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I am 29 years old, and I am putting aside about 22% each year for retirement. Out of this, about 11% is via 401k, 6% is mandated state retirement fund, and employer matches 5% of that. I have no 401k match where I work. Of course, technically, more is put aside via social security, but I am not counting that.
Is 22% about right? Is this significantly more than what most people should be putting aside? Due to my age, should I try to go all out and put away even more?
When did you start putting away money for retirement?
Honestly, there are far too many variables to say whether or not you're putting away enough money. For one, we don't know how much actual money you're saving (22% of $100k is a lot different than 22% of $25k). We also don't know when you plan to retire. Nor do we know how much money you plan to spend each year of retirement.
On the surface, I would say that very few 29-year-olds are saving 22% toward retirement and that you're on the right track. But like I said, there are a lot of unanswered questions.
Generally the rule of thumb that I've seen most often is 14% of gross for 30 years to live at same standard as just before you retire.I think that assumes a 10% growth in the 401K and other accounts from averaging the market from the past.If that state fund is a guaranteed annunity then you are lucky and if it has cost of living like mine that really makes a difference.
22% of about 72K/year. I have been saving since I started work in 2003, but it was maybe at the 15-20% mark then. I want to put away more, but I want to get rid of some 0% credit card debt and a $3,000 HELOC. I had some expenses due to a divorce.
When do you want to retire? That's going to be a key component. As is your desired standard of living once you retire.
It sounds like you've got a home (you mentioned HELOC). Personally, I'd stick with the 22% and knock out your mortgage and other debts with any leftover funds. This is assuming that you've already got an emergency fund that you can access at any time, should the need arise.
I am 29 years old, and I am putting aside about 22% each year for retirement. Out of this, about 11% is via 401k, 6% is mandated state retirement fund, and employer matches 5% of that. I have no 401k match where I work. Of course, technically, more is put aside via social security, but I am not counting that.
Is 22% about right? Is this significantly more than what most people should be putting aside? Due to my age, should I try to go all out and put away even more?
congrats! you are doing so much better than the average person! Too many people don't start thinking about saving for their retirement until they are in their 40s.
Go to Financial Calculators from Dinkytown.net and look at their retirement calculators. You can put in all of the variables and it will tell you what you will have at retirement. It is a great planning tool.
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Save while you can... I put a lot away before age 28; then the kids / farm / single income years that followed cut into the gravy & I did ~ 15%. Retired at age 49. (no pension or medical...)
You want to target your projected income needs at retirement (ez to use 80% of current income projected in future $$) then... you will want a nest egg large enough to fund it with only a 5% withdrawal rate. (allows for equity growth + distribution) Thus, a million bucks will provide you $50,000k of annual income (today's dollars)
IIRC... (off the top of my head... could be wrong, but surely someone will offer a correction)
In your case you calculate 80% of your salary ($57,600) value 40 yrs into the future (x 4.801 if 4% inflation) thus annual needs will be = ~ $276,500 and so you will need a $5.5M nest egg @ age 62. At 8% growth it looks like you need to stash ~ $21k (30%) per yr for 40 yrs, or get a better return... or some raises . Better check my math
You should devise a few ways to get to the golden #, as stuff happens....
systematic investment is best + some real estate / private business / and avoiding divorce.
I never retired my mortgage, and am still using it's 4.125 rate for investments (long-term, real estate secured commercial props) 3 yrs after my 'early' retirement. I like to retain enough liquidity to pay it off at a moments notice if necessary, but don't plan on doing so till after I quit itemizing deductions, or they exclude the mortgage interest. The I will probably write a personal mortgage note on my home and 'self fund my investment debt from my mortgage and deduct 100% of the interest against investment income.
Last edited by StealthRabbit; 03-13-2008 at 02:27 AM..
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