What to do with savings, instead of a savings account?
That rule makes no sense as it has nothing to do with what matters for retirement. Your expenses matter not your salary. You could have a $2MM salary for one year and save $1MM after taxes and expenses. If your average projected expenses are only $40k per year then you can retire after that single year. This is why your salary doesn't matter. The more you spend, the more you need to save.
You need to save 25 times your projected annual expenses to retire. You can withdraw 4% of the initial value of your retirement portfolio adjusted each year for inflation for a minimum of 30 years without running out of money 95% of the time. Most of the time you will end up with more in real terms than when you started. This is from the trinity study and is based off of past performance of invested assets.
You need to save 25 times your projected annual expenses to retire. You can withdraw 4% of the initial value of your retirement portfolio adjusted each year for inflation for a minimum of 30 years without running out of money 95% of the time. Most of the time you will end up with more in real terms than when you started. This is from the trinity study and is based off of past performance of invested assets.
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the one thing I did that hurt my retirement was being young and investing conservatively.
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That doesn't make it a good rule. It really gives you no idea whether you are doing well or not because if you are like most Americans and keep increasing your spending as your salary grows you won't retire until you're in your 70's. People need to understand what they spend or want to spend yearly in retirement. It's the only way to accurately gauge where you need to be from an invested asset standpoint. This approach also allows you to plan when you will retire and determine if it's feasible when you get to that point based on actual progress.
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I glossed the responses, but I don't think I saw it mentioned... before you can save, you must be free of unsecured debt. Every single conversation about investing or saving should start out with: "First, pay off all your credit cards". Then, throw everything in penny stocks.
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Thread Starter
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Joined: Oct 2011
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From: OKC, OK
If it's only $10k in cash it is better to just keep it in cash. You are taking on extra risk for what is presumably a small percentage of your net worth and inherently making it less liquid. Cash in a bank account is as liquid as it gets. If you really want extra earnings on it then you can find a high yield account.
Chasing the last .01% of gains on your total portfolio by keeping no cash in the bank is just over-complicating the situation. If you are set on not keeping it in cash and chasing that last bit of return I would build out a vanguard brokerage account with a 50/50 equity bond split which will insulate it from a lot of short term volatility in exchange for a reduced overall return but you could probably still manage 4-6% return in the current market this way. However, you will not have instant access to this money as you would need to sell positions when you need it. I don't think it's worth the hassle personally.
Chasing the last .01% of gains on your total portfolio by keeping no cash in the bank is just over-complicating the situation. If you are set on not keeping it in cash and chasing that last bit of return I would build out a vanguard brokerage account with a 50/50 equity bond split which will insulate it from a lot of short term volatility in exchange for a reduced overall return but you could probably still manage 4-6% return in the current market this way. However, you will not have instant access to this money as you would need to sell positions when you need it. I don't think it's worth the hassle personally.
I glossed the responses, but I don't think I saw it mentioned... before you can save, you must be free of unsecured debt. Every single conversation about investing or saving should start out with: "First, pay off all your credit cards". Then, throw everything in penny stocks.
Back in 2015 in a period of 3 months I got divorced, lost the house and 401k and got laid off. Took a shitty contract job, and got laid off again within 7 months of the previous layoff. I finally started a really good gig this year and I'm trying to get my money back on track.
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