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Savings Rate for Late Starter
Old 01-09-2015, 08:51 AM   #1
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Savings Rate for Late Starter

I have a friend who has recently come to the US. Since I've know him I've been promoting LBYM which he is doing.

He's a little depressed because he did not get here and start until his early 40's. I'd like to encourage him a bit. Can anyone suggest a good reference for savings rate or amount vs years to retirement?

I've done some googling and have not found something I trust. Can you recommend something that is pretty reliable?

Thanks in advance, and Happy Friday!!
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Old 01-09-2015, 10:17 AM   #2
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I think the short answer would be to save as much as possible without hampering one's chosen lifestyle. No one ever complains about saving too much for retirement. I also started saving for retirement later in life, mid 40's IIRC. I had 2 kids approaching college age that I was putting money away for as well as a mortgage. I participated in my company's 401k as well as maxing out Roth IRA contributions each year. As the kids completed college and the house got paid off, I increased the amount put into the 401k. The main thing is to start saving now.
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Old 01-09-2015, 11:20 AM   #3
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This one is nice:
https://networthify.com/calculator/e...thdrawalRate=4
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Old 01-09-2015, 12:29 PM   #4
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he needs to be deferring 18K into a 401k, if available
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Old 01-09-2015, 12:30 PM   #5
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and he can try getting a job that has a nice DB plan


he's kinda SOL saving that late - powerball is over 160M
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Old 01-09-2015, 12:39 PM   #6
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Without knowing retirement expenses, projected income or retirement age/duration - I don't know how we'd provide a meaningful savings rate. But these might help:

Withdrawal rates, age & probability of success

"25X Spending" variations

Your friend can calculate what savings rates might be needed with the tables in either post above, applying the unknowns mentioned in the first sentence above. Let us know if you have questions...
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Old 01-09-2015, 12:41 PM   #7
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Forget about savings rate. Max out the 401K. Max out the HSA. Do a Roth/Regular IRA. Then save more.
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Old 01-09-2015, 12:46 PM   #8
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Quote:
Originally Posted by Senator View Post
Forget about savings rate. Max out the 401K. Max out the HSA. Do a Roth/Regular IRA. Then save more.
agreed
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Old 01-09-2015, 12:48 PM   #9
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I was over 50 when I started so I took a five figure job with the federal government for the tiny pension and health care. Then I lived on 1/5 to 1/4 of my pay, and socked the rest away in maxing out the TSP while paying off my low cost house in four years, and then taxable savings on top of that. It's not rocket science once you get started in facing the reality of what you need to do. I retired at age 61 and 1/2.

The advantage of cutting back on spending, is that you get used to it and by the time you retire, it seems just fine. So it's not just what you save, but the acceptance of that lifestyle that helps a lot IMO.

I think the biggest hurdle in the process is accepting your own complete responsibility for your retirement and planning. Nobody else is going to help and that can be pretty scary at any age. Then accepting a level of spending that you can sustain in retirement, and immediately start living on that (or less) while saving for retirement. He needs to pick the spending level according to what he projects to save, rather than saving to meet a particular spending level. It's all just math.
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Old 01-09-2015, 01:17 PM   #10
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Quote:
Originally Posted by W2R View Post
I was over 50 when I started so I took a five figure job with the federal government for the tiny pension and health care. Then I lived on 1/5 to 1/4 of my pay, and socked the rest away in maxing out the TSP while paying off my low cost house in four years, and then taxable savings on top of that. It's not rocket science once you get started in facing the reality of what you need to do. I retired at age 61 and 1/2.

The advantage of cutting back on spending, is that you get used to it and by the time you retire, it seems just fine. So it's not just what you save, but the acceptance of that lifestyle that helps a lot IMO.

I think the biggest hurdle in the process is accepting your own complete responsibility for your retirement and planning. Nobody else is going to help and that can be pretty scary at any age. Then accepting a level of spending that you can sustain in retirement, and immediately start living on that (or less) while saving for retirement. He needs to pick the spending level according to what he projects to save, rather than saving to meet a particular spending level. It's all just math.
This -
A good friend/former boss was a single mom. Her ex basically walked out with all their assets leaving her with 1yo twins and no job and some debt. From that point till her twins graduated college she didn't save since she was busy getting them up and launched. At age 52, when they graduated she realized she had NO assets for retirement. She retired quite nicely at age 65 (not early but given her situation at 52, pretty impressive.) She has a paid for townhouse, decent 401k, SS, and has enough money to visit her west coast kids (she's back east) a few times a year.

I worked for her when she was really hitting the ground in saving for retirement. She had just bought her townhouse and was maxing extra payments on it, she was maxing her 401k, she was kissing the owners' butts to max out her bonuses - which went straight to savings... I was impressed with her dedication.
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