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Lifetime Earnings Question
Old 11-07-2013, 05:45 PM   #1
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Lifetime Earnings Question

OK, here is a thought to ponder. Went on the SS web site to see what my expected payments would be and got some very interesting data on my work history. I cut and pasted to an excel spread sheet to establish my lifetime earnings of 40 years. (OK, I gotta get a life) Anyway, I thought it fairly interesting. I have managed to save 57% of my lifetime earnings for ER. I think that is pretty good. I have been an aggressive saver and a mediocre investor for 30 years. Anyone else ever look at this relationship?
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Old 11-07-2013, 06:21 PM   #2
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The calculation for what we've saved is too hard, but I can give you a data point. Since I'm married, I look at DW and myself together. Since DW just retired a few months ago (I did it 12 years earlier). I can easily calculate one comparison.

The amount of our combined salaries as calculated by SS over our working lifetimes is very close to the value of our investment portfolio today. We're in our mid-60s, so that can be a data point.

Granted, this has little to do with saving, only with accumulated balances based on saving and investing, but it at least gives a meaningful number.
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Old 11-07-2013, 06:28 PM   #3
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WTG.
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Old 11-07-2013, 06:31 PM   #4
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I do not understand what you are comparing....

Did you actually SAVE 57% of your income

OR, do you now have a savings balance that is 57% of your income

BIG difference....



My current investment balance is actually higher than my lifetime earnings (salary that is, which is what SS shows)... but I do not know much of that I actually saved and how much is investment gains....
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Old 11-07-2013, 06:56 PM   #5
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I believe the book Early Retirement Extreme looks into the effects of large saving rates on the number of years to attain financial independence. There was a blog post describing this. Here is the link: The Shockingly Simple Math Behind Early Retirement | Mr. Money Mustache

It is good to share this sort of info for anyone early in their career who has the maturity/sophistication to understand that getting to financial independence early in life provides many options going forward. Gets harder to do once you have been on a high consumption lifestyle for a while.

-gauss
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Old 11-07-2013, 10:44 PM   #6
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Sorry if I was not clear in my assessment. When adding up the 40 years of income and comparing it to my current portfolio, it represents 57% of the total. As I have been saving and investing over that time, I do not know how much was saved verses the return on my savings. A bit obscure I admit.
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Old 11-07-2013, 11:07 PM   #7
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My fellow Long Islander, I have calculated every year since 1985 (when I first started working full-time) the percentage of total income I saved. Total income I defined as wage income plus investment income in my non-retirement accounts. I did not include unrealized cap gains nor did I include company match in my 401k or any gains in my retirement accounts. In the amount saved (numerator) I included all the purchases I made to my taxable accounts plus my own 401k contributions and reinvested dividends and cap gain distributions in the taxable accounts.

That being said, you have a very high percentage saved from your earnings. Using my similar measure, I have been in the 50-60% range in my best years but was lower than that in other years, particularly when I made a big purchase or paid down debt.
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Old 11-08-2013, 07:24 AM   #8
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Quote:
Originally Posted by Islandtraveler View Post
Sorry if I was not clear in my assessment. When adding up the 40 years of income and comparing it to my current portfolio, it represents 57% of the total. As I have been saving and investing over that time, I do not know how much was saved verses the return on my savings. A bit obscure I admit.

For DW and I the ratio is about 50%
after a work/investing time of about 25 years. We saved early and often. Dual Income No Kids. Each had/has an engineering career. Early FI was always the goal.

-gauss
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Old 11-08-2013, 07:40 AM   #9
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Other than curiosity, I'm not sure of the meaning of this variable, as it does not discount for time. A dollar saved in 1960 is given the same weight as one saved in 2013. In reality the purchasing power if the 1960 dollar would have been much greater, as would the effort to save it. Furthermore, the 1960 dollar would have a longer compounding interval. Two individuals with the same lifetime earnings might have very different stories. For example, A might have had a professional sports career from 1960 to 1964, earned $1,000,000, and never worked another day. B might also have earned a total of $1,000,000 over a 40 year career, starting at minimum wage and gradually increasing to a salary of $80,000 per year. In A's case, the earnings curve is skewed to the left; in B's case, it is skewed to the right.
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Old 11-08-2013, 07:43 AM   #10
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I'm pretty sure there is another thread from a couple years ago on this topic, if you want to see how people have responded in the past. Not sure exactly what to search for, nor am I motivated to search myself, but I'm pretty certain it's out there.
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Old 11-08-2013, 08:03 AM   #11
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You're not the only one to ponder, there have been several past threads on the topic.

% of Lifetime Earnings Saved based on SSA Medicare Earnings
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Old 11-08-2013, 08:45 AM   #12
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I saved little; I invested a lot!
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Old 11-08-2013, 09:22 AM   #13
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The numbers from ss may be wrong if you made over the max amount for medcare for some years and for some year the max amount for ss.I know on mine it shows the cap amount when I know I made more.

Unless you have a better place to look...I have what they use to send yearly....they stopped sending these about two years ago.
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Old 11-08-2013, 11:33 AM   #14
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Quote:
Originally Posted by RunningBum View Post
I'm pretty sure there is another thread from a couple years ago on this topic, if you want to see how people have responded in the past. Not sure exactly what to search for, nor am I motivated to search myself, but I'm pretty certain it's out there.
Yep....I started it...

% of Lifetime Earnings Saved based on SSA Medicare Earnings
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