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Old 03-16-2010, 11:06 AM   #21
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Why wait until they are out of college? My 5 YO asked me on Sunday (with a very serious look on her face) "Daddy, why don't some people save money?" Yesterday morning she asked DW if she (daughter) has any stocks or bonds.
Agreed, the "out of college" remark was getting specifically to retirement details. I don't think a 5YO is quite ready to grasp it at that level. But if they ask, that is great, and try to give them an age-appropriate answer.

All 3 of our kids seem to have a level head when it comes to spending wisely. We have only rarely had a conscious 'talk' about it, but I guess they pick up on the day-to-day conversations about whether this thing or that thing is a good value, looking for sales, etc, the regular LBYM stuff. And they see that we don't 'stress out' over money matters. Kids pick up on that stuff.

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Old 03-16-2010, 11:12 AM   #22
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Although I think the stuff they sell is generally cwap, the dollar store has been very useful as a teaching aide. DD has learned about spending vs. saving, making a choice when you want more than you can spend, and all about sales tax. Explaining what I was doing when filling out income tax returns was a little more cahllenging...
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Old 03-16-2010, 11:13 AM   #23
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I agree. The article says Gen Y (age 18-26) need to save between $2 and $3 million. If a million is enough today then in 40 years at 3% inflation you will need $3.16 million, so where is the surprise in that?
I've always had a problem with articles like these. They try to use fear to motivate saving more. Yet by throwing out numbers that most people can't fathom ever reaching (because they're living paycheck-to-paycheck), they do little to motivate anyone.

If you want to reach anyone in their 20s, you must approach them in a way that they don't perceive as stifling their desire to enjoy the best years of their lives (discretionary income, no kids, etc....) Tell them that you understand and want them to enjoy these years. Then explain how things like: saving ~15% of their gross pay, get the 401(k) match, fund the Roth and other tips to maximize their retirement savings won't stifle things. Save first, then they can spend the rest however they want.
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Old 03-16-2010, 11:13 AM   #24
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Who would be stupid enough to think that your salary is an allowance for you to spend?
I'll take it a step further, and say it is stupid (since that is the word you used), to make *any* correlation between salary and spending needs in retirement.

I could paint all sort of scenarios, but simply, what one spends in retirement is what they need to determine. And then determine if they have the resources to support that. It may or may not relate to what they earned in their last few years of working.

Anything else is an oversimplification that might be OK in general, but is dangerous to apply to an individual.

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Old 03-16-2010, 11:24 AM   #25
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If you want to reach anyone in their 20s, you must approach them in a way that they don't perceive as stifling their desire to enjoy the best years of their lives (discretionary income, no kids, etc....) Tell them that you understand and want them to enjoy these years. Then explain how things like: saving ~15% of their gross pay, get the 401(k) match, fund the Roth and other tips to maximize their retirement savings won't stifle things. Save first, then they can spend the rest however they want.
Exactly. My kids have always been good with money, learning to budget and save for things they want to buy. DS started working full time 3 years ago and I help him with his tax return each year. He doesn't earn much but saves enough in his 401(k) to get the full match, plus he puts some money into his Roth each year. He doesn't have targets in mind yet as he is only 27 but the fact that he is aware of the issue and saving now is really good to see.
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Old 03-16-2010, 12:04 PM   #26
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Scottrade recently polled 226 registered investment advisers on the topic and found that 71% don't believe $1 million is enough for the average American family. Most said families need to save double, or more than triple, the amount.
Surprise, surprise. Financial advisors want people to work longer and save more and I am sure it has nothing to do with them making a living off of other people's money.


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Bill Smith, president of Ohio-based Great Lakes Retirement Group, is among the advisers who took part in the survey. As he sees it, too many people rely on online retirement calculators. Much of that guidance uses a target based on making do with 70% to 80% of pre-retirement income.
"I've never been a big fan of planning to earn less in retirement than you are making now," he says. "I'd like to see an individual continue making the same amount of retirement as when he was working. Who wants to set themselves up in retirement to make less?"
As it turns out, a retirement income equal to 70-80% of my pre-retirement income would allow me to retire like a prince. I wouldn't even know what to do with all that money. But I am sure that Bill Smith would have a few suggestions to help me spend it... An annuity perhaps?

Call me a cynic.
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Old 03-16-2010, 12:10 PM   #27
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........we could comfortably retire on what is now about 40% of our current income. Without blinking.
Exactly! The retirement adviser in the article who advocates retiring on the same income you had when w*rking must frustrate a lot of clients. In order to retire you have to be saving a large %age of your income and when you retire you obviously can live on a lot less. He should have said something like "retirement income needs to meet your expenses in retirement which might be considerably less than when you're w*rking"
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Old 03-16-2010, 12:50 PM   #28
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Exactly! The retirement adviser in the article who advocates retiring on the same income you had when w*rking must frustrate a lot of clients. In order to retire you have to be saving a large %age of your income and when you retire you obviously can live on a lot less. He should have said something like "retirement income needs to meet your expenses in retirement which might be considerably less than when you're w*rking"
The operative word there is MIGHT. It might also be safe to assume that health care insurance will absorb any money that would be saved from work expenses no longer incurred after retirement. The $1,500+/month you spend on clothes, food, commuting, car payments, etc... might be equal to the insurance premium you'll be responsible for when your employer no longer picks up part of the tab.

On a slightly different topic, the 70% figure financial "experts" have been bandying about for years makes one key assumption - your retirement expenses will be 70% of what you earn at your peak earning years. If you're earning $100k a year at retirement (not unheard of, even for government workers), that means you're projecting retirement expenses at $70,000, even though you'll probably have a paid-off house (your biggest expense), paid-off cars, kids moved out of the house (and graduated college), and no more retirement savings needed (worth at least $16.5k if saving in a 401(k) account). Add to that any income your spouse earns and the entire speculative retirement calculation goes out the window.
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Old 03-16-2010, 12:52 PM   #29
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. He should have said something like "retirement income needs to meet your expenses in retirement which might be considerably less than when you're w*rking"


And it might not be ! Consider all the people who only make $30000 to $45000 a year . How much lower are they going to go in retirement ? This board is mostly comprised of very high wage earners and lucky recipients of large inheritances and I think sometimes you forget about the average American . Most of them save but certainly not at the rate high earners do and when they retire they really cannot cut their expenses drastically .
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Old 03-16-2010, 01:02 PM   #30
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And it might not be ! Consider all the people who only make $30000 to $45000 a year . How much lower are they going to go in retirement ? This board is mostly comprised of very high wage earners and lucky recipients of large inheritances and I think sometimes you forget about the average American . Most of them save but certainly not at the rate high earners do and when they retire they really cannot cut their expenses drastically .
This is true and our good fortune colors our perception of things. That said, the average American in that wage range will need to revise downward his/her retirement expectations if s/he failed to take reasonable steps early on in life. This will be a rude (and very sad) awakening for many folks in this situation, but it is a fact of life that cannot be denied. The alternative is to extend retirement for another 5-10 years (i.e. work until 65 or 70), which may not be so bad given the average lifespan today as compared to 30-40 years ago.
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Old 03-16-2010, 01:04 PM   #31
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...I don't think 100% of one's salary is a necessity or even a realistic goal these days.
It was for DW/me in our retirement income planning.

However, we never looked at gross salary (which many of these articles do).

We looked at 100% of our pre-retirement net salary (without all the contributions and taxable items not seen in retirement), adjusted for our personal rate of inflation, year over year (not the government's numbers).

Of course, another reason that it works is that we are completely debt free, along with not waiting to do "retirement stuff". For instance, travel is a big expense (our biggest...) but it is something we have always done - at least for more than a dozen years before retiring. It didn't require any "extra" savings in retirement.

Works for us ...
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Old 03-16-2010, 02:26 PM   #32
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And it might not be ! Consider all the people who only make $30000 to $45000 a year . How much lower are they going to go in retirement ? This board is mostly comprised of very high wage earners and lucky recipients of large inheritances and I think sometimes you forget about the average American . Most of them save but certainly not at the rate high earners do and when they retire they really cannot cut their expenses drastically .
I agree with you. I'm single, well paid and live frugally so I can save for retirement. People living pay check to pay check because they have poor benefits and low salaries are getting screwed. They are the ones who were really hurt by the demise of pension schemes and unless we are careful the attacks on SS will take the final leg of their retirement away. Even households with average income are in trouble if the $1M to retire is real. In MA the median 4 person household income is $85k which might sound a lot, but with having to pay more and more for health, college etc. I imagine very few are maxing out their 401ks or saving after tax. Combine their low retirement account balances with bad investment returns and I see a world of hurt for a lot of people through no fault of their own.
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Old 03-16-2010, 03:45 PM   #33
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This Gen X'er sure won't need 3 million... I could probably get there if I worked till 65, but I have absolutely no intention of doing so.
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Old 03-16-2010, 04:01 PM   #34
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I think savings is very important, along with realistic planning. One must have a realistic idea of what they need to live on.

But I also remember all the milestones along the way. We'll be comfortable when (the kids are out of diapers, not using formula, we're not paying daycare, are out of school, college is paid for, weddings are paid for...)

We always found a way, and pretty much LBYM. We told our daughter who attended college that we would cover 4 years of room and board and that she had to cover spending, the rest was on her--she got out in 3.5 years and worked part time besides.

I look around at neighbors and family and know that they have less than we do, and suspect that to be the case for others. We have saved and planned for retirement for 25 years, and it is just 13 months to go when we are both out by age 55. Those around us found a way, and we will to-- and are prepared to boot.

I may be naive, but I think with focus, sacrifice, living below your means and saving and planning, if one is really willing to do the work, make the trade offs, and is lucky enough to stay employed most of their working life, then early retirement is possible for many more than we realize.
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Old 03-16-2010, 04:48 PM   #35
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Why wait until they are out of college? My 5 YO asked me on Sunday (with a very serious look on her face) "Daddy, why don't some people save money?" Yesterday morning she asked DW if she (daughter) has any stocks or bonds.
So.....what's DD's asset allocation?

Out of the mouths of babes....
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Old 03-16-2010, 04:53 PM   #36
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So.....what's DD's asset allocation?

Out of the mouths of babes....
Outside of a bank account and a very elaborate electronic ATM that functions as a piggybank, SWBGX 100%. Its a small balance and I am likely subject to the "prudent investor" standard as fiduciary, so no sense getting exotic. She can do that when she turns 8.
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Old 03-16-2010, 05:09 PM   #37
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If a million now isn't enough to retire, and this article estimates that you'll need $2-$3M if you're in your twenties - how do you rationalize:

Less than 10% of US households have a net worth over a million.
Baby boomers have on average less than $100k saved for retirement
For those in their twenties - participation in 401K programs is +/- 50%
It requires saving $1700/mos. @ 7% for 35 years for +$3M
Average household income in the US is just over $46k

Reality dwells at a different end of the earth
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Old 03-16-2010, 05:20 PM   #38
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If a million now isn't enough to retire, and this article estimates that you'll need $2-$3M if you're in your twenties - how do you rationalize:

Less than 10% of US households have a net worth over a million.
Baby boomers have on average less than $100k saved for retirement
For those in their twenties - participation in 401K programs is +/- 50%
It requires saving $1700/mos. @ 7% for 35 years for +$3M
Average household income in the US is just over $46k

Reality dwells at a different end of the earth

My thoughts exactly. There is a major disconnect with these kinds of numbers for the vast majority of people.
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Old 03-16-2010, 05:37 PM   #39
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With an average household income of $46K, it would be difficult to sock away enough to grow to $2 million, wouldn't it?
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Old 03-16-2010, 05:41 PM   #40
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Ah -RITE! Time for someone to bring back 'The Four Yorshiremen' to put this thread in perspective and demonstrate true frugal.

Or something.



heh heh heh - After being 'cheap' so long in ER upping spending to match my ORP calculator before I croak is painful. Ok ok so maybe I trade in my Chevy and move on up to ?GMC? .
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