Absolute vs percentage saving

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Investing Newbie
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Joined: Sun Jun 22, 2008 1:27 pm

Absolute vs percentage saving

Post by Investing Newbie » Thu Dec 28, 2017 8:48 pm

Hi,

Most of my internet research and posts on this forum suggest a percentage of income based savings rate. Although there is no consensus, 15-20% of gross income at a minimum seems to be the recommendation on the internet. This forum tends to boil it down to the nitty gritty in terms of annual expenditure instead.

I'm 34 and my wife is 35 and together we have approx $120k in retirement savings.

If we continue to max his and her 401ks and roth iras, for a total of $48,000 in 2018, this works out to $3.6million in todays dollars at a retirement age of 65. This number came from a CNN calculator that assumes 6% rate of return, which I think may be optimistic.

Regardless of what percentage of gross income the $48k per years equals isn't this very likely to be adequate for retirement? A household income of $235k/year will invest $48K/year if they save 20% of their gross, so is it fair to say that a household income >235k/year can "safely" save < 20% and still retire with enough?

Thanks!

Not Law
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Re: Absolute vs percentage saving

Post by Not Law » Thu Dec 28, 2017 9:02 pm

It is all about what you expect to spend in retirement. At your age, your saving's rate is the best you can do, and that seems reasonable. As you get closer to retirement, you have to determine what your expected expenses are, and whether your savings can sustain them.

KlangFool
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Joined: Sat Oct 11, 2008 12:35 pm

Re: Absolute vs percentage saving

Post by KlangFool » Thu Dec 28, 2017 9:15 pm

Investing Newbie wrote:
Thu Dec 28, 2017 8:48 pm
Hi,

Most of my internet research and posts on this forum suggest a percentage of income based savings rate. Although there is no consensus, 15-20% of gross income at a minimum seems to be the recommendation on the internet. This forum tends to boil it down to the nitty gritty in terms of annual expenditure instead.

I'm 34 and my wife is 35 and together we have approx $120k in retirement savings.

If we continue to max his and her 401ks and roth iras, for a total of $48,000 in 2018, this works out to $3.6million in todays dollars at a retirement age of 65. This number came from a CNN calculator that assumes 6% rate of return, which I think may be optimistic.

Regardless of what percentage of gross income the $48k per years equals isn't this very likely to be adequate for retirement? A household income of $235k/year will invest $48K/year if they save 20% of their gross, so is it fair to say that a household income >235k/year can "safely" save < 20% and still retire with enough?

Thanks!
Investing Newbie,

<< A household income of $235k/year will invest $48K/year if they save 20% of their gross, so is it fair to say that a household income >235k/year can "safely" save < 20% and still retire with enough? >>

The big elephant in the room is can the person safely assume that he/she will be fully-employed until retirement age.

Assuming 33% effective tax rate, the household expense of this family = 235K - 78K (tax) -48K (savings) = 109K. Using 25X as the base assumption, this family need 2.725 million.

Starting Net Worth $120,000
Annual Savings $48,000
Years
Annual Return Rate 20 21 22 23 24 25 26
6.00% $2,150,565 $2,327,599 $2,515,254 $2,714,170 $2,925,020 $3,148,521 $3,385,432


This family needs to be continuously fully-employed for the next 23 to 24 years. Is it safe to assume that?

KlangFool

staythecourse
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Joined: Mon Jan 03, 2011 9:40 am

Re: Absolute vs percentage saving

Post by staythecourse » Thu Dec 28, 2017 9:28 pm

Investing Newbie wrote:
Thu Dec 28, 2017 8:48 pm
Hi,

Most of my internet research and posts on this forum suggest a percentage of income based savings rate. Although there is no consensus, 15-20% of gross income at a minimum seems to be the recommendation on the internet. This forum tends to boil it down to the nitty gritty in terms of annual expenditure instead.

I'm 34 and my wife is 35 and together we have approx $120k in retirement savings.

If we continue to max his and her 401ks and roth iras, for a total of $48,000 in 2018, this works out to $3.6million in todays dollars at a retirement age of 65. This number came from a CNN calculator that assumes 6% rate of return, which I think may be optimistic.

Regardless of what percentage of gross income the $48k per years equals isn't this very likely to be adequate for retirement? A household income of $235k/year will invest $48K/year if they save 20% of their gross, so is it fair to say that a household income >235k/year can "safely" save < 20% and still retire with enough?

Thanks!
Why not flip the equation around. If you make x money and take out all the taxes and costs to work (commute, car maintenance, clothes, etc...) and the amount you are saving (48k/ year) that is what you are actually spending. Take that multiply by 20-25x and see what that number is. Then figure out how much you need to save per year to reach that number with a more modest return ?4%. What are the results now? If you are still low then you either need to make more money, work for more years, or cut down on your expenses.

That is a better way of doing it then thinking about %savings.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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climber2020
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Re: Absolute vs percentage saving

Post by climber2020 » Thu Dec 28, 2017 9:29 pm

Investing Newbie wrote:
Thu Dec 28, 2017 8:48 pm

Regardless of what percentage of gross income the $48k per years equals isn't this very likely to be adequate for retirement? A household income of $235k/year will invest $48K/year if they save 20% of their gross, so is it fair to say that a household income >235k/year can "safely" save < 20% and still retire with enough?

Thanks!
No.

Someone who makes $100,000 a year and saves $48k a year lives on $52k a year minus taxes.

Someone who makes $5,000,000 a year and saves $48k a year lives on nearly 5 million dollars per year minus taxes. That savings rate won't be nearly enough.

delamer
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Re: Absolute vs percentage saving

Post by delamer » Thu Dec 28, 2017 10:13 pm

Well, $3.6 million will yield an annual income of about $140,000 if you assume a 4% withdrawal rate (and exclude any Social Security or pensions).

And also assuming that you’ll get the 6% return and that you’ll be steadily employed and saving, as KlangFool rightly points out. I think it is better to use real returns rather than nominal returns. A 6 percent return is a lot better with 2% inflation than 5% inflation.

Most people could live comfortably on $140,000 (including taxesj, but not everyone.

randomguy
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Re: Absolute vs percentage saving

Post by randomguy » Thu Dec 28, 2017 10:35 pm

Investing Newbie wrote:
Thu Dec 28, 2017 8:48 pm
Hi,

Most of my internet research and posts on this forum suggest a percentage of income based savings rate. Although there is no consensus, 15-20% of gross income at a minimum seems to be the recommendation on the internet. This forum tends to boil it down to the nitty gritty in terms of annual expenditure instead.

I'm 34 and my wife is 35 and together we have approx $120k in retirement savings.

If we continue to max his and her 401ks and roth iras, for a total of $48,000 in 2018, this works out to $3.6million in todays dollars at a retirement age of 65. This number came from a CNN calculator that assumes 6% rate of return, which I think may be optimistic.

Regardless of what percentage of gross income the $48k per years equals isn't this very likely to be adequate for retirement? A household income of $235k/year will invest $48K/year if they save 20% of their gross, so is it fair to say that a household income >235k/year can "safely" save < 20% and still retire with enough?

Thanks!
It depends a bit on starting age (i.e. 120k at 35 for people making 235k is very low. It happens with doctors and the like that don't hit the salary levels til thier late 20s).

6% nominal would be pretty pessimistic. 6% real might be a bit optimistic (even if it is well below historical norms). In general 15-20%, for 35-45 years is expected to replace ~70% of your post savings income. For most people that is enough to maintain your lifestyle. SAving less is double trouble in that you need more money (i.e. you are living on 85k instead of 80 if you save 15%) and are saving less (15k versus 20k). But yes if you retire with 2 million dollars (i.e. over 1/3 less than 3.6 million), you will find a way to have an ok retirement. The person who goes from say 20k to 12k on the other hand might find the reduction to move them into an unliveable situation. It is a lot easy to cut down to an upper middle class lifestyle from an upper class one than from a lower middle class one to a poverty line one.

Investing Newbie
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Joined: Sun Jun 22, 2008 1:27 pm

Re: Absolute vs percentage saving

Post by Investing Newbie » Thu Dec 28, 2017 10:45 pm

Thank you for the input. My initial stimulus for this question wasn’t whether or not I can save as little as possible and still be ok, but rather to limit the mental burden. It becomes a chore to make sure that I’m always saving the “proper” amount for retirement. I have two young children and want to save for their education via 529 once I’m convinced I’m saving enough.

It makes sense to figure out yearly expenses and then estimate from that. Right now my largest expenses by far are mortgage and day care, so really can’t accurately predict expenses 30ish years from now.

KlangFool
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Re: Absolute vs percentage saving

Post by KlangFool » Thu Dec 28, 2017 10:51 pm

Investing Newbie wrote:
Thu Dec 28, 2017 10:45 pm
Thank you for the input. My initial stimulus for this question wasn’t whether or not I can save as little as possible and still be ok, but rather to limit the mental burden. It becomes a chore to make sure that I’m always saving the “proper” amount for retirement. I have two young children and want to save for their education via 529 once I’m convinced I’m saving enough.

It makes sense to figure out yearly expenses and then estimate from that. Right now my largest expenses by far are mortgage and day care, so really can’t accurately predict expenses 30ish years from now.
Investing Newbie,

<< Right now my largest expenses by far are mortgage and day care, so really can’t accurately predict expenses 30ish years from now.>>

But, why would you want to do that? If you have enough to cover your current annual expense, you do not need to worry whether you can survive for the next 30 years until retirement age.

<< I have two young children and want to save for their education via 529 once I’m convinced I’m saving enough. >>

Why do you need to save for their education if you are saving 48K per year? If and when you save enough for retirement and/or financial Independence, you can stop your savings and pay for the college education from your annual savings. This is what I am doing now.

KlangFool

thangngo
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Re: Absolute vs percentage saving

Post by thangngo » Thu Dec 28, 2017 11:29 pm

Investing Newbie wrote:
Thu Dec 28, 2017 8:48 pm
Hi,

Most of my internet research and posts on this forum suggest a percentage of income based savings rate. Although there is no consensus, 15-20% of gross income at a minimum seems to be the recommendation on the internet. This forum tends to boil it down to the nitty gritty in terms of annual expenditure instead.

I'm 34 and my wife is 35 and together we have approx $120k in retirement savings.

If we continue to max his and her 401ks and roth iras, for a total of $48,000 in 2018, this works out to $3.6million in todays dollars at a retirement age of 65. This number came from a CNN calculator that assumes 6% rate of return, which I think may be optimistic.

Regardless of what percentage of gross income the $48k per years equals isn't this very likely to be adequate for retirement? A household income of $235k/year will invest $48K/year if they save 20% of their gross, so is it fair to say that a household income >235k/year can "safely" save < 20% and still retire with enough?

Thanks!
In retirement planning, maybe use 3-4% growth rate. There is a lot of unknown, but maintaining your saving rate as high as your spending (excluding tax) will get you and your family to financial independence sooner than you think. There's a general rule of thumb: 33% tax, 33% saving, 33% spending. My goal is to save at least $1 for every dollar I spend. Note that you can use your savings for kids' college, house, car, retirement, etc as long as you maintain your saving rate. This is down to the question: can you live below your means and continue to manage your lifestyle while your income increases?

Save 15-20% your gross only get you to comfortable retirement with a kick that you must keep your job until you retire around 60.

Investing Newbie
Posts: 83
Joined: Sun Jun 22, 2008 1:27 pm

Re: Absolute vs percentage saving

Post by Investing Newbie » Fri Dec 29, 2017 9:07 am

Everyone has given me a lot to think about, thank you.


randomguy: you are correct. $120k at 34 and 35 years old is a bit low but we are both physicians and not that long out of training.

I've been convinced that I do need to save more and hope to reach the 20% of gross savings rate mark and then increase from there as able. Even though $140K per year, assuming a 4% withdrawal rate, sounds like a tremendous amount, it's probably also important to realize that is in today's dollars right? Won't go as far in 30 years.

KlangFool
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Joined: Sat Oct 11, 2008 12:35 pm

Re: Absolute vs percentage saving

Post by KlangFool » Fri Dec 29, 2017 9:22 am

Investing Newbie wrote:
Fri Dec 29, 2017 9:07 am
Everyone has given me a lot to think about, thank you.


randomguy: you are correct. $120k at 34 and 35 years old is a bit low but we are both physicians and not that long out of training.

I've been convinced that I do need to save more and hope to reach the 20% of gross savings rate mark and then increase from there as able. Even though $140K per year, assuming a 4% withdrawal rate, sounds like a tremendous amount, it's probably also important to realize that is in today's dollars right? Won't go as far in 30 years.
Investing Newbie,

<<Even though $140K per year, assuming a 4% withdrawal rate, sounds like a tremendous amount, it's probably also important to realize that is in today's dollars right? Won't go as far in 30 years.>>

Yes and no. Yes, it may be true. But, it may not matters.

Please note that

A) Your annual expense may grow at the inflation rate (Y%). Let's assume your annual expense = X

B) Let's assume that your portfolio size is 25 times X and grow faster than Y%

It won't matters.

Assuming annual expense = 100K and inflation rate = 3%. Your portfolio is 2.5 million and growing at 5%.

After year 1, the annual expense = 103K. The portfolio = (2.5million - 100K) * 105% = 2.520 million.

In summary, as long as your portfolio is large enough and grew faster than the inflation rate, it won't matter.

KlangFool

delamer
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Joined: Tue Feb 08, 2011 6:13 pm

Re: Absolute vs percentage saving

Post by delamer » Fri Dec 29, 2017 11:36 am

Investing Newbie wrote:
Fri Dec 29, 2017 9:07 am
Everyone has given me a lot to think about, thank you.


randomguy: you are correct. $120k at 34 and 35 years old is a bit low but we are both physicians and not that long out of training.

I've been convinced that I do need to save more and hope to reach the 20% of gross savings rate mark and then increase from there as able. Even though $140K per year, assuming a 4% withdrawal rate, sounds like a tremendous amount, it's probably also important to realize that is in today's dollars right? Won't go as far in 30 years.
That’s why I suggested using a real, post-inflation return, in your calculations. Use a few different real returns — 1%, 3%, 5% — and see how your results change.

MathWizard
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Joined: Tue Jul 26, 2011 1:35 pm

Re: Absolute vs percentage saving

Post by MathWizard » Fri Dec 29, 2017 11:53 am

Investing Newbie wrote:
Fri Dec 29, 2017 9:07 am
Everyone has given me a lot to think about, thank you.


randomguy: you are correct. $120k at 34 and 35 years old is a bit low but we are both physicians and not that long out of training.

I've been convinced that I do need to save more and hope to reach the 20% of gross savings rate mark and then increase from there as able. Even though $140K per year, assuming a 4% withdrawal rate, sounds like a tremendous amount, it's probably also important to realize that is in today's dollars right? Won't go as far in 30 years.
If you are both new physicians, you are likely paying off a lot of student debt.

If you have committed to shifting the dollars that you are spending reducing student debt, you could consider
that (or at least the prince portion of the payment) towards your percentage income towards "increasing net worth".
This is then a percentage that you want to look at, as that is a number that should stay more steady.
Now remember, with this, your savings are not 120K, they are 120K minus what you owe on student debt, which may
be a negative number.

I am a big believer in looking at a complete picture of finances, starting point, income and outflow , to reach a final goal.


There is another site that you might also want to visit "The White Coat Investor" which is focused on investing issues related specifically to physicians.

Notgreg
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Joined: Sun Jul 15, 2018 8:30 am

Re: Absolute vs percentage saving

Post by Notgreg » Wed Aug 08, 2018 9:23 am

Investing Newbie wrote:
Thu Dec 28, 2017 8:48 pm

Regardless of what percentage of gross income the $48k per years equals isn't this very likely to be adequate for retirement? A household income of $235k/year will invest $48K/year if they save 20% of their gross, so is it fair to say that a household income >235k/year can "safely" save < 20% and still retire with enough?
Newbie,

Congratulations on the hard work to you and your spouse. I can relate to your current situation (I'm not a physician, but spouse is). A very large percentage of our household expenses are tied up in mortgage payments, childcare, retirement saving, and disability insurance--all things that we expect to go away by retirement. It's hard to imagine how much we'll actually need to maintain our lifestyle once these obligations are gone.

Then again, new and unexpected costs tend to arise in retirement. What if those new costs come closer to replacing the old costs than you planned for? As people have already pointed out, in your example the family making 235k and the family making over 235k are both going to have to live on the same amount during retirement . But that second family has grown used to spending more than the first. Let's say it's a few years down the road and you're making $350k/year, but still consistently saving less than 20%. At 350k, there is probably a single reason for that: lifestyle creep (though there are exceptions--I won't pretend to know your circumstances). And unfortunately, if you can't reasonably manage lifestyle creep on your own while you're working, you'll be forced to in retirement.

If it helps to hear, my wife and I cut ourselves a little slack right now because we're in the "having kids and paying astronomical amounts for childcare" phase of life. If we save a little less than 20% for a couple of years, we'll have to make it up plus interest at some point when life is less hectic, and we accept that. We keep the goal there, though, because I want it to sting just a little if we fall short.

KlangFool
Posts: 9517
Joined: Sat Oct 11, 2008 12:35 pm

Re: Absolute vs percentage saving

Post by KlangFool » Wed Aug 08, 2018 9:30 am

Investing Newbie wrote:
Thu Dec 28, 2017 8:48 pm
Hi,

Most of my internet research and posts on this forum suggest a percentage of income based savings rate. Although there is no consensus, 15-20% of gross income at a minimum seems to be the recommendation on the internet. This forum tends to boil it down to the nitty gritty in terms of annual expenditure instead.

I'm 34 and my wife is 35 and together we have approx $120k in retirement savings.

If we continue to max his and her 401ks and roth iras, for a total of $48,000 in 2018, this works out to $3.6million in todays dollars at a retirement age of 65. This number came from a CNN calculator that assumes 6% rate of return, which I think may be optimistic.

Regardless of what percentage of gross income the $48k per years equals isn't this very likely to be adequate for retirement? A household income of $235k/year will invest $48K/year if they save 20% of their gross, so is it fair to say that a household income >235k/year can "safely" save < 20% and still retire with enough?

Thanks!
Investing Newbie,

<<Most of my internet research and posts on this forum suggest a percentage of income based savings rate. >>

That should tell you that it is the wrong answer. Saving as a percentage of your annual expense is a better approach.

<<I'm 34 and my wife is 35 and together we have approx $120k in retirement savings.

If we continue to max his and her 401ks and roth iras, for a total of $48,000 in 2018, this works out to $3.6million in todays dollars at a retirement age of 65.>>

1) Can you be fully-employed continuously over the next 30 years? Across multiple recessions?

2) What is your annual expense? If it is 200K per year, it only takes 2 years of unemployment to wipe you out.

KlangFool

P.S.: You have to survive until retirement age before you can think about retirement. A lot of stuff could happen over the next 30 years.

Jags4186
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Re: Absolute vs percentage saving

Post by Jags4186 » Wed Aug 08, 2018 9:39 am

$48k/yr could be enough, it could not be.

There are a few things to consider:

Are you paying off student loans? While not really savings, once the payoff happens you will be able to reallocate those funds to savings. What would that increase your savings rate to?

Where are you in life? If at 34 and 35 you have 2 kids in day care and are only able to save $48k/$235k well maybe that's not too bad. Again, the kids will get older day care will stop and you'd likely be able to get at least another $24k into savings/yr. If you don't have any kids now and plan to, if everything else stays equal you will be lowering your savings rate.

Like others have said, it also depends on how much you want to spend. The more you earn the less Social Security will provide you as a percent of your preretirement income. The secret to savings rate is that each additional dollar you save serves 2 purposes: 1) it increases your assets 2) it decreases the amount you are currently spending.

KlangFool
Posts: 9517
Joined: Sat Oct 11, 2008 12:35 pm

Re: Absolute vs percentage saving

Post by KlangFool » Wed Aug 08, 2018 9:40 am

Investing Newbie wrote:
Thu Dec 28, 2017 10:45 pm
Thank you for the input. My initial stimulus for this question wasn’t whether or not I can save as little as possible and still be ok, but rather to limit the mental burden. It becomes a chore to make sure that I’m always saving the “proper” amount for retirement. I have two young children and want to save for their education via 529 once I’m convinced I’m saving enough.

It makes sense to figure out yearly expenses and then estimate from that. Right now my largest expenses by far are mortgage and day care, so really can’t accurately predict expenses 30ish years from now.
Investing Newbie,

<< I have two young children and want to save for their education via 529 once I’m convinced I’m saving enough. >>

You do not have to save for their education. If you saved enough for your retirement when they go to college, you can pay for their college education from your annual savings. You can stop your retirement saving for a few years.

<<It makes sense to figure out yearly expenses and then estimate from that. Right now my largest expenses by far are mortgage and day care, so really can’t accurately predict expenses 30ish years from now.>>

1) Don't predict your retirement expense. Calculate your current annual expense. You have to survive for the next 30 years before you can think about retirement.

2) Your expense may not drop after the kids grow up too.

KlangFool

soccerrules
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Re: Absolute vs percentage saving

Post by soccerrules » Wed Aug 08, 2018 9:57 am

Not Law wrote:
Thu Dec 28, 2017 9:02 pm
It is all about what you expect to spend in retirement. At your age, your saving's rate is the best you can do, and that seems reasonable. As you get closer to retirement, you have to determine what your expected expenses are, and whether your savings can sustain them.
I would second this and say right now it is about paying down any student debt and saving as much as possible. Very very few people "save too much". Life will likely get more expensive due to inflation,kids,lifestyle creep etc. Saving more now and allowing compounding interest to work in your favor is a BIG win.
Don't let your outflow exceed your income or your upkeep will be your downfall.

MrBeaver
Posts: 154
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Re: Absolute vs percentage saving

Post by MrBeaver » Wed Aug 08, 2018 10:09 am

Investing Newbie wrote:
Thu Dec 28, 2017 10:45 pm
Thank you for the input. My initial stimulus for this question wasn’t whether or not I can save as little as possible and still be ok, but rather to limit the mental burden. It becomes a chore to make sure that I’m always saving the “proper” amount for retirement.
Here is what I'm doing, in case it helps:
  1. Set spending and giving at a reasonable amount and commit to only a small amount of growth (0.5% above inflation) to account for a growing family. This ends up being roughly 40-50% of my gross income, depending on bonus.
  2. Save the rest.
  3. Either: When my portfolio would sustain a SWR set in #1, and I love my job, then increase spending + giving each year to match the SWR of my portfolio while still saving the rest. I'm no longer dependent on my job, so I can retire/quit at any time in the future.
  4. Or: When my portfolio would sustain a SWR set in #1, and I would rather not work at my job, then either (a) retire, or (b) work for myself doing whatever I want, not stressed and dependent on the income.
This way, I prioritize saving early, do not allow my expenses to balloon to keep up with the Jones's, and I will have a smooth 'glide path' of spending+giving from my working years to retirement. Assuming my income only grows with inflation, I will hit #3 or #4 in 12 years with 6.5% real returns, and 25 years with 3.5% real returns. Hopefully my income will grow and those timeframes will be shortened.

Would this strategy help reduce your mental burden since you're no longer trying to hit a specific target end date?

Stormbringer
Posts: 553
Joined: Sun Jun 14, 2015 7:07 am

Re: Absolute vs percentage saving

Post by Stormbringer » Wed Aug 08, 2018 6:42 pm

Investing Newbie wrote:
Thu Dec 28, 2017 8:48 pm
Most of my internet research and posts on this forum suggest a percentage of income based savings rate. Although there is no consensus, 15-20% of gross income at a minimum seems to be the recommendation on the internet.
I think there is a better way.

The first thing I would do is create a retirement budget, expressed in 2018 dollars. You can account for the probability that your home will be paid off, you are no longer saving for retirement, you are traveling more, etc. Let's say you come up with a number like $200,000 a year (doctor's lifestyle and all).

Next, subtract social security from that. If you are both doctors, you 'll probably have decent-sized checks. You can get an estimate from socialsecurity.gov, but let's assume it is $2500 a month each for simplicity. That is $60,000 a year from your $200,000, leaving you with $140,000 to fund from savings. Note: maybe you reduce your SS by 25% to account for the sorry state of Social Security -- your call.

Typically people say you can safely withdraw 4% from savings at retirement, and adjust it each year for inflation. So $140,000 / .04 = $3,500,000 in 2018 dollars that you would need in your retirement account. You might consider padding that a little to give yourself a margin of safety.

Next, use a spreadsheet and lay out the next 30 years or so as shown below, with column for the balance at the start of the year, how much you add, the real return (minus inflation -- I used 6% - 2% = 4%) on the starting balance, and the year-end total that carries over to the next year:

Code: Select all

Year	 Start 	         Contribute	 Growth  	 Balance
1	 120,000 	 48,000 	 4,800       	 172,800 
2	 172,800 	 48,000 	 6,912       	 227,712 
3	 227,712 	 48,000 	 9,108       	 284,820 
4	 284,820 	 48,000 	 11,393 	 344,213 
5	 344,213 	 48,000 	 13,769 	 405,982 
6	 405,982 	 48,000 	 16,239 	 470,221 
7	 470,221 	 48,000 	 18,809 	 537,030 
8	 537,030 	 48,000 	 21,481 	 606,511 
9	 606,511 	 48,000 	 24,260 	 678,772 
10	 678,772 	 48,000 	 27,151 	 753,922 
11	 753,922 	 48,000 	 30,157 	 832,079 
12	 832,079 	 48,000 	 33,283 	 913,363 
13	 913,363 	 48,000 	 36,535 	 997,897 
14	 997,897 	 48,000 	 39,916 	 1,085,813 
15	 1,085,813 	 48,000 	 43,433 	 1,177,245 
16	 1,177,245 	 48,000 	 47,090 	 1,272,335 
17	 1,272,335 	 48,000 	 50,893 	 1,371,229 
18	 1,371,229 	 48,000 	 54,849 	 1,474,078 
19	 1,474,078 	 48,000 	 58,963 	 1,581,041 
20	 1,581,041 	 48,000 	 63,242 	 1,692,283 
21	 1,692,283 	 48,000 	 67,691 	 1,807,974 
22	 1,807,974 	 48,000 	 72,319 	 1,928,293 
23	 1,928,293 	 48,000 	 77,132 	 2,053,425 
24	 2,053,425 	 48,000 	 82,137 	 2,183,561 
25	 2,183,561 	 48,000 	 87,342 	 2,318,904 
26	 2,318,904 	 48,000 	 92,756 	 2,459,660 
27	 2,459,660 	 48,000 	 98,386 	 2,606,047 
28	 2,606,047 	 48,000 	 104,242 	 2,758,288 
29	 2,758,288 	 48,000 	 110,332 	 2,916,620 
30	 2,916,620 	 48,000 	 116,665 	 3,081,285 
Having done that, you get a sense of whether you will meet that goal or not. If not, plan for some adjustments such as additional savings outside of the retirement plan, a backdoor Roth account, or catch-up contributions when you hit 50.

Note: Everything is expressed in 2018 dollars. The actual amounts, balances and growth will be higher due to inflation.
"Compound interest is the most powerful force in the universe." - Albert Einstein

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Earl Lemongrab
Posts: 4966
Joined: Tue Jun 10, 2014 1:14 am

Re: Absolute vs percentage saving

Post by Earl Lemongrab » Fri Aug 10, 2018 1:17 pm

What I did was to put the max allowed into my 401(k), 30% in the later years (included some Mega Backdoor), max Roth IRA, and then just spend what I determined appropriate. I have never budgeted. Then all of the excess in taxable is invested in regular brokerage accounts.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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