You can be completely on-track to achieve your savings goal by age e.g. 65 and still only assets equal to half that at 50. Because of the compounding growth.
Like many people with solid saving / investment habits, my last few years of fulltime employment my assets were growing every year by much more than my take-home pay that year.
But in each of those last years I still fully funded my 401K & IRA, and saved / invested some of the rest of my take-home. Because my living arrangements were chosen to be enough less expensive than my take-home pay. Such that I had nothing else to do with the money except save/invest it.
IMO the real point for the OP’s students is that every year, you need to plan to split your total income 3 ways: 1/3rd to taxes, 1/3rd to investing (401k / IRA / non-qualified), and 1/3rd to live on. That way lies a retirement wealthier than your working years, and a legacy to leave your kids.
One can quibble about exactly 33% each versus, say, 25%, 30%, 45%. The lower your absolute income the lower your tax brackets. Note that “taxes” are not just income taxes. There are also Social security taxes, Medicare taxes, property taxes, vehicle taxes, sales taxes, etc. And some of those are actually effectively higher rates as you go down the income ladder towards minimum wage.
Beyond the above points, a clear understanding that “saving” and “investing” are two different activities for two different purposes is also important. You need some of each early on, but after your first couple/few years of employment, the “savings” phase should be over and it’s pure investment from then on out to retirement.
I am also wondering what @Sandwich is thinking here?
It isn’t disagreeing with the statement; it’s not even having any idea what they are even thinking of with it.
The one thing I can think of is this, maybe. A major factor in increasing wealth inequality is that the wealthiest have the funds to invest, to weather volatile times without eating the seed corn, and to take some riskier swings at bat. So an economic wobble that wipes out the savings of a middle class family is a sniffle to the wealthier, who keep on dollar cost averaging, buying up stuff at a discount and becoming even wealthier on the other side of recovery.
But that doesn’t fit the stealing from current workers bit?
So I am left just confused. @Sandwich any further explanation of what you were meaning?
I basically set a goal of having a monthly income of at least 85% of my monthly income for my final year of employment. Some thought revealed that I would need a combination of my employment retirement income, in addition to what I would be able to generate from an investment program I started in my mid 30s. I did not rely on Social Security, even though I do receive benefits. My employment retirement benefit has a built-in cost of living adjustment, and my investment portfolio has exceeded inflation. This is an example of how I approached your question…Your lifestyle post employment is a major factor in determining what you will need as your monthly income needs, and only you can determine that. Each retirement financial situation needs to be planned for by the actual future retiree - there is no firm answer to the final answer, but figure out the financial tools you need, and the levels of savings to achieve your goals, start early funding your retirement, and stick with it. But that is just advice from one person who has navigated this question pretty well.
Your students may not want to plan on receiving much from Social Security as part of their retirement. The trustees of the program released a report this week that the fund will be depleted in 2033. At that point, it will only have enough to pay 77% of promised benefits. (Paywalled NYT cite.)
I think they’re saying the money came from somewhere, and you should take that into account. When you sell stocks, someone has to buy them. When you cash your SS check, many others are paying into the system. When you sell your house, another person has to buy it. While the economy is not zero-sum, there is a sense in which your higher-than-expected gains imply that someone else, or many someones, gained a lot less than they expected. Whimsically, and by exaggeration, you could maybe call that “theft”.
So if there are fewer SS-paying workers in the future, the stock gains aren’t quite as lucrative, and the housing market comes back to earth, all of which seem pretty likely, you can’t assume that just because Grandpa made a million dollars on his house, sold blue chip stocks at the top of the market from his 401k, and collected a lot of SS to boot, that you’ll be able to do the same in your retirement. The economy changes too much and too quickly to depend on that.
There will continue to be winners and losers, and if the boomers were overwhelmingly “winners” on average, the idea is that to some extent later generations will have to be “losers” to make up for it.
I don’t entirely buy the argument, but I think that’s what they were going for.
The person hasn’t been back to defend anything they wrote here.
I think it’s the usual economically illiterate stuff that all wealth is theft. Both intergenerational as you cite, but also at any given time. If I have more, somebody else must have less. And that difference must be theft, properly defined.
Reading between the lines, interest is theft in his view. So crackpot thinking all the way down.
Fleet sales are nowhere near half of new vehicle sales in the US. There are about 16 million new vehicles sold in the US in 2024 and there were about 2 million sold to fleets. I know lots of people who buy new vehicles, including myself. But I also keep them for ten years or so.
I just bought my first new car in 2 decades, I’ve been buying used for a bit. But the incentives on new EVs were too good to pass up. We’re close to retirement so we’re keeping close track on our savings.
This is true, but its not always easy to put into practice. When a person is in their 20s they may have a low paying job, student loan debt, etc. Then as they move up their career and into their 30s they have a higher paying job but they have a mortgage, daycare costs, saving for their kids college.
Sadly some people are middle aged before their income is high enough and their expenses are low enough (paid off mortgage, no kids to support, no student loan debt) that they can start saving and investing massively.
Having said that, I have known single people who lived frugal lives and never had children. Some of them saved a ton, and had a nest egg close to 8 figures by the time they were ready to retire, which is excessive if anything. A single person doesn’t need 5-10 million to retire comfortably.
I bought new in 2020 (just before Covid) mostly for safety features. Well worth it as you age. But not very expensive. In California my tush doesn’t need heated seats and a high quality cheap car gets you where you want to go just as well as a luxury car.