How Much Savings Should I Have Accumulated By Age?

Savings is the foundation of good personal finance. This article will discuss how much savings to accumulate by age so you can achieve financial independence and retire comfortably. It's important to have savings targets at every age to keep you on track. When it comes to building wealth, you don't want to just wing it!

I don't want to hear excuses as to why you can't save if you want to be free. Go somewhere else please. During the height of the pandemic in March 2020, the U.S. personal saving rate rocketed above 33% from ~9%. Therefore, we can all save more if we want to.

If you are serious about living life on your own terms, study my recommended savings by age chart carefully. The more you save, the sooner you can achieve financial freedom.

Recommended Saving Rate By Age And Income

How Much Savings Should I Have Accumulated By Age?

Your saving rate should increase the more you make. To do this, you've got to spend at a slower rate than the rate of your income increase. I'm trying to use realistic numbers here so that folks don't overly bitch and moan. I started saving 50% of my after tax income when I began earning more than $60,000, so please, save your excuses for the government instead.

Savings amounts are important, but what's more important is your expense coverage ratio given everybody has different lifestyles. In other words, how many years (or months) of expenses can your savings cover in case your income goes to zero?

Given nobody can work forever, we must increase our expense coverage ratio the older we get because we will have less ability to earn. At this point, it's time to start drawing down our savings. Let's review my savings by age chart below.

Recommended Savings By Age Chart: Pre and Post-Tax Savings Guide

Below is my recommend saving rate and guide by age. It shows how much you should have saved in your pre-tax retirement accounts (401k, IRA, Roth IRA, 403b, etc) and your post-tax investment accounts.

Sadly, the average 401k and IRA contributions are not high enough. However, you have the power to do better than average. For 2023, the employee 401k maximum contribution limit is $22,500. This is up from $20,500. Your goal should be to max out your employee contributions as soon as possible.

Your saving rate should increase the more you make. Not only should you be maxing out your tax-advantaged retirement accounts, you should also be building your taxable investment portfolios. Your post-tax (taxable) investment accounts are what will generate useable passive income if you wish to retire before 60.

How Much Savings Should I Have Accumulated By Age? - Saving rate and amount guide by age and income

I recommend everybody start off with 10% and raise their savings amount by 1% each month until it hurts.

If you've ever had braces, you get the idea. Keep that savings rate constant until it no longer hurts, and start raising the rate by 1% a month again. If you make more than $200,000, certainly shoot to save more if you can. You can theoretically achieve a 35%+ savings rate in two short years with this method!

Please note that I am making 401k and IRA contributions a priority over post-tax savings. The reasons are:

  1. We have a tendency to raid our post tax savings,
  2. Tax free growth,
  3. Untouchable assets in case of litigation or bankruptcy,
  4. And company match.

Obviously you need some post-tax savings to account for true emergencies. Ideally, my goal for everyone is to contribute as much in their pre-tax savings plans as possible and then save another 10-35% after tax.

The maximum 401k contribution for 2022 is $20,500 and for 2023 it rises to $22,500. The maximum pre-tax contribution amounts have historically increased by about $500 every two years. But it varies depending on cost-of-living adjustments and inflation rates.

The below chart is an expense coverage ratio chart that follows someone along a normal path of post college graduation until the typical retirement age of 62-67. I assume a 20-35% consistent after-tax saving rate for 40+ years with a 2% yearly increase in principal due to inflation.

The other assumption is that the saver never loses money given the FDIC insures singles for $250,000 and couples for $500,000. Once you breach those amounts, it's only logical to open up another savings account to get another $250,000-$500,000 FDIC guarantee.

You can buy an 18-month CD with CIT Bank for 4.5% thanks to aggressive rate hikes by the Fed. This is one of the best CD rates today. Before 2022, 18-month CD rates were less than 1%. Check back as the CD rate is always changing.

Expense Coverage Ratio = Savings / Annual Expenses

Savings Guideline by age using an expense coverage ratio

Note: Focus on the ratios, not the absolute dollar amount based on a $65,000 annual income. Take the expense coverage ratio and multiply by your current gross income to get an idea of how much you should have saved.

Savings By Age: Your 20s

You're in the accumulation phase of your life. You're looking for a good job that will hopefully pay you a reasonable salary. Not everybody is going to find their dream job right away. In fact, most of you will likely switch jobs several times before settling on something more meaningful.

Maybe you are in debt from student loans or a fancy car. Whatever the case, never forget to save at least 10-25% of your after tax income while working and paying off your debt. If you have the ability to save 10-25% after tax, after 401k and IRA contribution up to company match, even better.

In your 20s, it's paramount to get your personal finance fundamentals right. You want to beat the average net worth for the above average person. And you will, if you save and invest aggressively for a long enough period of time. Everything is relative when it comes to finance.

Savings By Age: Your 30s 

You're still in the accumulation phase, but hopefully you've found what you want to do for a living. Perhaps grad school took you out of the workforce for 1-2 years, or perhaps you got married and want to stay at home. Whatever the case may be, by the time you are 31, you need to have at least one years worth of living expenses covered.

If you've saved 25% of your after tax income for four years, you will reach one year of coverage. And if you saved 50% of your after tax income a year for five years, you will have reached five years of coverage and so forth.

Need some extra motivation to keep on hustling and saving money? Take a look at the top 1% net worth amounts by age.

Savings By Age: Your 40s 

You're beginning to tire of doing the same old thing. Your soul is itching to take a leap of faith. But wait, you've got dependents counting on you to bring home the bacon! What are you going to do?

The fact that you've accumulated 3-10X worth of living expenses in your 40's means that you are coming ever close to being financially free. You've hopefully built up some passive income streams a long the way, and your capital accumulation of 3-10X your annual expenses is also spitting out some income.

The best age to retire to minimize regret and maximize life is between 41 – 45. Therefore, you should be aggressively saving more in your 40s. Your 40s is a decade when you really start to recognize your mortality. More friends and family members you know start dying. You might also have some health issues as well.

Savings By Age: Your 50s

You've accumulated 10-15X your annual living expenses as you can see the light at the end of the traditional retirement tunnel! After going through your mid-life crisis of buying a Porsche 911 or 100 pairs of Manolo's, you're back on track to save more than ever before!

You are 100% in tune with your spending habits, therefore, you raise your savings rate by another 10% to supercharge your final lap. As you get closer to traditional retirement age, you can save more in Treasury bonds which are yielding over 4% thanks to Fed rate hikes.

You want to focus more on capital preservation and not capital growth with your savings in your 50s.

Savings By Age: Your 60s 

Congrats! You've accumulated 25X+ your annual living expenses and no longer have to work! Maybe your knees don't work either, but that's another matter! Your nut has grown large enough where it's providing you hundreds, if not thousands of dollars of income from interest or dividends.

Full Social Security benefits kick in at age 70 now (from 67), but that's OK, since you never expected it to be there when you retired. You're also living debt free since you no longer have a mortgage.

Social Security is a bonus of an extra $1,500 a month. You're budgeting a couple thousand a month for health care as you plan to live until 100.

Regarding a more aggressive target net worth, shoot to accumulate 20X your annual gross income by the time you want to retire. By using a multiple of income, your net worth goal continues to increase as you make more money. There's no way you can “cheat” your way to financial freedom by slashing your expenses.

Savings By Age: Your 70s and beyond

Sure, you've been spending 65-80% of your annual income every year since you started working. But now it's time to spend 90-100% of all your income to enjoy life! They say the median life expectancy is about 79 for men and 82 for women. Let's just bake in living to 100 just to be safe by taking your nut, and dividing it by 30.

For example, let's say you live off $50,000 on average a year and have accumulated 20X that = $1,000,000. Take $1,000,000 divided by 30 = $33,300. You're getting another $18,000 a year in Social Security, while the $1 million should be throwing off at least $10,000 a year in interest at 1%. If you're interested in retiring early, here's a more aggressive savings strategy for you.

Important Note: Obviously no one ever knows what might happen to provide a boost or a drag to their finances. Maybe you get lucky with a great new job offer or invest in the next Apple Computer. Or maybe you get laid off at 40 and can't find work for two years. My chart above merely serves as a savings guideline. Work to build alternative income streams in the meantime.

In your 70s, you should also think about what type of retirement philosophy you want to follow: YOLO or Legacy. Personally, I'm following the Legacy retirement philosophy in order to create a perpetual giving machine after I'm gone.

Save And Save Some More!

The only way to reach financial independence and hit my savings by age chart is to live within your means. National average money market accounts are still yielding a pitiful 0.07% as of November 2022.

Don't fall pray to letting your cash sit in a savings account with less than a 0.1% yield. Look to direct, online-only savings accounts like CIT Bank's Savings Connect Account instead. Even better is CIT Bank’s 18-month CD at 4.25%. Take advantage of these higher rates thanks to the Federal Reserve's aggressive rate hikes.

In fact, I keep most of my saving in high-yield online savings accounts. They prevent me from having the temptation to spend. With the Fed hiking rates so aggressively, you might as well take advantage of higher savings rates.

Think you can't save more? Below is the saving rate chart during the pandemic. Notice how the U.S. personal saving rate spiked to 33% in April 2020. It has since fallen back to trend as more Americans become more comfortable with living through uncertainty. But the point is, we can all save more when we really want to.

My savings by age chart is based on consistently beating the median savings rate of Americans. The more you save, the more you can invest and generate more passive income.

U.S. personal saving rate historical
Americans can save more if we want to

How I'm Reinvesting My Savings

For the money you are comfortable risking, actively invest the rest of your after-tax savings in real estate, the stock market, bonds, private equity and anything else that matches your risk tolerance.

Personally, I've invested $810,000 in real estate crowdfunding because I like owning real assets that produce income that are less volatile. I've invested in the heartland of America to take advantage of strong demographic trends. Valuations are cheaper and rental yields are higher.

With private real estate, it's great to earn income passively instead of having to manage tenants and work on maintenance issues. The work-from-home trend is here to stay. Technology is also only getting better.

My favorite real estate crowdfunding platform is Fundrise. They began in 2012 and are the pioneers of the private eREIT asset class. For most investors, investing in a diversified real estate fund is the way to go.

You can sign up with Fundrise for free and explore what they have to offer. Fundrise focuses on single-family rentals in the Sunbelt. With over 300,000 investors and $3.2 billion in assets under management, Fundrise is my favorite real estate investing platform.

Explore Now button

If you are an accredited investor, also check out CrowdStreet. CrowdStreet offers individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations and potentially higher growth. If you have more capital, you can build your own select real estate portfolio with CrowdStreet.

With high inflation, owing real estate is a shrewd move. Inflation whittles down the cost of debt and boosts the value of your real assets. Inflation also reduces the value of your cash savings. Hence, you should always be strategically investing your savings by age to at least keep up with inflation.

Diligently Track Your Net Worth

It's important to then track your investments to make sure you're comfortable with your positions. I highly recommend signing up for Personal Capital, a free online wealth management tool. It enables you to easily monitor your finances. It's easier to hit my savings by age target with this free tool.

Before Personal Capital, I had to log into eight different systems to track 28 different accounts to manage my finances. Now, I can just log into one place to see how my stock accounts are doing. I can track how my net worth is progressing as well.

One of their best features is their 401K Fee Analyzer. It is now saving me more than $1,700 in portfolio fees I had no idea I was paying. There is also have a fantastic Investment Checkup feature that screens your portfolios for risk.

Finally, utilize the incredible Retirement Planning Calculator. It uses your linked accounts to run a Monte Carlo simulation to figure out your financial future. You can input various income and expense variables to see the outcomes.

Definitely check to see how your finances are shaping up as it's free. Try it today!

Retirement Planning Calculator

Savings by age charts are completely updated for 2023 and beyond. After this post, hopefully, you are no longer wonder how much savings should I have accumulated by age. If the amount of money you're saving each month doesn't hurt, you're not saving enough!

Join 55,000+ subscribers and sign up for my free weekly newsletter. I recap the most important events of the week and share my thoughts as a 23+-year finance veteran.

You can also pick up a hard copy of my Wall Street Journal bestseller, Buy This, Not That. It is your unfair competitive advantage in building wealth. BTNT helps you make optimal choices for some of life's biggest dilemmas.

About The Author

240 thoughts on “How Much Savings Should I Have Accumulated By Age?”

  1. Hi Sam. I often find myself referring back to your valuable content over and over again! Thanks for helping me and others to realize financial freedom sooner! Are there any posts that set targets for passive income by age and/or salary? Perhaps I missed this somewhere!

  2. Smart Saver

    Great post FinancialSamurai. Saving money can be hard for a variety of reasons, including lack of budgeting skills, high cost of living, consumer culture, low income, and unexpected expenses. To overcome these challenges, it can be helpful to create a budget, cut costs where possible, and prioritize saving money. It can also be useful to seek financial advice from a professional or to explore resources such as financial literacy courses or online financial tools. I write a lot about saving money in my blog

  3. thanks for this post. One question: with savings you refer only to money in investment and/or saving accounts or can it also assets like equity on real estate?

    In my case im 43 years old. I was never a big earner, and I really dont have much in retirement saving accounts, or the bank for that matter. But i did invest in real estate since mid 20s (old properties at affordable prices but in good locations for rent, or, even better, locations that were going to be good, but still werent at the time of the purchase) , so if i sold my real estate assets and paid all my debts, i could live around 18-20 years eating the capital at my current spending. If we also consider the interest gains that money could generate minus inflation, then that time goes up to 27 years

    1. Tolamo Lobelo

      I am very pleased I came across your blog, I am 35 years old and passionate about passive income and expanding my portfolio more

  4. I just wanted to thank you for this wisdom.

    When I finished my Ph.D., the one thing that I wanted the most was to own a supercar. I wanted all of those years of hard work and low pay to be worth it.

    I got a very nice paying job doing what I love, worked hard, aggressively put in constant overtime, basically lived at the office on weekends for two years, and saved up constantly toward that goal. However, something always went wrong when I went to order a car. The first time, at one dealership, the sales associate left mid-transaction for another dealership and thus wasn’t responding to emails or phone calls. My car went to another buyer on accident. The second time, at another dealership, the sales associate couldn’t get me a build-order allocation due to the the model line being discontinued. A new model had been announced a few days after I made a deposit; I was put on a waiting list, as a result, and later had my deposit refunded since I’d be waiting about a year for a build slot.

    I was furious each time, but I didn’t know that I was also severely lucky. It saved me from making incredibly bad decisions.

    I later stumbled on your blog. At first, I thought that the advice was about cars and the one-tenth rule was out of touch. Then, by happenstance, I sat down with an asset manager at dinner and realized it was absolutely wonderful.

    I turned all of that overtime money into a just enough of a down payment to get a house in a highly desirable area. I put in for constant overtime so that I could make substantial home improvements in short time, like adding solar panels and a whole-house battery back-up system. I then sold that house and bought property to build my own house. I downsized immensely on that next house, but, thanks to the architects I used, I was able to get more usage out of less space. The overall build quality was vastly superior too. Most importantly, I was able to pay off the mortgage in under three years. All of that overtime led to back-to-back promotions that increased my pay rate and enabled me to make large principal payments every year.

    Even though life is good, I’m still driving the same car that I bought when I was in grad. school. I keep it looking new and take good care of it. I’ll likely get another six or seven years out of it.

    Without a mortgage payment and a car payment, I’m currently saving up almost ninety percent of my after-tax salary and investing about eighty percent of that every year. I just put everything into a mixture of ETFs and treasuries and let it grow. I could probably save up even more, but there’s a point where life becomes too austere; sometimes, you need to live a little.

    I don’t get paid a crazy amount compared to some of my peers from my lab in grad. school. I took the path of doing what I love, and basically being my own boss, versus grinding for an obscenely high paycheck. However, I can say that even with a good education, strong work ethic, and prudent spending mentality, you can easily save and invest to the point where, after about fifteen to twenty years of being patient, getting a new supercar every year is basically a fraction of the annual investment returns.

    If I still want a fancy car at that time, then at least I’ll be able to truly afford it.

  5. Hi there,

    I am 26 yrs old currently saving 16.5% pre-tax in my 401k including the company match and maxing out my Roth IRA each year. The rest post-tax money after expenses I put into multiple funds for emergency, car maintainence, and investment property. My question is should I reduce my 401k contribution to the minimum so that I can maximize saving for the investment property and/or put the post tax money into a taxable account?

    I don’t plan to get rich quick with real estate but I am looking to develop multiple cash flows sooner rather than later.

  6. Why should one save money in the beginning and keep that one and only goal. Rather work hard on one’s skills do an MBA from a top ranked university and become a CEO of a decent organization and earn 5 million dollars per year in mid 40s .Also want to know why would one leave an executive level position even though he/she had achieved financial Independence as the earning potential will increase manifold as you move a level up.Is financial indepence is more valuable than a top ranked MBA or an executive level position.Your views are highly appreciated since you worked at an executive level position.

    1. Hi. You underestimate work toll on mental and physical health. Corporate world is full of corpses in their 40s and 50s.

      Also no everybody can make it to executive level salary. But most can make average wage and push savings rates high.

      So yes you are right. But your 5mil wage will be reached only by couple of thousand. What about remaining hundreds of millions in USA only? FIRE applies to more general population.


      Mr Whyninetofive

  7. Hi Sam,
    I’m evaluating various online banks to park some cash. How is CIT Bank able to offer 1.5% while an outfit like Wealthfront is offering only 0.26%?

    1. Pretty incredible that CIT Bank is offering a 1.5% savings rate when the 10-year bond yield is at <0.7% and the Fed Funds rate is at 0% - 0.125% right?

      The answer is that each bank is different and have different needs for deposits. CIT Bank wants to attract more deposits because it probably sees more investing and lending opportunities than other banks. The spread is how banks make money.

      Take advantage!

      1. Sam, please also think of stablecoin returns (~8% these days) in places like BlockFi or Nexo. Although, harder and riskier for most people to get into.

        Thanks for your amazing and thoughtful articles over the years!

  8. Sam,
    I appreciate all of the insights you share on building wealth, and hope more Americans begin taking your advice earlier in their careers. One point of yours I may disagree on is maxing out a pretax 401k first, then using what’s leftover in after tax vehicles. In my situation, I invest ~$20,000 a year, but I find it more advantageous to put $14,000 in my 401k & $6,000 (max) into a Roth IRA, since I predict I won’t always be able to contribute to a roth (Not including back door conversions). Assuming I have the discipline to not touch my roth until retirement, I find the Roth’s tax advantages to greatly exceed that of a pretax account because I will never be taxed on the capital appreciation of my investments in the roth. Can you please share your thoughts on why you think maxing our pretax contributions first is a more efficient way of building wealth than maxing out a Roth, and investing the remainder into a pretax 401k? Thank you!


  9. Calvin Taylor

    I just turned 43 today and my wife is 45. I have been married for 20 years with three kids 20, 17, 13. My wife is retired military and currently receive $6000 a month in retirement and disability. My wife still works and has a salary of $52,000 a year and my salary is $75,000 a year. We have $25,000 in savings and another $200,000 spread out in TSP’s and ROTH IRA’s. We are 2 years into a 15-Year mortgage and we pay $500 dollars extra to the principle. Our remaining balance is about $170,000.00. We have about 9 years left due to paying extra. I would like to pay it off in the 3 years. Should we pay the house off early or invest the money we would use to pay off the house. I plan to work until I am 57 where I can receive about $2000.00 a month with out taking money from my TSP and Social security a little later. I feel like we are doing O.k. and will have a comfortable retirement. We have a great start due to my wife’s Military retirement. My top priority is no mortgage going into retirement. Any comments/suggestions will be helpful.

  10. This article is great if you take into account the !PERFECT! life scenario. By the time I was 20, I was alone and didn’t have a family. I had a good work ethic and a positive can-do attitude. However, all that doesn’t matter when a company goes bankrupt or it gets sold and your job goes with it. I never had a room-mate, and trying to make ends meet by yourself is not pretty. I never went to concerts, events, never drank coffee, never tried drugs, never smoked, didn’t go to pubs or restaurants, and never was a social drinker either. I saved, saved, and saved. Even today at age 50 I don’t have a mobile phone so I don’t have to pay for service. In my 30 working years I was unemployed a total of 11 years. Economy, buy-outs, layoffs, you name it. Now in my 50s, I have to face discrimination. I saved a total of 120k over the 30 years (or 20 actual working years). It’s not a rosy picture when you have to save your vacation days so when you get canned you can cash in your vacation time for survival. I am eyeballing moving to a 3rd world country, so I can retire with the money I saved. I don’t want to be homeless, because that’s pretty much what awaits you in the united states. And I don’t want to start a discussion with the 20-something millennials who call themselves “recruiters”. You think you have it now because you buy a new phone every year!? Well, just wait until you will be 50 and young kids will discriminate you. Remember, you did the same thing to others when you were young! Karma is right around the corner…

  11. Hi! Great article. I would love your advice. I am a 23 year old female who has been working full time for a year after finishing undergrad. I’m about to return to graduate school for Master’s and PhD on full scholarship (thank God!). However, I’m wondering how I should move forward financially. I currently only have a checking account with a few grand saved in it and two major credit cards. The job I’m about to leave from has been taking retirement out of my check which I will have the option to obtain or I assume roll over into a personal retirement account. I have been researching Roth IRA’s which seem like a great idea for someone at my age, but also feel like I need to open a regular saving’s account…I fear I am falling behind and am unsure of what I should do to feel more secure. Thanks so much!

  12. Kind of ridiculous to keep working around our 70s. Life is short, and money isn’t everything.

  13. Gary Swinimer

    this is only for rich people, not like me at 66 and NEVER in my life made over 20,000 a year!
    20,000 is barely enough to live on, and no spending money!

  14. Pay off Mortgage Principal vs After tax savings/investing?

    My wife and I currently have a good situation as far as income goes. But, we aren’t doing that well in the realm of savings. We are 29 living in the Greater NYC area, we make 250-300k/yr combined, own a 2 unit house just outside of the city w/ rental income that pays for half the mortgage. Last year we bought the house (10% equity), a new roof, furniture, car and paid off the remaining 40kish of our student loans.

    Unfortunately, we only have about 20k in liquid risk free assets (buffer), 50k in retirement accounts and a total net worth of about 110k. So, quite a bit lower than your target numbers. Our expenses were high last year, but hoping this year will be much lower. So, I’m trying to identify an optimal game plan to maximize our net worth. I’m assuming step 1 is to max out our 401k?

    The real dilemma is whether to work towards reducing principal in our mortgage or accumulating after tax savings and investing it. Our mortgage rate is 3.625% or 4.60% APR

    Benefits of Reducing Mortgage:
    1. Low Risk Investment — Guaranteed 4.6% annualized return (30yr) + effects on interest and mortgage length
    2. Reduces the effect of the front-loaded mortgage interest charge dramatically – No extra principal payments result in paying 82% above the principal over the 30yrs. The effects of paying down principal in the front result in approx 105% Return via lowered interest + lowered length of the mortgage.
    I.e. with no principal payments the total mortgage payment over 30yrs is 722k, paying a 2k payment now reduces my overall mortgage payments by $4,412 or 120% return. Discounted to inflation of 2.5% over 30yrs is approx 105%. These returns will decrease over time…

    3. Reduction in interest payments results in less interest tax benefits (small)
    4. Since half of the property is a rental property, we are depreciating the asset. So, I believe we may be subject to 15% capital gains taxes on that segment despite being a live-in property. Other half will likely have no capital gains implications
    5. All investments and paid principal will be into an illiquid asset.

    After-tax Investing
    1. Much Higher risk but also higher potential return. But, is the equity risk premium here large enough when factoring in opportunity cost of the mortgage principal reduction? Not sure @ current market levels…
    2. Higher tax implications on cap-gains
    3. Better liquidity if we ever needed to use those assets for something.
    4. Much higher potential to spend this money at some pt.

    The front-end load nature of a mortgage plays an interesting component in the decision. Solid near-guaranteed illiquid return vs Much higher risk but liquid and higher potential return….


  15. Hi I am a 22 year old Healthcare Admin graduate with $6k in savings and about 15k in student debt (which i didn’t start paying back yet seeing as I’m going for my masters) I make about 4k a month and live at my parents house rent/bill free. I have equity; my father owns a pretty lucrative contracting business; his business provides certain benefits that i am starting to use to my advantage such as example: not having to pay for gas for my car. Should I just start dumping majority of my income in my savings and let it increase ? or should i stick to the 10-25% rule? I find that once i put it in my savings i have a less need to spend becasue (out of sight out of mind).; sometimes i find this hard because I do like to go out and have fun. I’m a bit confused. Thanks

  16. I am 31 with about 175K in Roth IRAs currently I also own a Home that I sold on contract for deed at 6% interest that I am owed 40K in the next three years. The house I live in is worth about 90k and I owe 25k on it in debt. I recently switched jobs so I travel about 3000 miles a month in milage and purchased a new car that I could pay down but its 0% financing for 60 months so I plan to finance all 35k of that which gives my a total of 60k outstanding. What is my best option for savings in the future? I am putting about 15k into my Roth 401k annually and my house will be completely paid off in under two years at the rate of $1000 per month I am paying it currently. I have thought about creating more liquid cash instead of investing so heavily in the coming years? Is that a good option? I have about 20k currently.

    1. You are annoying.

      It’s not unrealistic. Just because “everyone else” chooses not to do it, that doesn’t mean it isn’t realistic. The average household income is 50k, so please tell me our the average household can’t manage to live and save at least 10% on 50k? If you can’t, you aren’t trying.

  17. Thank you for having this website and updated posts. I turned 26 on Sunday. Looking back on my undergrad and 2 years of full time, I haven’t learned to buckle and save. Now, I am self disciplined to do so. I have to. Learning from Financial Samurai is a risk I’ll take because I believe in the concept. I earn under 50k.. SF California. New car, student loans, multiple credit cards, and bills for adult living. I will manage before 30/29.5. I just gotta get to freedom sooner!

  18. It’s interesting seeing year end results that many investor’s have here. My returns are the results of not investing in the stock market (exited 3/09), no P2P lending (there has been a shortage of borrowers and an oversupply of institutional money to lend when i was looking into it) but i am a landlord of a couple of apartments with my brother and my own private lending (both ROTH IRA and non-IRA). Also, since i don’t invest in the stock market i no longer own any index funds or dividend paying stocks. I retired 2 years ago and am comfortably living off my earnings w/o touching my principal. Instead the principal is growing consistently nice and i comfortably believe i won’t outlive my assets. :)

    2009 – 50.18%
    2010 – 27.31%
    2011 – 18.90%
    2012 – 20.50%
    2013 – 20.94%
    2014 – 8.61%
    2015 – 15.74

  19. Saving 25-50% of post tax income? What planet are you on? Who pays your living expenses?

    Those kinds of saving rates arent even remotely in the ballpark for the working class. Not even close. We spend 90%+ of our income just making it month to month on things like health care, groceries, and rent.

    I dont mean to sound snarky, but suggestion guidelines like that totally disolve any credibility to look at this site further. Its simply not realistic for the vast majority of americans living check to check thanks to deflated wages and inflated costs of living.

    1. Kurt,

      Sorry you are struggling to get by. One of the ways I’ve challenged my readers is to work much longer than the typical 40 hours a week, and build their side hustles. Simple math states that you can make 50% more if you work 60 hours a week rather than 50% a week at the same rate.

      I’ve done this by driving for Uber for an extra 10-20 hours a week during peak hours making $35/hour (and you can get a bonus after your 10th or 20th ride), and teaching tennis for 5-8 hours a week for $60/hour. When I was working full-time 50 hours a week, I’d get up at 5am to work on my site for 2 hours before going to work, and then work on it again for another 2 hours at night. 3-4 hours a day X 365 days = 1,000+ hours a year for two years until I finally built enough courage and momentum to take a leap of faith in 2012 and go out on my own.

      Good things happen when you side hustle!

      Please read, Income Profiles Of Financially Free People, to CLEARLY see how normal working people go on to double and 20X the income of the median household. These are all REAL people.

      You can deny my credibility, but you are only denying realty that real people are hustling every day to save and make a better life for themselves. You must believe in yourself or else nobody else will.

      Related: Spoiled or Clueless? Try Working Minimum Wage Jobs As An Adult

      Fight on, and never surrender!


      1. Just to point out, if you’re salaried then the “simple math” of making 50% more if you work 60 hours/week isn’t so simple – aka, it literally doesn’t happen.

        Also, as I’m sure you know, to drive for Uber you need a very new car. If you don’t already have one, it makes no financial sense to buy one to drive for Uber (if you don’t believe that, go over to and read all the math that many Uber drivers have done to dissuade others from buying cars just to drive for Uber). Teaching tennis isn’t something that a lot of working class people can do, either.

        I’ve read your “Income Profiles” post and literally every single one involves ridesharing – not only is it not very creative if you’re trying to suggest that there are “many other ways” to make extra money, but I reiterate that that’s just not a financially sound option for most people.

        After ridesharing, the next highest earning outside-of-work line item you have on your “Income Profiles” post is “corporate consulting related to website.” Excuse me? You think that most working class Americans can offer corporate consulting on websites in their spare time to the tune of $300-$3,750 per week? That is a very narrow skill set, how on earth is that supposed to be applicable to most people trying to break the cycle of living paycheck-to-paycheck?

        Yes, you’re right that people need to believe in themselves, but don’t act like the people on your “Income Profiles” page have skill sets and cars that the average America, working-class person has.

        Fight on, never surrender, and realize that the side jobs you proclaim will help the most aren’t available to help the people who need it most.


        1. Hi KL,

          You’re spot-on that working 60 hours instead of 40 at a salaried job doesn’t net you anymore income. However, working those extra 20 hours in side jobs is what Sam is referring to. The ‘website related consulting’ can be anything. If you’re a ‘chef’ at Burger King but love culinary arts and have something to contribute to society then you can work to build the next That’s what Sam is saying: shoot for the stars, and commit to something you love doing that will benefit others, and you can make it a long way beyond BK.

          Best of luck!

    2. Im 21, making 47k and about 34k post tax a year. I save roughly 51% of my income(post tax), living off a total of about 14k a year. I could save more, but i decided to buy a 20k sports car, which is my hobby/passion for justifying the purchase. Before that I lived off of 8400 a year and saved 82%(post tax) of my income. Budgeting and comfortably living below your means is the key.
      My numbers:
      gas:100/m *would be 120 without the new car*
      insurance(2 cars):183/m *would be 25 without new car*
      food:80/m (split bill with gf, so 160 for month for both of us)
      car payment:315/m *would be 0 without new car*
      Misc: is not budgeted for because its negligible, maybe 16 for a movie night, and hygiene and toiletries are bought in bulk, on sale. My gf is great with coupons.

      My Tips: Get a roommate to lower rent cost despite mine being set regardless of roommates.
      Eat in more, and portion control, use leftovers for lunch the next day.
      Have your hobby to spend fun money, just dont go crazy like i did with a new sports car.(I can afford it though and still save 51%.)
      Utilize company 401ks!, I have 2 since I didn’t roll over my previous one as i liked the investment options better.
      Thinking about buying something? sleep on it for a week, then reconsider. Also pull out cash to buy it, makes it harder in the checkout line to justify.

      Other remarks: I am not “lucky” I have worked hard to be where I am, I have planned nearly every step of my life since I was 14. I graduated college debt free, paying my own tuition on 9 dollar an hour at a gas station. Which even on that income, I was saving nearly half. This stuff isnt impossible, its just hard to lower your living standard once youve become accustomed to a certain way of living. I dont know how you guys live paycheck to paycheck, I have always made saving a priority, and very cautious on my spending habits.

      1. EncourageSaving

        HI Jesse! I want to congratulate you on how hard you’ve worked and taken responsibility for yourself. It’s a great feeling when you know you can take care of yourself! I worked through college and post graduate school, rented in less expensive apartments, wore clothes that were used or handmade, drove a 10 year old car (my car currently is 16 years old), had a monthly food budget of $40 so that meant lots of meals at home, used the public library for movies and books etc. Fast forward 20 years, I paid off my graduate loans ($125,000 in 6 years), bought a home near the beach and have traveled around the world (including first class). It’s doable and it’s called lots of hard work and living beneath our means. I’m in my 40s and plan to retire in 10 years.

        1. Same here. I’m blessed to have a great job and a partner who also have a great job. We are early 30s and HH income is ~$225K/yr. We live in NY metro area and work really hard to live below our means to save about 60% of our paychecks, because temptation is there to spend spend spend!! We opt to not do what we can easily afford to: live in a more desirable neighborhood, take fancy vacations, eat at expensive restaurants….instead we invested in properties so retiring in our 40s/50s is possible should we choose to. Today, we have 4 properties with tenants paying our mortgages. This might seem like a brag.. and maybe it is, but just trying to say totally doable. We graduated with crappy jobs making $$35K..worked overtime to become more marketable and worked up to higher salaries and quickly paid down our student loan.

          1. $225K a year puts you in the top 3-5ish% of earners. Your story is not “totally doable” for most folks. In addition to what i’m sure has been hardwork, you have to have a great deal of luck as well to land in the top 3-5% of earners.

      2. how the frack are you eating off $80 a month. That’s $20/week. Calling not doable…

        That’s well less than SNAP benefits that most folks already regard as insufficient. Love to see a month of menus in your house because unless it’s 100% rice and beans there’s no way

        1. Read my post again, was split bill with gf so that would be 40 for 1 week, for 2 people.
          All of our dinners consist of ground turkey, chicken, ground chickenn corn, some kind of green vegetables like green beans or brocolli. Breakfast bars for on the go breakfast or an egg something given the time. Lunch consists of one or two snacks such as cucumber and hummus or some crackers and a sandwhich. Now for a week of dinners consider the following.
          Monday:spaghetti sauce,corn,noodles, ground turkey, broccoli
          Tuesday:quinoa, Brownsugar, soysauce,ground turkey(your pack of ground turkey is gone now),green onion.
          Wednesday:pasta, grilled chicken given whatever marinade or sauce you please, veggie.
          Thursday:breakfast for dinner! French toast and turkey.
          Friday:pasta(gf loves pasta)chicken stir fry
          Sunday: salad with raspberry dressing and fried chicken.

          All meals have the same core things like protein, pasta, veggie. With different ingredients and recipes it can still vary a lot through the monthe.

          Takes careful planning. Let me know if you have questions. As for the sufficiency of food, I’m type one diabetic and haven’t ever been hospitalized so I think my diet is okay.

        2. You are annoying.

          Cry me a freaking river. Geez, I’m not nearly as financially independent as most here, but I busted my butt to put myself through school from 25-30 and graduated with ~60k in debt. Guess what, now I make a decent income and I’m paying it back. If you can’t manage to figure out a way out of this situation of “oh, poor me, I don’t make enough”, then it is 100% because you don’t want to. From 18-28 I worked BS entry level jobs ranging from 7.25-11/hour and the most I made in a year was 18k. Then, I, as someone who barely made anything, still was screwed by the government in taxes on income. Yet, I have managed to overcome and now I make 100k a year and have 1x savings in expenses by 31. So please just shut up.

          1. Replying to post from: you are annoying…

            I AGREE 100%. I am a few years younger than you but that is exactly the truth! Everything you said is 100% accurate. If someone doesn’t like their situation, then they need to do something different to change it. I started with a minimum wage job then worked my way to six figures after busting butt for years and being dedicated. No one gives hand outs, you have to earn things in life if you want to succeed. Glad to know there are a few of us out there… But it can be everyone if they want it. But hard work simply scares people.

            Nothing Changes if Nothing Changes! Never forget that!!

            1. Agree with your sentiment. Now wait until you have 2 kids, buy a house, get divorced, pay child support and alimony while simultaneously helping out your parents (poor retirement planners) with a six figure income! Hard work and belief are important but some luck helps as well…..

      3. Alex Dennery

        Hey man thats awesome! I’m in a similar boat, no college debt, just paying off my car that’s all (300 a month) which is a honda btw, about a 90k net worth (half in savings rn, until I decide where to invest it) and about the other half in roth, 401k, and index funds. Worked my ass off since about 16, worked 2 years full time in cybersecurity, got laid off, now building my marketing agency for at least a year (and a few other side things). Trying to build up my passive income by the time I reach 30 so I can travel full time and work on other projects too that I’m also passionate about. I live pretty frugally, just trying to be aware of lifestyle creep, right now pretty much breaking even every month as I try to continue to build up my business. I can always get a job, not really worried about that, lol. Surprises me how many others don’t do the same, your 20’s are a time for experimentation and growth, not for sitting in a cubicle imo.

  20. Madcuzyoureoutoftouch

    I’m laughing so hard at all these people on here like “I have a million dollars, am I good???” It’s like yes you idiots, your good and you know that. You’re just bragging. i could live off a million dollars til I die and I’m 23. You guys have no idea what it means to actually struggle (at least currently) which is great but don’t act like you’re barely going to make it. There is no type of person I hate more than the “I’m not rich, I’m middle class with two houses, new car, zero debt, 3 kids, paid off their college, have enough savings to pay off student loans 20 times over but I’m just an AVERAGE middle classer trying to live!” Guess what? bragging is annoying and you all do it far too much all while pretending to be normal like the rest if us. You’re not. Congrats but shut up.

    1. With all due respect, you are 23 and your comments support the fact that you are not at a point where you can understand nor respect the concept of personal financial management. Unfortunately, a million dollars in investable assets (not including real-estate) would net you 40k per year in cash flow for at least 30 years of retirement. If you add up your expenses while in retirement you will quickly appreciate the fact that you will not have enough money to actually live the sort of lifestyle that you’ve become used to over the course of your 35-40 years of independent living. First off there’s medical costs which you may not have had to worry about for the balance of your 23 years of life. It’s not cheap and it’s getting to be more expensive every year. Let’s assume it’s $1,500 per month for a couple. Than there’s something else that you might not know much about and that would be long term care insurance for another 300 per month per person so call it $600 in premiums per month. That would cover the some of the costs to house you and or your wife in a long-term care facility when one or both of you get demantia. If not, you will wipe out most of your nest egg. House is most likely paid off along with cars so that leaves food, clothing, utilities and another round of taxes (20%). So @ 40k per year less 20% in capital appreciation tax that means a net take home of $2,666 per month. So, without SS that means I have $566 per month to spend on Food, Clothing, Utilities, Gas, Starbucks, Gym Membership, Golf Membership and all the other stuff that millionaires should be able to afford…(tongue in check)….Good luck on living in a van down by the river…!

      1. It depends on what you want to do when you retire. If you want to travel a lot, still stay in your large home and do other things the way you were while working, then of course you are going to need a big nest egg.

        For me, it is just myself and no debt at 58. I don’t have a large nest egg, but I think enough to survive along with SS. I plan on retiring at 62 and just enjoy doing my photography and living in my mobile home.

    2. Blah blah blah, scrounge, save, be frugal thru your whole life, have lots of money when you’re old, lmao……spend a little, take some vacations, save at the same time, I wouldn’t go by any of these guys advise, you should, you should…I say shut up and live man, wtf lol….finally get your retirement and die in 5 yrs. reward yourself, or be a slave all ur life then when you’re old, it’s too late and u screwed yourself of real living.

      1. Look up compounding Mr. Polo. It is the most important part of investing and it is the part that you apparently are clueless about.

    3. Dividend Miracle

      Honestly I get where he is coming from. He/she may not put it in the best way but Alot of Americans barely have a few Thousand saved and some are in their 30’s. smh I was reading a few and was thinking are you serious do you know some people can’t even imagine what you have. But to each their own I guess

      1. There are so many that are in hock and continue to spend. I started saving in my early twenties. I didn’t have a high paying job, but I saved as much as I could. I won’t have a ton of money when I retire, but I think I will have enough to survive and still enjoy life.

    4. Madcuzyoureoutoftouch – You will realize a million is not enough as you get older. A quarter of that (and in some cases half) will not even cover medical expenses and healthcare till you pass away. At 23, you might also think having a household income of $85,000 to 100,000 in enough, but you will soon realize after you have kids, mortgage, etc. how little even $100,000 will take you.

      1. depends on how you spend it. It’s all relative. Many people could make $100K last MUCH longer than you by the sounds of it.

    5. I know I’m responding to an old post, but I’m seeing it for the first time. I understand Madcuz’s frustration at what seems like people bragging; but I just wanted to say that one of the good parts of a website like this is you can talk about finances honestly without bragging. What’s the point of me “bragging” anonymously to strangers?

      The truth is that it is hard to talk about finances in the real world, so talking honestly about it here is important. If you tell your family or friends your income, they’ll either think (a) it’s more than they thought, and you’re spoiled/ privileged, and cheap because you don’t give them more, or (b) it’s less than they thought, and you’re not all that. People should be proud of financial success, and of the stability/ self-preservation it enables; but it is very hard to get any good vibes about financial success without lots of bad vibes. So Madcuz might not mean it that way, but responses like that are why people are financially illiterate: we can’t talk about finances without lots of heat and interpersonal unpleasantness. People who talk honestly here might be doing so because it is the only place they can use these numbers in complete sentences and get some validation that it’s OK.

      To be honest, my wife has modest financial needs, coming from a graduate student/ scientist mindset, and she knows how much money I make; BUT she has never brought herself to say “good job,” and despite the fact that our needs are fundamentally modest, when I have suggested I might retire early and live off our financial assets, she shot me a worried look and asked whether we could do that and still afford to pay for our son’s school. Analytically, she’s smart enough to know we can, and I do not believe she has forgotten all I have told her about my thinking on our finances; BUT she still stresses me out because people are bad about talking about finances. So she won’t give the calm response that says “you have accomplished great things and we can totally make it work,” because it isn’t something people talk about and we frankly don’t know anybody who has retired so young (52). I come here because I want good advice. If people here think I’m totally secure, and say so; or alternatively point out risks I haven’t foreseen, then great. But forgive me, this is one of the few places I can have this discussion. (Brokers say lots of things, but they’re never quite un-biased.)

      So Madcuz, please don’t try to shut people down by accusing them of bragging. This is an important place.

      And BTW, a million dollars isn’t that much. If the market tanks by 30 or 40% over a few years, and your spouse divorces you, and somebody gets sick, that million is now like $200K or less. I obviously don’t talk about worst case scenarios involving divorce with my wife, but honestly at my age I’ve seen plenty of friends’ spouses just dump them (and yes, in my experience it is usually the wife who grows unhappy in middle age, wanting some kind of fulfillment her dutiful husband isn’t giving her). So with my savings invested, I know it could be 60% of that in a bad downturn, and my wife could have a breakdown and turn that into 30%. A conservative 5% draw on 30% of my investments is all of a sudden not so great, even though I thought my $1M+ in investments sounded pretty great to start. Which you thought sounded like bragging. Start with $1M, and that leaves just $300,000 in assets (ignoring legal fees, and forget about somebody getting sick, that never happens…), at 5% withdrawal rate (which is higher than people recommend long-term) that’s $15,000 a year income. $2M in assets might sound like easy street to you, but take the same scenario (market loses 40% over some bad years, then divorce), and draw 4% annually (more sustainable), and it’s $24,000 a year. I probably could (did in college/ law school), but I don’t want to live on that.

      People are here to plan better than average, so we are allowed to — supposed to! — fantasize about secure, calm futures based on better than average savings and prudent investing. Don’t harsh on people who need to talk about particulars that come out in this open forum.

      1. Million is a large number. Those that don’t have this amount far exceed those who do. And there is a great deal of boasting from braggarts in all walks of life, even here. Travel the world and open your eyes. You are wealthy, just not as wealthy as you desire.

      2. trying to keep it real


        Your’s is an excellent post … filled with truths about the difficulty of discussing finances, and the impact of that on poor levels of financial literacy.

        I think we would agree that to someone with $5,000 of savings and $20,000 of debt, who earns $40,000 a year – that $1 million in savings is other-worldly.

        However I would say to that person – don’t be so quick to judge someone else’s heart. As AfterLaw says, that $1 million nest egg can become really small really fast.

        I would also say to that person – don’t presume to know what that millionaire’s ambition is for their savings. They may have hoped to be able to provide for children or grandchildren education. Or they may have hoped to give a substantial sum to their church or in support of missionaries. When I read some of these threads, it seems that some believe the millionaire is selfish and (frankly) some of the posts strike me as mean-spirited.

    6. Responding to madcuzyouroutoftouch…

      You are very immature and have no idea what the real world is. I am in my 20’s and make over 6 figures. I am successful and have a house, and a comfortable savings. I will be worth a million dollars early in my life, but that doesn’t mean I will simply be fine forever. Your adolescence and immaturity shows what is truly wrong with this country and the mentality of young americans and millenials. I might be young but have worked hard for everything I have and grown in the process. When you move out of mom and dad’s house and get a real life and have real bills, responsibility, and a family, maybe you will understand. I hope you have an “ah ha” moment where it clicks sooner than later. Good Luck.

    7. Reply to macuz

      I appreciate everyone’s point of view on this topic and Afterlaw was spot on in his comments that this site offers us the freedom to discuss numbers and plans that we cannot discuss with a spouse or even our financial planners (bias). My comment was not bragging or boasting to anyone but simply my attempt to connect with others in a similar life situation. I can see the end of my career but I’m not sure what that would entail. Will I need to adjust my lifestyle? Will I be required to work and how long and doing what? My goal would be to maintain my lifestyle but it’s still not clear since many of my expenses are attached to my college and high school children. As Afterlaw poignantly articulated, life happens and one would need to be prepared financially for this. Since my post, my wife and I refreshed our estate plan and wills and I’d highly suggest this exercise. I’d like to hear more from others on this board. Even the negative opinions are welcome.

  21. I’m a 52 years old and plan to retire around 59. I have accumulated $1.7M in a mix of retirement (401-k & IRA’s)/ investment funds. I do not include my home equity in this figure. House is appraised at $425k and we owe 180k on it. If we downsize we will use the equity we get from our home to pay for our retirement home. 2 cars are leased. I have 3 kids -1 freshman, 1 Junior in HS and 1 middle schooler. I have saved for 2 years of total public college costs for each in separate 529 plans. I do plan to fund the 3rd year out of our annual cash and their 4th year is all on them through student loans. I save approximately $40k per year in 401-k and Investment accounts. My wife is 5 years younger and plans to work a few years beyond my planned retirement. I would guess we have around 100k in total out of pocket expenses today. Do you think I’m on track to retire in 7 years?

  22. I am 24 years old, make about $12,000 a year, and have $25,000 saved across stocks, bonds, and multiple interest bearing accounts

    What about those of us on low income/minimum wage?

    I am not looking to have a high standard of living, but Id hate to have to work till I drop dead.

    But just curious, i Haven’t seen many posts from low income folks

      1. Thank you!

        In all honesty , $10,000 of that was matured stocks that had grown over time… I think my parents bought around $1,000 worth and by the time i got my hands on the stock at 18 it was worth $7,000…. So that grew a few thousand over the years to 10.

        The other 15 was just living on an extremely low budget… When I moved out I got into an apartment for 400 a month, absolute dump but I did save . I did without cable or wifi or air conditioning, didnt eat at restaurants and cut my own hair, just little things like that. I lived a block from goodwill so I did most of my shopping between there and aldis.

        Now I have a better place but I’m trying to resist the urge to fill it with nice purchases…

        2 other things I read online that helped lots : Squirrel money away into multiple accounts so it is harder to “find”. Dont use the ATM or the debit card

        And…. Put the credit card in the FREEZER. fill a bag with water and put it in and boom, your credit card habits are essentially frozen lol

        hope thatll help somebody out there. I have a long ways to go but have a start…

    1. I am 24. My take home is about 45K. I have no debt, 35K in investments and 20K in savings. I feel you about not wanting to work my whole life, that’s why I am investing heavy and staying out of debt. I hope to retire by 50 or earlier.

      1. Hi Lee. You guys are talking about saving money in stocks and investments. My question is,how do you even start doing the stocks without getting bad advice on where to buy stocks. Thanks

        1. Lexxy stop by your public library and ask the reference librarian to help you locate some articles and books. Concentrate on learning about interest paying stocks, index mutual funds, and compounding. Also read about the concept of making certain you have your investments and saving in a various forms [i.e., stocks, bonds, and cash]. The librarian has no financial vested interest in your portfolio. Keep that thought in mind when other are trying to tell you on the idea of using them to handle your finances. Doing your own very easy to do homework will save yourself a bundle. Nobody has all of the answers nor can anyone guarantee you anything.

  23. Pingback: Retire By A Certain Age, Not By A Certain Financial Figure | Financial Samurai

  24. Keith Sellers

    Love your work. I have followed your advise (and others like you in the 70’s and 80’s). I am now 61 and retired. I appreciate people like you preaching about savings and doing without now so we will have more later (made me not feel like a freak as I was putting 25% of my pay in savings all those 28 years of working).
    Keep up the good work and keep those funny yet truthful advise articles coming.

  25. Anonymous novice

    I am 41 yrs old with 2 kids that will be off to college in 6 years & 10 years.
    So far I have not been able to save much, have about $15K in savings and 2 mortgages from homes that I had bought but not able to sell. I have less than $200K in 401K since I have not been able to max out each year and have less than $10K in 529 plans for my boys. In addition, I have about 40K in credit card and car loans. Based on your chart, it is fairly impossible for me to reach the targets by age 45 or 50. Any suggestions for continuing to invest in the house or sell and shift to stocks or funds instead?

  26. Pingback: Is An MBA A Big Waste Of Time And Money? | Financial Samurai

  27. my grandparents put $50 I a savings bound for me and I get it this year it stared in 2001 and I want to know how much I will get when they give me them?

  28. Jesse norwalt

    According to your way of doing it you put in a ton of work and you end up with enough to leave you with 60 k a year. That is not retiring with dignity. If you take that money and invest it in the s&p 500 you will average 10% every year. So let’s say at age 30 you decide it’s time to start saving for retirement. So you save 500 dollars a month which is 6k a year. That’s not unreasonable considering it’s about 10 of the average persons income. If you do this then by the time you are 65 you will have accumulated 1.7 million dollars for your nest egg. Also if your earning 1% interest on it that’s crap. There are steady dividend stocks that are at about 5%. So even if you wanted to be really conservative you could have revenue from that well over your average salary. Trying to save without the power of compounding interest in the stock market is much more difficult than if you use it. I like that your telling people to save money thou that’s a large part of the problem. Summary work smarter not harder.
    Source 18 year old investor

    1. Where in the world would you get the idea that the S&P averages 10% returns per year??? The historic average is 7%. Also the financial samurai author is clearly focused on 401K plans, which means you ARE leveraging the stock market. Your comment makes no sense on any level.

  29. Pingback: Different Investment Strategies For Different Life Stages | Financial Samurai

  30. Pingback: It’s Impossible To Stay Retired Once You Retire Early | Financial Samurai

  31. I’m 25 and work as an engineering PhD student making $31k in Boston.

    -$0 debt (aggressively applied to scholarships till I got a full-ride for undergrad; worked to pay for the tuition until I got the entire bill covered; kept a GPA 3.97)
    -Save 70% a year 2014-2018 (I currently live on $10k a year, got to love beans and goodwill); my first year I saved 30% since rent costs were high (average)
    -no car (bicycle commuter), no house
    -2 years ago I opened an IRA now worth $15k
    -I have $13k in savings, another $15k in stock investments and $9k in checking
    -Entering grad school in 2012 I had $3k net worth; 2014 my net worth is $52k
    -At this rate I should have $112k in savings by the time I’m 28

    I would like to be able to buy my first house/apt in 2017 (as much cash down as possible; I hate borrowing), buy my first car (used & fuel efficient) in 2017, and have kids (3-6 total depending on circumstances) starting in 5 years (2019) at age 30 (I am a woman and anticipate having to take some time and income loss for this, so I want to be prepared. My entire professional career might in a worst case scenario only go till I’m 30 since the US is crappy for re-entry of the professional workforce for family leave, but I might be able to find the work-life balance (aka 30 hours max/wk + flexible leave) that I’d like if I’m fortunate. I know of only one prominent contemporary scientist in the entire world who became a professor after taking >2 years off for children (she took 8 for crying out loud!). I could be her someday, but it’s like a 1 in a 100,000 chance.

    Plan A: I think I could be lucky enough to skip post doc ($40k salary) and become a prof ($60 starting) which truly is my passion, even though this is somewhat rare today. With this optimistic plan, I would have saved ~$190k by the time I’m 30. The conservative option (post doc) would put me at ~$150k assuming I lived on $20k/year (which I consider well-off and comfortable by my standards)
    Plan B: If I really need to make more, industry would hire me at $100k with a PhD, but I don’t know if I would enjoy it. I would hypothetically have $270k by 30.
    Plan C: Quit grad school now (although I am happy where I’m at and am doing awesome, high impact research), work for a top consulting firm ($100k salary) selling my soul and saving 80% to amass over $500k in savings by the time I’m 30 and thinking about kids.

    In summary:
    Age 25: $52k
    Age 30 academic track: $150k-190k
    Age 30 industry: $270k
    Age 30 quit grad school & do consulting: $500k

    Am I on track even though I won’t be 28 until I have my phd and get a “real” job with benefits? Should I consider quitting grad school for financial reasons even though I love the cutting edge research I’m working on right now?

    1. You’re an engineer: have you looked at the hard job numbers for steady full-time professor opportunities, even in STEM, even with years spent toiling away for Post Docs? If you’re not on a tenure track, you’re going to have to bear the risk of relocating potentially multiple times. I don’t know the industry premium for graduate degrees in specifically what you do, but since you’ve already started, it will probably behoove you to finish it out. You don’t know that you _wouldn’t_ enjoy industry, either. Don’t underrate the joys of the peace and bargaining power of having a stable job with disposable income to shape your life as you want. If your credentials and skills will give you a lot of leverage, you could perhaps take a less demanding or part-time job and teach a class or two part time if you really like academia.

  32. Most people don’t really understand how investments work. Please do your due diligence and read how the stock market works. There are three key variables here, Principal, Rate of Return, Time. The MOST import variable is Time because that is something you can never get back. If you are young and have some money, go very aggressive (all stocks). I would also recommend moving everything out of a 401k into a roth ira conversion to avoid taxes in the future.

    Don’t do trading because your can’t beat the market, stick with indexes and sectors you understand. And also understand that you can make money even in down market with shorting and buying on the dip.

    1. Brian, while I understand your point… much easier said than done to make money on a down market via shorting and buying on dips…. you are basically trying to time the market which is almost analogous to “beating the market” which you said above is VERY risky to try to attempt.As this February 2016 proved, markets can recover and recover fast, and many people who shorted lost their gains. I agree with you that young people should be aggressive (I am 28 and am almost entirely small and mid-cap stocks). I think the key is: 1. Diversification 2. Patience… don’t panic when the market drops if you’re decades from retirement. Keep making your regular contributions. Remember… when the market is down, your regular contributions buy more shares for your money 3. DRIP (dividend reinvestment)

    2. I agree Matt.

      It’s better for young people to go aggressive with their investments since they have time on their hands if those investments don’t work out they can make changes to their portfolio.

      On the other hand, those elderly folks should be cautious with their investments since they are near retirement. If they suffer huge losses they may lose a large chunk of the money they invested in and hence enter retirement with less money.

  33. Hi! Thanks for the article, it is really informative and very helpful. However, I still wonder whether or not I am at the right place in my savings or not. I am 30, married, own a house, and both cars are paid off. Very little student loans between my wife and I, maybe 15K total. We have roughly 170K saved, between savings, 401K, IRA and stocks. Where does that put me in comparison to the population my age? Am I on the right track? Should I be doing anything else? Thanks for all your help!!!

  34. Combine household income of 185k. We have about 150k combined in 401k and 40k in liquid.
    My husband is 43 and i’m 35 years old. We have two young children in child care.
    Our house note is 2700 a month (including taxes/insurance) and a 50k student loan.

    I am concerned we are not investing enough. Any suggestions

    1. $2.7K a month on house?! Assuming you aren’t in NY, SF, DC, Boston, etc. Rent an apartment or buy a cheaper house until you’ve paid of student debt. Or commute further. You should not have 50K in student debt at that age. And that’s definitely impacting what you could be putting towards retirement.

  35. Great article. Unfortunately I wandered here because I took some horrible losses in the stock market on my savings account (not IRA). I’m going to be 29 in December and after my losses i’m left with the following: 20k Savings account + 41k IRA. My tax refund will go straight to my IRA account but is not factored in here. I make 70,000 (plus a free car) and put at least 1,000 away a month never a dime less and always more if possible. Also, I have no debt.

    A few questions:

    1) Does your expense coverage ratio include IRA/401 balances? I apologize but I reread this ten times and am not certain.

    2) Are you recommending to keep these savings separate from equity purchases? I want to purchase a home in 3 years and by then I expect my savings (not including IRA) to reach 56,000. I would put 20% down but couldn’t tell you the price range as I don’t know where my job will take me to next. Let’s say for argument sake I put 15,000 down. Does that draw from this ratio or is it factored considered it’s equity?

    Thank you!

    1. To be clear…I will have 20k by years end (when I turn 29) and not at the moment. I’m at 16k with at least 1k to be invested until December.

    2. Hi Jonathan,

      The savings guide is a good reference to use for ALL savings, including your IRA/401K balances, after tax savings and investments etc.

      Equity is considered part of your net worth. Don’t let anybody tell you otherwise. However, one can’t 100% count on equity until it is stolen, so I would put a discount to that.

      I think you’ll enjoy this post on Saving And Investing with FS-DAIR.

    3. Hi Jon,

      27 y/o here, bought my first house in 2013, with peers also buying around the same time. Just a few pointers that I and my peers wish we knew coming in:

      1) It’s obvious, but do your due diligence in researching home prices and where they might go for where you buy. This may be one of the largest, most highly-leveraged financial decisions you make in your life. Given the country’s 2008 experience, there’s still plenty of opportunity out there, but it’s nowhere near as safe as a home salesperson might tell you.

      2) This extends to the condition of the house. Make no mistake, fiduciary duty or not, real estate agents or Realtors can be biased toward making you buy anything and everything. One suckered a friend of mine into a contract on a black-mold-ridden house, and he ended up losing $5,000.00 in an earnest money deposit when he realized how bad black mold really was and pulled out.

      3) Don’t forget to factor in closing costs (going into that “discount” talked about by our financial samurai), and try to negotiate the seller into covering as much as possible (my lender let them cover up to 3% of the home value in closing costs).

      4) Interest rates: If they’re still super low (I had 3.5% on a 30-year fixed mortgage), definitely just put up the minimum down payment. Even with the required private mortgage insurance when putting less than 20% down, you can get a better return on your money in non-equity assets. This goes double since you’re young, in the accumulation phase, and can afford to invest in riskier assets (like me!)- don’t forget that we have more time to ride out the volatility and get to those long term returns. Take advantage of it!

  36. Hi,

    I’m 20 years old and I have about 15K saved. I have the majority of my my money invested with a financial advisement firm and also in online CD’s and savings accounts yielding me about .90%. I make about 65k a year before taxes. I just wanted some advice on how to best use and invest my money given my age. Any suggestions on where to invest?

    1. @Brandon “I have the majority of my my money invested with a financial advisement firm…” At 20 years old you are in fine shape but with your current assets and age you really don’t need to have your money parked with a financial advisement firm. Their usual yearly charge is about 1 to 2 percent of your assets and that money is better invested directly than giving it to them. At your age being aggressive is a good idea [because of compounding] park about 6 months savings in a bank CD and put the rest in an index fund in one of the two low cost majors family of funds [either Vanguard or Fidelity].

  37. I’m 30 years old, I have about 10k cash in a savings account. I make 36k a year before tax. I feel like i’m late in the savings arena but I hope I can catch up somehow. I plan on saving as much as I can every week for the next 5 years and hope I can increase my savings balance to 100k. Any advice anyone can give me would really, help I’m kinda worried about my situation. I wish I start saving earlier.

    1. I would work hard to get a second job, go to a competitor for a raise, or ask for a bigger raise at existing firm while being as frugal as possible.

      Raising your income is the biggest solution here.

  38. Richard Nelson

    My wife and I are 63. We’ve accumulated about $1.1M, about $1M in retirement accounts. We have zero debt and our net worth is about $1.4M. My wife was laid off 2 years ago but despite great efforts, she hasn’t found another job. I currently earn about $115K/yr. plus I’ve been getting a $20k/year pension from a previous employer. My wife will get a $5k/yr. pension when she turns 65.

    We’ve been to 3 retirement financial planners. The first, insurance salesmen, wanted us to use just about all of our money to buy equity index annuities. The second, a CFP that charges an hourly rate and doesn’t sell any financial instruments, suggested we keep about 3 years of living expenses in a liquid account, and about 50/50 of the rest in equities and bonds. The third, someone at a large investment company, recommended a balanced portfolio, offered to manage the whole thing for .25%/quarter. His company’s software indicated we could retire now, live off of my small pension and our cash until 66 and then begin to collect social security. The percentage chance of succeeding with this scenario is about 90% for the amount we need to live that included an assumed 3% average inflation rate.

    I so much want to retire (in 3 months) and the numbers are enticing. It looks doable, but of course we don’t want to outlive our money.

    Your opinion?

    1. Your 3 months will go by in a nanosecond! Given you can collect Social Security soon, have zero debt, and a $1.4 million net worth AND pension, you guys will be so fine. How old is the wife?

  39. I think you should consider paying off loans part of saving. A lot of us who are paying off student loans may not seem like we’re saving enough, but if you think about it terms of increasing your net worth, we really are.

    In my bracket, I’m supposed to be saving 25%. I’m saving 24%, but if I include loan payments, it’s 32%.

    I imagine this is true for a lot of people, including those who are much further under the “ideal rate” than I am.

    I’m also a little confused by your pre-tax/post-tax guidelines. Does the “savings %” only represent pre-tax? And is pre-tax only including 401ks or Roths too? (I know Roths are post-tax, but there’s also tax benefits on the other end.) I contribute 7% to my 401k (not counting match), 8% to a Roth, and around 9% to my savings account for an emergency fund/maybe eventually for a down payment on a house in the distant future/etc. (And another 8% to student loans.)

  40. I’ll be 30 in September and I have always been interested in saving for the future. Depending on Social Security seems fruitless and the emphasis for saving for the future is growing by the minute. I work for a University and make about $60,000. My intention is to increase my 401k contribution by 1% each year (retirement contribution is at 13% with the University contributing 6% of the total). According to Penn’s estimation, I should have just over $1M saved by the age of 65.

    My question for you is, what other revenue streams can I realistically expect to create for myself? I am about to get engaged, live in Philadelphia and want to buy a house. Is it a good idea to buy it, raise a family for 5 years, and then rent it out to pay the mortgage off and then have that revenue stream/asset? What other ways can I maximize my net worth and earn more money?

  41. So I’m a little bit concerned about my future. I’m almost 30 years old. I work for a university almost solely for the tuition benefit. I served in the Army and used my Post 9-11 GI Bill and TA to get my bachelors and master’s degree. They’re both paid off. The university that I work with pays 50% of my tuition, the other half was paid by the GI Bill. I went back to school- why not? I hope it will pay off later, but as always, no guarantees. I only have one semester left of GI Bill eligibility, which means that I will have to come up with $16,000 spread out over 2 years to finish my PhD in education (not a high paying field). Should I take out a college loan if I feel I can cover it?
    I make 47,000/year. I have about $16,000 cash, with an additional 50,000 in stocks in mutual funds. My employer contributes to a retirement fund. I’ve only worked for the uni for 2 years. I have another year before I’m vested and there’s not much in the account. I have another 10,000 to pay off for my car loan. I live in a city with a high cost of living. I’d like to buy a home in the future but I’m not there yet financially. I want to be able to retire comfortably someday but I’m not accruing money at the rate I feel I should be. I left the army to take care of my terminally ill parent. She’s since passed away. I’ve managed to erase the debt from that, at great costs- wiping out everything I had saved from the military. Is there anything I can do to make things better? I work full time and I’m a full time student- it’s pretty stressful. I want to be proactive and set myself up for the future, but I feel like I’m missing something.

  42. We make $330K combined, have $285K in 401K, 150K in investments, and about $500K in home equity. No student loans, minimal debt – but we do pay child care, college savings, $15K car loan. We are 37 years old and I feel like in a position to make this money bigger, but not sure how. Are we sitting on too much home equity? Any advise?

    1. A lot depends on how much you spend. Based on your current situation, if you can keep saving just 10% for 25-30 more years, your retirement and investments combined should get you to a comfortable retirement. I use compound calculator to run different scenarios. Plan on spending no more than 4% of your total saved amount per year. We will have to adjust as we go, based on the economy. (This is why I have started investing heavily in dividend paying stocks – dividend aristocrats who pay set amounts consistently, regardless of their stock price.)

  43. So, wife and I both 58, with combined DC balances of 1.4m
    wife to start pension of about 36k per year at age 65
    expect combined SS of about 53k at age 70.
    Currently making 165k combined, before taxes and savings
    small mortgage
    want to retire in four years.

    What do you think our chances are?

  44. How is this possible if you live in an area where average rent for a 1 bedroom studio is $2000? I live in SF where i Make 60K but over half my paycheck is going to rent.

    1. Definitely not easy in SF (I live here too).

      How about finding a roommate? Savings is a choice. I lived in a studio with another fella for two years. I figured it was like a luxurious dorm room, and I was able to save 40% of my income in Manhattan making $40,000 a year.

      1. Her Every Cent Counts

        I also live in SF (not city proper) — and yes, get roommates. Move to the East Bay or cheaper cities on the Peninsula or just get a lot of roommates in the city. You can definitely spend less on rent that way. And make sure to always negotiate for higher salaries given the cost of living in the area.

      2. This here is the problem. Although I understand the need to save, having to degrade my quality of living to the point where I am SHARING a room with someone in a studio is just simply ridiculous. I had a problem doing that my freshman, soph, and junior years until I was able to have a place with my actual own room.

        I make 65k a year pre-tax currently. Not possible to save 35% pre and post tax and still enjoy nightlife and not being poor, especially if you have loans to pay back. I have lived in NYC my whole life.

        I sincerely believe that the only way to make those kind of savings in a city like NYC (forget about Manhattan/Upper Brooklyn, I’m even talking Queens and the rest of the “affordable” city) at my kind of pay rate requires the need to have mommy and daddy behind the scenes supporting you either directly or indirectly.

  45. I am 23 years old and will make about 35 k (after taxes) after my first year(June). Im in a sales position and should be increasing so that by year 3 i am at about 60-70 k after taxes. Im looking to invest i am opening a 401k and my company is going to start matching. I do have some expenses coming up like a new car purchase but any general or specific advice. I am pretty good at saving my expenses are about 1400-1500 a month bc of a car payment i have to help my parents on. Without the car payment that ends in June ill be at 800-900 a month. I am just young and looking for direction

    1. You currently have advantage a lot of us no longer have: time. Consider contacting one of the two big low cost family of funds [Vanguard or Fidelity] and review their index funds. Put aside and emergency fund [about 6 months living expenses] in a Bank CD. Then invest the rest in a low cost index fund. Your assets in the index funds will go up and down over time but the with compounding it most certainly over time will increase dramatically.

  46. greg goetsch

    Actually, I don’t think the question or the answer depend on me at all. I was asking a financial question about how much SHE needs for her retirement savings/income at her age. But because I since judgement about my side of things, let just replace “buy house” with “give to worthy charity.”

    1. It’s hard to know the future b/c of rising medical costs. If her insurance is in place for LTC and such, only she can answer the question comfortably. I’d just ask and then add on a buffer just in case.

    2. “how much SHE needs…” Assuming you are not implying she should give you the excess the question is unable. The future has a way of biting us all in the butt. Whatever she currently is getting in should be considered what she needs. Anyone who claims to be able to answer your question is just spouting nonsense.

  47. greg goetsch

    My mother is 80, lives in one of the cheapest places in the country, makes 60k a year between social security and a guaranteed dividend (until she dies) from charitable gift. She also has about 500k in a mutual fund. She is considering buying my family a house as a gift. How much of the 500k should she keep for a rainy day at her age with a guaranteed income of 60k. She easily lives on the 60K and has little desire to buy expensive stuff or go on trips. I can’t see that she really needs much savings.

      1. “Depends how OK you feel about accepting money from your mother at her age w/ her expenses, and at your age…” Really really good answer considering the question.

  48. I am 52-years old an have almost $900K saved. I have a tax-deferred 401K with close to $390K, two tax-deferred annuities, which I most recently opened (to avoid my 28% tax bracket) with close to $405K, plus a bank CD account with another $105K earning 2.96% with an APY of 3.00%.

    But that’s still not it – The best news – I am practically DEBT FREE. That’s correct, debt free – My two-bedroom, two-bathroom condominium is paid off in full, I have no mortgage; my 2010 Honda Civic Hybrid is paid off in full, my student loan (from many years ago) is paid off in full, and my credit card debt is paid off each and every month.

    My only expenses are medical (I do have lung / respiratory issues), annual property taxes, monthly condominium maintenance fees + monthly utility expenses.

    I guess it’s safe to say I am doing pretty well, allthough I am slightly concerned about my overall health. I am a former cigarette smoker and come from a family history of ALL smokers. I do have early stages of COPD, but since I quit smoking, I am hoping my COPD does not progressively get worse. Medical expenses are outrageously high, although I do have medical insurance. But this HDHP (high deductible health plan) really stinks. I am also putting money aside via a HSA (health savings account).

    With my condominium, automobile and rare collectibles, I would venture to say I am already in the “millionaire’s club.” Yet, at 52-years old, I am still working for a Fortune 500 company because I am single and really do not have anything better to do with myself. I am already well-traveled. I have traveled extensively both here at home (in the U.S.A.) and abroad (Europe and the Middle East).

    Guess it’s safe to say, “Life is Great !!”

    1. That COPD is going to get you. You have 10 years left at best. Retire spend it down to zero over the next 10 years and quit that stupid job now!

      1. That’s horrible advice. Not sure who the above poster is but I’m a respiratory therapist, and COPD is by no means a life sentence. It’s manageable, even when it gets progressively worse. If you enjoy work, keep doing what you’re doing, and save modest amounts just like you have been doing. Life without health is a life disadvantaged but not a life not worth living.

        Silly rabbit, tricks are for kids.

      2. “That COPD is going to get you. You have 10 years left at best. Retire spend it down to zero over the next 10 years and quit that stupid job now!” And if ten years from now this individual is living well with COPD your advice would be …..? Those folks [such as yourself] with a “live for today” philosophy hurt us all.

  49. So how do you handle putting your kids through college? We saved a lot but not enough to put two kids through 4 years of college, and how do you continue saving while doing this?

    1. A quick note about college savings — any money you put into a college savings plan or a standard savings account (MMA, checking account, etc) or into savings bonds counts as money you COULD be putting towards college as far as needs scholarships and subsidized loans are concerned.

      Money put into a 401k, IRA, invested in your main home or used to purchase whole life insurance doesn’t count as an asset towards these calculations. What’s more, 401k contributions decrease your AGI, which is used to determine elligibility.

      In short: if your income is middle class and your liquid savings modest, you might qualify for more college help if you don’t save for college than if you did.

      Now I’m not saying “don’t save.” I’m saying max out those retirement accounts! Even though they aren’t considered assets for college, you can use money in them to pay for college tuition without penalty. A 529 can ONLY be used for college — if your kid decides to go to trade school or gets a full ride on a curling scholarship, the money is wasted (though you could use it yourself to go back to school).

      What’s more, a 529 isn’t really going to generate a big return due to compound interest — the average dollar put into it will only be in the market for 9 years — and it’s post tax money.

      In the worst case scenario, where the kid doesn’t get any money for college, you always have the option of taking 4 years off from investing for retirement and plowing the money instead right out of your paycheck into school costs. You will take a hit, but it’ll be offset by the years of not splitting your investments when it mattered.

      In the event of a loss of cabin pressure, adjust your own gas mask before you adjust those of your children. That advice applies to finances as well.

      1. Is this really true though? It is my understanding that only your “contributions” count in the college help eligibility and that any gains do not. You also get the advantage that the gains are tax free. If your child does not use the money for whatever reason, and if you cannot pass to another child in the household or hold for their future children, then you can withdraw for yourself for a 10% penalty. I still see some advantages.

  50. Hello FS and thank you so much for your very informative posts.

    I am intrigued by this article among others, and this lead me to a question for you.

    In my case I am ok with savings in % vs my salary, and aligned with you.
    However when it comes to the chart of how much cash you should have accumulated by a certain age, i get a bit “worried”. In my life i bought 2 houses and renovated them both. Pretty safe investment in terms of locations. In 1 i have no mortgage, in the other one I have a mortgage very manageable providing i keep my job…
    The choice of houses vs cash left me with “only” savings of 30x my monthly need (i am in the 40/45 year old range) and a small 401 k that should reach at least 1 mil $ by age 65.

    Should i sell 1 house in favor of having more cash to invest (600k approx) or just sit tight in your experience?

    Thank you in advance

  51. I have a question. I am 45 years old and have about 900K in savings total. I own my own business so my income is not really set per say. Last year I was taxed on about $400,000 but I would say I brought home around $250K (maybe a bit more). Also I have just gotten married and my wife makes 50K per year, so in a way I am supporting 2 people now at my present life style. She maybe has 14K in a IRA. In the past I never worried about a set amount for savings as I made enough to just put away a lot of money. I would say in the last 5 years I saved around 60% of my income (thus the 900K). I don’t think I will be able to do that now due to the money being for 2. My thought was to put around 100K per year total from here on out into savings. Does that seem to be enough? One other thing is we are going to buy a new house and thinking of just paying cash (around 400K) so that will bring my savings down to around 500k but will own my house out right. Thanks for any kind of advice.

    1. Howdy,

      Depends on how much longer both of you want to work.

      Cant go wrong being mortgage free given housing is usually the largest living cost for most.

      If you have an income, it behooves you to have a mortgage to take advantage of the tax shield and invest the difference. Id spread the 900k arouns into real estate, stocks, CDs, and even a little bit of bonda as theyve sold off in may 2013 so far.


    2. If you were taxed on more money than you brought home, you absolutely need to find a new tax accountant this year!

      The only reason this would happen is if you are paying workers under the counter, which is completely illegal and can get you sent to jail.

  52. Noel Vieira

    I am 27 yrs old. I don’t own any stocks, not have I invested in anything. Besides saving, what is the first step I should take to see any kind of money grow before I hit 40? Please note, I have not been very well educated on how I can make sure I’m taken care of by the time I’m elderly (based on my own actions).

    1. You should be in the market specifically investing in an index fund. Go to you local bookstore [or library] grab a few books on general personal finance or some similar subject and a cup of coffee from the coffee stand [or in the case of your library check the books out and head to a coffee shop or home] and read the books. Any advice you can get from a financial adviser will not be better than educating yourself.

  53. I have been reading your savings suggestions. These sound good except in this economy and years past, very few people were making 65k. I worked for the better part of my life at 35-40k. I saved what I could most now gone due to layoffs one right after another. Getting behind and playing catch up kills your saving potential. It’s taken me to the age of 59 to finally make 65k. I’ve managed to rebuild my savings to about 10k in 401k. I plan to work at least 10 more years. Ill save what I can but it’s a little too late to accumulate what you suggest. I venture to say there are a lot of people like me, hurt by the economy now left out in the cold. The problem with people like you is you don’t factor in the average wage earner. What you and others like you preach are for those who have the ivy league jobs right out of college. Where we’re you 30 years ago.

    1. Sorry to hear about your circumstances. I hope this article can inspire those who still have a lot more time.

      30 years ago I was trying to get good grades to give myself a chance at getting into a good college to get a good job.

      1. I went back to college and graduated with a bachelors at the young age of 34. I worked aggressively at paying off debt. Well the first job I got was a lucky one. I went to work for one of the repositories, or aka, credit bureaus. I learned how to earn credit with minimal income and debt/credit ratios. This has helped me saved thousands in every big purchase, ie. cars, real estate, loans, etc over the years and contribute more to retirement and 401K’s. I do make 6 figures now, but not without layoffs and proper managing. Saving anything you can and it will pay off! God Bless

    2. Don’t give up hope. Just do what you can to cut expenses and make a little money in retirement. Try to enjoy the free things in life. Good Luck!

      1. Really? Is this article geared towards people who live home and rent free and have no kids or kids with special needs? What about home maintenace and property increases that go up constantly? I always lived within my budget. But you can’t even save that much unless you have a second job. Oh… and I forgot, most of us, even the professionals, do not see a 3 percent increase! Most of us have gone at least six years average without a pay increase.

        1. I’ve gotten a pay raise of 5% every year like clockwork. If I don’t get it from my employer, I go to another firm.

          I’d recommend you be more aggressive about growing your salary.

          And as for the rest… If you can’t afford your lifestyle, whose fault is that? Adjust it. Bring it back down to where you can afford to save.

          1. Marine Officer

            I have a guaranteed job and paycheck and pension. I retire at 47 and will draw retirement that same year. I plan to work for the government and for side money. I have insane tax deductions. A 5% raise like clockwork is chump change bitch.

      1. “Worthless Federal Reserve notes…” Except you can trade this “worthless” material for a nice dinner, a good car, reasonable shelter AND a comfortable retirement. Worthless? Nonsense.

  54. @ MD
    Am I missing something here? How is someone making more than $150,000 going to contribute $22,500? Are you assuming that they have to be over 50? IRA contribution is NOT deductible at that income level. Am I missing some investment (per tax) vehicle?

  55. Sam,
    Can you help me out a little here? I’m (getting) old – spouse and I are in our mid-50’s. I love what I do and intend to work for a good 10 years, but spouse would quit her job in a heartbeat if we could afford for her to do so. Combined income is about $150,000 and she makes $100,000 of that. We’ve gotten all our kids thru college debt-free and don’t have any debt ourselves, except $130,000 mortgage left on a $400,000 house. (we intend to have that mortgage paid off in 3 years). We’ve only got $650,000 saved for retirement – mostly in 401(k)’s. She really does want to retire (grand babies are very alluring). Any suggestions? Thanks.

  56. In retirement, you will not have anywhere near the income that you had when working unless you are truly a special situation. Much of your spending will come from non-income sources. This could be from accumulated cash savings, sales from mutual funds (where a portion is return of capital which is not taxed and a portion is taxable at cap gains rates) and interest from bonds. Yes, your 401k will be subject to ordinary rates but you will only take out what you need to spend. So, in all likelihood, even if rates increase in the aggregate, your rate most likely will decrease from what it was when you were working.

    I see the magazines state the opposite all the time and it drives me crazy. Now, there are some additional, fantastic reasons for considering a Roth IRA and having a portion of your money coming back tax free is not a bad thing. It is just that I think that benefit is oversold.

  57. Debt-free Dan

    FS, yours in the first voice that I’ve heard against Roth options. I have always assumed that income tax rates will be higher in retirement. It’s 17 years or so until I can withdraw penalty-free. I contributed to my 401k for the first 10-15 years. I have been contributing to a Roth 401k and Roth IRA for the last few years, with the rough goal of having about the same amount in Roth and non-Roth retirement accounts.

    Your post has made me realize that although I believe income tax *rates* might be higher, my actual income might not be higher. I’m not ruling out a 2nd career of some kind in retirement. Traditional retirement account withdrawals will count as “income”, but it seems that if I’m withdrawing proportionately or working a more modest “retirement job”, then perhaps even moderately higher tax rates won’t result in a higher tax bill for me.

    I agree that reckless and excessive government spending is a good reason to contribute the legal minimum via taxes. One question I have for you is whether deferred taxes now really results in lower total taxes paid to the government. Let’s say you have a Roth retirement account with identical contributions and returns (for the sake of this example). In the “traditional” example, then I’m paying taxes on the contribution plus investment returns in the future at future tax rates. In the “Roth” example, I’m paying taxes on the contribution today at today’s tax rates. Therefore, isn’t the higher tax bill the “traditional” tax bill, even assuming constant tax rates paid with inflated future dollars?

    Please correct me if I have a mistaken assumption in here.

    1. Howdy Dan,

      Thanks for your thoughts. The way I see it, if you pay taxes up front, you are a guaranteed loser. If you defer as long as possible, you have a chance of being less of a loser.

      Here’s an example to illustrate. From 2003-2012, I was in the top marginal tax bracket. There is generally nowhere to go but down for me, even with income tax rates potentially increasing. As a result, I did not pay my rental mortgage down so as to have maximum deductions in order to have a net loss to pay zero taxes on my rental income. Since retiring in 2012, I no longer am in the top tax bracket. I can now pay down my mortgage and happily pay a marginal tax rate 10% lower on income I could have earned during my highest tax years.

      Bottom line, once we pay taxes upfront, we give up our optionality and our power.


  58. I’m confused why you say pre-tax savings are best. I have always been told to invest in the roth option of retirements savings. This is because 1. I plan on having a higher income when I retire and thus can save on taxes by investing in roth when I am in a lower tax bracket, and 2. Historically tax rates always go up so even if I were in the same tax bracket when I retire the tax % for that income will most likely be higher. With those two things in mind I prefer ROTH retirement options, why do you feel that Pre-tax savings is better?

  59. Financial Independence

    This is an excellent and very clear chart – road map to financial independence. The advantage of this method is that there is possibility to leave principal alone for the kids, should investments perform well.

    Alternatively there is some room to cover for inflation. What it does not take into account is fact that to reach $65 K a year takes time. On the other hand the life does not stop there and once there the income goes beyond it.

    1. Glad you enjoyed the post. I use $65,000 because I think it is a realistic income level average across a person’s entire career here in America. However, I recommend folks look at the expense coverage ratios and less on the income or absolute savings amounts because everyone’s costs of living needs are different.


  60. Time to start a new year and a new savings plan!

    I have been working and saving at a CPA firm in San Francisco for the last 5 years

    Being around finances for other clients, I have taken to tracking my own. I am not a superb saver, but try to do as much as is comfortable (which I am going to challenge in 2013).

    I am currently behind the “8 ball” when comparing myself to your calculation. Typically I have been saving somewhere between 15%-20% annually. This savings is heavily weighted toward retirement assets, but about 20% of it goes to contribute to a small mutual fund balance my family started investing in for me as a kid, as well as into a Schwab count for one-off trades.

    In early 2013 I will be turning 28. My savings as of year-end is approximately:

    ROTH IRA: 34,000
    ROTH 401(k): 27,000
    Pre-Tax 401(k):10,700
    Total 71,000

    For 2013 I am going to aim to max out my Pre-Tax 401(k) [17,500]. This will equate to about 23% of my current salary. Additionally, I am going to still try to add some funds to my ROTH IRA, setting up a deposit of $100 a month. In addition to this I can convert my credit card points into Fidelity contribution amounts; this should help me add another 250-500 of ROTH deposits over the course of the year.

    I am really going to take your recommendation of “saving until it hurts” to heart this coming year. I know some sacrifices today will help make things much easier to handle further down the road!

    Thank you for all your advice, Cheers! & Happy Holidays

  61. Looking at this chart sure doesn’t make me feel very good about how much I’m putting away. I’m not even close to the suggested savings in the table.

  62. other thing…
    I’m currently using about half of my post tax savings to help pay off my mortgage. I have no other debts, so me and the wife are putting extra cash towards paying off the house while also saving.

    Does the numbers you provided above account for a situation like this? Because if not, then I guess I’m a little off track with how much is actually going towards savings. If we were to put that 50% we’re putting in our mortgage towards savings, then we’d be right online with the chart above.

    But for us..we kind of see it as if our mortgage is paid off, then we’re almost retired since we don’t have no other debts. So the sooner we can do that..the better. At the rate we’re going at…we’ll have it paid off in less than 2 years. But we may end up going into a bigger house in a couple of years at some point because the house we’re in will be a tight squeeze when we plan to add another addition to the family.

    1. Hey Ryan,

      Paying off your mortgage is great of that makes you feel more financially secure.

      The question is, what is your after tax liquidity like? I actually think the ideal mortgage is $1 million bucks if you can afford it. Good to take advantage of as much government goodies in this interest rate environment.

      Spend some time looking around the site!


      1. Hey Sam,
        Could you clarify what you mean by “after tax liquidity”? I’m not sure exactly what you’re referring to.

        an ideal mortgage of $1million dollars sounds like a lot for a mortgage to me…but I guess it all depends what city you live in.


        1. I’m referring to the cash you have in your money market, CDs, and stock trading accounts you can easily sell.

          $1 million mortgage is ideal if you can afford it. The article explains why.

          thx, Sam

  63. Awesome post!! It really makes you reflect on your situation and see how good or how bad you’re doing. Which is a good thing because if you’re not on track, then you can get yourself on track.
    I’m in my mid 30’s and according to the charts, looks like I’m right on track!

    But I was wondering, where did you get this data from for the charts above? Is this something that is well known in the finance industry like the rule of 72.. that I just didn’t know about? :-)
    Or did you compile this yourself?

  64. I’ve got to say, this is one of the main reasons why I love to write about personal finance. It feels great helping motivate people to save and secure their financial future. When you can do something you like to do and help someone else in the process, it’s one of the best feelings in the world!

  65. I’m definitely behind the power curve, but I’ve always counted on a pretty generous pension and a second career to account for my poor savings. I’m late to the game, but I’ll catch up pretty fast with about a 50 percent savings rate! Great post!

    1. Mike, you are fortunate to have a pension! I’m considering taking on a government job in retirement and work for another 15 years traveling overseas (foreign service) so that I can have a nice pension as well. But, my fear is that Obama won’t be able to hold back the detractors over the next four years who call for a reduction in pensions!

      1. Yeah, this is definitely a real concern, but i tell you: the last place they had better go when the chopping starts is military benefits. I’ve seen too many people spend too many years fighting in over a decade of wars– people who served this country with an expectation that they had earned their benefits. Certainly there are other places that they can look where the sacrifices haven’t been so great.

        But, enough editorializing from me…

  66. College&Beyond

    Amazing recommendation, any extra income invested from a side job will increase your chances of retiring earlier.

  67. James @ Free in Ten Years

    This is really helpful FS. Feeling pretty good about having a 75% saving rate right now!

  68. Darwin's Money

    This would be ideal for many but probably unrealistic for vast majority of Americans. For one, most people live roughly up to their income (after putting away some money in 401k and paying taxes). Then, in 30s, you have many people still paying down college debt and often times, starting w kids. People are having kids later, so now those kid expenses shift even into 40s and 50s. Then the college expenses start to hit. For people with 2-3 kids, living in a medium-high cost of living area, probably way too aggressive. Unfortunately, what you prescribe is actually what is required for a conservatively safe retirement. There’s a major gap in America.

    1. Darwin, do you really think these charts are “way too aggressive” for “many” or “most” people? I really tried to make the charts as realistic and feasible as possible.

      Increasing savings by 1% a month is NOT that difficult. I would say a large majority of people won’t even know that 1% is missing!

  69. Sam – great article. I’m doing much better with post-tax savings than pre-tax savings, largely because my company does not contribute a dime to the 401K and a house that required me to significantly up my post-tax savings for a down payment :) Next year I’m focused on pre-tax savings and getting as close to 17K/yr in savings via 401K or IRAs. Next year’s bonus and salary increase will help with that too!

    But question – what about those who can live cheaply even in retirement? Why do we need such large sums of money in our late 60’s, 70’s when most don’t want to travel at that age or really live the way we do when we are in our 20’s/30’s? It seems the older my grandparents get the more they are inclined to get in that recliner and watch TV all day. They hardly spend money at all with the house paid off! Not saying I want to mirror this, I’d like to think I’ll have more adventure…. but at a certain age, let’s say 70, I don’t think my propensity to consume would be very high at all. Or am I wrong about this?

    1. Everybody’s tastes are different. My parents, for example, have pretty low expenses since they have no debt, but they love to take multiple month long cruises a year which costs a good chunk of change.

      It’s better to be safe than sorry than filled with regret. Life likes to throw curve balls, so it’s best to have as much padding as possible. Besides, wouldn’t it be nice to help donate some money or help support the grandkids? $500,000-$1,300,000 is not a huge amount of money with healthcare and other living costs for someone who plans to live for another 30 years.

  70. Glen, this is actually not really about comparison, b/c there’s nobody to compare yourself with. These charts are a guideline for everyone to check if one is on track to have a reasonable chance of retirement by their 50s and 60s.

  71. Hi Sam, great article. Just so I’m clear, the savings by age chart includes pre-tax savings and post taxing savings combined?

      1. Thanks – I just bought my first house and I’m thinking instead of upping my pre-tax savings, saving up for a down payment so I can move in 5 years and rent out the place I just bought. What do you think?

  72. Great charts Sam! I think you are pretty spot on, and being conservative given savings grow with proper investments. Better conservative and safe than over aggressive and come up short!

    I’ve got about $750,000 at 43, spread through various investments and savings.

  73. Thanks for the charts. I am saving the right amount just in the wrong buckets at 32 years old. I save $13800 in the 401k, max out the roth IRA and do $20000 per year in post tax savings. The reason for the big post tax amount is that Im saving up to just pay off my house in 4.5 years and in the meantime using it for my emergency/house/car repair fund. I’ll be maxing out my 401k in about 2 years (increasing the amount 2000 per year). My company gives me $11,000 for the 401k account.

    Hopefully in 4.5 yrs I’ll be maxing out the 401k and Roth IRA and saving $35000 per year (when I turn 37). Thants the birthday gift I’m working for.

    1. Whatever works for you Cosmic. That’s around $39,000 in annual savings right there which is excellent! If you can boost it to $57,000 a year at age 37, all the better. Savings add up QUICK!

  74. Great stuff here. I think that there are hard truths to savings required to be able to retire with minimal stress, and many people simply bury their head in the sand and pretend this isn’t an issue. The reality is that we are working for not only ourselves (and kids, if we have them) now, but also for the old person version of ourselves down the line who may or may not be in good health. Math is math, can’t get around that!

    It’s always fascinating to me how there are probably people that reject this entire line of thinking. Clearly, I’m not one of them :)

    1. Hey Ray, thanks mate. Building wealth takes active management for sure. Burying one’s head is definitely not a strategy, just like HOPE is not a strategy! This is why I’m so happy to have found a free online tool like Personal Capital to help me manage my finances.

      Once we think of our kids, or others who depend on us, we get that much more motivated to do better.

      Hope all is well!

  75. TB at BlueCollarWorkman

    THis is pretty good. And what I like too is the concept of starting by saving 1% mroe than you usually do for a month, then make it 2% until it hurts . Genius!

  76. retirebyforty

    You should combine this saving chart with your 401k chart. I guess add an asset chart and you’ll have a net worth cart. :)

  77. One problem I have with conservative investing at the 20 year age group is the effect of inflation and unforseen economic events. We all know the U.S. is hemoraging financially along with the rest of the world. I think it’s a good idea to take the money saved in the 20s and use it for high return/high risk reward investments. That could be real estate, option trading, buying a business, etc. You could become rich relatively quick with hard work (10+ years) or you could save and have the economic environment change in 30 years(which is a strong possibility) and wipe out that hard work of saving your peanuts.

    1. Did you say option trading? That’s risky, and I know a lot of derivative traders. They don’t even trade a lot of options with their own capital, only the capital of the firm’s. Selling covered calls ain’t so bad though.

      Share with us how you got rich after 10 years. Also, please define what “rich” is to you in terms of absolute dollars or expense coverage ratio. Thx!

  78. @Jon
    Good work Jon! Just keep on increasing the savings percentage to feel the squeeze!


    @Grayson @ Debt Roundup
    No problem. The guide isn’t the end all be all, but I definitely think the expense coverage ratios are realistic and important to follow as we grow older.

    @Miss T @ Prairie Eco-Thrifter
    Try raising your savings by 1% a month. If you do, I’m SURE you will get to 20% and beyond within 12 months if you start at 10% a month!

    It is a possibility. Annuities just restrict your liquidity flexibility. Also, locking in an annuity now may not be the greatest idea since interest rates are at record lows. Refinance your mortgage yes, but not so much investments for 20-30 years.

  79. Why not just buy an annuity after you know how much is your annual spending. That way you dont run out of cash and also dont need to go crazy spending after 70

  80. I like the categories you used in your Expense Coverage Ratio = Savings / Annual Expenses table. :) I’ve been slowly increasing my savings each year and I update my long term financial goals tracker a couple times a year. I started keeping my checking account balance super low so that I won’t withdraw that much cash and I then I can also earn a little more in interest from my savings account each month.

    1. Good stuff. I’d take a HARD look at your cash and move it to a higher interest online savings account, structured notes, or something that yields more than what it’s yielding now. Don’t give your existing bank free money!

  81. Kim@Eyesonthedollar

    Sam, I wish you had been telling me this at age 20, but I probably wouldn’t have listened. I’m not sure why this isn’t taught in school. Even if half of the people bought in, we’d be in a much better economic state.

    1. Don’t know why basic personal finance education isn’t taught in school either. Being able to save and invest the first 10 years out provides a huge windfall when we are in our 30’s.

      1. I believe NJ now requires a half-year financial literacy course in high school, that can be taken in person during the school year or online during the summer. It was an eye-opener for my son.

  82. I love this chart. Your expense coverage ratio is even higher if you consider that once you reach financial independence, you won’t include the savings as part of your yearly payout. A $65K earner in your example saving 50% only needs $32.5K to live for a year with no inflation.

    1. That is true indeed. I provided a wide range for the expense coverage ratios to allow for the age range and wiggle room. I’m hoping everybody can achieve 20X or greater coverage when it comes time to retire. Provides a huge runway to do what you want… and get back to work or build new income streams in case 20X is not enough!

  83. That’s a fun chart.

    I am 30 and currently live on about 35% of my after-tax income. I have over 5 years worth of expenses covered in savings and stocks (not including my home equity). I built my house when I was 23 and paid cash for it, so I’ve been living rent/mortgage free for the last 7 years. (Although I have a HELOC on my house to use for investing, as I mentioned in a previous post.)

    The hardest part is keeping my income up. I started a business when I was 18 and was doing really good for several years, but then I got hit hard in 2009/10. Things are going back in the right direction, but it’s been a long, bumpy recovery. For a while there my income over the years looked like a bell curve — definitely not something people want to see! Fortunately it’s starting to curve back up again so I can accelerate my savings.

    1. Saving 65% of your after-tax income will lead you on a path to early retirement within 20 years of start for sure!

      Many got trounced in 2009/10, but things are definitely coming back for those who were able to hang on!

  84. I was an idiot till my 25th birthday. I had a great job and relatively high income, but spend 105% of it. I moved from my parents house and started to enjoy life – two floor duplex 10 minutes from Prague’s Old Town, expensive parties twice a week, very expensive clothes, $15.000 dslr camera etc.

    Luckily I’m 26 now and totally changed my thinking about money. I save now almost 40% even though I don’t earn much – about $50000 year due my visas conditions, have to pay for college, and live in one of the most expensive place on Earth – Sydney, Australia. I’m still in red – about $5000 now, but that should be done soon and than I’m going to continue work hard and save like crazy. I also started 2 small businesses which are bringing me about $1000 a month – not a jackpot, but better than nothing, and 3 weeks ago bought a website for $2500 which looks to be earning about $500 a month.

    I’m really pissed off to myself because of those wasted money. But I can’t change the past. All I want now is to earn through my business and side income enough to left “employee” status in the dust.

    1. Jakub, you must be quite a photographer with a $15,000 DSLR camera! Do you have a portfolio online?

      The good thing about spending more than you earn is that you had a lot of fun, and you have the material goods to show for it e.g. camera still works right?

      I like your small business initiatives. Better late than never. 26 is still very young!

  85. I expected to see some outrageous assumptions from you on this one Sam, but these seem dead on. You can easily adjust the percentages up if you want to retire early as well. Glad to see a more balanced approach on this on your blog.

    1. This isn’t a “how to retire early” post. For those interested, they can click the link.

      This post is for everybody as I try and address what the common path the majority of people will go through. If everybody followed this realistic path, the economy would be in even better shape!

  86. Excellent added benefit to maxing out your 401(k). We live in a very litigious society, and people with a lot in the bank are big targets. However, I think the security of IRA accounts from lawsuits varies from state to state. Not sure if Sam has done an article on this, but it would be good one for the future.

  87. Mrs. Pop @ Planting Our Pennies

    Instead of looking at coverage as a multiple of after tax income, I tend to think of it as a multiple of spending. Our current net worth (updated today on the blog just for you, Sam!) is about 3x our after-tax income currently, but it’s about 8.5x what we spend currently in a year on non-investments.

    1. You say potato, I say potato? What’s the difference between a multiple of spending and a multiple of expenses for my Expense Coverage Ratio? I think my ratios is equivalent to your 8.5X of spending. That’s pretty good! I’m assuming that is for the both of you?

  88. Nice table! So my wife and I are 40 and I just retired. She likes her job very much and plans to work a few more years. For comparission we are sitting at about 15x expense coverage ratio, excluding primary residence of course… Just checked my records and for the past 17 years we have managed to save between 20 and 50% of our post tax income. Work your a$$ off early in life by working hard for money in order to pay for getting a good education and skill set. With this education and skill set, work hard to earn the most money you can – The key is living on much less than you have coming in. don’t get me wrong treat yourself when special goals are reached, but never bend to the will of the marketeers out there that earn their money buy you sending yours.

  89. Miss T @ Prairie Eco-Thrifter

    When we got married we had debt of mine to pay off. Now that it is gone, we are focusing on 20% savings right now and then will hopefully up it in the near future.

  90. Grayson @ Debt Roundup

    It looks like I am a little behind on my savings. I used my savings to pay off all of my credit cards and am about to hit 30. While still accumulating, I need to up the amount I put away. Thanks for putting this post together. It is all inspiring.

  91. Nice chart! For the record, the knees are doing just fine. My back is doing better too. Funny, chronologically I am old (66 y.o.), but I have never felt better. My doctor says I have the stats of a 35 year old. No, I won’t pay you in tennis!

    The savers out there already understand this and the non savers may never get on board. If the non savers only knew what it is like to have a huge safety net, they would get on board. Freedom is an overused word, maybe security is a new word again.

    1. OK, will spot you two games per set! Great to hear you feel as good as you did when you were 35. Were you feeling good at 35?

      What do you think attributes to your good health?

      1. Exercise, healthy eating, great relationships (including a wonderful wife) and discipline. It helps that I get checkups and follow his advice. I am not sure if good health helps everything else or everything else helps you stay healthy. It could be the chicken or the egg syndrome of which was first.

        BTW, my doctor said I had stats of a 35 y.o. I was probably at my peak at 35 years old because I lost 35-40 lbs. around 31 years old. That was 31 years ago, who knows for sure.

  92. Ecstatic to know that I’m actually on the right kind of track – tables like these are great – I love to actually be able to work my own way through the numbers. Thanks!

  93. Gen Y Finance Journey

    I do WAY more post-tax savings and a bit less pre-tax savings than you recommend for my income. Personally, I would advise to save more post-tax than you recommend so that you’re better prepared for things like buying a car and a house.

    1. Are you contributing the max to your pre-tax savings before your post-tax savings? If so, then saving way more post-tax than pre-tax is a good thing. If not, it’s not optimal.

      People have a HUGE tendency to spend their post-tax savings if it’s not locked away. Let’s say you make $65,000, you should be able to buy a $6,500 car with your post-tax savings while still contributing much more pret-tax for example.

      Protect yourself from litigation. Pre-tax accounts are untouchable.

      1. Gen Y Finance Journey

        I contribute about 2/3 of the max to my 401k, then I max out my Roth IRA, and then I put away an additional 25% or so of my take-home pay in taxable accounts. I don’t have an issue with spending my post-tax savings. :)

        1. Gotcha. So $11,500 goes to 401K, then $5,000 goes to ROTH, and even more than $16,500 (based on you saying you save more post-tax) goes to post-tax savings for a total savings of closer to $40,000 a year correct?

          If so, that is awesome! Although, I hate the ROTH. Never give the government more money than you need to, b/c they will waste it!

          At ~$40,000 a year in savings, there is no doubt in my mind you will have well over $500,000 accumulated over the next 10 years. You should write a post about your savings to encourage more young folks to save more!

          1. Yes, i know, I am replying to your 2013 post. This is my first time on your blog. I just happen to come across the comments and I must say I am absolutely blown away. I feel like I cheated myself, but I didn’t know anything about saving money or investing. I just turned 40 this year, and decided to part ways with my job of 20 years to finish school. I am leaving with only $50,000 invested. I had no clue I was suppose to be saving so much of my income at that time, of course I was making no were near $40,000 a year either. Reading these posts… a huge eye opener. I hope it’s not too late to continue investing, not even sure were to begin, but thank you for posting all of this great information. I’m trying to soak it all in!!

        2. Gen Y Finance Journey

          Not quite, but that would be nice! It’s $11,500 to 401k, $5,000 to Roth, then about $12,000 to post-tax savings. I also get an extra $4,000 pre-tax from my work between 401k matching and employer HSA contributions, so I think I’m doing pretty well.

          I know you hate Roth, but I’m a big fan of tax diversification, so I like putting away a bit into my Roth IRA each year.

          1. Gotcha. So does that mean you actually do way more pre-tax savings then post-tax savings as you first mention?

            $21,000 is greater than $12,000 after all! What am I missing here?

            Either way, it’s a great chunk of change to accumulate over time!

        3. Gen Y Finance Journey

          I do more tax-advantaged than regular taxed savings. But I do less pre-tax than you suggest in the chart and more post-tax than you suggest, since the Roth IRA is post-tax.

  94. I hope many people can do more than what you outlined here! We should reach a savings rate of 50% soon inspired by stories such as yours. As income increases that rate will go up of course. We’re both in our 20s but we don’t waste time with the big things in life and even look for shortcuts wherever possible. School is a distant memory and we’re working hard to increase income and assets.

    If you don’t save enough, you just have to hope to be rescued at some point… probably by others who can’t figure out how to save enough. I don’t like uncertain plans like that.

  95. Very excellent point about retirement age and mortality. That said, everybody nowadays wants to retire earlier than 65 while living longer as well. We want our lemon meringue pie both ways! The internet has allowed us to do so, but it take discipline and action.

    10 more years at your savings rate, and surely you will be free by 35!

    1. Well, you did buy a Porsche 911 Turbo or 100 pairs of Manolo’s in your 40s or 50s in this scenario. I think spending 65-80% of your income your entire life is spending money isn’t it? Just when you’re rocking your 60s and 70s is it time to spend 90%-100% of your income!

    2. Carlos, you are financially challenged if you think spending 80% of your income (20% savings) is not spending.

      I’m going to take a wild guess that you are way behind on your savings!

    3. Steve (NWOutlier)

      70 doesn’t mean you need a cane – google this:

      arnold schwarzenegger workout over 70
      sylvester stallone workout over 70

      take care of your health while you’re earning and accumulating – you will have no cane… :)

  96. Some good points in here about your 20s. I just want to add that it’s important to use your 20s to invest in yourself like crazy. On Saturday I had some (okay maybe not some) drinks with an older friend. He’s now in his 40s and he has managed to make lots of good money/investments over the years. He said he’s most proud of what he did in his 20s because it’s paying dividends now.

    His education, his skills, and his connections.

    1. You have a wise friend. Folks in their 20s don’t realize exactly how much their savings and good investment habits compound over time.

      Take the 401K for example. Max that baby out for 10 years, and BAM.. there is a super high probability you’ll have over $250,000 in there by the time you are 35 due to compounding and matching.

  97. I’ve been saving about 30% of my gross income total (401K and after tax) for the past five years and it is an awesome feeling to see my savings and investments grow.

    You’re right that if the percentage we are saving doesn’t hurt a little, are probably aren’t saving enough. Now, saving 10% is like a walk in the park. I think I’ll shoot for 35% now. Thx!

Leave a Comment

Your email address will not be published. Required fields are marked *