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Wow, am I super far behind?
Old 05-12-2011, 02:48 PM   #1
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Wow, am I super far behind?

Hi, I'm new here today. Wow, after reading some of these posts, I now feel incredibly behind. I'm 45 and plan on working until 62. My husband and I have about
200K in our 401K's
80K emergency savings
Save about 1k per month for unexpected expenses and emergency
House worth about 750K, owe 490K (We live in a very high cost area and we live in a less expensive house) We pay an additional $400 per month towards principal
No other debt other than our house
We both are contributing the max 16,500 to our 401K each year
My work contributes another 7,500 to my 401K each year.
Annual income around 185K
We do not have children.
Are we so out of the park for having a semi-comfortable retirement?
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Old 05-12-2011, 03:00 PM   #2
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Ignoring capital growth, your contributions + employer match will add 680,000 to your retirement savings. And you're putting aside separate funds for those nasty financial bumps in the road. You don't say if your mortgage will be paid off in 17 years but if so that's obviously an expense you'll no longer have.
And, we don't have info on your projected expenses/lifestyle after retirement.

All that being said, it looks to me like you're definitely not "so out of the park." You'll have a hefty retirement fund to draw on, considerably more than many people. Depending on your retirement expenses, it certainly looks like you're doing just fine. [I would recommend, if it's feasible, paying off the mortgage in time for retirement. Others may disagree on this].
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Old 05-12-2011, 03:00 PM   #3
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Welcome belasea.

We would need more information to help you realize your dream. What are your expenses? Do you have any taxable savings? Are you wedded to that house or could you sell and move to a cheaper area when you retire?

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Old 05-12-2011, 03:13 PM   #4
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Welcome aboard, belasea!

It might sound like you've got a long way to go, but at your age, you're probably doing better than most. And a lot can happen in 17 years! That's a long time for your your investments to grow, especially at the rate you're adding to them.

What is the interest rate on the house? If it's low enough, I wonder if it would be more worthwhile to invest that $400 per month elsewhere? There is something to be said for a paid-off house, though!
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Old 05-12-2011, 03:28 PM   #5
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Hello.

Throw your numbers into Firecalc using your current living expenses for a rough starting point.

Let us know what it shows.
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Old 05-12-2011, 03:38 PM   #6
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Welcome to the forum.

"super far behind" - I don't think so, I know people that retired with less than 100k and depended solely on SS with a small mortgage. So it depends on your expenses in retirement, i.e. housing, medical insurance, property taxes, lifestyle, etc.

After some research if you feel u r behind, at least you have time to adjust and address.
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Old 05-12-2011, 06:07 PM   #7
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Belasea,

Some of the forum members are amazing - lucky, well compensated, and/or able to live on next to nothing. The rest do our best.

As others have pointed out, you still have time on your side. At 45 you probably/hopefully have some nice pay raises to look forward to, which could translate into more savings and mortgage paydown [Note: I'm in the get-rid-of-the-mortgage camp; others see things differently].

Also, after age 50 you can put $5K additional catch-up contributions into your 401Ks.

Something this board taught me, is to set up spreadsheets and track every dollar of income and expense. Over time, the data become very useful - you can see your spending habits, expense trends, identify spare $$ that were draining through the cracks [although it sounds like you don't let much get away from you ] etc.

Good luck!

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Quote:
Originally Posted by belasea View Post
Hi, I'm new here today. Wow, after reading some of these posts, I now feel incredibly behind. I'm 45 and plan on working until 62. My husband and I have about
200K in our 401K's
80K emergency savings
Save about 1k per month for unexpected expenses and emergency
House worth about 750K, owe 490K (We live in a very high cost area and we live in a less expensive house) We pay an additional $400 per month towards principal
No other debt other than our house
We both are contributing the max 16,500 to our 401K each year
My work contributes another 7,500 to my 401K each year.
Annual income around 185K
We do not have children.
Are we so out of the park for having a semi-comfortable retirement?
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Old 05-12-2011, 06:11 PM   #8
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Welcome. You will find a lot of practical advice on this website. Please learn how to use the search function and the calculators already discussed.
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Old 05-12-2011, 07:46 PM   #9
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I wouldn't call it far behind, it takes a lot more effort in order to be able to spend 3 times or more than the average household does. It would take most people, including on this board, most of their non-elderly life to maintain $100k+ in spending every year, both while working and in retirement. It is extremely rare for someone to retire early with $3M+ in their 50s or even 40s, while living on a six figure budget. Just to have the option their household income would need to be in the top 0.5% (we are talking $300k+/year incomes), and the majority of those would not wish to retire that early.

It all depends on the level of spending a person prefers. Some are fine living very frugally, others have hobbies and tastes that are just more expensive, and they are willing to put in the extra years of work to enjoy those hobbies/interests.
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Old 05-12-2011, 11:06 PM   #10
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Thank you very much for the feedback. I see that I need to learn how to use the calculators. I had trouble using FireCalc. I will do more research on the website.
We have a fixed 30 year loan at 4.75%.
I'm not sure what DblDoc means by taxable savings? Our 401(k) will be taxable when we withdraw it, our emergency savings was funded with our after tax earnings.
We're not wedded to the house, but we would like to stay in our current city and we're already in a tiny place.
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Old 05-13-2011, 12:00 AM   #11
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Yes.

You need to create a financial plan.
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Old 05-13-2011, 09:27 AM   #12
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Quote:
Originally Posted by plex View Post
I wouldn't call it far behind, it takes a lot more effort in order to be able to spend 3 times or more than the average household does. It would take most people, including on this board, most of their non-elderly life to maintain $100k+ in spending every year, both while working and in retirement. It is extremely rare for someone to retire early with $3M+ in their 50s or even 40s, while living on a six figure budget. Just to have the option their household income would need to be in the top 0.5% (we are talking $300k+/year incomes), and the majority of those would not wish to retire that early.

It all depends on the level of spending a person prefers. Some are fine living very frugally, others have hobbies and tastes that are just more expensive, and they are willing to put in the extra years of work to enjoy those hobbies/interests.
I guess I am extremely rare then. Retired at 55 with $3.5 MM with a wife who has a very expensive horse hobby that consumes about $25K of our $140K annual budget. And I never earned $300K a year, topped out at about $250K. But I maxed out my 401(k) every year from my first job, and IRA's, lucked out on employee stock options (included in $250K total comp above), and "doubled down" and rebalanced into equities in Nov 2008.

Just because I had a high income and a six figure expense budget doesn't mean I pissed away everything and didn't save. In fact I would argue that a high earner saving 40% of his gross pay is just as impressive (if not more so due to progressive tax system) than a $50K a year guy saving 40% of his gross pay. It is all relative.

I also disagree that the high earners do not wish to retire early. Sure it is true for some but not all. You are stereotyping.
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Old 05-13-2011, 03:10 PM   #13
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Quote:
Originally Posted by plex View Post
I wouldn't call it far behind, it takes a lot more effort in order to be able to spend 3 times or more than the average household does. It would take most people, including on this board, most of their non-elderly life to maintain $100k+ in spending every year, both while working and in retirement.
I think so much of it depends upon where you live. If the national household only earns 33k per year, they must live in a location with a much lower cost of living. The average rent here is 24K annual alone. However, earnings are much higher here too. So, I think there are a lot of variables. It's not hard to spend 100K in earnings after paying taxes, housing and saving for retirement, house repairs, etc.
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Old 05-13-2011, 03:19 PM   #14
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In fact I would argue that a high earner saving 40% of his gross pay is just as impressive (if not more so due to progressive tax system) than a $50K a year guy saving 40% of his gross pay. It is all relative.
I would disagree on that. A lot depends on where you live. Here in the Midwest, folks are a LOT more frugal than other parts of the country. A $50K a year guy saving $20K is very impressive, and my area, not as uncommon as you think. That $50K guy also most likely has no deferred comp or stock options to look forward to. I know execs and have a few as clients that amassed LARGE nest eggs in deferred comp and stock options. So while it looks on paper like they are megasavers, in reality they are not, YMMV
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Old 05-13-2011, 04:36 PM   #15
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I know execs and have a few as clients that amassed LARGE nest eggs in deferred comp and stock options. So while it looks on paper like they are megasavers, in reality they are not, YMMV
I guess I don't understand your point. If I deferred my bonus while my peers took theirs in cash and blew it on a new BMW every 3 years, why don't I qualify as a megasaver? No different than Joe 6 pack having 40% of HIS paycheck go straight into the 401(k) plan. Oh, except he can roll his over into an IRA and I can't because mine is non qualified.

Yes a large part of my retirement savings came from deferred bonus and stock options. But hey, it was part of my total comp - and I didn't spend it but saved it.
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Old 05-13-2011, 05:13 PM   #16
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I tend to disagree.

I found that my income increases up to about $50k/year made a big difference in my real quality of life.

It meant eating better food, driving a dependable car, and living in a non-dive.

As my income rose above that, though, increasing my expenses rarely seemed worth it to me.

Examples--

Vodka-- going from Phillips-->Smirnoff-->Stoli's were real steps up in quality that were worth paying for as I got more money. Once I got to Stoli's though, I was content. There just wasn't any bang for the buck in buying "better".

Going from junk cars to a car that I was sure would start everyday made a big difference in my life. Spending more to upgrade from "solid" to "fancy" just didn't do much for me.

At 50k, I was able to go out pretty much as often as I wanted to the places I like to go. Spending more was possible, but fancy restarants really don't do much more for me than Timber Lodge or Red Lobster.

When my brother saves money at his $30k/year job, I'm impressed, because that money can make a noticeable difference in his quality of life.

For someone making 100k, its less impressive because it mostly just means not buying a lot of crap no one really needs.

Note that this assumes a single person living in a Midwest area, as that is what my experience was with.

Now that I'm married and have my first child, I understand how people can get sucked into a lot of excessive spending if they are not careful.


Quote:
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In fact I would argue that a high earner saving 40% of his gross pay is just as impressive (if not more so due to progressive tax system) than a $50K a year guy saving 40% of his gross pay. It is all relative.
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Old 05-13-2011, 07:10 PM   #17
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Living in a very expensive area and traveling are the two most common and highest expenses that most people run into, with cars being the third (boating and horses are not nearly so widespread, but very expensive of course). Doing whatever you enjoy is great, but some things require a large sustainable budget to enjoy for a long time.

I would definitely not call spending more money pissing it away, different things make different people happy, and it really doesn't matter a single bit whether they are expensive or not, as long as it can be fit within a reasonable budget. That was the point I was trying to make originally, though it may not have come across as clearly.


But, I don't agree 40% of 50K is easier to save than 40% of 100k, assuming they live in the same area at all. If you are living in a more expensive area, you should expect a similarly higher pay-rate. Determining how expensive an area is includes local and state taxes, not just food, housing, and transportation. The only thing (aside from work expenses) that increases directly with income is federal taxes, and the difference is actually marginal in real terms. While someone making $50K may be taxed 10% in real terms, a person making $100k is taxed something like 18% in real terms. That is just an 8% difference (these percentages are off the cuff, but are probably close). Let us assume the basic living expenses for a person in that area is 20k, and the local and state tax rates are 10%. The result would be, for the 100k person, they would have $52K to save, and the 50k person would have $20k to save.

That means the 50k person could save, at most, 40% if he saved every single bit of his extra income, and the 100k person could save 52% if he saved every single bit of his extra income. That doesn't even get into 401k's, which help a 100k person much more than a 50k person. Even on a percent basis, someone with a higher income can save more. Why did it happen this way? Because the basic expenses were all regressive, and consume a larger percentage of income (40% vs 20%), than the progressive effect of federal taxes (10% vs 18%).

Is a 100k person always able to save more than a 50k person? No, because the savings rate depends on the spending rate, and there are some (absurd, because the local/medicare/SS tax rates make this scenario impossible) examples where the 100k person is saving a lower percentage of their income than a 50k person. E.g. Let us say the basic living expenses are $5k in area. The 100k person would end up being only able to save 77% of his income, and the 50k person would end up being able to save 80%.

Another example in the opposite direction (and not absurd, since some areas are actually like this), if the basic expenses in area are very high, say $40k, the 100k person will be able to save 42% of their income, while the 50k person will only be able to save a meager 20%. I am thinking places like Manhattan, Orange County, and SV, actually it may be even worse than this in those areas.
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