How much to allocate towards retirement at 25 years old

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muitu
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How much to allocate towards retirement at 25 years old

Post by muitu »

I work at a bank. I make 45k. I put 7% into 401k with 5% match, max Roth IRA, save around $250 every paycheck into my emergency fund until I hit 10k (at 7k).

Took up a 2nd job as a server - $300 to $350 for a Saturday night and Sunday brunch shift (tips + wage). $1,000ish a month from that - saving for engagement ring (4k).

Think I'm doing as much as I can right now. Pay $500 in rent, $270 student loan, $200ish in electric & heat every month. I have around 45k between 401k and Roth. Once I purchase ring and hit emergency fund, excess funds will go into VTI in taxable.

Been using the allocation prioritization chart on the boglehead wiki. Just want some reassurance that I'm doing everything right. Seeing the multi-million dollar portfolio reviews on this forum is very unsettling. Difficult looking at the far-away finish line when you've just started the race.
"Wealth consists not in having great possessions, but in having few wants." - Epictetus
JD2775
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Re: How much to allocate towards retirement at 25 years old

Post by JD2775 »

You are doing fantastic. When I was 25 years old the last thing on my mind was saving money. I commend you for taking up that 2nd job to save for the ring, emergency funds and future taxable deposits. Only thing I would say is you may want to up your 401k% as opposed to adding to taxable (when the funds become available), but that is up to you and what you feel is best.
Keep doing what you are doing, and don't be put off by the multi-million dollar portfolio reviews you see thrown around here. A. you are 25 years old and B. a lot of what is posted here is not representative of the average persons situation in real life. I am in the same boat as you in that regard.
Point
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Re: How much to allocate towards retirement at 25 years old

Post by Point »

The way I see it, you could have 5-7, or more, doubles in your working life. Do the math on that!
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CommitmentDevice
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Re: How much to allocate towards retirement at 25 years old

Post by CommitmentDevice »

You're doing great!

The biggest factors you control in determining your lifetime portfolio value:
-Amount of risk (you're on this forum so probably already have a good asset allocation)
-Amount of time in the market (you're starting young)
-Savings rate (looks like you're doing great on this one as a % of income. In terms of total income, you've got tremendous upside potential. Position yourself for increasing your earning potential over the years)

A random few things to consider:
1) Check out the retirement savings contribution credit. You might qualify or be able to qualify. (https://www.irs.gov/retirement-plans/pl ... ers-credit).
2) Consider adding additional dollars to 401K before starting up taxable. I personally am trying to avoid a taxable investment account as long as possible.
3) Bit by bit, consider building up to an emergency fund of ibonds over the course of 3-5 years. They'll keep pace with inflation, where as high yield savings accounts won't.
squirrellyman
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Re: How much to allocate towards retirement at 25 years old

Post by squirrellyman »

It seems like you are way ahead of the game. These early years are so important to set you up for success. Keep up the good work!
You will be a millionaire soon enough :sharebeer
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miket29
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Re: How much to allocate towards retirement at 25 years old

Post by miket29 »

muitu wrote: Tue Mar 28, 2023 2:40 pm Seeing the multi-million dollar portfolio reviews on this forum is very unsettling. Difficult looking at the far-away finish line when you've just started the race.
I think you are doing great! Don't be discouraged by the numbers now, in 40 years when you're 65 then with compound growth you'll have millions yourself.

For example let's use a time machine and see how you would have done if you started 40 years ago. I'm assuming $250/paycheck means $500 month in 2023 dollars. 40 years ago in 1983 an inflation calculator show that would have been $165/mos and using the S&P 500 periodic investment calculator at https://dqydj.com/sp-500-periodic-reinv ... dividends/ shows that if someone had started investing $165/mos in the S&P 500 back in 1983 and grown their monthly investment to match inflation they'd have $1,108,347 today.

While we don't know the market returns over the next 40 years, your current savings amount likely will build to a tidy amount by then. I assume that as you go forward in your career you'll be earning more and if you continue to save the percentage you are saving now then you too will be someone in later age that (1) has accumulated millions in savings (2) envies those with decades to live in front of them
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Re: How much to allocate towards retirement at 25 years old

Post by Jack FFR1846 »

You're doing fine. I'll use my son and me as opposites. I started my first engineering job at 28, having gone back to school on my own dime. I put maybe 5 or 6% into the 401k for many, many years. Before finding Bogleheads, I never maxed it and never had a Roth. Today, at 66 years old, ignoring social security, I've got 56 times spending. So yes, you can get there easily, how you're going.

Opposite world, my son was 24 when he graduated engineering school. With my recommendation (and because having money means you MUST spend it), he puts the max into his 401k and Roth. But he still lives with us, so his expenses are his 2 cars, car parts, gas, taxes and when student loans become unfrozen, student loans at about $25k.

Since you're looking at marriage, you don't know what your finances will do, even with meticulous planning.
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Grt2bOutdoors
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Re: How much to allocate towards retirement at 25 years old

Post by Grt2bOutdoors »

You are doing great! At 25, I had no access to a 401k and limits for IRA back then were $2k per year. You are doing enough! Focus on growing your career, the income will come eventually as will the increased savings and compounding growth.

Ignore these million dollar posts - it’s not the amounts that matter as much as the principles of how it was attained. Outside of lottery type winnings, stock compensation and inheritance, the best opportunity for growing your wealth is slow and steady accumulation coupled by career progression over your lifetime and watching your expenses.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Tom_T
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Re: How much to allocate towards retirement at 25 years old

Post by Tom_T »

Yes, what is great about being 25 is that time is on your side. You can set aside money for 401K each month without blowing your budget, and you'll be fine because you have 35-40 years of compounding working for you. And you still have money to save for non-retirement needs. Way to go!

I know 40 years seems like forever. It did when I was 25... which was 39 years ago. :)
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Re: How much to allocate towards retirement at 25 years old

Post by Vanguard User »

Why are you buying a ring? What is the ROI on it?
KlangFool
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Re: How much to allocate towards retirement at 25 years old

Post by KlangFool »

muitu wrote: Tue Mar 28, 2023 2:40 pm Once I purchase ring and hit emergency fund, excess funds will go into VTI in taxable.
muitu,

1) 401K and IRA are not retirement accounts. They are tax advantaged accounts. You can take the money out tax-free and penalty-free before 59 1/2 years old.

https://www.madfientist.com/how-to-acce ... nds-early/

2) Unless you enjoy paying a lot of taxes instead of spending your own money, why would you put your excess funds into the taxable account. You should put more money into the 401K and IRA.

3) You are in NY. You are paying a lot of taxes.

4) 4K engagement ring?

This will be very expensive for you. I will avoid anyone asking me for a 4K engagement ring while I am having a student loan.

KlangFool
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gavinsiu
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Re: How much to allocate towards retirement at 25 years old

Post by gavinsiu »

Please don’t be discouraged by multimillion portfolio. When I was 25, I made about 30k a year as well. After nearly 30 years the portfolio is not multimillion but will get there by retirement. You just have to be disciplined and keep saving and sticking to your plans.

Note that different people on the board have different opinion on priorities. I happen to agree with you that marriage can be time sensitive.

After the ring, I would suggest maxing out your 401k since you live in a high tax state. If possible max out your Roth when you can.

As for allocation, this is a touchy issues. My personal allocation would be to do 80 to 100% total stock index and 0 to 20% total bond. However my fear is you would be too shocked by a market crash. What is your allocation now and how did you feel in 2022?
Motostash
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Re: How much to allocate towards retirement at 25 years old

Post by Motostash »

Vanguard User wrote: Tue Mar 28, 2023 4:38 pm Why are you buying a ring? What is the ROI on it?
Cute questions. Not everything of value is quantifiable. Like lots of basic things when done well, the ROI could be huge. https://www.schwab.com/learn/story/does ... l-benefits

Or it could make you a pauper.

Only one way to find out.
austin757
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Re: How much to allocate towards retirement at 25 years old

Post by austin757 »

Vanguard User wrote: Tue Mar 28, 2023 4:38 pm Why are you buying a ring? What is the ROI on it?
Are you suggesting he borrow or rent one?
rich126
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Re: How much to allocate towards retirement at 25 years old

Post by rich126 »

As someone who has reached retirement recently, I would say enjoy life and don't obsess over retirement. Always try to get the matching 401K money and never remove money from retirement accounts but you only live once and health issues or other issues can occur at any age so do things when you can without going overboard. Personally I think owning a home is a huge benefit and I've done well with homes. I think the biggest thing is to get things that bring you enjoyment and don't be one of those people who spend money just to keep up with "friends" and coworkers.

Don't obsess over getting to retirement without enjoying the road to retirement. Like many people my biggest regrets are things I did not do and not things I did do.
----------------------------- | If you think something is important and it doesn't involve the health of someone, think again. Life goes too fast, enjoy it and be nice.
homebuyer6426
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Re: How much to allocate towards retirement at 25 years old

Post by homebuyer6426 »

muitu wrote: Tue Mar 28, 2023 2:40 pm I work at a bank. I make 45k. I put 7% into 401k with 5% match, max Roth IRA, save around $250 every paycheck into my emergency fund until I hit 10k (at 7k).

Took up a 2nd job as a server - $300 to $350 for a Saturday night and Sunday brunch shift (tips + wage). $1,000ish a month from that - saving for engagement ring (4k).

Think I'm doing as much as I can right now. Pay $500 in rent, $270 student loan, $200ish in electric & heat every month. I have around 45k between 401k and Roth. Once I purchase ring and hit emergency fund, excess funds will go into VTI in taxable.

Been using the allocation prioritization chart on the boglehead wiki. Just want some reassurance that I'm doing everything right. Seeing the multi-million dollar portfolio reviews on this forum is very unsettling. Difficult looking at the far-away finish line when you've just started the race.
Here is my advice for a 25 year old (which I also got from Bogleheads forum at that age).

Put every last penny you can in your 20s into VTI. You will get an incredible compounding effect that you will no longer be able to achieve to the same degree when you are in your 30s, 40s, and 50s, because you have so much time for your money to multiply right now.

If you can, trying to increase your income in your 20s will have a big impact for the same reason.

Sounds like you are taking all the right steps. Cheers.
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protagonist
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Re: How much to allocate towards retirement at 25 years old

Post by protagonist »

Contrarian here.
Do you see yourself making a lot more money in the future?
If so, maybe you should be thinking of using your excess funds to have a little fun, while you still don't have kids. Vacations, hobbies, dining out, concerts, whatever. Romantic stuff you can do with your fiancee. Because if you have a higher income potential in the future, whatever you save today will seem pretty insignificant ten years from now. Just don't go into debt.

If your future earning potential is limited, then saving and investing at this point makes more sense to me.

As for the engagement ring....logically it makes no sense to spend $4K on a ring if you make $45K/yr., but life isn't all about logic, and you need to do what makes sense to you.
I am 70 years old. I am wearing a $45 silicone wedding ring. (I almost lost it last week, which would have set us back over $50 for a replacement since my wife bought it on sale). I really didn't want my wife to spend any more than that on my ring. I would rather her have the money. For me, it is symbolic and it means just as much as if she spent thousands (and from far enough away it looks a little like 24K gold anyway!).

Make money, but don't let money make you. https://www.youtube.com/watch?v=N19FUSBGefY
Last edited by protagonist on Wed Mar 29, 2023 8:10 am, edited 2 times in total.
protagonist
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Re: How much to allocate towards retirement at 25 years old

Post by protagonist »

miket29 wrote: Tue Mar 28, 2023 3:09 pm
muitu wrote: Tue Mar 28, 2023 2:40 pm Seeing the multi-million dollar portfolio reviews on this forum is very unsettling. Difficult looking at the far-away finish line when you've just started the race.
I think you are doing great! Don't be discouraged by the numbers now, in 40 years when you're 65 then with compound growth you'll have millions yourself.


What will a million dollars be worth in 40 years?
When I was 25 years old, like OP, the median home price was $43K. Today it is $395K. If home inflation continues at the same pace (a big "if" since we have no idea really), a million dollars in 2063 wouldn't even buy a third of an average home in the USA. It would make a decent down payment in a MCOL neighborhood I suppose.
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Wiggums
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Re: How much to allocate towards retirement at 25 years old

Post by Wiggums »

Our son is doing the same thing. It can feel like you are off to a slow start, but I assure you that you are doing everything right. Well done!!!
"I started with nothing and I still have most of it left."
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Re: How much to allocate towards retirement at 25 years old

Post by Sandtrap »

muitu wrote: Tue Mar 28, 2023 2:40 pm I work at a bank. I make 45k. I put 7% into 401k with 5% match, max Roth IRA, save around $250 every paycheck into my emergency fund until I hit 10k (at 7k).

Took up a 2nd job as a server - $300 to $350 for a Saturday night and Sunday brunch shift (tips + wage). $1,000ish a month from that - saving for engagement ring (4k).

Think I'm doing as much as I can right now. Pay $500 in rent, $270 student loan, $200ish in electric & heat every month. I have around 45k between 401k and Roth. Once I purchase ring and hit emergency fund, excess funds will go into VTI in taxable.

Been using the allocation prioritization chart on the boglehead wiki. Just want some reassurance that I'm doing everything right. Seeing the multi-million dollar portfolio reviews on this forum is very unsettling. Difficult looking at the far-away finish line when you've just started the race.
To OP:
1
Tangentially. . . is it possible to put your extra savings, money and "part time", toward achieving a graduate degree, or post grad work if you do not already? The benefits over a lifetime might far exceed maximizing those same dollars now.
The core concept being to exponentially increase earnings and focus on the dollars rather than focusing on the dimes with limited dollars as you are doing so well now at. (just a metaphor of sorts)
Just an actionable and substantive and "on topic" idea.

To OP:
Curious of "your" thoughts on this?

j :D
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Topic Author
muitu
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Re: How much to allocate towards retirement at 25 years old

Post by muitu »

Sandtrap wrote: Wed Mar 29, 2023 8:49 am
muitu wrote: Tue Mar 28, 2023 2:40 pm I work at a bank. I make 45k. I put 7% into 401k with 5% match, max Roth IRA, save around $250 every paycheck into my emergency fund until I hit 10k (at 7k).

Took up a 2nd job as a server - $300 to $350 for a Saturday night and Sunday brunch shift (tips + wage). $1,000ish a month from that - saving for engagement ring (4k).

Think I'm doing as much as I can right now. Pay $500 in rent, $270 student loan, $200ish in electric & heat every month. I have around 45k between 401k and Roth. Once I purchase ring and hit emergency fund, excess funds will go into VTI in taxable.

Been using the allocation prioritization chart on the boglehead wiki. Just want some reassurance that I'm doing everything right. Seeing the multi-million dollar portfolio reviews on this forum is very unsettling. Difficult looking at the far-away finish line when you've just started the race.
To OP:
1
Tangentially. . . is it possible to put your extra savings, money and "part time", toward achieving a graduate degree, or post grad work if you do not already? The benefits over a lifetime might far exceed maximizing those same dollars now.
The core concept being to exponentially increase earnings and focus on the dollars rather than focusing on the dimes with limited dollars as you are doing so well now at. (just a metaphor of sorts)
Just an actionable and substantive and "on topic" idea.

To OP:
Curious of "your" thoughts on this?

j :D
Hello Sandtrap,

I aim to obtain my MBA before 30 - my employer will pay for it, however I need to transition into a higher salaried role before they will allow me to. In the midst of trying to land a higher level, more technical role.

I have faith that my income will increase as I age. However, at this current moment, I'm trying to build a house with sticks. I want to make sure I have some sort of foundation - even if I'm focusing on dimes with limited dollars.
"Wealth consists not in having great possessions, but in having few wants." - Epictetus
Topic Author
muitu
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Re: How much to allocate towards retirement at 25 years old

Post by muitu »

Vanguard User wrote: Tue Mar 28, 2023 4:38 pm Why are you buying a ring? What is the ROI on it?
Nice.
"Wealth consists not in having great possessions, but in having few wants." - Epictetus
KlangFool
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Re: How much to allocate towards retirement at 25 years old

Post by KlangFool »

muitu wrote: Wed Mar 29, 2023 9:13 am
Sandtrap wrote: Wed Mar 29, 2023 8:49 am
muitu wrote: Tue Mar 28, 2023 2:40 pm I work at a bank. I make 45k. I put 7% into 401k with 5% match, max Roth IRA, save around $250 every paycheck into my emergency fund until I hit 10k (at 7k).

Took up a 2nd job as a server - $300 to $350 for a Saturday night and Sunday brunch shift (tips + wage). $1,000ish a month from that - saving for engagement ring (4k).

Think I'm doing as much as I can right now. Pay $500 in rent, $270 student loan, $200ish in electric & heat every month. I have around 45k between 401k and Roth. Once I purchase ring and hit emergency fund, excess funds will go into VTI in taxable.

Been using the allocation prioritization chart on the boglehead wiki. Just want some reassurance that I'm doing everything right. Seeing the multi-million dollar portfolio reviews on this forum is very unsettling. Difficult looking at the far-away finish line when you've just started the race.
To OP:
1
Tangentially. . . is it possible to put your extra savings, money and "part time", toward achieving a graduate degree, or post grad work if you do not already? The benefits over a lifetime might far exceed maximizing those same dollars now.
The core concept being to exponentially increase earnings and focus on the dollars rather than focusing on the dimes with limited dollars as you are doing so well now at. (just a metaphor of sorts)
Just an actionable and substantive and "on topic" idea.

To OP:
Curious of "your" thoughts on this?

j :D
Hello Sandtrap,

I aim to obtain my MBA before 30 - my employer will pay for it, however I need to transition into a higher salaried role before they will allow me to. In the midst of trying to land a higher level, more technical role.

I have faith that my income will increase as I age. However, at this current moment, I'm trying to build a house with sticks. I want to make sure I have some sort of foundation - even if I'm focusing on dimes with limited dollars.
muitu,

"I have faith that my income will increase as I age."

Why should this be true?

"Took up a 2nd job as a server - $300 to $350 for a Saturday night and Sunday brunch shift (tips + wage). $1,000ish a month from that "

Then, how does this weekend job makes any sense?

Won't that time be better serve to increase your skill and earning capacity?

"I aim to obtain my MBA before 30 - my employer will pay for it, however I need to transition into a higher salaried role before they will allow me to."

Why do you need an MBA in order to learn more skill? And, if you spend away your weekend in order to earn $1,000 per month, when can you find time to learn more skill?

What is there to stop you to learn anything that you want by self study? And, if you cannot self study, how can an MBA help you at all?

What was your undergraduate degree?

KlangFool
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edgeagg
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Re: How much to allocate towards retirement at 25 years old

Post by edgeagg »

KlangFool wrote: Wed Mar 29, 2023 9:30 am Won't that time be better serve to increase your skill and earning capacity?
KlangFool
First of all, congratulations on having a plan and secondly on having the curmudgeons on this list review it. You truly must have asbestos underpants!

That said, I do agree with the statement of KF above. If you can spend more time on increasing the slope of your upward trajectory, you will come out ahead, because of compounding. Also, if your slope is very steep, you'll likely get channeled into High Potential programs at the bank and that will result in an even steeper upward slope.

Finally, given the rate at which conversational AI is developing, I suspect many front line banking jobs may gradually fade away so you don't want to be there when that happens.
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muitu
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Re: How much to allocate towards retirement at 25 years old

Post by muitu »

KlangFool wrote: Wed Mar 29, 2023 9:30 am
muitu wrote: Wed Mar 29, 2023 9:13 am
Sandtrap wrote: Wed Mar 29, 2023 8:49 am
muitu wrote: Tue Mar 28, 2023 2:40 pm I work at a bank. I make 45k. I put 7% into 401k with 5% match, max Roth IRA, save around $250 every paycheck into my emergency fund until I hit 10k (at 7k).

Took up a 2nd job as a server - $300 to $350 for a Saturday night and Sunday brunch shift (tips + wage). $1,000ish a month from that - saving for engagement ring (4k).

Think I'm doing as much as I can right now. Pay $500 in rent, $270 student loan, $200ish in electric & heat every month. I have around 45k between 401k and Roth. Once I purchase ring and hit emergency fund, excess funds will go into VTI in taxable.

Been using the allocation prioritization chart on the boglehead wiki. Just want some reassurance that I'm doing everything right. Seeing the multi-million dollar portfolio reviews on this forum is very unsettling. Difficult looking at the far-away finish line when you've just started the race.
To OP:
1
Tangentially. . . is it possible to put your extra savings, money and "part time", toward achieving a graduate degree, or post grad work if you do not already? The benefits over a lifetime might far exceed maximizing those same dollars now.
The core concept being to exponentially increase earnings and focus on the dollars rather than focusing on the dimes with limited dollars as you are doing so well now at. (just a metaphor of sorts)
Just an actionable and substantive and "on topic" idea.

To OP:
Curious of "your" thoughts on this?

j :D
Hello Sandtrap,

I aim to obtain my MBA before 30 - my employer will pay for it, however I need to transition into a higher salaried role before they will allow me to. In the midst of trying to land a higher level, more technical role.

I have faith that my income will increase as I age. However, at this current moment, I'm trying to build a house with sticks. I want to make sure I have some sort of foundation - even if I'm focusing on dimes with limited dollars.
muitu,

"I have faith that my income will increase as I age."

Why should this be true?
The natural evolution of working individuals as they age is that their income increases. From a personal standpoint, I'm highly driven and demand a lot from myself.
"Took up a 2nd job as a server - $300 to $350 for a Saturday night and Sunday brunch shift (tips + wage). $1,000ish a month from that "

Then, how does this weekend job makes any sense?
I'm saving for a once in a lifetime event (hopefully).
Won't that time be better serve to increase your skill and earning capacity?
While true, I have no defined skillset yet. I am purely sales and soft skills. Once into a technical industry, I will take every accreditation & certification to increase my value.
"I aim to obtain my MBA before 30 - my employer will pay for it, however I need to transition into a higher salaried role before they will allow me to."

Why do you need an MBA in order to learn more skill? And, if you spend away your weekend in order to earn $1,000 per month, when can you find time to learn more skill?
View the MBA as an investment. It increases the career ceiling of the individual, relative to their industry. Again, the part-time weekend job is not a long term play.
What is there to stop you to learn anything that you want by self study? And, if you cannot self study, how can an MBA help you at all?
I self studied for all my insurance and investment licenses - not an issue. I do not know what path I want to hone in on yet, therefore self-studying on a subject may be futile if the subject/industry isn't what I plan to do. However, I have earned a certification from Corporate Finance Institute for Financial Modeling and Valuation in the past 6 months. Trying to decide where/how to leverage those newly acquire skills.
What was your undergraduate degree?
Always avoid this question - Business Administration and Management :-|. Too general. Should've really went in on a STEM degree or technical finance - however being 18-21, playing collegiate football and being in a fraternity is not conducive to smart future decisions. Trying to work my way into finance sector at the moment.
"Wealth consists not in having great possessions, but in having few wants." - Epictetus
Grt2bOutdoors
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Re: How much to allocate towards retirement at 25 years old

Post by Grt2bOutdoors »

edgeagg wrote: Wed Mar 29, 2023 9:59 am
KlangFool wrote: Wed Mar 29, 2023 9:30 am Won't that time be better serve to increase your skill and earning capacity?
KlangFool
First of all, congratulations on having a plan and secondly on having the curmudgeons on this list review it. You truly must have asbestos underpants!

That said, I do agree with the statement of KF above. If you can spend more time on increasing the slope of your upward trajectory, you will come out ahead, because of compounding. Also, if your slope is very steep, you'll likely get channeled into High Potential programs at the bank and that will result in an even steeper upward slope.

Finally, given the rate at which conversational AI is developing, I suspect many front line banking jobs may gradually fade away so you don't want to be there when that happens.
Don’t go into auditing either, they are saying accounting is at risk as well.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
KlangFool
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Re: How much to allocate towards retirement at 25 years old

Post by KlangFool »

muitu wrote: Wed Mar 29, 2023 10:05 am
The natural evolution of working individuals as they age is that their income increases.
muitu,

"The natural evolution of working individuals as they age is that their income increases."

That is not true. Everyone peak at a different level.

KlangFool
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smitcat
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Re: How much to allocate towards retirement at 25 years old

Post by smitcat »

KlangFool wrote: Wed Mar 29, 2023 10:17 am
muitu wrote: Wed Mar 29, 2023 10:05 am
The natural evolution of working individuals as they age is that their income increases.
muitu,

"The natural evolution of working individuals as they age is that their income increases."

That is not true. Everyone peak at a different level.

KlangFool
"Everyone peak at a different level."
Absolutely true ... and our income peaked as we aged.
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Re: How much to allocate towards retirement at 25 years old

Post by Sandtrap »

KlangFool wrote: Wed Mar 29, 2023 9:30 am
muitu wrote: Wed Mar 29, 2023 9:13 am
Sandtrap wrote: Wed Mar 29, 2023 8:49 am
muitu wrote: Tue Mar 28, 2023 2:40 pm I work at a bank. I make 45k. I put 7% into 401k with 5% match, max Roth IRA, save around $250 every paycheck into my emergency fund until I hit 10k (at 7k).

Took up a 2nd job as a server - $300 to $350 for a Saturday night and Sunday brunch shift (tips + wage). $1,000ish a month from that - saving for engagement ring (4k).

Think I'm doing as much as I can right now. Pay $500 in rent, $270 student loan, $200ish in electric & heat every month. I have around 45k between 401k and Roth. Once I purchase ring and hit emergency fund, excess funds will go into VTI in taxable.

Been using the allocation prioritization chart on the boglehead wiki. Just want some reassurance that I'm doing everything right. Seeing the multi-million dollar portfolio reviews on this forum is very unsettling. Difficult looking at the far-away finish line when you've just started the race.
To OP:
1
Tangentially. . . is it possible to put your extra savings, money and "part time", toward achieving a graduate degree, or post grad work if you do not already? The benefits over a lifetime might far exceed maximizing those same dollars now.
The core concept being to exponentially increase earnings and focus on the dollars rather than focusing on the dimes with limited dollars as you are doing so well now at. (just a metaphor of sorts)
Just an actionable and substantive and "on topic" idea.

To OP:
Curious of "your" thoughts on this?

j :D
Hello Sandtrap,

I aim to obtain my MBA before 30 - my employer will pay for it, however I need to transition into a higher salaried role before they will allow me to. In the midst of trying to land a higher level, more technical role.

I have faith that my income will increase as I age. However, at this current moment, I'm trying to build a house with sticks. I want to make sure I have some sort of foundation - even if I'm focusing on dimes with limited dollars.
muitu,

"I have faith that my income will increase as I age."

Why should this be true?

"Took up a 2nd job as a server - $300 to $350 for a Saturday night and Sunday brunch shift (tips + wage). $1,000ish a month from that "

Then, how does this weekend job makes any sense?

Won't that time be better serve to increase your skill and earning capacity?

"I aim to obtain my MBA before 30 - my employer will pay for it, however I need to transition into a higher salaried role before they will allow me to."

Why do you need an MBA in order to learn more skill? And, if you spend away your weekend in order to earn $1,000 per month, when can you find time to learn more skill?

What is there to stop you to learn anything that you want by self study? And, if you cannot self study, how can an MBA help you at all?

What was your undergraduate degree?

KlangFool
++10000000

Great outstanding points.
Well said, as always.

My immediate thoughts exactly!

Thanks, "klang"! :D :D :D :D

j :D
(insert standard dis laimer for individual experiences and perspectives.)
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Re: How much to allocate towards retirement at 25 years old

Post by Vanguard User »

austin757 wrote: Wed Mar 29, 2023 7:02 am
Vanguard User wrote: Tue Mar 28, 2023 4:38 pm Why are you buying a ring? What is the ROI on it?
Are you suggesting he borrow or rent one?
It’s just a piece of metal. What is the need for it?
YERER01
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Re: How much to allocate towards retirement at 25 years old

Post by YERER01 »

muitu wrote: Tue Mar 28, 2023 2:40 pm I work at a bank. I make 45k. I put 7% into 401k with 5% match, max Roth IRA, save around $250 every paycheck into my emergency fund until I hit 10k (at 7k).

Took up a 2nd job as a server - $300 to $350 for a Saturday night and Sunday brunch shift (tips + wage). $1,000ish a month from that - saving for engagement ring (4k).

Think I'm doing as much as I can right now. Pay $500 in rent, $270 student loan, $200ish in electric & heat every month. I have around 45k between 401k and Roth. Once I purchase ring and hit emergency fund, excess funds will go into VTI in taxable.

Been using the allocation prioritization chart on the boglehead wiki. Just want some reassurance that I'm doing everything right. Seeing the multi-million dollar portfolio reviews on this forum is very unsettling. Difficult looking at the far-away finish line when you've just started the race.
You are doing terrific in terms of savings.

Personal anecdote.

I was making about the same as what you make when I was your age. It was a dead end job, where the most salary growth I could expect was matching inflation. Thankfully a family member who has better insight than I bugged me to look into other career tracks. After a few conversations (over two years!!), I switched, and five years later, I was making 5 fold.

This is a long and winded way of saying this. You might want to consider increasing your income by changing career tracks.
Look at your competency. Look at the jobs/careers that have high average pay. See which one you like. See what it takes to get that job. Act on it. Do this before you get married and have kids. It gets harder to change a career after that.

You will thank me later.
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Re: How much to allocate towards retirement at 25 years old

Post by the_wiki »

OP:

Without reading the rest of the thread, I will say 10% income invested consistently starting in your 20s is enough for a comfortable retirement. I honestly think you are saving way too much to where it is making your life difficult to enjoy and making present goals harder to achieve. There are plenty of other things you need and want to do when you are young, it can't all be about a goal that happens 40 years in the future. Cut yourself some slack, this isn't a sprint race.
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Re: How much to allocate towards retirement at 25 years old

Post by the_wiki »

homebuyer6426 wrote: Wed Mar 29, 2023 7:27 am

Here is my advice for a 25 year old (which I also got from Bogleheads forum at that age).

Put every last penny you can in your 20s into VTI. You will get an incredible compounding effect that you will no longer be able to achieve to the same degree when you are in your 30s, 40s, and 50s, because you have so much time for your money to multiply right now.

If I could go send a message to myself in the past, it would be to see more of the world while I was young and spend more time maintaining my friend groups. Making some consistent investments in your future is important, but "every penny" just makes for a miserable existence, IMO. What are you even saving for?
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Re: How much to allocate towards retirement at 25 years old

Post by enad »

At your age you are doing great. Invest as much as you can as early as you can (this is the key) so that time can work for you, but do make sure you always have an emergency fund and also enjoy life i.e. don't deprive yourself of some things. You're on your way. Best wishes, Enad
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Re: How much to allocate towards retirement at 25 years old

Post by stoptothink »

protagonist wrote: Wed Mar 29, 2023 7:46 am
As for the engagement ring....logically it makes no sense to spend $4K on a ring if you make $45K/yr., but life isn't all about logic, and you need to do what makes sense to you.
I am 70 years old. I am wearing a $45 silicone wedding ring. (I almost lost it last week, which would have set us back over $50 for a replacement since my wife bought it on sale). I really didn't want my wife to spend any more than that on my ring. I would rather her have the money. For me, it is symbolic and it means just as much as if she spent thousands (and from far enough away it looks a little like 24K gold anyway!).
Why are you spending $45 on a silicone ring when you can get them for like $3 :mrgreen:? I learned my lesson about expensive rings and thankfully wife #2 thinks spending serious money on a ring is as silly as I do, hopefully OP doesn't learn the same lesson as I did. Not my place to tell others what to spend their money on.
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Re: How much to allocate towards retirement at 25 years old

Post by Late2Brake »

the_wiki wrote: Thu Mar 30, 2023 12:04 pm
homebuyer6426 wrote: Wed Mar 29, 2023 7:27 am

Here is my advice for a 25 year old (which I also got from Bogleheads forum at that age).

Put every last penny you can in your 20s into VTI. You will get an incredible compounding effect that you will no longer be able to achieve to the same degree when you are in your 30s, 40s, and 50s, because you have so much time for your money to multiply right now.

If I could go send a message to myself in the past, it would be to see more of the world while I was young and spend more time maintaining my friend groups. Making some consistent investments in your future is important, but "every penny" just makes for a miserable existence, IMO. What are you even saving for?
^^^^ All of This

You're doing great. My advise to my 25 year old self:

1- Go 100% stock. When you see a dip, don't panic. Better yet, don't look at all just keep putting in.
2- Read, read, read. Don't wait till your 50 to read up on investing and retirement.
3 - Most of all have fun. Have fun now. See the world. Go on kick ass vacations. Buy that new toy you want. Take your parents out often (and grab the dinner tab :happy you will miss them when they are gone).
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Re: How much to allocate towards retirement at 25 years old

Post by grog »

I was at a similar point when I joined the forum. You're way ahead of the game. Remember that financial growth is exponential. You start off slow but it really starts to snowball.

At 25, probably the most important thing is getting a job, thinking about your career trajectory, etc. Your future earnings are your most important asset, by far. Saving is good in terms of establishing habits and getting started, but imo it can be counterproductive to save an inordinate amount at a young age, especially if you expect your income to increase in the coming years. Looking back at things, I would have probably spent a bit more, if I'm being totally honest.

I think the most common errors for people in this sort of situation are probably these
-Doing silly stuff like day-trading on Robin Hood, crypto stuff, Wall Street Bets, etc
-Not taking advantage of tax-advantaged accounts (going for a brokerage account prematurely). I remember I was scared of having money "tied up" in retirement accounts.
-Holding too much cash (a cash cushion is good and if you have definite plans for the money, sure, hold cash, but if you have a large amount just sitting there it's probably better to have that in the 401k).

Probably the main challenge is that things are so open it makes it hard to plan ahead. Looking forward several years, you don't necessarily know what your income will be, where you'll be living, if you'll be buying a house, what your family situation will be, etc. These uncertainties are still there later but not to the same extent.
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Re: How much to allocate towards retirement at 25 years old

Post by CyclingDuo »

muitu wrote: Tue Mar 28, 2023 2:40 pm I work at a bank. I make 45k. I put 7% into 401k with 5% match, max Roth IRA, save around $250 every paycheck into my emergency fund until I hit 10k (at 7k).

Took up a 2nd job as a server - $300 to $350 for a Saturday night and Sunday brunch shift (tips + wage). $1,000ish a month from that - saving for engagement ring (4k).

Think I'm doing as much as I can right now. Pay $500 in rent, $270 student loan, $200ish in electric & heat every month. I have around 45k between 401k and Roth. Once I purchase ring and hit emergency fund, excess funds will go into VTI in taxable.

Been using the allocation prioritization chart on the boglehead wiki. Just want some reassurance that I'm doing everything right. Seeing the multi-million dollar portfolio reviews on this forum is very unsettling. Difficult looking at the far-away finish line when you've just started the race.
You've got your running shoes on and have everything aligned to indeed win the race. Kudos! :beer

Love the hustle with the side job!

I lived in NYC at your age and did the same regarding a side hustle as I was - in today's dollars - $47K in student loan debt at mid to high double digit interest rates. I worked a minimum of 6 days a week, sometimes 7 to try and service that debt. Unlike you, I wasn't able to put anything away in investments until I tackled my student loan debt, so the side hustle (for me it was singing at multiple weekly services, funerals, and weddings at St. Thomas Episcopal Church on 5th Avenue as a regular substitute along with another church singing gig I had) brought in a nice chunk of change over and above my full-time M-F job. Unlike you, my salary in today's dollars was quite a bit lower so I lived on a mattress on a floor in an apartment with two other roommates to keep costs as low as I could in that HCOL city. A few years later in NYC, I was finally able to get a platform bed as well as my permanent roommate for life. 8-)

Roth IRA didn't even exist at that time as it didn't come along until 10-12 years later.

We would all agree that at your age you should invest enough to get the full 5% match, then do as you are doing and move on to max your Roth IRA. Let's take a look just at Roth IRA maxing from age 25 - until retirement with a now outdated contribution limit of $6K, but you get the idea...

Image

Suffice it to say that compared to many of us who have what you call multi-millionaire portfolios, you are ahead of where we were at your age. It will all work out okay if you just stick with it through thick and thin over the coming decades.

:sharebeer

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Re: How much to allocate towards retirement at 25 years old

Post by socalindex »

Congratulations on such a early start.
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Re: How much to allocate towards retirement at 25 years old

Post by protagonist »

stoptothink wrote: Thu Mar 30, 2023 12:26 pm
protagonist wrote: Wed Mar 29, 2023 7:46 am
As for the engagement ring....logically it makes no sense to spend $4K on a ring if you make $45K/yr., but life isn't all about logic, and you need to do what makes sense to you.
I am 70 years old. I am wearing a $45 silicone wedding ring. (I almost lost it last week, which would have set us back over $50 for a replacement since my wife bought it on sale). I really didn't want my wife to spend any more than that on my ring. I would rather her have the money. For me, it is symbolic and it means just as much as if she spent thousands (and from far enough away it looks a little like 24K gold anyway!).
Why are you spending $45 on a silicone ring when you can get them for like $3 ?
My wife thinks I deserve only the very best.
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Re: How much to allocate towards retirement at 25 years old

Post by whodidntante »

My advice is not to view an IRA or 401k as a retirement account. View those as tax-advantaged accounts, because that is what they are. The retirement account label is just branding so we can feel like we did something to help future old people. There is somehow an impression that money gets locked away on the planet Krypton until you develop an inexplicable fascination with pickleball, but that just ain't so.

As the FIRE bloggers will tell you, there are ways to tap that money early with no penalty. In your 40's, or whatever. Now, there are huge benefits to allowing money to grow tax-free or tax-deferred, so it's not something you should do without consideration. And you have to plan a bit if you are going to tap a 401k while you still hate pickleball. So you have to pick what you optimize. For me, the goal is to optimize my spending power over my life after tax. Tax-free growth and tax-deferred growth can help with a goal like that. Tax drag is not helpful.

Maybe you want to have as much spending power as possible, too. I have not regretted putting money in a tax-advantaged account. I have regretted losing out on space because I didn't max out a tax-advantaged account.
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Re: How much to allocate towards retirement at 25 years old

Post by LotsaGray »

Vanguard User wrote: Tue Mar 28, 2023 4:38 pm Why are you buying a ring? What is the ROI on it?
Potentially x,000's of times anything you can earn in even the best market.
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Re: How much to allocate towards retirement at 25 years old

Post by invest4 »

Already many great comments. You are doing well!

A few things to to keep in mind during your journey (in no particular order):


* Do not underestimate the value of simplicity (you don't need many investments for a solid and enduring portfolio).


* Start learning about bonds now...they are more complex than stocks.


* Save what you can and remember to also enjoy life along the way
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Re: How much to allocate towards retirement at 25 years old

Post by H-Town »

muitu wrote: Tue Mar 28, 2023 2:40 pm I work at a bank. I make 45k. I put 7% into 401k with 5% match, max Roth IRA, save around $250 every paycheck into my emergency fund until I hit 10k (at 7k).

Took up a 2nd job as a server - $300 to $350 for a Saturday night and Sunday brunch shift (tips + wage). $1,000ish a month from that - saving for engagement ring (4k).

Think I'm doing as much as I can right now. Pay $500 in rent, $270 student loan, $200ish in electric & heat every month. I have around 45k between 401k and Roth. Once I purchase ring and hit emergency fund, excess funds will go into VTI in taxable.

Been using the allocation prioritization chart on the boglehead wiki. Just want some reassurance that I'm doing everything right. Seeing the multi-million dollar portfolio reviews on this forum is very unsettling. Difficult looking at the far-away finish line when you've just started the race.
skip the ring, especially the one that cost 4k. skip the girl that demands an expensive ring too. your future self will thank you later.
Time is the ultimate currency.
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Re: How much to allocate towards retirement at 25 years old

Post by dogagility »

Nice work, OP. Buy any ring you want for your future spouse.
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Re: How much to allocate towards retirement at 25 years old

Post by dagsboro »

I admire those who have the self discipline to save and invest starting at a young age. Investing for the long haul is the subject of many, many posts on the bogleheads forum. Reinforcing and encouraging that mind set is a 3/29/2023 article on Morningstar.com authored by Christine Benz, Morningstar's Director of Finance and Retirement Planning, and titled: 100 Must-Know Statistics About Long Term Care - 2023 Edition ( A Compendium of data about long-term care usage and costs, the state of insurance, and the toll on caregivers). No financial advisers worth their salt should overlook the issue of long term care when discussing financial issues.
A Random Fellow
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Re: How much to allocate towards retirement at 25 years old

Post by A Random Fellow »

The ring I bought for my wife has had the best ROI of anything I ever purchased: a wonderful wife, kids, happy home, happy marriage.

All things VTI can't produce. Buy a beautiful ring, OP...and congratulations on your upcoming engagement.
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Re: How much to allocate towards retirement at 25 years old

Post by hudson »

muitu wrote: Tue Mar 28, 2023 2:40 pm I work at a bank. I make 45k. I put 7% into 401k with 5% match, max Roth IRA, save around $250 every paycheck into my emergency fund until I hit 10k (at 7k).

Took up a 2nd job as a server - $300 to $350 for a Saturday night and Sunday brunch shift (tips + wage). $1,000ish a month from that - saving for engagement ring (4k).

Think I'm doing as much as I can right now. Pay $500 in rent, $270 student loan, $200ish in electric & heat every month. I have around 45k between 401k and Roth. Once I purchase ring and hit emergency fund, excess funds will go into VTI in taxable.

Been using the allocation prioritization chart on the boglehead wiki. Just want some reassurance that I'm doing everything right. Seeing the multi-million dollar portfolio reviews on this forum is very unsettling. Difficult looking at the far-away finish line when you've just started the race.
You are doing the right thing.
Keep on keeping on!
I didn't have savings, IRAs, or Roths until late in my career. (I'm now 75.)
My credit card was my emergency fund.
Once I stopped being a spender and started being a saver, things just worked out.
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Re: How much to allocate towards retirement at 25 years old

Post by smitcat »

the_wiki wrote: Thu Mar 30, 2023 11:52 am OP:

Without reading the rest of the thread, I will say 10% income invested consistently starting in your 20s is enough for a comfortable retirement. I honestly think you are saving way too much to where it is making your life difficult to enjoy and making present goals harder to achieve. There are plenty of other things you need and want to do when you are young, it can't all be about a goal that happens 40 years in the future. Cut yourself some slack, this isn't a sprint race.
+1 ... well said.
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Re: How much to allocate towards retirement at 25 years old

Post by KlangFool »

joe_the_buckeye wrote: Fri Mar 31, 2023 7:06 am The ring I bought for my wife has had the best ROI of anything I ever purchased: a wonderful wife, kids, happy home, happy marriage.

All things VTI can't produce. Buy a beautiful ring, OP...and congratulations on your upcoming engagement.
joe_the_buckeye,

Did you bought your wife a 4K ring while you were paying student loan?

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