3 ms·

$75k income, increasing at 1% a year, saving 15% each year, investing at 7% average returns over a 40 year career would give you $101k in retirement. That does

$75k income, increasing at 1% a year, saving 15% each year, investing at 7% average returns over a 40 year career would give you $101k in retirement. That doesn’t seem unreasonable.

phonon 7y ago
Err, who earns $75k a year for 40 years? 40 years ago that person probably started off below $15k/year. (In 1979 average household income was $19,553) https://www.multpl.com/us-average-income/table/by-year https://www.multpl.com/us-average-income/table/by-year
- closeparen 7y ago
  The calculation includes inflation. $20k in 1979 is $70k today. It’s also the classic tradeoff of government work: lower salary than you could get in the private market, but retirement equivalent to a higher salary than you could get. Compelling only if you are sufficiently long term oriented.
  - phonon 7y ago
    I ran a few scenarios--your numbers are not correct. Start at age 20, making $15,000/y, increasing 5% per year. (Salary at retirement over $100k/y) Assume annual savings rate of 15% 8% return Retire at 60. I get around a million dollars saved at age 60 (i.e. today). Not enough to buy an annuity that pays out over $100,000/y. Off by a factor of 2 or so, I think. And starting salary 40 years ago was probably under 15k, 8% consistent compounded returns are really good, the other retirement benefits besides the pension etc.
sseagull 7y ago
Your calculations are a bit off, since even $75k * 0.15 * 40 = $450k (ie, not taking into account salary increases or returns). Also, $75k is a lot more that most people make. From what I can find, that would be ~85th percentile of personal income, or around the 60th percentile of household income. Edit: Some representative (although a bit outdated) sources: https://en.wikipedia.org/wiki/Personal_income_in_the_United_States https://en.wikipedia.org/wiki/Personal_income_in_the_United_... https://en.wikipedia.org/wiki/Household_income_in_the_United_States https://en.wikipedia.org/wiki/Household_income_in_the_United...
- closeparen 7y ago
  101k a year in income, more than $2m in total balance. Chicago police officers make $65k within 18 months [0]. If $75k is a high estimate, it’s not by a ton. Government competes for professional/managerial/educated employees as well. [0] https://www.chicagomag.com/Chicago-Magazine/The-312/August-2013/CPD/ https://www.chicagomag.com/Chicago-Magazine/The-312/August-2...

$75k income, increasing at 1% a year, saving 15% each year, investing at 7% average returns over a 40 year career would give you $101k in retirement. That doesn’t seem unreasonable.

phonon 7y ago

Err, who earns $75k a year for 40 years? 40 years ago that person probably started off below $15k/year. (In 1979 average household income was $19,553) https://www.multpl.com/us-average-income/table/by-year https://www.multpl.com/us-average-income/table/by-year

closeparen 7y ago
The calculation includes inflation. $20k in 1979 is $70k today. It’s also the classic tradeoff of government work: lower salary than you could get in the private market, but retirement equivalent to a higher salary than you could get. Compelling only if you are sufficiently long term oriented.
- phonon 7y ago
  I ran a few scenarios--your numbers are not correct. Start at age 20, making $15,000/y, increasing 5% per year. (Salary at retirement over $100k/y) Assume annual savings rate of 15% 8% return Retire at 60. I get around a million dollars saved at age 60 (i.e. today). Not enough to buy an annuity that pays out over $100,000/y. Off by a factor of 2 or so, I think. And starting salary 40 years ago was probably under 15k, 8% consistent compounded returns are really good, the other retirement benefits besides the pension etc.

sseagull 7y ago

Your calculations are a bit off, since even $75k * 0.15 * 40 = $450k (ie, not taking into account salary increases or returns). Also, $75k is a lot more that most people make. From what I can find, that would be ~85th percentile of personal income, or around the 60th percentile of household income. Edit: Some representative (although a bit outdated) sources: https://en.wikipedia.org/wiki/Personal_income_in_the_United_States https://en.wikipedia.org/wiki/Personal_income_in_the_United_... https://en.wikipedia.org/wiki/Household_income_in_the_United_States https://en.wikipedia.org/wiki/Household_income_in_the_United...

closeparen 7y ago
101k a year in income, more than $2m in total balance. Chicago police officers make $65k within 18 months [0]. If $75k is a high estimate, it’s not by a ton. Government competes for professional/managerial/educated employees as well. [0] https://www.chicagomag.com/Chicago-Magazine/The-312/August-2013/CPD/ https://www.chicagomag.com/Chicago-Magazine/The-312/August-2...