The "Retirement Crisis" is worse than we thought

[Souschef]

Luck

The one that sticks in my my mind is when my wife met an acquaintance who she had not seen in some time, who told her she and her husband were "so lucky". At which time my wife told her he had died and she was widowed.

 

[Johanson]

Speaking of not using the 401K, at my Megacorp, we had a project manager that was known for his cheapness in regards to the projects he was on and to his techs. This guy made really good money. I was talking to him one day with a couple of other people and the subject of the 401K came up. At the time, we were getting matched dollar for dollar up to 8%. That's when he said he doesn't contribute to it and all of his investments were in a taxable account. We all told him how "stupid" he was but he said he wanted full control of his money. I wouldn't doubt he had 7 figures in it.

On a side note, he was always high stressed and loved going to construction meetings and going toe to toe with others. He ended up having two heart attacks with the last one happening in the office. The powers that be told him he was done and gave him 2 years "severance" to retire. He basically got paid the next two years, with all his benefits, to not show up for work. He was about 60 or so at the time.

Regarding the issue with retirement in MN. I plan on living here less than 182 days/year when I'm retired. It might even be 0 days/year. Taxes are too high here and I would have moved a long time ago if I didn't have dogs that need to be taken care of when I travel, which is generally weekly.

 

[target2019]

I work with someone who is 65 or so. He has labeled himself a polymath during conversations we've had. So he must be smart about most things. Very difficult to converse with, even about work items.

He missed a benefits meeting where 401k and company stock were discussed. Afterwards he asked me a few questions, and said he wouldn't participate, because the company would have his money. He went on to tell me about the vesting in great detail. Unfortunately he had only skimmed the materials, and was mixing up the rules about stock awards and 401k. The 401k has no vesting requirements, even for the match. He had missed out on a few thousand dollars of match last year. I pointed this out, and let him know I wasn't telling him what to do, but he might want to speak with our benefits manager.

I overhead some younger people at the office discussing retirement savings. They agreed that the moving parts were not understood well. I felt that I could contribute something to the conversation, but went about my way after considering the big picture. Maybe I'll just drop a book on someone's desk and ask them to share with friends.

 

[bradaz2488]

It is interesting to see the heated debate of "luck".. I do get a little peeved when people say I'm so lucking to have retired early when I know it took a lot of hard work and discipline to get there. I also understand that I'm lucky to have been born in the USA and to good parents that taught me hard work and integrity will lead to success. When you work hard for something you appreciate it more. So for most people born in USA to middle class families should consider themselves very lucky. It is want you make of that "luck" that separates the FIRE people from the paycheck-to-paycheck people.... just my 2-cents...

 

[2017ish]

... So for most people born in USA to middle class families should consider themselves very lucky. It is want you make of that "luck" that separates the FIRE people from the paycheck-to-paycheck people....

Nice summation.

 

[ER Eddie]

I suppose the ability to accurately and objectively analyze outcomes and to correctly attribute responsibility to ourselves, others, or luck would be the optimum situation, rather than reflexively attributing almost everything to luck or, alternatively, to our own efforts.

Yup. It can be a problem if you err in either direction. If you attribute too much to luck, you are a straw in the wind, a helpless pawn of fate. If you attribute too much to yourself, you are arrogant, controlling, and ungrateful.

 

[Nemo2]

Seems I'm swimming against the tide here, but 'dumb luck', (from my interpretation of it), has played a huge, and beneficial, role throughout my life.

Step onto the sidewalk...turn left or turn right? Perhaps/possibly/probably completely different outcomes, but in my uninformed state I seem to have always unknowingly 'walked towards the light' (so to speak).

A couple years after my late wife died, I was in online contact with, (among others), the lady who is now DW, (the best relationship I've ever had)....she was living/working about 220 miles from where I was temporarily located, and I was about to haul the 5th wheel in the opposite direction. She had to pass by one weekend because of her daughter's graduation, we met, and that was that.

(Prior to this, my oldest friend, of some 50 years, said to me "Something will turn up for you, it always does".)

Luck? I don't discount it, I don't rely on it, but I certainly embrace it.

 

[Ronstar]

I consider myself lucky. Our company got a 401k in 1986. Something I couldn't pass up - a great company match. So I maxed my 401k contribution. Then I didn't have enough $ to live on. Luckily I picked up additional work hours to make enough money to make ends meet while maxing the 401k. I had 0 retirement savings prior to that point.

 

[GTFan]

I see a few replies in this thread that mention "luck". Luck has very little to do with it. People who are successful at retiring early aren't lucky. That would only apply if you won the lottery got a huge windfall inheritance, etc. Planning, discipline, having the courage to be financially "different" than your peers, that's not luck. All luck is anyway is the intersection of preparedness with opportunity.
Don't short change your hard work.

Luck ALWAYS has a part in it. As you've seen from the responses, you're in a small minority if you truly believe that it has little impact.

Here's the #1 reason - most (if not all) of us were born on the right side of the bell curve.

Almost everything we have starts with that one simple luck factor, IMO, and it's probably the biggest one for most.

 

[seraphim]

That's what most of my former co-workers told me. It never seemed to occur to them to reduce their living expenses, and I never suggested it knowing what their response might be. Most couldn't imagine 'having less,' felt they were entitled to what they had, and more. Most of them made less than I did, yet they had nicer homes, cars and more/newer toys than DW and I. We make our choices, and live with the outcomes?

I had access to the contribution data on all our employees, about 2/3rds didn't participate in our 401k at all, and very few contributed 10% or more. And too many took out "loans" on their 401k's.

Yup. The concept of living BENEATH one's means doesn't seem to be a popular one.

 

[Chuckanut]

Psychologists have studied this quite a bit. It's known as "Locus of Control."

Bingo!

I think you have made an excellent point.

I have forgotten about this but I remember learning about it as a new teacher. Two students get an 'A' on an assignment. The external Locus of Control student says "The teacher must like me". The internal student says "My study and preparation paid off".

 

[Chuckanut]

Seems I'm swimming against the tide here, but 'dumb luck', (from my interpretation of it), has played a huge, and beneficial, role throughout my life.

I agree, up to a point. Good luck and go far to get one out of a bad situation. And bad luck can ruin the best of plans.

And, I have also observed that this is often true - Luck happens when preparation meets opportunity. I think this is powerful for those of us whose 'luck' is in the middle of the bell curve.

 

[seraphim]

It is interesting to see the heated debate of "luck".. I do get a little peeved when people say I'm so lucking to have retired early when I know it took a lot of hard work and discipline to get there. I also understand that I'm lucky to have been born in the USA and to good parents that taught me hard work and integrity will lead to success. When you work hard for something you appreciate it more. So for most people born in USA to middle class families should consider themselves very lucky. It is want you make of that "luck" that separates the FIRE people from the paycheck-to-paycheck people.... just my 2-cents...

Yes, my brother always tells me I've been fortunate. Yes, I was fortunate enough to work and pay my way through college after he ignored the full ride GI benefits he'd had so he could work and party with his buddies (his words). I started investing part of my military pay into mutual funds immediately upon graduating, and continued investing upon entering the private sector (blue collar) while he bought boats, motorcycles, drank, etc. DW worked at her own career and we staggered shifts when our son came along so we didn't need daycare; He wanted his wife to be a stay at home mom even long after the kids weren't at home. He DID pay to put his daughter through college, as we put our son, but now he retired at 70 with no savings and I retired at 57 with a large portfolio (which he doesn't know about). Yet, I'm the one who had all the good fortune, despite our personal incomes being similar. Hmmm, interesting theory....

 

[Nemo2]

And, I have also observed that this is often true - Luck happens when preparation meets opportunity. I think this is powerful for those of us whose 'luck' is in the middle of the bell curve.

Yes, recognizing, rather than ignoring or misinterpreting, the luck that's handed to you is a major factor.

I was, financially and otherwise, lucky to be offered a position in Saudi where I could accumulate tax free money.......a guy I knew, equally lucky from the onset, bitched and complained about the very conditions that warranted the extra pay/benefits, and terminated his contract after a brief stay.

I recognized my luck and stayed as long as I could; he didn't, and missed out.

 

[Danmar]

I blame it on the US being so much smaller then.
Surely one Texas Ranger could have done the trick, if we had only had one.

Right. Canada's population at the time was under 500,000 while the US population was about 7,500,000. Should have been easy. But I think it's fair to say that the world is a better place with Canada in it.

 

[Texas Proud]

That still doesn't sit right with me. I understand management access to all the statistics but knowing the identities seems intrusive (e.g. should be illegal). Our megacorp plan used to publish a chart of age band vs balance band with # of employees in each band. I can't imagine Fidelity sharing the identities with megacorp.

Yea, I see what you mean... and I will agree with you... in reality I was the only person who actually got to see the individual balances and holdings.... but I was kinda HR at the time so people would come to me to ask questions etc and I would have to be able to look at their accounts... we did have an outside person do payroll so I would not know 'salary', but I had to get that info in order to do some gvmt reporting, so I really knew...

The boss could look at general balances of funds and the total.... he was never interested even for that info... but if he had asked for individual info I would have given it to him..... but, nobody else in the company....

 

[Danmar]

I don't think you should credit your background to luck. It's just a circumstance....not luck. Plenty of people are born in similar circumstances and still fail, mostly through their own lack of knowledge/and or ambition.
Not getting arrested isn't luck either.
A lot of those things that we say are "serendipidous" are also our own doing whether we consciouslg knew it or not. I met my current wife in a place where I was not looking. I'd that serendipity, or was it just subconsciously registering a good opportunity that I took advantage of?
My point being sone of us get more of a head start than others, that much is true. But it is what we choose to do with it that matters.

Well, I think luck is "Yuge". If it was mostly your own efforts that count I must be some kind of "super" guy as I have so much more than the average retired person. I don't believe this. It's mostly luck, not all but mostly.

 

[Danmar]

Yup. It can be a problem if you err in either direction. If you attribute too much to luck, you are a straw in the wind, a helpless pawn of fate. If you attribute too much to yourself, you are arrogant, controlling, and ungrateful.

Yes, this rings true to me. It's obviously a combination of each. I have noticed that you will have more friends if you at least attribute a fair bit of it to luck. Nobody likes a person who thinks they "totally deserve" their success.

 

[Music Lover]

I worked in a very large govt. office where everyone knew exactly everyone else's salary due to a standard classification and pay system, so it can't be attributed to luck when the person who made the exact same salary as me was living cheque to cheque when I wasn't. Other than a few unfortunate circumstances, most of the difference came down to choices made over the years.

 

[mickeyd]

Boy, am I an oddball. Retired over 10 years ago and I am still saving for retirement. Note to self: Pick up your spending.

 

[kcowan]

Yep, it was the British ("Canadians not independent") that burned the White House.

Canada still has many forts along the St. Laurence River between Ontario and USA to defend against US invasion in 1800's

Interesting how nearly all our enemies are now our friends and allies...

Sorry for a bit of diversion here.

I miswrote in the above post. Yes, war was waged on Canada soil, but wasn't it the only one?

The Americans were blaming Canada for "the practice of removing sailors from American merchant ships and forcing them to serve in the British navy", among other harassment, and declared war in 1812. This was shortly after the Declaration of Independence, so the British were still sore, and enlisted the help of the Canadians. Canada did not achieve independence from England until 1866, so this could be considered a continuation of the Revolution War.

Jefferson, then a former president, said that it would be a piece of cake and just a matter of "marching" into Quebec. I guess it's that complacency that caused the invasion force to fail initially. In later attempts, the Americans did get far enough to burn some buildings in Toronto and blow up some forts. When the British sent reinforcements, it got too tough, so the Americans retreated.

Yes at the time we were all British, at least as subjects!

I know someone whose retirement plan is to pay off their mortgage by the time they retire, then sell the house and move to an apartment. They plan to live on the proceeds from the house sale plus the modest amount they will get from CPP and OAS.

Not a bad plan if they understand what their budget will be. I suspect they have not done that work. (Of course if the live in GVA/GTA they should be OK! Provided they move to the exurbs.)

But it was truly another war with the British, who did invade the US back and burned down the White House in 1814. Maybe the Canadians were just peace-loving colonists who got caught in the middle. I should remember to research this some more.

Yes my understanding was that they just wanted to be left alone (otherwise they would have occupied the White House).

I think most historians call it a draw. But it sure seems like a huge lost opportunity for the US not to have scooped up Canada. It was really there for the taking.

Yes the Canadians had no grandiose plans other than to avoid the rebels. They were referred to as the United Empire Loyalists.

Quite simply, the USA, the world's super power, would never allow another country to invade and conquer Canada. Thus, the USA is the only real threat, small as that might be.

Well it was not yet a superpower but yes that seemed to be the strategy.

Look, life is never fair. Some are born pretty, and tall, some ugly, short, and fat. What does one do? Complaining does not get one very far.

I would say that complaining is a good indicator of someone that will not encounter good luck.

Seems I'm swimming against the tide here, but 'dumb luck'

My friend describes his good fortune as dumb luck but he also earned his fortune (modest though it may be) in Saudi Arabia. How many forum readers would embrace that assignment as a way to build wealth?

Well, I think luck is "Yuge". If it was mostly your own efforts that count I must be some kind of "super" guy as I have so much more than the average retired person. I don't believe this. It's mostly luck, not all but mostly.

Yes I agree that luck when combined with opportunity defines how we make out.
- I went to Sarnia and worked for 3 years, mostly 16 hours a day, to make the project a success
- I went to London and accepted a sales territory that had not yielded any significant sales for 5 years. I managed to turn it around and got major orders from 4 big institutions in 2.5 years
- I went to Edmonton after it had been a desert of 5 years until they finally ordered just before I arrived. I had them double their order in 2 years against all odds plus many other smaller victories!
Every time everyone said why are you going there and I said because they will order more. No one believed me but they were all humbled when I was successful. They all thought I was lucky. I did not argue. I said it was better to be lucky than to work hard. BUT I worked hard!

 

[youbet]

Not sure why you're skeptical. DW and I have put together well into 7 figures with 403b plans while working for non profits. A university I worked for during the first part of my career had a 13.5% match, which was a good boost early on, while my wife's nonprofit employer had an 8% match. We bought low fee Vanguard and Fidelity funds.

Incidentally, throughout my career, I always felt I was more interested in retirement savings and that we had a higher savings rate than the people responsible for running the plans. Maybe that's one reason for the retirement crisis - the people in charge are themselves pretty lackluster at saving.

I'm skeptical just from personal experience. DW was a public school teacher in Illinois for many years. All the school districts here offer zero match and the 403b plans are administered by insurance companies which frequently offer only high ER, actively managed MF's. Most send generous kickbacks or pretend to provide some intangible benefit (such as "employee retirement counseling") to the school boards. Compared to my 401k with a private sector employer, DW's 403b sucked. I worked hard to sort through the BS to keep her fees reasonable and her investments in decent MF's.

Glad you got a good deal. I was unaware that some 403b plans offered a match. And congrats on getting yours up into the several million bux category! Even with DW maxing out her contribution many years, we never came close to that due to no match, crappy fund choices, etc.

 

[target2019]

I worked in a very large govt. office where everyone knew exactly everyone else's salary due to a standard classification and pay system, so it can't be attributed to luck when the person who made the exact same salary as me was living cheque to cheque when I wasn't. Other than a few unfortunate circumstances, most of the difference came down to choices made over the years.

That reminds me of this site, where you can look up federal employee salaries and other interesting data.
Data Universe - Public Records Search : Find it all in one place
It is called Data Universe. It excluded DoD employees, I think.

 

[samclem]

Two students get an 'A' on an assignment. The external Locus of Control student says "The teacher must like me". The internal student says "My study and preparation paid off".

Or as we hear so often, ask two students what they got on a test:. It will be "I earned an 'A'", or "She gave me a 'C'." Very seldom "I earned a 'C'.

 

[LOL!]

Yea, I see what you mean... and I will agree with you... in reality I was the only person who actually got to see the individual balances and holdings.... but I was kinda HR at the time so people would come to me to ask questions etc and I would have to be able to look at their accounts... we did have an outside person do payroll so I would not know 'salary', but I had to get that info in order to do some gvmt reporting, so I really knew...

The boss could look at general balances of funds and the total.... he was never interested even for that info... but if he had asked for individual info I would have given it to him..... but, nobody else in the company....

I was a fiduciary for our corporate 401(k) plan. Each year the fiduciaries got a report with dot plots that were quite interesting, but anonymized the employees:
BalanceRange vs SalaryRange
ContributionRange vs SalaryRange
Investments vs SalaryRange
Asset Allocation vs AgeRange

There was no real way to connect any dot to a particular person except perhaps the oldest person in the company. There was no correlation of "Balance vs Salary" because new hires always had a low balance no matter what their salary. There was no correlation of "Asset Allocation vs Age" because as folks got older, they could have assets elsewhere, so there was no "full picture" of anyone's portfolio. Even "Investments vs Salary" meant nothing because an employee's spouse working elsewhere could have a completely different set of investments. The same could be said for "Contributions vs Salary" because maybe the employee decided to contribute a lot of money elsewhere.

One could see real live behavioral finance in action.

• One of the highest paid employees did not contribute at all. I don't know who that was.
  
• A few employees were 100% money market fund even one with a very large balance.
  
• Some of the oldest employees were 100% S&P500 index fund.
  
• All the young people invested in a target retirement fund because that was the default when they became employed, so they never changed it.
  
• There seemed to be a group of employees who switched to the fund that had the best performance the past year.
  
• There were employees who split their contributions evenly among all the funds offered, so if 20 funds, they contributed 5% to each one.

I can look at the Form 5500 for my spouse's 401(k) online. I can see that she is probably one of two employees out of 300+ that invests in the only index fund her company because the dollar amount reported to be in that fund is about equal to my spouse's total value in her 401(k). It is pretty clear that almost no one else has any money in this index fund. An external peruser of the Form 5500 would not know her S&P500 index fund balance and might think quite a number of people used that fund.