Millions Unprepared For Retirement

[Fermion]

We were in the best shape right after Covid, as I had bet against the market and made a little money on S&P500 puts. I am glad I moved money into short term bonds but wish I had done a little more than I did. I currently have 40% in short term treasuries and 60% in stocks, I would have been happier in hindsight with 70% in short term treasuries. That consistent 5.5% rolling in no matter what is just an amazingly good feeling (even if inflation is 4%)

 

[pb4uski]

Agree. And this is why I think it's a real risk retiring if you are depending on stock market returns. Seems to me, a lot of folks accept that risk.

I'd frame it a little differently since we know that success is pretty stable across a wide range of AA... success is pretty much the same from 30/70 to 80/20 IIRC, but the WR is a larger factor. 3.85% or less is very solid 95% across a wide range of AA.

 

[MichaelB]

I'd frame it a little differently since we know that success is pretty stable across a wide range of AA... success is pretty much the same from 30/70 to 80/20 IIRC, but the WR is a larger factor. 3.85% or less is very solid 95% across a wide range of AA.

Very true that the specific allocation has less impact and what matters is just having enough equities. I think the real killer of retirement portfolios isn’t bear markets, it’s how people react to them by selling at the bottom and missing the recoveries.

 

[marko]

Agree. And this is why I think it's a real risk retiring if you are depending on stock market returns. Seems to me, a lot of folks accept that risk.

I'd venture that the stock market is how a high percentage of folks here got to be FIRE.

Very true that the specific allocation has less impact and what matters is just having enough equities. I think the real killer of retirement portfolios isn’t bear markets, it’s how people react to them by selling at the bottom and missing the recoveries.

+1

 

[LateToFIRE]

Very true that the specific allocation has less impact and what matters is just having enough equities. I think the real killer of retirement portfolios isn’t bear markets, it’s how people react to them by selling at the bottom and missing the recoveries.

+1

True. I also think that if you're going to rely primarily on a portfolio of largely equities, as I will, that your WD rate needs to be appropriately conservative and/or you need to have significant flexibility to alter your WD rate in down markets.

 

[Koolau]

It's been my experience that most folks w*rk out their retirement to fit their income. There are several hacks to get by on a lot less than most of us here live on.

Here in Paradise, the model seems to be: The oldsters (retirement age folks) have a house. It might be paid for and it might not be paid for. The oldsters may not have a lot of savings and SS/pension may be inadequate. At least one of the kids has a family and needs housing. They move in with the oldsters (before or after oldsters retire.) Eventually, the kids' kids do the same and there are 3 generations living in the original house. All three generations may be below the poverty level but the "family" does just fine. This is a very "cultural" thing to do in the Islands - which have nearly the highest COL of the states. Yet people have hit on a hack that w*rks for many. YMMV

 

[marko]

It's been my experience that most folks w*rk out their retirement to fit their income. There are several hacks to get by on a lot less than most of us here live on.

Here in Paradise, the model seems to be: The oldsters (retirement age folks) have a house. It might be paid for and it might not be paid for. The oldsters may not have a lot of savings and SS/pension may be inadequate. At least one of the kids has a family and needs housing. They move in with the oldsters (before or after oldsters retire.) Eventually, the kids' kids do the same and there are 3 generations living in the original house. All three generations may be below the poverty level but the "family" does just fine. This is a very "cultural" thing to do in the Islands - which have nearly the highest COL of the states. Yet people have hit on a hack that w*rks for many. YMMV

This similar to what my SIL did. She was always a bit of a ditz, ended up with no SS or much savings. She moved in with her daughter and provides a lot of support in raising two very active young grandchildren. They all pool their money and, somehow they make it work. The house is always a complete mess and a bit chaotic but everybody seems happy and relatively functional.

 

[Music Lover]

It's been my experience that most folks w*rk out their retirement to fit their income.

That's what I did, I mentioned it in another thread or maybe further back in this one?

I had a govt job with a COLA pension so I knew 25 years before I retired the exact day I would retire and roughly what my pension would be. My plan was to be debt free before retirement so I could comfortably live on my expected pension.

It's now been 7.5 years and it's gone exactly as planned.

 

[Exchme]

How about people that had enough money, retired and then…
2020 Bear market
2022 Bear market
2023 TBD, but not look’n so good.
I hope everyone who had “enough” prepared for poopy things to happen, because they will.

+1
Don't forget the wicked-ugly inflation. Even if folks' portfolios seem to be holding up, the 19% inflation (per the CPI-W) since the end of 2020 says otherwise.

 

[Mulligan]

I had forced savings via pension at my job at age 24, but it was inaccessible. Didn't really start saving until thirties-forties, like many here. School payments, young kids/childcare, 1st home at 8.5%, etc.

I do worry a bit about the younger generations.

That admittedly more than saved my bacon. Getting 14.5% taken out of check for pension was a big whack for me during the early working years. But it has more than paid off in retirement for me.

 

[Car-Guy]

I'd venture that the stock market is how a high percentage of folks here got to be FIRE.

I suspect that true for many (maybe even most) but not me. I would not have retired early if my calculations indicated that I would need to invest in the stock market to have enough money to do as I wanted in retirement. But that's me.

 

[marko]

How about people that had enough money, retired and then…
2020 Bear market
2022 Bear market
2023 TBD, but not look’n so good.
I hope everyone who had “enough” prepared for poopy things to happen, because they will.

+1
Don't forget the wicked-ugly inflation. Even if folks' portfolios seem to be holding up, the 19% inflation (per the CPI-W) since the end of 2020 says otherwise.

Throw in a couple of simultaneous wars and an election year ahead of us and I'm beginning to wonder....lots of uncertainty ahead of us.

 

[aaronc879]

I had forced savings via pension at my job at age 24, but it was inaccessible. Didn't really start saving until thirties-forties, like many here. School payments, young kids/childcare, 1st home at 8.5%, etc.

I do worry a bit about the younger generations.

If you had a good pension then you didn't need to save very much. Now days most don't have a pension and many didn't get any increase in wages to make up for it. That pension is worth a massive amount of money and is largely a thing of the past. Add in the fact that school, housing and childcare costs have all gone up more than the rate of inflation while raises have not and you get a serious problem for the current generation. Then you have some people wanting to get rid of the safety nets that are already not doing enough. Things are going to get really bad.

 

[mickeyd]

I have seen stories like this for the last 20+ years or so. After reading the piece I just assumed that I must be in poor financial shape too, even though I had made an excellent PLAN for my retirement (pensions, IRA, 401(k), brokerage account etc.).

When it got close to retirement and I did some stubby pencil work on my numbers, I realized that we would indeed have plenty of assets that would last a lifetime and I was not part of that number of folks that had not prepared properly.

I think folks just like to read these scary financial stories.

 

[Music Lover]

A lot of people retire with little or no savings. But as far as I know, not a single one of them has starved to death. Their standard of living has probably taken a big hit, but that's not something that keeps me awake at night.

 

[Time2]

Well, maybe. I had only one and I guess I was stingy with him! Well, I did put him through NY Military Academy and through college with no loans- but there was only one trip to Disney World, no cruises, no traveling sports leagues, no car as soon as he got a license. It all adds up.

Turns out we must have been stingy with our kids also! We had a conversation when they were in their 20s and they were relating how they thought we were poor.
I have one that probably thinks it was worth it though, as she got a BA, a Masters and finished dental school and has no student debt, i.e. "The Bank of Mom and Dad".

 

[HawkOwl]

Turns out we must have been stingy with our kids also! We had a conversation when they were in their 20s and they were relating how they thought we were poor.
I have one that probably thinks it was worth it though, as she got a BA, a Masters and finished dental school and has no student debt, i.e. "The Bank of Mom and Dad".

That is phenomenal. That is equivalent to the cost of A LOT of trips to Disney World. Good job Mom and Dad.

 

[Time2]

That is phenomenal. That is equivalent to the cost of A LOT of trips to Disney World. Good job Mom and Dad.

We did make one trip to Disney World when the kids were young. I had bought a book (yard sale) about planing a Disney visit. It suggested lowest time of year for visitors. So we were leaning towards that time, then 911 happened, flying or traveling was way down, we went to Disney World, the lines were very short we had a great time and very little waiting.

 

[Rustic23]

I have a brother in law, 85, that fits the picture. He lives on about $22,000 annual SSN. I am not sure how he does it. However, he has a paid off house, and defers the taxes. Manages to get most medications from a friendly doctor, and anyone that goes out to eat with him picks up the check. He takes all the left overs home and that's lunch for the rest of the week. Does not do any sort of state or local aid, lives alone. I am not sure how he does it.

Have a sister that could also qualify.

 

[aaronc879]

I have a brother in law, 85, that fits the picture. He lives on about $22,000 annual SSN. I am not sure how he does it. However, he has a paid off house, and defers the taxes. Manages to get most medications from a friendly doctor, and anyone that goes out to eat with him picks up the check. He takes all the left overs home and that's lunch for the rest of the week. Does not do any sort of state or local aid, lives alone. I am not sure how he does it.

Have a sister that could also qualify.

Really? You don't know how he does it? $22K with a paid off house I would feel rich. I will spend less than half that this year and my property taxes will be $3500 so less than $8K in total spending other than the prop taxes. $22K? I would be living large.

 

[Music Lover]

I have a brother in law, 85, that fits the picture. He lives on about $22,000 annual SSN. I am not sure how he does it. However, he has a paid off house, and defers the taxes. Manages to get most medications from a friendly doctor, and anyone that goes out to eat with him picks up the check. He takes all the left overs home and that's lunch for the rest of the week. Does not do any sort of state or local aid, lives alone. I am not sure how he does it.

Have a sister that could also qualify.

He has a paid off house and defers the taxes? He has plenty of money and shouldn't be mooching lunch from people.

 

[TheWizard]

Really? You don't know how he does it? $22K with a paid off house I would feel rich. I will spend less than half that this year and my property taxes will be $3500 so less than $8K in total spending other than the prop taxes. $22K? I would be living large.

I'm not sure that $22k/year and Living Large belong in the same sentence, but have it your way...

 

[jazz4cash]

I'm not sure that $22k/year and Living Large belong in the same sentence, but have it your way...

I believe $22k w paid off home and no income or property taxes seems quite manageable but not living large.

I have an 85 yr old cousin living in a sr apt on $17k. All of her income is from SS and she has a tiny inheritance nestegg. She also gets some help from family. Her rent is 90% of her income. I’m sure she qualifies for cheaper housing but due to demand vs supply and bureaucratic hoops I think it’s better for her to stay put. She is comfortable and has many opportunities to socialize.

 

[athena53]

He has a paid off house and defers the taxes? He has plenty of money and shouldn't be mooching lunch from people.

Some states allow low-income seniors to defer taxes till the home is sold but then they recover the back taxes (plus interest?). I actually like this a lot more than straight forgiveness or reduction (e.g., Homestead Exemption exceptions) because the taxes are eventually paid. Not sure what happens if the equity in your home at sale is less than the back taxes owed.

 

[ShokWaveRider]

I believe $22k w paid off home and no income or property taxes seems quite manageable but not living large.

It may be doable, but what sort of a miserable retirement life would it be? It certainly would not be our idea of a decent retirement.

We have a fully paid of home and our annual expenses, just the basics with food, healthcare etc. Top $45k.

That does not include discretionary expenses, vacations etc.