That ship has sailed, what will happen to these folks?

[Cut-Throat]

Do you ever hear comments like these? Whenever I do, I mostly keep my thoughts to myself, thinking "that ship has sailed" - without time on their side, how will these folks ever hope to retire?

And the answer to your question is, they may not be able to retire. I see folks a lot older than myself working at Home Depot every day. I would not guess that they are doing this for a great fulfilling life.

This is like anything else in Life. Have you ever seen people saying they were trying to lose weight, while snacking on high calorie snacks?

Those of us that have retired and planned for it, would not want to live without the 3 month winter vacation in the Bahamas, a new car every few years and expensive hobbies and so we have worked this into our budgets. Mostly to be able to do this in the Firecalc 'worst Case' conditions. (Which probably won't happen, but we could still live large, even if it did happen).

And if you have ever traveled the world and seen what truly poor people live like, I am talking Africa and areas of Central America, you may look at your friends as having a truly cushy retirement.

So, it's all relative.

 

[tmm99]

I have no idea how my friends are doing with money except for a few who shared their finance with me - Some are doing good, some are not.

It's a miracle I have as much money as I have, considering I didn't get into the saving mode until my mid-40's. I am not a big spender to start with, so money just kind of accumulated even before then, plus I was maxing out my 401K pretty much for the get-go for one reason or another.

It could have been a whole lot worse.

 

[REWahoo]

... I sternly disagree with your thoughts above.

OK, but I'll be rioting. Consider this your formal invitation to join me.

 

[eta2020]

I resemble this remark. I was flushed from a position where I thought I was important. They showed me how important I was at age 52. It took about 2 years but finally ended up in a much better place.

Lot of people retire because of layoff or health problems and they may do it before they are 62.

It is best to be fully prepared once you pass 50.......

 

[braumeister]

I know several people who say they are planning to work "forever"--I don't know why as some seem to be very well off (high level executive) or do not seem to overindulge in conspicuous consumption. They won't retire early and they will have fewer years to finance, perhaps at a decreased standard of living, when they do. Maybe they will need to move to a low cost of living area. It will work out one way or another.

Bill Gross has an estimated (by Forbes) net worth of over two billion dollars. So why didn't he just retire?
According to him, it's because it's vital for him to get up a 5:30 every morning and try to beat his peers at other companies. It's his life, and it's what gives his life meaning.

My take is that he's simply not tough enough to hang out with the likes of this group!

 

[MichaelB]

OK, but I'll be rioting. Consider this your formal invitation to join me.

By the time this happens it'll be a riot in the old folks home!
.
.

.
here

 

[REWahoo]

By the time this happens it'll be a riot in the old folks home! re

+1

I'm getting a walker with a torch-holder attachment!

 

[W2R]

OK, but I'll be rioting. Consider this your formal invitation to join me.

I'll join the group. Pass the torches.

 

[Sea Kayaker]

I may as well exist in another universe from pretty much all my friends and former co-workers. I don't know a single person who targeted ER in their early 30's and actually managed to do it. Pretty much everyone spends what they make and they don't hesitate in relating their financial challenges openly.

Hanging around this site I think causes me to drastically overestimate how many people have successfully built their finances up to a point where they can consider NOT working until 65.

I think we are a rare breed.

 

[38Chevy454]

To the OP's original question, at some point I think the ship has sailed and there is not a real ability to catch up. Unless the person has a high income and lives in near poverty to be able to save a huge percentage of their income, time just does not allow basic value of compounding to be effective.

As to the question of finances with friends and acquaintances, all I can say is most of the non-retirement savers are living paycheck to paycheck and just trying to keep their head above water. Both LBYM and pay yourself first seem to be foreign concepts to them. Those that do save, we do not talk more than general stuff and no specifics.

As to what the non-retirement savers will do? They all are basically assuming they will work long into 60's or even 70's.

 

[robnplunder]

They will work till 65 and then live on SS ( which will not cover decent living ).

I know number of people who worked untill 62 and then live on smaller SS. Somehow, they make it work. For those people, they don't need a ship to sail. A (life)boat would do fine for them.

 

[Cut-Throat]

REWahoo, while I almost always agree with your humor and sage wisdom, I sternly disagree with your thoughts above.

If the gov't was able to pass an income tax on up to 30% of your SS payments being DOUBLE TAXED (in the 90s), then they can do anything.

If the senior citizens didn't revolt then (and that tax affected MANY senior citizens), then surely the minority (or small majority) population of senior citizens that have ROTHs won't be able to muster up enough force at the ballot box to threaten the politicians.

Even though the $ involved could be higher than the double taxation on SS benefits, the AVERAGE ROTH IRA balance won't be high enough to institute political revolt. I don't have figures at hand, but surely just maybe 10% of senior citizens have a hefty ROTH balance to where a ROTH/asset tax would add up to a substantial sum. If a vastly higher % of SS didn't effect change with 30% of SS being double taxed in the 90s, I doubt a small minority of high ROTH balance senior citizens will matter.

Besides, they will be drowned out by the grasshoppers, who will be eagerly awaiting their share of the pie, since they have nothing.

If you believe this, you better hope that Social Security is not Cut anymore via chained CPI, the Minimum wage is raised and Medicare and Medicaid is protected. The huge tax cuts for Billionaires should be repealed and large penalties for off-shoring jobs from the U.S. should be enacted.

Without these safety nets and reforms you as a middle class taxpayer most certainly will be on the 'Hook'.

When we all do better, We All do Better!

 

[eta2020]

I hate to be a downer, but I suspect some Congress in the next 20 years or so will institute some wealth tax (asset tax) to "help" these folks.

either that or they'll start taxing Roth withdrawals

Seriously though, I'm amazed at these people in their late 50s and on up with great jobs....maybe I've always worked in cut throat industries, but people over 50 were hard to find - the organizations found a way to weed them out.

“Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.”
― John Steinbeck

 

[Chuckanut]

I know of a number of people who live solely on SS and make it work. They often live in the lower cost of living areas, share housing and don't enjoy much beyond treating the selves to a weekly mocha at Starbucks.

Over 50 and out of work? This is a sad situation. I have known of people who worked low paying jobs and drained their already meager retirement funds to survive until they hit SS. Then they join the group above.

 

[jonc]

I hate to be a downer, but I suspect some Congress in the next 20 years or so will institute some wealth tax (asset tax) to "help" these folks.

I'm looking forward to the rewriting of Aesop's Fable

The Ant and the Grasshopper

I figure the Ant still works all Spring, Summer and Fall while the Grasshopper goofs off, but the ending is changed: The Ant is vilified for planning ahead, having accumulated enough to survive Winter. As punishment for this crime, the Ant stripped of the fruit of his labor and it's distributed to all the needy Grasshoppers innocent of anything deserving their stern plight.

-Jon

 

[Letj]

And if you have ever traveled the world and seen what truly poor people live like, I am talking Africa and areas of Central America, you may look at your friends as having a truly cushy retirement.

So, it's all relative.

Asia too, Vietnam, Laos, Philippines, China, etc have some of the worst third world poverty, especially in the country side

 

[imoldernu]

The subject is tough to handle because "things were different then". Things like 401K's, Roth IRA's and investing in general, were different.
Making money in the market was not something common folk did.

It was a time of profit sharing, pension funds, and putting money in the bank, when savings interest rates were closer to loan rates, with a one or two percent differential.

It was a time when Social Security was designed to keep pace with incomes, and when it was expected that the Social Security Fund would be sacrosanct, as in a "trust"... where those who were responsible, would maintain the fund in keeping with the rise in prosperity. In fact, for those who were "paying in", expected that it would be a TRUST... Not used as a cushion for other government expenditures.

Growth was built on innovation, on learning to do things faster, cheaper, and better. There was room from creativity and imagination, not just to shuffle people into lower paying positions, but to better utilize labor, raw materials and to balance the labor force and industry to create a mutually beneficial improvement in life. Jobs were typically held for many years, and experience was in the individual, not the computer.

Not to say that we should live in that other time, but to understand that those of us who are in late middle age, were living in a very different time.

All of this points to a different mind set. In our 40's, we expected to be with the same firm (company) until we retired at age 65... and would have our base income coming from Social Security, to be supplemented by our pension or profit sharing plan... and from those dollars we had saved in our local bank.

The idea of "risk" for the average guy didn't, (except for a very few) come from being in the stock market.

In all of this, I am talking about my own experience... being in the workforce after college) from 1958 to 1989, when DW and I retired @age 53. Our combined ending salaries adjusted for today were probably about $125K... We had four children, who, by the time we retired, had been through school and were independent.

We were brought up to live within and below our means... except for home mortgages never borrowed money for anything, and managed to put aside a nominal amount, beginning when Traditional IRA's were established around 1980. Interest rates were quite different... Much higher during our savings years... roughly 1975-1990. 7 to 10% in Bank CD's were fairly common, and during that same period, housing values were increasing. Because of multiple moves, the net value increase was fairly substantial.

Mentioning all of this, simply to point out to those who are in their forties and early fifties, that the mind set of retirement planning was very different 25 to 35 years ago. Social Security was not designed to be some kind of a giveaway to the poor, but a pay as you go "investment". Banking was not a Federal Debt subsidized industry, and productivity was not measured by investment acumen.

In short, the path to financial security changed substantially over the past 30 years, and many people were caught short, not adapting to the changing face of the financial world.

recap:
SS trust fund mismanaged
Bank rate changes/US Debt Subsidy
Pension, Profit Sharing changes/buyouts
Devaluation of personal skills of the aging
Computers - across the board labor replacement efficiencies

Overall, the past 35 years might be the biggest, fastest change in planning for retirement.

Chart for historical interest rates:

 

[samclem]

The subject is tough to handle because "things were different then". Things like 401K's, Roth IRA's and investing in general, were different.
Making money in the market was not something common folk did.

Thanks for the thoughtful post.
Other things that have changed, and which bear on the problem:
- Expected remaining years after reaching SS age.
- Growth in material expectations. When today's 60 year olds were kids, most cars didn't have air conditioning. Most homes didn't have air conditioning. The average US home was about 1200 sq ft and had one bathroom.

People who find themselves a bit short for their retirement years might be there because they didn't hop on to the bandwagon of investing, or they missed out on the opportunities of the economy as it changed. But my guess is that at least as many find themselves in a tough spot because they hopped aboard the "buy more" bandwagon with both feet.

 

[W2R]

Thanks for the thoughtful post.
Other things that have changed, and which bear on the problem:
- Expected remaining years after reaching SS age.
- Growth in material expectations. When today's 60 year olds were kids, most cars didn't have air conditioning. Most homes didn't have air conditioning. The average US home was about 1200 sq ft and had one bathroom.

I still think of a smallish house like that with no AC, and one car with no AC, as the standard white-picket-fence middle class American dream. It was when I was a kid and teen back in the 1950's and early 1960's. Anything extra seems like luxury to someone brought up in those days.

People who find themselves a bit short for their retirement years might be there because they didn't hop on to the bandwagon of investing, or they missed out on the opportunities of the economy as it changed. But my guess is that at least as many find themselves in a tough spot because they hopped aboard the "buy more" bandwagon with both feet.

+1000 I do think that many in a tough spot may have been buying more than they really want or need, possibly due to the massive influence of advertising in recent years.

Also I suspect that many were caught in the freezing of, or reconceptualization of pensions at their organizations. For some pensions were the cornerstone of any retirement plans they might have had.

 

[daylatedollarshort]

Thanks for the thoughtful post.
Other things that have changed, and which bear on the problem:
- Expected remaining years after reaching SS age.
- Growth in material expectations. When today's 60 year olds were kids, most cars didn't have air conditioning. Most homes didn't have air conditioning. The average US home was about 1200 sq ft and had one bathroom.

My grandparents had the financial advantages mentioned by imoldrnu, plus the 2 bedroom house, one car, no A/C, no dishwasher other than my Grandmother, no cable, maybe 2 TVs, no cell phones, no Internet connection and lower relative health care costs.

They were quite financially comfortable. Many of the things people spend money on today had not been invented yet so they couldn't miss not having them.

 

[JoeWras]

imoldernu: good points. Let me add a few more.

Post WWII until cold war end was a special time in history. Americans were very privileged. Western Europe also joined in after some reconstruction. This will ultimately be an aberration.

It seems to me that some boomers or early X-ers are living with a mindset of their parents. They forgot their parents had pensions, good promise of SS, etc. But meanwhile, in their reality everything is different and they are not paying attention.

What some here may not be witnessing first hand is the globalization of the workforce. This is a huge game changer. There is really severe pressure on the pay and benefits of previous "good jobs." I've finally been swept up in it. I have to say it hurts. But I don't care, I'm near the end of my career. But for those behind this will leave a mark.

Today, business is gravitating to this idea that the only "workers" of value are managers of this global force. Hence the huge swing in CEO and executive pay. This too will eventually change. My fear is that some of us who scrapped and saved will be caught up in the revolt against these guys.

In any case, yes it is different. Let me add globalization to that.

 

[Ronstar]

...What some here may not be witnessing first hand is the globalization of the workforce. This is a huge game changer...

This may be the primary cause of the destruction of the middle class. American workers are not surviving as well in the globalized marketplace as they did in 1950's and 1960's. Back then, the middle class had solid, long term, decent paying jobs (and LBYM lifestyles) that provided for a solid foundation for retirement. Today these jobs are off shore or replaced by technological advances.

I don't know how most people today are going to make it in retirement. The LBYM lifestyle doesn't seem as prevalent as it used to. There's a lot more products and services backed by nonstop in your face advertising that are being purchased by those that really can't afford them. I haven't researched this, but it seems like workers near retirement age now have less savings than those of 40 years ago. And with pensions being cut or eliminated, retirement is going to be tough sledding for those not financially ready for it.



Sent from my iPad using Early Retirement Forum

 

[FUEGO]

I still think of a smallish house like that with no AC, and one car with no AC, as the standard white-picket-fence middle class American dream. It was when I was a kid and teen back in the 1950's and early 1960's. Anything extra seems like luxury to someone brought up in those days.

That's what I say. We're living the white picket fence middle class American dream from the 1970's (when our house was built). But our house has AC and both of our (modest, older) cars have AC. And one car even has a tape deck!

We have all of the other tech gadgets of the 2010's, but they are incredibly cheap, as in 1 paycheck can buy you an HDTV, gaming system, computers (plural), smartphones, etc.

Life today is pretty great, and the 1970's American Dream is still extremely affordable. I'd hate to have to chase the 2014 middle class American Dream. 4000 sf McMansion(s), 3+ luxury cars, private ivy league pre-school through grad school, vacation home(s), boat(s) and personal watercraft, a small battalion of people to serve you (masseuse, chef, maid, nanny, landscaper, handyman, car detailer). And my oh my at the goods and services available today (organic, gluten free organic, vegan, locally sourced, fair trade, zero carbon footprint, smart home, smart car, premium wind or solar energy sources).

 

[SunnyOne]

Yes, I've travelled to some very poor countries and generally speaking, the infrastructure is better here - roads, utilities, access to health care and education, etc.

but I might say that the point is irrelevant, unless some Americans plan to retire abroad.

Retirees in the US still need to pay Northamerican-based costs for healthcare, housing, transportation, etc.

An argument can also be made that older people in the developing world, in some ways, have it better than older Americans. Their community support systems are often much stronger and many of them still eat a much healthier, traditional diet.

We should all be that fortunate.

 

[daylatedollarshort]

I don't know how most people today are going to make it in retirement. The LBYM lifestyle doesn't seem as prevalent as it used to. There's a lot more products and services backed by nonstop in your face advertising that are being purchased by those that really can't afford them. I haven't researched this, but it seems like workers near retirement age now have less savings than those of 40 years ago. And with pensions being cut or eliminated, retirement is going to be tough sledding for those not financially ready for it.

One positive counterforce is the Internet, with sites like this and the many even more LBYMs blogs and forums. But Internet surfers have to have an interest in LBYM to begin with and seek out the LBYMs sites, because no one is paying for personalized, targeted ads following us around the Internet telling us to not spend money on depreciating consumer goods or not to buy very simple things we could easily make for ourselves.

The Onion's comment on Starbucks adding a $5.25 grilled cheese sandwich to their menu - "I’m glad they’re sticking with their core strength of things you could easily make yourself if you just woke up 10 minutes earlier in the morning.”

We are later to the game than many here on LBYMs but finding all the great ideas in books and on the Internet has been to us like finding the Rosetta stone to ER and financial security.