I am maxing out my 401k but there was 10 years when I was in my 20s where I barely saved anything because I was underemployed in a different career. Now I've got more so I'm wondering if I should invest more to make up the difference. A lot of retirement calculators use an 80% of current income rule to project what you'll need upon retirement but that can't be true when you're paid way more than the avg American, right? Even disregarding pay, my costs will be lower as I will no longer need to pay student loans, pay for daycare, save for children's education, etc. So what percentage should I expect to use and how much extra should I be saving to make up for lost time (given that I have all the other monthly expenses listed above). Age: 35 TC: 180k cash, 6k stock options. Expenses SO pays for house, me for childcare. 1 kid so far. Trying to pay down student debt as fast as possible so expenses: $2k - student loan $1700 - daycare $1500 - 401k $500 - 529 plan $2-3k - credit card bill Gives me ~1-2k left over to save or pay down debt.
I agree on those calculators that say you need to spend like $250k a year in retirement are bogus since our incomes are so high. Best to just give it a guess and go from there. Maybe like $120k to start. Factor in medical costs though. Can’t tell what health you will be in at that age.
The answer would vary by health and lifestyle. Calculate your anticipated expenses, then work backwards from there.
Get yourself a mint account. Look at your monthly spend. Deduct housing expenses assuming you’ll have paid off your house by then. Apply 2% inflation per year. About 5% increase per year in health spend. That will give you an aggressive estimate of your monthly expense in retirement. Obviously, that’s not accurate. But it’s a good ballpark figure, I think. Regarding your question around how much should you contribute to your 401K, a savvy answer would be, at least as much as the max your employer matches. But I would max out to 19000. Hope that helps
Vanguard and other retirement companies want you to max out retirement accounts always. I would say to pay off the highest interest rate loans first. CC usually and then student loan. Why pay interest unless you’re getting a better return elsewhere. Once you’re done, put towards 401k, Roth, etc
Amount you want per year in retirement times 26.
Priorities 1) Pay down debt - first credit card, then student loan 2) adequate emergency savings in case you are laid off 3) buy a house if you have a family 4) tax advantaged accounts - HSA, 401K, DCAP, 529 (in that order)
One big factor is how you live and spend money. Personally I’m a simple person so it wouldn’t take much to live off of but I also know plenty of people who want to retire with a huge house, new sports cars, etc. Where you retire plays a part too. Your description also leaves out other key factors, like TC, how long to retire, how old you are, where you live, etc.
Will update original post.