Am I saving too much?

[growerVon]

SO wages is our current living expenses. I don’t feel like we’re missing out on anything. We live a happy life and only cut back on travel but other than this one area we quite blessed. The reason why I don’t contribute to an IRA is due to wanting to have a larger taxable account.

Just a thought, you may want to pay expenses out of both of your wages so some of your SO's wages can go into their 401k. That's one optimization I see you could make.

 

[exnavynuke]

If your family isn't lamenting the lack of monetary ability to do XYZ that you wish you could be doing, then I'd say you aren't saving too much.

Are you saving "more" than you "need to" for your current plan though? I'd say quite likely. I put the following into FIRECalc:

Spending $54,000/year ($4.5k/month).
Current savings $0.
65 years (20 years pre-retirement to take you to age 50, 45 years in retirement to get you to age 95).

Retiring in 2037 (age 50 for you)
Adding $48k/year until then (your $36k/year current plus your planned $12k/year additional moving forward).
The results came back with:

FIRECalc looked at the 82 possible 65 year periods in the available data, starting with a portfolio of $0 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 82 cycles. The lowest and highest portfolio balance at the end of your retirement was $0 to $18,481,135, with an average at the end of $7,991,321. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 65 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.

Now, that doesn't include your pension, or SS (if you or your husband would have it), or your current investment balances (presumably greater than zero), etc. and to get that down to a 95% success rate I still had to pump up the spending by another $10k/year.

So, I wouldn't say you're saving too much, but I would say your current stated goals and spending support a lower savings rate than you're saying you'll have moving forward, especially assuming your current balances are likely greater than the $0 I was using to get those numbers..

 

[Silverton34]

I don't mean to rain on your parade but most long term calculations I have read indicate a pension from CA twenty years from now is highly unlikely. I hope it all works out but as you can imagine, 70% pension after 25-30 years plus free healthcare to a 55 year old who might live another 45 years is *****-pocus at best. I hope the prognosticators are wrong but I'm not sure I would bet my retirement financial future on it.

 

[rodi]

A few thoughts -

- First - great job at saving, living frugally, setting up a plan.

- Second - 20% is a good healthy downpayment. And depending on where in California, it can be an achievable goal. Are you near the capital? That's a lot more affordable than 80 miles west of the capital.

- Money is fungible... but retirement savings accounts aren't so much... You are putting your salary largely to savings in accounts that your SO may have not claim to... And he is putting up 100% of your joint living expenses. That doesn't seem fair. But - since money is fungible... he could contribute to his 401k - and you could kick in the equivalent amount towards living expenses.

This last bit is based on the fact that you use the term SO... so not married? If you're married then it's less of a worry because assets (savings) acquired during the marriage are community property - including retirement assets.

 

[rodi]

I don't mean to rain on your parade but most long term calculations I have read indicate a pension from CA twenty years from now is highly unlikely. I hope it all works out but as you can imagine, 70% pension after 25-30 years plus free healthcare to a 55 year old who might live another 45 years is *****-pocus at best. I hope the prognosticators are wrong but I'm not sure I would bet my retirement financial future on it.

I don't disagree that pensions will change for state employees... but current employees are probably in better shape than new employees. When San Diego reformed the pension they kept current employees on the pension, and put new employees on a tax preferred savings with match - but no pension. I suspect any pension reform at the state level will be similar.

 

[dvalley]

You are putting your salary largely to savings in accounts that your SO may have not claim to... And he is putting up 100% of your joint living expenses. That doesn't seem fair. But - since money is fungible... he could contribute to his 401k - and you could kick in the equivalent amount towards living expenses.

I thought I was the only one that noticed this but since there's one other person posting here who gets gender biased pretty easily I didn't want to say anything.

 

[vtd0918]

A few thoughts -



- First - great job at saving, living frugally, setting up a plan.



- Second - 20% is a good healthy downpayment. And depending on where in California, it can be an achievable goal. Are you near the capital? That's a lot more affordable than 80 miles west of the capital.



- Money is fungible... but retirement savings accounts aren't so much... You are putting your salary largely to savings in accounts that your SO may have not claim to... And he is putting up 100% of your joint living expenses. That doesn't seem fair. But - since money is fungible... he could contribute to his 401k - and you could kick in the equivalent amount towards living expenses.



This last bit is based on the fact that you use the term SO... so not married? If you're married then it's less of a worry because assets (savings) acquired during the marriage are community property - including retirement assets.

Yes we live in the heart of the capitol. Prices have been creeping up steadily here and I have heard many around me say rent is getting too expensive. We will eventually get married. We have agreed upon this type of set-up as it works for us in terms of savings will be done by me and living expenses will be paid with his check. We’ve been together for 14 years and still have separate bank accounts. When we lived on our own years ago when I earned a lot less than now I was the one who paid everything mostly but not to say this was the reason for of current agreement. We just think it’s easier to do this.

 

[vtd0918]

I don't disagree that pensions will change for state employees... but current employees are probably in better shape than new employees. When San Diego reformed the pension they kept current employees on the pension, and put new employees on a tax preferred savings with match - but no pension. I suspect any pension reform at the state level will be similar.

I agree with Rodi. I’m with CalPers. I believe for anyone who was hired after 2013 their retirement age is 62 years old. I was hired back in 2007 and mine is 2% at 55 but the earliest I can go is 50 with a reduced take home percentage. If changes do occur in the future at least all the money that was taken out of our pay for the pension will be given back to us. I guess my savings towards the 457/401 will save us from not having a possible pension when we retire.

 

[vtd0918]

I thought I was the only one that noticed this but since there's one other person posting here who gets gender biased pretty easily I didn't want to say anything.

I guess I never really thought about others seeing it in this way. SO always tells me I’m the smart one when it comes to our finances so he agrees with everything and never disagrees to our plans.

 

[vtd0918]

If your family isn't lamenting the lack of monetary ability to do XYZ that you wish you could be doing, then I'd say you aren't saving too much.

Are you saving "more" than you "need to" for your current plan though? I'd say quite likely. I put the following into FIRECalc:

Spending $54,000/year ($4.5k/month).
Current savings $0.
65 years (20 years pre-retirement to take you to age 50, 45 years in retirement to get you to age 95).

Retiring in 2037 (age 50 for you)
Adding $48k/year until then (your $36k/year current plus your planned $12k/year additional moving forward).
The results came back with:



Now, that doesn't include your pension, or SS (if you or your husband would have it), or your current investment balances (presumably greater than zero), etc. and to get that down to a 95% success rate I still had to pump up the spending by another $10k/year.

So, I wouldn't say you're saving too much, but I would say your current stated goals and spending support a lower savings rate than you're saying you'll have moving forward, especially assuming your current balances are likely greater than the $0 I was using to get those numbers..

Thank you for putting our numbers into this perspective. I guess it’s our safety net to save more now since we can than later on when unexpected expenses comes up or even just life gets more expensive with our growing daughter and if we add another little one in the future.

 

[vtd0918]

I don't mean to rain on your parade but most long term calculations I have read indicate a pension from CA twenty years from now is highly unlikely. I hope it all works out but as you can imagine, 70% pension after 25-30 years plus free healthcare to a 55 year old who might live another 45 years is *****-pocus at best. I hope the prognosticators are wrong but I'm not sure I would bet my retirement financial future on it.

In this case savings to my 457/401 and taxable account would alleviate this worry in the future if there’s any chance I won’t see a pension in 25 years.

 

[EvrClrx311]

Some perspective

I'm mid-thirties, and also LOVE the travel. It's one thing that adds so much value to my life, in fact. I didn't realize until I turned 30 just how much I missed it (I grew up with a family that often did road trips everywhere... lots of hiking, etc...). Seeing and experiencing the world... new things. In my 20's my "fun" would revolve around going out to eat with friends and getting dragged along to parties, because in the suburbs... what else would someone do with their weekends? And I think a part of me yearned to break from that cycle manifest itself in FIRE planning. So I've always been good there, with the savings.

Something changed in my situation a couple years ago that allowed me to revisit my finances. I decided to start spending a percentage of my income a year on travel and "adventure" as I'd put it - every 3 months or so I pick a new city to explore and off I go for a long weekend. I bought a camera, and took up photography as a means to explore the world and master a new skill capturing what I saw. When I look at my FIRE plans, I know this spending has pushed my FIRE date back a couple years, but I would never give it up. It's enriched my life... and pushing this kind of thing off till 50-53 isn't worth it to me. It's an area of my budget I'm happy to factor in now.

I think one of the risks future oriented mindsets like ours and those on this forum can miss is that the journey is what's important... more so than the destination. Make sure you plan your path in a way that also accounts your ability to feel you're living, and not just surviving towards a goal. On that note, I'd recommend keeping the travel, though strict look at t he budget might say otherwise. Sometimes there are variables at play that can't be put to logic and numbers. Be careful over planning, because you may miss them I know I once was.

 

[Doc0]

Every dollar you save today will become $8 when your 60. Every dollar you save when you're 50 will be $2

 

[vtd0918]

Thanks everyone for their kind suggestions and advice. I️ am so grateful for everyone on this forum who have similar end goal to FIRE. I️ appreciate all the posts and replies since I️ know it takes time to type all of it out. My journey is only in its early stages and I️ can’t wait to post more updates as I strive towards FI.

 

[gayl]

I'm going to drill down a little here and ask, you are a family of 3 who live in a generally HCOL state and can live on a total of 25K a year? How about cars, rent and all the other stuff that needs to be accounted for.

California isn't that HCOL if not renting and they only pay $300m rent. FWIW: my total utilities run less than 200 a month in California and food's cheap here. So take out housing and it's not HCOL