That ship has sailed, what will happen to these folks?

[SunnyOne]

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)

 

[shasta]

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.

 

[eta2020]

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.....

 

[hausfrau]

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.

 

[6miths]

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.

 

[nash031]

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.

 

[nash031]

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?

 

[nash031]

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.

 

[imoldernu]

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...

 

[Chuckanut]

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.

 

[jazz4cash]

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.

 

[FUEGO]

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.

 

[FUEGO]

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.

 

[Walt34]

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.

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!"

 

[EastWest Gal]

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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[JoeWras]

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.

 

[FUEGO]

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.

 

[Major Tom]

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!

 

[samclem]

+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.

 

[FUEGO]

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.

 

[nash031]

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...)

 

[eta2020]

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.

 

[kimcdougc]

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.

 

[Cut-Throat]

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.

 

[dallas27]

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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