$25,000 is all?

[dory36]

Fox News just reported on a study by the Employee Benefit Research Institute saying that 68% of workers were confident they had enough for a comfortable retirement, yet 40% of Americans over 55 had savings and investments totalling less than $25,000. 

Hmmm . . . wonder if I did the necessary coding to prevent divide by zero errors in Firecalc...

 

[Lazarus]

Most people will work untill they can't. That is the extent of their planning.

 

[REWahoo]

I saw the same information on CNN

Retirement: Great expectations, no preparation
A majority of workers say they're confident about retirement, but they don't have the dollars to show for it.
By Jeanne Sahadi, CNNMoney.com senior writer

http://money.cnn.com/2006/04/03/retirement/ebri_survey_2006/index.htm

An interesting quote:

"Part of the problem, for Baby Boomers anyway, is that the reality of retirement's price tag hasn't hit them yet because they see their parents with adequate funds in retirement thanks to pensions and employer-provided health coverage, said EBRI fellow Jack Vanderhei. And they may figure that because they make more than Mom and Dad ever did, that they'll be fine, too, he said. But Vanderhei's research suggests that some Boomers will burn through a significant portion of their savings within 10 to 15 years of retirement as they try to maintain their current lifestyle."

Chris24, did you see this?

 

[MasterBlaster]

Most people will work untill they can't. That is the extent of their planning.

Then their plan is to have government take much of your stash as their "Fair Share"

 

[cute fuzzy bunny]

We've seen this sort of unrealistic result from previous studies. Most plan for a comfy retirement, but they arent letting that pesky planning and saving get in the way. Something will happen that will solve the problem. A windfall, an inheritance, the lottery, batman...

 

[Sisyphus]

Wow... I have to wonder where that (in addition to the crazy health care cost increases) is going to leave those folks in the younger generations like myself.

Scary stuff. Makes me want to hit my savings goal and flee to Mexico.

 

[Cool Dood]

Dang, all I had to do was pray to Batman?

What a waste of effort!

 

[Chris24]

Chris24, did you see this?

Yes ! I won't be maintaining my current lifestyle ...

 

[bearkeley]

I guess they are all planning to move to the Phillippines, my father in law does pretty well on the $40 per moth allowance the MIL gives him. The family of the kid we sponsor gets by (ie does not completely starve) on less than $32 per month.

So $25,000 could be a lot of money somewhere and if all the old people move to the phillippines (I guess I should learn how to spell that ) then that will leave plenty of room for all the new folks coming across the border.

People want the Government to take care of them when they are old but they don't want to have to pay the taxes to make that possible.

Borrow and spend it is a way of life, it is a way of Government and if we all do it long enough togeather then it becomes a Conservative American Value. (and that is good, Righ?) Who da thunk borrowing and spending could be a conservative value?

"Ronald Reagan taught us that deficits don't matter" Dick Chenney

 

[Ed_The_Gypsy]

Borrow and spend it is a way of life, it is a way of Government and if we all do it long enough togeather then it becomes a Conservative American Value. (and that is good, Righ?) Who da thunk borrowing and spending could be a conservative value?

"Ronald Reagan taught us that deficits don't matter" Dick Chenney

Don't get me started!

The only positive thing I can see is a labor shortage so that folks who need to can work longer.

The negative thing is that I fully expect gummint to find a way to take more away from the few who have been provident enough to plan for their own future. (No, I am not JG in a different avatar. Paranoia is my hobby.)

Cheers,

Gypsy

 

[youbet]

The negative thing is that I fully expect gummint to find a way to take more away from the few who have been provident enough to plan for their own future. 
Cheers,

Gypsy

100% agree!  Look for means testing to qualify for SS and Medicare, dramatically higher tax rates and new taxes focused on what you own (savings and investments) as opposed to what you earn or spend. 

 

[shorttimer]

I wouldn't believe these articles except my boss has done taxes the last few years, he is planning on leaving work and starting a few seasonal businesses. He sees many people who have no 401/roth etc. Many that have no savings account. Many that have no savings at all, have car, boat, rv, snowmobile,credit card and house payments that equal or exceed their income.

another thing that amazes him is how many people are ecstatic to get thousands of dollars back each spring so they can go spend it as opposed to saving it or balancing their taxes so that the bottom line is zero or close to it and you get the interest instead of the government.

 

[azanon]

I mentioned this way back once, but I had an older workmate who caught on that I was fairly knowledgeable about finance stuff, so he asked me over for some help and said he was cruntching the numbers to see if he could retire.   He comes eligible for full retirement in 2 months.  Anyway, he pulled up his TSP and let me glance at the full balance.   It was only 55K!    And he had no other retirement accounts either, except he owned his home!     He also mentioned he was under the old federal retirement system that allowed waiving Social Security (which he said he did).

I just said "I see... hmmm"    I refrained from mentioning my TSP has about 70K and i'm only 34, to say nothing of my Roths and other IRAs.  I just told him you might need to put a few more years in and up those contribution levels, if possible (for my understatement for that day). The good thing is this guy is only 56 I think, so......

 

[yakers]

Azanon,

If your friend is under the old CSRS then he may be due a nice pension. If he has over 30 years of service and is paid about $100K then his pension would be in the $55K+ area. COLAd pension and affordable medical coverage. Shouldn't need SS and even the TSP is gravy.

 

[azanon]

Azanon,

If your friend is under the old CSRS then he may be due a nice pension. If he has over 30 years of service and is paid about $100K then his pension would be in the $55K+ area. COLAd pension and affordable medical coverage. Shouldn't need SS and even the TSP is gravy.

He's a GS-12 step 10, and yeah he's on CSRS. The better pension though (compared to FERS) is mostly, if not completely, offset by no social security. The TSP would be gravy in his case if you believed the non-convential wisdom this site supports that ~ 43% of gross is all you need for retirement. My opinion falls more inline with the larger sites, like Motley Fool, that you'll need, or should shoot for, 70-100% of preretirement income if more than existence is one's goal.

I'd freak with just 50K in cash and being 56. Whew, glad i'm not him. I know this would have to bother a lot of you guys too, because I recall those net worth polls where everyone voted, and the average person was sitting on 1Mil plus net worth here, or thereabouts.

 

[Jay_Gatsby]

100% agree!  Look for means testing to qualify for SS and Medicare, dramatically higher tax rates and new taxes focused on what you own (savings and investments) as opposed to what you earn or spend. 

I'm not sure that any or all will ultimately come to pass. There are wealthy Democrats as well as Republicans. What you'll likely see is a rise in the qualifying age for social security and medicare, and perhaps forcing terminal employers to allow people who retire from them to purchase health insurance under their plans. Likewise, a "wealth tax" would probably cause capital flight to countries who don't have one. Naturally, those countries would welcome people with money with open arms...

 

[Michael Moore]

He's a GS-12 step 10, and yeah he's on CSRS.  The better pension though (compared to FERS) is mostly, if not completely, offset by no social security.   The TSP would be gravy in his case if you believed the non-convential wisdom this site supports that ~ 43% of gross is all you need for retirement.  My opinion falls more inline with the larger sites, like Motley Fool, that you'll need, or should shoot for, 70-100% of preretirement income if more than existence is one's goal.

You need to keep in mind for those of us who were well along in our careers when we were offered the opton to switch to FERS, it often wasn't a very good deal compared to being under CSRS. For one, your regular retirement date gets pushed pretty far down the line. That was a big drawback to me.

We're a DINC household - both mid-to upper stepl GS12s, and we both ERed on early outs when we were 52 (after 27.5-29 years). We're lucky in that we live in the highest geographic pay area and that has carried through to our pensions (I think my 12-8 was about what a 14/1 would have made if an a location without locality pay). But our gross incomes have basically dropped 50%.

With the house paid off we so far are having no problems with letting the TSPs sit untouched, and even saving a bit out of the pensions. Any interest off of TSP/CDs etc just gets plowed back in, and not spent.

It seems pretty comfortable to me. We still go out to eat once or twice a week (just as we used to do), and do pretty much what we want (but we didn't have an extravagant lifestyle before retirement).

cheers,
Michael

 

[donheff]

But our gross incomes have basically dropped 50%.

With the house paid off we so far are having no problems with letting the TSPs sit untouched, and even saving a bit out of the pensions. Any interest off of TSP/CDs etc just gets plowed back in, and not spent.

It seems pretty comfortable to me. We still go out to eat once or twice a week (just as we used to do), and do pretty much what we want (but we didn't have an extravagant lifestyle before retirement).

I don't think it makes sense to say 43% of pre-retirement income is correct, or to say 70-80% is correct. The reality is people need to evaluate their expenses and their plans and calculate what it will take to meet them -- that is the number. For many of us it is a lot less than 70 - 80%. In some cases, like these folks with a 50% pension, it may be because the mortgage drops off and they move to a lower cost area, for others it is because the mortgage, tuition, and massive retirement savings drop off (my wife and I saved ~33% of gross for many years prior to ER).

It is true that many boomers are facing a rude awakening a few years down the road. But I think the problem is compounded by the financial advisors' drumbeat of "70%-80% or more". You can bet that the enormity of the numbers simply scares some people into not even trying to save when a careful analysis of their expenses would convince them they could make it if they put in an effort.

Don

 

[jondoh]

I don't think it makes sense to say 43% of pre-retirement income is correct, or to say 70-80% is correct. The reality is people need to evaluate their expenses and their plans and calculate what it will take to meet them -- that is the number.

Depends, too, how you figure "pre-retirement income." The last ten years I worked I saved 50%-60% of my gross salary (not too hard when you're single with a paid off mortgage and zero debt).

Upon FIREing I had a considerable uptick in my disposable income, even with a conservative withdrawal rate.

 

[Michael Moore]

I had the full allocation for TSP (10%) coming off the top of my $84.5K final salary along with the extra $4000 catch-up amount, so right there my effective gross yearly income was really $72K, so if you used the latter number then my gross income didn't drop 51%, it dropped 43%. My current net retirement check appears to be only 32% lower than my final net paychecks (converted to a monthly amount). Add back in the money I'm not spending on commuting (about $175/month) and my net monthly income is only reduced by 27%.

That doesn't look too shabby for not going to work.

We paid off the mortgage (early) about 3 years ago, and the disposable income certainly changed when the mortgage went away, even though the gross was the same. If you arranged things so that on the day you retired you also paid off your mortgage, the next day in retirement you might not actually see a big change in your accustomed disposable income.

Keeping the fixed costs as low as possible sure helps things.

cheers,
Michael

 

[audreyh1]

I find it fascinating that:

a) people are earning more money than their parents did and

b) people are seeing their parents have a comfortable retirement

so they assume they'll be just fine too - because their parents are.

I guess the whole benefits thing is quite invisible to a lot of folks. They really don't get how their benefits are completely different from their parent's benefits.

Gosh - there are a lot of rude awakenings in store for a lot of people!

Audrey

 

[lazygood4nothinbum]

a young man at work (24) was $25,000 in credit card debt. he had two cars. a truck for working his previous job and a sedan, i guess for evening wear. for two years i could not get through to him that that is not how you keep money. i finally had to give up the friendship as i couldn't stand to watch that train wreck any longer.

 

[yakers]

I don't think it makes sense to say 43% of pre-retirement income is correct, or to say 70-80% is correct. 

Also there is the case for some folks where their income gets high in the last few years. I expect I will have more like 55% of my final salary but 75%+ of my salary just a year or two ago. Pretty much adjusted to living on that income level.

 

[azanon]

I admit it just depends on what your retirement plans are.   I just know that once I've sat at home for 2-4 weeks with no job, and only my hobbies (which i have time for even working) to occupy me, than i'm going to get bored and maybe i'm going to want to go on some vacations.   Or heck, I might become prone to spending out of boredom.

Also, i dont want to just "run the numbers" and just mathematically be able to get by, by lets say 20% surplus.  IMO, that's just cutting it too close.  If i'm looking at a possible 30 yr retirement, i'm going to want a hell of a lot of safety room.  Can you say overkill, people?  30 yrs is a long time for a lot of s*** to change the circumstances.

I just see real ER as very risky unless you're just sitting on a literal overkill of capital.  Didn't Bernstein feel this way too?  Anyway, I want all kinds of breathing room when i pull the trigger.   I cant help myself; i'm financially conservative.

Azanon

 

[setab]

Az,

Let me give you a real life example...me. I am under the CSRS system and have been retired about five weeks now. I wasn't prudent in the past, and that's an understatement. I took credit card debt and a mortgage into my ER. I do have a modest six-figure balance in the TSP amd I did retire as a high step GS 15 with 27 plus years. I haven't received my first full pension check yet, but I know it will only be slightly more than 50 percent of my pre-retirement take home. What I did do is change the way I think about spending. I just don't buy "stuff" anymore and the thought of doing that and having to go back to work to support the habit scares the holy crap out of me. So, I don't even think about it. I pay all my bills now as soon as they come through the mail slot; I have set up a slow buy steady repayment schedule for my remaining debt and so far three of the smaller ones have been cleared in only five weeks. I could go on and on, but in short (and it may be too late for that looking at this post), it's more about attitude than you think. You don't need the piles of money the big boys say you do, espcially if you value your time more than your "stuff." My cash on hand has decreased by less than $1000 in the last five weeks and my TSP has increased by a part of that. I am sure I can do even better as I get the hang of this. If I were a cynic, I would say that the big boys want you to think you need 100 percent of your preretirement income because they need you to keep investing. Their pathetic lifestyles depend upon it in moe ways than one. Pay cash, work less and enjoy life!

setab