My only retirement plan is cancer.
2 Likes
I don’t doubt that it’s common. I have never, in this thread, suggested that it’s not a problem.
You and I are of an age. I’m curious about what the numbers are for those of our vintage — late Boomer / early Gen X — but the article never gives specific data on that.
Just one big lumpy aggregation and a badly designed chart about Millenials.
1 Like
This is an important point. Due to our general reluctance to talk about money, it’s extremely hard to know where you stand compared to others and/or a baseline.
All the generic online calculators talk about the “4% rule” - where a person should be able to comfortably withdraw 4% of their portfolio without depleting their capitol. But that is essentially meaningless when all the assumptions are based on fantasy numbers to begin with. Unless we have the courage to use real world data, I have no clue if I’m doing well or falling behind. The online calculator from my brokerage account says I’m “on track”.
My personal target is $2M in assets by the time I reach retirement age (67) which is about 20 years away for me. Between my wife and I, we have approx $415k in 401(k)s, IRAs and investments. Our house is worth $425 and we owe $250 with 15 years left on the mortgage. My wife is older so she’s already in catch-up mode with contributions but we both make sure to get our company matches. Kids are grown so we’re done with college funding but we do help them out financially from time to time. Our combined income is above average so we live comfortably but not extravagantly. We just paid off all our consumer debt and are living cash-only for the first time in decades which was a tremendous burden off our shoulders. We are building up an emergency fund and avoiding frivolous spending.
By my estimates, we are both fortunate and lucky. We make sure to pay it forward when we can and give generously to charity every year. By most accounts, we are the epitome of the American Dream. We are better off than our parents were and both of our families call us “rich” by their standards. We work hard to provide for our children and struggling family members while at the same time avoid being sucked down by leeches and manipulators.
My reckoning is we’re about 1/2 way to our retirement targets and as long as the economy doesn’t totally shit the bed, we should be ok but I still have considerable anxiety about it. I realize this put us in the minority compared to most Americans so I do try to stay grounded.
7 Likes
My parents bought their 1600 sq ft home in the San Gabriel Valley, just east of Los Angeles in 1948 for 8k. They sold it in 2007 just before the crash for 480k. Talk about a great investment. The Boomers benefited from the time in America when we had a strong labor force, strong unions and a much higher corporate tax rate. Everyone paid their fair share and the average Ameican benefited immmensely. Yes, I’m a boomer, but I was born on Dec. 24th, 1960. Had I been born a week later I would be a post boomer. At least my home is almost paid up!
5 Likes
Every time I see the “work until you are 75 or until you die” advice, I ask the same question. Work where, doing what? In addition to everything you’ve mentioned above, the elderly tend to have health/mobility issues and wages are low. We might see Walmart and Amazon turning away hordes of seniors, once shoppers decide they like being greeted by a facial recognition system and the warehouses are fully automated.
7 Likes
Bingo. If I had a dollar for every financial headline designed to make people panic, my retirement savings would be more than I’d ever need!
1 Like
This is why I hate the generic advice. Assumptions of what the average person needs to live on in retirement tend to be inflated. Also, many calculators generate figures that leave a lot of money in your estate for someone else to enjoy after you are gone.
1 Like
Two thoughts about this matter. First, an advantage of not spending all the money that you earn, assuming that you don’t need to use it to cover basic needs, is that you get used to doing with less, and would need less after you retire to “maintain your lifestyle”. Second, something that seems to me that some people don’t realize is that if everybody were to be rich and had a lot of money, it would not mean that everybody would be able to stop working. since work would still need to be performed, and people willing to work would be able to ask for more money. Having money only works if other people don’t have as much money as you do and are willing to perform work for you at a reasonable wage. In a number of countries the ratio between people working and people drawing a pension or using their retirement funds is decreasing. As populations grow older, and the number of people in the workforce decreases, those working still have to provide for everybody else. At the limit, money is just a way to price work: if everybody has a lot of it, work is more expensive, so it washes out. The way I see it, in the future, as populations get older, older people healthy enough to do it may have to keep working. It is not just a vast conspiracy against people retiring early and comfortably, it was much easier to have a fairly generous system when the ratio of people that reached retirement age was much smaller.
39.2% is more than half? Someone didn’t do well in math.
Since we’re sharing personal stories, I didn’t save much when I was young because life was quite precarious back then and anything I saved I had to spend soon enough. Over time I did build up some savings in 3 separate 401ks. Then fate struck and I had to drain those to pay the bills. Started over, and now I’m back above the 10,000 mark, so that’s something…for now. Still way behind where I should be. And it’s still difficult to both save and pay the bills.
As a gen-X, I remember when people used to be able to retire at 55. Then they upped retirement age to 60, 62, 65, 67. So I’ve seen it coming for awhile. No one my generation or younger will ever reach retirement age unless we achieve immortality. And if we do, they’ll just set the retirement age to immortality +5 years.
Only in America!
From what I’ve seen, at least $1 million (adjust up for inflation) or enough such that your yearly expenses come to about 4% of the total. I’m no expert, those are just the numbers that I’ve seen everywhere as ‘enough for a sustainable retirement’.
and never have your car breakdown, never lose a job, never have kids, never get sick, never have a landlord that raises the rent, never move to a higher-cost-of-living area for the opportunities there, never have insurance companies raise their rates… basically, luck out.
I’ve never had a credit card or a loan except for a small loan for community college. (People with debts have it much worse than me.) I understand compounding, and have since I was a kid. But it doesn’t work if there’s nothing to compound or you have to withdraw everything and start over. Like with investing in the stock market, if you have $1,000,000 to invest, and pay a $10 transaction fee, you can profit well on an 8% return. But if you only have $100 to invest and pay that same $10 transaction fee each way, then you’d need at least a 20% return just to break even. (Luckily, there are low-fee ways to invest now, but those weren’t available in the past, so compounding is moot in that case.)
We’re approaching a point where no matter how well you know what you should do (based on previous generations success), it’s just not going to work, not just for a few unlucky people, but for the majority.
6 Likes
My high school finance teacher had a big impact on me. We worked out an exercise once that involved twin brothers. One of them put $2000 in savings when he turned 18 and did that for the next 7 years so he had saved a total of $16000. The other one started on that eighth year and put $2000 in savings every year for the rest of his life.
The exercise had us use a 10% rate of return (which I know is not realistic), but due to the power of compound interest, the second brother putting $2000 away every year was never able to catch the first guy.
1 Like
I remember having a conversation with a friend about 8 years older than myself, married with two kids, house, and two cars, who admitted over a glass of bourbon that he’d given up any hope of paying off his student loans or saving for retirement, and wasn’t bothering with either one. “I just put $100 of every paycheck into a college fund for the kids and hope they’re rich when I’m old!” he shrugged. I’ve got a feeling a lot of people are in that situation.
5 Likes
Pretty much. I grew up eating government cheese and generic-brand food; my savings plan was to put my money in the bank and eat lots of ramen noodles. When the first company I worked at offered me a financial advisor, I just laughed, but my boss insisted. The early-20s version of myself thought this adult crap was dumb, but agreed to set up a 401k and put some money into a Roth IRA. They made smart choices with my small amount of money (props to the friendly folks at Raymond James) and I’ll have a fairly comfortable fund by the time I’m 50. But it took a lot of goading when I was young. Otherwise i’d just be sticking dollar bills into a mattress.
2 Likes
Failing to save is rational behaviour if the expectation is that the savings will either be gambled away by your banker/broker/fund manager/employer, or else confiscated to cover the losses of those whose were.
That’s the same question our elderly without a sufficient retirement savings ask themselves every day but it’s not like there is much choice in the matter. We’ve dismantled everything we had created to prevent the elderly from eating dog food for survival. We’ve cut back heavily on medical care coverage for our elderly to the point where people are dying from things we had a handle on 40 years ago.
The problem isn’t that working until you die is a bad plan. The problem is that working until you die has become the only option for millions of people.
4 Likes
There are only a few major options for effective retirement savings. First, just save it in a bank account and don’t do anything with it. You’ll get modest to zero interest and you’ll always be tempted to dip into it for other needs and reasons. Second is to use the pre tax benefits and sign up for your company’s 401 or 403 if you work for a nonprofit. Then, all you have to do is pay attention every few months to your allocations, make sure things aren’t going totally off the rails. You might get 5 to 15% gains every year, with a few bad years when shit goes south. The third option is to have your own IRA and actively manage your money. You can gain the most this way, by paying close attention to the market, moving money back and forth to cash or buying low and holding… All with the aim of “locking in your gains.” But this way is the biggest pain in the ass because you have to always be paying attention to it or you stand to lose big. I do a combination of all of the above.
2 Likes
Yeah, those percentages really matter.
Also, all those 401k and IRA funds tend to have a lot of hidden fees that are really good at masking what the real effective interest rate is. Not that we shouldn’t all try our best to save what we can, but it’s rarely as rosy as what those economic classes seem to imply.
7 Likes
And all of them require that you make enough money to avoid living paycheck to paycheck. Sadly 78% of us do work paycheck to paychek. Only 22% of us are lucky enough to have something to put away at the end of the month. If you are like most people you don’t have money left at the end of the month and your options are down to
- begging
- working until you die
- dying young
If you do have some savings your best bet is to never become ill because that will wipe out your savings in no time.
6 Likes
Is it really true that 78% of people in the US simply don’t earn enough money to save anything at all? I realize that there are vast numbers of working poor in this country who really struggle to get ahead despite living frugally, but is that more than 3/4 of people?
I’m fairly certain that more than 22% of people occasionally buy brand new cars rather than used ones, or new clothing at the mall that they don’t necessarily need rather than shop at thrift stores, or pay for luxuries such as cable TV. So there’s more than just luck at play if some of those same people also don’t have any money at all to save for the future.
(Great, I just made myself sound like a libertarian or heartless conservative. For the record, I support higher taxes on the rich, a higher minimum wage and a much stronger social safety net than what we’ve got now.)
1 Like
The original source for that number seems to be a national survey conducted by Harris Poll for careerbuilder.com. NBC, ABC, and CBS have found the information credible enough to use in their reporting and they have much better fact checking resources than I do so I’ll defer to them on how accurate that number is.
You are right about that. A good number of us will spend money on things you don’t need to survive. I believe there is this term people use… what was it? Oh yeah, quality of life. It seems that many people decide that some things would give them a higher quality of life and are forced by our lack of an effective social system to choose between bare necessities and enjoying what little time they have here on earth. They are forced to choose between enjoying life while they can or having a long one because most of use cannot afford to do both.
Absolutely. There is also the intentional erosion of our social safety net by both Republican and Democrats at play here as well as wage stagnation, lopsided taxation that takes 20%+ of your paycheck which hurts low wage employees more than most, there is the problem of education costs, mandatory insurance. Yep, there are plenty of factors that make life difficult for most of us. Of course, you could try to offer up the suggestion that these people are doing it to themselves. Maybe they are all stupid and reckless but unless the percentage of stupid and reckless people has gone up (and crime stats say that’s not the case) then there is some force external to the people that’s the heart of the problem.
8 Likes
