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Old 10-10-2014, 07:05 PM   #41
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And if you have ever traveled the world and seen what truly poor people live like, I am talking Africa and areas of Central America, you may look at your friends as having a truly cushy retirement.

So, it's all relative.
Asia too, Vietnam, Laos, Philippines, China, etc have some of the worst third world poverty, especially in the country side
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Old 10-10-2014, 07:41 PM   #42
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The subject is tough to handle because "things were different then". Things like 401K's, Roth IRA's and investing in general, were different.
Making money in the market was not something common folk did.

It was a time of profit sharing, pension funds, and putting money in the bank, when savings interest rates were closer to loan rates, with a one or two percent differential.

It was a time when Social Security was designed to keep pace with incomes, and when it was expected that the Social Security Fund would be sacrosanct, as in a "trust"... where those who were responsible, would maintain the fund in keeping with the rise in prosperity. In fact, for those who were "paying in", expected that it would be a TRUST... Not used as a cushion for other government expenditures.

Growth was built on innovation, on learning to do things faster, cheaper, and better. There was room from creativity and imagination, not just to shuffle people into lower paying positions, but to better utilize labor, raw materials and to balance the labor force and industry to create a mutually beneficial improvement in life. Jobs were typically held for many years, and experience was in the individual, not the computer.

Not to say that we should live in that other time, but to understand that those of us who are in late middle age, were living in a very different time.

All of this points to a different mind set. In our 40's, we expected to be with the same firm (company) until we retired at age 65... and would have our base income coming from Social Security, to be supplemented by our pension or profit sharing plan... and from those dollars we had saved in our local bank.

The idea of "risk" for the average guy didn't, (except for a very few) come from being in the stock market.

In all of this, I am talking about my own experience... being in the workforce after college) from 1958 to 1989, when DW and I retired @age 53. Our combined ending salaries adjusted for today were probably about $125K... We had four children, who, by the time we retired, had been through school and were independent.

We were brought up to live within and below our means... except for home mortgages never borrowed money for anything, and managed to put aside a nominal amount, beginning when Traditional IRA's were established around 1980. Interest rates were quite different... Much higher during our savings years... roughly 1975-1990. 7 to 10% in Bank CD's were fairly common, and during that same period, housing values were increasing. Because of multiple moves, the net value increase was fairly substantial.

Mentioning all of this, simply to point out to those who are in their forties and early fifties, that the mind set of retirement planning was very different 25 to 35 years ago. Social Security was not designed to be some kind of a giveaway to the poor, but a pay as you go "investment". Banking was not a Federal Debt subsidized industry, and productivity was not measured by investment acumen.

In short, the path to financial security changed substantially over the past 30 years, and many people were caught short, not adapting to the changing face of the financial world.

recap:
SS trust fund mismanaged
Bank rate changes/US Debt Subsidy
Pension, Profit Sharing changes/buyouts
Devaluation of personal skills of the aging
Computers - across the board labor replacement efficiencies

Overall, the past 35 years might be the biggest, fastest change in planning for retirement.

Chart for historical interest rates:
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Old 10-10-2014, 08:48 PM   #43
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The subject is tough to handle because "things were different then". Things like 401K's, Roth IRA's and investing in general, were different.
Making money in the market was not something common folk did.
Thanks for the thoughtful post.
Other things that have changed, and which bear on the problem:
- Expected remaining years after reaching SS age.
- Growth in material expectations. When today's 60 year olds were kids, most cars didn't have air conditioning. Most homes didn't have air conditioning. The average US home was about 1200 sq ft and had one bathroom.

People who find themselves a bit short for their retirement years might be there because they didn't hop on to the bandwagon of investing, or they missed out on the opportunities of the economy as it changed. But my guess is that at least as many find themselves in a tough spot because they hopped aboard the "buy more" bandwagon with both feet.
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Old 10-10-2014, 08:56 PM   #44
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Thanks for the thoughtful post.
Other things that have changed, and which bear on the problem:
- Expected remaining years after reaching SS age.
- Growth in material expectations. When today's 60 year olds were kids, most cars didn't have air conditioning. Most homes didn't have air conditioning. The average US home was about 1200 sq ft and had one bathroom.
I still think of a smallish house like that with no AC, and one car with no AC, as the standard white-picket-fence middle class American dream. It was when I was a kid and teen back in the 1950's and early 1960's. Anything extra seems like luxury to someone brought up in those days.

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People who find themselves a bit short for their retirement years might be there because they didn't hop on to the bandwagon of investing, or they missed out on the opportunities of the economy as it changed. But my guess is that at least as many find themselves in a tough spot because they hopped aboard the "buy more" bandwagon with both feet.
+1000 I do think that many in a tough spot may have been buying more than they really want or need, possibly due to the massive influence of advertising in recent years.

Also I suspect that many were caught in the freezing of, or reconceptualization of pensions at their organizations. For some pensions were the cornerstone of any retirement plans they might have had.
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Old 10-10-2014, 09:27 PM   #45
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Thanks for the thoughtful post.
Other things that have changed, and which bear on the problem:
- Expected remaining years after reaching SS age.
- Growth in material expectations. When today's 60 year olds were kids, most cars didn't have air conditioning. Most homes didn't have air conditioning. The average US home was about 1200 sq ft and had one bathroom.
My grandparents had the financial advantages mentioned by imoldrnu, plus the 2 bedroom house, one car, no A/C, no dishwasher other than my Grandmother, no cable, maybe 2 TVs, no cell phones, no Internet connection and lower relative health care costs.

They were quite financially comfortable. Many of the things people spend money on today had not been invented yet so they couldn't miss not having them.
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Old 10-11-2014, 07:12 AM   #46
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imoldernu: good points. Let me add a few more.

Post WWII until cold war end was a special time in history. Americans were very privileged. Western Europe also joined in after some reconstruction. This will ultimately be an aberration.

It seems to me that some boomers or early X-ers are living with a mindset of their parents. They forgot their parents had pensions, good promise of SS, etc. But meanwhile, in their reality everything is different and they are not paying attention.

What some here may not be witnessing first hand is the globalization of the workforce. This is a huge game changer. There is really severe pressure on the pay and benefits of previous "good jobs." I've finally been swept up in it. I have to say it hurts. But I don't care, I'm near the end of my career. But for those behind this will leave a mark.

Today, business is gravitating to this idea that the only "workers" of value are managers of this global force. Hence the huge swing in CEO and executive pay. This too will eventually change. My fear is that some of us who scrapped and saved will be caught up in the revolt against these guys.

In any case, yes it is different. Let me add globalization to that.
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Old 10-11-2014, 07:56 AM   #47
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...What some here may not be witnessing first hand is the globalization of the workforce. This is a huge game changer...

This may be the primary cause of the destruction of the middle class. American workers are not surviving as well in the globalized marketplace as they did in 1950's and 1960's. Back then, the middle class had solid, long term, decent paying jobs (and LBYM lifestyles) that provided for a solid foundation for retirement. Today these jobs are off shore or replaced by technological advances.

I don't know how most people today are going to make it in retirement. The LBYM lifestyle doesn't seem as prevalent as it used to. There's a lot more products and services backed by nonstop in your face advertising that are being purchased by those that really can't afford them. I haven't researched this, but it seems like workers near retirement age now have less savings than those of 40 years ago. And with pensions being cut or eliminated, retirement is going to be tough sledding for those not financially ready for it.



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Old 10-11-2014, 09:03 AM   #48
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I still think of a smallish house like that with no AC, and one car with no AC, as the standard white-picket-fence middle class American dream. It was when I was a kid and teen back in the 1950's and early 1960's. Anything extra seems like luxury to someone brought up in those days.
That's what I say. We're living the white picket fence middle class American dream from the 1970's (when our house was built). But our house has AC and both of our (modest, older) cars have AC. And one car even has a tape deck!

We have all of the other tech gadgets of the 2010's, but they are incredibly cheap, as in 1 paycheck can buy you an HDTV, gaming system, computers (plural), smartphones, etc.

Life today is pretty great, and the 1970's American Dream is still extremely affordable. I'd hate to have to chase the 2014 middle class American Dream. 4000 sf McMansion(s), 3+ luxury cars, private ivy league pre-school through grad school, vacation home(s), boat(s) and personal watercraft, a small battalion of people to serve you (masseuse, chef, maid, nanny, landscaper, handyman, car detailer). And my oh my at the goods and services available today (organic, gluten free organic, vegan, locally sourced, fair trade, zero carbon footprint, smart home, smart car, premium wind or solar energy sources).
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Old 10-11-2014, 09:13 AM   #49
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Yes, I've travelled to some very poor countries and generally speaking, the infrastructure is better here - roads, utilities, access to health care and education, etc.

but I might say that the point is irrelevant, unless some Americans plan to retire abroad.

Retirees in the US still need to pay Northamerican-based costs for healthcare, housing, transportation, etc.

An argument can also be made that older people in the developing world, in some ways, have it better than older Americans. Their community support systems are often much stronger and many of them still eat a much healthier, traditional diet.

We should all be that fortunate.
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Old 10-11-2014, 09:26 AM   #50
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I don't know how most people today are going to make it in retirement. The LBYM lifestyle doesn't seem as prevalent as it used to. There's a lot more products and services backed by nonstop in your face advertising that are being purchased by those that really can't afford them. I haven't researched this, but it seems like workers near retirement age now have less savings than those of 40 years ago. And with pensions being cut or eliminated, retirement is going to be tough sledding for those not financially ready for it.
One positive counterforce is the Internet, with sites like this and the many even more LBYMs blogs and forums. But Internet surfers have to have an interest in LBYM to begin with and seek out the LBYMs sites, because no one is paying for personalized, targeted ads following us around the Internet telling us to not spend money on depreciating consumer goods or not to buy very simple things we could easily make for ourselves.

The Onion's comment on Starbucks adding a $5.25 grilled cheese sandwich to their menu - "I’m glad they’re sticking with their core strength of things you could easily make yourself if you just woke up 10 minutes earlier in the morning.”

We are later to the game than many here on LBYMs but finding all the great ideas in books and on the Internet has been to us like finding the Rosetta stone to ER and financial security.
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Old 10-11-2014, 09:29 AM   #51
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My parents (in their 70s), enjoy a comfortable retirement and I'm amazed at how little they appear to have struggled to earn it....I think they were born during the sweet spot of American history.

During their working years, their skill sets were minimal and yet they earned reasonable salaries, both belonged to unions representing low skilled workers.

I'm where I am due to a combination of stress, sacrifice, location, timing, hard work and luck.

I look back now and it amazes me how little information was provided to a 20 something, new to the workforce, on how to manage her 401K. What the hell did we know at the time, we were freshly minted liberal arts majors....lol.

When America shifted away from pensions to 401Ks, why wasn't there some kind of mandatory educational process that went along with it? what a freaking disaster...as i said, I am lucky.

What did it take for people to wake up? 2008/2009 - when did Target funds come along? seems like they should have had them all along (not for everybody, but for those who can't or won't learn about the world of finance)
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Old 10-11-2014, 09:32 AM   #52
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I mostly worry about my family.

They have seen what I have done and are already subconsciously trying to lean on me more or expect me to the the hero that fixes everyone's problems and woes (mostly self inflicted).

I worked in a pretty rough environment for years that was no fun whatsoever and completely engulfed my time and life. I feel like I traded my blood for the money / savings engine that now feeds me. I won't endanger it for anything. I have no room to be cleaning up others messes.

I would however help them with budgeting, saving, low cost investing etc.... But they don't want that..... I'm sure many of you know how this plays out. Their mentality thinks they deserve what I worked and saved for regardless of of the choices they made in life or how they spent their time. They don't even want to hear any details of anything, they just want the money. They would likely mismanage the hell out of a portfolio with that mindset.

I moved far away from home at a very young age and made my own life. I have helped my family out a lot and been very generous. I don't need the constant woe is life passive aggressive manipulate nonsense all the time

I would likely intervene if someone was going to be homeless etc... But I have so many times seen people who made it and after years of hard work might finally enjoy life only wreck it by cutting the portfolio apart to help out the family.

I saw one family member do it to help out bratty offspring of another part of the family who had gotten into much trouble with the law. She had to sell equities during the market crash to do it even. She ruined he life and not even a year after the kids who she helped have just gotten into more trouble with the law and are both in prison again. It's sickening to see.

Edit : I am single with no children. I would of course focus responsibility there should needs arise. I'm talking about my upline.
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Old 10-11-2014, 09:39 AM   #53
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This may be the primary cause of the destruction of the middle class. American workers are not surviving as well in the globalized marketplace as they did in 1950's and 1960's. Back then, the middle class had solid, long term, decent paying jobs (and LBYM lifestyles) that provided for a solid foundation for retirement. Today these jobs are off shore or replaced by technological advances.

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+1
This also widened income gap. So somebody benefits from those trends. Probably upper 0.5 % most.....
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Old 10-11-2014, 09:41 AM   #54
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That's what I say. We're living the white picket fence middle class American dream from the 1970's (when our house was built). But our house has AC and both of our (modest, older) cars have AC. And one car even has a tape deck!

We have all of the other tech gadgets of the 2010's, but they are incredibly cheap, as in 1 paycheck can buy you an HDTV, gaming system, computers (plural), smartphones, etc.

Life today is pretty great, and the 1970's American Dream is still extremely affordable. I'd hate to have to chase the 2014 middle class American Dream. 4000 sf McMansion(s), 3+ luxury cars, private ivy league pre-school through grad school, vacation home(s), boat(s) and personal watercraft, a small battalion of people to serve you (masseuse, chef, maid, nanny, landscaper, handyman, car detailer). And my oh my at the goods and services available today (organic, gluten free organic, vegan, locally sourced, fair trade, zero carbon footprint, smart home, smart car, premium wind or solar energy sources).
I'd hate to be a 20-something person today. I'm in my 40's now, but 20 years ago we weren't expected to socialize in high-end restaurants and with expensive cocktails. My friends always met during the cheap happy hours and $1 drinks.

My starter job out of college in the 90s paid about $9/hr, but I was still able to afford to live on my own with my own apartment (tiny studio), a new econo car, food, student loans payments, etc. Rent was cheaper then. A lot of kids out of college today aren't getting paid much more, but the costs have risen so much.

I agree with you about the consumer goods. Your friends certainly didn't judge you if you served them Chili Cheese Fritos with Velveeta dip.

Maybe there will be a backlash against all this with the next generation. My kiddo is being raised in a old house with one bathroom, so maybe that will be her norm. We may add another bathroom when she gets older though, or we may not.
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Old 10-11-2014, 09:52 AM   #55
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One positive counterforce is the Internet, with sites like this and the many even more LBYMs blogs and forums. But Internet surfers have to have an interest in LBYM to begin with and seek out the LBYMs sites, because no one is paying for personalized, targeted ads following us around the Internet telling us to not spend money on depreciating consumer goods or not to buy very simple things we could easily make for ourselves.

The Onion's comment on Starbucks adding a $5.25 grilled cheese sandwich to their menu - "I’m glad they’re sticking with their core strength of things you could easily make yourself if you just woke up 10 minutes earlier in the morning.”
We can all hope. Although to hear some tell it, if we all start LBYMs then the economy will quickly collapse. Probably the Chinese economy first but since they have been doing such a good job of saving, they'll be in a better position to ride it out. I'm not that hopeful though because of what I see around me. My post RE hobby job is teaching and I see almost all of my 20-something students coming in with prepackaged sandwiches and sushi along with the Starbucks' coffee or a 2.50 bottled drink while I undo my tupperware to extract my ham sandwich and open the soda I bought 6 for $2 and brought from home. On the brighter side though, less and less of them feel the need for cars.
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Old 10-11-2014, 10:25 AM   #56
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Yes, I've travelled to some very poor countries and generally speaking, the infrastructure is better here - roads, utilities, access to health care and education, etc.

but I might say that the point is irrelevant, unless some Americans plan to retire abroad.

Retirees in the US still need to pay Northamerican-based costs for healthcare, housing, transportation, etc.
While true, I think some exposure to other parts of the world would be enlightening for many. I know it was for me as a 22-year-old living in Japan, and visiting Korea and Thailand, a 30-something living in Bahrain and visiting India, Indonesia, etc. Seeing how some of the rest of the world lives makes me appreciate being an American, and it makes me recognize that I don't need a McMansion or an $80,000 car to be happy or survive.

I think many in the middle class could benefit from such perspective as it pertains to use of their discretionary income. Housing does not have to be as expensive as many make it by their own choice.
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Old 10-11-2014, 10:28 AM   #57
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One positive counterforce is the Internet, with sites like this and the many even more LBYMs blogs and forums. But Internet surfers have to have an interest in LBYM to begin with and seek out the LBYMs sites, because no one is paying for personalized, targeted ads following us around the Internet telling us to not spend money on depreciating consumer goods or not to buy very simple things we could easily make for ourselves.
On the contrary, I think the internet is more of a problem in this regard. Access to crap you don't need is ubiquitous. In just two days, you can have whatever you want delivered to your doorstep by simple "Buy with 1-click." Advertisers bombard us with things we "need", and thanks to Google and Facebook, those ads are tailored towards our specific interests. It's easy for many to ignore TV ads for things they don't care about, but those banner ads that are targeted at me (selling me bike parts, race entries, etc.) are seductive. I shudder to think what the "average" American surfing the unfettered advertising and "news" environment of Facebook faces every day. How many of those banners get clicked?
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Old 10-11-2014, 10:35 AM   #58
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I'd hate to be a 20-something person today. I'm in my 40's now, but 20 years ago we weren't expected to socialize in high-end restaurants and with expensive cocktails. My friends always met during the cheap happy hours and $1 drinks.

Maybe there will be a backlash against all this with the next generation.
This is where it starts. Socializing, attempting to mate in settings that require you to buy the $9 cocktail or $6 pint and $15 small plate sets the table for the expectation that, as a 20-something with a modestly paying job, your income must go to the right clothes, the right car, the nice place, all so you can find the right mate. It is this way amongst the "popular" kids, and many who aspire to be like them. I've been fortunate enough to do fine with t-shirt and jeans, the $10 "beer bucket" and a plate of wings. My friends enjoyed this, as did I, but living where I lived in my 20s and early 30s, I was exposed to the more expensive tastes of the 20-somethings. That's where the seed is sown, and it grows from $9 cocktail to $900,000 home for many.

Unfortunately, I don't see that changing. I still see the 19-year-olds with low-wage jobs drinking $5 Starbucks drinks and planning for bottle service at the VIP section of the local club. I'm sure there are those out there LBYM right off the bat, but that lifestyle will never be construed as "sexy", and thus will never be mainstream expectation.
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Old 10-11-2014, 11:13 AM   #59
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My starter job out of college in the 90s paid about $9/hr, but I was still able to afford to live on my own with my own apartment (tiny studio), a new econo car, food, student loans payments, etc. Rent was cheaper then. A lot of kids out of college today aren't getting paid much more, but the costs have risen so much.
Can't help commenting on this, as it struck a chord...

My starter job, just out of college, in 1958 with a new wife, and a child on the way, was as a 2nd Lieutenent in Officers Candidiate School in Fort Benning, GA. The pay was $220/mo, an average of 60 hours/wk, for an hourly rate of about $.91/hr. Not bad... the government paid for our apartment, and we shopped at the PX.

Times change...
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Old 10-11-2014, 12:34 PM   #60
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I would however help them with budgeting, saving, low cost investing etc.... But they don't want that.....
Yep. I hear you. They want help, but on their own terms and conditions: You loan them money with no expectation of a payback, you give them money, you pay the electricity bill, you co-sign the loan, etc. etc. etc......

I had a relative ask me to co-sign a loan for a new car. His current car had less than 100,000 miles on it and ran well. It just needed new tires and maybe brakes. I advised him to keep the car. No go. He did not like the car. I then advised him to go to the credit union and find out what amount they would loan him on a used car. No go. He ended up with a six year loan on a deal that was padded with extended warranty charges, 100,000 mile services, and a towing package. He paid top dollar for all of it.

All I can say is that I am so very glad I did not cosign that loan.
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