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The Retirement saving shortfall tidal wave
Old 06-06-2016, 05:21 AM   #21
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The Retirement saving shortfall tidal wave

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Originally Posted by daylatedollarshort View Post
So maybe the income sources for the next up generation of retirees won't really be so different than those already retired?

I am not convinced... Keep in mind many of those already retired did so before the death of the defined benefit plan. With employers paying less and less the burden has shifted to the employee.. At 62 I did get some benefits from the conversion from DB to defined account but that was long ago and the amounts were modest.

In 2014, 46.2 million Americans were age 65 and older. Half of all older adults had less than $22,248 in yearly income from all sources. In 2014, half of all older households received less than $36,895 in yearly income from all sources.

Google income of today's older adults...

A single person managing on 22,248 (or less) even if they own a small home will be very challenging....

We were visiting Florida: The woman behind the at the Walmart Superstore counter was old, very old. Her pace was slow and steady but it felt all wrong. I'd like to think she is there because she wanted to be productive but my gut says no. She is there because she has to be. I think it was another 'there but for the grace of God...' Working until you drop... I have to wonder is that all there is?
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Old 06-06-2016, 06:40 AM   #22
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Originally Posted by DFA View Post
$38,000 less income taxes leaves about $33,500...
A family of 3-4 making only $38K does not pay any federal income taxes as far as I know. They even get EITC.

The average family of four only makes ~$56K a year, so $38K is below average.
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Old 06-06-2016, 06:49 AM   #23
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Originally Posted by daylatedollarshort View Post
This subject comes up often. I think part of it is human brains are generally programmed for short term thinking. There are many INTJs with higher than average long term planning and strategic thinking skills here and the other ER forums, compared to the 2% supposedly in the general population.
That and the BILLIONS of dollars that are spent on psychological warfare to get you to part with your money what is often a false need.
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Old 06-06-2016, 07:02 AM   #24
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Yes that number does seem a little high on taxes, at that income level you might get some earned income credit. If you have kids, child credits, I can see where it would be zero or you might even come out with net gain.

Of course MN taxes would be a different story, but you might get a property tax rebate if you own a home.

But some some of you guys are really "tough" love. I live in rural MN where there is not a lot of money. A lot of farmers are "rich on paper" but have cash flow problems. I know many people who are "working poor". Mainly young men who didn't really want city life but don't have high value skills. They might work for a local livestock or crop farmer, or at a local body shop,or even at the Menards in town. They marry local girls and have families and are chronically short of money.

These people buy their beer at the store and drink it at home.If they buy coffee it would be a .89 cup at Super America. Their kids wear family hand me downs. Mom doesn't go near a nail salon. I know these people, I've been in their homes and they are not full of stuff.

The kids b-day parties are cake and ice cream for the family, they might go to the local Pizza Ranch on Tuesday nite when kids eat free for a special occasion..their TV is the local UHF which is free. Are people supposed to have no fun in their lives or spend any money on something they think would be fun.

Throwing these people under the bus with someone who has a 175 dollar cable bill, seems a bit unfeeling and kind of smug.
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Old 06-06-2016, 07:38 AM   #25
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Are there some folks whose income and family situation makes it impossible for them to save? Of course. But I think everybody can point to someone with above average income who doesn't save, or worse lives above their means. In my experience, this results from two things: either ignorance of how to save, or willful prioritization of spending over saving. Ignorance is easy to fix, but the mindset that tells someone a $175 cable package is more important than saving is not. Unfortunately most of the people I know choose spending. Oh, they'll say they "don't have money to save" but when you suggest they cut down on the cable package or eating out or $100 bills at the bar each weekend, they refuse. And don't get me started on the people who "need" a new car every 2-3 years. Some have told me it's because they want to work until they keel over (yuck), some because they don't think they'll live long enough to retire, and some say they'd rather enjoy the money now and will cross the retirement bridge when they come to it.

I can absolutely believe the scary numbers presented here, because my family are the ones with $0 in savings. Not just one or two of them, but all of them. I did have one aunt who managed to put over $75K in savings over 30+ years, but when she lost her job at 55 she decided to just use that and unemployment to get through until SS kicked in, and that now represents 100% of her income. Everybody else - parents, siblings, aunts, uncles - has basically nothing. It's a sad state of affairs but none of the suffering anybody has seen has convinced them to change their ways.
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Old 06-06-2016, 08:30 AM   #26
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Is it discipline? How terrible it is out there? Is it a cultural thing ...to much tv?
Your thoughts if you care to contribute?
TV might be a part of it. Probably has been for awhile. I remember an old episode of "Leave it to Beaver" where Aunt Martha came to visit and Wally says "Hey Beave, check out their corny car!"

And, an episode of "Dennis the Menace" where some of the kids were boasting about their fathers and trying to one-up each other and one of the kids says "Oh yeah? Well my Dad's car has FOUR headlights!" And yeah, that actually was a thing. Just about every domestic car offered in 1958 had quad headlights standard, which made everything the previous year seem obsolete. And I can even remember as a kid, when it was usually bigger, pricier cars that had four headlights, and the cheaper, smaller ones usually had two, so it was still ingrained in the public mind.

Oh, and then in 1976, when most cars went to rectangular headlights, suddenly the ones with round headlights seemed outdated. They sure knew how to keep the buying public on their toes back then!
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Old 06-06-2016, 08:35 AM   #27
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I think it is a societal pressure and keeping up with the Joneses thing combined with low income.
I suspect the idea that it is primarily poor people who are not saving enough is incorrect. At my company, when highly paid engineers talk money they are always talking about their latest toys or how they can get yet another equity loan to get more money to spend.
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Old 06-06-2016, 08:38 AM   #28
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First, I will completely agree - Living below your means is necessary and saving is mandatory in the new economy. Now what I really feel.


I am amazed how different the workers are (even my Kids and other relatives) then when I started out. They do not want to move to where the work is, but want to stay close to friends and family. They do not want anything getting in the way of there work/life balance. When my boss would say, here is your airplane ticket to SE Asia for tomorrow, I would say YES SIR.. Kids now will say, sorry, but my wife birthday is next week. I have lived all over the world going were the work and the money is. When I needed a new skill, I learn it. These kid, will not take the time, to move, to spend 6 months to learn a new skill, leave there wife for 6-9 months to do a job. You get paid well for these jobs, and get rewarded over the years.


The new generations want the good paying jobs, without the sacrifices that me other others had to do. My feeling is that they can stay home, have a good work / life balance - do not have work interfere with the lives and go work every day at the $15 an hour job and complain about they have no opportunities.


There are lots of opportunities, they are just not will to grab them and do the job.
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Old 06-06-2016, 08:56 AM   #29
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I do believe that it is very much a question of self discipline. You need that to LBYM by putting off short term but fleeting gain for long term gain and FI. I have always saved at a pretty good level, sometimes over 30% of my income, and currently about 22%. I know others have done even better. I have 10 months to RE at 57.
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Old 06-06-2016, 09:08 AM   #30
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I do believe that it is very much a question of self discipline. You need that to LBYM by putting off short term but fleeting gain for long term gain and FI. I have always saved at a pretty good level, sometimes over 30% of my income, and currently about 22%. I know others have done even better. I have 10 months to RE at 57.

So that's wonderful that you have saved up and are so close to ER, now if we knew you income, we'd have some idea of where you sit on the scale of savings.

If you make 250K a year, you can save, still has some money for extras and do fine.

If you make 50K or less suddenly that % doesn't seem so doable..even if you practice LBYM..

I'm not asking for your income level I'm just saying you didn't give us the whole picture. if you make 500K a year and save 30% some here would say you spend too much money
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Old 06-06-2016, 09:49 AM   #31
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It's clearly obvious that many (if not most) people spend for today without much consideration for their future financial security. I'm sure there are myriad reasons for this, and certainly not all of them are worthy of scorn or condemnation. What really concerns me in all this is the likelihood that, at some point, the government might decide to "rob Peter to pay Paul" to fix the problem of so many people retiring with virtually no savings. Most likely it would be something like full taxation of SS benefits or a drastic reduction in SS income allowed for us "wealthy" folk. That's when I would start to get pretty angry and not very understanding of people who couldn't figure out some way to save for their retirement and decided it would be OK to just rob from me (via government handouts).

(Oh, and +1 to the OP's comment about cigarettes. I wonder how much of a correlation there is between cigarette smoking and lack of retirement savings...)
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Old 06-06-2016, 09:52 AM   #32
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I appreciated your post. IT is similar to what I see. I see quite a few people who are relatively low wage and one major episode would mess them up.

I stopped working eight years ago because of health issues. I am now 63.
The most I ever made was just under 40k. the wages just weren't there in the Part of the country I lived in. I have been divorced for far longer than I was married, no kids. LIved frugally and did manage to save about $500/month. IT sure has helped now.

even when you try to do everything right it doesn't always turn out.
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Old 06-06-2016, 10:05 AM   #33
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TV might be a part of it. Probably has been for awhile. I remember an old episode of "Leave it to Beaver" where Aunt Martha came to visit and Wally says "Hey Beave, check out their corny car!"

And, an episode of "Dennis the Menace" where some of the kids were boasting about their fathers and trying to one-up each other and one of the kids says "Oh yeah? Well my Dad's car has FOUR headlights!"
The average car loan is now over $30k. That boggles my mind.

US borrowers are paying more and for longer on their auto loans

While at a stop light today, noticed what looked to be a late 20-something next to me in a very expensive Mercedes (S-class, the kind that still have the hood ornament, which got my attention).

How is this possible? I'd never be retired if I decided to do that, even if I got promoted fast in my tech job. It would have killed all my savings.
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Old 06-06-2016, 10:06 AM   #34
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I expect both the problem and solution are more nuanced than a sound bite of "blame the folks for not saving" or "blame society for low wages". Although let's face it at certain levels wages it is not likely people can save and even if they do save a small disaster will derail the best of plans. Not many of the posters on this forum will find their financial lives significantly disrupted by a $300 car repair bill.

As to cigarettes, I expect that there is a high correlation between smoking and lack of retirement savings. There seems to be a high correlation between cigarette smoking and lack of education and lack of income...both of which correlate to lack of retirement savings.


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Old 06-06-2016, 10:31 AM   #35
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It's pretty much a tautology that in order to accumulate assets you have to LBYM not matter how much you make. It's also pretty clear that it's a heck of a lot easier to do this and to save more if you make more. That said, there are plenty of examples of people who remain broke, despite high incomes, because of their exorbitant life style; and of people accumulating a whole lot on very limited income by being very frugal. I think the only answer for those who can, won't, or have the bad luck not to make more is a "social security" system that supports a reasonable, but basic retirement life style for every worker. Retirement savings then provide a more comfortable pay-off for those who want more and have the skills or frugality to earn it!
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Old 06-06-2016, 10:38 AM   #36
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As to cigarettes, I expect that there is a high correlation between smoking and lack of retirement savings. There seems to be a high correlation between cigarette smoking and lack of education and lack of income...both of which correlate to lack of retirement savings.
And could >choosing< to smoke, >choosing< not to save money, making >choices< that lead to chronic low income, maybe tell us something about the role of >decisions< in forming outcomes? We can then ask why people make poor choices, but I think it's helpful to start with the observation that poor decisions serve as the foundation for a lot of individual (and societal) problems.
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Old 06-06-2016, 11:01 AM   #37
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Originally Posted by Sojourner View Post
It's clearly obvious that many (if not most) people spend for today without much consideration for their future financial security. I'm sure there are myriad reasons for this, and certainly not all of them are worthy of scorn or condemnation. What really concerns me in all this is the likelihood that, at some point, the government might decide to "rob Peter to pay Paul" to fix the problem of so many people retiring with virtually no savings. Most likely it would be something like full taxation of SS benefits or a drastic reduction in SS income allowed for us "wealthy" folk. That's when I would start to get pretty angry and not very understanding of people who couldn't figure out some way to save for their retirement and decided it would be OK to just rob from me (via government handouts).

(Oh, and +1 to the OP's comment about cigarettes. I wonder how much of a correlation there is between cigarette smoking and lack of retirement savings...)
I have a very good friend that asks me often what he can do to help speed along his retirement (he's 42 years old, like myself). He sure seems like and talks like he'd LIKE to retire early, but his actions say something different. The last time I talked to him, he was discussing how his municipal system is toying with the idea of getting rid of the "free healthcare" for its retirees and he's not happy with that and if that happens, then the US government should come in and pay for that premium since he was "guaranteed" the free healthcare (never mind that promise was NEVER actually extended). When I ask him just exactly how our government would continue to operate if they took up the slack for EVERYONE'S lack of contingency planning, he gives me a blank stare.

This friend seems to always have the biggest and best new iPhone (but it's on the AT&T Next plan...so it's almost free? So he says..I have no clue since I don't do new/contract/finance your phone plans). He also has 4 cars between him and his wife (he makes about 50K a year, she doesn't work) and well...they both smoke...and smoke a lot.

It's really kinda sad for me. I have been friends with him since HS but our relationship has become strained because of the financial differences. We used to take an annual trip with him and his wife to a Caribbean island but last year, they almost backed out at the last minute since they only had about $100 to spend while there for a week and well, they smoke the ENTIRE time. There is nothing like walking back and forth to the house pool and getting ash all over your feet. This year, we invited another couple who are a little better with their money and the original couple are acting offended that we didn't invite them. Ugh...
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Old 06-06-2016, 11:20 AM   #38
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That and the BILLIONS of dollars that are spent on psychological warfare to get you to part with your money what is often a false need.
I think that is a big part of it. The author of a book I'm rereading currently has a part about if advertisers focused only on what people needed they would go broke, because people really don't need that much to get by. Their entire focus is to create wants or artificial needs. And they have gotten really, really good at it!
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Old 06-06-2016, 11:58 AM   #39
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While at a stop light today, noticed what looked to be a late 20-something next to me in a very expensive Mercedes (S-class, the kind that still have the hood ornament, which got my attention).

How is this possible? I'd never be retired if I decided to do that, even if I got promoted fast in my tech job. It would have killed all my savings.
A high percentage of those expensive MB's are leased for $500 - $800 per month.

Pretty easy to do, have good credit, put down $4K, drive it for 36,000 miles, then give it back and get another.
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Old 06-06-2016, 12:18 PM   #40
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And could >choosing< to smoke, >choosing< not to save money, making >choices< that lead to chronic low income, maybe tell us something about the role of >decisions< in forming outcomes? We can then ask why people make poor choices, but I think it's helpful to start with the observation that poor decisions serve as the foundation for a lot of individual (and societal) problems.
I have a relative, who had a cable + phone bill of $278 /mo while she was slowly falling deeper and deeper in debt to a credit card

Every time I was there she always was watching the stupid tv shows like:
  • Pawn Wars.
  • Storage Wars.
  • The one with the black interviewer who tests DNA to see who is the daddy to some woman's child (usually never the one she says).
  • The White host where people tell their story how somebody slept with someone else and they fight on the stage while the audience cheers.
All these do not require an special cable so I told her many times cut out all the tv packages, but no it never happened.

Perhaps the problem is some folks feel very entitled to things, even if they cannot afford it, after all they see others with these things.
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