Kyle and I are both celebrating our 28th birthdays this July. We’ve been flirting with having one year’s income in our Roth IRAs and after the big upswing in the stock market last week I decided to take a closer look to determine if we had finally passed that one year mark. Wouldn’t that be a wonderful birthday present to ourselves?
The one-year’s-income-in-retirement-accounts milestone isn’t some objectively big accomplishment. If you poke around the web for “retirement account balance by X age” information you find a few articles that suggest having one year’s salary saved by age 30 or 35. I actually think this isn’t an ambitious enough goal (especially for relatively debt free people like us), so I am pleased that we are ahead of “schedule!”
I took at peek at our Roth IRA account balances in Mint after the market close on 7/12/2013. (I try to only look at our Roths after big upswing days – that way I always feel good!) This is what I saw:
The top is Kyle’s Roth IRA and the bottom is my Roth IRA. So the total we had in our retirement accounts on that day was $55,628.24. That’s the easy part – how does that compare with our income?
I don’t know about you, but to me that question is a bit tricky! Do I compare it with our income from last year? From this month extrapolated to one year? Should I count side hustle income? How about interest income and investment returns?
I decided to compare our retirement account balances with a few ways of calculating our income.
1) 2012 gross income, straight off our tax return: $55,325
2) June 2013 salaries, up to a year: $55,610
3) W-2 income from the first half of 2012 (salaries plus Kyle’s side hustle), multiplied by 2: $56,791
Looks like we’ve squeaked past that one-year mark if you just take into account our income from our primary jobs, but not if you could Kyle’s small job at church! Darn side hustle increasing our income! We do contribute 15% of all extra income we earn toward our Roths so I think it’s fair to count that income “against” the goal.
Of course with more market volatility the balance may swing back so that we don’t even meet the lower goal, but even with some volatility we should be safely past our highest estimate of one year’s income within a couple months just from our contributions.
We can pat ourselves on our back or whatever in that moment, but by the time we actually turn 30 I expect both of us will have real jobs, which means I’m hoping to fall way behind on this one-year’s-income milestone! That’s one reason why we’ve been particularly aggressive about saving through grad school – 17% may be a high percentage right now for someone not striving for early retirement, but its absolute value isn’t much once we look at our expected/hoped for salaries.
But for now, I’m really happy with our progress. I’ll have another post soon on how we’ve saved so much while living on stipends once we’ve safely reached that one-year goal. Sure, our low income means our target amount was small, but that also means that basic living expenses eat up a large chunk of our income. 🙂
Do you pay any attention to age-based retirement milestones? When you use your income for calculations, how do you estimate it? How are your retirement accounts faring?