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Balancing retirement with NOW (and the near future)

July 29, 2009

Trent wrote a controversial post, suggesting that a reader was saving too much for retirement.  Most of the 128 commenters were concerned about the advice.  Frankly, there aren’t enough details to know if saving “31%” of his income is too much (some comes from an employer match).   Trent chimed in with a final comment saying he really meant that Haruki should be considering his other goals when deciding how much to save.  (He also added “I find it astounding that anyone would think it’s a bad idea to think about one’s goals before taking action.”  Which no one said, btw.)

I can’t even quite figure out the correct way to calculate what percentage of my income I’m saving for retirement.  Pre-tax 15% (but only since July), post tax another $5000, plus 6% matching (pre-tax).  This may be too much for someone who was unable to meet my other cash goals, but for now, it is a balance that works.  I’m still able to save for travel, wedding, honeymoon, and a car (though that has been slow going!) and to fully fund an efund.

I must admit, 15% has been a bit more of a push than I expected.  I could (and should) blame the new TV I helped buy for making July a difficult month.  But more than that, my budget has felt much more free since moving in with T.  That is natural, but it doesn’t need to be SO free.

In August, I’m going to be very very careful.  It isn’t a “no spend” month (which means no “extras”), but it is a month of limited extras.  My usually generous “misc” budget is cut, and I already bought a text for work that took up $50 of it.  And I’m 100% set on buying the $30 nike ipod sport kit.

So, I’m not reducing it now.  I’m going to strive to keep it at 15% through December, then reevaluate.  Will I meet my wedding/travel cash goals at that rate?  Do I want to save more for car/down payment?  What is the next step?  I don’t know, but six months of 15% is just the retirement boost I need right now.  I just need to be more careful with the spending.  [Says the girl who just got back from going out to eat totally unnecessarily on a random Tuesday.]

7 Comments leave one →
  1. July 29, 2009 6:30 am

    It’s certainly a challenge to try to figure out how to balance all of your savings goals.
    As J and are aggressively saving for a down payment for a house (about 15% of income after tax), once my debt is payed off – I’ll have about 10% (after tax) of my income dedicated to RRSPs. Next year, when I join the company pension plan – I’ll get another 10% saved (pre tax?) from my employer/myself split – I figure that’s probably good enough :~)

  2. July 29, 2009 7:02 am

    I can’t wait until after the wedding so I can up my contributions. Kudos to you for doing it all at once.

  3. July 29, 2009 8:23 am

    @jessie – it is almost impossible for me to know what I feel like is enough, but “experts” do say if you start young, 10% is probably fine.

    @sallie’s niece – i suspect I’ll have to scale back in January in the final few months before the wedding. :/ We’ll see!

  4. July 29, 2009 8:58 am

    I find it so hard to save for the future and so easy to scrimp and save for the “now” – so if that guy wants to save 31% of his income – I think that is f’n fantastic.

    As I recall from the post he was pretty young, and life has a way of giving you more challenges as you get older. Like husbands/wives and children and college funds. Just because he is saving that much now doesn’t mean he always will and really, I don’t think anyone should EVER say that someone is saving too much.

    I mean really, the guy seemed smart enough to save a significant chuck of change from his income every month for something that is 40 years in his future – I’m guessing he’s going to be smart enough to know that if he has another goal he can trim down on the retirement savings until that goal is met and be JUST FINE.

    I just don’t, personally, understand how he can do it. I certainly don’t have the self control to make that possible!

  5. July 29, 2009 12:28 pm

    I do think Trents comments on considering more near-term goals were appropriate. Obviously this guy is asking for general insight, even though I’m sure he well knows that only HE can figure out if he’s really saving too much based on HIS goals and situation – which he didn’t choose to share.

    So not knowing what other goals he might have, all he is really asking is whether or not that percentage is generally “too much” – versus “sufficient” or “not enough.” And in general, it’s “too much,” especially if he’s not saving anything outside of retirement (which was implied).

    For a typical person over 30% of income going to retirement accounts is too much – particularly because you can’t access those funds without penalty until a certain age (so even if he wants to retire early and put all his money towards “retirement” he should be saving something outside of retirement accounts).

    But he needs cash savings too, for a variety of reasons – emergencies, to take time off if he needs/wants to, a new car or 2 which he’ll need before retiring, a home or 2 if he wants to own before retirement, a wedding, a child’s education, a vacation – the options are endless.

    But I do think it’s more than ok to save upwards of 30% of your income for retirement when and if you can – i.e. for the probably short period of time in your life where you have no other goals.

    Right now, I’m puting 16% of my gross income in a Roth 401k (includes employer match) and not saving much else. I own a home and have a car that should last me for as long as I want it to; I have an emergency fund and no wedding or other short term goal in sight. On top of that if I do marry and have kids I may only have income and/or access to a retirement plan for another 10 years. So that’s my choice – for now.

  6. elle & ish permalink
    July 29, 2009 10:12 pm

    I’m currently putting in 22% of my gross in my 401K, maxing out my Roth IRA, but with a cushy emergency/future fund already in place at the age of 24. My contribution percentage won’t stay this way forever though. But if I cut down to my minimum % to get the employer match, I will feel happy that I saved a lot when I could.

  7. July 30, 2009 7:15 am

    I pondered cutting back 401K contributions, and it’s still something I can think about if Chad doesn’t find a job. Right now, though, I almost feel like I should max it out as long as possible since I’m the only one saving now.

    Anyway, the more I save now, the less I’ll have to save later!

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