The Retirement saving shortfall tidal wave

[Andre1969]

Is it discipline? How terrible it is out there? Is it a cultural thing ...to much tv?
Your thoughts if you care to contribute?

TV might be a part of it. Probably has been for awhile. I remember an old episode of "Leave it to Beaver" where Aunt Martha came to visit and Wally says "Hey Beave, check out their corny car!"

And, an episode of "Dennis the Menace" where some of the kids were boasting about their fathers and trying to one-up each other and one of the kids says "Oh yeah? Well my Dad's car has FOUR headlights!" And yeah, that actually was a thing. Just about every domestic car offered in 1958 had quad headlights standard, which made everything the previous year seem obsolete. And I can even remember as a kid, when it was usually bigger, pricier cars that had four headlights, and the cheaper, smaller ones usually had two, so it was still ingrained in the public mind.

Oh, and then in 1976, when most cars went to rectangular headlights, suddenly the ones with round headlights seemed outdated. They sure knew how to keep the buying public on their toes back then!

 

[growing_older]

I think it is a societal pressure and keeping up with the Joneses thing combined with low income.

I suspect the idea that it is primarily poor people who are not saving enough is incorrect. At my company, when highly paid engineers talk money they are always talking about their latest toys or how they can get yet another equity loan to get more money to spend.

 

[Loving Life]

First, I will completely agree - Living below your means is necessary and saving is mandatory in the new economy. Now what I really feel.


I am amazed how different the workers are (even my Kids and other relatives) then when I started out. They do not want to move to where the work is, but want to stay close to friends and family. They do not want anything getting in the way of there work/life balance. When my boss would say, here is your airplane ticket to SE Asia for tomorrow, I would say YES SIR.. Kids now will say, sorry, but my wife birthday is next week. I have lived all over the world going were the work and the money is. When I needed a new skill, I learn it. These kid, will not take the time, to move, to spend 6 months to learn a new skill, leave there wife for 6-9 months to do a job. You get paid well for these jobs, and get rewarded over the years.


The new generations want the good paying jobs, without the sacrifices that me other others had to do. My feeling is that they can stay home, have a good work / life balance - do not have work interfere with the lives and go work every day at the $15 an hour job and complain about they have no opportunities.


There are lots of opportunities, they are just not will to grab them and do the job.

 

[DrRoy]

I do believe that it is very much a question of self discipline. You need that to LBYM by putting off short term but fleeting gain for long term gain and FI. I have always saved at a pretty good level, sometimes over 30% of my income, and currently about 22%. I know others have done even better. I have 10 months to RE at 57.

 

[ivinsfan]

I do believe that it is very much a question of self discipline. You need that to LBYM by putting off short term but fleeting gain for long term gain and FI. I have always saved at a pretty good level, sometimes over 30% of my income, and currently about 22%. I know others have done even better. I have 10 months to RE at 57.

So that's wonderful that you have saved up and are so close to ER, now if we knew you income, we'd have some idea of where you sit on the scale of savings.

If you make 250K a year, you can save, still has some money for extras and do fine.

If you make 50K or less suddenly that % doesn't seem so doable..even if you practice LBYM..

I'm not asking for your income level I'm just saying you didn't give us the whole picture. if you make 500K a year and save 30% some here would say you spend too much money

 

[Sojourner]

It's clearly obvious that many (if not most) people spend for today without much consideration for their future financial security. I'm sure there are myriad reasons for this, and certainly not all of them are worthy of scorn or condemnation. What really concerns me in all this is the likelihood that, at some point, the government might decide to "rob Peter to pay Paul" to fix the problem of so many people retiring with virtually no savings. Most likely it would be something like full taxation of SS benefits or a drastic reduction in SS income allowed for us "wealthy" folk. That's when I would start to get pretty angry and not very understanding of people who couldn't figure out some way to save for their retirement and decided it would be OK to just rob from me (via government handouts).

(Oh, and +1 to the OP's comment about cigarettes. I wonder how much of a correlation there is between cigarette smoking and lack of retirement savings...)

 

[Rushmore]

I appreciated your post. IT is similar to what I see. I see quite a few people who are relatively low wage and one major episode would mess them up.

I stopped working eight years ago because of health issues. I am now 63.
The most I ever made was just under 40k. the wages just weren't there in the Part of the country I lived in. I have been divorced for far longer than I was married, no kids. LIved frugally and did manage to save about $500/month. IT sure has helped now.

even when you try to do everything right it doesn't always turn out.

 

[JoeWras]

TV might be a part of it. Probably has been for awhile. I remember an old episode of "Leave it to Beaver" where Aunt Martha came to visit and Wally says "Hey Beave, check out their corny car!"

And, an episode of "Dennis the Menace" where some of the kids were boasting about their fathers and trying to one-up each other and one of the kids says "Oh yeah? Well my Dad's car has FOUR headlights!"

The average car loan is now over $30k. That boggles my mind.

US borrowers are paying more and for longer on their auto loans

While at a stop light today, noticed what looked to be a late 20-something next to me in a very expensive Mercedes (S-class, the kind that still have the hood ornament, which got my attention).

How is this possible? I'd never be retired if I decided to do that, even if I got promoted fast in my tech job. It would have killed all my savings.

 

[FIYes]

I expect both the problem and solution are more nuanced than a sound bite of "blame the folks for not saving" or "blame society for low wages". Although let's face it at certain levels wages it is not likely people can save and even if they do save a small disaster will derail the best of plans. Not many of the posters on this forum will find their financial lives significantly disrupted by a $300 car repair bill.

As to cigarettes, I expect that there is a high correlation between smoking and lack of retirement savings. There seems to be a high correlation between cigarette smoking and lack of education and lack of income...both of which correlate to lack of retirement savings.


Sent from my iPad using Early Retirement Forum

 

[jerryo]

It's pretty much a tautology that in order to accumulate assets you have to LBYM not matter how much you make. It's also pretty clear that it's a heck of a lot easier to do this and to save more if you make more. That said, there are plenty of examples of people who remain broke, despite high incomes, because of their exorbitant life style; and of people accumulating a whole lot on very limited income by being very frugal. I think the only answer for those who can, won't, or have the bad luck not to make more is a "social security" system that supports a reasonable, but basic retirement life style for every worker. Retirement savings then provide a more comfortable pay-off for those who want more and have the skills or frugality to earn it!

 

[samclem]

As to cigarettes, I expect that there is a high correlation between smoking and lack of retirement savings. There seems to be a high correlation between cigarette smoking and lack of education and lack of income...both of which correlate to lack of retirement savings.

And could >choosing< to smoke, >choosing< not to save money, making >choices< that lead to chronic low income, maybe tell us something about the role of >decisions< in forming outcomes? We can then ask why people make poor choices, but I think it's helpful to start with the observation that poor decisions serve as the foundation for a lot of individual (and societal) problems.

 

[ExFlyBoy5]

It's clearly obvious that many (if not most) people spend for today without much consideration for their future financial security. I'm sure there are myriad reasons for this, and certainly not all of them are worthy of scorn or condemnation. What really concerns me in all this is the likelihood that, at some point, the government might decide to "rob Peter to pay Paul" to fix the problem of so many people retiring with virtually no savings. Most likely it would be something like full taxation of SS benefits or a drastic reduction in SS income allowed for us "wealthy" folk. That's when I would start to get pretty angry and not very understanding of people who couldn't figure out some way to save for their retirement and decided it would be OK to just rob from me (via government handouts).

(Oh, and +1 to the OP's comment about cigarettes. I wonder how much of a correlation there is between cigarette smoking and lack of retirement savings...)

I have a very good friend that asks me often what he can do to help speed along his retirement (he's 42 years old, like myself). He sure seems like and talks like he'd LIKE to retire early, but his actions say something different. The last time I talked to him, he was discussing how his municipal system is toying with the idea of getting rid of the "free healthcare" for its retirees and he's not happy with that and if that happens, then the US government should come in and pay for that premium since he was "guaranteed" the free healthcare (never mind that promise was NEVER actually extended). When I ask him just exactly how our government would continue to operate if they took up the slack for EVERYONE'S lack of contingency planning, he gives me a blank stare.

This friend seems to always have the biggest and best new iPhone (but it's on the AT&T Next plan...so it's almost free? So he says..I have no clue since I don't do new/contract/finance your phone plans). He also has 4 cars between him and his wife (he makes about 50K a year, she doesn't work) and well...they both smoke...and smoke a lot.

It's really kinda sad for me. I have been friends with him since HS but our relationship has become strained because of the financial differences. We used to take an annual trip with him and his wife to a Caribbean island but last year, they almost backed out at the last minute since they only had about $100 to spend while there for a week and well, they smoke the ENTIRE time. There is nothing like walking back and forth to the house pool and getting ash all over your feet. This year, we invited another couple who are a little better with their money and the original couple are acting offended that we didn't invite them. Ugh...

 

[daylatedollarshort]

That and the BILLIONS of dollars that are spent on psychological warfare to get you to part with your money what is often a false need.

I think that is a big part of it. The author of a book I'm rereading currently has a part about if advertisers focused only on what people needed they would go broke, because people really don't need that much to get by. Their entire focus is to create wants or artificial needs. And they have gotten really, really good at it!

 

[aja8888]

While at a stop light today, noticed what looked to be a late 20-something next to me in a very expensive Mercedes (S-class, the kind that still have the hood ornament, which got my attention).

How is this possible? I'd never be retired if I decided to do that, even if I got promoted fast in my tech job. It would have killed all my savings.

A high percentage of those expensive MB's are leased for $500 - $800 per month.

Pretty easy to do, have good credit, put down $4K, drive it for 36,000 miles, then give it back and get another.

 

[Sunset]

And could >choosing< to smoke, >choosing< not to save money, making >choices< that lead to chronic low income, maybe tell us something about the role of >decisions< in forming outcomes? We can then ask why people make poor choices, but I think it's helpful to start with the observation that poor decisions serve as the foundation for a lot of individual (and societal) problems.

I have a relative, who had a cable + phone bill of $278 /mo while she was slowly falling deeper and deeper in debt to a credit card

Every time I was there she always was watching the stupid tv shows like:

• Pawn Wars.
• Storage Wars.
• The one with the black interviewer who tests DNA to see who is the daddy to some woman's child (usually never the one she says).
• The White host where people tell their story how somebody slept with someone else and they fight on the stage while the audience cheers.

All these do not require an special cable so I told her many times cut out all the tv packages, but no it never happened.

Perhaps the problem is some folks feel very entitled to things, even if they cannot afford it, after all they see others with these things.

 

[JoeWras]

A high percentage of those expensive MB's are leased for $500 - $800 per month.

Pretty easy to do, have good credit, put down $4K, drive it for 36,000 miles, then give it back and get another.

Sure. And THAT'S THE POINT!

The whispers of the billion dollar advertisers mentioned above get you to keep up with the Jone's. When you are done after 3 years, you have nothing. You just spent $40,000k (because after all, you drove 40k and they only allowed 30k miles).

You could have dropped the $40k down and gotten a loaded Acura TLX free and clear. But nevermind, an Acura is not an S-class, so I get it. It is about the "look at me" factor.

I'll stick with my $28K Chevy, thank you. Even Acura is too high brow for me. But nobody will notice me. (And I *did* notice that S-class, I have to admit.)

 

[nash031]

The truth, of course, is somewhere in the middle.

There are people with plenty of income who have no control of their spending and thus don't save.

There are people with adequate/average incomes who could do better and save more by cutting exorbitant cable and mobile bills, buying cars long term instead of leasing every few years, etc.

There are people with below average incomes who prioritize the latest smartphone over a simple flip or free phone, and have to have the latest shoes, etc. instead of saving.

And then there are people with below average incomes who scrape by and don't have the means to save for a variety of reasons, even if they scrimped and cut back all that they could.

The truth is, our culture is one of consumerism. The expectation of what makes a "simple" life in the US vs. in Europe and other places is drastically different... this is caused by the constant bombardment of advertising that makes us all believe we have to have X, Y, and Z in order to be average or adequate, or that even "poverty" in this country still includes a cell phone plan and basic cable.

Our culture is a pretty big part of the problem, but we are not beholden to it. Choices factor in and everyone makes them. And some people are simply tied down by circumstances beyond their control.

A big part of the polarization in our country is that people see things only one way. I think we all need to do better to understand and internalize that there's not just one answer to this LBYM/adequate retirement savings question that suffices for every single person out there. Kind of like the "why do we get fat" question...

We get fat because we consume more calories than we burn, but there are myriad factors affecting individuals as to why we eat more and why we burn less.

We don't save because we spend more than we make, and there are myriad factors to why that is so.

I think the majority of people don't save because they don't control their spending and LBYM. Some majority spends what they make or even more than they make.

I think there is a sizable minority that simply doesn't have the means to save, even living responsibly. Not every INTJ makes $200K/yr. I'd guess there are quite a few long-term thinkers and planners out there that didn't have the same opportunities as us, didn't get the same education we did, etc., who try to LBYM, but truly can't because their means just aren't adequate.

 

[kgtest]

LOL Pawnwars and cigs. I call this my lost decade, where me and DH smoked, and partied quite a bit, and lived very unhealthy.

I still managed to save $ in my 401k in the lost decade, by paying myself first but it was never more than 7% withholdings...fast fwd and today I am at like 22% and maxing 401lk/roth.

I remember when I quit smoking, I went to a quitplan site where it showed big bold letters how much $$ I saved so far, and projected future savings, that inspired me to quit but most dont have the financial willpower to see the potential.

Those subscription services sure can get ya. GigInternet, HBO and all the sports packages for cable, the unlimited data and constant top of line phone upgrades, OnStar, XM, Netflix, CostCo/Sams, AmazonPrime, Hulu, and that's the nice-to-have's don't forget , dollarShaveClub, unlimited car-washes, Schwans/Grocery Delivery, Culligan water delivery, Spa membership, Golf Membership, etc etc.

As for the smokers, our friends still smoke and we basically almost ceased to do anything with them. They have their FI plan so I can't knock them.

They like to smoke cigs everyday @10/pack, we like to take trips to the Hawaiian islands, Florida, Tennessee, San Diego, the cabin etc. It's hard to compare the two experiences, smoke cigs, travel the world...tough one. BTW my annual travel budget is about $3,650 or what I would have used to spend on my pack of smokes habit for the day...

 

[marko]

A high percentage of those expensive MB's are leased for $500 - $800 per month.

uhhh...not quite. Maybe the lower end MB's. An S will still run you about $1400 a month. As a rule of thumb, you take the advertised price: "...for only $499 a month...!" and double it.

That's been my experience; my most recent E class lease is $929 a month; advertised at $599

 

[Andre1969]

Why mess with an S-class when you can get a Bentley for just $2080 per month?
BentleyMotors

 

[ivinsfan]

The truth, of course, is somewhere in the middle.

There are people with plenty of income who have no control of their spending and thus don't save.

There are people with adequate/average incomes who could do better and save more by cutting exorbitant cable and mobile bills, buying cars long term instead of leasing every few years, etc.

There are people with below average incomes who prioritize the latest smartphone over a simple flip or free phone, and have to have the latest shoes, etc. instead of saving.

And then there are people with below average incomes who scrape by and don't have the means to save for a variety of reasons, even if they scrimped and cut back all that they could.

The truth is, our culture is one of consumerism. The expectation of what makes a "simple" life in the US vs. in Europe and other places is drastically different... this is caused by the constant bombardment of advertising that makes us all believe we have to have X, Y, and Z in order to be average or adequate, or that even "poverty" in this country still includes a cell phone plan and basic cable.

Our culture is a pretty big part of the problem, but we are not beholden to it. Choices factor in and everyone makes them. And some people are simply tied down by circumstances beyond their control.

A big part of the polarization in our country is that people see things only one way. I think we all need to do better to understand and internalize that there's not just one answer to this LBYM/adequate retirement savings question that suffices for every single person out there. Kind of like the "why do we get fat" question...

We get fat because we consume more calories than we burn, but there are myriad factors affecting individuals as to why we eat more and why we burn less.

We don't save because we spend more than we make, and there are myriad factors to why that is so.

I think the majority of people don't save because they don't control their spending and LBYM. Some majority spends what they make or even more than they make.

I think there is a sizable minority that simply doesn't have the means to save, even living responsibly. Not every INTJ makes $200K/yr. I'd guess there are quite a few long-term thinkers and planners out there that didn't have the same opportunities as us, didn't get the same education we did, etc., who try to LBYM, but truly can't because their means just aren't adequate.

Bravo, a very well written comment. I particularly like the comparison to weight control, telling someone who is struggling with money for whatever reason to"give up the lattes and the nail job" is about as useful as telling someone with a big weight problem,"What's the problem just eat less, it's easy." I find it interesting that money and weight are areas where a lot of people don't have much empathy for those who are struggling.

 

[dixonge]

You could have dropped the $40k down and gotten a loaded Acura TLX free and clear. But nevermind, an Acura is not an S-class, so I get it. It is about the "look at me" factor.

I'll stick with my $28K Chevy, thank you. Even Acura is too high brow for me. But nobody will notice me. (And I *did* notice that S-class, I have to admit.)

Or you could *lease* an Acura. Been there, done that.

And yet the wife's favorite car, from back when we both drove, was her much-beloved Hyundai Sonata w/ white leather interior. We took a dealer 'demo' model w/ maybe 5,000 miles on it. Solid car for many years and miles.

Now we have just the one, and it's a very used Scion XB which we affectionately refer to as 'salsa roja' - cost me $4200 and we'll sell it for at least $3k (I hope) when we move back out of country. My next car will be all electric!

 

[gerntz]

I take that retirement savings aren't a priority for a lot of people. Their choice.

 

[gerntz]

This subject comes up often. I think part of it is human brains are generally programmed for short term thinking. There are many INTJs with higher than average long term planning and strategic thinking skills here and the other ER forums, compared to the 2% supposedly in the general population.

Agree. This and other retirement sites are echo chambers for like thinkers.

 

[Keim]

Sorry but the article is not very convincing. Below is simply not what I see around me. Not even close. Most people I know have far more than $3k in their 401k account. Others have IRA account, house equities, .... Not everything on internet is true, eh?


"the median retirement account balance is $3,000 for all working-age households and $12,000 for near-retirement households."

You live in the Bay area. That's San Francisco, right? One of the richest, most expensive areas in the US. I'm going to go guess you might not be seeing a representative sample.