This has been on my list for the past few years. 20% of pre-tax income has been our target for retirement savings — a high enough number that we should be more than on-track for retirement, but a low enough number that this is not a regimen of deprivation (at all). In 2021, we opened up a taxable brokerage account, threw money regularly into VTSAX, and were rewarded with a great year.
In 2022, a chunk of our savings will be dumped into our house down payment, so I’m not sure we will hit 20% in pure retirement savings (though maybe I’ll be wrong – that would be awesome). However, down payment $ translates to equity which should appreciate with time so it’s sort of wealth building anyway — I know some debate whether home value should ‘count’ when one is calculating net worth.
We do continue to use YNAB and Josh and I do quarterly financial reckoning where we check each account and calculate net worth to see how we are doing.
Goal Breakdown:
20% savings
~35% taxes
~3% college savings
That leaves 42% to spend on both the necessary and the fun, which should be plenty. (Note to self: need to not procrastinate on our actual move too long b/c paying rent + mortgage is going to be a drag on the system . . . .)
ALSO – it’s a new year!!!! Past couple of days have been relatively relaxed. Yesterday no one got dressed until noon and we spent 3 hours at the playground. Last night’s NYE dinner = family charcuterie board!
NYE 2020 we made a video where Josh commented that he could not smell his champagne (we all had COVID). So this was a big step up!
17 Comments
I always like reading about others’ financial goals! We also do a quarterly review. My husband is way more into investing so he manages our non-401k investing. We both max out our 401k and then he contributes to our brokerage account. We met with a financial advisor in 2020 which was super helpful as he showed us that we have a lot in tax free accounts so need more taxable investments. We saw him not for investing advice but for the forecasting abilities. It was helpful to see when we could each take a step back from our careers/how long we need to last. Our industry is known for downsizing so it was helpful to see how much longer we need to survive! Since that meeting we have been focusing on dollar cost averaging into the brokerage account. We also contribute to the boys’ 529 plans.
I hope the moving process goes smoothly! It’s nice to have a gap between closing and moving so you can paint and do other things that are a pain to do when you are living there! We had all the upstairs carpet replaced before we moved into our current house. If we hadn’t done that, I don’t know when we could have tackled that project!
Wow!! That charcuterie board…. Yum!! Cheers to being able to smell the champagne this year!
How did you decide how much to save for retirement vs. college? Your retirement savings goal actually seems really high to me, compared to your college savings goal given that you have three kids who I presume are all likely to go to college.
We’ve been contributing steadily to retirement since finishing grad school 8 years ago, generally contributing 10-15% annually (of much lower salaries than you and Josh have), and I’ve looked at our savings much closer since learning our daughter’s disabilities will prevent her from truly supporting herself. And what I figured out is that even with the 10-15% contributions, compounding interest, and how much we actually spend on things that will be continued expenses in retirement (ie, not our mortgage, student loans, childcare, etc) we have been vastly oversaving for retirement. As in continuing our current approach leaves us totally equipped to leave our daughter with a very comfortable trust fund that she might not even be able to deplete, esp if her intellectual development plateaus at a young age.
We might be oversaving for retirement but I figure if we feel like we are in a great situation there in ~9 years when Annabel is going to college we’ll feel more comfortable cashflowing college and putting higher amounts into 529s. If our kids choose public college like UF then we will be fully set – we do the FL Prepaid program in addition to the 529s for each.
(Plus the taxable account technically can be used for anything – not a retirement specific vehicle. The retirement specific vehicles are our 403bs x2 and governmental 457×2).
Of course, that makes total sense. Your salaries are high enough that relatively modest 529 contributions will make it totally possible to cash flow college at even the most expensive schools without it having to drastically changing your day to day living (esp if your other big purchases like housing and transportation are relatively modest). I was totally only viewing it from my own perspective – cash flowing college isn’t on my radar with our HHI – too high for financial aid, but only able to pay for an expensive private school if we’d saved substantially in advance. And if you’re going to oversave anywhere, it makes more sense to do it in a less restrictive retirement or a taxable brokerage account than a 529.
Just wanted to say Hi as I have a daughter in a similar position. It’s nice to read a comment that takes those long term plans into account, as I have to as well. X
👋🏽 Always nice to meet a fellow traveler when it always feels like my situation is so rare.
It does, doesn’t it? <3
I love this ❤️
One of the things that has affected our decision making is thinking about the likelihood that both of us will continue working as much as we are now for the next 10-20 years. Even if we wanted to (and I do!) there’s a good chance that one or both of us will not be able to. That strongly influences the amount we were willing to spend on our house, how much we save for retirement, how much we save for college, etc. For instance, could we pay for college out of cash flow if one of us were disabled and we still owed X on the house? Is this something you’ve considered? Talking to people, it seems like most assume they will be able to/want to work this much forever.
Good point. When we do our quarterly reckoning we usually calculate years to FI and it’s like . . . 13? I do think we probably will be able to work at current levels (or close) for 13 years.
There’s also disability insurance.
Also – we purposely bought a lot less house than we ‘could’ have – we are definitely extravagant in other areas (kids school, activities, travel) – but not the house or cars.
I think this is so critical to consider – housing/expensive vehicles can make a huge difference in a financial bottom line.
There was a time when our family (by choice for entrepreneurial reasons) was – on paper – living below the poverty line. In that time we travelled to Australia and Denmark. I’m sure it seemed crazy to some people from the outside looking in but we lived in a tiny apartment, drove used cars, and used just about every other frugal know-how we could to make ends meet. We also travelled as economically as possible…but choosing to prioritize travel over more expensive housing was important to us.
When we bought our first/current house we bought one well below what the bank would offer us in terms of mortgages. This has allowed us to aggressively pay down the mortgage (a contentious decision, I know) and maintain a high quality of life. I know other people in similar financial situations literally living paycheck to paycheck because they maxed out their mortgage and have outrageous monthly payments on multiple new vehicles. By saving big in some of these key areas, it can really free up A LOT of money.
Thanks for sharing all these goals Sarah! Wondering if you could/would do maybe even quarterly check ins with how all these goals are going? I love this time of year and all of the planning for a fresh start – but need to focus more on the actual execution myself! And happy new year!
I’m just curious if this 20% savings includes retirement accounts (401k, IRAs, etc) or if this is all only taxable? I love hearing about budgets because I feel like if others can do it, then maybe I can, too!
It includes our contributions to both our retirement accounts (we each have a 403b and governmental 457) and taxable. I do not include any “company match” dollars in this calculation though they add a bit to the totals of what goes in.
I wondered the same, so thank you for answering. Now I am curious where my family is at with this. I put aside 15% into my 401k, which I thought was low, but the site’s planning tools say I save more than “super savers”…which is a nice reassurance! I bet if I look at the full picture including the taxable accounts we are up at 20% too.
Isn’t planning for FI fun? getting close makes work more enjoyable. (I think they call it FU money but the sentiment is nice- you work because you choose to, not because you need to). To note, I recognize the privilege surrounding this.