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Americans Retiring Early, Then Running Out of Money.
Old 11-11-2013, 11:59 AM   #1
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Americans Retiring Early, Then Running Out of Money.

Americans Retiring Early, Then Running Out of Money - TheStreet

The article cited this Genworth study
https://pro.genworth.com/riiproweb/p...pdf/155306.pdf

"The Genworth data reveals that 52% of pre-retirees expect their living expenses to decrease in retirement, but actually, 65% of retirees saw their costs rise in retirement. Genworth says health care costs are the main culprit, along with real estate and "money spent on dependent".
Only 12% of retirees interviewed by Genworth say they had enough money to meet those higher living expenses."
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Old 11-11-2013, 12:28 PM   #2
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In a nutshell, American's retire when they haven't saved enough because they spent too much (and therefore need to pay off debt before they can retire) and oh .... we did a study and you'll love our annuities !
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Old 11-11-2013, 12:39 PM   #3
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Interesting but this addresses the American public at large. The folks that frequent here are in a much better position than the public at large because unlike the general public most here LBYM and invest the difference.
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Old 11-11-2013, 12:45 PM   #4
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Interesting but this addresses the American public at large. The folks that frequent here are in a much better position than the public at large because unlike the general public most here LBYM and invest the difference.
+1
Two phrases: "The Street" and "Genworth Financial". That's all I needed to know to disregard.
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Old 11-11-2013, 12:48 PM   #5
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So many people retire without even knowing what they really spend and on what, except in a general sense, because they have never actually kept track of it thoroughly. I am pretty sure that most of us here have done that before retiring, or at least I hope that is the case.

It has been pretty hard for most retirees to budget for health care costs in recent years, so true.

Also, one can hardly fault those who are retiring due to unexpected job loss for their financial difficulties.

It is easy to spend more in retirement than while working. Not only do necessities cost more, but many of us find ourselves spending a lot more on things/experiences we don't need to survive. We "deserve" it, we have more time for shopping, and more leisure time for leisure activities and travel. Then there is the booming market, that may be inspiring some to spend more. Seeing all time net worth highs every few days just isn't conducive to extreme LBYM for some of us, including me.

So, like many, I am spending a little more in retirement than I did while still working. Luckily I can afford to do so right now; if/when the market crashes badly as in 2008-2009, I will need to cut back quite a bit.
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Old 11-11-2013, 01:41 PM   #6
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Average US Wage: $44K/year (pre-tax) (May 2012, Bureau of Labor Statistics)
Savings at a 4% draw rate required for the average US wage-earner to maintain his lifestyle in retirement: $1.1 million
Average 401K balance of investors over 55: $255K (Summer 2013, Fidelity Investments)

Frankly I'm surprised it's not worse.

Folks, this is the reason we need to make smart financial decisions in our 20s, 30s and 40s so we don't have to face tough choices in our 50s and 60s.
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Old 11-11-2013, 02:01 PM   #7
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Originally Posted by IlliniProgrammer View Post
Average US Wage: $44K/year (pre-tax) (May 2012, Bureau of Labor Statistics)
Savings at a 4% draw rate required for the average US wage-earner to maintain his lifestyle in retirement: $1.1 million
Average 401K balance of investors over 55: $255K (Summer 2013, Fidelity Investments)

Frankly I'm surprised it's not worse.

Folks, this is the reason we need to make smart financial decisions in our 20s, 30s and 40s so we don't have to face tough choices in our 50s and 60s.
Point well taken, though, in fairness, SS would replace some of that income.
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Old 11-11-2013, 02:23 PM   #8
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Interesting but this addresses the American public at large. The folks that frequent here are in a much better position than the public at large because unlike the general public most here LBYM and invest the difference.
So many of us here are just wired completely differently than the population in general. I talk to people who know they will have major income cuts before too long for one reason or another - forced retirement, layoff, losing child support - but they are living pay check to pay check now or close to it and putting shopping sprees and vacations on credit cards, instead of ramping down the expenses and preparing for the future.

I just try to be a sympathetic listener and not give advice, but I fundamentally do not understand the core lifestyle decisions of many of the people around me. If I was worried about my financial future I wouldn't be going on a cruise or be buying 10 more pairs of shoes because they were on sale.

I have posted this before, but for those that have not viewed it yet this is a cute article and video from The Onion -

Chipmunk's Plan for the Future Better Crafted Than 8 out of 10 Americans

Chipmunk

"Researchers also repeatedly witnessed the small quadruped stuffing its cheeks with seeds and nuts and depositing them in one of its subterranean chambers for consumption during winter, displaying an inclination toward saving resources for the future that had “almost no behavioral equivalent” among U.S. citizens."
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Old 11-11-2013, 02:28 PM   #9
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"So many people retire without even knowing what they really spend and on what, except in a general sense, because they have never actually kept track of it thoroughly. I am pretty sure that most of us here have done that before retiring, or at least I hope that is the case."

W2R, this really got me to thinking...I might be one those who never thoroughly kept track. I have always had a written budget (bi-weekly)however I never added up what I've spent. I figured as long as I was staying within my budget after contributing to my TSP, Roth IRA, car/house maintenance & paying bills I was doing ok. I've prepared a monthly budget which I'll start in Jnuary.

What is considered thoroughly keeping track? I retire in less than 55 days, so it may be too late, however, I'm still interested. I also have $$$ to cover my living expenses in the event OPM is slow or backed up. Thanks
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Old 11-11-2013, 02:28 PM   #10
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"Researchers also repeatedly witnessed the small quadruped stuffing its cheeks with seeds and nuts and depositing them in one of its subterranean chambers for consumption during winter, displaying an inclination toward saving resources for the future that had “almost no behavioral equivalent” among U.S. citizens."
"And who will help me eat the bread?" said the Little Red Hen...
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Old 11-11-2013, 03:00 PM   #11
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My helper one year was "retired". He retired at 46 or so with $200K in savings - still had a teenage daughter and a mortgage and for some reason thought that was enough money.

When he worked with me he was about 50 and had almost depleted his savings and was working part-time jobs trying to hang onto his retirement. He had none of the savings invested because he didn't trust the stock market. The post office was evil. He could quote FOX news and Rush Limbaugh and women like me were the reason good men couldn't get decent jobs.

He showed up to work everyday but it was the longest month of my life.
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Old 11-11-2013, 03:33 PM   #12
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It is hard for me to understand how anyone would retire if they didn't ensure they could, I mean really is that the dumbest thing possible? I'm not referring to people who lost their job and couldn't find anything and retired I mean those that said I'm ready but really weren't.

I checked my spending over 2 years in great detail several times certain that I was missing something. I looked at my retirement income and investments and read dozens of articles about SWRs and how the sequence of returns effects your ability to not run out of money. And despite all the research and analysis I did I was still scared I was making a mistake. I was leaving a well paying position and there would be no going back.

6+ years later I laugh at how paranoid I was and how ready I was! Assuming I don't lose my pension there's no way I could ever run out of money even if I live to 110 because I haven't spent anything of investments other than a tiny distribution to help pay off the mortgage. Even if I did lose the pension, my LBMN lifestyle would ensure I would be fine. I do acknowledge that medical costs down the road are an unknown but based upon the past 6 years I'll die with far more money than I retired with. But as it has been pointed out folks here are not representative of the general public, not by a long shot!
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Old 11-11-2013, 03:47 PM   #13
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Originally Posted by daylatedollarshort View Post

I have posted this before, but for those that have not viewed it yet this is a cute article and video from The Onion -

Chipmunk's Plan for the Future Better Crafted Than 8 out of 10 Americans

Chipmunk

"Researchers also repeatedly witnessed the small quadruped stuffing its cheeks with seeds and nuts and depositing them in one of its subterranean chambers for consumption during winter, displaying an inclination toward saving resources for the future that had “almost no behavioral equivalent” among U.S. citizens."
OMG that was definitely today's best laugh. I am tempted to share it on Facebook but I fear it will be piss off too many people. There are times when this forum feels like a support system, for folks with some weird dark sexual fetish, instead of good old fashion Puritan virtues.
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Old 11-11-2013, 04:01 PM   #14
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"The Genworth data reveals that 52% of pre-retirees expect their living expenses to decrease in retirement, but actually, 65% of retirees saw their costs rise in retirement. Genworth says health care costs are the main culprit, along with real estate and "money spent on dependent".
It's not unreasonable or uncommon for inflation adjusted expenses to decrease over the course of retirement, more during the less active later years, until when/if end of life (medical/assisted living) expenses kick in.

But to expect real dollar expenses (after inflation) to decrease over the many years in retirement would be "unrealistic."

I wonder if some folks see articles on the former and naively interpret them to mean the latter - I have seen it occasionally here in a few threads. Not sure which case the quote above pertains to, but since Genworth is selling annuities, it's for maximum effect anyway...
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Old 11-11-2013, 05:15 PM   #15
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Originally Posted by Cassie View Post
"So many people retire without even knowing what they really spend and on what, except in a general sense, because they have never actually kept track of it thoroughly. I am pretty sure that most of us here have done that before retiring, or at least I hope that is the case."

W2R, this really got me to thinking...I might be one those who never thoroughly kept track. I have always had a written budget (bi-weekly)however I never added up what I've spent. I figured as long as I was staying within my budget after contributing to my TSP, Roth IRA, car/house maintenance & paying bills I was doing ok. I've prepared a monthly budget which I'll start in Jnuary.

What is considered thoroughly keeping track? I retire in less than 55 days, so it may be too late, however, I'm still interested. I also have $$$ to cover my living expenses in the event OPM is slow or backed up. Thanks
Cassie, that is a good question. I suppose each of us has a different idea of what the answer might be. To me, I suppose it would mean keeping a record of each expenditure, how much, and for what. BTW, having some extra $$$ to cover your living expenses in the event OPM is slow or backed up is an excellent move. I have heard they are rapidly fixing that situation but I still think it's a good idea just in case.
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Old 11-11-2013, 05:51 PM   #16
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Cassie, that is a good question. I suppose each of us has a different idea of what the answer might be. To me, I suppose it would mean keeping a record of each expenditure, how much, and for what. BTW, having some extra $$$ to cover your living expenses in the event OPM is slow or backed up is an excellent move. I have heard they are rapidly fixing that situation but I still think it's a good idea just in case.
I don't think you need a lot of detail if you are sure you are spending a lot less than you expect in ER income including the 4 % SWD. In my case it was not a slam dunk, so I need to know where it is all going, and what I could do if I need to adjust discretionary expenses. For example, second home would be first to go. It is high discretionary.
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Old 11-11-2013, 06:07 PM   #17
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Frankly, it's headlines like this and my own paranoia that makes me wonder if 35x expenses is enough at 47.
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Old 11-11-2013, 06:09 PM   #18
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Hmmm - perhaps because I tested INTJ,was born lefthanded or my parents withheld being dropped on my head as a child.

Hindsight says being layed off 13 yrs before my planned ER caused enough panic to cut expenses to 12 - 18% of working expenses (including savings/investments) for the first 12 years and spending more than my salary when retired two or three years when remodeling worked. Toss in the 90's good market history, my conversion to balanced index funds(aka Boglehead) has left me after 20 years facing age 70 1/2 onset of RMD and jumping a couple tax brackets.

The joy and brutal enthusiasm with which I embraced 'downsizing/ expenses' causes some to question my sanity over the 20 year span. But I still test INTJ.

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Old 11-11-2013, 06:28 PM   #19
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Frankly, it's headlines like this and my own paranoia that makes me wonder if 35x expenses is enough at 47.
Headlines like this are tantamount to garbage. The Street is nothing more than a shill for the financial "services" industry, and I wouldn't trust a Genworth Financial study written about toilet paper. It was Bernstein himself who advised to log off the net, turn off the TV, read and educate oneself about investing. There are no shortcuts, and nobody loves your money more than you do (although they're just dying to take it from you).

Bogleheads Guide to Investing, among many many others, will provide you with much more reliable advice on how to prepare for retirement regardless of external circumstances. It's never different this time.
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Old 11-11-2013, 06:42 PM   #20
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It's not unreasonable or uncommon for inflation adjusted expenses to decrease over the course of retirement, more during the less active later years, until when/if end of life (medical/assisted living) expenses kick in.

But to expect real dollar expenses (after inflation) to decrease over the many years in retirement would be "unrealistic."
Agree with the observation, but it will mean that the nest egg needs to be invested wisely so that it will grow to compensate for inflation, as well as enabling people to enjoy the retirement and not mired in a constant concern needing frequent recalibration of the budget.
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