You probably need 25 to 30 times your current salary saved to retire??????

[runchman]

I think for the masses the message has to be communicated in short-term figures, rather than telling them they need a huge sum to retire.

How about "Save 10% of every dollar of salary you ever get, and you'll most likely be able to retire at 65".

Thinking long term and contemplating mutliple-hundred-thousand dollar balances are just too far out for many to imagine.

[teejayevans]

Originally Posted by runchman

How about "Save 10% of every dollar of salary you ever get, and you'll most likely be able to retire at 65".

I can understand why someone who plans on retiring at 65 and is in their 30s or 40s not
saving because its SOOOO far away, I'll bet most who haven't saved plan on doing it as
soon as the kids are out of college. Its human nature, just like playing lottery, because many
people are bad at math
tj

[SteveR]

Originally Posted by jIMOh

...I disagree to an extent. I do agree a person needs to save "based on expenses" and not "based on salary". BUT, and huge BUT.

salary drives spending... spending does NOT drive salary in any way shape or form. And current salary is also a reasonably successful predictor of future salary....

For the non-FIRE folks I know, most of them spend more than they make. As their salary goes up, so does their spending but not their savings. Salary drives spending only because it allows a person to spend up a limit which is their income (plus credit cards, car loans, personal loans, RV loans, boat loans, ATV loans, etc.). Spending is only casually related to income in these folks. They are limited by the size and number of loans they are allowed based on their income. At some point they have to slow down their spending as their debt load hits critical mass. Bankruptcy is the usual result....then they start all over again. "Rinse and repeat..."

These folks will HAVE to work until they hit retirement age. Company 401K plans require you invest in them and is not (always) automatic. The quickly becoming defunct pension plans (usually) did not require you do anything except sign somewhere (some companies did and still do require employee contributions.) So unless and individual actually went to the trouble to have money taken out of their paycheck it did not happen so there was no savings and no seed money available to create the nest egg. The only way these folks are going to get by is working until they have to retire or can't work any longer.

The big question is what then......SS is not going to cover all their expenses unless they radically change their spending habits and pay off their debt. I can't imagine going through life (again) with maxed out credit cards and second mortgages and telling the kids there is no money for college and that they will have to take care of mom and dad when they retire because there is not enough money for them to eat.

FIRE folks look at salary (income) and expenses in a different way. Salary (income) is the tool to drive initial savings through cafeful spending. Savings become the means to invest in the wide variety of instruments available that use money to create money. The old saying "it takes money to make money" is very true. At some point during the savings and investing cycle, the amount of salary no longer has much of an effect on the amount of the next egg since the growth of their investments in many cases, exceeds their salary. That is when you are FI and when you can look at ER.

[rmark]

"I think for the masses the message has to be communicated in short-term figures, rather than telling them they need a huge sum to retire.

How about "Save 10% of every dollar of salary you ever get, and you'll most likely be able to retire at 65".

Thinking long term and contemplating mutliple-hundred-thousand dollar balances are just too far out for many to imagine."

I agree. I think most people are overwhelmed with the dollars needed to support themselves with a comfortable standard of living, and tend to tune out the fact the starting with small amounts early is likely to lead to large amounts later on.

[Alan]

Did the "expert" mention anything about age? 20 years ago I did need 25 times my salary. Since then my income has trebled and our kids are through college.

If experts are going to talk salary rather than expenses then they should throw in other variables.

[kcowan]

All these rules of thumb are just starting points. There is no substitute for some detailed planning. We did a detailed budget at retirement and tracked actuals for three years. The total was very close but the detail was substantially different. Family situations and health can be bigger variables than planned spending.

Now we do more tax planning and do not track actuals although we have all the data.

[jIMOh]

Originally Posted by kcowan

All these rules of thumb are just starting points. There is no substitute for some detailed planning. We did a detailed budget at retirement and tracked actuals for three years. The total was very close but the detail was substantially different. Family situations and health can be bigger variables than planned spending.

Now we do more tax planning and do not track actuals although we have all the data.

YES YES YES.

I like how people snip reply to argue without seeing whole picture.

The 25X is a planning figure.

25X salary?
25X gross salary?
25X gross salary+bonuses
25X yearly spending?

will person be traveling.

25X=.04=4% SWR ... so anyone talking 4% SWR is talking 25X, it's just a matter of what the "principal amount" should be.

I need to plan 20-30 years out. I need a goal, because a goal makes it easier to measure success/failure. I base my goal on my salary/ my wife's salary (GROSS pay, without bonuses) and regular retirement age (67-68).

Realizing that we save 16% of our gross pay, FICA/medicare is about 7% more, and our mortgage is around 40% of our gross pay, I could see myself retiring on "50%" of what I've projected.

But travel expenses and healthcare expenses could be 50% of current gross pay just as easily in retirement. I need a number to plan from, and I think gross pay is the closest place to start.

If you use a different number to plan with, feel free to share.

One aspect I like to suggest with financial planning is it's like "peeling an onion" there are many layers.

The simplest plan is save x% and be debt free.
Then there is an insurance layer.
Then there is a tax layer
then there is a quality of living layer
then there is an estate planning layer
then there is an early retirement layer
then there is a child's education layer
then there is a taking care of elderly parents layer.

And I'm sure many of you have other layers to consider. FIRE means most of the layers, IMO, are accounted for.

[NinjaPigeon]

I actually think the estimate is pretty accurate. Considering that social security is a fantasy to Generation X and that medical expenses continue to skyrocket as life expectancies increase and you end up with a need for a large nest egg to retire on.

Besides, would you rather find out you saved too much or too little? If you saved too much you can always blow it by renting a villa in Italy for a decade!

[crazy connie]

A lot of americans have always lived in close proximity to where they grew up and that is frequently small town middle America. If they have modest income and modest homes, well a lot of them have the mortgage gone in their mid-50's on what they bought for 35 to 60 thousand when they were starting out. For these folks modest pensions and small savings along with SS allows a decent life.

Remember simple living can have simple costs. Many here are educated and have followed the big bucks career and many have allowed advertising to dictate lifestyle.

We all have decisions to make and I pray that each person makes the best of decisions. I really do not want to have to open my wallet for another government bailout. I prefer to leave my scraps on the table to my kids and some select charities that are my choice.