At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

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bigtex
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At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by bigtex » Fri May 03, 2019 2:01 pm

I don't understand the value in the retirement projections / calculators for someone younger trying to project an early retirement age or estimated portfolio balance. There are so many unknown variables that could occur over the next 15, 20, 25 years. The main unknowns that can drastically affect my retirement age and / or account balance are as follows:

1. Investment Rate of Return: Bogle suggests 6% or less going forward, but historically we've been closer to 10% right? This is a massive spread in terms what the ending account balance might be at age 50, 65, 75.

2. Steadiness of Employment: My odds of at least one layoff and period of unemployment are pretty high (greater than 50%) over the next 25 years. I think most people would agree that they have been laid off at least once or close to it over the course of a 35 year career. This would also drastically affect balance and retirement age if I had planned to retire at 48 but lose my job and income at 38 and can't find other employment at the previous income level.

2a. Raises / Promotions. I have no idea if I will get promotions how many and when. Also COL raises may not continue to occur forever. This makes it hard to predict into the future how much dollars as a percent of income I am actually saving. I make $60k now, but how do I know if that will double eventually?

3. Rate of Inflation: Historically inflation has been what 3%? This is sort of like the rate of return unpredictability. Even if inflation is 4.5% vs. 2% that wildly affects things when projecting far out.

4. Unforeseen Catastrophic Events: Major Health issue, disability causes inability to work, child with disability / disease, liability lawsuits, etc. These could all cause major setbacks in retirement age and portfolio balances.

So bogleheads, what is the value or point of me trying to forecast my retirement and determine if there is a means for early retirement for me when there are so many unknowns? Is it as simple as I should focus on my savings rate and increasing it, and low cost investing in index funds and hope it all turns out okay?

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by Dottie57 » Fri May 03, 2019 2:06 pm

I agree. So save and invest 15 to 20% of your gross income. As you age and come closer to retirement, you will see where you stand. Retirement will come into focus. Set savings goals and live by them.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by dziuniek » Fri May 03, 2019 2:08 pm

There are outcomes in-between, but the 2 most likely ones are:

1. You under save and you have to work longer or live on less than you would like.

2. You over save and worst case you can walk away from work sooner....

I'd prefer option 2.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by KlangFool » Fri May 03, 2019 2:08 pm

OP,

Why so complicated? If you save 1 year of current annual expense every year, you will be FI in about 20+ years. So, why do you need to think about retirement at retirement age?

KlangFool

Topic Author
bigtex
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by bigtex » Fri May 03, 2019 2:13 pm

KlangFool wrote:
Fri May 03, 2019 2:08 pm
OP,

Why so complicated? If you save 1 year of current annual expense every year, you will be FI in about 20+ years. So, why do you need to think about retirement at retirement age?

KlangFool
Sounds simple, but how do I know what my annual expenses are at age 40, 60, 80? Health costs are one unknown for example.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by MiddleOfTheRoad » Fri May 03, 2019 2:13 pm

Control the variables that you can control. Don’t waste too much time worrying about the variables that you cannot control. Then, you get there when you get there.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by NotWhoYouThink » Fri May 03, 2019 2:20 pm

Dottie57 wrote:
Fri May 03, 2019 2:06 pm
I agree. So save and invest 15 to 20% of your gross income. As you age and come closer to retirement, you will see where you stand. Retirement will come into focus. Set savings goals and live by them.
This, exactly.

Along the way you can educate yourself about taxes, so you can understand how different savings methods (Traditional IRA vs. Roth), investment types, and other factors affect how much of your income and savings you get to keep.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by The Wizard » Fri May 03, 2019 2:22 pm

Dottie57 wrote:
Fri May 03, 2019 2:06 pm
I agree. So save and invest 15 to 20% of your gross income. As you age and come closer to retirement, you will see where you stand. Retirement will come into focus. Set savings goals and live by them.
Correct.
Just do this and live for the present for the next few decades...
Attempted new signature...

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by carmonkie » Fri May 03, 2019 2:24 pm

You have one thing going for you. Time. You are young, the thing you do not see is you close your eyes and when you open them you will be 40 and you will be wondering where time went, then at that time you are left trying to stash as much as you can and hope there will not be a huge correction or recession.

You answered your own question. Start early, which you are, savings rate and low cost indexing.
You talked about unemployment, an emergency fund will come in to place there. Fund one with 6-12 months of expenses and in the event you end up in the unemployment line, you do not dip into your retirement accounts.
Read on tax efficiency and asset location.
Stick with an investment plan

There was a good thread the other day about biggest mistakes and the overall theme was not starting early, and not understanding fees or not maxing out tax advantaged accounts.

There are many future unknowns, taxes, economy, inflation so yes pretty much we are all hoping everything turns out OK and with the correct foundation it is doable. I have made many mistakes in the past, but with the help of this group, I feel I am in the right path. We'll see what happens 20 years down the road.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by sjt » Fri May 03, 2019 2:28 pm

Obviously you don't know what your expenses will be several decades down the road. Nobody does. You could have some terribly expensive disease by then, you could be in perfect health. You could have government funded single payer healthcare - who knows? The purpose of the calculators is to give you (or maybe more personal finance averse individuals) some sort of idea as to where they might end up.

I'm sure you could construct a better, more personalized spreadsheet that takes inflation and market return into account. Then adjust every year, month, week, whatever you want to do. You can assume low market returns and high inflation to see how that affects your stash. You can change those variables to see how they affect your stash.
"The one who covets is the poorer man, | For he would have that which he never can; | But he who doesn't have and doesn't crave | Is rich, though you may hold him but a knave." - Wife of Bath tale

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by Jack FFR1846 » Fri May 03, 2019 2:30 pm

bigtex,

I agree with all the black swans you fear. Except for lay offs, I've seemed to have had them all. So I've simply saved more than is "normal", lived frugally and planned for the worst and hoped for the best. As I've had too many "worsts" recently, I'm now hoping that there's a light out there and it's not just another train in this tunnel about to flatten me.
Bogle: Smart Beta is stupid

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by TSquare » Fri May 03, 2019 2:31 pm

I'm several years older than you, but share your sentiment. Only thing I can do is control my savings rate. When I get to the end of my working years, I'll take whatever I've saved and adjust my lifestyle to make the money work.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by KlangFool » Fri May 03, 2019 2:31 pm

bigtex wrote:
Fri May 03, 2019 2:13 pm
KlangFool wrote:
Fri May 03, 2019 2:08 pm
OP,

Why so complicated? If you save 1 year of current annual expense every year, you will be FI in about 20+ years. So, why do you need to think about retirement at retirement age?

KlangFool
Sounds simple, but how do I know what my annual expenses are at age 40, 60, 80? Health costs are one unknown for example.
bigtex,

Why do you need to care about your annual expense at age 40, 60, and 80?

If you save 1 year of current annual expense every year, you do not need to care.

Just think about this for a moment. Let's assume that your annual expense is X and the inflation rate is Y%.

A) Your annual expense is growing by Y%. But, if your portfolio is 12X (40)/32X(60)/52X(80), as long as it grows slightly faster than Y%, it will outrun the inflation.

<<Health costs are one unknown for example.>>

B) But, if you are not rich enough, it is not a problem. If you do not have 2 million, you would not spend 2 million to extend your life.

KlangFool

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by KlangFool » Fri May 03, 2019 2:33 pm

OP,

1) I save 1 year of expense every year whenever I am employed.

2) I lost 50% of my portfolio during Telecom bust.

3) I was unemployed for more than 1 year a few times.

4) I will be FI in a few years.

KlangFool

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by Grt2bOutdoors » Fri May 03, 2019 2:36 pm

The Wizard wrote:
Fri May 03, 2019 2:22 pm
Dottie57 wrote:
Fri May 03, 2019 2:06 pm
I agree. So save and invest 15 to 20% of your gross income. As you age and come closer to retirement, you will see where you stand. Retirement will come into focus. Set savings goals and live by them.
Correct.
Just do this and live for the present for the next few decades...
+3. Do this, and if/when you have excess disposable income after "living for the present" - consider upping your savings rate above the 15-20%. Life is stressful enough, no need to wring your hands over how much you may need in the future.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by HomerJ » Fri May 03, 2019 2:40 pm

It absolutely correct that retirement projections are fairly difficult when you're young.

You have very little idea of how much you're going to make over the next 30 years, how much you're going to want to spend in retirement, etc. You likely don't even know if you're going to have kids or not, or how many!

Just save at least 10%-15% of your salary, and save half of your raises. If you change jobs, and get a $8,000 raise, spend $4000 more a year, and save $4000 more a year.

Save even more than that if it's painless. You can increase your lifestyle each year, but only if you save more each year too.

After 10-15 years, you'll be saving a good chunk, you'll have a better idea where you stand on your career and expenses.

Having a good amount of money saved will open all kinds of options. If you're really fortunate, at some point you'll realize you have "enough", and you can stop increasing your lifestyle and start pouring 100% of raises into savings.
Last edited by HomerJ on Fri May 03, 2019 2:48 pm, edited 1 time in total.
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by Oakwood42 » Fri May 03, 2019 2:45 pm

The Wizard wrote:
Fri May 03, 2019 2:22 pm
Dottie57 wrote:
Fri May 03, 2019 2:06 pm
I agree. So save and invest 15 to 20% of your gross income. As you age and come closer to retirement, you will see where you stand. Retirement will come into focus. Set savings goals and live by them.
Correct.
Just do this and live for the present for the next few decades...
LOL - "live for the present for next few decades..."

That is the goal!

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by HomerJ » Fri May 03, 2019 2:45 pm

KlangFool wrote:
Fri May 03, 2019 2:08 pm
OP,

Why so complicated? If you save 1 year of current annual expense every year, you will be FI in about 20+ years. So, why do you need to think about retirement at retirement age?

KlangFool
50% saving rate is a difficult place to start for many people Klang.

Far easier to start at 10%-15% and slowly increase your savings as you get raises.

And if someone is in a position they love where they don't get large bumps in pay over time, sticking with 10%-15% is still pretty solid, especially when matched with Social Security in retirement.

Not everyone has the same career trajectory as you. It would be useful to recognize this.
Last edited by HomerJ on Fri May 03, 2019 2:48 pm, edited 1 time in total.
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greg24
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by greg24 » Fri May 03, 2019 2:46 pm

I've always felt that it was kind of silly to attempt to project retirement savings and costs decades before they happen.

You have it correct. Focus on your savings rate and investing in low-cost vehicles.

:sharebeer

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by alex_686 » Fri May 03, 2019 2:48 pm

"Plans are worthless, but planning is everything." - General Eisenhower

Everything you said is true, which is why planning is so important. You will create dozens of plans, you will toss dozens of plans. Life is good. Planning will help you figure out where you weak spots are. As time evolve, your plan will evolve. You goals will change. Market expectations will change. It is a plan - not a hard road map that you must follow for the next 50+ years. However, it will help you get a good feel of how you are progressing and what you can do.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by livesoft » Fri May 03, 2019 2:51 pm

bigtex wrote:
Fri May 03, 2019 2:01 pm
So bogleheads, what is the value or point of me trying to forecast my retirement and determine if there is a means for early retirement for me when there are so many unknowns? Is it as simple as I should focus on my savings rate and increasing it, and low cost investing in index funds and hope it all turns out okay?
There is no point. Instead, set an intermediate goal. Examples:
"I will have $500,000 invested by the time I am 40."
"I will visit 50 countries by the time I am 40."
"I will live 3 years overseas by the time I am 40."
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by Oakwood42 » Fri May 03, 2019 2:52 pm

Jack FFR1846 wrote:
Fri May 03, 2019 2:30 pm
bigtex,

I agree with all the black swans you fear. Except for lay offs, I've seemed to have had them all. So I've simply saved more than is "normal", lived frugally and planned for the worst and hoped for the best. As I've had too many "worsts" recently, I'm now hoping that there's a light out there and it's not just another train in this tunnel about to flatten me.
There is light and it's not a train! Keep pushing Jack.

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bigtex
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by bigtex » Fri May 03, 2019 2:53 pm

I'm sort of embarrassed to say this, but I have no idea how much I actually spend in each year. All I know is I make $60k a year and save about 25% of my gross income. I can't be overspending because im not racking up credit card debt or taking out lines of credit or anything like that. I guess that means my expenses per year are 60k minus 25% (15k) = $45k per year. That would include taxes, other payroll deductions, and the principal portion of my home being paid off too though. Thoughts?

student
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by student » Fri May 03, 2019 2:56 pm

Dottie57 wrote:
Fri May 03, 2019 2:06 pm
So save and invest 15 to 20% of your gross income. As you age and come closer to retirement, you will see where you stand. Retirement will come into focus. Set savings goals and live by them.
+1.

KlangFool
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by KlangFool » Fri May 03, 2019 3:05 pm

HomerJ wrote:
Fri May 03, 2019 2:45 pm
KlangFool wrote:
Fri May 03, 2019 2:08 pm
OP,

Why so complicated? If you save 1 year of current annual expense every year, you will be FI in about 20+ years. So, why do you need to think about retirement at retirement age?

KlangFool
50% saving rate is a difficult place to start for many people Klang.

Far easier to start at 10%-15% and slowly increase your savings as you get raises.

And if someone is in a position they love where they don't get large bumps in pay over time, sticking with 10%-15% is still pretty solid, especially when matched with Social Security in retirement.

Not everyone has the same career trajectory as you. It would be useful to recognize this.
HomerJ,

Or, they start at 10% to 15%. Then, they buy a big expensive house and count the house as savings. After that, it is all downhill from there.

<<Not everyone has the same career trajectory as you. It would be useful to recognize this.>>

It won't matter what the career trajectory is. You could always overspend on the house.

KlangFool

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by Grt2bOutdoors » Fri May 03, 2019 3:05 pm

bigtex wrote:
Fri May 03, 2019 2:53 pm
I'm sort of embarrassed to say this, but I have no idea how much I actually spend in each year. All I know is I make $60k a year and save about 25% of my gross income. I can't be overspending because im not racking up credit card debt or taking out lines of credit or anything like that. I guess that means my expenses per year are 60k minus 25% (15k) = $45k per year. That would include taxes, other payroll deductions, and the principal portion of my home being paid off too though. Thoughts?
If you make a withdrawal out of your savings account, you could be overspending and that's okay, so long as you put back and then some as life moves along. If you are saving $15K out of $60K, you are in the top 5% of your income bracket, very few are saving that kind of money at your age and income.

My thought is for you to enjoy your 20's and don't worry so much. Don't go to the extreme of writing down what you spend and what you spend.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

KlangFool
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by KlangFool » Fri May 03, 2019 3:07 pm

bigtex wrote:
Fri May 03, 2019 2:53 pm
I'm sort of embarrassed to say this, but I have no idea how much I actually spend in each year. All I know is I make $60k a year and save about 25% of my gross income. I can't be overspending because im not racking up credit card debt or taking out lines of credit or anything like that. I guess that means my expenses per year are 60k minus 25% (15k) = $45k per year. That would include taxes, other payroll deductions, and the principal portion of my home being paid off too though. Thoughts?
bigtex,

Your annual expense is 45K minus the taxes. And, you know your taxes (income + social security+ Medicare) from your tax return and paycheck.

KlangFool

Grt2bOutdoors
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by Grt2bOutdoors » Fri May 03, 2019 3:07 pm

KlangFool wrote:
Fri May 03, 2019 3:05 pm
HomerJ wrote:
Fri May 03, 2019 2:45 pm
KlangFool wrote:
Fri May 03, 2019 2:08 pm
OP,

Why so complicated? If you save 1 year of current annual expense every year, you will be FI in about 20+ years. So, why do you need to think about retirement at retirement age?

KlangFool
50% saving rate is a difficult place to start for many people Klang.

Far easier to start at 10%-15% and slowly increase your savings as you get raises.

And if someone is in a position they love where they don't get large bumps in pay over time, sticking with 10%-15% is still pretty solid, especially when matched with Social Security in retirement.

Not everyone has the same career trajectory as you. It would be useful to recognize this.
HomerJ,

Or, they start at 10% to 15%. Then, they buy a big expensive house and count the house as savings. After that, it is all downhill from there.

<<Not everyone has the same career trajectory as you. It would be useful to recognize this.>>

It won't matter what the career trajectory is. You could always overspend on the house.

KlangFool
You can buy an inexpensive house and then find out down the road it needs expensive repairs. Then you are "overspending" but if you don't fix it, your equity becomes worthless.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by Grt2bOutdoors » Fri May 03, 2019 3:08 pm

KlangFool wrote:
Fri May 03, 2019 3:07 pm
bigtex wrote:
Fri May 03, 2019 2:53 pm
I'm sort of embarrassed to say this, but I have no idea how much I actually spend in each year. All I know is I make $60k a year and save about 25% of my gross income. I can't be overspending because im not racking up credit card debt or taking out lines of credit or anything like that. I guess that means my expenses per year are 60k minus 25% (15k) = $45k per year. That would include taxes, other payroll deductions, and the principal portion of my home being paid off too though. Thoughts?
bigtex,

Your annual expense is 45K minus the taxes. And, you know your taxes (income + social security+ Medicare) from your tax return and paycheck.

KlangFool
Don't forget healthcare and any other deductions that come out of your paycheck. What's left over is your true disposable spendable income.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by The Wizard » Fri May 03, 2019 3:09 pm

bigtex wrote:
Fri May 03, 2019 2:53 pm
I'm sort of embarrassed to say this, but I have no idea how much I actually spend in each year. All I know is I make $60k a year and save about 25% of my gross income. I can't be overspending because im not racking up credit card debt or taking out lines of credit or anything like that. I guess that means my expenses per year are 60k minus 25% (15k) = $45k per year. That would include taxes, other payroll deductions, and the principal portion of my home being paid off too though. Thoughts?
Yes, that 75% figure is what we call the Top Down method of computing your expenditures for the year.
When closer to retirement in 25-30 years, it might need to be tweaked a bit, since payroll taxes (FICA) are not paid in retirement...
Attempted new signature...

KlangFool
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by KlangFool » Fri May 03, 2019 3:11 pm

Grt2bOutdoors wrote:
Fri May 03, 2019 3:07 pm
KlangFool wrote:
Fri May 03, 2019 3:05 pm
HomerJ wrote:
Fri May 03, 2019 2:45 pm
KlangFool wrote:
Fri May 03, 2019 2:08 pm
OP,

Why so complicated? If you save 1 year of current annual expense every year, you will be FI in about 20+ years. So, why do you need to think about retirement at retirement age?

KlangFool
50% saving rate is a difficult place to start for many people Klang.

Far easier to start at 10%-15% and slowly increase your savings as you get raises.

And if someone is in a position they love where they don't get large bumps in pay over time, sticking with 10%-15% is still pretty solid, especially when matched with Social Security in retirement.

Not everyone has the same career trajectory as you. It would be useful to recognize this.
HomerJ,

Or, they start at 10% to 15%. Then, they buy a big expensive house and count the house as savings. After that, it is all downhill from there.

<<Not everyone has the same career trajectory as you. It would be useful to recognize this.>>

It won't matter what the career trajectory is. You could always overspend on the house.

KlangFool
You can buy an inexpensive house and then find out down the road it needs expensive repairs. Then you are "overspending" but if you don't fix it, your equity becomes worthless.
Grt2bOutdoors,

Or, you buy an expensive house and you found that it needs serious repairs. A house may need repairs. It has nothing to do with whether it is an expensive or cheap house.

KlangFool

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by jason1 » Fri May 03, 2019 3:13 pm

bigtex wrote:
Fri May 03, 2019 2:53 pm
I'm sort of embarrassed to say this, but I have no idea how much I actually spend in each year. All I know is I make $60k a year and save about 25% of my gross income. I can't be overspending because im not racking up credit card debt or taking out lines of credit or anything like that. I guess that means my expenses per year are 60k minus 25% (15k) = $45k per year. That would include taxes, other payroll deductions, and the principal portion of my home being paid off too though. Thoughts?
If you are saving 25% of gross and you have enough emergency fund for your situation than you are doing very well. Keep going with your saving rate and check in when you are at 40. You will likely be happy with where you are at then, if nothing else you will be miles ahead of your peers.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by Mlm » Fri May 03, 2019 3:15 pm

bigtex wrote:
Fri May 03, 2019 2:53 pm
I make $60k a year and save about 25% of my gross income.
You're going great ! Pay yourself first and enjoy the rest. :beer

Topic Author
bigtex
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by bigtex » Fri May 03, 2019 3:17 pm

jason1 wrote:
Fri May 03, 2019 3:13 pm
bigtex wrote:
Fri May 03, 2019 2:53 pm
I'm sort of embarrassed to say this, but I have no idea how much I actually spend in each year. All I know is I make $60k a year and save about 25% of my gross income. I can't be overspending because im not racking up credit card debt or taking out lines of credit or anything like that. I guess that means my expenses per year are 60k minus 25% (15k) = $45k per year. That would include taxes, other payroll deductions, and the principal portion of my home being paid off too though. Thoughts?
If you are saving 25% of gross and you have enough emergency fund for your situation than you are doing very well. Keep going with your saving rate and check in when you are at 40. You will likely be happy with where you are at then, if nothing else you will be miles ahead of your peers.
I guess the purpose of knowing line by line your expenses each year is that it provides a way to find efficiencies or ways to save more money cut excess.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by il0kin » Fri May 03, 2019 3:19 pm

You are overthinking it (which I totally understand, I am an overthinker and like to consider all the variables).

The rule of thumb around here and other places is really tied to % saved, assuming traditional retirement ages and a 20-something start date for saving.

10% results in a decent, no-frills retirement.
15% results in a comfortable, pleasant retirement where your standard of living is about the same as working.
20% results in a very nice retirement where you probably spend more than you did while working.
25+% results in a very nice, and probably earlier than usual, retirement.

Personally, I have found equilibrium at 17% + company match and the only debt is the mortgage. When I run projections for an age 58 retirement, it is a gigantic swing between 1M and 5M+ depending on the variables you listed.

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bigtex
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by bigtex » Fri May 03, 2019 3:22 pm

il0kin wrote:
Fri May 03, 2019 3:19 pm
You are overthinking it (which I totally understand, I am an overthinker and like to consider all the variables).

The rule of thumb around here and other places is really tied to % saved, assuming traditional retirement ages and a 20-something start date for saving.

10% results in a decent, no-frills retirement.
15% results in a comfortable, pleasant retirement where your standard of living is about the same as working.
20% results in a very nice retirement where you probably spend more than you did while working.
25+% results in a very nice, and probably earlier than usual, retirement.

Personally, I have found equilibrium at 17% + company match and the only debt is the mortgage. When I run projections for an age 58 retirement, it is a gigantic swing between 1M and 5M+ depending on the variables you listed.

Wow I really like how you put that standard of retirement based on the percentages. I would like the 25%+ version because I want an earlier than usual retirement.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by MotoTrojan » Fri May 03, 2019 3:22 pm

At this stage I’d ignore inflation and use estimated real returns.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by aerosurfer » Fri May 03, 2019 3:26 pm

bigtex wrote:
Fri May 03, 2019 2:53 pm
I'm sort of embarrassed to say this, but I have no idea how much I actually spend in each year. All I know is I make $60k a year and save about 25% of my gross income. I can't be overspending because im not racking up credit card debt or taking out lines of credit or anything like that. I guess that means my expenses per year are 60k minus 25% (15k) = $45k per year. That would include taxes, other payroll deductions, and the principal portion of my home being paid off too though. Thoughts?
Use round numbers... what’s your monthly outlay? Housing, bills, CC, other debt, auto, insurances, food and entertainment, etc. pick a number and round up a few hundred to pad that. Multiply by 12.

How much are you saving, 401k, Roth, company matches, taxable etc. what’s the difference between the two? Now factor in future earning potential and buffer some life creep. If you can do 10-15%, then you can probably do 16-18% also. Small but consistent steps towards a savings rate

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by Watty » Fri May 03, 2019 3:31 pm

At your age you will have a lot of other financial goals in addition to retirement like, saving up a downpayment for a home, saving to pay cash for your next car, building up an emergency fund, paying off any student loans, etc and these may take priority over retirement savings and that could make the retirement projects useless even if it was accurate.

One thing I do each year is that I update a very simple spreadsheet with my net worth on January 1st to see how I am progressing.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by willthrill81 » Fri May 03, 2019 3:48 pm

Depending on your ability, I believe that it's wise to save at least 15% of your gross income every year, and 20% or more is better if you can swing it.

I've only ever heard a couple of people on this forum honestly say that they regretted saving as much as they did when they were younger. Considering that the average person supposedly knows about 2,000 people, I'd say the odds are in your favor that you'll be glad you saved every dime that you did.

Debt is robbing your future self. Saving is rewarding your future self.
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by greg24 » Fri May 03, 2019 4:00 pm

il0kin wrote:
Fri May 03, 2019 3:19 pm
10% results in a decent, no-frills retirement.
15% results in a comfortable, pleasant retirement where your standard of living is about the same as working.
20% results in a very nice retirement where you probably spend more than you did while working.
25+% results in a very nice, and probably earlier than usual, retirement.
I like this!

:sharebeer

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by beyou » Fri May 03, 2019 4:11 pm

bigtex wrote:
Fri May 03, 2019 2:53 pm
I'm sort of embarrassed to say this, but I have no idea how much I actually spend in each year. All I know is I make $60k a year and save about 25% of my gross income. I can't be overspending because im not racking up credit card debt or taking out lines of credit or anything like that. I guess that means my expenses per year are 60k minus 25% (15k) = $45k per year. That would include taxes, other payroll deductions, and the principal portion of my home being paid off too though. Thoughts?
I would ask why you feel you need to project a retirement age ? Your reasons for not being able to do so are correct.
But I am not sure why this is even a concrete goal at this age. To me there are different types of goals.
There are the short term MUST DO, intermediate term goals you are actively working towards with a concrete plan,
and very long range goals that are a bit less concrete by definition, but you are taking steps IN THE DIRECTION.

Saving a % of your income to an IRA or 401k is commonly called "paying yourself"
and a great way to take the steps in the direction of our long term goals.

Paying down the mortgage would be a more intermediate term goal (more concrete and also taking steps).
Getting a promotion/raise in the next 2-3 years would also be an intermediate term goal.
For these you should have a firmer plan but not set in stone.

Paying your next 12 months of bills, getting a project done at work are all short term goals.
These should have very specific steps from which you would deviate only when necessary.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by dknightd » Fri May 03, 2019 4:19 pm

bigtex wrote:
Fri May 03, 2019 2:01 pm
I don't understand the value in the retirement projections / calculators for someone younger trying to project an early retirement age or estimated portfolio balance. There are so many unknown variables that could occur over the next 15, 20, 25 years. The main unknowns that can drastically affect my retirement age and / or account balance are as follows:

1. Investment Rate of Return: Bogle suggests 6% or less going forward, but historically we've been closer to 10% right? This is a massive spread in terms what the ending account balance might be at age 50, 65, 75.

2. Steadiness of Employment: My odds of at least one layoff and period of unemployment are pretty high (greater than 50%) over the next 25 years. I think most people would agree that they have been laid off at least once or close to it over the course of a 35 year career. This would also drastically affect balance and retirement age if I had planned to retire at 48 but lose my job and income at 38 and can't find other employment at the previous income level.

2a. Raises / Promotions. I have no idea if I will get promotions how many and when. Also COL raises may not continue to occur forever. This makes it hard to predict into the future how much dollars as a percent of income I am actually saving. I make $60k now, but how do I know if that will double eventually?

3. Rate of Inflation: Historically inflation has been what 3%? This is sort of like the rate of return unpredictability. Even if inflation is 4.5% vs. 2% that wildly affects things when projecting far out.

4. Unforeseen Catastrophic Events: Major Health issue, disability causes inability to work, child with disability / disease, liability lawsuits, etc. These could all cause major setbacks in retirement age and portfolio balances.

So bogleheads, what is the value or point of me trying to forecast my retirement and determine if there is a means for early retirement for me when there are so many unknowns? Is it as simple as I should focus on my savings rate and increasing it, and low cost investing in index funds and hope it all turns out okay?
It is a crap shoot. Keep running projections until you think it is risk worth taking. Hope you get to decide. Then hope it works out

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by bloom2708 » Fri May 03, 2019 4:20 pm

Set 50% as a target for savings. Aim high! Big Hairy Audacious Goals (BHAG).

What if you fail and only hit 40 or 30 or 20%?

Think of the money set aside as "future spending" when you don't have a silly job getting in the way and taking up a big chunk of your time. Could be at 45, 50, 55, 60..to be determined.

It may also help have a goal of working towards maxing your pre-tax 401k (workplace plan) and Roth IRA as a floor. $19k and $6k per year currently for 2019.

If you get to this floor, then HSA, Taxable is all bonus savings.

Starting at 28 and spending time at this site will give you a big headstart over those that don't. :D
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by DrGoogle2017 » Fri May 03, 2019 4:21 pm

Just save aggressively now.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by engineer1969 » Fri May 03, 2019 4:25 pm

One thing I want to convey to my kids as they enter the workforce is always have a plan for savings. The plan can change, but make sure you know what you are trying to do. Save first then what you do with the rest doesn't matter so much. If you establish a savings habit early and increase savings as your income increases you will do well. I agree with the rule of thumb saving (10, 15, 20, 25) percentages above wholeheartedly for a young saver.

If you like numbers, expected returns over the long haul have historically been between 4-7% (after tax) depending on your allocation as a disciplined (buy and hold, re-balance) saver. As you've likely seen before, historical returns are not an indication of future returns but they appear to be a good rule of thumb.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by 3funder » Fri May 03, 2019 4:30 pm

Just save and invest as much as you can. Hard to go wrong that way.

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by longinvest » Fri May 03, 2019 5:13 pm

bigtex wrote:
Fri May 03, 2019 2:01 pm
So bogleheads, what is the value or point of me trying to forecast my retirement and determine if there is a means for early retirement for me when there are so many unknowns? Is it as simple as I should focus on my savings rate and increasing it, and low cost investing in index funds and hope it all turns out okay?
The planning problem isn't restricted to young investors. The future is unknown, even in retirement. One could die after a single year of retirement, or after a few decades of retirement.

Some of us plan to combine variable withdrawals that adapt to market returns and age, in retirement, with stable base income from Social Security, pension, and (if necessary) inflation-indexed single-premium immediate annuity (inflation-indexed SPIA).

As I'm still in the accumulation phase, I've extended this flexible adapting approach for the accumulating period. I call it: The Variable Savings Rate (VSR). I invite the OP to consider reading that thread.

Good luck!
Last edited by longinvest on Fri May 03, 2019 5:20 pm, edited 2 times in total.
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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by White Coat Investor » Fri May 03, 2019 5:17 pm

bigtex wrote:
Fri May 03, 2019 2:01 pm
I don't understand the value in the retirement projections / calculators for someone younger trying to project an early retirement age or estimated portfolio balance. There are so many unknown variables that could occur over the next 15, 20, 25 years. The main unknowns that can drastically affect my retirement age and / or account balance are as follows:

1. Investment Rate of Return: Bogle suggests 6% or less going forward, but historically we've been closer to 10% right? This is a massive spread in terms what the ending account balance might be at age 50, 65, 75.

2. Steadiness of Employment: My odds of at least one layoff and period of unemployment are pretty high (greater than 50%) over the next 25 years. I think most people would agree that they have been laid off at least once or close to it over the course of a 35 year career. This would also drastically affect balance and retirement age if I had planned to retire at 48 but lose my job and income at 38 and can't find other employment at the previous income level.

2a. Raises / Promotions. I have no idea if I will get promotions how many and when. Also COL raises may not continue to occur forever. This makes it hard to predict into the future how much dollars as a percent of income I am actually saving. I make $60k now, but how do I know if that will double eventually?

3. Rate of Inflation: Historically inflation has been what 3%? This is sort of like the rate of return unpredictability. Even if inflation is 4.5% vs. 2% that wildly affects things when projecting far out.

4. Unforeseen Catastrophic Events: Major Health issue, disability causes inability to work, child with disability / disease, liability lawsuits, etc. These could all cause major setbacks in retirement age and portfolio balances.

So bogleheads, what is the value or point of me trying to forecast my retirement and determine if there is a means for early retirement for me when there are so many unknowns? Is it as simple as I should focus on my savings rate and increasing it, and low cost investing in index funds and hope it all turns out okay?
Don't let uncertainty keep you from making a plan. Just make adjustments as you go. My path has been very different from my initial projections of income and returns, but I am so glad I made it way back in 2005. It has made a huge difference.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Re: At 28, I Don't See How I Can Make Any Projections for My Retirement Amount or Age?

Post by Green Street » Fri May 03, 2019 5:38 pm

Just save now, worry later.
Searching Through The FiRE

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