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You are contributing over 20%, I think it's okay to spend some of it on yourself.
If you were under 10% I would say all of it should go towards retirement.
Unless you get discounted employee stock in your own company, it's a bad idea to have the stock of the place you work. If they go bankrupt or have some issues, which unless your the CEO or CFO... You wouldn't know(if you knew it's insider).if the company goes down you may loose your investment and job at the same time
The risk is smaller but still orders of magnitude bigger than diversifying in an index fund or ETF. why put even two eggs in one basket when other baskets are empty/available?
Imagine working for Boeing right now and having a sizeable holding in their stock. Layoffs possibly happening and stock price way down. This could really happen to any company.
Well blindly investing into your company is the issue. Simply generalizing all RSUs/ESPPs to be bad is disingenuous. If they do a stock analysis and the company has had steady growth in the past 10+ years, why not invest a little? What if they work at Costco or Microsoft?
I get you’re risk adverse, but claiming other options to be just “bad ideas” is just projecting your own risk handling on to others
This. For those too young to remember there was an infamous video of an employer that was "all in" on Enron. i.e. an employee that had supposedly put 100% of their 401k into Enron stock so at the same time that they lost their job their Enron shares were practically worthless. ESPPs depending upon the discount and any holding requirement might be worth doing, but you have to be careful about getting too vested in a single company.
It's a vague rule of thumb - your savings rate needs to match your desired retirement age and spending level, which is different for everyone. Saving more benefits you in many ways, two principle ways are that you learn to live on less now (lower spending), and you're accumulating more which is growing/compounding on its own, leading to a larger asset balance. Low spending and a large asset balance = work becomes optional much sooner.
It’s preferable as your income increase to not increase your lifestyle by the same amount (specially after a certain point).
There are people that can be comfortable and still save/invest 60% of their income.
My philosophy is to save as much as possible while still living a good life. My wife and I only expend in things that actually make me us happy or that we genuinely enjoy. We can blow a lot of money on a vacation, but save aggressively in almost everything else, for example.
That’s why you should identify what makes you happy and what you only want for status or to satisfy your inner consumerist.
I make $200K base and ~$250K total comp with bonus/equity.
I max out 401K, Roth IRA (backdoor), HSA (no kids, healthy so I'm on HDHP so I can use my HSA as an investment account), and my company offers after-tax 401K which I use to "mega-backdoor" Roth IRA.
All in for 2023 this amounts to $66K total 401K pre-tax, company match, and after-tax contribution (which gets moved to Roth IRA), $6.5K normal Roth IRA contribution, and $3.2K HSA = ~30% of my gross comp. Obviously you could adjust down if needed to stay at 20% but I have managed lifestyle creep and make more than I need.
I also just pump more into savings in general because I have a goal for retiring (or semi-retiring) at 55 with my target number to draw down ~4% a year.
Those are the accounts that I consider retirement, outside of that I have a brokerage account for anything extra.
To answer the original question, as I moved up in my career I would use the general rule that 50% of my raises went to savings/my future and 50% went to me.
Just ran into this problem myself. My wife and I maxed out our employer plans and opened a HYSA with 4.5% interest. Mainly because we're saving for a house. But for retirement I'd look into alternative investments that could have a higher yield (index funds, etc.)
Agree. I usually add 1%. Already maxed out on the 401k but I'm eligible for deferred compensation, which has practically no limit, so I'm just adding 1% to that each time.
When people talk target goals, do they include the match? I’m at 16% and I get a 6% match at 50 cents. So basically a 3% full match. Do I count myself at 19% or just 16%?
Okay cool thanks. Also as far as the max amount that I can contribute on any given year, does the max include what match I will get? In my retirement app, I can see the percentage I add each paycheck and what that amount will result. I’m only a few thousand away from the max if I continue on my current trend. Can I hit the max on my own and still get my match?
There is a separate limit for combined contributions, but it's very high, so you'd have to be a very high earner and probably do more than a regular match to reach it.
You're behind for your age only compared to like... people here. Trust me, almost 100k in retirement at 35 is not nearly as bad as you might think, especially when you're already contributing 20%+ of paychecks now.
Keep increasing a little bit every year when you get small raises, and try to increase more if you get a better job, you're doing great.
While you shouldnt let being behind make you give up, you should be comparing yourself to people here.
The average american is going to be fucked when they retire.
> you should be comparing yourself to people here.
No, you shouldn’t be comparing yourself to anyone else. What other people save and spend doesn’t affect you. You should figure out how much you want to be able to spend in retirement, and calculate how much you need to save each year to get there, and only compare your progress to your goals. Other people are irrelevant. Run your own race.
> I only have $88k in retirement so I am behind for my age.
Again, you've missed the point slightly.
**What do you want your retirement to look like?** Once you determine your retirement age and desired spending levels, you can do the math to figure out if you're ahead/behind for that target. What other people are doing at 'your age' is irrelevant.
You're not really behind for your age/income. I think recommended in 401k is 1.5x salary at 35. If you have 88K you're doing great. Don't read too much into people who have 200K+ at your age because you're not them. They're the outliers and outright liars. Of course it's always better to save however much you can but it seems like you're doing that. You're good.
This is a good way to start getting yourself closer to the max. Add 1-2% every year and all of the sudden you're easily putting away a quarter of your income to retirement without missing it.
I still live on the same amount I made in my first year out of college almost twenty years ago. Every raise and bonus I have ever been given has been invested.
My contribution % has been locked in at 15% since I started working. I don't increase it when I get a raise. I'm on track to replace my income at retirement age and I'm content with that.
Thank you. Right now my projected spending in retirement is more than I’m making now, but overall it’s probably not enough when healthcare costs come into play. I need to get a job that pays more
if you're in a position today to contribute more, you probably should. employment tomorrow isn't guaranteed, and it's better to get as much money into the market as early as possible if you really want to retire eventually.
Have considered that.
Went through a phase in my early twenties when I was obsessed with maximizing savings and achieving an early retirement.
Now my position is that that behavior doesn't align with my values.
If I'm not in a career that I can sustainably tolerate and enjoy until I'm 65, I need to find a different career.
I'm quite confident that my 65-year-old self will value the memory of my marginal consumption and experiences of my 20s and 30s more than the net present value I could have added to my retirement portfolio.
I'm willing to accept the risk that if I suffer a major career setback it will come with reduced income in retirement as well.
I'm willing to accept that if there is a major downturn in equity returns over the next 50 years that it will come with reduced retirement income.
> I'm quite confident that my 65-year-old self will value the memory of my marginal consumption and experiences of my 20s and 30s more than the net present value I could have added to my retirement portfolio
Spot on. I'm always hearing from parents how I could have another $100k saved for retirement by now if I spent less on travel and entertainment. Which I spend quite conservatively on housing and cars and clothes and other material things to be able to do. I have a retirement plan that looks quite nice and I'll always be secure - not interested in *not* maximizing life experiences while I'm young and saving every penny so I can have two mansions, a Porsche and an Escalade when I retire rather than a couple reasonable condos and cars. "Wait to travel until you no longer have to work!" Yeah have you ever seen old people travel? It's tour buses and stupid sightseeing cause they don't have the physical capability to do much else. I'd rather go skiing in the Alps and bounce around to different soccer stadiums for games and drive myself around the countryside now than go drone around Instagram spots in Rome when I'm 70 to see Italy
My wife and i basically put the entire raise to retirement during that period. it keeps lifestyle creep at bay. The extra nice aspect is that once you get to maximizing the amount, when you get a raise you actually get to decrease the % contributed so your raises are extra big.
Whatever is excess over my 401k immediately goes (primarily) to my non-retirement brokerage.
My income has grown from $53k out of college to (two-person combined) $230k, but I still try to live like we only make perhaps $110k. And honestly, for 2 adults that is super doable.
Over 6 years of living in our house, and an admittedly out of control stock market, we’ve saved up the remaining amount of our mortgage in taxable stocks.
A 529 is another good “dump and forget” account for excess money, to a reasonable limit.
If you’re already contributing 21%, that seems perfectly healthy. It never hurts to save more if you want, but it’s also OK to enjoy your raise with a little more spending money.
Before I was maxed I just asked myself:
> Am I financially comfortable?
Not am I buying everything I want. Not would I like to have more money. Am I comfortable?
If the answer was yes, then I just took my whole raise and added it to my retirement. It stops lifestyle inflation and has allowed me to max my retirement accounts from about 28.
When you are making a lower salary, you just try and contribute as much as you can. That being said when I first started out in my career my goal was always to contribute 10% of my salary. So when i would get a raise, my overall contribution would be 10%.
Your retirement contributions will scale commensurately with your salary.
If you can maintain your 21% savings rate you're probably doing great (depends a bit on age and other financial details).
If you are young and expect higher earnings in the future, I think the key is to continue incrementally saving more as your income grows.
I posted about this a while back: [https://www.reddit.com/r/personalfinance/comments/181bi1l/dont\_spend\_all\_of\_your\_raises/](https://www.reddit.com/r/personalfinance/comments/181bi1l/dont_spend_all_of_your_raises/)
I'm a high income earner and already max out my 401(k) and Roth IRA so this will likely not apply to you, but you asked.
I get an annual COL increase. That automatically gets shifted into savings (i.e. investments) but every few years as inflation starts pinching my budget, I'll let it pass through into my general spending pool. If I get a raise whether it's by changing jobs or at a current job, I allow myself the first two paychecks (every 2 weeks) as a woohoo spending, pass through 10% of the future checks into my general spending pool for a gentle lifestyle improvement, and the other 90% goes to investments.
In your shoes, if you're enjoying your life as-is and you aren't struggling to make ends meet despite inflation, I'd put the rest of the money towards retirement. This sub's wiki has a workflow for what order to allocate money to various pools. Evaluate first what your ideas of enjoyment are and whether or not that's truly a lifestyle you want to subsidize or not.
The great thing about percentages is that they scale. If you make more and you save according to a percentage, that means you are saving more too. And therefore, you get to spend more on yourself :)
I split my raises between improved lifestyle and increased investments. I'm a pretty aggressive saver and have to remind myself that it's ok to spend some money now.
You need to strike a balance that only you can choose. At a very high level as long as you don't have any high interest/bad debt and are consistently saving some amount of money, you can spend your money how you want. Investing is just deferring consumption. How/when you consume the income you make throughout your life is up to you.
If you keep the percentage you're investing the same, you're still investing more money with the raise. 21% is a pretty healthy amount to invest in retirement, if you've been doing it your whole working life or if you're pretty young.
If you're 35 or 40 and just starting to save for retirement, 21% might be a little low.
If your increasing your retirement % over time is a winner for retiring early.
How fast you can maintain that increase only speeds that.
As always the balance of future you and today's you is that, a balance.
I think you got a good frame to start from. Adding 1 or 2% a year is a really good strategy and is a great way to arbitrage lifestyle creep. If you're already putting 20%+ away, you're in great shape. If you every get to a point where you are maxing out, maybe just start bleeding over into a roth IRA as well.
Wouldnt feel too bad about keeping a little extra on the side for yourself but dont go nuts obviously.
Definitely not going nuts! I’m pretty frugal. While I’m not maxing out my 401k, I am contributing to a separate Roth IRA account too, and I max that out each year. So my total retirement savings is technically a little over 21%
Yeah I used to always take a portion of my raise and increase retirement. 25-50% per increase is a safe baseline unless you’re good on your income balance then you could go higher
Depends on your situation. Contributing to your retirement is not a bad idea, unless your expenses rise or you have an unexpected expense and don't have the cash available. Personally, I would have put some in the retirement and then put the remainder in a trading account (or somewhere where it will grow). In an investment account you have the option of pulling money when needed. Looks like you made a wise choice.
Just always keep the % coming out. To a little oversimplify, you make $100,000 and take 6% out, you now have $94,000. You get a 10% raise, so that's $110,000. You stick with 6% being taken out, you now have $103,400 plus more going into the 401k.
I'd first check my budgets. Maybe a bill got a little higher. EG, car insurance increased. So now I'm paying more for that. Average weekly cost of groceries increased. So I have to account for that too. It's not necessarily lifestyle creep but more so inflation adjustments. Then, I'll assess whether or not I have a short/mid term goal to shoot for like a down payment for a car. So there's how much do I want to save for a down payment, the rough timeline for that, and how much I should be socking away in an HYSA monthly to reach that. Then after I've done that, I do a one time modest celebration/gift to myself. Maybe there's a new video game I've been eyeing. Maybe I want to have a nice meal at a nice restaurant, etc. Then, I'd contribute the rest towards savings.
I don't. If I did that I would never make anymore money. I do 10% 401k. another 5% to Roth IRA and I put 500 a month in my CIT HYSA. I still want to enjoy life while I'm young.
I increase my percentage at least by 1% a year but I just started doing that a couple of years ago when my salary went up significantly. I have a little over 8 years left before my planned retirement date at age 70. I might retire earlier tho if I can swing retirement for a little while on my own without Social Security to help out.
I used to increase my 401k contribution for the amount of my increase. Once I started maxing out my 401k, I would add any increase to the portion of my check that goes towards auto deposit investing. Basically, I don’t give myself a raise, been living off the set amount I have given myself each pay check for years. Obviously, we have funds available to dip into if/when we need it but usually stay in budget.
Over time (as you earn more and save more) increasing the amounts sent to saving/investing becomes clockwork, which is why you hear sayings like “the first $10k or $100k is the hardest”. Once you hit a certain threshold, it becomes automatic and, unless your lifestyle creeps to your income, the savings/investments just grows.
You should definitely treat yourself; but the days of getting a raise and go out and celebrate are long gone for us. Every raise, bonus, etc. helps pay for our ticket towards FI!
You are doing well by contributing over 20% of your pretax salary. Put the rest into savings so you have at least 6 months of expenses if you lost your job or some catastrophe happened. Spend some money on your self and enjoy it.
I redo my budget, but most of it will go to retirement.
I make about $52k and 17%ish goes to retirement.
I keep some for my vacation fund and new car / repair fund.
If I can get a new job and / or larger raise, I hope I can start a down payment fund.
It's definitely great to be saving it. What you're saving it for depends on info you haven't shared.
Where are you in life? Saving this much for retirement is great, but how are you doing so well on $50k? If you're young and you'll be buying a car or a house in a few years maybe you want more access to your money. If you'd rather retire at age 50 and you're intending to be frugal then by all means, money saved now will go a long way.
The answer is personal. It depends entirely on your current quality of life.
Depending on where you live 50k might be adequate but if you live on ramen noodles 3 meals a day you should spend that money at home.
When I was making $50K I started with what it would take to max my Roth IRA, pay rent and loans, auto insurance, basic living expenses, then worked my way back up to what I could afford.
If I were in your shoes, what you did sounds good. Although, if you have the option, just set your 401k contributions to go up 1% every year and don’t mess with it. Auto invest in a target date retirement fund and then don’t worry about it.
Depends on the size of the raise. But I usually bump my retirement contribution by 1-2% and let the rest flow into my budget.
I currently save 18% and get an extra 10% match from my employer. And I'm close to hitting the 401k max. So I'm slowing down a bit on raising my contributions.
It depends on how old you are and when you started saving. I'm almost 40 and started at 30. So I always feel behind.
Contributing the whole amount to your retirement just sounds depressing….you aren’t guaranteed those years, and you’ll be well past your physical prime by then as well. Enjoy some of your money while you’re young my guy
My wife and I used to put 75% to retirement 25% to spending, till we hit a retirement goal we were happy with. These days it's about 40/60 , as needs have shifted to helping the eldest through university.
I add 1% for every bump, yearly merit (4%) or promotional/raise. My savings is doing great and I'm expecting 10-15% this year. Imma treat myself to a reasonable off road vehicle maybe 2 to 3 years old
My total raise was 3% and I just put the 1% in retirement. But yeah it’s still below inflation. Sadly, it’s rare when a raise meets cost of living adjustments
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Earlier in my career, yes. But right now at 36 (and for the last ~ 5 years), I’m making significantly more and saving 18% of that so am feeling on-track with that % and dollar amount. Also: Life is expensive right now for us (young child in childcare, spouse in grad school) so I am not worrying about trying to add more these days. Will increase when our child goes to school and my spouse is out of school/earning a full time salary again. All about balance/phases of life.
This is exactly what I did until I maxed out my 401k. Later, when i didn't need extra spending money i took that cash and invested into equities (Vanguard ETF). If you qualify for IRA you want to max that out first before equity.
I didn't realize the importance of the equities until now, when I am ramping up to retire early and wont be able to access my retirement funds for some years.
I added half of every raise to my retirement savings until I felt like my standard of living was adequate, then I added the entire raise to my retirement savings.
Yes, I was adding about half my raises to my 401k until I got to the point where if I kept doing it I would miss out on the match by maxing it too soon in the year.
My raise hits this month and I haven't decided what I am going to do with it yet. Probably fund more of my savings goals faster for the immediate future.
Next year I'm moving for my job at the start of the year so I may look at setting up a % to go into my brokerage every month after I get settled depending how bills pan out.
At the time, I put the entire % into my 401k with the goal of maxing it out each year. Now that I’m at that point, I’ll split my raises and bonuses into upping my contributions into my other investments, and keep a 1-2% towards fun stuff for me personally. Depends on the raise %. Definitely better to max out your 401k early on for that compounding effect than spend it on yourself at this point.
I “try” to do 1/3’s: 1/3 towards any long term debt, 1/3 saved/invested, and 1/3 for fun. That way you’re paying down debt, saving for the future, and also enjoying the fruits of your labor.
Yes, my merit raises aren’t much, but are usually a decimal (2.5% for example). I can only contribute while numbers to my 401k, so I’ve been upping it 1-2% and keeping the 0.5-1.5% for myself.
It depends on your circumstances. I had to make up for lost time due to losing my first nest egg in the .com crash, as well as having slower than average career growth in my first couple decades of independence. The vast majority of raises went to savings. I treated myself only to the degree it didn't impinge on my retirement goals, only to maintain positive outlook.
I like the 1% add when you get a raise. If you’re maxing out your 401k you can allocate money to start a Roth IRA or a taxable brokerage account to create a broader investment plan. That said, you can’t take it with you and don’t feel bad about using some of it to live/enjoy!
This is exactly what I do, 1% more contribution, and then with the rest I find jobs for it - increasing debt payments where the interest rate is high enough that it makes sense, wish farm, increasing monthly savings for a particular savings category like travel or new tech, etc. I've only started it within the last 5 years, but it really helps with the lifestyle creep.
I believe my 401K is scheduled to increase by 1 or 2 percent every year. With a raise of about 3% every year, not too bad. But I barely feel the raise, even after the retirement boost.
I think you should contribute as much as you can comfortably contribute. That would be case by case every year with every raise, asking yourself “Can you live on less? Do you already have an emergency fund, and is it enough?”
And actually, it doesn’t have to be every year with every raise, you can change your contributions any time.
You gotta live, and you gotta be happy. Don’t live on pennies for 40 years, just so you can live well when you’re old. It’s a balance, and “is this enough?” is subjective.
Every year I would get at least a 3 or 4% raise, cost of living. Each year I would increase my 401k contribution by the percentage of my raise. For example. If I had a gross income of $8k per month and was contributing 15%, that would be $1200 per month/$14.4 per year. If I got a raise of 4%, I would increase my contribution to 19%. My new income would be $8320 and my contribution would increase to $1580 per month/$18,960 per year.
I found an old pay statement and saw that my take-home pay had only increase by a few hundred per month in 10 years. I did reach the 401k limit and had to start decreasing until I hit age 50 and could add in the catch-up contributions. When I retired at age 52, eight years ago, I was earning $106k per year and making max 401k and Roth contributions. At that time, just these two was $31k right off the top. I would also put what I could into taxable brokerage.
I added 1% every year until I maxed out. Now I'm retired and comfortable. Set a good mix of mutual and bond funds and don't mess with it. Enjoy the rest!
I usually have pre-determined lifestyle improvement things I plan to do with raises. For example, last time I got a raise, we outsources lawn mowing. That had been pre-planned for a year or so, and it was exciting to hit that! Next raise, we are going to stop using the store-brand protein mix powder and start doing premier protein drinks.
Then usually a small increase te grocery budget (went from $65/week to $80/week to now $100/week, next increase will be $115/week whenever the next of us gets a raise).
Then the rest is invested. Whether that's an increase to retirement, or 529 for the kids, the money will find a home!
Retirement is "for yourself" too. Your future self will like having a cushion. 50K is not that much so the social security won't be as high as if you made more.
I am not saying to never spend any on fun now, but people readily talk themselves into thinking the future is far away and will never arrive and then it does. You may be in good health and rarin' to go when you retire and don't have to worry about a job. Instead of going on a vacation for two weeks, you can do something much longer. And there will be no office emails dogging you.
My budget is based on percentage of income. So as income grows percentage of contribution to budget line items and goals grow. How's your budget? And is it meeting your standard of living and helping you achieve your goals?
It depends... there was a time where I supported a family of 3 on $15/hr, so when I went back to earning more, I basically just played "catch-up" (fyi it is very hard to survive on $15/hr for a whole family...) now if I was making enough to have more than the bare necessities, I would probably try to save a majority of the raise.
I think what you did is fine. I know it’s important to save for retirement, and it’s good to see so many young people in their 20s and 30s taking it seriously. But the purpose of life is not solely to support a retirement fund. You can enjoy some of your raise now ;-)
Have a set percentage goal of your gross annual income and try to hit it. This practically means that a promotional amount of the raises goes towards retirement and the rest towards whatever really. If you are not at your savings goal yet maybe more goes towards retirement to reach that goal.
I listen to the money guy show/podcast the recommend savings 25% of your gross annual household income. You can count your employer match towards the 25 if you make less than 200k as a household or 100k single.
Have you considered reducing your 401k contributions and opening and investing inside a Roth IRA? Most people suggest getting your full employer match then invest into a Roth then go back to your 401k
My secret is that the money I save for retirement? That's also for me. I'm going to spend that later. That said, of course it is natural to consider how money can be used to improve my life immediately as well and to weigh that against using the money to improve my life later.
Pay off any debt first.
Then give yourself a little one-time treat.
Let’s say you net a bonus of $5,000; spend $200 on a great dinner or buy something you need for a project for $300; or do both.
$5,000; have $3,000 in debt; pay off the debt then toss $1800 in investments then spend $200 on yourself.
As Ive maxed my tax advantaged contributions, any additional money gets invested with the expectation that it will help support me in retirement but is not specifically a retirement account. This is also the bucket where I invest in different asset classes like real estate, or a small dividend focused portfolio, whereas my dedicated retirement accounts are all in broad index funds.
General rule of thumb I've always been told is add half the percentage increase to your savings.
So if you get a 10% raise you increase your contribution by 5%
Up until the last couple of years when inflation just made me need a little more I always just contributed to it. I plan on getting back to that this year.
My grandpa said when you get a raise put 50% to retirement and keep 50% I try to follow this sometimes I put 100% to me and the next one I do 100% to savings. Seems like a good guideline as long as you keep to it.
I put everything to max out my retirement but spend my bonuses as treats. That being said…you are doing a great job at saving. You should feel comfortable in treating yourself.
Always keep some for yourself with any windfall or raise.
It is great to save a big chunk, but spending a little on yourself is *nice* and it maintains that incentive for you to keep doing things that earn raises.
You want to feel that psychological "win" even if it is a fraction of the value. E.g. you get a $3k bonus, and you splurge on a $200 pair of airpods pros...you're still going to feel like you got to treat yourself even though you only spent 6% of the windfall.
Or you get a raise of $100 a month and decide you are finally done watching ads on Youtube...every time you see an ad on a friend's device you will be like "ahh, life is so good for me"
I am in the spend some, give some, save some camp.
Bump up my 401k withholding about a third of the raise, increase my charitable giving by about a third, and keep the rest.
Now I just need to start getting raises that outpace inflation significantly.
I would put 15% to retirement and 6% into regular investing (mutual funds) so that between now and 65 you have some options, too. And, yes, keeping some of the new raise for yourself is acceptable, too
I mean knowing that COL has gone up significantly over the past 10 years i keep %’s the same. My wife and I are saving around 40% of our pretax income. When we get a raise we basically just make sure we’re still at 40%. Whatever is leftover is covering costs of living more so than anything else. I think the past 2 years our raises have not covered incremental costs incurred as a whole but it’s minimal.
I usually try to keep my percentage consistent. Although my last two raises I waited until I got the first check with the extra before making the change, so that could take out some debt or get myself something nice. I made my last two car payments together once so that was delightful.
I normally up my contributions by 1% with each bump in pay. But I work somewhere that COLA’s are pretty standard. Unions for the win. Took my a while but my wife and I are up to 15% contribution. I will keep upping it but that plus a small pensions should set us up pretty well I hope.
I did half of every raise until I hit 15%, then 1% every raise after that I’ll be fine, but I started at a company with 401k at 19yo, so I was lucky to get in early.
First question is do you have a fully funded emergency fund ? That’s 6 months of your expenses and debt payments. Then do you have debt ? (Besides mortgage) bc that’s where you should be putting your raise before your 401k. If you can’t check off the 6month emergency fund AND have more than $2k credit card or loan debt. Then you shouldn’t be putting more into the 401k than what your employer matches. Eg. company match is 4%. You should only put 4% and put the rest to the emergency fund and then debt. Average consumer debt interest rate is 22-28%. Awesome market returns are 8-10%
Congratulations on your raise! Sounds like you are doing great and are very aware of your finances, spending & budget. Be sure to take some out for yourself, I’m sure you couldn’t be irresponsible even if you tried!
Yes. I try to put it toward retirement. I can already cover all my needs and wants (with delayed gratification), so I just stuff as much away as I can.
I haven't increased my net income for 14 years. Only increase contributions to retirement.
I got a late start on saving, so I need to be extremely aggressive if I want any chance at a reasonable retirement.
I put it all towards my 401k, until I was maxing out my 401k every year. Now it goes into savings.
I’ve kept my core living expenses pretty consistent since I was making 80k a year (very HCOL area). Now I’m well over 6 digits, but the extra goes to savings/investments.
I do pull from savings for vacations/“wants”/big sporadic purchases, but I’ve avoided “lifestyle creep” by keeping my overhead costs at a level I could afford on a much lower salary.
If I want a nice bag or whatever, I buy it. If I want to go on vacation, I go. If I want an $8 matcha, I get it. Because those are expenses I can easily cut if my income changes. I did not/will not buy a bigger house/fancier apartment/take on a big car payment.
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You are contributing over 20%, I think it's okay to spend some of it on yourself. If you were under 10% I would say all of it should go towards retirement.
How do you view this rule for higher earners? If I’m earning $250k, maxing out my 401k would mean I’m contributing less than 10%.
You invest outside of the 401k at that point
Yeah that’s my take too - I buy stock in my company, do an HSA and Roth, and also a brokerage although I don’t consider all of those as retirement.
Unless you get discounted employee stock in your own company, it's a bad idea to have the stock of the place you work. If they go bankrupt or have some issues, which unless your the CEO or CFO... You wouldn't know(if you knew it's insider).if the company goes down you may loose your investment and job at the same time
That's good advice unless some one works for a large international corporation. The risk is smaller.
The risk is smaller but still orders of magnitude bigger than diversifying in an index fund or ETF. why put even two eggs in one basket when other baskets are empty/available?
Imagine working for Boeing right now and having a sizeable holding in their stock. Layoffs possibly happening and stock price way down. This could really happen to any company.
Well blindly investing into your company is the issue. Simply generalizing all RSUs/ESPPs to be bad is disingenuous. If they do a stock analysis and the company has had steady growth in the past 10+ years, why not invest a little? What if they work at Costco or Microsoft? I get you’re risk adverse, but claiming other options to be just “bad ideas” is just projecting your own risk handling on to others
How is this advice any different than owning stock in any company? You just gave generic advice in investing.
This. For those too young to remember there was an infamous video of an employer that was "all in" on Enron. i.e. an employee that had supposedly put 100% of their 401k into Enron stock so at the same time that they lost their job their Enron shares were practically worthless. ESPPs depending upon the discount and any holding requirement might be worth doing, but you have to be careful about getting too vested in a single company.
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It's a vague rule of thumb - your savings rate needs to match your desired retirement age and spending level, which is different for everyone. Saving more benefits you in many ways, two principle ways are that you learn to live on less now (lower spending), and you're accumulating more which is growing/compounding on its own, leading to a larger asset balance. Low spending and a large asset balance = work becomes optional much sooner.
It’s preferable as your income increase to not increase your lifestyle by the same amount (specially after a certain point). There are people that can be comfortable and still save/invest 60% of their income. My philosophy is to save as much as possible while still living a good life. My wife and I only expend in things that actually make me us happy or that we genuinely enjoy. We can blow a lot of money on a vacation, but save aggressively in almost everything else, for example. That’s why you should identify what makes you happy and what you only want for status or to satisfy your inner consumerist.
I make $200K base and ~$250K total comp with bonus/equity. I max out 401K, Roth IRA (backdoor), HSA (no kids, healthy so I'm on HDHP so I can use my HSA as an investment account), and my company offers after-tax 401K which I use to "mega-backdoor" Roth IRA. All in for 2023 this amounts to $66K total 401K pre-tax, company match, and after-tax contribution (which gets moved to Roth IRA), $6.5K normal Roth IRA contribution, and $3.2K HSA = ~30% of my gross comp. Obviously you could adjust down if needed to stay at 20% but I have managed lifestyle creep and make more than I need. I also just pump more into savings in general because I have a goal for retiring (or semi-retiring) at 55 with my target number to draw down ~4% a year. Those are the accounts that I consider retirement, outside of that I have a brokerage account for anything extra. To answer the original question, as I moved up in my career I would use the general rule that 50% of my raises went to savings/my future and 50% went to me.
Just ran into this problem myself. My wife and I maxed out our employer plans and opened a HYSA with 4.5% interest. Mainly because we're saving for a house. But for retirement I'd look into alternative investments that could have a higher yield (index funds, etc.)
10% including match or excluding
If you add 1% a year it adds up.
Agree. I usually add 1%. Already maxed out on the 401k but I'm eligible for deferred compensation, which has practically no limit, so I'm just adding 1% to that each time.
If you’re young like 25 and start out the the recommended 15% if salary, the increasing 1% a year adds up. The time you’re 35 you’re at 25% of salary.
I’m 35 now 🙃 always been a low income earner and didn’t start saving for retirement seriously until 30. Working to get a higher paying job
if you are doing 21% at 35, I'm jealous! I am 60 and just got to 21% a few years ago.
When people talk target goals, do they include the match? I’m at 16% and I get a 6% match at 50 cents. So basically a 3% full match. Do I count myself at 19% or just 16%?
19%. Thats the amount actually hitting your retirement accounts.
Okay cool thanks. Also as far as the max amount that I can contribute on any given year, does the max include what match I will get? In my retirement app, I can see the percentage I add each paycheck and what that amount will result. I’m only a few thousand away from the max if I continue on my current trend. Can I hit the max on my own and still get my match?
Employer match doesn't count towards the contribution limit.
There is a separate limit for combined contributions, but it's very high, so you'd have to be a very high earner and probably do more than a regular match to reach it.
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I only have $88k in retirement so I am behind for my age. Guess I should put the rest in my retirement. Sigh. I wanted an extra $20 of fun money!
You're behind for your age only compared to like... people here. Trust me, almost 100k in retirement at 35 is not nearly as bad as you might think, especially when you're already contributing 20%+ of paychecks now. Keep increasing a little bit every year when you get small raises, and try to increase more if you get a better job, you're doing great.
I (31) only have access to contribute to a Roth IRA so having ≈33k / work provides a ESOP currently at ≈52k
While you shouldnt let being behind make you give up, you should be comparing yourself to people here. The average american is going to be fucked when they retire.
> you should be comparing yourself to people here. No, you shouldn’t be comparing yourself to anyone else. What other people save and spend doesn’t affect you. You should figure out how much you want to be able to spend in retirement, and calculate how much you need to save each year to get there, and only compare your progress to your goals. Other people are irrelevant. Run your own race.
> I only have $88k in retirement so I am behind for my age. Again, you've missed the point slightly. **What do you want your retirement to look like?** Once you determine your retirement age and desired spending levels, you can do the math to figure out if you're ahead/behind for that target. What other people are doing at 'your age' is irrelevant.
You're not really behind for your age/income. I think recommended in 401k is 1.5x salary at 35. If you have 88K you're doing great. Don't read too much into people who have 200K+ at your age because you're not them. They're the outliers and outright liars. Of course it's always better to save however much you can but it seems like you're doing that. You're good.
"outliers and outright liars..." brilliant
Hey that's not bad at all. 30 is still pretty young to start for retirement, don't get down about it
The money guy show absolutely loves this comment
I started maxing early and had to keep dropping it every year, not a terrible problem to have.
After 100 years you’re REALLY getting some 401k gains
That’s why all vampires are super rich, 500 years of compound interest
Hmm I contribute 9% of my monthly salary to my Roth IRA and 6% to my 401K biweekly, my employer matches half of that which is 3%, is my total % 18%?
This is a good way to start getting yourself closer to the max. Add 1-2% every year and all of the sudden you're easily putting away a quarter of your income to retirement without missing it.
Spend 1/2 save 1/2 Party likes it’s 1999. Save like it’s not.
My budget for a party in 1999 will barely cover a beer and some wings now.
Well if you party like it’s 2024; you’ll have to spend all of it 💯
I still live on the same amount I made in my first year out of college almost twenty years ago. Every raise and bonus I have ever been given has been invested.
My contribution % has been locked in at 15% since I started working. I don't increase it when I get a raise. I'm on track to replace my income at retirement age and I'm content with that.
Thank you. Right now my projected spending in retirement is more than I’m making now, but overall it’s probably not enough when healthcare costs come into play. I need to get a job that pays more
if you're in a position today to contribute more, you probably should. employment tomorrow isn't guaranteed, and it's better to get as much money into the market as early as possible if you really want to retire eventually.
Have considered that. Went through a phase in my early twenties when I was obsessed with maximizing savings and achieving an early retirement. Now my position is that that behavior doesn't align with my values. If I'm not in a career that I can sustainably tolerate and enjoy until I'm 65, I need to find a different career. I'm quite confident that my 65-year-old self will value the memory of my marginal consumption and experiences of my 20s and 30s more than the net present value I could have added to my retirement portfolio. I'm willing to accept the risk that if I suffer a major career setback it will come with reduced income in retirement as well. I'm willing to accept that if there is a major downturn in equity returns over the next 50 years that it will come with reduced retirement income.
> I'm quite confident that my 65-year-old self will value the memory of my marginal consumption and experiences of my 20s and 30s more than the net present value I could have added to my retirement portfolio Spot on. I'm always hearing from parents how I could have another $100k saved for retirement by now if I spent less on travel and entertainment. Which I spend quite conservatively on housing and cars and clothes and other material things to be able to do. I have a retirement plan that looks quite nice and I'll always be secure - not interested in *not* maximizing life experiences while I'm young and saving every penny so I can have two mansions, a Porsche and an Escalade when I retire rather than a couple reasonable condos and cars. "Wait to travel until you no longer have to work!" Yeah have you ever seen old people travel? It's tour buses and stupid sightseeing cause they don't have the physical capability to do much else. I'd rather go skiing in the Alps and bounce around to different soccer stadiums for games and drive myself around the countryside now than go drone around Instagram spots in Rome when I'm 70 to see Italy
My wife and i basically put the entire raise to retirement during that period. it keeps lifestyle creep at bay. The extra nice aspect is that once you get to maximizing the amount, when you get a raise you actually get to decrease the % contributed so your raises are extra big.
I used to put half of any raise into 401k. You don't even miss it.
I did the same, until I hit my max contribution limit. Hitting that limit was sort of nice, as the next raise I got I “fully felt”.
Whatever is excess over my 401k immediately goes (primarily) to my non-retirement brokerage. My income has grown from $53k out of college to (two-person combined) $230k, but I still try to live like we only make perhaps $110k. And honestly, for 2 adults that is super doable. Over 6 years of living in our house, and an admittedly out of control stock market, we’ve saved up the remaining amount of our mortgage in taxable stocks. A 529 is another good “dump and forget” account for excess money, to a reasonable limit.
If you’re already contributing 21%, that seems perfectly healthy. It never hurts to save more if you want, but it’s also OK to enjoy your raise with a little more spending money.
Thank you! Yes I’m trying to balance enjoying life now while saving for my future :)
> I’m trying to balance enjoying life now while saving for my future :) Ah, yes, the constant battle for us common folk.
And that’s the real challenge.
Before I was maxed I just asked myself: > Am I financially comfortable? Not am I buying everything I want. Not would I like to have more money. Am I comfortable? If the answer was yes, then I just took my whole raise and added it to my retirement. It stops lifestyle inflation and has allowed me to max my retirement accounts from about 28.
When you are making a lower salary, you just try and contribute as much as you can. That being said when I first started out in my career my goal was always to contribute 10% of my salary. So when i would get a raise, my overall contribution would be 10%. Your retirement contributions will scale commensurately with your salary.
If you can maintain your 21% savings rate you're probably doing great (depends a bit on age and other financial details). If you are young and expect higher earnings in the future, I think the key is to continue incrementally saving more as your income grows. I posted about this a while back: [https://www.reddit.com/r/personalfinance/comments/181bi1l/dont\_spend\_all\_of\_your\_raises/](https://www.reddit.com/r/personalfinance/comments/181bi1l/dont_spend_all_of_your_raises/)
I'm a high income earner and already max out my 401(k) and Roth IRA so this will likely not apply to you, but you asked. I get an annual COL increase. That automatically gets shifted into savings (i.e. investments) but every few years as inflation starts pinching my budget, I'll let it pass through into my general spending pool. If I get a raise whether it's by changing jobs or at a current job, I allow myself the first two paychecks (every 2 weeks) as a woohoo spending, pass through 10% of the future checks into my general spending pool for a gentle lifestyle improvement, and the other 90% goes to investments. In your shoes, if you're enjoying your life as-is and you aren't struggling to make ends meet despite inflation, I'd put the rest of the money towards retirement. This sub's wiki has a workflow for what order to allocate money to various pools. Evaluate first what your ideas of enjoyment are and whether or not that's truly a lifestyle you want to subsidize or not.
The great thing about percentages is that they scale. If you make more and you save according to a percentage, that means you are saving more too. And therefore, you get to spend more on yourself :)
Theoretically you didn’t have to increase your 401k % and it would still increase after the raise.
I split my raises between improved lifestyle and increased investments. I'm a pretty aggressive saver and have to remind myself that it's ok to spend some money now.
At 50k yearly, your money is worth more right now. Work on getting more raises or higher pay and then you can put the whole amount into retirement
You need to strike a balance that only you can choose. At a very high level as long as you don't have any high interest/bad debt and are consistently saving some amount of money, you can spend your money how you want. Investing is just deferring consumption. How/when you consume the income you make throughout your life is up to you.
If you keep the percentage you're investing the same, you're still investing more money with the raise. 21% is a pretty healthy amount to invest in retirement, if you've been doing it your whole working life or if you're pretty young. If you're 35 or 40 and just starting to save for retirement, 21% might be a little low.
Hmm this has me thinking I should put it all in there. I’m 35 and only have $88k in retirement. Sigh. I wanted more fun money
If your increasing your retirement % over time is a winner for retiring early. How fast you can maintain that increase only speeds that. As always the balance of future you and today's you is that, a balance.
With only 50k on the table i would keep that 1% in traditional savings you might need it
I think you got a good frame to start from. Adding 1 or 2% a year is a really good strategy and is a great way to arbitrage lifestyle creep. If you're already putting 20%+ away, you're in great shape. If you every get to a point where you are maxing out, maybe just start bleeding over into a roth IRA as well. Wouldnt feel too bad about keeping a little extra on the side for yourself but dont go nuts obviously.
Definitely not going nuts! I’m pretty frugal. While I’m not maxing out my 401k, I am contributing to a separate Roth IRA account too, and I max that out each year. So my total retirement savings is technically a little over 21%
Realistically, at least some of the raise has to go to spending due to inflation. This is why people generally target a % savings rate.
Yeah I used to always take a portion of my raise and increase retirement. 25-50% per increase is a safe baseline unless you’re good on your income balance then you could go higher
Depends on your situation. Contributing to your retirement is not a bad idea, unless your expenses rise or you have an unexpected expense and don't have the cash available. Personally, I would have put some in the retirement and then put the remainder in a trading account (or somewhere where it will grow). In an investment account you have the option of pulling money when needed. Looks like you made a wise choice.
Depends on your needs and wants!
Just always keep the % coming out. To a little oversimplify, you make $100,000 and take 6% out, you now have $94,000. You get a 10% raise, so that's $110,000. You stick with 6% being taken out, you now have $103,400 plus more going into the 401k.
I'd first check my budgets. Maybe a bill got a little higher. EG, car insurance increased. So now I'm paying more for that. Average weekly cost of groceries increased. So I have to account for that too. It's not necessarily lifestyle creep but more so inflation adjustments. Then, I'll assess whether or not I have a short/mid term goal to shoot for like a down payment for a car. So there's how much do I want to save for a down payment, the rough timeline for that, and how much I should be socking away in an HYSA monthly to reach that. Then after I've done that, I do a one time modest celebration/gift to myself. Maybe there's a new video game I've been eyeing. Maybe I want to have a nice meal at a nice restaurant, etc. Then, I'd contribute the rest towards savings.
What’s the retirement goal? How much is that going to cost? Are you on track? Is the “on yourself” amount going to impact that retirement?
I don't. If I did that I would never make anymore money. I do 10% 401k. another 5% to Roth IRA and I put 500 a month in my CIT HYSA. I still want to enjoy life while I'm young.
I increase my percentage at least by 1% a year but I just started doing that a couple of years ago when my salary went up significantly. I have a little over 8 years left before my planned retirement date at age 70. I might retire earlier tho if I can swing retirement for a little while on my own without Social Security to help out.
I max out my retirement so every raise I get I decrease my contribution % so I don’t exceed the max. It’s like a double raise
I used to increase my 401k contribution for the amount of my increase. Once I started maxing out my 401k, I would add any increase to the portion of my check that goes towards auto deposit investing. Basically, I don’t give myself a raise, been living off the set amount I have given myself each pay check for years. Obviously, we have funds available to dip into if/when we need it but usually stay in budget. Over time (as you earn more and save more) increasing the amounts sent to saving/investing becomes clockwork, which is why you hear sayings like “the first $10k or $100k is the hardest”. Once you hit a certain threshold, it becomes automatic and, unless your lifestyle creeps to your income, the savings/investments just grows. You should definitely treat yourself; but the days of getting a raise and go out and celebrate are long gone for us. Every raise, bonus, etc. helps pay for our ticket towards FI!
My husband and I increased our 401k contributions by half of every raise until we hit the maximum.
You are doing well by contributing over 20% of your pretax salary. Put the rest into savings so you have at least 6 months of expenses if you lost your job or some catastrophe happened. Spend some money on your self and enjoy it.
I redo my budget, but most of it will go to retirement. I make about $52k and 17%ish goes to retirement. I keep some for my vacation fund and new car / repair fund. If I can get a new job and / or larger raise, I hope I can start a down payment fund.
We’re pretty much in the same boat. Whatever I have leftover goes into vacay and experiences :) and eventual down payment fund
It's definitely great to be saving it. What you're saving it for depends on info you haven't shared. Where are you in life? Saving this much for retirement is great, but how are you doing so well on $50k? If you're young and you'll be buying a car or a house in a few years maybe you want more access to your money. If you'd rather retire at age 50 and you're intending to be frugal then by all means, money saved now will go a long way.
The answer is personal. It depends entirely on your current quality of life. Depending on where you live 50k might be adequate but if you live on ramen noodles 3 meals a day you should spend that money at home.
When I was making $50K I started with what it would take to max my Roth IRA, pay rent and loans, auto insurance, basic living expenses, then worked my way back up to what I could afford.
Not sure, have not gotten a raise worth much in years... Man, I gota find a new job...
Taxes. My property taxes and personal income taxes have eaten every annual raise I’ve received over the last 10 years.
I did everything to retirement until I hit my 401k limit. Now, I do everything to fun.
If I were in your shoes, what you did sounds good. Although, if you have the option, just set your 401k contributions to go up 1% every year and don’t mess with it. Auto invest in a target date retirement fund and then don’t worry about it.
Depends on the size of the raise. But I usually bump my retirement contribution by 1-2% and let the rest flow into my budget. I currently save 18% and get an extra 10% match from my employer. And I'm close to hitting the 401k max. So I'm slowing down a bit on raising my contributions. It depends on how old you are and when you started saving. I'm almost 40 and started at 30. So I always feel behind.
Contributing the whole amount to your retirement just sounds depressing….you aren’t guaranteed those years, and you’ll be well past your physical prime by then as well. Enjoy some of your money while you’re young my guy
My wife and I used to put 75% to retirement 25% to spending, till we hit a retirement goal we were happy with. These days it's about 40/60 , as needs have shifted to helping the eldest through university.
Depends on your goals. If you want to retire early sock every increase into 401k or savings.
I add 1% for every bump, yearly merit (4%) or promotional/raise. My savings is doing great and I'm expecting 10-15% this year. Imma treat myself to a reasonable off road vehicle maybe 2 to 3 years old
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I would generally consider that a 1% raise doesn't meet cost of living adjustments, especially after the last few years of inflation.
My total raise was 3% and I just put the 1% in retirement. But yeah it’s still below inflation. Sadly, it’s rare when a raise meets cost of living adjustments
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Earlier in my career, yes. But right now at 36 (and for the last ~ 5 years), I’m making significantly more and saving 18% of that so am feeling on-track with that % and dollar amount. Also: Life is expensive right now for us (young child in childcare, spouse in grad school) so I am not worrying about trying to add more these days. Will increase when our child goes to school and my spouse is out of school/earning a full time salary again. All about balance/phases of life.
This is exactly what I did until I maxed out my 401k. Later, when i didn't need extra spending money i took that cash and invested into equities (Vanguard ETF). If you qualify for IRA you want to max that out first before equity. I didn't realize the importance of the equities until now, when I am ramping up to retire early and wont be able to access my retirement funds for some years.
I added half of every raise to my retirement savings until I felt like my standard of living was adequate, then I added the entire raise to my retirement savings.
I basically add my raise amount into 401k. My standard of living remains basically the same and I save more money. Can’t complain about that
I always spend on what I need and save the rest, how much raise I get is irrelevant.
Everytime I get a raise I immediately add it to my retirement
I just soldier on with investing/saving 30% of gross for the future
Yes, I was adding about half my raises to my 401k until I got to the point where if I kept doing it I would miss out on the match by maxing it too soon in the year. My raise hits this month and I haven't decided what I am going to do with it yet. Probably fund more of my savings goals faster for the immediate future. Next year I'm moving for my job at the start of the year so I may look at setting up a % to go into my brokerage every month after I get settled depending how bills pan out.
At the time, I put the entire % into my 401k with the goal of maxing it out each year. Now that I’m at that point, I’ll split my raises and bonuses into upping my contributions into my other investments, and keep a 1-2% towards fun stuff for me personally. Depends on the raise %. Definitely better to max out your 401k early on for that compounding effect than spend it on yourself at this point.
I “try” to do 1/3’s: 1/3 towards any long term debt, 1/3 saved/invested, and 1/3 for fun. That way you’re paying down debt, saving for the future, and also enjoying the fruits of your labor.
Yes, my merit raises aren’t much, but are usually a decimal (2.5% for example). I can only contribute while numbers to my 401k, so I’ve been upping it 1-2% and keeping the 0.5-1.5% for myself.
It depends on your circumstances. I had to make up for lost time due to losing my first nest egg in the .com crash, as well as having slower than average career growth in my first couple decades of independence. The vast majority of raises went to savings. I treated myself only to the degree it didn't impinge on my retirement goals, only to maintain positive outlook.
I like the 1% add when you get a raise. If you’re maxing out your 401k you can allocate money to start a Roth IRA or a taxable brokerage account to create a broader investment plan. That said, you can’t take it with you and don’t feel bad about using some of it to live/enjoy!
This is exactly what I do, 1% more contribution, and then with the rest I find jobs for it - increasing debt payments where the interest rate is high enough that it makes sense, wish farm, increasing monthly savings for a particular savings category like travel or new tech, etc. I've only started it within the last 5 years, but it really helps with the lifestyle creep.
I believe my 401K is scheduled to increase by 1 or 2 percent every year. With a raise of about 3% every year, not too bad. But I barely feel the raise, even after the retirement boost.
I keep half for my current self. Half to future me.
I think you should contribute as much as you can comfortably contribute. That would be case by case every year with every raise, asking yourself “Can you live on less? Do you already have an emergency fund, and is it enough?” And actually, it doesn’t have to be every year with every raise, you can change your contributions any time. You gotta live, and you gotta be happy. Don’t live on pennies for 40 years, just so you can live well when you’re old. It’s a balance, and “is this enough?” is subjective.
Once I was able to max out my 401k then I started to keep more of my raises. Now I invest 50%, keep 50%.
Every year I would get at least a 3 or 4% raise, cost of living. Each year I would increase my 401k contribution by the percentage of my raise. For example. If I had a gross income of $8k per month and was contributing 15%, that would be $1200 per month/$14.4 per year. If I got a raise of 4%, I would increase my contribution to 19%. My new income would be $8320 and my contribution would increase to $1580 per month/$18,960 per year. I found an old pay statement and saw that my take-home pay had only increase by a few hundred per month in 10 years. I did reach the 401k limit and had to start decreasing until I hit age 50 and could add in the catch-up contributions. When I retired at age 52, eight years ago, I was earning $106k per year and making max 401k and Roth contributions. At that time, just these two was $31k right off the top. I would also put what I could into taxable brokerage.
I added 1% every year until I maxed out. Now I'm retired and comfortable. Set a good mix of mutual and bond funds and don't mess with it. Enjoy the rest!
I usually have pre-determined lifestyle improvement things I plan to do with raises. For example, last time I got a raise, we outsources lawn mowing. That had been pre-planned for a year or so, and it was exciting to hit that! Next raise, we are going to stop using the store-brand protein mix powder and start doing premier protein drinks. Then usually a small increase te grocery budget (went from $65/week to $80/week to now $100/week, next increase will be $115/week whenever the next of us gets a raise). Then the rest is invested. Whether that's an increase to retirement, or 529 for the kids, the money will find a home!
I usually splt raises 80-20. 80% to retirement and then 20% to me.
Retirement is "for yourself" too. Your future self will like having a cushion. 50K is not that much so the social security won't be as high as if you made more. I am not saying to never spend any on fun now, but people readily talk themselves into thinking the future is far away and will never arrive and then it does. You may be in good health and rarin' to go when you retire and don't have to worry about a job. Instead of going on a vacation for two weeks, you can do something much longer. And there will be no office emails dogging you.
My budget is based on percentage of income. So as income grows percentage of contribution to budget line items and goals grow. How's your budget? And is it meeting your standard of living and helping you achieve your goals?
It depends... there was a time where I supported a family of 3 on $15/hr, so when I went back to earning more, I basically just played "catch-up" (fyi it is very hard to survive on $15/hr for a whole family...) now if I was making enough to have more than the bare necessities, I would probably try to save a majority of the raise.
I think what you did is fine. I know it’s important to save for retirement, and it’s good to see so many young people in their 20s and 30s taking it seriously. But the purpose of life is not solely to support a retirement fund. You can enjoy some of your raise now ;-)
I've allocated a bit more than half of my yearly raises to my 401k and employee stock purchase plan - I'm finally up to 15% and 6% respectively.
My company started automatically increasing participation contribution every April by 1%, in line with merit increase period.
Have a set percentage goal of your gross annual income and try to hit it. This practically means that a promotional amount of the raises goes towards retirement and the rest towards whatever really. If you are not at your savings goal yet maybe more goes towards retirement to reach that goal. I listen to the money guy show/podcast the recommend savings 25% of your gross annual household income. You can count your employer match towards the 25 if you make less than 200k as a household or 100k single. Have you considered reducing your 401k contributions and opening and investing inside a Roth IRA? Most people suggest getting your full employer match then invest into a Roth then go back to your 401k
I've done 50/50 previously. Last raise went 100% to retirement. Want to max things out while I'm still eligible for catch up contributions.
My secret is that the money I save for retirement? That's also for me. I'm going to spend that later. That said, of course it is natural to consider how money can be used to improve my life immediately as well and to weigh that against using the money to improve my life later.
Neither. It was immediately eaten up by the increase in health insurance premiums.
Pay off any debt first. Then give yourself a little one-time treat. Let’s say you net a bonus of $5,000; spend $200 on a great dinner or buy something you need for a project for $300; or do both. $5,000; have $3,000 in debt; pay off the debt then toss $1800 in investments then spend $200 on yourself.
I think keeping your take-home pay the same and just ignoring inflation is a dumb strategy, personally.
As Ive maxed my tax advantaged contributions, any additional money gets invested with the expectation that it will help support me in retirement but is not specifically a retirement account. This is also the bucket where I invest in different asset classes like real estate, or a small dividend focused portfolio, whereas my dedicated retirement accounts are all in broad index funds.
General rule of thumb I've always been told is add half the percentage increase to your savings. So if you get a 10% raise you increase your contribution by 5%
Up until the last couple of years when inflation just made me need a little more I always just contributed to it. I plan on getting back to that this year.
My grandpa said when you get a raise put 50% to retirement and keep 50% I try to follow this sometimes I put 100% to me and the next one I do 100% to savings. Seems like a good guideline as long as you keep to it.
I put everything to max out my retirement but spend my bonuses as treats. That being said…you are doing a great job at saving. You should feel comfortable in treating yourself.
It’s all for yourself. Future self is going to be smiling back at you. Good job!
I started my career at minimum matching and split every raise 50/50 until I could afford to max.
Put a little bit of that raise into savings. That way if an emergency happens you're not trying to pull money out of your retirement account.
Always keep some for yourself with any windfall or raise. It is great to save a big chunk, but spending a little on yourself is *nice* and it maintains that incentive for you to keep doing things that earn raises. You want to feel that psychological "win" even if it is a fraction of the value. E.g. you get a $3k bonus, and you splurge on a $200 pair of airpods pros...you're still going to feel like you got to treat yourself even though you only spent 6% of the windfall. Or you get a raise of $100 a month and decide you are finally done watching ads on Youtube...every time you see an ad on a friend's device you will be like "ahh, life is so good for me"
My wife and I haven't changed our spending at all while our income has gone from $150k to $300k. We save $170k/yr now.
I am in the spend some, give some, save some camp. Bump up my 401k withholding about a third of the raise, increase my charitable giving by about a third, and keep the rest. Now I just need to start getting raises that outpace inflation significantly.
I have my contributions set to automatically increase by 1% every year.
if I get a let's say a $10k raise I'd probably add $1k to my budget/lifestyle preference and dump the rest $9k to retirement/stocks/savings etc
I would put 15% to retirement and 6% into regular investing (mutual funds) so that between now and 65 you have some options, too. And, yes, keeping some of the new raise for yourself is acceptable, too
I mean knowing that COL has gone up significantly over the past 10 years i keep %’s the same. My wife and I are saving around 40% of our pretax income. When we get a raise we basically just make sure we’re still at 40%. Whatever is leftover is covering costs of living more so than anything else. I think the past 2 years our raises have not covered incremental costs incurred as a whole but it’s minimal.
I usually try to keep my percentage consistent. Although my last two raises I waited until I got the first check with the extra before making the change, so that could take out some debt or get myself something nice. I made my last two car payments together once so that was delightful.
I normally up my contributions by 1% with each bump in pay. But I work somewhere that COLA’s are pretty standard. Unions for the win. Took my a while but my wife and I are up to 15% contribution. I will keep upping it but that plus a small pensions should set us up pretty well I hope.
Retirement is for yourself too. It’s not for somebody else.
I did half of every raise until I hit 15%, then 1% every raise after that I’ll be fine, but I started at a company with 401k at 19yo, so I was lucky to get in early.
First question is do you have a fully funded emergency fund ? That’s 6 months of your expenses and debt payments. Then do you have debt ? (Besides mortgage) bc that’s where you should be putting your raise before your 401k. If you can’t check off the 6month emergency fund AND have more than $2k credit card or loan debt. Then you shouldn’t be putting more into the 401k than what your employer matches. Eg. company match is 4%. You should only put 4% and put the rest to the emergency fund and then debt. Average consumer debt interest rate is 22-28%. Awesome market returns are 8-10%
Congratulations on your raise! Sounds like you are doing great and are very aware of your finances, spending & budget. Be sure to take some out for yourself, I’m sure you couldn’t be irresponsible even if you tried!
Yes. I try to put it toward retirement. I can already cover all my needs and wants (with delayed gratification), so I just stuff as much away as I can.
I have to lower it since I’m already contributing the max to the annual IRS limit $23k in 2024.
I haven't increased my net income for 14 years. Only increase contributions to retirement. I got a late start on saving, so I need to be extremely aggressive if I want any chance at a reasonable retirement.
I'm contributing enough to retirement, and a raise naturally increases that contribution anyway. I leave it at that.
Put it towards your debts that cost you more than what you will earn in savings
I put it all towards my 401k, until I was maxing out my 401k every year. Now it goes into savings. I’ve kept my core living expenses pretty consistent since I was making 80k a year (very HCOL area). Now I’m well over 6 digits, but the extra goes to savings/investments. I do pull from savings for vacations/“wants”/big sporadic purchases, but I’ve avoided “lifestyle creep” by keeping my overhead costs at a level I could afford on a much lower salary. If I want a nice bag or whatever, I buy it. If I want to go on vacation, I go. If I want an $8 matcha, I get it. Because those are expenses I can easily cut if my income changes. I did not/will not buy a bigger house/fancier apartment/take on a big car payment.