36% of all Americans have less than $1,000 saved for retirement

[ellie05]

There is no magic formula for some early twenties might be a good time to save for other it might not. To people that decide not to have kids they can save more in their 30-40 when they make more money and have better paying jobs. For people that decide to have kids early 20's after 40 might be the time that they can put more into savings when they kids are away from home.

For us it might not be now, it might be when DH retires from the military and we have 3 paychecks coming and we might chose not to have children.

And to some it might not even matter how good they were at savings for retirement because they might never get to enjoy it.

 

[crisi]

There is no magic formula for some early twenties might be a good time to save for other it might not. To people that decide not to have kids they can save more in their 30-40 when they make more money and have better paying jobs. For people that decide to have kids early 20's after 40 might be the time that they can put more into savings when they kids are away from home.

For us it might not be now, it might be when DH retires from the military and we have 3 paychecks coming and we might chose not to have children.

And to some it might not even matter how good they were at savings for retirement because they might never get to enjoy it.

There is a magic formula - its called compound interest. The sooner you start to save and the more you save early, the more that magic formula will work to your benefit. You won't make up that difference if you have kids in your 20s and start saving when you are in your 40s - time will not be on your side.

 

[texaslady22]

I'm an educator. I pay 8% of my salary for my retirement and my college pays 12%! So that's 20% of my salary going to retirement. I'm only 28 right now and I already have more than 1x my salary saved up. We're barely making it but I think I'll get to retire!

 

[beck02]

My sister has little in a retirement account, but don't confuse her with a non-saver. She's changed jobs every 3 years or so, and usually, due to wait periods, wasn't always eligible to contribute to retirement. However, she has a huge chunk of change outside of retirement, in a regular stock market fund. Currently, whatever she earns on it would be taxed lower than income (although that can always change), and SHE has control of the money. Not some company that will allow another investment company to charge high management fees & do a poor investment job, or if the company goes under & robs all the retirement accounts, it doesn't matter to her. This is more typical of most american jobs any more--lots of moving around, and a high probability pensions and/or retirement funds might not be available when you retire, so some experts recommend only doing the mimum to get the retirement match then investing in just a regular stock market account.

I also know a professional stock broker, who's retirement plan is to work until he dies (he's in his late 60s now). He has next to nothing saved up, and makes well into the 6 figures. Like previous posters, I fear other's lack of planning, free-spending lifestyle will result in me getting less money simply because I did plan & save more (and had luck too)

 

[ellie05]

There is a magic formula - its called compound interest. The sooner you start to save and the more you save early, the more that magic formula will work to your benefit. You won't make up that difference if you have kids in your 20s and start saving when you are in your 40s - time will not be on your side.

My point to that is that to say you can save more money in your 20s vs later it really just depends on every person situation.

 

[crisi]

My point to that is that to say you can save more money in your 20s vs later it really just depends on every person situation.

1) you have no crystal ball for your future. You don't know what your future situation will be. You could decide not to save because you want to have your kids young - they'll be out of the house by the time you are in your mid-40s, then you can sock it away. Except you could find yourself out of work and then underemployed in your mid-40s or 50s for large amounts of time. Or your kids could never leave the next - and bring in another generation - making savings tougher.

1a) Yes, you could die young and then you wouldn't benefit from your savings - but I'm assuming that there are other people in your life - in my case, if I die young, my spouse will benefit from my retirement savings. My children at this point. Once my children get a little older and are independent and my husband's own savings will cover his needs, wills will be rewritten so if I die young my retirement savings with go into educational trusts for my descendants (and barring that, the descendents of my sisters). I've been very fortunate in my life to have benefited from inheritance - people who didn't think they needed to spend down every penny before they passed on. I HOPE to pass that on.

2) Compound interest is an amazing thing. Money you save when you are in your twenties will be turning into more money for you when you are 50.

 

[lisalis]

I think a big key to saving for retirement is buying a home considerably less than what lenders say you can afford, so when you encounter the increased costs of living and or kid expenses you don't have to cut into your savings amount.

 

[disykat]

I think a big key to saving for retirement is buying a home considerably less than what lenders say you can afford, so when you encounter the increased costs of living and or kid expenses you don't have to cut into your savings amount.

ITA! In general, living on less as a rule is the way to gain assets.

 

[disykat]

I disagree with you about saving a ton in your twenties. While you might not have formula or dippers, but you have student loans, you are just starting "real" jobs, trying to get a reliable car, etc. The job market has changed drastically even college graduates get pay very little, yet more debt from college. We are in our mid twenties and while yes we have been able put a good amount (for our age) in retirement we still not putting the 15% we should be putting for the past 2 years. And as you said sometimes no matter if you were financially responsible things happen that drain your savings this is what happen to us. We literally had everything that could have gone wrong all at once. Car trouble (both cars), A/C problems, dog 1 needed surgery on ACL, dog 2 gets rare cancer, Grandparents on both sides got really ill so 2 emergency trips (thankfully they both made it), and the list goes on and on. Literally the smallest bill we got form all the issue in the past 2 years was $1500 . we had 6 months of savings and another savings for the dogs, but that drained so quickly. We cut expenses but we still got into some debt. We are almost done paying it off thankfully we haven't paid interest because we got a credit card with 0 interest for the first 18 months. But we had to cut the 15% going into retirement to be able to take care of life happening right now.

We have friends and sibling in their twenties now and they are in similar situations not one is putting 15% into retirement not because they are spending money in martini bars, but truly because they just can't afford it.

Your circumstances sound quite fortunate financially and like you've planned well, but simply had some setbacks.

When I was in my 20s, dogs and emergency trips simply were not considered affordable for me, so I didn't do them. Because I was still at an income level that was "just starting out," I pinched my pennies to fly to visit my grandparents, knowing emergency trips wouldn't be an option. I felt lucky to be able to see them when I did. At that time, flying across the country was a big deal and weddings, funerals, etc. of people who lived far away were often just missed.

I'm not saying it's bad to prioritize those things, they are good things, simply that priorities are quite different now. Travel, pets, furniture that wasn't hand-me-down, etc. were things for people that had graduated from "just starting out" and had "enough to live comfortably." In my world, living comfortably involves having some savings. In my 20's I wasn't necessarily worrying about retirement but I definitely worried about "getting ahead" which meant having savings and some plans for my financial future.

I had a higher level of "affluence" than my parents did when they were just starting out. My kids will have a different level of affluence then I did. It's just the way the world works. That said, I think our society in general expects to live in a way that requires more output of money, so regardless of income, they spend!

I just read an article that described it as being "wealthy poor." We have lots of things and lots of experiences, but we are (in general) living longer and needing more money in retirement than ever before. Planning is crucial. I don't think anyone advocates saving it all and having no things or experiences, but in general that's not a problem our society is facing!

 

[tvguy]

I think a big key to saving for retirement is buying a home considerably less than what lenders say you can afford, so when you encounter the increased costs of living and or kid expenses you don't have to cut into your savings amount.

And not moving every 7 years like the average American does can save you thousands. One thing if your job requires it, but the people were bought our house from had never stayed in a house more than 4 years, and all 8 houses they had owned in 30 years were within a 5 mile radius. They just liked to move.

 

[MrsPete]

This reminds me of a conversation I had with one of our Deans the other day -- she was commenting that students and families are complaining about the cost of education going up, but that one of the primary things driving cost is that they also demand a middle-class standard of living while in college. Shared rooms and bathrooms down the hall aren't cutting it.

Yes, this makes perfect sense.

But let's add this: Our concept of middle-class life has changed. Larger houses, personal cars for everyone over 16 years old, fast food breakfast biscuits most mornings, purchased lunches and dinner out several times a week, etc.

 

[MrsPete]

So your saying the average 10% increase in tuition since 1980 is due to dorms with single beds? Seriously

We attended a college Open House yesterday. When our tour guide took us through the classroom buildings and the library, few people asked questions, but when we hit the residence halls, questions a-plenty:

- Are the buildings air conditioned?
- Do the suites have maid service to clean the in-room bathrooms?
- Where is student parking?
- Is food service open all night?
- Can my student bring her own mattress from home?
- What help is available on move in day?

Okay, they asked some good questions too, but many of the questions I thought were pretty stupid. The group also asked a bunch of questions that I could've answered simply because my kid and I looked at the website before we toured. I asked questions about dorm security and the details of riding the bus, and the group in general wasn't interested in those topics.

 

[MrsPete]

. . .
And we are saving because we DO understand how compound interest change but that doesn't change the fact that we are not saving the 15% we should. The reason we don't have children now because it will be very difficult to save. Many people in DH rank have 4 children already.

As Eliza had pointed out most of the people she talked in her 20's can't put the 15-20% they should be putting for retirement for a number of reasons. As far as our friends and family in their 20's no one is putting 15-20% in retirement because they can't afford to not because they .

You're not understanding my point: if saving is a priority, you save first, then decide whether you can afford the second car, the pets, whatever else. If you can't afford to put the money into savings, then you really can't afford the car, the pets, whatever else.

 

[MrsPete]

Which is part of the point - if you can't set aside something - not 15% or 10% but 3% or $20 a week or SOMETHING when you first get out of school, it DOESN'T get easier. Maybe you make more after a few years, but your expenses tend to escalate. Early marriage - two incomes, no kids - can be a sweet spot for a lot of people - but they often increase their expenses. Once kids come, its those kid expenses, and then you find yourself going to grad school at night to finish your MBA to compete - more bills. At some point, student loan bills get paid off, but they are often simply replaced with other bills.

AND its why you want to be careful about letting your kids take on the student loan monster. It decreases their opportunity to save when they get out of school - or do a lot of other things - buy a house, start a family.

Excellent advice.

 

[MrsPete]

There is a magic formula - its called compound interest. The sooner you start to save and the more you save early, the more that magic formula will work to your benefit. You won't make up that difference if you have kids in your 20s and start saving when you are in your 40s - time will not be on your side.

Yep, basic math doesn't lie. If you start early with a small amount of money each month, it adds up to a comfortable retirement. If you wait, you must deposit substantially more each month, which isn't possible for everyone -- in fact, it's not possible for most people.

The magic ingredient is time.

 

[ilovemk76]

Location is huge difference to in housing costs.
My wife's grandfather lived in this town, Albion, Illinois.

Here is a nice started house in a nice neighborhood for under $30k

http://www.zillow.com/homedetails/475-E-Walnut-St-Albion-IL-62806/119387900_zpid/

http://www.trulia.com/real_estate/Albion-Illinois/community-info/

This town does not have a household income of $120K.

In every category, they are below their state.


If it only took 3 months of your parents salary to buy a house, why did it take until your father was 40 to have the cash to buy that house?

Taking a 15 year loan at 25 would have resulted in the same paid for home at 40, plus they would have not paid to live somewhere for 15 years and gotten a income tax right-off on their mortgage.

 

[AZMermaid]

- Are the buildings air conditioned?
- Do the suites have maid service to clean the in-room bathrooms?
- Where is student parking?
- Is food service open all night?
- Can my student bring her own mattress from home?
- What help is available on move in day?
.

Most of these are werid- I agree, but I am going to guess it wasn't AZ State with the first! When it is 110 in August and September, AC is not a luxury, it is necessary. The school that I teach at turns the AC off at 4:00 and by 4:10, it is unbearable, maybe 4:30 with lots of fans.

 

[tvguy]

http://www.trulia.com/real_estate/Albion-Illinois/community-info/

This town does not have a household income of $120K.
Okay, I'm confused, I never mentioned household income.

In every category, they are below their state.
Sometimes you have to look beyond statistics. Great small town, with Champion has a huge employer, low crime, great schools, great community.

If it only took 3 months of your parents salary to buy a house, why did it take until your father was 40 to have the cash to buy that house?

My parents had just gotten married. I guess as a single guy he had no need for a house before then. My mom had been in town 2 years before they married. She was a nurse and due to a shortage of nurses after world war two, hospitals had to including housing for single nurses as part of the job

Taking a 15 year loan at 25 would have resulted in the same paid for home at 40, plus they would have not paid to live somewhere for 15 years and gotten a income tax right-off on their mortgage.
Doesn't apply since they weren't married 15 years before.

.

 

[ceecee]

1)
2) Compound interest is an amazing thing. Money you save when you are in your twenties will be turning into more money for you when you are 50.

Compound interest was more amazing in my 20's, not so much in today's market. That's why it is so important to start saving young.

 

[crisi]

Compound interest was more amazing in my 20's, not so much in today's market. That's why it is so important to start saving young.

It applies to the stock market as well - which still has an 8-10% return. If you have your retirement money invested in treasury bills, yeah, not too much gain.