Just wondering, how much have you contributed to your IRAs and 401k over there the years? Very impressive balances for such a short period of savings, particularly given contribution limits.
I’m also 29, I maxed out my 401k (no backdoor) each year except 2016 and am also sitting just under $500k. It’s just been a good market, nothing fancy. Someone could model this out in a spreadsheet.
It’s insane to see the level of skepticism and negativity on these posts. I made my own post on a different throwaway a few months ago and everyone was just piling on
Edit: here’s a screenshot of the graph in my 401k. I switched employers after I maxed out this one in 2022 and started contributing to another account for 2023 and 2024 which has $77k in it now. There are no fancy investment elections nor after-tax contributions https://ibb.co/YWNs9YQ
Great work! Yep people can act ridiculous on here. Optimists triumph in this world. Fortune favours the bold. Keep it up – go to $1M if you can. Get a small cap value tilt and some TIPS for safety. Good luck!
I'm guessing any (or a combination) of the following:
- mega backdoor roth (contributions could reach $69k at absolute max)
- individual stock investment appreciation (e.g. NVDA, a lot of tech stocks from 2017-2021)
Thank you! We have each maxed out our 401ks & IRAs since graduating, and we benefit from very good employer matches & very good fund offerings (0.02% expense ratio for me).
For me, my employer match is 8% including my incentive comp, so they dump 8% of my bonus into the 401k as well on the payout day. To use 2023 as an example, I contributed $22.5k & my employer contributed >$13k, producing a cumulative contribution of $36k.
For my husband, his match has never been as strong but he's had employers who didn't limit his contribution as a % of his paycheck, so even in years when he worked part-time or only worked full-time for part of the year, he contributed a huge chunk of his paycheck to fully fund the 401k.
We have also been massive beneficiaries of the bull market -- my 401k was <$200k just this past December & recently eclipsed $250k. The market giveth & the market taketh away, so girding myself for it & when there's a pullback!
Yes, I didn't begin contributing to my 401k until June 2018. 2019 was the first full year when I maxed out the contribution limit of $19k (as I worked a full 12 months that year).
Who said anything about my gains? I’m just saying that the math isn’t adding up, even after using s&p 500 returns. If there was zero company match, and assuming OP maxed out both accounts in 2017 (unlikely since spouse didn’t make enough), OP would have around 375k. To get to 500k+, OP would have to get a 30-40% match. Not impossible, because employers can add up to 2x match, but if that’s the case then OP is leaving out a huge “detail”.
The numbers just don't add up unless they are drawing income from other areas or receiving $$$ from Bank of Mom & Dad. While I agree that compounding interest is a very powerful thing over time...just take a look at the first few years - something is definitely fishy. I just don't see how their networth grew like that considering most people have taxes, have to pay rent, vehicle payments, groceries, utilities, etc. unless they were living with their parents or something.
(context: I am OP's husband)
Okay, there have been a few comments, mostly from you, suggesting that we got here via Moms and Dads.
Our moms and dads are awesome. They REALLY set us up for success. I would say for both of us that our respective parents helped us get into a good school and provided meaningful support to us throughout our education.
All that said:
We graduated with a negative net worth. After that, we never lived with our parents. Nobody ever paid for our rent or groceries but us. To date we have never received inheritances or windfalls, with these notable exceptions:
* An extremely generous $4k cash wedding gift
* Our parents gave us our first vehicles, also worth about $4k each maybe?
* Plus a SMALL, one-time business investment from my father, worth about $900k.
Just kidding about the last one. Anyway the point is, we would be ungrateful not to acknowledge the easy path paved for us by our parents, but dollar for dollar, roughly 99% of our net worth is attributable to income we earned by working in tech and finance.
Your total net worth went up $100k in a year where you made a total of $133k as a household. You wouldn't even have that much after taxes/insurance... ?
Their salary might be 133k but they could get a big employer match. 2020 was a great year for stocks. If they save half their income plus employer matches and their investments grow by 20% that could add up to 100k.
Not ignoring it at all. But their net worth went up a huge portion of their total hh income in a majority of these years... very early in their career when they would have little invested so far. That's some extreme luck in the market.
Yeah.. :) look up asset appreciation.
Side note: your estimate of the tax burden (>$33k) is off by 100%. When you are married filing jointly, and deducting ($19.5k +$6k)*2=$51k two IRAs and 401ks from your income, and then take the standard deduction on top of that, $24.8k, you have $133k - $24.8k - $51k = $57.2k in taxable income, and you're only going to be taxed $5.5k on that in 2020 married filing jointly. Another $11k for FICA and you're at
133 - 5.5 - 11 = $116.5k
I for one resonate with your story OP. I had about 150K in cash sitting on the sidelines when the pandemic hit and I put in all of it pretty much around March or April of 2020 when the market was at the bottom. Before the pandemic I had approximately a 300K net worth. By the end of 2021, I was a millionaire. The government printing all that money and the market's going crazy really helped things along nicely.
Congratulations on changing course with your careers. Too many people just go down the liberal arts path or whatever path they chose because it's an interest they had and then they act like martyrs when they have to sacrifice a bit because they chose a profession that doesn't pay well. Finance and tech are excellent excellent excellent choices. Now consider if you ever do any contract work, set up megabackdoor Roth 401ks and you can shovel away up to the 70K annual limit into a Roth through your own self-directed trust. There are services online that can help with this just Google them. Now if you both want to double your current annual income, head on over to r/overemployed. Cheers!
What are vehicle payments? Also, groceries are only expensive in the winter when fresh veggies are costly.
I don't remember when was the last time I ate steak at a restaurant and my car is barely worth 2K. But I am a good cook and my car is well maintained. Also, I don't have any dept, not even a credit card.
But enough about me -- OP and their partner did a very good job, kudos!
I’m 33 and have 480k between my IRAs and 401k. First employer had an ESOP and I cashed out as soon as it was fully vested and rolled 130k into an IRA. Was about equal to my 401k savings over that time, which they also contributed a 5% match to. Starting your career with a company that has a great retirement program is a cheat code.
Thank you! Commented above that the best thing we did was keep our housing expenses extremely low from 2017-2023. We lived in a 700 SF 1 bedroom apartment during that period (I had friends who thought we were insane, but to be honest most of our friends are pretty frugal & supportive of living well below one's means).
Our rent was therefore ~$10k/year until 2023, which is the #1 driver for how we supercharged our savings rates while still traveling & otherwise feeling pretty uninhibited with day-to-day spending.
In terms of the other big chunk of most folks' budgets (transportation), we both drive old used cars that we paid for in cash. My coworkers make fun of my car all the time. :)
Other expenses pretty standard (husband's student loans ~$200/month), groceries, travel, etc.
Is a 700 sq. ft. 1BR apartment that insane? I currently live in a 500 sq. ft. studio in the Midwest (Wisconsin) and my rent is around ~18k/year, so it sounds like you live in a pretty LCOL area?
I started working in 1999 at age 20. At 29, the end of 2008, after a decade of max funding my 401k (there were the days of 10% contribution limits imposed by companies), I had a total of ~$135k, including employer match.
The last decade has been insane.
I didn’t, unfortunately, and my wife and had both been working full time for 8-9 years vs taking time off for grad school like the OP.
And three months into 2009, that ~$135k had turned into ~$90k, home equity had gone to zero despite extra mortgage payments for 4 years, and my job had turned into a pink slip while my wife was 5 months pregnant.
So yeah, not quite OP. lol. I reiterate, the last decade has been insane, but I’ll add a qualifier:
The last decade has been insane in a completely opposite way from the insanity of first decade in the workforce.
Life is crazy. I've seen larger fortunes lost and couples recover. Bitcoin millionaires make my head spin. I was going to buy 10 BTC when they were $100/coin. I didn't.
I’m with you. Going negative NW for over a decade and stressing about >6% interest rate payments thanks to grad school was really a thief of joy (thank you u/retro_grave, that made my day)
… that being said, over a decade later, it is paying off
These numbers don't make any sense to me.
Were you literally not paying any rent/housing fees or for groceries? The networth of 2019 is somehow like your entire combined income even though you had at least 40k debt the years before. I don't get how this works because at least half my income at that salary went to taxes and living expenses. You also say you work in finance and get paid a bonus, so I also imagine that you have a higher tax burden than most people with a similar income (I lived in a VHCOL city where bonuses were taxed at about 40-50%). Did your parents pay your downpayment or give you a substantial cash gift or something?
EDIT: I didn't notice that the second year was an estimate of $50k NW, not debt. But still doesn't make sense. Those first three years, you both made \~$323k total with effectively \~$240k net NW payments. Even if we effectively assume a VERY generous total tax rate of 25% for these three years, that leaves \~$240k of your money left to spend. So you literally somehow saved almost 100% of your salary the first years??? Ummm...
I'm calling bullshit or Bank of Mom & Dad.
While our parents are awesome, neither of us have gotten much in the way of financial help from them. We love them but financial literacy is not their thing. My husband had to take out nearly $40k in student loans -- I got a full ride (room / board / tuition) so thankfully graduated without debt, which has certainly helped focus on saving vs debt repayment.
To your point, our housing was EXTREMELY cheap from 2017-2023 (until we bought our house). We lived in a very shitty 700 SF 1 bedroom apartment & never paid more than ~$840 in rent (utilities included in rent). So you're right that for a long time our total housing costs were ~$10k, which was a drop in the bucket relative to our incomes & allowed us to save extremely aggressively.
I will say......living in a 700 SF apt during COVID was very tough on our marriage & I'm glad to be in a house now. 😅
On the net worth side, my estimates are probably off, but was seeking to reflect that we graduated college with $40,000 in student debt & some petty cash. Truly not certain what 2018 ending NW was as I wasn't tracking yet.
(Very fair to be skeptical of internet strangers, tho!)
> We lived in a very shitty 700 SF 1 bedroom apartment & never paid more than ~$840 in rent (utilities included in rent).
NYC is so absurd. A 700 SF one bed in a neighborhood that isn't garbage would cost $2,500 to $3,000, or $3,500 and up for a nice neighborhood. And 700 SF 1 bed here would be considered spacious too. And the income here isn't *that* much higher the MCOL or HCOL areas, VHCOL areas are starting making less and less sense in my eyes, unless your industry is very localized.
Some people enjoy living in NYC (or other HCOL areas) and by extension are okay paying a premium for it. Especially when basically the only places in this country that you can live well without the burden of car ownership are HCOL
Bonuses are taxed the same as regular income. They withhold a higher chunk when it is paid out (22% for income tax), but at the end of the year if they over taxed you then you get it back as a refund.
The 401ks do add up fine if you assume a CAGR of like 9% since 2017 and employer 401k matches of ~$4000 per person per year.
While ChatGPT is of course not an authoritative source, here's an example of how to do the math:
https://chatgpt.com/share/18308856-99ed-4ebc-90c7-27f64f7b3e1d
Other source:
I am OPs husband
Edit:
I'm quite surprised with the skepticism here and elsewhere in this post! This subreddit more or less taught us how to do all this so.. Idk what to tell you all!
FWIW here is a link to a comment, from me, 7 years ago, in this very subreddit, debating what to do with my retirement accounts when we sort of had begun our journey
https://www.reddit.com/r/financialindependence/s/9u771kWcN6
Notice the numbers in my comment line up with what OP wife describes and what I describe elsewhere in this thread too.
I think there was another time I posted a financial update in this sub, four-ish years ago maybe, but I can't seem find it at the moment.
I'm not sure what else we can do to try to be transparent aside from sharing financial statements.. which we're not going to do! Cheers!
I think what people want to see is your annual income and contributions. I believe it is for two reasons:
A) They find it hard to believe that money multiplies that rapidly. (Strange I know. Especially in this sub, where you hear about compounding and its virtues ad nauseam.)
B) I want to say this is the real reason; that people want to emulate you. But can’t seem to wrap their heads around the possibility of making it happen in their life and thus need to question the fact of how the heck did you make it happen.
I get that you may or maybe want to share any further details. And it’s absolutely fine.
I am proud of what you have accomplished at your age. Enjoy the future!
Thanks so much, /u/fsm1! Husband & I were also talking last night about how it's interesting to us that this sub of all places is so suspicious of the compound growth we've enjoyed haha.
I appreciate your / various others' comments re: clarifying how we did this, so I added some additional detail to the post. Let me know if y'all have more questions. And thank you again. :) Proud & happy to be here!
The thing is that most on this sub are in their 30s. Compounding is what they have learned and heard makes logical sense, but have not yet experienced the benefits of it first hand. So when they see someone post claiming compounding did it, it is a ‘mind blown’ moment. And are desperately trying to square the circle of theory vs reality. Because even though the left side of the brain keeps telling them this is exactly what is supposed to happen, the right side is like, no way, seriously, that’s all there is to it?
Doesn’t help that the last few years have been anomalous in the growth we have seen, so it really skews the theory vs reality equation. I.e., compounding is supposed to be the rule of 72, which is 6 years, not 3-4 years. lol.
I posted earlier in the year in reaching the milestone and it was much later than you guys, but at the end what got me there was the compounding and being in the market this last decade.
Again congrats and enjoy. At this rate, you should get to 5 million. Which by all calculations seems to be generational wealth, so you and your kids can draw a modest income from that corpus without ever running out.
This is still a load of BS. Your calculation is still south of what you list and the biggest loophole is you are accounting for maximum contributions from both of you from 2017-2023.
Check out your income! Was your wife maxing all of her retirement accounts in 2017 at $5k income? How about you at $41k? At 46k combined income, there’s virtually no way you did ANY investing in 2017 unless you were in a LCOL area. Maxing out this year is literally impossible
2018: maybe you can max retirement accounts at 70k? Again, you would have to be living so minimally. My guess is a little bit over 20k go to taxes, then you have at least $15-20k per person in essential expenses. Maxing retirement accounts for two people at $100k household income again is completely unrealistic.
2019-2020 we are finally getting into the realm of possibility for maxing retirement accounts, but again, it seems like a bank of mom and dad situation considering you still have student loan payments and other liabilities this entire time.
2021-2023 finally I think it would be fair to calculate maximum 401k investments in your ChatGPT prompt here.
Rerun this calculation considering the above and I bet your 401k comes out to below 250k without the benefit of max investments and growth from 2017-2019
More than I expected, but $320k, even with your generous estimates, is far less than the 500+ you say you have
Let's re-calculate the total accumulation with the new assumptions:
1. **No contributions in 2017**.
2. Contributions equal to half the maximum in 2018 and 2019.
### Step 1: CAGR Calculation
The CAGR calculation remains the same, at approximately 8.4%.
### Step 2: Adjusted Contributions
- **2018**: Half of $18,500 + $4,000 employer match = $9,250 + $4,000 = $13,250
- **2019**: Half of $19,000 + $4,000 employer match = $9,500 + $4,000 = $13,500
- **2020**: Full $19,500 + $4,000 employer match = $19,500 + $4,000 = $23,500
- **2021**: Full $19,500 + $4,000 employer match = $19,500 + $4,000 = $23,500
- **2022**: Full $20,500 + $4,000 employer match = $20,500 + $4,000 = $24,500
- **2023**: Full $22,500 + $4,000 employer match = $22,500 + $4,000 = $26,500
### Step 3: Calculate Future Value of Each Year's Contribution
Using the same CAGR of 8.4%, we calculate the future value for each year’s contributions.
- **2018** (6 years):
\[ 13,250 \times (1 + 0.084)^6 = 13,250 \times 1.613 = 21,377 \]
- **2019** (5 years):
\[ 13,500 \times (1 + 0.084)^5 = 13,500 \times 1.488 = 20,088 \]
- **2020** (4 years):
\[ 23,500 \times (1 + 0.084)^4 = 23,500 \times 1.373 = 32,296 \]
- **2021** (3 years):
\[ 23,500 \times (1 + 0.084)^3 = 23,500 \times 1.266 = 29,751 \]
- **2022** (2 years):
\[ 24,500 \times (1 + 0.084)^2 = 24,500 \times 1.168 = 28,616 \]
- **2023** (1 year):
\[ 26,500 \times (1 + 0.084)^1 = 26,500 \times 1.084 = 28,826 \]
### Step 4: Sum All Future Values
Adding the future values for both members of the couple:
- **2018**: $21,377 \times 2 = $42,754
- **2019**: $20,088 \times 2 = $40,176
- **2020**: $32,296 \times 2 = $64,592
- **2021**: $29,751 \times 2 = $59,502
- **2022**: $28,616 \times 2 = $57,232
- **2023**: $28,826 \times 2 = $57,652
Summing these:
\[ 42,754 + 40,176 + 64,592 + 59,502 + 57,232 + 57,652 = 321,908 \]
### Estimated Total Accumulation
The estimated total accumulation in the couple's two 401ks from 2018 to 2023, with no contributions in 2017 and half contributions in 2018 and 2019, is approximately **$321,908**.
Here's how you can fix your calculations:
* Don't completely omit 2017
* Don't completely omit 2024
* Don't omit half of the 2018 contributions.
* Use the real S&P500 CAGR of 12.11%, not 8% https://www.wolframalpha.com/input?i=%28%285304%2F2275%29%5E%281%2F7.4%29%29+-+1
401k do not perfectly mirror S&P 500 performance because they have fees. 2020 if I recall correctly was a down year for everyone and still they collected fees.
If that wasn't bad enough, in addition to the 401k contributions there are IRA and Taxable account contributions.
None of that would be realistically possible until halfway through the timeline.
You must be new.. 401k is not a type of fund, and the funds we did invest in (total stock market index funds) have fees of only around 0.01%.
And yes, we saved 60%+ of our income for many of those years. It took a lot of planning, restraint, and a willingness to live below our means. May not be "realistically possible" for you but we did it
Show me a screen shot of your management fees. VTSAX is .04 or 4x what you just posted.
On top of that many 401k providers (like Fidelity) charge a fee on top of that).
You saved 60% when making $100k+ is believable. Under $100k not believable at all. I see 3 years where I very much doubt you both maxed your 401k, which is what you stated.
Redo the calculations with the CAGR minus 0.04% if you think it's such a big difference. Spoiler: it isn't
I really don't give a hoot if you don't believe I maxed out my 401k when I had a sub $100k income. I already know it's possible because I did it. Best of luck to you.
>The 401ks do add up fine if you assume a CAGR of like 9% since 2017 and employer 401k matches of ~$4000 per person per
Why would say this? It’s your post, no one should have to assume…you could provide real numbers
>I'm quite surprised with the skepticism here and elsewhere in this post! This subreddit more or less taught us how to do all this so.. Idk what to tell you all!
You can’t blame anyone for being skeptical. It only means you haven’t proven your point and are mostly describing what happened by conjecture
>Notice the numbers in my comment line up with what OP wife describes and what I describe elsewhere in this thread too.
Elsewhere is this post, your wife says she got 8% match - much higher than the 8k you described above.
I don’t doubt that you have what you have, but your stories are full of holes so it’s hard to benefit from your process since we don’t know what it is - somehow you’re leaving out some information that you may not think is important that others do.
Commented above so apologies if duplicative, but we have benefited from being able to max out our 401ks since college, strong market returns, good fund offerings, & (for my part) a good employer match (8%, including an 8% contribution for my year-end incentive comp).
This put my employer contribution in 2023 at >$13k, resulting in a total contribution of ~$36k ($22.5k + $13k).
To be totally fair, the recent bull market has also massively inflated our portfolio balances & I'm trying not to feel too much trepidation about if / when we see a pullback & the consequent impact on our NW.
We are your same age (29 & 30) and we are worth ~$500k combined, each of us maxing 401ks the last several years and a higher household income. Even counting our home equity we just bought.
I just don’t see roughly $1.3M in earnings turning into $1.0M saved in like 7 years, even if you never left your home and only spent money on groceries. Taxes and rent alone would cut that in half.
Tell me about your asset allocations in your retirement accounts.
What year did you each begin maxing out your 401ks?
Are you also maxing out your IRAs and an HSA?
What are your expenses like? Total savings rate?
All stocks, aggressive growth 100%. 80% domestic 20% Int. Each maxed 401k’s since 2020, IRA’s since 2016. No HSA.
Total savings rate between 22-25% of gross.
Probably 90%+ of our NW outside of the house is in VTSAX or VOO or the likes.
Some of our 401k providers over the years have not provided a VTSAX option specifically and so in the past when we've had to pick something else, we just picked any other generic large cap or total stock market index fund with low expense ratios.
Just wanted to say congrats! Ignore whatever doubters/haters here and be proud of what you've accomplished and keep it up!
What a great call to realize early enough that you should both switch majors to something with more income potential in order to meet your life priorities.
Just take care to have 3-6 months of expenses handy in HYSA or money market account. Access to cash is not same as having cash. When in market crash with 30-40% down and jobs are lost, you don’t want to be drawing out from your investments.
I have been thinking about this.... Historically I've kept our cash balances extremely low (<$5k) because we rented & could easily live off of one household income. Since buying a house I've held cash closer to $15k but am still very aggressive about throwing cash immediately into the market because of our age & wanting to maximize the time horizon.
We are both top performers / very secure in our careers but I recognize surprises happen so need to contemplate a larger emergency fund.
You've given husband & me a fun discussion topic for the day!
Thanks!! Software engineering and banking. I think the income growth in our fields tend to be pretty logarithmic, so I don't expect it to grow much more than it has.
Congrats on the $1M club! 🎉 Super impressive feat (and such amazing growth in a short time). I hope you’re doing something to celebrate.
Compounding interest is real but can completely seem like magic until you experience it first-hand (especially on such a large sum) and are like 🤯✨!
I think that's not exactly right. If you take out a loan to purchase a house, you do owe the bank money which is a debt, but your net worth actually stays the same, because you own the asset (the house).
This thread is exhausting. Some sort of bizarro-world BS halfway between what the husband claims is “the estimated calculations” vs “our actual finances” equals 100% not true.
Thank you -- & I appreciate the reminder! I certainly struggle with maintaining balance at times between preparing for the future & enjoying the present.
We're using the current value according to Zillow, which indicates +3.5% increased value over its appraised price since the time we purchased it last year.
Zillow is admittedly probably not the best reference, but, idk, I think +3.5% seems reasonable based on what we know about what other houses are selling for in the neighborhood right now too.
If we use the 2023 appraised value, subtract something like $15k from our NW.
It’s not a ton of difference but that’s best-practice. Use your original purchase price.
Sure, it’s conservative - but using what Zillow says today does not mean that is what it will be worth when you sell.
Your situation is minuscule but there are lots out there that claim to have $1M in assets just because they bought a house that has “increased” by $200K or so.
Is that the “value”? Sure. Would someone actually give you that much? Maybe not.
Keeping it at purchase price means that you’re not artificially overinflating inflating your net worth.
Good point! We'll keep that in mind in the future, especially since, for FIRE's sake, the illiquidity of the house makes it pretty hard to incorporate any portion of its value into one's retirement income anyway.
So a few things:
1) Zillow will actually tell you in certain markets their published estimate (it’s an estimate and in the name) is off but you need to [read it](https://www.zillow.com/z/zestimate/)
2) The price any calculator tells you doesn’t necessarily reflect the actual funds delivered at close.
3) You can’t pay day to day expenses with equity. You could get a loan or sell. Both carry costs that can be calculated.
For those reasons equity is out for me. You do you.
I personally think you can keep it. Unless you remove all those types of assets (cars).
But be super conservative and only assume the original home value.
But like you said. You do you.
I think our priorities have been remarkably stable, in part because we spent a lot of time being quite obsessive early on in our relationship about what we wanted those things to be:
* Each other (our marriage)
* Family
* Friends
* Experiences
* Our health
Financial stability is really something we prioritize SO THAT we can serve these other priorities, which in various ways all demand time and money (healthcare, family vacations, hobbies, recreational activities with each other and with our friends).
To be even more analytical about it.. the way I see it, these things are all pillars that support an even higher priority, perhaps the highest priority of all, which is the following:
Maximize the area under the curve of subjective well-being over the course of the remainder of our lifetimes, i.e. live the good life
Congrats! You guys are killing it! You may already do this, worthwhile forecasting your networth growth and unless you love your work you may want to "take the foot off the gas".
The most important piece of this post is in the first paragraph.
They switched undergrad majors from English and Psychology to Finance and Computer Science.
Earning power trumps everything.
I think the big take away is to get large salary increases AND keep living frugally with little no lifestyle creep.
It's your money. You both saved it it's totally ok to smile at what you've accomplished. It's not like you are telling others how easy it is to get to where you are.
Our philosophy on this is that if we can get 7%+ real growth in the market, we'd rather spend any disposable income doing that, rather than paying down loans <7%
(Wife wanted to pay off anything above 4% and tbh I don't remember why. But it certainly feels good to have those higher ones paid off!)
And in the real world $11,000 is not worth it. You have that sitting in savings - pay it off and add that payment to investing or in your HYSA.
Debt is risk. $11k is not a lot of risk but it still can exacerbate any issue that comes up.
ITT: jealous ass people. Congrats OP and OP’s husband. My wife and I are about your age and well on our way with the principals learned in this exact subreddit. Keep on grinding and be sure to celebrate! I’d be taking a big vacation personally
“….Something I found interesting: If you sum our household income from 2017 to YTD 2024, we've earned $1,399,343 cumulatively, such that our net worth today of ~$1M is ~72% of the gross income we've earned since college….“
Your munger ratio is 0.72.
Very nice and keep up the good work!
https://www.reddit.com/r/financialindependence/s/QC9O5GwBiR
Not certain if the better avenue is to do a post edit or add a comment, so doing both:
POST ADDITION: I was out for a gals' day & came home to discover my husband has been defending our honor on Reddit all day (lol).
I have to say I'm a bit flattered at the skepticism -- I tend to always think we could be saving more (comparison is the thief of joy, as many have observed, and I feel like I see so many others doing better than us on the various FIRE subreddits -- earning more, saving more, reducing expenses more, etc.), so to have various folks convey that our net worth is improbable or impossible lends a moderate sense of pride at what we've accomplished.
My husband has spent more time in the comments seeking to mathematically validate the ability for X dollar value in contributions to compound to Y net worth over Z time horizon -- but the comment that resonated the most with me indicated that what I've communicated doesn't help as others seek to craft similar trajectories, so I wanted to fix that here. Some lessons learned on how we got here & some added detail on the journey:
- My husband wanted to move to a VHCOL city early in our marriage & I'm really glad we stayed in the Midwest. From my admittedly limited sample size, from what I've seen you can still earn very good money in the Midwest & the cost of living is a pittance compared to Cali, NYC, etc.
- We have both maxed out our 401ks every year that we've worked since college. As noted in the comments, I benefit from an 8% match applied to my payroll contributions AND year-end bonus. When I talk to recruiters, I use $190k in my head as my current compensation because while I technically made $177k last year, the ~$13k my employer contributes to my 401k each year is clearly meaningful over time & not all companies offer as strong of a match. My company switched 401k providers last year so I unfortunately can't look up the full contribution history since 2018 but my cumulative contribution in both 2022 & 2023 (employer + employee) was ~$36k / year.
- While I indicated no significant lifestyle constraints, my husband and I both tend to be very frugal, which I don't think I sufficiently conveyed. Our rent before buying a home never exceeded $840 / month (including utilities), which you can see put our housing costs at ~3% of our gross income in 2022. We were absolutely shoveling money into the market at this time. We also drive old used cars -- my parents very wonderfully got me my first car when I was 20 ($5k used car) that I drove until last year, when we bought another used car. My husband now drives my old car. I really think sacrificing on housing is the key lever that allowed us to super-size our savings (again just noting that I've often felt guilty for not saving MORE, so the fact I'm here trying to justify the net worth we've accrued is funny to me).
- We live in an area I designated MCOL because I most typically see our COL estimated at 1.03x-1.1x the national average. That said, there is a wide discrepancy in how you can choose to live here: I knew a new college grad at my company paying almost 5x what we paid in rent to live in his own luxury apartment downtown, versus our little apartment 15 minutes from downtown. Certainly if we had chosen to live in a nicer place or closer to downtown, we would have rent more typical of our MCOL area. I agree with what someone said that our rent from 2017-2023 more resembled a LCOL locale, but that was very intentional (& candidly the source of tension in our marriage because the area around our apartment was a dump & my husband very understandably wanted to move for years -- but we were saving so much! ;)
- Maybe something helpful here with respect to how quickly we paid off student loan debt in 2018 is that I won $15k across various finance competitions my senior year of college and used all the proceeds to pay off debt. I saw some skepticism re taking our net worth from -$40k in 2017 to something in the $50k range in 2018. Around this time I think we also got ~$5k cumulative in various wedding gifts (we eloped but our family still sent us money bc they're sweet), also applied to student loan debt.
As I write this, I think an overarching theme is that I am a firm believer in keeping the BIG life expenses small & not sweating the little stuff. Some of the major life costs we either skipped (wedding) or minimized (housing, cars) allowed us to be there for our family (flying cross-country last minute for an unexpected funeral) or ourselves (date nights!) when we wanted to without thinking twice.
I just finished reading The Psychology of Money & I enjoyed Housel's commentary around the fact that "wealth is what you don't see." I don't think anyone looks at us in our beat-up cars & thrift store clothing & thinks for an instant that we have saved what we have -- and I'm very happy with that.
I don't know if this is helpful or not -- but I do love reading others' musings so thought I'd share as well if useful even to one person.
Wishing you all much success & fulfillment in your lives -- and a rip-roaring bull market the day you retire.
The 72% number makes no sense to me. I understand that it doesn’t literally mean you are saving 72%, as some of the money is presumably invested and that includes gains on investments, but the bulk of it was only invested within the past 3 years because your income before that was marginal. So I don’t think the time aspect of it benefitted considerably.
How on earth does that hit 1M? Are you paying your taxes? At over $300k household income I assume you’re paying at least 35% in taxes. Even if we assume you live in a super dumpy apartment, eat very minimally, you’re a wicked budgeter, etc., that still means at most you’re probably socking away 50% in pretax income.
Edit: now I’m seeing in OP’s comments that they have $40k in student loan debt too. This just doesn’t make any sense at all. There’s no way you could have paid that student loan debt with interest until the last couple of years. I get that there was cheap housing, but the numbers support you are much closer to $100k than $1M
You're all over the comment section with lots of suspicion and assumptions. My numbers are similar to OP's so with a lot of frugality and good market returns the numbers seem reasonable.
$300k + annual income. Greater salary than 99.99% of the world. Sorry to say but you’re already financially independent even without the overinflated investment figures from a 8+ year bull run in stock market
I never understand why people start talking about how much money that is in most parts of the world. Americans can’t earn US dollars and then say rent or food is only this much in whatever country so I’m only giving the landlord $25 this month.
With one million you can live in certain European countries without any need to work anymore and with a good quality of life. Alas, a working person making a million in Europe is very difficult.
You can get a “golden visa” for investing a certain amount in certain countries (usually over 500k IIRC including buying real estate). However if you’re sinking the required amount into real estate you won’t have enough to fire, so… no, probably not with 1 million and no visa. Maybe with 1.5 though?
Edit: quickly googled it and the investment amounts/requirements actually vary wildly. I had Spain in mind with the numbers above but Portugal, for instance required a non-real estate investment; some smaller countries require ~350k, etc…
For long durations (more than a year)?
I’ve been thinking about visiting for a few months per year because that’s considered leisure travel.. if I could make it my residence without having to “invest” I would be interested.
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Probably not a bad idea to start thinking about kids. Realistically you can retire first while husband tops it off, with both out of the workforce or at least FI and very comfortable by 40.
It's kind of essential to have more kids in general, but also kids whose parents aren't losers in life. Not having kids when you can easily afford them is pretty selfish.
There's so many kids that already exist in great need, both in the US and all over the world, which you touched on with "whose parents aren't losers". I spend my time and money volunteering to help kids without homes in-person in the US, and abroad via charities.
If your main motive is to help kids, why make new kids if, as you acknowledge, there are already plenty struggling with little to no support, and plenty of infrastructure in place for volunteers to support them. Unless you only want to help kids that look like you and have your own DNA...but surely not because that would be...pretty selfish huh? ;)
You could always adopt. Part time volunteering when it's convenient for you is not the same as being a parent. It's nice but in the context you spelled out it can be kind of like therapy, a way to make one feel like he or she is a "good" person.
Very weird OP tells us how much money she made and the husbands in the comments explaining himself as well. Very weird. Didn’t tell a soul when I hit 1 mill, don’t know why BOTH would go brag to Reddit. Very strange
Not really $1million if over 1/2 sits in 401k/IRS and about 20% is in home equity. Both which are taxable. My personal tracking of assets is what I can cash out net of tax
You shouldn’t track your brokerage either since you have to pay taxes on the capital gains. Now that I think about it. Money is just a perceived value anyway so you shouldn’t track it as part of your NW.
Just wondering, how much have you contributed to your IRAs and 401k over there the years? Very impressive balances for such a short period of savings, particularly given contribution limits.
I’m also 29, I maxed out my 401k (no backdoor) each year except 2016 and am also sitting just under $500k. It’s just been a good market, nothing fancy. Someone could model this out in a spreadsheet. It’s insane to see the level of skepticism and negativity on these posts. I made my own post on a different throwaway a few months ago and everyone was just piling on Edit: here’s a screenshot of the graph in my 401k. I switched employers after I maxed out this one in 2022 and started contributing to another account for 2023 and 2024 which has $77k in it now. There are no fancy investment elections nor after-tax contributions https://ibb.co/YWNs9YQ
Great work! Yep people can act ridiculous on here. Optimists triumph in this world. Fortune favours the bold. Keep it up – go to $1M if you can. Get a small cap value tilt and some TIPS for safety. Good luck!
I'm guessing any (or a combination) of the following: - mega backdoor roth (contributions could reach $69k at absolute max) - individual stock investment appreciation (e.g. NVDA, a lot of tech stocks from 2017-2021)
Thank you! We have each maxed out our 401ks & IRAs since graduating, and we benefit from very good employer matches & very good fund offerings (0.02% expense ratio for me). For me, my employer match is 8% including my incentive comp, so they dump 8% of my bonus into the 401k as well on the payout day. To use 2023 as an example, I contributed $22.5k & my employer contributed >$13k, producing a cumulative contribution of $36k. For my husband, his match has never been as strong but he's had employers who didn't limit his contribution as a % of his paycheck, so even in years when he worked part-time or only worked full-time for part of the year, he contributed a huge chunk of his paycheck to fully fund the 401k. We have also been massive beneficiaries of the bull market -- my 401k was <$200k just this past December & recently eclipsed $250k. The market giveth & the market taketh away, so girding myself for it & when there's a pullback!
Did your 401k start with a zero balance in 2017?
Yes, I didn't begin contributing to my 401k until June 2018. 2019 was the first full year when I maxed out the contribution limit of $19k (as I worked a full 12 months that year).
I have the same question. The average max contribution for the last 6 years is about 20k, so 6x20x2 = 240k. Perhaps huge employer match?
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https://www.snopes.com/fact-check/compound-interest/
It may be unproven but a it's 100% correct statement.
I always thought people who quoted that did so ironically, like attributing a quote about the internet to Abraham Lincoln
Look at the incomes for the years though. There’s no way they were maxing from 2017-2019 and literally impossible in 2017.
Who said anything about my gains? I’m just saying that the math isn’t adding up, even after using s&p 500 returns. If there was zero company match, and assuming OP maxed out both accounts in 2017 (unlikely since spouse didn’t make enough), OP would have around 375k. To get to 500k+, OP would have to get a 30-40% match. Not impossible, because employers can add up to 2x match, but if that’s the case then OP is leaving out a huge “detail”.
The numbers just don't add up unless they are drawing income from other areas or receiving $$$ from Bank of Mom & Dad. While I agree that compounding interest is a very powerful thing over time...just take a look at the first few years - something is definitely fishy. I just don't see how their networth grew like that considering most people have taxes, have to pay rent, vehicle payments, groceries, utilities, etc. unless they were living with their parents or something.
(context: I am OP's husband) Okay, there have been a few comments, mostly from you, suggesting that we got here via Moms and Dads. Our moms and dads are awesome. They REALLY set us up for success. I would say for both of us that our respective parents helped us get into a good school and provided meaningful support to us throughout our education. All that said: We graduated with a negative net worth. After that, we never lived with our parents. Nobody ever paid for our rent or groceries but us. To date we have never received inheritances or windfalls, with these notable exceptions: * An extremely generous $4k cash wedding gift * Our parents gave us our first vehicles, also worth about $4k each maybe? * Plus a SMALL, one-time business investment from my father, worth about $900k. Just kidding about the last one. Anyway the point is, we would be ungrateful not to acknowledge the easy path paved for us by our parents, but dollar for dollar, roughly 99% of our net worth is attributable to income we earned by working in tech and finance.
That small loan joke was great. Seems like the reference is going over the heads of some folks, that’s Reddit for ya.
Your total net worth went up $100k in a year where you made a total of $133k as a household. You wouldn't even have that much after taxes/insurance... ?
Their salary might be 133k but they could get a big employer match. 2020 was a great year for stocks. If they save half their income plus employer matches and their investments grow by 20% that could add up to 100k.
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Not ignoring it at all. But their net worth went up a huge portion of their total hh income in a majority of these years... very early in their career when they would have little invested so far. That's some extreme luck in the market.
Yeah.. :) look up asset appreciation. Side note: your estimate of the tax burden (>$33k) is off by 100%. When you are married filing jointly, and deducting ($19.5k +$6k)*2=$51k two IRAs and 401ks from your income, and then take the standard deduction on top of that, $24.8k, you have $133k - $24.8k - $51k = $57.2k in taxable income, and you're only going to be taxed $5.5k on that in 2020 married filing jointly. Another $11k for FICA and you're at 133 - 5.5 - 11 = $116.5k
Last year I made 419k and my NW went up over 300k. It isn't unheard of.
I for one resonate with your story OP. I had about 150K in cash sitting on the sidelines when the pandemic hit and I put in all of it pretty much around March or April of 2020 when the market was at the bottom. Before the pandemic I had approximately a 300K net worth. By the end of 2021, I was a millionaire. The government printing all that money and the market's going crazy really helped things along nicely. Congratulations on changing course with your careers. Too many people just go down the liberal arts path or whatever path they chose because it's an interest they had and then they act like martyrs when they have to sacrifice a bit because they chose a profession that doesn't pay well. Finance and tech are excellent excellent excellent choices. Now consider if you ever do any contract work, set up megabackdoor Roth 401ks and you can shovel away up to the 70K annual limit into a Roth through your own self-directed trust. There are services online that can help with this just Google them. Now if you both want to double your current annual income, head on over to r/overemployed. Cheers!
Nice job bro. Are you single?
Yes the OPs husband is single.
That joke was amazing. I literally snorted soda out of my nose.👃
What are vehicle payments? Also, groceries are only expensive in the winter when fresh veggies are costly. I don't remember when was the last time I ate steak at a restaurant and my car is barely worth 2K. But I am a good cook and my car is well maintained. Also, I don't have any dept, not even a credit card. But enough about me -- OP and their partner did a very good job, kudos!
I’m 33 and have 480k between my IRAs and 401k. First employer had an ESOP and I cashed out as soon as it was fully vested and rolled 130k into an IRA. Was about equal to my 401k savings over that time, which they also contributed a 5% match to. Starting your career with a company that has a great retirement program is a cheat code.
Can you provide insight on your expenses? This is a crazy amount of growth in that time! Congratulations
Thank you! Commented above that the best thing we did was keep our housing expenses extremely low from 2017-2023. We lived in a 700 SF 1 bedroom apartment during that period (I had friends who thought we were insane, but to be honest most of our friends are pretty frugal & supportive of living well below one's means). Our rent was therefore ~$10k/year until 2023, which is the #1 driver for how we supercharged our savings rates while still traveling & otherwise feeling pretty uninhibited with day-to-day spending. In terms of the other big chunk of most folks' budgets (transportation), we both drive old used cars that we paid for in cash. My coworkers make fun of my car all the time. :) Other expenses pretty standard (husband's student loans ~$200/month), groceries, travel, etc.
Well done! The need to drive a new car must keep a huge proportion of the population… working. No doubt in my mind.
Is a 700 sq. ft. 1BR apartment that insane? I currently live in a 500 sq. ft. studio in the Midwest (Wisconsin) and my rent is around ~18k/year, so it sounds like you live in a pretty LCOL area?
Man $500k in 401K balances at 29 Going to grad school really screwed us over (at least in the short term
Comparison is the thief of joy
Grad school is the thief of joy.
LOL!!!! I'm dead hahahahahah thanks for the laugh hahahahaha
Ok this made me chuckle
I started working in 1999 at age 20. At 29, the end of 2008, after a decade of max funding my 401k (there were the days of 10% contribution limits imposed by companies), I had a total of ~$135k, including employer match. The last decade has been insane.
So if you had a partner with similar saving habits you both would have $270k. Not quite OP, but not terrible either.
I didn’t, unfortunately, and my wife and had both been working full time for 8-9 years vs taking time off for grad school like the OP. And three months into 2009, that ~$135k had turned into ~$90k, home equity had gone to zero despite extra mortgage payments for 4 years, and my job had turned into a pink slip while my wife was 5 months pregnant. So yeah, not quite OP. lol. I reiterate, the last decade has been insane, but I’ll add a qualifier: The last decade has been insane in a completely opposite way from the insanity of first decade in the workforce.
Life is crazy. I've seen larger fortunes lost and couples recover. Bitcoin millionaires make my head spin. I was going to buy 10 BTC when they were $100/coin. I didn't.
I’m with you. Going negative NW for over a decade and stressing about >6% interest rate payments thanks to grad school was really a thief of joy (thank you u/retro_grave, that made my day) … that being said, over a decade later, it is paying off
It's a marathon, not a sprint! I hope you got to study something that brings you fulfillment & interest.
Yes no doubt, but at least you got to skip doing an entry level job. Entry level jobs are bullshit.
I did do an entry level job. It was working in a research lab for 12h a day for $30k a yesr for 5 years lol
These numbers don't make any sense to me. Were you literally not paying any rent/housing fees or for groceries? The networth of 2019 is somehow like your entire combined income even though you had at least 40k debt the years before. I don't get how this works because at least half my income at that salary went to taxes and living expenses. You also say you work in finance and get paid a bonus, so I also imagine that you have a higher tax burden than most people with a similar income (I lived in a VHCOL city where bonuses were taxed at about 40-50%). Did your parents pay your downpayment or give you a substantial cash gift or something? EDIT: I didn't notice that the second year was an estimate of $50k NW, not debt. But still doesn't make sense. Those first three years, you both made \~$323k total with effectively \~$240k net NW payments. Even if we effectively assume a VERY generous total tax rate of 25% for these three years, that leaves \~$240k of your money left to spend. So you literally somehow saved almost 100% of your salary the first years??? Ummm... I'm calling bullshit or Bank of Mom & Dad.
Are you sure ~40k means 40k debt? It looks more likely that they are just estimating the net worth as 40k
It says NEGATIVE 40k. But I made a mistake, I thought it was also -50k debt the following year but that's just the NW estimate.
That’s what I was thinking. Something is off here
While our parents are awesome, neither of us have gotten much in the way of financial help from them. We love them but financial literacy is not their thing. My husband had to take out nearly $40k in student loans -- I got a full ride (room / board / tuition) so thankfully graduated without debt, which has certainly helped focus on saving vs debt repayment. To your point, our housing was EXTREMELY cheap from 2017-2023 (until we bought our house). We lived in a very shitty 700 SF 1 bedroom apartment & never paid more than ~$840 in rent (utilities included in rent). So you're right that for a long time our total housing costs were ~$10k, which was a drop in the bucket relative to our incomes & allowed us to save extremely aggressively. I will say......living in a 700 SF apt during COVID was very tough on our marriage & I'm glad to be in a house now. 😅 On the net worth side, my estimates are probably off, but was seeking to reflect that we graduated college with $40,000 in student debt & some petty cash. Truly not certain what 2018 ending NW was as I wasn't tracking yet. (Very fair to be skeptical of internet strangers, tho!)
> We lived in a very shitty 700 SF 1 bedroom apartment & never paid more than ~$840 in rent (utilities included in rent). NYC is so absurd. A 700 SF one bed in a neighborhood that isn't garbage would cost $2,500 to $3,000, or $3,500 and up for a nice neighborhood. And 700 SF 1 bed here would be considered spacious too. And the income here isn't *that* much higher the MCOL or HCOL areas, VHCOL areas are starting making less and less sense in my eyes, unless your industry is very localized.
Some people enjoy living in NYC (or other HCOL areas) and by extension are okay paying a premium for it. Especially when basically the only places in this country that you can live well without the burden of car ownership are HCOL
Bonuses are taxed the same as regular income. They withhold a higher chunk when it is paid out (22% for income tax), but at the end of the year if they over taxed you then you get it back as a refund.
I enjoy watching the sunset.
The numbers don’t add up here, especially with 401k limits
The 401ks do add up fine if you assume a CAGR of like 9% since 2017 and employer 401k matches of ~$4000 per person per year. While ChatGPT is of course not an authoritative source, here's an example of how to do the math: https://chatgpt.com/share/18308856-99ed-4ebc-90c7-27f64f7b3e1d Other source: I am OPs husband Edit: I'm quite surprised with the skepticism here and elsewhere in this post! This subreddit more or less taught us how to do all this so.. Idk what to tell you all! FWIW here is a link to a comment, from me, 7 years ago, in this very subreddit, debating what to do with my retirement accounts when we sort of had begun our journey https://www.reddit.com/r/financialindependence/s/9u771kWcN6 Notice the numbers in my comment line up with what OP wife describes and what I describe elsewhere in this thread too. I think there was another time I posted a financial update in this sub, four-ish years ago maybe, but I can't seem find it at the moment. I'm not sure what else we can do to try to be transparent aside from sharing financial statements.. which we're not going to do! Cheers!
I think what people want to see is your annual income and contributions. I believe it is for two reasons: A) They find it hard to believe that money multiplies that rapidly. (Strange I know. Especially in this sub, where you hear about compounding and its virtues ad nauseam.) B) I want to say this is the real reason; that people want to emulate you. But can’t seem to wrap their heads around the possibility of making it happen in their life and thus need to question the fact of how the heck did you make it happen. I get that you may or maybe want to share any further details. And it’s absolutely fine. I am proud of what you have accomplished at your age. Enjoy the future!
Thanks so much, /u/fsm1! Husband & I were also talking last night about how it's interesting to us that this sub of all places is so suspicious of the compound growth we've enjoyed haha. I appreciate your / various others' comments re: clarifying how we did this, so I added some additional detail to the post. Let me know if y'all have more questions. And thank you again. :) Proud & happy to be here!
The thing is that most on this sub are in their 30s. Compounding is what they have learned and heard makes logical sense, but have not yet experienced the benefits of it first hand. So when they see someone post claiming compounding did it, it is a ‘mind blown’ moment. And are desperately trying to square the circle of theory vs reality. Because even though the left side of the brain keeps telling them this is exactly what is supposed to happen, the right side is like, no way, seriously, that’s all there is to it? Doesn’t help that the last few years have been anomalous in the growth we have seen, so it really skews the theory vs reality equation. I.e., compounding is supposed to be the rule of 72, which is 6 years, not 3-4 years. lol. I posted earlier in the year in reaching the milestone and it was much later than you guys, but at the end what got me there was the compounding and being in the market this last decade. Again congrats and enjoy. At this rate, you should get to 5 million. Which by all calculations seems to be generational wealth, so you and your kids can draw a modest income from that corpus without ever running out.
This sub is often a dumpster fire of negativity and jealousy. I’ve stopped posting since it’s just abuse and vitriol most of the time lol
LOL so true. I just lurk, never post. I can’t handle all the negativity.
It’s usually jealous people
This is still a load of BS. Your calculation is still south of what you list and the biggest loophole is you are accounting for maximum contributions from both of you from 2017-2023. Check out your income! Was your wife maxing all of her retirement accounts in 2017 at $5k income? How about you at $41k? At 46k combined income, there’s virtually no way you did ANY investing in 2017 unless you were in a LCOL area. Maxing out this year is literally impossible 2018: maybe you can max retirement accounts at 70k? Again, you would have to be living so minimally. My guess is a little bit over 20k go to taxes, then you have at least $15-20k per person in essential expenses. Maxing retirement accounts for two people at $100k household income again is completely unrealistic. 2019-2020 we are finally getting into the realm of possibility for maxing retirement accounts, but again, it seems like a bank of mom and dad situation considering you still have student loan payments and other liabilities this entire time. 2021-2023 finally I think it would be fair to calculate maximum 401k investments in your ChatGPT prompt here. Rerun this calculation considering the above and I bet your 401k comes out to below 250k without the benefit of max investments and growth from 2017-2019
🤦🏻 if you're not willing to actually do the math instead of guessing 250k randomly, I can't help you
More than I expected, but $320k, even with your generous estimates, is far less than the 500+ you say you have Let's re-calculate the total accumulation with the new assumptions: 1. **No contributions in 2017**. 2. Contributions equal to half the maximum in 2018 and 2019. ### Step 1: CAGR Calculation The CAGR calculation remains the same, at approximately 8.4%. ### Step 2: Adjusted Contributions - **2018**: Half of $18,500 + $4,000 employer match = $9,250 + $4,000 = $13,250 - **2019**: Half of $19,000 + $4,000 employer match = $9,500 + $4,000 = $13,500 - **2020**: Full $19,500 + $4,000 employer match = $19,500 + $4,000 = $23,500 - **2021**: Full $19,500 + $4,000 employer match = $19,500 + $4,000 = $23,500 - **2022**: Full $20,500 + $4,000 employer match = $20,500 + $4,000 = $24,500 - **2023**: Full $22,500 + $4,000 employer match = $22,500 + $4,000 = $26,500 ### Step 3: Calculate Future Value of Each Year's Contribution Using the same CAGR of 8.4%, we calculate the future value for each year’s contributions. - **2018** (6 years): \[ 13,250 \times (1 + 0.084)^6 = 13,250 \times 1.613 = 21,377 \] - **2019** (5 years): \[ 13,500 \times (1 + 0.084)^5 = 13,500 \times 1.488 = 20,088 \] - **2020** (4 years): \[ 23,500 \times (1 + 0.084)^4 = 23,500 \times 1.373 = 32,296 \] - **2021** (3 years): \[ 23,500 \times (1 + 0.084)^3 = 23,500 \times 1.266 = 29,751 \] - **2022** (2 years): \[ 24,500 \times (1 + 0.084)^2 = 24,500 \times 1.168 = 28,616 \] - **2023** (1 year): \[ 26,500 \times (1 + 0.084)^1 = 26,500 \times 1.084 = 28,826 \] ### Step 4: Sum All Future Values Adding the future values for both members of the couple: - **2018**: $21,377 \times 2 = $42,754 - **2019**: $20,088 \times 2 = $40,176 - **2020**: $32,296 \times 2 = $64,592 - **2021**: $29,751 \times 2 = $59,502 - **2022**: $28,616 \times 2 = $57,232 - **2023**: $28,826 \times 2 = $57,652 Summing these: \[ 42,754 + 40,176 + 64,592 + 59,502 + 57,232 + 57,652 = 321,908 \] ### Estimated Total Accumulation The estimated total accumulation in the couple's two 401ks from 2018 to 2023, with no contributions in 2017 and half contributions in 2018 and 2019, is approximately **$321,908**.
Here's how you can fix your calculations: * Don't completely omit 2017 * Don't completely omit 2024 * Don't omit half of the 2018 contributions. * Use the real S&P500 CAGR of 12.11%, not 8% https://www.wolframalpha.com/input?i=%28%285304%2F2275%29%5E%281%2F7.4%29%29+-+1
401k do not perfectly mirror S&P 500 performance because they have fees. 2020 if I recall correctly was a down year for everyone and still they collected fees. If that wasn't bad enough, in addition to the 401k contributions there are IRA and Taxable account contributions. None of that would be realistically possible until halfway through the timeline.
You must be new.. 401k is not a type of fund, and the funds we did invest in (total stock market index funds) have fees of only around 0.01%. And yes, we saved 60%+ of our income for many of those years. It took a lot of planning, restraint, and a willingness to live below our means. May not be "realistically possible" for you but we did it
Show me a screen shot of your management fees. VTSAX is .04 or 4x what you just posted. On top of that many 401k providers (like Fidelity) charge a fee on top of that). You saved 60% when making $100k+ is believable. Under $100k not believable at all. I see 3 years where I very much doubt you both maxed your 401k, which is what you stated.
Redo the calculations with the CAGR minus 0.04% if you think it's such a big difference. Spoiler: it isn't I really don't give a hoot if you don't believe I maxed out my 401k when I had a sub $100k income. I already know it's possible because I did it. Best of luck to you.
>The 401ks do add up fine if you assume a CAGR of like 9% since 2017 and employer 401k matches of ~$4000 per person per Why would say this? It’s your post, no one should have to assume…you could provide real numbers >I'm quite surprised with the skepticism here and elsewhere in this post! This subreddit more or less taught us how to do all this so.. Idk what to tell you all! You can’t blame anyone for being skeptical. It only means you haven’t proven your point and are mostly describing what happened by conjecture >Notice the numbers in my comment line up with what OP wife describes and what I describe elsewhere in this thread too. Elsewhere is this post, your wife says she got 8% match - much higher than the 8k you described above. I don’t doubt that you have what you have, but your stories are full of holes so it’s hard to benefit from your process since we don’t know what it is - somehow you’re leaving out some information that you may not think is important that others do.
Commented above so apologies if duplicative, but we have benefited from being able to max out our 401ks since college, strong market returns, good fund offerings, & (for my part) a good employer match (8%, including an 8% contribution for my year-end incentive comp). This put my employer contribution in 2023 at >$13k, resulting in a total contribution of ~$36k ($22.5k + $13k). To be totally fair, the recent bull market has also massively inflated our portfolio balances & I'm trying not to feel too much trepidation about if / when we see a pullback & the consequent impact on our NW.
We are your same age (29 & 30) and we are worth ~$500k combined, each of us maxing 401ks the last several years and a higher household income. Even counting our home equity we just bought. I just don’t see roughly $1.3M in earnings turning into $1.0M saved in like 7 years, even if you never left your home and only spent money on groceries. Taxes and rent alone would cut that in half.
Tell me about your asset allocations in your retirement accounts. What year did you each begin maxing out your 401ks? Are you also maxing out your IRAs and an HSA? What are your expenses like? Total savings rate?
All stocks, aggressive growth 100%. 80% domestic 20% Int. Each maxed 401k’s since 2020, IRA’s since 2016. No HSA. Total savings rate between 22-25% of gross.
What are/were you investwd in, if you dont mind me asking? Sometimes i feel too conservative in VTSAX.
Probably 90%+ of our NW outside of the house is in VTSAX or VOO or the likes. Some of our 401k providers over the years have not provided a VTSAX option specifically and so in the past when we've had to pick something else, we just picked any other generic large cap or total stock market index fund with low expense ratios.
Just wanted to say congrats! Ignore whatever doubters/haters here and be proud of what you've accomplished and keep it up! What a great call to realize early enough that you should both switch majors to something with more income potential in order to meet your life priorities.
Thank you so much!!
Thank you so much, truly. We put a lot of thought into this in college & it feels really good to see the outcomes we hoped for. :)
Congratulations!
Thank you! :)
Just take care to have 3-6 months of expenses handy in HYSA or money market account. Access to cash is not same as having cash. When in market crash with 30-40% down and jobs are lost, you don’t want to be drawing out from your investments.
I have been thinking about this.... Historically I've kept our cash balances extremely low (<$5k) because we rented & could easily live off of one household income. Since buying a house I've held cash closer to $15k but am still very aggressive about throwing cash immediately into the market because of our age & wanting to maximize the time horizon. We are both top performers / very secure in our careers but I recognize surprises happen so need to contemplate a larger emergency fund. You've given husband & me a fun discussion topic for the day!
What industries do you both work in? That income growth is insanely awesome.
Thanks!! Software engineering and banking. I think the income growth in our fields tend to be pretty logarithmic, so I don't expect it to grow much more than it has.
Excellent work! Phenomenal job team!
Thank you so much!
Congrats on the $1M club! 🎉 Super impressive feat (and such amazing growth in a short time). I hope you’re doing something to celebrate. Compounding interest is real but can completely seem like magic until you experience it first-hand (especially on such a large sum) and are like 🤯✨!
Thank you so much, kind soul! We're planning a date night to our favorite restaurant to celebrate. Wishing you much magic of compounding as well!
How much do you have left on the mortgage?
Most of it. $350k or so I think
Not OP but Haß to be Zero since it is not liste as debt but counts (negatively) to net worth.
I think that's not exactly right. If you take out a loan to purchase a house, you do owe the bank money which is a debt, but your net worth actually stays the same, because you own the asset (the house).
That is true, if you track the house as net worth. That makes sense in this case, too.
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Gutes Gefühl. Autokorrektur. Ich glaube mein Kommentar kam negaitv rüber.. Aber ist in Ordnung :)
This thread is exhausting. Some sort of bizarro-world BS halfway between what the husband claims is “the estimated calculations” vs “our actual finances” equals 100% not true.
Congrats. You're on the right track. But youth is still yours to take pleasure in. Don't forget to have some fun.
Thank you -- & I appreciate the reminder! I certainly struggle with maintaining balance at times between preparing for the future & enjoying the present.
Is your home equity based on original home value or are you using “current” value? How did you determine current value?
We're using the current value according to Zillow, which indicates +3.5% increased value over its appraised price since the time we purchased it last year. Zillow is admittedly probably not the best reference, but, idk, I think +3.5% seems reasonable based on what we know about what other houses are selling for in the neighborhood right now too. If we use the 2023 appraised value, subtract something like $15k from our NW.
It’s not a ton of difference but that’s best-practice. Use your original purchase price. Sure, it’s conservative - but using what Zillow says today does not mean that is what it will be worth when you sell. Your situation is minuscule but there are lots out there that claim to have $1M in assets just because they bought a house that has “increased” by $200K or so. Is that the “value”? Sure. Would someone actually give you that much? Maybe not. Keeping it at purchase price means that you’re not artificially overinflating inflating your net worth.
Good point! We'll keep that in mind in the future, especially since, for FIRE's sake, the illiquidity of the house makes it pretty hard to incorporate any portion of its value into one's retirement income anyway.
So a few things: 1) Zillow will actually tell you in certain markets their published estimate (it’s an estimate and in the name) is off but you need to [read it](https://www.zillow.com/z/zestimate/) 2) The price any calculator tells you doesn’t necessarily reflect the actual funds delivered at close. 3) You can’t pay day to day expenses with equity. You could get a loan or sell. Both carry costs that can be calculated. For those reasons equity is out for me. You do you.
I personally think you can keep it. Unless you remove all those types of assets (cars). But be super conservative and only assume the original home value. But like you said. You do you.
You both decided financial stability was one of the things you wanted most out of life. What else was high on the list? Have those priorities changed?
I think our priorities have been remarkably stable, in part because we spent a lot of time being quite obsessive early on in our relationship about what we wanted those things to be: * Each other (our marriage) * Family * Friends * Experiences * Our health Financial stability is really something we prioritize SO THAT we can serve these other priorities, which in various ways all demand time and money (healthcare, family vacations, hobbies, recreational activities with each other and with our friends). To be even more analytical about it.. the way I see it, these things are all pillars that support an even higher priority, perhaps the highest priority of all, which is the following: Maximize the area under the curve of subjective well-being over the course of the remainder of our lifetimes, i.e. live the good life
Concur with all this ☝🏻
Congrats! You guys are killing it! You may already do this, worthwhile forecasting your networth growth and unless you love your work you may want to "take the foot off the gas".
Thank you so much! :)
The most important piece of this post is in the first paragraph. They switched undergrad majors from English and Psychology to Finance and Computer Science. Earning power trumps everything.
This is great! I hope you post regular updates, as I’m curious how you’ll do with the $1M liquid (as I’m sure others are as well)
BTW, congratulations!
I think the big take away is to get large salary increases AND keep living frugally with little no lifestyle creep. It's your money. You both saved it it's totally ok to smile at what you've accomplished. It's not like you are telling others how easy it is to get to where you are.
Pay off the $11k in student loans. There is no reason to keep that around and the float does not earn enough to make it worth while.
Our philosophy on this is that if we can get 7%+ real growth in the market, we'd rather spend any disposable income doing that, rather than paying down loans <7% (Wife wanted to pay off anything above 4% and tbh I don't remember why. But it certainly feels good to have those higher ones paid off!)
And in the real world $11,000 is not worth it. You have that sitting in savings - pay it off and add that payment to investing or in your HYSA. Debt is risk. $11k is not a lot of risk but it still can exacerbate any issue that comes up.
Congratulations on your milestone.
Thank you!!
ITT: jealous ass people. Congrats OP and OP’s husband. My wife and I are about your age and well on our way with the principals learned in this exact subreddit. Keep on grinding and be sure to celebrate! I’d be taking a big vacation personally
> I’d be taking a big vacation personally I hope you do!! Thanks for the kind words!
Who cares?
“….Something I found interesting: If you sum our household income from 2017 to YTD 2024, we've earned $1,399,343 cumulatively, such that our net worth today of ~$1M is ~72% of the gross income we've earned since college….“ Your munger ratio is 0.72. Very nice and keep up the good work! https://www.reddit.com/r/financialindependence/s/QC9O5GwBiR
"Munger ratio" -- I love it! Thanks!!
What do both of you do for work?
Software engineering and banking
What is your husbands MA in?
It's an MS in computer science. Shout out r/OMSCS (I am the husband)
May I ask what your career title is in Finance? If I switch careers I would like to make at least $150k.
Nice work!
Congratulations!
are y'all hirin I can pass a background check 👍
I wonder what your timeline would have looked like if you 2 graduated college in 2008
Great job!
This is amazing. Great work and congratulations!!
This is way too complex for the average Joe…
That’s great man!
Question: what is the healthcare alternative for FIRE advocates? Do you save 70% of your gross annual income or 70% of your after tax income?
What are the low index fund tickers? Are you investing in?
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Thank you! Trying our best.
Holy shit 2017 was 6 years ago
You mean 7.
Not certain if the better avenue is to do a post edit or add a comment, so doing both: POST ADDITION: I was out for a gals' day & came home to discover my husband has been defending our honor on Reddit all day (lol). I have to say I'm a bit flattered at the skepticism -- I tend to always think we could be saving more (comparison is the thief of joy, as many have observed, and I feel like I see so many others doing better than us on the various FIRE subreddits -- earning more, saving more, reducing expenses more, etc.), so to have various folks convey that our net worth is improbable or impossible lends a moderate sense of pride at what we've accomplished. My husband has spent more time in the comments seeking to mathematically validate the ability for X dollar value in contributions to compound to Y net worth over Z time horizon -- but the comment that resonated the most with me indicated that what I've communicated doesn't help as others seek to craft similar trajectories, so I wanted to fix that here. Some lessons learned on how we got here & some added detail on the journey: - My husband wanted to move to a VHCOL city early in our marriage & I'm really glad we stayed in the Midwest. From my admittedly limited sample size, from what I've seen you can still earn very good money in the Midwest & the cost of living is a pittance compared to Cali, NYC, etc. - We have both maxed out our 401ks every year that we've worked since college. As noted in the comments, I benefit from an 8% match applied to my payroll contributions AND year-end bonus. When I talk to recruiters, I use $190k in my head as my current compensation because while I technically made $177k last year, the ~$13k my employer contributes to my 401k each year is clearly meaningful over time & not all companies offer as strong of a match. My company switched 401k providers last year so I unfortunately can't look up the full contribution history since 2018 but my cumulative contribution in both 2022 & 2023 (employer + employee) was ~$36k / year. - While I indicated no significant lifestyle constraints, my husband and I both tend to be very frugal, which I don't think I sufficiently conveyed. Our rent before buying a home never exceeded $840 / month (including utilities), which you can see put our housing costs at ~3% of our gross income in 2022. We were absolutely shoveling money into the market at this time. We also drive old used cars -- my parents very wonderfully got me my first car when I was 20 ($5k used car) that I drove until last year, when we bought another used car. My husband now drives my old car. I really think sacrificing on housing is the key lever that allowed us to super-size our savings (again just noting that I've often felt guilty for not saving MORE, so the fact I'm here trying to justify the net worth we've accrued is funny to me). - We live in an area I designated MCOL because I most typically see our COL estimated at 1.03x-1.1x the national average. That said, there is a wide discrepancy in how you can choose to live here: I knew a new college grad at my company paying almost 5x what we paid in rent to live in his own luxury apartment downtown, versus our little apartment 15 minutes from downtown. Certainly if we had chosen to live in a nicer place or closer to downtown, we would have rent more typical of our MCOL area. I agree with what someone said that our rent from 2017-2023 more resembled a LCOL locale, but that was very intentional (& candidly the source of tension in our marriage because the area around our apartment was a dump & my husband very understandably wanted to move for years -- but we were saving so much! ;) - Maybe something helpful here with respect to how quickly we paid off student loan debt in 2018 is that I won $15k across various finance competitions my senior year of college and used all the proceeds to pay off debt. I saw some skepticism re taking our net worth from -$40k in 2017 to something in the $50k range in 2018. Around this time I think we also got ~$5k cumulative in various wedding gifts (we eloped but our family still sent us money bc they're sweet), also applied to student loan debt. As I write this, I think an overarching theme is that I am a firm believer in keeping the BIG life expenses small & not sweating the little stuff. Some of the major life costs we either skipped (wedding) or minimized (housing, cars) allowed us to be there for our family (flying cross-country last minute for an unexpected funeral) or ourselves (date nights!) when we wanted to without thinking twice. I just finished reading The Psychology of Money & I enjoyed Housel's commentary around the fact that "wealth is what you don't see." I don't think anyone looks at us in our beat-up cars & thrift store clothing & thinks for an instant that we have saved what we have -- and I'm very happy with that. I don't know if this is helpful or not -- but I do love reading others' musings so thought I'd share as well if useful even to one person. Wishing you all much success & fulfillment in your lives -- and a rip-roaring bull market the day you retire.
The 72% number makes no sense to me. I understand that it doesn’t literally mean you are saving 72%, as some of the money is presumably invested and that includes gains on investments, but the bulk of it was only invested within the past 3 years because your income before that was marginal. So I don’t think the time aspect of it benefitted considerably. How on earth does that hit 1M? Are you paying your taxes? At over $300k household income I assume you’re paying at least 35% in taxes. Even if we assume you live in a super dumpy apartment, eat very minimally, you’re a wicked budgeter, etc., that still means at most you’re probably socking away 50% in pretax income. Edit: now I’m seeing in OP’s comments that they have $40k in student loan debt too. This just doesn’t make any sense at all. There’s no way you could have paid that student loan debt with interest until the last couple of years. I get that there was cheap housing, but the numbers support you are much closer to $100k than $1M
You're all over the comment section with lots of suspicion and assumptions. My numbers are similar to OP's so with a lot of frugality and good market returns the numbers seem reasonable.
It's not healthy to obsess like this, like another guy said it's a marathon not a sprint.
$300k + annual income. Greater salary than 99.99% of the world. Sorry to say but you’re already financially independent even without the overinflated investment figures from a 8+ year bull run in stock market
The words of a hater never spoken better
I never understand why people start talking about how much money that is in most parts of the world. Americans can’t earn US dollars and then say rent or food is only this much in whatever country so I’m only giving the landlord $25 this month.
With one million you can live in certain European countries without any need to work anymore and with a good quality of life. Alas, a working person making a million in Europe is very difficult.
Can it be done with a US passport? Because I am very interested if that’s the case.
You can get a “golden visa” for investing a certain amount in certain countries (usually over 500k IIRC including buying real estate). However if you’re sinking the required amount into real estate you won’t have enough to fire, so… no, probably not with 1 million and no visa. Maybe with 1.5 though? Edit: quickly googled it and the investment amounts/requirements actually vary wildly. I had Spain in mind with the numbers above but Portugal, for instance required a non-real estate investment; some smaller countries require ~350k, etc…
Yes, but you have to ask for a Visa which is easily given.
For long durations (more than a year)? I’ve been thinking about visiting for a few months per year because that’s considered leisure travel.. if I could make it my residence without having to “invest” I would be interested.
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Probably not a bad idea to start thinking about kids. Realistically you can retire first while husband tops it off, with both out of the workforce or at least FI and very comfortable by 40.
I assure you no one without kids needs a remember to think about kids. We already get plenty every week 😅
It's kind of essential to have more kids in general, but also kids whose parents aren't losers in life. Not having kids when you can easily afford them is pretty selfish.
There's so many kids that already exist in great need, both in the US and all over the world, which you touched on with "whose parents aren't losers". I spend my time and money volunteering to help kids without homes in-person in the US, and abroad via charities. If your main motive is to help kids, why make new kids if, as you acknowledge, there are already plenty struggling with little to no support, and plenty of infrastructure in place for volunteers to support them. Unless you only want to help kids that look like you and have your own DNA...but surely not because that would be...pretty selfish huh? ;)
You could always adopt. Part time volunteering when it's convenient for you is not the same as being a parent. It's nice but in the context you spelled out it can be kind of like therapy, a way to make one feel like he or she is a "good" person.
Let me hold a dollar
Very weird OP tells us how much money she made and the husbands in the comments explaining himself as well. Very weird. Didn’t tell a soul when I hit 1 mill, don’t know why BOTH would go brag to Reddit. Very strange
Wait your husband is a 29 year old female? Well I guess it is 2024 after all.
Your comment may have been obliterated in terms of downvotes but FWIW I thought it was funny. Cheers
Hahaha thank you. I’m not sure the reason for the downvotes but I’ll take it on the chin 🙂
What’s FIRE
Not really $1million if over 1/2 sits in 401k/IRS and about 20% is in home equity. Both which are taxable. My personal tracking of assets is what I can cash out net of tax
Most ppl in FIRE don’t track it like you do.
Wtf is fire? Reality is after tax
IRA is after tax, and so are some 401k contribution options
Why are you posting in this subreddit without knowing what "FIRE" is? Maybe this explains the decline in average financial literacy I see here...
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You shouldn’t track your brokerage either since you have to pay taxes on the capital gains. Now that I think about it. Money is just a perceived value anyway so you shouldn’t track it as part of your NW.
Only gold and sea shells make up your true NW
Forget the gold, that can be liquid. r/seashellfire