American workers are finding it harder to save for retirement !

[wog777]

What's the best way to overcome this problem?
http://www.ibtimes.com/articles/20061029/retirement-expectations.htm

 

[bbuzzard]

I figure the easiest way to solve this problem is to accept that when they are retired and eating dog food because they spent all their money on HDTVs and trips to Cancun when they were younger, the government will institute a wealth tax, because it obviously will not be fair that I have $2M and they have nothing.

I can't wait !

 

[W2R]

As bbuzzard implies, the problem is that people are living beyond their means. They seem to believe that they can afford a much higher standard of living than reality dictates. It's as though they decide they "deserve" a certain standard of living, and live according to their fantasy whether or not they can actually afford to do so.

Priorities need to be re-aligned. How can someone insist that they cannot afford to save for retirement, but they can afford a car, living quarters that they don't have to share, or taking on a dependant spouse and/or kids?

wog777 asks, "What's the best way to overcome this problem?". I can't say that I know the BEST way, but I do know that paying off credit cards and loans before expanding your lifestyle is a good start. Don't even think of taking on obligations like a car, house, or dependent spouse until you are debt free, living on your income easily, and have enough left over to fund your plans without going into debt to do so.

It's not as easy to live well now, as it was 50 years ago. Getting on sound financial footing is pretty much a prerequisite. Reality is pretty harsh sometimes but I think it has to be faced.

 

[d]

It's not as easy to live well now, as it was 50 years ago

want to have some 1957 surgery?, limit yourself to 1957 drugs?, live in a 1957 house?, drive a 57 chevy (maybe)? etc. etc. our living standards are greatly improved over the last 50 years. what has become problematic, is that many have apparently misused some of the financial/debt instruments which were not then available. 50 years ago one had no choice but to live within their means ... today it's too easy not to do so.

 

[bssc]

I think that sound bite solution would be to have everyone on a budget that takes into account the need to save for retirement. But unfortunately, a significant number of people aren't really interested in doing that. It will take a lot of education. I know that the company that I work for (very large Dow component) has simplified the retirement plan to a few choices in order to get people to contribute. They also sponsor these sort of financial seminars to try to get their employees involved.

Of course, Steve Martin has this problem too.

 

[Alan]

.... when they are retired and eating dog food ....

and licking their genitals as well - apprently dogs do this to take away the taste of the dog food

 

[Dog]

want to have some 1957 surgery?, limit yourself to 1957 drugs?, live in a 1957 house?, drive a 57 chevy (maybe)? etc. etc. our living standards are greatly improved over the last 50 years. what has become problematic, is that many have apparently misused some of the financial/debt instruments which were not then available. 50 years ago one had no choice but to live within their means ... today it's too easy not to do so.

Back then, people didn't make a purchase unless they had the money in hand to pay for it. Today, we figure if we can afford the monthly payment, or defer payment for 6 months, then we can afford the purchase. Just think how often financing is used to sell a product today....you can drive this car off the lot for only $250 a month (oh yeah.....$250 a month for 60 months).

 

[Helen]

Back then, people didn't make a purchase unless they had the money in hand to pay for it. Today, we figure if we can afford the monthly payment, or defer payment for 6 months, then we can afford the purchase. Just think how often financing is used to sell a product today....you can drive this car off the lot for only $250 a month (oh yeah.....$250 a month for 60 months).

I remember hearing how stressful it was to sit down with a banker and ask for a mortgage.

 

[dusk_to_dawn]

I figure the easiest way to solve this problem is to accept that when they are retired and eating dog food because they spent all their money on HDTVs and trips to Cancun when they were younger, the government will institute a wealth tax, because it obviously will not be fair that I have $2M and they have nothing.

I can't wait !

Yeah, it's already been discussed but not implemented. It's called means testing. If it's ever implemented, I guess it will work something like this......

Joe, our average American, lived well. He had cars, HD TV, all the cable channels, country club, vacations, and credit card debt. Now he is retiring and he is dependent on Social Security and his $15k roth ira he started three years ago. He needs Social Security to survive. Mr. bbuzzard on the otherhand saved diligently for 20+ years and now has a nestegg of $2M. He therefore does not "need" his Social Security to survive. He has the means to live well without it. Mr. bbuzzard's Social Security (and who knows what else) will be "adjusted" downward so that those that "need" their SS won't have to take a cut. Ouch. Means testing.......to those who haven't saved, it's a great way to make sure that no one goes without in their later years.

 

[d]

I remember hearing how stressful it was to sit down with a banker and ask for a mortgage

I remember hearing how stressful it was to sit down with a banker and ask for a mortgage

 

[Alan]

Yeah, it's already been discussed but not implemented. It's called means testing. If it's ever implemented, I guess it will work something like this......

In the UK it works in increased handouts. It always makes my father mad to see so many of his friends and neighbors getting all sorts of govt handouts because all they have is their govt pension. (ie SS). He has a small private pension which just takes him over the means tested threshold.

In France they tax an individual's net worth over ~ $1m

http://www.frenchentree.com/fe-legal/DisplayArticle.asp?ID=2173


Wealth tax is payable by any 'household', resident of France, whose combined worldwide assets are valued at more than 732,000 euros on January 1, 2005. Your 'household' includes spouses and dependent children, and it should be noted that stable unmarried couples are also taxed together. Non-residents of France may also have a wealth tax liability, but only on their French property assets.

 

[dusk_to_dawn]

Wealth tax is payable by any 'household', resident of France, whose combined worldwide assets are valued at more than 732,000 euros on January 1, 2005. Your 'household' includes spouses and dependent children, and it should be noted that stable unmarried couples are also taxed together. Non-residents of France may also have a wealth tax liability, but only on their French property assets.

I suppose this is a tax on all assets and that would include real estate. I don't live in an area with really high real estate prices like LA, San Francisco or New York, but I would imagine there are some high real estate areas in France, and 732,000 euros would be a threshold that many hit if they have held onto real estate for many years. Oh well, there is no escaping death and taxes.

 

[Bikerdude]

TV and other forms of advertising. created by Madison Ave. do such a good job most people have expectations for material wealth that is unrealistic.

It begins with Sat. morning cartoons and continues throughout your life as you are bombarded with advertisements. Just look at your kids and grandkids to see the super consumers they have become.

Hard to save money when you're always looking to buy the next must have status product or take that vacation that you "deserve".

 

[Alan]

I suppose this is a tax on all assets and that would include real estate. I don't live in an area with really high real estate prices like LA, San Francisco or New York, but I would imagine there are some high real estate areas in France, and 732,000 euros would be a threshold that many hit if they have held onto real estate for many years. Oh well, there is no escaping death and taxes.

Yes, the net worth includes equity in real estate.

The recent rise in French and UK property prices, particularly in the south of both countries, means that the number of people liable to wealth tax has increased dramatically.....
Wealth tax does not exist in the UK, and the concept sometimes comes as a surprise to the British, since not only are you paying an annual tax on the value of assets that you built up out of your taxed income, but the authorities also oblige you to list everything you own, which can leave some people feeling that their privacy has been invaded.


However I can never see this happening in the US as we would never put up with the loss of privacy.

 

[Spanky]

Since the article does not include reasons that people find it hard to save, it would be hard to provide a solution. I can think of two reasons: not making enough money, spending too much. I guess living below your means is one solution and making more money is another.

 

[bssc]

However I can never see this happening in the US as we would never put up with the loss of privacy.

The IRS has been summoning the credit card associations (Visa and MasterCard) to give up records for foreign banks issuing cards people who might be evading taxes on their income. I would think that doing the same thing on their assets would just be another step.

http://www.usdoj.gov/opa/pr/2002/August/02_tax_485.htm

 

[Donzo]

A good example of spending - needing the biggest and best....
In 2001 I bought(brand new) a Kawasaki Prairie 400 ATV - it was the biggest and badest quad out there then. I bought the quad because where I live now has incredible places to ride to and enjoy.

I ride w/ a group of 5-7 at least 2x per month. I still have the same quad - runs perfect, looks good - - it is the oldest and smallest quad in the group now. All others are 650 - 800s - these guys buy new quads every time there is an increase in cc! I am the same age - or younger and the only one retired. It is almost like they can't enjoy the ride if they don't have the biggest, best machine and this attitude extends thru their lives.

They ask me when am I gonna get a new machine...I tell them when I can't keep up with them! Has'nt happened .... yet.

 

[brewer12345]

Um, any of you read "The Two Income Trap"? A somewhat flawed analysis, but very eye-opening and makes it pretty clear that the problem isn't SUVs and lattes.

 

[Bikerdude]

Um, any of you read "The Two Income Trap"? A somewhat flawed analysis, but very eye-opening and makes it pretty clear that the problem isn't SUVs and lattes.

OK, you gonna tell us what it is.....

 

[brewer12345]

OK, you gonna tell us what it is.....

Its a whole book, but briefly they show that the basics (buying a home, family car, etc.) consume most of two incomes for most families, vs. much of one income back in the day. Today's families have relatively little discretionary income andthings get really bad if either earner is out of a job. Sending a second family into the labor force has made families less financially secure.

 

[maddythebeagle]

A good example of spending - needing the biggest and best....
In 2001 I bought(brand new) a Kawasaki Prairie 400 ATV - it was the biggest and badest quad out there then. I bought the quad because where I live now has incredible places to ride to and enjoy.

I ride w/ a group of 5-7 at least 2x per month. I still have the same quad - runs perfect, looks good - - it is the oldest and smallest quad in the group now. All others are 650 - 800s - these guys buy new quads every time there is an increase in cc! I am the same age - or younger and the only one retired. It is almost like they can't enjoy the ride if they don't have the biggest, best machine and this attitude extends thru their lives.

They ask me when am I gonna get a new machine...I tell them when I can't keep up with them! Has'nt happened .... yet.

I work with several folks like this...one needs a new boat and toys every few years....also know some that get new cars every few years.....I actually think some of this comes back into the attitudes in the workforce (not finding fulfillment in stuff and looking for it at work=more @@@holes)

 

[Bikerdude]

Its a whole book, but briefly they show that the basics (buying a home, family car, etc.) consume most of two incomes for most families, vs. much of one income back in the day.

I still think having a 3500 sq ft home vs. a 1100 sq ft one and a new 30K SUV vs. a basic 14K (or even used) car has something to do with it. I think couples that work hard want something to show for it.

You can still make it on one income but you won't "look" successful.

I never cared what other people thought because I knew I was on the right track. Now I enjoy waving to my neighbors as they go to work in their new SUV,

 

[sgeeeee]

I figure the easiest way to solve this problem is to accept that when they are retired and eating dog food because they spent all their money on HDTVs and trips to Cancun when they were younger, the government will institute a wealth tax, because it obviously will not be fair that I have $2M and they have nothing.

I can't wait !

Or maybe this is too close to the truth to be funny.

 

[WM]

Um, any of you read "The Two Income Trap"? A somewhat flawed analysis, but very eye-opening and makes it pretty clear that the problem isn't SUVs and lattes.

I agree! Very interesting reading. I remember one big motivator for people was trying to buy houses in "good" public school districts because they're worried that their kids will have a hard time in life without the best education. Which then drives up the cost of housing in those districts and elsewhere, which means families need two incomes just to pay the mortgage in addition to other bills...

Not that people couldn't consciously choose to live in a smaller place or otherwise cut back on expenses, but because of all the new ways to get into debt, it's much easier to get in over your head before you realize what happened. It's not intuitive to most people that one income might be better than two.

The same authors (Warren and Tyagi, I think?) wrote another book along the same lines about why it's harder than it used to be for young adults to get a good start financially. Not that it's impossible to do well from a young age, but you have to be a lot more financially savvy now that credit is marketed so much more aggressively, college costs have greatly increased so a lot more people start their careers in debt, etc.

 

[brewer12345]

You can still make it on one income but you won't "look" successful.

Maybe, maybe not. I am the sole breadwinner for my family and we do not live extravagantly, but there is absolutely no way we would make it on one income of, say, $70k gross. We live in a middle class neighborhood (my neighbors range from the retired to a firefighter/union carpenter to a water plant foreman to a couple of actuaries) in a 2k sq ft. house, with a commuter car and a minivan. Pretty ho-hum stuff. But if you buy a house here you will be paying $350k and up, paying $5k or better in property taxes, etc. Ain't happening on one even fairly healthy 70k salary for a family of four, assuming you don't have some huge pile of capital to fall back on.

If you rent, you are looking at $1500 a month or so for something "OK." Buying used cars only gets you so far.