How much do my later year contributions matter?

[teamzissou00]

hey all -

I did a few comparisons in some web calculators that made me think twice about my current year contributions and their value. 

i'm 37, and working toward 1.25M.  I contributed heavily since i was 22, and am at about 600k including house equity.  When i punched in the numbers of me contributing 18k a year until age 50 and 0 per year until 50, the final outcome was only about 300-400 lower if i contributed nothing at all for the next 15 years.

So - my question is how accurate is this really?  I could take half of that 18k and provide a much more comfortable life to my wife and 3 kids.  We'd have enough to take a yearly vacation, as well as not have to be living on such a tight budget. 

[MDM]

So - my question is how accurate is this really?  I could take half of that 18k and provide a much more comfortable life to my wife and 3 kids.  We'd have enough to take a yearly vacation, as well as not have to be living on such a tight budget.

It's as accurate as the return rate you used for the calculation.

There will always be trade-offs between "enjoy it now" vs. "enjoy it later".  Only you and your spouse can make that call for the two of you and your kids.

[lifeanon269]

If you're working toward $1.25M, then I'm assuming that is your goal because it allows for a safe withdraw rate based on your current spending. Correct?

The question would then be, if you increased your spending by decreasing your savings today, would that put into question whether $1.25M is still a good target nest egg for yourself?

Also, I am assuming that this $18K is a pre-tax contribution. So you'd have to take into consideration that your taxable income would go up if you decreased that amount which means that the government will get more of your money over your lifetime than if you had saved it for yourself.

These aren't things that would necessarily sway you one way or the other without knowing more info, but just things for you to consider.

[teamzissou00]

All good points, thanks.

My main discussion point was the extreme value the first 1/2 of your contributions to retirement as compared to the second half of contributions. 

Was just curious if the mindset of the group was more toward speeding up and snowballing contributions as you get older and closer to FI, or if you get that feeling that your hard work up front paid off and you can coast a little bit from your early efforts.

[markbike528CBX]

As you get to your FI goal, you'll find that daily fluctuations of stock/bond markets are greater than your yearly input.    It's kind of disheartening, but a good sign.   
I mostly still contribute max to my pre-tax to 1)reduce my current year tax burden, 2)reduce the tendency for hedonic adaptation (there is a MMM blog entry on that).   I've been squirreling away post-tax to the real estate holding (ie, my house mortgage).

[nobody123]

My wife and I have had these discussions recently.  While nowhere near hardcore Mustachian, we have generally avoided lifestyle inflation, so I'm at the point where my current retirement savings *should* grow enough to retire at the age I've targeted.  Recently, my wife has been making the arguement that we should enjoy a little more now.  Coincidentally, she'd like to take a nice family vacation each year as opposed to a nice one every 3 with two smaller ones in between, and spend some money on home improvements.

Logically, I know I've saved "enough" for a comfortable retirement and I need to let compounding work its magic.  But given the ~20 more years I plan on working, I figure too much can happen where I'm not comfortable making drastic cuts to my savings rate, even if that money might only double once before I retire.  My fear is that if I scale back, I won't be able to ramp the savings back up if the need arises because we'll become accustomed to spending more of my income.