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Retirement - 1 million dollars ain't enough
Old 03-16-2010, 09:46 AM   #1
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Retirement - 1 million dollars ain't enough

Essentially I see the headline is "all ye who entertain hopes of ever retiring should abandon all hope."

1-million-doesnt-cut-it-for-retirement: Personal Finance News from Yahoo! Finance
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Old 03-16-2010, 09:51 AM   #2
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Old 03-16-2010, 09:57 AM   #3
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News flash: Inflation means that a million bucks at retirement won't mean as much to someone who is 25 as someone who is 65. Someone go award the Nobel for Economics now; we have a winner....

And to OP's comment, I really do think we are reverting to the historical mean after a post-WW2 bubble, and that includes things like more extended family living arrangements to deal with elderly parents and grandparents, because the expectation of a long, comfortable and independent middle class retirement is slowly but surely withering away over the next few decades. Once the public sector jobs stop offering pensions to new hires, the transformation will be almost complete and no one will be able to retire unless they save and invest until it hurts for many, many years.
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Old 03-16-2010, 10:03 AM   #4
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One of my thoughts is the numbers are so large and will be seen as impossible by many young people. If the majority believe they can never acumulate enough money many who might adopt LBYM principles and become investors will say "screw it", I'll live for the moment.
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Old 03-16-2010, 10:05 AM   #5
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Originally Posted by ziggy29 View Post
News flash: Inflation means that a million bucks at retirement won't mean as much to someone who is 25 as someone who is 65. Someone go award the Nobel for Economics now; we have a winner....

And to OP's comment, I really do think we are reverting to the historical mean after a post-WW2 bubble, and that includes things like more extended family living arrangements to deal with elderly parents and grandparents, because the expectation of a long, comfortable and independent middle class retirement is slowly but surely withering away over the next few decades. Once the public sector jobs stop offering pensions to new hires, the transformation will be almost complete and no one will be able to retire unless they save and invest until it hurts for many, many years.
This is why I constantly browbeat encourage our kids to save like crazy while they are in their 20s. It is a constant battle against the materialism that tempts them as their incomes increase
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Old 03-16-2010, 10:07 AM   #6
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One of my thoughts is the numbers are so large and will be seen as impossible by many young people. If the majority believe they can never acumulate enough money many who might adopt LBYM principles and become investors will say "screw it", I'll live for the moment.
And many of the younger folks have seen their parents and grandparents able to retire despite not being prodigious savers, being that their parents and grandparents came of age in the "golden age" of middle class retirement when SS was a decent deal and many private companies offered pensions. That's less and less true today, and these folks may enter their 40s and 50s with a rude surprise that they will never retire unless they move in with their children.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 03-16-2010, 10:11 AM   #7
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These kinds of articles have their place, but since I am planning on retiring in 15 months....and will likely only have about $700k (house paid off etc)...smallish pension....I am going to quit anyway. I kind of agree with the article, but if you are still willing to withhold blowing money on things you don't need you won't need that much. Now I have to agree with other posters, I have a pension and I think they are dying out. Without the pension and hopeful VERA I would have to work for at least a few extra years before I could quit.
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Old 03-16-2010, 10:20 AM   #8
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Hmmm - seems to me, I'm seeing more and more couples with their children moving in (or never leaving) than the other way around.

Maybe I have a tendency to live in bad neighborhoods.



heh heh heh - one is probably not going to see 'aggressively frugal articles' on the Yahoo Finance pages. Nor how to have a 'cheap but good lifestyle'.
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Old 03-16-2010, 10:26 AM   #9
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Hmmm - seems to me, I'm seeing more and more couples with their children moving in (or never leaving) than the other way around.
Yeah, one way or the other it's that reversion to the mean. It was only in the last few decades after WW2 that the "nuclear family" arrangement became the norm and later the expectation, because only then was the economic growth and prosperity to sustain it in place. As it feels like that is slowly slipping away, I expect to see a lot more extended family living arrangements in the coming decades. I prefer not to think of it as declining prosperity, but rather a correction to a temporary period of plenty which provided unsustainable prosperity for the two generations fortunate enough to come of age in it.

Middle class retirement will still be attainable for many, but increasingly you're going to have to plan for it and save like hell in your 20s and 30s or else it ain't happening.
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Old 03-16-2010, 10:36 AM   #10
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heh heh heh - one is probably not going to see 'aggressively frugal articles' on the Yahoo Finance pages. Nor how to have a 'cheap but good lifestyle'.
A million dollars at 4% is $40,000/year. After taxes, maybe $2500-$3000/month. If a person has a paid off house and car, and has everything else they will need to live a happy life, to me this much in today's dollars is a huge amount of income (at least in the "flyover country" parts of the South and the Midwest). No need for frugality here. No need for a "cheap but good lifestyle", IMO.

The big unknown is health insurance but that is exactly what it is - - a big unknown. For all we know, it could be free by the time these kids retire.

I think this article is feeding some Poor Little Old Me (PLOM) tendencies in younger generations. Not to say that they have a copyright on those tendencies, but still it is what it is. I think they have serious challenges ahead, just as we did, but I just can't feel sorry for someone retiring with a million dollar portfolio if he has otherwise prepared for retirement.
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Old 03-16-2010, 10:37 AM   #11
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And many of the younger folks have seen their parents and grandparents able to retire despite not being prodigious savers, being that their parents and grandparents came of age in the "golden age" of middle class retirement when SS was a decent deal and many private companies offered pensions. That's less and less true today, and these folks may enter their 40s and 50s with a rude surprise that they will never retire unless they move in with their children.
That may be true, but what I'm trying to stress to my kids (well, the one out of college anyway), is that whether or not you retire early, having some savings is a powerful thing. An emergency fund can keep an emergency from dragging you down in a hole that is tough to climb out of. Having some funds gives you options, you can take advantage when opportunity knocks. So rather than fret about "the number", just save (and spend wisely) as much as makes sense while maintaining balance in your lifestyle. You will be better off than 99% of the people if you do that, and that is what will count.


Of course, there is something to be said for having gargantuan amounts of fun, racking up a pile of debt, and then walking away from it!

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Old 03-16-2010, 10:41 AM   #12
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Of course, there is something to be said for having gargantuan amounts of fun, racking up a pile of debt, and then walking away from it!
Oh pul-eeze! I have been trying for, let's see, 31 years to persuade my daughter that it is NOT cool to do things like that. Speaking of which, she did get very deeply in debt (mostly for medical bills) but pulled herself out of it all by herself without walking away from anything and I am very proud of her for that.
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Old 03-16-2010, 10:42 AM   #13
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I think this article is feeding some Poor Little Old Me (PLOM) tendencies in younger generations. Not to say that they have a copyright on those tendencies, but still it is what it is. I think they have serious challenges ahead, just as we did, but I just can't feel sorry for someone retiring with a million dollar portfolio if he has otherwise prepared for retirement.
All generations have their challenges. But I think the coming economic challenges are a real problem to the current young generation because they'll need a time machine to correct, and without such time travel someone who doesn't "get it" at a young age is doomed in terms of prospects for retirement. If you don't "see the light" in your 20s and 30s, there will increasingly be no retirement for you.

And really... how many people have saved a million dollars for retirement at ANY age? (This board is full of outliers in that regard; statistically we are an anomaly and a blip on the radar.) But as fewer and fewer people have significant income outside of personal savings in retirement, there will be a very rude awakening. I just hope those who prepared for it aren't asked to pay the bill.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 03-16-2010, 10:53 AM   #14
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OK, here's the most hilarious paragraph from that article:

Quote:
"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?"
Who would be stupid enough to think that your salary is an allowance for you to spend? By the time a person is over 50, anybody serious about ER will be contributing $22,000/year to their 401K and what, $6500/year? to their Roth if they qualify. Plus, hopefully they will be paying off their home with extra payments, and saving in taxable to build a taxable portfolio. My last year I was spending less than 24% of my income and even those who like spending more than me probably don't ever spend 100% of their income.

What younger generations (and some of us boomers too) refuse to acknowledge is that we have all been given a salary haircut with the demise of pensions. Salary is not a spending allowance, and I don't think 100% of one's salary is a necessity or even a realistic goal these days.
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Old 03-16-2010, 10:55 AM   #15
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A million dollars at 4% is $40,000/year. After taxes, maybe $2500-$3000/month. If a person has a paid off house and car, and has everything else they will need to live a happy life, to me this much in today's dollars is a huge amount of income (at least in the "flyover country" parts of the South and the Midwest). No need for frugality here. No need for a "cheap but good lifestyle", IMO.

The big unknown is health insurance but that is exactly what it is - - a big unknown. For all we know, it could be free by the time these kids retire.

I think this article is feeding some Poor Little Old Me (PLOM) tendencies in younger generations. Not to say that they have a copyright on those tendencies, but still it is what it is. I think they have serious challenges ahead, just as we did, but I just can't feel sorry for someone retiring with a million dollar portfolio if he has otherwise prepared for retirement.
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?
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Old 03-16-2010, 10:57 AM   #16
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That may be true, but what I'm trying to stress to my kids (well, the one out of college anyway), is that whether or not you retire early, having some savings is a powerful thing. An emergency fund can keep an emergency from dragging you down in a hole that is tough to climb out of. Having some funds gives you options, you can take advantage when opportunity knocks. So rather than fret about "the number", just save (and spend wisely) as much as makes sense while maintaining balance in your lifestyle. You will be better off than 99% of the people if you do that, and that is what will count.

-ERD50
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.
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Old 03-16-2010, 10:59 AM   #17
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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.
How adorable! Treasure these moments. I'll bet she is such a cutie.
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Old 03-16-2010, 11:02 AM   #18
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Who would be stupid enough to think that your salary is an allowance for you to spend? By the time a person is over 50, anybody serious about ER will be contributing $22,000/year to their 401K and what, $6500/year? to their Roth if they qualify. Plus, hopefully they will be paying off their home with extra payments, and saving in taxable to build a taxable portfolio. My last year I was spending less than 24% of my income and even those who like spending more than me probably don't ever spend 100% of their income.
Agreed. Consider:

* Paid off home in retirement = less income need to pay mortgage/rent

* No need to save for retirement *in* retirement = less income need to fund 401K, IRAs and other retirement investments

* Lower income = even lower income need to pay income taxes, especially cash flow from Roths, savings and taxable investments

* No jobs = possibility of needing only one car, having lower wardrobe expenses, less dining out because you're too busy/tired to prepare your own meals yourself = even more cost savings

In reality, the only expenses that would likely rise are health care and (perhaps) hobbies and travel if someone is into that. But I once calculated that even if I assumed $10K a year went to health insurance, we could comfortably retire on what is now about 40% of our current income. Without blinking.

But all of that, even with almost no pension coming, was made possible only because I saw the writing on the wall even in my early 20s and just starting out on my own. If I didn't save aggressively for my first 15 years in the "real world," my retirement dreams would be toast.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Bravo!
Old 03-16-2010, 11:02 AM   #19
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Bravo!

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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.
Great parenting!! Thanks for providing a warm chuckle today!
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Old 03-16-2010, 11:05 AM   #20
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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.
The fruit doesn't fall far from the tree. Sounds like she'll be an exception to the coming rule.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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