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How do we stack up?
Old 03-19-2004, 11:13 AM   #1
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How do we stack up?

Hope everyone is well! *I made my first and only post last June in the 'Hi, I am...' forum and titled it 'Young Dreamer'. *One month after my post, there was a new 'Young Dreamers' forum. *Does this make me famous?

Anyway, although I hardley ever post, I am reading in here almost every day and enjoy all the posts but I am especially interested in the Young Dreamers forum because of my age. *

There's one thing that I have yet to figure out and that is how my wife and I are doing when it comes to retirement savings compared to others who are around our age. *

I'm 30, she's 28 and we have just about $90,000 saved in our 401k's. *I have no idea if this is above average, below average or just about average. *I haven't been able to find anything that provides what the average American family has saved for retirement at various points in their life. *Does anyone know if figures like these exist?

Many thanks!
Daddy


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Re: How do we stack up?
Old 03-19-2004, 11:24 AM   #2
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Re: How do we stack up?

There are in fact figures, and they're dismal. Most americans arrive at 50 without any meaningful retirement savings aside from the company pension plan and hopes for SS.

At 90k with both of you in your 20's (I know you're 30, but I didnt acknowledge entry to my 30s until about a year ago at 42) you are probably in the top 1% of the top 1%.

Now keep going.
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Re: How do we stack up?
Old 03-19-2004, 11:29 AM   #3
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Re: How do we stack up?

I don't know of any stats, but I can say that you're way ahead of where I was when I was 30.

Here's some figures for you :
90,000 at age 30, save $100 / month for 25 more years
at a return of 6.5% will give you $532,073 by age 55.

If you don't put any more money into the 401k,
ie. 90,000 at age 30, save $0 , return of 6.5%,
you'll have $456990 at age 55.

You're doing just fine. Keep it up.
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Re: How do we stack up?
Old 03-19-2004, 11:51 AM   #4
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Re: How do we stack up?

Ok, here are some numbers from various studies. As with most studies, the results are entirely suspect, but as ballparks they should be ok.

% of americans who have saved anything significant for retirement: roughly 2/3. This number is rising year on year.

% of americans who have calculated how much they will need for retirement: about 37%. This number was low before the stock market run-up, moved up above 50% until the market peaked in 2000, and has since fallen back.

% who feel they will have adequate funds to retire on: 49%

Average amount they feel will be adequate: $26,256. Percent of those that are right: Less than 10%. All on the upper part of the average calculation.

Average savings per american per year: $2388

Average amount saved annually by americans age 25-34: $1761

Percent who have saved more than 100k: 17%

Percent covered by any employer retirement plan: 49%

44% of americans have balances under $10k.
14% have 10k-20k
46% have under 50k
15% have nothing saved
Average amount saved by Americans in their mid 50's: $71,250

With social security looking doubtful (if not the presence, at least the amount), and medical advances moving to increase our expiration dates forward, the future looks to be full of old folks with no money. I wonder if this will crush inflation due to the fact that the mass majority of people wont be able to afford higher prices, or if we'll simply turn into a country of poverty stricken elderly...
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Re: How do we stack up?
Old 03-19-2004, 11:56 AM   #5
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Re: How do we stack up?

Hey Daddy !
Sounds like you are doing great ! I'm 33 (soon to be 34, ouch !) and I have about $75K in my 401k plans. I also have some serious savings in taxable plans as well, close to double to what I have in 401k plans. If you want to retire early, you need to save over and above the 401k plans, if you are looking to retire on time, you are doing better than pretty much everyone else !

Define your dream and go for it. Good luck, and I hope this helps !

Pan
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Re: How do we stack up?
Old 03-19-2004, 12:00 PM   #6
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Re: How do we stack up?

Daddy, at 30 I had zero. My wife and I started at age 37 & 38 respectively. I'm 51 now and we have enough to retire very soon. At 30, the idea of retiring early had not even occurred to me! You are far, far ahead of where I was at your age.
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Re: How do we stack up?
Old 03-19-2004, 12:14 PM   #7
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Re: How do we stack up?

I'll be 34 in a couple of weeks. If you have no other significant assests like equity in a house then together you are well ahead of where I was at 30; divide the loot between you and we're roughly even I think.

I think we're way ahead of the average American 30-somethings, but now that I'm 3 months from my medium-term goal of being CC-debt free I'm starting to play with numbers a bit and am not sure if I'll be able to retire very early if I stick with the assumption that I'll need $1 million to retire comfortably.

I may be able to retire on less or save more, though. I haven't really gotten into the calculations since up until recently being debt-free and saving upwards of half my income seemed a long way into the future. (Now I'm pretty sure that by Jan 1 2005 I'll be 100% debt free, have a few months of living expenses in cash and nearly half of my salary going to savings in addition to my existing nest egg.)
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Re: How do we stack up?
Old 03-19-2004, 12:15 PM   #8
 
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Re: How do we stack up?

Daddy,

Very similar to Bob_Smith here. I'm 52 and ER'd 3 years ago. At age 30, I had a Negative net worth. Credit Card Debt of around 10K. Got serious at age 30 though.

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Re:  Get a library copy of "Millionaire Next Door"
Old 03-19-2004, 02:14 PM   #9
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Re:  Get a library copy of "Millionaire Next Door"

Page 13 in chapter one of the 1996 hardcopy edition (it was my birthday present, OK?!) says "Multiply your age times your realized pretax annual household income from all sources (except inheritances). Divide by 10. This, less any inherited wealth, is what your net worth should be."

On the next page Stanley says "To be well positioned in the 'prodigious accumulator of wealth' category, you should be worth twice the level of wealth expected."

Chapter two is titled "Frugal Frugal Frugal".
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Re: How do we stack up?
Old 03-19-2004, 02:50 PM   #10
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Re: How do we stack up?

Millionaire next door was an interesting book if nothing else for the success vs demographics data.

I should say the first half was interesting because it frankly got a bit repetitive. By page 100 I just said "ok, I get it...save as much as you can, live a simple life and dont waste money...anything else in here?" In scanning the rest of the book it didnt appear to be so.

A great book to read if you're 30 and either havent started accumulating net worth or if you're still living the high life. I think if you're 20, you either wont get it or wont want to get it. If you're 40 and still have no net worth you're getting a little late in the game.
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Re: How do we stack up?
Old 03-19-2004, 04:46 PM   #11
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Re: How do we stack up?

We're a married couple, ages 29 and 31, and we've salted away about $240K so far. ER/financial independence has always been on our minds, so we've saved something of what we earned even from the beginning, and purposefully kept debt loads (student loans only, no consumer debt) as low as possible.
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Re: How do we stack up?
Old 03-19-2004, 04:51 PM   #12
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Re: How do we stack up?

Thank you all for your responses!!!

Panhead, I do have a question for you. You mentioned that you have a substantial amount of money in taxable plans. For my own clarification, is this money in a Roth IRA or a regular brokerage account?

I want to make sure I understand what you mean because I have a substantial amount of money in a brokerage account and I haven't been funding a Roth IRA like I should be. If I start making the 100% contribution to a Roth IRA, I can still withdraw the principal anytime with no penalty, right? So it would seem that it's a no-brainer to first max out the Roth IRA before contributing to my brokerage account as I would have access to the principal no matter what. Do I have this right?
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Re: How do we stack up?
Old 03-19-2004, 05:42 PM   #13
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Re: How do we stack up?

The census publishes a comprehensive review of net worth every few years. I beleive the latest is here:

http://www.census.gov/prod/2003pubs/p70-88.pdf

The average net worth of households where the "householder" was less than 35: $7,240.
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Re: How do we stack up?
Old 03-19-2004, 06:23 PM   #14
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Re: How do we stack up?

Go to the IRS web site and read the publication on Roths. It is possible to withdraw before "official" retirement but its got to follow some strict guidelines.

But yes, you have it right...max out any Roths before investing in after tax investment vehicles. Its a no-brainer...in a Roth your money grows and can be withdrawn tax free later. In an after tax 'taxable' account, your growth is taxed at capital gains and dividend rates...both a lot higher than zero

Again, read the IRS pub to see if you qualify to contribute, and how much.
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Re:  Get a library copy of "Millionaire Next Door"
Old 03-19-2004, 09:48 PM   #15
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Re:  Get a library copy of "Millionaire Next Door"

You're doing a good job.

Here's some six year old data that will give you an idea. Since 1998 we've seen the stock market go way up and come back down and go a bit up again, and housing prices just kept going up so keep this in mind.

http://www.dallasnews.com/s/dws/bus/...line/score.htm

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Net Worth
Old 03-19-2004, 11:28 PM   #16
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Net Worth

Is there a standard for calculating net worth? Do the guidelines and rankings posted here follow the same standards for net worth calculation?

Subtracting today's liabilities from today's assest seems relatively straightforward. But I have a vested interest in a defined benefit pension plan and Social Security (well, maybe, maybe not :-/ ) that have no immediate value or any value if I die tonight.

I read somewhere that you should add 20 years' worth of your future defined benefits and add that to your net worth, but I'm not sure if that's actually useful for anything except possibly comparing notes with others.

Also, some people like to add their car, golf clubs and unsharpened pencils to their net worth, and some don't. The things I've read considers these all consumables, though.

When I posted earlier I was only counting my account balances minus my credit balances. (I don't own any property and therefore have no equity.) But if I get to add in 20 years of SS and pension my net worth doubles or triples or more.

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Re: How do we stack up?
Old 03-20-2004, 02:42 AM   #17
 
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Re: How do we stack up?

Well, for years I compulsively figured my net worth
whenever I was killing time, sometimes several times a
day. Cocktail napkins, old envelopes......nothing was
safe from my financial scratching. Anyway, I never added in any future income stream, mainly because
to me net worth is a snapshot in time. As you correctly point out, some stuff you never see if you die first.
However, I did include "consumables" under the
heading "personal property" because if you have a
pencil (even a stubby one) you don't have to buy a
new one for a while and so the cash is in the bank
(or your pocket, or somewhere). Once spent, the cash becomes
pencil value, and is still part of your net worth until it's
worn out. Of course, you could depreciate pencils, paper
clips and dryer sheets. There are several IRS
approved methods to accomplish this

JOhn Galt
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Re: How do we stack up?
Old 03-20-2004, 02:53 AM   #18
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Re: How do we stack up?

Good job !!! Good start...

My plan is as follows

1. Contribute to 401k until equal company match
2. Max out Roth IRA (Alas, due to an expatriate assignment I am ineligible for Roth in 2003 and 2004)
3. Finish Max of 401k
4. Contribute to emergency fund monthly until it reaches $10K
5. Contribute monthly to 529 for one child
6. Pay off CC debt (already refinanced at ultra-low rates) - WILL BE COMPLETE IN TWO WEEKS !!!

After that, I plan to start pouring money into after tax investment vehicles...
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Re: Net Worth
Old 03-20-2004, 08:16 AM   #19
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Re: Net Worth

Quote:
Is there a standard for calculating net worth? Do the guidelines and rankings posted here follow the same standards for net worth calculation? . . .
BMJ,

I think the short answer to your two questions is "no" and "no".

Because FIRECALC makes it easy to plan future withdrawals including social security and pensions, you don't even need to find a way to evaluate the effect of these benefits on your current net worth. Just plug anticipated benefit levels into the program and let it run. Other simulators and programs I've used are not all so friendly. So I have occasionally tried to evaluate a current net worth including pensions and social security. You can find various annuity calculators on the internet to do this, but the range of answers you can get based on the assumptions you have to make is very wide. From a planning perspective, it makes sense to include these benefits in your net worth unless you believe that your company pension is likely to default or that social security will go belly up.
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Re: Net Worth
Old 03-20-2004, 12:33 PM   #20
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Re: Net Worth

Quote:
Is there a standard for calculating net worth? Do the guidelines and rankings posted here follow the same standards for net worth calculation?
I'm sure everyone does it differently. Here's what I do:

-- I don't count any personal possesions (cars, furniture, etc.).
-- I don't count what I paid for long term care insurance, although it could very well be worth something if either my wife or I need to use it.
-- I don't count Social Security because almost everyone will receive it, so it isn't much use for comparison purposes.
-- I do count the value of my pension. I'm almost 52 and will collect for life at 55 (and my wife will collect 100% if I die before her). It would cost about $300,000 to buy an annuity with the payout my pension will provide. If I die before 55, my wife will receive roughly half that in a lump sum death benefit provided by the pension - plus I have life insurance to cover the balance (which I will drop at age 55). Since either the pension itself, or the value of the pension is virtually assured, I count it.
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