EXPERTS | How Much Should You Have Saved At EVERY Age
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- čas přidán 6. 08. 2024
- 00:00 Intro
02:34 Fidelity
06:21 Financial Samurai (Super Saver)
09:27 T. Rowe Price
12:08 The Millionaire Next Door
Fidelity Links: www.fidelity.com/viewpoints/r...
www.fidelity.com/viewpoints/r...
Financial Samurai: www.financialsamurai.com/how-...
T. Rowe Price: www.troweprice.com/personal-i...
Some of my favorite books: amzn.to/3KF3tlr
Camera & equipment I use: amzn.to/3Z20lof
Disclaimer: Please note that this video is made for entertainment purposes only and not to be taken as financial advice. Always make sure to do your own research.
Join the family & subscribe to my channel here: / erintalksmoney
Thanks for watching, I appreciate you!
I think I can speak for everyone here when I say that we are glad that you decided to come back to CZcams. You've changed a lot of our lives for the better, and your videos are very motivational and informative!
Living debt free is a special kind of freedom.
Debt is awesome when inflation runs hot.
I do not meet the expected retirement portfolios. However, I've spent my entire adult life mixing work and travel so I've had a wonderful and adventurous life. Now, beginning 2024, I am fully retired. My income is modest, at best, but I have lived at or below my means. I heartily suggest people consider their life goals along with long-term saving plans. Life is short and fickle, and it would be nice to have some fun and some money to retire. Seriously, you don't want to miss out on all the fun, and then leave a bunch of money to somebody else!
I had initially planned to retire at 62, work part-time, and save money, but the impact of high prices on various goods and services has significantly disrupted my retirement plan. I'm worried about whether those who experienced the 2008 financial crisis had it easier than I currently am. The volatility of the stock market is a concern as my income has decreased, and I fear that I won't be able to contribute as much as before, potentially jeopardizing my retirement savings.
The increasing prices have impacted my plan to retire at 62, work part-time, and save for the future. I'm concerned about whether those who navigated the 2008 financial crisis had an easier time than I am currently experiencing. The combination of stock market volatility and a decrease in income is causing anxiety about whether I'll have sufficient funds for retirement.
This is precisely why I like having a portfolio coach guide my day-to-day market decisions: with their extensive knowledge of going long and short at the same time, using risk for its asymmetrical upside and laying it off as a hedge against the inevitable downward turns, their skillset makes it nearly impossible for them to underperform. I've been utilizing a portfolio coach for more than two years, and I've made over $800,000.
Mind if I ask you to recommend this particular coach to you using their service?
Leticia Zavala Perkins, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
The biggest flaw with using your income as a barometer for how much in savings you should have is when your income greatly exceeds what you can reasonably expect as a return rate. My income has grown by 277% since late 2019, there's very little in the market that could match that return. Not to mention with retirement accounts, there are IRS limits to how much you can contribute. Lastly, I think that using your expenses is more important is determining how much you need saved for your retirement.
Well said, but likely the "problem" for the minority (us too). Most who make plenty are quite aware the guidelines don't fit them that well. We're saving 60+% and the guidelines say we're average savers, on track but meh....lol. When we use our expenses instead of income, well, we're more than comfy, could have stopped working years ago. Always makes me laugh at the "Ignorance is bliss" expression. Nope, ignorance kills. Most would drop dead from shock if they found out they worked a decade longer than they needed to!
@@dstevens518 I think it depends on your situation, if you like your job, and the other part is these averages can't predict if you die of a heart attack at 68 vs if you live with reasonably good health til 98. My grandmother is about to turn 88, my grandfather died 10 years ago, she did not think she would live as long as she has with full mobility and mental acuity. For a lot of people, if they had average income and investments, living too long means not having saved nearly enough money. I think overall these types of videos should be regarded as a blueprint for financial beginners. It doesn't get into the upward revision Fidelity made earlier this year, that millennials and Gen Z need to invest ~30% of their income because the expected annual rate of return is going to be a lot lower for them, since their 20s-40s won't have IBM and Apple invented during their primary working years. It doesn't deal with what happens if you have a market crash during retirement in which you have to cash out a lot more shares to fund expenses, which defeats the purpose of living off of the investment returns. It doesn't get into different asset classes and the fact that "savings" isn't really savings unless it's actual savings, it's speculative investment.
it's not a flaw. It's using an xfactor of your gross income based on savings rate and average return on investment. That should yield a nest egg that allows for 40-60% of your retirement income need. Retirement income isn't intended to match your active working year income, unless you are planning on needing the same amount of income in retirement as you did in active work years. Of course, then, these figures wouldn't match.
I fully agree. It never makes sense to me that they keep using your salary amount and not your expenses.
Nobody ever said that all of your “retirement savings” need to be in “retirement accounts”. If you’ve maxed out your 401k and IRA for the year, just save in a regular taxable account.
I'm glad you closed with a comment about expenses. As someone who falls FAR short of the experts' ideal models, I'm still not concerned because I'm debt-free and my annual expenses barely break past four figures. One thing I would want you to speak on a little more is the different types of savings accounts (as well as the need for liquidity). I know that for myself, half of my money is in 401k, a third is in HSAs, and the remainder is in personal savings/investments.
The Millionaire Next Door stress do not buy a house that maxes you out financially
Seems like yesterday I started watching your videos! Glad you are still making them!
The numbers the pundits throw out there are so out of whack. If you live below your means you need WAAAAAAAYYYYY less than those multiples. Those pundits only talk about income and don't discuss expenses. The expense side of the equation is soooo much more important. Agreed there is no one simple answer. Retirement is very individual. I am soo glad I didn't listen to all the naysayers. I retired at 52 and am very comfortable in retirement. Did I say I am going on a 24 day cruise to the Med in 2 weeks?.
LOL, updated, you added the expense addendum at the end. I should have waited for you to finish the vid before I posted. Great job as always Erin!
Enjoy the cruise!
you probably ought to actually read what they are saying rather than just the headline. They are in fact all talking about expenses. How you generate income in retirement is not the same as how you generate income during your active years. Your accumulation phase during active working years talks into account your income and your savings rate to afford your retirement income needs. The models assume your expenses are lower in retirement. Perhaps instead of wasting needless energy getting WAAAAAAAAYYYYY bent over headline, you might want to actually read what is being proposed. You can say you retired at 52 and going on a 24 day cruise in 2 weeks all you want to justify or bolster your argument, but that means you are giving us a headline for us to assume things about you the same as you are assuming about these pundit headlines. Everyeone is more than happy if you are comfortable in retirement.
@@hanwagu9967 LOL
It's in financial institutions best interest to keep you invested in the market's cuz their 100% guaranteed their fat commissions and fee's regardless of how the markets perform ...
Just remember, it's your hard earned money 100% capital, at 100% risk for 30% of the profits, it's not their money, there at no risk for 70% of the profits.
This is why owner's of financial institutions like fidelity have a net individual worth of $30 billion, and the millions of investors (customers) are barley scraping by.
I mentioned fidelity cuz this video gave examples from fidelity, and remember fidelity is one of the better financial institutions, as the others Luke Prudential, black rock etc their fees are totally outrageous.
Manage your money yourself, don't pay outrageous fees like 1% as that 1% is closer to 2% with BS hidden baked in fees, plus the outrageous fund fees, these fee's will erode your profits enomorous over a decade, 2 decades etc
Pay yourself, by not paying mange fees, don't invest in any fund with an expense ratio that exceeds .35%
I believe most of these methods assume that retirement expenses will be 80% of your working income so switching to use your expenses as the input for income will throw these off and understate how much you will need in retirement.
When these factors are presented - no one describes if the "8x salary by age 50" or whatever refers to my STARTING salary, or my salary AT AGE 50. It seems to me it's a moving target. I started with a salary of $36k. Now I make a healthy 6 figures. I've had 10x my starting salary saved for quite some time. I do not have 10x my current salary.
I've assumed it is whatever salary you have at that age, not starting salary
My guess would be your salary at that time because you likely inflated your lifestyle along with a lot of that salary increase
I’ve thought of it as 10x the expenses I expect to have in retirement, in current year dollars.
@@NotThatKrakenthat’s also a way to think about it but you may also miss out on some expenses that way like not working in replacement cars, home maintenance, healthcare, etc. If you account for everything then it is a good benchmark.
I'd be a genius, my starting salary was $2.35/ hr.!
Erin, I always love your videos. At about 15:15 you nailed something that should be up first in nearly all advice by any financial advisor. Swap income with expenses. My only suggestion after that is for folks looking for retirement advice, is simply: expenses are what you spend now +/- what changes.
I think that the 20x expenses is so much more clear. Best one yet! Thank you!
Erin is posting videos like a boss!
Great video. Thanks!
Another good video and discussion Erin. For many of the very reasons you mentioned, I too like the range approach. Additionally, I feel that peopel newer to this challenge would be a little less intimidated and more likely to find something they can relate to and agree to doing. Personally, I don't like a net worth focus. Far too many people are reliant on their home or real estate to give them a false sense of security ... those values won't pay the bills. Have a great weekend Erin. Larry, Central Valley, Ca.
Engagement comment for Erin. Keep up the great work!
This is the video I am looking for, thanks for reading my mind!!
Erin, Another great video, One thing I remind my young coworkers starting out ,is that they’re in a sweet spot ,most are not married, no kids, and at this point in their life they can invest a ton of money in these years And begin that compounding interest machine and it gives them a little bit of room when kids come along and maybe can’t save quite as much but at least they have that chunk of money working for them .
I love your videos! I would love to hear videos like this but separated into different retirement ages! Like here's how much they say you should have if you want to retire by 50, 55, 60, etc. I know it's all relative to one's expenses but nonetheless it's still a good starting point!!
Powerful information 🎉
Fabulous video, especially valuable for young viewers. Thanks, Erin.
Thanks Phil!! 😊
Great information, Erin... Thanks! 😊
Thanks for watching!
You might also want to use your total savings divided by the factor Fidelity suggests to see if that gets the income you need. My paycheck pretty much doubled a few years ago but I still live with the same expenses as when I had the lower paycheck and I plan to retire next year. I don't need anywhere near what I'm making now to retire, so my current pay isn't relevant in retirement calculations.
Hi Erin…. Love your content. I counted 4 ads “within” the video. Based on a different video you posted, I let them run without “skipping”… Happy to support your channel in that way. Keep up the great content!
4 ads seems like A LOT! I am definitely not placing 4 in there - I select to place 1-2 per video - but CZcams has the final say!
@@ErinTalksMoney either way, you’re doing great! Keep it up Erin!
Great video for the avg person!
Erin, thank you for mentioning that pensions and a paid off mortgage is an important consideration regarding x salary saved. All to often this is not brought up in CZcams videos regarding financial matters.
Been here since the early days.
I appreciate the fact you showed a few different methods in this video. when I saw the first table and a 14x for retiring at 62 I freaked out a bit. I am looking at retiring at 60 and thought no way I can get to 14x, but then I looked at my tracking spreadsheet, and my forecast puts me just a bit ahead of the 14x salary at retirement, 60, so I think I am doing ok. I am 52 now with 7.26x salary saved. If I stay the course, I think I will make it.
What made me save as a hobby was how commercial banks treated me when I was twenty. So I saved 20% of my annual income and took advantage of maximizing company matching program. Now I never look back and, look forward to finding new investments. I never talk about my wealth, drive an old truck and do all my own household repairs. Seriously the value of doing your own repairs is greatly under appreciated by most all investors.
Love your videos! Being a military spouse, have you done any videos that focus on military retirement and how the pension affects everything? I love sharing this content with my troops and peers. Thanks again for everything you do!
I haven’t but I was just told that May is military appreciation month…. so I will be putting out a couple videos during that month. It gives me a bit deadline that I have to stick to. 😊
there is no such thing as a US military pension.🤣
Hah! I spent this whole video waiting to make sure the flaw of all of these methods (using salary as a proxy for expenses) wasn't mentioned, and I'm glad I did -- it was a photo finish, but you did bring it up! It's extremely true, as well, and more true if you're a big saver.
Because believe it or not, you won't need to continue saving for retirement once you're retired. It does help to be critical of yourself, though: how much are you *actually* spending/saving, and will that spending realistically continue into retirement?
I'm also glad the TMND author mentioned the flaw in his formulas -- that they don't work for younger folks. I'm 38 and my income has quadrupled so far in my career, and that formula makes me look like I haven't saved anything despite having saved 10% of every dollar I've ever made.
these methods aren't using salary as a proxy for expenses. Where do people come up with this assumption? TMND flaw is using net worth.
Great video Erin!
There are a few things that get overlooked in the Fidelity recommendations though. For instance, of my gross income last year, about 33% went to taxes and insurance directly off of my paycheck. Of the remaining, over 50% went to retirement savings. This means that I comfortably lived on about one third of my gross income. 100% of my wife's income went to savings. If I hit the 8X number by 60, there will be way more there than we will need for retirement, and this isn't even including both of our social security payments.
Taxes and insurance don’t exactly go away in retirement.
I like the model based on expenses instead of income.
🤣 I invest with Fidelity which BTW is owned largely by Communist Chinese. Fidelity put my cash in bank of Hong Kong. See twenty-five companies people believe are American owned.
I'd love to see this channel collab with the money guys, Caleb, or one of the other popular financial channels. Your presentational style is really professional and you deserve a lot more subscribers.
One of my questions after this video is the allocation of these saved assets. Are these mainly referring to tax advantaged retirement savings? Should we have considerable liquid cash reserves as well? If yes, how much of each, or is that all in addition to these guidelines? I feel like there's never enough guidance on specific savings allocations between various asset and account types vs the generic "have this much saved"
Caleb provides idiotic advice. TMG are just out to sell you on their "program." You need to go to the source material. For Fidelity, it uses its target date fund asset allocation to determine asset growth to determine the mulltiplier.
You should consider coming up with an expense equation. I, basically, used that to decide how much I would need. I even put in a basic 3% annual inflation rate. Before everyone says, “you totally missed that one”, there were a few years of basically no change in my expenses.
I've been mulling over how to best invest my money to get a decent ROI to replace my weekend wages. I was looking at CDs, Bonds, Vending machines, brokerage accounts, rentals. What I actually need to do is buy solar panels. They make sense in my area. That will lower my expenses. Eureka!
I base NW off income (grounds up view) , but to satisfy the partner, I compare NW against percentile by age (like 75 percentile for 40-45 year olds) (top down view)
One of the originals here still watching.
I’ve always saw these and questioned the X times your income. If you for instance make $100k and have a high savings rate and only live off$60k per year and contribute everything in brokerage and Roth is that $60k times 3 or is that 100k times 3. I think the first example would be more accurate.
Keep the videos coming
We could pay off our mortgage fast if we wanted to. Mid-30s, decent paying positions and bought first house right at the beginning of covid for only 265k with seller paying closer cost and only 3.1% mortgage. House is obviously worth around 380k now post covid... So we could literally pay the house off in a few years if we wanted to. Only thing stopping us though is that with that 3.1% mortgage rate, its lower than the 4.5-7% we are receiving on various CDs, Treasure Bonds, and and High Yield savings.
Only have 7500 left in student loans, with just 1.9%, so im in no hurry to pay that off if i get more money investing my money than paying loans off early.
I adjust the fidelity guidelines to my income at each age milestone to compensate for inflation
I admire your approach and value the information you share!
There are many people, some who I hope have found your channel who are low-wage earner's.
It is critical to understand that it is very difficult to overcome low earnings.
My hopes is you help these people realize 15% or even 25% doesn't move the needle as much for low-earners.
Additionally, Social Security income isn't very liveable for this class.
If your at $15 hr. = $30,000 yr., you may want to save till it hurts and pray you're able to make it work.
Please people, listen to Erin!
hogwash! it is not very difficult to overcome low earnings. People simply make the choice not to improve their situation. My dad worked two jobs and my mom worked one job and one part time over the summer to improve their situation when I was growing up.
I base my ability to retire on expenses. I've used quicken for personal finance over the last 20 years, so I know exactly what I spend each year. Amazing how it does not change that much year to year. I've also invested 33% of my income into a 401K for the last 12 years. Therefore, I do not see gross income as a useful gage.
Thanks!
Thank you!! 🙏
I can't find you on Patreon.
I don’t have a Payreon at this time 😊 maybe one day
We'll. I've been listening to you for years. I'll start "tipping" you after every video. Just curious: are Patreon's terms unappealing? I'd assume your channel would do well...
Erin, when you mentioned that the "Millionaire Next Door" book was a couple decades old I had to look up when the book was originally published and use inflation calculator to figure out what that Millionaire back then would be worth today. The book was originally published in 1996 so a next door millionaire today would not be nearly as wealthy (in buying power) until (s)he had a net worth of $3,600,000 today. We have to realize, especially now with inflation FEELING like it is running high despite the FEDs saying it is only 3%, that setting your goal at a Million dollars is not nearly as lofty as it was 28 yrs ago nor will it buy much 28 yrs from now if inflation isn't reigned in on very quickly. I was talking to my brother today and he was telling me that MANY of the restaurants he went to 4 yrs ago have DOUBLED in price-- especially when you consider that not only have the menu prices increased but the percent you pay for tips has also increase 20-30% over what customary tips used to be. Your reinforcing the "save until it hurts" is good advice.
There is the updated version of the updated called The Next Millionaire Nexdoor. That came out in 2019. Please do a review.
The answer is always to detach my expense from my income. With physician level income and poor student expenses, most people will be able to retire early / comfortably.
Not easy in several places woth my method but that is why I am having fun.
Please could you look at how someone might 'die with zero', the idea being you optimise the value from your entire portfolio before you exit. The tricky bit is obviously knowing when the end date is, but also what's the best way to release value from your home, sell and rent or equity release?
czcams.com/video/0SM3gBPSFOc/video.html
You cannot use your expenses for a tool asking for your income. For example Fidelity assumes you are only going to spend 80% of your income in retirement, but you may have to pay 100% of your expenses in retirement.
Do you know if the Millionaire next door formula that includes net worth, should we include total net worth including home or just the investable asset net worth?
My wife and I are both near 40, I’m older, she’s younger. We were pretty far ahead, but both got raises in the past 2 years and are now behind. Do most people go through this around this stage of life? Wife coming back into work force and getting multiple promotions in a short time?
Good content, but is the TV behind you too high for comfortable viewing?
We retired at 57 and 66. About $2.5 in savings/investments. It was the best time for us. We are still doing great at 63 and 72. It is an individual decision. We have a brand new house and two new cars (paid for).
When you say savings, do you mean money put into an actual savings account or an investment account? It sounds like the latter. Or is the term ‘savings’ mentioned in the video a combination of both?
Great video! I have one observation, though. Late in the video, if I understood correctly, you suggested swapping expenses for income in applying these multiples. I think if you do that you are going to end-up with an unsustainable withdrawal rate of up to 7%-10%, depending on whose number you go with. I think the institutions coming-up with these multiples may have used the old 4% rule to back into their numbers. As an example using simple numbers, if you make $100k per year, spend $80k per year and social security will cover 45% of your expenses in retirement, then using the 4% rule you would have to cover $44k in expenses (55% of $80k). Multiplying that by 25 (1/4%) you would get a needed nest-egg of $1.1M. If you take the $100k of income and multiply it by 12 (around the middle of the multiples from the sources in the video) you get $1.2M. That's pretty close. That's a long-winded way of saying that if we use the multiples in this video as a rough guide, then we probably should not swap out the income number for the expense number. We'd probably run out of money.
agreed. The Fidelity multiplier assumes 45% of your retirement income needs will come from your investments, so swapping out multiplier from income to expenses would alter the math.
You are asking two questions. How much should your retirement account have at certain ages and how much should you contribute. These ae somewhat separate. First, as money contributed in early years, has the longest to compound, in many ways this is the most important time to contribute as much as possible. In fact if you sacrifice at this time, you can lighen up when you are older. On the second question, I think the only number that maters is the final one, when you are ready to start withdrawing or "retiring" But the 10x guide is probably a good one for a person retiring in their mid 60s.
Income is an interesting question - if you have a lot of assets, you probably have both earned income and investment income. This will make your savings seem lower compared to your income, even though it's your savings that are generating that income.
Can you do a video that takes into account pensions? For example, in 7 years I’ll begin collecting a $36K a year pension beginning at age 38, for the rest of my life. If I want to retire at 60, what is my target?
Thanks for the video. The millionaire next door author should scrap their formula though. I get that he says it doesn't work well for under age 40, but it's still trying to model something exponential with a linear formula. So it's just a wild guess
Does the Fidelity chart go back any younger than age 62? Would it be fair to extrapolate that if a person were to retire at age 50 that their savings factor would be something like a 24x savings factor? Basing that number upon the age 62 to 67 difference being 5 years and 4x and the age 65 to 67 being 2 years and 2x, and the age difference from 50 to 67 being 17 years so three 5 year blocks of time at 4x and one 2 year block of time at 2x?
When you (or Fidelity, T. Rowe, etc.) mention "savings" are you referring exclusively to retirement savings in 401k, IRA, Roth? Or all investable savings (we have a brokerage account for near-term objectives: 2-5 years from now)
Targeting your annual income is tough. Its a floating target. I wasn't even making $50000 in my 20's, Now I'm in my 40's and I'm in the 6 figures and I don't know where I'm going to be when I retire. I think its more beneficial to base the multiplier off of what your expenses are likely to be. I am at a 45% savings rate. I can live comfortably off off 55% of my current income.
Agreed. My income has gone up so much that even if I saved 100% of my income in my 20s, the stupid MND formula would call me an undersaver because it uses current salary x age instead of current expenses x age
How is inflation/level of price in the future accounted in? How is it factored in that the many left in the bnk, while withdrawing, can still make a reasonable return in safe assets... missing that
These studies also neglect the major milestones in people's lives and how dynamic incomes are. If you make $50k/yr at 40 and happen to get a new position or promotion that makes your salary $100k at 41, these calculations will make you feel like a failure because you obviously wouldn't have accumulated 4X your current salary of $100k.
no, they assume income escalation. The calculations can't make you feel anything: your feelings are a you problem.
@@hanwagu9967jesus christ dude take a day off the internet
@@adamp6320 seems you may want to take your own advice...better yet: get a rubber ball and squeeze it to relieve your pent up emotions. Seems if you dislike my being on the internet you have an obvious you problem.
Ok one question? For couples or each
I think one of the problems of using these metrics is that they sort of assume that income growth is linear as one gains experience. However, that is not always the case and it could very well be someone is making more money at a younger age than they are when they are older just because they had to switch fields or take up a lower paying job after a lay off.
You tube us something else. I had to resubscribe. I can't imagine how they can mess up something so simple as remembering your subscription.
I have a few income streams but at the moment they just drip income not stream it. :(
Most people at these milestone ages don’t have these amounts saved. Most people are going to be working into their 70’s. The culture now is YOLO and there’s going to be more tent cities in the future. A lot of boomers are into retirement now and experiencing this.
Does any brokerage firm consider you may be able to live on Social Security alone?!!! I don't regret saving more than I need, it just gives me more options. And, retiring at 56 was plenty early enough.
Rather than these "milestones" just plug your current data ( age, expected retirement age, current retirement savings, contributions, pension and expected inflation rate) into a retirement calculator such as Fidelity or T Rowe Price. Make adjustments from there.
As a 24 y/o, I find it very hard to look at retirement calculators, but none of them are talking about how I most likely will not have social security. Retirement money will need to be expected to 100% come from me. It’s frustrating
It's not just compound interest, it's compound growth in your investments. Also, I don't believe in the salary multiplier. Currently, my salary is far above our needs, hence why we can save excess in retirement. Getting to 10x to 15x is not reasonable.
I think income is used rather than expenses because most people don’t know their expenses. I also think some people are intimidated by the saving percentages because they don’t include employer matches. If you are making $100k and saving $5k but getting a $5k match, you are saving 10% of your income not just 5%!
Not all companies do match.
For example my company does match but max at 3%.
My wife's company is doing 5% but prior years it was up to 8%.
Each company is different so you do not include the matching in your savings.
It's your own % and that's it.
I don't understand why it seems that every finance advice I see based numbers off income. It's expenses that matter.
Does this amount includes both a 401k and a IRA combined?
When they talk about yearly income are they talking about gross or net yearly income?
I'm always so confused whether the example used 65k net year income or gross year income.
I keep seeing these videos about how much we SHOULD have saved or how much we should be saving. And I have to stop watching them. as an older person who's exwife wrecked his life plan who is now WAY behind these stats - it just causes too much stress and anxiety.
I hope it goes okay for you. True that other variables such as job loss, divorce, fraud and illness, even aging parents can wreak havoc on our best made plans.
Retirement planning is difficult. I'm 47 , I'm eligible for pension at 60. Currently saving in a Roth 401k with 9% pretax, and 11% after tax. Along with 300/month in a Roth IRA. Being single I'm sure I'll be fine...but there's always that bit of doubt. And what of SS.
I use gross income so that my target is higher than what I actually need. Better to save more than enough than not enough
I hope this Fidelity math works. I'm currently at 13x at 63, I have a 2.6 ratio. I may tell my boss bye bye this year :)
Really great content in general, but at some point, rules of thumb break down once you exceed a certain dollar figure. For example, say 55 year old with $6M in assets - can you retire? Yes, you can. The question I have been asking myself is "How Much Is Enough?" You make a million, then you want another. You make your second million, then you want four. Then you want eight. Then sixteen. Do you do this forever just to realize that when Financial Samurai says "Enjoying Retirement", he actually means hip replacement surgery? Even at a 5% rate of return, that's $300K taxed at the long-term capital gains tax rate, rather than the tax rate that makes you scream "where's my personal aircraft carrier?!?" every single year. Fidelity would tell you to save as much as you can, work until you die, and invest your money...with Fidelity. The rules of thumb break down.
Been here since the beginning! 🙋🏼♂️🙋🏼♂️🙋🏼♂️.
I don't use any of them, for several reasons. The first and largest, I have a pension compensation package that exceeds 6 figures and that's inflation protected. My wife (when she retires) will have a Federal Employee pension. I'm retired military and I have Tricare. Most retirees have to account for large medical needs in retirement - we do not! Additionally, I have VA healthcare where everything I need, including dental, is covered. We don't have many things to worry about in retirement.
You don't need 8x if you are just maximizing income in order to retire early. I need 4x income making $250k a year and saving 70-85% of what Ive been making the past 5 years.
I did the second calculation and came up with a result of about 2.65. Guess we're doing ok. And there were a lot of years in there where our household income was a heck of a lot less than it is now. I made a rough guess at what more of an average income though the years would be for us and came out above 4.
But I agree, income is a poor measure. We have about 12x our annual gross household income saved for retirement. But we've been saving so much for retirement (making up for lost time is hard!) for so many years that we don't need that full income - we are comfortable living on less. I'll get a raise when I retire ;)
of all the formulas the millionaire next door one is the most flawed. First, it doesn't actually attempt to calculate your nest egg need for retirement. Second, the formula spits out accumulator of wealth value based off of the millionaire next door sample data. Third, net worth value is heavily skewed in the millionaire next door, because it treats businesses the same as individual and treats whether you have $800k worth of beanie babies the same as $800k of investable assets. As far as income as multiplier, you along with so many other people on here don't actually read the methodology or misinterpret what is being presented. Expenses are the target for the multiplier formulas using percent of income to yield 40-60% of retirement income need. retirement income is the same same as retirement expenses.
@@hanwagu9967No worries, I don't put any amount of faith or value in a little calculation like this. It's just a fun little thing to do to see what the result will be and it's something to chat about. Our financial plan, which I have put more work into, shows a post retirement expenses of a certain amount a month after taxes (pretty much what we're living on now), and between retirement investments and the brokerage account we're good to pull out a fair bit more than that - and that's ignoring any income from social security or from rental on farmland we own. And it's also considering a pessimistic rate of return on investments and inflation. Add those other income sources in and it looks even better.
How do you save up and also have money saved up for home upgrades like siding or kitchen etc? I try to save as much as I can but if I save up that type of money it's that much money I've lost out in the market. Then if I put that money into a retirement accounts I'm losing out even more cause I wont have access to, or if I take from my roth I lose out on that growing since you can't put that money back once it's out. Do people put money into a normal brokerage account to try and grow enough money to do these big types of upgrades/fixes to their homes? Thanks!
It's called a budget. Divide the savings into categories. This much for you 401k, that much for home upgrade, then what's left over put the rest as an individual Ira account.
It's that's easy, each year.
@@kevinacker9843 Is it better to save in high interest savings or put it into a brokerage, or is it really how people feel is the best way? Thanks!
If you are debt free you dont need that much particularly if you have a pension, which I have
You aren’t wrong, but you also aren’t really helpful with the comment. (I have a pension as well.)
Since you don’t want to become someone complaining about living on a fixed income, you should still run some numbers about your expected retirement expenses and develop a suitable investment plan.
In Stop Acting Rich by Thomas Stanley that came out in 2009, 86% of the people driving the BMWs, Mercedes, Lexus are not millionaires, but those driving the bland Hondas and Toyotas.
BMWs were 4th. Stop Acting Rich and TMND are both flawed because they use net worth millionaires. Someone with a business asset value making them a millionaire and earning only $13.5k/yr income (averaage self-employed) may be a net worth millionaire but of course aren't going to be able to afford even mid-cost cars.
and yet all the millionaires I know drive porsches, range rovers, and teslas. Millionaires are not that uncommon anymore thanks to inflation either
Correct formulas, retired early at 58., its a piece of cake.
Goal is to save 15% to 20% of your income each and every year in the company's 401k.
plan.
Very easy to do.😊
Running numbers off of wealth/savings and expenses makes SO MUCH MORE SENSE than using income directly. Yes, income affects what you can save and spend.
Income is the most "transitory" of the three, and the one you have the least control over.
I’m not judging your personal experience, but it hits me as though did/ interesting that you don’t have control of your income. My income has increased every year of my life and I can identify steps I’ve taken to make that the case. That’s not a brag but sharing my experience. I’m nearing 50, so it’s been sustained for quite a while. I wouldn’t take your statement as an absolute that applies to everyone.
wealth is not the same as savings.
I have $10,000 saved up in retirement between roth ira and 401k. I have about $12,000 saved in liquid cash. About $3,000 in HSA, and I have about $11,300 worth of collectibles (net profit $4,200 according to FMV). I'm 24 years old, but I have $20,000 in student loan debt. Am I on the right track or not?
For high income earners these numbers don't make sense. For example if you make $220k and you're 53 then you should have $1.5 M in retirement accounts ( NOT NET WORTH )...just retirement accounts. This is nuts. Because this implies that you'll continue to need $220K per year in retirement. You won't. You'll need $100K max. So all you really need is $700K-$900K at that age. It just doesn't apply at high income levels.
Love that you don’t follow just one persons advice!
Love the video and exactly right. We were going to say that use should use expenses, but instead, we would use income needs.
Something we liked on this video was that it didn't mention the dreaded 70% income replacement.
These methods also don’t account for Roth as they have more spending power than traditional accounts.
Wish I had saved and invested back then at around my 40 only have a little over 15k savings 😂. Now for me it a race to the finish line 😊 going to buckle down and live off Rice and beans
Surprised Fidelity don't seem to understand compound interest
The idea you have to make the same in 30s, 40s, 50s I expect is why so many have little or no savings for retirement as the first 100k is much harder and slower than 400k-500k which is a lot more down to interest rather than having to put a lot in.
I'm sure people give up early as you'll fall behind at the start but catch up and likely pass these targets if you kept going.
Surprised people make surprising conclusions about something they haven't actually read. You are correct that over time return on investment should surpass and comprise more of your nest egg value than contributions; however, the Fidelity model doesn't assume constant earnings from 30s to 50s. You don't know what you don't know, and you don't know what you are talking about since you didn't actually reaad Fidelity's methodology.
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All those guidelines suggest I should already have over 1M. I’m so late to the party!
Save 10% when tje market is greedy save 25% when the market is fearfull.
How do you anticipate increased salary over time. If I'm 30 and my salary is $50K, 10X = $500K. However, It could be that by the time I'm 60, my income is $100K. So, should my target actually be $100K?
Egad, use expenses, not income. Things become much clearer then. You'll find all those raises just mean you're getting to FI faster, and that produces ELATION, not confusion and frustration....
If your expenses stay the same at $100K income level as it did with a $50K income use the $50k numbers. If your cost of living creeps up then you need to use the new numbers.
@@dstevens518 that's not how the math and methodology works.
the multipliers assume salary escalation and savings contributions over time. For fidelity multiplier, if you are 30 with $50k income, then their formula is for you to have $50k saved at 30. When you are 60 with $100k income, then their formula says you need $800k saved at 60.
I retired at 35 years old last year 2023 I save 100 times of my income on my investment to retired comfortably.
These guidelines that use income as a benchmark frustrate me. My income has gone up significantly over the years and will continue to go up. I will reach my max earning potential the last 4 years before mandatory retirement. So I will never reach these benchmarks prior to retirement.
it assumes you increase contributions as your income increases, since it sues % of income into savings. If you are saving less than that %, you wouldn't reach the xfactor amount.
@@hanwagu9967 I understand that part of it, but let’s say that instead of your income making a steady rise each year of your career, it takes a parabolic trajectory the last 5-10 years of your working days. They seem to set the benchmark based on your income just prior to retirement. Even if I save 100% of my income, I won’t be able to hit that benchmark nor do I think I will need that much money in retirement.
@av8rgrip I think it's just a nice calculation and she did say some of us live below our means.
Yes the formulas based on income assume a steady gradual rise in income over your career. If you double or quadruple your income in a decade then you would have to save ridiculous ratios of your new income to hope to catch up (or make some killer investment returns). However if you based the formula on 20x your current expenses, you'll probably be okay and it also shouldn't swing wildly when you get a 20% pay rise for moving jobs.
@@adamp6320 thanks. lol, my expenses probably aren’t realistic right now either. Kids aren’t all on their own yet, and I carry a fair amount of additional insurance because I have to remain healthier than the average person to maintain my job. Certain medical conditions would put me out on medical where the average person could keep working. I’m also putting a lot of money into a house we inherited, which may end up being our primary residence. Long story longer, lots of balls in the air. I’m just gonna do the best I can to save as much as I can. I seem to be ahead of the pack at this point.