Am I contributing enough to my retirement/savings?

Submitted by TheBigShrimp t3_yip9pu in personalfinance

Hi all. I'm curious to know if I'm saving enough money based on my income, age etc.

I'm 25 and make $70k a year. Only debt is $16k auto loan (car value is ~$26k) which I pay $300/mo.

I contribute 25% of my paychecks to my work's 401k. After employer match, it comes out to roughly $830 bi-weekly.

This makes my paychecks ~$1600.

The only monthly expenses I have are:

  • Car payment $300
  • Subscriptions/Gym $75
  • Coach $400 (will explain)

I know the coach is expensive but I'm a competitive powerlfiter, it's literally my only hobby so I pay for it.

I've noticed my total assets have been stagnant recently because of the way the market is and Im worried Im not contributing to enough savings. If I total all of my accounts together, it's about $80,000. I can't tell if Im behind or not for my age.

Should I be contributing more to 401k/Roth?

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rnelsonee t1_iujtetc wrote

At age 25, it's hard to gauge how much to have saved, as everyone starts saving at different ages. But a common early metric is save about a years' income by age 30, so I'd say you're doing great. And 25%+match is also great. If/when you start paying rent/mortgage, you may need to back that down. But now, you're fine, even with the coach.

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TheBigShrimp OP t1_iujtuvx wrote

Gotcha, thank you! Yeah I'm usually pretty hard on myself about spending but I convinced myself to splurge on coaching just because this is what I want to do (I also want to coach in the future) so I consider it an investment.

Luckily my parents and my girlfriends prefer us stay living with one of them for as long as possible so I don't have to move out.

I wanted to have 100k by 25, but the market has kind of prevented that. I guess it's a win to not have my net worth go down and at least stay stagnant right now?

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DelDotRun t1_iujudhk wrote

You are doing great! Contributing 25% at your age plus whatever your employer is contributing will be more than enough to retire at 65 or even earlier. Just make sure to keep it at 25% as your pay increases. If you want to retire earlier, then you might want to save at a slightly higher rate.

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SmartBar88 t1_iuk0ly3 wrote

Sounds like you are doing great for your age! Congratulations!

One cent's worth - consider building an emergency fund that makes you comfortable. Three-six months is good for most at your age.

One cent's worth - If I had one thing I could redo it would be to max out my annual Roth contribution. Just nice to have the extra tax free accumulation and withdrawal bucket for later in life.

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TheBigShrimp OP t1_iuk0vcl wrote

Thanks!

Sorry I didn't expand:

I have a $12k emergency fund.

$35k in a Roth IRA and $28k in a 401k.

This will probably be the first year I don't hit my max on the Roth, but I could if I sacrifice some emergency fund. Just gonna see how it goes, I have about $3k left to contribute this year. Normally I prioritize it but my girlfriend opened a business and I had to spend a little extra for support/her needs.

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Capable_Most_3630 t1_iuk1zz3 wrote

You are doing good. The Money Guys suggest saving 25% for retirement, which I wish I could. I would YouTube them and watch some of their videos. They are a good resource.

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Applejuiceinthehall t1_iuk2yvs wrote

You need to work backward from your goal. The general rule of thumb is 80% pre retirement income.

So, let's say you need 56,000 a year. Multiple that by 25 you will need 1.4 million. Now, look for a future value calculator online (or you can look up how to do formula on excel). Plug in goal and see how much you need to save yearly. If you are over that amount, then you will have more in retirement, or you will be able to retire early. If you are under, then you need to save more or retire later.

You might also run multiple by 30 or 33 if you want to be conservative.

Finally, if you're thinking, "I'm going to make more than $70k when I retire." You are probably correct. The way to deal with this is that every time you get a non-cost of living raise, you need to save half of the raise. Doing this means you are saving for your lifestyle creep. You don't need to save cost-of-living raises, but you can if you want.

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