Gen X has no retirement plan...

[kombat]

I can't imagine a newly minted college degree person paying off student loans, buying $3.00 + a gallon gas, etc, all on $25,000 or so a year??

Exactly my point, FinanceDude. Can any of the Boomers here provide some numbers regarding taxation in the 60's and 70's? What were the federal and provincial/state tax rates like, compared to today? Were there capital gains and dividend taxes, as we currently know them? What were property taxes like, as a proportion of the home's value (my annual property taxes are currently approximately 1.1% of my home's value - is that more or less than the 60's and 70's?)

 

[youbet]

Once again, your tone is masked by the unfortunate limitations of a text-based media, and I can't tell if you're being sincere or patronizing. Since it's Friday, and I want to start the weekend in a good mood, I'll choose to believe you're being sincere.

Why wouldn't I be sincere?

After reviewing your past posts, I've come to realize your case is different than the similarly aged folks I know here. But they're only anecdotal examples and certainly shouldn't be generalized to cover your case and your circumstances, which seem horrific and intolerable.

It's truly a shame and you have my deepest sympathy.

 

[Hamlet]

I'm 35 years old. I agree with much of your sentiment, but I would like to point out a few things to cheer you up a little about our generation's lot in life.

The lifestyle that the Gen-Xers are struggling to maintain is miles ahead of what the norm was back when the Boomers were raising kids on blue collar salaries.

Most people did not live in 4 bedroom/ 2 bath houses with a two car garage for just them and their children. Children shared bedrooms. My MIL had to share her bedroom with her schizophrenic aunt. One of her uncles slept on the living room couch. The idillic blue-collar life everyone remembers was not universal. Look at most of the houses from the 50s. Most were something like 1200 sq ft, 3 bed/1 bath ramblers with no AC. Maybe they had a 1 car garage.

A single family car was the norm.
TV's were small and black and white.
People didn't have cable.
Eating out was rare.
Travel was rare.

The wife may have stayed home with the kids, but the amount of work required to feed and clothe a family, and maintain a home was dramatically higher. There were no microwaves or convienence meals. Cooking from scratch was more the norm.

If you've never read the Tightwad Gazette, you should. She makes a strong case that that idillic 50s lifestyle is still available to people, but they have to take the bad with the good.

You want to get by on one salary? Live in a real 50s size house. Have your children share bedrooms. Get by with one car that you drive for 10-15 years. Get your TV (and children's clothes, tools, books, etc) from rummage sales. Don't bother with cable. Cook from scratch.

Fast-forward to the 90's. My generation graduates college and finds the following:

1) Taxes have skyrocketed, to pay for services that previously had been paid for with debt, to keep taxes artificially low. Boomers are getting older and falling ill, putting even more of a strain on the health-care system.
2) The national debt is through the roof. 25% of all taxes collected by the government are spent simply servicing the interest on the massive national debt, putting us taxpayers in the crippling position of only receiving 75% of the services we're paying for (on the other hand, our parents actually got more than 100% of the services they paid for, since it was largely funded by debt). So not only am I paying for my own services, I'm picking up the tab for my parents' services (with interest) from the 70's and 80's.
3) Housing prices have ballooned. Our parents are enjoying downsizing their housing, giving their savings yet another boost, on the backs of young families like mine who are just trying to find an affordable home.
4) Nobody is offering pensions. The percentage of companies offering lifetime pensions to new employees has plummeted, leaving us responsible for accumulating our own nest egg.

So in summary, we have no corporate pensions, are paying off our parents' debt, with mortgages twice the size of our parents' (for the same size house), with less money in our pockets (after taxes) to do it all with.

I'm a Gen-X-er, but I'm not apathetic. I'm downright mad.

 

[Milton]

Most people did not live in 4 bedroom/ 2 bath houses with a two car garage for just them and their children. Children shared bedrooms. My MIL had to share her bedroom with her schizophrenic aunt. One of her uncles slept on the living room couch. The idillic blue-collar life everyone remembers was not universal. Look at most of the houses from the 50s. Most were something like 1200 sq ft, 3 bed/1 bath ramblers with no AC. Maybe they had a 1 car garage.

Well, Wally and The Beaver shared a bedroom, but it was a big one and had an en suite bathroom. And the Cleavers enjoyed a nice centrehall-plan house, complete with a den for Ward!

[T]hat idillic 50s lifestyle is still available to people, but they have to take the bad with the good.

Well said.

 

[ziggy29]

You want to get by on one salary? Live in a real 50s size house. Have your children share bedrooms. Get by with one car that you drive for 10-15 years. Get your TV (and children's clothes, tools, books, etc) from rummage sales. Don't bother with cable. Cook from scratch.

I mostly agree with this in terms of stealth "lifestyle creep." What was seen as "baseline acceptable" standard of living has certainly creeped up in the last 50 years.

The problem with this particular paragraph, though, is that taking the chance of "getting by on one salary" is much more risky than it used to be. Job security was so much greater two generations ago. There wasn't much chance of Ward coming home to tell June that his job was offshored to India or China and now they were screwed with no job-related income.

Getting by on one income, even where financially feasible in the present, is playing "Russian roulette" with your financial future a lot more than it used to be.

Plus, Ward didn't have to put 20-25% of his income into his own retirement savings because he probably had a great pension and a solvent Social Security system which, for people of his age, paid out a LOT more than they put in.

Still, if more people today who compared the ease of "getting by" fifty years ago to the same today, if many of them had the exact same standard of living, they'd probably have a lot of money left over to fund their own retirement, and possibly an early one at that.

We could have "afforded" 4x the house we actually bought last year. But I wanted no mortgage and much lower property taxes and utility bills, so we chose a 1940s home with less than 1200 square feet which we could buy with cash. It is only the two of us, after all. And not being held hostage to a j*b in order to pay the mortgage is part of a retirement plan. Not allof retirement planning is on the income side.

 

[Hamlet]

Well I never claimed our generation has a bump-free road, just that the road of the Boomers wasn't as perfect as the "Leave it to Beaver" lifestyle that is remembered.

Job security was a historical aberration that the Boomers benefited from, not the norm. The Great Depression left a lot of people out of jobs. So did the 70s recession. The job losses from offshoring have been bad, but nothing like that. The Boomers faced massive layoffs in the 80s as well.

From the end of World War II to the early 70s, there was some job security. Other than that, we are in the same place we always have been.

We have challenges ahead of us, but I bet our path will be easier than facing WWII or the Great Depression. If not, well, we'll suck it up and muddle through.

I mostly agree with this in terms of stealth "lifestyle creep." What was seen as "baseline acceptable" standard of living has certainly creeped up in the last 50 years.

The problem with this particular paragraph, though, is that taking the chance of "getting by on one salary" is much more risky than it used to be. Job security was so much greater two generations ago. There wasn't much chance of Ward coming home to tell June that his job was offshored to India or China and now they were screwed with no job-related income.

Getting by on one income, even where financially feasible in the present, is playing "Russian roulette" with your financial future a lot more than it used to be.

Plus, Ward didn't have to put 20-25% of his income into his own retirement savings because he probably had a great pension and a solvent Social Security system which, for people of his age, paid out a LOT more than they put in.

 

[ziggy29]

Job security was a historical aberration that the Boomers benefited from, not the norm. The Great Depression left a lot of people out of jobs. So did the 70s recession. The job losses from offshoring have been bad, but nothing like that. The Boomers faced massive layoffs in the 80s as well.

From the end of World War II to the early 70s, there was some job security. Other than that, we are in the same place we always have been.

I agree, but you have to remember that for much of Gen X, consider their first "experiences" relating to elderly life and with people living in their old age -- namely, their grandparents at first and more recently their parents.

Most likely those generations toiled primarily in a time when a "job for life" wasn't an oxymoron. And when almost everyone who worked in a job for 40 years had a nice, often inflation-adjusted pension waiting for them and a generous Social Security check (relative to the 2-3% tax rates many of them paid for much of their working lives). Oh, and early retiree medical plans, too.

So while I agree this was an aberration brought about by the U.S. manufacturing infrastructure being the "only game in town" for 2-3 decades after the war -- a time when American business faced no real foreign competition and could give its workers almost anything (it's no coincidence that unionism peaked in this timeframe) -- it is nevertheless what today's Xers probably remember growing up in and seeing their parents and grandparents receive. So it is their "benchmark" against which they compare their own prospects for a prosperous (or at least reasonably comfortable) retirement.

I'm not saying times were better then or now -- but the rules have changed a lot, and the earlier one understands the rules coming for their generation, the better off they will be. I was fortunate enough to save according to the GenX rules as early as 1988 (at age 22) when I was starting my first "real" job and put 12% of pay into my 401K as soon as I was eligible. I didn't want to "assume" a pension, retiree health benefits or even Social Security and Medicare would be there for me.

 

[kombat]

So while I agree this was an aberration brought about by the U.S. manufacturing infrastructure being the "only game in town" for 2-3 decades after the war -- a time when American business faced no real foreign competition and could give its workers almost anything (it's no coincidence that unionism peaked in this timeframe) -- it is nevertheless what today's Xers probably remember growing up in and seeing their parents and grandparents receive. So it is their "benchmark" against which they compare their own prospects for a prosperous (or at least reasonably comfortable) retirement.

I think you're exactly right, Ziggy. You've echoed exactly what I've been trying to say, albeit your description is a lot more concise than mine have been.

 

[laurence]

I know it's easy for me to tut-tut my friends for not getting ahead or saving, we bought our brand new house when I was 26. As much as I'd like to say it was our brains and guts that got us there, that was made possible by a windfall of stock options at DW's work. Our income has always been way above average, so we've been able to buy any toy we've wanted and still save tens of k's a year for retirement and not touch the home equity. The first year after DW quit work to stay home with Tori was tight, but we are almost back to pre Tori days for take home income. We "played by the rules" - college, work hard, etc. but we also got a lot luckier than others who did the same.

 

[ziggy29]

As much as I'd like to say it was our brains and guts that got us there, that was made possible by a windfall of stock options at DW's work. Our income has always been way above average, so we've been able to buy any toy we've wanted and still save tens of k's a year for retirement and not touch the home equity.

I know what you mean. I "did the right things" in terms of working hard, going to college and paying my dues and all, and that's the only reason I feel much hope for our own financial future. I've contributed to 401Ks and Roths until the checkbook almost bled, and have for almost my entire 20 years in "industry."

As a result I'm sitting on about $520K in retirement savings at 42. It wasn't really luck, other than having many years of a good stock market to build it, but it did require that I read the writing on the wall about "retirement security" meant for Generation X, as in "do it yourself" -- and read the writing early, as in "during my 20s." That goes back to what I said about recognizing "changing rules" generation by generation, and hopefully getting a good feel for what the rules for your generation will be at a fairly early age.

 

[slepyhed]

You want to get by on one salary? Live in a real 50s size house. Have your children share bedrooms. Get by with one car that you drive for 10-15 years. Get your TV (and children's clothes, tools, books, etc) from rummage sales. Don't bother with cable. Cook from scratch.

That's pretty close to how I live.

I have an *actual* 1950's 3 bed, 1 bath ranch. One kid. My pickup truck is 9 years old and will last another 10 years easy. I cook from scratch.

My spreadsheet tells me that I'm paying $70,000 a year to sustain this lifestyle. $20,000 of that is income tax (including SS, medicare).

I'd say more, but I have to go cook the perogies.

 

[Martha]

A little more context on how great the world was for the baby boomers---

In the 1960s up to the early 70s, many male baby boomers got drafted into an unpopular war. Approximately 58,000 US forces were killed in the war with more than 150,000 wounded in action.

In the 1970s and 80s the job market, at least in my part of the country, stunk big time, especially following the crash of the steel industry. My city went from over 100,000 in population to about 75,000.

After years of relatively low inflation, inflation skyrocketed in the 70s. Watergate started years of cynicism about government.
A couple of oil crises didn't help. Recession time.

Houses may have been cheap, but in my community loans were difficult to come by. Our first house didn't cost a lot in today's terms, but the interest rate was 14%. And we couldn't afford a house until we were in our 30s. The kind of house we bought after I started at my law firm is nothing like the kind of house new lawyers at my law firm are willing to settle for now. We also pay them a lot more than what I first made, even accounting for inflation.

But, in this pre-aids world, the sex was good and the rock and roll could not be beat.


Every generation has its struggles and the future is always uncertain.

 

[W2R]

A little more context on how great the world was for the baby boomers---

In the 1960s up to the early 70s, many male baby boomers got drafted into an unpopular war. Approximately 58,000 US forces were killed in the war with more than 150,000 wounded in action.

In the 1970s and 80s the job market, at least in my part of the country, stunk big time, especially following the crash of the steel industry. My city went from over 100,000 in population to about 75,000.

After years of relatively low inflation, inflation skyrocketed in the 70s. Watergate started years of cynicism about government.
A couple of oil crises didn't help. Recession time.

Houses may have been cheap, but in my community loans were difficult to come by. Our first house didn't cost a lot in today's terms, but the interest rate was 14%. And we couldn't afford a house until we were in our 30s. The kind of house we bought after I started at my law firm is nothing like the kind of house new lawyers at my law firm are willing to settle for now. We also pay them a lot more than what I first made, even accounting for inflation.

But, in this pre-aids world, the sex was good and the rock and roll could not be beat.


Every generation has its struggles and the future is always uncertain.

Well said. This is really the way it was, at least from my perspective.

 

[youbet]

Nicely put Martha!

I'd also point out that many of the problems, such as job out-sourcing, that Gen X'ers are experiencing, are also simultaneous problems for the Boomers. The two groups overlap in the job market. Most X'ers are now working and suffer the consequences of the economy. Most Boomers are now (still) working and suffer the consequences of the economy. But when the Boomer gets laid off due to out-sourcing, he/she is in his/her 50's, is dealt a tough blow losing that DBP pension or not yet vested retiree health plan coverage late in life with no time to recover, and struggles to start a new career as a geezer.

While neither situation was fun, I think the layoffs and other economic problems I suffered in my 20's were easier to overcome than if the same things would have happened in my 50's.

This ball could be batted back and forth forever. The generations career periods overlap and whether the pros or cons are more beneficial or detrimental to one group or the other can be debated endlessly.

 

[Milton]

I'd also point out that many of the problems, such as job out-sourcing, that Gen X'ers are experiencing, are also simultaneous problems for the Boomers. The two groups overlap in the job market. Most X'ers are now working and suffer the consequences of the economy. Most Boomers are now (still) working and suffer the consequences of the economy.

Makes sense to me.

But when the Boomer gets laid off due to out-sourcing, he/she is in his/her 50's, is dealt a tough blow losing that DBP pension or not yet vested retiree health plan coverage late in life with no time to recover, and struggles to start a new career as a geezer. While neither situation was fun, I think the layoffs and other economic problems I suffered in my 20's were easier to overcome than if the same things would have happened in my 50's.

All other things being equal, someone in their 50's is definitely going to have a more difficult time recovering from job loss than a person in their 20's or 30's. On the other hand, the 50+ person (presumably) has their house paid off, (presumably) has some savings to fall back on, and typically will be entitled to a larger severance package. So it should be more or less a 'wash'.

This ball could be batted back and forth forever. The generations career periods overlap and whether the pros or cons are more beneficial or detrimental to one group or the other can be debated endlessly.

Agreed. And it is a somewhat pointless debate (kinda like arguing over who has the uglier spouse ... why would you want to win that argument?).

 

[FinanceDude]

But, in this pre-aids world, the sex was good and the rock and roll could not be beat.

I can relate to the music but not the sex....too young.............

 

[jazz4cash]

I can relate to the music but not the sex....too young.............

Don't sweat it...the music has changed, but the sex is the same.

 

[RobertInOhio]

After reading a number of these forums, I pretty much believe and very few of us "Generation Xers" are ever going to "retire". To be honest, I believe in retirement as much as I believe in Santa Claus.

I spend just about every dollar I make in bills, food, stuff for kids, etc that there is no place I stop paying for to "save" for retirement. To be honest, I am sick of hearing the word "save". It sounds like the word "f-ck" to me.

On the subject of an earlier post of a person in his 50s being laid off with no time to recover, it is not better for the 20 or 30 somethings. I am 32 now and back in 2003 to 2005, I was out of work for 18 1/2 months. I just this year finally got a stable non-contracting position and I will stick with it until they decide to fire me again where it just starts all over. Needless to say, I have not recovered and now I am worse off. I have a mid 450s credit scores, many charge-offs, and no money to file bankruptcy. Even though I qualify for a chapter 7, the cheapest lawyer I found wants $3700 in advance. He might as well ask me for a $1 million in gold bars. I am going to let a car get repo'ed so I can buy a used vehicle I can own outright.

Since our neocon friends stole bankruptcy and forced us into this 401k scam that pushes everyone into the stock market ponzi scheme, I certainly hope a future generation sets up some kind of program for indigents in their 70s and 80s who are broke and unable to work.

I suspect I (and millions of others) will need it.

America is a sham unfortunately, and most people never see it for the sham it is until they have no money. Money = Life in this country.

 

[REWahoo]

After reading a number of these forums, I pretty much believe and very few of us "Generation Xers" are ever going to "retire". To be honest, I believe in retirement as much as I believe in Santa Claus.

I spend just about every dollar I make in bills, food, stuff for kids, etc that there is no place I stop paying for to "save" for retirement. To be honest, I am sick of hearing the word "save". It sounds like the word "f-ck" to me.

Since our neocon friends stole bankruptcy and forced us into this 401k scam that pushes everyone into the stock market ponzi scheme, I certainly hope a future generation sets up some kind of program for indigents in their 70s and 80s who are broke and unable to work. I suspect I will need it.

Robert, welcome to the forum. Since you don't believe you will ever retire, much less retire early, why are you here? Whatever the reason, always nice to have another hard working young person with a positive outlook on life join us.

 

[Martha]

$3700 for a bankruptcy? What part of the country do they charge that much? NY? CA?

 

[samclem]

RIO,
Sorry you believe you are being treated unfairly by the system. A little free advice (which is often worth just what you pay for it): Work every day to find something good about your life and to slowly let go of the bitterness. I don't expect you to believe it, but you have more opportunities, in this location and in this time, than 99% of humanity has ever had. Really. Sounds like you've had a rough time over the last couple of years, but 90% of what happens from this point on is in your hands, not some amorphous external oppressive force. Look around, find someone worse off with which to compare your lot, and then dig in for the adventure. If you really want to feel good, help someone who has less than you do. If you let things happen to you rather than taking control of things, the picture won't get any better.

All trite, but all true.

 

[Milton]

After reading a number of these forums, I pretty much believe very few of us "Generation Xers" are ever going to "retire"....

I spend just about every dollar I make in bills, food, stuff for kids, etc. that there is no place I stop paying for to "save" for retirement. To be honest, I am sick of hearing the word "save". It sounds like the word "f-ck" to me....

Since our neocon friends stole bankruptcy and forced us into this 401k scam that pushes everyone into the stock market ponzi scheme, I certainly hope a future generation sets up some kind of program for indigents in their 70s and 80s who are broke and unable to work. I suspect I (and millions of others) will need it.

America is a sham unfortunately, and most people never see it for the sham it is until they have no money. Money = Life in this country.

Delightful! Thanks for sharing.

To be honest, I believe in retirement as much as I believe in Santa Claus.

Then you'll probably also want to contribute to this site: Write Santa Claus Christmas Letters.

 

[RobertInOhio]

What I was trying to point out is America does not work for everyone. I know homeless people here eat better out of the trash dumpsters than the rest of the 3rd world, but that does not mean life is better here. You do not see 3rd world people in Africa screwing each other over for jobs or percentages, because none of that exists there. Maybe what the rich have created for us here was a bad idea after all.

Sorry to be a kill joy, but I think retirement is going the way of the dodo , and unfortunately, it will take an entire generation of people starving to death in America in their 70s and 80s before it is realized the 401k/stock market ponzi retire scheme is a failure. If you do not believe me, ask someone who worked for Enron.

I'll never put on dollar I earn in a stock market or real estate. I'd rather be homeless and hungry than lose everything I worked for over my life in a stock market, just so I can die in an office cubicle anyway.

America & Capitalism are frauds. They just are.

Look at the threads on owning renter properties. How do you think those renters are doing? I am renter. I do not know property nor have I have ever so I can pretty much guess how those people are doing.

If you gamed the system and have millions, you have my congratulations. GOOD JOB! But unfortunately, America does not work for everybody and some people are just destined to be worker bees for their entire lives. Maybe I will luck my way into a pension, or win a lottery and come out ok.

OH! I forgot to add that in Chapter 13 bankruptcies, the lawyers fee are divided over the payments, in a Chapter 7, the lawyer wants the fee up front.

 

[samclem]

There are several good studies on the impact of beliefs concerning "external vs internal causation" and happiness. People who believe they are responsible and largely in control of their destiny are happier than people who believe that things just happen to them and luck drives outcomes. It also appears that the a belief in internal causation is predictive of better outcomes (higher pay, better health, more internal satisfaction with their life). IIRC, the studies were longitudinal and appeared to indicate that a belief in internal causation resulted in these better outcomes, rather than the outcomes causing the beliefs (I'm doing well, therefore I must be smart" or "I'm doing poorly, the system is keeping me down.")

It's easy to identify beliefs in external vs internal causation by looking at the word choices in a post like RIO's.

In large part, America "works" for those who "work." The reference to African/third world systems and fairness is funny. I'd urge anyone who thinks the US system is "dog eat dog" to spend a year in a third world country. Yes, the poor are often kind to each other and there is often a close sense of community, but the kind of ingrained structures to keep the poor in that state are much more prevalent in those countries than in the US.

In the words of a sage man (RAH), (paraphrasing) "Of course the game is rigged! Don't let that stop you. If you don't play, you can't win."

 

[Milton]

Thank you for your explanatory follow-up post.

I am sorry that things seem bleak for you. Whether that is because of personal choices, matters entirely beyond your control, or a bit of both, I don't know. In any case, it isn't much fun to be poor.

If Enron is the sole sample, then yes I agree capitalism appears entirely corrupt. But that is like saying "all dog owers are cruel people: just look at Michael Vick". There are a huge number of legitimate publicly traded companies that have conducted themselves properly and have made their shareholders weathly.

I'll never put on dollar I earn in a stock market or real estate. I'd rather be homeless and hungry than lose everything I worked for over my life in a stock market, just so I can die in an office cubicle anyway.... Maybe I will luck my way into a pension, or win a lottery and come out ok.

We all make our own decisions regarding such matters. Perhaps you will find empathy and encouragement for your plan in other quarters. But I don't think many people on this forum will agree.