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Just curious, in your opinion, what should be the net worth target for people making regular tech income in their 30's, 40's and 50's if they want to eek out co

Just curious, in your opinion, what should be the net worth target for people making regular tech income in their 30's, 40's and 50's if they want to eek out comfortable living in retirement, inflation-adjusted?

bherms 14y ago
Not my opinion, but I once read somewhere that you should aim for a savings (+investments) of 1x salary by 30, 5x by 40, 10+x by 50.
- itsybitsycoder 14y ago
  Based on the 10x at 50 multiplier, I'm guessing that's for retirement savings/investments alone, not a net worth target. (It makes a big difference if you're planning on making any other big expenditures -- down payment on a house, helping the kids with college, etc.)
- whichdan 14y ago
  So someone with 50k/yr of expenses should be making 100k, 250k, and 500k respectively?
  - bherms 14y ago
    I think you have it backwards. If your salary is 50k, they suggest trying to save up 50k by the age of 30, 250k by the age of 40, and 500k by the age of 50. Keep in mind this isn't direct savings. Stock and other investments count.
- cm2012 14y ago
  I believe this means you should have $50,000 in the bank or investments at 30 if you have a $50,000 salary by then, $250,000 at 40, $500,000 at 50 (if income doesn't change)
- noname123 14y ago
  Seems to me the most difficult is saving 5x between 30-40, especially at that age when a lot of folks get married, have kids and purchase property. How do you save up to 5x - which for a household income of $100,000/yr is half a million dollar; do you really get a lot of tax breaks on mortgages, kids and filing jointly? Also, at the current rate of US inflation; by the time I retire which is in about 40 years, $30K/year purchasing power will become $110K/year. Social security will not exist when I retire and a net worth of 1 million dollar, drawing down on principal will last me less than 10 years. For folks in your mid to early 40's, how are you guys planning for your retirement?
  - svachalek 14y ago
    All of the classic planning advice is based on about a century of economic history, most of that time period having little resemblance to today and things are only getting weirder, faster. Inflation is increasing (and increasingly under-reported), investment returns just--to put it bluntly--suck, social safety nets are falling apart, and we're expected to work for much longer in a world where age and experience don't count for much anymore. In short I don't think retirement is something you can "plan" for if it's more than 20 years out or so. It's more like disaster preparation. Save as much as possible, live as far below your means as you can handle, keep your skills valuable. Keep your money diversified and expect your returns to just about keep up with the real and honest cost of living increases until the world economy feels like taking a dramatic shift for the better. We're still "unwinding" from all the previous crises so I don't foresee that happening anytime soon.
    - Wilduck 14y ago
      > Inflation is increasing (and increasingly under-reported), investment returns just--to put it bluntly--suck. This is nearly a self contradictory statement. That is, if inflation were getting out of control, we would see high interest rates accompanying that change. I'm not saying your advice it bad (savings are a good idea), although maybe a little extreme sounding (too much doomsday feel for my taste). I do, however, wish people would stop it with the "inflation is scary" rhetoric.
- SonicSoul 14y ago
  in light of these new guidelines i'll be getting a job with a drastically lower salary this year. definitely don't want to be behind on savings!
  - fennecfoxen 14y ago
    The idea is that if you meet the guidelines with your existing salary, you can expect a lifestyle similar to the one you are already used to. If getting a lower-salary job lowers your lifestyle expectations, it could work. :P
- dpeck 14y ago
  That's nice, but honestly I'd be surprised if many were able to do that at all without a lot of generational wealth backing it up. Assuming you went to college and got out in 4 years thats only 8 years to put back 1x salary. Given that a lot of those first few years is invested into "setting up shop" getting things like furniture, a reliable vehicle, maybe buying a house, getting married, sometimes having kids, I don't think thats in the cards for many people.
  - philwelch 14y ago
    You can't make a savings rate of 12.5% without "a lot of generational wealth backing it up"?
HockeyPlayer 14y ago
You can conservatively spend 3% of a lump sum each year and the earnings will keep up with inflation. So if you had $1m in savings, you could spend $30k/year in today's dollars forever (and still have $1m at the end). If you want to spend down the principal, the calculation becomes more complex and you need to use software rather than a rule of thumb.
- ww520 14y ago
  I thought the typical withdraw rate is 4% to maintain a portfolio indefinitely.
  - hkmurakami 14y ago
    That's probably pre-financial crisis portfolio returns.
  - HockeyPlayer 14y ago
    I described 3% as conservative. Over most long periods 4% and even 5% would be fine, but you only have one life and you don't want to fall into an unfortunate period.
  - kablamo 14y ago
    Sorry but I've become a bit of a personal finance nerd recently. :) Here is the story on withdrawal rates: The 4% number comes from a study that discovered that a portfolio with a constant 4% rate would survive any period in US stock market history -- even the Great Depression. But past performance doesn't guarantee the future performance. Try to do this with European markets and there are periods where a nest egg won't survive a 0% withdrawal rate. But yeah 4% is the guess people use when planning retirement. Thats fine, but in real life you have to be flexible as you approach retirement and keep an eye on the math. The first 10 years of retirement are the critical ones. After that you hopefully built up a buffer and don't have to worry due to the nature of compound interest. More info: http://blog.networthify.com/withdrawal-rates/ http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/ http://financialmentor.com/free-articles/retirement-planning/how-much-to-retire/are-safe-withdrawal-rates-really-safe http://firecalc.com/
JoshTriplett 14y ago
Try http://networthify.com/calculator/earlyretirement http://networthify.com/calculator/earlyretirement for a fairly straightforward, income-independent answer to that question. Tell it your annual income and expenses, and it'll tell you when you can retire. Adjust the numbers and your retirement date changes. (The defaults for "return on investment" and "withdrawal rate" work pretty well.)
- georgeorwell 14y ago
  Just don't put in zero for annual savings or the savings rate, because what I'm guessing is a divide by zero somewhere can hang your browser.
  - fokov 14y ago
    Divide by zero should just cause an exception. My guess is it causes an infinite loop.
    - georgeorwell 14y ago
      Yeah, you're right, if you put 10 dollars down as the annual savings, it just takes a very long time to finish.
  - kablamo 14y ago
    Oh. Hey. This is my site. I will fix that.
- greghinch 14y ago
  Whenever I see one of these retirement calculators I don't understand how people save enough to actually retire. Are most people really socking away 25%+ of their gross income every year?? I certainly enjoy motorcycles and exotic travel far too much for that to ever become a reality (not to mention pay rent in the Bay Area and try to maintain an organic/local-sourced diet which costs about double a typical grocery store). Now you know why everyone out here wants to do startups: it's the only way to ever retire!

bherms 14y ago

Not my opinion, but I once read somewhere that you should aim for a savings (+investments) of 1x salary by 30, 5x by 40, 10+x by 50.

itsybitsycoder 14y ago
Based on the 10x at 50 multiplier, I'm guessing that's for retirement savings/investments alone, not a net worth target. (It makes a big difference if you're planning on making any other big expenditures -- down payment on a house, helping the kids with college, etc.)
whichdan 14y ago
So someone with 50k/yr of expenses should be making 100k, 250k, and 500k respectively?
- bherms 14y ago
  I think you have it backwards. If your salary is 50k, they suggest trying to save up 50k by the age of 30, 250k by the age of 40, and 500k by the age of 50. Keep in mind this isn't direct savings. Stock and other investments count.
cm2012 14y ago
I believe this means you should have $50,000 in the bank or investments at 30 if you have a $50,000 salary by then, $250,000 at 40, $500,000 at 50 (if income doesn't change)
noname123 14y ago
Seems to me the most difficult is saving 5x between 30-40, especially at that age when a lot of folks get married, have kids and purchase property. How do you save up to 5x - which for a household income of $100,000/yr is half a million dollar; do you really get a lot of tax breaks on mortgages, kids and filing jointly? Also, at the current rate of US inflation; by the time I retire which is in about 40 years, $30K/year purchasing power will become $110K/year. Social security will not exist when I retire and a net worth of 1 million dollar, drawing down on principal will last me less than 10 years. For folks in your mid to early 40's, how are you guys planning for your retirement?
- svachalek 14y ago
  All of the classic planning advice is based on about a century of economic history, most of that time period having little resemblance to today and things are only getting weirder, faster. Inflation is increasing (and increasingly under-reported), investment returns just--to put it bluntly--suck, social safety nets are falling apart, and we're expected to work for much longer in a world where age and experience don't count for much anymore. In short I don't think retirement is something you can "plan" for if it's more than 20 years out or so. It's more like disaster preparation. Save as much as possible, live as far below your means as you can handle, keep your skills valuable. Keep your money diversified and expect your returns to just about keep up with the real and honest cost of living increases until the world economy feels like taking a dramatic shift for the better. We're still "unwinding" from all the previous crises so I don't foresee that happening anytime soon.
  - Wilduck 14y ago
    > Inflation is increasing (and increasingly under-reported), investment returns just--to put it bluntly--suck. This is nearly a self contradictory statement. That is, if inflation were getting out of control, we would see high interest rates accompanying that change. I'm not saying your advice it bad (savings are a good idea), although maybe a little extreme sounding (too much doomsday feel for my taste). I do, however, wish people would stop it with the "inflation is scary" rhetoric.
SonicSoul 14y ago
in light of these new guidelines i'll be getting a job with a drastically lower salary this year. definitely don't want to be behind on savings!
- fennecfoxen 14y ago
  The idea is that if you meet the guidelines with your existing salary, you can expect a lifestyle similar to the one you are already used to. If getting a lower-salary job lowers your lifestyle expectations, it could work. :P
dpeck 14y ago
That's nice, but honestly I'd be surprised if many were able to do that at all without a lot of generational wealth backing it up. Assuming you went to college and got out in 4 years thats only 8 years to put back 1x salary. Given that a lot of those first few years is invested into "setting up shop" getting things like furniture, a reliable vehicle, maybe buying a house, getting married, sometimes having kids, I don't think thats in the cards for many people.
- philwelch 14y ago
  You can't make a savings rate of 12.5% without "a lot of generational wealth backing it up"?

HockeyPlayer 14y ago

You can conservatively spend 3% of a lump sum each year and the earnings will keep up with inflation. So if you had $1m in savings, you could spend $30k/year in today's dollars forever (and still have $1m at the end). If you want to spend down the principal, the calculation becomes more complex and you need to use software rather than a rule of thumb.

ww520 14y ago
I thought the typical withdraw rate is 4% to maintain a portfolio indefinitely.
- hkmurakami 14y ago
  That's probably pre-financial crisis portfolio returns.
- HockeyPlayer 14y ago
  I described 3% as conservative. Over most long periods 4% and even 5% would be fine, but you only have one life and you don't want to fall into an unfortunate period.
- kablamo 14y ago
  Sorry but I've become a bit of a personal finance nerd recently. :) Here is the story on withdrawal rates: The 4% number comes from a study that discovered that a portfolio with a constant 4% rate would survive any period in US stock market history -- even the Great Depression. But past performance doesn't guarantee the future performance. Try to do this with European markets and there are periods where a nest egg won't survive a 0% withdrawal rate. But yeah 4% is the guess people use when planning retirement. Thats fine, but in real life you have to be flexible as you approach retirement and keep an eye on the math. The first 10 years of retirement are the critical ones. After that you hopefully built up a buffer and don't have to worry due to the nature of compound interest. More info: http://blog.networthify.com/withdrawal-rates/ http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/ http://financialmentor.com/free-articles/retirement-planning/how-much-to-retire/are-safe-withdrawal-rates-really-safe http://firecalc.com/

JoshTriplett 14y ago

Try http://networthify.com/calculator/earlyretirement http://networthify.com/calculator/earlyretirement for a fairly straightforward, income-independent answer to that question. Tell it your annual income and expenses, and it'll tell you when you can retire. Adjust the numbers and your retirement date changes. (The defaults for "return on investment" and "withdrawal rate" work pretty well.)

georgeorwell 14y ago
Just don't put in zero for annual savings or the savings rate, because what I'm guessing is a divide by zero somewhere can hang your browser.
- fokov 14y ago
  Divide by zero should just cause an exception. My guess is it causes an infinite loop.
  - georgeorwell 14y ago
    Yeah, you're right, if you put 10 dollars down as the annual savings, it just takes a very long time to finish.
- kablamo 14y ago
  Oh. Hey. This is my site. I will fix that.
greghinch 14y ago
Whenever I see one of these retirement calculators I don't understand how people save enough to actually retire. Are most people really socking away 25%+ of their gross income every year?? I certainly enjoy motorcycles and exotic travel far too much for that to ever become a reality (not to mention pay rent in the Bay Area and try to maintain an organic/local-sourced diet which costs about double a typical grocery store). Now you know why everyone out here wants to do startups: it's the only way to ever retire!