Build Wealth With the 3 Bucket Strategy! (By Age) 2024 Edition
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- เผยแพร่เมื่อ 20 มิ.ย. 2024
- Build Wealth With the 3 Bucket Strategy! (By Age) 2024 Edition
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Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life.
I turn 36 today. Just hit net worth 500k last week! Very exciting for wife and I! Single income family, wife SAHM, one 7 year old child. I work in healthcare. Thanks for your videos Money Guy Show!
I am 38 and am a Nurse Practitioner. Have never had a 5% raise or a 5% match.
Yeah aside from promotion. I have never seen a 5%. It’s been 24 years. Get exceeds expectations. You get 3.5%
It took us 8 years to get the first $100k and 3 years for the second. When you see a big rise in the stock market and see your funds grow in one day more than you make in a month! Pretty awesome.
Long time viewer of the show. I love most of what I see in these case studies, however I don’t think a 5% annual salary increase is realistic. Maybe at the beginning of your career they are (and potentially even larger %), but I don’t think anyone in the latter parts of their career are continually getting 5% YoY raises as they hit career level at their companies. I would love to see the results with that variable changed over time to be more realistic.
As a senior level 5 engineer with a salary if $225,000, a raise of 5% is unrealistic for a normal year.
This channel appears to mainly focus for the 23-35 year olds in general.
I think the concept is that 5%/year also includes larger raises when he changes jobs. They mentioned on a previois show.
@@arh1234Still unrealistic. 3% would be more reasonable. They've almost doubled that.
@@sbman436 2% is more like it, or just enough to beat inflation.
@@TanTan_7 Sure. I'd be fine with a 2% increase as well.
Manny the Mutant is that, a mutant, and in the case study is amazing, not average. Ok to not be an amazing mutant, but this gives a good idea of where you COULD be. Instead of throwing shade, its ok to take stock and re-evaluate where you are and if any changes need to be made. If 3% raise and 2% match is what you have, then that is YOUR scenario and that is ok. This is a case study--take it for what it is worth. Evaluate if you are ok with where you are or want to follow the FOO and reach to be a financial mutant. Mistakes will happen along the way but hope you keep climbing!!!
As well as this no matter what your pay raises are, you would still reach the same amount of replacement income 80%ish by the end of the case study which is the overall goal of retirement.
Plus he reaches 6 million dollars! Most people hope to have 1-2 million in retirement so hes wayy above and beyond
I've been saving in my Roth IRA since I graduated high school! I was a super nerd in high school, so I got scholarships to cover college! 🤓
However, I don't make enough to move past step 5 in the financial order of operations. But I'm very happy with my Roth IRA and my Roth 401k!
Keep maxing out, you older self will be happy
It's a simple experiment, but a 5% raise every year is ridiculous. Most employers are stingy with 3% and declare that a "Merit" raise.
Manny will join a new company every few years and will negotiate each starting salary.
And when you get a15% raise? You're bad at math bro
If you're not getting good merit raises yearly, you need to get into a job where you can excel and be rewarded for it.
@@crackpotfox almost ALL jobs don't give merit raises, you're about 30 years late
@jtowensbyiii6018 You'll never win if you've already decided you've lost. Those jobs exist, that's why i specified a job where you can be rewarded for merit.
I would have preferred to see the numbers look a little more realistic. Average Raise Growth since 1986 has been 3.685% (Based information around Nov. 2023 when I wrote a retirement calculator). I think 3% growth would have been a great number to use. Median employer match is 3% I think 3% or 4% would also be more realistic.
In my retirement planning I am using 2% raise per year, 3% inflation, 9% Pre-Retirement Return, and 5% Post Retirement Return. My goal is to replace 100% of Pre-Retirement income at about 3.5% initial portfolio value.
I was thinking the same thing.
Depends on where you work, but consider if there are promotions along the way, those typically have a 5-10% raise. The several companies I've worked for in tech, when hourly was $1/year, which was close to 4-5%. Corporate jobs are very strict on the 3-5%. The current tech company I'm at, I'll see 4-6% yearly raise or 10-12% promotion raises. When I first started I was barely making 35k, my shovel jumped so high at 30, that's when I got more serious about paying debt and saving for retirement. Now that all my debt is gone, I just haven't justified doing more than 20%, since I'm in the messy middle. I'm thankful for this type of content I wish I would have done it sooner.
@@ubuntunewbI agree it’s out there, but I find it to be more of an outlier than the norm. I am making 3.7x what I was 9 years ago at 25 when my wife and I got married; about an average of 14.5% YoY. Definitely not the norm. My wife over that same period had about 4.4% growth which is more of the norm in my opinion.
“Raise” can be from changing jobs which can see 15-20% jump. So an average of 5% per year can be reasonable assumption between low annual raises combined with job switching every few years.
@@slevitron1543interesting I just checked my average for my 12 year career, average YoY salary change is 14.5%
Success depends on the actions or steps you take to achieve it. Building wealth involves developing good habits like regularly putting money away in intervals for solid investments. Financial management is a crucial topic that most tend to shy away from, and ends up haunting them in the near future.., I pray that anyone who reads this will be successful in life!!
Starting early is simply the best way of getting ahead to build wealth , investing remains a priority . I learnt from my last year's experience , I am able to build a suitable life because I invested early ahead this time .
Exactly ! That's my major concern and what lucrative investment can one venture into with the current rise in economic downturn
In fact, I had no prior experience or understanding when I began investing in 2018, but by the end of 2019, I had made a profit of almost $750k. All I had been doing was going by what my financial advisor had told me. This demonstrates that all you truly need is a professional to assist you; you don't even need to be a great investor or put in a lot of work.
*@lilyhershey1* That does make a lot of sense, unlike us, you seem to have the Market figured out. Who is this consultant?
Gertrude Margaret Quinto is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
Such a great reference point. One thing I'd like to see in addition is Mannys budget at each decade. What does he spend in federal taxes, housing/ real-estate savings/ transportation/ food. The highlights.
These things always show what “could be, would’ve been”, but most of us watching who didn’t start in our 20s would love to see some options & scenarios too.
They literally have videos on starting at every decade and have a free resource showing you how much your money can turn into at every age...
Yeah. In the real world no one is getting a 5% raise every year.
More like 1% every year or 2.
@saulgoodman2018 That's why job hopping every few years and getting at least a 15% raise by leaving is necessary.
A realistic raise is definitely around 2.5% on average, and I know I can job hop to increase the scale. But I think job hopping overlooks the qualitative value if you work with great people and boss’s. For me, 5% is a lot less valuable to me if I’m surrounded by douchebags.
@thehomeless_trucker Most people don't job hop "every few years" or get a 15% raise whenever they do
It does seem crazy and disconnected. How many boomers do you know that started making equivalent to 50k and now make 300k+. Those play raises aren’t realistic for the average American.
Manny the Mutant should graduate with the average student loan debt to make this example more relatable to young people today
They sort of do this by only having him start with 15% at 25. That extra 10% theoretically should be going to necessities like paying down the debt faster.
That's what he's spending on in the remaining budget
Let's assume he paid then off when 22-24.
Manny the mutant is setting an example of what young people today should follow. It's never too late to redirect the ship on the correct path.
Student loan debt is what you agree to pay. I paid off mine and the wife's while making the average salary. Much less than 6 figures.
A 5% raise per year is a little steep most jobs wont give you that.
If you job hop it's more than possible..... Sadly thats what it comes down to these days...
My company is handing out compensation paperwork this week and next. From what I see the average raise is 3.0%. I've never worked for a company where the raise was 5% unless I performed amazing. Definitely not the average raise. Also depends on management. Same company that gave me 5% for 2 years straight changed management that cut raises to 2-3% with 2% being the average.
@nicolawilliams2319 sure but its not guaranteed and it's not going to be consistently 5% per year or even an average for the entirety of one's working career.
Plus, I have a government job. Job hopping would actively hinder my future retirement prospects. While that's not the norm, it is a factor to consider.
@@nicolawilliams2319 I haven't job hopped like most but here is my experience working with job hoppers that make really good money changing jobs every 2 years. They make good money but they are terrible at the job. The don't know what they are doing and companies were hiring them for reasons other than knowledge. Guess we needed bodies. Nobody missed them when they left because their work was terrible
I think it helps account for regular raises (2-3%) and averages out the impact of larger raises due to job change or promotion that could be more like 10-15%
Just wanna thank you guys for teaching me that Roth’s have a tax & penalty-free escape hatch on contributions. I’m probably never going to use it but I would’ve never started a Roth without that information
Need more 4 hour brian. That guy kills me. IYKYK
I just learned that brokerage accounts can also be inherited tax free, because of the “step up in basis” rules.
How?
@@perfectlymprfct The “Step up in basis” rules. The price paid is reset to the time of death of the owner, as though the stocks, etc. where just purchased. So you could technically sell it tax free, if it has no gains after the owners death. If the one inheriting the account is the spouse, then half of the account is eligible for a step up in basis. Your heirs would only owe taxes on growth that occurs after the time of the owner’s death.
Thanks for the great video! Starting out my journey at 26 now, trying to be like manny lol
My side hustle is my investments. Pays pretty well!
16:31 Can you say that again slower? (age*income)/(10+(40-age))? So if you're 40, making 100k, your score is 400k. How is Manny < 1?
Yep. This made no sense
They forgot to mention the full formula. I believe (may be wrong) it is total net worth / (age*income)/(10+(40-age)). So example, total net worth is 100K and making 50K at age 30.
(100,000)/((30*50,000)/(10+(40-30))) = (100,000)/((150000)/(10+10)) = (100,000)/(75,000) = 1.33
You got the formula correct; that is the formula to determine how much you should have saved up. What they didn't mention is to get your Wealth Score you then want to compare what you have saved vs what the formula says you have saved.
E.G.: (what you have saved)/((age*income)/(10+(40-age)). If you have $200,000 saved in the scenario you've given above then you have a Wealth Score of 0.5; (200,000)/((40x100000)/(10+(40-40))) = (200,000)/(4,000,000/10) = 200,000/400,000 = 0.5
You can also use their calculator in free resources on their website.
As others said here, this formula gets your denominator. Your actual savings is the numerator. Total savings / (wealth formula) = ratio.
Whoop whoop 🎉
another GREAT time for roth conversions are if you are planning to go to grad school. you get tuition tax credits so you can transfer a LOT of traditional into Roth. I filled my traditional assets in my early 20's because I KNEW I was going to go to grad school in my late 20's and my income would drop to zero.
Where does manny live? 50k is shit living in a coastal city. Realistically manny started saving at 30, maybe 3% raises, and played the stock market till age 35 with little to show for it, and then he got serious.
Manny determined he can't afford San Francisco, so he moved to Dallas.
Sounds more like a Manny the Mediocre.
@@buckwildzthis 😂
So based on your assumptions, Manny's raises would have been double inflation for the last 40 years. That's amazing. No job changes. Never got hit with any negative situations. I mean with those kinds of assumptions, why isn't everyone at retirement in the top 10% of earners.
I guess it's the best you can do. Also next year, please provide what Manny actually does to get these assumptions because I want my kids to do that since I haven't seen too many people be that successful.
I think that they do that to simulate job changes and moving up in his field. In reality it happens in spurts (I.e entry level then mid- level then senior level) Their simulation has a smooth transition with a 5% increase yearly which likely under estimates the career growth that you will likely see with advancing your level and taking into account inflation. Ex. my job in my 20’s naturally leads to a >2x increase in my 30’s but stagnates to 3% a year without job changes. Any significant increase from here depends on career strategy and longterm career goals.
I love how Bo looks at people off screen when Brian begins his long “story share” time 😂
My aunt passed away, and I inherited part of her portfolio and cash savings. I'm 28 years old, and everyone always tells me to invest. So, what stocks are excellent long-term investments? My sole big plan is to use my gains to buy a house in five years.
Lucky you, I’d buy a lot of tech stocks and Dividend portfolios with that.
The market is not necessarily a rollercoaster if you know your way around the market, there are various opportunities in the present market to accrue good profit, If you are not too savvy with the market, just buy and hold on strong companies with good earnings, or consult with advisors on ETFs and actively managed funds.
Great content. I love sharing these with my kids in their 20s. Makes me look smart for what I’ve been telling them for years. Been listening since I was about subscriber 19,000. Take care.
This is the first video that has had specific enough information to make me think I need to make an appointment with the Money Guy team and get some personalized advice. In general, I’m doing fine- but with all the details on different accounts and caps- it would be great to get advice that’s just for me.
The after tax brokerage account allows One to retire early with ACA health insurance. As withdrawals is not all taxable income. It's great as a bridge account.
Doesn’t ROTH do the same? As long as you can access it. So not super early retirement
@@mackhazelwoodROTH is not the same in that you’ve paid taxes on it. The after-tax brokerage would allow you to take the basis (what you put in) and earnings up to the standard deduction completely tax free. Assuming you have no other income (which you wouldn’t if you haven’t reached RMD age), then you’d be able to pull out another $44,625 tax free due to cap gains rates being 0%… if MFJ it’s 89,250 for 2023. You could essentially get earnings of $58,475 as a single person or $116,950 MFJ of tax free EARNINGS on your after-tax brokerage account. If you include the basis in this you might be able to pull significantly more. This is all assuming you’ve held the things you’re selling for at least 2 years. So long as the tax system is set up like this it’s hard for me to justify locking my money away in advantaged accounts…
You can access ROTH pretty early, with conversions.@@mackhazelwood
I’d be curious to get the figures on what his cash reserves are if he follows the FOO to a T and where they’re being stored/at what return rate. It feels to me like they were contributed to these bucket figures instead of being separated.
yeah, not only do your cash reserves need to grow over time but you need to spend them over time as well. gotta repair homes buy cars, gotta use that HSA for medical bills. would be good to factor in a 5-10k in unexpected bills every year or so. it really effects your savings starting out, and then as you grow, more slowly than Manny, it evens out and turns into not as big of a deal. Also I guess Manny saved for his kids college on top of saving 25% for retirement. or Maybe Manny is a DINK.
Great show! I have really liked both of these you did with Manny and the buckets.
Manny is my HERO!
Manny!!! Let's go!!!
Is step 1 of the FOO the start of your emergency fund or do they need to be held separately?
How do you get a ratio from the wealth calculator, are they dividing his calculated net worth by the target net worth???
Hey guys, these videos you do are great, this one too, as always, so thank you! However, what about those of us in our early to mid 50s who JUST STARTED due to major life events (i.e. divorce, etc). Some of us could never afford to invest til this point. What about someone who is 53 or 54 years old, and is at step 6 of your FOO, and will likely never get to steps 7 through 9, because we just don't have time? Can you do scenario / suggestions for us? Again, thank you! Huge fan of you guys and Dave Ramsey for years now. Y'all have really helped me.
Great request. I’m in pretty much the same situation. I don’t make much money as a teacher, but I will have a solid pension.
I want to be Manny. 0-3% raises are the norm, 2% match is max, and we have a position cap , so some years it’s zero. Even when I got to 26% at 52, I finally hit $500k
Brian dug deep on that last sentence but, like a financial mutant, he got those words out anyway. Great ep!
Good video and I like the case study. One modification I would like to see in the future is to show the hypothetical income/taxes/spending for the case study subject. Knowing how much money the subject is earning and then spending vs. saving is important in today’s economy too, otherwise the example seems too hypothetical and idealized.
@moneyguys, can you explain the targets couple's should have vs single people? I feel like my wife and I are doing really well hitting hyper accumulation, but that's both of us combined hitting the targets you cite. Individually, we are way under. Should we be hitting these dollar goals as couple's or Individually?
Catch up contributions and still maxing out every year may not be necessary if you want to up your spending before 65. It depends how expensive a lifestyle you want to lead after 65, but putting 30K into an already multi-million dollar portfolio where the growth is much more than that 30K each year may not be necessary. That is another benefit of starting early. Think about your lifestyle, giving, legacy goals and don’t just shoot for a bigger and bigger number
Id be curious to see if they would recommend all roth in my situation. First, if i have tax deferred money, its a possibility they can tax social security. Also i avoid property taxes in my state if i dont earn more than 50k a year. Thats why i was looking to go all roth for my wife and i
I’ve got a question for their Roth vs traditional formula. When they add of the marginal taxes does that include SS and Medicare tax or just the federal and state taxes?
No because SS and Medicare tax are independent of traditional contribution deductions. If you look at your W2 when you contribute to a traditional 401k you'll have separate income levels; Boxes #1 & #16 should show Wages, tips, and other comp. (less 401k contributions), Boxes #3 should show Social security wages, and Box #5 Medicare wages and tips.
Boxes #1 & 16 are the ones you care about when trying to control Marginal Tax rates.
24, have been maxing out Roth since 20 but had to back off in 2023 after buying a house that realistically I couldn’t afford. Still able to contribute 10% to a 401k with a 7% match and 10% profit sharing on top of that, but it sucks I can’t also afford to max the Roth IRA
Building equity in the house is good at that age though took me to 31 to get into a home. Your income will grow and you'll do okay. Get a part-time job if you need the extra money.
You got this!
You're rich af, what work do you do?
On these calculations, how are you accounting for joint investments? If you have joint investments should you be using household income instead?
Please do a case study with everyday people. Some people never make 6 figures or more. What about " life happens " divorce, death and births , repairs, hospital visits and etc .
Mu family has always been money/career driven with family values. Only thing i told my brothers was, if you pick a bad partner, thats the worst financial mistake you can make. Don't ignore that part of life or put it second place or else you will literally lose half of the money you have made and will make in the near future. Be as sharp looking for a partner as you are looking at building wealth.
Question. If you are 50 with $4 million invested having 50% in etfs based on broad indexes (Dow, Spy, Nasdaq) and 50% money market. Is this $ enough to retire? I rent a 2 bedroom apartment, no debt, no kids. I also ask because I have slight back pain sitting at PC 8 hours a day. I wonder how long I can endure it. I anticipate 6% returns but the past 30 years seem like a rosey picture. I will have 0 pension. Thanks.
While my compensation is good (not great), my employer does offer sums great benefits. They match 9% into 401k, and contribute $1,500 annually into your HSA (1,500 for a family, $750 of your single). On top of that if you retire early, prior to hitting 65, you can opt to stay in the companies insurance plan until you're 65, provided that you have a been with them for X Number of years.
That’s a great match to have! My company does 4% if you put in 3%. We have a program where you do “wellness activities” like getting your flu shot or having doctors appointment and they’ll contribute up to $1,000 to your HSA. Taking full advantage of it for sure.
When looking at the 15%, do we include pension contributions? I’m a government employee and my pension contributions have ranged from 7.9% down to current 6.5%.
Great Video!
Do they count money put towards hsa as part of the saving percentage number?
for the calculation for AAW/PAW, do you use before-tax income or after-tax income?
i don't think there was mention of before or after tax income mentioned in "The Millionaire Next Door". so it would have been gross. even if you save aggressively and invest, it's hard to become a PAW (2X of AAW) till you are around 50 y/o by the original formula. every time you get a significant raise, the income part of the equation puts the goalpost further away.
Is the net worth score based only on investment accounts, what about assets (house)?
Every time i watch you i wish i had found you sooner. Trying to teach my 18 year old to be like manny. Shes got a roth ira through her part time job and already a sizable savings that she did on her own. Really proud of her.
combined marginal is federal+SSI+Medicare+state+local correct?
What’s the FOO for people looking to achieve FIRE/FINE. If someone wants to retire at 40/45? Would they need to focus more on a bridge account?
Model it out, but you can use the 72(t) rule (SEPP) to access retirement accounts penalty-free in early retirement. No need to change the FOO.
No tweaks necessary. Roth contributions are always available for withdrawal tax free and you can start a Roth conversion ladder or use the above mentioned SEPP to access traditional accounts penalty free. Heck, if you have a very high savings rate, you might even come out ahead by deferring in the 32% bracket and withdrawing in the 12% bracket and paying the 10% penalty.
I would be fascinated to know how much of the audience makes too much money to make Roth Contributions in their 30s. It's either way more than I think or way more than the Money Guy thinks.
I don't make too much to make Roth contributions. And that's at 39 with a professional job. I think most people in their 30s don't. Their comment about it felt very off to me.
Love the episode, but who in the world is getting a 5% raise every year?
Did Manny buy a house anywhere in his journey?
I am struggling to figure out if i should reduce some of my 401k contributions so I can keep more cash in an after-tax brokerage so help save for a down-payment on a house. I don't plan on buying for another 3-5 years, realistically.
I love you guys but I always have to take and translate what you are saying into semi-equivalent Canadian options. 🎉
We have tax-deferred RRSPs and after tax/tax free on growth TFSA. There is no bucket that says tax free that I can find. 😢
In the Manny the Mutant case study, is the employer match included in his savings contributions, or is it in addition to Manny’s contributions?
Great show! The tax buckets are an area where I haven’t placed much thought yet. Thank you for planting the seed!
I think they generally say to not include it into your savings rate, it’s just extra. It’s all based on your gross income. I can’t recall if they have a more specific reason. In general, you end up saving more if you’re looking at your own savings rate instead of relying on a company match that could change. Just my thoughts :)
They say to include employer match unless you make over 200k per year.
@@mwagner1996 Yes! That is what got me curious about whether the employer match was included until Manny passes the $200k threshold around 50 years of age.
How it’s framed in the show, it seems the employer contributions are excluded from Manny’s contribution rate. One more reason he’s a mutant!
So much of this content is about the accumulation stage. I would love to see some content on the decumulation stage.
Wow, 5% pay increases ever year? I want to work for you guys. I’m consistently at 2%.
Not related to 3 buckets but how i should i view my cash reserves with a small business?
I have a year worth of cash on personal side and like to keep 6 months worth of operating in business. In total its well over 6 figures. Is this too much cash on hand? Im 33 just for reference and max my retirement and putting away into a taxable brokerage
You're probably ok, but you should watch the episode where The Money Guy goes through Caleb Hammer's finances. They give him a lot of advice that might be relevant for you.
Keep some in HYSA but otherwise you should have a run rate for if the business takes a prolonged dip.
Man, I love your show, especially these case studies. However, I'd love it if you did a teacher case study. That starting salary at age 25 of $50,000 with a 5% annual pay raise is just out of the realm of reality for us teachers. More a starting salary of $39,000 and retiring with a salary of $65,000. With multiple pay freezes built in. I'd love to see what a financial mutant could do with that!
What a rich guy starting at $50k! 25 years old I was making $27k and putting 1% in retirement. This was 15 years ago. Listening to this I’m so fucked
Hey Money Guy, I've been watching the show for a while and as I reach the messy middle am having a hard time understanding if I can let up a little bit or need to keep going pedal to the metal with investing. If someone is 30 years old and has a 100k salary, by your formula, they should have 150k invested. If I understand your wealth multiplier, that 150k if left alone, should turn into 3.5m just by being invested until 65. That alone turns into 138k in income by 65. If someone is in that spot or better, is it safe to say that person can pretty easily go back down to 10-15% for a few years while dealing with the daycare portion of the messy middle and still be able to retire comfortably? Obviously the more invested earlier the better, but you also don't want to be able to give your family a good life too. - Cory
They answered a question like this in a recent short video. They said stay at 25%. I disagree. You have to have balance. If you are on track, save what you need to to stay on track. Be prepared to increase your contribution if the market goes down and you fall off track.
@The Money Guy Show: I am considering transferring my 401(k) and IRA to Robinhood in order to get the 3% match that they offer. Free money, right? I might switch back to Fidelity after several years, when the conditions for vesting are satisfied. What should I worry about when making this decision?
Curious what they say. I know there are transfer fees to consider.
@@briankelly1240there was enough fine print on it when I checked the details that I wasn’t interested. Also seemed shady how they added the bonus to the account (feels like a possible loophole that’ll be closed because it’s basically adding excess contributions over the limit). If it is all legit, other places like Fidelity will do it soon anyway so no reason to switch. Similar to how Fidelity started waiving transaction fees after Robinhood set that standard.
How much is the fee to have gold? Check out the fine print.
I had a friend open an IRA in Robinhood just to get their account locked up. Couldn’t deposit more money or withdraw his first deposit to the account. No idea where he left that at, but yeah.
I don't know that they 3% match a transfer vs a contribution (looks like a "limited time offer), if just a contribution, sure, go ahead and go with it. It appears Gold is 5$ a month, so if you get at least that in a match (so contribute over 200$ a monthish) then you should come out ahead.
Also note that you have to have the money in for 5 years to vest. Which isn't crazy, but you are now marrying yourself to Robinhood.
"We want this to be realistic."
5% Pay raises every year. Lol
Certainly achievable on average if you enter a professional career and switch jobs with some level of frequency, especially towards the beginning. If that’s not possible for you, consider changing careers
Most companies are lucky to keep up with inflation. Also 5% match is pretty high for an average.
@@radgamerxyz Perhaps as an average over the first couple of decades, but most careers - even with the jumping around - peak salary around 45-50. The 50k-300k consistent glide path from 25-65 makes a lot of assumptions that are just not grounded in reality for most. That said, I think Manny here could have hit his peak salary around 40 and still been plenty fine without the fairly unrealistic endpoint totals.
5% pay raise per year is absolutely crazy for the majority of people!
How much invested money in index funds before reaching boiling point?
I forgot where i heard this term "encore career" its basically where you quit the job that you HAVE to do for the money. And replace it with a job that you WANT to do. So like if you were making 100k as a software developer but hated it, maybe once you get to a place where youre cash flowing you can quit and work in a field you had more passion in like cooking or something
You go giiirl!!! Hardwork truly pays off! ❤🎉
I'm currently maxing my Roth IRA AND my 401k, but am having trouble putting any money in an after-tax brokerage.
With regards to 401k Roth accounts, I know my employer only matches the traditional, so someone in their 20s will probably want to focus on the traditional 401k if they can only get up to the employer match. They changed the law so employers can start matching 401k Roth but it isn't required
I just found the money guys and the FOO a couple months ago, I feel like it’s too late at 33. I’m caught in the messy middle AND way behind
It’s never too late, the important thing is to start 👍
That’s NOT too late. Still super early. You’ve got 32 years till 65! That’s time for a lot of growth
I was around that age when I put the pedal to the metal. I’m now 39.
Start today. Your 39 year old self will be very thankful.
Just start! Set a budget, establish an emergency fund, use the debt snowball, finish a proper emergency fund. Then you will have room to breath and start the fun part of investing and watching it grow.
I'm a late starter as well hence the name 🙃
As someone who has seen their income double from age 22 - 29 I think the formula for the wealth score can be skewed by income increases outpacing someone's savings growth even if they are putting away considerable amount just because the savings haven't had time to compound.
Take an average annualized income over the span of your career in your calculations instead of looking at the most recent year.
@@RetirementEnthusiast good suggestion. Thank you!
🥇🥇🥇
Maxing out both 401ks and both Roth iras would require $240k annual gross income in order to meet step 7, 25%. If we don't make that much, do we put anything in the after tax bucket in our 40s?
Can we do a case study for someone starting at 29-30
30 yrs old, currently saving 25% in retirement accounts (Max Roth, 401k, and HSA). On top of that, I save 10% in a brokerage account, with mostly volatile assets. If I plan to retire at 55, how should I position my buckets to ensure I have an adequate bridge before my retirement funds are available?
Same question for me.
Have you heard of the rule of 55?
I'm 30 years old as well, I save more than 25%.
I was hoping they'd go into more detail on when to actually do an after-tax bucket properly and different scenarios.
Right now my distributions is as follows:
1. Max Roth IRA
2. Get 401k Employer Match (12% total gross contribution)
3. Between 12%-24% (Gross Income) into brokerage
Should hit about 1m$ in financial assets at 40, 1m$ NW at 38/39, (optional) retirement at 50-55.
Expected at 40:
Brokerage: 700K
Roth IRA: 152k
401k: 183k
@@spdog3344 yes, I understand I can withdraw from 401k assets if I leave the job in the year I turn 55 or later. But I'd like to start converting my 401k at that time, not necessarily use it for retirement. So I'll need a bridge strategy using my after tax brokerage
if your goal is to retire at 55 then you will want to make sure you have enough money saved in your savings and/or brokerage account to pay your bills until you get to age 59 1/2… so that’s around 5 years. After that you can then start pulling money from your 401k and Roth IRA. Depending on what you have saved and when you plan on applying for social security will play a big role at the age of 59 1/2 of what your next steps will be as for example you may not have enough saved at that age to pull from your 401k or Roth IRA without risking being out of money sooner than expected.
Can we count our HSA as part of our retirement contributions? I'm healthy and my HSA balance is 25% of my total retirement balance
You can't retire off of hsa, it's only for Healthcare purposes, id treat it as it'll be heavily taxed and penalty fees if you do include it unless you have a 100% Healthcare need to be paid for
Those of you beefing up your after tax brokerage accounts. What are doing to avoid tax surprises? Are you consulting a pro? My 1099 is way lower than I estimated.
5% pay raise a year. Try 3%
Shouldn't the recommendation be to pull from the tax deferred bucket first until you hit at least the standard deduction, since at that point it's tax free?
that's my goal... to hit $1M by age 50!
I wish they did this with all inflation adjusted numbers.
you could assume they adjusted for inflation in the rate of return
@@supermills03 they are assuming a 10% rate of return to start, definitely not inflation adjusted.
@@scottwible1532 but maybe nominal return is 12.5% I usually assume 8%
Age x income / 10 + age you get to 40 = target. Then net worth / target net worth. Ex. (37x80k) / (10+3) = 234k 250k net worth / 234k target networth = 106%
Massive correction: net investment worth NOT net house/investment worth. It is interesting to see both though.
There’s a 5 year clock on the Roth IRA. Can’t get to your contributions penalty free until after 5 years. Just another reason to start early as possible
To me, this seems like a case study showing why a 25% savings rate is too high…
He could have enjoyed life a lot more along the way and still come out wealthy. And the rate of return they used in these calculations is way too low on top of that. Likely he hits 65 with $10M or more and a lot of regrets about living too frugally when his kids were in the house.
Exactly! 25% of gross income is a significant amount. One really has to artificially keep their lifestyle down in their prime 20 years of life just so they can retire a multi millionaire and discover their declining health prevents them from spending it on anything other than medical services and prescription drugs. There has got to be a better balance in life.
@@RetirementEnthusiast 🎯
Lmfao spoken as someone poor 🤣
@@jtowensbyiii6018 Lol, not at all. You misspelled experienced. We hit FI a long time ago, my dude.
LOL at 5% raises.
Normally I like when you guys do this type of content, but this one had almost no basis in reality. I wish you would do this with numbers that more normal people expect to be making
For the Prodigious Accumulator of Wealth calculations, should it just be your monetary position like in this video or should it include equity in your house?
My wife and I got married when I was 24 and we had just under $40,000 cash in the bank. Exactly 15 years later, our monetary position is $650,000 (1.83 wealth score) with a total net worth of $1.05 million (2.83 wealth score).
I think they use total net worth in the calculation
What is the minimum percent in Roth bucket that you should have-
How about do real life budgets from listeners and provide insight into the changes they can make to get on track. Kinds like Suze Orman "how I am doing episodes 15 years ago. That is more relatable.
I love the ROTH, but there is nothing wrong with Traditional. I created a chart that shows tax liability on the same money amount almost always goes down over time. Meaning 100k taxed today is not the same as 100k taxed in the future say 10, 20, 30 years. Until you turn 75 you decide how much to pay tax on by how much you pull out. And really the next 5 years are not a big deal for the RMDs. Yes ROTH has some cool inheritance rules but that is for others after I am dead not advantages for me. And yes MFJ filing to single is an issue for the future to consider.
So filling up the tax-free account first is better than the tax-deferred, even if you are not in the very lowest tax bracket in your 20s?
Not necessarily. You have to look at your cumulative marginal tax bracket. Money guys have done some videos around it and if you’re in the 25-30% bracket across federal and state, you might want to go tax deferred first and then backdoor Roth is still able to stretch your dollar.
My HSA, what I don't use goes back to employer so I can't invest any of it. Use it or lose it. 😢
What about Manny’s little and less wise brother Maurice the Mundane? Maurice had fun, socks a little away, got married, got kids, got plenty of debt, etc and finally sees Manny doing so well. What advice or steps does Manny recommend to mid-life, “I’m behind”, Maurice the Mundane to catch up.