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How Much To Save?

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Hi everyone

I'm curious, how much should one save in order to ensure sufficient savings for retirement?

My husband and I currently save about 40 percent of our combined monthly gross income.

I was having a chat with my colleagues and they say that's very high. So I'm wondering whether we're saving too much ...

Would be interested to hear what others have to say.

 

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Hi everyone

I'm curious, how much should one save in order to ensure sufficient savings for retirement?

My husband and I currently save about 40 percent of our combined monthly gross income.

I was having a chat with my colleagues and they say that's very high. So I'm wondering whether we're saving too much ...

Would be interested to hear what others have to say.

i don't think it's simple matter of what percentage to save, since income and expenditure would vary between persons and phases the person is in. How much you would need for retirement would also take into account many factors such as expected lifestyle, medical coverage, number of dependants, life expectancy, current age, etc etc etc.

Since i am not equipped to comprehensively calculate for myself, I spoke with different professional financial planners/bankers and had them calculate for me, and i compared the results to get a gauge of whether we were on track for retirement at our desired age (this also factored in how comfortable i was with each financial planner).

Even though the calculations showed that we are on track, it was still an eye opener for me to find out how much my kids' tertiary education would cost, and the rate of return (yep, roi, since saving alone would not be enough for our case) i would consistently need on the amount accumulated/saved to reach my desired retirement amount in my desired time frame to maintain my desired lifestyle.

Edited by random_username
 

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Hi everyone

I'm curious, how much should one save in order to ensure sufficient savings for retirement?

My husband and I currently save about 40 percent of our combined monthly gross income.

I was having a chat with my colleagues and they say that's very high. So I'm wondering whether we're saving too much ...

Would be interested to hear what others have to say.

I feel it isn't easy to save 40% of income given the high cost of everything today, when your colleagues say that you are saving too much, do they mean that you could allocate some funds for investment to grow your money at a faster pace or that you should spend more money? :P

I don't think there's anything wrong with saving too much :D

Like what random_username said, perhaps you could do a projection of the expenditure you'll likely have in retirement using your current expenditure as a reference, most people should spend less in retirement, unless they're planning to travel the world then its different :)

 

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Hi everyone

I'm curious, how much should one save in order to ensure sufficient savings for retirement?

My husband and I currently save about 40 percent of our combined monthly gross income.

I was having a chat with my colleagues and they say that's very high. So I'm wondering whether we're saving too much ...

Would be interested to hear what others have to say.

Well there's always inflation to consider. You may be able to buy a plate of chicken rice for $3.50 today but 10 years later, the standard price may be $5. So even if you start saving now and 10 years later you have accumulated, say $70K in cash in the bank, you will find that it's not enough for the "retirement" life you intend to lead...

Might be better to put the savings somewhere where it can grow and multiply$$$$ :)

 

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Hi everyone

I'm curious, how much should one save in order to ensure sufficient savings for retirement?

My husband and I currently save about 40 percent of our combined monthly gross income.

I was having a chat with my colleagues and they say that's very high. So I'm wondering whether we're saving too much ...

Would be interested to hear what others have to say.

40% of take home pay? Good habit, keep it up!

Edited by bepgof
 

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I went for a GRC presentation almost 6 years ago & based on the surveys that they've done during those days, we need to have at least $150k hard cash sitting in the bank to enjoy a complete retirement.

Those who don't meet the criteria will have to continue to work well into their twilight years.

Now that 6 years have lapsed, I supposed that that arbituary figure must have risen now that the costs for every single thing has gone up.

So while you are young, able-bodied to be gainfully employed, try to set aside as much as possible.

 

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Retirement, simple yet difficult, need fix some assumptions first before calculation is made possible thus following make sense:

Assumptions, at retirement age(say 60 year old):

- No financial liabilities for all sort of "loans"-eg car loan, house loan, hire & purchase....

- Insurance premiums all fully paid.

- No need to give $, in whatever forms( eg Angbao...,), to relatives, children, grandchildren.....

- Best with some sources of income. eg, From chrildren, dividend of stock, interest of some deposit, rental of some assets,need no payment of taxation.......

- Retirement lasts for 15 years.

- Forget about the SA in CPF.

Calculations:

- Everythings apportioned to monthly based.

- Eat, cloth, entertain, tpt, social....- $400

- Medical expenses-$100

- household utilities bills -$150

- CPI of 3%-5% is negligible and omitted.

- No other income sources.

So, mothly abt 400+100+150 = $650

Yearly = $7,800

15 years = $117,000

In other words, now need to set aside $650 (in OA or cash)monthly for 15 years without fail!

Above just an example of a down-to-earth "template" of assumptions & calculation for retirement age, can follow & modify to suit your own need. No copy right. :P

Edited by bepgof
 

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Hi Webbit,

Yup, saving 40% is definitely good....no need to worry others saying that its too much or too little...so long you and hubby are comfortable today. If come retirement and it turns out to be really too much, reward yourself n hubby a retirement honeymoon loh...

Hi Bepgof,

I suppose $650 is minimal for very simple living with no 'surprises' .... and $650 is today's money... assuming that person is 40yrs old today.. the computation will need to take care of that 20yrs inflation, etc, etc...

20 yrs later, $650/mth will definitely be not enough... just like what Blue skies and Edenstrauss pointed out.... today, chicken rice $3.50, 20yrs later, it may be $10 or more ...

for simplistic computation, if chicken rice is x3 in 20yr, $650 * 3 => $1950! working backwards, $1950*12*15 => $350k. Anyway, i suppose one should save the max that one can afford to. The more today, the merrier later.... :)

Live within one's means, save and invest the rest..... dun worry too much...enjoy life....

GongHei FattChoy to all and wishing all good Health, Happiness and Prosperity in Bunny Year!

Retirement, simple yet difficult, need fix some assumptions first before calculation is made possible thus following make sense:

Assumptions, at retirement age(say 60 year old):

- No financial liabilities for all sort of "loans"-eg car loan, house loan, hire & purchase....

- Insurance premiums all fully paid.

- No need to give $, in whatever forms( eg Angbao...,), to relatives, children, grandchildren.....

- Best with some sources of income. eg, From chrildren, dividend of stock, interest of some deposit, rental of some assets,need no payment of taxation.......

- Retirement lasts for 15 years.

- Forget about the SA in CPF.

Calculations:

- Everythings apportioned to monthly based.

- Eat, cloth, entertain, tpt, social....- $400

- Medical expenses-$100

- household utilities bills -$150

- CPI of 3%-5% is negligible and omitted.

- No other income sources.

So, mothly abt 400+100+150 = $650

Yearly = $7,800

15 years = $117,000

In other words, now need to set aside $650 (in OA or cash)monthly for 15 years without fail!

Above just an example of a down-to-earth "template" of assumptions & calculation for retirement age, can follow & modify to suit your own need. No copy right. :P

 

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In accountancy, there is a Future Value of money calculation formular, mainly used in Capital Budgeting:

FV=PV(1+i) x to the power of n.

FV=future value

PV=present value

i= rate of return=interest rate

n= number of period of payments

Say, pV=$1000, i=1%, n=10 years=10

So FV of money 10 years later will be = 1,000(1+0.01)x to the power of 10= is about $1,100.

This formular has not taken in some factors like appreciation/depreciation of money over the years. Example if a country keeps printing money, its currentcy value will drop fast....

Hi Webbit,

Yup, saving 40% is definitely good....no need to worry others saying that its too much or too little...so long you and hubby are comfortable today. If come retirement and it turns out to be really too much, reward yourself n hubby a retirement honeymoon loh...

Hi Bepgof,

I suppose $650 is minimal for very simple living with no 'surprises' .... and $650 is today's money... assuming that person is 40yrs old today.. the computation will need to take care of that 20yrs inflation, etc, etc...

20 yrs later, $650/mth will definitely be not enough... just like what Blue skies and Edenstrauss pointed out.... today, chicken rice $3.50, 20yrs later, it may be $10 or more ...

for simplistic computation, if chicken rice is x3 in 20yr, $650 * 3 => $1950! working backwards, $1950*12*15 => $350k. Anyway, i suppose one should save the max that one can afford to. The more today, the merrier later.... :)

Live within one's means, save and invest the rest..... dun worry too much...enjoy life....

GongHei FattChoy to all and wishing all good Health, Happiness and Prosperity in Bunny Year!

Edited by bepgof
 

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Hi Bepgof,

yes...something like that... but i think that formula just compute the future money considering interest and maybe compound rate... doesn't take into consideration of inflation which can be significant.

Future value measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is the present value multiplied by the accumulation function[citation needed].

The value does not include corrections for inflation or other factors that affect the true value of money in the future. This is used in time value of money calculations.

btw, there is a calculator for the FV and PV you have shared:

http://www.uic.edu/classes/actg/actg500/pfvatutor.htm

http://en.wikipedia.org/wiki/Time_value_of_money

not sure if this is correct, but is may be slightly more realistic.

http://www.simplejoe.com/web-calculators/i...-calculator.htm

rgds,

In accountancy, there is a Future Value of money calculation formular, mainly used in Capital Budgeting:

FV=PV(1+i) x to the power of n.

FV=future value

PV=present value

i= rate of return=interest rate

n= number of period of payments

Say, pV=$1000, i=1%, n=10 years=10

So FV of money 10 years later will be = 1,000(1+0.01)x to the power of 10= is about $1,100.

This formular has not taken in some factors like appreciation/depreciation of money over the years. Example if a country keeps printing money, its currentcy value will drop fast....

 

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Hi Bepgof,

yes...something like that... but i think that formula just compute the future money considering interest and maybe compound rate... doesn't take into consideration of inflation which can be significant.

Future value measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is the present value multiplied by the accumulation function[citation needed].

The value does not include corrections for inflation or other factors that affect the true value of money in the future. This is used in time value of money calculations.

btw, there is a calculator for the FV and PV you have shared:

http://www.uic.edu/classes/actg/actg500/pfvatutor.htm

http://en.wikipedia.org/wiki/Time_value_of_money

not sure if this is correct, but is may be slightly more realistic.

http://www.simplejoe.com/web-calculators/i...-calculator.htm

rgds,

i think what bepgof means is to assume a fixed inflation rate so you can use the formula to calculate the future value of money... :)

this should be same as the PV/FV formula in Excel, rite?

Edited by marshmallow
 

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Hi Bepgof,

yes...something like that... but i think that formula just compute the future money considering interest and maybe compound rate... doesn't take into consideration of inflation which can be significant.

Future value measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is the present value multiplied by the accumulation function[citation needed].

The value does not include corrections for inflation or other factors that affect the true value of money in the future. This is used in time value of money calculations.

btw, there is a calculator for the FV and PV you have shared:

http://www.uic.edu/classes/actg/actg500/pfvatutor.htm

http://en.wikipedia.org/wiki/Time_value_of_money

not sure if this is correct, but is may be slightly more realistic.

http://www.simplejoe.com/web-calculators/i...-calculator.htm

rgds,

wrong. u just have to pluck in the correct interest rate to account for inflation.

do note that the exercise is very academic in nature, a small increase in the rate used can affect the end result greatly, esp over a long period of time.

no one can say 100k is not enough or 1mil is enough. Many other unknown factors like health, living habits, etc come into the picture as well.

So how much should one save?

- as much as you can. There is no such thing as saving too much. Thats my view.

 

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Webs given are all correct. I studied "Capital Budgeting" in 1992, both "FV", "inflation rate" & "opportunity cost" factors have to be taken into consideration while making decisions as to choose the best choice of investments if there are a few of them of similar nature available but one can only choose one investment only. This is like someone having some cash on hand wanted to buy a private property and facing practical issues: New or resale? Rental yield immediately/cash flow problem for deposit/instalment now or in near future? Appreciation rate for new vs resale? FH vs L99/L999? If buy resale get immediate rental yield and forego new purchase, the opportunity cost is how much?

One has to take note that prevailing interest rates for deposits(say FD, saving,etc) are always lower than the prevailing CPI(inflation),otherwise all banks eat "north west" wind liao. If you see a country with "high" domestic interest rates, mean that country's inflation is higher than that rates. Singapore's FD/saving is abt 1% and cpi is 5%, difference =4%!

Liquidity is another consideration factor, "how bad" you need that sum of money in near future?

Generally, as rule of thumb, if investment's roi is = or >CPI, then, one is making a "good" decision. However, there are always "better" decisions.

My real encounters:

1. Stock mkt( Jan-Dec 2010): invested $250,000. In/out several counters, the "accumulated" IN(buy) amounted to some $2.2mil! I made profit of $19,500 = 19500/250000 = 7.8% ROI. Another possible investment of 250k is to put in fd which earns abt 1.5% or less which is the opportunity cost. I've made a "good" decision.

2. Was caught in juncture whether to buy a resale FH or new for "investment", instead of putting cash with bank or in stk mkt. After much cal/consideration/observation, bought a "new" $1.03mil FH, top 2014 june. Loan 80%, 1st cash disbursement for 10% expected ti be in march this year...

Having written so much above, one need to have relevant knowlege and keep learning, most importantly is doing "homework". Homework pays.

 

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Webs given are all correct. I studied "Capital Budgeting" in 1992, both "FV", "inflation rate" & "opportunity cost" factors have to be taken into consideration while making decisions as to choose the best choice of investments if there are a few of them of similar nature available but one can only choose one investment only. This is like someone having some cash on hand wanted to buy a private property and facing practical issues: New or resale? Rental yield immediately/cash flow problem for deposit/instalment now or in near future? Appreciation rate for new vs resale? FH vs L99/L999? If buy resale get immediate rental yield and forego new purchase, the opportunity cost is how much?

One has to take note that prevailing interest rates for deposits(say FD, saving,etc) are always lower than the prevailing CPI(inflation),otherwise all banks eat "north west" wind liao. If you see a country with "high" domestic interest rates, mean that country's inflation is higher than that rates. Singapore's FD/saving is abt 1% and cpi is 5%, difference =4%!

Liquidity is another consideration factor, "how bad" you need that sum of money in near future?

Generally, as rule of thumb, if investment's roi is = or >CPI, then, one is making a "good" decision. However, there are always "better" decisions.

My real encounters:

1. Stock mkt( Jan-Dec 2010): invested $250,000. In/out several counters, the "accumulated" IN(buy) amounted to some $2.2mil! I made profit of $19,500 = 19500/250000 = 7.8% ROI. Another possible investment of 250k is to put in fd which earns abt 1.5% or less which is the opportunity cost. I've made a "good" decision.

2. Was caught in juncture whether to buy a resale FH or new for "investment", instead of putting cash with bank or in stk mkt. After much cal/consideration/observation, bought a "new" $1.03mil FH, top 2014 june. Loan 80%, 1st cash disbursement for 10% expected ti be in march this year...

Having written so much above, one need to have relevant knowlege and keep learning, most importantly is doing "homework". Homework pays.

sorry, i dont understand that part - means your buy in's (and selling, to buy in again?) amount to 2.2m ie. the movements amount to 2.2m; or you levered up on the 250k to 2.2m? how much did the transaction costs come up to roughly? Thanks!

Edited by random_username
 

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