Prime Earning Years

[cons]

What do 'prime earning years' mean to you all here (in a monetarily and lifetime sense)?

I have heard that your prime earning years are between the ages of 45-55??
basically, the age group that todays baby boomers are in.

Do you all agree with this?

I don't. My reasoning behind this is my financial situation right now. I don't see myself having the time/potential/motivation to keep 'earning' more.  I also don't see myself being able to save (percentage wise) as much down the road as I'm able to at the present because I will inevitably have more responsibilities (mortgage, kids, etc) later on in life. Maybe that's why I don't agree  with the 'prime earning years' theory.

Maybe this 'theory' doesn't take into account your savings percentage rate.

or maybe, a majority of people in this age group, are at the peak of their careers and thus at their prime in earnings potential??

I am curious as to what ERs and wanna be ERs think about this.



Your thoughts are much appreciated

 

[Nords]

What do 'prime earning years' mean to you all here (in a monetarily and lifetime sense)?

The theory of the prime earning years is that you'll have advanced to your terminal rank-- the highest level of management (or whatever field) that you can go without getting fired for incompetence. Your responsibilities won't get any greater and your salary won't get impressively higher unless you make a drastic career change like striking out on your own.

Ironically, because it takes you two or three decades to get to that level, they're also your prime SAVINGS years. Ideally you have a home, furniture, a car or two, and enough material possessions to sustain life without trying to compete against Donald Trump. Maintenance & replacement costs are hopefully minimal. The end of your 15 or even 30-year mortgage may be in sight. You're probably not procreating anymore, either, and your first attempts at that lifestyle are hopefully finished with college and leaving the nest so that you don't have to buy them extra groceries or pay more college tuition.

So most financial advisors presume that you can really sock it away in the 10-15 years before you turn 65. Although you're not enjoying as much compounding as you did in your 20s or 30s, you're able to throw larger quantities of money into your retirement portfolio.

Of course that's presumption. It's quickly thrown off track by a McMansion, an interest-only mortgage and a home equity loan, a few SUVs, an Ivy League tuition or two, a summer home,... you get the picture.

My prime earnings years were 2000 and 2001. That's because they paid me more than any previous year and I retired partway through 2002.

Our retirement portfolio's prime earnings years may still be in its future!

 

[Michael]

It also depends upon whether you have a manual job, or a cerebral one. Manual careers tend toward earlier peak earnings than cerebral careers.

 

[Gone4Good]

It seems to me that the concept of "prime earning years" relates to a "normal" pattern of earnings growth over a typical career. I'd categorize most folks on these boards as a bit atypical, so the standard may not apply. This is certainly true for anyone who has, or plans, to retire early. Peak earnings for an early retiree may come in the years before their "prime earnings years", which they joyfully spend doing something other than earning.

 

[MJ]

My prime years were between 1998 to 2002 until 2003 when the CEO decided to reverse his generous salary increases (which I had demanded) by knocking a 1/3 off, setting me back to my 1997 salary. Now, that really hurt.

 

[Mr._johngalt]

My
"prime earning years" were definitely between ages 45-55.
My "prime savings years"? Don't know. Never had any real
savings plan, thus no way to tell.

JG

 

[Martha]

My biggest earning year ever was when I was 49. Then I went part time and I anticipate this year, my 50th, I will earn substantially less from employment. If I had not gone part time, I anticipate my earning would have increased for the next several years, unless we had a bad year or two at the firm.

 

[CyclingInvestor]

As typical for a programmer/engineer, my salary rose rapidly at first, but peaked
with a pair of job changes in 97/98 and has been been flat (inflation adjusted)
since (in the low 6 figures). My savings rate has remained fairly constant at
around 20% 401K/IRA and 5-10% other the entire period. I am certain that
kids would have dramatically affected the savings rate. At 47 I can now retire
whenever I want, and if I dont get laid off I will retire spring 08.

I guess that would make my "prime earning years" to be 38-47+. I could have
pushed them somewaht higher by allowing myself to be promoted, but I did
not like the +40% hours for +20% salary that many accept.

 

[Calgary_Girl]

So most financial advisors presume that you can really sock it away in the 10-15 years before you turn 65.  Although you're not enjoying as much compounding as you did in your 20s or 30s, you're able to throw larger quantities of money into your retirement portfolio.

Of course that's presumption.  It's quickly thrown off track by a McMansion, an interest-only mortgage and a home equity loan, a few SUVs, an Ivy League tuition or two, a summer home,... you get the picture.

I don't think DH and I don't fit the typical age range of 45 - 55 as being our prime earning years. I think our prime earning years are right now since we sock away over 40% of our combined gross incomes every month in retirement accounts and our taxable portfolio. No mortgage, car loans or any other debt to speak of. We are in the process of renovating our basement but already have money set aside for that so no debt there either. Of course, we are expecting the pitter patter of little feet in April so there will be college to think about and the extra expenses but I still think we'll be able to put away a significant portion of our income.

Luckily, neither one of us has the desire to keep up with Jones' and get a bigger home, etc. We quite like knowing that we own our home free and clear. My sister on the other hand sometimes scares me. She was saying the other day how she can't imagine having so much money in the bank without the desire to buy a bigger home. She's already planning on how she and her husband will be upgrading to a bigger home in 10 years' time once the kids are older (and they don't even have any yet!)

 

[Mr._johngalt]

I don't think DH and I don't fit the typical age range of 45 - 55 as being our prime earning years.  I think our prime earning years are right now since we sock away over 40% of our combined gross incomes every month in retirement accounts and our taxable portfolio.  No mortgage, car loans or any other debt to speak of.  We are in the process of renovating our basement but already have money set aside for that so no debt there either.  Of course, we are expecting the pitter patter of little feet in April so there will be college to think about and the extra expenses but I still think we'll be able to put away a significant portion of our income.

Luckily, neither one of us has the desire to keep up with Jones' and get a bigger home, etc.  We quite like knowing that we own our home free and clear.  My sister on the other hand sometimes scares me.  She was saying the other day how she can't imagine having so much money in the bank without the desire to buy a bigger home.  She's already planning on how she and her husband will be upgrading to a bigger home in 10 years' time once the kids are older (and they don't even have any yet!)   

My sister in law does that. She is an RN and makes good money, but she is in her 50s and finally has an empty nest. She got remarried about the same
time as DW and I tied the knot (4 years ago). They are on thier 3rd house
(each one bigger and grander of course).
We expect to die in this one.

JG

 

[SteveR]

I guess I am still in my prime income years (50-55) but am also in my prime spending years at the same time. : My DW and I will never make more than we do now and neither of us want or will accept a promotion to higher management (been there done that and have the T shirt to prove it). So, we are trying like mad to save for ER with paying off debts (stock loan and mortgages) helping my youngest with his last couple of years of college with partial fianancing from the Bank of Dad, and at the same time helping out older family members that are on the edge.

DW wants and needs to retire from her job. Her quality of life needs a transplant. 21 months and counting to ER. I ER'd once already but current plans require a couple more years of paychecks to set things up to never work again. DW wants to stay to get her non-COLA pension and health insurance.

Milestones to ER are on the horizion. I will be fully vested in my current 401k in 11 days. An additonal 20% of my stock options vest on Oct. 31. DW hits her year end bonus on Dec. 31. I get a bonus on March 31. DW gets increase in May. I get increase in July. Repeat 1 more time then ER August 1, 2007.

 

[Caroline]

I have heard that your prime earning years are between the ages of 45-55??
basically, the age group that todays baby boomers are in.

Interesting point, Cons.  As SteveR has pointed out, your "prime earnings years" can also be prime spending years, and it's how much you keep, not how much you make.

If I look at it another way - if I remember that money made early has a lot more time to grow before you retire and live on it -- then your prime years may indeed come early in your career. 

I am 48 and am making more in salary and bonus than I ever did. On the other hand, if I had known at your age (24, right?) what I know now about the magic of compounding, I wouldn't be working AT ALL!   

So you ARE in your prime years now, if you're saving it and investing it wisely!
Caroline

 

[Dawg52]

I'm enjoyng my prime earning years right now. As a result, sometimes I think maybe I should work until age 55 and sock away a few more bucks. Then I take off a few days as I did last week and come to my senses.   Golfing and farting off is far more enjoyable than what you have to put up with to make a few more deposits. I'm sticking to my 12/31/06 plan.  8)

 

[yakers]

For me my earnings are at the highest in my career though it is unlikely to go up by more than inflation, I will be 55 soon and could retire then, technically. But these are also the years my DB pension is based on, so there is some incentive to work a couple more for the 'high three' the pension is based on.

 

[Gone4Good]

It's all relative. I'm 34 and am probably in my "prime earnings years" right now considering I plan to quit in a few year's time.