Dear Quentin,

My wife and I, both 33, are lucky enough to have high-paying jobs in New York City.  

Collectively, we make $270,000 a year.  We own a home in Seattle, worth $500,000, that is rented out and covers the mortgage and cash flow. We have zero debt outside of our mortgage. We have an emergency fund of $45,000. We rent our house in Brooklyn. Collectively, we max out our 401(k)s, and I receive a pension of $8,500 a year, so we’re saving approximately $53,000 a year toward retirement.  

We have about $75,000 in our retirement accounts from our work in Seattle. We have no kids and likely don’t plan on having any. We’d like to retire at 50 to 55. My question is: Are we saving enough? We live a rather lavish lifestyle. We travel a lot, eat at nice restaurants and essentially buy what we want. I justify it because we’re saving $50,000-plus a year toward retirement and have zero bad debt. 

But part of me feels maybe we should cut back on our spending, and contribute to a brokerage account or a backdoor IRA. 

Living Along the Way

Dear Living,

The good news: There will be people reading your letter looking — in vain — for the problem. I say that because it should give you some perspective — you are doing better than most Americans. You have a property that is paying for itself and, taxes and maintenance aside, will be a literal and figurative ATM when the mortgage is paid off. At 33, the age of Christ, you have another 20 years to allow your savings and portfolio to grow, and another 30 years if you decide to keep working. 

The average 401(k) balance for someone in their early 30s is just over $30,000, according to data from Vanguard. You can expect that to be much lower for the median balance — that is, the middle number, without taking into account the variations in balances across income groups. At your current rate of saving, you and your wife would have approximately $1.8 million respectively by the age of 55, assuming an annual compounding of 9% (on both your capital investment and appreciation).

That, plus the fact that you may have paid off your house by then, will see you home and dry before you can say, “Waiter, check, please!” The problem with living in New York City for young, upwardly mobile professionals: Kitchens are too small, and people work 10-hour days. When they’re not working, they’re on their way to the gym — and when they’re not on their way to the gym, they’re on their way to their therapist’s office. And when they’re not there, they’re meeting friends for dinner because their kitchens are too small.

While millions of Americans are worried about rising food prices and whether they can afford their rent or mortgage, and wondering if they will ever be able to retire, you have a different, more fortunate problem that’s not unique among high-earning New Yorkers. If you dine out on your savings now, you may end up on a stricter budget in retirement — forever choosing from a limited number of options on the happy-hour menu. New Yorkers spend approximately $8,082 per year dining out, 130% more than the national average

Keep making contributions to your retirement; contribute to your 401(k), if you have one; and build up your savings for a rainy day. You and your wife are earning six figures, but an annual salary of $100,000 feels more like $36,000 after taking taxes and the high cost of living in New York City into account, according to a review of the 75 largest U.S. cities by SmartAsset, an online personal-finance platform. Leave room for sickness, job loss, divorce and — as the man says to the barman — whatever you’re having yourself. 

Cook more, spend less, see the world, and leave the door open to working beyond 55.

Readers write to me with all sorts of dilemmas. 

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The Moneyist regrets he cannot reply to questions individually.

More from Quentin Fottrell:

Do children get 529 accounts in a divorce? My in-laws opened two plans for our kids, but their marriage is on the rocks. 

My husband and I have $6 million in retirement and zero debt. What do you recommend for the couple who has everything?

Our older son, 37, is an artist and puts $1,000 a month on our credit card. Our other son, 35, is self-sufficient. Is that unfair?

2023-08-26T09:55:12Z dg43tfdfdgfd