What % of your income have you converted to wealth?

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nolesrule
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Re: What % of your income have you converted to wealth?

Post by nolesrule » Thu Apr 13, 2017 2:55 pm

This is interesting. We both turn 41 this year, yet 50% of our income has been the last 5 years, 75% in the last 10.

Unfortunately, I only have our year-end net worth numbers going back to 2014. But it's nice to see an upward progression, even though the number isn't all that high compared to others here.

2014 - 22.50%
2015 - 24.74%
2016 - 28.22%

And including through my wife's paycheck today 29.48%.

Rainmaker41
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Re: What % of your income have you converted to wealth?

Post by Rainmaker41 » Thu Apr 13, 2017 4:02 pm

Doing this sort of calculation will become nontrivial after a few decades, but...

Age 27 (for tax year), worked 2014-2017 so far. Defined as earnings subject to FICA.

% of cumulative income, adjusted for inflation, converted to wealth in retirement accounts by end of Q1 2017:

29.66% without Roth gross-up

34.46% with Roth gross-up by 21% federal + state marginal tax

I figure this being so close to my target savings rate is due to 2014's 0/negative savings rate being offset by modest investment growth. So long as the savings rate remains roughly constant and real returns are above 0, % of income converted to wealth must surely increase over one's career.

Interesting metric though.
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dwickenh
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Re: What % of your income have you converted to wealth?

Post by dwickenh » Thu Apr 13, 2017 5:23 pm

my net worth is a little over 100% of our income over the years. My wife was a SAHM for all but 15 years and then worked very part time.
We were not high earners, but we were good savers. We am happy with the results and that is all that counts to us.

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MichaelRpdx
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Late starters

Post by MichaelRpdx » Thu Apr 13, 2017 6:54 pm

We're at about 45%.
Significant savings didn't start until we were in our late 30s.
First home purchase at 38.
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Re: What % of your income have you converted to wealth?

Post by LadyGeek » Thu Apr 13, 2017 7:08 pm

^^^ I merged MichaelRpdx's post into here.
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Re: What % of your income have you converted to wealth?

Post by Candor » Thu Apr 13, 2017 8:35 pm

Candor wrote:45 single and currently at 45% (44.6). Hopefully they will both continue on the northern path.
64.7% today at 49. It's moving in the right direction for now.

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How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by chinto » Sat May 20, 2017 9:40 pm

[Thread merged into here, see below. --admin LadyGeek]

So I was doing some personal financial work and noted something...and wonder how common it is.

So here is the question: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income? If you are married your answer should reflect both lifetime earned income and investment assets from both marital partners.

Note(s)

The reference is to earned income not passive income.

I did not ask about net worth, but rather investment type assets, For example I am trying to eliminate equity in a personal residence unless you purchased your personal residence as an investment. For instance my home is paid for, but I am to including it in my total of investment assets.

If possible (within a few years) your approximate age when you think this occurred.

Thank you any response.
Last edited by chinto on Sat May 20, 2017 10:02 pm, edited 1 time in total.

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TheTimeLord
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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by TheTimeLord » Sat May 20, 2017 9:47 pm

chinto wrote: For exampleI am trying to eliminate equity in a personal residence unless you purchased your personal residence as an investment. For instance my home is paid for, but I am to including it in my total of investment assets.
So you call it an investment and it counts, but if you don't it doesn't. Seems like a distinction without a difference.
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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by chinto » Sat May 20, 2017 10:00 pm

TheTimeLord wrote:
chinto wrote: For exampleI am trying to eliminate equity in a personal residence unless you purchased your personal residence as an investment. For instance my home is paid for, but I am to including it in my total of investment assets.
So you call it an investment and it counts, but if you don't it doesn't. Seems like a distinction without a difference.
A buddy of mine is a lifetime house builder/flipper. The homes he has lived in his adult life are always investments, in other words he has no true personal residence and a large amount of his assets are always deployed in the current project. In other words he lives in homes perpetually under construction for investment purposes.

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GerryL
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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by GerryL » Sat May 20, 2017 10:29 pm

I did a quick calculation and it seems that I can easily say my investment assets exceed total earned income. (Yea for compounding!) No idea when that occurred.

One thing you didn't include in the calculation is inheritances. I had a couple of small inheritances, but I don't think that would change my answer. A small inheritance early in life or a large one later on could skew the responses.

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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by TheJoker » Sat May 20, 2017 10:34 pm

You can, Invest early and often. What's your point ?

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celia
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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by celia » Sat May 20, 2017 11:20 pm

So you retire, maybe even early. The earned income stops.

You have low living expenses (house is paid off, kids are paid for, and your retirement accounts are "enough"). If you can live solely off your pension/retirement, your assets will continue to grow. I've no idea if they total our earned income, but eventually (if we live long enough) they will.

Better yet when one of us dies, I guess we can discount that person's earned income.

So what should we do???


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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by CFM300 » Sat May 20, 2017 11:42 pm

chinto wrote:How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?
Do you mean actual income or indexed earnings?

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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by Daryl » Sun May 21, 2017 5:25 am

Liquid Net Worth / Social Security Statement Lifetime Earnings > 75%.

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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by student » Sun May 21, 2017 5:43 am

You may be interested in this thread.

viewtopic.php?f=10&t=111483

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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by RadAudit » Sun May 21, 2017 6:22 am

Quick estimate. Made it. Took 46 years after graduation.

Wishing you better and quicker success.
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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by MoonOrb » Sun May 21, 2017 9:24 am

Many older Bogleheads. Few younger Bogleheads.

More likely to be Bogleheads who retired early than those who continued to work; more likely to be Bogleheads who lived in LCOL areas but had jobs paying relatively highly for those areas, than to be those who spent their working years in HCOL areas.

More likely to be Bogleheads who rely on investments for retirement instead of pensions.

Just curious but what is the import of determining this?

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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by hulburt1 » Sun May 21, 2017 10:21 am

My wife and I have never made more then $90000 to together. In the last 5 years our investment have made close to 1m. Right now we are at 230000 for the year and only live on 60000.

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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by Christine_NM » Sun May 21, 2017 10:29 am

Where can you calculate lifetime earning adjusted for inflation? Usually I use the BLA inflation calculator, but that would be incredibly tedious.

I started at less than $100 a week net, and supported myself living in Boston. That is the same as $40k/yr gross today. The dollars are not the same.
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easyliving
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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by easyliving » Sun May 21, 2017 11:08 am

I m currently blessed with a good income and am planning early retirement. In retirement, I intend to spend less money than my investments earn passively.

Therefore, assets should continue to grow, eventually exceeding that earned through work.

Of course, retirement assets must be significant, and spending must be modest.

Tamales
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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by Tamales » Sun May 21, 2017 11:44 am

If I understand correctly, the OP's goal (indirectly, when you unravel it) is to see whether a person's lifetime living expenses plus lifetime W2 taxes is greater (or less) than their investment GAINS (not investment account value, but investment gains).

If your investment gains are greater, the market and compounding has worked for you, since all your cash outflow over your lifetime has been compensated by your investment gains.

But you can still retire comfortably even if that's not the case. A high savings rate can still get you there even in the face of mediocre market returns.

In any case, you'd need a full lifetime document trail of taxes, expenses, cost basis, etc., from when you began working. Most people don't have that.

What would be a more practical set of information to work from?
>>The information that is fairly easily available on the income side is your lifetime W2 medicare earnings.
>>The information that is fairly easily available on the savings/investment side is the current value of all your savings/investment accounts.

So the question as I see it, if you want this to be something people can fairly easily calculate, is what can be done with those two numbers?

If the sum of your lifetime W2 medicare earnings is greater than the sum of your current savings/investment account balances, what does that tell you? What if it's 30%, 50%, 100%, 150%...what does that tell you?

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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by CFM300 » Sun May 21, 2017 12:04 pm

Christine_NM wrote:Where can you calculate lifetime earning adjusted for inflation?
I use the index values from Social Security for calculating benefits. See page two of this pdf:

https://www.ssa.gov/pubs/EN-05-10070.pdf

I've recorded all of my SS wages in a spreadsheet by year, and periodically update the index values whenever I'm interested.

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House Blend
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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by House Blend » Sun May 21, 2017 12:17 pm

chinto wrote:How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?
Easy way to make that happen is to inherit at a young age.

A quick and dirty way to estimate lifetime earnings is to take the lifetime medicare taxes paid (found on your annual SS statement) and divide by 0.0145. (Has the employee share always been 1.45%?)

Of course this won't account for income outside of the SS world, such as working for some state governments that offer a pension in place of SS benefits to some categories of state employee. Likewise, work outside the US. And some employee benefits, such as health care premiums, can be paid with pre-tax income. (The $700/yr I pay for parking near my employer is a pre-tax deduction, so I get to skip out on paying 1.45% medicare tax for that.)

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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by kramer » Sun May 21, 2017 12:51 pm

It's true for me ... easy to calculate because my main work career was short (< 12 years, finished school at age 29) and I retired at age 41. I think I was over the "net after taxes" lifetime amount when I retired but now, 10 years after retirement with some inflation and portfolio growth, I am above the lifetime "gross before taxes" cumulative lifetime earned income.

chinto
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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by chinto » Sun May 21, 2017 2:35 pm

Since a few of you asked, it is not important it is just a matter of curiosity. I have seen a lot of threads about how long it takes to sock away your first million or how long it takes to go from one million till two...etc, but I never have seen threads about lifetime earned income verses savings accumulated. So it was something that crossed my mind a few times and thought it would make for an interesting and potentially insightful thread.

One person replying did link to a similar thread I had missed when I searched.

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DaftInvestor
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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by DaftInvestor » Sun May 21, 2017 2:58 pm

I suppose it would depend upon whether or not one considers ESPPs, ISOs, NQOs, RSUs, etc earned income or not.

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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by boxerbali » Sun May 21, 2017 3:04 pm

chinto wrote:
So here is the question: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income? If you are married your answer should reflect both lifetime earned income and investment assets from both marital partners.
I was thinking something similar the other day. At what age , you investment income becomes greater , max of earned income in any give year during your career?

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Re: What % of your income have you converted to wealth?

Post by LadyGeek » Sun May 21, 2017 3:43 pm

I merged chinto's thread into here, which is a similar discussion.
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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by Christine_NM » Sun May 21, 2017 6:47 pm

CFM300 wrote:
Christine_NM wrote:Where can you calculate lifetime earning adjusted for inflation?
I use the index values from Social Security for calculating benefits. See page two of this pdf:

https://www.ssa.gov/pubs/EN-05-10070.pdf

I've recorded all of my SS wages in a spreadsheet by year, and periodically update the index values whenever I'm interested.
Thanks. It only took a few minutes to figure my SS-indexed wages. My total lifetime indexed earnings are essentially the same as my current portfolio, and I've been retired 13 years. What does that mean? Nothing, really. Perhaps you could say that my portfolio has gained the same as the inflation-adjusted wage-indexed amount that I have spent so far. I dunno.
Last edited by Christine_NM on Mon May 22, 2017 12:06 am, edited 1 time in total.
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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by Tamales » Sun May 21, 2017 7:51 pm

CFM300 wrote:
Christine_NM wrote:Where can you calculate lifetime earning adjusted for inflation?
I use the index values from Social Security for calculating benefits. See page two of this pdf:

https://www.ssa.gov/pubs/EN-05-10070.pdf

I've recorded all of my SS wages in a spreadsheet by year, and periodically update the index values whenever I'm interested.
You may or may not care about this distinction, but the SS indexed earnings are indexed to "wage inflation" as opposed to CPI.
I once created a spreadsheet to graph the annual implied wage inflation from SSA versus annual CPI and they are quite different.

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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by CFM300 » Sun May 21, 2017 8:05 pm

Tamales wrote:the SS indexed earnings are indexed to "wage inflation" as opposed to CPI.
Good point. Thanks.

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Re: What % of your income have you converted to wealth?

Post by RudyS » Sun May 21, 2017 8:44 pm

MathWizard wrote:Sans gifts/inheritances, this is really a measure of how long a person has been investing, since
as the length of time of investment gets large:
the numerator is exponential in time, and
the denominator is linear in time.

Eventually this would surpass any fixed percentage.
That makes a lot of sense.

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Re: What % of your income have you converted to wealth?

Post by Portfolio7 » Mon May 22, 2017 1:10 pm

RudyS wrote:
MathWizard wrote:Sans gifts/inheritances, this is really a measure of how long a person has been investing, since
as the length of time of investment gets large:
the numerator is exponential in time, and
the denominator is linear in time.

Eventually this would surpass any fixed percentage.
That makes a lot of sense.
It does, but I really wish the exponential part would get it's act in gear! (My growth 'curve' looks so darn linear... maybe if I squeeze the chart horizontally...) :wink:

Actually, this is a consideration for folks - patience is critical. I started investing mid 1990's, so I got a quick run-up, and then two nasty dips in the last decade. This made my growth 'curve' real flat until the past few years, when it's finally showing some of that expected upwards bias that exponential functions are supposed to exhibit. Overall returns/CAGR have been solid, it's just a sequence of returns thing.
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Re: How many Bogleheads have investment assets that exceed their cumulative lifetime earned income?

Post by tfb » Tue Nov 28, 2017 1:46 pm

Tamales wrote:
Sun May 21, 2017 7:51 pm
CFM300 wrote:
Christine_NM wrote:Where can you calculate lifetime earning adjusted for inflation?
I use the index values from Social Security for calculating benefits. See page two of this pdf:

https://www.ssa.gov/pubs/EN-05-10070.pdf

I've recorded all of my SS wages in a spreadsheet by year, and periodically update the index values whenever I'm interested.
You may or may not care about this distinction, but the SS indexed earnings are indexed to "wage inflation" as opposed to CPI.
I once created a spreadsheet to graph the annual implied wage inflation from SSA versus annual CPI and they are quite different.
I created a spreadsheet to make it easy to adjust earnings to CPI. Just enter the starting year and your earnings, in separate columns for a two-earner household. If you have the net worth numbers by year, you can also see how your wealth conversion efficiency progressed.

https://1drv.ms/x/s!AjFcG3iXMFM5gQibWc9CPkHhA5Ca
Last edited by tfb on Wed Nov 29, 2017 2:59 am, edited 1 time in total.
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CMD1
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Re: What % of your income have you converted to wealth?

Post by CMD1 » Tue Nov 28, 2017 8:14 pm

It would be interesting to see the age of everyone as they post their %. While it's nice to have a high percentage at a young age its much harder with lower wages and less investment earnings.

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Re: What % of your income have you saved?

Post by Johnnie » Tue Nov 28, 2017 9:09 pm

What a fascinating exercise! Much obliged to tfb for bumping this 2013 thread (which I see had another round that I missed last May).

nodenuff2 wrote:
Thu Feb 21, 2013 12:54 pm
Using Social Security earnings as basis I have been blessed to be worth 120% of my life time earnings. With just savings figuring into the equation no real estate I am at 75%. How in the world did that happen? I am 63 going to start withdrawls in less than one year. Scary days ahead.
My methodology, tally, age and situation are very similar. I used nominal social security earnings and current portfolio balances and current real estate values. I'm a few years out from retirement, have no debt and a bit less net worth represented by my principle residence than nodenuff.

(Hey Nodenuff2 - if your plans went as expected it looks like you picked a good time to retire! Knock on SOR-risk wood...)
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