How much do we need?

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Lwcgrad08
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How much do we need?

Post by Lwcgrad08 »

Hi we are 35 and almost 40... 40 year old husband has no retirement at all... 35 has about 9800 in 401ks at work... currently we need about 3000-3500 a month to comfortably live and we have no debt not even the house.... how much would we need to retire?
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Picasso
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Re: How much do we need?

Post by Picasso »

$3500 x 12 months = $42k per year spending

$42k x 25 = $1.05M

That $1.05M is a good place to start without knowing any other income stream like social security
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David Jay
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Re: How much do we need?

Post by David Jay »

Welcome to the forum!

It is all about expenses in retirement. You say you need to generate $3000 - $3500 per month.

Figure out what SS looks like at, say, age 67 (normal retirement age). Subtract that amount and any pensions and you have the target requirement. Multiply that amount times 12 months. That is your yearly requirement. Now multiply that times 25 and that is what you need.

The other choice is to spend less than $3000 a month.
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furnace
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Re: How much do we need?

Post by furnace »

Lwcgrad08 wrote: Wed Jun 09, 2021 3:16 pm Hi we are 35 and almost 40... 40 year old husband has no retirement at all... 35 has about 9800 in 401ks at work... currently we need about 3000-3500 a month to comfortably live and we have no debt not even the house.... how much would we need to retire?
Think outside the box. You can retire now.

You retire now, and allow your husband the privilege of continuing to work. When he gets tired, he can retire and you jump back on the treadmill. You just alternate a couple of rounds, and before you know it, you both will be collecting Social Security together. :sharebeer
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22twain
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Re: How much do we need?

Post by 22twain »

Lwcgrad08 wrote: Wed Jun 09, 2021 3:16 pm how much would we need to retire?
It depends on when you retire. If you retire at a "normal" age of 60-65, a common rule of thumb is that you should have about 25 x (annual expenses minus Social Security minus other pension). So if your annual expenses are $36,000 to $42,000 per year, and you expect to get $24,000 in Social Security (this is just a random number because I have no idea what you will actually get), then you should have about 25 x ($12,000 to $18,000) = $300,000 to $450,000.

These are in "today's dollars", and will be inflated over the next 25-30 years, so you will have to re-evaluate this target every 5 years or so. Also, you will probably refine your estimated expenses as times goes on. For example, you may have a few years' gap between when you retire and when you start to collect Social Security. Also, you need to include taxes and health insurance in your expenses.

Many people on this forum would probably consider $36K to $42K per year to be low for two people because they live in relatively expensive areas and make a lot of money. You may not be in such circumstances. Nevertheless, you should try to form a good idea of what your expenses and sources of income will actually be when you retire. If you retire at a "normal" age, you still have time to figure this out.
It's "Roth", not "ROTH". Senator William Roth was a person, not an acronym.
Topic Author
Lwcgrad08
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Re: How much do we need?

Post by Lwcgrad08 »

Considering our health I would guess we will retire probably about 60... covid really messed my health up badly... how can I find out about the social security what we are expected to receive? I haven’t received an estimate thing in years...
guitarman555
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Re: How much do we need?

Post by guitarman555 »

Lwcgrad08 wrote: Wed Jun 09, 2021 5:52 pm Considering our health I would guess we will retire probably about 60... covid really messed my health up badly... how can I find out about the social security what we are expected to receive? I haven’t received an estimate thing in years...
You can go to the SS website and set up an account.

my.ssa.gov
Last edited by guitarman555 on Wed Jun 09, 2021 6:52 pm, edited 1 time in total.
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BolderBoy
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Re: How much do we need?

Post by BolderBoy »

Lwcgrad08 wrote: Wed Jun 09, 2021 5:52 pm Considering our health I would guess we will retire probably about 60... covid really messed my health up badly... how can I find out about the social security what we are expected to receive? I haven’t received an estimate thing in years...
Create an account at mySSA and you can generate estimated benefit statements every day if you want. Same with your spouse. Be forewarned, if you go that route you'll not get another one in the mail.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
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JoeRetire
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Re: How much do we need?

Post by JoeRetire »

Lwcgrad08 wrote: Wed Jun 09, 2021 3:16 pm Hi we are 35 and almost 40... 40 year old husband has no retirement at all... 35 has about 9800 in 401ks at work... currently we need about 3000-3500 a month to comfortably live and we have no debt not even the house.... how much would we need to retire?
Do you expect to live the same lifestyle in retirement as you do today?
Is $3500/month a reasonable guess at your expenses in retirement?
Just remember: it's not a lie if you believe it.
Topic Author
Lwcgrad08
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Re: How much do we need?

Post by Lwcgrad08 »

I don’t know what to expect for inflation... what would you do if you don’t have any kids and those who have helped you the most will probably be gone before you are... who would you leave as a beneficiary for any that may be left over?
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Watty
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Re: How much do we need?

Post by Watty »

Lwcgrad08 wrote: Wed Jun 09, 2021 3:16 pm currently we need about 3000-3500 a month to comfortably
In your calculations be sure to include things like income taxes and property taxes. You will also need to budget for lumpy expenses like when you need a replacement car or a new roof. If you need $3,000 a month for your normal living expenses you will need more income than that to cover he lumpy expenses and taxes.

Be sure to contribute enough to your 401k accounts to get any employer match, that is free money.

You should also check to see if you can qualify for a Retirement Savings Contribution Credit if you can keep your adjusted gross income low enough to get that. If the stars align just right you may be able to each get a $1,000 match for making a $2,000 contribution to one of your retirement accounts. The income numbers on this web site are a bit misleading since they are after a number of adjustments and subtractions so your salaries can be higher. Even if you only get a 10 or 20 percent match that would still be free money.

https://www.irs.gov/retirement-plans/pl ... ers-credit

A very common mistake is for people to start Social Security too soon so it would be good to plan and save so that you are not forced to start it early. You can check this web site for a suggested claiming strategy.

https://opensocialsecurity.com/

It will vary a lot but for a couple it will often suggest that once spouse start SS early and the other wait until they are close to 70.
mikejuss
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Re: How much do we need?

Post by mikejuss »

How are you calculating how much you'll need monthly in 30 years, at retirement?
superbobbyg
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Re: How much do we need?

Post by superbobbyg »

Best advice-start to read articles/books on investing. See a fee only financial planner. Go to the Merriman site, read on this Boglehead site, books by Swedroe, Pfau, Merriman and others.

There is no way anyone on this site can give you an accurate answer. Need to do homework and get educated first.

Too many unknowns and too many years ahead of you to provide an answer.
KlangFool
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Re: How much do we need?

Post by KlangFool »

OP,

Why do you need to worry about retirement? You need to have enough savings and investment to survive over the multiple recessions between now and 62 years old. Do you assume that you would be fully-employed continuously until 62 years old?

Spend less and save more now. What is your annual savings? What is the size of your emergency fund?

KlangFool
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Kenkat
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Re: How much do we need?

Post by Kenkat »

The most important thing is to start saving now. Let’s say you want to try to have $1 million by 65. Maybe you need less or maybe you need more, but it’s something to shoot for. Don’t get hung up too much on details. Retirement is so far off and many things will change. Don’t get caught in analysis paralysis. Looking at some round numbers:

If you have 30 years until retirement:

Waiting just 10 years has a huge effect on the amount you’ll have to save to reach your goal. Even with an average annual return of 10%, you’ll have to save $481 per month to get to $1 million before you retire. At 6%, you would need to save $1,021 per month.

If you have 20 years until retirement:

The longer you wait to start saving, the more cash you’ll have to put aside each month to reach your goal. If you wait until retirement is 20 years away, you will need to save $1,382 per month to hit the million dollar mark, assuming a 10% return. At 6% you will need to save $2,195 per month!


https://www.moneyunder30.com/save-one-million-dollars

You have 25-30 years. I think 10% return is too much to count on. Let’s use 6%. Let’s just use the 30 year timeframe. You need to save $1,000 a month. Are you doing that? Can you do that? Could you do $1500 or $2000 a month? You can always throttle back savings later in life but you can’t make up lost time not saving.

These numbers may not be the exact numbers but it gives you something to shoot for. Start saving now - it needs to be a pretty good amount. Then see where you are at every few years and make adjustments as needed or warranted. Saving too much puts you in a great place by the time you hit your 50s and 60s. Money = Options.
Topic Author
Lwcgrad08
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Re: How much do we need?

Post by Lwcgrad08 »

I have been following dave Ramsey and have 13k put back plus almost all of June July and august funded... I have 9800 in 401k but the match is horrible... we can do 6% of our regular check which isn’t even 60 bucks and get 3% max... I just maxed that out
dbr
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Re: How much do we need?

Post by dbr »

Please go run www.firecalc.com and the other retirement planning programs.

Also go to getting started in the Wiki and read including the retirement planning and retirement spending content.

Yes, for a raw estimate you take your wanted spending less known income and multiply by 25. Real retirements are more complicated and justify looking at statistical models at least to see what is involved.
aristotelian
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Re: How much do we need?

Post by aristotelian »

Picasso wrote: Wed Jun 09, 2021 4:12 pm $3500 x 12 months = $42k per year spending

$42k x 25 = $1.05M

That $1.05M is a good place to start without knowing any other income stream like social security
Keep in mind that would be $1.05M real. The actual number will be higher when adjusting for inflation.

Another rule of thumb is to save 15% of income to achieve retirement at normal retirement age. You will need to save more than that to retire earlier. Of course, if you have no wish to retire early and can live off of social security, you do not need to save at all.
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Re: How much do we need?

Post by KlangFool »

Lwcgrad08 wrote: Thu Jun 10, 2021 9:33 am I have been following dave Ramsey and have 13k put back plus almost all of June July and august funded... I have 9800 in 401k but the match is horrible... we can do 6% of our regular check which isn’t even 60 bucks and get 3% max... I just maxed that out
Lwcgrad08,

That is the wrong thinking. What is your marginal tax rate? Do you pay state income tax? How much taxes do you save by contributing more to the 401K?

KlangFool
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Grt2bOutdoors
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Re: How much do we need?

Post by Grt2bOutdoors »

Lwcgrad08 wrote: Thu Jun 10, 2021 9:33 am I have been following dave Ramsey and have 13k put back plus almost all of June July and august funded... I have 9800 in 401k but the match is horrible... we can do 6% of our regular check which isn’t even 60 bucks and get 3% max... I just maxed that out
If 6% of your regular check isn’t even $60, how are you living on $3k-$3.5k after taxes? Where is the money coming from? Are you paid weekly or twice a month?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
rich126
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Re: How much do we need?

Post by rich126 »

Definitely a good question to ask and get an idea of what you may need down the road. Personally I wouldn't obsess over it since you got decades to go and if you obsess over it now, you will be wasting what should be your best years of your life now in a race to get to the end.

Now that I'm nearing 60 I look back and realize a few things:
1. Life goes too quickly. Can't believe I started my first full time job 36 years ago (actually July 2 will be exactly 36 years ago). Seems like yesterday.
2. Don't only live for the weekends. Early in my career I enjoyed work but as I got older I think I was in such a hurry for the weekends (i.e., no work!) that I threw away 5/7ths of a week and a large part of my life.
3. Don't think you can always do something tomorrow because things change. Your friends move, people get sick, etc. Do stuff now.
4. Don't sweat things so much. Things that seem really bad, usually aren't unless they are health related.

As to the $1M estimate. That may seem unreachable now but consider a few things:
$3500 a month is $42000 a year.
You might be able to get a good chunk of that from social security (no guarantee but you might). Even if it only were to provide 50% of that, that takes your savings needs down to $500K. If ss provides 75% of that, then you may be down to $250K.

While a lot of people here seem to have tons of money (Can I retire with $4M? etc.) most people don't and they can survive fine in life. Avoid debt as much as you can, hopefully have a paid off place to live and then you may not need much money at all to enjoy retirement. Money helps with a lot of things but I've seen a lot of very unhappy people who have a lot of money and a lot of happy people that enjoy life with limited funds.

Good luck.
Grt2bOutdoors
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Re: How much do we need?

Post by Grt2bOutdoors »

KlangFool wrote: Thu Jun 10, 2021 9:45 am
Lwcgrad08 wrote: Thu Jun 10, 2021 9:33 am I have been following dave Ramsey and have 13k put back plus almost all of June July and august funded... I have 9800 in 401k but the match is horrible... we can do 6% of our regular check which isn’t even 60 bucks and get 3% max... I just maxed that out
Lwcgrad08,

That is the wrong thinking. What is your marginal tax rate? Do you pay state income tax? How much taxes do you save by contributing more to the 401K?

KlangFool
Hey Klang - when you were a beginner investor, did you have all the answers to the above? The OP is here to learn - so teach them. They may not know where to find this information or where they can access the calculators to determine those numbers.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
KlangFool
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Re: How much do we need?

Post by KlangFool »

Grt2bOutdoors wrote: Thu Jun 10, 2021 9:53 am
KlangFool wrote: Thu Jun 10, 2021 9:45 am
Lwcgrad08 wrote: Thu Jun 10, 2021 9:33 am I have been following dave Ramsey and have 13k put back plus almost all of June July and august funded... I have 9800 in 401k but the match is horrible... we can do 6% of our regular check which isn’t even 60 bucks and get 3% max... I just maxed that out
Lwcgrad08,

That is the wrong thinking. What is your marginal tax rate? Do you pay state income tax? How much taxes do you save by contributing more to the 401K?

KlangFool
Hey Klang - when you were a beginner investor, did you have all the answers to the above? The OP is here to learn - so teach them. They may not know where to find this information or where they can access the calculators to determine those numbers.
To start, someone needs to know what questions to ask. If they do not know what questions to ask, how could they find answer?

When you asked the wrong question, you would never get the right answer!

KlangFool
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LittleMaggieMae
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Re: How much do we need?

Post by LittleMaggieMae »

Lwcgrad08 wrote: Thu Jun 10, 2021 9:33 am I have been following dave Ramsey and have 13k put back plus almost all of June July and august funded... I have 9800 in 401k but the match is horrible... we can do 6% of our regular check which isn’t even 60 bucks and get 3% max... I just maxed that out
the highlighted sentence is a bit of a jumble. (and generally any employer match is considered good. It's "free money". But sometimes an employer's match will require you to jump thru some hoops to get the full advantage -that might be the horrible part you mention. It's hard to tell from what you've written.)

Generally, the percent you contribute is based on your GROSS pay or income. If your yearly salary/income is 50K - if you set up a 6% contribution rate - that would be 50,0000 * .06 = 3,000 - then divide that 3,000 by the number of paychecks you get in a year - maybe 26 (if you are paid every two weeks) which would mean a deduction/contribution of $115.38 per pay check. That's YOUR contribution to the 401K plan.

Your employer may match some part of YOUR contribution OR they may have some other way to determine their contribution. There are all sorts of different "employer match" plans. I do not have an employer match on my 401K so I don't pay much attention to the different matches. (My employer contributes to a Pension plan - instead of doing a 401k Match).

Can you provide some information on what your contribution percent is, maybe your gross yearly income (or what your typical gross is previous tax forms may help you if your income varies from year to year) and what/how your employer contribution works (there's probably an explanation in writing somewhere - your employee handbook? or with your 401K documentation). It might seem like indecipherable sentences. The kind people here may be able to help you decipher it. Which may help you get the most value out of your 401K plan. :)
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Kenkat
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Re: How much do we need?

Post by Kenkat »

Lwcgrad08 wrote: Thu Jun 10, 2021 9:33 am I have been following dave Ramsey and have 13k put back plus almost all of June July and august funded... I have 9800 in 401k but the match is horrible... we can do 6% of our regular check which isn’t even 60 bucks and get 3% max... I just maxed that out
When you say you have put $13k back, over what period of time is that? How much is funded for June-August?

How often do you get paid? If you get paid every two weeks, that’s $90 x 26 = $2340 or close to $200/mo. That leaves $800/mo. to save - either in the 401k, an IRA, etc. Can you do that?
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Wiggums
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Re: How much do we need?

Post by Wiggums »

guitarman555 wrote: Wed Jun 09, 2021 6:50 pm
Lwcgrad08 wrote: Wed Jun 09, 2021 5:52 pm Considering our health I would guess we will retire probably about 60... covid really messed my health up badly... how can I find out about the social security what we are expected to receive? I haven’t received an estimate thing in years...
You can go to the SS website and set up an account.

my.ssa.gov
https://www.ssa.gov/
dbr
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Re: How much do we need?

Post by dbr »

It is a good idea to have accounts at places like SSA and IRS to be sure you can do business electronically as the world more and more is closing out people without electronic access to the bureaucracy. It is also good to have such accounts before someone stealing your identity creates them. Someone else can deal with the chances of getting such accounts hacked.
Topic Author
Lwcgrad08
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Re: How much do we need?

Post by Lwcgrad08 »

Someone asked how 6% is 60... that is biweekly on my regular checks and they won’t let me do anything out of my commission aka bonus check...
Topic Author
Lwcgrad08
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Re: How much do we need?

Post by Lwcgrad08 »

KlangFool wrote: Thu Jun 10, 2021 9:45 am
Lwcgrad08 wrote: Thu Jun 10, 2021 9:33 am I have been following dave Ramsey and have 13k put back plus almost all of June July and august funded... I have 9800 in 401k but the match is horrible... we can do 6% of our regular check which isn’t even 60 bucks and get 3% max... I just maxed that out
Lwcgrad08,

That is the wrong thinking. What is your marginal tax rate? Do you pay state income tax? How much taxes do you save by contributing more to the 401K?

KlangFool
I don’t know off the top of my head what my tax rate is and no we don’t pay a state income tax... i’m doing a Roth 401k so not saving on taxes
KlangFool
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Re: How much do we need?

Post by KlangFool »

Lwcgrad08 wrote: Thu Jun 10, 2021 12:14 pm
KlangFool wrote: Thu Jun 10, 2021 9:45 am
Lwcgrad08 wrote: Thu Jun 10, 2021 9:33 am I have been following dave Ramsey and have 13k put back plus almost all of June July and august funded... I have 9800 in 401k but the match is horrible... we can do 6% of our regular check which isn’t even 60 bucks and get 3% max... I just maxed that out
Lwcgrad08,

That is the wrong thinking. What is your marginal tax rate? Do you pay state income tax? How much taxes do you save by contributing more to the 401K?

KlangFool
I don’t know off the top of my head what my tax rate is and no we don’t pay a state income tax... i’m doing a Roth 401k so not saving on taxes
Lwcgrad08,

Why? Why do you choose to pay more taxes when you are behind in your retirement savings? What is your household income?

https://taxfoundation.org/publications/ ... /#brackets

KlangFool
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Lwcgrad08
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Re: How much do we need?

Post by Lwcgrad08 »

So maybe this will explain it a little bit better... my regular check is grossing a bit over 23k a year and u can only take 401k out of it... if I do 6% then the company will do 3% but anything over 6% they won’t do anything on other than the 3%... I also make a bonus that is not a guarantee but has averaged out to at least 32k or more for the last three years... we do have the option of doing a traditional or a Roth 401(k)... when I first started they only had a traditional available and then when I noticed we can eat raw I switch to that... so I have 9800 set aside between my traditional 401k, their match, and my Roth 401k after what it has grown...
Topic Author
Lwcgrad08
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Re: How much do we need?

Post by Lwcgrad08 »

KlangFool wrote: Thu Jun 10, 2021 12:19 pm
Lwcgrad08 wrote: Thu Jun 10, 2021 12:14 pm
KlangFool wrote: Thu Jun 10, 2021 9:45 am
Lwcgrad08 wrote: Thu Jun 10, 2021 9:33 am I have been following dave Ramsey and have 13k put back plus almost all of June July and august funded... I have 9800 in 401k but the match is horrible... we can do 6% of our regular check which isn’t even 60 bucks and get 3% max... I just maxed that out
Lwcgrad08,

That is the wrong thinking. What is your marginal tax rate? Do you pay state income tax? How much taxes do you save by contributing more to the 401K?

KlangFool
I don’t know off the top of my head what my tax rate is and no we don’t pay a state income tax... i’m doing a Roth 401k so not saving on taxes
Lwcgrad08,

Why? Why do you choose to pay more taxes when you are behind in your retirement savings? What is your household income?

https://taxfoundation.org/publications/ ... /#brackets

KlangFool
I choose to pay more now so I don’t have to pay it whenever I’m in retirement and probably bringing in more money than I am now
H-Town
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Re: How much do we need?

Post by H-Town »

Lwcgrad08 wrote: Wed Jun 09, 2021 3:16 pm Hi we are 35 and almost 40... 40 year old husband has no retirement at all... 35 has about 9800 in 401ks at work... currently we need about 3000-3500 a month to comfortably live and we have no debt not even the house.... how much would we need to retire?
Umm… you gonna have to answer this question. No one can answer how much do you need to retire.

After you figure it out, give us a number and your plan. Maybe we can help to evaluate whether it’s a reasonable plan.
Grt2bOutdoors
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Re: How much do we need?

Post by Grt2bOutdoors »

Lwcgrad08 wrote: Thu Jun 10, 2021 12:26 pm So maybe this will explain it a little bit better... my regular check is grossing a bit over 23k a year and u can only take 401k out of it... if I do 6% then the company will do 3% but anything over 6% they won’t do anything on other than the 3%... I also make a bonus that is not a guarantee but has averaged out to at least 32k or more for the last three years... we do have the option of doing a traditional or a Roth 401(k)... when I first started they only had a traditional available and then when I noticed we can eat raw I switch to that... so I have 9800 set aside between my traditional 401k, their match, and my Roth 401k after what it has grown...
Do you expect your income to grow dramatically over the next 20 years? This is important because the way the tax code is currently written, a couple who make $50k per year gross in retirement on a pretax basis pay zero in federal income tax liability. Given your current level of savings, you would need to have $1 million saved plus social security today - to incur any tax liability. By the time you retire it’s likely the threshold to incur federal taxes will be even higher. What KlangFool is saying is correct, you should be saving on a pre-tax basis which puts more money in your hands today, use that money to possibly increase your contribution to the 401k plan - if the investment options are low cost choices. If they are not, invest up to the match, the remaining amount you invest in a traditional IRA account or a Roth account in a broad based target retirement index account. You can open one up at Fidelity / no minimum or low minimum. Vanguard will let you in for $1k to open one.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Grt2bOutdoors
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Re: How much do we need?

Post by Grt2bOutdoors »

Lwcgrad08 wrote: Thu Jun 10, 2021 12:28 pm
KlangFool wrote: Thu Jun 10, 2021 12:19 pm
Lwcgrad08 wrote: Thu Jun 10, 2021 12:14 pm
KlangFool wrote: Thu Jun 10, 2021 9:45 am
Lwcgrad08 wrote: Thu Jun 10, 2021 9:33 am I have been following dave Ramsey and have 13k put back plus almost all of June July and august funded... I have 9800 in 401k but the match is horrible... we can do 6% of our regular check which isn’t even 60 bucks and get 3% max... I just maxed that out
Lwcgrad08,

That is the wrong thinking. What is your marginal tax rate? Do you pay state income tax? How much taxes do you save by contributing more to the 401K?

KlangFool
I don’t know off the top of my head what my tax rate is and no we don’t pay a state income tax... i’m doing a Roth 401k so not saving on taxes
Lwcgrad08,

Why? Why do you choose to pay more taxes when you are behind in your retirement savings? What is your household income?

https://taxfoundation.org/publications/ ... /#brackets

KlangFool
I choose to pay more now so I don’t have to pay it whenever I’m in retirement and probably bringing in more money than I am now
How much more do you think you will earn between now and in retirement annually?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
KlangFool
Posts: 20965
Joined: Sat Oct 11, 2008 12:35 pm

Re: How much do we need?

Post by KlangFool »

Lwcgrad08 wrote: Thu Jun 10, 2021 12:28 pm
I choose to pay more now so I don’t have to pay it whenever I’m in retirement and probably bringing in more money than I am now
Lwcgrad08,

Please explain how is that possible?

<<I choose to pay more now so I don’t have to pay it whenever I’m in retirement probably bringing in more money than I am now>>

Please explain how could you earn more in retirement.

<<my regular check is grossing a bit over 23k a year >>

And, how much do your spouse earn?

KlangFool
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KlangFool
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Re: How much do we need?

Post by KlangFool »

Grt2bOutdoors wrote: Thu Jun 10, 2021 12:37 pm
Lwcgrad08 wrote: Thu Jun 10, 2021 12:26 pm So maybe this will explain it a little bit better... my regular check is grossing a bit over 23k a year and u can only take 401k out of it... if I do 6% then the company will do 3% but anything over 6% they won’t do anything on other than the 3%... I also make a bonus that is not a guarantee but has averaged out to at least 32k or more for the last three years... we do have the option of doing a traditional or a Roth 401(k)... when I first started they only had a traditional available and then when I noticed we can eat raw I switch to that... so I have 9800 set aside between my traditional 401k, their match, and my Roth 401k after what it has grown...
Do you expect your income to grow dramatically over the next 20 years? This is important because the way the tax code is currently written, a couple who make $50k per year gross in retirement on a pretax basis pay zero in federal income tax liability. Given your current level of savings, you would need to have $1 million saved plus social security today - to incur any tax liability. By the time you retire it’s likely the threshold to incur federal taxes will be even higher. What KlangFool is saying is correct, you should be saving on a pre-tax basis which puts more money in your hands today, use that money to possibly increase your contribution to the 401k plan - if the investment options are low cost choices. If they are not, invest up to the match, the remaining amount you invest in a traditional IRA account or a Roth account in a broad based target retirement index account. You can open one up at Fidelity / no minimum or low minimum. Vanguard will let you in for $1k to open one.
Grt2bOutdoors,

OP spends about 36K to 42K per year. I would assume that the gross income is more than 50K per year.

KlangFool
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Topic Author
Lwcgrad08
Posts: 10
Joined: Wed Jun 09, 2021 3:06 pm

Re: How much do we need?

Post by Lwcgrad08 »

Hopefully our income does increase as we started a business in 2019 and just started profiting last year... 80k is the max we have ever made together before anything is taken off the income taxes... most for myself was I think 63k... I really need to understand this better...
Grt2bOutdoors
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Location: New York

Re: How much do we need?

Post by Grt2bOutdoors »

KlangFool wrote: Thu Jun 10, 2021 12:43 pm
Grt2bOutdoors wrote: Thu Jun 10, 2021 12:37 pm
Lwcgrad08 wrote: Thu Jun 10, 2021 12:26 pm So maybe this will explain it a little bit better... my regular check is grossing a bit over 23k a year and u can only take 401k out of it... if I do 6% then the company will do 3% but anything over 6% they won’t do anything on other than the 3%... I also make a bonus that is not a guarantee but has averaged out to at least 32k or more for the last three years... we do have the option of doing a traditional or a Roth 401(k)... when I first started they only had a traditional available and then when I noticed we can eat raw I switch to that... so I have 9800 set aside between my traditional 401k, their match, and my Roth 401k after what it has grown...
Do you expect your income to grow dramatically over the next 20 years? This is important because the way the tax code is currently written, a couple who make $50k per year gross in retirement on a pretax basis pay zero in federal income tax liability. Given your current level of savings, you would need to have $1 million saved plus social security today - to incur any tax liability. By the time you retire it’s likely the threshold to incur federal taxes will be even higher. What KlangFool is saying is correct, you should be saving on a pre-tax basis which puts more money in your hands today, use that money to possibly increase your contribution to the 401k plan - if the investment options are low cost choices. If they are not, invest up to the match, the remaining amount you invest in a traditional IRA account or a Roth account in a broad based target retirement index account. You can open one up at Fidelity / no minimum or low minimum. Vanguard will let you in for $1k to open one.
Grt2bOutdoors,

OP spends about 36K to 42K per year. I would assume that the gross income is more than 50K per year.

KlangFool
Perhaps today he is, but with current savings track and social security projections he may be making $50k or less in retirement when he does actually retire.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
KlangFool
Posts: 20965
Joined: Sat Oct 11, 2008 12:35 pm

Re: How much do we need?

Post by KlangFool »

Lwcgrad08 wrote: Thu Jun 10, 2021 12:44 pm Hopefully our income does increase as we started a business in 2019 and just started profiting last year... 80k is the max we have ever made together before anything is taken off the income taxes... most for myself was I think 63k... I really need to understand this better...
Lwcgrad08,

1) If you have a business, you should think about solo/individual 401K.

https://www.bogleheads.org/wiki/Solo_401(k)_plan

2) At your income level, you should learn about Saver's Credit

https://www.bogleheads.org/wiki/Saver%27s_credit

KlangFool
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Topic Author
Lwcgrad08
Posts: 10
Joined: Wed Jun 09, 2021 3:06 pm

Re: How much do we need?

Post by Lwcgrad08 »

Thank u... I will be reading those... we own a business which I am 50% and he is 50% on and both are active in the business and I also work another job...
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