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How To Save More For Retirement If You Don’t Make Much Money

Updated: 10/25/2021 by Financial Samurai 221 Comments

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* $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

How much savings you should have by age

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

401k savings targets by age


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.

CONCLUSION

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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Filed Under: Retirement

Author Bio: I started Financial Samurai in 2009 to help people achieve financial freedom sooner. Financial Samurai is now one of the largest independently run personal finance sites with about one million visitors a month.

I spent 13 years working at Goldman Sachs and Credit Suisse. In 1999, I earned my BA from William & Mary and in 2006, I received my MBA from UC Berkeley.

In 2012, I left banking after negotiating a severance package worth over five years of living expenses. Today, I enjoy being a stay-at-home dad to two young children, playing tennis, and writing.

Order a hardcopy of my new WSJ bestselling book, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. Not only will you build more wealth by reading my book, you’ll also make better choices when faced with some of life’s biggest decisions.

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Comments

  1. Life Ant says

    February 7, 2014 at 8:18 pm

    My wife’s Retirement Plan is for me to work till I drop so she can collect on my life insurance plans.

    All kidding aside, I’m impressed with Fidelity’s Retirement Planning Services, tools / calculators and I’ve spent considerable time looking at my numbers under various inflation, investment return and longevity.

    My biggest retirement concern is when De Blasio was elected as Mayor of New York City this past November. We are already taxed to death by City, State, Federal, Sales and Property…….and our soon to be elected Mayor is promoting the socialist concept of taxing the rich. I don’t consider myself “rich” but I do believe that I will be caught up in the desire to level the playing field.

    God help us!

    Reply
  2. Ray says

    January 22, 2014 at 6:56 pm

    Hi First of all let me tell you, Love your blog…
    Me and my wife make combine income of 180K gross. I am 40 and my wife is 34. I have been contributing on my 401k for last 12 years and since last 3 years i am maxing out my 401k. My wife she started working 4 years back also has 403(b) and 457 plan and we also maxing out on both the plan. So total of 51K we are saving Pre-Tax. Do you feel we putting too much in pre-tax? We also religiously put in both Roth-IRA and 529 Plan (2 kids). I have few Individual stocks but not good planing on Post-Tax Saving Plan. Do you have good suggestion on Post_Tax Saving other than Saving act and CDs. I also have 250k mortgage and was thinking of paying it off early (5-7 years), not sure if that is such a good idea. My goal to semi retire @ age 55 want to start my own realestate and have wife working till her age of 55 (i will be around 60). We like to travel and have steady retirement income of 200K/yr. Love to hear from you.. Thanks

    Reply
    • Financial Samurai says

      August 1, 2014 at 8:45 am

      Hi Ray,

      Welcome to my site and hope you’ve subscribed on the top right. I don’t think you are putting too much pre-tax at all, b/c I don’t think maxing out our pre-tax vehicles is enough.

      Best, Sam

      Reply
  3. Stefanie @ The Broke and Beautiful Life says

    September 16, 2013 at 1:48 pm

    Having variable income is the hardest part for me. I don’t feel comfortable contributing to my retirement accounts throughout the year as I don’t know how much income I can anticipate and I may need that emergency money if things get rough. Instead, when I book a new gig, I calculate how much I’ll make and then figure out how much I can afford to deposit into my IRA. Thus far I’ve been able to max out my ROTH each year. (The 401 k is a bit trickier as I only get contributions when I’m working and not from all employers).

    Reply
  4. Sharon says

    June 15, 2013 at 2:30 am

    I’m 43 unemployed I have only saved $4k in super
    I am freaking out. How can I boost my super?

    Reply
  5. mysticaltyger9 says

    March 30, 2013 at 4:49 pm

    I have to say I have to agree with the recommended savings percentages for those on lower than average incomes. I live in the high cost San Francisco Bay Area (not as expensive as SF proper, but still one of the higher cost parts of the already high cost Bay Area). I made 45.5K in 2012. I saved $12,725 in my 401K plan last year…so my income was on the low end of the 45K-65K range yet my savings was on the high end of the range for my income level.

    It can be done if you:

    –Don’t have kids, or at least don’t have them out of wedlock. That’s financial suicide.
    –Don’t drive new cars. (Mine is 16 years old and runs fine).
    –Live in a studio or shared housing instead of a 1BR apartment.
    –Keep the food budget resaonable. Stock up on things on sale. I still eat out at moderately priced places 2X per week (usually for lunch, which is cheaper).
    –Skip the Cable TV. Most of what’s on is junk anyway…and almost all of it has too many commercials. You can get DVDs from the library, watch stuff on YouTube (My 42″ TV screen is hooked up to my PC. I have wireless mouse & keyboard), or get NetFllix.

    Reply
  6. Matt says

    January 2, 2013 at 2:26 pm

    I am new to the corporate world having just graduated in May, but was lucky enough to find a decent paying job that I started in August at 42.5k a year. My question to you is that there is no way I could max out my 401k each year, not saying that I’m not saving I put 10% with a 7% match, but I am saving for a home so need to invest my savings in something a little more liquid than a 401k. That being said I do still spend a lot of money on having fun, a lot to due with the fact that most of my friends either dropped out of college or are just working part time jobs. I will say that my plan is to increase my 401k contribution everytime I get a raise, which if histroy holds true should be around 3% per year depending on economic conditions. I also am eligable for a 5% bonus every April depending on how the company is doing, which currently would be just over 2k. I plan to add 2k to that each year and load it into a Roth. Given my circumstances, would you consider me on track (also no debt)

    Reply
    • Financial Samurai says

      January 2, 2013 at 2:34 pm

      Matt, too early to say if you are on track if you just graduated in May 2012.

      At least you’re thinking about your savings and retirement, which is a good first step!

      Reply
  7. ichiban says

    November 29, 2012 at 10:59 pm

    In my humble opinion the RothIRA is the best saving vehicle there is….except the 5k/yr limit.

    5k/yr. after tax money
    30 yrs. earning FS’s est. of 8%/yr.
    Indiv. investment of 150k over 30 years
    Your TAX FREE money at retirement age of $561,461

    If your finances for investing for your future are tight, I think this is a good plan….

    First, if your company matches a 401k contribution and pays for the management fees, do the max employer match contribution first…..that’s an instant 100% return on your investment.

    Then max out your own and your wife’s(if married) Roth before investing any more to your 401k.

    IMHO it’s also a matter of government stability. The Roth IRA tax advantage isn’t a “right”, it can disappear at any time.

    Reply
    • Ilma says

      December 12, 2012 at 8:20 pm

      I make less than 15,000yr and pay rent and other bills. Now, I am over 50 and work less than 40 hours, and don`t have any savings.
      I would Like to know if it is not too late for some retirement plans.
      Roth? or 401k ?

      Reply
  8. Meredith says

    November 26, 2012 at 7:40 pm

    For all the rules and advice, I think it alls comes back to determining what’s important to you. Like someone said on another post, Gen Y we’re happy with internet connection, our iPhones, and then in my case a Starbucks coffee (killing someone due to caffeine withdrawal will def put a hamper on future earnings and retirement savings).

    The H and I make more than this guideline, $170K/ year pre-tax. But with our budget we will save a little less than $50K next year between 401K (not including employer match), IRAs, savings, and other investments. I’d like to save more, but one of those judgement calls of things thats important to us is being active. And our food bills run us like another mortgage at ~$900/ month. Could we cut that down some and invest it, yes. Would we be happy if we did, no. So we make sacrifices in other areas. Like not buying a lot of expensive clothes, and both driving cars that are 7 years old and each have 100K+ miles on them.

    I think savings should “hurt”… but maybe not on the stuff that is integral to who you are and what TRULLY makes you happy… Let it hurt on the other stuff.

    Reply
  9. jairus mcallum says

    November 4, 2012 at 4:00 pm

    i agree with the story but the obama part i heard enough from alot of these ignorant ass people. i see yall not talking about bush and how he didnt know what the hell he was doing while in office.

    Reply
  10. astrid says

    October 10, 2012 at 12:50 pm

    It might be better if you are more careful with you recommendation of contributing to an traditional 401K vs Roth401K or just Roth because some, for example people in the military, have tax exempt income which leaves the effective tax rate lower than when they will retire. In this case a Roth is better since the Taxes then will probably be more, especially if you have a big nest egg to draw from when you retire. Our income for example is about 120K, due to some income not being taxable our actual “taxable” income is 86K and after all the detuctions our tax rate is only 9%. Do you think we will be at a 9% tax rate in 35years when we retire? We are mid 20’s with one spouse in military and the other having professional career.

    Reply
    • Financial Samurai says

      October 10, 2012 at 1:27 pm

      Are you talking federal, state, or combined? Sure, why not? Move to Hawaii and your pension (giving you are talking military) has no state tax at all. Several states are like this.

      Do what you feel is right. Saving is better than no saving. I cannot know everybody’s individual case, and whether they have a sweatheart deal from the gov’t, have carried interest income, an inheritance, a pension, etc.

      The point is to save.

      Reply
  11. Steve says

    October 10, 2012 at 9:32 am

    Sam,

    I agree with your concept. Just wanted you ask a few questions. The average college grad comes out with $20 – $25k worth of student debt. They also have typically another 5k or so in credit card debt. I think the average salary for a 2012 grad was around $40,000. Starting our professional careers, most of us are typically at least 20k in the whole. If you took federal financial aid, there is no real benefit in paying off student loans early. The interest rate is fixed, and you even receive a discount if you have it auto-deducted from a checking account. Not to mention the fact that you can write off student loan interest on your taxes.

    What is your reccomendation for tackling student debt/debt in general vs. saving. I have an average salary (50k). I put 8% into a roth 401k, (company match is 5%) This is about as much as I can afford as I try to windle down Credit Card debt. I’m doing my best to save and want to maximize that for my future, while also reducing debt at the same time. Thoughts?

    Thanks,
    Steve

    Reply
    • Financial Samurai says

      October 10, 2012 at 10:24 am

      Hi Steve,

      Welcome to my site! I’m glad you are at least contributing to your ROTH 401K currently. I don’t know your entire financial picture, and your cost of living, but my suggest is to TRY and increase your 8% savings to 10% and see how you feel.

      Slowly turn that savings notch up until you feel PAIN. After a while, you will start getting accustomed and do what you can to make yourself feel better e.g. cut down on expenses, stop accumulating CC debt, realizing that true pain is starving on the streets.

      Also, ask yourself why you have $5K in CC debt. Was it for necessities or desires? You’ve got to cut that out and not having revolving CC debt.

      Sam

      Reply
  12. Lloyd says

    October 9, 2012 at 12:54 am

    Hey man can you write about a article about private banking and their perks?

    Reply
    • ARB says

      July 9, 2016 at 6:00 pm

      Seconded! I am looking to go into private banking and have been doing research on it for awhile! I would like to see how much harder and more stressful the work of a private (not investment) banker is compared to that of a retail banker.

      Sincerely,
      ARB–Angry Retail Banker

      Reply
  13. charles@gettingarichlife says

    September 16, 2012 at 9:53 pm

    Sam,
    If you have a big mortgage in an expensive state and NOT maxing out 401K and Roth you can’t afford your home. Our mortgage with insurance is 25% of our income, but I still felt we couldn’t afford it with maxing out two 401Ks and Roth IRAs. We rent downstairs out, we rarely see the tenants. The only drawback is we lose our backyard. Only in America is a 2500 sq ft house on a 10000 sq ft for four people is average, yet the cost of maintenance for that prevents them from maximizing their retirement accounts. The worst part is once a calendar year passes you lose a year of contribution.
    Rent out rooms, build a garage or back extension for additional income. You’ve been to other countries, the rest of the world live in much smaller homes with multiple people. Problem now is my wife is itching to take the rental check and buy her an LV bag.

    Reply
  14. Shilpan says

    September 12, 2012 at 5:52 pm

    Great write up! I just spoke with a friend who lives in Manhattan. His family never made more than $75000 combined in the last 12 years. Yet he has has managed to save over 50% consistently. In this 12 short years, my friend bought a small condo and, today, he took over a small restaurant.

    You can save 40-50% once you decide to do so because you will adjust your expenses to make it happen.

    Reply
  15. Math Major says

    September 11, 2012 at 1:02 pm

    Hey,

    I have a question. What if you do not like any of the investments that your company is offering in a 401k plan, or think you can do better yourself?

    Also, does putting money in a 401k plan lower your tax bracket? For example, if I make 60k and I put the full 17 into the 401k, would I have the same tax bracket as someone who makes 43k?

    Please let me know.

    Thanks

    Reply
    • Financial Samurai says

      September 11, 2012 at 3:19 pm

      Unless you hate the stock market as a whole, and or are some sophisticated investor, then you should like at least one investment.

      Yes, dumping 17K will lower your effective tax rate. You might still be in the same tax bracket though given brackets are wide.

      https://www.financialsamurai.com/2012/07/19/maximum-mortgage-tax-deduction-depends-on-income/

      Reply
  16. drea says

    September 10, 2012 at 1:00 pm

    Great article except for one consideration for the likes of me: student. debt.

    My conundrum for the few months I’ve had the funds to contribute to 1. my emergency fund 2. retirement AND 3. paying down my debt has been how much, or, what percentage of my income each month should I be putting towards each? I have $11k left in student loan debt (my only form of debt), I contribute $500/mo to our (my husband also contributes about $600/mo) emergency fund and $200/mo to my consolidated student loan. I have the opportunity to increase that amount by about $800/mo to any of these 3 places and I’m trying to figure out which one should get the gold. My instinct is to put it towards my loans, pay those off in a years time and be done with it but my total savings is grossly under what you have listed as where I should be by the time I’m 30 (I’m 28 now and hope to have around 30 – 40k by the time we’re 30).

    Any recommendations for where my $800/mo surplus should go?

    Reply
    • charles@gettingarichlife says

      September 16, 2012 at 10:00 pm

      Drea,
      I recommend open an Ally account, make it a Roth IRA and place your emergency fund in the no penalty CD of .84% You can draw out principle from a Roth at any time, (not the interest). You want to do this so that you don’t lose a year of Roth contribution. Once your debt is paid off and you have additional money you can always place outside money into a no penalty CD as emergency, than rollover those CDS to investments. That way you will have additional money in your Roth.

      Reply
      • ARB says

        July 8, 2016 at 6:05 pm

        For the emergency funds, instead of a CD with Ally, I believe a savings account with CIT Bank would be even better. Last I checked, the APY was just shy of 1%.

        Sincerely,
        ARB–Angry Retail Banker

        Reply
  17. JJ says

    September 4, 2012 at 12:39 am

    Does this equation change if you invest in a business or real estate. I have a regular job and I only save 3% in my 401k. The majority of my money is invested in real estate. For example, I have more than 5 rental properties (several are paid off) that generate <30k per year (after expenses). The money from the rentals is re-invested to purchase more homes. I also have a business that generates <20k per year. This money is re-invested into either the business/real estate.

    Reply
    • Financial Samurai says

      September 4, 2012 at 5:23 am

      Sure, the equation changes if you are making 50k a year.

      Divide 50k by a realistic risk premium of say 3% and you’ve got a retirement nut of around $1.65 million.

      Why not max out the 401k first?

      Reply
  18. Marc says

    August 6, 2012 at 2:04 pm

    Yes, lets put more money into the hands of bankers who rape you, lets put more money in places that are regulated to death…you cant take money until 59,60,63,69,70,80…etc etc, oh, and when you take it there is a new 5% social tax….sorry! Listen folks, it all sounds good now but remember its all paper. A dollar saved 100 years ago is worth 4 cents today, and that rate of decline in value of the dollar is increasing faster than ever. Spend now, risk now to make a return now and live your life now, and what little you do save put it somewhere other than in a bankers hand, if YOU cant hold YOU don’t own it.

    And no, I’m not poor, not even the slightest, and yes, you can do it as well, just buy a laptop and fire up Google, there’s terabytes of ideas/suggestions/business/opportunities to make money on.

    Reply
    • Michael says

      August 20, 2012 at 6:55 pm

      How would you recommend saving for a 401k or 457 if you are a public sector worker who participates in a pension plan? I make 38,000 a year and pay just over 10% into a pension plan. I started a 457 contributing 4% pretax and 1% Roth. Changed that to 5%/2% and just recently again to 12%/2%. How much should I rely on a pension? I realize this is unique given the availability of pensions in the U.S.

      Reply
    • ARB says

      July 9, 2016 at 5:56 pm

      Yes, let’s put it into the hands of the government instead. You think we bankers are stealing from you? You don’t know what theft is until you see how much of your money is taxed and where it goes. Sure, take my money and send it to the Middle East! I certainly wasn’t planning on using it.

      Sincerely,
      ARB–Angry Retail Banker

      Reply
  19. Cheddar Stacks says

    July 27, 2012 at 6:26 pm

    I don’t know about you all but I’m getting cheddar stacks over here! I live in the midwest and… make good money..yes, can be boring but you can afford to do any damn boring thing you want and save a ton simultaneously. Almost left Oklahoma for California which would have been the worst decision in my life. Being a mortgage broker rocks!!!!

    Reply
  20. brandon says

    July 27, 2012 at 5:07 pm

    I was just starting to enjoy your savings guide & some of your other articles until I got to the part about saving for retirement if you don’t make much money and needing to vote for Obama to continue the prosperity of the middle class. Obama is AGAINST the middle class. Raising taxes on the rich will not solve anything. Re-distribution of wealth is not the way to go. If the companies & business owners “the rich” are not making money then the working man “middle class” is not making money. We are seeing companies closing their doors all accross the mid-west due to higher taxes & increased gov. regulation. Fewer companies =Fewer jobs. Re-distribution of wealth by raising taxes on the rich & passing it on down the line will not help the middle class at all. It will simply fly right over our heads and be handed down to the freeloaders that abuse the system with Welfare & Food stamps. I’m not saying that I am against federal assistance for the needy with the key word being NEEDY, but the majority of the people that get federal assistance such as Welfare are just abusing the system & do not want to “better themselves” by any other way than reaching into MY (and any other working persons) pockets!

    Other than that a lot of the other stuff you wrote about saving for retirement makes some sense. Have a nice day

    Reply
  21. Island Hopper says

    July 20, 2012 at 10:53 am

    I have read both articles (stumbled on through Google) and while I was shocked at first, after crunching the numbers think it is do-able, and you offer sage advice. I am 42 and I am living on a tropical island making ~50k tax free. Looking at the 300k goal for my age it was disturbing to say the least as I was 40 with no savings aside from two small pensions from previous employers. What made it do-able was taking the 25 years left and seeing how much/ year I would need to make the 723k (2,461/month) and I can do that! It might hurt a little, in that, for the last 3 years I have only been putting away $1200 a month, and I definitely don’t have the $43000 difference between the two contribution levels squirreled away. Therefore, some drastic cost reductions are needed. I can still island hop if I trim the fat elsewhere.
    I do thank you for posting these articles as it is tough to figure out what a person realistically needs to save for retirement.
    Dave

    Reply
    • Financial Samurai says

      July 20, 2012 at 2:46 pm

      Sounds like a good life! Which island, and how is your 50K tax free?

      Glad you enjoyed the article. I’ve got a house in Hawaii that I plan to live in for 3-6 months a year myself!

      Reply
  22. Patch says

    July 16, 2012 at 9:36 am

    do we include the equity in our homes in the savings numbers?

    Reply
    • Financial Samurai says

      July 16, 2012 at 9:51 am

      It’s up to you, but probably best not to since you have to live somewhere. If you have more than one house, and can sell another in retirement to extract the equity, then yes.

      Reply
  23. Milan says

    June 24, 2012 at 8:18 am

    I really loved your articles and the stern tone of disciplined saving. It is worth Re-reading again when you feel you deserve to spend large sums of money on things like car

    Reply
    • Financial Samurai says

      June 24, 2012 at 11:50 am

      Right on! A good attitude and desire is half the battle! Hope you can fulfill your money saving goals!

      Reply
  24. Ken says

    June 24, 2012 at 12:42 am

    @Cindi

    Check my entry a few comments above and i’ll try to respond if you have any questions. I found this site a while ago but just happened to stumble back to it tonight and decided to begin commenting. Hopefully the samurai is ok with my comments :)

    Reply
  25. Ken says

    June 24, 2012 at 12:41 am

    Check my entry a few comments above and i’ll try to respond if you have any questions. I found this site a while ago but just happened to stumble back to it tonight and decided to begin commenting. Hopefully the samurai is ok with my comments :)

    Reply
  26. Cindi says

    June 12, 2012 at 10:17 am

    Any suggestions for a newly divorce 45 yr.old working two jobs and trying to figure out how much to invest and where to invest to have a little something in 20 plus years???? HELP

    Reply
  27. Anica1704 says

    June 10, 2012 at 4:12 pm

    So my husband and I both work at jobs that do not offer retirement options — and don’t pay much. His salary is deposited directly into our checking account monthly, and I get a check weekly. In both our cases the taxes are already taken out. How do we put pre-taxed money into an IRA?

    Reply
  28. Chris says

    June 6, 2012 at 2:05 pm

    Is there any other options other than Roth IRA ( dont trust the government that they wont tax me in the future ) Maybe I am wrong but I thought that the government made the same promises on social security not being considered taxable income which it is. Are you 401k figures over inflated to cover the tax you will need to pay out of your NUT ( 401k is not tax exempt but tax deferred? Is there tax exempt saving tools that would be more tax favored than 401k?

    Reply
    • Ken says

      June 24, 2012 at 12:44 am

      @Chris

      Investment Property and 10% of net worth in things like GDX, GLD or physical bullion.

      Reply
  29. AJ says

    June 5, 2012 at 8:49 pm

    People must have inheritances or something :-) I save 10% of my income and I have 12K in 401K and 21K in Roth IRA. I have scraped together 10K for a down payment on a house and have kept that in a CD for a few years, and it has made very little money. I have a midwest salary, maybe that is the problem. From about 24-30 I made 36K per year. When I was 31 I found a job making 45K. I am 32 years old. I feel like I am on track, but after reading this I do not. It can be difficult starting a new job and having to wait a year before 401K benefit and not being vested before leaving a job.

    Reply
    • Financial Samurai says

      June 5, 2012 at 10:22 pm

      If you are lucky enough to live in the Midwest and ENJOY it, then you can probably cut these figures in half. Good luck!

      Reply
      • aJAbsstyle says

        June 15, 2012 at 10:40 pm

        Thank you so much for writing back. I was often thinking about how I was going to come up with all that money to be on track. I may not be as far off as I thought because of the Midwestern location. I have doubled my savings rate to about 20% of my take home paycheck and I am feeling pretty good about that. Hopefully I get a raise and can retire at about 57 as I had hoped :-)

        Reply
        • Ken says

          June 24, 2012 at 12:38 am

          In my opinion everyone is different. To compare yourself to a chart may hurt more than help. Take for example how you felt better when the midwest factor was brought back into the equation. It may be easier to think about what percentage of your current income will you need annually to live comfortably in retirement. These things we speak of are so relative you cannot really put it into a chart. For example what does “confortably” mean, or to save enough so it is painful and hurts in the short term, in exchange for better fruits in the future? Since that is tough and also things can change as life passes you may want to reverse engineer things and make a plan from there. Some financial advisers state one can live on 80% of their current income in retirement due to hopefully not having a mortgage at that point etc. Others say one should go ahead and expect to save enough to replace 100% of their current annual income in order to have the same standard of living. Since we don’t know what the tax structure will be, let alone inflation leading upto and during the years of retirement this is why FS calls to max everything out and pretty much save as much as you can everywhere you can. If you believe retirement is the biggest priority in life and can sacrafice standard of living for the 25-40 years of work leading upto retirement that is a very personal choice. I would rather take one small vacation every year, than no vacations at all so i can enjoy life during my working years for example. Here are some variables i have considered: what age would i like to retire? (when running the 401k calculators you will find maybe working 2-3 more years than expected could boost your account value hundreds of thousands if not millions). Take the average lifespan of your gender and consider how healthy your lifestyle is, and how healthcare will likely offer bumans the ability to live a bit longer in the future. Decide if you want to pass any money to your heirs or if you only need enough to live for your own lifespan. Decide what percentage of your current income would you need to replace in order to live the lifestyle you envision in retirement. Run those 401k, and IRA calculators on a regular basis to ensure you’re on track. Be sure to account for tax brackets on your 401k, and disregard the tax brackets for any ROTHs. Be sure to compare those numbers to a drawdown calculator so you can see what your account values will provide on an annual basis which will give you the number of years the acount value will last, or will give you the amount per year it will provide based on a static years in retirement number. And for the scary part be sure to include 2-3% annual inflation!! Once you account for both income taxes from withdrawals, inflation-adjusted valuation, and expected lifespan it should give you an idea if you’re on track. The next step is to learn about the markets: equities, bonds, commodities, currencies. Things that can affect your account values and tools that can be used to protect your gains, or increase leverage if that is what is needed. All the work will be for nothing if you can’t replicate the “rate of return” assumption that these calculators call for. Education is your best tool for retirement, never stop learning so you can protect your gains and position for sdequate risk management later in life. If you’re younger you can take bigger risks that is why i like stock options although they are not for the weak stomach. Real estate is a very good long term investment. I recommend reading crash boom by greg rand as he provides i nice perspective on the current opportunity and in real estate and investment property. Good luck to all.

          Reply
  30. 30sAndRetired says

    June 3, 2012 at 4:04 pm

    Regardless of income, financial independence is a choice that requires sacrifices, PERIOD. After reading this post, I checked our annual saving rate, and it is around %35+ range for the past few years. For my wife & I, financial independence started with paying off the house, so we just did that.

    Reply
    • Financial Samurai says

      June 3, 2012 at 4:21 pm

      Excellent work! Sacrifice is needed indeed. I venture to guess that even the most financial sacrifice, still pails in comparison to the real sacrifices others make in their lives in other countries. We have it good.

      Reply
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