The 20% Savings Rate

[@robertw5391]

I received a 50% take home raise. I live at the same place. Drive the same vehicle. It all goes to savings. Best advice I received was act like it’s not there. If you use it, it becomes normal.

[@imdoc7872]

Thanks doc. You answered my question exactly. I was wondering if a taxable brokerage account counts towards the 20% savings. Unfortunately my job does not offer good retirement investments so I had to open a taxable brokerage account to get to the 20%.

[@Random-ld6wg]

once i was an attending i saved 25-35% and invested it. my bonuses were saved and raises were mostly saved with fairly minimal lifestyle creep. fortunately there wasn't much inflation from 2010-2020. we lived on the same amount pretty much during that decade. i saved typically about 70K minimum per yr for an 11yr same job stretch but this included hsa and 529 for my son. finished residency 1996 and retired in 2021. that being said we didn't/don't have a doctor lifestyle. i consider my hsa as part of my retirement assets as i can tap it more as i have increasing healthcare costs as i age and for medicare premiums. i am saving receipts and paying out of pocket for now. from 0 end of residency to mid 7 figures by retirement in 25 yrs.

[@Pashinator1]

Would you include posting into mortgage into that 20%?

[@thewhitecoatinvestor]

No, the 20% is only including savings directly for retirement.

[@OurRetireEarlyJourney]

Savings rate is the most critical component of financial health pre-retirement. Last month our savings rate was 80% and YTD was 60%. If you want to retire early, you have to aggressively save!

[@sunnythumar855]

nice. are you W2? what is your current savings rate? how do you calculate it?

[@OurRetireEarlyJourney]

@@sunnythumar855 Our savings rate year to date is 60%. Calculate your total savings: Subtract your total expenses from your total income (net income, side hustle income, taxable interest income, taxable dividend income, retirement savings 401k/403b, hsa savings) Divide by your total income: Divide your total savings by your total income. Multiply by 100: Multiply the result by 100 to get your savings rate as a percentage.

[@anderacpharmd]

What about contributions you're making towards a pension? What about contributions your employer is making towards your pension? Do these amounts count towards the 20% savings rate?

[@thewhitecoatinvestor]

Yes

[@firecraig]

“Instead of giving it to the tax man it goes into your retirement account”??? With that strategy you now get to pay taxes on your contributions PLUS all the growth! 🤦‍♂️ Let me guess, you think taxes are going to be lower or you will be in a lower tax bracket??

[@forkevbot]

The alternative is paying taxes on both ends bud. And yes you will almost certainly be in a lower tax bracket in retirement if you are a high income earner now. You also clearly don't understand the power of compounding interest, the extra base contribution from it not being taxed will be ENORMOUS after 20 years, way way more than you will be taxed on the account.