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Old 10-07-2020, 06:33 PM   #121
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I think the abolishment of pension plans would be a good first step in financial responsibility.

"we have this great pension plan pay out 70% after retirement"

But the minimum is 20 years and you got fired at 19. Ooops, sorry, no pension.
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Old 10-07-2020, 06:49 PM   #122
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I think the abolishment of pension plans would be a good first step in financial responsibility.

"we have this great pension plan pay out 70% after retirement"

But the minimum is 20 years and you got fired at 19. Ooops, sorry, no pension.
Actually under ERISA, accumulated benefits vest 100% after 7 years service, as long as the plan is not terminated (when some but less than full benefits will be vested). No guarantee that it will be 70% but it will be something. Unfortunately, most companies have frozen their plans which no longer accumulate new benefits and have switched to defined contribution (401(k) plans when the risk of outcomes is totally shifted to the employee and their investing ability.

However DB plans still provide a good retirement basis for union working people and public employees (stop -- not the politicians but civil servants).

In today's world where people don't generally work for 30 years for the same company and retire with a gold watch and a pension, investing for retirement requires more personal responsiblity.
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Old 10-07-2020, 06:58 PM   #123
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Yeah. Instead of defined benefit "vaporware", let's go with a Company funded 401 that the company contributes $1 a year to. Then there is a "profit sharing" component that varies on what the employee contributes.

The more you save the more you earn. Fully vested in 5. That's the plan I was in at all but the first job I worked (for 4.5 years, got nothing at my "pension" job) back in 1978.

If it was a 401K setup I would have been 80% vested. I would have got something instead of the shaft.
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Old 10-07-2020, 07:08 PM   #124
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I think the abolishment of pension plans would be a good first step in financial responsibility.

"we have this great pension plan pay out 70% after retirement"

But the minimum is 20 years and you got fired at 19. Ooops, sorry, no pension.


That happened to a lot of people! I know some personally that companies got rid of and got nothing.
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Old 10-07-2020, 07:33 PM   #125
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Just to prove a point, I plugged this one into my compound interest calculator this morning.
Staring with nothing, what would $200/month turn into in 40 years, at 7% average gain? The answer is over 500k. Certainly not a fortune. But between that and SS. I would say a vast majority that led frugal lives could get by on that just fine.
I would say that for the vast majority of people in the US, I would guess over 85%, could probably swing that, if they felt like their lives depended on it. Which in a very real way..... it does.
This is not so much a financial problem as it is a mindset and education problem. When I was 29 I started really saving seriously. Friends though I was crazy when I opened my ROTH IRA with $2000. Back in those day’s, that was a huge amount of money for me. And when the market tanked and it lost $900 I felt like a fool. Luckily, I stayed the course... and flash forward 18 years... I am a millionaire.
Or you can play the “maybe something lucky will happen to me, and I will be OK” game. Your life belongs to you, all the choices are yours, and better choices usually lead to better outcomes. I have met many who became poor “accidentally”. I have never met someone that became wealthy by accident....


Wow! Thanks for running those numbers. That is stunning good news. I always wondered about this scenario but never thought it would be that accumulative.
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Old 10-07-2020, 11:14 PM   #126
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Sometimes people lead you to believe that there is a net. It is tough to fight that.

That is the situation I was in. when I started with Megacorp, they offered such a good pension deal that, in my early 20s, the last thing I was thinking about was retirement. It was all taken care of, and along with SS no worries. Back then little was being discussed about SS not being enough to retire on. And while there were a few warnings about it running out of money... that was going to be 70+ years in the future. Don't worry, be happy. Besides, Megacorp practically promised me that as long as I did not do anything illegal or unethical, I would never lose my job.

When 401ks came along, my initial view was "I don't need to worry about this". Goodness, give up some of my salary to get money that I could not touch for 35 years? I have "better things" to do, I am married, we want to start a family, get a bigger house, get "better" things... we "need" the money now. I was not a spendthrift, I knew about having 3-6 months put away for emergencies, but I did not need anything beyond that.

I was SO fortunate that a couple of older, wiser co-workers harassed me daily about opening up a 401K for close to a year before I did. They showed me calculations, said I could better budget, said you cannot assume Megacorp pension will be as it is... and it still took close to a year for them to get through to me.

In sum, I had to be convinced to take a long term view. And it was challenged when I hit my first "bad" market experience on Black Monday of October 1987. I was tempted to take the short term view, as were a lot of my co-workers, and listen to the "boasts" of those who claimed being in the market was too dangerous. But... I listened and read up on all angles. And DW and I concluded that, really, we had been fine without touching the 401k money, let us just leave it alone. And maybe, as a vote of confidence, saving more and increase putting money into it. And then I started reading more about investing for the long term...

Perhaps what happens to some is that they assume "why worry about the long term, there is/will be a safety net". Others can make lead you into that belief. It was not until the mid-1990s, after surviving Megacorp's first major purge as well as changes to that "nice" pension plan that I fully realized that I had to take full responsibility for any future in retirement. I was not thinking FIRE, but started more thinking "the only safety net I have is the one I try to build myself".
Nicely said. I was like most people back in the 80s and didn’t think much of 401ks. I didn’t have any older, wiser employees harass me about opening one, and so got a late start on saving (like most people our age, I suppose). The only good thing about that was once I realized how late I was in getting started saving for retirement, I began putting away the maximum I could every year.
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Old 10-08-2020, 06:54 AM   #127
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I never had the problem of saving, but I did quit work and go to law school full time when I was 30. That took up all the money we had saved to that point, and we had to start over from zero when I graduated three years later.
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Old 10-08-2020, 07:08 AM   #128
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Gumby >>> After going back to work after law school, did you think you lost ground using all your funds to go to school.

I would bet you gained that money you spent on school back pretty fast. The only difference would be the longer you are invested, can make a difference.
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Old 10-08-2020, 07:23 AM   #129
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Originally Posted by RobbieB View Post
I think the abolishment of pension plans would be a good first step in financial responsibility.

"we have this great pension plan pay out 70% after retirement"

But the minimum is 20 years and you got fired at 19. Ooops, sorry, no pension.

Makes perfect financial sense, terminate the 19 year employee, helping the bottom line for the company and the safety of the pension for those already drawing.

I have a friend that worked for Wang for many years had a great pension coming.
Then Wang went through financial troubles and bankruptcy and he lost that pension. Luckily he was wise and did have other savings, so he is doing very well at 77 years old.
After reviewing the thread, I need to reiterate how lucky I was that I took an interest in Bob Brinkers radio program in the late 80s. It put my unto investing in low cost mutual funds generating even more interest in saving.
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Old 10-08-2020, 07:44 AM   #130
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Nicely said. I was like most people back in the 80s and didn’t think much of 401ks. I didn’t have any older, wiser employees harass me about opening one, and so got a late start on saving (like most people our age, I suppose). The only good thing about that was once I realized how late I was in getting started saving for retirement, I began putting away the maximum I could every year.


I gotta say I’m surprised how many here had negative opinions of 401k initially. Between the match and tax deferral I was anxious to participate. Any hesitation I had was put to rest when they described the much maligned so-called “loan” provision for emergency access. In the very early days of 401k they excluded your contribution from FICA calculation but that loophole closed pretty quickly.
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Old 10-08-2020, 08:19 AM   #131
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It's a sad development, 50% of Americans aged 55 and up will retire in poverty or near poverty.
How poor is that? “A person who’s 65 will be near-poor or poor if they’re living on less than $20,000 a year,” she told me. “I think we could all agree that means chronic deprivation for the rest of your life.”
My mother who is retired lives on less than 20k a year. $15.6k spent last year to be exact, so I guess she qualifies as living in poverty. Of course, she's worth 7 figures and for the life of me, I can't get her to spend more on herself to "enjoy" life.

Why do we still use income or spend as a barometer? Like net worth, I think it should be based on assets. Now if they say they have 0 assets and have to live on less than 20k, that would be a better description.
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Old 10-08-2020, 08:50 AM   #132
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Considering assets, income and spending is a better way of looking at the working poor, retired poor, and so on.

My mother insisted that investable assets stay in CDs. There were good rates until they went away. She had SS, and paid-off home. She was able to stay there until death at 84. Her approach worked for her through 25 years. Growing up poor during the Great Depression had significant effect on her, and no doubt helped during periods of need. I don't think she ever asked any of the 5 children for support.

But I don't believe that her case fits everyone else.
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Old 10-08-2020, 09:09 AM   #133
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Gumby >>> After going back to work after law school, did you think you lost ground using all your funds to go to school.

I would bet you gained that money you spent on school back pretty fast. The only difference would be the longer you are invested, can make a difference.

I calculate that it took me 12 years to break even, considering the money spent on tuition, the lost wages during school and the fact that my pay was lower for the first few years as a lawyer than it had been when I was an engineer at the nuclear plant. That calculation assumes I never would have received a promotion or a raise at the power plant. It also does not account for the fact that I had spent all my money by 1992, so I missed most of the 90's bull market. So, most likely, it took longer than my rough calculation.

In my observation, unless you can immediately make much more money when you graduate, it is likely to be a money-losing proposition to return to school in your thirties. That is especially true of law school, as a great many graduates do not find work in the law at all, and the ones that do are not paid as much as most people think. To really make money, you need to score a position with a big city law firm. If you aren't in the very top of your class at a big name law school, that probably will not happen for you. And even if they do score the big firm position, many lawyers are miserable.

That said, I greatly enjoyed law school and being a lawyer. I didn't dislike being an engineer; helping to make electricity is socially useful, the work was interesting and challenging, the people were nice and the pay was very good. I just thought it would be fun to go to law school, and it was. In a way, it was like taking an advance on my retirement years.
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Old 10-08-2020, 09:14 AM   #134
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My mother who is retired lives on less than 20k a year. $15.6k spent last year to be exact, so I guess she qualifies as living in poverty. Of course, she's worth 7 figures and for the life of me, I can't get her to spend more on herself to "enjoy" life.

Why do we still use income or spend as a barometer? Like net worth, I think it should be based on assets. Now if they say they have 0 assets and have to live on less than 20k, that would be a better description.
My mother at age 89 is the same. A child of the depression she is very thrifty. I have trouble getting her to spend much of anything and of course now there is not much to spend it on. I have list of her assets (mostly bonds and CDs) and it is 7 figure also. When I show mother the list of assets, she says she does not believe it. MY DH's parents on the other hand were the opposite. They are now deceased but spent every penny they ever earned and DH and I had to supplement their retirement income. I did not mind that but I did mind that DH's big spender siblings never contributed.
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Old 10-08-2020, 10:29 AM   #135
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Just to prove a point, I plugged this one into my compound interest calculator this morning.
Staring with nothing, what would $200/month turn into in 40 years, at 7% average gain? The answer is over 500k. Certainly not a fortune. But between that and SS. I would say a vast majority that led frugal lives could get by on that just fine.
I would say that for the vast majority of people in the US, I would guess over 85%, could probably swing that, if they felt like their lives depended on it. Which in a very real way..... it does.
This is not so much a financial problem as it is a mindset and education problem. When I was 29 I started really saving seriously. Friends though I was crazy when I opened my ROTH IRA with $2000. Back in those day’s, that was a huge amount of money for me. And when the market tanked and it lost $900 I felt like a fool. Luckily, I stayed the course... and flash forward 18 years... I am a millionaire.
Or you can play the “maybe something lucky will happen to me, and I will be OK” game. Your life belongs to you, all the choices are yours, and better choices usually lead to better outcomes. I have met many who became poor “accidentally”. I have never met someone that became wealthy by accident....
The vast majority cannot afford $200/month savings as 42% of workers earn less than $15/hr; 1 in 4 household incomes are under $35k. Using US averages for a single person as an example:

30,000 annual salary less:
5,189 Fed/MN state taxes
12,000 rent one bedroom apartment
4,200 car payment
2,000 gas/car insurance
2,640 food
960 Utilities phone, electric etc.

Leaving about $250 a month for health insurance premiums and/or out of pocket medical and dental, credit card debt, clothes, gifts, entertainment, pets, etc. That said, 3 of my siblings retired more or less near poverty and had a roof over their heads, enough food and old used cars.
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Old 10-08-2020, 11:13 AM   #136
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The vast majority cannot afford $200/month savings as 42% of workers earn less than $15/hr; 1 in 4 household incomes are under $35k. Using US averages for a single person as an example:

30,000 annual salary less:
5,189 Fed/MN state taxes
12,000 rent one bedroom apartment
4,200 car payment
2,000 gas/car insurance
2,640 food
960 Utilities phone, electric etc.

Leaving about $250 a month for health insurance premiums and/or out of pocket medical and dental, credit card debt, clothes, gifts, entertainment, pets, etc. That said, 3 of my siblings retired more or less near poverty and had a roof over their heads, enough food and old used cars.
Yes, it's tough earning less than 30K.
When I was starting out, I would buy $1,000 cars drive them for 1 or 2 years and then sell them for $800. Sometimes I went without a car.

The other common way to reduce expenses is to rent a 2 bedroom with a room-mate as it costs less than renting a 1 bedroom.
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Old 10-08-2020, 11:15 AM   #137
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Shrinking wages, rising costs, and an over-dependence on shitty 401K plans. Oh, and those pensions didn't raid themselves...
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Old 10-08-2020, 11:51 AM   #138
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I calculate that it took me 12 years to break even, considering the money spent on tuition, the lost wages during school and the fact that my pay was lower for the first few years as a lawyer than it had been when I was an engineer at the nuclear plant. That calculation assumes I never would have received a promotion or a raise at the power plant. It also does not account for the fact that I had spent all my money by 1992, so I missed most of the 90's bull market. So, most likely, it took longer than my rough calculation.

In my observation, unless you can immediately make much more money when you graduate, it is likely to be a money-losing proposition to return to school in your thirties. That is especially true of law school, as a great many graduates do not find work in the law at all, and the ones that do are not paid as much as most people think. To really make money, you need to score a position with a big city law firm. If you aren't in the very top of your class at a big name law school, that probably will not happen for you. And even if they do score the big firm position, many lawyers are miserable.

That said, I greatly enjoyed law school and being a lawyer. I didn't dislike being an engineer; helping to make electricity is socially useful, the work was interesting and challenging, the people were nice and the pay was very good. I just thought it would be fun to go to law school, and it was. In a way, it was like taking an advance on my retirement years.
Very interesting! Thanks for that and it was an interesting work career you had. I also was in the electrical engineering field in my career. I never totally got a degree EE, but landed a great career in the field of electricity.
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Old 10-08-2020, 02:25 PM   #139
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My mother at age 89 is the same. A child of the depression she is very thrifty. I have trouble getting her to spend much of anything and of course now there is not much to spend it on. I have list of her assets (mostly bonds and CDs) and it is 7 figure also. When I show mother the list of assets, she says she does not believe it. MY DH's parents on the other hand were the opposite. They are now deceased but spent every penny they ever earned and DH and I had to supplement their retirement income. I did not mind that but I did mind that DH's big spender siblings never contributed.
Lets hope those big spender siblings each have at least one child like your DH, or they will be SOL in their old age!
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Old 10-08-2020, 02:30 PM   #140
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Lets hope those big spender siblings each have at least one child like your DH, or they will be SOL in their old age!
No they don't--but not our concern. We helped DH's parents by giving them money each month but we have already decided we will not help his siblings with money.
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