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Old 02-20-2008, 03:40 PM   #21
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Several years ago I watched in horror as a co-worker, against the advice of everyone who knew him, left our company to work for another and cashed out both the pension lump sum AND his 401k. AT AGE 50! Took the tax hit and penalty. And here's the kicker: He was just 6 months short of 15 years of service which would have qualified him for retiree medical benefits! An absolute train wreck!
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Old 02-20-2008, 03:45 PM   #22
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Several years ago I watched in horror as a co-worker, against the advice of everyone who knew him, left our company to work for another and cashed out both the pension lump sum AND his 401k. AT AGE 50! Took the tax hit and penalty. And here's the kicker: He was just 6 months short of 15 years of service which would have qualified him for retiree medical benefits! An absolute train wreck!
Middle age crazy?
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Old 02-23-2008, 01:03 PM   #23
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Why are you astounded? This IS the way most Americans live. My step kids were like this until we had "the chat" about money and debt. Now they are spending less and saving more...but...one still spends way too much trading cars every couple of years..but at least they are buying used and not brand new and eating ALL the first couple of years depreciation every time. I gave my "Pilars" and other books to one of my SILs and he is starting to "get it". We have some interesting talks now.

Still, bad habits are hard to break and spending what you don't have to get what you think you need (but don't) is very difficult for some folks. Many believe they are "entitled" to spending lavishly to make up for having a hard job. Retail Therapy. An affliction that infects both sexes and can kill a FIRE plan in short order. Heck, I could have been FI several years before I was had my DW not had this disease.
i guess i've been living in a cave. (kidding)

my DH-to-be spent 22 years like this. the ex and kids had to have it all NOW and he got to pay for it all. worked 7 days a week despite being military for 20 years and then civil service for 7. he couldn't take it anymore. his debt load blew my mind, but it's all gone now.

he himself is a good money manager with an occasional instant gratification moment. boys and toys! LOL

he is watching my investing habits and mimicking them so he can rebuild his retirement. lost half his 401(k) in the divorce plus 37% of his military pension for life. but he will recover under my tutelage. a very willing pupil...

i am the original tightwad. learned that from my mom and my own life experience.
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Old 02-23-2008, 01:05 PM   #24
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Several years ago I watched in horror as a co-worker, against the advice of everyone who knew him, left our company to work for another and cashed out both the pension lump sum AND his 401k. AT AGE 50! Took the tax hit and penalty. And here's the kicker: He was just 6 months short of 15 years of service which would have qualified him for retiree medical benefits! An absolute train wreck!
must have been a real doozy of a reason to pull that act.
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Old 02-23-2008, 01:24 PM   #25
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His only salvation is his wife is an only child and will probably be left a chunk of change.
Well, that and the untold millions he'll cash in when his band hits it big...
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Old 02-23-2008, 02:15 PM   #26
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I am not surprised... My FIL is 61 years old and he is in the process of borrowing $50K from his 401K to repay a loan from his employer and to pay what he owes to the IRS for 2007. He makes $200K a year, he has no emergency fund (he asked to borrow $2000 last week to repay medical bills), he had $200K in retirement funds before borrowing from his 401K. He bought a house last year with 0% down. He hates his job and wants to quit at the end of June. I had to remind him that if he did he would owe taxes on the money he borrowed from the 401K. He can't afford to quit.
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Old 02-23-2008, 02:21 PM   #27
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Well, at age 41 I had about 80,000 saved. I really didn't start thinking about retirement until about 45 or so. However I did decide to start saving more even though I would receive a pension. In 14 years it grew to over 1m. Granted he may not follow that route, but it can be done. I was never a big spender and never carried much debt. Just the same he's not doomed yet!
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Old 02-23-2008, 03:13 PM   #28
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I think it was in my late 30's that it sunk in: The "far distant future" has a rather disconcerting habit of becoming "the present". Those people will figure it out in about another 20 years.

Makes me so glad I married an accountant who knows how to run a spreadsheet. She's quiet, cute, and very, very, smart.
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Old 02-23-2008, 03:30 PM   #29
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I know quite a number of people in similar situations.
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Old 02-23-2008, 04:10 PM   #30
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I saw that he was "selling camera equipment that he owed money on". Since he is a trucking company executive and not a professional photographer, this would seem to be the category of discretionary spending. In my view, using credit cards to finance discretionary spending on consumer goods is probably responsible for more financial misery in this country than anything else.

Part of the blame lies in better communication, mostly television. When I was young, we were very poor, but so was everyone else around us and so we didn't feel very bad about it. Now, anyone who watches TV can see extravagant lifestyles on display. They feel the need to keep up with Joneses who live in an entirely different part of the country, not just the neighbors.
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Old 02-23-2008, 04:20 PM   #31
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Not only do they see extravagant lifestyles on display (constantly) but the lifestyles are way beyond the reach of even the affluent. Huge mansions in resort areas. Young and very attractive new college graduates have interesting jobs that seem to take very little time but pay astonishingly well, or don't work at all but never seem to lack for funds.
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Old 02-23-2008, 04:31 PM   #32
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Not only do they see extravagant lifestyles on display (constantly) but the lifestyles are way beyond the reach of even the affluent. Huge mansions in resort areas. Young and very attractive new college graduates have interesting jobs that seem to take very little time but pay astonishingly well, or don't work at all but never seem to lack for funds.
And on TV, even the poor are rich.
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Old 02-23-2008, 05:54 PM   #33
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And on TV, even the poor are rich.
TV? what's that? just kidding. actually i watch very little of it.

love your avatar. just made the association between your online name and one of my favorite Star Trek movies. i've watched it at least 5 times and never tire of Khan's speech "I stab at thee...". Herman Melville quote from Moby Dick?

anyway, back on topic. the cashers of 401(k) for consumer debt payoff are gonna pay the fiddler later on...my 401(k) was my escape route from a miserable job, but at least I converted it into an immediate annuity, for life, at 5.25% fixed. translated monthly paycheck to set me free. the tradeoff was my health, sanity, and happiness. no brainer.
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Old 02-24-2008, 03:47 AM   #34
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Part of the blame lies in better communication, mostly television. When I was young, we were very poor, but so was everyone else around us and so we didn't feel very bad about it. Now, anyone who watches TV can see extravagant lifestyles on display. They feel the need to keep up with Joneses who live in an entirely different part of the country, not just the neighbors.
Yes. It also seems that every generation of parent tries to provide a bit more for their children. It seems that we are at a point where the current generation that is entering the workforce has mighty high expectations for immediate gratification in spending. The middle class in the US is turning themselves into financial wrecks... they want it all right now. They have become spoiled. Forget financial independence... most are not even financially stable.
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Old 02-24-2008, 04:30 AM   #35
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When I was a young adult, we lived in a small (really small) rental apt in a larger house to save up some money before buying a first "starter house" that needed a lot of work. With some careful planning we've been able to spiral up from there and now live in a pretty nice place - though not extravagant and not up to TV standards.

I have coworkers much younger than I who used jumbo loans to finance a first house immediately out of school which was nicer than their parents "pretty nice house". For the parents, that lifestyle was a product of a lifetime of financial efforts and slow building of resources. For the offspring, that lifestyle was a starting point and they expect to have it all (and more) as soon as possible. It has required lots of debt, they seem to have some plan to refinance something all the time, and I don't think it's sustainable.
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Old 02-24-2008, 08:18 AM   #36
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What a lot of folks don't understand is that you can't argue with math.

Numbers add up to what they add up to & are not influenced by individual desires and/or perceptions of how things are, how things ought to be, or what one feels they "ought" to have, "deserve", or are "entitled" to.
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Old 02-24-2008, 05:05 PM   #37
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Some people apparently just can't stand seeing money in the bank. "Gotta have it now." Reminds me of the different behaviors with myself and the ex. When the house sold, I put the money in the bank for down payment on a house and started an IRA. She took a six-week trip to England with her sister.
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Old 02-24-2008, 05:24 PM   #38
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What a lot of folks don't understand is that you can't argue with math.

Numbers add up to what they add up to & are not influenced by individual desires and/or perceptions of how things are, how things ought to be, or what one feels they "ought" to have, "deserve", or are "entitled" to.

What a terrific observation. I think I am going to steal this line. Do you want credit or did you steal it from somebody else?
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Old 02-24-2008, 07:22 PM   #39
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What a terrific observation. I think I am going to steal this line. Do you want credit or did you steal it from somebody else?
Totally original - I tell my daughter this all the time
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Old 02-24-2008, 07:43 PM   #40
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What a terrific observation. I think I am going to steal this line. Do you want credit or did you steal it from somebody else?



edit: The above is from xkcd.com

xkcd - A webcomic of romance, sarcasm, math, and language - By Randall Munroe
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