Retirement crisis: From bad to worse

[aenlighten]

Some have rich secure pensions

and will actually do fine even with a lot of debt. Others who have only themselves to rely on will have problems even without going over their heads. The more others have to work in retirement, the less likely the rest of us will have to.

CC companies won't need any bailout as they will have been paid many times over. Lenders are turning the screws on home equity loans, so if people were using them for emergencies, they may find themselves out in the cold.

 

[bugs8]

I could yell you countless stories of co workers and family members who did all of these things! I swear I talked to all of them until I was blue in the face. NOBODY listened. Now, all three family members one of them being my daughter are upsidedown in their home loans because the kept tapping the ATM at home. None of them have any savings and 2 of them are close to retirement age with no hope of retiring. At least my daughter and husband are younge enough to recover from this.
Funny to hear them all talk now...As far as coworks go I have one who's loan reset in Nov. and suprise she can't pay the xtra grand per month. So she's working with Countrywide. They told her stop paying and then we can help you. Also, she told me they are going to lower the principal to current market price with is 100 k less than she paid! What the &*<K?? She just shrugged her shoulders and says whatever I'll just walk away if they don't work with me. In case your wondering Southern California Orange county.

 

[shoe]

Tadpole I'm sorry to say that I do know someone who cashed out the equity in their home, went shopping yadda yadda yadda. I relative of mine bought a house for $45000 in 1980. Everytime the house increased in value, they cashed out and bought trips and a pool and things for the kids. He became ill and spent time on disability and all the while they continued to cash out their equity. Two bankruptcies, a repo and a foreclosure later, a widow is left with absolutely nothing but poor judgement.

 

[Tadpole]

shoe, I can see someone doing such things for medical bills for a child or a grandchild. It really is hard to understand someone using their house as a piggy bank. I think I'm getting to old and senile for this strange world.

 

[Tadpole]

Walt34,
They've had a great time the last 20 years running up their credit cards, sucking the equity out of their house to pay them off, and running up the credit cards again.

I haven't lived my life with as much due diligence as some of you guys but I have never ever borrowed against my house or left a credit card unpaid at the end of the month. I don't get it. I have more "stuff" than I can stand and I almost never go shopping. My dog even likes plastic bottles and plastic lid Frisbees. Debt gives me the hives but I am beginning to think the debtors will end up sharing my savings. I'm a bleeding heart liberal but I guess I thought I was sharing with the less fortunate, not my next door neighbors.

 

[MooreBonds]

Still, it does point to the "I'll be irresponsible and let others pay for it" mentality that seems to be so pervasive and which the political candidates are handing out like candy on Halloween. What is a "treat" for some turns into a "trick" for everyone else who pays for it.

I'd say it points more to the idiocy and (very un)common sense when it comes to finances.

If she kept no credit card debt, do you realize how many MORE cruises she could afford and pay for with the interest she's paid to the credit card companies? (Unless you run up a $30k balance for the first time when you're 83 and only live 2 more years). It never ceases to amaze me at how people will pay outrageous sums of money in interest, and end up spending far less $ on goods/services/fun than they could have if they merely waited to pay cash for the thing.

 

[Htown Harry]

Um, does anyone here personally know someone who cashed out the equity in their home, ran up their credit cards, and other wise went into a binge when told to "go shopping"?

Yep. A guy in his late twenties, not the sharpest tool in the shed. He got a single mother pregnant, married her and then bought a nice, shiny new house with granite countertops and fancy appliances. She was soon discovered to be a deadbeat whose only verifiable ambition was to spend more than every penny he brought home. His slide to financial disaster, ending in divorce and bankruptcy, took about three or four years. I knew he had hit rock bottom when I saw his name in a newspaper legal notice listing the names of people whose stuff was being auctioned off by a mini-storage landlord.

The ironic (predictable?) part: he worked during much of this time as a mortgage broker.

 

[Raul]

Quelle Ironique!

Switch mortgage broker for lawyer, put the divorce a year or so out there, and you've described my brother to a T. I reckon he'll come looking for his handout from his LBYM brotha about the time I skip country to FIRE.....

 

[chinaco]

Thank you Mom and Dad for teaching me about LBYM. Thank you for showing me that diligence, hard work and honesty will help one to improve their lot in life. Save, Save, Save.

Their depression era experiences gave them an appreciation for what it means to have little so they had a healthy respect for being conservative with money.

 

[Texarkandy]

I haven't lived my life with as much due diligence as some of you guys but I have never ever borrowed against my house or left a credit card unpaid at the end of the month. I don't get it. I have more "stuff" than I can stand and I almost never go shopping. My dog even likes plastic bottles and plastic lid Frisbees. Debt gives me the hives but I am beginning to think the debtors will end up sharing my savings. I'm a bleeding heart liberal but I guess I thought I was sharing with the less fortunate, not my next door neighbors.

Although I'm apparently on the opposite end of the political spectrum from you Tadpole (see "bold" in quote) - I've lived the same way - we've spent a little over the years on good times & "stuff", but we've never borrowed on the house & Mr Visa gets paid in-full every month no matter how much it hurts. - I do resent my tax dollars going to bail-out those who haven't lived the same way (& I know some of them personally)

As to Chinaco's reference to having had "depression parents" - same here also (BTW - all the FDR stuff didn't really directly benefit either of my parents' families - I will allow there might have been just a bit of indirect benefit)

 

[UncleHoney]

Retirement crisis? What retirement crisis? I don't see one. As long as they all stay hitched to the plow they'll be just fine.

I don't see any laws being broken here, so I'm inclined to watch from the sidelines. Far be it for me to stick my nose into someone else's business.

The crisis will come when they stop paying into SS and start to collect. For most, they will be under the the greener grass on the other side of the fence instead of nibbling on the tender shoots when that time gets here.

 

[Tadpole]

I do resent my tax dollars going to bail-out those who haven't lived the same way (& I know some of them personally)

A few years ago, I began reading too much about retirement, pensions, SS, etc. and watching the adjustments as pensions were "re-characterized", SS and Medicare were adjusted, etc. Also, until a few years ago, scenario studies within the government agencies and CBO were far more accessible. Many of these played "what if" with Boomer retirement. I can't find them now but they are probably still public but only if you know how to pull them up. I had been following them because many played with the CRSR and FERS retirement systems (changing high three to five, reducing CSRS COLA, changing FERS match to .5 up to 9% [1% + 8%@ .5] and things like that).

Here are a few examples of what I see. The enactment of the 50-85% tax on SS became a saver's surcharge effectively taxing part of a person's deferred retirement account directly into the SS and Medicare system - A second payroll tax on those making more than poverty in retirement since the level of the means testing is not indexed to inflation. Similarly, the disastrous Medicare-D enactment has had the side effect of means testing that seems directly intended to remove COLA increases from people with pensions and/or savings. (Look at Medicare B increases based on income.) Conversion values after a company restructures their pension plans are falling more heavily on a segment of the boomers than on any other demographic since the older of these has no time to grow the converted cash values. I could give examples in health care over the last few years but that would be useless since no change will ultimately be relevant past the impact on forcing future changes in paying for health care.

I characterize what I think I see as "putting the boomer wealth in one big pot and redistributing it". So, I am saving for myself and my unsaving neighbor who ends up with hidden assets that I don't such as the additions to his home, his speed boat, etc. It makes me wonder if I am stupid to have savings rather than luxury items that I can sell if necessary. But wait, it won't be necessary since another neighbors savings is paying any deficit I have in living expenses. To me this is the problem with middle class means tests; a moderate income person can very well end up shifting wealth to a high rolling upper income middle class after having squeezed his/her spending for years to have a decent retirement. With the latest madness in debt buildup, the saver might find that he dare not tap the savings because of the shift of funding retirees is overly targeted toward other retirees. This backs up my "one pot" observation. I am and will always be a bleeding heart liberal in the 1950's tradition but the label never meant subsidies to people who wanted to live far above their means and then pretend to be a hard working low wage earner by avoiding the same "means testing" that falls on the savers in the same salary cohort group while working.

Rant has to end. Husband is "ready any time I am" to go. That means - get up off your butt and come on.

 

[Texarkandy]

.............. I characterize what I think I see as "putting the boomer wealth in one big pot and redistributing it". So, I am saving for myself and my unsaving neighbor who ends up with hidden assets that I don't such as the additions to his home, his speed boat, etc. It makes me wonder if I am stupid to have savings rather than luxury items that I can sell if necessary. But wait, it won't be necessary since another neighbors savings is paying any deficit I have in living expenses. To me this is the problem with middle class means tests; a moderate income person can very well end up shifting wealth to a high rolling upper income middle class after having squeezed his/her spending for years to have a decent retirement. With the latest madness in debt buildup, the saver might find that he dare not tap the savings because of the shift of funding retirees is overly targeted toward other retirees. This backs up my "one pot" observation. I am and will always be a bleeding heart liberal in the 1950's tradition but the label never meant subsidies to people who wanted to live far above their means and then pretend to be a hard working low wage earner by avoiding the same "means testing" that falls on the savers in the same salary cohort group while working. ..............

Based partly upon some of the same things you allude to in your rant above, I am personally committed to "gaming the system" in nearly every (legal) way possible after my semi-retirement next year.