Great Opinion piece on the coming Retirement Crisis.....

[Ginny Favers]

Why are you switching jobs so often? Most people I know who do that are doing that because they are climbing a corporate ladder. And every time they move they are getting a sizeable pay increase. That translates into being able to put more money away, not less. Granted, it takes some discipline if the companies you are moving to don't allow contributions for a year to do your own saving for a year, but even that isn't hard now with automatic transfers at the bank.

Not us-- layoffs due to bad economy or company restructuring, changing jobs because of a 3 hour commute, moves to help family. I am actually making just as much now as I made getting out of college. Companies don't keep employees that long anymore. But we have been saving in between jobs... just not as much as if we'd been working steadily at the same companies.

I also am self-employed at another full-time job, and all the money I make from that job (and it's just as much as I make at my other job), goes into our IRA. Seeing what we're supposed to have, I STILL don't think it'll be enough.

 

[nunzia]

Those pensions were not sustainable now that people are living into their 80's and 90's and have put many corporations out of business (including one Fortune 500 company that my husband worked for). Not to mention what those pensions have done to the taxpayer, in particular school districts, due to teacher pensions. Look at Scranton, PA who had to file bankruptcy because keeping up wage, retirement and healthcare commitments that it no longer has the revenue to pay off.

Cities going broke..just the tip of the very huge iceberg coming up.
We do pretty well..we don't make much more than the median but we are frugal. We have also had some inheritance that we socked away..we are still nowhere near that magic ridiculous high number, though. We are of the age where we should still get SS and since we live debt free (house will be done in a month or so..whoop!) can easily live on that and wil hopefully take no more than 4% a year out of our retirement accounts. The big variable is health care..there is no way we can plan for that looming monster.

 

[jgreco]

I had a small business that offered matching 401K. I even had the 401K company come in to do the "scared straight" program to get people to participate. My husband and I were the only ones to participate. I get that the median age of the employees we had was early 20's..but their answer- I'll just get Social Security.

 

[chalee94]

I'm not sure if there's another country that has a voluntary system like we do. Clearly, the Europeans don't want it. They're happy paying very high taxes to have their governments care for them.

this is a good idea...until you realize that your government (state or federal) is composed of individuals with the same kind of want-it-now mentality as the culture at large. as we're finding out in so many cases now, it's a lot easier for government to make promises than to pay for them. paying more taxes only works if the money is spent/saved as promised rather than squandered.

 

[Colleen27]

Our mortgage rate was even 18.50% when we bought our house so it can be done! And no, we are not at the high end of middle class - very much in the middle and many of our years starting out we were in the very low end of the bracket.
But I've never had a manicure or pedicure, don't have a smart phone or laptop, buy basic cable, color my own hair etc. It's a lifestyle that many don't want to commit to.
A co-worker who has nothing saved (and has a very similar family income as mine) gets her mani-pedi every week, bikini wax, highlights, tanning etc. and when I suggest doing those things yourself and putting the money in a 401K, she says $20 here or there won't help. Oh, yes it does! $20 or $30 every week (especially if it's matched) makes a huge difference when multiplied by 40 or 50 years! There are a lot of people who just want it all, but don't want to sacrifice anything!

And a lot of people only want to see the "grasshoppers" and not the "ants" who just don't have enough left. I've had my nails done twice in my life (senior prom and my wedding), don't have a smartphone or laptop, have basic cable, and quit coloring my hair 10 years ago because even DIY I didn't like the bite it took out of our (then very tight) budget. We're still never going to save a million dollars. Maybe if we stopped saving for the kids' college, quit traveling, cut back on the kids' activities and our family outings (with 5 of us, even going to the zoo costs $100), and lived entirely to save for retirement we might get to 2/3 of our projected retirement needs.

I think there's another difference between you and some of us on the more pessimistic side of things... I just don't see income growth factoring in. DH just took a new job making the same wage he made in 2000 and that was a big raise over what he's earned in recent years. Still, the new place doesn't do COL increases and he's near the top of the ladder as far as advancement goes so I expect his income to remain static for the foreseeable future, not grow even enough to keep pace with inflation much less really get ahead. But for a blue collar guy with a construction background he's doing better than most.

 

[eliza61]

And a lot of people only want to see the "grasshoppers" and not the "ants" who just don't have enough left. I've had my nails done twice in my life (senior prom and my wedding), don't have a smartphone or laptop, have basic cable, and quit coloring my hair 10 years ago because even DIY I didn't like the bite it took out of our (then very tight) budget. We're still never going to save a million dollars. Maybe if we stopped saving for the kids' college, quit traveling, cut back on the kids' activities and our family outings (with 5 of us, even going to the zoo costs $100), and lived entirely to save for retirement we might get to 2/3 of our projected retirement needs.

I think there's another difference between you and some of us on the more pessimistic side of things... I just don't see income growth factoring in. DH just took a new job making the same wage he made in 2000 and that was a big raise over what he's earned in recent years. Still, the new place doesn't do COL increases and he's near the top of the ladder as far as advancement goes so I expect his income to remain static for the foreseeable future, not grow even enough to keep pace with inflation much less really get ahead. But for a blue collar guy with a construction background he's doing better than most.

Which definitely plays into your ability to save Colleen, I think the "people are living la vida loca mantra" is an extremely simplistic view on the problem. I hardly believe that a full 70% of the working public is failing to save because they are getting their nails and hair done.

Food prices are projected to jump 10% in the near future due to this horrible summer weather we are having. The bottom line is that if your salary is stagnant, rising food prices, gas prices, etc etc do make a substantial hit to your ability to save. I'm not even going to touch college tuition or health care with a 10 foot pole. those cost has risen darn near by the power of 10

Case in point my dh has to take some thing called Nueprogen shots. one to two shots a week. medicine is 100 bucks a pop AFTER insurance. now we do have a budget and emergency savings but the fact of the matter is this is now 400-800 dollars a month that has to be accounted for. long term will this effect some ones ability to save? sure it could.

 

[disney1990]

Our mortgage rate was even 18.50% when we bought our house so it can be done! And no, we are not at the high end of middle class - very much in the middle and many of our years starting out we were in the very low end of the bracket.
But I've never had a manicure or pedicure, don't have a smart phone or laptop, buy basic cable, color my own hair etc. It's a lifestyle that many don't want to commit to.
A co-worker who has nothing saved (and has a very similar family income as mine) gets her mani-pedi every week, bikini wax, highlights, tanning etc. and when I suggest doing those things yourself and putting the money in a 401K, she says $20 here or there won't help. Oh, yes it does! $20 or $30 every week (especially if it's matched) makes a huge difference when multiplied by 40 or 50 years! There are a lot of people who just want it all, but don't want to sacrifice anything!

Sorry, but I don't do those things either. Never had a smart phone, never had a manicure or pedicure, color my own hair and don't eat out. Our first mortgage was 19% and we refinanced and paid our house off in 15 years. Always paid into 401K, but far from ready for retirement.

 

[crisi]

Which definitely plays into your ability to save Colleen, I think the "people are living la vida loca mantra" is an extremely simplistic view on the problem. I hardly believe that a full 70% of the working public is failing to save because they are getting their nails and hair done.

Its what people want to believe - its hard to accept that other people who are like them - people who work hard with good "American Values" may not be "doing anything wrong" but may have a system that is failing them. Because if the system is failing them, it could fail me, and it could fail the kids. We want to believe that if "those people" would get rid of their cell phones and give up cable tv, the problem would be fixed and its completely a matter of personal discipline.

Wouldn't it be nice if the world were that simple and the Puritan belief that virtue was rewarded with success was true. We really never have escaped our Puritan background in this country.

There are a lot of people who ARE spending out of control and aren't "choosing to be able to afford to save" - and they happen at many income levels. Some of it is human nature - its fun to have things, its seductive to keep up with the Jones, retirement is SO far away when you are 22. Some of it is "math is hard." But there are a lot of people not making enough money to be able to do more than keep a roof over their head, food in their mouths - some can't do that - and some can do a little more, but the astronomically huge numbers they are told that they'd need to save for retirement are completely out of reach.

Most "middle class" people now get out of high school and go to college. They take on some student loan debt (some, through a combination of smarts, talent, planning, and or luck, manage to avoid it, but I believe the average person is coming out with some debt). They are twenty two. They get a starter job. They have to pay down their student loan debt while starting a life on their own. The student loan debt takes a huge bite out of their income, and they want the independent carefree lifestyle of a single 22 year old, so they don't save because, well, there is plenty of time (and really not that much money after rent, food, those student loans, that new professional wardrobe), they get married a few years later, and are going to start saving for retirement, but they really want a house to raise kids in. So the downpayment for the house becomes the priority, and they still have those student loans - plus now a husband with student loans. They buy the house, and time the pregnancy to happen around the mortgage signing, so now they have student loans, a mortgage, and baby on the way. They then discover how expensive daycare is! Now they have student loans, a mortgage and either daycare or one income. It will free up with promotions and raises - but in a stagnant economy, they just feel lucky to have the jobs they started with six years ago. They aren't saving for retirement, they'll do that when daycare ends.......

Now I know Mrs. Pete can tell you how not to fall into this trap (and I can too, and so can a bunch of you) in a dozen different ways, but its a fairly normal path to take. Especially for the generation that follows mine (and hers - we are about the same age - sort of the dawn of the financial aid trap) Suddenly, you are in your late thirties, haven't yet managed to save nearly enough, and your own kids college is looming - and you now have to choose - set the same trap for them, or save for your own retirement. But it isn't a trap you fall into because you aren't hardworking or responsible...its a trap you fall into because frankly, we are setting ourselves up to fall into it. And once you take that first step with that first student loan at eighteen that is going to burden you, your feet are on the path.