| Posted by | Message |
Zach 
LSU Fan
Member since May 2005
55471 posts
| 20% saving for retirement??? (Posted on 11/3/12 at 8:54 am)
Eliz. Warren is running for Senate in Mass. against Scott Brown. A few years ago she wrote a book on personal financial advice. In it she recommended that as soon as you enter the workforce, let's say at 22 when you graduate college, you should put 20% of your income into a retirement account.
Questions.. Is that realistic? And, if so, for how many people?
|
| Back to top | Share on  |
GoCrazyAuburn 
Auburn Fan
Member since Feb 2010
9090 posts
| re: 20% saving for retirement??? (Posted on 11/3/12 at 9:13 am to Zach)
Realistic, can be, however most don't have the discipline to do it. I did that for a while when I just started working and my expenses were very low.
|
| Back to top | |
Bayou Tiger
LSU Fan
The Woodlands, TX
Member since Nov 2003
2939 posts
| re: 20% saving for retirement??? (Posted on 11/3/12 at 9:21 am to Zach)
Not only is it possible, but there is no better time to do it.
When I got out of college, I set up that much for 401k payroll deduction with my first paycheck and never missed what I never had.
Even though that was not the best choice for a savings vehicle (nor was the 15-year home loan I got a few years later), I didn't really have enough maturity to save something that was not automated.
With more financial maturity now, the 401k deduction is only enough to get the match but I save in other ways.
|
| Back to top | |
LSUKTR
LSU Fan
Baton Rouge
Member since Nov 2005
925 posts
| re: 20% saving for retirement??? (Posted on 11/3/12 at 9:28 am to Zach)
One thing that's never been clear when we ask these questions is are we referring to pre-tax or post-tax? So for simplicity, assume a $100k salary. So if you put $17k pre-tax into a 401k, do you put $3k post-tax into an IRA/Roth IRA? Or for 20% do you put $2250 post-tax IRA/Roth IRA (if assuming 25% tax rate)?
We always throw around these percentages, but I rarely see it mentioned if we're talking gross income or net income.
|
| Back to top | |
Zach
LSU Fan
Member since May 2005
55471 posts
| re: 20% saving for retirement??? (Posted on 11/3/12 at 9:35 am to LSUKTR)
I don't think it's realistic for the vast majority of Americans. When I was 22 I saved money for:
a. Buying a house so I didn't have to rent.
b. Buying the next car so I didn't have to finance.
c. Emergencies.
My savings for retirement was more like 10% and I thought that was pretty disciplined.
Keep in mind, most people don't make 100K a year. To save 20% they'd have to stop eating.
|
| Back to top | |
Layabout 
UNO Fan
Baton Rouge
Member since Jul 2011
4478 posts
| re: 20% saving for retirement??? (Posted on 11/3/12 at 9:55 am to Zach)
Sadly most people don't wake up to the reality of retirement until they're in their forties and then it's too late to catch up because time is no longer on their side.
|
| Back to top | |
dlmast87 
Ohio State Fan
Ohio
Member since Dec 2007
1113 posts
| re: 20% saving for retirement??? (Posted on 11/3/12 at 9:57 am to Zach)
It is possible if you have the mindset. My motivation to save is seeing a lot of our elderly living off only social security, barely making it because of poor decisions in the past. I want to reward myself in retirement and will do what it takes to get to my "number." My wife and I are currently saving 18% of our post tax income in a 401k and two Roths and the only reason I'm not saving more is because we are saving heavily for a house, vehicle, and a small vacation/emergency fund. My wife and I are in our mid 20s and early in our careers so our income is far below 100k but we're still able to do it.
|
| Back to top | |
foshizzle
LSU Fan
Member since Mar 2008
25157 posts
 Online
| re: 20% saving for retirement??? (Posted on 11/3/12 at 11:13 am to Zach)
It may or may not be realistic for a lot of people, depends on how much you spend on stuff that isn't discretionary, like food and kids. But it's certainly possible if you tighten down on costs, I'm doing it today.
|
| Back to top | |
Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
115780 posts
Online
| re: 20% saving for retirement??? (Posted on 11/3/12 at 12:18 pm to Zach)
quote:
Eliz. Warren is running for Senate in Mass. against Scott Brown. A few years ago she wrote a book on personal financial advice. In it she recommended that as soon as you enter the workforce, let's say at 22 when you graduate college, you should put 20% of your income into a retirement account.
Questions.. Is that realistic? And, if so, for how many people?
Probably not realistic for most people
I can do it now only because my income far exceeds my lifestyle
But if you're making 30K a year, it's not likely you'll be able to do it unless you have a car paid off and have roommates.
|
| Back to top | |
JWS3 
Purdue Fan
Baton Rouge
Member since Jun 2008
2502 posts
| re: 20% saving for retirement??? (Posted on 11/3/12 at 12:49 pm to Powerman)
quote:
But if you're making 30K a year, it's not likely you'll be able to do it unless you have a car paid off and have roommates.
Everyone has what they consider a minimum standrard of living, but beyond that the key to saving is to make it automatic and somewhat invisiable. When I started investing 35 years ago, everytime I got an increase in pay I would increase my savings contribution the same amount. I had been living on my existing salary for the previous year so I figured I could live on the same amount it for another 12 months. Doing this had me maxed out in only a few years, and I never missed the money.
This post was edited on 11/3 at 12:53 pm
|
| Back to top | |
JHPREJEAN
LSU Fan
Watson, LA
Member since Jan 2012
15 posts
| re: 20% saving for retirement??? (Posted on 11/3/12 at 4:18 pm to JWS3)
It depends on your income and expenses, but when I graduated college at $32,500/year, with a small family, there wasn't enough money to put 20% away. Doing so would give you $26,000 after pre-tax savings.. less ~10% taxes (fed/state/fica) leaves you with $23,400 to live on, assuming you don't have to pay for health insurance because you're still on your parents plan. That gives you $1,950/month.
This is whats left to pay the mortgage (or rent), utilities, car notes, car insurance, cell phone, gas, and groceries, unexpected expenses, plus any other debt payments you might have (student loans, credit cards).
|
| Back to top | |
matthew25 
Ole Miss Fan
Member since Jun 2012
1530 posts
| re: 20% saving for retirement??? (Posted on 11/3/12 at 10:17 pm to JHPREJEAN)
My gameplan has always been 15%. Company match of 4% so I put up 4. Then I invest another 7% at TD or Scott or Vanguard.
The 401k is a myth if you want to retire with money. In 10 years with my 401k, I have amassed $100,000. Even working 40 years, with compounding, I am not going to be secure, so the 7% is the key.
|
| Back to top | |
jimbeam
LSU Fan
Patrick F. Taylor
Member since Oct 2011
16200 posts
| re: 20% saving for retirement??? (Posted on 11/4/12 at 12:46 am to Zach)
How much does each increment in percentage equate to either lifestyle once retired or how soon you can retire?
Say the usual 10% vs this 20%. How much sooner could you retire?
|
| Back to top | |
Zach
LSU Fan
Member since May 2005
55471 posts
| re: 20% saving for retirement??? (Posted on 11/4/12 at 8:27 am to jimbeam)
quote:
How much does each increment in percentage equate to either lifestyle once retired or how soon you can retire?
My lifestyle was austere. But I know that if I had saved 20% when I was 20-40 years of age I would have lost money I saved in interest on car notes and mortgages. Because I wouldn't have enough saved to pay cash for cars and big down payments on my houses.
|
| Back to top | |
dewster 
Maryland Fan
TN
Member since Aug 2006
4447 posts
| re: 20% saving for retirement??? (Posted on 11/4/12 at 8:51 am to Zach)
I'm at about 18% and it's not easy.
|
| Back to top | |
yellowfin 
Illinois Fan
Paige is Pretty
Member since May 2006
51965 posts
| re: 20% saving for retirement??? (Posted on 11/4/12 at 9:43 am to Zach)
only if you want to retire at a reasonable age
|
| Back to top | |
Breadcrumbs
LSU Fan
Baton Rouge
Member since May 2005
2797 posts
| re: 20% saving for retirement??? (Posted on 11/5/12 at 3:07 pm to jimbeam)
quote:
How much does each increment in percentage equate to either lifestyle once retired or how soon you can retire?
I think I read in Smart Couples Finish Rich or something...10% savings for basics in retirement 15% for comfort 20% for luxury lifestyle.
|
| Back to top | |
ItNeverRains
LSU Fan
Franklin, TN
Member since Oct 2007
4611 posts
| re: 20% saving for retirement??? (Posted on 11/6/12 at 6:41 am to Breadcrumbs)
It's all relative to income. You make 200k and put 10% away for 30 years you'll be fine barring ZA.
|
| Back to top | |
jso0003
Auburn Fan
Birmingham/Atlanta
Member since Jun 2009
4459 posts
| re: 20% saving for retirement??? (Posted on 11/6/12 at 8:20 pm to ItNeverRains)
quote:
It's all relative to income. You make 200k and put 10% away for 30 years you'll be fine barring ZA.
Yes, because so many people start out making 200k per year.
|
| Back to top | |
fishfighter
LSU Fan
Baton Rouge
Member since Apr 2008
11229 posts
| re: 20% saving for retirement??? (Posted on 11/7/12 at 3:02 pm to Zach)
quote:
Questions.. Is that realistic? And, if so, for how many people?
Very unlikely. Look at it this way. You finish school, get a job say paying $65k a year to start. Now you get married, have a few kids. Say by that time you are making $80K. Well, a house is going to cost an easy $1200 a month, throw in car notes, insurance for both and then health insurance. That's another 1800-2k a month. Every day expence for day care or school, that's another 5k a year per kid. Now house expence, throw in around $700. Put all that together after taxes, you don't have shite left. 
20% is very high at the start of your life. I wasn't able to put that much in till I finished up with the kids. Before that, I was able to save around 12%.
|
| Back to top | |
