so I save on her college costs. Subjectively changing the definition makes all of the posts pretty pointless. Correct me if I am wrong, but I am fairly certain when the OP said "what percentage of you income are you saving" that they actually meant "what percentage of your income are you saving".
Perhaps because the question did not ask how much are you saving for retirement. That has a straightforward definition. Savings in general is much more fuzzier and leads to different definitions. If I save 2k/month but then buy a car out of savings, what was I saving for the year? What if instead I got an interest free loan. I buy a house for cash and then save alot to recoup my emergency fund vs. I put 20% down and "save" less but have a large portion that goes to my mortgage principle each year. Does paying extra on the mortgage count? What about 15 year vs. 30 year mortgage. What about gross versus net savings? etc etc.

That's why I prefer controllable networth increase as what I look at for savings (assuming the question is not specific to retirement savings). Net 401k savings+match+taxable saving (net) +principal paydown over total income + match.

Sorry - again your are looking for fuzz where there is none. Savings is NOT any opportunity cost saved. It's hard dollars in an account.

Using such a broad definition any opportunity cost could qualify as savings. I just thought about buying a $50k Mercedes. Then, decided not to. Did I just save $50k.

market timer · Post by **market timer** » Thu Dec 12, 2013 10:50 pm

leonard wrote:
HornedToad wrote:That's why I prefer controllable networth increase as what I look at for savings (assuming the question is not specific to retirement savings). Net 401k savings+match+taxable saving (net) +principal paydown over total income + match.
Sorry - again your are looking for fuzz where there is none. Savings is NOT any opportunity cost saved. It's hard dollars in an account.

Using such a broad definition any opportunity cost could qualify as savings. I just thought about buying a $50k Mercedes. Then, decided not to. Did I just save $50k.

Based on HornedToad's definition, no. Your net worth did not increase.

bhsince87 · Post by **bhsince87** » Thu Dec 12, 2013 11:09 pm

Increasing your net worth is a good step, but not completely there, IMO.

What if you’re plugging a hole that’s bleeding red ink?

Isn’t that a good use of potential retirement savings?

PS241 · Post by **PS241** » Thu Dec 12, 2013 11:30 pm

24. About 16.5% I've only read the beginning of boglehead's guide to retirement (the free trial on amazon) but I believe it suggests 15-20%.

basspond · Post by **basspond** » Thu Dec 12, 2013 11:41 pm

Over 20%. But when I first started over 30 years ago it was 6%. Just like in any endeavor, the most difficult step is the 1st one.

dublin · Post by **dublin** » Fri Dec 13, 2013 12:29 am

market timer wrote:
leonard wrote:
HornedToad wrote:That's why I prefer controllable networth increase as what I look at for savings (assuming the question is not specific to retirement savings). Net 401k savings+match+taxable saving (net) +principal paydown over total income + match.
Sorry - again your are looking for fuzz where there is none. Savings is NOT any opportunity cost saved. It's hard dollars in an account.

Using such a broad definition any opportunity cost could qualify as savings. I just thought about buying a $50k Mercedes. Then, decided not to. Did I just save $50k.
Based on HornedToad's definition, no. Your net worth did not increase.

I'll jump on this bandwagon - agree with HornedToad and market timer - at the end of the day, my net worth (not strictly my 'retirement' accounts) will essentially determine my ability to retire, so what I'm trying to monitor and track (for the purpose of maximizing) is the percentage of my income that I choose to use to further that goal, whether it's through putting it in an IRA, or putting it against my mortgage, or paying off a student loan that I therefore won't have to pay off later on.

BC_Doc · Post by **BC_Doc** » Fri Dec 13, 2013 1:00 am

Previously about 20%, but now climbing as we recently paid off the mortgage. I don't track the exact dollar amount or percentage of what I save-- I do know, though, that I am more like the ant than the grasshopper. Winter could always be around the next corner and I want to always be ready, therefore I save.
Cheers,
BC Doc

pswift · Post by **pswift** » Fri Dec 13, 2013 3:44 am

For retirement, I save a little over 20% of gross. For my income and family (3 kids), that's about as much as is possible, even with frugal living. Some of the supersavers in this forum must have wildly different lifestyles than us. Actually I'm very happy with our saving goals, and am planning on taking the family on a special trip to celebrate at the end of the year. I don't want to save it all for later and miss the good times now. Especially with children, I want to use the resources available for their education and to create good family memories now. Some things are more important than saving.

obgyn65 · Post by **obgyn65** » Fri Dec 13, 2013 8:17 am

About 80 to 90%. Age 48. No mortgage.

Kielke · Post by **Kielke** » Fri Dec 13, 2013 8:19 am

It varies from month to month depending on other expenses, but on average ~12% 401k, ~2% Roth IRA, and ~6% to emergency funds and other savings. These are real numbers, because sadly on paper I sit down and think a ~30% savings rate is possible, but it seems I would need to pretty much force myself to life a monastic lifestyle and pay for little more than the basics to make that happen. Oh and I am age 25, and am debt free.

Grt2bOutdoors · Post by **Grt2bOutdoors** » Fri Dec 13, 2013 8:55 am

Kielke wrote:It varies from month to month depending on other expenses, but on average ~12% 401k, ~2% Roth IRA, and ~6% to emergency funds and other savings. These are real numbers, because sadly on paper I sit down and think a ~30% savings rate is possible, but it seems I would need to pretty much force myself to life a monastic lifestyle and pay for little more than the basics to make that happen. Oh and I am age 25, and am debt free.

Rome wasn't built in a day, nor were many of these uber-saver rates, including my own either. Little by little, 1/4 percent, 1/2 a percent, 1 percent at a time, before you know it you'll be at your 30 percent rate. Enjoy your youth.

TomatoTomahto · Post by **TomatoTomahto** » Fri Dec 13, 2013 8:59 am

brian2013 wrote: In particular what percentage of your total before-tax household income are you saving for retirement?

~7%. I chose to answer the question asked. I did not include college savings, vacation savings, auto savings, Amazon savings, etc. I did include taxable accounts that are intended to be left alone until after we retire.

EDITED TO ADD: btw, our overall savings are ~15% of our pretax income. I am retired, my wife is not. We allow ourselves to live in a high-tax area, send our kids to a pricy school, and have fully funded college accounts for them. It is not that I am opposed to saving a lot, but I believe in consumption smoothing, and I have no desire to be the richest man in the crematorium; our assets should be able to comfortably fund a comfortable retirement.

Dulocracy · Post by **Dulocracy** » Fri Dec 13, 2013 9:10 am

stoptothink wrote:
letsgobobby wrote:One thing that has come up in the past is how intimidating it is to new forum members, lower income earners, and just your average person trying to save a few bucks when they read that everyone here is saving 20%, 40%, 60% of their gross household income. It might send the wrong message that you can't be a successful investor if you aren't an ubersaver.
Post of the day. I've heard this exact statement from numerous people I've referred to this board. I make a comfortable income and my net worth is above the 90th percentile for my age group, yet these threads always end up making me feel like a total slacker. Getting creative with the accounting ruins any purpose these threads may possibly have.

legsgobobby - that is exactly my issue (and why I do not post on these threads). I think we have bias in the thread itself for two reasons. One is that many who do not save much are not going to come on and tell about it. The second bias towards exaggerated numbers is as pointed out by stoptothink: Getting creative with the accounting is cheating the numbers. I think this has another issue that comes with it. If people are fudging numbers to add in things not typically considered savings (like paying debt), how can we trust other posts on the site. What else are we willing to fudge.

Personally, I feel guilty and concerned that I am only saving 16% of my gross income. I am debt free except for my mortgage, but I am worried that my savings are not enough. Unfortunately, there is not a lot of room in the budget to increase my savings. My wife's savings rate is something like 37%, but she makes a lot less than I do. Still, I am worried that we are not doing enough to put money aside because of the savings rates I see here. It does not help that I really started putting money aside for retirement at 35, rather than in my 20's like many on this board.

fposte · Post by **fposte** » Fri Dec 13, 2013 9:46 am

There are a lot of stories numbers don't tell. I'm not an ubersaver--I'm a non-saver who started scurrying to make up for lost time when some career uncertainty hit at about 50. My pay is low enough that maxing out any defined compensation plan makes me a double-digit saver.

I agree that savings rates, etc., can become an inappropriate lure in their own right, but there's something to be said about setting savings up as a source of satisfaction in the first place. That's quite a paradigm shift for a lot of us.

pc95 · Post by **pc95** » Fri Dec 13, 2013 9:55 am

Before tax? I couldn't tell you...after tax (take home): Varies from year to year, but our target is 70% of our take-home pay - usually it's high 50s or low 60s percentile range.

MathWizard · Post by **MathWizard** » Fri Dec 13, 2013 10:05 am

To the posts regrading "fuzzzy math", please consider the following.

Person A and person B hve the same income, students loans and mortgage, at the same interest rates, and have the same overall wealth.

Both have sufficient liquid funds to pay off all student loans and mortgage.
These payments amount to 15% of his/her income

Person A pays off the student loans and mortgage. Person A then puts 30% of income in a 401K.

Person B does not pay off the loans, paying 15% of income on the loans and puts 15% of income in a 401K.

Are you saying that person A has double the savings rate of person B?

I think that it does discourage younger people who have those debts early in their career to be comparing their savings rate
to those near the end of their career who have paid off student loans and have a house free and clear.

Including in the savings rate thise things that have and retain value and from which income is derived is reasonable.
Others may differ.
Notice though that if you include these, then both A and B have the same savings rate.

For those say "this increases wealth, but is not income" may be correct in their technical definition, but are missing the point.
The goal is to increase wealth. Paying down debts used to purchase things that either increase your income, or which will reduce
later expenses is a good thing, as others have already pointed out.

I did not give a percentage, but I determine my "wealth" by adding the value of my financial investements and
subtracting my mortgage balance and subtracting the amount that my wife an I have pledged to proviode for my children's college expenses, since these are encumbered funds.
I then figure those into my savings rate when I see how I am doing towards retirment.

Regarding "fudging" and "trust issues":
Here people are letting you know what they are adding in, so they are not being deceptive, so I don't think there is any trust
issue at stake.

englishgirl · Post by **englishgirl** » Fri Dec 13, 2013 10:10 am

I don't know how much I'll earn this year, so I won't be able to tell you until I do my taxes.

I put 10% of my pretax income of job #1 into a 401k. This year, that job is probably going to be 85-90% of my income. So, let's say 8.5% into 401k. I max my Roth IRA. I don't know what this works out to exactly yet, but maybe 6%, or 7%. Something like that. Let me take the middle of those guesses at 6.5%. So, voila, a nice round 15%.

Given that the question asked specifically about saving for retirement, I'll stop there, despite all the other discussion about overall savings rates. I do also put money in an HSA, and have other savings.

market timer · Post by **market timer** » Fri Dec 13, 2013 10:15 am

Going further into the "fuzzy math" of savings, I think it would be reasonable to include mandatory contributions to pension plans, including Social Security, as a form of savings (both the employee and employer contributions).

MnD · Post by **MnD** » Fri Dec 13, 2013 10:36 am

I define savings as what percentage of current income is being converted into lasting household wealth, less any current additions to debt.
Your savings rate times your annual income should correspond to your annual change in net worth excluding investment gains and losses.
"Savings" for what will be expended shortly on a new roof or washer-dryer doesn't cut it by that definition, but mortgage principal reduction would.

We are at 27%, (22% excluding mortgage principal reduction if that bothers some people).
We are also paying for tuition, fees, room and board for two college educations out of current cash flow.

MathWizard · Post by **MathWizard** » Fri Dec 13, 2013 10:57 am

MnD wrote:I define savings as what percentage of current income is being converted into lasting household wealth, less any current additions to debt.
Your savings rate times your annual income should correspond to your annual change in net worth excluding investment gains and losses.
"Savings" for what will be expended shortly on a new roof or washer-dryer doesn't cut it by that definition, but mortgage principal reduction would.

We are at 27%, (22% excluding mortgage principal reduction if that bothers some people).
We are also paying for tuition, fees, room and board for two college educations out of current cash flow.

I feel for you, we have two in college at the same time too, also paying out of current cash flow. 10 years ago,
I would never guessed that we could do it. It helped that both boys went to the top state Univ. rather than to a
private or out-of-state school.

travellight · Post by **travellight** » Fri Dec 13, 2013 11:22 am

but it seems I would need to pretty much force myself to life a monastic lifestyle and pay for little more than the basics to make that happen. Oh and I am age 25, and am debt free.

If the mere ten points in savings rate makes a difference between a monastic lifestyle and a good lifestyle, go with good! I am one of the 80%+ savers and I would say that I have a good lifestyle; I am really not suffering to do this. I have a high income and am later in that curve than you are though. 20% in your twenties especially with a lower income is quite decent.

Dulocracy · Post by **Dulocracy** » Fri Dec 13, 2013 11:23 am

MathWizard wrote:To the posts regrading "fuzzzy math", please consider the following.

Person A and person B hve the same income, students loans and mortgage, at the same interest rates, and have the same overall wealth.

Both have sufficient liquid funds to pay off all student loans and mortgage.
These payments amount to 15% of his/her income

Person A pays off the student loans and mortgage. Person A then puts 30% of income in a 401K.

Person B does not pay off the loans, paying 15% of income on the loans and puts 15% of income in a 401K.

Are you saying that person A has double the savings rate of person B?

Yes. And person B has a higher debt reduction rate.

I think that it does discourage younger people who have those debts early in their career to be comparing their savings rate
to those near the end of their career who have paid off student loans and have a house free and clear.

I agree. I also think this is because most people use their rate of savings for retirement as the amount of money they are putting towards retirement. They consider debt reduction to be a different category. That is what I have seen on this site as a standard in posts giving advice about individual situations, as well as general discussions.... until we get to the savings percentage questions. We need to be consistent with the message given in advice forums to maintain credibility.

Including in the savings rate thise things that have and retain value and from which income is derived is reasonable.
Others may differ.
Notice though that if you include these, then both A and B have the same savings rate.

I disagree. They have different rates of saving for the future and different rates of debt reduction. If we do not agree on that, however, I hope we can agree that the retirement savings rate does not include debt reduction for goods or services (whether helpful or not) consumed in the past.

For those say "this increases wealth, but is not income" may be correct in their technical definition, but are missing the point.
The goal is to increase wealth. Paying down debts used to purchase things that either increase your income, or which will reduce
later expenses is a good thing, as others have already pointed out.

I agree, but I would not call everything that increases wealth savings. My house increased in value by $20k this year, but that is not savings. I paid extra to pay off my car (yay!), but that is not added to my savings tally. It is debt reduction (at least as I understand the advice I have read on this site).

I did not give a percentage, but I determine my "wealth" by adding the value of my financial investements and
subtracting my mortgage balance and subtracting the amount that my wife an I have pledged to proviode for my children's college expenses, since these are encumbered funds.
I then figure those into my savings rate when I see how I am doing towards retirment.

Would not this computation of your savings rate mean that any increase in value of your home or your investments would inflate your savings rate?

Regarding "fudging" and "trust issues":
Here people are letting you know what they are adding in, so they are not being deceptive, so I don't think there is any trust
issue at stake.

I am not accusing anyone of being dishonest at all. I do, however, believe that inconsistency in the method of determining something as key as a savings rate could make newer readers doubt other advice on this forum. I am not saying I have a magical solution, or that anyone has done anything wrong. I am pointing out, however, that one byproduct of these post may be insecurity in the advice posted.

I hope the above explains what I meant better than I did the first time. Again, I am criticizing no one. I am merely addressing the byproduct of inconsistency that the more creative methods of finding a savings rate can create.

Dulocracy · Post by **Dulocracy** » Fri Dec 13, 2013 11:25 am

brian2013 wrote:In particular what percentage of your total before-tax household income are you saving for retirement?

Apparently, you cannot quote from more than one page (or I do not know how). I wanted to remind the group of the question that we are debating. I do not see debt reduction as a part of the percentage of before-tax dollars being saved for retirement.

stoptothink · Post by **stoptothink** » Fri Dec 13, 2013 11:41 am

MathWizard wrote:To the posts regrading "fuzzzy math", please consider the following.

Person A and person B hve the same income, students loans and mortgage, at the same interest rates, and have the same overall wealth.

Both have sufficient liquid funds to pay off all student loans and mortgage.
These payments amount to 15% of his/her income

Person A pays off the student loans and mortgage. Person A then puts 30% of income in a 401K.

Person B does not pay off the loans, paying 15% of income on the loans and puts 15% of income in a 401K.

Are you saying that person A has double the savings rate of person B?

I think that it does discourage younger people who have those debts early in their career to be comparing their savings rate
to those near the end of their career who have paid off student loans and have a house free and clear.

Including in the savings rate thise things that have and retain value and from which income is derived is reasonable.
Others may differ.
Notice though that if you include these, then both A and B have the same savings rate.

For those say "this increases wealth, but is not income" may be correct in their technical definition, but are missing the point.
The goal is to increase wealth. Paying down debts used to purchase things that either increase your income, or which will reduce
later expenses is a good thing, as others have already pointed out.

Than how should I account for the over $150k I invested in my education over a decade, completely out of pocket, into my current "savings" rate? What about the $9k I just spent to pay off my wife's car? Should I include contributions to my HSA, which I may or may not use before I retire? Obviously paying off mortgage and education debt is a good thing and leads to progressively increased wealth, but does it have anything to do with what the OP was asking? For the data from this thread to be valid and generalizable, all the posters need to be making the determination of savings rates based upon the same metrics.

I contributed ~25% of my gross income to my 403b, IRA, taxable and emergency funds for '13; that's my answer.

bigfun · Post by **bigfun** » Fri Dec 13, 2013 12:51 pm

IlliniDave wrote:
brian2013 wrote:
stoptothink wrote:
letsgobobby wrote:One thing that has come up in the past is how intimidating it is to new forum members, lower income earners, and just your average person trying to save a few bucks when they read that everyone here is saving 20%, 40%, 60% of their gross household income. It might send the wrong message that you can't be a successful investor if you aren't an ubersaver.
Post of the day. I've heard this exact statement from numerous people I've referred to this board. I make a comfortable income and my net worth is above the 90th percentile for my age group, yet these threads always end up making me feel like a total slacker. Getting creative with the accounting ruins any purpose these threads may possibly have.
This is one of the things i really like about this forum, that folks on here want to encourage others, so i hear ya. I'm actually a "new forum member" and it gives me some helpful perspective, but it's not particularly intimidating to me. But for anyone discouraged by this thread, just a couple of years ago we were barely saving at all for retirement. I lived at home with my parents at 27. I'm not sure what the creative accounting reference is to in particular, but the "percentage of gross income" was just a rough, random way to compare apples to apples, without getting CPAs involved to give us some exact numbers.
I can see letsgobobby's concern, but at the same time bogleheads as a group are high achievers and understanding that it makes a bit more than contributing the minimum to get the company match on your 401k and putting it in an index fund to retire early and wealthy is important too. I often have the same reaction as stoptothink despite having top quintile income and maybe net worth for my age demographic (but sub par among bogleheads), but part of life is learning to do the best we can while accepting that we may not be anywhere near close to the top of the heap. I'm happy the culture here is helpful and non intimidating to you. This isn't about "beating" the other guy, just doing the best we can with the balancing act of having a good life now and a good life in the future. A popular saying here is (paraphrased), "There are many roads that lead to Dublin."

I know what you meant, IlliniDave, but in no way do I perceive this as a "retire early and wealthy" message board. I think of it as a "let's leverage our knowledge into excellent investment results while avoiding unnecessary hassles so we can go about our financially secure lives" message board.

Depending on income and cost of living area, there's a spectrum of gaps between "saving enough" and "saving as much as I possibly can". I know my spouse would not enjoy the austerity required to achieve some of the savings rates posted here. Being a boglehead is cool. If I were poking around Mr. Money Mustache, which is fascinating, I would be flirting with miser-dom in a way that's not healthy for me because I could take it way too seriously.