Is there a disconnect between real life and the "professionals"?

[bclover]

this is one of those topics where you ask 10 different people and you can get 10 different answers.

So it seems in the financial/investment/retirement world the message is if you don't have AT LEAST a million dollars saved that you are pretty much doomed to living your old age in a box underneath a bridge.....

Yesterday I went to a wine and cheese tasting with my sister and 4 of her friends.
topic started with wills and living wills but eventually got around to retirement.

Ages of us gals range from 52-62. ALL are retired except me.

now full disclosure 3 are retired correction officers and my sister and one other are retired NYC police officer so they all get pensions.
1 lady was also a retired military along with correction officer.
but I did ask if anyone had 1 million in savings. All said no, one young women does own a NYC apartment that generates income. 2 have mortgages, 2 do not.

I know quite a number of people who retired well before 67 and seem to be enjoying life as a retiree. Sure no one is running away with the cabana boy to live in tahiti but they seem pretty darn happy. they travel annually, have hobbies etc etc. Only one seemed interested in finding a second career.

So is all the doom and gloom about a nation of retirees about to implode media inspired hysteria?

 

[W2R]

Hi bclover, and welcome.

this is one of those topics where you ask 10 different people and you can get 10 different answers.

So it seems in the financial/investment/retirement world the message is if you don't have AT LEAST a million dollars saved that you are pretty much doomed to living your old age in a box underneath a bridge.....

Yesterday I went to a wine and cheese tasting with my sister and 4 of her friends.
topic started with wills and living wills but eventually got around to retirement.

Ages of us gals range from 52-62. ALL are retired except me.

now full disclosure 3 are retired correction officers and my sister and one other are retired NYC police officer so they all get pensions.
1 lady was also a retired military along with correction officer.
but I did ask if anyone had 1 million in savings. All said no, one young women does own a NYC apartment that generates income. 2 have mortgages, 2 do not.

I know quite a number of people who retired well before 67 and seem to be enjoying life as a retiree. Sure no one is running away with the cabana boy to live in tahiti but they seem pretty darn happy. they travel annually, have hobbies etc etc. Only one seemed interested in finding a second career.

So is all the doom and gloom about a nation of retirees about to implode media inspired hysteria?

What has worked for me in the past, has been to ignore all the doom and gloom articles and the professionals, and instead to just look at my own financial situation, to figure out exactly what I would need in retirement, and then to plan how to get it.

My brother once told me, "Nobody cares about your money and your future any more than you do." After hearing that I decided that while I am not a financial guru, I could work really hard to learn and understand more about my situation than anybody, and go from there. I have only been retired 5 years, but so far so good....

Try using out free retirement calculator, FIRECalc (link at the bottom of each page). No calculator is the "be all and end all", but it's a starting point if you want one.

 

[Midpack]

If you need about $40K/yr inflation adjusted and plan to be retired for 30 years with no pension, Soc Sec or other income - it could take $1M to do it with reasonable confidence. It's not surprising that the folks you asked who do have pensions/other income wouldn't have $1M saved, though some others may. And most Americans will have some floor income from Soc Sec, so they could certainly get by on less than $1M.

And if you ask 10 random people how much they need to retire, I would expect 10 different answers since 9 out of 10 people wouldn't know. Some of those 9 wouldn't have any idea whatsoever.

 

[MRG]

Yes bclover it is media inspired. People want to read something, predicting doom and gloom always attracts attention.

That said it's up to each of us to plan.

 

[walkinwood]

I think there is a real issue with people who don't have pensions or savings, and live a life that requires more than what SS will provide.

Depending on your circle, the anecdotal evidence will be very different.

But, the only thing that matters is your own situation. Have you saved enough?

 

[Bestwifeever]

We all have different real lives. The $1 million target is not necessarily the same for each of us.

 

[Clone]

My brother once told me, "Nobody cares about your money and your future any more than you do."

I'm not sure that is true. On a somewhat regular basis, I get the distinct feeling that assorted folks have a great deal of interest in my money. My future, much less interest. Perhaps they are more interested in converting my money into their money?

Some folks have/had a job with a company that has healthcare in retirement, a good pension, and wages that generate significant SS contributions. The need for savings is much less. The opportunity to retire early depends on having enough savings to bridge between w*rking and drawing SS.

Folks that do not have a substantial SS record, no healthcare benefit, and no pension will need to have increased savings. The earlier you retire, the bigger the pot needs to be, and the greater the risk.

 

[pb4uski]

It all depends on what you need to live and how much your pension and SS are/will be. Any remaining gap needs to be filled in from retirement savings. Broadly speaking you'll need 25x your gap.

But a public pension is a big leg up.

 

[MikeP]

Hi bclover, and welcome.



What has worked for me in the past, has been to ignore all the doom and gloom articles and the professionals, and instead to just look at my own financial situation, to figure out exactly what I would need in retirement, and then to plan how to get it.

My brother once told me, "Nobody cares about your money and your future any more than you do." After hearing that I decided that while I am not a financial guru, I could work really hard to learn and understand more about my situation than anybody, and go from there. I have only been retired 5 years, but so far so good....

Try using out free retirement calculator, FIRECalc (link at the bottom of each page). No calculator is the "be all and end all", but it's a starting point if you want one.

This is the way to look at it, the way i would look at it. don't let other people dictate the way you should view retirement.

 

[marko]

If someone is getting a $40K pension, that is about the same as $1MM saved (4% X 1MM).

A lot of people don't have pensions and need to get more creative, but as noted above, there's more than one way to skin a cat.

If there wasn't any doom and gloom, nobody would read these articles. I've always said that "if you're not afraid of just about everything, you're not watching enough TV".

 

[MrLoco]

I think the message is not so much the actual "number" needed in savings for a comfortable retirement, but the fact that most Americans do not have nearly enough saved to support the type of retirement they desire. This is why everyone freaked out when Legg MAson came out with their "$2.5 million" needed for a comfortable middle class retirement.

Obviously, there are many variables involved. Location, couple, versus individual, expenses, etc.

I think one of the big problems is that many people do not realize just how much they will need to contribute to their health insurance costs once they retire. Also, those with pension and future SS benefits factor in these numbers as virtually " guaranteed" and set in stone. Nothing could be further from the truth....look at Detroit. Pension benefits can and do change. Future SS benefits will definitely change. Medicare? Who knows for those of us 5 or more years away from 65. In fact when estimating me and my wife's future income versus expenses I do not even factor in pension and SS benefits. I figure whatever we get will be a "bonus."

I know one thing. I would rather have the "millions" myself, invested myself, and under my control than be at the mercy of some private or government entity to pay me a monthly benefit. And my wife and I will receive future pension payouts but I know they can be changed at anytime.

 

[athena53]

If the professionals want to scare everyone who thinks SS (plus maybe an IRA of $50K-$100K) will be enough for them, it's fine by me. Most of them are thinking in terms of what they need for groceries, gas, clothing, etc. and not the occasional big-ticket items such as repairing or replacing the car, a new roof, hearing aids, etc. When I see a house that's crumbling but occupied, I figure that many times it's someone who wanted to age in place but doesn't have the money to keep things maintained and who lacks the energy/co-ordination to DIY.


I agree that if you've got a good pension coming in, especially if it comes with decent COLA provisions and/or retiree medical you need a lot less in savings.

 

[LOL!]

People will lie to your face before they tell you they have a million dollars. But that doesn't mean one needs a million dollars.

As already noted, people with pensions (government pensions at that) may be doing rather well, but it will depend on whether the pension is adjusted for cost of living and whether the pension income is a reasonabl amount. If someone is getting $200 a month pension, they are going to be different from someone getting $3500 a month.

And as far as I am aware, the US doesn't have millions of mentally healthy homeless retirees.

On the other hand, it may be that all those gals could not afford wine and cheese on their own, so they had to go to a tasting.

 

[Car-Guy]

IMHO, you shouldn't worry about others money, lifestyles, investment strategies, etc. To me it's "interesting" to read the articles or listen to the conversations, news, etc, but that's all it is. I really don't put much "stock" into what others say or think about how much money I need to retire, if I should live below my means (I don't) or how I should investment my money. If I heeded the advice, recommendations or suggestions by the professionals or even individuals opinions I hear or read (including many on this forum) I'd be miserable.

 

[ArkTinkerer]

The points about COL and expectations in retirement are biggies. One thing I pick up from this forum is a big divide is growing between government and private industry. In private industry pensions are pretty much dead. I'll get a tiny defined contribution pension when I FIRE. This is one of the few companies in the area that still offers any sort of pension and its being phased out. Pensions with COLAs are gone from private industry as far as I can tell. It may take a while but I'm betting they will be on the way out for government workers in the next 20 years. Will take longer than that for them to disappear but by then I suspect new workers will no longer be eligible.

 

[Big_Hitter]

Yes bclover it is media inspired. People want to read something, predicting doom and gloom always attracts attention.

That said it's up to each of us to plan.

I don't think it's media inspired. There is a train coming.

 

[athena53]

IMHO, you shouldn't worry about others money, lifestyles, investment strategies, etc.

I agree with Big_Hitter. There's a train coming. What others do is not my business until they want my tax money to support them in retirement because they have no savings. I'm not talking about the people who worked at minimum-wage jobs their entire lives, but people who bought new cars (and a truck) every 3 years, used their HELOC as an ATM and figured SS would be enough. I know there's no neat line to separate the "deserving" low-income retirees from those who are in that position because of bad decisions, but I know I'm going to end up subsidizing many of the latter.

 

[fritz]

this is one of those topics where you ask 10 different people and you can get 10 different answers.

So it seems in the financial/investment/retirement world the message is if you don't have AT LEAST a million dollars saved that you are pretty much doomed to living your old age in a box underneath a bridge.....

Yesterday I went to a wine and cheese tasting with my sister and 4 of her friends.
topic started with wills and living wills but eventually got around to retirement.

Ages of us gals range from 52-62. ALL are retired except me.

now full disclosure 3 are retired correction officers and my sister and one other are retired NYC police officer so they all get pensions.
1 lady was also a retired military along with correction officer.
but I did ask if anyone had 1 million in savings. All said no, one young women does own a NYC apartment that generates income. 2 have mortgages, 2 do not.

I know quite a number of people who retired well before 67 and seem to be enjoying life as a retiree. Sure no one is running away with the cabana boy to live in tahiti but they seem pretty darn happy. they travel annually, have hobbies etc etc. Only one seemed interested in finding a second career.

So is all the doom and gloom about a nation of retirees about to implode media inspired hysteria?

As I see it - you answered your own questions.

• If you have $1M as a single - you are in the top 4% of the U.S. If you split it with your spouse - you are in the top 7%.
• If you have $250K - you are in the top 14%. Split with spouse - you are in the top 23%. Not that many people have accumulated a total net worth of even $250k, much less the touted $1M figure.
• As a reference point - a "Legg Mason" net worth of $2.5M for a comfortable middle class retirement as a single puts you in the top 2% - split with your spouse is top 3%.

Wealthometer: USA

When peddling fear of retirement to the masses - picking a "number" that most will never achieve (reference stats above) leads to the masses seeking answers from those middle class workers that make a living at handling your money, selling annuities, etc, (and not necessarily guiding you to a worry-free retirement). Their job is to get you to give them your money, so they can make money off it during their career while you save for retirement over your career.

Your friends are in a club of retirees that have benefited from jobs where lucrative pensions still exist (or did still exist). The private sector middle class worker mostly toils away in non-union pension-less positions (around 89% of workers are non-union, and only 20% of all workers are covered by a pension).

http://www.bls.gov/news.release/pdf/union2.pdf

The Disappearing Defined Benefit Pension and Its Potential Impact on the Retirement Incomes of Baby Boomers

Private sector choices of retirement vehicles - chosen by the company, are most likely from the lowest bidder (and can change often based on cost evaluation). These days it's defined contribution (ie. 401K) retirement plans that dominate the landscape. When this retirement avenue was quickly adopted by mainstream corporate America - workers were pretty much left to figure it out for themselves. Leaves a lot of room for people to write articles about the pending retirement dilemma. A lot of people are making money off your retirement savings these days - how many of them know you or worry about your retirement success.

Most people will still retire (on their own, or eventually forced into retirement by health issues/age). Most of them will have to adapt to a less than comfortable "middle class" retirement with net worth's less than as targeted by Legg Mason at $2.5M......

 

[ERD50]

....
So it seems in the financial/investment/retirement world the message is if you don't have AT LEAST a million dollars saved that you are pretty much doomed to living your old age in a box underneath a bridge...

....

So is all the doom and gloom about a nation of retirees about to implode media inspired hysteria?

The first and second lines are mostly unrelated.

The first is a gross over-simplification of what it takes to retire. Though, since I guess I don't listen to the same 'financial/investment/retirement world' that you do, I'm not even sure the statement itself is true.

As others have pointed out, your portfolio only needs to cover the shortfall between your expenses and other sources of income (SS, pension, etc). So there is no one single number that is meaningful. It is highly variable and dependent on individual circumstances.

The second is not something I've paid much attention to. Again, it might be the same 'financial/investment/retirement world' talking? Those people probably have some SS and pension. As long as the grasshoppers don;t come looking for us ants any more than they already do, they'll just have to find a way.

-ERD50

 

[38Chevy454]

I agree, what number works for you is what is important. However, simple math provides that a pension is a great offset to how big your savings need to be.

Most people have three sources of potential retirement income: Pension, Savings, and SS. If you need $60K/year for your expenses and living, then you have to get that out of the three sources. First example: if pension is good for $24K, and SS is good for $18K, that totals $42K. $60K - $42K leaves $18K needed from savings. Second example, same $60K/year needed: $0 Pension, same $18K from SS. Leaves $42K required from savings.

Only you can determine what expense level is right for you. Once you have that number, it has to come out of the three sources. Cost of living plays a big part, as well as controlling expenses. Media hype is somewhat true that many do not have much savings. So it does not bode well for a retirement at the level that many are living while working, to support a similar level in retirement.

 

[MRG]

I don't think it's media inspired. There is a train coming.

That's why I choose to plan. I can control my spending and investments. I can't control others, or their foolish spending. I can't control taxes, inflation, or SS, so I'm just gonna have to be OK with that.

 

[robnplunder]

So it seems in the financial/investment/retirement world the message is if you don't have AT LEAST a million dollars saved that you are pretty much doomed to living your old age in a box underneath a bridge.....

< snip >

So is all the doom and gloom about a nation of retirees about to implode media inspired hysteria?

I think there is something to that. Both of my parents retired with no savings at earlier than age 62. They live on SS + "allowance" from me. They live within their budget and they are contend. This is the case with a lot of people I know around me. Typical ER.org members are exceptions to this (they piled up money, they are financially astute & conservative, want to live well in their ER, ....). Just look at ER.org's introduction threads. If I average those folks net worth, I think it is closer to or north of $3M, and many with good SS & pension. And they still ask the question "can I retire?" ER.org is not a reality for the vast majority of folks out there. Out there, people retire at later age, and get by with what they have in retirement. ER.org folks should not have much to "rant" about their lives, at least, in financial areas.

 

[Cobra9777]

...One thing I pick up from this forum is a big divide is growing between government and private industry. In private industry pensions are pretty much dead. I'll get a tiny defined contribution pension when I FIRE. This is one of the few companies in the area that still offers any sort of pension and its being phased out. Pensions with COLAs are gone from private industry as far as I can tell. It may take a while but I'm betting they will be on the way out for government workers in the next 20 years. Will take longer than that for them to disappear but by then I suspect new workers will no longer be eligible.

Generally, government workers make less than equivalent workers in private industry. Pensions compensate for that. So, there's a built-in, mandatory LBYM arrangement, that's compensated later with a pension that replaces a decent percentage of working income. Private industry folks need to DIY, which is where the failures usually occur. But I would argue that with focused and disciplined planning, they have a better opportunity to ER and/or improve their status at retirement, vs their public-sector counterparts. I wouldn't despair too much over the lack of private-sector pensions. Those who choose to spend all their money early in life and live on SS later have made their choice. Just don't ask me to help with their bills.

 

[bclover]

I think the message is not so much the actual "number" needed in savings for a comfortable retirement, but the fact that most Americans do not have nearly enough saved to support the type of retirement they desire. This is why everyone freaked out when Legg MAson came out with their "$2.5 million" needed for a comfortable middle class retirement.

Obviously, there are many variables involved. Location, couple, versus individual, expenses, etc.

I think one of the big problems is that many people do not realize just how much they will need to contribute to their health insurance costs once they retire. Also, those with pension and future SS benefits factor in these numbers as virtually " guaranteed" and set in stone. Nothing could be further from the truth....look at Detroit. Pension benefits can and do change. Future SS benefits will definitely change. Medicare? Who knows for those of us 5 or more years away from 65. In fact when estimating me and my wife's future income versus expenses I do not even factor in pension and SS benefits. I figure whatever we get will be a "bonus."

I know one thing. I would rather have the "millions" myself, invested myself, and under my control than be at the mercy of some private or government entity to pay me a monthly benefit. And my wife and I will receive future pension payouts but I know they can be changed at anytime.

I think that right there is the problem. Every day we are bombarded with new information. first it was a million, then it was 2.5 million. recently I read an article that said you should plan on working until you're 70 since our life expectancy is changing.

I know for me it gets depressing. I do start to feel like, "what's the point". I play the game and the goal line keeps moving.

the other day I was listening to Suzy O and she's berating this poor slob because he wants to buy a new luxury car. He could afford it, and she did approve it but she goes on and on about how it's a waste of money. Of course I'm screaming, damn after being frugal for 60 years, working hard for 40 years, poor slob still can't buy the car of his dreams without feeling guilty about it.


So I guess I wish I did here more stories like the ones at the wine affair.
Just regular folks enjoying their retirements, now like I said I didn't know all of them well enough to ask private questions so maybe I'm totally off but I wish I could get to the point where every freakin thing I read doesn't scare me half to death.


it's amazing, I always thought that people who did not have enough were under a lot of stress. now I'm feeling like it might be the opposite.


LOL, I could probably retire if I stop purchasing retirement books and retirement calculating software.

 

[athena53]

I think that right there is the problem. Every day we are bombarded with new information. first it was a million, then it was 2.5 million. recently I read an article that said you should plan on working until you're 70 since our life expectancy is changing.

I know for me it gets depressing. I do start to feel like, "what's the point". I play the game and the goal line keeps moving.

I know. The 4% withdrawal rate was considered a good safe shot for years. Then the financial crisis hit and suddenly the "experts" were saying maybe you should plan on a 2% withdrawal rate. I was in my late 50s at the time, so not that many years to shift gears. I just stuck to my "invest as much as we can while still having fun with a little of our $$" philosophy. Now they're saying 4% again.