Financial Experts say...

[LETSGOBROWNIES]

It’s a general rule to give everyone a basic idea of where to be, but everyone will be different.

You don’t have to be at that number by that age, but it should serve as a good marker that perhaps you’re a bit behind and will need to make up for that in the future if you aren’t.

Honestly though I feel like most of these are just clickbait for people who want to see how they stack up to others on a topic people don’t often openly discuss with others.

[ET80]

1 hour ago, Bullet Club said:

You should have 2x your annual salary saved up by the age of 35

Welp, I'm boned.

[Mox]

9 minutes ago, EliteTexan80 said:

Welp, I'm boned.

According to the numbers provided 85% of people said they did not or will not reach that number by 35.

[tom cody]

I saw that. I'm 35 now. More or less a seasonal worker. I have a savings plan plus money saved up. I'm not in debt but I feel having twice your annual salary saved up at 35 is a bit much.

[ramssuperbowl99]

1 hour ago, LETSGOBROWNIES said:

It’s a general rule to give everyone a basic idea of where to be, but everyone will be different.

You don’t have to be at that number by that age, but it should serve as a good marker that perhaps you’re a bit behind and will need to make up for that in the future if you aren’t.

Honestly though I feel like most of these are just clickbait for people who want to see how they stack up to others on a topic people don’t often openly discuss with others.

I don't disagree, but as someone who knows PF and doesn't mind talking about it, I'd rather have that as an excuse to start a conversation and at least lead the horse to water. Hopefully someone who isn't saving changes.

[skywindO2]

When you say saved up, does that mean just in my savings account or in a retirement fund? I'm at about 1x salary in my 401k at 31 but my actual savings is much less. I don't see how it's going double in 4 years but I also don't really know how money works. 

[LETSGOBROWNIES]

34 minutes ago, ramssuperbowl99 said:

I don't disagree, but as someone who knows PF and doesn't mind talking about it, I'd rather have that as an excuse to start a conversation and at least lead the horse to water. Hopefully someone who isn't saving changes.

I don’t disagree, the more folks discuss this stuff the better off they are.

[Forge]

1 hour ago, Bullet Club said:

According to the numbers provided 85% of people said they did not or will not reach that number by 35.

I'm an underwriter by trade, and I can vouch for this to some extent. Very seldom do I see someone with that kind of savings when looking at their financials. 

[RavensTillIDie]

7 minutes ago, Forge said:

I'm an underwriter by trade, and I can vouch for this to some extent. Very seldom do I see someone with that kind of savings when looking at their financials. 

Just out of curiosity, what exactly do you look at when assessing someone's financials? And in regards to savings, do you only look at liquid assets or also things such as retirements accounts, long term savings vehicles, etc?

 

As for the topic at hand, I'm essentially on track at 28 years old (when factoring in retirement accounts) to reach/exceed 2X my salary at 35. However, I've been pouring a ton of my cash on hand into investment opportunities and my side business, so aside from the 25% of our paycheck (post taxes) that my wife and I put into our joint savings account, it doesn't leave much room for additional savings. I don't see the point of just letting all your money stay idle.

[Forge]

33 minutes ago, RavensTillIDie said:

Just out of curiosity, what exactly do you look at when assessing someone's financials? And in regards to savings, do you only look at liquid assets or also things such as retirements accounts, long term savings vehicles, etc?

This is almost never an issue any more unless it a huge loan (680K and up is considered jumbo, 850K and up considered super jumbo which has very restrictive lending limits for most financial institutions) or a non primary / single family home. Investors nowadays almost seem to treat assets as an after thought when it comes to buying a primary residence sub 680K. YOu can go up to 105 CLTV (combined loan to value via multiple mortgages) 97% ltv (loan to value - based on a single mortgage) and some lenders will still have 100% ltv programs that they portfolio (credit unions most often). You really don't have to have any money saved - the funds can all come from a gift; at one point, for a lot of investors, there was a minimum borrower contribution.  Now that typically only applies for non primary residences or larger loan amounts.

There was a time when retirement, stocks, etc were downgraded from their current balance (you were allowed to use 60% - 70% of the current balance depending on investor), but now you can actually take them at pretty much face value, which really makes no sense given if you w/d it you're getting hit with 25% taxes for the most part along with potentially a 10% penalty). Even if it were a loan, most plans have restrictions on what kind of loan you can take out (up to 50% of vested balance or 50K), so 100% usage just seems like an odd decision. But lending has really loosened up compared to where it was 8 years ago.  So really, retirement / investment holds no less weight than a standard bank account for underwriting purposes (there are still some investors that only use a max percentage of the balance though), though there may be a couple of more hoops to jump through (may have to document terms of withdraw depending on balance in account, etc). When looking at liquid accounts, it's almost more about what's going in and coming out. Large deposits need to be sourced, and you have to go through the transactions to identify any possible undisclosed recurring debt, so combing through the liquid financials is less about what they actually have saved and more about where their money is going and coming from. On an exception basis, you may look at it and see if they have problems keeping accounts positive, see what the saving history itself looks like (are they spending more than they are depositing and the like), but again, this is more or less exception based. Otherwise, the balance is just kind of the balance and so long as they meet the cash to close requirement, even if they have absolutely no money post closing. 

When the property is a jumbo, or multi family home or investment property, assets become more of an issue, but again, most of them, liquid / retirement / investment or brokerage accounts, are counted just the same. 

Personal property (such as autos) aren't given any weight. Real property, additional owned homes, aren't given any weight with regards to your assets unless they are being sold prior. OTherwise, they could actually force you to have more saved up (if you are purchasing an investment property, for example, you need to have a certain amount of reserves to cover the subject property investment, and then additional reserves for each and every additional financed investment property). 

[DontTazeMeBro]

Whoever said this probably inherited and sold a house when they were 28

[RavensTillIDie]

8 minutes ago, Forge said:

This is almost never an issue any more unless it a huge loan (680K and up is considered jumbo, 850K and up considered super jumbo which has very restrictive lending limits for most financial institutions) or a non primary / single family home. Investors nowadays almost seem to treat assets as an after thought when it comes to buying a primary residence sub 680K. YOu can go up to 105 CLTV (combined loan to value via multiple mortgages) 97% ltv (loan to value - based on a single mortgage) and some lenders will still have 100% ltv programs that they portfolio (credit unions most often). You really don't have to have any money saved - the funds can all come from a gift; at one point, for a lot of investors, there was a minimum borrower contribution.  Now that typically only applies for non primary residences or lower loan amounts.

There was a time when retirement, stocks, etc were downgraded from their current balance (you were allowed to use 60% - 70% of the current balance depending on investor), but now you can actually take them at pretty much face value, which really makes no sense given if you w/d it you're getting hit with 25% taxes for the most part along with potentially a 10% penalty). Even if it were a loan, most plans have restrictions on what kind of loan you can take out (up to 50% of vested balance or 50K), so 100% usage just seems like an odd decision. But lending has really loosened up compared to where it was 8 years ago.  So really, retirement / investment holds no less weight than a standard bank account for underwriting purposes (there are still some investors that only use a max percentage of the balance though), though there may be a couple of more hoops to jump through (may have to document terms of withdraw depending on balance in account, etc). When looking at liquid accounts, it's almost more about what's going in and coming out. Large deposits need to be sourced, and you have to go through the transactions to identify any possible undisclosed recurring debt, so combing through the liquid financials is less about what they actually have saved and more about where their money is going and coming from. On an exception basis, you may look at it and see if they have problems keeping accounts positive, see what the saving history itself looks like (are they spending more than they are depositing and the like), but again, this is more or less exception based. Otherwise, the balance is just kind of the balance and so long as they meet the cash to close requirement, even if they have absolutely no money post closing. 

When the property is a jumbo, or multi family home or investment property, assets become more of an issue, but again, most of them, liquid / retirement / investment or brokerage accounts, are counted just the same. 

Personal property (such as autos) aren't given any weight. Real property, additional owned homes, aren't given any weight with regards to your assets unless they are being sold prior. OTherwise, they could actually force you to have more saved up (if you are purchasing an investment property, for example, you need to have a certain amount of reserves to cover the subject property investment, and then additional reserves for each and every additional financed investment property). 

Damn, was not expecting that level of detail, but I certainly appreciate the response. Thank you!

[ramssuperbowl99]

@Forge thanks for the explanation. That is fascinating. The fact that the equation is not "has this person been able to make meaningful savings for their house" and is instead "to what degree could we keep this person above water" is... disheartening.

 

[ramssuperbowl99]

1 hour ago, skywindO2 said:

When you say saved up, does that mean just in my savings account or in a retirement fund? I'm at about 1x salary in my 401k at 31 but my actual savings is much less. I don't see how it's going double in 4 years but I also don't really know how money works. 

It's savings earmarked for retirement. So if your savings account is more an emergency fund, or perhaps a car fund, that wouldn't count. Your 401k would, unless you were planning on using that money as a downpayment for a house or something (don't do that).

1x salary at 31 is a very nice start.

[MacReady]

Done.  With five years to spare.  No kids.