WSJ: A Retirement Wealth Gap Adds a New Indignity to Old Age

[CoolRich59]

I'm reading this story in the Journal right now.

I didn't have to read far till I got to this whopper: "Around 10,000 baby boomers are turning 65 every day, and the same number will continue doing so for years. Some are on solid financial ground after a lifetime of planning and the fortune of well-timed home purchases and stock investments."

I had no idea wealth accumulation had nothing to do with getting an education, working hard, saving, or living below ones means. Who knew!

 

[RobbieB]

Well let's see...

Stock purchases continuously since I was 23, timing not an issue I guess and home purchase when mortgage rates were 10%.

Whatever.

 

[SumDay]

Well let's see...

Stock purchases continuously since I was 23, timing not an issue I guess and home purchase when mortgage rates were 10%.

Whatever.

Ditto, except our first mortgage was 13%, and could have capped at 18%. 401(k) contributions since our late 20's, and maximizing them when the kids got out of college, along with a generous market got us where we are. Slow & steady won the race.

 

[Crabby Mike]

I'm reading this story in the Journal right now.

I didn't have to read far till I got to this whopper: "Around 10,000 baby boomers are turning 65 every day, and the same number will continue doing so for years. Some are on solid financial ground after a lifetime of planning and the fortune of well-timed home purchases and stock investments."

I had no idea wealth accumulation had nothing to do with getting an education, working hard, saving, or living below ones means. Who knew!

Not sure what offends you here. You chose not to bold the "lifetime of planning" part. I also didn't read that as saying that these are the only factors. But for me, that's not such a bad description, though as you say, you could add a couple of other factors, like education, etc. I know I'd also have more if I'd avoided a couple of divorces ...

 

[Beldar]

I think the author is making some broad, generic assumptions. Financial security in retirement has many flavors, as this forum's community can demonstrate.

_B

 

[CoolRich59]

Not sure what offends you here. You chose not to bold the "lifetime of planning" part. I also didn't read that as saying that these are the only factors. But for me, that's not such a bad description, though as you say, you could add a couple of other factors, like education, etc. I know I'd also have more if I'd avoided a couple of divorces ...

What I found objectionable was the implication that wealth is accumulated by "luck" or "timing" -- well timed-home purchases or well-timed stock buys.

As Robbie said, he's been investing since he was 23. I strongly suspect his wealth is due to a lifetime of disciplined, prudent investing and not due to luck or a stock tip that resulted in a windfall. (Of course, I don't know Robbie so this is just my surmise.)

I guess I'm a little thin-skinned on this topic because I've been hearing it from family members. I went to school at night while w@rking full-time, w@rked hard and advanced my career, put away money every month, generally lived within my means, and was able to FIRE this year. But, according to family members I was able to retire early because I was "lucky".

 

[Dtail]

What I found objectionable was the implication that wealth is accumulated by "luck" or "timing" -- well timed-home purchases or well-timed stock buys.

As Robbie said, he's been investing since he was 23. I strongly suspect his wealth is due to a lifetime of disciplined, prudent investing and not due to luck or a stock tip that resulted in a windfall. (Of course, I don't know Robbie so this is just my surmise.)

I guess I'm a little thin-skinned on this topic because I've been hearing it from family members. I went to school at night while w@rking full-time, w@rked hard and advanced my career, put away money every month, generally lived within my means, and was able to FIRE this year. But, according to family members I was able to retire early because I was "lucky".

There are many jealous folks who wake up in their 50's and realize that retirement is not going to be pretty.
Heck, a 30 something guy in the ice cream shop was upset that I was retired........

 

[Fedup]

I don’t tell people I’m retired anymore. I used too in my first two years and then found out a lot of people older than me are still working.

 

[foxfirev5]

I prefer good fortune to well timed investments. Nothing I did could be considered well timed which would imply some level of skill that I do not possess. Real estate is another matter. My primary residence has been a dog. On the other hand my RE bottom feeding adventures have more than made up for this. No one size fits all.

 

[Cut-Throat]

I'm reading this story in the Journal right now.

I didn't have to read far till I got to this whopper: "Around 10,000 baby boomers are turning 65 every day, and the same number will continue doing so for years. Some are on solid financial ground after a lifetime of planning and the fortune of well-timed home purchases and stock investments."

I had no idea wealth accumulation had nothing to do with getting an education, working hard, saving, or living below ones means. Who knew!

Agree that you left out the 'lifetime of planning' part.... And timing and luck DOES have a lot to do with it...... You were lucky enough to be born in a locale that probably offered you a Free public education. Not to mention Good Health. The paragraph that you quoted also said "SOME are on solid financial ground".... So, nothing here to get that worked up over.

 

[haha]

I'm reading this story in the Journal right now.

I didn't have to read far till I got to this whopper: "Around 10,000 baby boomers are turning 65 every day, and the same number will continue doing so for years. Some are on solid financial ground after a lifetime of planning and the fortune of well-timed home purchases and stock investments."

I had no idea wealth accumulation had nothing to do with getting an education, working hard, saving, or living below ones means. Who knew!

You did it that way, or you had good timing and don't realize how much that helped. Timing obviously can't make a dumb person smart, but it should be clear that luck and large social and economic trends strongly affect us. Plenty of hard working, intelligent, well educated people were just born at a less favored time than we.

Timing is partly luck, but I do not hold to what seems to be the base view on the board, that timing is not possible, we should just keep shoveling the coal into the firebox until we have enough and retire.

In particular, I believe with Shakespeare that "There is a tide in the affairs of men, which taken at the flood, leads on to fortune. Omitted, all the voyage of their life is bound in shallows and miseries."

Ha

 

[YVRRocketSurgery]

Everything kind of plays into it.
I'm an Gen X'er and even though I did save and invest, we were lucky to purchase a single detached house before the real estate boom in Vancouver in the 2000's. Foreign money, economic conditions, etc has made the price of housing (both purchase and rent) very unaffordable relative to local incomes. If you didn't get into the housing market early enough in Vancouver, housing costs now are eating up a large portion of your income, making it difficult to save and invest. Building a retirement nestegg is going to be difficult for some of the Gen X'ers and most millennials living in Vancouver.

 

[Andre1969]

Sometimes, timing does play a major role in things, and education and sacrifice have little to do with it. For example, here's the sales history (that I know of) of my condo...


1985: Previous owner bought it for $78K.
1994: I bought it for $84K. But, once you factor in inflation, selling costs, etc, it's a safe bet that previous owner actually made very little, if any.
2004: I sold it for $185K. Once the mortgage got paid off (plus a second mortgage I took out and invested), plus the agent's commission, and the costs of a bunch of renovations I did, I think I walked about with around $76,000. I attributed that to good luck more than any market savvy, though. At the time, $76K seemed like a lot of money, but over the course of 10 years, plus factoring in inflation, it probably wasn't so hot.
2007: Next owner sold it for $245K. Now he probably made out pretty well, unless he tapped out a lot of equity.
2017: Next owner sold it for $190K. The pictures of it are still up on various real estate websites. It has hardwood floors throughout most of it, a new washer/dryer, new paint throughout, a ceiling fan and a couple new light fixtures, and looks like at least a new outside unit for the heat pump. Now, I don't know which of the two owners after me did what, but I'd presume that since the most recent one had it for ten years, they probably did the most. They also took a bath to the tune of at least $55K, plus selling costs.

Throw inflation into the mix and it gets really ugly. Even though it's been low for awhile now, it's still crept up. That $185K I got for the place way back in 2004 would be $245K just factoring in inflation. And the $245K the next owner paid in 2007? Try $297K today! And to think people thought those home prices would go up forever, and they couldn't lose...


Edit: I just ran those other numbers through an inflation calculator. That $78K the first guy paid, in 1985, comes out to around $180K today. The $84K I paid in 1994 comes out to around $141K in current dollars. Then, once you throw in property taxes, condo fees all those years, plus various repairs, maintenance, upgrades, etc, it just shows that, unless you really know how to do a quick get in and get out, lipstick on a pig flip, most people just don't make that much money on real estate. And that's why I don't think of home equity, when I do my net worth calculations. To me, the biggest value in owning real estate is that, over time, your costs go down, presuming you have a fixed mortgage, and eventually when it's paid off, you eliminate that monthly mortgage payment. If I had stayed in my condo, it would be paid off by now, so I'd just be paying maybe $500 per month, to cover the property taxes, insurance, and condo fee, and then utilities.

 

[HI Bill]

The fortune of well-timed home purchases can help out a lot, especially in the right areas. Many Boomers who bought in southern CA in the 1970s could easily sell their homes for more than $1M, and move to someplace with a lower COL. I moved to Maui when the market tanked, and you could get an entry level condo for less than $90K. I did, and 4 years later, sold at $200K. Another few years later, the same condos were selling for $350K, before they plummeted to ~$178K. Lucky timing in real estate can indeed boost one's net worth. I work with someone on Oahu, whose home value has gone up $800K in the past 15 years or so!

 

[Fedup]

It depends on the area. My family bought a home in 1976 in Southern Cal, we’ll be lucky if we can clear $600k. It’s a ranch style house.

 

[JDARNELL]

I guess I'm a little thin-skinned on this topic because I've been hearing it from family members. I went to school at night while w@rking full-time, w@rked hard and advanced my career, put away money every month, generally lived within my means, and was able to FIRE this year. But, according to family members I was able to retire early because I was "lucky".

About 3 years ago a couple of people that I know from a social group always would say to me "it must be nice to be retired." Bothered me at first but then I was like screw that. Now when they say it I say "Yep. I highly recommend trying it."

 

[HadEnuff]

unfortunately for me, I never made any money on my homes, because I chose to live in a small Upstate NY town (read: "rustbelt"), where properties did not appreciate.
In fact, my office building which I owned for 35 years was worth less on the market in 2015 when I sold it, than it was in 1980 when I bought it. However, I never had to pay rent, but still, that kinda sucks.
But, I chalk that up to the cost of some of the benefits of my small town lifestyle, such as the 4 minute commute.

I turned 65 three weeks ago, so I am in the age group that the author refers to, and frankly,many of my contemporaries did make out quite well with their real estate purchases if they were in more vibrant urban, or suburban locales. I don't think it's unfair of the author to point that out.

 

[daylatedollarshort]

Luck plays a big role in our area in terms of wealth. Some start ups go bust, some turn into Facebook and a lot are in between. Employees here play the start up lottery all the time trying to get in early on on stock options that might be worth a small fortune or worthless in a few years.

Houses? When we moved to the Bay Area, Silicon Valley was having layoffs, house prices there dropped and many tech workers were out of work. In our part of the Bay housing was hot, then cold for years, then hot again. Cashing out from a hot housing market to a LCOL area can mean an extra $1M+ for retirement.

Studies show luck plays more of a role in success than many successful people would like to think it does:
The Role of Luck in Life Success if Far Greater Than We Realized
https://blogs.scientificamerican.co...life-success-is-far-greater-than-we-realized/

 

[tb001]

The fortune of well-timed home purchases can help out a lot, especially in the right areas. Many Boomers who bought in southern CA in the 1970s could easily sell their homes for more than $1M, and move to someplace with a lower COL. I moved to Maui when the market tanked, and you could get an entry level condo for less than $90K. I did, and 4 years later, sold at $200K. Another few years later, the same condos were selling for $350K, before they plummeted to ~$178K. Lucky timing in real estate can indeed boost one's net worth. I work with someone on Oahu, whose home value has gone up $800K in the past 15 years or so!

Yep. We just sold our house in the bay area for 800K more than we paid for it 7 yrs ago. You could argue we were smart--I sat back and waited after selling in 2007, but not everyone has that luxury and I was lucky that the rental market wasn't insane when I rented. And we sold because it felt frothy and we wanted to get $ out, but who really knows if that will have been the right decision financially 5 or 10 yrs from now. A lifetime of planning, definitely, but for sure luck and timing plays into it as well.

 

[corn18]

Luck plays a big role in our area in terms of wealth. Some start ups go bust, some turn into Facebook and a lot are in between. Employees here play the start up lottery all the time trying to get in early on on stock options that might be worth a small fortune or worthless in a few years.

Houses? When we moved to the Bay Area, Silicon Valley was having layoffs, house prices there dropped and many tech workers were out of work. In our part of the Bay housing was hot, then cold for years, then hot again. Cashing out from a hot housing market to a LCOL area can mean an extra $1M+ for retirement.

Studies show luck plays more of a role in success than many successful people would like to think it does:
The Role of Luck in Life Success if Far Greater Than We Realized
https://blogs.scientificamerican.co...life-success-is-far-greater-than-we-realized/

Luck is the intersection of opportunity and preparation.

 

[dtbach]

I'd have to agree with the Journal's statement in that at 65, I did indeed get some luck by investing in the 80's and 90's and with jobs that generously matched my 401 contributions. I also had a job with pension.


Most of those things aren't readily available to younger generations.

 

[HI Bill]

Studies show luck plays more of a role in success than many successful people would like to think it does

Correct! After working for small companies for the first 7 years of my career, I moved up to a 10K+ person company. I did not know that they were an ESOP company, or even what that was. 17 years later, I had nearly $0.5M in ESOP company shares, without paying a dime. I stayed with the company to earn more shares (not luck), but joining them was pure chance.

I 'earned' more than $120K in real estate holdings (buying and selling 3 condos), but I could have just as easily lost that much or more if my timing had been worse, or my judgement had been worse.

I was lucky to find my first job out of college in 1991, when almost no one was hiring (ok, some luck, some education, some experience).

Even if you work really hard, LBYM, invest wisely, getting to the point of FIRE before age 50-55 can more easily be done with some good 'luck'! Good luck!

 

[RobbieB]

Having worked at jobs all my life that didn't have a pension caused me to save and invest on my own.

 

[Dtail]

Luck is the intersection of opportunity and preparation.

Like that quote. Will use it.

 

[gcgang]

No problem with the article.

When I started working the DJIA was <1000. Today it's approaching 28,000. Little luck, good timing, helps. Unfortunately, I didn't own much stock when I started working.