OT - How much should your 401k be

[LGR4GM]

 

I'm a huge fan of the Boglehead way of investing, one of their basic principles is not trying to time the market.  Just offering this up as general advice to you, I obviously do not know nearly enough info about your personal situation to offer anything specific.  

 

I do think that the general principles of saving and investing should be taught in high school, it certainly would have helped me get serious about if before my early 30's.

 

Boglehead Investment Philosophy:

 

1. Develop a workable plan
2. Invest early and often
3. Never bear too much or too little risk
4. Never try to time the market
5. Use index funds when possible
6. Keep costs low
7. Diversify
8. Minimize taxes
9. Keep it simple
10. Stay the course

 

That seems reasonable. I feel pretty good right now. I started my retirement saving when I was younger and know I will have to work until at least 55. I try to keep my debt down as low as possible so outside of my student loan, it isn't bad at all. 

[Hank]

Reason 438 why you should encourage your kids to join the military - I retired in my early 40's and between my pension and disability I net 5,500/mo until the day I die.

[Sabres Fan in NS]

:huh:

 

'Tis true.

 

Invented so big corporations (hello we've) could get out of paying for their employees retirement = scam.

[PASabreFan]

Eight inches here. Not bragging or anything.

[Hank]

Eight inches here. Not bragging or anything.

HA! I see what you did there. :p

[bcsaberks]

Here's my math:

Spending $60k a year ($5k per month) * 20 years of being retired = $1,200,000 in the bank.  Give or take, and not accounting for social security.  $5k a month is probably more than needed but if you like good food/booze, want to live in your house (NY property tax) and want to do stuff....also I think our (gen x) out-of-pocket medical costs are going to be much higher than previous generations.

 

So if 15-20 years left to deposit, and at 200k, better giddy-up.  Max is $18,500 per year.

[Hank]

Reason 438 why you should encourage your kids to join the military - I retired in my early 40's and between my pension and disability I net 5,500/mo until the day I die.

Free health care for life too. And damn near free health care for the wife and kids.

[Claude_Verret]

Here's a good retirement calculator that I've used

 

 

http://www.firecalc.com/

[sabills]

 

I'm a huge fan of the Boglehead way of investing, one of their basic principles is not trying to time the market.  Just offering this up as general advice to you, I obviously do not know nearly enough info about your personal situation to offer anything specific.  

 

I do think that the general principles of saving and investing should be taught in high school, it certainly would have helped me get serious about if before my early 30's.

 

Boglehead Investment Philosophy:

 

1. Develop a workable plan
2. Invest early and often
3. Never bear too much or too little risk
4. Never try to time the market
5. Use index funds when possible
6. Keep costs low
7. Diversify
8. Minimize taxes
9. Keep it simple
10. Stay the course

 

 

I strongly believe that macro economics courses should be eliminated in highschool in favor for personal finance courses. Macro Economics is so complicated that a half year course in it barely scratches the surface in any sort of meaningful way. Teaching kids about how to manage their own money is so so so much more important in the lives of 90% of the population. 

[TrueBlueGED]

Here's my math:

Spending $60k a year ($5k per month) * 20 years of being retired = $1,200,000 in the bank. Give or take, and not accounting for social security. $5k a month is probably more than needed but if you like good food/booze, want to live in your house (NY property tax) and want to do stuff....also I think our (gen x) out-of-pocket medical costs are going to be much higher than previous generations.

 

So if 15-20 years left to deposit, and at 200k, better giddy-up. Max is $18,500 per year.

The very notion of spending $5000 a month is hilarious to me. I'll do naked cartwheels around the block the moment I start grossing that each month.

[That Aud Smell]

'Tis true.

 

Invented so big corporations (hello we've) could get out of paying for their employees retirement = scam.

 

That word. I don't think it means what you think it means.

[bob_sauve28]

I strongly believe that macro economics courses should be eliminated in highschool in favor for personal finance courses. Macro Economics is so complicated that a half year course in it barely scratches the surface in any sort of meaningful way. Teaching kids about how to manage their own money is so so so much more important in the lives of 90% of the population. 

Yes. Totally agree. 

[Taro T]

I haven't started contributing to my 401k yet because I know nothing about it and haven't made the time to meet with somebody about it.

Should I contribute if I don't plan on staying with the company long?

Absolutely you should contribute. All money you put in is 100% vested and you typically are partially vested in the company match at the onset or 1 year later at worst. You'll be fully vested typically in 3 - 5 years.

 

You're cheating yourself by not participating.

[dEnnis the Menace]

I strongly believe that macro economics courses should be eliminated in highschool in favor for personal finance courses. Macro Economics is so complicated that a half year course in it barely scratches the surface in any sort of meaningful way. Teaching kids about how to manage their own money is so so so much more important in the lives of 90% of the population. 

 

I completely agree with this.

 

I've been in the work force for 5.5 years now, and I have around 20k in my 401K.  All of that is from the last 3.5 years however,  I had another 4.5k in my 401k from my first job, but borrowed that (laid off for 3 months and had a lot in student loans to pay) and didn't pay it back (taxes hurt).  I have a high risk portfolio now and It's netting awesome returns.  We get 50% matching up to 6%, and I take full advantage of it, plus we get profit sharing at the end of the year into our 401k.  

The very notion of spending $5000 a month is hilarious to me. I'll do naked cartwheels around the block the moment I start grossing that each month.

 

between student loans, our mortgage, and medical bills from the twins, my wife and I spend $4000/month.  Doesn't leave much in the tank after the fact (thank god so many people blessed us with diapers and clothes, we've barely had to purchase any).  Cannot wait to have the medical bill paid off, as that will slice nearly a grand off.  

[Ogre]

'Tis true.

 

Invented so big corporations (hello we've) could get out of paying for their employees retirement = scam.

I know the driving force behind the rise and fall of pensions in this country has been well discussed but the point you're making has been exactly what I've been thinking. As a guy who's always had a pension, I paid particularly close attention to the "why" involved each time I saw a company pension program die. Every time the argument that 401k will do everything a pension did for you was used. Scam? Absolutely. The fact that Ink was compelled to inquire about a comfortable amount to have saved should be the flashing light for the truth about 401k savings. In the days of pensions no one would have worried about retirement because the pension payed you for life. I teach a course to apprentices about home budgeting/money management and I use the three legged model from the 60s/70s. Retirement=pension+SS+savings(annuitys/401k/investments). Replacing pensions with 401k saved huge amounts of money for the corporations even when the philosophy started with 100% match. 50% match up to 6% sounds like theft to me. The corporations save on pension contributions and operating costs and still managed to "bargain" their responsibility for your retirement even lower seems archaic. What's next? Will the Pinkertons return with their baseball bats to start smashing our kneecaps?

[Hoss]

My advisor says I need about 5 million to retire in the lifestyle I want so....

Cocaine is a hell of a drug

[Taro T]

 

And as was mentioned above, if you don't max contribute to your 401k then every time you get a raise bump up your contribution %age. W/in about 5 years you'll be at the max and won't even have felt the hit to your current cashflow.

[TrueBlueGED]

I completely agree with this.

 

I've been in the work force for 5.5 years now, and I have around 20k in my 401K. All of that is from the last 3.5 years however, I had another 4.5k in my 401k from my first job, but borrowed that (laid off for 3 months and had a lot in student loans to pay) and didn't pay it back (taxes hurt). I have a high risk portfolio now and It's netting awesome returns. We get 50% matching up to 6%, and I take full advantage of it, plus we get profit sharing at the end of the year into our 401k.

 

 

between student loans, our mortgage, and medical bills from the twins, my wife and I spend $4000/month. Doesn't leave much in the tank after the fact (thank god so many people blessed us with diapers and clothes, we've barely had to purchase any). Cannot wait to have the medical bill paid off, as that will slice nearly a grand off.

Well yea, married with kids is a whole 'nother ballgame. Presumably by retirement you're no longer going to be supporting them, paying student loans, or a mortgage.

 

IMO if you're spending $5000 a month in retirement you're either really unhealthy/unlucky or living a fairly lavish lifestyle (before any snark ensues, I'm not saying this in a judgmental sense at all... if you were able to set yourself up to live this way, good on you). Don't think this is a likely monthly expense amount for your average person.

[dEnnis the Menace]

Well yea, married with kids is a whole 'nother ballgame. Presumably by retirement you're no longer going to be supporting them, paying student loans, or a mortgage.

 

IMO if you're spending $5000 a month in retirement you're either really unhealthy/unlucky or living a fairly lavish lifestyle (before any snark ensues, I'm not saying this in a judgmental sense at all... if you were able to set yourself up to live this way, good on you). Don't think this is a likely monthly expense amount for your average person.

 

 

haha all good points

[Taro T]

I know the driving force behind the rise and fall of pensions in this country has been well discussed but the point you're making has been exactly what I've been thinking. As a guy who's always had a pension, I paid particularly close attention to the "why" involved each time I saw a company pension program die. Every time the argument that 401k will do everything a pension did for you was used. Scam? Absolutely. The fact that Ink was compelled to inquire about a comfortable amount to have saved should be the flashing light for the truth about 401k savings. In the days of pensions no one would have worried about retirement because the pension payed you for life. I teach a course to apprentices about home budgeting/money management and I use the three legged model from the 60s/70s. Retirement=pension+SS+savings(annuitys/401k/investments). Replacing pensions with 401k saved huge amounts of money for the corporations even when the philosophy started with 100% match. 50% match up to 6% sounds like theft to me. The corporations save on pension contributions and operating costs and still managed to "bargain" their responsibility for your retirement even lower seems archaic. What's next? Will the Pinkertons return with their baseball bats to start smashing our kneecaps?

Provided the pensions are 100% funded at the time they are set up/ earned, I've got no problem w/ them. Unfortunately, they rarely are and oftentimes are funded 80% (or less realistically as the rate of return %age is very often unrealustically high). When that is the case, the employer gets the labor at below market rates and both employer and employee expect the shortfall to be made up for it by future owners of the company. So, IMHO, most defined benefit pensions are immoral as the employer knows at the time the pension plan is agreed to that he won't be paying the pension, the next guy will and the employee also knows that (or should know it) as well.

 

Again, if the defined benefit plan is fully funded, there is nothing wrong with it as the employer paid, at the time the work was performed, the full going rate for that labor. Unfortunately, that rarely happens.

[bcsaberks]

Well yea, married with kids is a whole 'nother ballgame. Presumably by retirement you're no longer going to be supporting them, paying student loans, or a mortgage.

 

IMO if you're spending $5000 a month in retirement you're either really unhealthy/unlucky or living a fairly lavish lifestyle (before any snark ensues, I'm not saying this in a judgmental sense at all... if you were able to set yourself up to live this way, good on you). Don't think this is a likely monthly expense amount for your average person.

Good points.  I suppose I'm not fully adjusting current cashflow for sans-kids and paid-for housing.  ie we are dropping >$1k  a month w/ Danny right now (3 kids + IPA habit).  Maybe that drops to $150 a week?  Still, add in some travel/leisure and regular medical expense and I think the spending shifts to different buckets.  

[Lanny]

Here's my math:

Spending $60k a year ($5k per month) * 20 years of being retired = $1,200,000 in the bank.  Give or take, and not accounting for social security.  $5k a month is probably more than needed but if you like good food/booze, want to live in your house (NY property tax) and want to do stuff....also I think our (gen x) out-of-pocket medical costs are going to be much higher than previous generations.

 

So if 15-20 years left to deposit, and at 200k, better giddy-up.  Max is $18,500 per year.

Have to factor in inflation, your $5k today may need to be more like $7k in 20 years

[josie]

My company's 401k matching has been inactive for some time now. I'm squirreling away a good chunk of every paycheck and have enough for a house downpayment in one of my savings accounts. The idea is I live off it if/when I move and can't find another job and cry a lot or use it for wedding/house/honeymoon stuff as d4rk climbs his way out of debt, mostly the student loan variety. 

 

Though when the day comes to spend some of that money, I'll be pretty upset... I prefer to hoard my funds. 

 

I wish I understood all of this stuff better. I just know that hoarding/investing is good, spending is bad. 

[TrueBlueGED]

Good points. I suppose I'm not fully adjusting current cashflow for sans-kids and paid-for housing. ie we are dropping >$1k a month w/ Danny right now (3 kids + IPA habit). Maybe that drops to $150 a week? Still, add in some travel/leisure and regular medical expense and I think the spending shifts to different buckets.

Sure spending shifts around, especially towards medical expenses, but in a county where median household income doesn't even reach $5k a month, I have a pretty hard time believing that's the monthly expense that most people need to plan for in retirement. That's really all I'm saying, and I certainly don't mean to suggest that people should aim to save only the bare minimum.

 

Besides, I want to take more vacations when I'm young and can have fun, not when I'm old and have to plan my day around my pills and, ahem, digestive track :p

[Claude_Verret]

Surveys of retirement spending.

 

Two books in my library that I need to dust off for a refresher read:

 

https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ref=sr_1_1?s=books&ie=UTF8&qid=1475767924&sr=1-1&keywords=bogleheads+guide+to+investing

 

https://www.amazon.com/gp/product/B002QX44IS/ref=pd_sim_351_1?ie=UTF8&pd_rd_i=B002QX44IS&pd_rd_r=8GMFDX3FEKVA0YKRTJDZ&pd_rd_w=69MIw&pd_rd_wg=JqHNg&psc=1&refRID=8GMFDX3FEKVA0YKRTJDZ