Are we saving enough?

[TheMom]

We're struggling with figuring out if we're saving 'enough' for retirement. Sure more is better, but there are things we'd like to save for now as well - house improvements, for example.

Our stats:
family - DH (41), me (40), 3 kids (3, 5, and 7)
income (DH's) - $89,000 gross, $5900 net/month
monthly expenses - $4000
liquid emergency fund - $22,000
savings for repairs, vacations, car replacement, home improvements, etc - $11,000
my IRA (401k rollover) - $153,000
DH's 401k - $290,000
Roth IRAs combined - $32,000
Total current retirement = $475,000

DH contributes 5% to his 401k and the company contribution is another 7% for 12% total. We are adding $500/month to our Roth IRAs total. So, annual amount is $16,680 right now.

Our home value is probably $175,000 and we owe $72,000 @ 4.75% and we'll pay that off in 2017 at the latest.

We have 2 years for each child of prepaid tuition that my parents bought for them. The remaining years will be paid by us and the kids together and we are planning on using the house payment to do that, since the house will be paid for when the oldest is 13. We are currently paying a minimum of $1075/month towards the mortgage and will increase that based on raises, etc.

We have no other debts.

We are currently saving $500-$700/month towards the car replacement/home improvment area. We'll need to replace acar in 2-3 years and would like to get new carpet or hardwood floors in 2-3 years and eventually we'd like to update our kitchen.

So, I want to save towards the 'fun' goals, but don't want to short-change retirement. We could bump up the 401k or Roth IRA contribution and slow down the other savings if necessary.

What do you experts think? Are we good ro do we need to increase the %age?

Thanks!

[ActYourWage]

Correct me if I'm wrong. You are currently saving almost 19% (18.7%) of your gross for retirement?

You retirement savings is very healthy. Just be sure to monitor your kids college fund.

[adstalker]

I think its awesome you have a 22,000 emergency fund.

[jpg7n16]

I usually don't consider employer contributions when calculating the amount to save. And I usually recommend that people save between 15-20% of their income.

Right now you guys are doing fantastic. Ample EF, good balances in retirement accounts, good monthly surplus of cashflow. You've got a great start, and a very healthy level of employer contributions. And at present, you are contributing 11.74% (not including employer contributions)

Also, your parent's gave your kids a great head start on college.


So there's really not much to complain about here You're doing great!

The very small suggestion I'd make is, instead of $500/month to the Roth, and $700 towards car savings - make it $700/month to Roth and $500 towards car savings. (Or $600/600) It would calm your nerves a bit (obv you wouldn't post unless you were slightly worried/unsure), and I just like the feeling of saving more for retirement, than for my next car.

Then final suggestion: once your total retirement balance hits $500,000, reward yourself with new flooring! You guys have been doing awesome and that seems like a good milestone for a reward

[disneysteve]

Correct me if I'm wrong. You are currently saving almost 19% (18.7%) of your gross for retirement?

No, it is 11.74% as noted by jpg. You shouldn't include the employer match in the calculation.

I think its awesome you have a 22,000 emergency fund.

That is great at 5.5 months worth. Everybody should have a 6 month EF and you guys are right on target.

The very small suggestion I'd make is, instead of $500/month to the Roth, and $700 towards car savings - make it $700/month to Roth and $500 towards car savings.

Agreed. You should strive to max your Roths - $10,000/year or $833/month. Retirement is more important than buying a car. Besides, even at $400/month, in 3 years you'd have $14,400 saved which is more than enough to buy a good car even if you had nothing saved yet.

[TheMom]

The $11,000 account that the savings goes into is for everything. I keep track on a spreadsheet and right now, I have $5k earmarked for house repairs (14 year old furnace, a/c, etc), $900 for gifts, $1500 for vacation, and the rest for car repairs/replacement and that's at $3500. I've capped the house repairs for now, and of the $500-$700/month savings, $100 goes to gifts (3 kids birthdays and Christmas), $100 for vacation, and the rest towards the car fund. So, that's $300-$500/month for the car. The reason for the variation is because I do not budget monthly for all annual bills. If I can cover it out of our leftover, I will. For example, this month we paid our trash pickup for the next year and it's $230, so less into savings. I budget monthly for things like car insurance, which is $1800/year since I don't have that much extra in 1 month.

Clearly, if we needed to replace a car now, I'd shuffle most of that money around and we'd be just fine. I like having goals for all the things we want to do though . It works for us.

I'll up the Roth to $600 for now, and will add to it if DH gets a raise in 2012.

For the emergency fund, my thinking was that if DH lost his job, we'd immediately cut things like dining out and our 'fun money', which would free up $250 or so a month quickly. If he was out for a couple months, we'd start cutting out things like TaeKwonDo, gymnastics, etc. There are lots of places we can cut costs if needed. And, if he loses his job, hopefully it won't be right after buying a car, taking a vacation and needing a new furnace, so we'd have money in that savings account, too .

Thank you for the reassurance that we're on track. I figured we weren't doing terribly, but wasn't sure if we were there enough. And thanks for encouraging me to up the Roth amount.

[TheMom]

Then final suggestion: once your total retirement balance hits $500,000, reward yourself with new flooring! You guys have been doing awesome and that seems like a good milestone for a reward

While I do like this idea, I need/want to wait. Our youngest is potty trained, but still has accidents and I want to be absolutely, positively sure that no one is going to pee on my new carpet!