Retiring into Poverty

[Montecfo]

Quote:

Originally Posted by OldShooter 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.

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.

[Closet_Gamer]

Quote:

Originally Posted by Chuckanut One thing our fearless leaders have not taken to heart is that the War on Savers ultra-low interest rates of today are taking a huge tole on those who did save money in their insured savings account. Alas, the accounts are not insured against inflation and Fed policies that toss the savers to the hungry dogs. I remember when I figured I could count on 3-4% interest on my insured savings account and maybe as high as 6% on a five year CD when I retired. Had somebody told me I would be scraping the bottom of the barrel to find 1.6%, I would have thought the person to be a nut case.

I'm the first to raise the "personal responsibility" flag, but I agree 100% with the war on savers issue.

For over a decade now, we've made it nearly impossible to begin getting the savings-fly-wheel spinning with some solid, interest bearing safe accounts. I remember getting 6.75% on a CD in 90s. Admittedly, my student loans were also a 8-10%.

But if you don't see results from your savings, its disheartening. Low rates encourage also piling up debt. And the vast majority of people are not wired to immediately learn about building an AA and leap into the market.

Personally, I believe the low rates are pushing on an economic rope at this point. Those of us who hold a bunch of assets would get clipped hard if rates went up, but I actually think it would be healthy for society.

[bmcgonig]

Quote:

Originally Posted by OldShooter 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.

+1

[athena53]

Quote:

Originally Posted by OldShooter Regarding "not saving enough" I am not judgmental 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'm with you on the people who didn't have the skills for well-paying jobs and/or had bad breaks.

As for the ones who wasted their money- annual cruises, Disney World, shiny new cars every few years, houses full of Stuff... well, no I don't look down on them but the unfortunate fact is that the taxpayers (and our children and grandchildren) end up propping them up- subsidized senior housing, property tax breaks and ultimately Medicaid nursing homes. I really don't have an answer- we can't let them starve- but for some seniors, poverty in old age would have been preventable.

[target2019]

Quote:

Originally Posted by Tekward It's a sad development, 50% of Americans aged 55 and up will retire in poverty or near poverty. https://www.marketwatch.com/story/ha...oor-2020-10-01 “Our data is showing that, because of the COVID recession, about 50% of workers over the age of 55 will be poor or near-poor adults when they reach 65,” she said. 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.”

I posted a link recently (https://fredblog.stlouisfed.org/2020...-on-net-worth/) that mentioned the loss of wealth during the Great Recession. The summary is that the bottom half lose much of their accumulated wealth during a typical recession. The graph will change during each recession, and I imagine this ongoing recession is a similar disaster for many.

[Chuckanut]

Quote:

Originally Posted by teetee It is the first I hear that low income enables property tax reduction. Curious why would any people lose their houses because they can't pay for the property tax from job loss.

Not all states and counties offer that program, but many do. The idea was to not tax grandma and grandpa out of their homes in high property tax areas. If their sole income is SS, the tax break can be substantial.

Quote:

Available To: Taxpayers who meet one of the following requirements as of December 31 of the year before the taxes are due: at least 61 years of age or older retired from regular gainful employment due to a disability veteran of the armed forces of the United States receiving compensation from the United States Department of Veterans Affairs at one of the following: combined service-connected evaluation rating of 80% or higher total disability rating for a service-connected disability without regard to evaluation percent Program Benefits: The qualifying applicant receives a reduction in the amount of property taxes due. The amount of the reduction is based on the applicant's income, the value of the residence, and the local levy rates.

[brett]

There is another side to low interest rates.

Low inflation. When we retired eight/nine years ago we expected inflation to be higher. We have experienced low inflation than we built into our model and a higher return on equity.

I believe that there are two groups. The working poor who cannot afford to save a dime for retirement. Another group who can but simply do not or cannot perhaps because of lifestyle, medical, whatever.

It seems to me that it is very easy to criticize and make wide generalizations when one is not in the position of not having any retirement savings.

[jkern]

The numbers in the article are misleading. They don't take into account any subsidies from friends, family or government. For example, in Santa Clara County someone on Section 8 may pay $50 per month for a $2550 per month housing unit. That's $30K per year net, or approximately $45K gross per year. They could have Medical for their medical cost which could be another $15K gross subsidy. Add in Food Stamps and you may get another $5K gross. That's about a $65K gross subsidy. If that person were to have $15K income, their standard of living actually matches someone with $80K gross income with no subsidies.

[NW-Bound]

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.

[daylatedollarshort]

Supporting a college kid in a very high cost of living area made me realize how one could live cheap and well. Rent was $800 a month, for a small but very nice apartment (split with a roommate) near the beach in an upscale, walkable area. College tuition was free with grants. Students could get free bus passes. We paid for a car but it was hardly used since parking was a hassle. Taking the bus, walking, biking and Uber were easier. Utilities were low for a small apartment in a mild climate. The local thrift shops were really nice - almost like regular stores with gently used goods. The entire apartment was furnished really cute with hand me downs from relatives, thrift shop items and Ikea (especially the yellow tag bargains). I think I spent under $200 for most of the furnishings and kitchen appliances from thrift shops and garage sales. With discount stores and a plant based diet, groceries were not that expensive. ACA plan for medical. Paid internship for spending money. The college had cheap events and gym facilities. Barbecues at the beach with friends were low cost.

One of our kid's friends at the same school shared a bedroom with a friend so had similar expenses except rent was ~$400 a month. And those costs were for student roommates who were dependents and did not qualify for Medicaid, Section 8, SNAP, low income utility help, etc. It did not seem like living in poverty to me at all. It actually seemed like a pretty cool life. In California tuition is free at many top colleges, even schools like UCLA, for senior citizens.

Another friend of one of our kids lives in a rural area of the Pacific Northwest where houses rent for $600 a month. Split with a roommate that is $300 for monthly housing in a scenic area. It is not an area with a lot of high paying jobs but that is the kind of area perfect for seniors on SS. I guess cost of living just depends on location, understanding government and community services, maybe part-time work, etc.

[Dtail]

Quote:

Originally Posted by NW-Bound 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]

Quote:

Originally Posted by Sunset 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]

Quote:

Originally Posted by Montecfo 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]

Quote:

Originally Posted by CardsFan 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]

Quote:

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

+1

[RenoJay]

Quote:

Originally Posted by jim584672 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.