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Old 10-11-2014, 12:48 PM   #61
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Originally Posted by TresBelle65 View Post
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)
I distinctly remember when megacorp rolled out thier 401k in 1983, there was a sense that providing too much information/education represented a liability for megacorp. Our 401k was in additon to a DB pension so it was not essential to retirement plans. The 401k replaced a stock purchase program that was designed to payout an annual "bonus" from a balance that grew slowly.

The growth of the 401k and the idea of them as a replacement for DB pensions was accidental, IMO.

We have a great plan but the educational resources were limited until the late 90's and the custodian (Fidelity) led the effort to advise and inform taking Megacorp off the hook.
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Old 10-11-2014, 02:18 PM   #62
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I distinctly remember when megacorp rolled out thier 401k in 1983, there was a sense that providing too much information/education represented a liability for megacorp. Our 401k was in additon to a DB pension so it was not essential to retirement plans. The 401k replaced a stock purchase program that was designed to payout an annual "bonus" from a balance that grew slowly.

The growth of the 401k and the idea of them as a replacement for DB pensions was accidental, IMO.

We have a great plan but the educational resources were limited until the late 90's and the custodian (Fidelity) led the effort to advise and inform taking Megacorp off the hook.
DW's megacorp now automatically enrolls new employees in the 401k with an option to opt out. The initial contribution percentage is 6-7% IIRC, which, after taxes is barely noticeable and gets lost in the jumble of fed, state, FICA, HI, and dental deductions on the paycheck. And the custodian automatically suggests you opt in to the 1% per year auto increase option so you ratchet up the % savings as you (theoretically) increase your salary over the years.

I think there was some new federal law or rule that let companies do the auto enroll without any liability. That's a rare good piece of regulation. It makes saving a percentage of income for retirement the default choice and you have to deviate from the norm if you want to keep all your paycheck and not contribute anything.
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Old 10-11-2014, 02:29 PM   #63
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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.

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.
I tended to associate with friends who had low monetary expenditures, too. This crimped my social life during law school, where everyone seemed to have a beamer, a judge or politician for a father, a trust fund, and vacationed in places I've only seen on TV.

I don't think all of the newly minted adults are big spenders though. Especially after the 2008-2009 recession. Being frugal is a little cooler now than it was during the earlier 2000's.

I still have a small hope for mankind due to some of the younger people I meet these days. I run a blog, and occasionally get requests to meet strangers for coffee to chat about FIRE (yeah, meeting strangers from the internet, I know... ). So far I have been blown away with these kids that are 21-24 and way smarter than I was at that age.

They know all about the savings plans, the 4% rule, low cost index funds (one even snagged a career at Vanguard in finance!), real estate investing, how to analyze rent vs buy in different locations, how you buy something and not the perception of something, entrepreneurship, the value of saving when you're young, legitimate shortcomings of the US vis a vis other developed nations (and our strengths) etc.
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Old 10-11-2014, 03:26 PM   #64
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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.
You're describing exactly where I grew up. I don't remember the white picket fence in the side yard but my parents said there was one when we were little. The house was two bedrooms, an attic converted to a third, one bathroom, and we had one car. Dad rode in a car pool to work. A/C? That was something in movie houses and drugstores, certainly not in the home, let alone the car, of anyone we knew. I still remember the first time I walked into a drugstore that had A/C and was astonished at it.

A six pack of Coke and a box of Ritz crackers was a rare treat and I didn't see the inside of a restaurant until I was in high school.

And after reading the posts of some other's posts here I realize that I had it pretty good. We never went hungry, were warm in the winter, and always had a secure roof over our heads.

As an aside, yesterday I was watching a video (I'd link to it but it's on a pay site) about photographing airplanes and one of the people who crews a WWII bomber commented on why they were so cramped. Well, they weren't, really, because those WWII airplanes were built to fit young adults who grew up in the Depression and their diets were often not very good so they were 5'6" and weighed 130 lbs. That was the world my parents grew up in.

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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.
That reminds me of talking to a woman at my last job who told me about taking her then 10-year-old daughter to Mexico in part because she wanted her daughter to see how the other half of the world lived. On a long bus ride the daughter was silent for an hour as they rolled past villages with naked children running around and the huts and shacks they lived in. Her daughter turned to her mother and said "Mom, I will never say I don't have enough". Mom thought "Mission accomplished!"
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Old 10-11-2014, 04:13 PM   #65
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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.

My 20 something DS keeps little cash on hand and has a low limit credit card for gas. He 's student teaching in the middle of nowhere so has to brown bag it- makes a sandwich, grapes and chips, occasionally a soda from an 8 pack at the store. He has Eggos for breakfast and student dining plan for most dinners, or a Subway sandwich if he's busy. He hates dessert and hot drinks (coffee , hot chocolate, even tea); alcohol he finds repulsive to what he saw with his friend's parents and in the dorm. He goes to on campus movie nights and campus sponsored video game nights when he can (all free.) How in the heck did he turn out this way? This was how we all behaved when I was in college.


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Old 10-11-2014, 08:14 PM   #66
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DW's megacorp now automatically enrolls new employees in the 401k with an option to opt out. The initial contribution percentage is 6-7% IIRC, which, after taxes is barely noticeable and gets lost in the jumble of fed, state, FICA, HI, and dental deductions on the paycheck. And the custodian automatically suggests you opt in to the 1% per year auto increase option so you ratchet up the % savings as you (theoretically) increase your salary over the years.

I think there was some new federal law or rule that let companies do the auto enroll without any liability. That's a rare good piece of regulation. It makes saving a percentage of income for retirement the default choice and you have to deviate from the norm if you want to keep all your paycheck and not contribute anything.
We need more of this to avoid the issue of the OP's original post. If companies could just auto enroll people at like 2% with 1% increases per year, most of the clueless would never notice and have a benefit when they retire without ever even realizing it.

I like this idea.

I've always encouraged my young co-workers to start at 1, 2 or 3% and click the "increase 1% per year" option on the plan.

In other news... I just maxed out my 401k this last paycheck. We have this "true up" calculation that won't benefit me until next spring. (This is for my megacorp's match.) Frankly, I don't mind contributing too much right not to not maximize my match. It is really small numbers anyway. I have some coworkers who go through contortions to exactly hit their 401k match on the last paycheck in December. This maximizes the megacorp match perfectly. But hey, with the "true up", I really don't care. Oh well, I miss 5 months of potential match on a few bucks. No big deal.
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Old 10-11-2014, 09:08 PM   #67
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In other news... I just maxed out my 401k this last paycheck. We have this "true up" calculation that won't benefit me until next spring. (This is for my megacorp's match.) Frankly, I don't mind contributing too much right not to not maximize my match. It is really small numbers anyway. I have some coworkers who go through contortions to exactly hit their 401k match on the last paycheck in December. This maximizes the megacorp match perfectly. But hey, with the "true up", I really don't care. Oh well, I miss 5 months of potential match on a few bucks. No big deal.
I was one of those guys tweaking my 401k withholding % to make sure I get the maximum match every paycheck. There was no truing up, so if I maxed out my 401k a paycheck too early (on Dec 15th), then I would lose out on $120-$160 in matching contributions (4-6%).

That's enough for me to do some quick calcs and log in to Fidelity to change the % from 27% to 26% a couple months before the end of the year.
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Old 10-11-2014, 09:21 PM   #68
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As an aside, yesterday I was watching a video (I'd link to it but it's on a pay site) about photographing airplanes and one of the people who crews a WWII bomber commented on why they were so cramped. Well, they weren't, really, because those WWII airplanes were built to fit young adults who grew up in the Depression and their diets were often not very good so they were 5'6" and weighed 130 lbs. That was the world my parents grew up in.
That reminds me of the house in England that one of my brothers and his DW raised their family in. It had been built in 2 stages. The original part of the house was from sometime in the 1700's. The ceilings were relatively low, floorboards creaky, and there were no straight lines anywhere - the walls and ceilings were "roughly" straight. Later, in the Victorian era, an addition was built, with the typically higher ceilings from that period - all straight lines and high ceilings. It was an odd-looking house, with it's two mismatched parts from very different ages, but had a definite charm. Why did the older part have lower ceilings? Quite simply because people were shorter then!
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Old 10-11-2014, 10:38 PM   #69
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+1
This also widened income gap. So somebody benefits from those trends. Probably upper 0.5 % most.....
It's reducing one income gap--the longstanding income gap between workers in the developed countries and those in the developing ones. Many of those workers and their families are better off now than anyone they have ever personally known, and on wages that we would think are terrible. There are a few "0.5%"ers making a lot, too, but nothing like the number of >desperately< poor who are helped.
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Old 10-12-2014, 09:56 AM   #70
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It's reducing one income gap--the longstanding income gap between workers in the developed countries and those in the developing ones. Many of those workers and their families are better off now than anyone they have ever personally known, and on wages that we would think are terrible. There are a few "0.5%"ers making a lot, too, but nothing like the number of >desperately< poor who are helped.
Can confirm. SIL worked in a sweatshop in Thailand for a couple of years (in the mid 2000's). The pay was a buck or two per hour IIRC. She illegally snuck into Thailand from Cambodia for the outsized wages and otherwise excellent standard of living compared to the jungles of Cambodia and working a rice field from sun up to sun down for much lower equivalent wages.

She would literally laugh at the idea that she was "exploited", if she could even understand how getting way more money and living a nicer life is exploitation from our Western perspective.
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Old 10-12-2014, 10:52 AM   #71
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It's reducing one income gap--the longstanding income gap between workers in the developed countries and those in the developing ones. Many of those workers and their families are better off now than anyone they have ever personally known, and on wages that we would think are terrible. There are a few "0.5%"ers making a lot, too, but nothing like the number of >desperately< poor who are helped.
Goes hand in hand with what I was talking about how people live in other countries. To us, the idea of working 8 hours a day for $2/hour is exploitative and evil. For many overseas, it's what raises them out of desperate poverty. As a people, we generally lack perspective.

Paradoxically, some talk about raising up those in poverty in other countries, failing to realize it's a zero-sum game. Sending jobs overseas helps raise people up, but it hurts Americans. I guess everyone's right answer is for the 0.5% to pay Americans more AND give money to people overseas... until, of course, it's their money we're talking about...

(Note: I'm not saying we shouldn't seek out opportunities to help others overseas...)
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Old 10-12-2014, 01:01 PM   #72
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Look at a positives of Globalization.

The S&P 500 is not U.S. GDP. The S&P 500 continues to outgrow the U.S. economy. Earnings power is to great extend decoupled from U.S. GDP.
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Old 10-12-2014, 02:59 PM   #73
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We were very fortunate in 1984 my husband went to work for a fortune 500 company in Atlanta. His boss sat the entire facility down (one of many for the fortune 500 company) and showed the workers (with a few poster boards) how their money could grow and compound in their 401k if they just continually put 10% of their pay in it. All employees were relatively young then as it was a new location. This enabled us to become a little educated about retirement at the time.

If he had not taken the time to "show" us how our 401k could grow we would not be where we are today. We had always been savers but not to the extent that our 401K grew over the years.

We have shown both our children what they too can accomplish if they only start young. 25 year old DD is doing great with it all. 34 year old DS is not.

I think it is great when a company automatically signs you up for the 401k or 403b etc. If you never see the money it is a lot easier to do without.
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Old 10-12-2014, 03:27 PM   #74
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Goes hand in hand with what I was talking about how people live in other countries. To us, the idea of working 8 hours a day for $2/hour is exploitative and evil. For many overseas, it's what raises them out of desperate poverty. As a people, we generally lack perspective.
Yes, even the kids are helping these destitute families escape poverty; some as young as 8 years old working side by side with the others. These industrious people are known to work 80-100 hour weeks that propel them out of poverty twice as fast! And why should the masses waste their time on vacations when they could be working instead! We in the U.S. can only hope we aspire to these great models of Capitalism! Yes, I agree, as a people we generally lack perspective.
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Old 10-12-2014, 04:38 PM   #75
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We in the U.S. can only hope we aspire to these great models of capitalism

Yes, because the us never exploited slaves for cheap labor, then when that well dried up, exploited foreigners as wage slaves for robber barons, them when that well dried up, exploited women, then foreigners some more, human trafficking is picking up again....


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Old 10-12-2014, 05:20 PM   #76
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I'm sure there is some connection to early retirement here, although it is not evident to me.
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Old 10-12-2014, 05:58 PM   #77
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Where I work we don't talk specifics but based on the behavior I see in my co-workers, I'd say that most of our over 40s range from well-prepared to very well-prepared. Our engineers tend to be from a middle-class upbringing and are moderately high in earnings, conservative in nature, and low on spending. Our recent buyout program saw many takers, and among those who didn't go I know several well enough to know they weren't staying on for financial reasons. A couple who came back after the blackout period did so out of boredom; one described how difficult it was to adjust from being a world-class expert in his field to someone whose opinion didn't matter. My own FI status isn't a secret and hasn't drawn any attention at all.

I'm less familiar with our 25-40 generation, and I would have to believe they feel more stress mainly due to our high cost of housing. They seem to spend even more carefully than my age cohort, but wages haven't kept up with home prices, so those who have families to support and want to retire in-place probably won't be able to swing it without putting in a full 30 years.
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Old 10-12-2014, 06:12 PM   #78
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Where I work we don't talk specifics but based on the behavior I see in my co-workers, I'd say that most of our over 40s range from well-prepared to very well-prepared. Our engineers tend to be from a middle-class upbringing and are moderately high in earnings, conservative in nature, and low on spending.
Thomas Stanley says engineering is a common profession among millionaire next door types: "Engineers typically are people who are frugal. They view products in terms of their performance characteristics and their durability. So they are big on Toyotas and Hondas and cars like that. And they do quite well. Plus, they [engineers] are analytical; they’re very good at investing, typically. Educators do well also. So there are a lot of folks out there who are disciplined and who know how to play the game. You don’t have to own a business."

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An Interview with Thomas Stanley, Co-Author of The Millionaire Next Door
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Old 10-12-2014, 07:00 PM   #79
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My fifty-something friends are 50 -50.

Several have all made 100K plus salaries since their early 40s, but spent most of their money and haven't taken any interest in financial planning, going so far as to ignore their advisor's advice. It's sad to see, some of them have made double my earnings, but living the high-life is short term happy and long term expensive.

Others are in good shape. One has a pension, retiree medical and although was at the lower end of the pay spectrum, was always a conservative spender, LBYM, with the pension, medical and subsidy for SS until hitting 62, will retire at 60. Another went through a costly divorce but LBYMs, leaving the high cost mecca for a lower COL and will retire by 60. Others have pensions for at least half of their working career, which makes a huge difference.

I have a couple of friends who are in their 40s still and they see my course and tell me they are trying to FIRE. And my DS is in his 20s and is seriously putting away money, it looks like he was listening after all!
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Old 10-12-2014, 07:42 PM   #80
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That's the thing. I've seen plenty of people living quite happily on very little, especially as they get old enough that travel and other spending seems more like work than fun.

The adjustment may be hard for some of these people, but they aren't going to starve. Is downsizing into a little apartment when you're too old to work really a disaster?
+1

My mother in law is 66 and retired at 62 1/2 on SS only. She only had about 100k in investments at the time and has since spent down her entire portfolio.

Now she lives on SS and a small PT $9/hr job. She seems happy with a nice (small but brand new) house in The Villages, FL and a new convertible Miata. The extensive travel has been completely eliminated, though.

I have no idea how she pays for it all, but she always figures it out!
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