Why save so much for when you're old?

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investingdad
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Re: Why save so much for when you're old?

Post by investingdad » Mon May 08, 2017 9:05 am

I was friends with the OP when I was 24.

Said friend told me, "you can sleep when you're dead", whenever I was ready to call it a night because I liked getting sleep. Said friend also used to laugh and ask why I was talking about retirement when I just started working and was only 24.

I lost touch with him, but I hope he's doing ok.

I'm now almost 44...and I would give anything to go back 20 years, buy 24 year old me a beer, and thank me for being a long-term thinking kinda guy. I'd tell him his long view has bought us options, lots of them, and many nights of stress free sleep. I'd tell about the $5000 MRI procedure as a result of playing soccer with our son but it's cool, we'll write a check for the full amount and not give it another thought.

And when our daughter is ready to upgrade to a $1500 silver flute? Yep, just write the check, no worries. Actually, we'll use a credit card to get the rewards and then just pay it off.

And so on.

I'd probably buy 24 year old me a second beer because he deserves it. I'd also tell him hold onto the spreadsheet he created that gave him this financial epiphany, because it'll be fun to watch twenty years of net worth milestones achieved as he forecasted.


As to the OP...I strongly suggest you be comfortable with whatever choices you make.

barnaclebob
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Re: Why save so much for when you're old?

Post by barnaclebob » Mon May 08, 2017 9:20 am

imareal1 wrote:Hi, I'm 24 yrs old and almost one year into my actuarial career (first real job).

I'm basically asking for a justification of why I'm putting away significant money into my 401Ks and IRAs that I can't even touch until I'm 65 and old and don't have the energy to do the stuff I would do now in my 20s.
I thought actuaries ran numbers on stuff like this...

conlius
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Re: Why save so much for when you're old?

Post by conlius » Mon May 08, 2017 9:27 am

Throwing a bit extra at financial independence is usually not that noticeable to a lifestyle but it can do wonders for your future. Find the balance...Then hope that current you never regrets the decisions of past you.

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Re: Why save so much for when you're old?

Post by flamesabers » Mon May 08, 2017 9:29 am

barnaclebob wrote:
imareal1 wrote:Hi, I'm 24 yrs old and almost one year into my actuarial career (first real job).

I'm basically asking for a justification of why I'm putting away significant money into my 401Ks and IRAs that I can't even touch until I'm 65 and old and don't have the energy to do the stuff I would do now in my 20s.
I thought actuaries ran numbers on stuff like this...
I think the OP's question is more philosophical (we're only young once in our lives) then anything else.

goblue100
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Re: Why save so much for when you're old?

Post by goblue100 » Mon May 08, 2017 10:04 am

imareal1 wrote:I guess I just value the present a lot more than the future, especially since the future is not guaranteed, so saving for that period of time isn't appealing to me. I know...I'm the instant gratification kind of guy.
Like the song says, how will you ever get to be old and wise if you're never young and foolish? My advice may be a little different than many in the thread.
You shouldn't totally give up the now for the future. Set some aside, enjoy some, and make sure you know the difference between wants and needs. Balance is the key.
Some people are immune to good advice. - Saul Goodman

s0me0nesmind1
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Re: Why save so much for when you're old?

Post by s0me0nesmind1 » Mon May 08, 2017 10:05 am

There is a very valid point in this overall question.

Often times I find myself sacrificing fun on trips because I find a particular outing to have a ridiculous cost for what it is. It's also why I never book resort style vacations and opt to get a standard hotel. At the end of the day though, I feel more comfort knowing I'm financially safe.

Part of that might be more of my business senses kicking in and doing a rough calculation of their overall costs of the service or product and determining that their profit margins are simply too outrageous to be deemed reasonable. So maybe it's not always just about saving money per-say.

smurth2000
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Re: Why save so much for when you're old? Here's why.

Post by smurth2000 » Mon May 08, 2017 10:14 am

Taylor Larimore wrote:imareal1:

Welcome to the Bogleheads Forum!
I am 93. Every Friday my two sons come by and drive me to lunch.

This morning we went to a very good but expensive restaurant: Joe's Stone Crab on Miami Beach. I was able to encourage them to order whatever they want. We had great conversations and a wonderful meal together!!

This is why I put "significant" money away when I had the chance. I can't think of a better reason.

Best wishes.
Taylor
Agree with Taylor! I watched a program on Bloomberg where worlds famous billionaires defined what happiness meant to them and if the wealth they had gave them that. Summary of it was "Yes I have lots of wealth, but happiness is when I am surrounded by people who love me." To that I personally added "...people who love me (and people on whom I like to spend my $$$)" - The line within parentheses is why you need to save for retirement!

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Phineas J. Whoopee
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Re: Why save so much for when you're old?

Post by Phineas J. Whoopee » Mon May 08, 2017 1:30 pm

zaboomafoozarg wrote:...
BH.org would claim that it is a mathematical impossibility to retire with that amount of money. Yet somehow they all do it. It's not early and not extravagant, but they do it.
Ah. Hyperbole.

Plenty of people are retired on their Social Security retirement benefits with no savings at all, and while somebody here may have said it's impossible I don't remember reading it.

Other people have little to nothing in savings or SS retirement benefits.

We're the lucky ones.

PJW

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Pajamas
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Re: Why save so much for when you're old?

Post by Pajamas » Mon May 08, 2017 1:34 pm

imareal1 wrote:Hi, I'm 24 yrs old and almost one year into my actuarial career (first real job). I expect to make good money in the future and have started investing since I was hired. My question is why is saving a lot for retirement so important? I get that we need money for when we're retired and no longer have an income from working, but it seems like the amount needed usually requires a lifelong sacrifice of saving relentlessly and living frugally. This is where I'm kind of missing the logic of saving for retirement. My perspective of an ideal life is to live adventurously (AKA lavishly) while we're young and have energy to enjoy life and chill out when we're old and have less expenses. This clearly goes against general investing for retirement advice...

I'm basically asking for a justification of why I'm putting away significant money into my 401Ks and IRAs that I can't even touch until I'm 65 and old and don't have the energy to do the stuff I would do now in my 20s.
http://read.gov/aesop/052.html

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SeeMoe
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Re: Why save so much for when you're old?

Post by SeeMoe » Mon May 08, 2017 4:25 pm

We did it , at first, for the nice tax deferrals that we received on our 2 IRA plans and then our 2 457b plans. Flollowing Vanguard advice we also began short term and intermediate term (taxable accounts)investment plans. This allowed us to take (normal)retirement in our early 50's and we were " blessed" with enough monies to include foreign vacations and still invest in the taxable accounts. Now we reinvest our year end RMD's and also pension monies. Stopped the big time vacations a few years ago when they they became tiresome and even boring....

SeeMoe.. :dollar
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Re: Why save so much for when you're old?

Post by azanon » Mon May 08, 2017 5:21 pm

investingdad wrote:I'm now almost 44...and I would give anything to go back 20 years, buy 24 year old me a beer, and thank me for being a long-term thinking kinda guy. I'd tell him his long view has bought us options, lots of them, and many nights of stress free sleep. I'd tell about the $5000 MRI procedure as a result of playing soccer with our son but it's cool, we'll write a check for the full amount and not give it another thought.
If you do find a way to time travel, maybe tell that young guy about health insurance, with reasonable deductibles. :beer

gvsucavie03
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Re: Why save so much for when you're old?

Post by gvsucavie03 » Mon May 08, 2017 5:24 pm

This is a great book: https://www.amazon.com/Make-Your-Money- ... 1476743762. I think she does a great job of discussing retirement from many different perspectives.

Remember also that this is personal finance. It doesn't really matter what anyone tells you or advises you to do. Just remember that there is a lot of wisdom on this website as well as the other great resources folks have mentioned. Save enough to have a comfortable fruition, but live comfortably now if you have the income at your disposal.

Side note - "Living lavishly" sounds pretty immature. Living comfortably and below your means is what a wise person would do at any income level.

Do some soul-searching and consult a good retirement calculator. Common sense tells us that 100% spending now or 100% savings now are both not wise. You need to decide your number and be very realistic in that process.

As others have mentioned, you have the power of time at your disposal. I'd take advantage of it while you can, but again, that's me and you may not agree.

investingdad
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Re: Why save so much for when you're old?

Post by investingdad » Mon May 08, 2017 5:55 pm

azanon wrote:
investingdad wrote:I'm now almost 44...and I would give anything to go back 20 years, buy 24 year old me a beer, and thank me for being a long-term thinking kinda guy. I'd tell him his long view has bought us options, lots of them, and many nights of stress free sleep. I'd tell about the $5000 MRI procedure as a result of playing soccer with our son but it's cool, we'll write a check for the full amount and not give it another thought.
If you do find a way to time travel, maybe tell that young guy about health insurance, with reasonable deductibles. :beer
We did the math analysis...high deductible plan makes the most sense for us.

RudyS
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Re: Why save so much for when you're old?

Post by RudyS » Mon May 08, 2017 8:05 pm

Best place to save is living in houses below your means and reasonable price cards - Subarau Outback right now.. I'm 80, and so glad that if/when we need LTC, can pick a nice place, not take whatever has Medicaid beds. If we don't need it, the kids/grandkids will appreciate the inheritance. We never felt we were depriving ourselves of anything. Luckily, kids went to State University and we cash-flowed it.

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Re: Why save so much for when you're old?

Post by azanon » Mon May 08, 2017 8:06 pm

investingdad wrote:
azanon wrote:
investingdad wrote:I'm now almost 44...and I would give anything to go back 20 years, buy 24 year old me a beer, and thank me for being a long-term thinking kinda guy. I'd tell him his long view has bought us options, lots of them, and many nights of stress free sleep. I'd tell about the $5000 MRI procedure as a result of playing soccer with our son but it's cool, we'll write a check for the full amount and not give it another thought.
If you do find a way to time travel, maybe tell that young guy about health insurance, with reasonable deductibles. :beer
We did the math analysis...high deductible plan makes the most sense for us.
Oh ok, at least you had/have a policy. I'll be the first to admit I'm not health insurance expert, but it just caught my eye that you paid the full price for it (I assumed the way you worded it you paid it in full), but worded it like that was a good example to follow. My employer pays 75% of my premium (the DoD), so I admit if that weren't the case, I'd probably be price shopping too. I think that procedure would cost me $150 deductible, or something like that (Fed BCBS).

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Re: Why save so much for when you're old?

Post by Dottie57 » Mon May 08, 2017 8:15 pm

OP,

Why do you think people who are retirement age don't like to have fun with their money. I have plenty of uses for mine beyond food, shelter, car, entertainment, maybe some travel both domestic and international. Lots of ways to enjoy life.

Even if you are old.

2 bits
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Re: Why save so much for when you're old?

Post by 2 bits » Mon May 08, 2017 8:27 pm

It strikes me that the young you is likely jealous of the money you are collecting now, and the older you might be envious of the money that was spent in your youth. That's another thing I learned here on Bogleheads, the difference between jealousy and envy. I am just sorry I can't site my source.

and yet,
s0me0nesmind1 wrote: Often times I find myself sacrificing fun on trips because I find a particular outing to have a ridiculous cost for what it is. It's also why I never book resort style vacations and opt to get a standard hotel. At the end of the day though, I feel more comfort knowing I'm financially safe.
I still lament not buying the big tickets for a for a jazz trumpet concert in a basement hall in Tokyo, or going to a local baseball game there. I'm not likely to have that chance again.

But at this point it is kind of nice to be retired before most of my contemporaries. It wasn't a race, but I like the everyday is Saturday thing.

The actionable part is to find a balance.
I sometimes think that I am living the life of which my immigrant ancestors dreamed.

IMO
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Re: Why save so much for when you're old?

Post by IMO » Mon May 08, 2017 8:34 pm

carolinaman wrote:Your question is good. There is a lot of emphasis on saving for retirement on this forum. Some seem to see the distant retirement as a nirvana that we sacrifice the present for. IMO, one should strike a balance between living life today and saving for retirement. Both are important.

In a recent post, someone stated that you cannot over save for retirement. I totally disagree with that statement. Life is a continuum from the present until you die. Do not sacrifice the present for tomorrow nor sacrifice tomorrow for today.
Agree.

You don't know what health changes will occur in your life. Thus, you need to save in case things happen, and you need to live a little, in case things happen.

Paul78
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Re: Why save so much for when you're old?

Post by Paul78 » Mon May 08, 2017 8:50 pm

A few things

1. Saving when you are young gives you an option to retire sooner. I am planning on retiring in my mid fifties. Ideally (I acknowledge the future is not certain) that will give me a 10 year window of still being pretty active and spending a good chunk of change. Plus retiring 10 years early is also of significant value to me.
2. A dollar spent in 2017 gives you far less purchasing power than a dollar saved in 2017 and spent in 2057. Investing gives you a chance to have far more spending power (ie you get to buy more stuff/experiences).
3. Legacy- whether it be kids, nieces/nephews, a charity, religion having money (should I save more than my retirement lifestyle needs or should I perish before I have a chance to spend it) to "give away" is of value to me.

I do acknowledge some people can be far to frugal when they are young/full of energy. For me to personal combat this I work OT for "fun" money which I subsequently spend. I use that youthful energy to put in some extra hours at work and then use that same energy to see various parts of the world. One year I work OT (about 40k net) to purchase a nicer car (nothing to amazing but far more expensive than I needed) to cover the additional 20k price tag (ie the cost above an economical car) and an estimated 20k extra in lifetime expenses (ie an insurance rate that is double, worse gas mileage, more expensive repairs, ect).

imareal1
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Re: Why save so much for when you're old?

Post by imareal1 » Tue May 09, 2017 10:57 am

Thanks for all the different perspectives. It was a really enjoyable read and I learned a lot. All these anecdotal experiences are quite enlightening. As someone has pointed out, my original question was more philosophical than mathematical. But yes, I agree compound interest alone is enough of a reason to save early.

To the father of the 22 yr old who's becoming a FCAS and already earning a six figure salary, that's really, really impressive.

2m2037
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Re: Why save so much for when you're old?

Post by 2m2037 » Tue May 09, 2017 12:31 pm

My first post here - I registered only because I wanted to subscribe to this thread. I too was wondering the answer to this question last week and am glad I found this thread! Always helps to have advice from "future selfs". Cheers all :sharebeer

Guilherme
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Re: Why save so much for when you're old?

Post by Guilherme » Tue May 09, 2017 5:40 pm

This is my first post as well.

Tons of good advice in these 3 pages. Thanks all, specially for Taylor Livermore, a person whose wisdom I'm going to study for sure!

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Re: Why save so much for when you're old?

Post by Grt2bOutdoors » Tue May 09, 2017 6:52 pm

Guilherme wrote:This is my first post as well.

Tons of good advice in these 3 pages. Thanks all, specially for Taylor Livermore, a person whose wisdom I'm going to study for sure!
It's Taylor Larimore. Livermore is a federal installation, i believe. :wink:
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Guilherme
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Re: Why save so much for when you're old?

Post by Guilherme » Tue May 09, 2017 7:52 pm

You're right, Grt2bOutdoors!

Sorry for the mistake! :happy

It's amazing that a 90+ year-old share with us his wisdom and superior knowledge! :D

wrongfunds
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Re: Why save so much for when you're old?

Post by wrongfunds » Wed May 10, 2017 9:43 am

Why does 90+ year old have to pay for lunch of his 60+ year sons ? :-)
It should be other way around :-) :-)

lazydavid
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Re: Why save so much for when you're old?

Post by lazydavid » Wed May 10, 2017 1:09 pm

If you start early, you can finish early. I just turned 39, and am pretty close to "winning the game" as a result of saving aggressively. If the CAGR of my portfolio is just 4% over the next 25 years (I hope/expect it'll be better than that), I'll have enough to retire with $80k/yr in today's dollars plus SS, even if I never save another penny. That's a plenty comfortable lifestyle, and I can't really describe the sense of relief in knowing that it's well within reach.

Once you get to this point, why not stop saving and spend even more? One, you're into the realm of diminishing returns, where it takes dramatically larger and larger outlays for smaller and smaller increases in happiness. More importantly, continuing to save gives me options, like retiring earlier with even more disposable income.

Yes, I could certainly live more lavishly than I do. But I don't feel the need to. I have a wonderful wife (of 14 years) and son, a modest mortgage on a 4100sqft house in a nice neighborhood with a kitchen that rivals many $2M+ homes (wife and I both love to cook), two (older) luxury cars, and am involved in tons of activities with my son. We're going on 4 vacations this year, two simple driving ones, two flying (discounted) first class. I don't have regrets about spending extra on these things precisely BECAUSE I know I'm also taking care of my future. Our spending has definitely ramped up over time as we've gained more financial security. It's all about finding the right balance.

I'm still relatively young--or at least choose to think of myself as such--but I'll echo our older members in saying my biggest financial regret is not starting to save even earlier.

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Re: Why save so much for when you're old?

Post by JaneyLH » Wed May 10, 2017 1:29 pm

I started maxing out my IRA and 401(k) contributions at 22. In my early 30's, I started investing in taxable accounts.

At 43 I started working 24 hours/week in a telecommute arrangement. I moved to Lake Tahoe and started skiing 50 days/year, hiking, and sailing. At 45 I lost that great work gig but was able to pick up contract work. Because I owned my own house outright and had a sizable investment portfolio outside of retirement accounts, I didn't have to have a regular paycheck. Still, I kept working on a part-time basis when the opportunity for projects arose until I was 58 and hadn't yet touched a penny of my portfolio. Now 62, my husband and I travel 50% of the time -- and not always on the cheap, either. We still ski and hike. We enjoy being able to pay all our bills without worry and pretty much can spend whatever we want. We have 3 vehicles, a sailboat, and two travel trailers. We have more income than when we were working, and the time to enjoy it.

How to save for a house? Starter home, worked my way up to nicer and nicer accommodations as my equity grew.

kaudrey
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Re: Why save so much for when you're old?

Post by kaudrey » Wed May 10, 2017 2:12 pm

I am twice your age, and starting investing right out of school like you. But I also found a balance. I traveled and enjoyed myself in my 20s (and 30s, and today), but I saved for trips and I saved for cars/houses/ at the same time. Maybe you don't max out your 401(k) right now, but saving consistently toward current and future goals now will not only allow compounding to start but also create a habit that will benefit you for your entire life.

In my 20s, I took several trips to Europe, one to Mexico, and honeymooned in Hawaii (that we paid for). I was still contributing to my 401(k) at that time, and didn't go into credit card debt. But, I also shared apartments with people and drove the same car for a decade. Spend money on things that are important to you, and enjoy life, but living "lavishly" is not necessary to do these things.

When you are my age, and have almost $2M saved while living on a middle-class salary all of those years, you will thank us.

And, if you think I am too "old" to enjoy myself - last year I biked through Portugal for a week, and 3 years ago I hiked for 4 days to get to Macchu Picchu. I still plan to hike Mt. Kilimanjaro in a few years. I think your perspective of what your future holds is a bit skewed. :sharebeer

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raven15
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Re: Why save so much for when you're old?

Post by raven15 » Wed May 10, 2017 9:07 pm

You are saving money to retire in your 60's? Ouch. I'm 33 and I spent the last 3 years saving to retire in my 40's. Ideally 40, but I doubt the markets like me that much.
It's Time. Adding Interest.

chinto
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Re: Why save so much for when you're old?

Post by chinto » Thu May 11, 2017 12:21 am

imareal1 wrote: To the father of the 22 yr old who's becoming a FCAS and already earning a six figure salary, that's really, really impressive.
He sat for the FCAS last Friday. Now we wait to see if he passed. Pins and needles time. He did well. Passed all exams the first time. The reason he is so advanced in the career is he started college when he was 14 and went to a college with a program of actuarial excellence. So he already has been working in the field 3 years, 4 if you count internships.

The challenge you may face is the one you hinted at in your original post. It takes a certain type of person to stay home night after night studying for exams and studying each Saturday and Sunday for years on end while your peers are out and about enjoying the young single life or even young married life. But if you stay the course (of study) you can knock off those exams. Aim for 2 a year until you get to the annual progression ones. Good luck to you.

wrongfunds
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Re: Why save so much for when you're old?

Post by wrongfunds » Thu May 11, 2017 10:13 am

I would have thought being able to start college at 14 puts your son in a the top 0.000001 % of the students in the universe :-) To put it another way, it is impossible for OP to emulate your son or for that matter almost any body else to emulate your son.

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Re: Why save so much for when you're old?

Post by wfrobinette » Thu May 11, 2017 10:19 am

imareal1 wrote:Hi, I'm 24 yrs old and almost one year into my actuarial career (first real job). I expect to make good money in the future and have started investing since I was hired. My question is why is saving a lot for retirement so important? I get that we need money for when we're retired and no longer have an income from working, but it seems like the amount needed usually requires a lifelong sacrifice of saving relentlessly and living frugally. This is where I'm kind of missing the logic of saving for retirement. My perspective of an ideal life is to live adventurously (AKA lavishly) while we're young and have energy to enjoy life and chill out when we're old and have less expenses. This clearly goes against general investing for retirement advice...

I'm basically asking for a justification of why I'm putting away significant money into my 401Ks and IRAs that I can't even touch until I'm 65 and old and don't have the energy to do the stuff I would do now in my 20s.
If you start now you can find a good balance between lavish and ultra-frugal and still retire comfortably. You only get so much life and you can't take anything with you when you die. You could be dead at 25 or 105 and unless you end it yourself no one know when you'll die.

supersharpie
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Re: Why save so much for when you're old?

Post by supersharpie » Thu May 11, 2017 10:29 am

imareal1 wrote:Hi, I'm 24 yrs old and almost one year into my actuarial career (first real job). I expect to make good money in the future and have started investing since I was hired. My question is why is saving a lot for retirement so important? I get that we need money for when we're retired and no longer have an income from working, but it seems like the amount needed usually requires a lifelong sacrifice of saving relentlessly and living frugally. This is where I'm kind of missing the logic of saving for retirement. My perspective of an ideal life is to live adventurously (AKA lavishly) while we're young and have energy to enjoy life and chill out when we're old and have less expenses. This clearly goes against general investing for retirement advice...

I'm basically asking for a justification of why I'm putting away significant money into my 401Ks and IRAs that I can't even touch until I'm 65 and old and don't have the energy to do the stuff I would do now in my 20s.
You don't need to live particularly frugally to max out your 401k and IRA contributions on an actuary's salary.

My wife and I only gross about 160k combined and yet we manage to dine out weekly, attend plenty of concerts and plays, travel relatively lavishly (annual two week trips to either the west coast or Europe while staying at well appointed Airbnb properties + a week at the beach + multiple long weekends in NYC and upstate NY), buy quality beer and wine, AND max out our retirement funds.
Last edited by supersharpie on Thu May 11, 2017 10:36 am, edited 1 time in total.

LiterallyIronic
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Re: Why save so much for when you're old?

Post by LiterallyIronic » Thu May 11, 2017 10:35 am

supersharpie wrote: My wife and I only gross about 160k combined and yet we manage to dine out weekly, attend plenty of concerts and plays, travel relatively lavishly (annual two week trips to either the west coast and Europe while staying at well appointed Airbnb properties + a week at the beach + multiple long weekends in NYC and upstate NY), buy quality beer and wine, AND max out our retirement funds.
In what world is $160k household income "only"?

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flamesabers
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Re: Why save so much for when you're old?

Post by flamesabers » Thu May 11, 2017 10:41 am

LiterallyIronic wrote:
supersharpie wrote: My wife and I only gross about 160k combined and yet we manage to dine out weekly, attend plenty of concerts and plays, travel relatively lavishly (annual two week trips to either the west coast and Europe while staying at well appointed Airbnb properties + a week at the beach + multiple long weekends in NYC and upstate NY), buy quality beer and wine, AND max out our retirement funds.
In what world is $160k household income "only"?
I was thinking the same thing. That kind of income for a married couple puts you in the upper 25% tax bracket/starting part of 28% tax bracket.

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Re: Why save so much for when you're old?

Post by stoptothink » Thu May 11, 2017 10:45 am

flamesabers wrote:
LiterallyIronic wrote:
supersharpie wrote: My wife and I only gross about 160k combined and yet we manage to dine out weekly, attend plenty of concerts and plays, travel relatively lavishly (annual two week trips to either the west coast and Europe while staying at well appointed Airbnb properties + a week at the beach + multiple long weekends in NYC and upstate NY), buy quality beer and wine, AND max out our retirement funds.
In what world is $160k household income "only"?
I was thinking the same thing.
+2. FWIW, my wife and I maxed out both our tax-deferred retirement accounts when we first married (4yrs ago) and our income was about half of $160k, and we had an infant and we aren't misers (well, she isn't).

imareal1
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Re: Why save so much for when you're old?

Post by imareal1 » Thu May 11, 2017 11:17 am

I'm currently putting away 10% into my 401k and making monthly contributions to max out my Roth IRA - this comes out to putting away ~20% of my gross salary. If I wanted to save more (for the future in general), should I increase my 401k contribution or start putting away in a taxable account? In what situations would I pick one over the other (assuming I haven't maxed out 401k)?

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flamesabers
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Re: Why save so much for when you're old?

Post by flamesabers » Thu May 11, 2017 11:39 am

imareal1 wrote:I'm currently putting away 10% into my 401k and making monthly contributions to max out my Roth IRA - this comes out to putting away ~20% of my gross salary. If I wanted to save more (for the future in general), should I increase my 401k contribution or start putting away in a taxable account? In what situations would I pick one over the other (assuming I haven't maxed out 401k)?
It depends on a number of factors. What tax bracket are you in? What kind of funds do you have in your 401k? Will you be needing to withdraw the money before retirement age?

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Re: Why save so much for when you're old?

Post by Grt2bOutdoors » Thu May 11, 2017 11:42 am

supersharpie wrote:
imareal1 wrote:Hi, I'm 24 yrs old and almost one year into my actuarial career (first real job). I expect to make good money in the future and have started investing since I was hired. My question is why is saving a lot for retirement so important? I get that we need money for when we're retired and no longer have an income from working, but it seems like the amount needed usually requires a lifelong sacrifice of saving relentlessly and living frugally. This is where I'm kind of missing the logic of saving for retirement. My perspective of an ideal life is to live adventurously (AKA lavishly) while we're young and have energy to enjoy life and chill out when we're old and have less expenses. This clearly goes against general investing for retirement advice...

I'm basically asking for a justification of why I'm putting away significant money into my 401Ks and IRAs that I can't even touch until I'm 65 and old and don't have the energy to do the stuff I would do now in my 20s.
You don't need to live particularly frugally to max out your 401k and IRA contributions on an actuary's salary.

My wife and I only gross about 160k combined and yet we manage to dine out weekly, attend plenty of concerts and plays, travel relatively lavishly (annual two week trips to either the west coast or Europe while staying at well appointed Airbnb properties + a week at the beach + multiple long weekends in NYC and upstate NY), buy quality beer and wine, AND max out our retirement funds.
How many kids do you have?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
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Re: Why save so much for when you're old?

Post by Grt2bOutdoors » Thu May 11, 2017 11:47 am

imareal1 wrote:I'm currently putting away 10% into my 401k and making monthly contributions to max out my Roth IRA - this comes out to putting away ~20% of my gross salary. If I wanted to save more (for the future in general), should I increase my 401k contribution or start putting away in a taxable account? In what situations would I pick one over the other (assuming I haven't maxed out 401k)?
Increasing 401k contribution ensures you remain in the 25% marginal tax bracket for now. Right now, you are in the lower end of 28% tax bracket or higher end of 25% tax bracket, as I don't know what if anything you kick in for HSA or medical insurance. Anything above 91,150 in taxable income as a single taxpayer is in the 28% tax bracket. Given the above about current contributions, you have room to save 3% on your marginal tax bracket by putting more into 401k plan on a pre-tax basis.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Why save so much for when you're old?

Post by DTSC » Thu May 11, 2017 11:53 am

imareal1 wrote:Thanks for all the feedback. It seems like my perspective of middle/old age life is grimmer than what it is in reality. It's great to hear that people are able to find a balance and I'm super glad I'm starting to save already. Cheers.
Getting older SUCKS! Except the alternative (dying young) is even worse.

The thing I fear more than being old and sick - being old, sick and poor!!

MnD
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Re: Why save so much for when you're old?

Post by MnD » Thu May 11, 2017 11:57 am

Paul78 wrote: 1. Saving when you are young gives you an option to retire sooner. I am planning on retiring in my mid fifties. Ideally (I acknowledge the future is not certain) that will give me a 10 year window of still being pretty active and spending a good chunk of change. Plus retiring 10 years early is also of significant value to me.
Same situation exactly - planning a mid-50's retirement in a bit over a year. I happen to be a civilian scientist for a major government and if you follow the news you know this isn't the dream spot to be in right now. With every additional piece of bad news that comes down the response under my breath is the same - "sure glad I saved $X.X million dollars". Those who didn't are going to have contend with whatever the new world order is. Substantial savings for old age means having FU money throughout your career. You are not owned by the entity signing your paycheck which comes in handy when things get ugly.

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Re: Why save so much for when you're old?

Post by keystone » Thu May 11, 2017 12:16 pm

raven15 wrote:You are saving money to retire in your 60's? Ouch. I'm 33 and I spent the last 3 years saving to retire in my 40's. Ideally 40, but I doubt the markets like me that much.
Yep, I think a common mistake is to assume that retirement means in one's 60's or at an age later than necessary. I'll never forget submitting the request to max my 401K at a job I had just started at age 24 and then listening to the person on the receiving end of my request caution me that I am possibly "over-saving" for retirement. I politely laughed this off, but perhaps he had a similar frame of mind as the OP. All along I knew I was building a foundation for (very) early retirement.

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Re: Why save so much for when you're old?

Post by bigred77 » Thu May 11, 2017 12:30 pm

imareal1 wrote:I'm currently putting away 10% into my 401k and making monthly contributions to max out my Roth IRA - this comes out to putting away ~20% of my gross salary. If I wanted to save more (for the future in general), should I increase my 401k contribution or start putting away in a taxable account? In what situations would I pick one over the other (assuming I haven't maxed out 401k)?
Up your 401k to 15%. At your age you'll quickly adjust to the new take home pay and won't miss it.

2m2037
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Re: Why save so much for when you're old?

Post by 2m2037 » Thu May 11, 2017 1:08 pm

stoptothink wrote:
flamesabers wrote:
LiterallyIronic wrote:
supersharpie wrote: My wife and I only gross about 160k combined and yet we manage to dine out weekly, attend plenty of concerts and plays, travel relatively lavishly (annual two week trips to either the west coast and Europe while staying at well appointed Airbnb properties + a week at the beach + multiple long weekends in NYC and upstate NY), buy quality beer and wine, AND max out our retirement funds.
In what world is $160k household income "only"?
I was thinking the same thing.
+2. FWIW, my wife and I maxed out both our tax-deferred retirement accounts when we first married (4yrs ago) and our income was about half of $160k, and we had an infant and we aren't misers (well, she isn't).
My SO and I work in the Bay Area and gross approx $190-$200K before ESPP/RSUs. We pay $2k monthly rent for a 1br/1ba for a location 50 miles south of San Francisco and don't feel like we would be able to afford a house here any time in the near future. I honestly don't know how this compares to other states or areas since we've only been here a short while, but we feel like maybe we're around the median household income or slightly below... Is combined gross income of $160K considered a lot? Is the COL in SFBA blown way out of proportion?

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Re: Why save so much for when you're old?

Post by freyj6 » Thu May 11, 2017 1:11 pm

I agree it's super important to be financially responsible, but it all depends on what you're giving up to save.

If you're putting off what you really want to do with your life, forgoing the things that are really important to you or grinding away at a job you hate, it's never worth it.

On the flip side, if you know what you care about and what you don't, you can live a pretty awesome lifestyle and still save a huge amount of money.

Personally, I know exactly what's important to me and what's not. I spend almost nothing on material things, never eat out unless it's with friends, and avoid so many other things people spend money on that I don't even know what they are. I do, however, spend liberally on healthy food, rent, dates and I've also done a lot of very long term travel -- those are the things that are important to me right now.

In my experience, you can live an awesome lifestyle for around $25,000 per year (if you're young and single). If the amount you're spending is really negatively affecting the quality of your life, you're probably saving too much or spending on the wrong things.

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Re: Why save so much for when you're old?

Post by stoptothink » Thu May 11, 2017 1:13 pm

imperio wrote:My SO and I work in the Bay Area and gross approx $190-$200K before ESPP/RSUs. We pay $2k monthly rent for a 1br/1ba for a location 50 miles south of San Francisco and don't feel like we would be able to afford a house here any time in the near future. I honestly don't know how this compares to other states or areas since we've only been here a short while, but we feel like maybe we're around the median household income or slightly below... Is combined gross income of $160K considered a lot? Is the COL in SFBA blown way out of proportion?
Even in the Bay Area, $160k/yr is twice the median household income in most zip codes http://citylab.news21.com/data/types/19/. And yes, the COL in the Bay Area, specifically housing costs, is absolutely outrageous compared to the rest of the country.

Dottie57
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Re: Why save so much for when you're old?

Post by Dottie57 » Thu May 11, 2017 1:17 pm

freyj6 wrote:I agree it's super important to be financially responsible, but it all depends on what you're giving up to save.

If you're putting off what you really want to do with your life, forgoing the things that are really important to you or grinding away at a job you hate, it's never worth it.

On the flip side, if you know what you care about and what you don't, you can live a pretty awesome lifestyle and still save a huge amount of money.

Personally, I know exactly what's important to me and what's not. I spend almost nothing on material things, never eat out unless it's with friends, and avoid so many other things people spend money on that I don't even know what they are. I do, however, spend liberally on healthy food, rent, dates and I've also done a lot of very long term travel -- those are the things that are important to me right now.

In my experience, you can live an awesome lifestyle for around $25,000 per year (if you're young and single). If the amount you're spending is really negatively affecting the quality of your life, you're probably saving too much or spending on the wrong things.
Awesome doesn't mean he same thing to all people. It sounds like Op wants to spend every penny to live a lavish life.

I really don't care what OP does, s/he can be as smart or foolish as desired. OP just needs to bear the consequences.

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Re: Why save so much for when you're old?

Post by cbr shadow » Thu May 11, 2017 5:22 pm

imperio wrote:
stoptothink wrote:
flamesabers wrote:
LiterallyIronic wrote:
supersharpie wrote: My wife and I only gross about 160k combined and yet we manage to dine out weekly, attend plenty of concerts and plays, travel relatively lavishly (annual two week trips to either the west coast and Europe while staying at well appointed Airbnb properties + a week at the beach + multiple long weekends in NYC and upstate NY), buy quality beer and wine, AND max out our retirement funds.
In what world is $160k household income "only"?
I was thinking the same thing.
+2. FWIW, my wife and I maxed out both our tax-deferred retirement accounts when we first married (4yrs ago) and our income was about half of $160k, and we had an infant and we aren't misers (well, she isn't).
My SO and I work in the Bay Area and gross approx $190-$200K before ESPP/RSUs. We pay $2k monthly rent for a 1br/1ba for a location 50 miles south of San Francisco and don't feel like we would be able to afford a house here any time in the near future. I honestly don't know how this compares to other states or areas since we've only been here a short while, but we feel like maybe we're around the median household income or slightly below... Is combined gross income of $160K considered a lot? Is the COL in SFBA blown way out of proportion?
I also live in the SFBA and agree that it's crazy expensive to live here. In many situations salaries make up for that though. If you're grossing $200k and spend $24k/yr on rent then why do you think you are below the median household income? You must be saving (or spending) huge amounts of money somewhere. Most people don't have that option.
Our household income is a big higher than yours, but our rent is also significantly higher. Still, we save a ton of money and spend money on lots of things we don't "need" like travel and hobbies.
I'm confused as to why you would think you're below the median household income.

2m2037
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Re: Why save so much for when you're old?

Post by 2m2037 » Thu May 11, 2017 6:00 pm

cbr shadow wrote:
imperio wrote:
stoptothink wrote:
flamesabers wrote:
LiterallyIronic wrote:
In what world is $160k household income "only"?
I was thinking the same thing.
+2. FWIW, my wife and I maxed out both our tax-deferred retirement accounts when we first married (4yrs ago) and our income was about half of $160k, and we had an infant and we aren't misers (well, she isn't).
My SO and I work in the Bay Area and gross approx $190-$200K before ESPP/RSUs. We pay $2k monthly rent for a 1br/1ba for a location 50 miles south of San Francisco and don't feel like we would be able to afford a house here any time in the near future. I honestly don't know how this compares to other states or areas since we've only been here a short while, but we feel like maybe we're around the median household income or slightly below... Is combined gross income of $160K considered a lot? Is the COL in SFBA blown way out of proportion?
I also live in the SFBA and agree that it's crazy expensive to live here. In many situations salaries make up for that though. If you're grossing $200k and spend $24k/yr on rent then why do you think you are below the median household income? You must be saving (or spending) huge amounts of money somewhere. Most people don't have that option.
Our household income is a big higher than yours, but our rent is also significantly higher. Still, we save a ton of money and spend money on lots of things we don't "need" like travel and hobbies.
I'm confused as to why you would think you're below the median household income.
I guess it's because we would rather pay for a mortgage than rent, but can't afford home ownership. And when you walk down a street of houses, every single one of them has to have a owner! That and at work a lot of people seem to have luxury cars, and they're only slightly senior to us in terms of work hierarchy. How do these people afford these things? :confused

Stoptothink posted a link above showing that the median household income in this area is $80K... I find it a little hard to believe.

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