Hello all,

I just found this board today, and in my first 5 minutes of reading it, I ran across a post by ChocoKitty in which she said she is only putting about 20% of her gross away for retirement. (Chuckles about how only a FIRE wannabe would lament saving only 20% were also included).

CKs post got me wondering...what percentage of gross income are all of you saving towards retirement/FIRE? I am personally putting 14% of gross into my 401k at this time, with plans to increase my retirement savings anytime I get a raise, and further increase them when I've paid off my CC debt. I don't have a particular percentage goal in mind at this time since I'm really trying to focus on some other items first before I hit FIRE super-hard.

How about all of you? How much are you currently saving towards retirement, as a percentage of gross? How much would you LIKE to save towards retirment as a percentage of gross? (If you are already retired, let us know what percentage you saved during your accumulation stage).

Looking forward to responses,

d

Diana asks:How much are you currently saving towards retirement, as a percentage of gross?

DW and I save 10% of gross in our 401k's, to which our employers add about 4.2%. Then we save an additional 25% of gross in a taxable investment account. Every January (in fact, maybe I should do this today!) I move $6,000 total into our two Roth IRA's out of our taxable account.

Our goal for 2003 was to save 35% of gross, not including company match. Our actual savings was 36.5%, as of 12/15. I can live with that... ;)

I will be starting business school next August (I find out where I am going on January 21st!), so I doubt we will keep our current pace for the two years I am not working. I guess we will have to save double-time when I get out and start making the big bucks... :p

st

How about all of you?

Right now I'm putting 16% of my gross into my 401K and the company match adds another 4%. I also max out my Roth IRAs. I started my Roth savings about 5 years ago (when I started aggressively saving), but the first two years I could only manage $1000 each year. I'm looking to up my 401K another percentage or so this year. Some people might say put the extra over the comapny match into a brokerage account, but my company's fund options are pretty good. I do also have a small taxable account at a brokerage firm, but I don't add to that as strictly. But I do add to that any extra I can afford .

Donna

dianakalt,

How much are you currently saving towards retirement, as a percentage of gross?

(As a percentage of gross earned income, I assume - excludes investment income?) I'm not sure exactly whether the answer to this question really *means* anything, but since you are curious, I'll toss my statistic into the ring: 33%.

That percent is unintentional - it just happened that way in 2003. I could probably save even more, maybe up to 40% of gross, by making my pennies squeal. But I also like to live it up from time to time! BTW this probably also matters: I live in a rental apartment, and I am a single individual with no dependents.

How much would you LIKE to save towards retirment as a percentage of gross?

Heheh... as much as possible, of course. But there's always a balancing point; one must decide whether the saved income is more valuable than the joy one receives from spending it.

Rocannon

That percent is unintentional - it just happened that way in 2003. I could probably save even more, maybe up to 40% of gross, by making my pennies squeal. But I also like to live it up from time to time! BTW this probably also matters: I live in a rental apartment, and I am a single individual with no dependents.

Great point, Rocannon. I'm probably saving about 30-35% of my gross right now, but I also allow myself to live it up from time to time. I don't impulsively buy things, but if I want something after a few days/weeks/months then I will buy it. Of course I'll shop around for the best buy. :-)

I'm a single mother, and I want my daughter to be smart about money (she is). I don't think she should be raised to think spending money is bad. Just to think before she spends.

Donna

Currently, we save about 10% of our gross. 3 years or so I was saving about 14%, but rises in health insurance and other expenses and a pay raise freeze has resulted in the savings amount dropping off.

I do have 2 pensions that I'm working on so I don't need to save as much as a person who has no pension. One pension is from the federal government and one is from a state government, so I figure I am about as safe as safe can be with a pension.

Whenever I do get another payraise, I will save at least half of it as I have done with all of my payraises over the past 5 years or so.

No question about it though, I will be FIRE'd by age 50.

Currently, we save about 10% of our gross.

That is a mistake by the way I'm calculating how much I save. I forgot to add something in to the equation. We are actually saving about 12.5% of our gross income.

However, part of what I'm counting as savings is what I'm spending to buy back 4 years of military time to add to my state pension. I'm counting this because even though I don't have the figures handy, the little bit I'm spending to buy the time back will pay for itself many times over as long as I live to collect my pension.

Welcome Diane,

The board doesn't get a lot of traffic but the posts are usually of high quality. I personally think that's a lot more valuable.

Petey


Hello all,

I just found this board today, and in my first 5 minutes of reading it, I ran across a post by ChocoKitty in which she said she is only putting about 20% of her gross away for retirement. (Chuckles about how only a FIRE wannabe would lament saving only 20% were also included).

CKs post got me wondering...what percentage of gross income are all of you saving towards retirement/FIRE? I am personally putting 14% of gross into my 401k at this time, with plans to increase my retirement savings anytime I get a raise, and further increase them when I've paid off my CC debt. I don't have a particular percentage goal in mind at this time since I'm really trying to focus on some other items first before I hit FIRE super-hard.

How about all of you? How much are you currently saving towards retirement, as a percentage of gross? How much would you LIKE to save towards retirment as a percentage of gross? (If you are already retired, let us know what percentage you saved during your accumulation stage).

Looking forward to responses,

d

How much are you currently saving towards retirement, as a percentage of gross?

36% between my 403(b) (28%), Roth IRA (6%) and taxable investments (3%).

There is another approximately 5% that is also getting invested but, since they are not part of the systematic investments, I haven't counted it in the 36%. For example, last year I had stashed about 6% of my gross income into EE-bonds as part of the second tier of my emergency fund during talks of budget crisis at work. However, this coming year I'll be working more on my investments.

This doesn't count the 12% my employer puts in a pension plan on my behalf.

How much would you LIKE to save towards retirment as a percentage of gross?

Actually, I would have liked to start these percentages a whole lot earlier! I was in my early 40s when I started investing, and now I am 50. The pension plan is pretty good, but the state legislature keeps on trying to cut back on the benefits, so I have to invest as much as I can now.

How much are you currently saving towards retirement, as a percentage of gross?

To enjoy a comfortable, timely, secure retirement, most investors must save at least 15% of their gross incomes every year starting in their early 20s. Investors who start late, want to retire early, or want to retire in luxury must save more. If you look through posts on TMF's retirement discussion boards, you'll discover many TMF subscribers claim to save 25% of their annual gross incomes, and a few claim to save over 50% of their annual gross incomes -- in addition to what they save for houses, cars, vacations, and other immediate needs.

I know many people figure they'll save for retirement when they start making serious money or when they get closer to retirement. If you have a financial calculator or a spreadsheet, try this demonstration. First calculate the effect of saving $2,000 per year every year from your 18th birthday for eight years at 8% per year, and then never saving another penny until you're 65, but allowing your savings to compound. Then calculate the effect of saving $2,000 per year starting from your 26th birthday until you're 65, again allowing your savings to compound at 8% per year. Compare the total amount invested ($2,000 per year times eight years vs. $2,000 per year times 39 years) and the final values of the two portfolios at age 65. If this demonstration doesn't convince you to save early and often, I have no idea what will.

Here's a link to an article that contains the results of a similar calculation in a table (click on the link to Rich Man, Poor Man (The Power of Compounding)). The difference between my demonstration and the demonstration in the article is the article uses a 10% annual return (rather than 8%), and the article saves for seven years (rather than eight years).
http://dowtheoryletters.com/dtlol.nsf

Some people argue in retirement your income needs are less than when you're working. You're not saving for retirement anymore. You're not paying Social Security or Medicare taxes. Your children probaby are on their own. Your requirements for a business wardrobe are substantially reduced. You probably can get by with one car, rather than a motor pool.

However, in retirement, your medical expenses almost certainly will be higher. You'll probably want to spoil your children or grandchildren. You'll probably want to enjoy some of the things you denied yourself while you were working (e.g., frequent meals at restaurants and exotic vacations). You may even take up one of those hobbies notorious for consuming money (e.g., chasing a small, white ball across the countryside or trying to outwit an eight pound, 12-inch fish).

Investors can safely withdraw about 4% per year from a well-performing, well-balanced investment portfolio without cannibalizing their principal. They can withdraw a little more in years with good returns, and a little less in years with poor returns. Lower withdrawal rates are better, and much lower withdrawal rates are much better.

Another way to look at that 4% number is you must have 25 times your gross annual income in savings to retire. You can retire with less money, but you'll have to cannibalize your principal, reduce your standard of living, or reduce your expected lifetime to do it.

Retirement income needs and the timing of those needs vary from person to person, but when you do the research and crunch the numbers, you'll probably discover you have to max your 401(k)/403(b), max your IRA (and spousal IRA), and still make additional retirement investments in non-retirement accounts.

David Jacobs
TMFDj111

I just completed the numbers for 2003. Our percentage was higher than normal, it came in at 28%. That's increased from 27% in 2002, and 20% in earlier years.

In 2004, the amount we put towards "retirement saving" will be a lower percentage, as I now have a SIMPLE instead of a 401(k) (4,000 lower annual max allowed, unfortunately), and my new job has increased compensation. So my max SIMPLE amount is a lower percentage of gross income than my max 401(k) amount was at my old job.

However, I'll be putting a bunch more money into paying off CC debt (it's low interest, which is why I still have it), and after all CC debt is paid off I'll be putting savings into other "savings" funds, at least some of which can be used for retirement. So if you factor that in, our 2004 "savings" percent will be higher.

Depends on how you define it, I guess.

-synchronicity

How about all of you? How much are you currently saving towards retirement, as a percentage of gross? How much would you LIKE to save towards retirment as a percentage of gross? -dianakalt

Last year was about 42% IIRC, however, since I don't have a sinking fund for deferred expenses 35% may be more "honest." If I didn't buy the house, I'd be over 55%. How much would I like to save? More!

FoolNBlue (Who spends more on taxes than himself)

<<<How about all of you? How much are you currently saving towards retirement, as a percentage of gross? How much would you LIKE to save towards retirment as a percentage of gross? -dianakalt>>>>

This is really bad but I only save about 17% on retirement. 11% in my IRA and I max my TSP plan that a couple of you guys turned me on to. Thanks by the way. I also take the left overs from my monthly budget and put it into some high risk stock (favs are the sat Rad companies XMSR and SIRI and ERTS). I can't say that it is an actual percentage but it is a coupla (short for "couple-of").

LIKE TO SAVE:

A few months ago I was saving tons, and I wasn't happy. I bumped up my spending on the budget and i admit that I am enjoying life more. My goal for this year was to reduce the high risk stock purchases and save more. I know that the first one will come easy enough but the second I will have a hard time with. I like to snowboard and goe visit my girlfriend and both of those things are long distance and expensive. Anyway a happy medium needs to be found and I know that I will be able to find it. I am glad I have the magic of compounding on my side.

LAter all
Nick

coupla bucks
coupla bucks
coupla beers???......no bucks

sorry I am dumb

Nick

Between my pension contributions and 459 plan at work, plus my IRA, I'm putting away about 35% of my gross income for retirement.

Only a FIRE aspiree would want to put away 50%, which is my goal!!

Between retirement accounts and taxable investments, DH and I put about 46% of gross away last year. We had a few major purchases to make for the fixer-upper we bought last year, so this year I'm aiming for about 50-55%. Plus, neither one of us has particularly secure employment, so the more we put away, the better.

<<CKs post got me wondering...what percentage of gross income are all of you saving towards retirement/FIRE?>>


I went from being essentially broke (net worth=$0) in 1979 to financial independence in 1999 by saving and investing around 50% of my after tax pay as an office clerical and blue collar worker at a utility company.



Seattle Pioneer

I got 23.7% which I'm less than satisfied with.

FoolNBlue (Who spends more on taxes than himself)

Join the crowd.

Timely post for me as I just calculated my savings rate yesterday at 44%. Breakdown:

17% 401K
4% 401K Employer Match
4% Roth IRA
19% Taxable Investments

Based on keeping up the above savings rate, I could retire early in 8 years at age 36. I'm still debating whether that's my goal or not...

I don't know that this counts with us as we are already retired, but we're still saving 20%.

<FoolNBlue (Who spends more on taxes than himself)>

Join the crowd. -zsimpson

At least the wealth confiscated from me under threat of deadly force is going to good uses. I am particularly proud to be an invountary contributer to the art of basketweaving. I can't bare to think of what kind of world we would have if this important art were not subsidized by my hard-earned money. Fortunately, we have the government to save society from selfish people like me who, if given a choice, would keep our money rather than support such worthy causes.

From http://www.nea.gov/grants/recent/04grants/Services.html :

Northwest Native American Basketweavers
Omak, WA
$25,000
To support the 2004 Annual Gathering of Basketweavers. The regional gathering will honor 35 Native-American basketweavers, their apprentices, and families by showcasing their basketry, demonstrating artistic styles and techniques, and producing a public art market day.

FoolNBlue (Disgusted)

Somewhere between 20 and 25%. That's all I would want to save too. I'd hate to die before I got to spend and have fun now.

Fortunately, we have the government to save society from selfish people like me who, if given a choice, would keep our money rather than support such worthy causes.

From http://www.nea.gov/grants/recent/04grants/Services.html :

Northwest Native American Basketweavers
Omak, WA
$25,000
To support the 2004 Annual Gathering of Basketweavers. The regional gathering will honor 35 Native-American basketweavers, their apprentices, and families by showcasing their basketry, demonstrating artistic styles and techniques, and producing a public art market day.

FoolNBlue (Disgusted)

So you personally gave them abouy $0.07. So what? Given the choice between this and and a lot of the other crappy places our lovely senators (both Dem and Rep.) choose to spend money our money (hmmm, $25,000 to Native Americans, $87,000,000,000 to Iraq) I'm sorry they didn't get $50,000.

So you personally gave them abouy $0.07. So what? Given the choice between this and and a lot of the other crappy places our lovely senators (both Dem and Rep.) choose to spend money our money (hmmm, $25,000 to Native Americans, $87,000,000,000 to Iraq) I'm sorry they didn't get $50,000.

It is not the magnitude, it is the principle. Do not tell me that it's only 7¢ when it is MY 7¢ taken against my will. Besides, this was also one example out of thousands of totally wasted giveaways that have NO legitimate basis. At least the funds wasted on Iraq have some connection to a legitimate governtmental function (defense). I'm going to stop here, lest this become a political thread (I really hate to pollute it further as the original thread was and is very good).

FoolNBlue (Further disgusted)

How about all of you? How much are you currently saving towards retirement, as a percentage of gross? How much would you LIKE to save towards retirment as a percentage of gross?<?i>

Somewhere around 40%.

Would like it up to 50%.

I promised myself to track spending closely this year.

How much are you currently saving towards retirement, as a percentage of gross?
For 2003, I saved 38.6% of gross.
Additional percent: 6.0% approximately (put in for me by my employer)

How much would you LIKE to save towards retirement as a percentage of gross?
40% - 50% of gross.

I don't make very much, so I need to save a bigger percentage of my income. I have been thinking of trying to get more income (working on that other side rather than the expense side), but I don't know if I'll do it. I love my free time...

flipstress

How much are you currently saving towards retirement, as a percentage of gross?


24.75% This year. And 37% to debt, extra mortgage and last kid in college.

Want. 50% or more. Also to have mortgage totally cleared off....

grannydoc, pulling her shawl tightly and shaking her head...

18% this year, down from 35% in previous years. This year we purchase, renovated and furnished our first house. We also had our first child and I've take time off from work to be with her. When I return to work in a few months our goal is to get retirement savings in the 20-25% range. I have a secure defined benefit pension at work and the house can pay for itself if needed, so we're comfortable with that amount.

Crazyinlovefool

Actually, I would have liked to start these percentages a whole lot earlier! I was in my early 40s when I started investing, and now I am 50. The pension plan is pretty good, but the state legislature keeps on trying to cut back on the benefits, so I have to invest as much as I can now.


Mark,

Congratulations on taking the bull by the horns! One of my pet peeves is people who work in a job that has potential for pension (like gov't jobs, teaching, etc) that will complain about the fact that the pensions look like they might be cut in the future, but they won't take steps to save up on their own!

d

25.4% We are working on increasing that to 30% in the upcomming year. Most of the aditional "savings" will be in the form of paying down the principle of a loan for land we purchased this December. We plan on having the loan retired in 18 months.

NuclearRedneck

I'm going to stop here, lest this become a political thread (I really hate to pollute it further as the original thread was and is very good).

Good point. I'll meet you at the PA board at high noon.

So you personally gave them abouy $0.07. So what? Given the choice between this and and a lot of the other crappy places our lovely senators (both Dem and Rep.) choose to spend money our money (hmmm, $25,000 to Native Americans, $87,000,000,000 to Iraq) I'm sorry they didn't get $50,000.

Let me see if I get this straight, it's okay for them to spend money on a bunch of crappy little things that add together to make a bunch of crappy things than to spend a lot of money on something worthwhile one time?

It is not the magnitude, it is the principle. Do not tell me that it's only 7¢ when it is MY 7¢ taken against my will. Besides, this was also one example out of thousands of totally wasted giveaways that have NO legitimate basis. At least the funds wasted on Iraq have some connection to a legitimate governtmental function (defense). I'm going to stop here, lest this become a political thread (I really hate to pollute it further as the original thread was and is very good).

FoolNBlue (Further disgusted)

Sorry, you can only recommend a post to the Best of once.

Drat.

I had been saving around 40% of gross for quite some time, but found that was a bit too overboard. I've loosened up the pursestrings to save 20% of gross income consistently while increasing my fun money, but (in a reverse LAYM move) find myself sneaking extra dollars into my FIRE fund because "it's just sitting there and I'm not buying anything soon anyway." I snuck in an extra $200 to my FIRE fund last week just for that reason. It's actually kinda humorous.

I'd love to be able to save 50% of gross. That's still a target.

CK

Sorry to be late to this thread, my Mom was visiting for the holidays and I ignored TMF for a while.

We hit about 27% of gross last year after including a combined 401(k) match of 5% and cash balance pension credit of 4%. These big savings benefits are a reason I remain in a less than ideal job at Big Bank employer. I was offered two positions at other financial institutions offering far less generous retirement benefits and turned them down largely because of this. I have mixed feelings about the decision, but from a FIRE perspective, it was exactly the right thing to do.

While 27% is way below some of the others here, I am pretty happy with it and generally comfortable with our goal of FIRE just before age 50. My wife and I are now 38 and have three young kids, ages 7, 8 & 10.

We're pretty happy with this result because I was unemployed from 11/13/02 through 5/18/03. My wife earns a very small wage working one day a week at a preschool, so the loss of my pay check was a huge income hit. The generous retirement benefits were because the bank that laid me off 11/13 re-hired me 5/18 and bridged my service for benefits purposes. This was a huge positive.

Someone mentioned building up a taxable account so they could fully fund Roths in January. We are looking to try and do this as well. We will be dropping our savings percentage a bit early in the year to clean up the last of our holiday debt (gone in Jan.04). We had been in the habit of fully funding Roths around 04/15 after receiving our tax refunds. It has been hard trying to accelerate that process. The extra 15 1/12 months of compounding for the Roths should be significant over time if we can get this set up on automatic pilot (suddenly I hear strains of "To Dream the impossible Dream").

We are also looking hard at a big kitchen remodel and auto purchase some time around Jan.05 if the used car gods smile on our 1987 Chevy Caprice station wagon and allow it to keep running for another year. A new roof is probably in our future this spring too We have almost $15k set aside for the kitchen remodel, which is theoretically my wife's budget, but there is little extra set aside for the roof or new to us used car. The kitchen remodel is is a potential money pit, so we'll have to be careful.

Happy New Year all,

JohnH

How much are you currently saving towards retirement, as a percentage of gross?

Just ran up the numbers last Friday, things are down pretty significantly this year (down from ~27% previously).

 9.12% 401k
 4.56% Roths
------
13.68% retirement savings
 1.72% additional from employer
======
15.40% TOTAL RETIREMENT SAVINGS

Looking at our other savings amounts I think we did pretty good on limiting the expenses that we had:

14.62% for house down payment
10.29% to create efund
 3.84% to create car fund
======
28.75% TOTAL NON-RETIREMENT SAVINGS

45.15% TOTAL SAVINGS

We also had a couple big outflows this year, but were able to pay for them entirely with cash:

paid for our wedding (ceremony, reception, rings, honeymoon) with CASH (6.08%)
paid for our pre-honeymoon trip to Europe with CASH (1.90%)

All in all I'd say it was a good year for us despite retirement savings being down. Keeping it all in perspective, our net worth is up 136% over the past 14 months. Ideally, I'd like to be saving around 30% for retirement, but I'm not sure how realistic that's gonna be as it's likely I'll be less employeed soon.

-Ben

How about all of you? How much are you currently saving towards retirement, as a percentage of gross? How much would you LIKE to save towards retirment as a percentage of gross?

I realize I'm late responding... but... I'm going to anyway :)

Both DH and I have 15% of gross directed towards our 401k/403b.

Additionally, we are 1) pumping up our efund, 2) putting money into IRA's and 3) buying real estate.

I'm not sure how much that equates to as each real estate purchase requires different amounts depending upon the purchase price (we put a minimum of 10% down to secure a solid positive cash flow).

I'm "guessing" (educated guess) it comes to at least 25-30% of gross.

C.

Who spends more on taxes than himself


YES! I HATE THIS!

Hence our mad dash for tax shelters this year!

C.

<<While 27% is way below some of the others here, I am pretty happy with it and generally comfortable with our goal of FIRE just before age 50. My wife and I are now 38 and have three young kids, ages 7, 8 & 10.
>>


The ability and inclination of people to save varies widely. Since a majority of people have saved little or nothing, I'd say 27% is great!


Seattle Pioneer

How much are you currently saving towards retirement, as a percentage of gross?

Hi Diana,
Glad you found our little corner of enthusiasm here on TMF. One thing I would caution with using percentages of gross is that they can be quite misleading. If savings are allowed to be gross (ie in a tax deferred plan), it is much easier to hit a higher target. This means the percentages that everyone quotes are not really comparable.

For example, let's say I make $50K and my employer matches the first 5% of my contributions to their 401(k). I contribute $2,500, or 5% before funding my Roth.

My Roth is $3,000, or 6% of my gross. I am unable to save more.

In total, I have saved 11% of my gross in retirement accounts.

However, if I forgo the Roth, I can save an additional $4,000 in my 401(k) instead of $3,000 thereby saving 13% of my gross income.

The effect on net income is negligible: the only difference is that I saved one amount pre-tax, the other post tax.

Also, you will notice here that some people include their employer matches in their calculations of what they saved; others don't. Neither method is right nor wrong.

There are plenty of other variables in people's lives too. One may have a 30 year mortgage, the other a 15 year. While extra principal payments on the latter aren't savings, they are a vehicle to increasing one's net worth.

So while these percentages and other stats can sometimes be useful, I wouldn't place much emphasis on them. I would hate for someone to feel discouraged because they thought they weren't hitting the mark, or for someone else to feel complacent because they thought they were ahead. The only person you can reliably compare to is yourself: how are you doing vs. how you did in the past?

Anyhow, I'm glad to see that you are able to move on from servicing debt to thinking about FIRE! Any increase in your percentage of gross contributed to retirement should be a great motivator and reward for you.


LikesDoingSumsBeastie.

<< So you personally gave them abouy $0.07. So what? Given the choice between this and and a lot of the other crappy places our lovely senators (both Dem and Rep.) choose to spend money our money (hmmm, $25,000 to Native Americans, $87,000,000,000 to Iraq) I'm sorry they didn't get $50,000. >>

It is not the magnitude, it is the principle. Do not tell me that it's only 7¢ when it is MY 7¢ taken against my will. Besides, this was also one example out of thousands of totally wasted giveaways that have NO legitimate basis.

I'm not throwing this in here to be political, and I agree that you have every right to be upset with the principle of the matter on this giveaway. However, I just want to point out the true magnitude of the issue.

Using 2003 numbers (as per FRED), and projecting for all of 2003 from the first 3 quarters of '03 (I know this is 25K in '04, but that should make little difference for terms of this estimate).

The federal government had total expenditures in 2003 of an estimated 2,252,067,000,000 (that's just over 2.2 trillion) dollars.

You use a rough estimate of 42% in savings, and say you spend "more on taxes" than on yourself. Realizing that you're talking rough numbers, and with no idea how much you actually earn or pay in taxes but trying to guesstimate anyway, let's say you spend...oh, 32% of your total income in taxes (leaving you with 26% left). Florida doesn't have any personal income taxes. Florida's sales tax rate appears to be about 6%, but you don't spend much on yourself and I doubt all of your spending is subject to sales tax. Let's just say 1% for sales tax, 31% on fed income and FICA.

Depending on deductions and all that, that would equal a federal tax liability of roughly 130K. I really don't care if your actual tax liability is half that or double that, as you'll see below it doesn't make much difference, I'm just throwing the number out for purposes of this example.

130K divided by 2.252 trillion, times $25,000, equals…roughly 14 hundredths of a cent. Not seven cents, but one seventh of a cent.

Even worse, federal receipts in 2003 are estimated at 1.837 trillion dollars, or about 81.6% of total expenditures. Multiply that by 1/7 of a cent, and you wind up with 1/9 of a cent.

Now, I agree that are probably thousands of giveaways like the one you referenced, and I'm not going to try and defend a single one of them. But how many are there? Ten thousand? Fifty thousand?

Fifty thousand such giveaways would equal fifty eight bucks and change out of a 130K income tax bill.

You're right, there's lots of…er, questionable federal expenditures. But it's the big ones that we really have to focus on. Even if you eliminated every one of these little things, and there were fifty thousand of them, it would barely make a dent in the overall tax burden.

But again, that doesn't mean you can't (or shouldn't) be upset about these items. Heck, the hypothetical fifty eight bucks above is still 58 bucks.

-synchronicity

hehe, you took some time studying me synchronicity! Unfortunately, I make far less than your deduction. I count all taxes in that figure.. utilities, property, both halves of payroll taxes (it is being spent by my employer for my labor.. just that I never see it). Sales tax is 7% in my county although food/meds are not taxed and that is kind of nice.

While the "tag" on my initial post was just an observation with respect to expenses/savings (and regrettably started an OT tangent), I think I have every right (heck, I'll go so far to say even a duty) to point out immoral and unjust government expenditures. It is just flat out wrong and I feel personally violated and would like to see my "representatives" called on it. I am very much aware that every tax dollar is taken under threat of death. It may sound extreme to say that but is it really? If I don't pay my taxes, a process starting with nasty letters and ending with guys with guns will ensure that I pay up and, yes, possibly kill me -especially if I defend myself. IMO, the government should recognize the extreme threat taxation is to liberty (our Revolution was largely based on unfair and unethical taxation) and only tax and spend to the minimum extent necessary to perform essential legitimate government functions.

FWIW, I am a civil servant and never forget where my office's budget (and my paycheck) comes from and I do my best to see that the taxpayers' are not screwed on my watch -as far as my position and authority allow me to do so. I take that part of my job very seriously and think our political leadership should do the same.

FoolNBlue (Concerned Citizen)

hehe, you took some time studying me synchronicity! Unfortunately, I make far less than your deduction. I count all taxes in that figure.. utilities, property, both halves of payroll taxes (it is being spent by my employer for my labor.. just that I never see it).

Bummer on the income, although I kinda figured it was high, but also realized it would make the point that even if you are a high AGI taxpayer, the taxes paid on some of these items is really really small. Not that this justifies them.

Yes, I did forget to gross up the FICA taxes. Your property taxes are probably kinda high (they're high in Illinois as we have low income taxes, wouldn't be surprised to find the same thing in Florida), but then there's the deduction issue for income purposes. You might spend less in taxes than you think. Not that it's much solace.

Sales tax is 7% in my county although food/meds are not taxed and that is kind of nice.

Ours are between 8%-8.75%, the latter number is what gets charged downtown.

When I lived in Portland, we had zero sales tax. I liked that.

I think I have every right (heck, I'll go so far to say even a duty) to point out immoral and unjust government expenditures. It is just flat out wrong and I feel personally violated and would like to see my "representatives" called on it.

I'm not disgareeing with you. I think there are a lot of ridiculous government expenditures, although I don't want to get into what anyone thinks is or isn't, as this will take this thread even more OT.

It's just that the place to really look is at the big-ticket items. If there's, say, a billion dollar spending bill, 1% pork is ten million bucks. That's an awful lot of basket-weaving.

To try and bring this back to a FIRE topic: I've known lots of people who clip 25 and 50 cent coupons, or aggressively shop for clothes at various stores, but still complain that they "have no money", in spite of their efforts. What they forget to mention is that, even though they used a 50 cent coupon at the grocery store, they blew 80 bucks last week eating out at restaurants. Or that their clothes may have been a "good deal", but they already have a closet full of clothes.

And don't even start trying to explain how much money they spend a year on credit card interest.

FWIW, I am a civil servant and never forget where my office's budget (and my paycheck) comes from and I do my best to see that the taxpayers' are not screwed on my watch -as far as my position and authority allow me to do so. I take that part of my job very seriously and think our political leadership should do the same.

From your mouth to God's ears. Both sides of the aisle are guilty on this. Then again, why should we expect or representatives to be different than us? It's tough enough to stay out of the red with our own money, why should it be easier with OPM?

-synchronicity

71% of Net, 59% of gross. Sweet.

with a handle such as yours, you better go to MIT! :-)

ben, your post was the best because it distinguished general savings from retirement only savings

Me

10% 401k
3% 401k match
10% Stock Purchase Plan
2.5% taxable account from y.e. bonus
5% amount to pension

~ 30%

BUT, wife asks that each year we take 1/2 of the stock purchase money (or 5%) on house stuff, so my retirement savings is really closer to 25%.

Wife

15% 401k
3% 401k match
10% Stock Purchase Plan
5% Pension

=38% (or 33% to retirement savings)

Lets just say that averages out to 28% of our combined retirement savings. Now, technically, we also put about another 4% of our combined income against principal in our mortgage each month. So, that puts us at about 32%.

So while these percentages and other stats can sometimes be useful, I wouldn't place much emphasis on them. I would hate for someone to feel discouraged because they thought they weren't hitting the mark, or for someone else to feel complacent because they thought they were ahead. The only person you can reliably compare to is yourself: how are you doing vs. how you did in the past?

I agree - thoughts to think about.

I don't include employer match - because I'm not actually putting it in - I consider it a bonus to my savings - but not my personal savings rate.

Additionally, there are many people paying huge % amounts towards debt - which also can be considered "savings" as they are increasing their networth.

And, we are starting to buy rental properties again - while the 20% down we put I don't count towards savings, it's still increasing our networth.

Additionally, I squirrel away lots of other income - we currently have a roommate - I put their portion of the rent/utilites directly into savings and don't count it in our budget, DH performs (and is paid) and I do websites/databases - and that full amount is put directly into savings - and when figuring my % rate, I don't count that income (just cause I never know what it will be until we do our taxes).

So, while our "savings rate" is 15% - if we count all the factors: employer match, debt payments, real estate down payments, etc - we are "saving" over 65% of our gross income.

Wow - thats an eye opener.

C.

migunnemsae:
71% of Net, 59% of gross. Sweet.

This is the best I've seen so far.

Can anyone do any better?


I knew a banker once who made a substantial 6 figure salary. He gave away 90% of his income away to charities and lived on 10% in a modest middle class lifestyle, about the same I was living on (35k-40k per year back in the late 80's).

decath

My savings/investing % breakdown at the beginning of 2003 was the following:

living expenses: 48%
charities: 10%
E-Fund: 12%
FIRE Investing: 30%


Later on in the year, my wife stopped working and my college age daughter ran out of money so my %'s were adjusted to the following:


living expenses: 60%
charities: 5%
Daughter's college: 6%
E-Fund: 9%
Fire Investing: 20%

I'm hoping to get back to where I was by Febuary of this year. My wife and daughter is agressively seeking employment and the daughter has applied for a small school loan. My daughter is on a partial basketball scholarship that pays for books and tuition but not room and board.

decath

I knew a banker once who made a substantial 6 figure salary. He gave away 90% of his income away to charities and lived on 10% in a modest middle class lifestyle, about the same I was living on (35k-40k per year back in the late 80's).

My hero!!!

KrissyLou

We just figured our estimates for 2004.  Looks like this:

Tax	    23.27%
Retirement  22.25%
Home	    10.70%  Mortgage and insurance only
Medical	     6.08%  Major dental work this year
Charity	     5.81%
Vacation     5.05%  Fun SCUBA stuff this year
Auto	     4.46%  Repairs/fuel - no loans
New windows  4.04%  
Balance to other living -- showed only the "hot" items above. 

We have some rather large chunks going to Medical and Home improvement this year.  So, plan for 2005 and beyond is to shuffle the window and medical $$ up to Retirement(taxable accounts though) and any raises will also go to investments.  Target for 2005 is 35% and I think it's a reasonable goal.  We'll be maxing all non-taxable accounts this year and maybe even putting an additional 2% in taxable investments.

Yay!
96hokies

I hate that table option...
the paragraph that goes on forever reads:

We have some rather large chunks going to Medical and Home improvement this year. So, plan for 2005 and beyond is to shuffle the window and medical $$ up to Retirement(taxable accounts though) and any raises will also go to investments. Target for 2005 is 35% and I think it's a reasonable goal. We'll be maxing all non-taxable accounts this year and maybe even putting an additional 2% in taxable investments.

96hokies
Plus, I forgot to mention that my employer puts about 7% of my pay (about 3% overall household income) into a retirement account, too! And DH's company is putting 3% into his 401k for some special reason this year, too. Nice guys :)

This is the best I've seen so far.

Can anyone do any better?

I don't think you can say that one person's savings rate is better than another's. There are too many variables, and while a lot of people think of LBYM as Living Below Your Means, it is important to remember that it is Living Below Your Means instead.

As with a diet, if you cut back so hard you are unhappy then you will never stick with it. Moderation in all things.

st

"The pension plan is pretty good, but the state legislature keeps on trying to cut back on the benefits"

DH and I will both have state pensions. We also have 457s, Roth IRAs, and money market accounts. Helps me sleep at night.

ceo

I agree with your sentiments here.

Why do people save? To fund retirement? Okay.

If so, isn't a far better analysis to consider what percentage of your planned retired annual budget was saved from salary? Or what percentage of your target total investments needed was saved this year? That's after all what you'll be using the money for, to fund your lifestyle, so it is a much more relevant test than an arbitary percentage of gross pay. It's a personal "This is what I'm going to spend when retired" review.

It is also useful to break out gains via human capital vs. gains/losses from investments the past year. This can reflect where more attention may be needed. People tend to be strong in one area but weak in others and this is a drag on overall performance.

Petey


Hi Diana,
Glad you found our little corner of enthusiasm here on TMF. One thing I would caution with using percentages of gross is that they can be quite misleading. If savings are allowed to be gross (ie in a tax deferred plan), it is much easier to hit a higher target. This means the percentages that everyone quotes are not really comparable.

I just worked this out for 2003.

Notes:

1) We are living in Argentina where living expenses are now very inexpensive compared to US.
2) We sold our home just over a year ago = no mortage payment
3) We have a three-year old and another one on the way

So:

401(k) - 14%
IRA - 5%
529 Plan - 18%
Other (future house, general investment) - 20%
= Total 57%

Saludos,
Papa

I am now FIRE. My husband and I saved 20 percent of our gross on a regular basis since 1970. So it took us over 30 years. But we enjoyed life a little inbetween. We are 53 and 55 yrs of age.


I found that starting early made the huge difference in being able to live well the last 10 years before FIRE.

If we saved more during the last 10 years we would have a bigger income in FIRE. But we have enough to give us 80 percent of our after tax income. We will be able to supplement that with some work that we enjoy if we want to let our investments grow some more.

When you start saving early in life, it gives you more options when you are older. And the since of security that it gives you is even worth more then all your savings.


Fool Kath

In the interest of identifying what works VERY well: the overseas status of papaaccionista and the person living in the highly affordable Chiang Mai Should be duly noted.

Cheers,
inhanyt

I'm currently putting 15% of my gross towards my 401K. My dh does not have a 401K, he has a pension annuity fund through his union (I don't know the formula yet). We are fairly early in our quest for financial independence. We are paying off about $24,000 in credit card debts (so far this year have brought it down to just above $20,000). We also have a car payment and a student loan to pay off. Suffice it to say, we need to pay down our debts thus cannot afford to put anymore in retirement accounts at this time. We also refinanced our mortgage to a 15 year at 5% (was a 30yr FHA at 7.25%).

My father (a CFP) told me I should put only 3% in my 401K and use the rest to pay off the debts. I realized that with watching our spending, I don't have to sacrifice my 401K (somedays the increasing balance is what keeps me going). DH and I decided that in order to pay off our debts, vacations had to be forgone for 2 years and work we wanted to do on the house had to be put off for 1. Anyway, he has no pension or any big well of retirement funds and basically lives on Social Security along with a tax job. If he were to have an long illness during tax season (a possiblity, he smokes, drinks and has a heart problem) he would end up having to borrow against his home (a condo with ever-rising common fees and taxes -- NYS). So I think we are taking the best course for us.

I am 38 and my dh is 35.

My goals are to pay off all debt--credit cards (this year), student loans, and vehicle (next year). After that we can handle the mortgage payment while maxing out our retirement accounts and my son's 529 and hopefully have a little extra to build some wealth in investments.

At least that is where we are now.

LuceLu

<<My goals are to pay off all debt--credit cards (this year), student loans, and vehicle (next year). After that we can handle the mortgage payment while maxing out our retirement accounts and my son's 529 and hopefully have a little extra to build some wealth in investments.

>>


Those sound like really excellent goals for life. It sounds like you have chosen.... wisely.


<<My father (a CFP) told me I should put only 3% in my 401K and use the rest to pay off the debts. I realized that with watching our spending, I don't have to sacrifice my 401K (somedays the increasing balance is what keeps me going). DH and I decided that in order to pay off our debts, vacations had to be forgone for 2 years and work we wanted to do on the house had to be put off for 1. Anyway, he has no pension or any big well of retirement funds and basically lives on Social Security along with a tax job. If he were to have an long illness during tax season (a possiblity, he smokes, drinks and has a heart problem) he would end up having to borrow against his home (a condo with ever-rising common fees and taxes -- NYS). So I think we are taking the best course for us.
>>


You are making choices that involve sacrifice and which you are willing to do because you can meet specific goals such as watching that 401K balance rise. Those are emotional but real reasons for making the choices you have.


If you have high interest rate debts, the rational thing to do might be to pay those off and reduce the 401 K contributions. It might also be worthwhile to fund Roth IRAs because of the tax advantages of those. But you have a good plan which are willing to make sacrifices for in order to carry it out. That appears to be more important to you, and may be a good reason for sticking with your current plan.




Seattle Pioneer