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Old 03-25-2015, 07:57 AM   #121
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....You would think it would be easier to save money if you are well paid but LBYM is all that's really needed. We can wring our hands about social inequity but there is no "living wage" that assures people will adequately save for their retirement.
Great observation... I think we can all think of highly compensated people who are in good shape because they LBYM and other highly compensated people who live paycheck to paycheck because their lifestyle is equal to their earnings. Similarly, the same can be said of low/middle income people.

While I concede to bUU that it is easier to save if you have a good/high income, at the same time living below your means is a much more important factor in being comfortable economically and can be accomplished by those of modest means. We often hear the pundits telling us that how much you spend is more important than how much you make in determining wealth, and that certainly seems to be true.
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Old 03-25-2015, 08:20 AM   #122
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I wish I could differentiate between income and poor choices. I am sure it's not one or the other, and I'd be surprised if poor choices is simply "anecdotal." But I can't say with any certainty the relative influence of either. bUU's paper shows the trend, but not "why."

However, we can see there's been a dramatic increase in savings rate at all levels since the great recession (even the chart bUU offered shows an upturn in the bottom 90%). No evidence that real incomes have increased over that period, the difference may be largely planning/better choices? There is a group at the extreme low end who probably can't save much of anything, but where else did the middle suddenly find a way to double their savings?

I'll keep looking...

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Psychologically, it is well-established that many of us discount the future. This means that if we are faced with a decision to enjoy a delight today versus a sacrifice for a gain tomorrow, we will grab the delicious delight today. Far too many of us are not good at delayed gratification. Sociologically, the phrases "keeping up with the Joneses" and "retail therapy" capture the commercial culture that seduces us to consume today, even going into debt, as an expression to ourselves and others, including strangers, that we have arrived or made it.
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Old 03-25-2015, 09:10 AM   #123
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I worked at a place, and one day the owner called me into his office to explain due to a bank issue, paychecks would not be coming out on Friday (the next day), but would be out Tuesday.

I told him, no problem.
He was shocked as so many folks had already whined/complained about how they were going to be starving over the weekend without their pay.

I told him I always keep a couple of thousand in my bank account, and consider it my Zero level, so I'll always have cash for any little hiccup.
This reminds me a little of what happened when I first switched from working full-time to part-time back in 2001. The next pay period came around 2 weeks into my part-time era came around and I didn't get paid. I went to my boss and she told me that it was because I had also switched from working on a straight salary to working on an hourly basis - my pay was now on a 2-week lag. She was apologizing profusely for not warning me beforehand but I was like, "No big deal, it's okay, don't worry about it." With my expenses so low thanks to LBYM and having paid off my mortgage a few years earlier, I had been living on one paycheck anyway.

She was somewhat surprised at my lackadaisical reaction.
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Old 03-25-2015, 09:37 AM   #124
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We all have our own personal experiences, but again, they're just anecdotal. The reason why such conflicting perspectives flourish is because they support conflicting intentions, and because there is no effective means of proving nor refuting any of them, because they have to do with the content of people's minds and hearts. All we can say with assurance is that the savings rates are different and have trended in a specific direction, correlated with other changes in economic indicators that track to the same categories.
I can't see dismissing the experiences as "just anecdotal" either. Having done rental property for years I see two distinct populations--people in transition (newlyweds, students, people new to the area, people who have had a recent tragedy) and people stuck at the bottom.

Those who are stuck at the bottom are there for one of two reasons--health or bad decisions. Those who made bad decisions have, without exception, continued to make bad decisions again and again and almost always wind up being evicted or forced out. By contrast, those with health problems often manage their meager income to avoid becoming homeless.
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Old 03-25-2015, 09:41 AM   #125
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Great observation... I think we can all think of highly compensated people who are in good shape because they LBYM and other highly compensated people who live paycheck to paycheck because their lifestyle is equal to their earnings. Similarly, the same can be said of low/middle income people.

While I concede to bUU that it is easier to save if you have a good/high income, at the same time living below your means is a much more important factor in being comfortable economically and can be accomplished by those of modest means. We often hear the pundits telling us that how much you spend is more important than how much you make in determining wealth, and that certainly seems to be true.

I will not profess to have any understanding of whether it is possible to save at all on the bottom edges of societies wage rate. But I don't need a study to know what I have seen in the 50k-100k rural midwest income range. Yes, you can save, but HARD and SMART choices need to be made. Saving has to take a priority over a new car, an extra nice house, fancy cell phones. Simple things like lack of planning can consume thousands of dollars a year. Friends wonder how I can travel so much, but they don't understand I can take 3 vacations for less than their one yearly trip because I look daily and pounce on a deal. Not just ..."owe lets go on vacation and book it now".
And yes it is hard to choose savings over immediate impulses and gratifications. Lord knows I have failed gloriously at times. I have always been a nut that wished the govt could confiscate a small portion of each persons check (and not spend it) and then give it back in an annuity at retirement.


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Old 03-25-2015, 09:45 AM   #126
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....I have always been a nut that wished the govt could confiscate a small portion of each persons check (and not spend it) and then give it back in an annuity at retirement. ...
They do Mulligan. Or am I missing something?
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Old 03-25-2015, 09:51 AM   #127
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Several have talked about "the bottom." Since this thread is (was?) about 401k's, we're really not talking about the "bottom" are we? Most of the lowest (two) quintile(s) probably doesn't have access to a 401k. I'd think we're talking the top 60-80% of incomes where 401k's are more prevalent. I was anyway...
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Old 03-25-2015, 09:54 AM   #128
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They do Mulligan. Or am I missing something?

Yes you are PB... A better explanation on my part! I mean as a supplementary retirement annuity separate of SS that is truly your money. Not being partially drained by other benefits SS pays out such as old men fathering children from young women and then getting a check sent to you every month until they are 18 even if you are a billionaire!


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Old 03-25-2015, 09:57 AM   #129
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Several have talked about "the bottom." Since this thread is (was?) about 401k's, we're really not talking about the "bottom" are we? Most of the lowest (two) quintile(s) probably doesn't have access to a 401k. I'd think we're talking the top 60-80% of incomes where 401k's are more prevalent. I was anyway...
You're probably right but I suspect there are still lots of people in the lowest two quintiles who have access to a 401k (or could do the same things themselves with a myIRA or tIRA or Roth).

DS is currently in that area and one of the two jobs he has had since finishing his training had a 401k, which he contributed to at my suggestion even though there was no match and rolled it into a Roth when he changed jobs.

At one of the megas I worked at we have loads of people in those income levels that had access to a 401k.
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Old 03-25-2015, 10:01 AM   #130
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I wish I could differentiate between income and poor choices. I am sure it's not one or the other, and I'd be surprised if poor choices is simply "anecdotal." But I can't say with any certainty the relative influence of either. bUU's paper shows the trend, but not "why."
./.
I'll keep looking...
Please do keep looking. This discussion often touches on the need to limit and defer current consumption, then uses income as a measure of potential savings opportunity. If this is true, higher income might automatically result in a higher natural savings rate before needing to defer, so a 3% savings rate by a low income household might actually reflect more sacrifice than the 9% saved by the upper income family. A true measure and comparison of hard choices and deferred consumption should reflect this.
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Old 03-25-2015, 10:02 AM   #131
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Yes you are PB... A better explanation on my part! I mean as a supplementary retirement annuity separate of SS that is truly your money. Not being partially drained by other benefits SS pays out such as old men fathering children from young women and then getting a check sent to you every month until they are 18 even if you are a billionaire!
I see what you are referring to now. That has been proposed by some as a solution, but how much nanny-state and loss of freedom of choice do we want?

As much as I would like to see all citizens live at or below their means and save for the future, I am loathe to the idea of making it compulsory and impinging on our freedom. If they ever start making the receipt of SS benefits means tested as some have proposed then I would probably change my mind.
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Old 03-25-2015, 10:07 AM   #132
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You're probably right but I suspect there are still lots of people in the lowest two quintiles who have access to a 401k.
Benefits :: McDonalds.com
Additional Benefits
Short-term disability
Term life insurance
401(k)
Paid holidays
Vacation
Educational assistance

2013 Global Responsibility Report
Financial benefits for U.S. Walmart associates
Financial benefits for our eligible full-time and part-time U.S. associates include 401(k), bonus incentives and stock purchase plans. We match contributions made to the Walmart 401(k) Plan, dollar-for-dollar up to 6 percent of annual pay, as well as to the Associate Stock Purchase Plan by matching up to 15 percent of the first $1,800 purchased each plan year. Since the matching contribution was introduced to the 401(k) Plan, the number of associates who choose to save for their retirement through the U.S. 401(k) plan has increased by 45 percent. We continue to work hard to encourage associates to save for their future.
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Old 03-25-2015, 10:18 AM   #133
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Yes, but what percentage of their workers who are out of high school are eligible for those benefits? The impression that I have is that they (and other entry level employers) frequently "manage" associates work schedules to minimize people who would qualify for these benefits, but I hope that I am wrong.
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Old 03-25-2015, 10:21 AM   #134
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stock purchase plans (spps) can be pretty good


my old megacorp had a 423 plan where we could purchase up to 15% of pay (some limit applied) and got to buy the shares with after tax deferrals at the end of the year at the LOWER of 85% of the beginning of year or end of year share price. Saved a ton of money that way until they had to end it when FASB made companies start booking a liability for it.
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Old 03-25-2015, 10:30 AM   #135
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Yes, but what percentage of their workers who are out of high school are eligible for those benefits? The impression that I have is that they (and other entry level employers) frequently "manage" associates work schedules to minimize people who would qualify for these benefits, but I hope that I am wrong.
Sure, we all know some good and some bad employers, but they aren't all bad.

5 Employers With Generous 401(k) Matches - US News
McDonald's. The company that invented extra-large fries and soda provides many of its employees with a supersized 401(k) match. McDonald's matches each dollar an employee contributes to the 401(k) plan with three dollars, up to the first 1 percent of pay. For employees age 21 and older who have been with the company for at least a year, the company also matches a dollar for each dollar saved on the next 4 percent of pay.
From further googling I see there is a 20 hours minimum you need to work to qualify for 401(k), profit sharing, and the stock purchase plan. Seems reasonable to me.
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Old 03-25-2015, 10:34 AM   #136
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I would agree that 20 hours is reasonable... by coincidence that was the same cutoff for similar benefits at my last mega job. 300% match on the first 1% of saving is quite generous, as is 100% on the first 4% for people 21+ with a year of service. I wonder that their participation rates are.
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Old 03-25-2015, 10:52 AM   #137
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Many companies do manage their employees to try and keep more part time than full time employees. The managers are usually very up front about it. It is usually only the managers and maybe assistant managers that have any chance of going over part time and qualifying for benefits like a 401K.

One thing that SS does provide and that we often leave out of the equation is payments for disability and survivor benefits to widows and children. I don't think these are huge if you compare the expense of providing these thru private insurance but for those at the bottom they matter and should not be ignored as a benefit.
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Old 03-25-2015, 11:02 AM   #138
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Sure, we all know some good and some bad employers, but they aren't all bad.

5 Employers With Generous 401(k) Matches - US News
McDonald's. The company that invented extra-large fries and soda provides many of its employees with a supersized 401(k) match. McDonald's matches each dollar an employee contributes to the 401(k) plan with three dollars, up to the first 1 percent of pay. For employees age 21 and older who have been with the company for at least a year, the company also matches a dollar for each dollar saved on the next 4 percent of pay.
From further googling I see there is a 20 hours minimum you need to work to qualify for 401(k), profit sharing, and the stock purchase plan. Seems reasonable to me.
I would love to see what the median and mean values are of McDonald employees' 401(k)s.
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Old 03-25-2015, 11:10 AM   #139
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I would love to see what the median and mean values are of McDonald employees' 401(k)s.
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Old 03-25-2015, 11:16 AM   #140
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Thanks for the link!

Unfortunately this only gives the mean, not the median, which can be fantastically skewed by the top.
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