What percent of your income goes toward retirement and/or college savings?

[O's mommy]

I have been trying to figure out how much of our income we should be putting towards retirement and college savings for our two kiddos. We have been following the Dave Ramsey plan and we are almost up to retirement/college savings. He says 15% for retirement and a formula calculation based on you children's ages for college.

Doing the percentages for it though have me wondering if I'm correct in my calculations or goals. For 15% to go towards retirement and even $125 a piece going for college (I just grabbed a number out of my head, I know it's not even enough) I am floored at how much money it turns out to be. I know we weren't saving anywhere close to that. Am I just sticker shocked or do others save that much? I want to be prepared for the future but I'm not exactly sure where we would come up with that amount of money.

[sunnysandiegan]

I'm not a DR follower. What is the 15% OF? As in, 15% of gross salary or net salary or monthly expenses or something else?

We put the maximum allowed by law towards our Roth IRAs. DH's company does not offer any retirement savings opportunities and I am not employed at this time. We contribute $416.66 to his Roth and $416.66 to my Roth every month. We started out contributing $25 a month each and worked our way up to the maximum allowed. We wish we could contribute more.

When we both worked for companies that offered 401k plans, we each started contributing at low amounts and quickly got to the maximum point where the company matched (3% for his; 6% for mine). Those were percentages of gross salary. His salary was much higher than mine and his company matched 1-to-1. My company matched 1-to-1 for the first 3% of my gross salary and then matched 0.5% for each percent up to 6%. DH worked his way from 1% up to 3%. I jumped from 0% to 3% as soon as I was eligible, then worked my way up to 6%.

[greenmom4]

Right now I invest 8% of my gross pay (my company matches up to this point). I am a DR follower, but I just started and I'm not going to halt retirement contributions (we don't really have that much debt to pay off). After BS 2 I'm going to save 15% of both my dh and my gross pay in retirement.

We have 3 kids and there's just no way we will be able to save for college in the amounts that he suggests, at least with our current income. We have been throwing money into an account occasionally and we'll probably contribute more regularly as we can, and then maybe when we're not paying for preschool we can put that money into the college fund and then work up to the amounts he suggests. Maybe by the time my kids are ready for college it will be universal and free in the U.S.

[zinemama]

Originally Posted by sunnysandiegan

We put the maximum allowed by law towards our Roth IRAs. DH's company does not offer any retirement savings opportunities and I am not employed at this time. We contribute $166.66 to his Roth and $166.66 to my Roth every month. We started out contributing $25 a month each and worked our way up to the maximum allowed. We wish we could contribute more..

I don't understand. The maximum contribution amount for a Roth is currently $5,000. You're contributing $1999.92 yet you say you're contributing the maximum allowed by law. Am I missing something?

[EFmom]

We contribute 15% of our gross to supplementary retirement accounts. Dh will have a defined benefit pension and I have a defined contribution pension as well. I have to contribute a few percent to that, as well as what my employer contributes. My contribution to that will be phased out over the next two years, but for now it's on top of the 15%.

[Kristine233]

We don't do either. I'm not a believer in paying for my kids' college (no debate please) we'll be supporting them (if they want/need) in other ways at that time. Our house will be paid off shortly after our last child reaches college age. We don't plan on moving until that time and will use the money from this house to pay off the new house in full. (and our house has nearly doubled in value already) We will then put all income that would have gone to our mortgage into a retirement fund. We'll have 15-20 years after our house is paid off and before we retire to dump lots of money in. I'll only be 40 or 45 when we pay off the house completely, yay!! We have alternative plans too if something were to happen to our house or us etc, but that's the main plan for now. My ILs did something really similar so we know it can work... and we'll have more time between kids at home and retirement to save.

I know its not the traditional retirement plan, but its our plan and we know it'll work for us. Neither of us have the type of job or income where putting money into savings is possible, so we are focusing on long term goals and paying off the house ASAP.

[MtBikeLover]

I max out 401K every year (whatever the gov't allowance is) and I put 5% of my gross into college savings every year.

[sunnysandiegan]

Originally Posted by zinemama

I don't understand. The maximum contribution amount for a Roth is currently $5,000. You're contributing $1999.92 yet you say you're contributing the maximum allowed by law. Am I missing something?

I am missing something! We have four accounts each in our Roths and the $166.66 is the last transaction that comes through each month. I knew I should have double checked my info before posting... We actually contribute a total of $416.66 per month EACH. Thanks zinemama!

[SeekingJoy]

We were contributing 15%, but about 18 months ago shifted to

1) maxing out a ROTH for each of us, and

2) throwing every other dime we can save toward pre-paying our mortgage

We have no consumer debt, and a year's expenses. We have intentionally suspended college savings for both kids, and only contribute gift money at this point.

[PlayaMama]

probably not helpful to you but we contribute nothing to either. we're getting our six months of expenses and moving fund (as we're planning on moving later this year) together right now which leaves nothing to for anything else.

we do put any money the kids receive for gifts into their cd's. right now that's all they have for college, though i will congratulate myself for locking in a five year cd at 4.5% about two years ago.

[chiromamma]

delete

[annethcz]

Right now we've got 10% of DH's gross salary going to his 401K. I just started working (after being a SAHM for 10 years) last month and I'm working on getting a Roth IRA set up for myself. Once it is set up I will be contributing at least 10% of my income, probably more (it's a small income, I only work part time).

We also contribute $40/month to each of our children's 529s ($160/month total, we have 4 kids). We'll be upping that amount next year. I'm shooting for $100/month/child = $400/month total.

I recently ran the numbers, and although I would love to contribute 15% of our gross income to retirement accounts, it just doesn't work with our current budget. Give it a few years, maybe that will change.

[Gentle~Mommy :)]

We put 150.00 per week away in bank accounts for our 2 sons (300.00 total) and $400.00 a week into an investment savings account for our retirement fund. So basically 36,000 a year saved for the future. We also have emergency funds and other savings accounts, I'm not really overly concerned for savings as my parents and my DH's parents are both wealthy and we are both only children.

THey are fit and well and happily traveling and joking that they are spending our inheritance, good for them!

[1growingsprout]

DH has a 401k that he fully contributes to and we both have IRA's as well. Our kids have accounts that can be used for education but I expect them to apply for scholarships and aid as well. Our home is paid for which is a godsend these days. Right now in savings our priority is retirement, then savings, then kids accounts.

[O's mommy]

I've figured out why the 15%(even 10%) number sounds like SO much to me. My DH has been putting about 3% into 401k out of his gross(comes out of his check so we never see it, that is gross I think, I always get that confused)

But I've been doing an upcoming budget for us partly because of being ready to move to the next step with the DR plan, but also because DH is going into business for himself in a couple of months so I'm trying to make sure the budget is ready. He is estimating that he will make about $45,000-$50,000 to start which is a little bit less than half of what he makes now (I am a SAHM right now). With the new budget of income our mortgage is about 42% of our take home. If our mortgage was more around 25% of our take home then the retirement amount would not be so shocking I have been thinking that we should move to decrease our mortgage but around here the housing market is so expensive and I think if we were to move we would have to move to an area that is not as safe, and the house couldn't get too much smaller we are already squished in here as it is.

In the beginnng of the new business I'm not planning on putting that much into retirement I'm just going to focus on paying the necessary bills, but I'm trying to think long term (and trying to see what we should be doing per DR). I suppose DH will probably make more too sometime and I will go back to work in a few years maybe I should wait till then to start socking the money away.

[SuzyLee]

We each (when we are working, LOL DH is home right now) contribute ~12% of our income to 401K's (part fo that is company match). We also fully fund our Roths. Total that is probably around 20% savings for retirement.

For college we are doing nothing so far but that is just becuase we are too lazy to get the accounts set up. We will probably start putting 200$/month in once we get around to it. My g'pa contributes 60/month for DS too. Our plan is to pay for in-state-tuition only, and since our mortgage will be paid off around that time, we will have room in the budget to supplement college savings.

[velochic]

We contribute 20% (of gross) total to retirement among the various accounts. We invested a very large sum in college 529 for dd when she was just an infant and have not contributed to that any more. Mostly that is because she will be 18 when dh is 65 and we decided to focus on retirement and use THAT for college for dd if she needs more money. If you're going to be at least 59 1/2 when your child is ready for college, it's actually a smarter move because you don't pay any penalties if you have to withdraw it for some purpose other than college and if they don't go to college at all, you're that much farther along on your retirement goals.

[Ruthiegirl]

We save 15% of our gross. Right now we are building a decent emergency fund, after that we will contribute to dh's retirement fund and Roth IRAs. We have minimal saved for college because we are simply starting so late on our own retirement funds.

By the time our first is ready to attend college, I will be working again and we can cash flow school. Or they can attend the university where dh works for free.

[hopefulfaith]

We were doing 15%, but I realized this fall that while we were socking away tons of money (for us) into retirement, we were broke four days after payday and relied on our credit card too much. I knocked us down to 11% and it seems to be helping.

The kids have college funds, although we only put $20 per paycheck in for each of them. I figure they can borrow for college but we can't borrow for retirement, right?! It's mostly a token sort of thing; we put any money they receive into it, and it's a good way for my ILs to give at Christmas without loading up on the MIC stuff... At the rate it's going, though, it will be enough to pay for maybe half of their first semesters!

[MamaMelis]

We max out my DH's 401K annually. We max out my (non roth) IRA annually. We have UGMA accounts and 529's for the kids, to which we contribute $400/kid/month (total between the UGMA and the 529's, not each).
We also gift them annually, directly into a trust. Helps a lot with taxes. We also overpay and pay our mortgage biweekly ~ we only have 20 years left on our 30 year mortgage and we moved in less than 2 years ago as a result of overpayments. They also have savings accounts in each of their names that any money they get at birthdays/holidays etc goes directly into, we keep that separate from any college/school savings.

It means that money is tighter than I would love for it to be, and that we are not doing a lot of furniture shopping or home projects, but I keep telling myself that it will all be worth it later in life, for both us and for our kids

Its hard finding the right balance. Play with the numbers until you come up with what feels right ~ remember that even putting a small about away is better than none at all, but make sure that you are not putting in too much and incurring debt/interest as a result ~ that would offset any benefit of the interest you are earning