Author Topic: Savings question  (Read 1425 times)

Spondulix

  • Pencil Stache
  • ****
  • Posts: 640
  • Age: 39
  • Location: Los Angeles, CA
Savings question
« on: November 02, 2014, 12:56:42 AM »
When someone says they have a 40% savings rate, does that include IRA/401k contributions?

deborah

  • Walrus Stache
  • *******
  • Posts: 8630
  • Location: Australia or another awesome area
Re: Savings question
« Reply #1 on: November 02, 2014, 01:13:20 AM »
Probably. Depends on what they include - pre-tax, post-tax, payments on their mortgage... It's always a bit wonky.

Spondulix

  • Pencil Stache
  • ****
  • Posts: 640
  • Age: 39
  • Location: Los Angeles, CA
Re: Savings question
« Reply #2 on: November 02, 2014, 01:08:44 AM »
Okay so I have good reason to be confused, then! When MMM says he did 50% and FI in 7 years, I wasn't clear what constituted investing. He was in his 20s, so the money isn't going to be seen for 25 years or more...

Johnez

  • Handlebar Stache
  • *****
  • Posts: 1072
  • Location: Southern California
Re: Savings question
« Reply #3 on: November 02, 2014, 04:27:41 AM »
Not all "retirement" money has to go into retirement accounts.

There are ways to pull out money early even from restricted accounts.

Research "401k Roth IRA pipeline," "Backdoor Roth" and various iterations of "how to withdraw 401k early."

A quick fact before you set off on your googling adventure-you can pull out CONTRIBUTIONS to a Roth IRA at ANY time for ANY reason without paying any tax, fee, or fine.


Mrs. Frugalwoods

  • Bristles
  • ***
  • Posts: 354
  • Location: Vermont
Re: Savings question
« Reply #4 on: November 02, 2014, 07:05:58 AM »
From what I've read on the forum and elsewhere, everyone calculates their savings rate slightly differently. I think you've just got to figure out what works for you. FWIW, my husband and I calculate our savings percentage by the following equation: monthly after-tax savings / take-home pay. In other words, our 65%-85% monthly savings rate represents cash saved after taxes, after both maxing out our individual 401Ks.