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Old 03-17-2010, 12:15 PM   #61
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Interesting. Can you provide a reference for this? I honestly do not know if it is true or not, or if it can even be measured since standards of living change over the years.

-ERD50
Another example of the squeeze on the middle class...

"Members of the middle class are losing their health insurance faster than any other income group, according to a new report from the Robert Wood Johnson Foundation.

The number of middle-income earners covered by employer health insurance fell by three million from 2000 to 2008, and government programs and the individual market aren't picking up the slack. The total number of uninsured middle-income earners rose from 10.5 million to 12.9 million, representing 16.2 percent of the income bracket -- a bigger increase than for any other income group.

People who earn less money were more likely to lose employer coverage, but also more likely to be covered by a government program like Medicaid. According to the report, only about half of the decline in employer-sponsored coverage for middle-income earners was offset by government insurance programs."

Link to article:

Middle Class Losing Health Insurance Faster Than The Rich Or Poor
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Old 03-17-2010, 01:07 PM   #62
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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
Would add that average job tenure is +/- 5 years. A great majority of private companies with 401k programs only provide their stock for matching usually (3%) maximum of your salary contribution portion. To get 100% of that amount you have to stay with them around 5 years to be vested. Won't make it to retirement comfortably on their plan. If you did, you ran the risk of getting left behind in personal job growth/experience and potential earning power.

Let's go back to the premise that you need more than a million now, and those in their twenties will need around $3M. Let's suppose US Households with a net worth of at least $1M was 90% instead of well under 10% as it is now. Would everyone then enjoy a comfortable retirement? What would the potential increase in the wealth curve of those in their 20's do to those going into retirement?
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Old 03-17-2010, 06:36 PM   #63
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The more I think about this "survey" the more I conclude that it tells us a lot more about financial advisers and other folks involved in money management than it tells us about retirement needs.

The median household income in this country is 44,389. The survey is suppose to be about the average family's need, so for simplicity sake lets say average=median.

The average retired couple receives $1,735/month from Social Security or just over $20K if we assume that for 62+ year old that $1,000,000 has a SWR of 4% that means that a couple with $1 Mil +SS = $60K/income. 60K/income is more than 63% of households in the country make. From a disposal income perspective 60K in retirement is worth a least 5-6K more than 60K in wages due to not paying FICA/Medicare and the more favorable tax treatment of Dividends and SS income.

Another way to look at the problem is how much money to do I need to supplement social security to have an average household income. Today that number is 44K-20K= 24K/year in pension benefits or $600K in assets. So how much inflation do we need end up with 600K? for someone 10 years from retirement it needs to be 5.2% or less for someone 20 years away 2.6%. So for people in their 40s and 50s $1 million is fine, especially if you have a paid off house and/or pension.

What about young folks. If we assume an inflation rate of 3% for the next 40 years, some one in their mid twenties would need to save just under $2 million to have the equivalent of 600K in today's dollars.

Now obviously if you want to live an above average lifestyle than you need to save more. The real problem is that a "average" financial adviser having two,three, or four or more times more than the median income, living on 44K a year is incomprehensible.

The danger of these type of survey is that a $1 million seems an impossible goal to the vast majority of Americans. Telling them that it isn't enough even when it is just discourages people to save anything at all, and puts additional pressure on the fragile safety net.

What about for
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Old 03-17-2010, 07:48 PM   #64
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The more I think about this "survey" the more I conclude that it tells us a lot more about financial advisers and other folks involved in money management than it tells us about retirement needs.

The median household income in this country is 44,389. The survey is suppose to be about the average family's need, so for simplicity sake lets say average=median.
I thought you were going somewhere else with this observation. To wit, it is very unlikely that if the median family income is $44,000 that the same family will have any chance of saving sufficiently to put away $1,000,000. Thus, putting into question the "survey".
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Old 03-17-2010, 07:53 PM   #65
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The more I think about this "survey" the more I conclude that it tells us a lot more about financial advisers and other folks involved in money management than it tells us about retirement needs.

The median household income in this country is 44,389. The survey is suppose to be about the average family's need, so for simplicity sake lets say average=median.

The average retired couple receives $1,735/month from Social Security or just over $20K if we assume that for 62+ year old that $1,000,000 has a SWR of 4% that means that a couple with $1 Mil +SS = $60K/income. 60K/income is more than 63% of households in the country make. From a disposal income perspective 60K in retirement is worth a least 5-6K more than 60K in wages due to not paying FICA/Medicare and the more favorable tax treatment of Dividends and SS income.

Another way to look at the problem is how much money to do I need to supplement social security to have an average household income. Today that number is 44K-20K= 24K/year in pension benefits or $600K in assets. So how much inflation do we need end up with 600K? for someone 10 years from retirement it needs to be 5.2% or less for someone 20 years away 2.6%. So for people in their 40s and 50s $1 million is fine, especially if you have a paid off house and/or pension.

What about young folks. If we assume an inflation rate of 3% for the next 40 years, some one in their mid twenties would need to save just under $2 million to have the equivalent of 600K in today's dollars.

Now obviously if you want to live an above average lifestyle than you need to save more. The real problem is that a "average" financial adviser having two,three, or four or more times more than the median income, living on 44K a year is incomprehensible.

The danger of these type of survey is that a $1 million seems an impossible goal to the vast majority of Americans. Telling them that it isn't enough even when it is just discourages people to save anything at all, and puts additional pressure on the fragile safety net.

What about for
The information I interjected into this thread was an effort to introduce a little reality into the absurdity of telling soon-to-be retirees they have to have more than $1M to retire.

The facts are - less than 10% of households in the US have it (and could afford to retire according to their financial advice).

Most soon-to-be retirees have less than $100k and are out of time when it comes to saving that +$1M.

Only half of our young people currently even attempt to save for retirement, and how many of those saving could afford to put away $1700/mos @7% for 35 yrs to reach that article's predicted $3M goal for their retirement.

Articles like this are like watching television - real life is nothing like it....
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Old 03-17-2010, 08:25 PM   #66
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I thought you were going somewhere else with this observation. To wit, it is very unlikely that if the median family income is $44,000 that the same family will have any chance of saving sufficiently to put away $1,000,000. Thus, putting into question the "survey".
It is difficult but far from unlikely to hit $1, million. If you can save 10% of your income and get a 5% employeer match or $6,600 starting at 22 a year for 43 years with 5% real historical stock rate you'll end up with just under million. This sum along with Social Security will exceed working income.. I suspect that 1/2 that amount $500K will equal the after tax income for a median family.

Honestly, just starting out with saving 6% getting a 3% employer match and than saving say 1/3 of your raises gets most people to what they need in 40 years.
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Old 03-17-2010, 08:32 PM   #67
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Professor Warren attempts to use data to show the erosion of the middle class.

Alan, been a few decades since I've attended a college lecture. Thanks I enjoyed the presentation disconcerting as the theme was. Couple of surprises for me on where the money was going. I think the issue identified is a huge problem, didn't hear the proposed solution. Maybe the Nancy Reagan Just say no? To huge mortgage pmts, car pmts, childcare pmts? healthcare you gotta pay.
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Old 03-18-2010, 10:02 AM   #68
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Alan, been a few decades since I've attended a college lecture. Thanks I enjoyed the presentation disconcerting as the theme was. Couple of surprises for me on where the money was going. I think the issue identified is a huge problem, didn't hear the proposed solution. Maybe the Nancy Reagan Just say no? To huge mortgage pmts, car pmts, childcare pmts? healthcare you gotta pay.
It shouldn't be a surprise to anyone that has been paying attention that the middle class is under assault. I have seen her presentation before that health care, housing, and increased taxation are squeezing the middle class into near poverty and upping the risks of economic disaster. She compares the family finances from the period around 2003-2007 with the early 70's. caveat: It should have been noted that the early 70's (of which she baselines against) in many ways was the zenith of American prosperity.

She had some vague solutions of which to fix schools as the ticket to a middle class lifestyle. However she conveniently ignored the severe upcoming fiscal challenges of medicare and Social Security which will compete for resources.

So I concur, She laid out (part of) the problem. The solution to that problem is much more elusive.
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Old 03-18-2010, 10:13 AM   #69
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Alan, been a few decades since I've attended a college lecture. Thanks I enjoyed the presentation disconcerting as the theme was. Couple of surprises for me on where the money was going. I think the issue identified is a huge problem, didn't hear the proposed solution. Maybe the Nancy Reagan Just say no? To huge mortgage pmts, car pmts, childcare pmts? healthcare you gotta pay.
Prof Warren has talks more sense than just about anyone about this topic.
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Old 03-18-2010, 11:26 AM   #70
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I think you can still live pretty cheaply in some places. The Northeast isn't one of them (well, if you go into the back woods of ME or VT maybe).

May have to go down south and buy a "manufactured home" or something.

I think I'll have enought assets to retire early, but may have to move to a lower COL area to pull it off.

Then again, who knows?!?
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Old 03-18-2010, 12:02 PM   #71
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Stop wurkin' and Start Livin'

Why Work for the man, When you can retire right now !

You can live really cheaply here ! A sack of beans and you are all set.

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Old 03-18-2010, 12:51 PM   #72
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Prof Warren has talks more sense than just about anyone about this topic.
I have read some of Prof. Warren's stuff before, but this is the first lecture I've seen. She is a good speaker.

The lesson I take from her is that if you want to be on the high end of the new dumbbell shaped curve, you need to:

1. Get married and stay married; and
2. Both work, but make sure that you can live on the salary of the lower paid spouse, which will be far more likely if you;
3. Don't have any children, and
4. Do everything you can to live a healthy lifestyle.
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Old 03-18-2010, 01:27 PM   #73
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I think you can still live pretty cheaply in some places. The Northeast isn't one of them (well, if you go into the back woods of ME or VT maybe).

May have to go down south and buy a "manufactured home" or something.

I think I'll have enought assets to retire early, but may have to move to a lower COL area to pull it off.

Then again, who knows?!?
Housing and healthcare are the biggest costs in MA, but once my mortgage is paid off I can live off $30k a year easily, and that's budgeting $500/month for health insurance which the state mandates. At least there are no issues with being dropped from a plan for a pre-existing condition and pending legislation hopes to control costs. In fact if I keep my income low enough I can get insurance at a reduce rate as I'll be below 3xpoverty level.
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Old 03-18-2010, 01:56 PM   #74
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Western MA is pretty cheap/rural I think. I was always curious about the MA insurance mandate. I figured that could be my back up plan. Move to MA, and go on the public dole.
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Old 03-18-2010, 04:46 PM   #75
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I found Prof. Warren's lecture very interesting. It occurred to me that she has very precisely identified the "symptoms" of the problem but hasn't really identified the problem. (Others suggested she didn't present any solutions.) Unfortunately, the typical approach to any problem, at least at first, is treat the symptoms. You may not know what the problem is.

It seems to me that underlying shifts in economic power world wide are at the root of the symptoms. The US is no longer the only economic super power (as it was after WWII). I think the degradation of the after-inflation family income (even with 2 workers instead of 1) stems from the fact that the US has tremendous downward pressure on wage rates as the rest of the world catches up educationally and economically.

I certainly can't back this up with hard data, but we all know examples of outsourcing of jobs due to labor costs. Technology is no longer just centered in the US. On it goes. I'd be interested in other's take on the "root" cause(s). I don't think we solve the problem until we can truly identify it. It's not as simple as "mommy went to work". That is certain.

I wasn't actually surprised at Prof. Warren's opening discussion of what costs have gone down and what costs have risen. I wouldn't have been able to quantify them as she did, but I think I could have identified most by the appropriate direction of change. I'm not patting myself on the back by saying that, I'm just saying I've lived as an adult during exactly the time she was describing. I saw everything she described as it happened. Maybe I didn't sit down and think about the magnitude of each change, but I saw everyone she mentioned - especially housing and medical care.

Much as it would be nice to roll back some years of age (or at least some miles) I certainly would not want to be a 23 year old kid right now. While "things will change" is still true, I think the outlook for younger folks is more bleak than when I was that age 40 years ago. JMHO of course. YMMV and all that rot.
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Old 03-18-2010, 05:52 PM   #76
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I have read some of Prof. Warren's stuff before, but this is the first lecture I've seen. She is a good speaker.

The lesson I take from her is that if you want to be on the high end of the new dumbbell shaped curve, you need to:

1. Get married and stay married; and
2. Both work, but make sure that you can live on the salary of the lower paid spouse, which will be far more likely if you;
3. Don't have any children, and
4. Do everything you can to live a healthy lifestyle.
Without going back and watching the whole thing again, I could have sworn she was making a case for one spouse staying at home and taking care of the children.

She is a good speaker and she raised some very interesting points. Like others though, I was curious about some of the things that she didn't offer much detail about. Taxes for instance; she showed a ~25% increase, but I immediately wondered if she was capturing and comparing all of the hidden and added taxes we pay today that were uncommon (or unheard of) in 1970 (i.e. User Fees).

Her comparisons on housing seemed limited as well. The number of rooms hasn't substantially grown (I think it was around 1 room difference) but the size of houses has to have grown as well as all of the amenities. That's just my opinion of course, and I think she may have been limited in her comparisons by what data was available.

At several points in her lecture I found myself thinking much like Koolau - the lesser skilled jobs that used to provide for a lot of working class lifestyles are now being held by foreign workers. Great for the foreign laborer who has a great job paying 50 cents per hour, great for the executive who got $5 mil in performance bonuses by cutting costs, wonderful for the shopper buying cheaper goods at Wal Mart; but, not so great for the man or woman whose factory job doesn't exist here anymore.

When she got to healthcare all I could think of was that the whole mess (not just HC but the complete onslaught against the middle class) was created by "smart people" who figured out ways to squeeze more money out of something or somebody. Everybody was busily looking at their own bottom line that they never thought about the ultimate fallout.
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Old 03-18-2010, 06:39 PM   #77
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FYI, this lecture was first posted and discussed almost two years ago right before the financial meltdown. Ladelfina was a big fan of Professor Warren before she became famous. Has anyone heard from her, her last posting was Aug 2009?
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Old 03-18-2010, 07:35 PM   #78
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I certainly would not want to be a 23 year old kid right now. While "things will change" is still true, I think the outlook for younger folks is more bleak than when I was that age 40 years ago.
I know what you mean, and generally agree, but let's apply a different perspective:

How about the 23 YO in India, or China, or [fill in the blank]? The 'flattening' of the world is a very good thing for those on the bottom, anxious to work their way up. Hopefully, we can raise everyone's standard of living, but I do think the US is bound to have hit some kind of ceiling.

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Old 03-18-2010, 07:49 PM   #79
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Without going back and watching the whole thing again, I could have sworn she was making a case for one spouse staying at home and taking care of the children.
It seemed to me that a lot of the problem areas revolved around the very presence of children. Such as
1. At least 6 increased years of parent financed education (pre-K and college)
2. Increased child care costs due to both parents working
3. The fact that house prices in good school districts get bid up
4. Sickness of children leading to missed work and potentially lost jobs, as well as increased health care costs.

If I recall correctly, her subsequent data supported this observation, showing greater income volatility and greater chances of filing bankruptcy for households with children versus those without.

As T-Al succinctly noted two years ago, the answer is simple -- don't have children.
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Old 03-18-2010, 10:36 PM   #80
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The survey asks investment advisers how much families should save. IMO, that's like asking car salesmen how much people should spend on cars.

I understand that it's hard to get young people to save for retirement. There's a good reason - for most of them, getting out of debt is more important. If I could get one retirement idea across to young people, it would be "Calculate your DFD (debt free date) Then ask yourself if you'll be able to save enough after you are through paying off your debts to save for retirement."
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