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:
|72T IRA Distributions||$10,404||$7,971||$18,375|
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)).
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?
|Health Savings Account: We use Elements Financial to access commission-free, low-cost Vanguard ETFs at TD Ameritrade.