Americans Don’t Save for Retirement Because They Don’t Earn Enough Money

[Andre1969]

Agree on the not being upper middle class, although I stated middle/upper middle but nitpicking. However, even a 250k home means 50k down with a 200k mortgage which is a multiple of 2.85x of income which is not a walk in the park to afford.

I just refinanced to a 3.875% rate on my mortgage. $200K at that rate would be around $940/mo, for principal and interest. Throw on maybe another $300/mo for property taxes, $100/mo for insurance, and you're at $1340/mo.


My grandmother's cousin recently sold her house, and is going to downsize to a 1br apartment in a fairly cheap, low-income neighborhood. Her monthly payment is going to be around $1300/mo. Most apartments in my general area are $1500+ for a 1br, and they often jack that price up after a year.


So, owning can be more beneficial than renting. But, you still have to have the discipline to save up that 20% down payment. And, there's upkeep and utilities that you have to deal with, when you own a home. Often with apartments, some or most of the utilities are included.

 

[marko]

(Not) surprisingly, there is a strong correlation between financial security and getting/staying married.

The late Robin Williams once said that 5 wives is why he had to keep working.

 

[Tetto]

I am waiting for the next person to say "you are so lucky to retire early". NO, luck had nothing to do with it.

-I was disciplined enough to keep the same job with a pension for 30 years.
-I was disciplined enough to start my 401K early.
-I added 1-2% of contributions each year when raises came
-We bought a nice farm, and kept it for 30 years fixing it up myself.
-We have driven -$5000 used cars for 40 years now that I paid cash for.
-We go camping rather than resort destination trips
-We have stayed happily married for 40 years (bumps along the way)
-I have overcome several major illnesses (cancer, CHF, car accident)
-We overcame a failed business attempt/near bankcruptcy 20 years ago.
-We research each purchase to get the best products/deals.
-We cook 95% of our meals at home.
-We make lists of what we need before shopping.

+1
These are simple things that should be hammered into school children's heads, along with the three R's!

 

[Which Roger]

I am waiting for the next person to say "you are so lucky to retire early". NO, luck had nothing to do with it.

-I was disciplined enough to keep the same job with a pension for 30 years.

I have to disagree with this one. A lot of luck goes into keeping the same job for 30 years. I was able to, in part because of my skills, versatility, etc. But a big part of it was just dumb luck. MegaCorp had frequent layoffs, and I just happened to not be working on the big project that got the ax. A lot of my friends and co-workers weren't so fortunate.

 

[Andre1969]

+1
These are simple things that should be hammered into school children's heads, along with the three R's!

I dunno...I consider myself lucky, to be where I'm currently at, financially. I'm lucky, in the sense that I had family to fall back on when the times were rough. I'm lucky, that I haven't had any major medical issues. I lucked out back in 2004 when I sold my condo. The guy who I hired to do some renovations on it jerked me around and eventually screwed me over, and I had to hire someone else. But, the delay in getting it to market worked in my favor, because I got around $35K more for it than originally planned. I'm lucky that my divorce didn't screw me over even more than it did. I'm lucky that I haven't gotten laid off, fired, downsized, etc.


I don't mind if someone says that I'm lucky. Because, luck did have something to do with it. What I hate though, is if someone says "You don't realize how lucky you are". It's the "you don't realize..." part I hate...the annoying assumption. How does this person know what I do or don't realize?

 

[Nemo2]

^ +1

 

[Badger]

The 2 words most misunderstood in personal finance are NEED and WANT.



Cheers!

 

[RISP]

Three generations ago, college was by no means the expectation for most of society, even in First World countries. My parents' generation was the first in their families where all their siblings attended college.

The difference is, of course, that back in the day you did not practically NEED a college degree to make a decent living. Today, workers with a high school degree or less education make less money than 40 years ago in real terms (source: "Real Wage Trends, 1979 to 2017", https://fas.org/sgp/crs/misc/R45090.pdf)

You'll probably enjoy the "Old Economy Steven"-meme: https://knowyourmeme.com/memes/old-economy-steven/photos

 

[pb4uski]

While I understand your point and generally agree there is also the flip side... people with college degrees (and sometimes masters or doctorates and the student loans to show for it) but have not been able to find employment in their field or it didn't work out for them or they didn't like that field and they are working in lower paying jobs to just put food on the table.

 

[razztazz]

1) you were able to
2) It worked out for you.

Sounds like luck to me. Did you crate and control all inputs and all outcomes all along the way? Is it a guarantee that everybody everywhere in all cases always gets the same? Sounds like luck to me

The fact is these "grasshoppers" many have mentioned do exist. I know them myself. I don't get their "philosophy of life." But that is not what the article or real-life is referring to. They will always be there just like people being born rich and people who did well and l think they did it in a vacuum will. The realities are, people aren't, as a rule, paid enough. They do not control the marketplace. They have to take what they can get. The grasshopper discussion is irrelevant but not surprising.

Eating fewer hamburgers, and drinking less coffee isn't going to do anything except make McDonalds and Starbucks go seeking favorable legislation to ease their burden.

I am waiting for the next person to say "you are so lucky to retire early". NO, luck had nothing to do with it.

-I was disciplined enough to keep the same job with a pension for 30 years.
-I was disciplined enough to start my 401K early.
-I added 1-2% of contributions each year when raises came
-We bought a nice farm, and kept it for 30 years fixing it up myself.
-We have driven -$5000 used cars for 40 years now that I paid cash for.
-We go camping rather than resort destination trips
-We have stayed happily married for 40 years (bumps along the way)
-I have overcome several major illnesses (cancer, CHF, car accident)
-We overcame a failed business attempt/near bankcruptcy 20 years ago.
-We research each purchase to get the best products/deals.
-We cook 95% of our meals at home.
-We make lists of what we need before shopping.

 

[Mdlerth]

Maybe 40 years ago wasn't normal, and maybe today isn't the aberration.

The difference is, of course, that back in the day you did not practically NEED a college degree to make a decent living. Today, workers with a high school degree or less education make less money than 40 years ago in real terms (source: "Real Wage Trends, 1979 to 2017", https://fas.org/sgp/crs/misc/R45090.pdf)

I well remember reporting to my first job in industry in 1980 and being discouraged that my engineering degree paid about 2/3 what the high-school-graduate-or-less union employees were paid. Throw in overtime and 2/3 became 1/2.

Most of those jobs are gone. I wonder why?

 

[Squirrel]

You'll probably enjoy the "Old Economy Steven"-meme: https://knowyourmeme.com/memes/old-economy-steven/photos

This one is true:
https://i.kym-cdn.com/photos/images/newsfeed/000/549/899/394.jpg

One of my professors got to the airport late. "Don't worry, sir. We're holding the plane for you."

end threadjack.

 

[kcowan]

I think while many people don’t earn enough to save for retirement, there is an equal or more number of people who don’t save because it’s not the way they think. Most Americans are raised in relative comfort where they just didn’t have to scrimp and save to make ends meet and to put food on the table. Moreover, most of us are conditioned to spend money and spending money equates to life satisfaction in our minds. It’s not surprising that immigrants raised in deep poverty and deprivation find it easier to save due to cultural values and lack of having a consumer mindset.

When I was a kid, the immigrants would buy a house and equip it for three families. Then they would all work like sled dogs and pay the house off. Then they would move and leave a family in the house and add another immigrant family to do it again. Having a paid off house made the whole process worthwhile. And it only took 3-4 years. It might take longer these days in certain geographies. But I don't see it happening anymore.

 

[ShokWaveRider]

I think Also contributing to the OP's editorial is the fact that people are bombarded with ads for "Things and Services" they simply "Must" have and cannot do without, phones & fashion clothing that change annually are prime examples. You cannot look anywhere without seeing some kind of advertising. Some people simply do not have the willpower to resist keeping up with the Jones', especially the young and impressionable. so as long as we are in a Consume, Consume, Consume and consume more environment, I cannot see things changing much in general. Those with good guidance from parents and support groups are of course the exceptions.

So for the most part they do earn enough, in other countries folks earn less and manage to put money away. We were not particularly high wage earners in comparison to some of our friends in SoCAL, but we have managed to retire a decade before any of them.

 

[RISP]

I well remember reporting to my first job in industry in 1980 and being discouraged that my engineering degree paid about 2/3 what the high-school-graduate-or-less union employees were paid. Throw in overtime and 2/3 became 1/2.

Most of those jobs are gone. I wonder why?

Are you saying that an entry-level union job paid significantly more than an entry-level college-graduate job? Cause if you compare your graduate self to the entire workforce, you are not comparing apples to apples. In my first job after graduating, I made a lot less than some colleagues who never attended university. Of course I did; they had decades of experience and I didn't. That changed quickly as my career progressed.

 

[jkern]

I have to disagree with this one. A lot of luck goes into keeping the same job for 30 years. I was able to, in part because of my skills, versatility, etc. But a big part of it was just dumb luck. MegaCorp had frequent layoffs, and I just happened to not be working on the big project that got the ax. A lot of my friends and co-workers weren't so fortunate.

Good preparation puts you in a position to take advantage of any luck that might come your way.

 

[jkern]

I believe that the majority of people that haven't saved any money have made many poor decisions and are poor money managers (wasteful and inefficient). At the same time there are some people, through no fault of their own, that life just hasn't worked out well for them financially.

Where I live, expensive restaurants are booked. Expensive sporting events and concerts are booked. Expensive cars are everywhere. There is a 10 minute line to get a $6 cup of coffee. The average income in my zip code is $171K. It appears that there are a lot of people that can be saving money.

 

[ckelly78z]

^^^Sometimes you create your own "luck" by being a stable, trustworthy employee, husband, and working harder than the next guy.

This sounds like I am bragging, but I see too many folks just plodding along, not trying to change their situation, even when hard luck befalls them like it did for me several times.

("-I have overcome several major illnesses (cancer, CHF, car accident)
-We overcame a failed business attempt/near bankcruptcy 20 years ago.)"

 

[Lewis Clark]

^^^Sometimes you create your own "luck" by being a stable, trustworthy employee, husband, and working harder than the next guy.

This sounds like I am bragging, but I see too many folks just plodding along, not trying to change their situation, even when hard luck befalls them like it did for me several times.

("-I have overcome several major illnesses (cancer, CHF, car accident)
-We overcame a failed business attempt/near bankcruptcy 20 years ago.)"

+1

The harder I work, the luckier I have been.

 

[Sunset]

Would love to know your mobile phone & internet provider(s). I've had TracFone for years & used to be able to get an additional 365 days of service as an add-on after my order of minutes for around $50 but last time I re-upped the option was gone so I'm researching deals for low mobile phone usage (2 lines). ATT Uverse is my internet provider & they seem to go up every couple of months.

It is T-mobile, pay as you go, so no data included. But I can text and phone when I NEED to for 1,000 minutes per year.

I am in a grandfathered plan, as that's all I've had for many many years.

 

[Sunset]

A smart phone is an absolute requirement to have a chance at independent employment in this world IMO. It can also be a distraction, but I wouldn't begrudge ensuring that a fledgling you are trying to kick out of the nest has smart phone.

So that fledgling can use a computer in parents house to search and find a job, and answer emails every day.

He can use a cheap $10/month plan with a cheap $30 cell phone to answer voice calls and text for his job appointments.

The nicer it is to live at home, the longer it takes to leave.

 

[Sunset]

I have a co-worker that complains that he can't afford to get into the 401K...he's 42 years old, single, and has 2 car payments totaling $900 a month. Until recently, he was renting with a GF, and her kids, but now has moved back home with his parents.

I make virtually the same money as him, and contribute 20% to my 401K, with no debt, and fully paid vehicles, and farm.....PRIORITIES !

+1
I had the same thing, back in the day while working at a crap job, I saved for 5 years and stretched to buy a cheap condo apt.

My co-worker was so surprised, she made exactly the same amount and had zero savings. She had no idea where her money went.

 

[Starsky]

Rant On:

Maybe it's because we're all competing with every other worker in the world. There seems to be extreme pressure being placed on employers to lower salary overhead and focus on minimizing the impact of wages on the bottom line. This not only impacts wages, but also long-term benefits like 401Ks, Pensions and bonuses.
We have all seen the effects on pensions - they are anachronistic and on their way out as an unsustainable method of saving for retirement. I'm not sure if that's completely true, or just is incompatible with modern finance where a huge pile of money is irresistible to institutional investors to raid and invest poorly.
401Ks are quaint, and are a great way to align the worker's success with the success of the really rich in the market. They are a useful tool, but the idea of a million dollar 401K is for some reason considered absurd (remember how Romney was skewered about it?), which is in itself absurd if you need at least three million dollars to RE. I guess if you could retire on a 401K at 59 1/2, your employer would think you're making too much money. 401s are another huge pile of money that is irresistible to institutions and government when the SHTF. During the last financial crash, corporations stopped contributing to 401Ks first, before changing any executive compensation or modifying their plans. It was clear that employees were "lucky to have their jobs" which is a new experience for American workers - at least since the Depression.
And when was the last time bonuses were a 'thing'? I used to make about 30% of my annual salary in bonuses. It changed a lot in the past 20 years. That was another thing that disappeared in the financial crisis - except for Wall Streeters.
Sure, some people will save, others won't. It's not like everyone in the past were financial wizards. We have been very fortunate to live during an incredibly prosperous time in our history and seem to think that we're individually entitled to it. The real American Dream was about removing the obstacles to wealth. The fact is that externalities drive the overall investment profile of most people. If there's nowhere to make money, then it's hard to be rich - unless you're born into it. This is why it is so frustrating to hear people who think they are "all that" by getting rich in the U.S. This is the easiest place to become wealthy because our system was designed for it.
If we fail to protect that "secret sauce" of institutional security that is the foundation of our capitalist system, we will certainly risk becoming no better than any other country where people struggle to get by. There is little appetite in D.C. for any kind of safety net because we still seem to believe 'we're better than that', but nobody is protecting the institutions that have made us who we are. Those who run the levers of power are choosing to exploit them instead.

Rant off.

 

[pb4uski]

That is a wide brush you are using... how did you get it through the door?

 

[HtownRose]

It is T-mobile, pay as you go, so no data included. But I can text and phone when I NEED to for 1,000 minutes per year.

I am in a grandfathered plan, as that's all I've had for many many years.

Thank you! There may not be any similar deals available for new subscribers, but in a few years I will be eligible for 55+ plans so there's that to look forward to...