What some think about their retirement.

[rodi]

My parents had a completely different mindset. Dad had only four years of primary education in a rural one-room schoolhouse. Mom had a high school education, but in an overcrowded, rundown school system. Yet they were both anxious to improve their lot, both for themselves and their kids. As soon as they were able, they started to dip their toes into the stock market. They got burned in the beginning by believing the "tips" they got, but quickly learned to do their own research and invest in safer vehicles. By the time my Mom died, she had enough left after several years of very expensive assisted living and memory care facilities to leave me over 200K.

My parents were very similar to yours. My in-laws were the opposite. They mastered (or MIL did, anyway) the LBYM mindset and saved diligently. But they never trusted the stock market. I don't think it's that uncommon in folks who grew up in the depression. Fortunately, interest rates paid by banks were decent. My MIL recently entered memory care. FIL spent about 8 months in a nursing home before passing. Yet there is still plenty of money to pay MIL's bills for many years to come.

There's more than one way to skin a cat. Your parents were probably the outliers for their generation and income group.

 

[RAE]

It amazes me that once most people hit their mid-fifties they realize they are way behind the curve and will most likely not retire until they are seventy or older.

It's sad in a way but they made their choices.

This is very true, but on the flip side of the coin, it is also true that young people today are not earning the same salaries that many of us earned over our lifetimes. I do believe that you can save at least some $$ for retirement on even a fairly low salary, but it is certainly tougher to accumulate the amount you will need in retirement when you are making $12-15/hour, with only a 401K with no employer match, and no good health insurance. I'm fortunate to have a pension, and good health insurance in retirement, but those things are becoming increasingly rare these days. The world is very different for young people these days than it was when I got out of college. I was able to get a decent job, earn a decent wage, and qualify for a pension before I retired. Yes, I also saved a significant portion of my income to supplement the pension, but one of the reasons I was able to do that was because I did earn a fair wage. So, let's not condemn everyone who find themselves in a situation where they have not saved enough to retire. The way things are today, it's not too hard to predict that there will be many more people in this situation in the near future than there are today.

 

[48Fire]

I've seen some corporate DB plans that accrue 2% of pay times years of service (depending on age at hire). That would provide a "decent" benefit. Of course it's used as a huge attraction tool.

That's what mine was. Lucky enough to cash in on it.

 

[frayne]

This is very true, but on the flip side of the coin, it is also true that young people today are not earning the same salaries that many of us earned over our lifetimes. I do believe that you can save at least some $$ for retirement on even a fairly low salary, but it is certainly tougher to accumulate the amount you will need in retirement when you are making $12-15/hour, with only a 401K with no employer match, and no good health insurance. I'm fortunate to have a pension, and good health insurance in retirement, but those things are becoming increasingly rare these days. The world is very different for young people these days than it was when I got out of college. I was able to get a decent job, earn a decent wage, and qualify for a pension before I retired. Yes, I also saved a significant portion of my income to supplement the pension, but one of the reasons I was able to do that was because I did earn a fair wage. So, let's not condemn everyone who find themselves in a situation where they have not saved enough to retire. The way things are today, it's not too hard to predict that there will be many more people in this situation in the near future than there are today.

Good point and I agree with what you are saying about conditions and many jobs today. My point is that those in their fifties today are not from this same era but one more like the era many of us came through. I'm not condemning all just making a point that some who had the opportunity to save and invest just never took advantage because they wanted it all today and never thought longer term.

 

[Senator]

When I was a Section 8 landlord, my tenants were all retired by around age 20. When my older tenants had kids, they got their voucher at 18 as well. It was like a proud family tradition. That is unless the kid went to prison.

It doesn't take much to not work, some people would consider that retired. It certainly doesn't take 15 years of working. It takes more to have financial freedom.

 

[CaliforniaMan]

A friend from high school recently confided in me that he will probably never be able to retire, just have to keep working forever and collect what he can from SS.

Now this really floored me because he is highly educated and intelligent and ran a successful business. I just naturally always assumed he must be doing well. He said that his divorce and subsequent problems sucked him dry.

Another college friend is in the same situation. His family net worth was far greater than mine, he is very creative and intelligent, but also told me he will have to work forever, expected inheritances never materialized.

The father of another friend, who owned their own successful company, a man with many patents and well respected in his field, made a lot of money in his life, flew his own plane, etc. Eventually he and his wife had to live off only what they got from SS and a reverse mortgage on their home.

All these people made a lot of money in their working life. In some ways maybe they thought the good times would keep rolling, and they could always make and save money later.

One does not have to be ignorant or uneducated to "forget" to save enough for that seemingly far off retirement.

Makes me sad.

 

[hnzw_rui]

A friend from high school recently confided in me that he will probably never be able to retire, just have to keep working forever and collect what he can from SS.

Now this really floored me because he is highly educated and intelligent and ran a successful business. I just naturally always assumed he must be doing well. He said that his divorce and subsequent problems sucked him dry.

If I ever had any plans of getting married, the financial disaster stories I've seen or read about due to nasty divorces will probably cure me of that ailment really quick.

 

[Redbugdave]

A friend from high school recently confided in me that he will probably never be able to retire, just have to keep working forever and collect what he can from SS.

Now this really floored me because he is highly educated and intelligent and ran a successful business. I just naturally always assumed he must be doing well. He said that his divorce and subsequent problems sucked him dry.

I have seen that with a few of my friends, too. They will never retire as we know it. Some people go through two or more divorces. Somehow they survive. I guess inheritances, being rich enough already, or a new partner can help with the financial burden.

 

[HFWR]

Most people ARE from outer space and do not have a clue [-]about retirement savings, IRA accounts, 401's, etc. I simply do not understand how people, (some highly educated), are so ignorant about saving, the idea of compounding interest, and what it takes to really retire. I understand with the older annuity plans that are going away very quickly, you don't need to know anything, really.

According to the article below from the Motley Fool, most people have around $100K. That's peanuts! It will be a rude awakening for the ones that realize they can't retire and there is no Retirement Fairy out there. I planned for more than two decades to retire and put away around 30 percent of my salary to do it. We lived below our means...and still do, but have loosened up some. It's a lifestyle, you know.

I have several doctor friends making big money, in their 60s and cannot even think of retiring. Money to them is like crack. They cannot fathom how an average guy can do it. We are human beings and supposed to be above the animals living in just the present. But, with most people that is not the case.

The Typical American Has This Much in Retirement Savings. How Do You Compare?

Sorry for the rant. I just smile when I see everybody slaving away and I no longer have to.[/-]

fify...

 

[athena53]

If I ever had any plans of getting married, the financial disaster stories I've seen or read about due to nasty divorces will probably cure me of that ailment really quick.

My first husband was a financial disaster; fortunately I got out with no responsibilities towards him and he agreed to "let" me keep all the invested assets in my name (purchased with whatever of my earnings were left after paying most of the bills) in return for not paying him child support. Second husband has been a win-win: a good partner, a spectacular stepfather, and when he retired at age 65 after we married, we pretty much banked his SS, as well as the equity in his house after he sold it since I worked for another 12 years. So, the right marriage can be a financial benefit.

But, to get back to the OT: Yes, I see it on FB all the time. One friend, a retired nurse, once referred to the "meager" savings she and her husband had, but posts with questions about her iPad and iPhone and invites people to swim in their above-ground pool. When one of our classmates turned 62 she asked him if he was going to file for SS. Totally different example: our local paper used to have a financial writer who wrote about retirement. One person wrote and asked him if, instead of talking about people who retired with $500K in assets, he could give advice to those who would consider themselves "blessed" to have $50K or $100K saved. His advice: "Keep working".

 

[Mulligan]

I'm sure you're relating that incident accurately, but it's still hard for me to wrap my mind around it.



My parents had a completely different mindset. Dad had only four years of primary education in a rural one-room schoolhouse. Mom had a high school education, but in an overcrowded, rundown school system. Yet they were both anxious to improve their lot, both for themselves and their kids. As soon as they were able, they started to dip their toes into the stock market. They got burned in the beginning by believing the "tips" they got, but quickly learned to do their own research and invest in safer vehicles. By the time my Mom died, she had enough left after several years of very expensive assisted living and memory care facilities to leave me over 200K.



What went wrong?

How did our society manage to give the current youthful generations the idea that saving and LBYM is not still right?



The last thing I want to do is turn this into a political argument, but I honestly wonder. I don't understand it.

I believe the reasons below have contributed greatly to the problem.
1) More sophisticated marketing which creates "needs" 2) Increased ease of consumer credit 3) Need for instant gratification


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[daylatedollarshort]

I believe the reasons below have contributed greatly to the problem.
1) More sophisticated marketing which creates "needs" 2) Increased ease of consumer credit 3) Need for instant gratification

Those are dangerous combinations. Billions of dollars go into advertising to get us to buy a lot of stuff we do not need. And it keeps many on a work-spend-work treadmill they cannot break free from.

I picked up a book awhile back that was a reproduction of a Sears catalog from years ago. It was kind of interesting to flip through as it really had many of the basic things people would need to live a sustainable lifestyle, even today, compared to all of the zillions of products on Amazon alone.

 

[big-papa]

My eldest son once looked at the possibility of saving $100k by age 30, then never needing to save again since it would grow at 10% per year compounded until 65 when he could retire on his current salary. I pointed out that he may have unexpected costs over the next 40+ years and the market does not grow at 10% per year every year! He since has figured out that a more reasonable plan is to continue to save aggressively and possibly retire early or at least be in a position to retire early or eve take a sabbatical at some point in hi career. His friends are planning on living on their SSI and meager 401k when they turn 65. How sad is their retirement going to be!

Similar story - I had a co-worker who was convinced that he only had to save $1M by his early 30's and then could retire on the interest. He did, but guess what - that was in the early 1980's with sky-high interest rates. 5 years later, back to work.

 

[karen1972]

I have a different perspective on this. Like the iPhone someone mentioned, if you live out in the country, a landline can cost up to $35/month because of the monopoly they are allowed to have vs. you can go down and get a $35/month plan with a "free" iPhone from the cellphone company, so its a no brainer where you spend that $35.

Just because you spent $600 on a coach purse doesn't mean the one I carry cost me $600 vs. the $30 I paid for one on a facebook rummage sale.

I'm just saying the other issue is that some people are really good at pretending to have wealth that don't. If you go to discount clothes stores and rummage sales and spend the time you can live a "good life" on relatively little money.

So maybe the person at the counter doesn't have a lot of money, but maybe she doesn't need it. Maybe she only worked 15 years because she was busy raising a family before that and maybe got a divorce.. who knows.. maybe she is retiring now to take care of her elder parents and they will merge their money to live a comfortable lifestyle.

I think part of the issue in "BOTH" directions is people have a perception of what things cost and what a "standard" lifestyle looks like and they are so drastically different. The person who makes $100k/yr can't afford a home because they can't find one that has a decent kitchen with stainless steal and granite and the person who makes $40k/yr is bragging they just bought a home with newer cabinets and laminate floors and the person making $20k is just happy they bought their fixer upper for $50k and almost has it paid off and dream of the great life will be when they don't have that $350/month mortgage payment...just think what they could buy with $350 extra each month.

Its all perception and where you fit on the scale. I retired early because I don't have huge expectations, I don't want to live in a huge house, or spend money on toys. I just want to be able to hike all day which is pretty cheap. Most people would look at how much I saved and say "that's not enough".

 

[Big_Hitter]

Some research on line indicates employer offers a 6% match up to $18,000, which is almost 75% of a high end clerks salary, and a 'retiree discount of 10%' on purchases. The clerk indicated her husband was retired with a 'very small amount' each month.

My gut feeling is they will be OK, but will draw heavily on state and federal benefits for based on their income bracket.

that match is on the maximum deferral, not the pay - didn't she say she couldn't afford to defer 15% of pay?

 

[Animorph]

I think if you tell most people who are not already saving for retirement, at any income level, to start saving 10% to 15% it seems like an impossible amount. Most of us wouldn't like to cut our expenses by an additional 15% either. That would cut most of my travel budget.

People survive just fine on a median income. So people making the median plus 10% ought to be perfectly OK with saving 10% for retirement right? Doesn't seem like that is happening. Not enough income is the excuse, but no priority for retirement is the problem.

I told my kids to save 15% of gross pay as soon as they started working.

 

[CaliforniaMan]

I think if you tell most people who are not already saving for retirement, at any income level, to start saving 10% to 15% it seems like an impossible amount. Most of us wouldn't like to cut our expenses by an additional 15% either. That would cut most of my travel budget.

People survive just fine on a median income. So people making the median plus 10% ought to be perfectly OK with saving 10% for retirement right? Doesn't seem like that is happening. Not enough income is the excuse, but no priority for retirement is the problem.

I told my kids to save 15% of gross pay as soon as they started working.

+1
I think you nailed it exactly.

 

[MichaelB]

I told my kids to save 15% of gross pay as soon as they started working.

That's the key. I gave the same message to mine. That's why it makes so much sense to have a default 401k contribution that needs to be opted out, not it.

FWIW I think more young people are saving for retirement today vs the same age group a generation ago.

 

[MRG]

It's sad to see the amount of financial illiteracy in this thread. I w*rked in the financial services industry, it's no different. Many folks had Series 7 licenses to sell securities, but couldn't manage their own finances.
Some of us FIRE'd, but I have friends that will never be able to retire. Sad when I hear stories of the stupid decesions they have made.

 

[Rustic23]

She did not say, but. She indicated she was not putting that much in.


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[daylatedollarshort]

Our oldest kiddo lives a pleasant life now as a college student on budget. I've suggested spending $1K more a month post graduation and banking the rest towards FI, and then being able to live a work optional life at an early age, similar to the advice in the video link below from Robert Shiller to his students:

The investing golden age may be over: Robert Shiller | Watch the video - Yahoo Finance

 

[hnzw_rui]

I think part of the issue in "BOTH" directions is people have a perception of what things cost and what a "standard" lifestyle looks like and they are so drastically different. The person who makes $100k/yr can't afford a home because they can't find one that has a decent kitchen with stainless steal and granite and the person who makes $40k/yr is bragging they just bought a home with newer cabinets and laminate floors and the person making $20k is just happy they bought their fixer upper for $50k and almost has it paid off and dream of the great life will be when they don't have that $350/month mortgage payment...just think what they could buy with $350 extra each month.

*sigh* We're kinda in the $100K household gross income but can't buy a house category. It's a bit hard when move-in ready starter SF homes go for $600K minimum. Another problem is realtors tend to buy the fixers with cash and then flip them for double the price.

 

[marko]

What went wrong?
How did our society manage to give the current youthful generations the idea that saving and LBYM is not still right?

.

LBYM has been overridden by YOLO. That's how.

Got a guy on my street just bought a $250,000 boat, wife drives a nice new Mercedes. They keep these things until they get repo'd; I suspect he'll turn the boat in after the season so he'll have had a nice summer with it for what might amount to four payments.

He's on his third bankruptcy/foreclosure; doesn't look worried.

Thinking about RE? No problem! He doesn't have a job now and hasn't for all the time I've known him!

Maybe he's onto something.....the road to RE seems to have many avenues. I'm being snide of course.

 

[Gumby]

I believe the reasons below have contributed greatly to the problem. . . 3) Need for instant gratification

This seems like a universal human characteristic that has existed at all times and places, so I think the modern American phenomenon of inability to save for retirement must be attributable to other things unique to our present culture, economic system and/or government.

 

[karen1972]

This seems like a universal human characteristic that has existed at all times and places, so I think the modern American phenomenon of inability to save for retirement must be attributable to other things unique to our present culture, economic system and/or government.

I think its still that, but now add easy credit cards (no cash needed any longer) and how different shopping is today. You have access to see and buy a million things at your fingertips. Ie so if I never saw something I wouldn't know I "NEEDED" it right? you only had 3 TV channels and only so much ad space. I think when you watch TV today, its also very different.. when I watch older tv shows, they all live in a "normal" house and people are actually doing real jobs (folding laundry while they talk..etc).. however now if you turn on TV, every single person lives in an expensive house, with expensive items, with the fanciest cars, the best gadgets.. so all this has become "standard" expectations.. so if I don't have what is shown on TV, then I must not be middle class thus I'm poor.

Unfortunately I also think things like Super Walmarts where there is just an overload of everything in your face makes that "impulse" to buy NOW even stronger. Its not like you see something in a magazine and wonder about it and think well I wonder how big it really is or what quality it is or does it really do A/B/C.. maybe i'll order it, but they only take check so I need to wait till pay day.. its right there in the store in front of you.. and you can have it this second. you don't even have to have the money to buy it because you have a Credit card and you can pay for it when you get your next paycheck.

So what is different, our brains are on overload from marketing and we have easy access to credit and we have very limited impulse control.. made worst by the devices we use every day feeding that lack of impulse control.