Retirement crisis: From bad to worse

[serie1926]

Retirement crisis: From bad to worse - MSN Money

[Notmuchlonger]

Jim "Mr Negative" Jubak strikes again..

[freebird5825]

what a cheerful outlook.

um, who is this guy?

[RockOn]

I find parts of the article to be thought provoking, I'm interested in his follow-up ideas. I'd rather read something "outside the box" like this than a cheerleading piece by someone on Wall Street. He might be too gloomy, who knows, he might be right on, it's happened before. I remember about 10 years ago when the CNBC clowns used to ridicule Jim Rodgers on a weekly basis on his commodities predictions. Look who's laughing all the way to the bank now. There's nothing wrong with looking at all of the possibilities.

[jIMOh]

Filled with rhetoric but few facts. Boom-bust-boom is what I relying on to retire in less than 20 years. Things can be bust now and for another 5 years while I accumulate. I will sell on the way up to retire.

[RockOn]

Quote:

Originally Posted by jIMOh Boom-bust-boom is what I relying on to retire in less than 20 years. Things can be bust now and for another 5 years while I accumulate. I will sell on the way up to retire.

Your market timing could be excellent, going out 20 years is a little tough though. It could be boom-bust-boom-bust...........

[W2R]

I couldn't help but think that he was talking about the kind of people that don't post on the ER forum. He talked about people using their houses as piggy banks, about percentage investing in 401K's and IRA's going down, about fewer people putting anything away in savings, and so on. Actually, the article made me feel pretty smug about my financial situation right now.

Yes, I agree that the non-LBYM'ers out there who haven't really thought about retirement are going to have problems.

[RockOn]

Quote:

Originally Posted by Want2retire I couldn't help but think that he was talking about the kind of people that don't post on the ER forum. He talked about people using their houses as piggy banks, about percentage investing in 401K's and IRA's going down, about fewer people putting anything away in savings, and so on. Actually, the article made me feel pretty smug about my financial situation right now. Yes, I agree that the non-LBYM'ers out there who haven't really thought about retirement are going to have problems.

I agree. I think his points do apply to the average person, not the ER forum type. What % of families fall in the average person category? I wonder. Surely there are many out there who are trying to make correct decisions about their future, defaulting into 401k plans as a minimum.

[Tadpole]

Um, does anyone here personally know someone who cashed out the equity in their home, ran up their credit cards, and other wise went into a binge when told to "go shopping"? The funny thing is that I don't know anyone in any of these categories much less anyone in all of these categories. It makes me wonder if all these stories that make it appear that the entire country was in a debt binge are exaggerating. Most of the people I know were just getting up each morning and going to work and paying their bills.

[CyclingInvestor]

Quote:

Originally Posted by Tadpole Um, does anyone here personally know someone who cashed out the equity in their home, ran up their credit cards, and other wise went into a binge when told to "go shopping"?

I know of 2 couples. One is retired, HELOC'ed out, bad money troubles, only SS and tiny pension left,
gambling away what little they have. The second is worse - spent 2 lump sums from pensions, borrowed
and spent equity in previously paid-off house, then sold house and moved to tiny apt, kept
spending, declared bankruptcy, now living on SS.

[Walt34]

Quote:

Originally Posted by Tadpole Um, does anyone here personally know someone who cashed out the equity in their home, ran up their credit cards, and other wise went into a binge when told to "go shopping"?

Yes, DW and I know of at least one. This pair of idiots is about 60 and "own" a $530K house and have about $30K equity in it. He's a carpenter, she just retired as (of all things!) a math teacher. They've had a great time the last 20 years running up their credit cards, sucking the equity out of their house to pay them off, and running up the credit cards again.

They probably won't actually starve since she does have a retirement income from the teaching job, but when the music stops some bank is going to be left holding the bag of debt. Perhaps that is their financial plan.

Perhaps I'm mistaken but it seems to me they'd be further ahead by not paying all those interest charges for the sake of immediate gratification.

[bugs8]

I could yell you countless stories of co workers and family members who did all of these things! I swear I talked to all of them until I was blue in the face. NOBODY listened. Now, all three family members one of them being my daughter are upsidedown in their home loans because the kept tapping the ATM at home. None of them have any savings and 2 of them are close to retirement age with no hope of retiring. At least my daughter and husband are younge enough to recover from this.
Funny to hear them all talk now...As far as coworks go I have one who's loan reset in Nov. and suprise she can't pay the xtra grand per month. So she's working with Countrywide. They told her stop paying and then we can help you. Also, she told me they are going to lower the principal to current market price with is 100 k less than she paid! What the &*<K?? She just shrugged her shoulders and says whatever I'll just walk away if they don't work with me. In case your wondering Southern California Orange county.

[Htown Harry]

Quote:

Originally Posted by Tadpole Um, does anyone here personally know someone who cashed out the equity in their home, ran up their credit cards, and other wise went into a binge when told to "go shopping"?

Yep. A guy in his late twenties, not the sharpest tool in the shed. He got a single mother pregnant, married her and then bought a nice, shiny new house with granite countertops and fancy appliances. She was soon discovered to be a deadbeat whose only verifiable ambition was to spend more than every penny he brought home. His slide to financial disaster, ending in divorce and bankruptcy, took about three or four years. I knew he had hit rock bottom when I saw his name in a newspaper legal notice listing the names of people whose stuff was being auctioned off by a mini-storage landlord.

The ironic (predictable?) part: he worked during much of this time as a mortgage broker.

[Raul]

Switch mortgage broker for lawyer, put the divorce a year or so out there, and you've described my brother to a T. I reckon he'll come looking for his handout from his LBYM brotha about the time I skip country to FIRE.....

[RockOn]

I live in a fairly new fast growing, semi-wealthy area. The keeping up with the Jones is out of control here. I suspect in a small midwestern town it is much different. I don't know where you live.

[Tadpole]

I live in MD, north of Baltimore; DOD territory.

[barbarus]

Quote:

Originally Posted by RockOn I live in a fairly new fast growing, semi-wealthy area. The keeping up with the Jones is out of control here. I suspect in a small midwestern town it is much different. I don't know where you live.

The semi-wealthy are as willfully clueless as J6P.
The economy has a lesson for them.

[haha]

Quote:

Originally Posted by barbarus The semi-wealthy are as willfully clueless as J6P.

Could you explain what or who is J6P?

Thanks.

Ha

[chinaco]

I don't know if his conclusions are completely correct. But he has a point.

The home is the largest asset many people own. I am sure some were considering using its equity during retirement. The values of houses (and liquidity through sales or loans/reverse mortgages, etc) may have changed for several years. The housing market will correct itself, but some are finding themselves to be worth less now and for the next several years.

Look at it this way. Many people have taken the approach... a nice large home means everything so they invested heavily in a home over the last 20 - 30 years. Now that they are older they are planning to free up the money. If you have a large home and have always considered that once the kids moved, you would downsize and pull $200 or 300k out of it to help finance your retirement... you just hit a bump in the road. Especially if your home was a large portion of your investment assets.

Our home is a small fraction of our assets (about 15% - 20% not considering taxes). This debacle does not affect DW and I too much. However, if our home was 60% of our assets and I was planning to free up half of it to spend during retirement, we would have a problem.

Couple home values/liquidity along with the effects of a recession (some lose jobs unexpectedly) and their 401ks and IRAs take hits because of the stock market... Those people just had a rude awakening, they will be working longer!

[Retire Soon]

[quote=barbarus;624217]The semi-wealthy are as willfully clueless as J6P.
The economy has a lesson for them.[/quote

This is a very brilliant, insightful and true statement. You've made my day!