Some of my favorite questions come from readers who are worried that they’re saving too much. This is a great problem to have. For example, Henry wrote recently with this dilemma:
I’ve been reading Get Rich Slowly since I was 15. At that time, it inspired me to save 20% of everything I earn for retirement. I’m almost 20 now, and I currently max my Roth IRA each year. (Well, I did in 2008 and 2009.) I also take the required percentage to get my employer’s 401(k) match. I also tithe. All of this means that I only take home about 50% of my net (after-tax) income.
I currently live at home, and I’ve wanted to move out, but I’ve realized that while I’m saving the money I can’t afford to be on my own. But if I stopped contributing to my retirement accounts, I could. I also want to open a business by the time I graduate from college, and I’d like replace my car (though I don’t really need to). With as much as I save for retirement, I find it hard to save more money for the things I want today. Am I being stupid to save so much money that I can’t touch until I’m 65?
First, I want to say that it’s awesome to see somebody so young saving so much money. That’s fantastic. In a society where young people tend to spend much more than they earn, here’s a guy who has made saving a priority. Henry, you’re all right.
But what about his dilemma? Is he saving too much? Would it make more sense for a young man to put saving on hold and fund the needs of today?
A part of me wants to tell Henry to keep doing what he’s doing: He’s already maxing out his Roth IRA every year and he’s getting the full 401(k) match from his employer. Combined, these two retirement plans will give him a ton of financial weight once the effects of compounding come to fruition in the coming decades.
So, one option for Henry is to keep contributing to his 401(k) and his Roth IRA, but to intentionally plan to use future increases in income for his other goals. That is, if he continues his super saving, he can use upcoming raises to get his own place, buy a new car, and start a business.
But another part of me wants to tell Henry to seek balance. Money is a tool. It’s there to help you build a life that makes you happy, both today and tomorrow. If he’s not happy today, that’s a problem.
The question, then, is how to find balance. Henry needs to be careful not to swing too far the other way. I think it would be a mistake, for example, to stop saving for retirement completely. It’d also be a mistake to begin using debt to finance the things he wants today.
How can Henry find balance? What would you do if you were in his shoes? I think I’d try to make small adjustments until I found the balance I needed. He might, for example, pick one of his three goals — moving out on his own, starting a business, buying a new car — and adjust his retirement savings downward in order to pursue it. Or, he could stop contributing to his Roth IRA and use the proceeds to meet one of his goals.
Whatever Henry chooses, it’s going to involve trade-offs. That’s one of the realities of personal finance. Though we can generally have anything we want, we can’t have everything we want. Henry is going to have to establish some priorities, and then use his money to meet them.
This article is about Ask the Readers, Choices, Retirement, Savings
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Henry is in a great spot. With that said, I would recommend reducing the amount put towards retirement. When I first began my career, I was in a similar situation. I had been putting a significant portion of my income towards retirement. A few years down the road when I was ready to quit renting and purchase a home, I didn’t have much for a downpayment. As a result, my monthly payments were high and the amount that went towards interest was unnerving. With all things in life, you need a balance. Understand your short term and long term goals and alter your saving accordingly.
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How about his parents?
I will take up that cause.
WIth Henry living at home his parents are unable to save as much for THEIR retirement. They love him and want the best for him- so they let him stay.
Saving money is important but growing up is also important. He should move out IMMEDIATELY and become a full part of society.
The obsession with “saving enough” is crazy in this case. We didn’t save much until our kids were out of the house. WE now have plenty to retire (even after yesterday).
Time to find your own place Henry!
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Henry is saving too much – for retirement – if he is unable to meet other financial goals as a result. A key concept that seems to be missing from the (good) advice he has received so far is the idea of investment horizons. For investment goals before age 59 1/2, such as a house, car or start-up capital, an IRA is not the right choice. A regular, after tax, mutual fund would likely be the best option here.
If Henry has to cut back on the retirement investment in order to fund his short term goals he should keep the 401(k) match going and sacrifice some of his IRA investment. If his employer is not offering a match right now then keep the IRA instead.
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Henry says he’s going to college, but how does that fit into the picture? Won’t you move into on-campus housing? Its an experience I think you’ll remember your whole life, not to mention the friends you’ll meet. I think its okay to delay retirement savings until after college in order to have those experiences. Especially if you can avoid huge amounts of student debt.
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Money is a tool. It’s there to help you build a life that makes you happy, both today and tomorrow. If he’s not happy today, that’s a problem.
Sage advice. Although not likely but also not impossible, a satellite could fall out of the sky or a bus could jump the curb or that oyster could be a bit off. My advice for him would be to explicitly state where his retirement funds should be donated to in the unlikely event…
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I think I would worry that in 5 years, 10 years or 15 years Henry would just get fed up of “denying” himself and would dip into the retirement savings. But if Henry is truly satisfied with his way of life and aggressive retirement savings plan keep at it! Can we be friends in 40 years?!?! (jk!)
Maybe take baby steps and, while continuing to contribute to retirement, make short term goals (emergency savings, down payment on a house/first months rent, new car, etc.) and start funding those accounts too – as generously or as laid back as you feel, depending on how motivated you are to reach those goals.
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you can never save too much of your income. most Americans don’t save at all.
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The future is an uncertain time, so saving for it is a good thing. However if it is having a serious negative impact on your present, you should definitely reconsider. Personally I would invest in my more immediate future. In his situation my priorities would be to 1. Put money towards my business 2. Save for retirement 3. Move out.
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“Am I being foolish for saving so much?”
No.
Next question.
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For this instance, I highly recommend Elizabeth Warren’s book – All Your Worth – I think she has a great plan for balance.
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I think it’s pretty great that Henry is so disciplined about his money, and that he is clearly into delayed gratification. That bodes well for him and his financial future. He is already ahead of the game, because we know that early retirement investments are generally the most profitable down the road.
However, I concur that it is vital to be happy today. Sixty-five doesn’t arrive for everyone. He could use a gradient of savings tools at this point that would allow him to have short-term goals as well as liquid assets.
Good work, Henry!
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I say yes, he is saving too much. And here’s why – getting rich slowly is not just about the figures. It’s about responsibility. Right now Henry is doing a great job on paper, but as long as he lives at home he is not learning true financial responsibilty. Paying your bills, covering your rent and still finding something to save towards your goals is a careful balancing act. Henry needs to stand on his own two feet (financially as well as socially) and he won’t be able to learn this until he moves out and relies solely on himself. I was in the same boat 2 years ago – I saved well over half of my earnings towards a future mortgage deposit, but it was only when I moved out of my mothers home and into my own place that I truly began to learn the life lessons which will see me through to getting rich slowly. True, I save less per month now than I could before (after rent, bills, food etc) but I know that what I save now is sustainable. I have a budget that works for me, and I can plan accordingly. In the grand scheme of things, the skills Henry will learn when he is working (and saving) under his own steam will repay him with interest later in life.
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I think Henry is doing great — this is not crazy at all — the money he saves today will be so so much more powerful than money he would be saving in the future due to compounding. The people who are telling you otherwise, Henry, have no idea the security this can bring.
That said, you wrote in because you want to make changes. Keep in mind you can get back on this track easily, so as for next steps — I would prioritize moving out for sure.
Start to pare back your savings now, so that you can a) build up a down payment & move in costs and b) start to understand what your new monthly paycheck will look like. Then you will be comfortable and prepared when you do move out. With luck, your income will increase when you are out of college and you can go back to maxing out your accounts.
Then I would think about goals to reach. Your pace of savings may not be the same living on your own, but you could say that you want to add another $5K to retirement before paring back again to save for the new car, and then perhaps add another $5K again before saving for the new business.
Set goals, make it a challenge, and enjoy the freedom you will have vs. so many of your peers.
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Another VERY important question here is how Henry is paying for school. If he can afford the tuition without loans and still finance his Roth that is great. At this point I would yell at Henry to stop worrying SO much about the future and live in the here and now a little more. Stop putting money in your IRA and spend it on your own place. Learning to live on your own now pays many, many benefits in the future.
If you are taking loans to pay for that tuition you need to take that money and spend it on your school fees. Your student loan interest will be close to what you can get in the stock market (on average) unless you are getting an amazing deal. Even with an amazing deal, if you want to start your own business right out of school, having that debt is going to cause problems.
Finally, if the parents are paying your tuition, then you need to take that over. IN MY OPINION, you are taking something from someone else you really do not need. Your parents have already spent mountains of money raising you; don’t make them spend more than they have to.
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It would depend on his goals. What does he want to do? Early retirement? Travel extensively in retirement? This is really only a question he can answer. If he doesn’t know, he should think about it.
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Financial planning is not about how much we save, but having a proper balance. Every individual can save as much as he earns, but what about the other expenses then? Your saving for retirement at this age is quite appreciable. However, do not miss the essentials. Plan well, you still have much time.
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If your parents aren’t struggling financially, I would sacrifice freedom for a little longer and use the opportunity to save more for a personal savings account. Maybe 80% for your money to savings, 20% to retirement; or even put retirement on hold for one year to meet your other financial goals.
A word of advice: it is wayyy more expensive living out on your own than you probably expect. Enjoy having no mortgage/rent, water bills, electric bills, groceries, internet, cable, phone….. it goes on and on!
Best of luck!
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You can view your Roth savings as not just retirement savings, which may help the can’t touch for over 40 years issue. I’m not saying to use it to buy toys, but you can use it for a down payment on a house in a few years, or as an investment in your new business (I would only do this one if your business has shown signs of being successful, don’t do this as the initial investment amount unless you are really really really sure you won’t lose it all). I wouldn’t touch the 401k, or lower its contributions, and I wouldn’t ever touch the gains on your Roth. You should maybe look at other investment tools that aren’t retirement focused, and put some of that money there, so you won’t feel guilty dipping into it.
Since you will be graduating college, do you think there is a raise likely to happen? Use that to buy the car. Rent really shouldn’t take up 50% of your pay, that will make living really tight, so be honest about what you are spending your money on now. Is it school, which will go away when you graduate.
And, run some calculators now on retirement savings. Just plug in the amount you have saved now, even with a conservative % interest, you will be happy to see that at 65, you will be well taken care of. This will allow you to easily cut back in 10 years if you have a family, or someone wants to be a stay at home parent, or you decide to travel the world, or give up full time work for your business, etc. You have so many options!
In the end, I think that you have too many things you want at once, focus on one thing at a time, whether that is the new car, the new apartment, or the new business. Everything at once will overwhelm.
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I think Henry is very smart for saving early but I do have to agree he is a bit too obsessed with money. I agree about needing to find balance but he first needs to prioritize some of the things he is sacrificing to save more. for instance, buying a new car when he doesn’t need to is a “want” and not a “need”. he needs to separate those things from the “wants” and the “needs” and then cut back on his savings accordingly.
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Arrange your finances so that you can move out if need be/want be. Cultural mores vary regarding an adult child still living with the parents, so I won’t say it’s bad or suboptimal.
Just remember that your parents have no obligation to support you as a legal adult! Living at home while going to college is more justifiable but after? Especially if you have a job with a decent salary? They may want you to strike out on your own soon, or you may want that more yourself. Have the pot of money available where you can move out on your own when the time comes.
An acceptable compromise may be to pay your parents rent to defray their costs of keeping you around, and compensate for their trouble. It would still be less than living on your own but you’d be pulling your weight in the house, too. It may even be preferable; if you’re looking at starting your own business you may be gone for long hours anyway.
The usual reason for living at home is when one’s job doesn’t pay enough to live independently. It doesn’t sound like the case here. Do make sure you have your parents’ honest feelings on you staying around, and under what terms. And good on you for saving so much!
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Foolish? No way! But I think maybe he needs to think more about his priorities and figure out what is *most* important to him.
It’s also worth remembering that a person’s 20′s, and possibly even into the 30′s, are relatively lean years. You’re getting an education, starting a career, maybe getting married and starting a family, all before you reach your peak earnings. I think it’s important to remember that massive savings are not easy during these years, but it DOES get better… I’m finally seeing that as I approach my mid-30′s and the kids reach school-age and my career is getting on-track.
While I think saving 20% of his income is fantastic, maybe some of it should be directed to other life goals than just retirement? Things like starting a business and buying a house are WAY better if you’ve got a large chunk of money saved for them!
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I think Henry can reduce his savings rate UNLESS he thinks his savings rate in the future will be low – see the analysis I did a couple of days ago:
http://notrichyet.com/?p=16
* Saving 5% of your net income per year will take you 55 years to save up that 20x income nest egg – i.e. Henry would need to work until he is 75
* Saving 10%, will take 44 years – i.e. Henry would be 64
*Saving 40%, will take you 23 years – i.e. Henry would be 43
*Saving 60% will take you 18 years – i.e. Henry would be 38
So Henry can reduce his savings rate unless he wants to become a starving artist or take some other career that would point to a savings rate of less than 10% long-term.
That said I think he should not stash what he is savings into tax-deferred accounts. Who knows what the government will do by the time he retires, better not to have all eggs in one basket; also better to retain some liquidity.
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I really don’t understand some comments here regarding the “still staying at home” issue.
I mean…IF the parents don’t have financial problems why shouldn’t they allow their own child to continue living under their roof since he obviously has a plan. Why not pay for his college fees and some bills along the way?
If, as a parent, I can tell the difference between “I stay because I don’t want to grow up” and “I stay so as to save some money for house/business/car etc” then I will most definitely want to help my son as much as possible.
My parents did the same and I will, too.
Henry, I think you should cut back on your retirement for now (don’t stop of course just set a more doable amount), start saving for whatever goal you set next(for me it would have been the business), finish college, meet your goal and if all goes as planned, then restart the retirement finance.
Of course, we do not know Henry’s character to give advice, but my guess is that if he wanted to live alone, party or whatever he would have done it already.
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I was in a simular situation in college. When I realized that I wanted to go to graduate school I stopped putting money aside for retirement and started saving for dental school. I was able to pay for the first year of private dental school tuition out of pocket. Now that I’ve established my own practice, have a house and two kids (within 5 years of graduation) I’m back to maxing out the 401k and IRA. My financial adviser says I’m right on track with a full retirement age of 65.
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I think its great Henry “thinks” about finacial planning! However, I have to tell you I am so seeing a trend of late 20′s to mid 30 somethings that don’t seem to have life skills to be independent. No its not the economy in these cases, it really seems to be liking to have money to spend on fun things and wanting the comforts of home. Where the parents actually worked decades to get those things. I think the next step is learning to live on your own on a budget. Savings would be a category on his budget too! 20 is a great age to begin this transition.
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He can always take out his Roth contributions penalty and tax-free, just not the earnings.
It’s hard to make a call otherwise, but if he wants to move out – why not get a few roommates, that will lessen the cost and maybe he can keep saving. It all depends on what his goals are.
What a great problem to have at 20 years old, nice work Henry!
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Edited: Oops, can’t read!
If you weren’t in college, if you were working full time and you can’t afford rent, yes, you’re saving too much.
If you’re in college and not making a lot, then it’s trickier. I lived with my parents for my first year of college and then realized I needed to be on my own even if it meant working 30 hours a week while in school and being “poor.” Others feel fine living with family longer (and their families are ok with it).
My leaning is that yes, you’re saving too much. Money is only one thing. Having independence, learning to take care of yourself in a million ways that don’t happen when you live at home, and developing your own identity (which is not impossible at home, just a lot harder) are equally important, if not more important than money.
Others have also pointed out that you may be saving in the wrong way. A Roth is pretty restrictive. Put your money somewhere you can get it back when you want to buy a car, start a business, move out, or move across the country to start out for yourself.
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I say he is investing too much (though the easy way to determine this is for him to run his savings strategy through an online retirement calculator). As long as he isn’t saving for something he needs very soon (say, early retirement) then he should cut back and enjoy life now, while still being responsible.
One strategy he could employ: Save 1/2 as much and then borrow on margin (interest rates are very low) to invest twice as much (or the amount he was originally investing). Over the long run, so long as stocks outpace the rate of interest, he will experience increased gains.
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@suzanne #4
Not everyone lives on campus. Where I went (University of Texas) there are like 50,000 students and only 2000 on-campus dorms. Most people live on their own. At the time I went, a dorm cost about $6,000 while tuition for a year was only $3,000. Living in an apartment was a no brainer.
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Wow! Powerful line at the end “That’s one of the realities of personal finance. Though we can generally have anything we want, we can’t have everything we want.”
That’s a message we don’t hear often enough and never from marketing.
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Wow, if this is the worst of your problem, congrats! Seriously, though, it’s not a bad problem. You are maxing out your Roth and you are meeting your employer’s match your 401k. It’s hard to argue against either of those. But most experts I’ve read would say if you were going to cut back it should be in the Roth department. The reason being is that the employer match is free money. The only caveat is that your 401k limits where you can invest your money and a Roth does not. But if I were going to cut back it would probably be in the area of the Roth.
Make sure you aren’t tithing too much. Tithing usually denotes that of a religious nature, but some people include giving to charity into tithing, too. Never the less, it’s great that you give back. But at this age don’t give back too much. They’ll be time, especially at the rate you save, to give back more. Perhaps you can give time more than money?
About the car. If it doesn’t need replacing then don’t replace it. It is not an appreciating asset. Cars suck you dry – sales tax, property tax, insurance, depreciation. They will bleed you dry. We save 35% of our take home income (and it’s in the upper $100ks). My car is 9 yrs old, my husbands 4. I could go to any dealership in town and write a check for 2 new cars (nice ones, too
, but that would defeat our goals of setting our selves up to be financially independent. I’d probably have to have assets around $1M before I’d go out an buy a really nice ($40k+) car.
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I think it is admirable what Henry has accomplished and he needs to prioritize what he really wants. For instance, we could take every discretionary cent we have and allocate it to retirement. We would have to eliminate vacations, eating out and other things we really enjoy. To me, that is not worth it.
Henry says he wants to move out and buy a car, even though he doesn’t need it. How bad does he want to move out? Henry is 20 and a lot of people live at home while in college. He could continue to live at home and save money for his business, down payment on a home or rent, whatever. Just maybe not allocate so much money to retirement.
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I’d start with telling Henry to talk to his parents – are they happy having him there? Would they like him to move out? If he’s thinking about starting his own business, would they be happy for him to stay there through that too? What about paying them rent?
Because if things are getting tense at home, or if his parents are happy now but have an expectation he’s going to be moving out at a specific point (like when he graduates), it’s important to be able to move out easily and amicably.
After that, I’m with the commenter who reminds Henry he can pull that Roth money out to start his business or buy a house – it’s not “saving too much” it’s not prioritizing short-term goals enough. Making sure there’s money for goals in the next few years might just mean thinking about those Roth contributions differently – or maybe setting up a short-term goal account separately.
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Wow. I thought I was really on the ball at 19 when I dumped the income from my 2 summer jobs into a run-of-the-mill mutual fund. Kudos, Henry.
Were it I, I would definitely continue with the matching 401(k); you can’t beat free money. As for maxing out the IRA, I would probably curtail that for the time being. I would split that money between a ‘moving out/ emergency/ short term needs’ fund, tucked away in an interest bearing checking account, and the other half I would put in a quality no-load stock index fund (depending on how far out you expect to need this money). If you and your parents are fine with your current living situation, I personally would make that work as long as I could, but it’s always nice – some might say priceless – to have the freedom to move whenever you feel like it. And the stock index fund gives you a nice rate of return and obviously no “early withdrawal” penalties on money you could use post-graduation for start-up cash, or a down payment on a house. I know it’s hard driving a beater, but you said yourself you don’t technically “need” a new car. Drive the one you’ve got until it starts costing you in repairs. Every month you go without a car payment is just money in your pocket. And if you’re still able to squeeze any more dough out after taking care of all the above, stick it back in that IRA. At the very least, it’s good discipline. And when you land a post-grad job or your small business starts earning, you can get right back on track with maxing out the IRA.
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I would echo the advice to move out of you parent’s house if you want to start working towards a realistic budget. If you are saving as much as you are because you don’t have to pay any real living expenses then you probably aren’t learning a great deal about how a budget really works.
Before buying a new car that you don’t need, start paying for the living expenses that adults are responsible for. You could even start by paying your parents rent and part of the utilities. That would probably give you a better idea of whether you are saving too much. If you still have money to spend after paying bills – then you aren’t saving too much. If paying “real life” bills means that you can no longer save, then you are saving too much.
I was a little confused about the problem with only having 50% of your take home pay left over after savings and not being able to afford the things you want? 50% of net take home pay to be able to go into your pocket is a pretty decent sum. Where is that money going? How are you budgeting it?
I need some more information to be able to understand the issue here, is there any way to get more clarification?
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I love the comments on this…I’ve asked myself the same question many times – am I saving too much?
I just checked the numbers…of my gross income, ~20% goes to taxes, 10% to giving, 35% to savings, and I live on the other 35%. Of the savings, about 50% goes to Roth/403b, 20% to HSA, and 30% is what I call my ‘long-term savings’ fund – downpayment on house, beefing up the E-fund to 12 months, saving for a ‘new’ car, or even new furniture.
And my answer? No, I’m not saving too much. Why not? Because I am living happily and comfortably. A year ago, I made half what I do now, and was comfortable. Why spend more, just because I ‘can’? I’d rather save so I have flexibility in the future. No job? No panic. Once-in-a-lifetime trip? Let’s go! Kids? Okay, I can afford to dial back the savings. House? Sure, here’s the downpayment.
Save while you can, particularly if you’re living comfortably enough. Things change in the future…lower paying (or no) job, health issues, family issues (whether caring for a parent, or having kids!)
One caveat, though…Henry, have a frank talk with your parents. It’s not worth it unless they are FULLY on board with the choices you’re making now. Even if they are on board, it may be time dial back some retirement savings so you can offer some room/board (maybe half of what you would spend on your own?) – this should help you to feel more independent, and help your parents to realize that you are making a responsible choice (and not just mooching.)
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I think it is great that Henry already knows the value of saving. But I have to agree that he might be saving too much of the money in the wrong accounts.
What I mean is that everyone should have an account for retirement, an account for short-term goals (ie. 5 years time horizon), and an account for emergency that you can access the money instantly (or within a couple of days).
If I were Henry, I would continue to get the max employer match and continue to contribute a smaller amount to the ROTH IRA. Then, I would open an investment account outside of retirement and start contributing the seed money for opening a business, down payment on a house, or even for a wedding. And I will also have an emergency fund with an online savings account that can help with moving out in a future date. As for a new car, if it ain’t broken, then continue driving it. But I will probably look into having a larger emergency fund with the idea that you might want a new car in the future.
You are lucky that you have parents that can help you out when you are in college. I hope you remember to thank them.
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Jeez.. and I thought I was doing good for my age!
I have two friends who moved from Bosnia that I go to school with. Both of them still live at home, each 22. Why? Because there is no point in moving out of the house right now. They are able to save money. They don’t have new cars either.
I think the U.S. is one of those few countries where people are looked down upon for not leaving the nest right away. But it just doesn’t make sense to do so. As long as you’re getting along with your parents, I’d stay and figure out ways to increase your income to save for the short term goals.
FYI.. Most older people I have talked to have suggested that I stay at home as long as possible. However, since I am a very independent person, I knew I needed to move out. Also, I don’t get along well enough with neither my dad nor mom.
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You can call me Chicken Little if you want, but I think we are headed for a global financial collapse. So there is little point, at least in the near future, in trying to accumulate any sort of wealth. Buying a house is one thing – you need a place to live – but pieces of paper? No, not so much. He shouldn’t waste money on another car if he doesn’t need one. But for crying out loud, get a place of your own and start enjoying life. I regret saving as much as I did in my 20s and 30s. Recently I liquidated most of my IRA (and paid hefty fines and taxes in the process) and paid off my home. I wish I’d done that a long time ago, instead of buying pieces of paper in the first place. Now I have a paid-for home, no other debts, and can make a living as a freelancer.
There is no way that twenty years from now I will look back and regret doing it, even if the stock market goes gangbusters. There is SO much more to life than trying to accumulate wealth as an end in itself. Denying yourself everything during your young, healthy years, so you can afford a retirement home when you’re 90? That’s just like spending your whole life dying.
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@Jan I understand where you are coming from. But Henery is still in college, so I feel him staying at home is not a big deal. While I was in college my parents made me stay home (a condition of them paying my tuition). I did buy 2/3 my own groceries (other than dinners).
Henery, stay at home. I was able to buy my first home months after graduation (I had a steady job) and that (to me) is part of my retirement plan (Only property tax in my old age).
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Hmmm. I applaud his savings, but maybe it’s the vehicle and not the amount that’s the problem? I’m Canadian, so I don’t know the ins and outs of 401Ks and IRAs, but wouldn’t it be wise to have an emergency fund saved up before he starts his business or moves out? I mean something that’s accessible when he needs it, not something he could be penalized for withdrawing.
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I don’t agree that it’s necessarily a priority to move out of your parents’ house, especially if you are still in school. You could target your savings less toward retirement and more towards things that will be useful to you in building your life – i.e. your business, or a home. However it sounds like you want to move out, and in that case I would have no qualms about saving less for retirement in exchange for starting your own life! It’s also true that your priorities and goals may change once you move out – right now you want to start a business and to buy a new car – you may still want those things, or other things may become more important. I know everyone’s situation is different, but my personal story is that I received a huge amount from my parents during my bachelors degree – they gave it willingly and I benefited hugely and am grateful. But the feeling of being beholden, of not really being able to separate from my parents’ wishes and expectations, stopped me from owning my decisions and feeling like I was responsible for my own life. I felt really freed once I was supporting myself with my own money and at least could make my own mistakes!
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Hey people, Henry is ONLY 19 years old! I don’t know many 19 year olds that are out living on their own unless they are away at college, and under those circumstances the parents are usually paying for it. My recommendation is that Henry begin to cut back on the retirement savings to begin saving for a down payment on a home and the business he wants to start, after saving an emergency fund. As a parent, I would want my child to have the best possible start. If I had as responsible kid as Henry, I would support him in any way possible until at least age 25. Then I would expect him to be living on his own.
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Who is paying for Henry’s college? Himself? His parents? Scholarships? Loans?
I don’t think anyone can give him advice until that question is answered.
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Henry, first off nice job on savings.
I actually think you should stop tithing!
You can’t afford a home of your own, a new car or to start a business. Until you get all three goals, they can wait for a donation from you.
God does not need the money and I find it a complete travesty that these religious organizations would take a cent from someone in your position.
When you are old and rich and all your children are through college, if you want to give some of your estate to your church, go for it. Right now your life is for living, and your organized religion is getting in the way.
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Agreed with #45 Mark — too many questions unanswered to really give useful advice.
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I guess I am not religious so the idea of tithing freaks me right out…. I’d say cut that out (or down), but I suppose that may not be an option.
I’d save a bit less for retirement. I am not in the US, so I don’t know the difference between the 2 retirement accounts, but maybe take advantage of the one the employer matches? Hard to say…
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Different Nicole than the one above.
I also think there’s not enough information.
Think seriously about goals– what will this business require? Is it feasible? Is it realistic? Do you have an emergency fund?
What do the parents think? Will you be on your own after graduation, will they start asking for rent? How does post-graduation housing costs figure into your future salary? What if you meet a significant other?
What happens after graduation? Is there a raise? Will there be loans due?
I will say not to replace the car until you need to (where need is defined by you, but probably involves repair costs or safety).
Until you have a clear goal about what you want and need, go ahead and keep contributing to retirement– it won’t hurt. Once you have a real plan that requires real numbers, go ahead and start targeting savings towards that instead, so long as you keep up with the employer match on your retirement at least (or the Roth if you’re self employed).
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Wouldn’t it be prudent to plan how much you want to retire with and when and then setup additional bucket accounts for other things you want in life?
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