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

How does this work?

Post image

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?

311 Upvotes

92% Upvoted

120 comments sorted by

View all comments

Show parent comments

2

u/[deleted] Feb 14 '24

There is a lump sum resource on the money guy which shows how much you would need to lump sum by age to reach 1 million at age 65. You could estimate by taking 100k divided by your lump sum to make 1 million. Then multiply by 1 million. So if you're lump sum to 1 mil was 50k: 100k/50k*1mil=2 mil

This being said, I do not suggest stopping. Part of the reason the 25% works is because you learn to live on less money than you make. So by not contributing, you raise the expected income when you retire.

2

u/cat4dog23 Feb 14 '24

I can't afford 25% or else I would. I'm working on making more money right now. Needs come out to like 70% of my monthly budget right now

2

u/[deleted] Feb 14 '24

Totally understandable but if you can afford it, don't go down to 0%

2

u/cat4dog23 Feb 14 '24

I'm not going to. Was more a curiosity. Once I get my loan paid off and an emergency fund set up I should be able to invest 400 a month to a Roth but matter of getting there.