Tag Archives: saving

The Ideal Amount of Savings at Age 30

Posted by on in Retirement, Saving • 23 Comments

The Ideal Amount of Savings at Age 30I love looking really far down the road. I love projecting account balances in the future, and I love the idea of compounding interest.

I also like making money today, I like having the ability to spend money on the things I want, and I have no problem paying a little extra for things if I can afford it. I hate stress, so if a few dollars saves me from worrying, it’s money well spent.

So I thought about, in order to retire comfortably at age 66, I’d need $4 million. Why that much? Because it’s such a huge number, that even with inflation and everything, there’s no way I could ever need more than that. It’s very possible I won’t need that much. But I know that in 40 years, if I have $4 million in savings, there’s no way I won’t have enough money for everything I’ll want.

So working backwards, with an 8% rate of return, I’d need $250,000 in savings by age 30 to hit that mark. If I earn 8% every year, I’d have $367,000 at age 35, $539,000 at age 40, $1.16 million at age 50, $2.5 million at age 60, and just about $4 million at age 66. The “normal” retirement age will probably increase in the next 40 years, so I’ll still be retiring early at age 66.

$250,000 is not an easy target to hit by 30, but the benefits are enormous.

There would be no need to save a dime the rest of your life. Once retirement is fully funded, there’s no need to save extra. As long as you earn as much as you spend, you can spend that money however you want. No more saving 20% for retirement, you can focus on education, the house, travel, or whatever else you’d like.

Instead of saving for huge goals, savings can go toward family vacations, education, and some of life’s pleasures. $250,000 is my goal for 30, and then that extra 20% (or more ideally, 60%) of income that goes to savings can go toward a house or kids.

Readers, what do you think? Is $250,000 a realistic goal? Are the benefits enormous enough to make it worth it?

How Much Do You Need To Save To Retire 1 Day Early?

Posted by on in Retirement • 13 Comments
invest
by turbotoddi

Retirement calculators out there offering to calculate how much you’ll need in retirement. I love thinking about retirement (even if it is 40+ years away), and am saving almost 50% of my after-tax income, a large portion of that in my Roth IRA and Individual 401(k).

Thinking in the long-term can be pretty depressing, and even looking at the ideal amount of savings by age 30 can be hard for some people to handle, so I got to thinking: how much additional money I would need to invest this year in order to retire one day early?

Assumptions

I’m making several assumptions. The first is that at the current rate, I would be saving enough to retire at age 65. Additionally, I’m assuming I would need $100,000 a year in retirement, which seems reasonable.. Finally, I would earn 8% on my investments until I reached retirement. I do not account for inflation in this calculation. Based on this, it seems that in order to take out $100,000 a year, I’d need about $274 a day.

I Need to Save $12.61 Today To Retire 1 Day Early

That means that I would be able to retire a day early if I saved an extra $274 for my 65 year old self, right? I’m 25, so I have 40 years ahead of me. By plugging all this into a time value of money calculator, I’d have to put away $12.61 today in order to have $274 when I’m 65 and be able to retire one day early.

Not terrible, but what if I only needed $75,000 a year in retirement? It drops to just $9.46

Try It Yourself

How much do you have to save to retire a day early?

If you want to check out how much you’ll need to save today to retire 1 day early, here’s a link to the spreadsheet. Feel free to play with the numbers for yourself!

If you bring your lunch to work one or twice this week instead of going out to lunch, that could mean you’ll be golfing one day earlier!

5 Crazy Ways People Waste Money

Posted by on in Money • 18 Comments

In the world of personal finance blogs, we spend most of our time trying to share ways to better invest or save money. It’s a worthwhile pursuit, and can make us so focused on saving every dollar, quarter, and penny that comes our way that we start to take wise saving – and wise spending – habits for granted.

And then there are those people who act as if money really grows on trees.

I’m always baffled when I hear these stories, whether I stumble across them on the news, another personal finance blog, or hear them directly from a friend. They’re always good for a laugh; hopefully, you’ll get a chuckle out of a few of these… that is, if you’re not guilty of them yourself.

1. Getting an oil change every 3,000 miles. Have you ever checked your vehicle’s owner’s manual? If you’re still following the advice of the folks at Jiffy Lube and changing your oil every 3,000 miles, I’m guessing the answer is no. Most vehicles only require an only change every 5,000 to 7,500 miles; some go as high as every 10,000 miles. Oil changes are a necessary expense, but at $25-$30 for each oil change, why double or even triple your costs by following the repair shop’s directives and not your vehicle manufacturer’s?

2. Buying brand name medications. Most name brand medications have a generic substitute; and most insurance plans reward you for making the switch. On our plan, a generic prescription costs as little as $5 a month, compared to $45 for a 30-day supply of the equivalent name brand pill. While it’s true that some name brand medications work better than the generic in some people, by and large, your health won’t suffer any negative consequences from asking your doctor to write you a prescription for the cheaper generic.

3. Not checking your receipts, invoices, bills, and statements. Every month, I review my transactions online. Why? Because my financial life does depend on it. Sometimes, companies make honest mistakes and accidentally bill you more; other times, they’re actively fleecing you, like AT&T has done to me countless times. Whether it’s a grocery store receipt or a bill at your vacation hotel, check it line by line as soon as possible, and report any errors immediately to a customer service representative.

4. Paying for things you’ll never use. A friend’s mother recently paid $110 to get a new passport book…which would be fine, except the woman has a fear of flying and hasn’t boarded a plane in 30 years. She could have saved herself $80 and purchased a passport card for $30 instead, which she could use when she drives to Mexico, or Canada, or takes a cruise to the Caribbean. But it’s not just passports; people pay huge amounts of money for huge data plans for their smartphones, then use next to nothing. My rule? If you don’t use it, then lose it.

5. Buying what you could get for free. One of the hottest gifts of the 2012 holiday season were tablet computers, like the Kindle Fire, the Barnes & Noble Nook, and Apple’s iPad. All these products let you download music, videos, books, magazines, and more, but at a cost. The thing is, most large, urban libraries contain all this and more, and it’s absolutely free. Sure, it may lack the convenience or novelty of an iPad, but why spend hundreds of dollars on a tablet, apps, and media materials you could get at the library for the price of a gallon of gas?

What crazy ways do you and those you know waste money?