YAY!
The plan: $500 to Roth IRA and $550 to Money Market Fund. The rest will go to car insurance and credit card payment. Including the above contributions, I’ve put in $1,000 for the Roth IRA and $2,050 to the Money Market Fund. Granted, a grand of the MMF contribution were from pre-2008 earnings/savings, but still.
So the big secret (well, not secret) is that even though I started saving for retirement early, I still don’t see how the heck am I supposed to accumulate however much money that will last me in my dotage. I don’t even know how much I need to save. I just know that it is a Very Very Big Number (VVBN).
So, to up my odds of getting to VVBN, I’m shoving money in saving accounts. But that’s because I can. I’m sure that there will be times in the future when it’ll be difficult to save aggressively… new computer, major car repairs or purchase, maybe grad school tuition, recessions, illnesses, down payment, family obligations, etc.
I just hope that by starting a couple years earlier than the norm I’ll buy myself some breathing room down the road.
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I think that it is near impossible for people our age to know how much to save for retirement. I just save as much as I can afford to, and cross my fingers! I think that is common, too, as is not saving at all (though uncommon in the pf world!). You can do those silly “how much do you need” projections, but there is a lot of magic guessing involved.
You are right, the future is so unknown.
I do it like you and sjean do, too–just do as much as I can do, cross my fingers, hope for the best. We’re doing something just by starting young, you know? It’s totally impossible to know what we’ll need and what other resources we have fifty years down the road, so…for now, I think, we just do our best.
Seriously, though, you’re doing great.
I have to agree with the above posts. I’m in my 20s also and I just put as much money away as I can. It’s never as I want, and it never seems enough. But I just have to keep reminding myself that it’s something and hopefully one day I’ll be making a lot more money then I do now and therefore putting away more. I’m impressed with how much money you can put away. That’s awesome! You should feel really good about yourself!
I’m with you and the others-who knows how much we’ll need when we retire, but we have to be squirrels and just stash it until it’s time. I know when I retire I’m going to say ‘Wow, who knew I had this much money to live on? I’m going on vacation!!’ That’ll be the day, and I can’t wait.
Compound interest is your friend. You can’t count on the calculators because that’s a best case scenario. It doesn’t count stuff like kids (and all things related), emergencies, parents to support, car troubles, husbands, etc.. So keep on saving, and we’ll all get there in good time.
I figure I will have lots of really good excuses later on not to save as much–health problems, a lower paying job, maybe no job, the kids need tutoring, whatever–so for right now, while I don’t have any good excuses except that I would rather travel or buy a superfluous but awesome computer, I am going to save as much as I can for retirement. I like the term “VVBN” too. I feel like that’s about as specific as it can be at this point.
Calculating how much money you need for retirement is what you do in your 40′s when you’ve already got a very substantial nest egg. And the only reason I recommend doing it then (rather than just saving as much as you can) is to determine if you’re saving too much. No point in saving a lot more money than you need.
But you can’t save too much in your 20′s and 30′s. Just save as much as you can afford to without making yourself miserable. If you cross seven figures saved before you’re 40, then I suppose you should go ahead and calculate it then.
Use the PV, FV and PMT functions in Excel!
I went by assuming $40K/year as my “I won’t starve and can live OK” number. The usual recommended withdrawal so you don’t risk outliving your $ is 4%. 40K is 4% of 1M. Then, I guessed at an inflation rate and grossed it up over 40-odd years. $3.5M, I think. Anything I get to above that amount is just gravy.
Next, I used the PMT function to figure out what I already had saved, and my goal, along with time elapsed and an estimated rate of return, to calculate a moving monthly target contribution.
I actually did this because we all hear you need to save more for retirement; yet I needed to feel comfortable saving for shorter-term goals like a house and a new car.
The biggest revelation – the difference between 8% and 8.5% in returns is nearly 16% more money when I retire! If I can pull in an average of 10% instead of 8%, I’d have 85% more money! Compound interest is truly an awesome thing
Slow and steady wins the race, lil fella. Set up your contributions as best you can and then just do your thing. My budget is virtually “set it and forget it.” The only thing that changes is OT, which I get an extra 15k a year in. You obsess about the future to much and all of these funds, just put everything on cruise control and let it be. Hope for the best, but plan for the worst.
I think saving as much as you can afford in your twenties and thirties will put you ahead by the time you reach your forties.
So many people neglect to do this (me included) and end up chasing their tails. The earlier you start the better it is.
Well-heeled said:
“I still don’t see how the heck am I supposed to accumulate however much money that will last me in my dotage. I don’t even know how much I need to save.”
pf response:
Agree…it almost seems impossible…at first. However, it’s really amazing what consistent saving and decent returns can do for a portfolio over time (not to mention increases in your salary). Unfortunately, it seems almost like an eternity before you see results. I vividly recall checking on my portfolio when there was 8K in it, then $40K…seeming like a snail’s crawl to get there. However, when we finally reached $100K, it was easily half the time to surpass the $200K mark. Just keep plugging away…it will happen.
As for the “how much”, that’s a more difficult question. Attached below is a post I made a year ago that discusses my own quest to find out and includes a number of links that might help you do the same:
http://pfodyssey.wordpress.com/2007/03/06/goals/
Don’t you make too much to contribute to a Roth?
About 110k for singles. She has some wiggle room.
What I dont know is if that includes bonuses and overtime.