4 ms·

Who manages to only save 6% of their salary? For $75,000/year that's a measly $4,500. For someone working in tech on a good salary this should be closer to 50%

by daemin 12y ago

Who manages to only save 6% of their salary? For $75,000/year that's a measly $4,500. For someone working in tech on a good salary this should be closer to 50%, easily. Even paying a high rent, and heading out every night one should be saving at least 25%.

cpwright 12y ago
People who have expenses like child care, mortgages, car payments, unexpected medical bills, don't contribute to a 401K through automatic payroll deductions, or who just don't budget as well as they might. The average savings rate from 1959 to 2014 was 6.82%. [1] [1] http://www.tradingeconomics.com/united-states/personal-savings http://www.tradingeconomics.com/united-states/personal-savin...
- greenyoda 12y ago
  These days, student loans can also be a significant expense.
- deleted 12y ago
  [deleted]
adventured 12y ago
I've never met a person that could save 50% of their income that wasn't making $250k+. If you're living in California and making $125,000 per year at a job, you're paying $33,000 in income taxes alone. Your 50% savings rate would be $62,500 - after taxes you have $92,000, so the person can live off of $30,000 per year. Rent alone can easily run $1,500 to $2,500 per month. This is an impossible scenario without even getting into the real costs of existing (ie bills, families, debts, vehicle & getting to work, accidents, problems, charity, social life, doing things). My ex, who lives in Los Angeles, and makes $70k per year in the medical field, can't save more than $400 to $500 per month max after all costs and taxes. That savings is inevitably slashed in half due to once-per-year events that cost a few thousand dollars to fix. Her only salvation is her 401k.
- smm2000 12y ago
  Looking at pre-tax saving rate for high income individuals in California is useless - top marginal tax rate is ~53% so often it's mathematically impossible to save 50% pre tax. Looking at saving rate post tax makes much more sense. Though you should always utilize 401k, 529k and other tax-efficient methods to save of course.
- hotpockets 12y ago
  Its ridiculously easy to live off about $20,000. You don't even have to try very hard. Source: any graduate student.
  - phlyingpenguin 12y ago
    As a successfully graduated grad student, I disagree. It is possible, but not at all easy, healthy or sustainable.
    - hotpockets 12y ago
      I've never seen anyone fail at it?
      - phlyingpenguin 12y ago
        Fail at being a grad student? Tons of folks do. Grad degrees have a fairly low success rate and living conditions are certainly one of the reasons people drop out or leave early (the case where the student goes for a PhD and leaves after getting a masters). I'm not claiming it's the only reason, but it's certainly on the list.
  - bzbarsky 12y ago
    It's not too bad if you're single, yes. If you want a family, it's a different story.
  - nasalgoat 12y ago
    As a 40-something person, I couldn't possibly live in the rathole I lived in when I was 20-something.
Iftheshoefits 12y ago
I suppose a single person with no debts whatsoever might be able to save 25% and live in a high rent area, or 50% and live in a lower cost of living area, assuming they are living in a no-income-tax state. But fewer than 25% of the population is debt free[1], and I'd guess the percentage of debt-free individuals capable of landing a $75,000 job out of college is even lower. Taking on any debt, or having any kind of "major" expense blows your computation apart. [1] http://hosted.ap.org/specials/interactives/_business/debt_addiction/index.html?SITE=AP http://hosted.ap.org/specials/interactives/_business/debt_ad...).
daemin 12y ago
I probably should have made myself clearer, and I guess I didn't take the US situation into account (I'm living in Sydney). When I ran the numbers through my head before making the original comment I assumed the savings would be 25-50% of take-home pay, so with the necessary taxes taken out. Which I would argue should still be more than a measly 6% of the total. The other point to make is that a mortgage would count as savings, since you're paying off a rather large purchase as opposed to paying rent. That and most people would be putting the savings away to buy a residence in the first place.

by daemin 12y ago

cpwright 12y ago

People who have expenses like child care, mortgages, car payments, unexpected medical bills, don't contribute to a 401K through automatic payroll deductions, or who just don't budget as well as they might. The average savings rate from 1959 to 2014 was 6.82%. [1] [1] http://www.tradingeconomics.com/united-states/personal-savings http://www.tradingeconomics.com/united-states/personal-savin...

greenyoda 12y ago
These days, student loans can also be a significant expense.
deleted 12y ago
[deleted]

adventured 12y ago

I've never met a person that could save 50% of their income that wasn't making $250k+. If you're living in California and making $125,000 per year at a job, you're paying $33,000 in income taxes alone. Your 50% savings rate would be $62,500 - after taxes you have $92,000, so the person can live off of $30,000 per year. Rent alone can easily run $1,500 to $2,500 per month. This is an impossible scenario without even getting into the real costs of existing (ie bills, families, debts, vehicle & getting to work, accidents, problems, charity, social life, doing things). My ex, who lives in Los Angeles, and makes $70k per year in the medical field, can't save more than $400 to $500 per month max after all costs and taxes. That savings is inevitably slashed in half due to once-per-year events that cost a few thousand dollars to fix. Her only salvation is her 401k.

smm2000 12y ago
Looking at pre-tax saving rate for high income individuals in California is useless - top marginal tax rate is ~53% so often it's mathematically impossible to save 50% pre tax. Looking at saving rate post tax makes much more sense. Though you should always utilize 401k, 529k and other tax-efficient methods to save of course.
hotpockets 12y ago
Its ridiculously easy to live off about $20,000. You don't even have to try very hard. Source: any graduate student.
- phlyingpenguin 12y ago
  As a successfully graduated grad student, I disagree. It is possible, but not at all easy, healthy or sustainable.
  - hotpockets 12y ago
    I've never seen anyone fail at it?
    - phlyingpenguin 12y ago
      Fail at being a grad student? Tons of folks do. Grad degrees have a fairly low success rate and living conditions are certainly one of the reasons people drop out or leave early (the case where the student goes for a PhD and leaves after getting a masters). I'm not claiming it's the only reason, but it's certainly on the list.
- bzbarsky 12y ago
  It's not too bad if you're single, yes. If you want a family, it's a different story.
- nasalgoat 12y ago
  As a 40-something person, I couldn't possibly live in the rathole I lived in when I was 20-something.

Iftheshoefits 12y ago

I suppose a single person with no debts whatsoever might be able to save 25% and live in a high rent area, or 50% and live in a lower cost of living area, assuming they are living in a no-income-tax state. But fewer than 25% of the population is debt free[1], and I'd guess the percentage of debt-free individuals capable of landing a $75,000 job out of college is even lower. Taking on any debt, or having any kind of "major" expense blows your computation apart. [1] http://hosted.ap.org/specials/interactives/_business/debt_addiction/index.html?SITE=AP http://hosted.ap.org/specials/interactives/_business/debt_ad...).

daemin 12y ago

I probably should have made myself clearer, and I guess I didn't take the US situation into account (I'm living in Sydney). When I ran the numbers through my head before making the original comment I assumed the savings would be 25-50% of take-home pay, so with the necessary taxes taken out. Which I would argue should still be more than a measly 6% of the total. The other point to make is that a mortgage would count as savings, since you're paying off a rather large purchase as opposed to paying rent. That and most people would be putting the savings away to buy a residence in the first place.