And this is why I likely won’t be able to retire. At a recent retirement meeting my company gave, they said that people should be putting 15% of their income into retirement. However, I can’t afford to do this. Not even close.
I live a pretty frugal life. I don’t vacation. I rarely go out to eat or order food in. I plan my meals and only buy what we need. I drive a 14 year old car that’s paid off. Still, my expenses, while less than my income, wouldn’t let me reduce my pretax income by 15%.
I’m 48 and I doubt if I’ll have 20% of the figure above when it comes time to retire.
And still 700K for retirement is still low since I’m sure they’re using the US median salary and the old adage of saving 10 times your salary for retirement. So far every place I’ve worked and attended the financial seminar, my own retirement manager, and my sister who works in the industry have told me you really should be saving 15 - 20 time your salary if you want to live comfortably.
So to me what this article is saying is that you’ll need that just so you can live pay check to pay check through retirement and still be stressed the fuck out and at risk for being homeless in your golden years.
I assume you’re in the US? Because many other developed countries rely a lot less on private retirement savings and a lot more on public retirement programs in order to get everyone covered.
Of course, that means higher earners would have to pay more into programs similar to social security through taxes to cover lower earners, which many Americans are not willing to do.
Now, I don’t know where you live, but Canada at least has old age security (and a pension plan) that should offset a good chunk of your expenses when you retire.
That’s in addition to whatever you do manage to put away.
However, it really helps if you own a home and are mortgage free by the time you hit retirement age.
I do own my house and hopefully will be mortgage free by the time I retire (or hit retirement age). I’m in New York State. Social Security would theoretically help, but who knows if it’ll be around in 30 years. If it’s not, I’ll be working until I’m 90. If it is, I might be able to retire at 75. Assuming I don’t have any large, unexpected expenses (which is a huge assumption).
US also has Social Security to help fund a basic retirement but it’s pretty minimal. It is enough to keep you from living on cat food
I also can’t finish paying off my mortgage before I should retire and given rampant ageism, I don’t know whether I’ll be able to find a job that long. And Social Security won’t cover my mortgage plus utilities
And even worse, Social Security needs adjustments to be able to continue meeting its commitments. The longer our political leaders avoid that, the more impact it will have when they are forced to do their jobs
What’s your employer match for you 401k? that 15% saving should be the savings after your employer match. So if you have that, you might be able actually sacrificing less than 15% of take home pay to save fore retirement.
I’d have to look it up. My company actually just changed the entire system to help out younger employees - but with the effect of hurting employees who have worked here longer. So it actually ends up being harder for me to save up. They acknowledged this, but argued it off as not affecting that many people. (Not many people - just the folks who stuck around the longest!)
The explanation we were given, though, was that 15% came before the matching. So I should take every $100 I earn and stick $15 into my retirement fund. Then, of course, I’d need to put some into healthcare, some into taxes, and some into basic costs of living. Then, when I’m done, I might be lucky enough to have a shiny penny left over. Unless I have any unforeseen expenses in which case I’d go deep into debt.
I think that advice makes sense. Ideally put away more than 15% of your gross income if possible, but I think the general advice is that you should be saving 15% of your gross income every year. Whether part of that 15% of gross comes from employer match or directly from you doesn’t matter.
I think my employer did have a grant or something for new hires as well. The other thing I think they have is automatic increases annually of 401k contribution. So just in case you are an employee that doesn’t manually go in to modify contributions, those employees will automatically have an increase of 1% contribution to 401k every where up to a certain upper limit, iirc.
Good luck on the retirement. Hope it works out. Also, when you look at the calculators to project future retirement, they tend to assume the market will greatly underperform historical market performance. For me it looks bad on that default. When I flip the project to match historical performance, or out perform historical performance, my retirement looks excessive. So save as much as you can and follow the guidelines, but there is some luck of market factors involved as to how you will end up.
I work in a municipality in Texas, and despite our state government being crazy the benefits at most cities are fantastic.
We have the Texas Municipal Retirement System in most places. At the last several cities I’ve worked at there’s a mandatory 7% employee contribution, but then the city double-matches the contribution, so I’m paying 7% in while putting 21% away.
The catch is you have to work in TMRS city for a minimum of 5 years before you vest. If you don’t put in your 5 years you only get the 7%.
And the really big cities don’t participate. So I ain’t gonna go work for Austin or Houston.
Do you mind me asking, what do you do? Do you own or rent your residence?
I’m 41, and really striving to hit those numbers too and I feel like I’m doing pretty well with my position in life… it’s just life seems to be getting away from me as I look into the future and see my kids getting much more expensive.
I’m a web developer. I own my house, but am still paying the mortgage. (So I guess I don’t technically fully own it yet.) I’m in a decent position financially at the moment - my income exceeds my expenses. Still, I’ve had some big financial hits recently ($3,600 for hearing aids for me, $1,000+ for tests to rule out cancer for my wife, $750 for a new dryer when our old one died, the potential new car that I might need to buy,…).
So while I’m able to keep my head above water, financially, I’m not able to put enough away to secure my retirement. Also, one big adverse event (medical crisis, job loss with unsuccessful job search, etc) and my current financial state could go from “decent in the short term” to “drowning in debt.”
Yeah, I think these rules (US) were made by people doing the math, without considering reality. It’s real easy to set aside a good amount to retire, as long as you set aside the recommended percentage throughout your career.
Of course the reality is that most of us will never do that. Many of us will get divorced and lose half what we put aside. Many of us will have financial emergencies such as medical emergencies, or being out of a job. Many of us will just be scraping by and can’t afford to set aside that much of our pay. Many of us just won’t have the perspective to be willing to set aside money for retirement many decades away. Many of us will live through times when our investments lose significant value over years. More importantly , most of us will hit those conditions sometime in our career and the basic premise is just not realistic. At least as importantly, with so much dependency on compounding returns over decades, there’s no way to recover when all those rosy assumptions don’t pan out.
I’m a good example, where I make a good income and realized the importance early on. At the beginning of my career I was able to daydream about my expected millions to retire. A few decades later and I’ve hit all of the above so am not even close. Even now as I panic about how soon I need to retire and how little I have set aside, and am making renewed effort, there’s no way to make up for all those missing years of compounding returns, and there’s only so much I can do while paying kids college expenses.
And this is why I likely won’t be able to retire. At a recent retirement meeting my company gave, they said that people should be putting 15% of their income into retirement. However, I can’t afford to do this. Not even close.
I live a pretty frugal life. I don’t vacation. I rarely go out to eat or order food in. I plan my meals and only buy what we need. I drive a 14 year old car that’s paid off. Still, my expenses, while less than my income, wouldn’t let me reduce my pretax income by 15%.
I’m 48 and I doubt if I’ll have 20% of the figure above when it comes time to retire.
And still 700K for retirement is still low since I’m sure they’re using the US median salary and the old adage of saving 10 times your salary for retirement. So far every place I’ve worked and attended the financial seminar, my own retirement manager, and my sister who works in the industry have told me you really should be saving 15 - 20 time your salary if you want to live comfortably.
So to me what this article is saying is that you’ll need that just so you can live pay check to pay check through retirement and still be stressed the fuck out and at risk for being homeless in your golden years.
How exactly is one supposed to store more than one makes?
Probably 15-20 your annual salary. So if you make 50k you should have $750k- 1 mil saved when you retire.
Sure thing I will get right on that.
I assume you’re in the US? Because many other developed countries rely a lot less on private retirement savings and a lot more on public retirement programs in order to get everyone covered.
Of course, that means higher earners would have to pay more into programs similar to social security through taxes to cover lower earners, which many Americans are not willing to do.
I’m willing.
Are you me? Wow.
Now, I don’t know where you live, but Canada at least has old age security (and a pension plan) that should offset a good chunk of your expenses when you retire.
That’s in addition to whatever you do manage to put away.
However, it really helps if you own a home and are mortgage free by the time you hit retirement age.
I do own my house and hopefully will be mortgage free by the time I retire (or hit retirement age). I’m in New York State. Social Security would theoretically help, but who knows if it’ll be around in 30 years. If it’s not, I’ll be working until I’m 90. If it is, I might be able to retire at 75. Assuming I don’t have any large, unexpected expenses (which is a huge assumption).
Our future looks grim, friend. May the odds be ever in our favor. 🫰
US also has Social Security to help fund a basic retirement but it’s pretty minimal. It is enough to keep you from living on cat food
I also can’t finish paying off my mortgage before I should retire and given rampant ageism, I don’t know whether I’ll be able to find a job that long. And Social Security won’t cover my mortgage plus utilities
And even worse, Social Security needs adjustments to be able to continue meeting its commitments. The longer our political leaders avoid that, the more impact it will have when they are forced to do their jobs
What’s your employer match for you 401k? that 15% saving should be the savings after your employer match. So if you have that, you might be able actually sacrificing less than 15% of take home pay to save fore retirement.
I’d have to look it up. My company actually just changed the entire system to help out younger employees - but with the effect of hurting employees who have worked here longer. So it actually ends up being harder for me to save up. They acknowledged this, but argued it off as not affecting that many people. (Not many people - just the folks who stuck around the longest!)
The explanation we were given, though, was that 15% came before the matching. So I should take every $100 I earn and stick $15 into my retirement fund. Then, of course, I’d need to put some into healthcare, some into taxes, and some into basic costs of living. Then, when I’m done, I might be lucky enough to have a shiny penny left over. Unless I have any unforeseen expenses in which case I’d go deep into debt.
I think that advice makes sense. Ideally put away more than 15% of your gross income if possible, but I think the general advice is that you should be saving 15% of your gross income every year. Whether part of that 15% of gross comes from employer match or directly from you doesn’t matter.
I think my employer did have a grant or something for new hires as well. The other thing I think they have is automatic increases annually of 401k contribution. So just in case you are an employee that doesn’t manually go in to modify contributions, those employees will automatically have an increase of 1% contribution to 401k every where up to a certain upper limit, iirc.
Good luck on the retirement. Hope it works out. Also, when you look at the calculators to project future retirement, they tend to assume the market will greatly underperform historical market performance. For me it looks bad on that default. When I flip the project to match historical performance, or out perform historical performance, my retirement looks excessive. So save as much as you can and follow the guidelines, but there is some luck of market factors involved as to how you will end up.
I work in a municipality in Texas, and despite our state government being crazy the benefits at most cities are fantastic.
We have the Texas Municipal Retirement System in most places. At the last several cities I’ve worked at there’s a mandatory 7% employee contribution, but then the city double-matches the contribution, so I’m paying 7% in while putting 21% away.
The catch is you have to work in TMRS city for a minimum of 5 years before you vest. If you don’t put in your 5 years you only get the 7%.
And the really big cities don’t participate. So I ain’t gonna go work for Austin or Houston.
Do you mind me asking, what do you do? Do you own or rent your residence?
I’m 41, and really striving to hit those numbers too and I feel like I’m doing pretty well with my position in life… it’s just life seems to be getting away from me as I look into the future and see my kids getting much more expensive.
I’m a web developer. I own my house, but am still paying the mortgage. (So I guess I don’t technically fully own it yet.) I’m in a decent position financially at the moment - my income exceeds my expenses. Still, I’ve had some big financial hits recently ($3,600 for hearing aids for me, $1,000+ for tests to rule out cancer for my wife, $750 for a new dryer when our old one died, the potential new car that I might need to buy,…).
So while I’m able to keep my head above water, financially, I’m not able to put enough away to secure my retirement. Also, one big adverse event (medical crisis, job loss with unsuccessful job search, etc) and my current financial state could go from “decent in the short term” to “drowning in debt.”
That’s wild. Like 4k of that isn’t anything I’d consider an expense due to universal health and insurance that covers the gaps.
I hope you are able to remain stable though.
Yeah, I think these rules (US) were made by people doing the math, without considering reality. It’s real easy to set aside a good amount to retire, as long as you set aside the recommended percentage throughout your career.
Of course the reality is that most of us will never do that. Many of us will get divorced and lose half what we put aside. Many of us will have financial emergencies such as medical emergencies, or being out of a job. Many of us will just be scraping by and can’t afford to set aside that much of our pay. Many of us just won’t have the perspective to be willing to set aside money for retirement many decades away. Many of us will live through times when our investments lose significant value over years. More importantly , most of us will hit those conditions sometime in our career and the basic premise is just not realistic. At least as importantly, with so much dependency on compounding returns over decades, there’s no way to recover when all those rosy assumptions don’t pan out.
I’m a good example, where I make a good income and realized the importance early on. At the beginning of my career I was able to daydream about my expected millions to retire. A few decades later and I’ve hit all of the above so am not even close. Even now as I panic about how soon I need to retire and how little I have set aside, and am making renewed effort, there’s no way to make up for all those missing years of compounding returns, and there’s only so much I can do while paying kids college expenses.