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Could you imagine being this woman?
Old 05-17-2010, 02:15 AM   #1
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Could you imagine being this woman?

Could you imagine being 60 and needing to bust your azz to makeup for retirement? How much easier it would have been for this woman to have socked away the $2K per year from 25 to 45, and just let it have ridden.

No retirement savings? It's not too late to catch up - May. 13, 2010

60 years old and no retirement savings

(Money Magazine) -- Question: I'm one of those Americans who are just not financially prepared for retirement. I'm 60, but have very little saved because my money went into my own businesses, all of which eventually failed. I'm now working for a company and participate in its 401(k). But short of winning the lottery, I don't know what to do to be able to retire. Any suggestions? --Tony F., St. Louis, Missouri
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Old 05-17-2010, 06:30 AM   #2
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Originally Posted by swampwiz View Post
Could you imagine being 60 and needing to bust your azz to makeup for retirement? How much easier it would have been for this woman to have socked away the $2K per year from 25 to 45, and just let it have ridden.

No retirement savings? It's not too late to catch up - May. 13, 2010

60 years old and no retirement savings

(Money Magazine) -- Question: I'm one of those Americans who are just not financially prepared for retirement. I'm 60, but have very little saved because my money went into my own businesses, all of which eventually failed. I'm now working for a company and participate in its 401(k). But short of winning the lottery, I don't know what to do to be able to retire. Any suggestions? --Tony F., St. Louis, Missouri
First off, I am always a little suspicious that these "letters" are from ficticious individuals invented solely to tell the writer's tale. (Where does it say the person is a woman, BTW?) Now, having said that, Mr. Updegrave did cover all bases by pointing out that this is not an unusual situation -- there are many people that age with no savings and for a great variety of reasons -- most having to do with "luck of the draw." I am sure reading "fluff" of this kind gives those folks a "warm fuzzy feeling" (not dissimilar to the feeling we "savers" get from reading such baloney imaginative tales) but no "real world" solutions were offered.

Case in point is the T Rowe Price article claiming to have done a "study" of such situations. It looks suspiciously like something produced by the calculations in a very simple Excel spreadsheet since it relies on so many "ifs." In fact, it even mentions focusing on "a 55 year old who has no retirement savings" -- another fictitious character, I imagine.

Harumph.
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Old 05-17-2010, 11:52 AM   #3
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I dunno. It isn't THAT impossible, or that stupid - - we don't know everything that went on in someone's life leading up to being in this situation, and I would be slow to criticize. This man admits to having put everything into a failed business, but there may be more. For example he also could have had a disabled child, could be the victim of a con man, or who knows what that you and I didn't have to cope with.

There but for the grace of G*d go you and I.

America is a wonderful place, and if you are determined you can do just about anything. If he works hard at it, it shouldn't be too hard for him to put together a bare bones retirement by age 70, or earlier if his SS estimate is high. The proverb says "There are many roads to Rome", and in this case I think that "There are many ways to attain retirement".
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Old 05-17-2010, 12:07 PM   #4
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I can't imagine being a woman named Tony F. All the rest seems SOP.

Ha
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Old 05-17-2010, 12:13 PM   #5
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I also saw Tony and thought male even though my grandmother's nickname was Tony (for Antoinette). Tony the Tiger reminds me, I'm late to breakfast.

Yes, OP, every once in a while a random thought jumps into my head, "I'm so glad I'm not at work." Then another little voice says, "yeah, at my age."
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Old 05-17-2010, 02:09 PM   #6
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This story is hardly surprising to me. I know at least 3 people among my close relatives who are in their 60s and have next to nothing in savings:

1) My mom, mid 60s. She has $7K in her name. She lives on SS, a tiny pension and income from PT work. If she couldn't work anymore, the income she receives from SS and the pension would barely cover the essentials.

2) FIL, mid 60s. Cashed in the last chunk of his retirement accounts earlier this year. Still 27 years to go on his mortgage. No pension. SS is his only source of income currently. Lost his job 2 years ago. Hasn't found another one yet. Decided to create a small business but finding funding sources has been next to impossible.

3) MIL, the richest of the bunch. Mid 60's. A few hundred Ks in the bank. No pension. SS covers only 1/3 or her bills. To cover the other 2/3, she uses her savings with a withdrawal rate upward of 10%.

I used to be a critic of SS, but no more. Without SS, those 3 people would be homeless or living in my house. There are few things that keep me up at night, but our parents' financial situation is one of them.
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Old 05-17-2010, 02:28 PM   #7
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Originally Posted by FIREdreamer View Post
This story is hardly surprising to me. I know at least 3 people among my close relatives who are in their 60s and have next to nothing in savings:

1) My mom, mid 60s. She has $7K in her name. She lives on SS, a tiny pension and income from PT work. If she couldn't work anymore, the income she receives from SS and the pension would barely cover the essentials.

2) FIL, mid 60s. Cashed in the last chunk of his retirement accounts earlier this year. Still 27 years to go on his mortgage. No pension. SS is his only source of income currently. Lost his job 2 years ago. Hasn't found another one yet. Decided to create a small business but finding funding sources has been next to impossible.

3) MIL, the richest of the bunch. Mid 60's. A few hundred Ks in the bank. No pension. SS covers only 1/3 or her bills. To cover the other 2/3, she uses her savings with a withdrawal rate upward of 10%.

I used to be a critic of SS, but no more. Without SS, those 3 people would be homeless or living in my house. There are few things that keep me up at night, but our parents' financial situation is one of them.
So, do you believe each of these individuals are to "blame" for their prediciment? Or that they, personally, could have prevented it from happening by something other than "hindsight"?

The reason I ask is that in future name-calling "us vs them" threads, I would enjoy refering the holier-than-thou back to this post.
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Old 05-17-2010, 02:46 PM   #8
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So, do you believe each of these individuals are to "blame" for their prediciment? Or that they, personally, could have prevented it from happening by something other than "hindsight"?
Not at all. Since I'm 62, I'm smack dab in the named cohort.

Additionally, since my wife did not work in the early years (stayed home to care for our disabled child), we had one of those black swan thingy's that get in the way, some times.

What is common (at least for a non-govermental j*b) is that in the private sector (where I was), you did not have to worry about retirement as you do today. A lot of company had defined benefit (e.g. pension) plans, which you did not have to contribute to.

Additionally, IRA's and 401(k)'s did not come about when us "oldsters" started our careers/families. Heck, my DW/me (same age) didn't start our IRA/401(k) contributions till we were in our mid-30's when our respective pensions were eliminated, the 401(k)'s were offered, and IRA's were available for all employees - not just those that were not covered by a pension plan (as had been the rule years earlier).

It's tough to plan when they keep changing the rules ...

At least we did ok. We were living the LBYM lifestyle before we knew what the term was. Married poor, lived poor, continued to live poor even though we were doing financially better as we passed our 10th anniversary.

But hey - that's life. Sometimes you lose, sometime win, and sometimes break even...
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Old 05-17-2010, 03:43 PM   #9
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I can easily imagine being that woman . I see it everyday where women who think they are set for retirement become widows and find out their late husband was pretty awful with money or they are blindsided by divorce from someone who has already liquidated some accounts or had a gambling problem . It's not just living above your means that gets you sometimes it's just life .
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Old 05-17-2010, 04:08 PM   #10
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Originally Posted by swampwiz View Post
Could you imagine being 60 and needing to bust your azz to makeup for retirement? How much easier it would have been for this woman to have socked away the $2K per year from 25 to 45, and just let it have ridden.

No retirement savings? It's not too late to catch up - May. 13, 2010

60 years old and no retirement savings

(Money Magazine) -- Question: I'm one of those Americans who are just not financially prepared for retirement. I'm 60, but have very little saved because my money went into my own businesses, all of which eventually failed. I'm now working for a company and participate in its 401(k). But short of winning the lottery, I don't know what to do to be able to retire. Any suggestions? --Tony F., St. Louis, Missouri

after reading this article i was left disappointed with the advice given, which sounded alot like "save as much as you can and hope for the best". instead i would look at this problem as i would any ER problem (not that this is an ER but the principles are the same) by looking at living expenses and sources of income. i would first suggest cutting living expenses as much as possible. then compare the required expenses to the amout of SS to be paid this person at 70 (all in real terms). if SS at 70 covers those expenses then there isnt much of a problem, just save everything above that SS amount while working and retire at 70 on SS with a cushion of savings. if SS at 70 more than covers those expenses than compare the expenses to SS at FRA, maybe retirement at FRA is possible. these two cases are the easy cases but what if SS at 70 doesnt cover those expenses? 1st thing to consider doing is try cutting those expenses even more. then a more complicated analysis involving wages, payments from SS, living expenses and life expectancy is required instead of just "save as much as you can and hope for the best"!
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Old 05-17-2010, 04:12 PM   #11
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So, do you believe each of these individuals are to "blame" for their prediciment? Or that they, personally, could have prevented it from happening by something other than "hindsight"?

The reason I ask is that in future name-calling "us vs them" threads, I would enjoy refering the holier-than-thou back to this post.
Rotten luck and bad decisions clearly played a role. But I will let you judge for yourself.

1) My parents, before their marriage fell apart, were very much middle to upper-middle class. The divorce changed that in a big way, for my mom especially. My mom was making just about $1,500 a month at the time and she was receiving only $200 a month from my dad for child support (my dad made upward of $7,000 net a month). In addition, during the split, she inherited the family home which was too expensive for her to maintain on her own. But she decided to hold on to it because it was our home. So she had a rough time there for a while, at least until my sister and I moved out. Then she found herself with much more disposable income and went a bit crazy (pent up demand if you will), to the point of getting into credit card debt. She hid the debt for a long time but when she figured out she could not repay the debt on her own, we had to bail her out. Then, in her mid 50's, she inherited about $100K from her father. The inheritance did not last long as she went on an ambitious program to renovate the family home from top to bottom (a lot of it was cosmetic). She only saved about $7K from the inheritance. A few years later, she became severely ill. The doctor said it was stress-related and he recommended her to lighten her work load. At the time, she qualified for SS benefits, so she asked her employer whether he would allow her to continue working part time while she officially retired. Today she can easily cover her regular expenses. But I have to help with unexpected bills and large purchases like a new car. If she has to stop working, however, there will be a significant income shortfall.

2) FIL and MIL were married until fairly recently. During most of their marriage, they were undoubtedly upper-middle class (income above $15K a month). FIL was always an optimist entrepreneur who liked to count his chickens before they hatched. They loved to live large and enjoyed very expansive and expensive houses. Often time, the carrying costs were so high that they didn't have much left to save for retirement. FIL hated the idea of retirement anyways ("retirement is for losers", he used to say), so saving for retirement was never his top priority. MIL was a housewife and deferred all financial decisions and planning to her husband who kept her in the dark. A few years go, the marriage dissolved and they divided the assets 50/50. She was shocked at how little there was to split.

MIL used her share to buy outright too much house (once again) but she was counting on a hefty alimony check from FIL at the time, so she figured she could easily afford that "little" luxury. But things didn't go as planned. Soon after the divorce, FIL lost his job. The alimony payments stopped. Suddenly, there was no money coming in. But MIL was convinced the situation was only temporary so she failed to curb her spending for the most part. Fast forward a few years, and she is still not getting her alimony checks. She has gone through her savings and now she has to start depleting her retirement accounts. Of course, the financial crisis of 2008 didn't make her any more financially secure. So here she is now, collecting SS and having to count on a somewhat reduced nest egg to make ends meet. She still refuses to cut expenses to the bone, she laughs at me when I tell her to get a part time job, and she refuses to look into reverse mortgages. But I am convinced that, had the alimony checks continued to arrive, she would have been in a very enviable financial situation by now.

FIL's fall from grace was more dramatic. When he lost his job, he went from making a fine living to making no money at all. He looked for jobs everywhere, but I think he was asking too much money. When he couldn't find a job, he decided to create a company using a lot of his savings as seed capital. The company had a promising first year, but when he started running out of capital, he found himself in a bind. It was time to go out and find investors. Once again, it proved terribly difficult for him to find investors willing to hand out their cash in the midst of the great recession. It still is. So, he has no money coming in (except SS) and, as I said, his retirement savings are gone. The company is falling apart due to the lack of capital but he refuses to give up. He recently described his financial situation as "disastrous".

Sorry for the long post.
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Old 05-17-2010, 05:42 PM   #12
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I used to be a critic of SS, but no more. Without SS, those 3 people would be homeless or living in my house. There are few things that keep me up at night, but our parents' financial situation is one of them.
While I am an advocate of a safety net for those who through no fault of their own need it, I have to wonder whether more people would put more effort into saving for their own retirement if there was not the promise of taxpayer funded financial support waiting for them when they reach old age? Looking at countries which have much more limited welfare programmes (mostly in Asia), high savings rates are a noticable characteristic.
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Old 05-17-2010, 08:33 PM   #13
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Those societies also have a very strong ethic of families sticking together, younger members taking care of older, etc.

To see why that is long gone in the US just read this board.

The US, and to a possibly somewhat lesser extent Europe, is obsessed with self.

Ha
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Old 05-17-2010, 10:03 PM   #14
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While I am an advocate of a safety net for those who through no fault of their own need it, I have to wonder whether more people would put more effort into saving for their own retirement if there was not the promise of taxpayer funded financial support waiting for them when they reach old age? Looking at countries which have much more limited welfare programmes (mostly in Asia), high savings rates are a noticable characteristic.
IMHO "safety nets" are designed to catch people who are falling. They don't ask if your are negligent or foolish instead of deserving but unlucky. Perhaps some are suggesting that Soylent Green is a better approach for the willfully stupid or inept. Or as Scrooge said "And the union workhouses - are they still in operation?
Every society has to deal with its "undeserving poor". Rome gave its poor citizens bread and circuses to keep them fed and occupied and prevent social upheaval
The issue is always what is the cheapest way to maintain social order. ON that scale SS is a huge success
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Old 05-17-2010, 11:04 PM   #15
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Thanks for sharing FIREdreamer. Certainly sounded to me like a lot of bad decisions in those stories. I saw a couple of things that may qualify as bad luck. I don't know whether people consider assuming that high paying jobs will always be there is a bad decision or bad luck. I am leaning towards the former. As for a bad illness due to high stress - I would lean towards back luck on that one... it would be too bad if these circumstances keeping you up at night would get you one of those later on. Hope your dreams about FIRE keep you warm and stress-free :-)
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Old 05-18-2010, 07:02 AM   #16
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This story is hardly surprising to me. I know at least 3 people among my close relatives who are in their 60s and have next to nothing in savings:
Same here. One is FIL, a nice guy, played by the rules (of the 1960's) but hasn't placed any effort on savings. The company he worked for moved and he was given the choice of ER or uprooting his family and his wife leaving her government secretary job, so he took ER and drove a school bus for another ten years. He has about $2,200/month net income between SS and the pension but continues to spend beyond his income by about $100/month, with credit cards. DW even took a spreadsheet (he's a former bookkeeper) and showed that what he's doing is not sustainable but he keeps on anyway. He's 84 and his health has declined noticeably in the last year so I'm not sure how that's going to play out.

Another is a half-sister-in-law in her early 80s who grew up in a well-to-do family and never adjusted to the reality that she can't always have what she wants. She's in foreclosure now and recently applied for food stamps. I have absolutely no sympathy for her.

Another is niece in her 50s who is diabetic, divorced after a 20-year marriage, and all but completely disabled. She has made some unwise financial decisions but nothing terribly out of line so that's not the cause of her problems. She had the chance for a free college education (secretary at MD U. for ten years, employees could take two or three classes/semester for free) and didn't take it, and her health has never been terrific. Living with her parents, who are in their 80s and won't be around too much longer. Not sure how that's going to play out but it won't be pretty.
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