Savings Rate - Early Retirement

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RRAAYY3
Posts: 926
Joined: Thu Jan 17, 2013 12:32 pm

Savings Rate - Early Retirement

Post by RRAAYY3 » Tue Feb 13, 2018 2:26 pm

Retirement Goal: 20 years

eligible for 401k in summer, will be maxing ROTH/401K (23,500k saved/invested 3% match annually) ...

no debt

I'm currently able to save 53% of my net income each month. I have 6 month EF in cash and maintain a 100/0 asset allocation

once eligible for 401K, will max that and ROTH IRA for some tax diversification - if my numbers are correct I'll be able to continue saving 5K annually + max 401/ROTH. This 5K will either be added to high yield savings or taxable investments to rebalance as needed.

Is this an appropriate savings rate to reach my goals? i've already done a ton of travel and by early retirement i mean basically reaching a point of choosing to work [full or part time] rather than be forced to.

RRAAYY3
Posts: 926
Joined: Thu Jan 17, 2013 12:32 pm

Re: Savings Rate - Early Retirement

Post by RRAAYY3 » Tue Feb 13, 2018 2:27 pm

* I will be receiving a decent inheritance that will total approximately 500K at least, but I choose to prepare/save as if that is not a given

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luminous
Posts: 98
Joined: Sat Dec 30, 2017 10:28 pm

Re: Savings Rate - Early Retirement

Post by luminous » Tue Feb 13, 2018 2:39 pm

That's a great savings rate, keep it up.

20 years is a long time, and many things can change between now and then. You could move, get married, have kids, become disabled, your income could triple, you might win the lottery, etc. Anytime you retire early you also have to think about the cost of medical care, which is hard to estimate now 20 years in advance.

By keeping your goal in mind, resisting lifestyle inflation, and sticking to your investment plan I think you'll do fine.
50/20/30 US stock/international stock/bonds. Hope to semi-retire in 2026.

magicrat
Posts: 413
Joined: Sat Nov 29, 2014 7:04 pm

Re: Savings Rate - Early Retirement

Post by magicrat » Tue Feb 13, 2018 2:40 pm

RRAAYY3 wrote:
Tue Feb 13, 2018 2:26 pm
Retirement Goal: 20 years

eligible for 401k in summer, will be maxing ROTH/401K (23,500k saved/invested 3% match annually) ...

no debt

I'm currently able to save 53% of my net income each month. I have 6 month EF in cash and maintain a 100/0 asset allocation

once eligible for 401K, will max that and ROTH IRA for some tax diversification - if my numbers are correct I'll be able to continue saving 5K annually + max 401/ROTH. This 5K will either be added to high yield savings or taxable investments to rebalance as needed.

Is this an appropriate savings rate to reach my goals? i've already done a ton of travel and by early retirement i mean basically reaching a point of choosing to work [full or part time] rather than be forced to.
Not enough information. How old are you, what's your portfolio now, how is it invested? How much do you project to have in 20 years? What do you anticipate your annual expenses will be in retirement?

RRAAYY3
Posts: 926
Joined: Thu Jan 17, 2013 12:32 pm

Re: Savings Rate - Early Retirement

Post by RRAAYY3 » Tue Feb 13, 2018 2:42 pm

85K invested 100% equity in TOTAL US / INT'L [1K monthly added until I start maxing 401K]. I'd like to retire early in 20 years. Random searches suggest my savings rate is excellent, but figured I'd ask the almighty Bogleheads.

if i marry, household income will approach 200K/yr and we are both fairly "simple" / not materialistic at all

debt: 0

my significant other also maxing retirement accounts

Jags4186
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Joined: Wed Jun 18, 2014 7:12 pm

Re: Savings Rate - Early Retirement

Post by Jags4186 » Tue Feb 13, 2018 2:51 pm

Instead of focusing on retiring in 20 years focus on your career and maintaining a high savings rate.

Too many unknowns 20 years from now but if you save 50% you’ll certainly be in a good position.

RRAAYY3
Posts: 926
Joined: Thu Jan 17, 2013 12:32 pm

Re: Savings Rate - Early Retirement

Post by RRAAYY3 » Tue Feb 13, 2018 2:54 pm

Jags4186 wrote:
Tue Feb 13, 2018 2:51 pm
Instead of focusing on retiring in 20 years focus on your career and maintaining a high savings rate.

Too many unknowns 20 years from now but if you save 50% you’ll certainly be in a good position.
thanks; simply worrying about what I can control - my savings rate.

* i love my job, this isn't a desperation thread.

Olemiss540
Posts: 567
Joined: Fri Aug 18, 2017 8:46 pm

Re: Savings Rate - Early Retirement

Post by Olemiss540 » Tue Feb 13, 2018 3:01 pm

To be honest, this may not be the best place for feedback as this forum tends to be on the fiscally conservative side. Might want to check in on the FIRE forums to get their take.

You may want to stick to investing questions here, just my input based on being around for a bit.

With 50% savings rate, you should be in great shape. Try to focus on the journey and not the results so you don't end up regretting your younger years!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

staythecourse
Posts: 6016
Joined: Mon Jan 03, 2011 9:40 am

Re: Savings Rate - Early Retirement

Post by staythecourse » Tue Feb 13, 2018 3:17 pm

Impossible to say. We see way TOO MANY of these type of questions without giving some very important info, such as: Is your job really stable and can be count on without some unemployment/ underemployment in the future? Are you or are you considering getting married? Are you finished with your housing purchases? Are you thinking of kids? If so, how many kids? Are you planning on retiring in HCOL or LCOL area? How much do you want to spend in retirement per year? What are you going to do in retirement (meaning the hobbies you have how much do they cost)? How about healthcare coverage? Do you have a job that is even ammenable to part time work and/ or getting back into the workforce if you wanted to after several years of retirement?

As you can see NONE of the questions are above have ANYTHING to do with savings rate, BUT the answers to the above will give you an inkling if continuing to save 53% is enough or not.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

RRAAYY3
Posts: 926
Joined: Thu Jan 17, 2013 12:32 pm

Re: Savings Rate - Early Retirement

Post by RRAAYY3 » Tue Feb 13, 2018 3:32 pm

Olemiss540 wrote:
Tue Feb 13, 2018 3:01 pm
To be honest, this may not be the best place for feedback as this forum tends to be on the fiscally conservative side. Might want to check in on the FIRE forums to get their take.

You may want to stick to investing questions here, just my input based on being around for a bit.

With 50% savings rate, you should be in great shape. Try to focus on the journey and not the results so you don't end up regretting your younger years!
Thank you! (That savings rate factors in splurging on the weekends - I could save a lot more if I wanted to, but life needs to be lived as well !)

The frugal thread on here makes me look like a big spender

H-Town
Posts: 1255
Joined: Sun Feb 26, 2017 2:08 pm

Re: Savings Rate - Early Retirement

Post by H-Town » Tue Feb 13, 2018 3:48 pm

RRAAYY3 wrote:
Tue Feb 13, 2018 2:26 pm
Retirement Goal: 20 years

eligible for 401k in summer, will be maxing ROTH/401K (23,500k saved/invested 3% match annually) ...

no debt

I'm currently able to save 53% of my net income each month. I have 6 month EF in cash and maintain a 100/0 asset allocation

once eligible for 401K, will max that and ROTH IRA for some tax diversification - if my numbers are correct I'll be able to continue saving 5K annually + max 401/ROTH. This 5K will either be added to high yield savings or taxable investments to rebalance as needed.

Is this an appropriate savings rate to reach my goals? i've already done a ton of travel and by early retirement i mean basically reaching a point of choosing to work [full or part time] rather than be forced to.
With this rate, you're aiming for financial independence, not necessary retirement now.

But I have a hard time following % saving of net income. I can understand % saving of gross income, i.e. (x1+x2)/x3 * 100%. If you save 50% of gross income (like I do now), you essentially save twice of your annual living expenses. I think saving rate based on annual expenses is a better metric to reach your financial independence goal.

Gross income (x3)
- 401k (x1)
- pre-tax healthcare premium
- pre-tax FSA
- FICA
- federal tax withheld
- state tax withheld
-------------------
= Net pay
- Living expense
------------------
= Additional saving (x2)

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teen persuasion
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Joined: Sun Oct 25, 2015 1:43 pm

Re: Savings Rate - Early Retirement

Post by teen persuasion » Tue Feb 13, 2018 4:03 pm

I think this is what you are looking for: http://www.mrmoneymustache.com/2012/01 ... tirement/

Dottie57
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Joined: Thu May 19, 2016 5:43 pm

Re: Savings Rate - Early Retirement

Post by Dottie57 » Tue Feb 13, 2018 4:13 pm

RRAAYY3 wrote:
Tue Feb 13, 2018 2:26 pm
Retirement Goal: 20 years

eligible for 401k in summer, will be maxing ROTH/401K (23,500k saved/invested 3% match annually) ...

no debt

I'm currently able to save 53% of my net income each month. I have 6 month EF in cash and maintain a 100/0 asset allocation

once eligible for 401K, will max that and ROTH IRA for some tax diversification - if my numbers are correct I'll be able to continue saving 5K annually + max 401/ROTH. This 5K will either be added to high yield savings or taxable investments to rebalance as needed.

Is this an appropriate savings rate to reach my goals? i've already done a ton of travel and by early retirement i mean basically reaching a point of choosing to work [full or part time] rather than be forced to.
Contrary opinion. The rate is great - maybe too great. A financial advsor told me I might be saving too much. She said to make sure I also spent and enjoyed the present. She was right.

marcopolo
Posts: 1126
Joined: Sat Dec 03, 2016 10:22 am

Re: Savings Rate - Early Retirement

Post by marcopolo » Tue Feb 13, 2018 5:36 pm

Well, if you are saving 53% if net, that means your are essentially living on 47% of net. So, each year you are contributing a little over a years living expenses. Assuming you stay employed, and keep increasing wages (usually grows faster than inflation), even with just moderate investment growth rates, you should be well over 30x your CURRENT expenses in 20 years. The big question is what will happen to your expenses between now and then, and will you be able to maintain such a high savings rate. Do you have kids, plan to? That can be a big factor that drives up expenses quite a bit.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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