Poll

What's your savings rate?

Under or equal to 10%
26 (2.7%)
11-20%
48 (5%)
21-30%
107 (11.2%)
31-40%
142 (14.9%)
41-50%
176 (18.4%)
51-60%
190 (19.9%)
61-70%
148 (15.5%)
71-80%
82 (8.6%)
81-90%
25 (2.6%)
91% or above
11 (1.2%)

Total Members Voted: 942

Author Topic: Mustache poll: how much do you save?  (Read 94538 times)

grantmeaname

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Mustache poll: how much do you save?
« on: February 13, 2013, 07:45:34 PM »
Hey everybody! Another netizen suggested this poll over in the other poll thread, and I thought it was a terrific idea, and that it is really very important. Use whatever method you want to calculate your savings rate (God knows we've had enough 'how do I calculate my savings rate' threads...), and feel free to post with any opinions you have to share!

destron

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Re: Mustache poll: how much do you save?
« Reply #1 on: February 13, 2013, 07:56:53 PM »
My method:

Savings: Increase to accounts + debt pay down
Income: net

Gets better every year.
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dragoncar

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Re: Mustache poll: how much do you save?
« Reply #2 on: February 13, 2013, 08:02:39 PM »
While I appreciate the poll, I think the best question is:  What percent of your net income do you save above MMM level?  This will correct for large income disparities.

Something like: savings/(net income - 30k)

*I'm not really sure what MMM level is, but I think it's around 30k

Edit:  Maybe not the "best" question, but one I'm interested in.  Because consider:

A family saving 10k per year on 40k net income (25% savings rate, 100% mustache rate)

vs.

A family saving 25k per year on 100k net income (25% savings rate, 33% mustache rate)
« Last Edit: February 13, 2013, 08:09:18 PM by dragoncar »

grantmeaname

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Re: Mustache poll: how much do you save?
« Reply #3 on: February 13, 2013, 08:06:04 PM »
That would give negative numbers for people making less than $30k. I get where you're going, and it may be a good goal, but I don't think there's a formulaic way to address it.

TN_Steve

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Re: Mustache poll: how much do you save?
« Reply #4 on: February 13, 2013, 08:18:56 PM »
I assumed after taxes . . . 

sheepstache

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Re: Mustache poll: how much do you save?
« Reply #5 on: February 13, 2013, 08:30:45 PM »
Oh, I assumed gross.

I see what Dragoncar is going for in terms of reducing the effects of income inequality, but I think since sheer percentage is what determines your time to retirement, that's more interesting.

And we should decide whether we're talking about percentage of gross or net so it's consistent.

dragoncar

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Re: Mustache poll: how much do you save?
« Reply #6 on: February 13, 2013, 09:41:43 PM »
In terms of time to retirement, it's easier to use net.  That way time to retirement is:

(1-savings_rate)/(SWR*savings_rate)

*assuming savings returns just pace inflation

edit: also, gross and net will be the same for low earners, and but gross won't make sense for high earners since they will likely be in a much lower tax bracket on retirement
« Last Edit: February 13, 2013, 09:44:06 PM by dragoncar »

sheepstache

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Re: Mustache poll: how much do you save?
« Reply #7 on: February 13, 2013, 09:49:33 PM »
In terms of time to retirement, it's easier to use net. 


I agree.  In other words, taxes are not a "real" expense because you won't be paying them during retirement, or barely any (even if you're low-income, skipping the payroll taxes is nice), so you don't need to replace that money.  (I only went by gross because that's how the spreadsheet I use calculates it.)

Mike

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Re: Mustache poll: how much do you save?
« Reply #8 on: February 14, 2013, 01:18:22 AM »
I calculate savings rate by taking total saved divided by gross income minus all taxes and then multiply the result by 100 to get the percentage.

Self-employed-swami

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Re: Mustache poll: how much do you save?
« Reply #9 on: February 14, 2013, 09:22:51 AM »
I calculated mine in weekly take-home pay.  I accounted savings as mortgage payments (since I make a lot more than my minimum mortgage payment a week), RRSPs, and my two savings accounts for vacations and house repairs.  I suppose the vacation account isn't a true 'savings' account, in the MMM sense though, since we do drain it periodically, for trips, and things like Christmas gifts for family members.  But, on it's face value, I have a savings rate of 37% a week.  The remainder, which I didn't add in, goes to insurance (house and vehicle), food, utilities, property tax, DH's beer and wine-making supplies and a few monthly payments towards DH's student loan.

I have two different thought processes for this:

1) Savings should be anything that you are removing from your chequing account that isn't being spent (such as debt repayments, RRSPs, investments etc).

2) Savings should be anything that, at the end of the year, increases your net worth.  I could calculate this, but in 2012, we paid for things that weren't luxuries, but still didn't increase our net worth, such as about $20,000 out of my health care spending account (self-funded through my business).  In that grain though, I'd have to somehow figure out what the increase in value of my house, because of the renovations we did last year.  That would be tricky.
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The Taminator

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Re: Mustache poll: how much do you save?
« Reply #10 on: February 14, 2013, 09:24:10 AM »
Net. Payroll deductions (CPP, EI and Federal Taxes) are gone in my mind. Makes no sense to include them in my calculations. Ditto for debt repayment. That's just spending I've already done and am now paying for.

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Re: Mustache poll: how much do you save?
« Reply #11 on: February 14, 2013, 09:26:41 AM »
In terms of time to retirement, it's easier to use net.  That way time to retirement is:

(1-savings_rate)/(SWR*savings_rate)

*assuming savings returns just pace inflation

edit: also, gross and net will be the same for low earners, and but gross won't make sense for high earners since they will likely be in a much lower tax bracket on retirement

I've always debated this.  If it's easier to use net, how do you account for 401k and other pre-tax savings?

Made up example:  If you make $100k as a family, deposit $35k into pre-tax, and lop off 1/3 of gross for taxes, you have ~43k net. If you spend $25k, and save $18k, what are you saying your savings rate is?
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Re: Mustache poll: how much do you save?
« Reply #12 on: February 14, 2013, 09:27:26 AM »
(1-savings_rate)/(SWR*savings_rate)

Hmmm. 

(1-.37)/(0.04*.37)
=.63/0.0148
=42.56 years??

I guess that might be somewhat accurate, since we seem to have had a spendy few years, with house renos and DH being back in school. 
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frugalcalan

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Re: Mustache poll: how much do you save?
« Reply #13 on: February 14, 2013, 10:02:02 AM »
I went the lazy route.

Went to mint.  Looked at "net income" for the past 5 months.  Averaged it.

Perfectly accurate?  Probably not.  But it claims that I save about 54% of my after-tax income.  There is a $1500 gift in there, which I don't really think should count, so I put myself in the 40-50% category.
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galaxie

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Re: Mustache poll: how much do you save?
« Reply #14 on: February 14, 2013, 10:26:53 AM »
I used after-tax take-home, but added pretax retirement contributions to both the "income" and "savings" column. 

I also included mortgage payments as savings for the poll.  With them, we have a ridiculously large savings number.  Without, it's more like 21%.

needmyfi

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Re: Mustache poll: how much do you save?
« Reply #15 on: February 14, 2013, 10:32:07 AM »
I like to look, for my own purposes, at only the portion of the money I bring in from working vrs how much of that I saved-excluding dividends, capital gains and a monthly loan repayment from my brother, but including 401k contributions and company stock purchases .  Have no mortgages or debts of any kind, but I do subtract $375 from that savings for prorated taxes and insurance on property.

I do it this way probably because the 4% swr is not as important to me since I am older -55- have no kids and and would like to die broke.  Since I know we can live on our rental income along with our ss (if I wait till I'm 65), I get a better picture of how much longer I will be working before I have enough money to safely bridge that gap.  We plan to live on those monies and use investment gains to fund vacations and travel.  Last month we saved 61% of our salaries.

Mike

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Re: Mustache poll: how much do you save?
« Reply #16 on: February 14, 2013, 10:37:03 AM »
Quote from: bo_knows
Made up example:  If you make $100k as a family, deposit $35k into pre-tax, and lop off 1/3 of gross for taxes, you have ~43k net. If you spend $25k, and save $18k, what are you saying your savings rate is?
I get 67.9% for that example.

Total saved = $53k
Income - taxes = $78k
Savings rate = 53k/78k x 100

Don't know why anyone would go by just net or just gross when it can be easily lumped together.

KulshanGirl

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Re: Mustache poll: how much do you save?
« Reply #17 on: February 14, 2013, 10:42:28 AM »
I used after-tax take-home, but added pretax retirement contributions to both the "income" and "savings" column. 

This is what I do.  I never thought about counting mortgage payments as savings.  That would make a big shift in my number.  What about counting only the principal part of the mortgage payment?  Is that what you do? That seems like it would actually be a good thing to count.  Hmmmm.

arebelspy

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Re: Mustache poll: how much do you save?
« Reply #18 on: February 14, 2013, 10:43:30 AM »
Quote from: bo_knows
Made up example:  If you make $100k as a family, deposit $35k into pre-tax, and lop off 1/3 of gross for taxes, you have ~43k net. If you spend $25k, and save $18k, what are you saying your savings rate is?
I get 67.9% for that example.

Total saved = $53k
Income - taxes = $78k
Savings rate = 53k/78k x 100

Don't know why anyone would go by just net or just gross when it can be easily lumped together.

Well, not easily.  Some of your savings is pretax, some is post tax, and you just lump them together as if they're the same.

See: millions of previous discussions on how to calculate savings rate, and OP comment on why he said to calculate it however you want, since everyone has their own pet ways.  :)
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arebelspy

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Re: Mustache poll: how much do you save?
« Reply #19 on: February 14, 2013, 10:44:12 AM »
I used after-tax take-home, but added pretax retirement contributions to both the "income" and "savings" column. 

This is what I do.  I never thought about counting mortgage payments as savings.  That would make a big shift in my number.  What about counting only the principal part of the mortgage payment?  Is that what you do? That seems like it would actually be a good thing to count.  Hmmmm.

Yes, many people count the principal of debt repayment (mortgage, cars, even credit cards) as "savings." 

There's arguments for and against both methods.
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dragoncar

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Re: Mustache poll: how much do you save?
« Reply #20 on: February 14, 2013, 11:07:45 AM »
(1-savings_rate)/(SWR*savings_rate)

Hmmm. 

(1-.37)/(0.04*.37)
=.63/0.0148
=42.56 years??

I guess that might be somewhat accurate, since we seem to have had a spendy few years, with house renos and DH being back in school.

Yep- but this assumes you are starting from zero, investing in something like tips, and don't lower your savings rate over time (for example, banking 100% of raises)

So for "low" savings rates (anything where time to retirent is many years) you will have to factor in compounding returns.... Hard to predict.

On net income: again, assuming mmm spending levels, "pretax" income is essentially equivalent to "post tax" income so no problem lumping them together.

Self-employed-swami

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Re: Mustache poll: how much do you save?
« Reply #21 on: February 14, 2013, 11:55:21 AM »
Yep- but this assumes you are starting from zero, investing in something like tips, and don't lower your savings rate over time (for example, banking 100% of raises)

So for "low" savings rates (anything where time to retirent is many years) you will have to factor in compounding returns.... Hard to predict.

On net income: again, assuming mmm spending levels, "pretax" income is essentially equivalent to "post tax" income so no problem lumping them together.

Interesting.  I already have a bunch saved up though, so I'm not that concerned :)

I'm more interested in staying home once we have young kids, and then maybe returning to something resembling employment, once they are back in school. 
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The_Dude

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Re: Mustache poll: how much do you save?
« Reply #22 on: February 14, 2013, 01:33:48 PM »
I voted using money saved from gross net income of wages&gifts.  I did not include investment appreciation as income or savings.  That put me in the mid 30's % range.  If I were to use net income after taxes my savings rate is closer to 50%

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Re: Mustache poll: how much do you save?
« Reply #23 on: February 14, 2013, 02:39:40 PM »
(1-savings_rate)/(SWR*savings_rate)

Hmmm. 

(1-.37)/(0.04*.37)
=.63/0.0148
=42.56 years??

I guess that might be somewhat accurate, since we seem to have had a spendy few years, with house renos and DH being back in school.

Yep- but this assumes you are starting from zero, investing in something like tips, and don't lower your savings rate over time (for example, banking 100% of raises)

So for "low" savings rates (anything where time to retirent is many years) you will have to factor in compounding returns.... Hard to predict.

On net income: again, assuming mmm spending levels, "pretax" income is essentially equivalent to "post tax" income so no problem lumping them together.

Or you could use MMM's "Shockingly Simple" table...

37% savings rate = about 26 years

http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

Herbert Derp

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Re: Mustache poll: how much do you save?
« Reply #24 on: February 14, 2013, 02:49:42 PM »
I am currently saving 75% of my net pay, which I hope to increase to 82% in a few months. I also save 4% of my gross pay through my employer's 401k program, which is matched 50%, bringing it to 6% I guess. So overall I am currently saving 81% if you just add those two figures together. I'm really looking forward to reaching 90%!

-Edit-

It's mathematically incorrect to add the savings percent of gross pay to the savings percent of net pay. Instead I should have added the dollar amount of gross pay savings to my net income. So actually I am saving around 77%, not 81%.
« Last Edit: February 16, 2013, 01:20:23 AM by Herbert Derp »

dragoncar

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Re: Mustache poll: how much do you save?
« Reply #25 on: February 14, 2013, 04:53:42 PM »

Or you could use MMM's "Shockingly Simple" table...

37% savings rate = about 26 years

http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

Right on.  But for that chart, you should still use savings rate as a percentage of net income.

arebelspy

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Re: Mustache poll: how much do you save?
« Reply #26 on: February 14, 2013, 04:56:11 PM »
Or you could use MMM's "Shockingly Simple" table...

Or calculate your own at Networthify - http://networthify.com/calculator/earlyretirement

But then you get to Yolfer's point that future returns are hard to predict.
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darkelenchus

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Re: Mustache poll: how much do you save?
« Reply #27 on: February 14, 2013, 05:15:49 PM »
We averaged about 72% for the last two years, but my pay was cut, so we've been between 55% and 60% over the past few months.
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Re: Mustache poll: how much do you save?
« Reply #28 on: February 14, 2013, 05:50:36 PM »
I used after-tax take-home, but added pretax retirement contributions to both the "income" and "savings" column. 

I also included mortgage payments as savings for the poll.  With them, we have a ridiculously large savings number.  Without, it's more like 21%.
I did the same as you.  I did include principle reduction on debts, because once the debt is gone those amounts will go to retirement savings.

So this says we saved about 44% of net in 2012.  Wow!  That's way better than I expected, since we save 15% into 401-K's and pay extra to debt right now.

Xtal

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Re: Mustache poll: how much do you save?
« Reply #29 on: February 14, 2013, 09:05:52 PM »
I used net income, and I added in my 401(k) contributions on both the income/savings side, as someone mentioned above.

I'm "only" saving 57%!  This is pretty good, I guess, but not as good as I thought. 

I'll have to see what I can do to improve this.  My goal is to be somewhere between 60%-75%.
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JamesL

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Re: Mustache poll: how much do you save?
« Reply #30 on: February 14, 2013, 09:55:18 PM »
I'm saving about 70-80%, although I need more month's data to really make a decent average. I've only just started becoming very very conscious of my spending.

Take home pay=1500 month
Expenses= 272

I love at home= rent free, free food

kolorado

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Re: Mustache poll: how much do you save?
« Reply #31 on: February 15, 2013, 09:53:09 AM »
Income expected of $50K this year - payroll taxes +tax return +company match of 401K = total net income
401k saving us +401K savings them +net savings from sticking to the budget +mortgage principle payments =net savings
Net savings/Net income=savings rate
Ours is expected to be(and has been so far)43%. :D We're a one income family of five.

KulshanGirl

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Re: Mustache poll: how much do you save?
« Reply #32 on: February 15, 2013, 10:59:55 AM »
My savings rate is 37%.  My investment rate is 24% right now, and as I get braver I will invest more of my savings I'm sure.  If I count my mortgage principal payments, my savings rate jumps up to 44%. In a couple of years, I will eliminate full-time daycare from my expenses.  I pay 25% of my net income for daycare, ouch!  But I look forward to adding a good percentage of that to the savings rate in the future.  :)

dragoncar

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Re: Mustache poll: how much do you save?
« Reply #33 on: February 15, 2013, 12:36:20 PM »
C'mon, you have to hear from the 91%+ person.  Don't leave us hanging!

anastrophe

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Re: Mustache poll: how much do you save?
« Reply #34 on: February 15, 2013, 01:33:50 PM »
C'mon, you have to hear from the 91%+ person.  Don't leave us hanging!

Seriously! Who are you, and how do you do it?!

arebelspy

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Re: Mustache poll: how much do you save?
« Reply #35 on: February 15, 2013, 01:47:20 PM »
Obscene earner, ridiculous EERE (the extra e is for an extra extreme), or had help (i.e. living at home for free room/board)?

You decide!
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Re: Mustache poll: how much do you save?
« Reply #36 on: February 15, 2013, 02:22:59 PM »
C'mon, you have to hear from the 91%+ person.  Don't leave us hanging!

Seriously! Who are you, and how do you do it?!
I will hazard a guess, I think it is arebelspy! I think he said in the 2012 net worth update thread that his net worth jump had exceeded his day job income... so depending on some fuzzy math, it could be him?

Emerald

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Re: Mustache poll: how much do you save?
« Reply #37 on: February 15, 2013, 02:27:45 PM »
I used gross pay/total savings. 

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Re: Mustache poll: how much do you save?
« Reply #38 on: February 15, 2013, 03:54:00 PM »
C'mon, you have to hear from the 91%+ person.  Don't leave us hanging!

Seriously! Who are you, and how do you do it?!
I will hazard a guess, I think it is arebelspy! I think he said in the 2012 net worth update thread that his net worth jump had exceeded his day job income... so depending on some fuzzy math, it could be him?

I think he'd be bragging here, if that was indeed him.
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arebelspy

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Re: Mustache poll: how much do you save?
« Reply #39 on: February 15, 2013, 04:12:17 PM »
I think he'd be bragging here, if that was indeed him.

Ouch!  :D

I will hazard a guess, I think it is arebelspy! I think he said in the 2012 net worth update thread that his net worth jump had exceeded his day job income... so depending on some fuzzy math, it could be him?

I did indeed say that, but nope, not me, I'm a shade over 70%, because I count all income, I don't do fuzzy math to boost an artificial and unimportant number.  ;)
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Re: Mustache poll: how much do you save?
« Reply #40 on: February 15, 2013, 04:15:55 PM »
I think he'd be bragging here, if that was indeed him.

Ouch!  :D


Oh, I meant it as a compliment :)
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happy

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Re: Mustache poll: how much do you save?
« Reply #41 on: February 15, 2013, 10:17:30 PM »
OOOh look at that do we have  a normal distribution?
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anastrophe

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Re: Mustache poll: how much do you save?
« Reply #42 on: February 16, 2013, 06:35:28 AM »
OOOh look at that do we have  a normal distribution?

We do! And a decent sample size, no less. Plenty of bias though;)

Mike

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Re: Mustache poll: how much do you save?
« Reply #43 on: February 16, 2013, 12:12:04 PM »
Quote from: arebelspy
Well, not easily.  Some of your savings is pretax, some is post tax, and you just lump them together as if they're the same.
For a number that isn't *that* important in the grand scheme of things to get exactly right, I'd rather keep the associated calculation simple. 

Besides, unless all of your after tax money is going into a Roth or some other tax free investment, the "post tax" savings to which you refer isn't entirely post tax.  Although I suppose one could ignore the 1099's and "forget" to file the info on a tax return, but I would guess that the IRS would figure that one out pretty quickly and slap you with an audit.

Jaherman99

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Re: Mustache poll: how much do you save?
« Reply #44 on: February 16, 2013, 01:37:15 PM »
OOOh look at that do we have  a normal distribution?

We do! And a decent sample size, no less. Plenty of bias though;)

Ha!  I was going to comment that we had a great bell curve for the math geeks in the audience. You beat me to it.

arebelspy

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Re: Mustache poll: how much do you save?
« Reply #45 on: February 16, 2013, 04:07:46 PM »
Quote from: arebelspy
Well, not easily.  Some of your savings is pretax, some is post tax, and you just lump them together as if they're the same.
For a number that isn't *that* important in the grand scheme of things to get exactly right, I'd rather keep the associated calculation simple. 

Fair enough.  Anything is easy to lump together if you don't care about accuracy.  In that case, I mostly agree with your "Why use net or gross when they can easily be lumped together."

On the other hand, if someone else has the same goals as you (keep the calculation simple and have a fairly accurate number), can't you see why they might choose one or the other (net or gross)?

There are arguments for any method, and I find ones to count either of them as compelling as the arguments for lumping them together.  I also don't mind if people count 85% of their after-tax ones (if they make the assumption of being in a 15% tax bracket at retirement).  Any method works, as long as you have reasoning and are consistent. 
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skyrefuge

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Re: Mustache poll: how much do you save?
« Reply #46 on: February 16, 2013, 07:56:31 PM »
I finally made a spreadsheet and did the math. I somehow was lucky enough to discover Mustachianism in 2004 (years before it even existed), so using my records for the last 9 years, found that my savings rate over that period has been 75.8%. It's been relatively constant over that period, with yearly figures ranging from 74% to 84%, except for the year that I bought a brand new car when it dipped to 53%.

So, looking at the Shockingly Simple Math (SSM), MMM tells me I can retire in 7 years at that savings rate. Yet, I've been doing it for more than 9 years, and even started in 2004 with a net worth already at $180k (9 times my yearly expenses). And I'm still working. Hmm. Have I disproved Mr. Money Mustache?

I believe the main problem is that my investments haven't performed at the level he assumes in the SSM. My annualized rate of return (IRR) over the 7 year (2004-2010) period was 6.42%, while inflation averaged 2.2%, for a real return of 4.2% per year. The SSM assumes a 5% real return.

My inflation-adjusted expenses over the same period have averaged $21.2k/year. After seven years (and with a big head start), a 4% SWR would have covered 90% of those expenses. After 2+ more years, a 4% SWR currently covers 131% of those expenses, so you might say that another problem with the math is that I'm just a big wuss. Anyhow, while the "7 year" result spit out by the SSM wasn't sufficient, it at least wasn't *too* far off.

Since I've carefully tracked my spending over that period, I used that to find my savings rate.  I subtracted taxes from my gross income-from-labor (which includes 401(k) match) to get net income, and then spending_rate=(spending/net_income). Everything I don't spend ends up getting saved by definition, so savings_rate=(1-spending_rate).

Mike

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Re: Mustache poll: how much do you save?
« Reply #47 on: February 18, 2013, 02:41:24 AM »
Quote from: arebelspy
Fair enough.  Anything is easy to lump together if you don't care about accuracy.  In that case, I mostly agree with your "Why use net or gross when they can easily be lumped together."
I think of it as a reasonable estimate moreso than anything else.  As long as people are generating an answer that is relatively accurate, it'll provide them a good (enough) idea of where they stand and how far they need to go.  Plus with useful sites like mint and the associated goals you can create there, you can pretty easily get to the point where the legwork is done for you in terms of how much time you have left before you hit FI (assuming of course that somebody did the proper initial calculation/used the right calculator to come up with a reasonable estimate of funds needed at retirement and plugged that number into the mint goal).

Quote
On the other hand, if someone else has the same goals as you (keep the calculation simple and have a fairly accurate number), can't you see why they might choose one or the other (net or gross)?
Of course.  My main concern is with calculations that are more intensive with data entry which leads to a greater likelihood of entering the wrong number in the wrong place and rendering the whole exercise useless.  Most people simply aren't that proficient at math (hence the existence of a multi-billion dollar tax prep industry that will even fill out 1040EZs for customers).

Quote
I also don't mind if people count 85% of their after-tax ones (if they make the assumption of being in a 15% tax bracket at retirement).  Any method works, as long as you have reasoning and are consistent.
I don't personally like tax assumptions since they generally don't fit the situation very well.  If I'm in the 15% bracket, I'm not paying 15% in taxes - it's probably going to be closer to 10%, if that.  Plus there's the whole long term capital gains issue - if most of my income is coming from that, I could escape federal taxes altogether (capital gains rate is zero for incomes up to $36,000 I think).

grantmeaname

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Re: Mustache poll: how much do you save?
« Reply #48 on: February 22, 2013, 11:51:46 AM »
Shout out to big M for putting the thread in today's post!

Nathan Drake

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Re: Mustache poll: how much do you save?
« Reply #49 on: February 22, 2013, 01:45:28 PM »
Look at that bell curve!

65% of net myself.