Tales From the Wallet: How Much to Save For Retirement


2018 Update: Check out our discussion on the FIRE movement (financial independence retire early) for beginners! 

How much should you be saving for retirement? Are there savings benchmarks by ages? Is saving different for women? These are all questions that come up frequently (and no one really has all the answers) that I thought we should talk about them today. (Pictured:  Marc by Marc Jacobs Wallet, on sale at Bloomingdale’s — was $148, now $103.60.)

A few notes from poking around the Internet:

– According to the Department of Labor, on average women live longer than men, invest more conservatively, work fewer years (or work part-time/freelance jobs without access to a retirement plan).  Joy! MoneyLiving notes that women also have higher health care expenses, in part due to maternity expenses, but also higher premiums.

– According to CBS Money Watch (in an article not aimed at women), if you want to retire by age 65 and you start saving at age 25, you should save 15% of your income (that’s a bit more than the 10% I’ve always heard is standard, and that’s a young age — if you start saving at 35 and want to retire at 65, the percentage goes up to 24%).  WSJ MarketWatch (again, not aimed at women) notes that by age 35 you should have saved 1x your income, and by age 40 you should have saved 2x your income; Time agrees.

– If you just want to know where you stack up with the Joneses, Learnvest did a survey a while back that said how much people had saved. 72% of respondents 25-32 had $49,999 or less saved in their 401Ks/IRAs/etc.

– You can find a number of retirement calculators to tell you your specific savings goals — for example, Fidelity, Bloomberg, MSN Money, and CNN Money all have retirement calculators.

So here are the questions, ladies:  How much are you saving?  What time do you want to retire?  (Or, do you expect to keep working well past age 70?)  Have you changed your savings goals with the hope/knowledge/expectation of taking any time off for family issues (either to care for your children or your aging parents)?  Particularly for the readers who are older, with kids — how are your retirement savings?  What’s your advice for the younger readers?

For my own $.02: I barely thought about retirement in my 20s, and I regret that.  I saved a lot of each paycheck (after tax) once I was out of law school, but kept most of the money in low-interest money market funds.  I didn’t start contributing to the firm’s 401K until I was 27!  Looking at the info above (and thinking about my personal friends, and you readers, and the other stuff I’ve read) I think the most daunting part of the various info I found is how from age 35 to age 40 you’re supposed to increase your retirement savings from 2x your salary to 3x your salary — I can’t help but notice how that time frame also overlaps with prime child-rearing time.  A lot of mothers either aren’t working, or aren’t working full-time with access to a retirement account — and even if they are working, with so many extra kid-related expenses it seems unlikely that anyone is saving as much as they were in their 20s.  I suppose interest/market gains can account for a lot of that jump from 2x-3x, and I know that child-rearing expenses aren’t unique to women — but I think that the best advice anyone can give women is this:  If you are in a position to save a lot for retirement, today, then do it — save as much as you can, as early as you can, whether in tax advantaged accounts (401k, IRA) or in after-tax accounts (regular investment accounts).


  1. scarf lady :

    My husband and I are saving approximately 50% of our after-tax take-home pay for retirement. We both max out our respective 401(k)s and IRAs, and contribute additional funds to investment accounts that are earmarked for retirement. On top of this, I’ve been paying-off professional school debt, which will be finished this year, and are saving for a down payment on a house which we hope to purchase in the next 3-5 years.

    I’m terrified of something happening to us in the future, or being in the position later where we can’t save as much as we can now. We’re relatively young (under 30) and childless, so figure that NOW is the prime time to live below our means and sock away as much as possible for retirement before life gets more complicated and unpredictable and expensive with kids etc.

    I’ll also throw out that part of a comprehensive retirement savings plan includes insurance premiums that you’re paying to adequately insure you and your spouse (if you both work) in case one of you dies prematurely or becomes disabled etc. Term insurance is pretty cheap, so there’s no excuse not to get fully protected and ensure that you can continue funding your future in the event something horrible happens to you or your spouse.

    • I am SINGLE and do NOT have a husband to save for me, so my DAD manage’s my RETIREMENT 401(k) for me. He make’s me save enough so that I am maxed out every year. This way, he says, I will be abel to retire at age 60 at the latest, assuming I keep my job and have steady income, or else get MARRIED to a guy who will suport me until he retires. My dad also recomends when I get married to a guy that I get LIFE INSURANCE on him, just in case anything hapens to him. OMG, that is all I need. I Finaly find a guy, marry him and something hapens? FOOEY on that! It has to be forever, I told dad.

      Today, I found out we are goieing to HAVE to go to trial on a WC case I have pending. It is one of Roberta’s cases. I need to get another depo from our doctor expert b/c the other doctor moved to Florida and will NOT be availabel for trial. Wouldn’t you know it, but BRIAN’s firm is representing the plaientiff, and Brian is second chairing it b/c the senior partner there want’s to buff up on his courtroom expertise. I was used to manhandeling BRIAN with the judge, but this guy has been around the block, and I am not sure the judge will give me the same liberties that he does when I am up against BRIAN. At least Brian will not have to sweat all over the pleeading’s that his hands to the judge and me. GROSS!

      I told Roberta, and she wasn’t happy, but I told her there was nothing I could do b/c Brian’s firm was prepared this time and answered the calendar call as ready for a trial date. Now, in addition to getting a new expert DOCTOR, Roberta will have to get an HR person to come in and tell our side of the story — that the guy was NOT even injured when he went home, but must have slipped on a banana peel somewhere OUTSIDE of work. The plainetiff has the burden of Proof, so FOOEY if we contest where and how he wound up with a sore hip.

      Myrna is comeing over here in a couple of hour’s and I am leaving early with her to go to a MUSEUM uptown. Myrna says I need to get some culture, and mabye we can meet guy’s there she says. I told her that most guy’s at museum’s are effeminate. She said she would proove me wrong. I hope I am. YAY!!!!!!

  2. I Do Not Like the Cone of Shame :

    This is a great topic, and I have been looking for these types of recommendations!

    Like you, I wasn’t thinking about saving for retirement in my early 20’s – but I was pretty focused on saving up to buy my first house. I think once you get past that financial hurdle it’s a lot easier to wrap your mind around retirement.

    I feel like I have been maxing out my 401K and IRAs since my late 20s, and now that I am 45, it’s a little depressing to look at my 401K and feel like I’m not ahead of the game. The last 5 years have not been kind, but it’s rebounding now.

  3. I have maxed out my 401k ever since I was 22 (with the exception of my time in business school) and this is the best thing I have done for my finances. My salary had varied a bit during this time but would be on par with law salaries I think. I’ve also received matches ranging from 3-12%.

    Now I am in my mid 30s with two little kids and having this money in the bank gives me so many options career wise. Right now the only change I’ve made is to cut back to 80% time but that may change in the future.

    My husband was more like Kat so I can tell you the difference it makes- I have more than 2x his retirement savings.

    If you are not saving now start small and remember this money comes out pre tax so you will not feel the full dollar (will be more like 70-80 cents on the dollar depending on tax bracket) and then slowly increase the amount over time. Don’t let the buts (but I don’t like my job, but I don’t know if I want to get married/have kids) stop you.

    • Sugar Magnolia :

      It comes out pre-tax if your employer sponsors a retirement plan. Not all do keep in mind. What is the recommendation if your employer doesn’t I wonder…

      • Baby DC Attorney :

        I’m an avid Suze Orman viewer, and Suze would say if your employer does not offer a 401k, you should max out a Roth IRA. If your income cuts you off from the Roth, then do a traditional IRA and then roll it over to a Roth.

    • Ms. Van Squigglebottoms :

      Question: does it matter whose account money is in? I’m in public interest; my husband is not. Consequently, his retirement accounts are 4x mine. Does it matter?

      • If you divorce, retirement accounts can be split even if all the money is in one name but I don’t count on that. Look at the options, matching and expenses of each employer’s plan but my bias is to put some into each person’s retirement accounts.

  4. To set the stage: I’m 27, have been working full-time since graduating with a B.A., and I just recently got married. Both my husband and I are strong savers and tend to be slightly risk-averse — we think carefully before spending significant sums.

    My two cents: Start saving as early as possible, and take advantage of employer (or parental) match. My parents had me start a Roth IRA once I started making more than a couple hundred bucks at my college summer jobs, and that alone is already in the $25-30K range (just by contributing at or near the match each year). I’ve also saved at least 10% of my income each year in my 401(k) at work, excluding employer matches.

    If you feel like you don’t know what you’re doing, meet with a financial planner (focus on fee-only, hourly fee-based ones, not those who work on commission) or start reading. There are lots of great resources (but also a lot of bad ones) out there. For example, the book I Will Teach You To Be Rich (by Ramit Sethi) is an approachable read on saving, money management, and investing in general.

    • We must be twins, my parent’s did a similar match thing and it has made me a life long saver– also love Ramit’s book. I think it’s a great and simple guide for those of us in our 20s, or just simply overwhelmed with all of this to just get started.

  5. My favorite post on retirement math


    Wish I had read it when I was younger and had more disposable income! Makes me wonder were the standard advice of 10% came from.

    • Houston Attny :

      Oh wow – fascinating article. Scary as h*ll but fascinating.

    • goldribbons :

      That article is amazing.

    • Interesting, but I really wonder how the hell one is supposed to live on 35% of the salaries most of my fellow sub-25-year-olds are making. I did some quick math on that basis, and I would have been able to afford 1. rent, 2. utilities (no TV or internet), and 3. groceries OR gas for my car.

      • Cornellian :

        or 35% of the salary of zero so many of my fellow 26 year olds are making.

      • LadyEnginerd :

        I can barely live on 100% of my take-home salary! My rent alone is 40% of my take-home. Frankly, I’m doing well if I can put anything into savings in a given month (which I usually do, but it’s usually a pitiful percentage of take-home). Thankfully, I have only one more year as an indentured servant at a university or I’d really have to take a hard look at how unsustainable my finances are and move in with roommates, sell my car, etc.

      • Well, Mr. Money Mustache is Hardcore.

        He would encourage you to not pay for gas in your car. He is all about riding bikes. Also, he wears long johns under his clothes in his house. So, that might bring your utilities down. I’m fairly certain he would NEVER use AC. He posts his family’s annual expenses and they are at approximately $25,000 a year. I’m pretty sure Mrs. Money Mustache is not reading this blog since the whole family spent $327 on clothes last year.

        Saving 35% of your income would allow you to retire in 25 years without decreasing your spending post retirement. If you could reduce your spending (say by having your house paid off, and not buying clothes, and not commuting, and not dry cleaning, and not eating out so much) post retirement, you could save less and retire sooner.

    • I can be so OCD about these things, but this is my new goal! I am going to drive my SO nuts. Even if I don’t actually retire in 10 years, I could if I wanted to (if I do things WAY differently than I am now) and that peace of mind would be priceless.

      So far, at 30 and a 1st year associate (who worked a professional job prior to law school for several years), I max out my 401k and IRA ($22,500 total annually) (will start converting the IRA contributions to a Roth this year since I now make too much for the deduction), and have about $70k saved in retirement accounts from before law school.

      I used up most of my cash savings in law school, and so am trying to save up a strong emergency fund. Again, this would be easier to do if I significantly lower our household expenses. We’re fairly frugal anyway, but I can at least keep them from rising with my pay increases as I (hopefully) move through the Big Law ranks.

      This will be sooooo much easier when SO finds a steady job. A big law salary should go a lot farther than it does for a family of 3. I guess it would go farther if we were married and I could take the write offs, but I’m not sure its worth forcing the marriage talk at this point.

  6. Statutesq :

    How much are you saving:
    I started doing 15% in a 401K at age 27 (now 30). Even assuming I continue to do this, and don’t run into any major market crashes (highly unlikely), I can’t imagine at 65 I’ll have enough to retire with. I’m also skeptical that I can actually save my way into a happy retirement at age 65. What do you all do in addition to a 401k that’s aimed at retirement?

    When do you want to retire: ASAP–I’m over this working full time thing ;)

    • I completley agree — I put 12% into a 401K right now because these are lean times for me — heavy mortgage, insane childcare payments. I don’t think there’s any possible way I’d be able to retire before 75 at this rate (I’m 33 right now). I’m assuming I’ll live to 100 (like my grandparents) so that’s nearly 3 decades to live on. Yeesh.

    • I think, starting at 0, never putting in windfalls or increasing your rate, and not reducing your spending post retirement, and discounting any SS or pension, if you save 15% you have to work for 43 years. So, you are right, about age 75. (Then you’ll have enough for a “safe” 4% withdrawal rate.)

      But, I have some faith in some social security. And, your childcare payments might go down, so you can up your saving to 18%-20% to make up for these leaner years. And, I bet after 50, you could really lean in and save even 25%-30%. And, if you pay off that house before retirement, and can cut expenses a little in addition, you are probably looking at 70 or even 67. And, if you are willing to risk it- and actually use principle you could maybe even do 65.

  7. Before I started practicing law I started a Roth IRA and contributed $5k to it each year. Now I put 6% of my salary into a 401k, and get a 3% match. Otherwise focusing on paying off my law school debt and mortgage (2nd loan w/ balloon payment coming up in a few years).

    • ETA, weird as it may sound early retirement is not really my objective. I enjoy working, I have reasonable hours and some flexibility in my job, and do not plan on having children. I can see working until about age 60.

      • Well let me know where I can get a job like that

      • I consider 60 to be quasi-early retirement.

        • Was gonna say this too! But, I think the thing is– sometimes things in life change and further, what if you can’t work anymore– despite wanting to.

      • I agree. Assuming I stay in my current area, I would probably not want to retire till at least 70, maybe later. That said, I still feel like I need to contribute more to my retirement accounts. I do about 7% with some additional employer benefits, but this whole conversation is making me start to panic.

  8. Anyone know how home equity plays into this equation? We put down about 35% of the purchase price of our house when we bought it last year. Home values were pretty depressed in our area when we bought, but we’re seeing them rise steadily the last 12 months (and, given some new industry in our area, we expect this increase will continue at least for the next few years). Does that matter at all?

    • goldribbons :

      If you plan to sell your house when you retire, it would play in to your savings. If you plan to continue living in your house, it doesn’t count (except to the extent that someday you would no longer have to pay a mortgage).

      • Older/wiser :

        I counted my home equity as part of my retirement fund until 2008. Big mistake, as I’m mid-50s and now way behind for retirement. (And our house isn’t even under water – it’s worth 3x what we paid for it.) Don’t count on it – the market could crash when you least expect it to.

    • Senior Attorney :

      I plan to have the house paid off by the time I retire. So the home equity figures into the retirement calculation insofar as I won’t have to pay rent or a mortgage payment in retirement, and therefore my need for retirement income will be lower than if I did need to pay rent or mortgage.

      • Anonymous :

        But remember — property taxes can still be significant in some areas, so that will be your ongoing “rent”. Sometimes it isn’t practical to be thinking that in 30 years you will still want to live and maintain a very expensive 4 bedroom 2 bath home, with MUCH higher property taxes/utilities etc… then selling and even just renting a much cheaper to maintain apartment/condo.

        For example, my parents recently retired and their property tax for their small house (but in a nice suburb) is more then $1000 a month. That’s suburban Chicago. Most retirees move out, unless they are wealthy.

        • Senior Attorney :

          Of course there are multiple considerations, which I have of course considered. Fortunately I bought my (modest “starter”) house in California long enough ago that my property taxes are quite low, thanks to good ol’ Prop 13, and never succumbed to the urge to trade up to that very expensive 4 bd/2 ba McMansion. So yes, at this point my cheapest retirement housing option will definitely be my own house, even accounting for the taxes. YMMV, of course.

  9. I save 15% in my 401k, and save/invest another 5-10% each month. However, I am lucky to live in a region with really low cost of living, and we are living well below our means on top of that.

    I am targeting to retire by age 60, and I am currently a good bit ahead of schedule. I may take time off if/when we have kids #2 & #3 if I can without hurting our financial goals.

  10. Even though I was very responsible in my 20’s, I was totally clueless that I was supposed to be saving for retirement (did save for a house). Then went to law school, so now I’m early 30’s and realizing I have a lot of catching up to do. Our primary focus right out of law school was to get the higher interest student loans paid off, and once the lower interest ones are paid off, I expect to have a lot more left over to put into my 401k. I know compound interest is awesome, but am having a hard time justifying putting money into a 401k when I’m paying 6-8% on my student loans. Shouldn’t I get all of those paid off first, especially when big law firms don’t do any 401k matching so I’m not losing out on any free money? I’m also hoping that the major salary increases over the coming years as I become a mid-level and senior associate will give me a lot more to put into savings each year.

    In addition to my question about paying off loans vs. savings, I also have a question about Roth or regular. I understand that you’re supposed to do pre-tax if you think you will be taxed at a lower rate upon retirement. How do you determine that? Is there some salary threshold at which you should start doing pre-tax vs. post-tax? What if you plan to make partner or have some other extremely high paying gig, so you expect to have a lot more money in the future than you have now, but you’re making over $200k a year now.

    Finally, how do you factor in your spouse’s salary when determining what % to put away. My husband stays at home, so does that mean I should be saving ~30%? Yikes!

    Looking forward to hearing everyone’s thoughts on this topic.

    • I’m in the exact same boat, and I’m taking the exact same approach. I would love to hear others’ thoughts.

    • On Roth vs. Regular- despite our higher income, DH and I are able to get our effective tax rate down to about 10% (lots of deductions!). We’re putting everything we can into Roth for now, knowing that when the kids are on their own and we are still working and/or about to retire, we’ll lose a lot of our deductions. And I think that 20 years from now, there is about a 0% chance that my tax rates will be any lower, regardless of who is in office. I know lots of folks have varied opinions on this–but this is our stance. Plus, Ilike to look in the bank and see $X and know it’s all post-tax.

      • Are you doing a Roth 401k too? And what are these magic deductions?! I’ve managed to get mine down to 20%… its still WAY too much as dollar figure. I made less than that working for a full year while in college…

    • Well you are still missing out on being able to reduce your tax liability assuming you can put some money away pretax. It might work out to being equivalent or more advantageous in terms of earnings/amounts over time. (You may be earning 8% tax free vs paying off a 6% loan with after tax dollars)

      Also remember, you can’t eat/pay rent with paid off loans. You can with money in savings. Personally I make sure to pay loans aggressively but also put money towards retirement and emergency savings, because nothing is guaranteed.

      • Oh I also forgot to mention that you should also consider that the federal limits on contributions really prevent you from going back to make up those missed years where you didn’t contribute. It’s more likely that in future years you will be forced to save in a taxable account to make up for what you didn’t do earlier. Then you are also losing out even more.

        • Senior Attorney :

          There are catch-up provisions to increase contributions once you hit 50 or so. Not enough to make up for a late start, but better than nothing.

        • That is a great point and probably the one thing that keeps nagging at me to be putting more away now. We got our emergency fund to a comfortable place in 2012 (finally recovered from the law school hit to our savings), so I’m thinking we can finally start putting more away into retirement now, but it is so tempting to just throw all of that extra money to my loans so we can be done with them.

    • As a foreigner working internationally retirement an even weirder, scarier animal for me but I’ve recently pondered the same question. Would you rather use big savings rates on your incomes and do what I’d call short-term project financing: save for grad school/pay off grad school, then buy a house, then keep a high savings rate (30-50% of your net income) to save for retirement afterwards OR would you prefer saving/paying off these continually at moderate rates.

      Considering employer matching (that’s not guaranteed to be continually available throughout your career), student loan rates, mortgages rates, paying for rent vs. mortgage, tax breaks, the power of compound interest, the inevitability of stock market cycles throughout your career, possible moves and thus obliteration of paying into retirement under different systems earlier or later in your career etc. etc. it sometimes feels like the variables are too out of control to make a good decision – no matter how badly one wants to or how sophisticated one’s Excel model is.

  11. Sydney Bristow :

    I’ve just started, which I regret not being able to do earlier, and am currently saving 10% of my after-tax income in a Roth IRA. When I reach the contribution limit for the year, I’ll put the rest into a regular investment account. I hope to bump up the percentage I’m saving soon, hopefully to 20%, but I’m holding off for now because my IBR payments are about to jump significantly so I need to grow my emergency fund a little more and my current work project may be ending soon. It’s stressful to feel like I’m so far behind.

  12. Anonforthis :

    My current base salary is $90k. I had been saving about 12% of that in a (post-tax) Roth 401(k), plus 3% that my employer kicks in (pre-tax). I have a (post tax) roth IRA that gets maxed out ($5) each year. I assume these suggested percentages (15-25%) are of pre-tax money, in which case I’m pretty on track with the suggested targets, since the majority of my current contributions are actually post-tax. I’m 28 and have about 65k in post-tax dollars stashed away, plus 20k in not-yet-taxed funds. I have been saving since I got my first job, but low-paying jobs and grad school made it hard to max things out each year until recently.

    DH is 29 and has about 90k in post-tax money set aside. He just finished an MBA and during that period only had his Roth IRA to contribute to but prior to that had been putting about 10% of his income away in his company matched 401k.

    Now that we are married and making over $200k, the Roth IRA option doesn’t exist for us…but we’re maxing out our 401(k)s (mine as a Roth) and socking away money in our long term investment accounts.

    Kid #1 is due in the fall, so we’re trying to stuff in what we can, as early as we can.

    • Anonforthis :

      I should add that when DH and I do our financial planning, we have set our target retirement age is 55. We are doing things this way so that if we hit dire financial straights and have to hold off 5 years on retiring…we’re only 60.

  13. North Carolina? :

    Going anon for this. I might be moving to NC later this year. Are there any readers of [this site] around there? I’d appreciate any advice on the legal scene there/recommendations for recruiters!

    • NC, I know absolutely nothing about the legal scene but I’m in the Triangle..a few of us are here and will meet up later in the month or in March. If you do end up coming out, feel free to shoot us an email! c h i n a r e t t e AT the google email service (no spaces–trying to avoid moderation!)

    • No, but I also might be moving (assume their bar application doesn’t kill me–it’s a bear) and join in the request for any advice on the legal scene.

    • My brother is a senior associate at a well-regarded, large regional firm in Charlotte. SIL is baby-retired (as she calls it) and was a biglaw corporate associate after a public interest career in other states. I have lots of connections at some of the banks there due to working in one of their legal depts. I can ask them whatever you want to know, so feel free to shout out on the site your specific questions. What type of law do you need a recruiter for? Happy to help.

      • Thanks, MJ. I guess 2 main questions…what does the IP market look like there and how hard it is to break into? I don’t do patent prosecution but do mostly IP-focused litigation with some non-patent prosecution as well.

  14. I’m like most of the posters above- took out loans for a graduate degree, worked a lot to pay them down, then bought a house and am now thinking: how to save up enough to eventually pay off this mortgage, and to retire before The Corporation “retires me” (like a replicant in BladeRunner) and replaces me with a young, bright-eyed kid who’ll take 1/2 the pay.

    Part of the problem is being in the Northeast. I’m in a higher cost area and we bought a modest house -which in our area cost $550K. I understand that in another state, I could have easily gotten the same or better house for $200-$250K. We don’t have kids, and don’t plan to, but if we did, I’d expect to never be able to retire because …see the math below:

    Doing very rough math, just for our situation, the $150K (loans between me and my guy) + $550K mortgage, plus, easily, another $650K total cost for raising 1 child and me working the whole time so childcare is included), that’s $1.35MILLION dollars. And that’s just for stuff we have to pay, and not our retirement.

    This is the sort of thing that makes me want to go live in a shack in the woods and go off the grid and just get off the rat race already. Because with each level of the maze cleared, you take on more financial obligations.

    Level 1: pay exorbitant amounts to get a grad degree to get a high-paying job
    Level 2: buy a decent house in a decent neighborhood with a mostly reasonable commute for both of us so we don’t have to deal with crazy landlord, neighbor-tenant, rising rents, and other annoyances
    Level 3: have a kid so we can fit into the social conventions. (We’re not doing this, but it’s the usual path)

    We’re not doing Level 3 of the maze, but even 1 & 2 seem to be a hard slog to me. OK, rant over.

    • Sydney Bristow :

      I very much feel your pain on this. My boyfriend and I have been talking about trying to buy a place, but it looks less and less likely the more we do the math.

      • Cornellian :

        Not that you asked, but the new york times has an amazing rent vs. sell calculator. you can input local property taxes, what tax bracket you expect to be in, etc. Very accurate. Disheartening for me, but accurate!

      • Good luck, regardless of what you opt for.

        I remember a brief feeling of bliss when I paid down my own loans, and a few months later, dear-fiance became dear-husband and now his loans are our loans, so we’re back in the same boat again and then the mortgage. That said, we sat down to do a first “let’s try to increase the amount we’re saving” conversation a few weeks ago, so this is so timely.

        I made a list of 20 things we CAN cut, but some of the cuts would make us miserable. So we’re starting by cutting 5, and seeing how we do, and then in maybe a year, we’ll cut another 5 things. Y’ know, like boiling the frog to death vaaaaaiiiry slowly.

  15. Thinking about retirement makes me so nervous. My first two years out of college, I diligently contributed 10% of my salary to a Roth IRA (no employer-sponsored 401(k), much less any kind of matching program)…but since I was making a pittance busting my bum for AmeriCorps, the total amount in my IRA is less than many of you ladies contribute in a month. And now I’m continuing the low-paying trend, with my current living-stipend sitch here in Spain. Next year I’ll either still be in Spain, or in grad school, making $0. And education is not a field I can bank on making big bucks in, once I am settled in an actual career.

    So seriously. I have no idea how I will ever retire. I think about it and I feel like crying. I worked so hard to scrimp and save and fund my IRA before, because I know it’s so important to start in your 20s, etc. etc. etc. But I feel like it’s such a miniscule amount that it doesn’t even matter.

    • When I worked “in education” (I worked in a non-educational role, but for a university), they had a KILLER retirement plan: if you contributed 5% of your salary, they contributed 10%. If you were there over a certain number of years, if you contributed 10% they contributed 15%.

      So before you totally despair, know that some employers know how to make you feel better about your retirement options.

      • Mm, problem being that these retirement plans are going the way of the dodo bird and the dinosaur, if the people I know are anything to go by. (Granted, most of them work for a state school, so private universities might be different beasts.)

        • I worked at a private university, from 2006-2009. They didn’t axe the retirement plan during the recession. So there is hope, albeit private university hope :)

        • I work at a private university and we still have this system for retirement plan contributions.

        • Jenna Rink :

          I work at a public university, and ours is still close to a double match. I was looking at jobs at private universities last year and couldn’t find a single private school in my area that wouldn’t be a step down in benefits. But I’m in a state with limited state contributions, so the recession didn’t impact us quite as much as some other state schools.

      • Miss Behaved :

        My university contributes 10% regardless of what I contribute. I put in 13% currently. And, if I were making 6 figures, they’d put in 15%.

        • Anonymous :

          I’m surprised that doesn’t violate IRS rules. Employer plans usually can’t favor highly compensated employees.

  16. Mid 20s. I spent the first few years out of school working abroad. My pay was significantly lower than the US average. Now I’m putting a husband through a professional degree that will bring in decent money later, but not significantly increase his earning potential (not JD/MD/MBA). We’ve been great at saving (saved >20% of our income abroad, kept it in savings accounts for emergencies & relocating back to the US), but not for retirement. We’re pretty thrifty and do save for emergencies, but with one non-profit, entry-level income there’s just not much for formal retirement savings right now. I finally have a small matching 401k-type program, but I don’t have a lot to go in it after tuition, reasonable living costs, health-care costs (damn you high-deductible plans!), etc. It scares me. I want to put away as much as we can but don’t have a lot of traction to do it yet.

  17. Cornellian :

    I am on track to max out my 401(k) this year (first full year of having one), and am hoping to contribute more to my IRA, as well. I pull 12% of my post-tax paycheck in to a savings account.

    I’m 26 and currently have about 25K in a roth IRA from pre-law firm days, 15 in a 401K from the last 10 months of working, and about 40K in investments. I’m now focused more on having a savings cushion, as I currently have enough for about 1 month of living. NO GOOD.

  18. I think the 2x to 3x jump is hard, especially if you end up with raises in this time period.

    We’re paying for our daughter’s college right now, so it’s hard to do that and bump the savings the way this says we should. On the other hand, I’m going to feel really rich in 3 years. :-)

  19. I can’t tell you how much I wish I was older and made all my money in the 90s. I’m 24. I’ve been contributing whatever my employer matches to my 401k. I should know more about this but I think it’s 7.5% and they match up to half of 7.5%. I started out with $30k debt to my parents and I’m down to $5k. Go me! I’ll be done paying my parents off this year and then I’ll be moving out finally which will cost a lot in itself. When all that’s said and done I would like to begin contributing to an IRA of some kind when I’m 25 or 26. Aside from paying my parents back, I haven’t been saving much, so that needs to change.

    My boyfriend is a HUGE saver.. to the point where it’s kind of obnoxious.. but I guess one of us has to be. So assuming we end up together, I think we’d be in good shape. I want to retire tomorrow (hahhaha) but that’s not happening. I’m learning from my parents’ mistakes. My parents aren’t under water by any means, but I don’t need THE big dream house. I want kids but now I’m thinking two would be so expensive.. but then again I don’t want my kid to be an only child.

    Basically, the more I hear about the economy, the more I’m convinced I’ll never be able to retire. I also want to live my life now. I don’t want to save absolutely everything and be miserable until age 60… Sooo yeah I guess I need to read these links Kat posted, start contributing to an IRA and just doing what I can. Not depressing..

  20. anonforthis :

    Help, ladies. I’m worried I’m on the path to financial disaster (or, at least, a lifetime of paying things off vs. saving). I’m fresh out of law school, in a 2-year clerkship. $200k in debt from law school; currently on IBR (with my law school making the IBR payments for me, which is great). No savings. About $12k in credit card debt. My take-home pay is about $42-45, and I’m paying about $1000/month in rent (incl. utilities). Yet I can’t seem to get a handle on anything. Should I even be thinking about opening an IRA at this point, or should my entire focus be paying down all the cc debt first? Should I focus on trying to find a gov’t job post-clerkship so that I can stay in the 10-year debt forgiveness program, or should I try to transition to big law and pay down the law school debt in 5-6 years (if that’s even possible?). I don’t know how long I could stomach big law, but I don’t think more than a few years, and I’m in a large secondary market (1st years start at $145k, not sure how much 3rd years make, but no $70k clerkship bonus like in NYC, probably more like $35k)..

    • Cut all of your expenses to the bone – do all the things you read in those frugality articles. Live with family if necessary. Save up a little cushion, then pay off the credit cards, and then pay off the student loans. Be aggressive, and don’t worry about retirement for a year or two. If you can stomach getting a better paying job, the whole process will go a lot quicker. I know you have IBR, but seriously I don’t think you want to wait the 25 years to be done with this process.

      • Cornellian :

        Agreed. Plus, you’ll eventually want to be able to put money towards kids’ college savings, medical costs, etc, which will be hard to do if you still expect to qualify. And, as we all discussed recently, there’s no guarantee that program will be around forever.

    • AND, if you should happen to get married before the IBR period is up, you may no longer qualify as your spouse’s income and your joint assets will affect your qualification. Just food for thought, as I have a few friends that are learning that lesson now and kicking themselves.

    • Deep breath. You are definitely not on the path to financial ruin. I think the first thing you need to do is create a spreadsheet (or use Mint, whatever you prefer) to figure out what your expenses are. Do not gloss over things. Don’t guesstimate that you spend $15/week on Starbucks when it’s really $50.

      If your take home pay is 42k, and your annual rent plus utilities is 12k and you don’t make student loan payments, you should have approximately 2500/mo leftover after paying rent. Factor in things like car payments, insurance, etc. When you reach a static number (i.e., there are no more “fixed” expenses that you MUST pay every month, including a budget for groceries), that’s how much extra cash flow that you should have every month. That’s what’s left over for things like drinks with friends, clothing, cable, and paying off debt.

      I think your two focuses should be on building an emergency fund and paying down your credit card debt. I don’t think you should be focused on an IRA until you at least have some emergency savings. Your emergency fund can be small to start (some people recommend eventually getting to 6-12 months of expenses), but right now you just need enough money so that if an emergency crops up (like somebody hits your car, you have out of pocket medical expenses, etc.) that you don’t need to put it or all of it on your credit card.

      So after you have your free cash flow number, take that and separate it out into categories of emergency fund, credit card repayment, and miscellaneous stuff. Again, try to be realistic about how much you spend on things so that you don’t wind up setting your budget too low and then spending on your credit card. Try not to use your credit card for expenses at all. If you need to use a credit card, try transferring your balance to another card with a lower interest rate and don’t use it for anything while you’re paying it off. I’ve also had luck switching to a debit card for every day purchases.

      • anonforthis :

        thanks for all the good advice. I will definitely focus on creating an emergency fund, paying down the cc debt, and using a debit card for everyday purchases.

        i think i have 2 problems: feeling scared about not knowing what’s coming in the future, and thus avoiding planning for it at all; and not controlling my clothing/impulse purchases. I don’t even buy really expensive stuff; I just buy a lot of it. I just finished making a list of things I am not allowed to buy at all for at least 6 months. Looking at the list, it shouldn’t even be hard to follow because there’s no way I’ll need anything on it during that period of time. So hopefully it’ll help me reign in the expenses. I really wasn’t frugal at all during law school, which contributed to maxing out my loans and my huge student loan debt; I need to learn how to be frugal, but it really sucks feeling like I’m actually going in reverse as far as how much disposable income I have.

      • One thing to note is that you can withdraw your Roth IRA contributions whenever you need to (you can’t put them back in though and can’t touch the interest) so they can count as an emergency fund if you need them to. If you think you’re fairly stable in employment, that’s what I would do…

  21. These calculators are always really confusing to me. They often assume that you’ll consistently make more money each year as you get older. While this might be a fair assumption overall, it’s not reality for a lot of people (see, e.g., SAHM for five years). For example, I started at biglaw right out of law school. Huge salary. Then went to government. Half my previous salary. Then moved on to something else. Even less salary. Looking at another job which would pay even less, at first, but would open the door to jobs with more money. Meanwhile, husband is currently in school, making zero money. Next year, he’ll probably make at least 75% – 100% of what I currently earn. So I have no idea what 1x my salary really means.

    • I do the calculations using both income and expenses. While our income is fluctuated a lot the past few years, our expenses have been fairly consistent. While our investments:income ratio fluctuated a lot, our investments:expenses ratio has slowly grown.

      • mama of 2 :

        That’s a really good idea. I also anticipate that I will make less money as I get older (in biglaw now.) One of the things I hate about biglaw is the sense of no job security — as an associate, I feel like even though my reviews are great, I could be let go at any point. I am totally fungible. And I don’t know where I could possibly make as much money as I do now.

  22. I contributed to a 401K before law school, but I didn’t work with that employer very long. I contributed to a 401K again for a little while after law school, but now my employer no longer offers a plan. So, now I have a Roth IRA. There’s about 56K in the 401K, and about 5800 in the Roth. I have always either contributed 10% to the 401K or the annual limit on the Roth. In the meantime, I prioritized debt repayment for the student loans. I’m 32 now, finished with law school debt and building a cash buffer. Once that is done, I’ll start a taxable investment account that is tagged for retirement. My goal is to start contributing a total of 20% to the retirement accounts by the end of this year because I know that I am a little behind where I should be.

  23. Ms. Van Squigglebottoms :

    My advice, as someone who went to law school in my late 20s soon after starting a family, is not to make any assumptions about financial decisions before finding out the specifics how law school loans and repayment programs work. My hubby and I paid off all debt (including undergrad and grad school loans) before I went to law school to pursue a public interest career, but then discovered that I would have gotten higher benefits through my school’s repayment program had I kept the student debt. We were also shocked that my school expected us to liquidate our retirement accounts to pay tuition, despite the fact that we were nearly 10 years closer to retirement than most of my classmates participating in the same repayment program!

  24. Wife of a fed :

    Husband has a TSP that is out performing the 401ks as far as I can tell. I have a standard 401k and my employer puts 3% of my salary in regardless of what I contribute. We are currently not in a financial position to max out our retirement plans. I’m not sure our exact numbers but let’s say husband contributes 5% plus his match and I contribute 3% plus my firm’s 3%. Since his plan is doing so much better, I would rather we put 10% of his salary in his and none in mine. I have protected rights to his retirement under federal regulations so he can’t empty it without me signing off. In a worst case scenario divorce, my state would split it 50/50 anyway. He thinks this is a bad idea and it is better to be diversified and I should keep funding mine instead. I also like the idea of having one in my name, regardless, even if it is way under-performing his in growth. In our situation, would you put the family money in the TSP instead of splitting between my 401k and his TSP?

    Also, if any feds out there could give more insight on the TSP/pension business I’d love to hear it. The way I understand it is the money he puts in the TSP is like a 401k and he can only lose it to the market. Matching contributions are likewise his unless lost to the market. The 1% govt paid is only his once vested (which he is). The pension is a completely separate calculation and can be taken away at anytime along with retirement health benefits. Is this right? If so, then why have I heard that government workers are “required to pay x% towards their pension?” Are the TSP contributions part of their pension? I’m so confused.

    • I’m a fed and should know this, but…. I’m 90% certain that the TSP is like a 401K – it can’t be taken away from you (well, it can if the market crashes again). There are 2 retirement systems, the older one in which some people ended up with a pretty nice pensions, and the new one, called FERS, in which I think you get something like 3-5% of your 3 highest years of salary, something like that? The FERS is what new hires (hired within last 3-5 years) are being asked to pay more towards.

      My strategy is to just try to save a lot. I guess between the TSP, some Vanguard accounts, and an online bank account intended as a place to save “buy a house money,” I probably put away about 25% of my salary (very low 6 figures). So I’m decent at saving, but not great at investing. I think my TSP did about 10% this year, my BF’s did about 17% (have to copy his distributions!). Also, I didn’t start a 401K until I was about 32 (grad school, then postdoc) and really didn’t aggressively save until probably 35-37. I figure I’m doing about as much as I can, and am hopeful that I will be able to retire (am 45 now, figure maybe I could retire at 67?), but am pretty sure I will not be nearly as comfortable as my parents who managed to do well during the boom years of the 1990s and avoid huge losses in the 2000s.

      But honestly, I think as people who are in their 40s and younger get closer to retirement, there is going to be a huge retirement crisis. I’m not terrified, but don’t feel hugely confident about retirement and I am doing a decent job of saving, have no loans, have a decent salary and secure-ish job, and no children to worry about. What happens to all those people living basically paycheck to paycheck? Something is going to have to change, somehow.

    • Government retirements can vary based on start date, years of services, and even agency. My agency provides access to a benefit statement that explains what you are entitled to given your specific situation. You can also read up more here: https://www.opm.gov/retirement-services/calculators/

      Assuming he’s a relatively new government employee, the pension portion of our retirement is fairly small and people should be contributing to the TSP too. They aren’t the same money though.

      Also a TSP may not be as secure as you are thinking from government interference: See for example http://www.washingtonpost.com/blogs/federal-eye/wp/2013/01/15/tsp-used-for-debt-ceiling-relief/
      I agree with your husband its good to diversify.

    • Ha, I was a fed straight out of undergrad (for four years) and am also slightly confused! I’m vested in my TSP, which is awesome. It’s my understanding that TSP and pension are separate and I didn’t pay into a pension. Maybe it’s because I was such a recent addition, I’m not sure. The TSP does function like a 401(k).

    • The TSP is not the pension. So any mention of pension is not the TSP. Since tsp is pre tax and lowers the taxable paycheck, I have not noticed a big difference at all in the paycheck when I raise my tsp percentage. I would have your husband try raising it to 10 for a paycheck or two and see what the difference is. I think you’ll find its less than you’d think.

  25. Diana Barry :

    We max out retirement. DH has a SEP-IRA and made a lot of money for the past few years, so was able to put about 35K in the SEP for the last 2 yrs. Lucky. I have a 401k and max it out – my employer matches 4%, I think. We don’t do IRAs any more as we are over the income limit for having them be deductible and the basis tracking is a PITA. We haven’t thought about a target retirement age yet – we are mid-30s.

    I didn’t have any school loans and DH only had about 10K by the time we got together, fortunately. Our house costs an insane amount, but that’s par for the course in this area.

  26. Left Coaster :

    For you ladies who have pensions, how does that figure into your retirement plans? I work for a local government with great benefits, one of which being a defined benefit pension plan. If I stay through retirement (which is very possible — I can also switch to other jobs within the state while preserving my pension) I will be able to retire at 62 with 75% of my salary. I have a mandatory deduction of around 11% of my salary to fund this plan. I’m 32.

    I have been struggling with figuring out how much more to be saving. I’ve been socking away an additional 8% or so of my salary into a 457(b) plan. I feel pretty happy with that savings amount, but especially because my retirement savings will likely have to cover both me and my husband, I’m less sure.

    • pension plan :

      I also work for my state and have a pension plan to which I make mandatory contributions. I will vest after 10 years of service and can then collect the pension at age 60 or after 30 years of service, whichever comes first. My employer also requires mandatory contributions into a supplemental annuity, with a match. I also do the optional deferred compensation and contribute to non-retirement mutual funds. I am not planning to rely on the pension because honestly I am not sure I can stomach working for 30+ more years. It’s a really tough call, since I just barely made it into the pension plan by a hair (employees hired after me do not qualify). The security of the pension is worth its weight in gold – how could I ever give it up. My parents are also state employees (one semi-retired, one will retire in 2 years) and they told me they will be able to live just on their pensions and will not have to touch their supplemental accounts at all. I guess it all comes down to how long I want to work for the state. I could work 35 years and be totally set. But I am only 2 years in and 33 years is a very very very long time.

    • lucy stone :

      I have a similar pension plan. I save 10% in addition to that. Part of my pension is funded by my salary so I can’t afford to save more right now without making cuts I’m unwilling to make.

  27. I feel behind but I can’t do much more. Currently 28

    Work in non-profit… will get automatic pension contributions starting next year at 5% of salary (have to be employee for 1 year). I contribute 7% of my salary to 403-b (no match). I also put $400/month into a Roth IRA. I’ve contributed to a Roth each year since I was 23 (5 years), but was in grad school until 25. I have 32K in the Roth, 15K in my former TSP account, and about 1500 in other investments. I can’t up the contributions as we’re saving for honeymoon right now and I am supporting FI while he finishes his licensing exam (although he brings in probably about 20K/year). Our housing expenses are outrageous but not much we can do. I bring in about 85K gross, Housing is $2500/month (ugh…going rate for 2 bedroom near a metro in DC with pets!)

  28. JessiJames :

    I feel so behind…just turned 26, only started funding my 401k a few months ago (my job during/just after college didn’t have any retirement options, and I was more focused on my student debt). Problem is, I can’t really afford to put 15% or even 10% in every check – I’m barely surviving as is, with 5% every check (and then health insurance, and taxes, and all those other little things). Meanwhile, I’m still up to my neck in debt from school. *sigh*

  29. AccountingNerd :

    I’m 24 and have 16k in a Roth IRA and 14k in my state retirement account. I will be quitting my job (permanently, although I may do some freelance bookkeeping if necessary) when we start having babies (hopefully next year). Living on my husband’s current income we will be able to max out the Roth every year, but that might be all we can afford to save. And that kind of concerns me. :/ The calculators show that we will have over $1Million in the roth by age 60, but $1M won’t be worth as much in 36 years.

  30. I am sort of obsessed with retirement saving. I don’t trust the calculators and rules of thumb, because they all assume a rate of return that I just don’t see going forward. My savings account has been earning less than 1% since 2009–that’s not really a blip. And it’s a not-blip that will continue through 2015, as Bernanke plans to hold interest rates near zero until then.

    Objectively, I am highly on track. I’ve been maxing out 401k contributions with employer match since I was 29 (when I finally started a “real” job) and save about 40% of my take home in addition, split between cash and an index fund. I only got around to a Roth starting with a 2011 contribution, but I really don’t see how $5000/yr is going to make much of a difference in anything (and I was saving the money anyway, just not in a tax-advantaged way).

    So I have substantial savings; I’m 38 and am a little short of 3x my (gross) income saved. But the growth is so nil that I just don’t see the miracle of compound interest performing any miracles. I see the stock market roller-coastering, with little real growth gain over time. I feel like for us it’s going to be all cash, not growth, that we’ll have to live on. A 5% rate of return on a lump sum investment is an absolute pipe dream, based on recent performances. A 2% return seems possible (but still not guaranteed) but the lump sum for that is astronomical–even at my extremely aggressive savings rate, it will take another 37 years to accumulate enough principal to generate about what I live on now. And that’s in 2013 dollars, not even taking inflation into account. And also not taking into account that I still have hope of having children, which would be a huge financial setback.

  31. I just started contributing to my 401k last year and I’m happy that I did. I barely notice the difference in my paycheck. However, I’m also supporting my boyfriend who is in college and paying 100% of our rent and expenses. I wish I were able to save more, but it’s just not possible right now. I’m surprised I feel comfortable contributing anything to a 401 k right now, but i know it’s in my best interest.