[leifaffles]

Behavior determines successful outcomes far more than circumstances.

Saving $5.5k in an IRA every year for 40 years earning 7% ARR is a retirement nest egg of $1.1M dollars.

Median family income is $60k, making this 9% of the budget. Even if you earned say... $25k/yr ($12 per hour) for your entire life, you can afford to save $5.5k per year.

There is zero excuse for most people not emerging a millionaire at retirement.

[pandler]

Just to put things into perspective:

According to [1], 25k/year is about 21k take home wages per year, or ~$1755 per month. $5.5k/year is ~$460/month, so you budget is essentially $1300/month for everything: living expenses, food, transportation, everything else. In other words, you’re living on what is pretty close to minimum wage.

I’ll leave it up to you to make your own decisions about that, but I question the practical utility of having a million dollar retirement fund when you’ve spent your life living a minimum wage lifestyle, even if you have the fortitude to save that much at those wages.

[1] https://www.taxformcalculator.com/tax/25000.html

[leifaffles]

It's extremely rare to make only $25k/year for your entire life. Most people improve their earnings over time. Most people get married at some point.

The important point is that even under the most pessimistic assumptions people can get by AND build a secure retirement.

The "it can't be done" mentality is not justified in 2017 America.

[Y7ZCQtNo39]

I feel like you haven't lived on $25k/yr, at least not without the help of student loans or family.

You take FICA out, some federal/state taxes, you've got less than $2k a month. That doesn't stretch too far in some places.

Also, since you're lower working class, you're not going to be buying in bulk. You're not going to be avoiding late fees. You're not going to have economies of scale available to you on a $100k annual income.

So, the ability to save $5.5k is much different for someone earning $25k vs $100k. I'm not saying it's outright impossible, but it will have measurable impact on lifestyle for the lower income worker, whereas not so much for the higher income worker, since each marginal dollar you earn provides less and less utility. But the first $25k you earn really is your lifeline to meet basic necessities in life.

[loco5niner]

I did it for years. I was single, had a mortgage. Ate out. Went on reasonable vacations. It's doable.

[leifaffles]

I live on 18k/year in a HCOL area. Don't tell me it can't be done.

[Y7ZCQtNo39]

So you earn 18k, save 5.5k, and live off 12.5k? Do you have any assets, such as paid off home, that would significantly reduce your monthly expenses? Context would be key here.

[leifaffles]

I mean my living expenses, including rent, utilities, food, transportation, health care, etc, add up to $1.5k per month (or ~18k per year).

As in, I could make $25k (at a level where the tax rate is effectively near-0) and still save > $5k per year.

[Y7ZCQtNo39]

Is this employer-provided health care? Sounds like you're receiving is subsidized. Living on $18k a year would be rough. Are you splitting an apartment? How much would you be paying if you had kids and needed another bedroom? Again, context is key. For a single person in their 20s, who will have the lowest level of responsibility and statistically the best health situation of their life, it's possible. But for other people, $1.5k/mo in a HCOL would not cut it.

[yarrel]

So you don't actually live on 18k per year, and you're certainly not saving 5k/pa on 18k?

[Bjartr]

It'd be cool to see a deeper breakdown of your expenses, if you wouldn't mind?

[frgtpsswrdlame]

>Behavior determines successful outcomes far more than circumstances.

Well it sure does for the kind of people who go to Stanford and emerge with no debt. For everyone else circumstance is a heavy weight.

>Even if you earned say... $25k/yr ($12 per hour) for your entire life, you can afford to save $5.5k per year.

...How many people over the age of 30 do you actually know making $12/hr? If you have kids on that kind of wage there is absolutely no room for any saving.

[leifaffles]

Most people make more than $12 an hour, which is great news! Not having kids outside of marriage is something everyone can do as well.

[frgtpsswrdlame]

I don't see the relevance of this reply to my comment.

[geebee]

I finished grad school in 2000 and started saving then. We haven't had 7% returns for 2000-2017, even with the recent increase in the market.

40 years is a long time, and I'm talking about a notably bad start and end date (though remember how it looked between 2000-2010, almost a lost decade from the perspective of investment growth for retirement planning).

But while I still support saving and investing, a lot of people are reasonably starting to wonder, at what point should we stop assuming these kinds of returns in our planning?

[heedlessly2]

40 years from now $1.1 million won't feel that much actually.

[adjkant]

Bingo. Hopefully, this course talked about inflation adjusted ARR, that a nest egg must keep up with inflation, etc. I'm assuming it would, but it goes to show there are a lot of details that are easy to skip over.

[lghh]

> $25k/yr ($12 per hour) for your entire life, you can afford to save $5.5k per year.

Man, I'd love to live in a world where that would be possible.

[leifaffles]

It's extremely rare to live on 25k for your entire life. That's a pessimistic assumption.

My point is that even if you do make that for your entire life, you can still get by and build a secure retirement.

[lghh]

> It's extremely rare to live on 25k for your entire life.

Not where I'm from or from what I've seen.

And my point is that you can't save that amount of money on that sort of salary.

[leifaffles]

I do. See above comments. I spend $18k per year in a HCOL area. Plenty of room to save $5k in there and still have buffer for expenses that come up.

[jxramos]

You could probably fire up a YouTube channel of your experience and strategies and tradeoffs and garner a reasonable following maybe possibly growing to a sizable subscribership and possibly making some side cash. I'd watch some videos detailing these sorts of things.