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    #16
    Originally posted by disneysteve View Post

    That's easy to say when you're on the higher end of the income scale, but fully half of the US population earns less than 68K. If you're making 50K, for example, once you pay taxes, health insurance, rent, utilities, food, clothing, gas, auto insurance and maintenance, out of pocket medical bills, maybe some kids' activities, a budget vacation once a year, and whatever else you need to live, setting aside $7,500 for retirement can be quite a challenge.

    It gets easier and easier the more you earn because so many costs are regressive.
    I think lifestyle creep plays into this quite a bit as well. I started with my company out of college making $35k/yr. It's taken me 14 years to get to $87k. While there are some things I'm willing to spend more on now that I'm a little more comfy (GOOD toilet paper, healthy food over convenience food, a rental car over public transport when we travel) I still drive a 14 year old car, live in a modest 1,500 sq ft 1 bath house, and budget/track my spending. My two biggest categories that have increased over time are taxes and savings. I'm not saying it's not hard when you're starting out or as a lower income earner, but it is hard to prioritize what to do with increased income and reduce the urge to spend when you've spent so much time not having that luxury.

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      #17
      Originally posted by riverwed070707 View Post
      I started with my company out of college making $35k/yr.
      Were you saving 15% of gross for retirement at that point?

      We were not saving 15% for quite a few years into my career. Why? Because less than a year after finishing residency we bought a house. 18 months later we had our daughter. I had 100K in student loans, DW still had a student loan I think and a car loan. Our money was going to establish our lives as independent adults. We were saving and we bumped up the % every time our income rose or at least annually regardless but it was a number of years before we got to that magic 15% number. We were well into our 30s by then.
      Steve

      * Despite the high cost of living, it remains very popular.
      * Why should I pay for my daughter's education when she already knows everything?
      * There are no shortcuts to anywhere worth going.

      Comment


        #18
        Originally posted by disneysteve View Post

        Were you saving 15% of gross for retirement at that point?

        We were not saving 15% for quite a few years into my career. Why? Because less than a year after finishing residency we bought a house. 18 months later we had our daughter. I had 100K in student loans, DW still had a student loan I think and a car loan. Our money was going to establish our lives as independent adults. We were saving and we bumped up the % every time our income rose or at least annually regardless but it was a number of years before we got to that magic 15% number. We were well into our 30s by then.
        We make a great comparison to demonstrate the point I was trying to make (perhaps missed the mark). I recognize that it's definitely harder on the low end of the income scale. But as I referred to, you started out into your career with a pile of student loans & mortgage & car loan, etc. Starting a career way behind like that is crushing. The money that could otherwise go to savings is instead servicing debts, and it's no surprise you couldn't save effectively.

        By contrast, I started my career with a $40k income, maybe $5k in the bank, and roughly $30k in debt. But I lived with roommates to keep my expenses down, and even though I wasn't earning alot, I was still saving 15-20%. I had gotten into the habit of saving as a college student (earning maybe $10k after room/board/fees/supplies), but with the little I was getting, I was building a Roth IRA, and maxing it by the time I graduated. A full-ride scholarship is certainly not the circumstances everyone has available, but I only use my example to demonstrate that deep debt & not saving from the start hamstrings a person's ability to save. It'd be little different for a 19-20y/o who lived at home while attending a trade school/apprenticeship/community college, getting the skills necessary (at a low cost) to start working & earning an income with some growth potential. Note: The growth potential is important as well..... Many jobs simply don't offer (or make readily available) that upward trajectory.

        In my mind, we need to squash the idea that a mountain of debt & spending frivolously is the path to happiness & success. Until then, people will always struggle to save.
        "Praestantia per minutus" ... "Acta non verba"

        Comment


          #19
          Originally posted by kork13 View Post

          By contrast, I started my career with a $40k income, maybe $5k in the bank, and roughly $30k in debt. But I lived with roommates to keep my expenses down
          And it's great that you were able to do that. It would have been different if you were married with a kid. That likely would have altered your ability to save. We got married while I was still in training. We had our daughter just over 2 years after I started working. And we were super frugal. We paid about 1.5 times income for our house which is pretty conservative, and we did many other things to economize. But we still couldn't come close to 15% for retirement in those early years.
          Steve

          * Despite the high cost of living, it remains very popular.
          * Why should I pay for my daughter's education when she already knows everything?
          * There are no shortcuts to anywhere worth going.

          Comment


            #20
            Our daughter is 25. She graduated college in 2018. She is working though not earning a ton, but she's living at home and does save 15% for retirement as well as additional money into her regular savings. She already paid off her student loans. She owns her car outright (bought used for $5,000 with some help from us and grandmom). She's establishing good saving habits that will serve her well throughout her life.

            If she was out on her own, though, there's no way she could do it. Rent alone would suck up everything that is currently being saved.
            Steve

            * Despite the high cost of living, it remains very popular.
            * Why should I pay for my daughter's education when she already knows everything?
            * There are no shortcuts to anywhere worth going.

            Comment


              #21
              Originally posted by disneysteve View Post

              Were you saving 15% of gross for retirement at that point?

              We were not saving 15% for quite a few years into my career. Why? Because less than a year after finishing residency we bought a house. 18 months later we had our daughter. I had 100K in student loans, DW still had a student loan I think and a car loan. Our money was going to establish our lives as independent adults. We were saving and we bumped up the % every time our income rose or at least annually regardless but it was a number of years before we got to that magic 15% number. We were well into our 30s by then.
              I've definitely varied my savings percentage over the years. Started out around 15%, dropped it down when we went into serious debt payoff mode and again when I was focused on acquiring rentals which require a large down payment. I can absolutely understand why everyone can't run out of the gate putting away 15%, I was just commenting on how some people never get there because (unlike you and a number of others on this board) when their income increases, they buy a new car or a bigger house instead of allocating that money to savings and retirement. I reflect frequently on how crazy it is how much the average size home has increased over the last 50 years ... and it certainly isn't because we're having more children per household! Any house under 2k sq ft is now deemed a "starter home" when it was probably built to house a family of 5. A couple years ago my city tried to pass an ordinance that stated no new construction homes could be less than 1,700 sq ft, had to have basements that were able to be finished and had to have a garage Fortunately it didn't pass.

              Comment


                #22
                Originally posted by riverwed070707 View Post

                I can absolutely understand why everyone can't run out of the gate putting away 15%, I was just commenting on how some people never get there because (unlike you and a number of others on this board) when their income increases, they buy a new car or a bigger house instead of allocating that money to savings and retirement.
                So true. What we did over the years is when income rose, we allotted much/most of it toward increased savings but also put part of it into our day to day spending, so we got the benefit both ways. We upped our lifestyle, but not by as much as the increased income would have allowed for.

                I reflect frequently on how crazy it is how much the average size home has increased over the last 50 years ... and it certainly isn't because we're having more children per household! Any house under 2k sq ft is now deemed a "starter home" when it was probably built to house a family of 5.
                This was actually something I included in an article I had published years ago in a national financial magazine. The whole concept of a "starter home" is relatively new. My parents bought one home when they got married, raised 2 kids there, and my mom lived there until she was in her 70s and moved to a senior apartment building. We bought one home when we got married (bigger than the one either of us were raised in) and have lived here for 27 years. We could have easily afforded to upgrade along the way. We chose not to, and I have to say that's been one of the biggest drivers of our financial success. That and buying affordable used cars.
                Steve

                * Despite the high cost of living, it remains very popular.
                * Why should I pay for my daughter's education when she already knows everything?
                * There are no shortcuts to anywhere worth going.

                Comment


                  #23
                  Originally posted by disneysteve View Post
                  When we had a mortgage, I did count extra principal payments as part of our savings figure (but not the regular scheduled payment).
                  That was my mental savings technique too. Made putting extra principal in more palatable.

                  Don't torture yourself, thats what I'm here for.

                  Comment


                    #24
                    One thing that I have noticed in DH's latest 401k is an "Automatically increase your paycheck deduction"

                    It is actually a default setting that increases by 1% annually (if allows you to select up to a 3% annual increase). If you leave it on autopilot, it will continue until the annual increases to your paycheck deduction will stop at your savings cap (which is set at a default of 75%, but it allows you to select a cap anywhere between 6%-75%).

                    Every time we want to make a change to the paycheck deduction amount, we have to opt our of the default annual increase option.

                    I believe the 401k is "opt out" for new hires, too. So, you have to purposefully do something or you are automatically enrolled. There is a company match up to the first 5%.

                    My scheme for increasing contributions (or increasing saving in general) was to always time it with a pay increase so it wasn't noticeable.

                    Comment


                      #25
                      Originally posted by Like2Plan View Post
                      One thing that I have noticed in DH's latest 401k is an "Automatically increase your paycheck deduction"
                      .....
                      I believe the 401k is "opt out" for new hires, too. So, you have to purposefully do something or you are automatically enrolled. There is a company match up to the first 5%.

                      My scheme for increasing contributions (or increasing saving in general) was to always time it with a pay increase so it wasn't noticeable.
                      In most cases, I think this is a great way to help people start saving for retirement. Especially knowing that pensions are mostly unavailable, it seems like the very least an employer can do to help their employees have SOMETHING going toward retirement. Sure, it's not really difficult to opt back out of the 401k. But at least auto-enrollment and auto-increase policies put inertia working in the RIGHT direction for folks, versus inertia keeping them from saving nothing.

                      I will say, though, that 75% as a default savings cap? woof.... Seeing that makes even me shudder a bit. lol
                      "Praestantia per minutus" ... "Acta non verba"

                      Comment


                        #26
                        Originally posted by kork13 View Post

                        In most cases, I think this is a great way to help people start saving for retirement. Especially knowing that pensions are mostly unavailable, it seems like the very least an employer can do to help their employees have SOMETHING going toward retirement. Sure, it's not really difficult to opt back out of the 401k. But at least auto-enrollment and auto-increase policies put inertia working in the RIGHT direction for folks, versus inertia keeping them from saving nothing.

                        I will say, though, that 75% as a default savings cap? woof.... Seeing that makes even me shudder a bit. lol
                        I think that has the "potential" for an unwelcome surprise. (And then trying to figure out what the heck went wrong with the withholding. )


                        Comment


                          #27
                          Originally posted by kork13 View Post

                          I will say, though, that 75% as a default savings cap? woof.... Seeing that makes even me shudder a bit. lol
                          Well it's only going up 1%/year and if it starts at 3% (which is a common auto-enrollment feature), it would take 72 years to get to 75%. Even if you started higher, you'd obviously notice it creeping up each year.

                          I like that they offer a 75% cap. My job (and my wife's former job) had a 50% cap. We wanted to set hers at 100% but they wouldn't let us.
                          Steve

                          * Despite the high cost of living, it remains very popular.
                          * Why should I pay for my daughter's education when she already knows everything?
                          * There are no shortcuts to anywhere worth going.

                          Comment


                            #28
                            While we're on the subject of auto-enrollment...I think we need to be very careful about how we approach this topic. Yes, you can improve someones' savings rate if you auto-enroll them in a 401(k), but that's a policy which is consistent with treating employees like children or serfs. Do you really want to live in a country that lets corporations treat people like that? Instead shouldn't we be educating the general public about the benefits of saving? That's an approach that would probably get us to a higher savings rate without infantalizing the general public.
                            james.c.hendrickson@gmail.com
                            202.468.6043

                            Comment


                              #29
                              Originally posted by james.hendrickson View Post
                              While we're on the subject of auto-enrollment...I think we need to be very careful about how we approach this topic. Yes, you can improve someones' savings rate if you auto-enroll them in a 401(k), but that's a policy which is consistent with treating employees like children or serfs. Do you really want to live in a country that lets corporations treat people like that? Instead shouldn't we be educating the general public about the benefits of saving? That's an approach that would probably get us to a higher savings rate without infantalizing the general public.
                              I disagree. I see nothing at all wrong with auto-enrollment. You can easily opt out if you'd like to. I don't see it as infantalizing people. I see it as putting them on the correct path, giving them a little push to get started, which is the hardest part - starting. I'd love to see the stats for what percent opt out. I'm guessing it's fairly low.

                              Inertia is a powerful force. If people are doing nothing, they're likely to keep doing nothing. If you auto-enroll them, they're likely to keep investing. Even better if you add in auto-increases each year.
                              Steve

                              * Despite the high cost of living, it remains very popular.
                              * Why should I pay for my daughter's education when she already knows everything?
                              * There are no shortcuts to anywhere worth going.

                              Comment


                                #30
                                Originally posted by disneysteve View Post

                                I disagree. I see nothing at all wrong with auto-enrollment. You can easily opt out if you'd like to. I don't see it as infantalizing people. I see it as putting them on the correct path, giving them a little push to get started, which is the hardest part - starting. I'd love to see the stats for what percent opt out. I'm guessing it's fairly low.

                                Inertia is a powerful force. If people are doing nothing, they're likely to keep doing nothing. If you auto-enroll them, they're likely to keep investing. Even better if you add in auto-increases each year.
                                Ah...and who are these omniscient, perfect, corporate HR staffers who decide what the "correct" path is? Societies, in general, get the best outcome when people are free to make their own decisions.
                                james.c.hendrickson@gmail.com
                                202.468.6043

                                Comment

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