How much income is enough?

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Picasso3

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Noodleface said:
Sure we could say he will die one day, maybe tomorrow, so just blow it
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No, there's a happy medium and personally I think 25% is pushing it.

If saving a fuckton makes you feel great then yeah. But skipping kid free vacations or not taking memaw to dinner because you're strapped because you want to pull out more than your salary in 40 years you need to consider more than accumulation.

If you save that much itd probably work out better to pay tax now and if you're not getting a match how much is it benefiting you to have it in 401k?
 
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Picasso3

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Soygen said:
Said nobody who was 65 and still working...
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If he uses it to buy a house in a better neighborhood, lives in it hits whole life, and has it paid off at 65 is that worse?

401k is not the only savings vessel
 
Cad

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Crone said:
So I just accepted a new job, and it's a significant bump in pay from $52k to $80k. When I got the offer at $80k I kept thinking dang, per @Khane 's links, I'm now at the peak of hapiness! What I hear is that overtime will nudge me into 6 figures barely.

So for others that have had these huge bumps in pay. I think Noodleface Noodleface did right outta school? Or others, how did your finances go? Have a pretty significant surplus at first, then the bigger house, new car, etc just started coming and now you are back to using it all up? Have discipline and retain a bunch extra for retirement or savings?

I expect possibly not a huge bump in take home, but we'll see. Health insurance, 401(k), and a higher tax bracket is all gonna throw it outta whack.
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Re: tax bracket

Remember tax rates are marginal so while the rate is higher on higher income, it's not like when you click over into a new "bracket" you suddenly bring home less. You only pay a higher rate on the income over a certain amount thats in that bracket. So for example if you made $80k, you'd only pay the $76k+ bracket tax on the top 4k. You don't pay a higher rate on your entire income.
 
Soygen

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Picasso3 said:
No, there's a happy medium and personally I think 25% is pushing it.

If saving a fuckton makes you feel great then yeah. But skipping kid free vacations or not taking memaw to dinner because you're strapped because you want to pull out more than your salary in 40 years you need to consider more than accumulation.

If you save that much itd probably work out better to pay tax now and if you're not getting a match how much is it benefiting you to have it in 401k?
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Oh, I completely agree. I put as much as I can away without sacrificing the things I really want to do. Obviously, this all depends on what you want to do and what you consider living within your means. Like I said, though...a poorly planned retirement will definitely make you regret those "kid free vacations" if you're scraping by at 65. Nobody plans on dying at 61 and sadly, most Americans don't plan their retirement very well.
 
Soygen

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Picasso3 said:
If he uses it to buy a house in a better neighborhood, lives in it hits whole life, and has it paid off at 65 is that worse?

401k is not the only savings vessel
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Of course it's not. It's hard to beat as far as tax advantage, though. On average, stocks far outperform the housing market. Buy a better house and pay it off, but put as much as you can comfortably afford to into a tax-advantaged IRA or 401k.

That said, I don't have expensive tastes when it comes to anything except electronics and cars(and I can't really afford the expensive cars). I don't spend a lot on clothes and eating out. I live well below my means and I have no complaints. None of this is a one size fits all, but I would say that 'save as much as you can' is probably better general advice than 'take expensive vacations because you never know!'.
 
Palum

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Sounds like the best solution is to compromise between the two and buy timeshares!
 
Lost Virtue

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Burnesto said:
If you'll potentially be hitting six figures, and you're already comfortable on your current budget, you might was well max your 401(k) at $18k each year. If you get an HSA max that as well. It sounds callous, but you should prioritize your own retirement before you do college savings, etc.

Don't fall into the trap of needing to upgrade your lifestyle and such. You'll still get a large net increase of income even after maxing the two items mentioned above.

I wouldn't be too concerned with moving into a new tax bracket. You only get taxed at 28% on the amount that exceeds about $76,000.
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Probably the best advice I've heard. I know plenty of individuals that starting making six figures+ that went out and bought bigger houses, cars, vacations when they had great types of those as-is. We basically do as stated here in which we invest as much as possible into our retirement (401k, IRA, and an easily-liquidable managed account) over bigger, more fun toys.

We are also going to start buying large amounts of cheap (and tree filled) land to start doing forestry. My parents do this and make a considerable profit from lumber. They cut and replant so over the course of generations potentially later, the family would be able to profit once again either through lumber or when the land is eventually bought for industry.
 
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Crone

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Cad said:
If you're a sole earner at 70k you probably won't be able to max your 401k, but you can try.

Depending on your earnings and what type of income you have you can also do things like SEP-IRA, backdoor roth, etc.. just try to maximize your tax-advantaged savings/retirement accounts before you worry about saving/investing otherwise.

And roll the shitty company-managed IRA's over into vanguard so you can invest in some super low fee funds.
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80k, hehe. But still a long stretch with 3 kids in the house, and I'm the sole earner.

The 401(k) plan Philips offers is through Vanguard, so I'm set there.

I figured I'd start at 10% or maybe just go 15% of pay into the 401(k), because absolutely if you never see it, it's very easy to make those contributions.

I just worry that I've got a certain take home pay right now, but it doesn't have retirement or health insurance deductions from it. My thought is after both of those, my take home might be pretty similar with the new job. Doing a little math would probably alleviate that far. Obviously still better off if I'm putting the money towards retirement, but to have the huge bump, but no more take home pay is just psychologically hard for me.
 
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Lambourne

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I did it the "wrong" way, basically had lifestyle inflation gobble up most of the income increases for a few years. Found myself looking through old payslips wondering where that extra 1k take-home pay went because it sure wasn't going into savings. Never missed a payment on anything but I was still basically living paycheck to paycheck.

Eventually found MMM and /r/personalfinance (before it became a default and went to shit) and reorganized my finances. Took a few years but I now have paid off my car loan and student loan (close to 70k combined before I started paying more than the minimums) and now have a 4 figure sum going into savings each month. Already had a pension plan so that part was covered thankfully.

I have no intention of growing tomatoes in my backyard or retiring at 45 but I think MMM has the gist of it right, pay off non-mortgage loans, cut unnecessary spending and spend less than you make each month.
 
BrutulTM

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It's tough to get more bang for your buck than IRA in your 20s, or better yet, your teens. You could even stop contributing in your 40s while your kids are in college and probably still come out ahead of someone who didn't contribute in their 20s and goes hard in their 40s-50s.

Also, the shit you are spending it on in your 20s is probably useless. Cars, clothes, vacations, etc. People get way too fucking romantic about travel, like it's something you need to do to to have a fulfilled life. It's just entertainment. If you live abroad, that probably does give you some perspective that might be life altering, but not a vacation. Going to Europe and seeing Big Ben and the Louvre are fun things to do, but that's all, just fun. The idea that it alters your life or makes you a better person is just sentimental horseshit.
 
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Picasso3

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If you'd bought 2 cows when you were 25 you'd have a herd of 720 at 65 and could have eaten 2,152
 
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a_skeleton_03

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Yeah I fall firmly in the camp of retirement is great and all but spend your money on enough happiness now.

Do things and go places and eat interesting and delicious food.
 
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BrutulTM

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Picasso3 said:
What are you going to spend it on in retirement?
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Whatever you want. The good thing about it is that there will be about 20 times as much of it as you gave up in your 20s and at that point you may not have the option to work and get more.
 
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a_skeleton_03

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I mean I still put quite a bit into retirement but I put less into savings than a lot of people. I have a huge amount of credit available at any given time though for emergencies.
 
Vinen

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Cad said:
If you're a sole earner at 70k you probably won't be able to max your 401k, but you can try.

Depending on your earnings and what type of income you have you can also do things like SEP-IRA, backdoor roth, etc.. just try to maximize your tax-advantaged savings/retirement accounts before you worry about saving/investing otherwise.

And roll the shitty company-managed IRA's over into vanguard so you can invest in some super low fee funds.
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Man I always forget about that. The recommendation should be max 401K to match and max Roth IRA. If you can afford it max the 401K past that.

My Roth which I invested in as my first job had no 401K match has grown from 20 to 40 in the past few years with no action of my own. Pretty nice to see.
 
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