The Big Squeeze

[Mountain_Mike]

This is a 5-page article that basically says Americans are not saving enough.... People on this forum really must be the elite.

http://www.usnews.com/usnews/biztech.../13squeeze.htm

Consider this: Fifty-five percent of young boomers--those ages 45 to 54--have saved less than $50,000 toward their retirement, not including the value of their primary residences. Two thirds have less than $100,000 saved. And nearly 9 in 10 have less than $250,000.

[Now how smart is this?]

Last year, the Eberts refinanced their mortgage and took some of their equity out of the home to pay for additions to their house. They redid their kitchen and added a bedroom and a garage for their growing family. To do so, they took an old 30-year mortgage--of which they already paid down 12 years--and replaced it with a new 30-year loan. This means Paul will be around 77 by the time his home is paid off.

[Do you agree that we need 100% of income?]

Mortgage bonfire. The fact that so many Americans will be carrying mortgages well into retirement means that the old rule of thumb of needing to replace 70 or 80 percent of your preretirement income is out the window. "That may have been true in the old days, when retirees burned their mortgages before retiring," says Rande Spiegelman, vice president of financial planning for the Schwab Center for Investment Research. But today, he says, young boomers should plan on saving enough to replace 100 percent of their preretirement income--minus whatever they are setting aside to build up their nest eggs.

[riskadverse]

I've heard these stats before and I really can't imagine what is going to happen when the boomers reach 62 to 65* - which will begin in 5 years or so.* One thing missing is the inheritance card.* The amount of wealth transfered from the boomer's parents to them will be greater than any other generation.* *Also the boomers will have more political clout (in numbers).* I'm thinking there will be push for more entitlement programs to alleviate the shortfall in their retirement savings.* It's ironic but, the middle class boomers will move to the left politically and the affluent left will move to the right politically.*

[VoyT]

* *I know a few folks whose retirement plan seems to be hinged on their inheritance.* Of course, they're gambling that mom and dad won't need nursing home care ....

[JPatrick]

Originally Posted by VoyT

* *I know a few folks whose retirement plan seems to be hinged on their inheritance.* Of course, they're gambling that mom and dad won't need nursing home care ....

I read somewhere where the inheritances are not proving to be quite as golden as what may have been thought.
In any case, planning on that to finance retirement is a really bad idea.
Another bad idea that I hear alot;;"Oh well, I guess I'll just keep on working."* Maybe so, those stories about the 100 year old who still hasn't missed a day of work are lots of fun, but for the average person working beyond 65 may be way out of the question.

[spike]

JP: I hear that also, I have no plans to retire, just work till I die. One person that told me that, has refinanced his home 3 times, eats out almost every night, and has the gout.

My son is 37 and hasn't saved a dime in his life. I think he's hoping his mom and I will die and leave him his retirement bonanza. He wants to get into realestate as long as I put up the cash. I don't know how to tell him, but were planning on dying broke.

[KB]

Spike.....My Dad told me when I was in my teens, that I shouldn't expect anything from him.
So I've never expected anything, worked hard, yada yada...

Well, he tricked me, I'm inheriting a bundle...but never expected it. That's the way to do it.

[peggy]

Now how smart is this?

Pretty darn dumb, IMHO. * *DH (who turned 44 last month) and I (37 last January) have almost $200,000 in retirement accounts. *We're young enough that we got the "don't count on Social Security" message drummed into us in plenty of time to plan around it. *Of course, if we actually do get any Social Security money, that's gravy.

Do you agree that we need 100% of income?

Basing your retirement plans on your income alone is, IMHO, silly. *See the 33% threads elsewhere in the forum for specifics.

How much to save for retirement depends on how much you anticipate your expenses in retirement to be--but that's not an easy, quotable answer, so people make up these "rules" for whatever reason. *(The cynic in me says the financial pros make up scary numbers to coax/coerce people into investing with them. *The kinder, gentler me says they're just looking for a sound bite.)

As for inheritance--I'm in an unusual situation: an only child, with a still-living mother who sees it as her mission to leave me as much as she possibly can. To that end, she bought long-term-care insurance at least ten years ago so that her assets wouldn't be eaten up by her care. (Her mother was in a nursing home for more than 30 years, so she had reason to plan ahead.)

That said, most people don't plan nearly as well as my mom (Go, MOM!), and so counting on an inheritance is chancy at best.