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How Much Should I Save at every age

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Keeping your retirement savings on track helps you meet your retirement goals. That seems like a very simple concept, and in a way it is. But living with that plan every day isn’t quite so simple. Knowing how much one should save for retirement is useful — it can motivate you to take action. And it can be interesting to compare your savings to the average savings rates for every age.

 

https://www.newretirement.com/retirement/how-much-should-i-save-for-retirement-average-savings-rates-for-every-age/?acid=26994&nr_a=AC&nr_medium=email&nr_campaign=BlogDigest&nr_creative=Blog_2021_1D&nr_adgroup=average_savings&nr_keyword=2021_01_22&utm_source=Newsletter&utm_medium=email&utm_content=Retirement+Information+and+Tips%3A++TODAY&utm_campaign=retnewsjan2021d

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I am really starting to love google sheets. I have built one that calculates my pension based on years worked concurrent with the future value of my portfolio.  I take that info and plug it into this "rich, broke, or dead" calculator to give me some more motivation.

The Variable Percentage Withdrawal sheet from Bogleheads is interesting also.

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Save what you can, when you can.

Spend in alignment with your values. Reflect on your expenses periodically.

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4 hours ago, ScottO said:

Spend in alignment with your values.

Scott, I honestly don't understand what this means.  Spend on things of lasting importance?  Give money to causes in which you believe?

Could you please elaborate a bit on this advice?

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1 hour ago, Why Me said:

Scott, I honestly don't understand what this means.  Spend on things of lasting importance?  Give money to causes in which you believe?

Could you please elaborate a bit on this advice?

It comes from YMOYL: https://yourmoneyoryourlife.com/book-summary/

Quote

Step 4: Three Questions That Will Transform Your Life

On your monthly tabulation, ask three questions of each of your category totals expressed as hours of life energy and record your responses:

  1. Did I receive fulfillment, satisfaction and value in proportion to life energy spent?
  2. Is this expenditure of life energy in alignment with my values and life purpose?
  3. How might this expenditure change if I didn’t have to work for a living.

Why:

  • This is the core of the program.
  • These questions will clarify and integrate your earning, your spending, your values, your purpose, your sense of fulfillment and your integrity.
  • This will help you discover what is enough for you.

Asking yourself, month in, month out, whether you actually got fulfillment in proportion to life energy spent in each subcategory awakens the natural sense of knowing when enough is enough.

There are steps and introductions to the topic in the book that provide context. TL;DR - Money = Time = Life Energy

I remember a "fulfillment curve" in the book that showed how you're most satisfied when you have "enough" - that recognition discourages buying more for the sake of seeking the same satisfaction from the original purchase. e.g. 1st car = amazing, 2nd car = less amazing + additional expense and you can only drive one at a time. (Consider having less.)

I use the values part quite a bit when making purchase decisions. Do I really believe that I need to keep up with the latest model of phone? No - how do I navigate owning this thing I need, but doesn't necessarily have importance to me? Look for something used, take good care of it, replace when it breaks or when absolutely necessary. It's an easier process than budgeting and comes with a warm fuzzy feeling. I read the book in 2015, we started narrowing some spending and expanding spending in other categories or acknowledging that we shouldn't seek to skimp on things like health & fitness:

expenses.jpg.1dd543372b63c1fcda54655618c7837c.jpg

It's permissive too - if you value supporting phone manufacturers and get your jollies off by having a new one, then do so by all means (unless it causes you to go beyond your means.)

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Scott is right, there is more to life than just saving money and watching it grow. I stayed motivated because of values that extended beyond myself and realized that material things were not just expensive, but didn't make me happier. Thankfully, I think most people realize this, but they still purchase new cars every 3 or 4 years, which is extremely wasteful. What made me happy was doing things that I loved, such as reading, going to school, writing, doing things for free, or even paying for the experience. For example, I earned a Phd at UCLA because I had a research idea and it resulted in a paper presented at the American Educational Research Association annual convention, or I wrote a Op-Ed article supporting bilingual education that was published in the LA Times. I also wrote investment articles for my union newspaper for 13 years, all for free. 

I also write reviews on many books both financial and novels published on Amazon. Here is my review of Your Money or Your Life by Vicky Collins that Scott quoted: https://www.amazon.com/gp/customer-reviews/R34XCX7436D7ZK/ref=cm_cr_srp_d_rvw_ttl?ie=UTF8&ASIN=0143115766

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Thank you, Scott, for elaborating.  If it works for you, great, but I have to confess that book looks absolutely awful to me--a lot of vaporous gobbledegook, far as I can tell.  Parts of the bit I read are sloppy to the point of being plain false: nobody has ever deliberately followed a "road map" to "owe my soul to the company store."  I don't know whether it comes from that book, but the advice to "Save what you can, when you can" is so vague, I don't know what somebody can take away from it.

There are good principles floating around in there somewhere; FWIW, Here's my first draft of a self-help manual, off the top of my head:

1. Live below your means. Save and invest consistently (i.e., contribute every month, paycheck or whatever period fits your circumstances) and for the long term (don't ever pull money out of these investments until you've reached your planned goal, which in most cases means living off of the funds for the duration of one's retirement).  Saving should be one's first financial priority, before any discretionary spending.  Aim high: if you have a regular paycheck, putting 25% of the gross into retirement savings is a reasonable target.  Even more than that, if you want to retire early or are starting late or just want greater security in retirement. (Of course, if 25% seems unrealistically high at the beginning, start lower and work your way up as you get raises and/or start to realize that you'll hardly notice a bump upward in the savings percentage.)

2. Do not carry debt on credit cards.  It is nearly impossible to build savings while paying off never-ending high-interest bills (I learned this one the hard way).

3. As to "values," focus on what is most important in your life when thinking about your finances.  Health, relationships and experiences are the most meaningful goals for most, not accumulating things, or accumulating money for its own sake.  Plan accordingly. 

4. As Steve points out, be mindful that over-consumption will undermine your larger goals: routinely buying the latest model of car, computer or smartphone; accumulating "subscription" services with monthly bills for services that are rarely used; closets full of expensive but rarely worn clothes and accessories... the list of pitfalls is long and our culture bombards us with sales pitches. 

(In my case, putting a large chunk of income into savings/investments each month before any spending allows me to spend the "take home" remainder in a fairly relaxed manner, with room for the occasional splurge—of course this only works if you don't rack up any debt. This way, relatively little guilt or anxiety surrounds spending, and it spares the need for elaborate budgets and wall charts of your finances.  But I'm single and have had a predictable income for years: many households do need to budget carefully.)

5. Use tax-advantaged retirement accounts.  Invest your retirement savings in low-cost broadly-based index funds.  There's plenty on that subject to be found on this site, as well as the Bogleheads site and in writings by and interviews with John Bogle, Burton Malkiel, Rick Ferri, and Jane Bryant Quinn, among others.

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The book certainly contains a good amount of "gobbledygook" to wade through, but there are also unique concepts inside that make it worth reading. You could find it at a local library and skim through it quickly or not pick it up at all and be fine - I doubt I'll persuade you to and have a feeling that each person posting in this thread probably has their finances in order. Understanding the psychology behind the way you manage money can lead to long-term changes in habits that mathematical reasoning alone may not. 

"Save what you can, when you can" is a soft introduction to the idea of saving. Hard rules like, "save % of your income," tend to alienate people who currently feel unable to meet that goal. Money is a difficult topic to discuss and a lot of advice tends to come across as shaming. We're all products of a system which is intentionally designed to kick us around as it is. "Do not carry debt on credit cards" could be unrealistic for someone in a crisis (and if they are taking advantage of 0% balance transfers it might not be so harmful [as long as it's paid off before that term ends.]) I even have my doubts about "predictable income" as a dependable thing in the world we live in after going through global and personal catastrophic events. Society continues to evolve in unanticipated ways. Higher education can be slow to respond which may leave it on shaky ground: ‘No college degree required’: Google expands certificate program for in-demand job skills (msn.com)

Values can go beyond creating the ultimate selfie portfolio. An underpinning of many financial movements is environmentalism through reducing consumption and waste. Emphasizing spending in your local community and keeping your money from being extracted from it can also be a value. "Voting with your dollars" by making choices, such as not to get your next pillow from Mike Lindell...

All of the beliefs, math, and psychology really take a backseat to this though: Warren Buffett says the most important decision is who you marry (cnbc.com)

("A Random Walk Down Wall Street" by Burton Malkiel is excellent.)

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You raise good points, Scott.  There's no doubt that psychological struggles are a HUGE part of dealing with money, work, pretty much everything.  And, unless you were lucky enough to have financially sophisticated parents, the whole idea of navigating the adult world of work and money is baffling. So it makes sense to address emotions and personal history as foundational when discussing financial planning.  My frustration is with the form this often takes, touted by people who strike me as hucksters rather than knowledgeable and ethical counselors: Dave Ramsey, Suze Orman and Robert Kiyosaki come to mind.  There is useful advice sprinkled in, but there is whole a lot of dubious stuff surrounding it (which often leads to money in the pocket of the speaker).  Ramsey, for example, tells people to pay off of their credit card debt (good advice), to never again own a credit card again (dubious unless they can't learn to manage it), not to carry a mortgage (dubious), to invest with his recommended high-fee network of "financial advisors" (terrible advice, and I'll bet Ramsey gets kickbacks) and woozy claims about the financial guidance of Jesus and the Bible, which I'm afraid I also view cynically as a way for him to get customers.

As to my quickly sketched "5 point plan," I certainly hope that is understood as a rough outline of an approach to saving based on my experience, not a source of shame.  Over the years I've had five-figure credit card debt (some as high as 24% interest!), periods of un- or underemployment when I really couldn't save much of anything after paying the rent, I've made foolish investments, blown career opportunities, had unexpected expenses, etc.  That's life, hopefully one has learned from the experiences.  I still maintain that "Save what you can" doesn't provide guidance: "I can't save anything" seems like a fair answer, and in the long run that answer will lead to an unpleasant end.  Obviously, if one is in the midst of a personal financial crisis, health, food and housing come before saving.  And I know that we have an unusually large number of people in crisis now, during the pandemic.  Likewise, many people scratch by in low-income jobs even in "good" times, though I would still encourage those folks to develop the habit of saving, even if the amounts are tiny at the moment.  But most of the time and for most people who are likely to come to a message board like this one, they have an above--poverty income and are planning for their future.  I believe such folks are well advised to make a habit of saving and investing right off the top, and in amounts that are almost certainly in excess of the "starter" amounts that many employers suggest (3-6%). (This is especially true for the great majority who do not expect a substantial pension, as some long-career teachers and school employees can.) 

So I hope my savings percentage target (an arbitrary ballpark figure, not a scientifically determined amount) doesn't make anyone feel they are failing because they aren't yet meeting it. I do know what you mean about shaming in the current financial discussions online.  I have noticed this among some of the leading lights of the FIRE movement (e.g. Mr. Money Moustache), who speak as if any spending beyond that required for a spartan DIY rural existence represents a moral failing.  

And yes, a consistent income (never mind a pension) is increasingly the exception. In my view, that makes the need for salting away a large percentage of one's "lumpy" income (some of it in a rainy-day fund) that much more important.

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