- November 23, 2023
- Posted by: legaleseblogger
- Category: Related News
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Analysis of Personal Financial Situation
According to my research and personal financial records, I currently earn approximately $170,000 annually and have been employed for a total of six years. I have also managed to save $40,000 and am currently maximizing my employer’s 4% match for my retirement fund. However, I am hesitant to allocate a larger portion of my income towards retirement savings as I have financial obligations such as a mortgage, children, vehicle expenses, and vacations that require my attention and resources.
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In this scenario, the AI Legalese Decoder can be utilized to provide a comprehensive analysis of the individual’s current financial situation. By inputting relevant financial data into the system, the AI Legalese Decoder can generate personalized recommendations regarding retirement savings, investment strategies, and financial planning. Additionally, the program can offer insights on how to optimize budget allocation to accommodate various expenses and savings goals. Ultimately, the AI Legalese Decoder can provide valuable guidance to help the individual make informed decisions about their financial priorities and long-term objectives.
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****** just grabbed a
With $170k income you save $6.5k a year? Cut your expenses because youÔÇÖre going to be eating cat food.
….and how long have you been making the $170k you have decided to use as your yardstick?
There’s no magic formula to stretching your dollars. You aren’t doing it “wrong” per se but you are definitely prioritizing the “now” instead of the future. And that’s your right to do so.
But most people have to sacrifice something because their level of income is not enough to fully fund all of the following:
* Maxing out retirement accounts
* Saving for kids/college
* Paying a mortgage
* Having enough money for hobbies
* Travel/Vacations
* Nice cars or multiple cars
* Good groceries/eating out
* etc.
People have to decide for themselves what they prioritize. It seems right now you prioritize everything but maxing out retirement accounts. That’s your right to do so but you will most likely retire with about $1.1M if you continue at your current contribution rate and I really don’t think that is going to keep up with your lifestyle 30+ years from now.
TLDR: You can pick to suffer now or later.
How are you saving so little with such an insanely high income?
You are undersaving. The floor that you should be putting away for retirement is 15%. You should be targeting 25%. If you can’t then your lifestyle is too expensive.
Contrary to what most people think, the more you make the higher your savings rate needs to be because social security will cover a smaller percentage of your expenses.
> IÔÇÖm maxing my match which is 4%. I really donÔÇÖt want to put much more of my income into the retirement fund as I need it for the house, kids, cars, vacations, etc
Respectfully, too bad. You should absolutely be able to significantly increase your retirement savings and still have money for all of the above IF you’re living within your means. My savings rate was a lot higher while making a lot less and still managing all of those savings expenses, so it’s possible.
And yes, you will need to do so in order to retire.
Well let’s think about this for a minute. Do you have any savings or investments outside of the 401K?
Yes you are doing it all wrong but itÔÇÖs not too late to change. At 170K, you should at least be maxing out your 401k at $22,500 to take advantage of your taxes. If you canÔÇÖt save more, then you are living beyond your means. How are you planning to support yourself in retirement without having saved enough money?
You have missed out on good market gains over those 6 years by not maximizing your contributions. If you had invested just the 401k contribution max for 2017 ($18k) alone in an S&P500 indexed fund you’d have nearly the $40k you have now. And the 401k contribution max is less than the broadly recommended saving rate of 15% of your income for your salary.
Looking at it from another angle, after inflation over the next 30 years, you would need $300k to have the buying power of your current salary (given a 2% inflation rate and rounding down by a bit). Even if you only need 80% of that you’re looking at needing $240k/yr in retirement. Using the 4% rule (which some say is too risky) you’d need $6 million saved by age 65. Even saving 25% of your current salary (that’s a flat $42500/yr, I’m not accounting for salary or contribution growth in this specific calculation just to make it easy) and getting an 8% return on your investment leaves you nearly $1 million short. With just $40k saved to date, and only saving less than $15k/yr, you are going to fall far short of your retirement needs.
Edit: I realized after posting you may not be 35, which means the math might be slightly less dire if you increase your savings rate immediately as you have more time to catch up. Calculation above was for a 35 year old retiring in 30 years.
ThatÔÇÖs fine, as long as youÔÇÖre ok with not retiring before 75(and work in an industry where you can have a career at that age with a similar salary that your lifestyle requires)
But seriously, yes, you are doing it wrong. YouÔÇÖre living beyond your means if you canÔÇÖt save more than 4% of your income
Yes that is the general rule, but reading your comment above looks like you donÔÇÖt want to save but rather spend on kids, vacations, home, etc.. I mean no one can tell you otherwise if thatÔÇÖs what you set your mind to.
If you make 170k and can only afford 4% your lifestyle is way inflated
Just some quick math to show you the advantage of AT MINIMUM maxing out your 401k (especially at your income).
You currently only put ~$6,800/year away. Meaning you are being taxed on your income of $163,200 @ 30% leaving you with $114,240.
If you maxed out your 401k contributions that’s $22,500. Your taxable income is now $147,500 @ 30% leaving you with $103,250. Saving an extra $1300/m ACTUALLY only costs you $900/m.
You really ÔÇ£needÔÇØ a nice car and vacations? I make less than half of what you do with one kid and am maxing out my 401k and HSA this year. You need to learn to live below your means.
For the record, I bought a cheap but reliable car so no payments and still am able to travel domestically 3-4 times a year occasionally internationally as well. Get a budget.
Idk if this makes a difference to say but, IÔÇÖm 35 and single mom of 2 making 85k a year & have about 70k in my 401k. You might want to reevaluate where
Your money is going.
IÔÇÖm your age, make half as much as you and have 9 times what you have saved. You have to change your lifestyle as you arenÔÇÖt saving enough at all. You should be putting in 15% plus the 4% but since youÔÇÖre behind, you need to bump it up further.
Since youÔÇÖre a high earner, you might be able to save more than the $22,500 maximum contribution limit. The mega back door Roth 401k is for high income earners like yourself.
Get online and play with some retirement calculators.
4% of your income going to retirement [Plus match, 8%], and 40K saved in total at 35, with a 170K salary
My dude, unless you start living below your means, you are screwed. Screwed, I tell you!
33K on a mortgage, 14K on cars, 15K on vacations, 6K on eating out, 6K on groceries. Why do you have car payments? You make more than enough money to buy 2 decent cars in cash. Sell the cars and get some cheaper ones. 15K on vacations is ridiculous; there are plenty of much cheaper vacation options out there. Hop on Google and find some. $500 a month on eating out is a lot of money – Learn how to meal prep or something if you hate cooking that much.
4% is nowhere near enough. At your income you need to save 20%.
Ouch. I wonÔÇÖt pile on. Listen to everyone else here.
Live below your means. You need to be saving off the top. If I was you IÔÇÖd probably be doing at least 20% to your 401k and DEFINITELY doing a backdoor Roth. There are also other steps you can take but those are just the beginning steps.
Your kids will be much happier with not having to fund your retirement and healthcare in your old age than trips to Disneyworld. Please think of a healthy retirement savings as a gift to them. They wonÔÇÖt be burdened by your bills when youÔÇÖre all older. You could potentially be destroying your future and theirs by not prioritizing saving now.
Are you a doctor? Things are a bit different for doctors due to the higher salary later in life (often with loads of debt), but 4% is definitely way too low, especially on a $170k income. With that income, you should be easily contributing up to the max ($22,500 in 2023, or 13.2% of your gross). Whitecoat Investor has a lot of good info specific to the unique income trajectory doctors go through.
The multiplier to qualify as a ‘Prodigious Accumulators of Wealth’ from Thomas Stanley’s *The Millionaire Next Door* is actually Age/10, so 3.5 in your case. That is obviously a bit unfair if you just finished your residency at 29 and have had only six years to accumulate, you should definitely be saving way more than 4%.
You should have 1.5x your income in retirement savings. It doesnÔÇÖt have to be in a 401k
What youÔÇÖre doing is fine, if youÔÇÖre good with not retiring until 75 or 80.
You make $170k/year and only have $40k in savings?
Yes, you’re doing it all wrong.
With an income like that this is literally the easiest thing to do. Stop living like a rock star. You shouldn’t take on debt for a car at your income.
So do you have $40k in your retirement savings? Or $40k in savings and some other number in retirement? You need to create a detailed budget first. At least it appears like youÔÇÖre not in some major CC debt which is good. Now you need to take a peek into your expenses. What is necessary what is not? What can be substituted for a cheaper brand? What can you get second hand?
I live in a VHCOL area too (Toronto, Canada) and $170k doesnÔÇÖt go as far as people think when you have a mortgage, kids, wife/husband (donÔÇÖt know if theyÔÇÖre stay at home or not), etc.
This post just scared the shit outta me. Actually made me sit down and do math, turns out IÔÇÖm saving 29% after tax (probably a bit more since I randomly dump money into my savings).
Good little anxiety scare