Our 2015 Savings Rate


NOTA BENE:  our 2015 salary and tax information was updated on February 5th, 2016.  These updates resulted in higher savings rates than previously estimated.

Greetings current and future millionaires!  A reader wanted to know about our savings rate, and I realized that I needed to put this figure to paper.  Since June represented the midway point of the year, I projected our annual income by simply doubling the amounts of our June pay stubs.   Basically, I opened up a spreadsheet,  doubled our June pay stubs, and entered the amounts.  Within in 10 minutes I had some numbers to work with.  (I can’t believe that I had never made this calculation before!)

As the chart below indicates, we have three sources of income:  the salaries from our jobs, our 72t IRA distributions, and our 457 distributions.  From those numbers I was able to determine our savings rate as a percentage of our salaries and another as a percentage of our total income.  The varying savings rate estimates are based on our 2015 savings goal of $106,250.  Our savings goal of $106,250 should result in a savings rate of 85.99%  ($106,250 / $123,562) as percentage of our salaries and 63.65% ($106,250 / 166,937) as a percentage of our total income.  Take a look:

2015 Salary and Other Income
72T IRA Distributions$10,404$7,971$18,375
457 Distributions$10,000$15,000$25,000
Savings Rate of Salaries = 85.99%
Savings Rate of Total Income = 63.65%

When you consider that we also have taxes and benefits deducted from our paycheck, our savings rates look even better.  In 2015 we will pay almost $23,000 in taxes and benefits in 2015.  In the table below I included our 2015 federal and state income tax estimates based on our 2015 free money.  As the numbers show our 2015 effective savings rate of our salaries should be 105.96% ($106,250 / ($123,562 – $23,292)), and our effective savings rate of our total income should be 73.97% ($106,250 / (166,937 – $23,292)).

2015 Taxes and Benefits
Social Security$3,789$3,616$7,202
Federal Income$423$422$845
Georgia Income$802$801$1,603
Total Taxes$5,900$5,685$11,585
Georgia TRS$4,002$3,584$7,322
Health Insurance$2,717$0$2,706
Dental Insurance$0$1,237$1,232
Vision Insurance$0$168$168
Total Benefits$6,718$4,988$11,707
Total Taxes and Benefits = $23,292
Savings Rate of Salaries - (Taxes + Benefits) = 105.96%
Savings Rate of Total Income - (Taxes + Benefits) = 73.97%

Depending on how you look at it, it seems that we’re saving from 64% to 106% of our money.  Could we do better?  Sure, ideally we could save 100% of our salaries AND learn to live on less money.  That said, I am happy with our 2015 savings prowess thus far.  What’s your savings rate for 2015?  Are you going to hit your savings goals?

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  1. Hi Ed! I don’t track this either. My expenses are basically as low as I feel comfortable pushing them, and I just save/invest everything else. Personally, I don’t really care what my savings divided by my income is. At the end of the day I’m just trying to get investable assets that I can live off of. But nonetheless, your savings rate is extremely high. Good work!

    • Ed Mills

      Like you, I pay attention to other numbers. My first priority is to hit our savings goal for the year. Next, I try to keep our 2015 income at about $43,050 (our free money + 10%-bracket). Focusing on those numbers should keep our savings high and our spending low…a reliable path to financial independence! Thanks for the feedback. Ed

  2. My savings rate is similar to yours. Maybe even a bit higher. My savings goal is about double. Already maxed out 401K by mid-March, and am at 101% of my goal at this point in the year.

    A few heavy expenses coming up, but I should make it.

    • Ed Mills

      Nice, I love the 401k fully funded by mid-March part! It is amazing what a high savings rate does for your bottom line. I look forward to checking out your website. Keep hammering and good luck on your savings goals.

  3. Joe

    Hey Ed, I know your son is still a ways from attending college, but I see you are saving in 529 and ESA accounts. Being a teacher, have you ever thought of getting a job as a college professor when the time comes and taking advantage of tuition remission?


    • Ed Mills

      I hadn’t thought about that, but I think you’re on to something. I’m sure I could find a job as an ESL or Spanish teacher somewhere; I could also coach basketball if needed. I already think we have enough money in our son’s education accounts because I plan on showing how to get an economical college degree via CLEP tests, community college, and in-state tuition. There are so many possibilities out there for those who are flexible and unconventional. Thanks for your thoughts. Ed

      • Yeah, speaking of which. When is that blog post on hacking a college degree in 12 months for under $7,000 coming out? My daughter will be graduating high school soonish and I sure could use some info like that!

        • Greeings Mrs. Hazleneut, I’m currently finishing “our Trillionaire Plan,” and the degree hacking post is next. Thanks for reading and sorry for the delay…my job is a time suck!

    • Dan

      Many school offer free college if you make under the yearly tuition.

      Think Harvard’s current $60k floor you must stay under. 🙂

  4. Jonathan

    Maybe I’m missing something. It appears from the above article that you are earning money from your salary, 72t and 457. I understand the salary and 72t withdrawals because you have to follow the IRS rules, but why are you withdrawing money from your 457 just to resave the money? Why don’t you just stop withdrawing money from your 457?

    • Jonathan,
      Good questions, why do we do this? The withdrawals from our IRAs ($18K) and 457 ($25k) total $43K; that figure represents our “free money” + the remainder of the 10% tax bracket. By taking 457 distributions early in the year we are able to save almost all of our salaries going forward. In my eyes, the distributions help us to maximize our savings. By providing us with money at the beginning of the year, our 457 distributions help us cover living expenses and save the majority of the salary from our jobs.

      In the future we hope to live off the $18K of IRA distributions without taking 457 distributions. Since we’re selling our home this month (ie, no more mortgage), we should be able to get by in 2016 without the 457 distribution. In 2016, we plan on doing a Roth conversion of $25K in place of taking 457 distributions.

      Are we robbing Peter to pay Paul? Maybe, but I don’t think we could have saved as much we did this year without the cash flow provided by our 457 distributions. Thanks for the question and thanks for reading. Ed

  5. So, if you’re selling your house where are you planning to live? Are you going to rent something? Do you have enough equity to buy something in cash? I just wonder because it sounds like you will be saving quite a bit after selling, but I assume you still plan to live somewhere other than under a bridge. This sounds really interesting. I am now quite curious. And good luck with the sale. I hate selling houses (and I’ve only done it once).

    • We’re already renting a 2/1.5 townhouse in our new town. Our house in LaGrange, GA was very nice, but it was simply too much home for the three of us. For now, we’re going to continue renting until we blast off for some travel. Our lives are going to get really interesting around June of 2016.

      We going to take a little loss of the sale of the home, but we will experience increased freedom. Stay tuned…

  6. Hope

    Hello Ed,
    You and your family are such an inspiration! I love your story and how you started “a little later” but were still able to meet some awesome savings goals.
    I’m currently listening to your podcast on FI’s website and was wondering about a 72t? Is this instead of a 401k?
    Me and my husband are both 27 with a 1 year old. We currently max out our IRA’s but I’m wondering where should we invest the extra savings each year? We don’t currently have access to any 401ks.
    Any info would be greatly appreciated,

    • Greetings Hope,
      First, congrats on the birth of your child; the joys of parenthood are infinite! The 72T I cited in the podcasts refers to the IRS tax code provision that allows you to tap your retirement plans before 59.5 WITHOUT the 10% early withdrawal penalty. At your age I would not consider this option, instead I would consider setting up a Roth Conversion Ladder at some point in the future. Here are some great blog post regarding the subject:

      Root of Good’s Roth IRA Conversion Ladder
      Go Curry Cracker: Never Pay Taxes Again
      The Madfientist: Traditional vs. Roth IRA

      It seems to me that you two should consider hammering your traditional IRAs with an eye on converting them to Roth IRAs sometime in the future. As for additional retirement savings, you could suggest to your employer that they consider offering a 401k-style retirement plan. If you’re self-employed, you could set up an individual 401k plan with Vanguard. As you can probably tell from my blog posts, I would quit my job to take a job with better retirement plans if I were in your shoes.

      If had any extra savings, I would probably invest them into a taxable mutual find account at Vanguard. I’d simply invest them in the VTSAX. If you have a HDHP, you could also open an HSA account which would allow to deduct another $6,650 a year from your taxes. Until you gain access to some other tax-deferred accounts, I would 1.) consider hammering my traditional IRAs, and 2.) consider opening a taxable mutual fund account. I hope this helps and good luck going forward. Ed

      Until you gain access to

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