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I've been thinking about this for a while, and reading posts in this forum sort of reinforces my thoughts. I think that most retirement calculators that make you believe that you need 80% of your current income are, well, bogus. They are sponsored and/or hosted on websites of companies such as Fidelity, Charles Schwab etc., so, companies who will directly benefit from people saving more into their retirement accounts.
The way I see it, there is no way I will need this much in retirement. We save about 15% of our pretax income and about 10% of our net. This in itself means that we are living on less than 80% of our current income right now. We have two school age children, one of them will be off to college next year and we are preparing for the added costs of paying for his education. We are also paying mortgages on two properties, and they both should be completely paid off before we reach 65. One can become a rental property later on.
I understand there will be added medical and insurance costs when we retire, but can they possibly be more than two mortgages and costs of raising two children?
On the other hand, with our incomes, reducing our pre-tax retirement contributions means our income taxes will be higher. For every $400/month I don't contribute to my 403B I will have to pay ~$120 in taxes. So, it's either having extra $400 in my retirement account or $280 in my checking account.
Sorry, this may sound like a very much of a first world/high earner problem, but I was wondering if there were other people who share my thoughts and what approach you are taking to your retirement savings strategy.
Oh, and I don't want to retire early, at least now, at 38, I really don't see myself retired any time soon.
One thing you should bear in mind is that you may not have a choice about retiring early. There are a lot of folks out there in their mid-50s and up who've lost their high-paying jobs and are now permanently unemployed or working part-time for poverty-level wages. Being in a financial situation to retire early if necessary is financially prudent in today's economy.
Realistically, we could probably retire at 58 and live entirely off of my wife's pension, but we're not counting on it. Ideally, we would also like to do more than just save for retirement. We want to pay for our kids' college, buy (or rent) a second home and still leave behind a sizeable inheritance.
So we save pretty aggressively and make hay while the sun shines. If we hit a few road bumps and don't reach all our goals, we should still be pretty comfortable... and every penny that goes into that cushion helps us sleep better at night.
I've been thinking about this for a while, and reading posts in this forum sort of reinforces my thoughts. I think that most retirement calculators that make you believe that you need 80% of your current income are, well, bogus. They are sponsored and/or hosted on websites of companies such as Fidelity, Charles Schwab etc., so, companies who will directly benefit from people saving more into their retirement accounts.
The way I see it, there is no way I will need this much in retirement. We save about 15% of our pretax income and about 10% of our net. This in itself means that we are living on less than 80% of our current income right now. We have two school age children, one of them will be off to college next year and we are preparing for the added costs of paying for his education. We are also paying mortgages on two properties, and they both should be completely paid off before we reach 65. One can become a rental property later on.
I understand there will be added medical and insurance costs when we retire, but can they possibly be more than two mortgages and costs of raising two children?
On the other hand, with our incomes, reducing our pre-tax retirement contributions means our income taxes will be higher. For every $400/month I don't contribute to my 403B I will have to pay ~$120 in taxes. So, it's either having extra $400 in my retirement account or $280 in my checking account.
Sorry, this may sound like a very much of a first world/high earner problem, but I was wondering if there were other people who share my thoughts and what approach you are taking to your retirement savings strategy.
Oh, and I don't want to retire early, at least now, at 38, I really don't see myself retired any time soon.
I've been thinking about this for a while, and reading posts in this forum sort of reinforces my thoughts. I think that most retirement calculators that make you believe that you need 80% of your current income are, well, bogus. They are sponsored and/or hosted on websites of companies such as Fidelity, Charles Schwab etc., so, companies who will directly benefit from people saving more into their retirement accounts.
The way I see it, there is no way I will need this much in retirement. We save about 15% of our pretax income and about 10% of our net. This in itself means that we are living on less than 80% of our current income right now. We have two school age children, one of them will be off to college next year and we are preparing for the added costs of paying for his education. We are also paying mortgages on two properties, and they both should be completely paid off before we reach 65. One can become a rental property later on.
I understand there will be added medical and insurance costs when we retire, but can they possibly be more than two mortgages and costs of raising two children?
On the other hand, with our incomes, reducing our pre-tax retirement contributions means our income taxes will be higher. For every $400/month I don't contribute to my 403B I will have to pay ~$120 in taxes. So, it's either having extra $400 in my retirement account or $280 in my checking account.
Sorry, this may sound like a very much of a first world/high earner problem, but I was wondering if there were other people who share my thoughts and what approach you are taking to your retirement savings strategy.
Oh, and I don't want to retire early, at least now, at 38, I really don't see myself retired any time soon.
Many if not most people in their 50's want to retire early and you may find that you may want to as well. better to have too much than not enough. You can always reduce your saving or get it to me to retire early.
Realistically, we could probably retire at 58 and live entirely off of my wife's pension, but we're not counting on it. Ideally, we would also like to do more than just save for retirement. We want to pay for our kids' college, buy (or rent) a second home and still leave behind a sizeable inheritance.
Why do you want to leave a sizeable inheritance? I'm an immigrant, and we came here with $1000 dollars borrowed from my parents, two suitcases full of old clothing and not much else, and a 3 year old. We can't count on any inheritance, instead, we help our parents financially.
So, I'm questioning the idea of having to leave inheritance to my children. They will probably inherit our house or whatever property we have when we are old, isn't that enough? I'm also insuring they are getting good education and I brought up to not shy away from work and develop good work ethic early in life. I don't think insuring a life of luxury for them is my parental responsibility. It may be not to their advantage either.
I understand, however, a desire to have more than you need, just in case of a job loss or illness later in life.
Well, 80% is only a guideline. You certainly know your current living situation and your future expectations best, and can plan accordingly.
If you target less however, just be sure you are not short changing yourself. It's hard to predict the future and the more you have saved, the better off you are.
Worse case scenario if you save "too much" is that you have more money in retirement to enjoy your retirement with.
Why do you want to leave a sizeable inheritance? I'm an immigrant, and we came here with $1000 dollars borrowed from my parents, two suitcases full of old clothing and not much else, and a 3 year old. We can't count on any inheritance, instead, we help our parents financially.
So, I'm questioning the idea of having to leave inheritance to my children. They will probably inherit our house or whatever property we have when we are old, isn't that enough? I'm also insuring they are getting good education and I brought up to not shy away from work and develop good work ethic early in life. I don't think insuring a life of luxury for them is my parental responsibility. It may be not to their advantage either.
I understand, however, a desire to have more than you need, just in case of a job loss or illness later in life.
My wife and I are also immigrants. I was making more than my dad within my first year after graduating college, and since then I've also been helping them out with their finances. I was only able to do that because our parents did the best they could for us, so now we want to do the best that we can for the next generation (and generations after that).
Many disagree with me, but I don't think that having a strong work ethic and a large bank account are mutually exclusive. I also don't think that a lack of wealth necessarily needs to a strong work ethic. One thing that I do believe in is that wealth provides more opportunities.
I agree that most retirement calculators are inflated. Although it's gone down some as my son got older, at some points in time, childcare was over 10% of my income. I'm not going to have that expense in retirement. Plus the percent of income that is allocated to retirement savings. And I expect to have my mortgage paid off by retirement. Well below 80% already.
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I can also spend more now, and even on you, Traveler. I can take you out to dinner.
