Retiring into Poverty

[Dtail]

Some posters have already mentioned that they are doing fine on $20K/year, and perhaps that's even for a couple. And we all know that a lot depends on the COL of the area, and even more importantly, whether people have a paid-for home when they retire.

A friend of my wife just lost her job. The writing has been on the wall for many years for her, and I did not expect her IT job would last so long. She's one who keeps her head in the sand, and never takes any real effort to plan for the future, or to update her skills. She just hangs on to her job, and hopes something good will happen.

She never wants the trouble with homeownership, and just plans to live in a rented apartment until she dies. All that is fine if she can find money to pay rent, but I wonder if she ever thinks about that. She does not share how much savings she has, but whatever it is I don't think it will last long.

Here's one case where I think a person could be in a much better financial shape, if she plans better for rainy days. She has not been making a ton of money, but she is not one of the low-pay workers who live paycheck-to-paycheck. And no, she is not a big spender, just not a good planner or informed investor. And she is not one who expects to be rescued by a prince either.

Probably a very common example which doesn't get enough attention in all the analytics.

 

[brett]

I have seen a number of people who were downsized in their early to late fifties. They did not see it coming, were not prepared. Debt, O/S Heloc balances, mortgages, etc were all in play.

Some of them with DB plans were downsized before they were 55 and thus were not able to take full advantage of the DB plan that places so much benefit on the last several years. Some simply could not replace their incomes...even if they did eventually secure a similar level of employment. Contract work does not provide security or benefits.

Where we live the oil industry is in crisis. Downtown office vacancy rates are now at 30 percent. There have been many families where both earners have been laid off or terminated. When they burn through their termination settlements and employment they will turn to what retirement savings they may have.

It will make retirement, early or otherwise, very challenging for them.

 

[foxfirev5]

The reduction in property tax approval takes some time, to take effect. Missing the current bill puts a person at risk of losing the house.

The amount of reduction is varied, so perhaps some places get 50% off, but I'm guessing some are only 10%, 20%. All that sounds good but if you can't pay the 50% , you lose.

I also think, these reductions are based on a person having very low income, and no bank assets. Imagine the outcry if some person with $1,600,000 in the bank in IRA's and owned a $1M house, had zero income, does he qualify ?

FWIW Here in Michigan the home must have a taxable value of less than $135k (270k assessed) with less than 60k income. Millions in other assets don't count against you. ��

 

[Time2]

Actually, people of any race that become educated, marry and have children (in n that order) are the "lucky" ones. Of course, these are choices, not luck.

I was not born to middleclass parents, I only finished high school, married a I did
have two kids.
My luck is marrying a person the would LBYM and getting interested in Bob Brinkers radio show in the late 80s.
We saved money and I how to learned to invest it. Our life time income* was just a above the median us income, but we retired in the 95% of US networth.


* I used our SS statements and inflation adjusted the incomes to the present.

 

[jim584672]

I investigated SNAP and found it doesn't give much. Able bodied adults can only get it for 3 months, then a work requirement comes in. This may be waived in times of high unemployment. Also they calculate a budget based on your expenses and income, so when that is considered unless you have zero income you are not getting anywhere near the max benefit. I would have gotten a whole $16 a month, which is the minimum amount.

At 60 the rules change since then you are "elderly", so the work requirement stops.

 

[harllee]

If you take out travel and buying my fancy car DH and I (late 60s) live on about $45,000 per year. We are "thrifty" but we feel like we have everything we need and want. I have delayed SS until age 70. When I start my SS we will really be living "high on the hog."
We could easily live on less than $40,000 if we needed to.

 

[samm]

Bingo! The current "crisis" is always the problem. Not saving for the previous 20-40 years has nothing to do with it.

+1 LOL
Exactly what I was thinking

 

[RenoJay]

Bingo! The current "crisis" is always the problem. Not saving for the previous 20-40 years has nothing to do with it.

+1

 

[RenoJay]

I spend at what would be considered poverty levels, but that is by choice. As long as you own your own housing it is doable. I do it because that is how things have been my whole life, so to me it is normal. When I see people who need $10,000 a month I just don't get it.

It’s easy...$8,000 for the ex, $2,000 to live on.

 

[karen1972]

I think the big thing is that the people who are living at or under poverty were likely living that way their whole life and retiring into it isn't going to be a big game changer, maybe some people will live a lower lifestyle, but you would be surprised the # that lived that way their whole lives.

 

[Tetto]

Well, life is not fair. Nothing we can do about that.

Regarding "not saving enough" I am not judgemental on that. There are people on subsistence incomes, people who must support other family members (like parents) on their incomes, people with high medical expenses, ... Lots of reasons for that recent observation that 40% of Americans adults couldn't come up with $400 in an emergency. Then there are those who legitimately wasted their money, including sports stars, where I guess we could look down on them. But why? So we can feel superior? Man plans, and God laughs. Most of what DW and I have is probably more due to good luck than to wisdom, starting with being born to middle-class white families.

I agree completely. There are plenty of people that despite their best effort, just don’t earn enough money to save meaningful amounts for retirement. And you are probably more correct than not in regards to ones birth circumstances. Sad but true.

 

[mpeirce]

Retirement is really a modern innovation. Before that most people died before they got really old - at least by current standards.

Those who lived a long life depended on their family. One reason (among many) that people strove to have a big family.

Lots of people still depend on family.

My point is that people are rarely wired to save big for retirement. Why would they? It really wasn't something people did.

 

[street]

^ maybe not wired for saving for retirement but a lot of older people from my area lived frugal and saved. They saved for some reason and many that had just an everyday small town jobs with no 401K or pensions did very well for themselves.

 

[cyber888]

Retirement is really a modern innovation. Before that most people died before they got really old - at least by current standards.

Those who lived a long life depended on their family. One reason (among many) that people strove to have a big family.

Lots of people still depend on family.

My point is that people are rarely wired to save big for retirement. Why would they? It really wasn't something people did.

This is why warriors, knights, samurais were next to kings and royalty in the 12th - 18th.. they wanted to die fighting.

But before the Big Flood (Noah), people lived to 700-900 years old. .. Methusalah lived to 969 years old. Noah lived to 950. Lamech Noah's father lived to 777, and Enoch 365 years old. Not sure if they ever retired.

 

[Dtail]

This is why warriors, knights, samurais were next to kings and royalty in the 12th - 18th.. they wanted to die fighting.

But before the Big Flood (Noah), people lived to 700-900 years old. .. Methusalah lived to 969 years old. Noah lived to 950. Lamech Noah's father lived to 777, and Enoch 365 years old. Not sure if they ever retired.

They would have put a further strain on the SS system.

 

[Ready-4-ER-at-14]

I think most of us here are somewhere between frugal and cheap in many areas but probably have one area or areas where we spend the dough because we can.

I know that family and travel are our splurges but only because other costs are contained and we are in the "fat part" of retirement where inflation has not ravaged our fixed income yet and we have prepaid our future income taxes somewhat by roth conversions.

I was frugal by osmosis. Growing up in a small LCOL area I did not even realize there were even vast wealth in entire communities until I saw tv shows like Dallas.. I thought we were all yokel John Boys.. The wealthy apparently did not flash it where I lived or I was clueless on the get a good education to get a good job on the public education hamster wheel. Get a car, get a job, get a wife, get some kids, have some grandkids, retire and die. Only differences seemed to be the models of job, car, wife, house you could afford. IE how much in maintenance.. lol

 

[frank]

What we need is a huge class action lawsuit against the Fed to reclaim our lost purchasing power and lost interest. Nobody elected them, and they are actively trying to hurt savers and low income individuals by their policies.

I would sign up for that suit.

 

[Gumby]

That may be the effect of their policies, but I doubt it is the intent.

 

[OldShooter]

I would sign up for that suit.

Quite funny, actually. If you guys win, where would the money come from and what would the macroeconomic effects be?

 

[brett]

I believe that the current move towards a service based economy and knowledge based economy away from a manufacturing and in some instances a natural resource based economy has had a dramatic impact on wealth at retirement age for many people

It has left many in their fifties in lower paying jobs with no pension provision or benefits. In the past these were the highest earning, highest retirement savings years.

 

[Nemo2]

I believe that the current move towards a service based economy and knowledge based economy away from a manufacturing and in some instances a natural resource based economy has had a dramatic impact on wealth at retirement age for many people

I recall, but with no details, part of a TV documentary a number of years ago where an Ontario town/city, known for its vehicle manufacturing, was drastically reducing output.

The show interviewed a number of families, many engaged in unskilled/semi skilled production line jobs, who had all the 'bells & whistles', boats, multiple vehicles, that kind of thing, but little or no savings.

After all, it was going to sail along forever.....and then there were 'good pensions'........

 

[Sunset]

I believe that the current move towards a service based economy and knowledge based economy away from a manufacturing and in some instances a natural resource based economy has had a dramatic impact on wealth at retirement age for many people

It has left many in their fifties in lower paying jobs with no pension provision or benefits. In the past these were the highest earning, highest retirement savings years.

Yes, factory work for high school grads, with a Union was a plum job.
I was considered a dummy for not getting an Auto manufacture job when I was 18. My friend got one, got a new muscle car at worker discount, and lived well at the time.
Now those jobs are gone.

 

[brett]

As a senior manager one of my frustrations was trying to get employees to take advantage of the firms pension plans. DB(grandfathered) for some, DC for others

The basic DB plan was non contributory. EE's did not have to pay a dime. There was an add on for supplementary benefits. If the employee put it 3 percent, the company would match 1.5 percent. Surprising to me how very few actually subscribed.

On the DC front there was an equal match up to five or seven percent (I forget). Again, surprising how many employees failed to subscribe to this or failed to max out. I sometimes heard excuses like I do not want the firm managing my money. They did not, it was managed by an outside investment firm and the ee selected investment options that they were comfortable with.

I saw the stats of those who were in the DC program with regard to how often employees even logged into their accounts let made adjustments to their investment mix. it was in the low thirties.

Our employer did everything possible to encourage ees to save for, and have a secure financial retirement. I was told that our experience was in line with other companies. So much money left on the table by employees who did not care to know.


Finally, our HR group sponsored regular retirement savings seminars during normal business hours. They did several presentations so that they could reach as many employees as possible. The attendance was generally very, very disappointing. Often only those a few years away from retirement.

 

[Time2]

I had to fix about 6 mistakes , I must have been tired, I swear I wasn't drinking!

I was not born to middleclass parents, I only finished high school, I'm married and I have two kids.

My luck is marrying a person that would LBYM and, getting interested in Bob Brinkers radio show in the late 80s.
We saved money and I learned how to invest it. Our life time income* was just a little above the median US income, but we retired in the 95th percentile of US networth.

* I used our SS statements and inflation adjusted the incomes to the present to find my avaerage income.

 

[Redbugdave]

It just comes down to the fact that most people live totally in the present and do not think or plan about the future. Financial planning is not taught in High School and most people do not talk about finances. They have family around and can depend on them during bad times. No need to live below their means...it's all good. For me...I left home from a dysfunctional family and soon learned that I had only me to depend on. You learn real quick when it is sink or swim. The military and beyond was my salvation. You need to be mobile if you want to get a good job...whether you have a good education or not. Most will not move out of the hole and most have a life history of the same mistakes.