# Am I saving enough?



## StarTrekFan (Aug 15, 2012)

I have been asking this question to myself almost every day for the past few months. As days go by, I am turning more fearful about my future. This is also the kind of question that I not comfortable asking close family and friends for obvious reasons. 

I am 39 years old and my wife is an year younger. The last time, I felt this fearful about future was around 31, few months after our first child was born and we were neck deep in debt.

Bad luck and few bad decisions in my 20's meant that it was a financially wasted decade. By the time, I turned 30 I am pretty sure, I had negative net-worth. We spent the next few years paying off debt, building emergency fund,buying a house and having two kids.

Exactly 5 years ago (Sep 2008) at age 34, I opened my first 401(k) account. My wife had a 401(K) before we were married, but she was barely put anything to in it, something like 2% in the first few years(Don't ask me why...that is a different story). I have been keeping track of our net-worth for the last 2 years. Today we have 230K in our retirement accounts and our net-worth is 360K. Significant chunk of net-worth outside of retirement accounts is the equity on our home.

The last couple of years, we have been saving about 40K per year. This accounts to 25% of our pretax income. 30K in pretax (401k) and 10K for post tax(ROTH IRA). This is the most we are able to save, we pretty much live paycheck-to-paycheck with the reminder of our money. Few times we had to dip into emergency funds ($300-$500 at a time) to make it thru the end of the month.

I realize that I may come off as a show-off, when I ask if saving 40K is enough. I could also be perceived as fishing for compliments. This is the reason I do not want to ask this question of my family and friends. I am genuinely fearful of my financial future. This fear is a big part of my psyche. My dad was exactly like this and so were my grand parents. So the universe must have felt that it's only fair that this fear eat me out as well. Although I am much less fearful than my dad & grand parents. My dad never again invested in stocks after losing some money initially. I have no such fear.

Now the obvious question someone woud ask is, if we feel we are not saving enough, why don't we find better paying jobs. We could make bit more money if we switch jobs. The reason both of us have not done are the perks that we have earned over the years, These perks most likely will not manifest in new jobs, at least right away.

Biggest of the perks is that we both get to work from home 2-3 days a week, So someone will always be home, when kids come from school. We also receive excellent coverage for healthcare and pretty generous vacation & sick days. Also professionally both of us are in a good place. I am at a job, where I am minimally supervised and have a lot of say in choosing the projects that I want to work on. My wife is also finally on the stream that she always wanted to be in. For me the biggest surprise professionally is that this is the first time in my life that I like the people I work with as well as enjoy the work I do. before this job, it's always been one or the other

The question that I am grappling now is Am I saving enough for our future. Would my current saving rate be enough to be able to retire in our mid sixties. The retirement life that I envision is pretty basic, a debt free with enough for food, housing and medical expenses if any.

I would deeply appreciate response from anyone who has been thru this stage. I would also appreciate if you tell me that I am out of my mind and that I am blowing this out of proportion. Any feed back would be welcome.


----------



## Married but Happy (Aug 13, 2013)

You are saving an extraordinary amount. Use some of the various online calculators to see how much you'll need in retirement to sustain a particular lifestyle - of course, much depends on when you retire, and how much social security will provide then (if it stays solvent!).

If you plan to work past 50, there are also "catch up" contributions you can make on top of the usual 401k and IRA contributions.

If you expect to have a higher income in retirement than currently, you may want to consider putting future investments into Roth accounts, which won't be taxed when distributed (although you lose the tax advantage on contributions, the money still grows tax free).


----------



## turnera (Jan 22, 2010)

If you're planning to keep working until at least 50 or 55, you are saving plenty. I would also urge you to consider investing in some real estate, preferably the kind that pays you monthly income, whether you're working or not.


----------



## OhGeesh (Jan 5, 2010)

It's all about the life you plan to lead in retirement that is the sole indicator if you a saving enough. I know people who retired on 150k in savings last year and they get 1700/mo from SSI.

People like me need at least 8-10K/mo in income, so just do the math and assume a 4-6% draw rate and you will be fine!

Good job btw! We save the same about 40K/yr, but have over 100k in negative equity on the house ;(

You can't take it with you and it's all about quality of life!!


----------



## couple (Nov 6, 2010)

There are many more indicators of whether you are saving enough (just things to think about rather than answer here):
1. college/university costs - I think you said you have 2 kids. If you expect that they will go to college and you will be the sole provider of education expense this is obviously a big issue.

2. house - from what you have said, i assume that the 40k per year does not include money 'saved' into home equity (meaning amount that goes into principal vs interest each month). You need to make sure that your house paydown is aggressive enough. If it's not, it will mean you will need more savings later to make up for any shortfalls.

3. Linked to the previous point, it seems that you don't have enough spare cash outside of 401k and home equity.

4. What is the likelihood that you will be able to continue the 40k savings per year? What other 'exposures' do you have in the future? Some you might have no idea about today (e.g. perhaps health and other misfortunes) but others that you might anticipate - parents needing care, home needing big repairs like septic, roof, etc at some point, etc). That 40k extra (considering you are pretty much paycheck to paycheck outside of that) can easily be eaten into each year by financial 'surprises'.

5. What's your inheritance picture? Careful not to bank on anything but if there is a significant pot of inheritance at some point, your financial future will obviously be brighter than what you've described would suggest.

6. Career progression? Career tracks can vary greatly as one gets on in years. Sometimes age and years of experience can mean much less earnings and job security (e.g. some IT jobs, middle management, sales, etc) and in other cases, it can mean escalating earning potential at some point (e.g. lower paying highly specialized government or education jobs which can sometimes reap much higher earnings later in consulting, etc). These are just examples to make a point. Each type of career type is different and it's very hard to generalize. I'm just trying to explain that each career has a very different earnings curve over the years. We all know people in very low paying careers from the start who paid the dues and shot up according to a real plan and others who were higher paid from the start at the expense of longevity in earnings potential as years wore on.

If you could only make a little more by switching jobs, then it's clearly not worth it considering the level of comfort and satisfaction in your current jobs. New jobs might mean higher commuting and wardrobe expense if you don't have the ability to work from home, less security, etc.

I don't mean to be at all negative about your situation and there are many dimensions to thinking about where you are today. 40k per year is a great amount to save and i would think it's well above most people today. As you realize though, you started off behind the curve once you got serious about saving. So your overall net worth is low for your age (my opinion). Anyway, you can't do much about that except to do your best to make up for it now. To put that into perspective, with even relatively modestly paying careers and steady employment, steady saving and discipline and no financial crises, it should not be that hard to achieve around $1m in net worth (inclusive of home equity, retirement funds and other savings) by age 40.


----------



## OhGeesh (Jan 5, 2010)

couple said:


> There are many more indicators of whether you are saving enough (just things to think about rather than answer here):
> 1. college/university costs - I think you said you have 2 kids. If you expect that they will go to college and you will be the sole provider of education expense this is obviously a big issue.
> 
> 2. house - from what you have said, i assume that the 40k per year does not include money 'saved' into home equity (meaning amount that goes into principal vs interest each month). You need to make sure that your house paydown is aggressive enough. If it's not, it will mean you will need more savings later to make up for any shortfalls.
> ...


Shows how skewed your opinion is when the average family has less than 100K in the bank by age 60!!

Just fruit for thought and the median income for a family of 4 in the US is what? 53k ish these days?


----------



## couple (Nov 6, 2010)

Geesh,

I hope I was able to offer some things for the OP to think about to help him do his own analysis and come to some answers for his question. This was the vast majority of the content of my post.

Additionally, I offered my own opinion - opinions by their nature are skewed! I have made not represented my opinion in any way as linked to any national averages or anything and I have made it clear from the rest of my post that I do not understand the OP's situation and it depends on the factors that I mentioned plus many others. The OP clearly stated that his income is far above what you say is the median family income for the US.

100k today in savings at age 60 today might be OK if you no longer have college expenses, your children are fully independent, you live in a paid off home and you have retirement medical coverage (fast becoming rare) and you have a stream of income from a defined benefit pension (i.e. final salary type arrangement which is not counted as an asset like a 401k is - and also becoming rare but still around with many retirees today). It also depends what part of the country you live in and of course what kind of retirement you want. Don't forget also that people who are aged 60 today have a lower life expectancy than the OP will have when he is 60.

My opinion (and I'll further state clearly that this is only my own opinion, however skewed) is that assuming the OP will have no other significant income streams at retirement like DB pensions, he has college expenses ahead for 2 children (maybe true or not), etc is that he's behind the curve with what is needed. 

Your attributing averages and medians to help suggest if the OP has enough savings is flawed in many ways. As stated, he is far above median income and I assume that he and his wife are at least 'semi-professional' and middle class, having life expectations and matching financial commitments that are broadly aligned with their class rather than with lower or poverty classes which account for a huge part of these national numbers. For example, I think only something like 30% of americans over 25 have a 4 year college degree. US has a great disparity in income and saving across different states (and counties within states). I don't know where he lives but applying national averages and medians to his economic class and location can be very misleading.

Anyway, it's pretty well universally accepted that people are saving too little for retirement so being ahead of averages and medians should not give anyone comfort.

My opinions are not meant to be alarmist and i'll restate that the OP is doing great by maintaining a 40k per year saving rate. It's just that he now needs to make up for a slow start earlier in life.


----------



## OhGeesh (Jan 5, 2010)

couple said:


> Geesh,
> 
> I hope I was able to offer some things for the OP to think about to help him do his own analysis and come to some answers for his question. This was the vast majority of the content of my post.
> 
> ...


I don't disagree with your post at all just the "opinion" part. Like you said it's all up to his goals and then developing a plan to meet them, but consider this report by the EBRI.



> According to the 2012 report, the average savings by age group are as follows:
> 
> • Workers younger than 35 have an average of $6,000 in savings
> • Individuals between 35 and 44 have about $22,500
> ...


That is not networth, but it makes you wonder how people make it yet they do very frugally I would imagine. 

I think the East/West coast of this country is very "skewed" on to what the norm for most american families is, especially retirees.

If he continues he should be more than fine by 59 1/2 and as far as leaving a inheritance? Who cares about doing that? Kids get the house I promise my $$$$ will be gone!!


----------



## aeasty (Jun 5, 2013)

This just makes me glad I live in Australia from the 1st job you get to the end you have 12% or more go into superannuation(retirement investment fund) some play the stock market, some play currency and some play property and others just do high interest but it never hurts to save more just a quick thought for the OP would that 40k or 30k be better off knocking down your home loan faster and then using your "free'd up" mortgage money then into your 401k as well just so then your not losing money in interest on the house might be worth a look of doing a few years of paying it out aggressively then swapping it or some side ventures that make a stable yield of say $100 p/w for your one off 40k investment


----------



## Wild Mustang (Oct 26, 2013)

An accountant or financial advisor (fee based, not one selling product) could give you solid info to start with and hopefully give you some emotional relief. 

The perks of your jobs sound too good to give up so see where you stand in your present situation and how to plan ahead.


----------



## jac70 (Sep 7, 2013)

Wild Mustang said:


> An accountant or financial advisor (fee based, not one selling product) could give you solid info to start with and hopefully give you some emotional relief.
> 
> The perks of your jobs sound too good to give up so see where you stand in your present situation and how to plan ahead.


:iagree::iagree::iagree:


----------



## mr hillbilly (Jul 16, 2012)

I often stress about the same things to the degree that I save almost the same amount reach year. Fortunately both my wife and I have had stable jobs with no debt over the years so my fear is likely unwarranted. I just don't trust the future. 

I agree with the op in that I find it difficult to discuss with others because I suspect I'm doing better than the average but I don't want to come across as an ass so I keep quite and directly stress.


----------

