Page 1 of 1

Portfolio Contribution Question

Posted: Mon Aug 10, 2020 7:16 am
by BinkUSMC
Good morning/day everyone,

I have question about portfolio contributions. Everything I have read about how much or what percentage of your income one should contribute to their portfolio has been roughly 10%.

I was wondering if most people do contribute this high of a number. Especially in these times 10% is pretty high. I am a high school teacher and just purchased my 1st home. I still contribute monthly to my Roth but at a much lower percentage. What is your take on it? Thank you for your insight.

Re: Portfolio Contribution Question

Posted: Mon Aug 10, 2020 7:26 am
by McDougal
I think it varies widely depending on your income and your expenses, as well as your retirement goals and time horizon to reach those goals. I personally do 12% FWIW. But I did not aim for 12%, I just saved as much as I could, and after doing the math turns out to be 12%.

Re: Portfolio Contribution Question

Posted: Mon Aug 10, 2020 7:27 am
by BinkUSMC
Probably should mention that I am 39 years old. I will retire with a pension and my investments.

Re: Portfolio Contribution Question

Posted: Mon Aug 10, 2020 7:44 am
by lakpr
This is Bogleheads forum, we start with a minimum of 15% to be saved in retirement plans (401k + IRA). Anything less than that, you are only guaranteeing that you will work until death. [ Sorry to be harsh, but that's the truth ]

edited to add: You can count your mandatory pension fund contributions (401a plan??) to figure out the percentage.

Re: Portfolio Contribution Question

Posted: Mon Aug 10, 2020 7:46 am
by 000
Shoot for 50%.

Re: Portfolio Contribution Question

Posted: Mon Aug 10, 2020 8:05 am
by BinkUSMC
Shoot, would love to do 50%. I am a teacher so.... you know.

Re: Portfolio Contribution Question

Posted: Mon Aug 10, 2020 9:15 am
by tashnewbie
Like someone else said, it depends heavily on your expenses, your income, your desired retirement age, whether you'll have a pension, etc.

If I were you, I'd count the mandatory pension contributions as part of my savings %. I would just focus on living below my means (to a reasonable extent) and investing the difference.

Re: Portfolio Contribution Question

Posted: Mon Aug 10, 2020 9:22 am
by runner3081
We contribute many times more than 10% - and we also have a pension. at 10%, not comfortable we could ever retire.

Not planning on either the pension or SS income. Will plan to self-fund somewhat early retirement.

Re: Portfolio Contribution Question

Posted: Mon Aug 10, 2020 9:49 am
by Valuethinker
BinkUSMC wrote: Mon Aug 10, 2020 7:16 am Good morning/day everyone,

I have question about portfolio contributions. Everything I have read about how much or what percentage of your income one should contribute to their portfolio has been roughly 10%.

I was wondering if most people do contribute this high of a number. Especially in these times 10% is pretty high. I am a high school teacher and just purchased my 1st home. I still contribute monthly to my Roth but at a much lower percentage. What is your take on it? Thank you for your insight.
1. as a teacher are you already a member of a Defined Benefit pension plan?

2. are you a member of US Social Security? (teachers in some states are not I believe)

(related question: do you have pension benefits, or credit towards your teacher's pension, arising from service in USMC?). All these things affect the needed size of your portfolio in retirement - and how you invest it.

The actual ideal is closer to 15-20%, at which point a 35-40 year career should be able to provide an income of around 60% of pre retirement level.

However for many people that is impossible. There's no point beating yourself up about what you cannot do. This group is somewhat distorting - there are some people on some pretty high incomes here, and among those working I would say 6 figures is the norm rather than the exception. It's a very distorting lens.

If 10 % is what you can do, 10% is what you can do. What's important is to be realistic and, to accept the fundamental uncertainty about all this ... none of us know what future returns will be and what is "enough".

Re: Portfolio Contribution Question

Posted: Mon Aug 10, 2020 10:10 am
by Taylor Larimore
BinkUSMC wrote: Mon Aug 10, 2020 7:16 am Good morning/day everyone,

I have question about portfolio contributions. Everything I have read about how much or what percentage of your income one should contribute to their portfolio has been roughly 10%.

I was wondering if most people do contribute this high of a number. Especially in these times 10% is pretty high. I am a high school teacher and just purchased my 1st home. I still contribute monthly to my Roth but at a much lower percentage. What is your take on it? Thank you for your insight.
BinkUSMC:

Pat and I had three children in our early years. I was earning a small salary as a government employee. There was no way we could save "roughly 10%" of our income. We couldn't save "anything" and went horribly into debt.

We are all different -- including our capacity to save.

My advice: Live with reasonable frugality and save as much as you can until your retirement is assured.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The disparity in income is deeply regrettable. I don't know what we do about it exactly."

Re: Portfolio Contribution Question

Posted: Mon Aug 10, 2020 10:18 am
by retired@50
BinkUSMC wrote: Mon Aug 10, 2020 7:16 am Good morning/day everyone,

I have question about portfolio contributions. Everything I have read about how much or what percentage of your income one should contribute to their portfolio has been roughly 10%.

I was wondering if most people do contribute this high of a number. Especially in these times 10% is pretty high. I am a high school teacher and just purchased my 1st home. I still contribute monthly to my Roth but at a much lower percentage. What is your take on it? Thank you for your insight.
I think the answer for many people is "it varies". For me personally, some years I contributed nothing, or almost nothing, and other years I contributed over 40% of my income to retirement savings using 401k, Roth IRA, and taxable accounts. The key ingredient for me was to avoid lifestyle creep as I earned higher wages. If your earnings are steady, and steadily rising, then you may be able to commit more money to retirement savings in later years.

Regards,

Re: Portfolio Contribution Question

Posted: Mon Aug 10, 2020 7:17 pm
by Eagle33
Here is an article that gives you the number of year needed to work before can retire based on your savings rate. https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

I have seen other articles that show one can same a $1mm by saving 10% from 20yo to retirement. While a 30yo didn't saving anything in there 20's and needed to save 15% forward to reach the same $1mm. Compounding is your friend when your are savings/investing and your enemy if you borrow.