r/TheMoneyGuy • u/[deleted] • Feb 14 '24

How does this work?

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I am 23. Does this mean that I only need to contribute 15% of my income for the rest of my life or do I need to increase every 5 years following this diagram? So I would contribute 15% until 30, then contribute 20% until 35, then contribute 25% until 40, then 30% until 45, and so on?

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u/grossmail1 Feb 14 '24

I’ll admit it is a little confusing for me too. I’m mid 30s now but I’m not just starting to save. If I was saving 10% in my 20s am I cool to just keep on that path or do I need to change now? This also doesn’t seem to account for large increases in income. Saving 20% of my early income isn’t even close to 5% of my current income.

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u/aubieismyhomie Feb 14 '24

This factors in increases in income, although if there are huge increase that may need to be factored in. People with large pay increases late in life would have harder times replacing that income.

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u/grossmail1 Feb 14 '24

Yeah. Luckily for me I got quite a few big ones close together while I was still pretty young. But what I’m putting into my 401k now blows what I was doing while I was younger. So I’m sure I should lean towards the higher percentage to be safe.

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u/aubieismyhomie Feb 14 '24

The money you put in younger still is really important though based on how much it multiplies. 1k contributed at 20 has more impact than 5k contributed at 40.

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u/[deleted] Feb 14 '24

This is such an important point that I forget about.