What is the average savings rates for bogleheads?

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basspond
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Re: What is the average savings rates for bogleheads?

Post by basspond »

During our accumulation period, we were as low as 10% when we first started and around 40% our last decade but it was based on gross salary. Too many variables for net, do you count state income tax and other SALT? Making contributions to Roth or traditional IRA will also give you different percentages. Stick with gross.
sailaway
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Re: What is the average savings rates for bogleheads?

Post by sailaway »

KlangFool wrote: Sun Jul 25, 2021 7:16 am
anon_investor wrote: Sat Jul 24, 2021 11:30 pm
KlangFool wrote: Sat Jul 24, 2021 11:00 pm
PowderDay9 wrote: Sat Jul 24, 2021 10:39 pm
anon_investor wrote: Sat Jul 24, 2021 10:33 pm

I wonder if some people exclude them completely in their calculations or include them in savings but not income (thus juicing their %).
I'm sure it happens. I find the savings rate threads confusing because of all the different ways somebody can calculate their savings rate. OP asked for net of taxes and several people posted their gross savings rate.

Maybe we need a complete list for the numerator and denominator to define both gross and net savings rates.
PowderDay9,

And, the whole problem is eliminated if the saving rate is based on annual expense instead. And, it is a better number. If the goal is for FI, the person use current annual expense. If the goal is for retirement, the person use retirement expense. Then, it is done.

The saving rate based on income has no relevance to the GOAL. It is a pointless number.

Save 1 year or 100% of the annual expense, you will reach your goal in less than 20 years. Save X% of the income has no meaning. What income? Gross? Net? Take-home? Include bonus/commission? Overtime? Working hard to get a meaningless number. Why bother?

KlangFool
Why not save more than 1x/yr?
A balanced approach. For the goal to FI in less than 20 years, it is good enough.

Save too much and if you don't live long, you don't get to spend your money.

KlangFool
We have had health issues come up that make me very glad that we have been saving 2x for many years. I am equally glad that we have lived life to the fullest while doing so, with slow travel being the only thing we have put off for retirement.

However, I don't think that even 1x is a reasonable number to throw around as a general rule. General rules should look achievable to the general public. Elizabeth Warren's 50/30/20 has been hard enough to push forward.
Susan1963
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Re: What is the average savings rates for bogleheads?

Post by Susan1963 »

Our savings rate hovers around 50% (47% year to date).
It's a lot easier to increase our savings rate as our incomes increase (just make sure your spending remains static)
smitcat
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Re: What is the average savings rates for bogleheads?

Post by smitcat »

KlangFool wrote: Sun Jul 25, 2021 7:16 am
anon_investor wrote: Sat Jul 24, 2021 11:30 pm
KlangFool wrote: Sat Jul 24, 2021 11:00 pm
PowderDay9 wrote: Sat Jul 24, 2021 10:39 pm
anon_investor wrote: Sat Jul 24, 2021 10:33 pm

I wonder if some people exclude them completely in their calculations or include them in savings but not income (thus juicing their %).
I'm sure it happens. I find the savings rate threads confusing because of all the different ways somebody can calculate their savings rate. OP asked for net of taxes and several people posted their gross savings rate.

Maybe we need a complete list for the numerator and denominator to define both gross and net savings rates.
PowderDay9,

And, the whole problem is eliminated if the saving rate is based on annual expense instead. And, it is a better number. If the goal is for FI, the person use current annual expense. If the goal is for retirement, the person use retirement expense. Then, it is done.

The saving rate based on income has no relevance to the GOAL. It is a pointless number.

Save 1 year or 100% of the annual expense, you will reach your goal in less than 20 years. Save X% of the income has no meaning. What income? Gross? Net? Take-home? Include bonus/commission? Overtime? Working hard to get a meaningless number. Why bother?

KlangFool
Why not save more than 1x/yr?
A balanced approach. For the goal to FI in less than 20 years, it is good enough.

Save too much and if you don't live long, you don't get to spend your money.

KlangFool
"A balanced approach. For the goal to FI in less than 20 years, it is good enough."
It depends a lot on the income level.

"Save too much and if you don't live long, you don't get to spend your money."
Your lifes goals may include spending for others as well: parents, children, family, charity, friends and others.
KlangFool
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Re: What is the average savings rates for bogleheads?

Post by KlangFool »

sailaway wrote: Sun Jul 25, 2021 8:07 am
We have had health issues come up that make me very glad that we have been saving 2x for many years. I am equally glad that we have lived life to the fullest while doing so, with slow travel being the only thing we have put off for retirement.

However, I don't think that even 1x is a reasonable number to throw around as a general rule. General rules should look achievable to the general public. Elizabeth Warren's 50/30/20 has been hard enough to push forward.
sailaway,

A) I came from a country where the average gross saving is 30+%. And, my family had spread across the world. Many of them like me still save 30+% of their gross income. This is across the world at multiple income levels. So, it is achievable by many people.

B) This is not someone's else priority in life. I understand that perfectly. I came from a group of people that had survived 800+ famines cross 800+ years. We had to save while we starve in order to survive. This is not something that you can teach to other without similar background.

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KlangFool
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Re: What is the average savings rates for bogleheads?

Post by KlangFool »

smitcat wrote: Sun Jul 25, 2021 8:18 am
"A balanced approach. For the goal to FI in less than 20 years, it is good enough."
It depends a lot on the income level.

"Save too much and if you don't live long, you don't get to spend your money."
Your lifes goals may include spending for others as well: parents, children, family, charity, friends and others.
smitcat,

1) I disagreed. But, we are coming from a different background. I came from a country with an average gross saving rate of 30+%.

2) If I cannot save myself aka FI, I am in no position to save others.

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smitcat
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Re: What is the average savings rates for bogleheads?

Post by smitcat »

KlangFool wrote: Sun Jul 25, 2021 8:24 am
smitcat wrote: Sun Jul 25, 2021 8:18 am
"A balanced approach. For the goal to FI in less than 20 years, it is good enough."
It depends a lot on the income level.

"Save too much and if you don't live long, you don't get to spend your money."
Your lifes goals may include spending for others as well: parents, children, family, charity, friends and others.
smitcat,

1) I disagreed. But, we are coming from a different background. I came from a country with an average gross saving rate of 30+%.

2) If I cannot save myself aka FI, I am in no position to save others.

KlangFool
"1) I disagreed. But, we are coming from a different background. I came from a country with an average gross saving rate of 30+%."
The country does not matter at all.
If you save 30% and it represents 1X expenses it is much differnet than saving 30% and represnting 2X expenses or 1/2 expenses.

"2) If I cannot save myself aka FI, I am in no position to save others."
As I said ....Your lifes goals may include spending for others as well: parents, children, family, charity, friends and others.
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anon_investor
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Re: What is the average savings rates for bogleheads?

Post by anon_investor »

KlangFool wrote: Sun Jul 25, 2021 8:24 am
2) If I cannot save myself aka FI, I am in no position to save others.

KlangFool
I agree with this, sometimes you just have to say no.
Normchad
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Re: What is the average savings rates for bogleheads?

Post by Normchad »

sailaway wrote: Sun Jul 25, 2021 8:07 am
KlangFool wrote: Sun Jul 25, 2021 7:16 am
anon_investor wrote: Sat Jul 24, 2021 11:30 pm
KlangFool wrote: Sat Jul 24, 2021 11:00 pm
PowderDay9 wrote: Sat Jul 24, 2021 10:39 pm

I'm sure it happens. I find the savings rate threads confusing because of all the different ways somebody can calculate their savings rate. OP asked for net of taxes and several people posted their gross savings rate.

Maybe we need a complete list for the numerator and denominator to define both gross and net savings rates.
PowderDay9,

And, the whole problem is eliminated if the saving rate is based on annual expense instead. And, it is a better number. If the goal is for FI, the person use current annual expense. If the goal is for retirement, the person use retirement expense. Then, it is done.

The saving rate based on income has no relevance to the GOAL. It is a pointless number.

Save 1 year or 100% of the annual expense, you will reach your goal in less than 20 years. Save X% of the income has no meaning. What income? Gross? Net? Take-home? Include bonus/commission? Overtime? Working hard to get a meaningless number. Why bother?

KlangFool
Why not save more than 1x/yr?
A balanced approach. For the goal to FI in less than 20 years, it is good enough.

Save too much and if you don't live long, you don't get to spend your money.

KlangFool
We have had health issues come up that make me very glad that we have been saving 2x for many years. I am equally glad that we have lived life to the fullest while doing so, with slow travel being the only thing we have put off for retirement.

However, I don't think that even 1x is a reasonable number to throw around as a general rule. General rules should look achievable to the general public. Elizabeth Warren's 50/30/20 has been hard enough to push forward.
You are obviously correct about reasonable ness.

Reading this thread, it really just comes across as people bragging. And not humble bragging either. It feels like a measuring contest.

Occasionally there will be posters asking if this is just a forum for the wealthy or the high income. Threads like these reinforce the impression that it is.

There are lots and lots of happy retires who didn’t come close to matching these savings rates.
MathWizard
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Re: What is the average savings rates for bogleheads?

Post by MathWizard »

PowderDay9 wrote: Sat Jul 24, 2021 10:29 pm
anon_investor wrote: Sat Jul 24, 2021 10:16 pm How are people viewing company 401k and HSA contributions? Do they count as savings and this also added to gross income for calculation purposes?
I include those in gross income and also count them as savings. Same for net of taxes income. They are income and savings, but just forced into certain accounts.
I add them to numerator and denominator.

I consider the employer match is part of my compensation, just deferred.
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anon_investor
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Re: What is the average savings rates for bogleheads?

Post by anon_investor »

MathWizard wrote: Sun Jul 25, 2021 8:33 am
PowderDay9 wrote: Sat Jul 24, 2021 10:29 pm
anon_investor wrote: Sat Jul 24, 2021 10:16 pm How are people viewing company 401k and HSA contributions? Do they count as savings and this also added to gross income for calculation purposes?
I include those in gross income and also count them as savings. Same for net of taxes income. They are income and savings, but just forced into certain accounts.
I add them to numerator and denominator.

I consider the employer match is part of my compensation, just deferred.
Leave it to MathWizard to help with the math! :sharebeer
Jags4186
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Re: What is the average savings rates for bogleheads?

Post by Jags4186 »

I don’t believe it makes sense to say “net after taxes” because “net after taxes” is different for everyone. The question should always be framed in terms of gross income to equalize across different people and different incomes and different tax situations. Taxes are an expense like any other, you should be rewarded for reducing your tax liability. I could save more “net after tax” money by not contributing at all to a 401k, increasing my take home pay (and tax burden) and then saving more.

Second, I think that savings rates have to be looked at in terms of income. A low income earner doesn’t need to save as much as an high income earner for retirement because a low income earner will have a higher percentage of their income replaced by social security.

Third, I think these questions are all just a big humble brag. A very high savings rate is usually attainable by making a very high income. If you make $100k/yr, you’re not saving 80% unless you live some whacky austerity lifestyle. If you make $800,000/yr you can save 80% “net after tax” and still live a lifestyle far nicer than the average person. Someone with $800k income might have $400k take home and then 20% of that is $80,000…which is more take home pay than someone who makes $100k/yr and saves $0.
KlangFool
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Re: What is the average savings rates for bogleheads?

Post by KlangFool »

Normchad wrote: Sun Jul 25, 2021 8:31 am

There are lots and lots of happy retires who didn’t come close to matching these savings rates.

1) And, there are homeless people on the street that did not make it to retirement.

https://www.capitalareafoodbank.org/hun ... ur-region/

<<1 out of 10 residents of the metropolitan Washington region is food insecure.

Nearly ⅓ of them are children.>>

2) My local food bank was supplying food to 10% of the local population before COVID-19. It is doing a lot more now. I would be donating more to the food bank since I am employed now.

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CyclingDuo
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Re: What is the average savings rates for bogleheads?

Post by CyclingDuo »

Havoner wrote: Fri Jul 23, 2021 10:28 pm So lots of different ways of calculating this I am sure but just to keep it consistent would like to hear what people's savings rates are as a percentage of net pay after taxes. Mine averages about 25%-35% depending on bonuses and expenses. Would like to collect some rough data from the group but please feel free to share if there has been a survey or something similar in the past that collects this.

What sort of rate do you normally have?
Has it varied that much over the years or been fairly consistent?
Do you regret having too much of one and not enjoying more or saving too little and wish you had put back more?
Havoner, I think it really depends on what stage of life a household happens to be in regarding their rate of savings. It also depends on the makeup of the household. We were of the standard two kids, house, two dogs, dual income variety. Things would have been different without the children regarding our expenses and rate of savings.

One of my favorite images posted below is one that Michael Kitces used in a blog article regarding the three phases of one's working life that we currently find ourselves in (the empty nest phase). This is the phase where we are able to - due to our lower expenses of clothing and feeding only 2 of us instead of 4 of us - play catch up with our savings as we have more discretionary income to utilize for that purpose.

We were not able to save as much as we are now during the young adult phase working years, and our child bearing phase/parenting years, so our rate of savings has certainly not been of the "fairly consistent" variety through each phase. The years we were a single income household (early child rearing years), our rate of savings - or sheer dollar amounts going into investments - dipped. During all of the dual income years our savings were higher. We even picked up a job that included a mandatory pension contribution a bit later in life than most. In other words, it's been a journey through our working lives where our saving rate was based on the phases: young adult early working years (where we were devoted to retiring all student loan debt), child bearing/parenting years which included saving for their college educations and several years of being a single income household, and now the decade+ of the empty nest years before our working careers come to an end. So count us in the Variable Rate of Savings BH Crowd.

:sharebeer

Image
https://www.kitces.com/blog/empty-nest- ... etirement/

CyclingDuo
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KlangFool
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Re: What is the average savings rates for bogleheads?

Post by KlangFool »

Jags4186 wrote: Sun Jul 25, 2021 8:45 am I don’t believe it makes sense to say “net after taxes” because “net after taxes” is different for everyone. The question should always be framed in terms of gross income to equalize across different people and different incomes and different tax situations. Taxes are an expense like any other, you should be rewarded for reducing your tax liability. I could save more “net after tax” money by not contributing at all to a 401k, increasing my take home pay (and tax burden) and then saving more.

Second, I think that savings rates have to be looked at in terms of income. A low income earner doesn’t need to save as much as an high income earner for retirement because a low income earner will have a higher percentage of their income replaced by social security.

Third, I think these questions are all just a big humble brag. A very high savings rate is usually attainable by making a very high income. If you make $100k/yr, you’re not saving 80% unless you live some whacky austerity lifestyle. If you make $800,000/yr you can save 80% “net after tax” and still live a lifestyle far nicer than the average person. Someone with $800k income might have $400k take home and then 20% of that is $80,000…which is more take home pay than someone who makes $100k/yr and saves $0.
Jags4186,

<<Second, I think that savings rates have to be looked at in terms of income. A low income earner doesn’t need to save as much as an high income earner for retirement because a low income earner will have a higher percentage of their income replaced by social security.>>

I disagreed. By comparing saving rate base on expense, it equalize the comparison.

<<Third, I think these questions are all just a big humble brag. A very high savings rate is usually attainable by making a very high income.>>

I disagreed again. At high income level except if you own your own business, it is hard to avoid taxes. Meanwhile, at the lower income tax level, some folks have negative taxes. We have folks achieve that at 40K to 50K household annual income.

<< If you make $800,000/yr you can save 80% “net after tax”>>

You are doing "bait and switch".

A) You say that saving rate should be based on gross income.

B) Now, you switch to "net after tax" in order to support your high income save more theory.

C) Please stay consistent.

You missed a very important "Keeping Up with the Jones" effect with high income people. They have high social status. They have to live in certain neighborhood and attend certain social circle to keep their job. It costs a lot of money.

Engineers are outliers. They could get paid a lot but do not have to keep up with Jones.

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anon_investor
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Re: What is the average savings rates for bogleheads?

Post by anon_investor »

KlangFool wrote: Sun Jul 25, 2021 9:07 am
You missed a very important "Keeping Up with the Jones" effect with high income people. They have high social status. They have to live in certain neighborhood and attend certain social circle to keep their job. It costs a lot of money.

Engineers are outliers. They could get paid a lot but do not have to keep up with Jones.

KlangFool
"Keeping Up with the Jones" isn't required if you are high income. It is a choice. Many BHs are high income, not engineers and not falling into the "Keeping Up with the Jones" trap.
Jags4186
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Re: What is the average savings rates for bogleheads?

Post by Jags4186 »

KlangFool wrote: Sun Jul 25, 2021 9:07 am
<<Second, I think that savings rates have to be looked at in terms of income. A low income earner doesn’t need to save as much as an high income earner for retirement because a low income earner will have a higher percentage of their income replaced by social security.>>

I disagreed. By comparing saving rate base on expense, it equalize the comparison.
Savings based on income vs. based on expenses is the same equation with the variables flipped around. It doesn’t really matter, TBH. But, however it’s easiest for you to conceptualize it is fine.
KlangFool wrote: Sun Jul 25, 2021 9:07 am <<Third, I think these questions are all just a big humble brag. A very high savings rate is usually attainable by making a very high income.>>

I disagreed again. At high income level except if you own your own business, it is hard to avoid taxes. Meanwhile, at the lower income tax level, some folks have negative taxes. We have folks achieve that at 40K to 50K household annual income.
Correct, it is hard to avoid taxes if you have big income. If you live in a high tax state and have big income, you have a big tax expense. That makes it hard to save a large portion of your income.

You certainly can have a high savings rate on a low income. I just think unless you live in one of those austerity lifestyles it’s very difficult to. A $40k income, even if you actually end up with a negative tax liability, is still only $40k. Sure, you can live one of those austerity lifestyles but I think most people don’t want to do that.

KlangFool wrote: Sun Jul 25, 2021 9:07 am
<< If you make $800,000/yr you can save 80% “net after tax”>>

You are doing "bait and switch".

A) You say that saving rate should be based on gross income.

B) Now, you switch to "net after tax" in order to support your high income save more theory.

C) Please stay consistent.
No bait and switch. High income earners like to say “how much do you save net after tax” because they have a high income tax bill. Like I said, if you have $800k income and have a 50% total tax burden, even if you spend $0 for an entire year the most you can save is 50% of your income. Then you can’t come on Bogleheads and make a post saying you save 80% of your income to make other people feel bad.


KlangFool wrote: Sun Jul 25, 2021 9:07 am You missed a very important "Keeping Up with the Jones" effect with high income people. They have high social status. They have to live in certain neighborhood and attend certain social circle to keep their job. It costs a lot of money.

Engineers are outliers. They could get paid a lot but do not have to keep up with Jones.

KlangFool
I don’t miss this point at all. But that is a personal failure, not a financial or mathematical one.
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Re: What is the average savings rates for bogleheads?

Post by anon_investor »

Jags4186 wrote: Sun Jul 25, 2021 9:29 am ... High income earners like to say “how much do you save net after tax” because they have a high income tax bill. Like I said, if you have $800k income and have a 50% total tax burden, even if you spend $0 for an entire year the most you can save is 50% of your income. Then you can’t come on Bogleheads and make a post saying you save 80% of your income to make other people feel bad.
You don't enjoy reading "I have $X million, can I retire?" threads?
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Re: What is the average savings rates for bogleheads?

Post by KlangFool »

anon_investor wrote: Sun Jul 25, 2021 9:25 am
KlangFool wrote: Sun Jul 25, 2021 9:07 am
You missed a very important "Keeping Up with the Jones" effect with high income people. They have high social status. They have to live in certain neighborhood and attend certain social circle to keep their job. It costs a lot of money.

Engineers are outliers. They could get paid a lot but do not have to keep up with Jones.

KlangFool
"Keeping Up with the Jones" isn't required if you are high income. It is a choice. Many BHs are high income, not engineers and not falling into the "Keeping Up with the Jones" trap.
anon_investor,

It depends on the kind of job that you have.

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Re: What is the average savings rates for bogleheads?

Post by anon_investor »

KlangFool wrote: Sun Jul 25, 2021 9:46 am
anon_investor wrote: Sun Jul 25, 2021 9:25 am
KlangFool wrote: Sun Jul 25, 2021 9:07 am
You missed a very important "Keeping Up with the Jones" effect with high income people. They have high social status. They have to live in certain neighborhood and attend certain social circle to keep their job. It costs a lot of money.

Engineers are outliers. They could get paid a lot but do not have to keep up with Jones.

KlangFool
"Keeping Up with the Jones" isn't required if you are high income. It is a choice. Many BHs are high income, not engineers and not falling into the "Keeping Up with the Jones" trap.
anon_investor,

It depends on the kind of job that you have.

KlangFool
I am an attorney and I don't bother keeping up with the Jones.
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Re: What is the average savings rates for bogleheads?

Post by KlangFool »

Jags4186 wrote: Sun Jul 25, 2021 9:29 am
No bait and switch. High income earners like to say “how much do you save net after tax” because they have a high income tax bill. Like I said, if you have $800k income and have a 50% total tax burden, even if you spend $0 for an entire year the most you can save is 50% of your income. Then you can’t come on Bogleheads and make a post saying you save 80% of your income to make other people feel bad.

Jags4186,

Why should I let them do that?

By comparing saving rate based on annual expense, it equalize the comparison.

A) The low income folks has lower income but they have lower tax bill and low income. It is hard to save 1 year of current annual expense.

B) The high income folk has high income but high tax bill. It is hard to when 40% to 50% of your income go towards taxes. It is hard to save 1 year of current annual expense.

1) It is a FAIR comparison.

2) It is RELEVANT to the Financially Independence GOAL.

And, we can calculate when someone can be FI without knowing the actual income and/or expense. Aka, privacy protection.

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Re: What is the average savings rates for bogleheads?

Post by KlangFool »

anon_investor wrote: Sun Jul 25, 2021 9:48 am
KlangFool wrote: Sun Jul 25, 2021 9:46 am
anon_investor wrote: Sun Jul 25, 2021 9:25 am
KlangFool wrote: Sun Jul 25, 2021 9:07 am
You missed a very important "Keeping Up with the Jones" effect with high income people. They have high social status. They have to live in certain neighborhood and attend certain social circle to keep their job. It costs a lot of money.

Engineers are outliers. They could get paid a lot but do not have to keep up with Jones.

KlangFool
"Keeping Up with the Jones" isn't required if you are high income. It is a choice. Many BHs are high income, not engineers and not falling into the "Keeping Up with the Jones" trap.
anon_investor,

It depends on the kind of job that you have.

KlangFool
I am an attorney and I don't bother keeping up with the Jones.
And, it depends on what kind of clients that you are keeping.

<<I don't bother keeping up with the Jones.>>

Is your house cheaper and smaller than the median house at the neighborhood?

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Re: What is the average savings rates for bogleheads?

Post by anon_investor »

KlangFool wrote: Sun Jul 25, 2021 9:56 am
anon_investor wrote: Sun Jul 25, 2021 9:48 am
KlangFool wrote: Sun Jul 25, 2021 9:46 am
anon_investor wrote: Sun Jul 25, 2021 9:25 am
KlangFool wrote: Sun Jul 25, 2021 9:07 am
You missed a very important "Keeping Up with the Jones" effect with high income people. They have high social status. They have to live in certain neighborhood and attend certain social circle to keep their job. It costs a lot of money.

Engineers are outliers. They could get paid a lot but do not have to keep up with Jones.

KlangFool
"Keeping Up with the Jones" isn't required if you are high income. It is a choice. Many BHs are high income, not engineers and not falling into the "Keeping Up with the Jones" trap.
anon_investor,

It depends on the kind of job that you have.

KlangFool
I am an attorney and I don't bother keeping up with the Jones.
And, it depends on what kind of clients that you are keeping.

<<I don't bother keeping up with the Jones.>>

Is your house cheaper and smaller than the median house at the neighborhood?

KlangFool
I have 1 client, my megacorp employer.

My house is probably about average for my area, there are plenty of larger and more expensive ones. Most neighbors have newer cars than us. We chose this area because the public schools are better, we have 3 young kids.
SQRT
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Re: What is the average savings rates for bogleheads?

Post by SQRT »

Mine would be an unusual case, although perhaps becoming less so. Didn’t actually save in the traditional sense of putting away XX% of my salary. Rather, I simply didn’t cash out my incentive comp awards (options and DSU’s) until retirement. This was risky in that I was hugely over invested in my employer’s stock (still am but to a much lesser degree). But my employer was a well established, successful, very large, well managed company. Since my incentive awards dwarfed my cash comp, and my employer did very well, I ended up with a exceptionally well funded retirement at 56. Very lucky indeed.
Last edited by SQRT on Sun Jul 25, 2021 10:22 am, edited 2 times in total.
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Re: What is the average savings rates for bogleheads?

Post by MikeWillRetire »

Over my 36 year career, it has varied from negative to 30% of gross. When I got my first apartment and car, it was zero. When I was unemployed, it was negative.
When I had a mortgage and children, it varied from 10 to 15%. Now with a paid off house and independent children, it is 30%. The average over 36 years has been around 15%.
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Re: What is the average savings rates for bogleheads?

Post by KlangFool »

anon_investor wrote: Sun Jul 25, 2021 10:07 am
KlangFool wrote: Sun Jul 25, 2021 9:56 am
anon_investor wrote: Sun Jul 25, 2021 9:48 am
KlangFool wrote: Sun Jul 25, 2021 9:46 am
anon_investor wrote: Sun Jul 25, 2021 9:25 am

"Keeping Up with the Jones" isn't required if you are high income. It is a choice. Many BHs are high income, not engineers and not falling into the "Keeping Up with the Jones" trap.
anon_investor,

It depends on the kind of job that you have.

KlangFool
I am an attorney and I don't bother keeping up with the Jones.
And, it depends on what kind of clients that you are keeping.

<<I don't bother keeping up with the Jones.>>

Is your house cheaper and smaller than the median house at the neighborhood?

KlangFool
I have 1 client, my megacorp employer.

My house is probably about average for my area, there are plenty of larger and more expensive ones. Most neighbors have newer cars than us. We chose this area because the public schools are better, we have 3 young kids.
anon_investor,

<<I have 1 client, my megacorp employer.>>

Understood.

<<My house is probably about average for my area,>>

Which by definition, you are the "Jones". Aka, the average. Only folks that are below average is not keeping up with the Jones.

KlangFool
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Re: What is the average savings rates for bogleheads?

Post by AerialWombat »

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Re: What is the average savings rates for bogleheads?

Post by anon_investor »

KlangFool wrote: Sun Jul 25, 2021 10:29 am
anon_investor wrote: Sun Jul 25, 2021 10:07 am
KlangFool wrote: Sun Jul 25, 2021 9:56 am
anon_investor wrote: Sun Jul 25, 2021 9:48 am
KlangFool wrote: Sun Jul 25, 2021 9:46 am

anon_investor,

It depends on the kind of job that you have.

KlangFool
I am an attorney and I don't bother keeping up with the Jones.
And, it depends on what kind of clients that you are keeping.

<<I don't bother keeping up with the Jones.>>

Is your house cheaper and smaller than the median house at the neighborhood?

KlangFool
I have 1 client, my megacorp employer.

My house is probably about average for my area, there are plenty of larger and more expensive ones. Most neighbors have newer cars than us. We chose this area because the public schools are better, we have 3 young kids.
anon_investor,

<<I have 1 client, my megacorp employer.>>

Understood.

<<My house is probably about average for my area,>>

Which by definition, you are the "Jones". Aka, the average. Only folks that are below average is not keeping up with the Jones.

KlangFool
While the house may be average for the area, we have no car loans and ours cars are older than average for the neighborhood. So we are not keeping up with the Jones.
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Re: What is the average savings rates for bogleheads?

Post by H-Town »

Reading this thread, I think boglehead is an abnormal group of people. To be honest, I've never seen a colleague at my company who would max out retirement accounts (401k, HSA, back-door Roth 401k, Roth IRA, etc.) The ones who seem to be very fiscally responsible only put away 10% to their 401k. So for those who can and actually max out 401k, you're way ahead of many average savers out there.

As far as saving rate, the "saving 1 year of annual expense" rule from KlangFool seems to be a good rule to follow if you make $100k-$120k HHI and spend around $50k-60k a year. But for those who have high income and still choose to maintain their lifestyle as average American (50k-60k), they should be able to save 2, 3, or 4 times the annual expense. It takes a lot to achieve high income: time, effort, lucks, sacrifice other parts of your life, so I don't think high income comes without cost. And if high income people decide to spend most of their income, well... it's all for naught. It's like buying an expensive bottle of wine and pour it down the drain. To me, the main goal of achieving high income is to help me to get to FI goal faster.

High income does make savings easier, but it doesn't take high income to achieve KlangFool's rule of saving 1 year of expense annually. A dual income of $60k, who max out 401k (19.5k) and Roth IRA (6k), will already save $1 for every dollar they spend during the year.
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Re: What is the average savings rates for bogleheads?

Post by AerialWombat »

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Re: What is the average savings rates for bogleheads?

Post by fatcoffeedrinker »

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Re: What is the average savings rates for bogleheads?

Post by AerialWombat »

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Re: What is the average savings rates for bogleheads?

Post by KlangFool »

AerialWombat wrote: Sun Jul 25, 2021 10:57 am
KlangFool wrote: Sun Jul 25, 2021 9:46 am
anon_investor wrote: Sun Jul 25, 2021 9:25 am
KlangFool wrote: Sun Jul 25, 2021 9:07 am
You missed a very important "Keeping Up with the Jones" effect with high income people. They have high social status. They have to live in certain neighborhood and attend certain social circle to keep their job. It costs a lot of money.

Engineers are outliers. They could get paid a lot but do not have to keep up with Jones.

KlangFool
"Keeping Up with the Jones" isn't required if you are high income. It is a choice. Many BHs are high income, not engineers and not falling into the "Keeping Up with the Jones" trap.
anon_investor,

It depends on the kind of job that you have.

KlangFool
I have to side with anon on this one. Given my occupation, one would expect me to own many nice suits, but I refuse to dress that way. I don’t own a single dress shirt or tie, and am proud of it. I give formal presentations in t-shirt and jeans, and get paid the same.

Same with the car I drive and the very blue collar homes I live in. Even if I earned $1 million a year, I’d dress, drive, and live the same.

I recently read “Stop Acting Rich” by Dr. Thomas Stanley. Great book that very much resonated with me.
AerialWombat,

"It depends". Your client do not care. Hence, it won't matter to you. However, some client cares.

KlangFool
Last edited by KlangFool on Sun Jul 25, 2021 11:21 am, edited 1 time in total.
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Re: What is the average savings rates for bogleheads?

Post by KlangFool »

H-Town wrote: Sun Jul 25, 2021 10:53 am
Reading this thread, I think boglehead is an abnormal group of people. To be honest, I've never seen a colleague at my company who would max out retirement accounts (401k, HSA, back-door Roth 401k, Roth IRA, etc.) The ones who seem to be very fiscally responsible only put away 10% to their 401k. So for those who can and actually max out 401k, you're way ahead of many average savers out there.

As far as saving rate, the "saving 1 year of annual expense" rule from KlangFool seems to be a good rule to follow if you make $100k-$120k HHI and spend around $50k-60k a year. But for those who have high income and still choose to maintain their lifestyle as average American (50k-60k), they should be able to save 2, 3, or 4 times the annual expense. It takes a lot to achieve high income: time, effort, lucks, sacrifice other parts of your life, so I don't think high income comes without cost. And if high income people decide to spend most of their income, well... it's all for naught. It's like buying an expensive bottle of wine and pour it down the drain. To me, the main goal of achieving high income is to help me to get to FI goal faster.

High income does make savings easier, but it doesn't take high income to achieve KlangFool's rule of saving 1 year of expense annually. A dual income of $60k, who max out 401k (19.5k) and Roth IRA (6k), will already save $1 for every dollar they spend during the year.
H-Town,

Isn't this OBVIOUS? Average American save less than 5% of their gross income. This is pretty much universal across all income level.

KlangFool
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Re: What is the average savings rates for bogleheads?

Post by smitcat »

KlangFool wrote: Sun Jul 25, 2021 9:56 am
anon_investor wrote: Sun Jul 25, 2021 9:48 am
KlangFool wrote: Sun Jul 25, 2021 9:46 am
anon_investor wrote: Sun Jul 25, 2021 9:25 am
KlangFool wrote: Sun Jul 25, 2021 9:07 am
You missed a very important "Keeping Up with the Jones" effect with high income people. They have high social status. They have to live in certain neighborhood and attend certain social circle to keep their job. It costs a lot of money.

Engineers are outliers. They could get paid a lot but do not have to keep up with Jones.

KlangFool
"Keeping Up with the Jones" isn't required if you are high income. It is a choice. Many BHs are high income, not engineers and not falling into the "Keeping Up with the Jones" trap.
anon_investor,

It depends on the kind of job that you have.

KlangFool
I am an attorney and I don't bother keeping up with the Jones.
And, it depends on what kind of clients that you are keeping.

<<I don't bother keeping up with the Jones.>>

Is your house cheaper and smaller than the median house at the neighborhood?

KlangFool
"Is your house cheaper and smaller than the median house at the neighborhood?"
This is neither an indicator or important unless it affects your financial health.
And count us in as one more that do not keep up with the Jones's.
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Re: What is the average savings rates for bogleheads?

Post by Candor »

I just retired last month but prior to that I was saving 50-60% of gross pay. I had grown to really dislike my job/career and planned to retire early so that was a good motivator to save a large percentage of my pay.
The fool, with all his other faults, has this also - he is always getting ready to live. - Seneca Epistles < c. 65AD
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Re: What is the average savings rates for bogleheads?

Post by 59Gibson »

There should be no question..the higher the income the easier it is to save higher multiples, whether the person decides to is another question. It's also nearly impossible for someone in America making $40k/ yr to save 1 yrs expenses. Sorry not realistic at all.
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Re: What is the average savings rates for bogleheads?

Post by smitcat »

59Gibson wrote: Sun Jul 25, 2021 11:30 am There should be no question..the higher the income the easier it is to save higher multiples, whether the person decides to is another question. It's also nearly impossible for someone in America making $40k/ yr to save 1 yrs expenses. Sorry not realistic at all.
A very good observation....
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Re: What is the average savings rates for bogleheads?

Post by AerialWombat »

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Re: What is the average savings rates for bogleheads?

Post by HENRYGRUGER »

Havoner wrote: Fri Jul 23, 2021 10:28 pm So lots of different ways of calculating this I am sure but just to keep it consistent would like to hear what people's savings rates are as a percentage of net pay after taxes. Mine averages about 25%-35% depending on bonuses and expenses. Would like to collect some rough data from the group but please feel free to share if there has been a survey or something similar in the past that collects this.

What sort of rate do you normally have?
Has it varied that much over the years or been fairly consistent?
Do you regret having too much of one and not enjoying more or saving too little and wish you had put back more?
Quick "down and dirty" Calculation...48.09% of Gross Salary. That does NOT include ANY savings from our SS benefits, which we began collecting last November 1st, as I reached age 70. ($59,472 Gross) I am still working.

My savings was pathetic until about age 55. I spent 401k balances earlier in my life, twice, instead of rolling them over. Once, starting a business (successful) and another time, to pay for my first child's education and wedding.

Since age 55, I have managed qualify for the 2 Comma Club and basically we buy whatever we want, when we want it. I know I could do better, but...
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Re: What is the average savings rates for bogleheads?

Post by KlangFool »

59Gibson wrote: Sun Jul 25, 2021 11:30 am
There should be no question..the higher the income the easier it is to save higher multiples, whether the person decides to is another question. It's also nearly impossible for someone in America making $40k/ yr to save 1 yrs expenses. Sorry not realistic at all.
59Gibson,

My 20+ years old daughter was doing it. Now, she earn more and still doing it. Ditto for my son. But, he earn more at above 50K level. It is actually not that hard.

No, they do not live with me.

KlangFool
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Re: What is the average savings rates for bogleheads?

Post by HENRYGRUGER »

AerialWombat wrote: Sun Jul 25, 2021 10:57 am
KlangFool wrote: Sun Jul 25, 2021 9:46 am
anon_investor wrote: Sun Jul 25, 2021 9:25 am
KlangFool wrote: Sun Jul 25, 2021 9:07 am
You missed a very important "Keeping Up with the Jones" effect with high income people. They have high social status. They have to live in certain neighborhood and attend certain social circle to keep their job. It costs a lot of money.

Engineers are outliers. They could get paid a lot but do not have to keep up with Jones.

KlangFool
"Keeping Up with the Jones" isn't required if you are high income. It is a choice. Many BHs are high income, not engineers and not falling into the "Keeping Up with the Jones" trap.
anon_investor,

It depends on the kind of job that you have.

KlangFool
I have to side with anon on this one. Given my occupation, one would expect me to own many nice suits, but I refuse to dress that way. I don’t own a single dress shirt or tie, and am proud of it. I give formal presentations in t-shirt and jeans, and get paid the same.

Same with the car I drive and the very blue collar homes I live in. Even if I earned $1 million a year, I’d dress, drive, and live the same.

I recently read “Stop Acting Rich” by Dr. Thomas Stanley. Great book that very much resonated with me.
Wombat...

I love your attitude.

I am 70. I have worked since age 16, in 1967. First year's income, per my SS Statement, $197.00.

From 1972-2010, I wore the traditional "Corporate Uniform." Hell, in one of my positions, (Group VP,) I was even sent to a "Seminar for Senior Management Attire." Uniform of the day...Dark Suit, White or light blue dress shirt, Stipped or Club tie, shined shoes or boots. (I was in TX for 25 years.)

Since 2010, business casual has been the uniform of the day, except when being "on camera."
(Recording videos for the classes I teach. I am a college professor.)

Since 2015, I have worn Dockers styled slacks and golf styled shirts, when teaching off campus, live classes. When NOT teaching live classes, like when I am teaching online, I wear shorts, T-shirts and flip flops. In the winter months, sweats. I went to a funeral last year, and had to buy a suit!

Since March of 2020, with the onset of COVID, 100% online, and 100% shorts, t-shirts and flip flops. My institution will most likely never go back to live classes, so I will most likely rarely, if ever, dress up any more than business casual again.

I remember the original Dr. Stanley books on The Millionaire Next Door. I have to admit however, I do buy cars new, although I have never paid close to retail. (I spent @30 years in Auto finance and lending.) My bride of 47 years however, has a 2006 Chrysler Sebring Touring (Convertible) and has NO desire to replace it.

Bogle ON!
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Re: What is the average savings rates for bogleheads?

Post by lurkman »

What I have learned from this thread (combined with reflections on my/our saving history):

1. Paying yourself first (saving the max in 401k/IRA/Roth) and spending only from the rest is a valuable habit to inculcate early. I followed this from my first job. Before I was eligible for 401k, I opened IRAs when I had a low-paying job and made only 24k per year. Saving in the early years pays off (especially if it becomes habit-forming in the long-term, and also because of the power of compounding). I personally did not ever think (still don't) in terms of percentage of income saved or in terms of years of expense saved. But savings targets and investing them have always received priority.

2. Another rule I followed as much as possible (learned from a friend who successfully created and sold two high-tech companies): "Keep fixed costs low!" These are words to live by both in business and home finance. It's not the occasional splurge or vacation or emergency that will sink your savings boat. High fixed costs over time will take you down. Or at least delay or compromise your reaching stated financial goals. Fixed costs include most things that occur regularly: mortgage/rent, utilities, home maintenance/repairs, car payments, car maintenance/repair, taxes, club memberships, subscriptions etc. Keep these as low as possible (they matter more than avoiding the daily latte that many finance articles target). Treat your monthly savings as a non-negotiable fixed cost as much as possible.

3. If the savings-target is met, allow yourself to spend on some aspirational goals. Opportunities in life are often timed and may not be always available if postponed. Food must be eaten fresh or at most after brief refrigeration. Saving groceries like produce or fruit for years doesn't work.
Life opportunities are somewhat similar. Youth and the opportunities (and mindset) that go with it are available when they are. They may not be available after your retire. Spending on some of these is worthwhile (without ignoring or forgetting your savings target completely). My friend above (whose words, "Keep fixed costs low" are etched in my memory) was a driven high-tech entrepreneur and was fiscally savvy, but even before the big success came, he allowed himself to buy a Mazda Miata convertible--his reasoning, "I am young now and would probably enjoy it more now than waiting till I'm 60." He bought the basic model, a stick-shift with no frills, kept it for 2 or 3 years and sold it. It did not escalate his lifestyle too much and probably got some FOMO out of his system without compromising his long-term goals. He loved cars and convertibles. He accommodated that while pursuing his more ambitious financial life goals.

4. Rules of thumb are just that. Not all rules of thumb about savings rates may be applicable under individual circumstances.

P.S. I was a Boglehead before I heard of the Bogleheads. In the 1990s, I read Malkeil, Peter Lynch, Bogle and Stanley's "Millionaire Next Door" before I found the Diehards forum. I was not impressed by the stock-picking stories from Lynch (as a winning strategy, though his stories were fun to read) or some of the implied biases and glorifications of "Millionaire" (I acknowledge some of its main points); I was very much in alignment with Malkeil and Bogle. Following their recommendations has enabled me to achieve many financial goals. Bogleheads on this forum have taken this and expanded the state of the art far beyond anything I have lived by or could have imagined. I learn daily from this forum.
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Re: What is the average savings rates for bogleheads?

Post by 59Gibson »

KlangFool wrote: Sun Jul 25, 2021 11:58 am
59Gibson wrote: Sun Jul 25, 2021 11:30 am
There should be no question..the higher the income the easier it is to save higher multiples, whether the person decides to is another question. It's also nearly impossible for someone in America making $40k/ yr to save 1 yrs expenses. Sorry not realistic at all.
59Gibson,

My 20+ years old daughter was doing it. Now, she earn more and still doing it. Ditto for my son. But, he earn more at above 50K level. It is actually not that hard.

No, they do not live with me.

KlangFool
Klangfool,
I think it's a severe disservice to members and visitors to BH website looking for legitimate info, support, and/or motivation to suggest $19-20k/yr is a "not that hard" amount to live on in America per year. This IMO would be classified as Extreme. One can come up w/ anecdotal 20 yr olds doing it and folks living in rooms in basements, and many other non traditional scenarios. I maintain it's not realistic or reasonable to expect to save 1 yrs expenses at 40k/yr income level.
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Re: What is the average savings rates for bogleheads?

Post by Kenkat »

Must.....suppress.....feelings.....of.....inadequacy.....

Saving 70% of your income? There’s nothing average about this place! :shock:
blueberrypi
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Re: What is the average savings rates for bogleheads?

Post by blueberrypi »

25% comes out of my paycheck for 401k/HSA, or goes into Roth IRA automatically. My goal is 1/3 of gross income.
Last edited by blueberrypi on Sun Jul 25, 2021 1:48 pm, edited 1 time in total.
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Re: What is the average savings rates for bogleheads?

Post by AerialWombat »

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Re: What is the average savings rates for bogleheads?

Post by KlangFool »

59Gibson wrote: Sun Jul 25, 2021 1:16 pm
KlangFool wrote: Sun Jul 25, 2021 11:58 am
59Gibson wrote: Sun Jul 25, 2021 11:30 am
There should be no question..the higher the income the easier it is to save higher multiples, whether the person decides to is another question. It's also nearly impossible for someone in America making $40k/ yr to save 1 yrs expenses. Sorry not realistic at all.
59Gibson,

My 20+ years old daughter was doing it. Now, she earn more and still doing it. Ditto for my son. But, he earn more at above 50K level. It is actually not that hard.

No, they do not live with me.

KlangFool
Klangfool,
I think it's a severe disservice to members and visitors to BH website looking for legitimate info, support, and/or motivation to suggest $19-20k/yr is a "not that hard" amount to live on in America per year. This IMO would be classified as Extreme. One can come up w/ anecdotal 20 yr olds doing it and folks living in rooms in basements, and many other non traditional scenarios. I maintain it's not realistic or reasonable to expect to save 1 yrs expenses at 40k/yr income level.
59Gibson,

I disagreed. The greater disservice to the public is to assume that saving less than 5% of gross income is the ONLY choice.


<< One can come up w/ anecdotal 20 yr olds doing it and folks living in rooms in basements, and many other non traditional scenarios.>>

There is nothing non-traditional about sharing a 2 bedrooms apartment with a roommate.

The median US household income is 50K to 60K. And, the median household is more than one person. So, why do you think that a single person earning 40K per year cannot save a lot of money?

KlangFool
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Re: What is the average savings rates for bogleheads?

Post by AerialWombat »

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Re: What is the average savings rates for bogleheads?

Post by Cruise »

No idea what is our savings rate, or why that would be important. What is important for me is meeting financial goals while balancing the “here and now” need for basic necessities and fun times. If you can’t have some fun because you are hyper-focused on an artificial rate goal, what is the point?
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