* $180,000 by age 30
* $500,000 by age 40
* $1 million by age 50
* $2 million by age 60
These are the rough estimates for what I think everybody needs to have in their 401Ks or savings accounts to have a reasonable attempt at a comfortable retirement. Of course these figures aren’t set in stone and there are many other things you can do to help your retirement quest. I advise keeping an open mind and using these figures as targets.
If you read the comments from my “401K amount by age” article, you will notice that those in their mid-30s and below tend to disagree with these amounts, while those older generally agree, verify, and accept.
I don’t know why younger folks aren’t willing to follow along. It’s often times just rebel and justify why they aren’t saving. “Live life!“, they say. True, but who says you can’t live life while saving? The easiest way to learn, is to listen to an older person who has gone through what you will go through. Perhaps it’s immaturity, or the way things are where every generation needs to question the next generation and the status quo.
There’s really no mystery to money. The more you have, the more you can make. It’s all about building the NUT large enough so that when you make a fortuitous 10% return, you’re pulling in an extra $50,000-$100,000 on your $500,000-$1 million portfolio. Get going so you can have more significant returns.
If you aren’t on retirement track based on my 401k age chart and disagree with my figures, just do the math YOURSELF and see whether you’ve saved enough to retire on. I don’t think you’re going to like the results.
There’s one question that kept coming up over and over again, and that’s, “How can I save so much, if I don’t make so much?” It’s a fair question that needs addressing. One commenter mentioned my table must be of “California Currency”, which made me chuckle. The problem of not making enough and therefore not being able to save enough is an honest problem which I’d like to address via a change in mindset and a chart.
HOW TO SAVE FOR RETIREMENT IF YOU DON’T MAKE MUCH
* If you don’t find it painful saving money, you’re not saving enough. If you’re not sweating at the gym and your muscles don’t feel sore the next day, you might as well go eat a double cheeseburger with a milkshake and fries because you’re just wasting your time. The same goes with saving. Since you’re in the lower income bracket, savings is not supposed to be easy. If you’re not feeling the disposable income pinch of putting away, 20%, 25%, 35%, 50% of your income into your 401K, IRA, or savings account, you simply are not saving enough. You need to feel the pain, so you are forced to change your spending habits.
* Recognize that you are not rich. For whatever reason, you do not make a lot of money. It could be by choice (messed up in school, less lucrative field) or misfortune (laid off, accident, starting over). Once you recognize you are of lower income, you’ve got to come to grips with the fact that retirement is not going to be filled with milk and cookies. Think tasty water and crackers instead. You’re going to be working longer and harder than others. You’ve got to save more than your wealthier friends simply because you have less. If you only make $50,000 a year, what on earth are you doing driving a $25,000 car? That’s 50% of your gross income, and around 65% of your net income! If you guys only earn a combined $70,000 a year and have a child, what are you doing living in a 3 bedroom apartment that costs $2,500+ a month? Downsize to a two bedroom apartment and save the difference. A family of four in Tokyo live in 600 square foot, 2 bedroom apartments! Don’t act rich, because you are not.
* Do the math. One commenter asked how he can put away $17,000 a year in his 401K and then another $5,000 in his traditional IRA if he “only” makes $70,000 a year. I told him to do the math. He did the math, and he did it all wrong! This is what he calculated:
70k – 17k (401K) = 53k —> Fine.
53k * 0.4 (taxes)= 31.8k —> 40% tax rate on a $53,000 income?
31.8k * 0.2 (after tax) =25.4k —> What’s this extra 20% tax?
25.4k-5k (Roth) = 20.4k —> Why contribute to a Roth after tax, when you can contribute to a traditional IRA pre-tax?
20.4k/12 = 1.7k per month. —-> Wrong. Should be around $35,500 net = $2,960/month, 74% more than what is stated.
The effective tax rate on a $53,000 income is around 17%. Add on 9% state tax, and at most he’s around 26%. His Roth deduction is fine, if he doesn’t want to contribute $5,000 in a traditional pre-tax. However, I always recommend paying less taxes than more. I am shocked how little people understand what their effective tax rates are, and the difference between pre-tax and post-tax contribution. Do the math people. You have more than you think!
* The new normal is a lower rate of return. Anybody telling you to input more than a 5% constant rate of return on your investments is being too aggressive. The days of 8%+ portfolio returns are gone in an environment of 2% long-term treasury yields. There is an inextricable link to fixed income and equities, and baking in more than a 2.5X return over the risk-free rate is a stretch. We can increase our assumptions once we see an uptick in inflation, corporate earnings, and risk appetite, but not now.
* Realize that making more money is a choice, especially if you live in a developed country. According to one researcher, it only takes around $34,000 to be in the top 1% of world income earners. Meanwhile, $33,000 so happens to be the middle line between the top 50% and bottom 50% of US income earners. You have a choice to work more than 40 hours a week to get ahead. You have a choice to have as many or as little kids as you wish. You have a choice to start a business and make extra income on the side. You have a choice to get in before everyone and leave last, while proposing new profitable ideas for your company. You don’t have to be a top income earner, you just have to make enough to be happy and save. We live in a free country, not North Korea.
* Acccept bigger government. With a ~$2 trillion dollar deficit generated under the Obama administration, the incumbent is your best bet for ensuring that social welfare programs, unemployment insurance, affordable healthcare, and low taxes continue for the middle class. By raising taxes on “the rich”, the current administration is effectively redistributing wealth to lower income individuals through government programs. Republicans are more focused on cutting spending to balance the budget, and not raising taxes given our system already has a progressive structure already. Both systems have its merits and flaws, but if you are making under $200,000 and your retirement accounts are light, from a financial point of view, you’re better off voting for the incumbent. At least you know what you’re getting.
Now that you’ve changed your mental outlook, here’s a proposed savings chart I developed to slowly turn the screws so that you get to your retirement goals. Here are some following assumptions:
FINANCIAL SAMURAI RECOMMENDED SAVINGS RATE CHART
Assumptions for the chart:
* No matter what your income level, you are saving some money. Develop the savings habit early and always.
* Your goal is to ultimately save at least 20X your annual expenses to achieve financial independence. If you can get there before 65, great! The sooner the better.
* It’s important to keep your rate of spending slower than your income and savings growth. Don’t let lifestyle inflation derail your plans.
* After you have maxed out your 401K, save an additional 20% or more in your after-tax investment accounts. Having liquidity is important if you want to retire sooner.
* If the amount of money you’re saving each month doesn’t hurt, you’re not saving enough!
FINANCIAL SAMURAI 401K RETIREMENT SAVINGS GUIDELINE RECAP
The good thing about not making much money, is that you are used to living on not much money, and therefore you don’t need much money to retire on! With the above assumptions and chart, I hope I’ve provided a guide for those who have wondered how they can save so much if they don’t earn much at all. Savings should be an automatic way of life. Always save money before you pay yourself. That way, you will always operate in the confines of your disposable income.
Another good thing about retirement is that when you are retired, you do not have to save for retirement. That 5-35% savings rate I discuss in my charts disappears, making you suddenly that much richer. Meanwhile, you’ve hopefully paid off all your debts, and can live in your home mortgage-free for the rest of your life. But, even if you still have a mortgage, or are renter, with the above system, you should still have enough money to support you until the end.
Please try not to make excuses for why you cannot save even just 5-10% of your pre-tax income in your 401K. I lived in super expensive Manhattan on $40,000 a year and managed to put away $15,000 into my 401K. $40,000 in Manhattan is like $35,000 in San Francisco, and only $25,000 in the MidWest. You just have to make a choice whether you want to build a safety net for your retirement or not. Hopefully you will continue to make more money the longer you work, making saving more money easier and easier. You’ll wake up 10 years from now and amaze at how much money you’ve managed to accumulate.
It’s really up to you. See you at the beach!
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Updated for 2022 and beyond.
[…] can follow my savings guide to increase your chances of a wonderful retirement by 50-65. But, what if you want to retire […]
My employer does not have a 401K. I’m maxing out the traditional IRA at this point ($5000 already saved in it for this year). I put additional savings in various places – mainly stocks i.e. Betterment and the like. I’m getting started on Fundrise. Any other places I need to try? The lack of 401K is killing me from tax purposes or so it seems.
call your 401k provider and ask them if they have self-directed options? My provider Voya allows you to control 80% of your account through TD Ameritade. I tend to day trade or swing trade that part of my retirement account, or move the funds to cash, during times when the market is dropping.
Terry Pratt says
Low earnings inherently hinder wealth building in ways that don’t apply to most of us.
For starters, owning a home typically requires greater initial financial resources than a low earner has, although some are able to acquire ownership without purchase (e.g. inheritance or gift from family). Once you acquire ownership, it is much easier to save money and build wealth because you now have escaped rent inflation, stabilized your housing expense long-term, and captured for yourself all future appreciation and principal reduction.
Since most of us start out not owning a home, low earners generally must pay market rent – unless, again, we have some family advantage not available to others.
For many low earners, having to pay that market rent month after month gets in the way of keeping spending growth lower than income growth; I live in a city where rents have recently been increasing 5-15 percent per year. Rent inflation for many means spending growth exceeds income growth where the only lifestyle inflation accrues to your landlord. (Nice gig if you can get it!)
Marcel Jara says
Hello Financial Samurai,
My name is Marcel Jara and I am 19 years old. I recently moved out of my parents house to move closer to school NC State. Through seeing the struggle that my mom went through in my earlier years I made it into an inspiration and motivation for myself to insure my financial future so that neither I nor my children in the future would have to go through the same difficult situations that I did. I am a Human Biology student but have always had a focus towards money and financial independence. I made my first investment to my future when I was in 10th grade with money that I worked hard for and had accumulated overtime by putting 1,000 in my first roth IRA account. Ever since that day I have been saving the majority of my minimal income and investing it as efficiently and effectively as possible. I make 11 an hour working at my parents food truck. Seeing my Dad 55, working countless hours on his business made it clear to me that I did not want to spend the rest of my life working especially at his age although I know that 55 if not old at all but I know that i want to reach financial independence sooner.
I have been focused on saving and investing as much as my finances allow me to even if it is just 20$. This has allowed me to have now about 5,000 dollars in investments distributed through Acorns, Betterment, Robinhood, Stash Invest, Roth IRA and today for the first time I invested 1,000 into Fund Rise ereit. I have made each deposit with a lot of hard work and I know that almost everyone deters me from investing my money especially at this age and also considering that I have only a couple hundred dollars in my bank account while still having to pay for my rent and all expenses but what I have pushed myself to do is to deposit about 500$ a month with the little money I have. I have been smart with my money by rarely ever eating out or doing other things that almost everyone my age is doing and wasting their money on. I know you are an extremely busy individual and that your time is way more valuable then spending time mentoring me but that is what I would like to ask. I would like more information on what I should be doing with such a low income while investing and what you recommend would be the best way to invest my money in a way that I can truly build that residual income. I have always been focused to start as early as I can investing because I know the power of compounding although I just have 5,000 invested now I know if I stick to it I can reach financial security in the long run but I want to educate myself more on how I can get financial security with a smaller time horizon such as in the next 10 years because I end goal is to reach financial independence by 30 which is a big aspiration but I know with the right tools and mentoring I can reach it and help others do the same as you have been doing:) Thank you very much for your time!
I am 23 with about $70000 invested in a managed mutual fund with a fee of .08% I make about $3000 a month with another $500-1000 from online sales on the side. Do you think I am on a good path to savings? My aim is to reach $100000 before I hit 24 and $500000 before I turn 30.
Hi Sam! Just started reading your blog and I am inspired to get on this path. I just took a job that I’m excited about, but they don’t offer a 401k for the first year of employment. Are there other ways to save pre-tax income that could be beneficial in my specific circumstance? Thanks a bunch for any advice you can offer.
Financial Samurai says
Is there an IRA option where you can contribute $5,500 tax free? If so, do that. If not, then diligently save in an after tax brokerage account like Wealthfront, which charges no fees for the first $15K under management and only 0.25% after. Digital wealth advisors are very good and inexpensive nowadays. I wouldn’t mess around with trying to pick stocks unless you are a professional.
Over 50, spouse, two teenagers, a 2011 bankruptcy on a combinde family income that’s ~$70k a year. After rent, utilities, student loan pmt and food there’s nothing left for car repairs (they’re 20 yrs old) or kids clothes or medical bills. Note the “or”. There’s never enough to even cover all the basics, we’re subsidized by spouse’s parents via forgiven utilities money & they pay for our phones. No life insurance, no college savings for kids, no money to fix the teeth falling out of my head (can’t afford the co-pays.) Every time I even attempt to create an emergency savings, two or three juicy emergencies swallow it all and send us begging for the shortfall. We have about $65k in TRS3 retirement acct and no room to add to beyond unless we stop eating or learn to live without cars in an area w/o public transport. What would you do if you were us? No money to move, no money for school, make too much to qualify for tuition assist, can’t afford to fix one of the cars now. I’m supposed to worry about retirement when I can’t buy my kids shoes? The privileged basis of our system is breathtaking, no?
So, my question to your positive-attitude-wins-out is what would you do in our shoes to be able to eat and cover the basics now (not happening currently) AND save for retirement? Only way to scrimp further is to live in our dead minivan. One of us works a job that’s about 60 hrs a week – schoolteacher, and the other works two jobs totaling about the same # of hours. No benefits at job(s) or better options in the area for the two job worker. If we pick up stakes and try elsewhere we lose all benefits and stability from teacher tenure. Earn way too much to qualify for assistance anywhere, but too little to do the responsible.
Great post, especially about the part on lifestyle inflation.
It’s amazing how far in debt people will go for shinier “stuff”. I know in NYC, there was a controversy after some high end store discriminated against a 19 year old black kid, assuming he was using a fake debit card because there was “no way” he could afford that stuff. Obviously making assumptions based on race is a bad thing, but I noticed when I followed the story that what blew so many people away was that this kid–with no income to speak of, as far as I know–was buying $300 sneakers or whatever it was that the staff thought he was stealing.
I’ve worked with a teller a few years ago that leased a very expensive car. I forgot what type. It was nice, but on a teller salary? He lived a couple blocks away from me, and I walked to work everyday. I didn’t think anything of it at the time, but now it blows me away that we work so hard for our money, only to throw it away and put ourselves in debt to someone else for shinier “stuff”.
ARB–Angry Retail Banker
No need to worry about retirement. This is all coming to an end. You may want to read the good book.we are in later Days. Our father is coming to reastablish his kingdom here.No need to worry .May the spirit of the Lord bring peace to us all.
May be true…but the Lord still wants us to work hard and be smart about it.
Terry Pratt says
Having wealth means not having to work hard.
So, why were you reading this or on this site?
Sam, I’m an avid reader of your writing and I have used several of your suggestions. I’ll be candid in admitting that I use your suggestions like commandments to filter my spending urges. “What would Sam do?”
In your retirement savings guideline by age, I was wondering whether you are netting out savings used for buying a home, paying off student loans, bringing up kids, etc. Just so you know, I live in Brooklyn, NY, and I consider myself, for all practical purposes, poor. By your standards, it would seem to me that you have to be earning upwards of $250,000 from a rather young age to hit these targets? Am I missing something here? I would really like to get a perspective here, before I jump off the Brooklyn Bridge in total despair! (just kidding but you know what I mean…)
Financial Samurai says
Good question! I think you can consider paying off debt, saving for a down payment, paying for tuition etc as part of the savings number b/c after all, what is savings for, but to have for security and spend on life’s most important things!
I just got back from Asia and saw a lot of poverty again in Cambodia. As a result, I’ve turned my hustle barometer to OVERDRIVE and have been testing out being an Uber driver for the past week. So far, so good as I’m grossing $32/hour and netting $24/hour after commission and taxes. Now, whenever I plan to buy something, I think to myself, how long must I drive to afford it!
There’s something fun and magical being able to make money anytime within minutes. You should check out driving for Uber if you want to make more and have a car. I think they are giving a $250 bonus for drivers after their 20th passenger.
Thank you Sam. That was helpful. I’ll just keep at it and see where I land when I retire. I intend to move to a little town in the Himalayas, when I do, which hopefully will be less expensive than NYC, but you never know!
Yes, I have been thinking about driving for Uber. I don’t own a car though – it’s just a hassle to maintain it without a “critical mass” of usage. But if I can make that depreciating asset into a cash-flowing one, then I would even buy a used car to drive for Uber.
Keep the hustle going Sam. We need it more than you know!
Financial Samurai says
No problem. Check out this post too, given you mentioned the Himalayas: The Digital Nomad Lifestyle Is Worth Living
You might as well sign up for my e-mail feed so you never miss a post!
Never stop hustling indeed!
By the time I’m 40, I’ll be in the “low end” of your spectrum for retirement (maybe a few thousand dollars added to that). In your view, is that low-end still acceptable for retirement? Are you saying that $300K would be in the low-end of the acceptable range for retiring comfortably?
Can you do saving plan if you do not have a Company 401k and match. If you make over 6 figures where do you put your money would you do a 18k max for a standard IRA?
Im in the same boat. I would open up a Sole Proprietorship business and then a Solo 401k. You pay into it and “your company” meaning you pays into it as well. That way you are getting tax deductions on both ends. I would first max out your Roth IRA and then max out your Solo 401k. That should give you a good 25-35,000 in deductions. If you can save more then look into a high yield savings account or put money into ETFs and index funds (only if you plan to keep it in till retirement). I work as a 1099 and I do these things.
Standard IRA in 2019 I believe is $6,500 max. Solo 401k is 19k (i think) and you can match yourself up to that amount as well.
All these are tax deductible.
“Realize that making more money is a choice, especially if you live in a developed country.”
So where did you get your free job? Because most of us are working our asses off – we are smart, hard-working and do everything right but even so, no one wants to hire people.
People get laid off because some 80 year old dude who won’t give up his job decides to take their spot. Employers are lazy and entitled and expect employees to have years of experience for entry level positions because they don’t want to spend any time training them. Some people have mental illness that isn’t taken care of by their community’s doctors and organizations. Some people have no friends and therefore no contacts to help them get into the jobs.
It’s not THAT easy to even GET a job, let alone get one that pays above minimum wage. And people who say “keep applying”: Towns and living areas have a finite amount of companies that are hiring and compatible with the particular employee. If they all turn the person down, they’re out of luck. And sometimes a person could have made a mistake in their past that prevents them from getting hired, for example having a criminal record. What if you don’t even have money or a home to enable you to get around and apply for jobs? Spend your life applying for welfare cheques that don’t come through? Or take out another loan and get yourself more in debt? Stay in school forever?
Even if you are privileged enough to have had the finances and living situation required to get a post-secondary education (even in “developed countries”, this is often not possible), you still struggle to find a job at McDonald’s. But it’s easy to get a job if you’re 50 and built up plenty of experience and contacts when they were handed out like pamphlets to anyone who said they would work hard, and have settled into a position with upward mobility.
YOU can say that making money is a “choice”, because for you, it is. (To be fair, I am making an assumption here. Maybe you are poor or job-impaired. But in that case, you shouldn’t have such an attitude).
And can we stop with the tired, childish accusations that younger people don’t want to work hard or suffer? Yes, we SHOULD be able to live life. God forbid we enjoy ourselves before we die. If you think it’s entitled to forgo savings in favour of not being depressed: There’s no joy in living if you are only spending your money on a future self that may not even be alive. And if you’re young and poor, the only “choice” is how to spend the measly $50 that you have to yourself for the entire month – put it in savings, or buy yourself something you’ve been wanting for months but couldn’t afford. So I think plenty of us have had enough “pain” and are going to be staying away from the gym for a while so we can heal.
Financial Samurai says
To answer your question; I got my first job after 55 interviews and 6 rounds after I was the only one to get on the bus from my college at 6am to go to DC for a finance job fair.
My second job was after I decided to make the move to SF after entertaining a headhunter,
My final job was created by myself by starting this site and writing consistently for 6 years, 3-4 posts a week.
I’m lucky. I also try very, very hard and will frequently work 70 hour weeks.
Please share your situation Eg age, occupation, etc. I strongly believe half the battle is having that positive mindset.
Terry Pratt says
Just curious, how might one have and maintain a positive mindset when living in a miserable environment?
I’ve been renting rooms in overcrowded houses (8 people in a 3BR, 1BA claustrophobic house), with drunks, druggies, growers, dealers, sex offenders, and SSI recipients.
For evermore!! I was trying to educate myself a bit and found I don’t even speak the language. It’s like trying to read computer lingo when your experience is on an IBM select III. Really, does everybody else understand this? I must be a total idiot. A poor one; that explains a lot, eh?
Hi, if you want to learn the language go to ameritrade website they have free training on investment and also investopedia that can help you a lot with the definitions etc.
Thank your for the re-emphasis on saving more now while we’re young. I’ve been working now at 70k for two years and only the start of May this year, have I been maximizing my 401k per paycheck. Looking forward to the start of next year where I will be maximizing it to the fullest!
By the way, I’d like some updates on your P2P investing. How has your performance been since the start and at what percentage of overall portfolio would you keep at? Right now, I’m at 10%.
You forgot an important aspect in your “why you don’t have enough money” list: medical issues and lack of decent, affordable health insurance (meaning a plan that costs less than $500+ per person per month and comes with a deductible that’s less than $3k).
Financial Samurai says
You don’t need much money anymore. The government is subsidizing folks for health care. The poorer you are, the more you get.
Read: Subsidy Amounts By Income For Obamacare
i UNDERSTAND GOOD ARTICLE . I get what Conny says. Although OBuma care. Many small to medium sized corps adjust to this and some take penalty hits as they are harsh but still not harsh that they make decreases and changes to their employees plans. So yes if you make nothing Medicaid. But the working poor have to buy something OBAMA care not cheap for a family of 3 or 4. And if like conny says has medical issues that if you made nothing medicaid would pay 100%. You a family and make 35,000 with 20 % deductibles for surgery you are heading towards bankrupt or 401K early withdrawl. So in theory yes. But the sad reality for many working class folks and familys this is more the reality that noneone has good answers for. Many familys live paycheck to paycheck and never expected to see a huge recession and be out of worjk that long even those with degrees who had worked consistany for many years bought house had a family planned on emergencys but not sunamis. Take care .
I wanted to point out what I think is a bit of vaugeness in one of your examples. The example of the 70k income, that chooses roth instead of traditional. You question this choice as strange, however its common for 401k participants to make this choice. I think you are correct in this specific example that the MAGI would be less than 59k (53 in this example assuming no other sources apply) but at 59k (not too far away) the ability to deduct a IRA contribution for someone participating in a 401k plan (as this person is) — is limited. And goes away entirely by 69k. If you can’t deduct your contributions to IRA, you’re better off using Roth. You didn’t say anything incorrect, per se — but by not talking about it you make it sound like the traditional is always preferable in these circumstances, when infact, there are some limits you need to pay attention to.
Jim Nic says
I found your site by accident while surfing at 3:00 am (not sleeping because of a toothache); and while reading your followers’ replies, I zeroed in on Jack R’s reply of February 13, 2014. I, too, have the same story to tell… But my desire is that it will be looked at [by your readers] as a story about ‘hope and what happens, when you never give up’.
I will be 64 in November of 2014 and here’s my story:
Back in our ‘Economic Abyssal Plunge of 2008’, I lost everything, and I mean everything. My business, house, car, life savings, credit rating – all gone. The only four things I had left, were… My faith in God, my beloved wife of 30+ years, my dignity and my refusal to give up (So I was still rich!).
The last 6 years have been the rockiest road in my life… unemployment for almost 3 years, my wife being so seriously ill (twice), she almost died both times and also having to move our lives from Southern New Mexico to Northern Colorado, after having originally moved from the North East.
I never thought at 61, that I was even remotely employable. BUT, faith and tenacity reigns! I sent out over 400 resumes and filled out countless applications, looking for almost any kind of work and anyone that would hire me. By grace, I wound up being employed with a large healthcare organization, all based on (are you ready for this?) my experience in the U.S. Army over 40+ years ago?!
With my current job, I have gone full circle in my business career; I started out on the front line, eventually went into management, then stepped outside corporate, became self-employed,owning 2 businesses for over 20 years (broker/builder)… And now, here I am close to retirement, working on the front line again, this time in healthcare (I work in the ER of our local hospital). My sweet wife also works for the same organization too!
With the huge medical bills almost gone, we have been able to put money into our 401K’s and are maximizing our 403b’s. No, we will not have much money to work with in the end, but we won’t be on the street either. I plan on working until I’m 67 or 68, because I’m in good health (Social Security will be deferred until then & both our monthly SS checks will be of decent amounts)… I even have plans to eventually start up a special wood crafting design business with my much younger brother in law.
The moral of this little story… Don’t ever stop trying, because it is NEVER too late. Have faith in a higher power and yourself, love your spouse and your family… don’t ever stop looking for the best job possible (one that make you happy), save or invest what you can, when you can… and don’t ever, ever stop having fun in life!
I know this is on the long side and it’s not all about personal finance but it IS a true story; and like you, I also like to write! Thank you for allowing me to share it with your readers… It hope it inspires someone who might be on the ‘edge’ like I was!
Best wishes for continued success to you and your readers!
Financial Samurai says
I love your story and your never die attitude! WAY TO GO! I have been hearing more and more stories about people who lost it all and had to start over nearing retirement age 60-65. I was at the local Bed, Bath, and Beyond store the other day when a really nice man, about 68 years old helped me out with some stools I wanted. I didn’t have the 20% off coupons, but he said not to worry, that he’d take care of me with all four stools.
He said his partner died earlier, and he lost his business after 25 years. I asked if hopefully he was OK? And he said, “I’m OK. I don’t live in a house anymore, but a small apartment. But each day is a blessing.”
He looked quite ill, with spots all over his body. It is scary how we can work so hard, and exogenous variables can just crush us so easily.
Thank you for sharing your story! And if you like to write, I would love to publish a guest post for you on my site! I think you’ll enjoy the community.
Thanks for this chart. Im a low earner and I always thought it was bull, that when our supplemental insurance guys would come and say, “oh you will only being paying x amount out of y so you will be saving pretax”. That only works if you are in the higher earning brackets. There is no saving when your paycheck is already low. My check is reduced by the full amount of the premiums even though I do pre-tax my contributions(health insurance, 401k, and supplemental).
Financial Samurai says
No problem. Do you have more time in the week to work a second job perhaps?
I am going to respectfully disagree with your figures for the younger crowd. In my first 8 working years post-college (so, the ones leading up to the 30-year-old mark), I made an average of $26,000 a year (considerably less at the beginning, considerably more at the end). As you point out, median worker income in this country is around $30k, and younger folks tend to make considerably less than older folks. I say all this to point out that my situation is not atypical: my income for my age over those years is a little bit low for a college graduate, but not that low–my guess is that if I were to have direct access to the pays stubs of all my college friends for all those years, my average would be firmly in the middle of the pack.
During those 8 years, I was able to pay off all my student loans, my car loan, and save some (more than your recommendations for percentages for my income levels over those years), but I didn’t just fall short of your recommended 180k by age 30; I wasn’t anywhere close). My grand total at that point was $22k in a retirement account plus $14k in an emergency fund. I could have saved another $10k were it not for a medical issue that drained my emergency fund at one point, forcing me to restock it, and of course one *always* could have done more, but if you run the numbers, you can see that not even your “low end” $127k was in my reach. (I had roommates; I bought almost all my furniture from thrift stores; I had exactly one expensive vacation that cost me $3000).
I agree with you that saving is an imperative (and I think I have done that); I just don’t think your numbers are really for people who “don’t make much money,” especially when one considers how incomes tend to vary with age (with even college-educated 25-year-olds making considerably less than the 40-year-old versions of themselves).
Financial Samurai says
Thanks for sharing your story Claire. I really appreciate it. I’d love to hear more of your perspective on your peers who are in this income range and how much they’ve saved, and how you/they plan to save some more and eventually achieve financial independence. If you have any desire to write a guest post and try your hand at blogging, let me know!
I agree with your figures and mindset fully. It’s very sad but there is a large number of people who were simply not taught ANYTHING about money, credit, savings, etc. by anyone in their lives. Even today, many parents act as if talking and educating their children about it is taboo when they are doing nothing but forcing their kids to learn the hard way by making mistakes rather than going out into this modern money based world informed and proactive.
This is exactly what I and a number of people that I know experienced and we unfortunately are not the only ones. Many years were wasted on mistakes that I would have easily avoided had my parents had simply given me the information needed. We cannot forget there are some lackluster parents who fall down on the job. Sure after a certain age we are responsible and ignorance is not an excuse, however, there is also no legitimate excuse for parents to have children they do not teach and lead by example. But still it happens. I will never understand why people bring children into this world and neglect important areas of their life and growth. Sad.
Man I Didn't Like the Tone of This Article says
“Choose to have as many or as few kids?” So let me get this straight: I should eschew having children, drive a 1989 Honda that breaks down 3 times a year because I don’t make payments on it, live in a studio shack that costs a pittance and never work out at a gym or go out to dinner….all in the name of having a comfortable retirement? Wow. SO what else did you spend your 20’s doing? Have you picked out your coffin? Did you go with silk or was that too extravagant, wouldn’t want to spend more than you have to after all and it’s not like you’re gonna be alive to enjoy it! Seriously, I get that it’s incredibly important to make sure you’re taken care of once you’re too old to take care of yourself. Even more important if you’re such a tightwad you didn’t even have a family, because then you’re going to have to PAY for people to make sure you take your medicine and don’t wander out into traffic. But lets not lose sight of the fact that, no matter how long you hope your “retirement” years are, they aren’t guaranteed to everyone. Life IS short. Fill it with what matters. And I don’t need to point out the fact that working out is good for you, right? Taking care of the body that actually DOES the work will probably increase your ability to be USEFUL during those elderly years. Gah. I hope I never get old and think I know everything about being young.
Financial Samurai says
It definitely is a balance about living it up and not running out of money and having the government or someone to support us.
Perhaps Gen Y is right? YOLO?
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Man I Didn't Like the Tone of This Article says
It’s just, I’m really struggling with a lot of financial information getting chucked at me at once. My husband and I are 28 with 3 kids. On one side, you get a lot of mud slung at you over whether you’re saving for your children’s college educations and a whole lot of judgey parent crap like “Blah blah blah don’t you care about your kids at all!” On the other side, you’re realizing “Hey, 30 isn’t really that young in terms of How Much Have You Set Aside For Retirement?” I’m still not done with my own college education, I chose to spread it out over my 20’s rather than incur student loan debt. I’m 8 classes shy of a BA that we have paid for out of pocket and through grants and scholarships. He’s in the army for now, finishing his own degree as well, but isn’t 100% sure the army is where he wants to stay. And we’re enlisted not commissioned, so we’re a one-income family of 5 bringing in about 54K a year. I know once all the kids are in school and I’m ready to re-enter the workforce, he’ll be able to contribute a lot more and so will I. But where we’re at now, “living it up” is a bit of a stretch when describing our lives. We go nowhere. We do nothing. We live off of approximately 1800 dollars a month after bills, which goes faster than I’d like it to and even faster when we plunk some money into our personal savings account, which gets raided yearly due to some issue or another: Dishwasher crapped out, termites, whatever. The house we bought last year has needed some work, and since we want it to be there for us 30 years from now it’s not like we can put it off. It’s probably very easy to look back with 20/20 clarity on how you could have spent differently or saved better. But in the trenches, it isn’t as clear-cut and doesn’t boil down to concrete figures. Besides which, I have real concerns about the economy and where that money even goes. What if the market crashes? Will we lose everything? Will we have forced a savings plan to work in an already overextended budget, for nothing? My husband has a thrift Roth IRA through the army, they don’t match contributions and up to now we have contributed very little (like, 1%). He’s getting a promotion, we plan to bump up a few percentages. When I start working, we’ll seriously ramp it up. But will our money be safe? Didn’t a bunch of people lose their retirement savings during that big crisis a couple years back?
Financial Samurai says
Thanks for sharing. I think it’s great you will be finishing your BA, and I believe you’ll have more opportunities upon graduation.
The key is diversification. But it first starts with saving aggressively. Raise those percentage points for saving until it hurts so good. Then raise it again. Diversify into stocks and bonds. We had the worst crash ever in 2008-2009, and now the markets are at record highs again. Stay the course, and I strongly believe you will be fine!
I don’t understand why all the poor people don’t just save all of their money?
ZAHIR SHAH says
This is quite useful information and I love it.
my income is 25000 INR per month and at the end on month i end up spending all money and could not able to save the money. Now, i am 29 yrs old now. Please help me with the saving Techniques.
Looking forward asap
Um… the title of this article is “How To Save More For Retirement If You Don’t Make Much Money” and then you begin by saying that by age 30 I should have saved $180,000.
How in the hell do you save anywhere near that amount if you don’t make much money???
You people have no idea what it’s like in the real world for people who ‘actually’ don’t make much money, do you? Thanks for nothing.
Financial Samurai says
Your welcome. I will give you your money back if you provide a receipt. Keep up the positive attitude!
I am saving till it hurts and then some. I calculated that for the past two years I was able to save 100% of my earned income. I’m happy to say I managed to live off my passive income only basically for the last two years. Feels like a little bit of a accomplishment! Current checking, savings and retirement accounts are totaling about 362k as of today according to personal capital. I turn 30 this year and plan on keep going strong!
Jack R. says
I am 62 yrs old, I lost everything last year (long story). I have 0 to retire on, no savings. I am still working and expect to continue working until I’m physically able to. I make $52k per year. Can anyone please help me devise a savings plan to help me retire someday. Thank you all for your suggestions.
Financial Samurai says
Jack, shoot me an email from my About page.