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Am I saving too much?
Old 10-27-2017, 10:24 PM   #1
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Am I saving too much?

30F making $84k per year as a government employee for the State of California. SO is 32 and makes $25k a year which we are using his income for our current monthly living expenses. We have a 8 year daughter together and plan to have another one in 3-5 years, maybe. Currently renting at my in laws house. Right now we have $100k saved split between my 401k and 457 accounts. I max both the 401 and 457 which totals to $36k a year. Starting next year I will be saving $12k each year to a taxable account. Weíre also saving to put down 20% to purchase a home within the next year or two. I am estimating our retire expenses will be $4500 a month. This is due to adding more travel after RE. We currently live on $2k a month but Iím estimating after buying a home it will be around $3k.

I am still considering if I should go at 50 or 55 or the middle of the two at 53. If I retire at 55 my pension will provide me with 70% of my current pay and free healthcare. For the pension, 70% of my current pay would be roughly $5280 before any taxes are taken out. The earliest I can retire is 50 but that would drastically cut my pension unless I defer it to 58 to still get the 70% but would then lose healthcare. If I defer the pension and retire at 50 the gap between age 50-58 I would use the taxable account and 457 as a retirement vehicle until the pension kicks in. I will not touch the 401 and let it grow.

SOís employer contributes 3% of his pay into his 401 each year and healthcare is free. He doesnít anything towards his 401k. SOís 401k is at $60k invested in VTSAX. He doesnít plan on retiring early as his job is pretty easygoing. I did some back of the napkin calculation for his 401 with a 5% return he will have roughly $600k by 60. I may hop on his healthcare plan if I retire earlier but it isnít all that great with high copays but itís better than going through the exchange.

Assuming I continue to max the 401 and 457 for the next 25 years along with contributing the $12k a year to a taxable I would have way more than enough to retire on. I didnít factor in Social Security. I sometimes feel I am saving too much and could use that money now to do more traveling but at the same time that would push back my FIRE plans. I really just want the option readily available for me to quit even earlier if I ever change my mind.
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Old 10-28-2017, 05:54 AM   #2
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Don't skimp so much that you never have any fun. That makes it harder to get to a safe RE. I would take a path that has health coverage. You seem to be saving well so keep it up. I would think that getting married would be good vis a vis having rights with your SO.
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Old 10-28-2017, 06:49 AM   #3
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Your progress toward FIRE is your fun. As soon as you get a bad boss, you'll see how urgent it is.

Keep saving.

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Old 10-28-2017, 07:25 AM   #4
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Welcome !!! I do not think there is a such thing as saving too much as long as your current lifestyle does not make you and your family miserable Higher saving rate now will give much more options later, and because your pension is so far away - you never know what can happen in the meantime and how it might change. Keep going as long as you live comfortably on the current budget.
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Old 10-28-2017, 08:43 AM   #5
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No I don't think you are saving too much. You have a very unequal relationship with your partner. Even at that low salary..is it possible to find a job that pays 25K with full benefits? Is your SO part time? Your SO should be putting something in his 401...you live in a HCOL state. If you marry and it doesn't work out your SO will walk away with half of everything.

WE have so many younger 30 YO come here and try to pin down the exact year they can stop working and have their whole lives planned out..Stuff happens. You have a 32 YO partner and already have decided together that he will bring in only 25K a year for the next 30 years. It's one thing to have a SAHM parent its another thing to have someone out working and bringing in 2K a month permanently. I don't know how much rent you pay, but you are going to buy a home with 20% down and the taxes, insurance and utilities and upkeep are only going to add 500 bucks a month to your budget?

You are doing well,but should consider some the things I mentioned.
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Old 10-28-2017, 10:32 AM   #6
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As long as you have all the essentials met and if it isn't impacting your enjoyment of life or adversely affecting personal relationships, then there is no such thing as saving too much. Now if it's making you miserable or causing friction in the family, then maybe there's room for a little bit more living for today.
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Old 10-28-2017, 10:50 AM   #7
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I don't think you are saving too much. As others have noted, you are a long ways from ER and a lot of unforeseen things can happen, i.e. job loss, illness or injury that can drastically impact your income and even your ability to work at all. The more you save now the more options you will have in the future.

Are you feeling deprived? If so, maybe loosen the purse strings just a little bit. After all, it is tough to stay on a course of action for 20 plus years if you start to resent the lifestyle. But if you are content with the life you are living, keep it up. The end game is worth it.

Definitely don't neglect saving in taxable accounts. Having access to that money may wind up being a crucial at some point.

I was always an extreme saver by nature, and was content with a simple lifestyle. So the things that I missed out on, weren't really the things that mattered to me to begin with. As long as I had money to do the things that truly brought me joy, I didn't miss the trappings of a luxurious life. Fortunately, I enjoy local trips, reading a good book, puttering in the yard, hanging out with family and friends. All of these things cost very little.

Best of luck to you! It sounds like you are on a good path towards ER.
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Old 10-28-2017, 05:51 PM   #8
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At 30 I think you are too young to be worrying about whether you will retire at 55 or 57. It's great to have the goal to retire early, but a lot of things can change over the next 20 years. Just save as much as you can without being miserable. It sounds like you are doing a great job, so keep it up!
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Old 10-28-2017, 08:33 PM   #9
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+1 Use Quicken Lifetime Planner to develop a plan and Quicken to monitor your progress, but don't scrimp too much today for tomorrow.

True story. My grandmothers BIL... scrimpped and saved all his working life for his retirement... retired... dropped dead of a heart atttack less than 12 months later... for what?
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Old 10-29-2017, 05:31 AM   #10
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Quote:
Originally Posted by vtd0918 View Post
..... SO is 32 and makes $25k a year which we are using his income for our current monthly living expenses.

..... SOís employer contributes 3% of his pay into his 401 each year and healthcare is free. He doesnít anything towards his 401k. SOís 401k is at $60k invested in VTSAX. He doesnít plan on retiring early as his job is pretty easygoing. I did some back of the napkin calculation for his 401 with a 5% return he will have roughly $600k by 60. I may hop on his healthcare plan if I retire earlier but it isnít all that great with high copays but itís better than going through the exchange.
Is there any reason not to increase SO's 401k and/or IRA contribution to reduce taxable amount as part of savings?

In respect to saving, do you feel you need to spend on something or you are missing out? I feel that is one factor regarding saving too much, is it negatively impacting something to the point it is no longer satisfying or good. Your family, i.e. You and SO, need to decide that.

p.s. In my late 20's I felt the same way, so I didn't contribute as much to IRAs, but always max'd out my 401k. I spent as needed, but my Taxable account is pretty healthy in my late 40's now.
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Old 10-29-2017, 10:24 AM   #11
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Originally Posted by Aiming_4_55 View Post
Is there any reason not to increase SO's 401k and/or IRA contribution to reduce taxable amount as part of savings?



In respect to saving, do you feel you need to spend on something or you are missing out? I feel that is one factor regarding saving too much, is it negatively impacting something to the point it is no longer satisfying or good. Your family, i.e. You and SO, need to decide that.



p.s. In my late 20's I felt the same way, so I didn't contribute as much to IRAs, but always max'd out my 401k. I spent as needed, but my Taxable account is pretty healthy in my late 40's now.


SO wages is our current living expenses. I donít feel like weíre missing out on anything. We live a happy life and only cut back on travel but other than this one area we quite blessed. The reason why I donít contribute to an IRA is due to wanting to have a larger taxable account.
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Old 10-29-2017, 10:28 AM   #12
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At 30 I think you are too young to be worrying about whether you will retire at 55 or 57. It's great to have the goal to retire early, but a lot of things can change over the next 20 years. Just save as much as you can without being miserable. It sounds like you are doing a great job, so keep it up!


You are definitely right with regards to me worrying about ďwhenĒ to retire. We are truly blessed with our current lifestyle being able to eat well, travel here and there, but most importantly being able to save. I will keep on trucking away...
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Old 10-29-2017, 11:37 AM   #13
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SO wages is our current living expenses. I donít feel like weíre missing out on anything. We live a happy life and only cut back on travel but other than this one area we quite blessed. The reason why I donít contribute to an IRA is due to wanting to have a larger taxable account.
I'm going to drill down a little here and ask, you are a family of 3 who live in a generally HCOL state and can live on a total of 25K a year? How about cars, rent and all the other stuff that needs to be accounted for.
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Old 10-29-2017, 11:44 AM   #14
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I agree, as long as you are happy and not feeling deprived, continue at the savings rate you can. With the power of compounding, saving as much as you can as early as you can, will provide the maximum potential savings for retirement.

Don't worry about the details 25 years in future, besides general plans and savings toward that long term goal. Instead focus on the current shorter term plans and how those work to meeting the long term goals.
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Old 10-29-2017, 12:05 PM   #15
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I'm going to drill down a little here and ask, you are a family of 3 who live in a generally HCOL state and can live on a total of 25K a year? How about cars, rent and all the other stuff that needs to be accounted for.


Yes $25k a year is more than enough with our current lifestyle. This is due to not owning a home. We live with SOís parents. We are fortunate and thankful for their generosity that they only wanted $300 for rent. We are a one car family which has another two years of $370 monthly payments with 0% APR. I take light rail to work. Our biggest expense right now is food ($700-$800) which can be drastically cut if we needed to. We eat out almost everyday. No daycare expenses for our daughter as SOís parental watches her. We take one big vacation once a year and do weekend getaway once every other month.
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Old 10-29-2017, 12:19 PM   #16
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Nice job pretty early in life! Are you familiar with SWR (safe withdrawal rate, Trinity study) concepts and retirement planners like Firecalc?? Since you seem detailed oriented and a long term planner, both of these will give you a better idea of how much is needed based on your expenses, savings rate, and historic performance of the market. I wish I had these tools when I planned for my escape in my early 30's. With luck and DW's help, I got out at 45!

In general, I think the greatest risks are one's health and marriage, official or otherwise. You are saving very well now, but this is based in good part on your health. Suggest you consider term life and disability insurance independent of employment. "Invest" time in your relationship with SO and continue on the same page, financially and otherwise.

Aside: I never had a decent pension and retiree health care. Honestly, I feel a bit jealous of all of those here who do have these goodies. On the other hand, I FIREd at 45. I didn't feel compelled to stay in a j*b that I had grown to hate just for the bennies. So, I think it's great that you have the possibility of a pension and healthcare, but 20-25 years is a long way to go and anything can happen, often not good.

Bottom line: if you are happy with your living standard, keep saving. Dig into Firecalc and learn about SWR to get a better idea of how much you need to save.

You have lots of time for your savings to grow in the market. I hope you are invested wisely. For your age, this means mainly broad market (S&P 500 or total market) index funds or ETF's, with low expense ratios. Avoid financial advisors. There 1.5% annual fees and other hidden costs can consume more than half your investment gains over 50 years (20 yrs w*rking + 30+ yrs retired!). Instead, Vanguard and Fidelity are popular here because of these low cost offerings.
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Old 10-29-2017, 01:16 PM   #17
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Yes $25k a year is more than enough with our current lifestyle. This is due to not owning a home. We live with SOís parents. We are fortunate and thankful for their generosity that they only wanted $300 for rent. We are a one car family which has another two years of $370 monthly payments with 0% APR. I take light rail to work. Our biggest expense right now is food ($700-$800) which can be drastically cut if we needed to. We eat out almost everyday. No daycare expenses for our daughter as SOís parental watches her. We take one big vacation once a year and do weekend getaway once every other month.
Well so this is more like it, but I don't understand how you say owning a home will raise your monthly expenses only 500 bucks. You get subsidized housing expenses and subsidized daycare. Projecting this number for living 30 years into the future is completely unrealistic. A fun exercise but not practical.
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Old 10-29-2017, 01:38 PM   #18
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Well so this is more like it, but I don't understand how you say owning a home will raise your monthly expenses only 500 bucks. You get subsidized housing expenses and subsidized daycare. Projecting this number for living 30 years into the future is completely unrealistic. A fun exercise but not practical.
+1

It's good your current expenses are so low, but I agree this is probably not realistic long term. Suggest that you sock away as much as possible now, even if you have to reduce you savings rate later. The money will still grow if invested wisely and cheaply; you have time.
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Old 10-29-2017, 02:22 PM   #19
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Well so this is more like it, but I don't understand how you say owning a home will raise your monthly expenses only 500 bucks. You get subsidized housing expenses and subsidized daycare. Projecting this number for living 30 years into the future is completely unrealistic. A fun exercise but not practical.


The increase is actually $1000 not $500. In my original post I said we currently live on $2k a month but expect $3k after home purchase. The current $2k has a lot of extras like eating out everyday that will be cut down as we intend to cook at home on the week days. We wonít have a car payment in 2 years. Cutting food costs and not having a car payment will free up $700 already. We plan on putting close to 40% as a down payment on our house.
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Old 10-29-2017, 02:28 PM   #20
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The increase is actually $1000 not $500. In my original post I said we currently live on $2k a month but expect $3k after home purchase. The current $2k has a lot of extras like eating out everyday that will be cut down as we intend to cook at home on the week days. We wonít have a car payment in 2 years. Cutting food costs and not having a car payment will free up $700 already. We plan on putting close to 40% as a down payment on our house.
Your original post suggested 20% down..how long do you estimate it will take you to save 40%...In a market like California it seems with rising prices you could be chasing that number for a long time
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