the first $200K is the hardest to save???

[cons]

is this true?

i've heard people say that once you have saved your first couple hundred grand that it's usually smooth sailing from there?

is this because by the time you've saved that much, you're used to saving regularly and that it becomes automatic (almost second nature)?

or is it because this is when compounding really starts to take affect into the reitrement accounts?

what if someone has inherited $200k i don't think it would be smooth sailing for that person, especially if he/she is spending a lot of their earned income instead of saving it.



maybe some reitrees can chime in and give their experiences...were your first $100k..$200K..or $$$K the hardest, and then easy from then on?

 

[Mr._johngalt]

is this true?

i've heard people say that once you have saved your first couple hundred grand that it's usually smooth sailing from there?

is this because by the time you've saved that much, you're used to saving regularly and that it becomes automatic (almost second nature)?

or is it because this is when compounding really starts to take affect into the reitrement accounts?

what if someone has inherited $200k i don't think it would be smooth sailing for that person, especially if he/she is spending a lot of their earned income instead of saving it.



maybe some reitrees can chime in and give their experiences...were your first $100k..$200K..or $$$K the hardest, and then easy from then on?

Well, I never noticed. I just quit and worked out the details later.

JG

 

[unclemick]

I took from 1976 to 1992 to save 198k in 401k - ER'd - rolled over to Vanguard in 1993 - marked to market by Vanguard 6/30/2005 - 629k - nothing added 1993 - 2005. Plan to take some out this year at age 62 - maybe.

 

[sgeeeee]

At some point, earnings on your investments become comparable to the amount of your salary you can invest.  For example, imagine that you are earning $50,000 per year and investing 20% ($10,000 per year).  Also assume you are earning 5% on your investments.  If you have no savings, your savings go up in increments of $10,000 plus 5%.  Once you have saved $200,000, your investment stash goes up by $10,000 each year from earnings alone.  Add your salary contribution and your savings are increasing at twice the rate they were when you were starting out.

I don't know anything magic about $200,000, but clearly investment earnings make nest egg growth easier.  At some point, it is likely that your investment earnings are greater than your salary.  This is when you really start to wonder why you are working.  

 

[Nords]

i've heard people say that once you have saved your first couple hundred grand that it's usually smooth sailing from there?

is this because by the time you've saved that much, you're used to saving regularly and that it becomes automatic (almost second nature)?

or is it because this is when compounding really starts to take affect into the reitrement accounts?

what if someone has inherited $200k i don't think it would be smooth sailing for that person, especially if he/she is spending a lot of their earned income instead of saving it.

I thought it was "The first million is the hardest" or "A million here, a million there, pretty soon you're talking REAL money" but I guess inflation has taken its toll.

Like SG says, compounding is pretty significant. On a good day it's wonderful to watch your portfolio jump by a month's pay, and it makes you wonder how much longer you're gonna put up with this crap.

But, yeah, by the time you've put away $200K your savings habits should be on autopilot. You're probably far enough along in your career to have received a few pay raises, too, and if they're not spent then they can accelerate your DCA rate. We hit $200K in the early 90s after I got that humongous 25% O-4 promotion raise.

I think the hardest part was to start mailing $50/paycheck to Fidelity in 1982. I remember I decided not to rent the 1-BR apartment with the balcony because that would have cost a whole $10/month more, which would have whacked 10% off my savings rate for no perceivable benefit. Things got easier after that first step.

 

[REWahoo]

Not sure it was the "hardest", but it sure took a lot longer than the next $200.

1st - 14 years
2nd - 4 years

REW

 

[retire@40]

...Once you have saved $200,000, your investment stash goes up by $10,000 each year from earnings alone.

That's the major reason the second $100K is easier to save than the first, and the third $100K is easier than the second, and so on.

When you first start saving, you may notice your portfolio moving up and down with the market (assuming you invest in the market) a few hundred dollars on a daily basis.  As your portfolio grows, you will notice larger and larger increases and decreases in net worth.  I went down a few thousand bucks today, but I'm optimistic that there will be more ups than downs over time.

 

[Eagle43]

I dunno how hard it was; but, it ain't hard now. Compounding interest; now there's a natural law I love. And savings is on autopilot; reinvest all the dividends. DW wants to delve into it, but not yet!

 

[retire@40]

Not sure it was the "hardest", but it sure took a lot longer than the next $200.

1st - 14 years
2nd - 4 years

REW

For me, the first was also harder and it took longer.

1st - 6 years
2nd - 3 years
3rd and each additional $100K - about 2 years with each additional amount taking a slightly shorter duration.

 

[REWahoo]

3rd and each additional $100K - about 2 years with each additional amount taking a slightly shorter duration.

Just a clarification, are you quoting time frames for $200K or $100K?

 

[retire@40]

Just a clarification, are you quoting time frames for $200K or $100K?

$100K

 

[maddythebeagle]

ditto on whatever one else said. I have a spreadsheet with my accounts and the compounding is really powerful now that I have a "base" in my early 30s. Moral: start saving in large sums in your 20s.

 

[cons]

maddythebeagle, that's exactly what i'm doing.

i want to save aggressively into my retirement accounts for the next 10-12 years which would then give me a nice 'base' in my mid 30s.

i'll hit my 1st 100k in the middle of next year. which will have taken my 3 1/2 years.
the next 100k...who knows...hopefully not as long as the first.

thanks for the responses!!

 

[Andre1969]

I haven't gotten to my second $200K yet, but it seems reasonable to me that the first of ANY amount is always the hardest to save. I have a spreadsheet that tracks the values of all of my accounts (401Ks, IRA, mutual funds, stocks, bonds, savings, checking, etc) that goes back to March of 1998. One month before my 28th birthday. I had a grand total of $20,685 saved up back then. In fact, at the time I didn't realize I had that much, because in 2003 my Mom told me about some savings bonds she had taken out for me when I was a kid, and she had forgotten about. Well, suddenly, 30+ years were gone by and some of them weren't paying interest anymore, so it was time to cash them in. I had to backtrack on the spreadsheet to put in their value as of March 1998, and they came out to $9788...almost half of my total savings at the time, and I didn't even know I had it!

Well, I broke the $100,000 barrier in August of 2003. I broke the $200K barrier in December of 2004, but a good deal of that was profit from when I sold my condo. I broke the $300K barrier in February of 2005, but again, that wasn't under normal circumstances...I took out a $100K HELOC on my house, and used some of the money to invest, and a big chunk of it went into a money market fund to use for home repairs, building a garage, etc.

At this point though, I'm probably saving about $35K per year between 401k, regular mutual funds, and a Roth IRA. So I'm expecting the totals to go up pretty quickly. That is, unless we have another crash like 2001-2002! It was pretty scary watching my total drop from around 88K in May of 2001 down to 68K by July of 2002!

 

[SteveR]

I did not have more than $5000 in savings and 401(k) until I was 42. It was not until after my divorce that I really had the "ability" to start saving. My first $10k took a while since I was a single parent with a house payment and debt payments (thanks to ex-wife) so my first priority was debt reduction. That took a couple of years but once it was done....the savings could begin.

It has taken me 10 years to save enough to be able to FIRE anytime I want. It was not easy but it was the best thing I ever did. I lost half of my retirement and pension to my ex-wife; the good thing was that there was not much there to lose so I came out way ahead in the long run. My first $200k came at 45 and has doubled twice since. I am now seeing more than $100k a year increase in my overall networth not counting home equity. It is a very nice place to be.

You have to start somewhere and getting started is the most difficult part.

 

[BigMoneyJim]

I've heard the first $100k is the hardest and the first $1mil is the hardest. I now have $100k in sight...possibly this year depending on market forces and my next job move.

But so far it seems like the growth accelerates: "takes money to make money". Sure it's almost as simple as compound interest and plus savings habit plus payraises increasing savings, but the feeling is that things accelerate as you accumulate.

 

[TromboneAl]

Don't forget that at the point that you've saved your first 200K, you are probably have a significantly larger income then when you started out.

 

[maddythebeagle]

yep, that too! When I started in my 20s, the 401k max was 7500, and now it is 14000 and next year 15000. 7500 seemed like a lot back then. 15000 doesnt sound like that much now..

 

[peteyperson]

The first $1 is the hardest to save.

Beginning a new saving habit, and then maintaining it is the hardest thing!

Petey

is this true?

i've heard people say that once you have saved your first couple hundred grand that it's usually smooth sailing from there?

is this because by the time you've saved that much, you're used to saving regularly and that it becomes automatic (almost second nature)?

or is it because this is when compounding really starts to take affect into the reitrement accounts?

what if someone has inherited $200k i don't think it would be smooth sailing for that person, especially if he/she is spending a lot of their earned income instead of saving it.



maybe some reitrees can chime in and give their experiences...were your first $100k..$200K..or $$$K the hardest, and then easy from then on?

 

[Caroline]

what if someone has inherited $200k i don't think it would be smooth sailing for that person, especially if he/she is spending a lot of their earned income instead of saving it.

I don't think so either... but I'd sure like a chance to PROVE it!

Seems a HECK of a lot easier than earning it.
Caroline

 

[Caroline]

As I think about it, I think it gets easier to save more as you go along because more money give you more FLEXIBILITY to take advantage of various opportunites.

After I maxed out my 401k, etc. for the year, I had money left over and invested in rental property in Northern California. This was a BIG contributor to my net worth, and one I couldn't have managed if I hadn't saved a down-payment.

The ability to take out 15-year instead of 30-year mortgages is another benefit -- one I wouldn't have had the nerve to undertake without a big emergency fund, given my high-tech, high-risk job.

I'm sure there are bigger and better opportunities out there... these little decisions of mine are only a couple of examples of how I think having savings generates MORE savings.

Caroline

 

[runchman]

To the original poster, another way to consider it is to project yourself forward to, say, when you are 41 like me. Sounds a very far way off if you're 24 right? Well once you *do* hit 41, believe me, looking back, 24 will seem like just yesterday.

I started in engineering with a decent salary, and contributed 10% to the 401(k) from day one. Married another engineer along the way, which didn't hurt. I've gone from:

college graduation $12,500 debt $0 Assets

To

Now cash savings around $600k

My point (is there one?) being, get in the habit of squirreling away cash, and before you know it you'll be seeing the light at the end of the tunnel. It's like you're finally coming up to the crest of this big hill that you've been riding up for so long, and man is it exciting to think about reaching the top and going into coasting mode, having your investments sustain you.

Ok so it's late, I'm rambling. Plug away at that savings, you won't regret it.

- John