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  • Savings Rate Comparison

    I know the concept of the savings rate has been debated in previous threads, so sorry if I missed the issue I'm bringing up here.  Was doing a mid-year assessment this morning and started thinking more about the savings rate when I was calculating ours.

    It doesn't make sense to use your own or compare savings rates - either based on gross or net - to indicate whether you're on track for meeting your retirement goals (also a function of asset allocation, time, planned spending).  I feel like following the "rule of thumb" of 20% savings of gross for retirement is also too crude a method for determining anything meaningful - whether you're a good saver or whether you'll meet your retirement goals.  For example, a high income earner should have a much easier time reaching that 20% of gross than someone earning $40k a year, and if they are highly risk averse, have less time to retirement or plan on living the high life in retirement that 20% savings rate guidance will likely have them fall short.  IMO, if one begins with the end goal in mind (needs for retirement), as anyone should, then the savings rate is simply a derivative of your short term (year to year) goals to help you achieve the long term goal.  So it seems that the savings rate has little use by itself for internal or external comparison.  However, I can see use in utilizing a savings rate for internal/external checks on one's frugality and to perhaps push them further in that regard.

    Any savings rate used for such purpose would have to be nuanced and scaled to income in order to be meaningful across time and income levels.  To use % of gross is inappropriate because your total saving potential will be largely affected by taxation and credits, which is highly progressive.  Thus, I think a tool for comparison would be something like:

    ((Total Savings/After-Tax Income) / After-Tax Income) x 100,000

    The 100,000 is simply to bring the ratio to a reasonable decimal place.
    Total savings = taxable, pre-tax retirement, HSAs, employer contributions, 529s, principal payments, etc.
    After-Tax Income = Gross Income - (FICA + State + Federal Taxes)

    I realize this isn't perfect, but it accounts for much of what is under the individual's control - which state they choose to live in, the job they chose (with certain retirement benefits), etc. - while also scrubbing out the effect of the vastly different tax rates we all pay.

    Again, this should not affect anything from an individual retirement planning perspective.  But I think it does serve as a useful tool for comparison across all income levels and might help drive someone to push themselves harder on the frugality scale.  Thoughts?

  • #2
    Savings rates are commonly used in comparison but I find that they are difficult to fully assess what an individual is doing. Like you said, every individual is different with regards to what their maximum savings potential is because of things like local and state taxes that can vary by region. You can have a person with a savings rate of 80% and one with 10% and the one saving only 10% may end up having a greater total amount of savings. However, they may not get the lifestyle they want or are used to in retirement.

     

    Personally, I don't look at my savings rate as a percentage but I look at my monthly/yearly savings goal to be able to live a lifestyle I want in retirement as well as to have the option to retire early if I so choose. Based on my savings, I ask myself if I am saving enough. That will leave me with only two options: yes or no.

    Comment


    • #3
      I find it to be a very useful "rule of thumb" or "shoot-from-the-hip" concept for n00bs or for those who either can't or won't get into nuts and bolts. Obv if you want to dissect it and look closely, as you've done, you'll see there are way more moving parts and that it doesn't fully accurately represent the entire picture.

      I like it for the simple calculation of saying if you save 20% for 30 years and earn 5% real at a 4% withdrawal rate, you'll replace just over half (56%) your income. That's a reasonable assumption because you won't be saving 20% anymore, so down to 80%, and you'll be in a lower tax bracket, so say you save another 10%ish, and hopefully won't have a mortgage anymore, so another 10%ish down to 60%ish, and some of that is probably tax-fee anyway, so even continuing similar living/spending habits, it probably comes out to be about the same.

      It is very clear to most of us who frequent this board, esp "FIRE" folks, that there are a million holes in nearly every aspect of the above paragraph: future inflation, tax status of investments, earning term, rate of gain, withdrawal rate, and so on...but still, for *most* new initiates to the world of personal finance and retirement savings, I still posit that it's "good enough."

      I also think that makes the argument for why anything not going specifically to create retirement income, such as paying debts, mortgages, and any other positive-net-worth action, should be excluded from the "savings rate." I understand the extrapolation that one would probably be putting that toward retirement savings were one not eliminating those debts, but it muddies the waters as to the very purpose of what a "savings rate" was for in the first place.

      Comment


      • #4


        ((Total Savings/After-Tax Income) / After-Tax Income) x 100,000 The 100,000 is simply to bring the ratio to a reasonable decimal place. Total savings = taxable, pre-tax retirement, HSAs, employer contributions, 529s, principal payments, etc. After-Tax Income = Gross Income – (FICA + State + Federal Taxes)
        Click to expand...


        We've tracked our gross and net savings rates for the last two years, and we use your definitions for both "total savings" (albeit with no 529, mortgage, or HSA) and "after-tax income." However, we haven't scaled the rates to income.

        Using your formula, our scaled savings rates were 0.21 and 0.19 in 2015 and 2016, respectively.
        Erstwhile Dance Theatre of Dayton performer cum bellhop. Carried (many) bags for a lovely and gracious 59 yo Cyd Charisse. (RIP) Hosted epic company parties after Friday night rehearsals.

        Comment


        • #5
          I can't see the logic of including employer contributions in the numerator but not the denominator. Unless you mean to include that in "gross income".

          Comment


          • #6




            I can’t see the logic of including employer contributions in the numerator but not the denominator. Unless you mean to include that in “gross income”.
            Click to expand...


            .
            Erstwhile Dance Theatre of Dayton performer cum bellhop. Carried (many) bags for a lovely and gracious 59 yo Cyd Charisse. (RIP) Hosted epic company parties after Friday night rehearsals.

            Comment


            • #7
              I have no idea what our savings rate is. It varies every year. This year it could be 30%...or 60%. I am not sure what to put in the numerator and what to put in the denominator.

              I do know how to add up the components of our nest egg, and at the end of the day, that's what matters most to me. If our nest egg were not hitting the appropriate targets, I might be inclined to drill down on the savings rate. It is, so I am not inclined.

              Comment


              • #8
                Agreed with CM.  I include all income of any kind in Gross income, whether it be in the form of traditional salary, employer match, FLP distribution, gifts, dividends, etc.  The idea here is to see how frugal you were with all income from any source.

                Comment


                • #9




                  I know the concept of the savings rate has been debated in previous threads, so sorry if I missed the issue I’m bringing up here.  Was doing a mid-year assessment this morning and started thinking more about the savings rate when I was calculating ours.

                  It doesn’t make sense to use your own or compare savings rates – either based on gross or net – to indicate whether you’re on track for meeting your retirement goals (also a function of asset allocation, time, planned spending).  I feel like following the “rule of thumb” of 20% savings of gross for retirement is also too crude a method for determining anything meaningful – whether you’re a good saver or whether you’ll meet your retirement goals.  For example, a high income earner should have a much easier time reaching that 20% of gross than someone earning $40k a year, and if they are highly risk averse, have less time to retirement or plan on living the high life in retirement that 20% savings rate guidance will likely have them fall short.  IMO, if one begins with the end goal in mind (needs for retirement), as anyone should, then the savings rate is simply a derivative of your short term (year to year) goals to help you achieve the long term goal.  So it seems that the savings rate has little use by itself for internal or external comparison.  However, I can see use in utilizing a savings rate for internal/external checks on one’s frugality and to perhaps push them further in that regard.

                  Any savings rate used for such purpose would have to be nuanced and scaled to income in order to be meaningful across time and income levels.  To use % of gross is inappropriate because your total saving potential will be largely affected by taxation and credits, which is highly progressive.  Thus, I think a tool for comparison would be something like:

                  ((Total Savings/After-Tax Income) / After-Tax Income) x 100,000

                  The 100,000 is simply to bring the ratio to a reasonable decimal place.
                  Total savings = taxable, pre-tax retirement, HSAs, employer contributions, 529s, principal payments, etc.
                  After-Tax Income = Gross Income – (FICA + State + Federal Taxes)

                  I realize this isn’t perfect, but it accounts for much of what is under the individual’s control – which state they choose to live in, the job they chose (with certain retirement benefits), etc. – while also scrubbing out the effect of the vastly different tax rates we all pay.

                  Again, this should not affect anything from an individual retirement planning perspective.  But I think it does serve as a useful tool for comparison across all income levels and might help drive someone to push themselves harder on the frugality scale.  Thoughts?
                  Click to expand...


                  That's fine for someone who reads this forum. Now imagine the typical doc. He asks you "how much do I need to save for retirement" and you sense he will zone out in 1 sentence. What do you say? "I say, something in the neighborhood of 20% of your gross for retirement."

                  If he does that, will he probably be fine? Probably. How many people do you know who save 20% of gross for retirement who won't be fine? I don't know any.

                  As noted above, 20% at 5% real for 30 years divided by 4% replaces 56% of income. SS on top of that ought to get you up to 70% or so, which is more than enough for most docs given that 10% or so is going to payroll taxes and 20% to savings while working. In fact, most docs will probably be fine on much less than 70% of their pre-tax gross income in retirement. More like 25-50%, depending on how good of savers they are.
                  Helping those who wear the white coat get a fair shake on Wall Street since 2011

                  Comment


                  • #10







                    I know the concept of the savings rate has been debated in previous threads, so sorry if I missed the issue I’m bringing up here.  Was doing a mid-year assessment this morning and started thinking more about the savings rate when I was calculating ours.

                    It doesn’t make sense to use your own or compare savings rates – either based on gross or net – to indicate whether you’re on track for meeting your retirement goals (also a function of asset allocation, time, planned spending).  I feel like following the “rule of thumb” of 20% savings of gross for retirement is also too crude a method for determining anything meaningful – whether you’re a good saver or whether you’ll meet your retirement goals.  For example, a high income earner should have a much easier time reaching that 20% of gross than someone earning $40k a year, and if they are highly risk averse, have less time to retirement or plan on living the high life in retirement that 20% savings rate guidance will likely have them fall short.  IMO, if one begins with the end goal in mind (needs for retirement), as anyone should, then the savings rate is simply a derivative of your short term (year to year) goals to help you achieve the long term goal.  So it seems that the savings rate has little use by itself for internal or external comparison.  However, I can see use in utilizing a savings rate for internal/external checks on one’s frugality and to perhaps push them further in that regard.

                    Any savings rate used for such purpose would have to be nuanced and scaled to income in order to be meaningful across time and income levels.  To use % of gross is inappropriate because your total saving potential will be largely affected by taxation and credits, which is highly progressive.  Thus, I think a tool for comparison would be something like:

                    ((Total Savings/After-Tax Income) / After-Tax Income) x 100,000

                    The 100,000 is simply to bring the ratio to a reasonable decimal place.
                    Total savings = taxable, pre-tax retirement, HSAs, employer contributions, 529s, principal payments, etc.
                    After-Tax Income = Gross Income – (FICA + State + Federal Taxes)

                    I realize this isn’t perfect, but it accounts for much of what is under the individual’s control – which state they choose to live in, the job they chose (with certain retirement benefits), etc. – while also scrubbing out the effect of the vastly different tax rates we all pay.

                    Again, this should not affect anything from an individual retirement planning perspective.  But I think it does serve as a useful tool for comparison across all income levels and might help drive someone to push themselves harder on the frugality scale.  Thoughts?
                    Click to expand…


                    That’s fine for someone who reads this forum. Now imagine the typical doc. He asks you “how much do I need to save for retirement” and you sense he will zone out in 1 sentence. What do you say? “I say, something in the neighborhood of 20% of your gross for retirement.”

                    If he does that, will he probably be fine? Probably. How many people do you know who save 20% of gross for retirement who won’t be fine? I don’t know any.

                    As noted above, 20% at 5% real for 30 years divided by 4% replaces 56% of income. SS on top of that ought to get you up to 70% or so, which is more than enough for most docs given that 10% or so is going to payroll taxes and 20% to savings while working. In fact, most docs will probably be fine on much less than 70% of their pre-tax gross income in retirement. More like 25-50%, depending on how good of savers they are.
                    Click to expand...


                    Sure, saying 20% to a room of docs at the start of their career might be a broadly safe recommendation, but it comes with several asterisks.  What if the room of docs has people who just started saving in their early 50s, or docs in their 30s who want to retire in 20 years on half their income?  The 20% figure misses those nuanced scenarios, making it dangerous to follow or advise unless you are talking to a homogenous group of young docs planning on long careers and living modestly in retirement.  As for the typical Doc, I know we hear the horror stories but are there studies on doctors out in practice and how good/bad they are with retirement planning?  Lots of selection bias unless properly studied.

                    Comment


                    • #11










                      I know the concept of the savings rate has been debated in previous threads, so sorry if I missed the issue I’m bringing up here.  Was doing a mid-year assessment this morning and started thinking more about the savings rate when I was calculating ours.

                      It doesn’t make sense to use your own or compare savings rates – either based on gross or net – to indicate whether you’re on track for meeting your retirement goals (also a function of asset allocation, time, planned spending).  I feel like following the “rule of thumb” of 20% savings of gross for retirement is also too crude a method for determining anything meaningful – whether you’re a good saver or whether you’ll meet your retirement goals.  For example, a high income earner should have a much easier time reaching that 20% of gross than someone earning $40k a year, and if they are highly risk averse, have less time to retirement or plan on living the high life in retirement that 20% savings rate guidance will likely have them fall short.  IMO, if one begins with the end goal in mind (needs for retirement), as anyone should, then the savings rate is simply a derivative of your short term (year to year) goals to help you achieve the long term goal.  So it seems that the savings rate has little use by itself for internal or external comparison.  However, I can see use in utilizing a savings rate for internal/external checks on one’s frugality and to perhaps push them further in that regard.

                      Any savings rate used for such purpose would have to be nuanced and scaled to income in order to be meaningful across time and income levels.  To use % of gross is inappropriate because your total saving potential will be largely affected by taxation and credits, which is highly progressive.  Thus, I think a tool for comparison would be something like:

                      ((Total Savings/After-Tax Income) / After-Tax Income) x 100,000

                      The 100,000 is simply to bring the ratio to a reasonable decimal place.
                      Total savings = taxable, pre-tax retirement, HSAs, employer contributions, 529s, principal payments, etc.
                      After-Tax Income = Gross Income – (FICA + State + Federal Taxes)

                      I realize this isn’t perfect, but it accounts for much of what is under the individual’s control – which state they choose to live in, the job they chose (with certain retirement benefits), etc. – while also scrubbing out the effect of the vastly different tax rates we all pay.

                      Again, this should not affect anything from an individual retirement planning perspective.  But I think it does serve as a useful tool for comparison across all income levels and might help drive someone to push themselves harder on the frugality scale.  Thoughts?
                      Click to expand…


                      That’s fine for someone who reads this forum. Now imagine the typical doc. He asks you “how much do I need to save for retirement” and you sense he will zone out in 1 sentence. What do you say? “I say, something in the neighborhood of 20% of your gross for retirement.”

                      If he does that, will he probably be fine? Probably. How many people do you know who save 20% of gross for retirement who won’t be fine? I don’t know any.

                      As noted above, 20% at 5% real for 30 years divided by 4% replaces 56% of income. SS on top of that ought to get you up to 70% or so, which is more than enough for most docs given that 10% or so is going to payroll taxes and 20% to savings while working. In fact, most docs will probably be fine on much less than 70% of their pre-tax gross income in retirement. More like 25-50%, depending on how good of savers they are.
                      Click to expand…


                      Sure, saying 20% to a room of docs at the start of their career might be a broadly safe recommendation, but it comes with several asterisks.  What if the room of docs has people who just started saving in their early 50s, or docs in their 30s who want to retire in 20 years on half their income?  The 20% figure misses those nuanced scenarios, making it dangerous to follow or advise unless you are talking to a homogenous group of young docs planning on long careers and living modestly in retirement.  As for the typical Doc, I know we hear the horror stories but are there studies on doctors out in practice and how good/bad they are with retirement planning?  Lots of selection bias unless properly studied.
                      Click to expand...


                      I think you overestimate the danger of telling people to save more. I assure you that the vast majority of people I tell to save 20% of gross are saving less than 20% at the time I tell them that. Very few would be cutting back to 20% and I suspect most of those I tell don't increase to 20% just because I told them to, but they probably do save a little more. So I don't see it as particularly dangerous advice. You seem a little out of touch with what's really going on out there in doctor-land. Trying polling a group of docs who don't read FIRE blogs about their savings rate some time. You'll be horrified. I'd bet the percentage saving over 20% of gross is under 5%.
                      Helping those who wear the white coat get a fair shake on Wall Street since 2011

                      Comment


                      • #12













                        I know the concept of the savings rate has been debated in previous threads, so sorry if I missed the issue I’m bringing up here.  Was doing a mid-year assessment this morning and started thinking more about the savings rate when I was calculating ours.

                        It doesn’t make sense to use your own or compare savings rates – either based on gross or net – to indicate whether you’re on track for meeting your retirement goals (also a function of asset allocation, time, planned spending).  I feel like following the “rule of thumb” of 20% savings of gross for retirement is also too crude a method for determining anything meaningful – whether you’re a good saver or whether you’ll meet your retirement goals.  For example, a high income earner should have a much easier time reaching that 20% of gross than someone earning $40k a year, and if they are highly risk averse, have less time to retirement or plan on living the high life in retirement that 20% savings rate guidance will likely have them fall short.  IMO, if one begins with the end goal in mind (needs for retirement), as anyone should, then the savings rate is simply a derivative of your short term (year to year) goals to help you achieve the long term goal.  So it seems that the savings rate has little use by itself for internal or external comparison.  However, I can see use in utilizing a savings rate for internal/external checks on one’s frugality and to perhaps push them further in that regard.

                        Any savings rate used for such purpose would have to be nuanced and scaled to income in order to be meaningful across time and income levels.  To use % of gross is inappropriate because your total saving potential will be largely affected by taxation and credits, which is highly progressive.  Thus, I think a tool for comparison would be something like:

                        ((Total Savings/After-Tax Income) / After-Tax Income) x 100,000

                        The 100,000 is simply to bring the ratio to a reasonable decimal place.
                        Total savings = taxable, pre-tax retirement, HSAs, employer contributions, 529s, principal payments, etc.
                        After-Tax Income = Gross Income – (FICA + State + Federal Taxes)

                        I realize this isn’t perfect, but it accounts for much of what is under the individual’s control – which state they choose to live in, the job they chose (with certain retirement benefits), etc. – while also scrubbing out the effect of the vastly different tax rates we all pay.

                        Again, this should not affect anything from an individual retirement planning perspective.  But I think it does serve as a useful tool for comparison across all income levels and might help drive someone to push themselves harder on the frugality scale.  Thoughts?
                        Click to expand…


                        That’s fine for someone who reads this forum. Now imagine the typical doc. He asks you “how much do I need to save for retirement” and you sense he will zone out in 1 sentence. What do you say? “I say, something in the neighborhood of 20% of your gross for retirement.”

                        If he does that, will he probably be fine? Probably. How many people do you know who save 20% of gross for retirement who won’t be fine? I don’t know any.

                        As noted above, 20% at 5% real for 30 years divided by 4% replaces 56% of income. SS on top of that ought to get you up to 70% or so, which is more than enough for most docs given that 10% or so is going to payroll taxes and 20% to savings while working. In fact, most docs will probably be fine on much less than 70% of their pre-tax gross income in retirement. More like 25-50%, depending on how good of savers they are.
                        Click to expand…


                        Sure, saying 20% to a room of docs at the start of their career might be a broadly safe recommendation, but it comes with several asterisks.  What if the room of docs has people who just started saving in their early 50s, or docs in their 30s who want to retire in 20 years on half their income?  The 20% figure misses those nuanced scenarios, making it dangerous to follow or advise unless you are talking to a homogenous group of young docs planning on long careers and living modestly in retirement.  As for the typical Doc, I know we hear the horror stories but are there studies on doctors out in practice and how good/bad they are with retirement planning?  Lots of selection bias unless properly studied.
                        Click to expand…


                        I think you overestimate the danger of telling people to save more. I assure you that the vast majority of people I tell to save 20% of gross are saving less than 20% at the time I tell them that. Very few would be cutting back to 20% and I suspect most of those I tell don’t increase to 20% just because I told them to, but they probably do save a little more. So I don’t see it as particularly dangerous advice. You seem a little out of touch with what’s really going on out there in doctor-land. Trying polling a group of docs who don’t read FIRE blogs about their savings rate some time. You’ll be horrified. I’d bet the percentage saving over 20% of gross is under 5%.
                        Click to expand...


                        First, is there an actual poll to back that up?  Keep in mind you are hearing disaster stories and people looking for help because they know they have a problem.  Again, selection bias.  The Medscape net worth survey would seem to contradict your assertion.  Secondly, I think people who you give advice to and even many on this forum need to save more than 20%, either because they started late, want to retire early, are starting at a market peak, etc.  Sure, 20% may be better than 5%, but if they need to be at 30% and think they've succeeded when they get to 20 that is where this 20% advice falls short (among many other instances).

                        Comment


                        • #13






                           
                          Click to expand…


                          I think you overestimate the danger of telling people to save more. I assure you that the vast majority of people I tell to save 20% of gross are saving less than 20% at the time I tell them that. Very few would be cutting back to 20% and I suspect most of those I tell don’t increase to 20% just because I told them to, but they probably do save a little more. So I don’t see it as particularly dangerous advice. You seem a little out of touch with what’s really going on out there in doctor-land. Trying polling a group of docs who don’t read FIRE blogs about their savings rate some time. You’ll be horrified. I’d bet the percentage saving over 20% of gross is under 5%.
                          Click to expand...


                          The power of a ROT like 20% is that once you internalize it it becomes a MINIMUM.

                          Like Jim said there are so many docs out there who are doing much less, sometimes basically nothing.

                          You can't draw any meaningful conclusions about the world from this forum or the comments much as I enjoy them. This is the Pro Bowl of physicians in terms of personal finance. Here we're arguing about 20% vs 25% savings rate and how you calculate mortgage interest tax deduction into your 4% loan to decide if you should refi to a 15 year or just pay early.

                          Just look around the doctor's parking lot at any hospital in America to see what many docs are doing instead.

                          Comment


                          • #14
















                            I know the concept of the savings rate has been debated in previous threads, so sorry if I missed the issue I’m bringing up here.  Was doing a mid-year assessment this morning and started thinking more about the savings rate when I was calculating ours.

                            It doesn’t make sense to use your own or compare savings rates – either based on gross or net – to indicate whether you’re on track for meeting your retirement goals (also a function of asset allocation, time, planned spending).  I feel like following the “rule of thumb” of 20% savings of gross for retirement is also too crude a method for determining anything meaningful – whether you’re a good saver or whether you’ll meet your retirement goals.  For example, a high income earner should have a much easier time reaching that 20% of gross than someone earning $40k a year, and if they are highly risk averse, have less time to retirement or plan on living the high life in retirement that 20% savings rate guidance will likely have them fall short.  IMO, if one begins with the end goal in mind (needs for retirement), as anyone should, then the savings rate is simply a derivative of your short term (year to year) goals to help you achieve the long term goal.  So it seems that the savings rate has little use by itself for internal or external comparison.  However, I can see use in utilizing a savings rate for internal/external checks on one’s frugality and to perhaps push them further in that regard.

                            Any savings rate used for such purpose would have to be nuanced and scaled to income in order to be meaningful across time and income levels.  To use % of gross is inappropriate because your total saving potential will be largely affected by taxation and credits, which is highly progressive.  Thus, I think a tool for comparison would be something like:

                            ((Total Savings/After-Tax Income) / After-Tax Income) x 100,000

                            The 100,000 is simply to bring the ratio to a reasonable decimal place.
                            Total savings = taxable, pre-tax retirement, HSAs, employer contributions, 529s, principal payments, etc.
                            After-Tax Income = Gross Income – (FICA + State + Federal Taxes)

                            I realize this isn’t perfect, but it accounts for much of what is under the individual’s control – which state they choose to live in, the job they chose (with certain retirement benefits), etc. – while also scrubbing out the effect of the vastly different tax rates we all pay.

                            Again, this should not affect anything from an individual retirement planning perspective.  But I think it does serve as a useful tool for comparison across all income levels and might help drive someone to push themselves harder on the frugality scale.  Thoughts?
                            Click to expand…


                            That’s fine for someone who reads this forum. Now imagine the typical doc. He asks you “how much do I need to save for retirement” and you sense he will zone out in 1 sentence. What do you say? “I say, something in the neighborhood of 20% of your gross for retirement.”

                            If he does that, will he probably be fine? Probably. How many people do you know who save 20% of gross for retirement who won’t be fine? I don’t know any.

                            As noted above, 20% at 5% real for 30 years divided by 4% replaces 56% of income. SS on top of that ought to get you up to 70% or so, which is more than enough for most docs given that 10% or so is going to payroll taxes and 20% to savings while working. In fact, most docs will probably be fine on much less than 70% of their pre-tax gross income in retirement. More like 25-50%, depending on how good of savers they are.
                            Click to expand…


                            Sure, saying 20% to a room of docs at the start of their career might be a broadly safe recommendation, but it comes with several asterisks.  What if the room of docs has people who just started saving in their early 50s, or docs in their 30s who want to retire in 20 years on half their income?  The 20% figure misses those nuanced scenarios, making it dangerous to follow or advise unless you are talking to a homogenous group of young docs planning on long careers and living modestly in retirement.  As for the typical Doc, I know we hear the horror stories but are there studies on doctors out in practice and how good/bad they are with retirement planning?  Lots of selection bias unless properly studied.
                            Click to expand…


                            I think you overestimate the danger of telling people to save more. I assure you that the vast majority of people I tell to save 20% of gross are saving less than 20% at the time I tell them that. Very few would be cutting back to 20% and I suspect most of those I tell don’t increase to 20% just because I told them to, but they probably do save a little more. So I don’t see it as particularly dangerous advice. You seem a little out of touch with what’s really going on out there in doctor-land. Trying polling a group of docs who don’t read FIRE blogs about their savings rate some time. You’ll be horrified. I’d bet the percentage saving over 20% of gross is under 5%.
                            Click to expand…


                            First, is there an actual poll to back that up?  Keep in mind you are hearing disaster stories and people looking for help because they know they have a problem.  Again, selection bias.  The Medscape net worth survey would seem to contradict your assertion.  Secondly, I think people who you give advice to and even many on this forum need to save more than 20%, either because they started late, want to retire early, are starting at a market peak, etc.  Sure, 20% may be better than 5%, but if they need to be at 30% and think they’ve succeeded when they get to 20 that is where this 20% advice falls short (among many other instances).
                            Click to expand...


                            Are you reading the same Medscape net worth survey I am? The one where 1 out of 8 docs in their sixties have a net worth of < $500K? Even if you look at all docs, the data shows 25% <$500K, 25% $500-$1M, $25% $1-2M, and 25% > $2 M. The average doc is definitely NOT saving 20% of gross income for retirement.

                            At any rate, try telling a random attending in the doctor's lounge that he should save 1/3 of his gross income (while he's paying 1/3 of it to taxes.) See how that goes for you. They'll probably look at you like you have a horn coming out of your forehead. I feel like I've won if I can just get them to calculate their savings rate and realize they're nowhere near the 20% rule of thumb.

                            All rules of thumb have asterisks. That doesn't mean they're not useful too. But if you put too many asterisks on a rule of thumb, nobody remembers it at the end of the lecture/blog post/podcast/video/book etc.

                            Frankly, I don't view my job as helping the top 10% of doctors reach FIRE a year sooner. PoF can do that just fine without me. I'm trying to get the bottom 25% to reach a dignified retirement at a time of their choosing along with a few luxuries along the way and get the financial services industry to quit seeing doctors as whales to be harpooned.
                            Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                            • #15




                              get the financial services industry to quit seeing doctors as whales to be harpooned.
                              Click to expand...


                              would you make that the tagline on your blog/cast instead of "helping those who wear the white coat..."

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