What should the savings be for an average professional

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Pajamas
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Re: What should the savings be for an average professional

Post by Pajamas » Mon Aug 28, 2017 3:27 pm

wrongfunds wrote:
Mon Aug 28, 2017 1:55 pm

Am I the only one who believes that numbers of zeros do not match with the intention of the person providing them? Otherwise, this would be very odd way of writing $45Millions!

If I am right about incorrect number of zeros, it is amazing that even on this forum this type of error goes unchecked. It is doubly ironic that we were discussing how engineers are good with numbers :oops:
How about 450 lakh?

https://en.wikipedia.org/wiki/Lakh

Or with Indian use of separators, 4,50,00,000?

https://en.wikipedia.org/wiki/Indian_nu ... separators

wrongfunds
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Re: What should the savings be for an average professional

Post by wrongfunds » Mon Aug 28, 2017 4:55 pm

I know but do you know that amount is not even equal to a million dollar which is like chump change for all of us BHs :-)

Engineer250
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Re: What should the savings be for an average professional

Post by Engineer250 » Mon Aug 28, 2017 5:42 pm

Jags4186 wrote:
Mon Aug 28, 2017 1:38 pm
skor99 wrote:
Wed Aug 23, 2017 7:32 pm
I was talking to a friend who am I open with about money topics and issues. We got talking about how much an average earning professional like an engineer or accountant should have saved after working for 20 years. To keep things simple, we just talked about a single earner family.
Obviously there are many factors at play such as number of kids and COL etc. But as a ballpark, I was of the opinion that a person starting out say in the mid 50s salary range right after college and working their way upto say 120K per year with two kids in a MCOL area with a 30 yr mortgage on a 300 K house ( all average numbers) should have around $450K - $500K saved including their retirement accounts ( not including home equity). He laughed at the suggestion and said 150K-200K is more like it in the real world and even lesser for financially ignorant people. He hinted that he falls in roughly the same pattern and is not close to 500K. I know for sure that he is sensible with his money, so his lower number is not due to excessive spending.
I understand the number can vary widely, but as a general guideline, is 400K too much in the real non boglehead world for an average middle aged professional ?
Well I did a little playing around in excel and it looks like the average starting salary for a Chemical Engineer graduating form Cornell in 1997 was $42,500. That was the quickest number I was able to find by googling...but let's go with it. So $42,5000 with 6% raises for 20 years puts that person at $128,XXX in 2017. If that person saved 15% of their salary every year into a 401k and got a 3% employer match, and just threw the money into the S&P 500, they should have $552,000 as of December 31 2016.

So I would posit that your friend is not that great of a saver.
6%? Where does this guy work?

The problem is salary boosts work like most industries. Maybe you get 2-3% in this post recession economy. Maybe even your pay was frozen for a few years (depends on what industry obviously). Maybe you make manager or make a jump to get a 10% raise somewhere. But you get that all at once, not like you've been benefitting from gradual increases for several years. And you still only have so much space in your retirement accounts once you get to the point you can afford to max them.
Where the tides of fortune take us, no man can know.

chinto
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Re: What should the savings be for an average professional

Post by chinto » Mon Aug 28, 2017 6:46 pm

I wonder if I am the only person who finds these threads odd. I have always walked the road less traveled, but these threads seem very strange to me. It seems to me, people have likes and dislikes and ways they simply wish to live. To that end you develop a lifestyle and perhaps you have aspirations of a different lifestyle. Your income, in that regard, simply either means you can live your chosen lifestyle or you cannot. It seems to me anything above your preferred lifestyle is simply something you invest so that you can one day retire to your chosen lifestyle. Hence I am not sure what the average professional does is relevant. In other words who cares what someone else does? I know I never gave a furry-kitten what my alleged peers did and to this day I do not. A thread like this makes me think the mainstream population gets some sort of innate joy from conspicuous consumption.

My advice, determine your lifestyle, figure out how much it costs to live that lifestyle, make an approximation of what it would take in terms of a lump sum at 45, 50, 55, 60, 65, 70 years of age to retire. Then simply invest the difference between your income and your lifestyle expenses. When you hit one of your age related lump sums, you can pause and decide if you wish to retire at that point in time.

Which is to say, I would ignore the noise of what the average person would do and do what is relevant to me based on the only relevant character in the equation: me, not the guy next to me.

skor99
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Re: What should the savings be for an average professional

Post by skor99 » Tue Aug 29, 2017 6:48 am

In my view, comparisons are important not so that you can blindly copy somebody but to try to see that you are not falling behind in this competetive world. Yes, You can isolate and focus on just yourself, but there are so many factors that you don't control, which would determine your future retirement. To that end, it is always helpful to look at the person next to you and the one next to them to see where you stand. This is not from a point of envy but from a point of information sharing and mutual benefit.

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Re: What should the savings be for an average professional

Post by Jtf6 » Tue Aug 29, 2017 7:30 am

This is a site for super savers, so we are obviously not the norm, and can't expect the average person, professional or not, to save as much as we do. I save about 30% of my income, which is way more than most people I know. My sister is not fortunate enough to make as much as I do, but I was still able to convince her to contribute 10% of her income to her 401k. If in 20 years, she can have $100-200k saved, it would put her light years ahead of most people in her income bracket, and in addition to her social security benefits, and the hopeful assistance of at least one of her 4 kids, she should be ok during retirement.

I have colleagues who make $120k now, I'm their late 30s and contribute nothing to their retirement plans. Every year they mention to me that they will eventually start doing what I'm doing, but they never cross that road.

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CyclingDuo
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Re: What should the savings be for an average professional

Post by CyclingDuo » Tue Aug 29, 2017 9:57 am

chinto wrote:
Mon Aug 28, 2017 6:46 pm
My advice, determine your lifestyle, figure out how much it costs to live that lifestyle, make an approximation of what it would take in terms of a lump sum at 45, 50, 55, 60, 65, 70 years of age to retire. Then simply invest the difference between your income and your lifestyle expenses. When you hit one of your age related lump sums, you can pause and decide if you wish to retire at that point in time.

Which is to say, I would ignore the noise of what the average person would do and do what is relevant to me based on the only relevant character in the equation: me, not the guy next to me.
Well stated!

The two of us certainly marched to a different drum beat compared to what I read on some of these threads at BH. We front end loaded our life with world travel and experiences while we were young, healthy, mobile, raising children (while we were between the ages of 25 and 45 where we lived and worked overseas during most of that). We both openly discussed the reality of getting one shot at life, and how to do it in a fiscally sound way that provided a nice balance of experience and fiscal responsibility. Choosing careers that had Summers off certainly created a lot of flexibility for meeting our lifestyle balance/goals. So a lot of bucket list stuff has already been crossed off the list. We managed to save a minimum each year of 15% for retirement through all of that, but were not supersavers for retirement beyond that percentage as we were cash flowing our travels, expenses, and saving for two college educations for our children (mark us as supersavers for that!!). Actually saved a lot more in taxable than tax advantaged all those years living overseas due to the FEIE.

I don't think we even thought about what other people were doing at the time as it didn't pertain to our lifestyle of hiking, skiing the Alps, cycling, driving the minivan all over France, Germany, Italy, Austria, Poland, England, Czech Republic, etc. Taking the kids to operas, plays, ballets, soccer matches, sporting events, amusement parks, museums, and all of the great cities in Europe. Enjoying the foods, languages, and culture of all of it. Ages 55 and 59 now, and we still travel internationally at least every other year, but as expected - it is much more fatiguing now than it was in our 30's and 40's. Personally, we're glad we planned it that way to hit most everything earlier in life when we knew it would be easier physically and mentally. Stamina, energy, sharp minds, multi-lingual abilities all worked much better then than it does now.

Empty nesters as of last week!

Now the drum beat of boosting to supersavers for retirement and to pass on to our heirs has kicked up simply because we can, and the lifestyle has by choice/age slowed down. Saved 25% of income last year for retirement, and slated to save 64% of income for retirement this year by taking advantage of the age 50+ IRS boost of $24K each in the 403b, $6500 each into ROTH IRA's. On top of that, wife has mandatory pension contribution with match, and we are saving in taxable as well.

All that to say - here's to reaching one's goals and not getting caught up in the what the average person does...

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Re: What should the savings be for an average professional

Post by Sandi_k » Tue Aug 29, 2017 1:40 pm

Average professionals don't save 20%+ of their income.

Average professionals don't LBTM.

Average professionals are reflected in the oft-quoted statistics about not being able to come up with $500 in cash for an emergency:

https://www.cbsnews.com/news/most-ameri ... y-expense/

Or having less than $100k for retirement:

http://time.com/money/4258451/retiremen ... gs-survey/

https://www.financialsamurai.com/how-mu ... etirement/

http://www.investopedia.com/articles/pe ... e-2016.asp

I think your friend is trying to make himself feel better. But he's blinded by the thought that it takes ACTION to do better. He's looking for solace, not solutions. On the other hand, he's right. ;)

skor99
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Re: What should the savings be for an average professional

Post by skor99 » Tue Aug 29, 2017 4:21 pm

Sandi_k wrote:
Tue Aug 29, 2017 1:40 pm
Average professionals don't save 20%+ of their income.

Average professionals don't LBTM.

Average professionals are reflected in the oft-quoted statistics about not being able to come up with $500 in cash for an emergency:

https://www.cbsnews.com/news/most-ameri ... y-expense/

Or having less than $100k for retirement:

http://time.com/money/4258451/retiremen ... gs-survey/

https://www.financialsamurai.com/how-mu ... etirement/

http://www.investopedia.com/articles/pe ... e-2016.asp

I think your friend is trying to make himself feel better. But he's blinded by the thought that it takes ACTION to do better. He's looking for solace, not solutions. On the other hand, he's right. ;)

I think you are talking about average people. They are the ones who can't come up with $500 in an emergency. Professionals such as engineers, accountants etc. do have better sense and cannot be lumped in the same category as average people.

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Re: What should the savings be for an average professional

Post by Sandi_k » Tue Aug 29, 2017 8:26 pm

skor99 wrote:
Tue Aug 29, 2017 4:21 pm
Sandi_k wrote:
Tue Aug 29, 2017 1:40 pm
Average professionals don't save 20%+ of their income.

Average professionals don't LBTM.

Average professionals are reflected in the oft-quoted statistics about not being able to come up with $500 in cash for an emergency:

https://www.cbsnews.com/news/most-ameri ... y-expense/

Or having less than $100k for retirement:

http://time.com/money/4258451/retiremen ... gs-survey/

https://www.financialsamurai.com/how-mu ... etirement/

http://www.investopedia.com/articles/pe ... e-2016.asp

I think your friend is trying to make himself feel better. But he's blinded by the thought that it takes ACTION to do better. He's looking for solace, not solutions. On the other hand, he's right. ;)

I think you are talking about average people. They are the ones who can't come up with $500 in an emergency. Professionals such as engineers, accountants etc. do have better sense and cannot be lumped in the same category as average people.
I disagree. I know many engineers, medical professionals and university faculty who are smart - but not action-oriented. They think being smart means that nothing catastrophic will happen to them.

We had a death in the extended family last month. Two members own(ed) a business together. One did the books, the other operations. The bookkeeper/contracts person died suddenly at 59. The operations person doesn't even have passwords for the master accounts. No clue how they're gonna do taxes, payroll, etc.

You can be above-average in your profession; doesn't mean you're above average when it comes to financial planning.

chinto
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Re: What should the savings be for an average professional

Post by chinto » Tue Aug 29, 2017 9:34 pm

CyclingDuo wrote:
Tue Aug 29, 2017 9:57 am
Well stated!

The two of us certainly marched to a different drum beat compared to what I read on some of these threads at BH. We front end loaded our life with world travel and experiences while we were young, healthy, mobile, raising children (while we were between the ages of 25 and 45 where we lived and worked overseas during most of that). We both openly discussed the reality of getting one shot at life, and how to do it in a fiscally sound way that provided a nice balance of experience and fiscal responsibility. Choosing careers that had Summers off certainly created a lot of flexibility for meeting our lifestyle balance/goals. So a lot of bucket list stuff has already been crossed off the list. We managed to save a minimum each year of 15% for retirement through all of that, but were not supersavers for retirement beyond that percentage as we were cash flowing our travels, expenses, and saving for two college educations for our children (mark us as supersavers for that!!). Actually saved a lot more in taxable than tax advantaged all those years living overseas due to the FEIE.

I don't think we even thought about what other people were doing at the time as it didn't pertain to our lifestyle of hiking, skiing the Alps, cycling, driving the minivan all over France, Germany, Italy, Austria, Poland, England, Czech Republic, etc. Taking the kids to operas, plays, ballets, soccer matches, sporting events, amusement parks, museums, and all of the great cities in Europe. Enjoying the foods, languages, and culture of all of it. Ages 55 and 59 now, and we still travel internationally at least every other year, but as expected - it is much more fatiguing now than it was in our 30's and 40's. Personally, we're glad we planned it that way to hit most everything earlier in life when we knew it would be easier physically and mentally. Stamina, energy, sharp minds, multi-lingual abilities all worked much better then than it does now.

Empty nesters as of last week!

Now the drum beat of boosting to supersavers for retirement and to pass on to our heirs has kicked up simply because we can, and the lifestyle has by choice/age slowed down. Saved 25% of income last year for retirement, and slated to save 64% of income for retirement this year by taking advantage of the age 50+ IRS boost of $24K each in the 403b, $6500 each into ROTH IRA's. On top of that, wife has mandatory pension contribution with match, and we are saving in taxable as well.

All that to say - here's to reaching one's goals and not getting caught up in the what the average person does...
I just love this post; it made me happy just reading it! Re: CyclingDuo - is that bicycle, motorcycle?

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CyclingDuo
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Re: What should the savings be for an average professional

Post by CyclingDuo » Tue Aug 29, 2017 10:40 pm

chinto wrote:
Tue Aug 29, 2017 9:34 pm
I just love this post; it made me happy just reading it! Re: CyclingDuo - is that bicycle, motorcycle?
Bicycles, of course. We ride road bikes together. In addition to our regular rides throughout a routine week, we usually try to throw in at least one week of a cycling trip each Summer (did 50 - 80 miles a day for a week in the Chianti region in Tuscany last Summer, and the same in Colorado/Utah the previous year), but this year remained home due to moving our children to their respective locations on either coast. I race mountain bikes 10 - 15 weekends a year for fun, but started to have trouble keeping up with the 40 and under crowd the past couple of years. Heck, even the 50 and under crowd.

Wife has her 60th next year, so might have to start planning some sort of a cycling trip to honor that milestone with her.

:sharebeer

chinto
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Re: What should the savings be for an average professional

Post by chinto » Tue Aug 29, 2017 11:16 pm

CyclingDuo wrote:
Tue Aug 29, 2017 10:40 pm
chinto wrote:
Tue Aug 29, 2017 9:34 pm
I just love this post; it made me happy just reading it! Re: CyclingDuo - is that bicycle, motorcycle?
Bicycles, of course. We ride road bikes together. In addition to our regular rides throughout a routine week, we usually try to throw in at least one week of a cycling trip each Summer (did 50 - 80 miles a day for a week in the Chianti region in Tuscany last Summer, and the same in Colorado/Utah the previous year), but this year remained home due to moving our children to their respective locations on either coast. I race mountain bikes 10 - 15 weekends a year for fun, but started to have trouble keeping up with the 40 and under crowd the past couple of years. Heck, even the 50 and under crowd.

Wife has her 60th next year, so might have to start planning some sort of a cycling trip to honor that milestone with her.

:sharebeer
Awesome. I have not cycled yet this year...but I dream. When I retire one of my first planned junkets is to rebuild my 1982 Puch Odyssey and ride the Natchez Trace. If that goes well, I'll try IL to CA again(that ol' Puch and I did that 6-8 times back in the 80s). And then, a distant maybe, is coast to coast. It is awesome you have your woman to experience it with; I'll be, regretfully, soloing.

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randomizer
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Re: What should the savings be for an average professional

Post by randomizer » Tue Aug 29, 2017 11:22 pm

skor99 wrote:
Wed Aug 23, 2017 7:32 pm
What should the savings be for an average professional
I know this isn't the question you were asking (you were asking for dollar amounts), but my favorite answer for this kind of thing is "as much as you can". Worst case scenario: it's not enough and you're screwed anyway. Best case: you get to retire early.

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CyclingDuo
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Re: What should the savings be for an average professional

Post by CyclingDuo » Wed Aug 30, 2017 7:16 am

chinto wrote:
Tue Aug 29, 2017 11:16 pm
Awesome. I have not cycled yet this year...but I dream. When I retire one of my first planned junkets is to rebuild my 1982 Puch Odyssey and ride the Natchez Trace. If that goes well, I'll try IL to CA again(that ol' Puch and I did that 6-8 times back in the 80s). And then, a distant maybe, is coast to coast. It is awesome you have your woman to experience it with; I'll be, regretfully, soloing.
Talk about not following the crowd via owning an Austrian made Puch!!! French fit to boot. :sharebeer

Our suggestion: sell the Puch (there's a demand for them out there somewhere), invest in a sub 20 pound carbon touring bike from Specialized or Trek or Giant and start riding this weekend. No need to dream. Just get out there and ride! That's not to be taken as a follow the crowd suggestion by buying a big box bike company carbon gadget, but it's taken to be a life is passing you by if you are not out there riding right now and just dreaming about it suggestion. :mrgreen:

If we used a formula such as 50/30/20 (50% for needs/30% for wants/20% for savings), we are way skewed from the norm thanks to low cost transportation, low cost of our housing as we don't live in a HCOL area, but certainly that allows the percentages to adjust to budget for our outdoor cycling adventures and gear - as well as start socking away a much higher percentage to savings in our final decade or so of our careers.
Last edited by CyclingDuo on Wed Aug 30, 2017 7:25 am, edited 1 time in total.

KlangFool
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Re: What should the savings be for an average professional

Post by KlangFool » Wed Aug 30, 2017 7:25 am

CyclingDuo wrote:
Tue Aug 29, 2017 10:40 pm
chinto wrote:
Tue Aug 29, 2017 9:34 pm
I just love this post; it made me happy just reading it! Re: CyclingDuo - is that bicycle, motorcycle?
Bicycles, of course. We ride road bikes together. In addition to our regular rides throughout a routine week, we usually try to throw in at least one week of a cycling trip each Summer (did 50 - 80 miles a day for a week in the Chianti region in Tuscany last Summer, and the same in Colorado/Utah the previous year), but this year remained home due to moving our children to their respective locations on either coast. I race mountain bikes 10 - 15 weekends a year for fun, but started to have trouble keeping up with the 40 and under crowd the past couple of years. Heck, even the 50 and under crowd.

Wife has her 60th next year, so might have to start planning some sort of a cycling trip to honor that milestone with her.

:sharebeer
CyclingDuo,

https://tyrellbikesint.ning.com/the-fx

My older sister early retired at 49 years old. She traveled everywhere with her double fold bike. She took her bike along on train, bus, and plane. She flew into countries like Cambodia and Australia and cycle.

I am looking into buying a folding electric bike.

KlangFool

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CyclingDuo
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Re: What should the savings be for an average professional

Post by CyclingDuo » Wed Aug 30, 2017 7:33 am

KlangFool wrote:
Wed Aug 30, 2017 7:25 am
CyclingDuo,

https://tyrellbikesint.ning.com/the-fx

My older sister early retired at 49 years old. She traveled everywhere with her double fold bike. She took her bike along on train, bus, and plane. She flew into countries like Cambodia and Australia and cycle.

I am looking into buying a folding electric bike.

KlangFool
If it pedals, it's all good by us. Although the type of riding we do requires the large wheels (lots of mountain ascents/descents) as our preference. We've found in all of our travels that it is easier to simply rent bikes overseas. Flying with each bike overseas and what airlines charge us for Heavy/Oversize luggage (usually $300 - $400 per bike for the round trip), not to mention how it limits your mobility getting to and from the airport, and to your hotel with any kind of transportation a hassle. So we just arrange road bikes in the appropriate sizes for us months in advance at our destination. It's usually the least expensive part of our trips. I did take my bike to Germany in 2015 as I was working there for 4 months, so it was more cost effective to bring my own in spite of the schlep involved...

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Re: What should the savings be for an average professional

Post by Grt2bOutdoors » Wed Aug 30, 2017 7:34 am

Is this a thread about biking or savings? :oops:
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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DaftInvestor
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Re: What should the savings be for an average professional

Post by DaftInvestor » Wed Aug 30, 2017 7:43 am

randomizer wrote:
Tue Aug 29, 2017 11:22 pm
skor99 wrote:
Wed Aug 23, 2017 7:32 pm
What should the savings be for an average professional
I know this isn't the question you were asking (you were asking for dollar amounts), but my favorite answer for this kind of thing is "as much as you can". Worst case scenario: it's not enough and you're screwed anyway. Best case: you get to retire early.
There's actually a third scenario: you end up saving "as much as you can" at the expense of enjoying life. This probably isn't the extreme you envisioned with your statement but some people do it. Life is short (and can be shorter for some) and if you live your life doing nothing but saving you might regret it later in life. This could be a worst case scenario: you end up in your death bed earlier in life than expected with multiple- millions in the bank wishing you had taken the kids to Disney or Europe - or wishing you didn't spend so many hours working and sacrificing time with family to save "as much as you can".
That's why I budget and plan. I want a comfortable retirement but I don't want to unnecessarily sacrifice living my life along the way to get there.

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Re: What should the savings be for an average professional

Post by skor99 » Wed Aug 30, 2017 7:46 am

CyclingDuo wrote:
Tue Aug 29, 2017 9:57 am
chinto wrote:
Mon Aug 28, 2017 6:46 pm
My advice, determine your lifestyle, figure out how much it costs to live that lifestyle, make an approximation of what it would take in terms of a lump sum at 45, 50, 55, 60, 65, 70 years of age to retire. Then simply invest the difference between your income and your lifestyle expenses. When you hit one of your age related lump sums, you can pause and decide if you wish to retire at that point in time.

Which is to say, I would ignore the noise of what the average person would do and do what is relevant to me based on the only relevant character in the equation: me, not the guy next to me.
Well stated!

The two of us certainly marched to a different drum beat compared to what I read on some of these threads at BH. We front end loaded our life with world travel and experiences while we were young, healthy, mobile, raising children (while we were between the ages of 25 and 45 where we lived and worked overseas during most of that). We both openly discussed the reality of getting one shot at life, and how to do it in a fiscally sound way that provided a nice balance of experience and fiscal responsibility. Choosing careers that had Summers off certainly created a lot of flexibility for meeting our lifestyle balance/goals. So a lot of bucket list stuff has already been crossed off the list. We managed to save a minimum each year of 15% for retirement through all of that, but were not supersavers for retirement beyond that percentage as we were cash flowing our travels, expenses, and saving for two college educations for our children (mark us as supersavers for that!!). Actually saved a lot more in taxable than tax advantaged all those years living overseas due to the FEIE.

I don't think we even thought about what other people were doing at the time as it didn't pertain to our lifestyle of hiking, skiing the Alps, cycling, driving the minivan all over France, Germany, Italy, Austria, Poland, England, Czech Republic, etc. Taking the kids to operas, plays, ballets, soccer matches, sporting events, amusement parks, museums, and all of the great cities in Europe. Enjoying the foods, languages, and culture of all of it. Ages 55 and 59 now, and we still travel internationally at least every other year, but as expected - it is much more fatiguing now than it was in our 30's and 40's. Personally, we're glad we planned it that way to hit most everything earlier in life when we knew it would be easier physically and mentally. Stamina, energy, sharp minds, multi-lingual abilities all worked much better then than it does now.

Empty nesters as of last week!

Now the drum beat of boosting to supersavers for retirement and to pass on to our heirs has kicked up simply because we can, and the lifestyle has by choice/age slowed down. Saved 25% of income last year for retirement, and slated to save 64% of income for retirement this year by taking advantage of the age 50+ IRS boost of $24K each in the 403b, $6500 each into ROTH IRA's. On top of that, wife has mandatory pension contribution with match, and we are saving in taxable as well.

All that to say - here's to reaching one's goals and not getting caught up in the what the average person does...
Let me congratulate you on accomplishing all that you wanted in life financially as well as the bucket list stuff before that. But I think you do understand that this is not how it works for the vast majority of the people and they do not have the opportunities that you had . To be reasonably secure in life later on and provide for the kids, most have to slog through Work life right after school. They have to scrimp and save and cannot spend money on bucket list stuff early on. If somebody does that and has trouble later on they would be chastised as being irresponsible or worse.

investingdad
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Re: What should the savings be for an average professional

Post by investingdad » Wed Aug 30, 2017 7:52 am

Here's the simple truth I've learned...the Boglehead philosophy, if executed from an early age, is one of the best ways to insulate oneself from Corporate garbage that surrounds me on a daily basis.

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Re: What should the savings be for an average professional

Post by KlangFool » Wed Aug 30, 2017 8:00 am

Grt2bOutdoors wrote:
Wed Aug 30, 2017 7:34 am
Is this a thread about biking or savings? :oops:
Bike to save. :shock: :happy :D

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Re: What should the savings be for an average professional

Post by CyclingDuo » Wed Aug 30, 2017 8:39 am

skor99 wrote:
Wed Aug 30, 2017 7:46 am
Let me congratulate you on accomplishing all that you wanted in life financially as well as the bucket list stuff before that. But I think you do understand that this is not how it works for the vast majority of the people and they do not have the opportunities that you had . To be reasonably secure in life later on and provide for the kids, most have to slog through Work life right after school. They have to scrimp and save and cannot spend money on bucket list stuff early on. If somebody does that and has trouble later on they would be chastised as being irresponsible or worse.
We are not in disagreement at all, as I am well aware of the numbers within my chosen professions.

I pretty much chimed in as an example that not everyone fits in the same mold with their careers, and their journey taken to accumulate wealth. Believe me, at least in my case, I really put a lot of thought into it during my college days surrounding career choice (went to school to become an accountant, but found my calling in an entirely different discipline). Investigating income, lifestyle, reality of the work season for chosen careers - I became attracted to avenues that had the option of Summers off. That being said, to get there and to that point - I worked every Summer for the first 15 years of my career within my discipline. Not because I had to, but because I took Summer employment to increase income, build my career, and take advantage of working in a variety of locales. At that point, and with two small children, I had the choice to work or not work through the Summer months taking independent contract jobs or not as my main place of employment was closed from the end of June to the beginning of September every year.

There are 3.5 Million public/private educators in the US. There are another 1.7 Million college/university educators in the US. There are 2.1 Million full time professional performing/visual artists in the US. True, that when combined, that only amounts to about 4.5% of the total US work force. Yet, that doesn't mean we don't exist. It doesn't mean that we do not have the choice of some free month(s) in the Summers. It doesn't mean that many of us have not successfully accumulated wealth. It doesn't mean that the time in the Summer we do have off for taking trips, travel, vacations, bucket list stuff is going to bankrupt us or gouge our retirement savings since we saved during the work year for our travels/vacations, along with our pensions, 401k's/403b's, IRA's. The option to live, work, teach in foreign countries is real for all of us as a choice.

In agreement that 4.5% of the work force doesn't equate to the average, but there are many educators and performing artists here at BH based on the posts that I read and participate. We are all "average" in that we had a choice in college to pursue a particular career. That's right - we actually chose our path (as does everyone in college). It just so happens that within our respective careers, and accumulation of wealth - we have the luxury of time to travel, work overseas, see the world without being irresponsible by enjoying ourselves along the way. The job I even had and chose to accept overseas (foreign employee working for the government of Austria) paid me an extra month's salary for Summer vacation, and an extra month's pay for Christmas. So I got 14 months salary for 10 months of work.

We've got one life to live. Making career choices that get you through the journey abound. Whether they are average or not shouldn't alter the course of saving for retirement as I think we are all in agreement about that. I just piped up to speak for the 4.5% that I am aware of who enjoy a tremendous balance of flexibility in our schedules to enjoy an amazing balance of working and living life throughout our careers. The two of us both work in fields revolving around education/academia which allows for a dual income household, who both have plenty of travel time (3 months in the Summer, and three weeks during the Winter holidays) to balance out our lives.

Time is money, right? We enjoy that time...
Last edited by CyclingDuo on Wed Aug 30, 2017 11:38 pm, edited 1 time in total.

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Re: What should the savings be for an average professional

Post by LadyGeek » Wed Aug 30, 2017 9:30 am

With regards to some earlier posts, please stay focused on personal finance. Biking can be discussed in the Personal Consumer Issues forum.
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Re: What should the savings be for an average professional

Post by telemark » Wed Aug 30, 2017 10:03 am

chinto wrote:
Mon Aug 28, 2017 6:46 pm
I wonder if I am the only person who finds these threads odd.
It puzzles me too. Retirement is not a competition.

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Re: What should the savings be for an average professional

Post by emoore » Wed Aug 30, 2017 10:33 am

telemark wrote:
Wed Aug 30, 2017 10:03 am
chinto wrote:
Mon Aug 28, 2017 6:46 pm
I wonder if I am the only person who finds these threads odd.
It puzzles me too. Retirement is not a competition.
That's true that it's not a competition but I think it's only natural to try to gauge how well you are doing. If you can see how the average person retires and what their life it like and know how much the average person saved, you can extrapolate how your retirement would be with more or less money. It's not perfect but it might give you an idea how well you are doing.

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Re: What should the savings be for an average professional

Post by 2Birds1Stone » Wed Aug 30, 2017 10:35 am

Can't comment on how much someone in that scenario SHOULD have, but this thread sure makes me very glad to be part of a DINK couple.

Even in a HCOL area, with a HS diploma/AA degree my SO and I lucky enough to have 2X gross annual income saved at age 30/26.

If we have kids down the line (35/31) we should definitely have $500k in retirement accounts and cash.

It all comes down to priorities.

If we start the family, let the $500k ride in the market, and never contribute another penny to retirement accounts, that $500k should turn into $2M by full retirement age.

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Re: What should the savings be for an average professional

Post by chinto » Wed Aug 30, 2017 10:56 am

skor99 wrote:
Wed Aug 30, 2017 7:46 am
CyclingDuo wrote:
Tue Aug 29, 2017 9:57 am
chinto wrote:
Mon Aug 28, 2017 6:46 pm
My advice, determine your lifestyle, figure out how much it costs to live that lifestyle, make an approximation of what it would take in terms of a lump sum at 45, 50, 55, 60, 65, 70 years of age to retire. Then simply invest the difference between your income and your lifestyle expenses. When you hit one of your age related lump sums, you can pause and decide if you wish to retire at that point in time.

Which is to say, I would ignore the noise of what the average person would do and do what is relevant to me based on the only relevant character in the equation: me, not the guy next to me.
Well stated!

The two of us certainly marched to a different drum beat compared to what I read on some of these threads at BH. We front end loaded our life with world travel and experiences while we were young, healthy, mobile, raising children (while we were between the ages of 25 and 45 where we lived and worked overseas during most of that). We both openly discussed the reality of getting one shot at life, and how to do it in a fiscally sound way that provided a nice balance of experience and fiscal responsibility. Choosing careers that had Summers off certainly created a lot of flexibility for meeting our lifestyle balance/goals. So a lot of bucket list stuff has already been crossed off the list. We managed to save a minimum each year of 15% for retirement through all of that, but were not supersavers for retirement beyond that percentage as we were cash flowing our travels, expenses, and saving for two college educations for our children (mark us as supersavers for that!!). Actually saved a lot more in taxable than tax advantaged all those years living overseas due to the FEIE.

I don't think we even thought about what other people were doing at the time as it didn't pertain to our lifestyle of hiking, skiing the Alps, cycling, driving the minivan all over France, Germany, Italy, Austria, Poland, England, Czech Republic, etc. Taking the kids to operas, plays, ballets, soccer matches, sporting events, amusement parks, museums, and all of the great cities in Europe. Enjoying the foods, languages, and culture of all of it. Ages 55 and 59 now, and we still travel internationally at least every other year, but as expected - it is much more fatiguing now than it was in our 30's and 40's. Personally, we're glad we planned it that way to hit most everything earlier in life when we knew it would be easier physically and mentally. Stamina, energy, sharp minds, multi-lingual abilities all worked much better then than it does now.

Empty nesters as of last week!

Now the drum beat of boosting to supersavers for retirement and to pass on to our heirs has kicked up simply because we can, and the lifestyle has by choice/age slowed down. Saved 25% of income last year for retirement, and slated to save 64% of income for retirement this year by taking advantage of the age 50+ IRS boost of $24K each in the 403b, $6500 each into ROTH IRA's. On top of that, wife has mandatory pension contribution with match, and we are saving in taxable as well.

All that to say - here's to reaching one's goals and not getting caught up in the what the average person does...
Let me congratulate you on accomplishing all that you wanted in life financially as well as the bucket list stuff before that. But I think you do understand that this is not how it works for the vast majority of the people and they do not have the opportunities that you had . To be reasonably secure in life later on and provide for the kids, most have to slog through Work life right after school. They have to scrimp and save and cannot spend money on bucket list stuff early on. If somebody does that and has trouble later on they would be chastised as being irresponsible or worse.
Hmmmmm...well, when I first read what CyclingDuo wrote I thought he knew me personally, it seems we did much the same thing...heck I was an itinerant, worker, serial entrepreneur until I was hit 30 or so. My father told me to get that wander lust out of my system when I was young, because once I started a family things would change. As usual, dad was spot on.

The point is your average person makes choices in life, many of those early choices set them on a trajectory that limits the viability of later choices they may wish to make. When I look around me, I am happy to see I am not average because your average person looks to me to be living in a prison of their own making; that observation seems to cut across income levels and professions.

I see it cut across this thread in the various comments people make, somehow (as this seems to be mostly a U.S. and first world forum) happiness is equated to some level of conspicuous consumption and income which is an odd first world problem. Heck some of my fondest memories are from a time when I literally was homeless, broke, and living literally under a bridge and off the land.

So while the thread may be entitled "What should the savings be for an average professional" I think the response you are hearing from a few of us is why the heck would you want to shoot for average in any regard? Average does not seem to be a happy place to be. I fully get that which garners pleasure for some does not garner pleasure for others, but often enjoyment is linked to your perceptions and what you grow accustom to. In general the U.S. is a consumer driven economy, one driven by conspicuous consumption, and most have chosen to live to work verses work to live long ago as part of the endemic culture. But that was a choice they made, it clearly was not made for them. I went from zero to 62.5 expenses in about 20 years and it was not on a austere budget, heck I had one of the more expensive luxuries, a stay at home, home schooling mommy for the offspring. My point is, few do that, it is not average, but it is not hard, it was simply about choices.

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Re: What should the savings be for an average professional

Post by Admiral » Wed Aug 30, 2017 11:25 am

Interesting discussion. Here's a data point, and why "average" is meaningless
And if you were a legitimate millionaire, with exactly $1,000,000 in net worth in 2013, you were in the 90.5th percentile. That’s right – fewer than 10% of Americans are millionaires, by our estimate (and by the Fed’s definition of Net Worth – please see their summary variables for more detail).

Here’s an even more detailed take on some of the hot-button net worth percentiles:
Wealth Percentile Net Worth
99.90% $30,644,280.00
99.50% $11,898,128.00
99.00% $7,869,549.00
95.00% $1,868,640.00
90.00% $943,656.00
80.00% $428,540.00
70.00% $247,026.00
So even if one has a low (by Boglehead standard) net worth of $247k by the time they are 50 (or by the time they retire, or at anytime, for that matter), they still have more than the vast majority of the US population.

Here's another chart, by age group:
The top row is the ‘net worth bracket’, and if you trace the age group across you’ll see the ‘minimum amount’ to be in that bracket. Age refers to the age of the ‘primary earner’, or whomever the household listed as the primary for retired households.

Age 10% 25% 50% 75% 90% 99%
18-24 -$20,900.00 -$2,860.00 $4,400.00 $15,600.00 $45,521.00 $388,350.00
25-29 -$22,900.00 -$1,100.00 $9,460.00 $42,000.00 $127,580.00 $594,400.00
30-34 -$16,500.00 $1,600.00 $19,400.00 $90,400.00 $242,450.00 $1,373,300.00
35-39 -$6,100.00 $4,300.00 $36,320.00 $185,806.00 $496,000.00 $2,814,200.00
40-44 -$6,140.00 $8,330.00 $62,200.00 $251,150.00 $761,400.00 $7,282,400.00
45-49 -$2,500.00 $11,060.00 $72,070.00 $305,400.00 $831,780.00 $5,216,000.00
50-54 $0.00 $14,200.00 $122,100.00 $440,400.00 $1,017,000.00 $7,222,100.00
55+ $2,600.00 $44,300.00 $194,700.00 $548,910.00 $1,485,000.00 $10,814,000.00
One can assume that "professionals" (however one defines that term) are over-represented in the higher net worth percentiles. This chart shows that someone who is 50-54 and has about 400k (in NET WORTH, not liquid savings) has more than 75 percent of the U.S. population.

But, again, it's somewhat meaningless data, as everything depends on your cost of living and what you deem comfortable. I can tell you personally that we are mid-40s, 95-96 percenters, save a ton, have a NW of over $1m, and some days the bills still need juggling. Sad but true :annoyed We will (hopefully) have a comfortable early retirement, but saving $50k a year does affect our choices.

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Re: What should the savings be for an average professional

Post by skor99 » Wed Aug 30, 2017 11:38 am

I understand that it is mostly a matter of personal preference when people decide to have kids, but from a pure financial point of view, I think it is much better to have kids earlier rather than later as soon as one has been employed for a few years ( say late twenties for the first and early 30s for second ). This would make the college costs of the kids coincide with peak earning years and maybe even have a few years left over for additional savings before retirement

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Re: What should the savings be for an average professional

Post by skor99 » Wed Aug 30, 2017 11:42 am

2Birds1Stone wrote:
Wed Aug 30, 2017 10:35 am
Can't comment on how much someone in that scenario SHOULD have, but this thread sure makes me very glad to be part of a DINK couple.

Even in a HCOL area, with a HS diploma/AA degree my SO and I lucky enough to have 2X gross annual income saved at age 30/26.

If we have kids down the line (35/31) we should definitely have $500k in retirement accounts and cash.

It all comes down to priorities.

If we start the family, let the $500k ride in the market, and never contribute another penny to retirement accounts, that $500k should turn into $2M by full retirement age.
I understand that it is mostly a matter of personal preference when people decide to have kids, but from a pure financial point of view, I think it is much better to have kids earlier rather than later as soon as one has been employed for a few years ( say late twenties for the first and early 30s for second ). This would make the college costs of the kids coincide with peak earning years and maybe even have a few years left over for additional savings before retirement

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Re: What should the savings be for an average professional

Post by KlangFool » Wed Aug 30, 2017 12:31 pm

emoore wrote:
Wed Aug 30, 2017 10:33 am
telemark wrote:
Wed Aug 30, 2017 10:03 am
chinto wrote:
Mon Aug 28, 2017 6:46 pm
I wonder if I am the only person who finds these threads odd.
It puzzles me too. Retirement is not a competition.
That's true that it's not a competition but I think it's only natural to try to gauge how well you are doing. If you can see how the average person retires and what their life it like and know how much the average person saved, you can extrapolate how your retirement would be with more or less money. It's not perfect but it might give you an idea how well you are doing.
emoore,

That natural tendency is a sure way to destroy your happiness. I choose to be happy.

<< It's not perfect but it might give you an idea how well you are doing.>>

No, it does not give you any idea how well a person is doing.

It is very simple.

If a person wants to judge how well he/she is doing, just look at their investment asset as a multiple of either

A) Their current annual expense

Or

B) Their projected retirement expense

They do not need to look at others to get this answer.

KlangFool

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Re: What should the savings be for an average professional

Post by chicagoan23 » Wed Aug 30, 2017 1:09 pm

skor99 wrote:
Wed Aug 30, 2017 7:46 am
To be reasonably secure in life later on and provide for the kids, most have to slog through Work life right after school. They have to scrimp and save and cannot spend money on bucket list stuff early on. If somebody does that and has trouble later on they would be chastised as being irresponsible or worse.
I think this is correct. Those with public jobs/the promise of public pensions; entrepreneurs who manage to hit it big, expats living abroad, artists, etc. are the exceptions to the rule. No judgment and good for them for their lifestyle choices that work well for them, but the "average" person on here will be responsible for saving for their own retirement, doesn't get summers off, won't have retiree health care other than Medicare, won't have a big liquidity event at any point in their life, etc. Given that reality it is only natural to wonder if you are doing what you need to be doing at various stages throughout your career.

As for the "where should I be" question, I think the earlier poster who ran the numbers on expected savings had it about right. Take 15% of income each year from when you started working, assume 6% nominal returns over long periods of time, and do the math. I would say that is a *minimum* number regardless of kids / spouse working / HCOL area, etc. Hopefully you'll be able to start saving more than 15% after some big purchases are out of the way. If your friend is around $200k or so while in his 40s and making $120k per year, I would think he is well behind where he needs to be and should make changes to his savings habits. The fact that half the population is way below that number should give him no comfort.

Small lifestyle changes, compounding, and favorable markets will make a huge difference. But you must get started early and stay with it.

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Re: What should the savings be for an average professional

Post by emoore » Wed Aug 30, 2017 1:11 pm

KlangFool wrote:
Wed Aug 30, 2017 12:31 pm
emoore wrote:
Wed Aug 30, 2017 10:33 am
telemark wrote:
Wed Aug 30, 2017 10:03 am
chinto wrote:
Mon Aug 28, 2017 6:46 pm
I wonder if I am the only person who finds these threads odd.
It puzzles me too. Retirement is not a competition.
That's true that it's not a competition but I think it's only natural to try to gauge how well you are doing. If you can see how the average person retires and what their life it like and know how much the average person saved, you can extrapolate how your retirement would be with more or less money. It's not perfect but it might give you an idea how well you are doing.
emoore,

That natural tendency is a sure way to destroy your happiness. I choose to be happy.

<< It's not perfect but it might give you an idea how well you are doing.>>

No, it does not give you any idea how well a person is doing.

It is very simple.

If a person wants to judge how well he/she is doing, just look at their investment asset as a multiple of either

A) Their current annual expense

Or

B) Their projected retirement expense

They do not need to look at others to get this answer.

KlangFool
I disagree.

KlangFool
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Re: What should the savings be for an average professional

Post by KlangFool » Wed Aug 30, 2017 1:15 pm

emoore wrote:
Wed Aug 30, 2017 1:11 pm
KlangFool wrote:
Wed Aug 30, 2017 12:31 pm
emoore wrote:
Wed Aug 30, 2017 10:33 am
telemark wrote:
Wed Aug 30, 2017 10:03 am
chinto wrote:
Mon Aug 28, 2017 6:46 pm
I wonder if I am the only person who finds these threads odd.
It puzzles me too. Retirement is not a competition.
That's true that it's not a competition but I think it's only natural to try to gauge how well you are doing. If you can see how the average person retires and what their life it like and know how much the average person saved, you can extrapolate how your retirement would be with more or less money. It's not perfect but it might give you an idea how well you are doing.
emoore,

That natural tendency is a sure way to destroy your happiness. I choose to be happy.

<< It's not perfect but it might give you an idea how well you are doing.>>

No, it does not give you any idea how well a person is doing.

It is very simple.

If a person wants to judge how well he/she is doing, just look at their investment asset as a multiple of either

A) Their current annual expense

Or

B) Their projected retirement expense

They do not need to look at others to get this answer.

KlangFool
I disagree.
I wish you best of luck in finding happiness.

KlangFool

emoore
Posts: 337
Joined: Mon Mar 04, 2013 8:16 pm

Re: What should the savings be for an average professional

Post by emoore » Wed Aug 30, 2017 2:00 pm

KlangFool wrote:
Wed Aug 30, 2017 1:15 pm
emoore wrote:
Wed Aug 30, 2017 1:11 pm
KlangFool wrote:
Wed Aug 30, 2017 12:31 pm
emoore wrote:
Wed Aug 30, 2017 10:33 am
telemark wrote:
Wed Aug 30, 2017 10:03 am

It puzzles me too. Retirement is not a competition.
That's true that it's not a competition but I think it's only natural to try to gauge how well you are doing. If you can see how the average person retires and what their life it like and know how much the average person saved, you can extrapolate how your retirement would be with more or less money. It's not perfect but it might give you an idea how well you are doing.
emoore,

That natural tendency is a sure way to destroy your happiness. I choose to be happy.

<< It's not perfect but it might give you an idea how well you are doing.>>

No, it does not give you any idea how well a person is doing.

It is very simple.

If a person wants to judge how well he/she is doing, just look at their investment asset as a multiple of either

A) Their current annual expense

Or

B) Their projected retirement expense

They do not need to look at others to get this answer.

KlangFool
I disagree.
I wish you best of luck in finding happiness.

KlangFool
Same to you.

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Re: What should the savings be for an average professional

Post by Meg77 » Wed Aug 30, 2017 2:05 pm

Blogger Financial Samurai has a very popular post called "The Average Net Worth for the Above Average Person" you might enjoy.

https://www.financialsamurai.com/the-av ... ge-person/

His recommendations/projections are right in line with what you are assuming with a middle tier saver in his/her early 40s having 401k assets around $550k. This assumes he or she began working at 22 and maxing out a 401k after the second full year of work.
"An investment in knowledge pays the best interest." - Benjamin Franklin

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Re: What should the savings be for an average professional

Post by davidsorensen32 » Wed Aug 30, 2017 8:46 pm

Average rule of thumb that my mentor told me when I was starting my career: Target for $1M by 40. That's savings+investment gains. For someone starting their career now I'd say $2M by 40. But don't forget to live a little. Remember everybody dies, but not everyone lives.

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Re: What should the savings be for an average professional

Post by GoldenFinch » Wed Aug 30, 2017 9:02 pm

davidsorensen32 wrote:
Wed Aug 30, 2017 8:46 pm
Average rule of thumb that my mentor told me when I was starting my career: Target for $1M by 40. That's savings+investment gains. For someone starting their career now I'd say $2M by 40. But don't forget to live a little. Remember everybody dies, but not everyone lives.
Two million by forty, assuming you have a life, would be very difficult to attain without a very high salary, high savings rate and forgiving stock market.

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Re: What should the savings be for an average professional

Post by Bacchus01 » Wed Aug 30, 2017 9:11 pm

Engineer250 wrote:
Mon Aug 28, 2017 5:42 pm
Jags4186 wrote:
Mon Aug 28, 2017 1:38 pm
skor99 wrote:
Wed Aug 23, 2017 7:32 pm
I was talking to a friend who am I open with about money topics and issues. We got talking about how much an average earning professional like an engineer or accountant should have saved after working for 20 years. To keep things simple, we just talked about a single earner family.
Obviously there are many factors at play such as number of kids and COL etc. But as a ballpark, I was of the opinion that a person starting out say in the mid 50s salary range right after college and working their way upto say 120K per year with two kids in a MCOL area with a 30 yr mortgage on a 300 K house ( all average numbers) should have around $450K - $500K saved including their retirement accounts ( not including home equity). He laughed at the suggestion and said 150K-200K is more like it in the real world and even lesser for financially ignorant people. He hinted that he falls in roughly the same pattern and is not close to 500K. I know for sure that he is sensible with his money, so his lower number is not due to excessive spending.
I understand the number can vary widely, but as a general guideline, is 400K too much in the real non boglehead world for an average middle aged professional ?
Well I did a little playing around in excel and it looks like the average starting salary for a Chemical Engineer graduating form Cornell in 1997 was $42,500. That was the quickest number I was able to find by googling...but let's go with it. So $42,5000 with 6% raises for 20 years puts that person at $128,XXX in 2017. If that person saved 15% of their salary every year into a 401k and got a 3% employer match, and just threw the money into the S&P 500, they should have $552,000 as of December 31 2016.

So I would posit that your friend is not that great of a saver.
6%? Where does this guy work?

The problem is salary boosts work like most industries. Maybe you get 2-3% in this post recession economy. Maybe even your pay was frozen for a few years (depends on what industry obviously). Maybe you make manager or make a jump to get a 10% raise somewhere. But you get that all at once, not like you've been benefitting from gradual increases for several years. And you still only have so much space in your retirement accounts once you get to the point you can afford to max them.
At 43, my pay level has a CAGR of about 12.5%.

It does and can exist. I started by making $30K a year back in 1997 when I graduated college.

Bacchus01
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Re: What should the savings be for an average professional

Post by Bacchus01 » Wed Aug 30, 2017 9:14 pm

skor99 wrote:
Wed Aug 30, 2017 11:42 am
2Birds1Stone wrote:
Wed Aug 30, 2017 10:35 am
Can't comment on how much someone in that scenario SHOULD have, but this thread sure makes me very glad to be part of a DINK couple.

Even in a HCOL area, with a HS diploma/AA degree my SO and I lucky enough to have 2X gross annual income saved at age 30/26.

If we have kids down the line (35/31) we should definitely have $500k in retirement accounts and cash.

It all comes down to priorities.

If we start the family, let the $500k ride in the market, and never contribute another penny to retirement accounts, that $500k should turn into $2M by full retirement age.
I understand that it is mostly a matter of personal preference when people decide to have kids, but from a pure financial point of view, I think it is much better to have kids earlier rather than later as soon as one has been employed for a few years ( say late twenties for the first and early 30s for second ). This would make the college costs of the kids coincide with peak earning years and maybe even have a few years left over for additional savings before retirement
It's also a choice when you do have kids on whether you pay for their college.

Bacchus01
Posts: 1107
Joined: Mon Dec 24, 2012 9:35 pm

Re: What should the savings be for an average professional

Post by Bacchus01 » Wed Aug 30, 2017 9:16 pm

Sandi_k wrote:
Tue Aug 29, 2017 1:40 pm
Average professionals don't save 20%+ of their income.

Average professionals don't LBTM.

Average professionals are reflected in the oft-quoted statistics about not being able to come up with $500 in cash for an emergency:

https://www.cbsnews.com/news/most-ameri ... y-expense/

Or having less than $100k for retirement:

http://time.com/money/4258451/retiremen ... gs-survey/

https://www.financialsamurai.com/how-mu ... etirement/

http://www.investopedia.com/articles/pe ... e-2016.asp

I think your friend is trying to make himself feel better. But he's blinded by the thought that it takes ACTION to do better. He's looking for solace, not solutions. On the other hand, he's right. ;)
I think this is totally false. The links you posted are not representative of the specific group of people discussed by the OP. He defined "average professional" as someone like an engineer or an accountant I believe. Those studies are not representative of those groups of people.

avalpert
Posts: 6197
Joined: Sat Mar 22, 2008 4:58 pm

Re: What should the savings be for an average professional

Post by avalpert » Wed Aug 30, 2017 9:16 pm

Bacchus01 wrote:
Wed Aug 30, 2017 9:11 pm
Engineer250 wrote:
Mon Aug 28, 2017 5:42 pm
Jags4186 wrote:
Mon Aug 28, 2017 1:38 pm
skor99 wrote:
Wed Aug 23, 2017 7:32 pm
I was talking to a friend who am I open with about money topics and issues. We got talking about how much an average earning professional like an engineer or accountant should have saved after working for 20 years. To keep things simple, we just talked about a single earner family.
Obviously there are many factors at play such as number of kids and COL etc. But as a ballpark, I was of the opinion that a person starting out say in the mid 50s salary range right after college and working their way upto say 120K per year with two kids in a MCOL area with a 30 yr mortgage on a 300 K house ( all average numbers) should have around $450K - $500K saved including their retirement accounts ( not including home equity). He laughed at the suggestion and said 150K-200K is more like it in the real world and even lesser for financially ignorant people. He hinted that he falls in roughly the same pattern and is not close to 500K. I know for sure that he is sensible with his money, so his lower number is not due to excessive spending.
I understand the number can vary widely, but as a general guideline, is 400K too much in the real non boglehead world for an average middle aged professional ?
Well I did a little playing around in excel and it looks like the average starting salary for a Chemical Engineer graduating form Cornell in 1997 was $42,500. That was the quickest number I was able to find by googling...but let's go with it. So $42,5000 with 6% raises for 20 years puts that person at $128,XXX in 2017. If that person saved 15% of their salary every year into a 401k and got a 3% employer match, and just threw the money into the S&P 500, they should have $552,000 as of December 31 2016.

So I would posit that your friend is not that great of a saver.
6%? Where does this guy work?

The problem is salary boosts work like most industries. Maybe you get 2-3% in this post recession economy. Maybe even your pay was frozen for a few years (depends on what industry obviously). Maybe you make manager or make a jump to get a 10% raise somewhere. But you get that all at once, not like you've been benefitting from gradual increases for several years. And you still only have so much space in your retirement accounts once you get to the point you can afford to max them.
At 43, my pay level has a CAGR of about 12.5%.

It does and can exist. I started by making $30K a year back in 1997 when I graduated college.
Wouldn't that put your salary over $300k? I mean, sure it can and does happen - but since that would put you in the top 2% or so of earners it is by definition rare.

avalpert
Posts: 6197
Joined: Sat Mar 22, 2008 4:58 pm

Re: What should the savings be for an average professional

Post by avalpert » Wed Aug 30, 2017 9:18 pm

GoldenFinch wrote:
Wed Aug 30, 2017 9:02 pm
davidsorensen32 wrote:
Wed Aug 30, 2017 8:46 pm
Average rule of thumb that my mentor told me when I was starting my career: Target for $1M by 40. That's savings+investment gains. For someone starting their career now I'd say $2M by 40. But don't forget to live a little. Remember everybody dies, but not everyone lives.
Two million by forty, assuming you have a life, would be very difficult to attain without a very high salary, high savings rate and forgiving stock market.
In my experience, having a high salary is the safest and easiest way to having healthy savings/net worth - far more impactful than asset allocation decisions.

Bacchus01
Posts: 1107
Joined: Mon Dec 24, 2012 9:35 pm

Re: What should the savings be for an average professional

Post by Bacchus01 » Wed Aug 30, 2017 9:19 pm

avalpert wrote:
Wed Aug 30, 2017 9:16 pm
Bacchus01 wrote:
Wed Aug 30, 2017 9:11 pm
Engineer250 wrote:
Mon Aug 28, 2017 5:42 pm
Jags4186 wrote:
Mon Aug 28, 2017 1:38 pm
skor99 wrote:
Wed Aug 23, 2017 7:32 pm
I was talking to a friend who am I open with about money topics and issues. We got talking about how much an average earning professional like an engineer or accountant should have saved after working for 20 years. To keep things simple, we just talked about a single earner family.
Obviously there are many factors at play such as number of kids and COL etc. But as a ballpark, I was of the opinion that a person starting out say in the mid 50s salary range right after college and working their way upto say 120K per year with two kids in a MCOL area with a 30 yr mortgage on a 300 K house ( all average numbers) should have around $450K - $500K saved including their retirement accounts ( not including home equity). He laughed at the suggestion and said 150K-200K is more like it in the real world and even lesser for financially ignorant people. He hinted that he falls in roughly the same pattern and is not close to 500K. I know for sure that he is sensible with his money, so his lower number is not due to excessive spending.
I understand the number can vary widely, but as a general guideline, is 400K too much in the real non boglehead world for an average middle aged professional ?
Well I did a little playing around in excel and it looks like the average starting salary for a Chemical Engineer graduating form Cornell in 1997 was $42,500. That was the quickest number I was able to find by googling...but let's go with it. So $42,5000 with 6% raises for 20 years puts that person at $128,XXX in 2017. If that person saved 15% of their salary every year into a 401k and got a 3% employer match, and just threw the money into the S&P 500, they should have $552,000 as of December 31 2016.

So I would posit that your friend is not that great of a saver.
6%? Where does this guy work?

The problem is salary boosts work like most industries. Maybe you get 2-3% in this post recession economy. Maybe even your pay was frozen for a few years (depends on what industry obviously). Maybe you make manager or make a jump to get a 10% raise somewhere. But you get that all at once, not like you've been benefitting from gradual increases for several years. And you still only have so much space in your retirement accounts once you get to the point you can afford to max them.
At 43, my pay level has a CAGR of about 12.5%.

It does and can exist. I started by making $30K a year back in 1997 when I graduated college.
Wouldn't that put your salary over $300k? I mean, sure it can and does happen - but since that would put you in the top 2% or so of earners it is by definition rare.
Well over that. Being rare doesn't mean impossible. And 2% is still like 2 MILLION+ earners in the US

davidsorensen32
Posts: 248
Joined: Wed Jul 24, 2013 9:57 am

Re: What should the savings be for an average professional

Post by davidsorensen32 » Wed Aug 30, 2017 9:35 pm

Until I got laid off recently, my CAGR was about 9% per annum over 17 years. I changed jobs a bunch of times - partly due to compulsion and partly because of better pay. Never hit a jackpot. No startup gold either. Just plain old grind. 60-80 hour weeks, crazy travel, missed birthdays and anniversaries over 17 years. My salary was below six figures for the first eight years of my career. My starting salary was above the median, but I live in a VHCOL area. I consider myself perhaps slightly above average for where I live and my line of work. But nothing astronomic. And I was unfortunate to be hit by stock market double whammy - the lost decade of the oughts. Supported my extended family of 5 mostly on my salary for the bulk of the time except for the last 4-5 years. So it can be done. I saved thousands listening to bogleheads
Bacchus01 wrote:
Wed Aug 30, 2017 9:19 pm
avalpert wrote:
Wed Aug 30, 2017 9:16 pm
Bacchus01 wrote:
Wed Aug 30, 2017 9:11 pm
Engineer250 wrote:
Mon Aug 28, 2017 5:42 pm
Jags4186 wrote:
Mon Aug 28, 2017 1:38 pm


Well I did a little playing around in excel and it looks like the average starting salary for a Chemical Engineer graduating form Cornell in 1997 was $42,500. That was the quickest number I was able to find by googling...but let's go with it. So $42,5000 with 6% raises for 20 years puts that person at $128,XXX in 2017. If that person saved 15% of their salary every year into a 401k and got a 3% employer match, and just threw the money into the S&P 500, they should have $552,000 as of December 31 2016.

So I would posit that your friend is not that great of a saver.
6%? Where does this guy work?

The problem is salary boosts work like most industries. Maybe you get 2-3% in this post recession economy. Maybe even your pay was frozen for a few years (depends on what industry obviously). Maybe you make manager or make a jump to get a 10% raise somewhere. But you get that all at once, not like you've been benefitting from gradual increases for several years. And you still only have so much space in your retirement accounts once you get to the point you can afford to max them.
At 43, my pay level has a CAGR of about 12.5%.

It does and can exist. I started by making $30K a year back in 1997 when I graduated college.
Wouldn't that put your salary over $300k? I mean, sure it can and does happen - but since that would put you in the top 2% or so of earners it is by definition rare.
Well over that. Being rare doesn't mean impossible. And 2% is still like 2 MILLION+ earners in the US

skor99
Posts: 84
Joined: Mon Jun 26, 2017 5:51 pm

Re: What should the savings be for an average professional

Post by skor99 » Wed Aug 30, 2017 9:44 pm

As somebody pointed out, I am definitely referring to your average mechanical/chemical/computer engineer or accountant or pharmacist. The one who is a manager or maybe a senior manager making around 120-130K. I am definitely not talking about the top performer who made it to the top management and making 300K or the guy who made it big in Silicon Valley making 500K + stock options or the partner in a big 5 firm . It surely does happen, but not to the vast majority of professional workers.

The person making 300K+ will do just fine financially and if they don't, then they do not deserve any sympathy. It's all the rest that I am talking about. The financial samurai blog focuses on the high achieving top guns to inspire their readers, but their numbers do not turn out to be true for most.

emoore
Posts: 337
Joined: Mon Mar 04, 2013 8:16 pm

Re: What should the savings be for an average professional

Post by emoore » Wed Aug 30, 2017 10:02 pm

GoldenFinch wrote:
Wed Aug 30, 2017 9:02 pm
davidsorensen32 wrote:
Wed Aug 30, 2017 8:46 pm
Average rule of thumb that my mentor told me when I was starting my career: Target for $1M by 40. That's savings+investment gains. For someone starting their career now I'd say $2M by 40. But don't forget to live a little. Remember everybody dies, but not everyone lives.
Two million by forty, assuming you have a life, would be very difficult to attain without a very high salary, high savings rate and forgiving stock market.
+1. I think this is why this forum feels unwelcoming sometimes. I think I'm doing pretty well but have $1M let alone 2M by 40. Not even close. You'd have to save a huge % of your income or have a very high salary to achieve that. It's great that a small percentage can do that but the average professional will be no where near that.

User avatar
CyclingDuo
Posts: 843
Joined: Fri Jan 06, 2017 9:07 am

Re: What should the savings be for an average professional

Post by CyclingDuo » Thu Aug 31, 2017 8:32 am

Bacchus01 wrote:
Wed Aug 30, 2017 9:14 pm
skor99 wrote:
Wed Aug 30, 2017 11:42 am
2Birds1Stone wrote:
Wed Aug 30, 2017 10:35 am
Can't comment on how much someone in that scenario SHOULD have, but this thread sure makes me very glad to be part of a DINK couple.

Even in a HCOL area, with a HS diploma/AA degree my SO and I lucky enough to have 2X gross annual income saved at age 30/26.

If we have kids down the line (35/31) we should definitely have $500k in retirement accounts and cash.

It all comes down to priorities.

If we start the family, let the $500k ride in the market, and never contribute another penny to retirement accounts, that $500k should turn into $2M by full retirement age.
I understand that it is mostly a matter of personal preference when people decide to have kids, but from a pure financial point of view, I think it is much better to have kids earlier rather than later as soon as one has been employed for a few years ( say late twenties for the first and early 30s for second ). This would make the college costs of the kids coincide with peak earning years and maybe even have a few years left over for additional savings before retirement
It's also a choice when you do have kids on whether you pay for their college.
Certainly there are pros and cons to the bolded sentences about having kids earlier. One of the pros of waiting until you are in your 30's is that, if you had student loans from college, they will have been paid off, your income will have increased, and you will have saved for nearly a decade. That would put parents in a position to address the highlighted red sentence where they would be able to contribute a decent percentage of funds to a 529 or UTMA account to build funds for their college education. And, as 2Birds says, the kids will then be attending college during or near the parents' peak earning years which helps cash flow some of the costs/expenses.

We waited until 32/36 respectively for our first, and two years later for our second. All of our student loans had been paid off, we had been saving for retirement for a decade, had a house, and were a full decade into our careers.

Our thought is that an "average professional" certainly could stick within some sort of formula with kids - be it 50/20/30 - if they wait until late 20's to early 30 or mid 30's to procreate. In our case, I don't think we considered the college savings for our children a "want", but considered it a "need" - especially the first 10 years we were contributing to it to take advantage of the power of time/compounding. Fortunately, it didn't alter our 20% formula of other savings - retirement and taxable savings as we kept our 50% portion of the budget as low as possible (older used Hondas, low housing cost, low taxes).

We still love the simple formulas - be it David Bach's formula of saving the equivalent of one hour's wage per day (usually works out to 18.25% of gross income), or the 50/20/30 rule where 20% goes to savings and or early debt repayment. Add in the employer match to either one of those simple formulas, and wealth is accumulated over the course of one's career as long as the big three - housing, transportation, food - are all kept in a realistic percentage.

stoptothink
Posts: 3745
Joined: Fri Dec 31, 2010 9:53 am

Re: What should the savings be for an average professional

Post by stoptothink » Thu Aug 31, 2017 9:23 am

GoldenFinch wrote:
Wed Aug 30, 2017 9:02 pm
davidsorensen32 wrote:
Wed Aug 30, 2017 8:46 pm
Average rule of thumb that my mentor told me when I was starting my career: Target for $1M by 40. That's savings+investment gains. For someone starting their career now I'd say $2M by 40. But don't forget to live a little. Remember everybody dies, but not everyone lives.
Two million by forty, assuming you have a life, would be very difficult to attain without a very high salary, high savings rate and forgiving stock market.
Only on Bogleheads. According to financial samurai, just above 1% of the U.S. population has a net worth exceeding $2m(not even savings +investments) by age 40. That's an odd definition of "rule of thumb".

We're a two professional family, aged 36 and 31. If we hit $1m in combined savings and investments (not including home equity - home should be long paid off by then) by the time my (younger) wife hits 40, I'll be satisfied with our progress. As it is, short of halfway there right now, we are considered wealthy by friends and family. I'd be absolutely shocked if our savings + investments wasn't currently significantly more than all members of both sides of our family combined (both our parents and our 9 total siblings).
Last edited by stoptothink on Thu Aug 31, 2017 9:31 am, edited 1 time in total.

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