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retirement savings at 36 years old

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nh70
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retirement savings at 36 years old  Reply with quote  

I am currently saving, but is it enough? Currently, I have $4,000 in a 403b with approxiamately $80 going in monthly. In addition, I have $1,500 in a traditional IRA via a vanguard star fund. Also, $3,500 in a roth ira via a vanguard star fund. I put $35 in each of these funds a month for a total of $70. I also have a savings account, but this is as an emergency fund in case i were to lose my job etc. My question is: am i saving enough in my 403b and iras or do i need to step it up? As mentioned, I am 36 years old. THANK YOU!
Post Sun Sep 08, 2013 10:12 pm
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oldguy
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Yes - I think you'll want to step it up. Very Happy

You have $9000 and you are investing $1800/yr. You are using an 8%/yr fund. That will be $270,000 at age 65. But in Year2042 that will be about like $125,000 in today's dollars. I'm pretty sure that you aren't going to like retirning on only $270,000.

But it depends on your life situation - do you have an awesome pension plan in addition to SS that you can count on? An inheritance? Do you have a spouse that has an equal (or bigger?) retirement account?

If you increase the $1800/yr to $4450/yr the $270k would double to $540k.
Or if add risk and switch from 8%/yr investments to 11%/yr investments, the $270k would be $505k.
And if you did both - $4450/yr and 11%/yr - it would be $975,000 at age 65.
The $975k account plus SS should give you adequate wealth. Very Happy
Post Sun Sep 08, 2013 11:59 pm
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coaster
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You can also google "retirement savings calculator" for a list of online tools to help you decide how much you need to be putting away now in order to have enough when you retire; you plug in your numbers and out pops an answer. You may not like the answer.

Some examples:

http://www.kiplinger.com/tool/retirement/T047-S001-retirement-savings-calculator-how-much-money-do-i/index.php

http://cgi.money.cnn.com/tools/retirementplanner/retirementplanner.jsp

http://money.msn.com/retirement/retirement-calculator.aspx

As you can see, there's quite a variety of presentations; and probably a like variety of results. So take what you get as a sort of a general guideline, and then recalculate again every couple of years to see how you're doing.

It's good you're asking this question now, and not 10 or 15 years down the road.

~Tim~
Post Mon Sep 09, 2013 4:59 am
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littleroc02us
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Here is a formula that I use and it came from an older book called the "Millionaire Next Door" to determine where I sit with my retirement savings based on income. It's a really good measuring stick to see where you should be if you want to be wealthy.

Take your age and mulitiply that by your Gross salary and divide that by 10. This is where your net worth should be at this point in your life. It's a very aggressive formula because it determines whether or not you've been a prodigous accumulater of wealth and is based upon your income and doesn't compare yourself to someone else who may have a higher income.

For example if you take two families and one of them make 100k a year and the other only makes 50k a year and their both 40 years old and after doing the formula the 100k family should have a ne tworth of around 400k and the family making 50k should have a net worth of 200k, but let's say the 100k family spent their money on cars, and depreciating assets and only had 200k in savings and the 50k family was diligent in their savings and had 200k, we'll as you can see the family with the lower income is better at putting their money to work and being discipline.

Remember this formula is just a tool that is very aggressive and is one of my measuring sticks to keep my investing in line.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Mon Sep 09, 2013 4:28 pm
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MrNewEngland
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quote:
Originally posted by littleroc02us


Take your age and mulitiply that by your Gross salary and divide that by 10. This is where your net worth should be at this point in your life. It's a very aggressive formula because it determines whether or not you've been a prodigous accumulater of wealth and is based upon your income and doesn't compare yourself to someone else who may have a higher income.

Remember this formula is just a tool that is very aggressive and is one of my measuring sticks to keep my investing in line.


This does seem aggressive and according to this I am no where near where I need to be. Is this rule of thumb start at a certain age? Seems like the younger you are the less likely you could be to achieve that "goal". A 25 year old making $50k should have $125,000 in net worth? I'd say a positive net worth at 25 is pretty good (I was in the red at 25 due to student loans).

Now a 40 year old making $50k probably should be worth $200k.
Post Wed Sep 11, 2013 5:49 pm
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littleroc02us
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quote:
This does seem aggressive and according to this I am no where near where I need to be. Is this rule of thumb start at a certain age? Seems like the younger you are the less likely you could be to achieve that "goal". A 25 year old making $50k should have $125,000 in net worth? I'd say a positive net worth at 25 is pretty good (I was in the red at 25 due to student loans).

Now a 40 year old making $50k probably should be worth $200k.


Get the book the Millionaire Next Door, it's a study on self made millionaires and deca-millionaires and they found through the study that a prodigous accumulator of wealth should be close to what the mathematic formula results in, but it is ok if your slightly under this number which basically means your saving well, but could be doing better. I understand what your saying about a 25 year old, but the book states that if you are 25 your not really concentrating on net worth quite yet, it's a better tool when you are in your 30's and on. Remember this too, because of compound interest you have a better chance of being wealthy then someone who waits until 35 to start.

In addition, if you are able to save enough for retirement and your net worth is where it should be, you'll be doing quite well. Again, I use it as a goal to achieve, I mean why wouldn't you want to be a prodigous accumulator of wealth?

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Wed Sep 11, 2013 7:08 pm
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coaster
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I think probably you could just leave the student loan balance out of the net worth calculation. In all practical terms, a student loan is more like an investment than a liability. You buy $5K worth of stock and it's a $5K liability against your net worth balanced out by ownership of $5K of investment. You buy $5K of student loan and it's a $5K liability against your net worth; but what's that worth in terms of an investment in your future financial picture? It's not a concrete, tangible number like the $5K of stock investment is, but is worth something; you just don't have a number for it yet. So, leaving out the liability that purchased that unknown future asset number, because you don't have that number to plug into the balance, seems to me to be a reasonable way to handle that calcualtion. After all, it's only a "howgozit" number, not a bank balance.

Just my opinion....though, a CPA would probably start feeling a little woozy. Wink

~Tim~
Post Thu Sep 12, 2013 4:38 am
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Wino
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Maybe I'm misreading the formula here.

Say I'm 50 (I like easy math).
Say I make $100K per year. (more easy math)

50 / 10 = 5 X 100K = $500K

This formula says I should have $500K in net worth? That doesn't seem like enough for a 50 year old to have at that stage in life. Maybe $500K in investments, but still that's not very aggressive in my book.

Am I missing something?
Post Tue Sep 17, 2013 4:38 pm
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coaster
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mod's note  Reply with quote  

Some posts are missing from this thread. They were posted by a new member who insisted on violating the form rules repeatedly. The three strikes policy was enforced against that new member. Forum rules are prominently posted. Any new member who can't be bothered to find and abide by them after two warnings can just feel free to move on after the third. They have demonstrated they are here for their own self-interests and not the interests of the forum community.

~Tim~
Post Wed Sep 18, 2013 4:54 am
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Wino
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But did I do the formula right? Is that the amount my net worth should be assuming the figures to be correct?
Post Wed Sep 18, 2013 1:19 pm
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littleroc02us
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Yes, that is the calculation the Millionaire next door recommends. You did do it right. If you were to retire right now at age 50 with 500k in retirement and withdrew 5k each month which is 60k a year your investment would last 12 years assuming an 8% ROI. Obviously that wouldn't be enough for retirement if your spending 5k a month.

If you retired at age 60 and your salary has bumped up to 150k a year for the past ten years you'd have 900k in networth, so if you were to retire then with a 5k withdrawl assuming an 8% ROI, it would last past 30 years.

Now the variable IMO, is whether or not you have a house payment, haven't calculated social security or a pension of some type, that your 5k would go a lot further then someone who retires with a lot of debt and monthly payments.

I see this formula as just a starting point to determine how your doing, my wife and I plan on blowing this plan away in retirement savings, but the fact is that you can retire well if you use the formula as a tool.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Wed Sep 18, 2013 4:33 pm
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Wino
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I'm a spender, not a saver, and if I fell below that formula, I would be in a panic.
Post Wed Sep 18, 2013 5:56 pm
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littleroc02us
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quote:
Originally posted by Wino
I'm a spender, not a saver, and if I fell below that formula, I would be in a panic.


Does that mean then you have a lot of bills and payments?

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Wed Sep 18, 2013 9:00 pm
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