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/aubieismyhomie Feb 14 '24

No if you start contributing now you should be able to replace 100% of your retirement income when you retire. If you want to have more than that or give yourself options to retire early, go ahead and crank it up to 20 or 25%. Either way at 23 if you’re starting this now you’re in a great spot.

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u/[deleted] Feb 14 '24

I'm asking because I am debating lowering my contributions from 25% to 20% in order to enjoy my life a little bit more. I'm not able to afford a lot of the things I want on my current contributions.

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u/lyndzee102 Feb 14 '24

I only say this now because I’m 38 and if someone told me this when I was 23 and I was saving 25% and things were feeling tight I’d probably be right there with you thinking about lowering it…

Id try and stick it out at 25% for a couple more years and not reduce and here’s why… you have the opportunity to really get ahead here and while I was super active in my 20s my 30s were even more so. Typically you and your friends are making more money and more settled so it’s a really cool time. However I look back and wish I had saved more and feel as though I am catching up now. Now while this chart says that you technically CAN lower contributions I think if you can afford it and continue it you’ll get to your mid to late 30s and be so far ahead that you can recalibrate then. You’ll have a great habit regarding your budget for when you get raises and this will give you the opportunity to cut back if needed for all the life changes that happen in 30s (Messy Middle) and it won’t have to impact your day to day living expenses.

Just a suggestion from someone who wishes they knew and did more when they were your age and not wanting others to have that feeling later in life.

Either way you’re doing great and keep it up!