What is your Target Savings?

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socialforums2019
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What is your Target Savings?

Post by socialforums2019 »

Want to know how much is "left over" to be allocated to taxable, overall savings, emergency purchases, etc.

Assumptions:

You max out all retirement accounts (401K, Roth/Backdoor IRA, HSA if applicable)
You have paid/allocated all of your Necessities and Wants

For example: $10K post tax income, $5K Necessities, $2K Wants, $3K "savings" which is then allocated to additional retirement, college tuition and general savings buffer.

What is your savings number and how do you allocate/put a job to it?
runner3081
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Re: What is your Target Savings?

Post by runner3081 »

After maxing 401K, ROTH, HSA and 457B, we just keep dumping into post-tax until it gets to the point of almost hurting. For us, that savings above and beyond the maxed out accounts is 38% of gross income (goes into post-tax brokerage and 529 - mostly brokerage).

We don't make much (compared to people on here), but are frugal minimalists.
Robdac
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Re: What is your Target Savings?

Post by Robdac »

runner3081 wrote: Sat Oct 03, 2020 7:34 pm After maxing 401K, ROTH, HSA and 457B, we just keep dumping into post-tax until it gets to the point of almost hurting. For us, that savings above and beyond the maxed out accounts is 38% of gross income (goes into post-tax brokerage and 529 - mostly brokerage).

We don't make much (compared to people on here), but are frugal minimalists.
We save a remarkably similar amount.

Our target is to max out the 401(k)s along with a very generous company contribution. But we're always well above it. Frugal minimalists. The concept of enough is a wonderful thing.

Because we are frugal we don't "put a job to it" or budget. We just invest what's left over every month on top of the tax deferred investments. Last year that worked out to over 40% of take home pay.
Last edited by Robdac on Sun Oct 04, 2020 5:17 am, edited 1 time in total.
dissonance
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Re: What is your Target Savings?

Post by dissonance »

After maxing out 2x 401k, 1x 457, 1x 529, 2x backdoor roth ira and 1xHSA that's $83,600 of tax advantaged/deferred savings. So we save about $7k/mo tax adv/def, live off of about $6k/mo with ~85k/mo post tax income for a 93-94% savings rate. About $100k is kept in emergency fund/discretionary spending.

We're just saving it all until we figure out how to spend the new income.
KlangFool
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Re: What is your Target Savings?

Post by KlangFool »

socialforums2019 wrote: Sat Oct 03, 2020 7:14 pm Want to know how much is "left over" to be allocated to taxable, overall savings, emergency purchases, etc.

Assumptions:

You max out all retirement accounts (401K, Roth/Backdoor IRA, HSA if applicable)
You have paid/allocated all of your Necessities and Wants

For example: $10K post tax income, $5K Necessities, $2K Wants, $3K "savings" which is then allocated to additional retirement, college tuition and general savings buffer.

What is your savings number and how do you allocate/put a job to it?
socialforums2019,

1) I save 1 year of current annual expense every year.


<<$3K "savings" which is then allocated to additional retirement, college tuition and general savings buffer.>>


2) I do not have allocation. Money is fungible. If I am rich enough, I have money to spend on anything that I want.

3) After saving 1 year of expense every year, I have enough money left for any discretionary expenses.


4) The only exception is paying for my kids' college education. I only do that after my portfolio exceed 1 million.


KlangFool
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Makaveli
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Re: What is your Target Savings?

Post by Makaveli »

50% savings (or rather investment rate) of excess cash post 401k, HSA, etc deduction. Dumped in taxable on the odd weeks that I do not get paid (mentally I view this as more DCA vs lumping 401k contributions and taxable on same day). Likely makes no significant differences but it’s my plan and it’s working.
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socialforums2019
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Re: What is your Target Savings?

Post by socialforums2019 »

dissonance wrote: Sat Oct 03, 2020 8:32 pm After maxing out 2x 401k, 1x 457, 1x 529, 2x backdoor roth ira and 1xHSA that's $83,600 of tax advantaged/deferred savings. So we save about $7k/mo tax adv/def, live off of about $6k/mo with ~85k/mo post tax income for a 93-94% savings rate. About $100k is kept in emergency fund/discretionary spending.

We're just saving it all until we figure out how to spend the new income.
Just so I understand.

$7K/mo for retirement/major purchases
$6K/mo is your expenses
You make $85K/mo post tax?!
livesoft
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Re: What is your Target Savings?

Post by livesoft »

We don't have any number and don't allocate or put a job to it. Anything leftover goes into our joint taxable investment account and gets invested in broad market index funds. If our asset allocation gets imbalanced, then we rebalance in a tax-deferred account.
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socialforums2019
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Re: What is your Target Savings?

Post by socialforums2019 »

livesoft wrote: Sun Oct 04, 2020 8:10 am We don't have any number and don't allocate or put a job to it. Anything leftover goes into our joint taxable investment account and gets invested in broad market index funds. If our asset allocation gets imbalanced, then we rebalance in a tax-deferred account.
So if/when you need to pay for thinks such as let's say a major home repair, new car, etc. you pull that money from your taxable? Is that taxable also going to play as part of your retirement fund?
catlady
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Re: What is your Target Savings?

Post by catlady »

We’re at the invest what’s leftover stage instead of having a specific savings target. We usually have about 50-60% of our take home pay leftover of which we put 25% towards the mortgage and the rest goes to vanguard taxable account. Bonuses are split the same.
nolesrule
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Re: What is your Target Savings?

Post by nolesrule »

50% of un-dedicated cash gets put toward pure investing (aka taxable retirement)... the other 50% is for extra mortgage payoff, charitable giving, accelerating savings for home improvement projects and money for the kids when we kick them out of the house.

However we begin each month with a target of 6.5 months of take home pay in cash plus a few other short term budget items, and the rest gets swept to the brokerage account. Months in which we begin below the cash target, we just don't sweep anything and allow income to rebuild it.
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Makaveli
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Re: What is your Target Savings?

Post by Makaveli »

livesoft wrote: Sun Oct 04, 2020 8:10 am We don't have any number and don't allocate or put a job to it. Anything leftover goes into our joint taxable investment account and gets invested in broad market index funds. If our asset allocation gets imbalanced, then we rebalance in a tax-deferred account.
+1

Even though I have a set "50% of take home" goes to taxable in reality my remaining 50% allocation to fixed items (rent, groceries, etc.) is never fully spent so even more gets plopped into taxable. I have recently transitioned from a 6-12 month emergency fund to having everything deployed in taxable. It's odd only seeing $3,000 - $5,000 in my checkings/savings account but better to be invested once the portfolio is large enough to handle a market drop + meet an emergency.
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anon_investor
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Re: What is your Target Savings?

Post by anon_investor »

Annually we max out all of our tax advantaged space:
-1x 401k (including mega backdoor Roth to HCE cap)
-2x Roth IRA (via backdoor)
-family HSA
-529 plans to state income tax limit

We already have a fully funded 8 month emergency fund in CDs & I Bonds, and could be stretch much further if we eliminated nonessential expenses.

Every month after making sure current and expected expenses are accounted for, any leftover money usually goes 100% into index funds in our taxable account.

I usually get a large bonus annually, which we will allocate a portion of for any planned or expected large expenses (think home projects), but the rest goes 100% into index funds in our taxable account.

We do not allocate to "savings", since we likely could pay for any expense via credit card then pay it off at the end of the statement cycle, which can buy you extra time and allow for things to be paid via cash flow over multiple pay checks.

This strategy has worked out well for us over the past few years, and allowed our taxable account to grow significantly in size.
Radman
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Re: What is your Target Savings?

Post by Radman »

Our net income basically gets divided into thirds, 1/3 taxes, 1/3 savings, and 1/3 spending.

We max my profit sharing 401k 56k, cash balance pension ~30k, college 529 for 3 kids ~24k, backdoor Roth’s x 2. Have an HRA at work so not eligible for HSA. Post tax brokerage savings per year 150k.

Monthly we spend ~12k, ~2k 529, 12.5k brokerage. Usually That leaves around 4K if extra savings which we just add to our online savings account/EF/vacation spending.

Emergency fund has about 12 months of necessary spending but we have had some big ticket housing items that have been basically using the excess (new deck, landscaping, and fence). I imagine in the future we will still send the excess to the EF and when it gets too big just make extra lump sum payments to mortgage or the brokerage account.
stoptothink
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Re: What is your Target Savings?

Post by stoptothink »

catlady wrote: Sun Oct 04, 2020 8:42 am We’re at the invest what’s leftover stage instead of having a specific savings target.
Similar. At the moment, we're diverting $1000/wk to ALLY savings and $500/wk to taxable. As soon as we have enough in ALLY to max pair of Roths and 529s on January 1st and have a 3 month cushion, then the leftover will just be directed towards taxable. That will be happening with our mid-October paychecks. Just opened taxable account after we knocked out the mortgage in May. We're at ~55% gross savings rate.
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mmmodem
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Re: What is your Target Savings?

Post by mmmodem »

Only one of us works. Our target savings is maxing out HSA, 401k and 2x Roth IRA. That's equals $38,600. There are no target savings beyond this. This will allow us retire in our 50's. We feel there is little reason for a taxable account after maxing tax advantaged. As it is on a single income, there is very little remaining for taxable after yearly expenses anyway.
dissonance
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Re: What is your Target Savings?

Post by dissonance »

socialforums2019 wrote: Sun Oct 04, 2020 8:02 am
dissonance wrote: Sat Oct 03, 2020 8:32 pm After maxing out 2x 401k, 1x 457, 1x 529, 2x backdoor roth ira and 1xHSA that's $83,600 of tax advantaged/deferred savings. So we save about $7k/mo tax adv/def, live off of about $6k/mo with ~85k/mo post tax income for a 93-94% savings rate. About $100k is kept in emergency fund/discretionary spending.

We're just saving it all until we figure out how to spend the new income.
Just so I understand.

$7K/mo for retirement/major purchases
$6K/mo is your expenses
You make $85K/mo post tax?!
Yes, my startup went into overdrive last year and frankly, we don't know what to do with the increase in income. It doesn't feel real to us so it goes straight to VTSAX/VTMGX. Our savings rate went from 40% to 90%+ since we made no adjustments to our lifestyle. We will pay like $600k in taxes this year... :shock:
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AerialWombat
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Re: What is your Target Savings?

Post by AerialWombat »

I don’t budget, and don’t really track. My after-tax savings rate is well over 80%. Around the 5th of each month, give or take a few days, after all the mortgages are paid, I sweep whatever is left over into HYS and Vanguard brokerage.
johnegonpdx
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Re: What is your Target Savings?

Post by johnegonpdx »

Turns our we are saving about 30% of our total income. We have maxed out our contributions to all available tax advantaged investments. On-track to build a healthy cash reserve in case things go really sideways. Once we have our liquid / low volatility coffers reasonably full (I'm trying make my family financially bulletproof for at least 3 years), I'll keep pushing our excess savings into taxable stock index funds.
Onlineid3089
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Re: What is your Target Savings?

Post by Onlineid3089 »

dissonance wrote: Sun Oct 04, 2020 11:12 am
socialforums2019 wrote: Sun Oct 04, 2020 8:02 am
dissonance wrote: Sat Oct 03, 2020 8:32 pm After maxing out 2x 401k, 1x 457, 1x 529, 2x backdoor roth ira and 1xHSA that's $83,600 of tax advantaged/deferred savings. So we save about $7k/mo tax adv/def, live off of about $6k/mo with ~85k/mo post tax income for a 93-94% savings rate. About $100k is kept in emergency fund/discretionary spending.

We're just saving it all until we figure out how to spend the new income.
Just so I understand.

$7K/mo for retirement/major purchases
$6K/mo is your expenses
You make $85K/mo post tax?!
Yes, my startup went into overdrive last year and frankly, we don't know what to do with the increase in income. It doesn't feel real to us so it goes straight to VTSAX/VTMGX. Our savings rate went from 40% to 90%+ since we made no adjustments to our lifestyle. We will pay like $600k in taxes this year... :shock:
And yet there are people out there who say the rich don't pay their 'fair share'. Congrats on your success :beer
azianbob
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Re: What is your Target Savings?

Post by azianbob »

Yeah, I personally don't believe in savings targets. The goal should be to minimalize your expenses as much as possible, which will increase your savings as much as possible. Why restrict yourself to say 10K of savings per year and blow an extra 5K you could of saved?

As other say, keep a liquid amount that's about a year's worth of expenses in a HY savings account or CD, then the rest invest. Each month after you pay all your bills any money left over, invest that.
bedon
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Re: What is your Target Savings?

Post by bedon »

azianbob wrote: Tue Oct 06, 2020 12:08 am Yeah, I personally don't believe in savings targets. The goal should be to minimalize your expenses as much as possible, which will increase your savings as much as possible.
I have a similar approach - I focus on minimising spending and having max target spend per month/year and everything else goes into saving/investing.
smitcat
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Re: What is your Target Savings?

Post by smitcat »

bedon wrote: Tue Oct 06, 2020 12:17 am
azianbob wrote: Tue Oct 06, 2020 12:08 am Yeah, I personally don't believe in savings targets. The goal should be to minimalize your expenses as much as possible, which will increase your savings as much as possible.
I have a similar approach - I focus on minimising spending and having max target spend per month/year and everything else goes into saving/investing.
We always focused on balance...
- do not spend all for today
- do not save all for tommorrow
Minimizing expenses at either end of your plan would not seem to be wise as there would be unecessary sacrifice.
bedon
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Re: What is your Target Savings?

Post by bedon »

smitcat wrote: Tue Oct 06, 2020 7:37 am We always focused on balance...
- do not spend all for today
- do not save all for tommorrow
Minimizing expenses at either end of your plan would not seem to be wise as there would be unecessary sacrifice.
I agree on the balance thing... I'm not saying we don't spend on anything or that we never spend over the target... it just that I find it much more practical to focus on having spendings targets than having savings target. As our income rises over time or I get some additional funds, the default action is to put it into savings (since the savings rate is "free floating" :) ) instead of spending it.
smitcat
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Re: What is your Target Savings?

Post by smitcat »

bedon wrote: Wed Oct 07, 2020 12:38 am
smitcat wrote: Tue Oct 06, 2020 7:37 am We always focused on balance...
- do not spend all for today
- do not save all for tommorrow
Minimizing expenses at either end of your plan would not seem to be wise as there would be unecessary sacrifice.
I agree on the balance thing... I'm not saying we don't spend on anything or that we never spend over the target... it just that I find it much more practical to focus on having spendings targets than having savings target. As our income rises over time or I get some additional funds, the default action is to put it into savings (since the savings rate is "free floating" :) ) instead of spending it.
"it just that I find it much more practical to focus on having spendings targets than having savings target."
At various points in our life that would have worked very well. At other times when income went down or when spending spiked it would have been less effective. More or less by mistake we found that a net savings rate target based on expenses had the most value as a metric.
YMMV
bltn
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Re: What is your Target Savings?

Post by bltn »

dissonance wrote: Sun Oct 04, 2020 11:12 am
socialforums2019 wrote: Sun Oct 04, 2020 8:02 am
dissonance wrote: Sat Oct 03, 2020 8:32 pm After maxing out 2x 401k, 1x 457, 1x 529, 2x backdoor roth ira and 1xHSA that's $83,600 of tax advantaged/deferred savings. So we save about $7k/mo tax adv/def, live off of about $6k/mo with ~85k/mo post tax income for a 93-94% savings rate. About $100k is kept in emergency fund/discretionary spending.

We're just saving it all until we figure out how to spend the new income.
Just so I understand.

$7K/mo for retirement/major purchases
$6K/mo is your expenses
You make $85K/mo post tax?!
Yes, my startup went into overdrive last year and frankly, we don't know what to do with the increase in income. It doesn't feel real to us so it goes straight to VTSAX/VTMGX. Our savings rate went from 40% to 90%+ since we made no adjustments to our lifestyle. We will pay like $600k in taxes this year... :shock:
600,000 in taxes! I would call that overdrive.
Congratulations on the success of your business, and on your discipline to maintain a relatively modest lifestyle.
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willthrill81
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Re: What is your Target Savings?

Post by willthrill81 »

Our target is to save 50% of our gross household income, which is easy to determine mathematically. Thankfully, we have enough tax-advantaged space to allow us to do that fully (i.e. no taxable accounts are needed).
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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vitaflo
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Re: What is your Target Savings?

Post by vitaflo »

Target is 50%. Actual over the past decade is 44%. Close enough.
azianbob
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Re: What is your Target Savings?

Post by azianbob »

bedon wrote: Wed Oct 07, 2020 12:38 am
smitcat wrote: Tue Oct 06, 2020 7:37 am We always focused on balance...
- do not spend all for today
- do not save all for tommorrow
Minimizing expenses at either end of your plan would not seem to be wise as there would be unecessary sacrifice.
I agree on the balance thing... I'm not saying we don't spend on anything or that we never spend over the target... it just that I find it much more practical to focus on having spendings targets than having savings target. As our income rises over time or I get some additional funds, the default action is to put it into savings (since the savings rate is "free floating" :) ) instead of spending it.
Yes balance is good. We do not skimp on important stuff like medical, organic high quality food, etc. We will treat ourselves to random stuff we need and/or improves our quality of life (tech upgrades, quality clothes if old one is no longer good, nice vacation (pre-covid), etc) but we just try to live a simple life where we can (no need to have a new luxury car every 3 years, constantly buy designer clothes when you have plenty good clothes to wear, upgrade to the newest tech even if the one you have works fine, eat out a lot in fancy places, etc).

I'm not advocating you eat rice beans and instant noodles and wear the same shirt everyday for 20 years to maximize lower expenses.
mc2
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Re: What is your Target Savings?

Post by mc2 »

livesoft wrote: Sun Oct 04, 2020 8:10 am We don't have any number and don't allocate or put a job to it. Anything leftover goes into our joint taxable investment account and gets invested in broad market index funds. If our asset allocation gets imbalanced, then we rebalance in a tax-deferred account.
That's what I do. I also have a decent cash buffer for those somewhat regular, larger household items such as insurance, car tires, appliance, roof, etc.
CoAndy
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Re: What is your Target Savings?

Post by CoAndy »

401(k)-----$19,000
457--------$19,000
FSA--------$2,000
Pension---$2,500 (approximately)

These are my goals for the upcoming year. Whether I hit them or not is another story. This will sure help reduce my tax bite.
getthatmarshmallow
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Re: What is your Target Savings?

Post by getthatmarshmallow »

Don't really have one. We max (ish) a 401k , a 457b, two Roths and an HSA. Those are the only real savings targets for us. Beyond that, I typically set aside a set amount per month for 'lumpy' predictable expenses (taxes, insurance mostly), pay extra toward mortgage principle, and contribute toward the kids' 529s.
airborne
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Re: What is your Target Savings?

Post by airborne »

bedon wrote: Tue Oct 06, 2020 12:17 am
azianbob wrote: Tue Oct 06, 2020 12:08 am Yeah, I personally don't believe in savings targets. The goal should be to minimalize your expenses as much as possible, which will increase your savings as much as possible.
I have a similar approach - I focus on minimising spending and having max target spend per month/year and everything else goes into saving/investing.
Similar here too. I don't have any savings targets on a percentage basis. I have savings targets of dollar amounts for certain accounts or goals paired with a spending budget. Seeing the account balances rise toward their goal amounts (or for retirement accounts, toward their annual max) helps me keep the spending down.

Percentages of income don't really excite or motivate me, personally. The best method for you is whatever motivates you to achieve your goals.
sailaway
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Re: What is your Target Savings?

Post by sailaway »

Our target is to live, pay taxes and workplace deductions from salary and bonus, then save RSUs and ESPP (also a workplace deduction, but then this isn't a science) in brokerage. In reality, this only happens in minimalist years. We have plans for spending roughly equal to ESPP for next year. Whether we actually cash out ESPP or RSUs just depends on the timing.
rich126
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Re: What is your Target Savings?

Post by rich126 »

Never had one. Never worried about it.

My only rules were -
Make sure I max out the matching money in the 401K (they were still in the early stages when I began working)
Never take money out of retirement funds.
Have money deducted from your paycheck to go directly into investments so there is no temptation to spend it

Other than that I never had a budget, never a savings plan, never an investment plan, etc. Probably the only (typical?) mistake I'd make would be to move money out of the market at times. And honestly never ran any kind of estimates for what I would have at retirement until I was in my 50s.

It seemed like I had a 6th sense that when I seemed to spend more money, then I knew to dial it down for a while but my expenditures were never in the big dollar items (cars, jewelry, etc.) although I did have a nice home (usually limited to the 3X income rule).

I also have to admit that I never expected to live long enough to retire. Not sure why, and yeah it is a bit morbid, but initially I thought I'd never see 40 and then retirement seemed unlikely. Not sure why (no pre-retirement deaths in the family). My parents didn't have a good retirement because my mother got sick just before my father retired and they were limited by her condition which was (sadly) on a one way path for the next decade.

I wanted to enjoy life while saving some for retirement. Even if it costs me a couple of years of early retirement, I'm glad for those life experiences at the younger ages when I could enjoy it, especially considering my view of the world now. And it hasn't hurt me too much since I'll likely retire at 60 and probably could do so now if I felt more confident in the market.

Obviously some people have little self control whether it is spending every dollar in the bank, or maxing out credit cards, or buying the car/house they really can't afford but I never was interested in keeping up or following other people whether it was money related, alcohol, drugs, etc. I did my own thing.
austin757
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Re: What is your Target Savings?

Post by austin757 »

For a younger accumulator, is a taxable account even necessary? Do you think they could save enough in Roth and 401(k) to have enough at a normal retirement age? No plans to FIRE
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Makaveli
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Re: What is your Target Savings?

Post by Makaveli »

austin757 wrote: Thu Oct 08, 2020 8:12 pm For a younger accumulator, is a taxable account even necessary? Do you think they could save enough in Roth and 401(k) to have enough at a normal retirement age? No plans to FIRE
Depends on what kind of lifestyle you want to live in retirement. For most people, Roth IRA + 401(k) + Social Security should be more than enough.
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Re: What is your Target Savings?

Post by abuss368 »

I look fro ways to increase every year. Whether that involves an increase in income, decrease in expenses, or some combination of.

I have found simplifying BOTH our financial and non-financial lives has achieved savings.
John C. Bogle: “Simplicity is the master key to financial success."
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wander
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Re: What is your Target Savings?

Post by wander »

My target is 25 times expenses. When I reach that point, I don't save anymore.
MathIsMyWayr
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Re: What is your Target Savings?

Post by MathIsMyWayr »

wander wrote: Thu Oct 08, 2020 10:26 pm My target is 25 times expenses. When I reach that point, I don't save anymore.
Yes, if the expenses is written in stone. If you are that good in prediction, you will make a good career out of it.
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wander
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Re: What is your Target Savings?

Post by wander »

MathIsMyWayr wrote: Thu Oct 08, 2020 10:33 pm
wander wrote: Thu Oct 08, 2020 10:26 pm My target is 25 times expenses. When I reach that point, I don't save anymore.
Yes, if the expenses is written in stone. If you are that good in prediction, you will make a good career out of it.
It's not rocket science. You can calculate your expenses and set your target.
pasadena
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Re: What is your Target Savings?

Post by pasadena »

My real, target is to max out my mega backdoor Roth (after maxing out my 401(k), classic backdoor Roth and HSA). Beyond that, I try to set an optimistic goal at the beginning of the year.

If all goes according to plan, this year I will have saved ~48k between mega backdoor, EF and taxable. OTOH I took out a car loan after spending $5,500 for a downpayment.

Expenses budgeted at $50,400 ($4,200 a month), including necessities and regular "wants". I spent a lot more than that in the first months of the pandemic, tbh.
H-Town
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Joined: Sun Feb 26, 2017 2:08 pm

Re: What is your Target Savings?

Post by H-Town »

socialforums2019 wrote: Sat Oct 03, 2020 7:14 pm Want to know how much is "left over" to be allocated to taxable, overall savings, emergency purchases, etc.

Assumptions:

You max out all retirement accounts (401K, Roth/Backdoor IRA, HSA if applicable)
You have paid/allocated all of your Necessities and Wants

For example: $10K post tax income, $5K Necessities, $2K Wants, $3K "savings" which is then allocated to additional retirement, college tuition and general savings buffer.

What is your savings number and how do you allocate/put a job to it?
Let's put it this way: however much your spouse and kids didn't spend, you save.
cogito
Posts: 229
Joined: Fri Nov 30, 2018 2:12 am

Re: What is your Target Savings?

Post by cogito »

I have a very silly mental accounting practice that I employ. Every year I would like my net worth to go up by 100k, and then I feel like I am making genuine progress. Started 5 years ago at a net worth of 0, and so far so good. In the interim, have had two kids, bought two cars, bought a house, changed jobs... so life happens, but at least we aren't moving backwards.
KlangFool
Posts: 19088
Joined: Sat Oct 11, 2008 12:35 pm

Re: What is your Target Savings?

Post by KlangFool »

MathIsMyWayr wrote: Thu Oct 08, 2020 10:33 pm
wander wrote: Thu Oct 08, 2020 10:26 pm My target is 25 times expenses. When I reach that point, I don't save anymore.
Yes, if the expenses is written in stone. If you are that good in prediction, you will make a good career out of it.
MathIsMyWayr,

If you use the "Pay Yourself First" saving method, the expense is written in stone. You cannot spend the money that you do not have.

<<If you are that good in prediction, >>


It is not a prediction in that case.


It is very simple.


Some people save first and spend later. Meanwhile, some others spend first and save later. Folks that spend first and save later do not believe that their expense can be fixed and controlled. And, in their case, it is true for them because of their belief.

KlangFool
Soon2BXProgrammer
Posts: 1629
Joined: Mon Nov 24, 2014 11:30 pm

Re: What is your Target Savings?

Post by Soon2BXProgrammer »

socialforums2019 wrote: Sat Oct 03, 2020 7:14 pm Want to know how much is "left over" to be allocated to taxable, overall savings, emergency purchases, etc.

Assumptions:

You max out all retirement accounts (401K, Roth/Backdoor IRA, HSA if applicable)
You have paid/allocated all of your Necessities and Wants

For example: $10K post tax income, $5K Necessities, $2K Wants, $3K "savings" which is then allocated to additional retirement, college tuition and general savings buffer.

What is your savings number and how do you allocate/put a job to it?
I follow an "anti budget" strategy.

Rule 1: Set a target amount in checking that gives for multiple months of spending as an "error budget".
Rule 2: Decide any ear marked spending/saving that you want to do. (for us, right now that is nothing, but previously, we would have certain things pulled out of the checking account on payday such as 529 accounts) / Decide how much of your paycheck you want to show up in checking (if you have variable income, one should siphon off some to a savings account, to use as a buffer when the paychecks are "short") / if you are someone who gets overtime, i am a fan of siphoning off those dollars to something else as well, so that they can't go to "lifestyle" expenses
Rule 3: Spend
Rule 4: Analyze: see if you are trending over your target amount or under once a month and make corrections.

(Inside Rule 4 if you have surplus, you can decide how to deploy that surplus)
Soon2BXProgrammer
Posts: 1629
Joined: Mon Nov 24, 2014 11:30 pm

Re: What is your Target Savings?

Post by Soon2BXProgrammer »

cogito wrote: Fri Oct 09, 2020 12:33 am I have a very silly mental accounting practice that I employ. Every year I would like my net worth to go up by 100k, and then I feel like I am making genuine progress. Started 5 years ago at a net worth of 0, and so far so good. In the interim, have had two kids, bought two cars, bought a house, changed jobs... so life happens, but at least we aren't moving backwards.
this is very hard when you have sizable assets and investments take a bath
Traveler
Posts: 849
Joined: Fri Aug 30, 2013 9:07 pm

Re: What is your Target Savings?

Post by Traveler »

I save about 50% of gross income. There isn't a lot of rhyme or reason to that number, just what I have been able to do over the last 5 or so years so it has more or less become the norm. I want for very little (except enough savings to retire sooner rather than later) so life is good.
smitcat
Posts: 6994
Joined: Mon Nov 07, 2016 10:51 am

Re: What is your Target Savings?

Post by smitcat »

Soon2BXProgrammer wrote: Fri Oct 09, 2020 7:56 am
cogito wrote: Fri Oct 09, 2020 12:33 am I have a very silly mental accounting practice that I employ. Every year I would like my net worth to go up by 100k, and then I feel like I am making genuine progress. Started 5 years ago at a net worth of 0, and so far so good. In the interim, have had two kids, bought two cars, bought a house, changed jobs... so life happens, but at least we aren't moving backwards.
this is very hard when you have sizable assets and investments take a bath
Yes - agreed 100%.
smitcat
Posts: 6994
Joined: Mon Nov 07, 2016 10:51 am

Re: What is your Target Savings?

Post by smitcat »

Traveler wrote: Fri Oct 09, 2020 11:41 am I save about 50% of gross income. There isn't a lot of rhyme or reason to that number, just what I have been able to do over the last 5 or so years so it has more or less become the norm. I want for very little (except enough savings to retire sooner rather than later) so life is good.
"I save about 50% of gross income."
That only works at specific income levels.
I have found that a metric that utilizes expenses (thank you KlangFool) to be much more valuable.
It also works more unbiversally with varied incomes and cicumstances.
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