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Lifetime Earnings Question
11-07-2013, 04:45 PM
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#1
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Recycles dryer sheets
Join Date: Apr 2012
Location: Long Island
Posts: 141
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Lifetime Earnings Question
OK, here is a thought to ponder. Went on the SS web site to see what my expected payments would be and got some very interesting data on my work history. I cut and pasted to an excel spread sheet to establish my lifetime earnings of 40 years. (OK, I gotta get a life) Anyway, I thought it fairly interesting. I have managed to save 57% of my lifetime earnings for ER. I think that is pretty good. I have been an aggressive saver and a mediocre investor for 30 years. Anyone else ever look at this relationship?
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11-07-2013, 05:21 PM
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#2
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,198
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The calculation for what we've saved is too hard, but I can give you a data point. Since I'm married, I look at DW and myself together. Since DW just retired a few months ago (I did it 12 years earlier). I can easily calculate one comparison.
The amount of our combined salaries as calculated by SS over our working lifetimes is very close to the value of our investment portfolio today. We're in our mid-60s, so that can be a data point.
Granted, this has little to do with saving, only with accumulated balances based on saving and investing, but it at least gives a meaningful number.
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11-07-2013, 05:28 PM
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#3
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Moderator
Join Date: Apr 2012
Location: San Diego
Posts: 14,169
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WTG.
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11-07-2013, 05:31 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2005
Posts: 17,203
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I do not understand what you are comparing....
Did you actually SAVE 57% of your income
OR, do you now have a savings balance that is 57% of your income
BIG difference....
My current investment balance is actually higher than my lifetime earnings (salary that is, which is what SS shows)... but I do not know much of that I actually saved and how much is investment gains....
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11-07-2013, 05:56 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Aug 2011
Posts: 3,594
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I believe the book Early Retirement Extreme looks into the effects of large saving rates on the number of years to attain financial independence. There was a blog post describing this. Here is the link: The Shockingly Simple Math Behind Early Retirement | Mr. Money Mustache
It is good to share this sort of info for anyone early in their career who has the maturity/sophistication to understand that getting to financial independence early in life provides many options going forward. Gets harder to do once you have been on a high consumption lifestyle for a while.
-gauss
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11-07-2013, 09:44 PM
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#6
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Recycles dryer sheets
Join Date: Apr 2012
Location: Long Island
Posts: 141
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Sorry if I was not clear in my assessment. When adding up the 40 years of income and comparing it to my current portfolio, it represents 57% of the total. As I have been saving and investing over that time, I do not know how much was saved verses the return on my savings. A bit obscure I admit.
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11-07-2013, 10:07 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2009
Posts: 6,681
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My fellow Long Islander, I have calculated every year since 1985 (when I first started working full-time) the percentage of total income I saved. Total income I defined as wage income plus investment income in my non-retirement accounts. I did not include unrealized cap gains nor did I include company match in my 401k or any gains in my retirement accounts. In the amount saved (numerator) I included all the purchases I made to my taxable accounts plus my own 401k contributions and reinvested dividends and cap gain distributions in the taxable accounts.
That being said, you have a very high percentage saved from your earnings. Using my similar measure, I have been in the 50-60% range in my best years but was lower than that in other years, particularly when I made a big purchase or paid down debt.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.
"I want my money working for me instead of me working for my money!"
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11-08-2013, 06:24 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Aug 2011
Posts: 3,594
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Quote:
Originally Posted by Islandtraveler
Sorry if I was not clear in my assessment. When adding up the 40 years of income and comparing it to my current portfolio, it represents 57% of the total. As I have been saving and investing over that time, I do not know how much was saved verses the return on my savings. A bit obscure I admit.
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For DW and I the ratio is about 50% after a work/investing time of about 25 years. We saved early and often. Dual Income No Kids. Each had/has an engineering career. Early FI was always the goal.
-gauss
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11-08-2013, 06:40 AM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2006
Posts: 11,401
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Other than curiosity, I'm not sure of the meaning of this variable, as it does not discount for time. A dollar saved in 1960 is given the same weight as one saved in 2013. In reality the purchasing power if the 1960 dollar would have been much greater, as would the effort to save it. Furthermore, the 1960 dollar would have a longer compounding interval. Two individuals with the same lifetime earnings might have very different stories. For example, A might have had a professional sports career from 1960 to 1964, earned $1,000,000, and never worked another day. B might also have earned a total of $1,000,000 over a 40 year career, starting at minimum wage and gradually increasing to a salary of $80,000 per year. In A's case, the earnings curve is skewed to the left; in B's case, it is skewed to the right.
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11-08-2013, 06:43 AM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,202
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I'm pretty sure there is another thread from a couple years ago on this topic, if you want to see how people have responded in the past. Not sure exactly what to search for, nor am I motivated to search myself, but I'm pretty certain it's out there.
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11-08-2013, 07:45 AM
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#12
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gone traveling
Join Date: Apr 2009
Location: Eastern PA
Posts: 3,851
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I saved little; I invested a lot!
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11-08-2013, 08:22 AM
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#13
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Recycles dryer sheets
Join Date: May 2010
Posts: 497
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The numbers from ss may be wrong if you made over the max amount for medcare for some years and for some year the max amount for ss.I know on mine it shows the cap amount when I know I made more.
Unless you have a better place to look...I have what they use to send yearly....they stopped sending these about two years ago.
__________________
You've got to ask yourself one question: Do I feel lucky? Well, do ya, punk?
Retired July '11 investments in very low cost index and mutual funds, balance once a year at best.
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11-08-2013, 10:33 AM
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#14
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Recycles dryer sheets
Join Date: Feb 2010
Posts: 293
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Quote:
Originally Posted by RunningBum
I'm pretty sure there is another thread from a couple years ago on this topic, if you want to see how people have responded in the past. Not sure exactly what to search for, nor am I motivated to search myself, but I'm pretty certain it's out there.
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Yep....I started it...
http://www.early-retirement.org/foru...ngs-67724.html
__________________
FIREd at 46, 8/31/11
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