Serious question: if you didnt save enough or run out of retirement money...

[georgina]

This thread provides a very interesting contrast to another running on the Budget board -

https://www.disboards.com/threads/my-great-aunts-advice-about-vacations.3615054/

(about spending your money because you can't take it with you)

 

[DLgal]

These days, if you have a family, both parents have to work.

This is a broad statement with no factual basis. We have 2 kids and I have been a stay at home mom since my oldest was born almost 13 years ago. My husband is a military officer. We have always lived in high COL areas (Southern CA and Northern VA). We are able to save for college, retirement, take vacations, etc.

I have a sister who lives in San Francisco. The actual city. She has 2 kids under 6. She stopped working 3 years ago. She has a part time job that she does mostly for fun, as she uses the drop in daycare there while she works, which almost negates her pay. Her husband is a creative director (graphic designer). They probably spend every penny they make, but they are not struggling.

I know several other people who have kids and only one parent works. It's not uncommon at all.

That said, we will have a military pension for life in about 2 years (husband will be 41). If my husband passes away before me, I will still get 50% of that pension, which will be around $8k per month by the time we are 70. So, me not working won't impact my future retirement much at all. We also have a separate retirement savings fund (TSP) and Roth IRAs.

My parents raised three kids on one income and are now retired in Florida at a retirement community. Their social security checks cover their living expenses and then some. They bought a brand new house when they retired and have about a $120k mortgage. Their payment is like $800/month. Their social security checks total around $4000/month combined. My dad has a small pension. They have a 401k with about $500k, ALL of which was saved in my dad's last 10 working years (he lost almost all of it during the recession in 2008). Right now, they are taking the minimum required distribution, but it is only coming out of the interest at this point. The principal hasn't been touched. So, it IS possible to save really late in the game and end up okay. But, my dad was a high wage earner at the end. He was able to sock away a ton of money at the end.

 

[Colleen27]

I put "dream" in quotes sarcastically.

And, I'm not an older person making "backhanded generational insults". I technically fall into the millennial category. I was just using statistics that divided savings rates into those age groups. My point was that people from all ages are not saving enough to comfortably fund their retirements. If you're 55 and only saving 5% (like the statistic I cited)-- that's too little. It wasn't a jab at millennials.

I never said that I believe that this generation is inherently more irresponsible than those before. My grandparents are actually a big contributing influence to why I think it's so important to save. They were always "keeping up with the Joneses" and then retired too early with no savings. My parents have been at least partially financially responsible for them almost as long as I have been alive and my dad will need to delay his own retirement (a minimum 15 years from now) because my grandparents failed to save. My mom does not work and her entire life is devoted to caring for my grandparents (who are actually in better physical health than she is). I refuse to ever do that to my children. So, despite all the economic trends you mentioned that are stacked against my generation, my husband and I have made saving for our retirement a priority.

Okay, I see what you're saying. I'm sorry I took you the wrong way. I'm so used to the millennial-bashing that I immediately went in that direction with what you posted.

My mother devoted a lot of time and money to caring for my grandmother as well, and my aunt to my grandfather on the other side of the family. For better or worse, we'll probably do the same... Not because our parents didn't plan, but because the norm in our family is aging-in-place and not giving up the family home which means the adult kids do end up picking up the slack over time. My mother probably won't ever need us financially but that doesn't mean I won't be the ones doing her shopping and writing the checks for her bills and otherwise managing her affairs if/when she can no longer do so for herself. And women in my family expire at 90 (a family joke with a nugget of truth - my grandmother and 6 of her 11 sisters died at 90 exactly; only one died younger and the rest simply haven't gotten to 90 yet) so she's got a ways to go yet. My father and brother are already gone, so it falls to me and by extension DH & our kids.

This may be true but a recent report came out that said low income people spend 40% of their money on "luxuries" which I really think means other than basic necessities. If this is true, helping people learn to make better financial decisions could help them start to save even a little bit.

I'd love to see a source and methodology for that. I have a really hard time believing it because we've never quite met the definition of low income, even in our worse years, and we never had 40% of our income leftover after paying for necessities until we bought this house (with cash, practically eliminating our housing payment).

These days, if you have a family, both parents have to work.

That's a catch-22 for many lower income families because the second income may not actually be enough to cover the cost of daycare when the kids are young. Many of the SAHMs I know originally left the workforce because their income was a net drain on the household, not a contribution.

Well, I still think it's sad, especially if he starts to have health issues. Some people are in considerable pain as they age, arthritis and such, and have to slog through the day. I don't like to see anyone suffer. And maybe this isn't the case for him, either way, I think it's hard on folks.

I think it is sad if it gets to the point where work is a burden, but I've come to the realization that some people just aren't cut out for retirement. Younger DD's best friend has a great-grandfather who is still working at 90, not out of financial necessity (the property his marina sits on is probably worth more than a decade's worth of profits) but because that's how he wants to spend his time.

 

[tvguy]

I'd love to see a source and methodology for that. I have a really hard time believing it because we've never quite met the definition of low income, even in our worse years, and we never had 40% of our income leftover after paying for necessities until we bought this house (with cash, practically eliminating our housing payment).
.

I can't speak to the source or methodology for the study, but after watching Suze Orman or Gail Vaz-Oxlade, I have a very easy time believing it. With apologizes to Bill Clinton, it depends on what your definition of "necessities" is.
And really, I only have to look at my own spending. Gym memberships, satellite TV, high speed home internet, pest control, cell phone data plans, burglar alarm monitoring, termite insurance and auto club memberships aren't really necessities. And those items alone gobble up 15% alone of my take home pay.

 

[piccolopat]

I'd love to see a source and methodology for that. I have a really hard time believing it because we've never quite met the definition of low income, even in our worse years, and we never had 40% of our income leftover after paying for necessities until we bought this house (with cash, practically eliminating our housing payment).

You can read the article on the Marketwatch website. I'm not sure I agree with their definition of luxuries but I do know that many low income people today are considerably better off than those of a century ago. We have more safety nets today and that helps. I also know people that have always been in that low income category and they never learned to manage what little money they had. For example, they charged large amounts for holiday gifts but sometimes couldn't pay the oil bill. The needs versus wants lesson is a hard one to learn but it should be taught at an early age and serves people well even when they have more resources.

 

[tzolkin]

This may be true but a recent report came out that said low income people spend 40% of their money on "luxuries" which I really think means other than basic necessities. If this is true, helping people learn to make better financial decisions could help them start to save even a little bit.

it depends on what your definition of "necessities" is.
And really, I only have to look at my own spending. Gym memberships, satellite TV, high speed home internet, pest control, cell phone data plans, burglar alarm monitoring, termite insurance and auto club memberships aren't really necessities. And those items alone gobble up 15% alone of my take home pay.

I think this is the key. Many people are living paycheck to paycheck who believe they are only spending on "necessities". Sometimes it may be true that all their categories are necessities (like food, housing, transportation, etc), but their spending in those categories is significantly more than their income supports.

For example, my husband has been dealing with some family members who were about to be evicted from their apartment and are in horrible financial shape. His cousin called him a few days later and said that his truck "died" (basically needs a new motor on top of $1500 in previous repairs that he still hadn't paid off). DH said, "Well, maybe you need a different vehicle" and the cousin responded that he STILL OWED $7,000. Sure, a vehicle to get to work is a necessity. But if you are below the poverty line, can't pay your rent or afford food a $10,000+ truck is a luxury not a necessity.

The same goes for basic life necessities like food or shelter. Of course you need to eat, but you do not need to go out to restaurants (even fast food) multiple times a week. Of course you need somewhere to live, but you do not need to live in a home with a mortgage that causes you to have no money left over at the end of each month.

 

[lifesavacation]

In my own family, the non-planners have become a burden on their children. And it's not like they were "poor" during their working years. They failed to plan for retirement, and then refused to change their lifestyle once they retired. It has really created animosity between those family members who have to deal with the financial mess.

Having watched my dad struggle to deal with my uncompromising grandmother, I know he would never burden me like this. I have little sympathy for someone who made poor financial choices and now expects everyone else to deal with their consequences.

 

[Pacolovestacos]

Surprised nobody has mentioned this but one option is to move to an area of the world where the USD goes very, very far. Mexico, Central America, some parts of South America.

 

[Colleen27]

For example, my husband has been dealing with some family members who were about to be evicted from their apartment and are in horrible financial shape. His cousin called him a few days later and said that his truck "died" (basically needs a new motor on top of $1500 in previous repairs that he still hadn't paid off). DH said, "Well, maybe you need a different vehicle" and the cousin responded that he STILL OWED $7,000. Sure, a vehicle to get to work is a necessity. But if you are below the poverty line, can't pay your rent or afford food a $10,000+ truck is a luxury not a necessity.

The same goes for basic life necessities like food or shelter. Of course you need to eat, but you do not need to go out to restaurants (even fast food) multiple times a week. Of course you need somewhere to live, but you do not need to live in a home with a mortgage that causes you to have no money left over at the end of each month.

Some of those are common "poverty traps", though. Your car needs more work than it is worth, but you don't have enough cash on hand for either the repairs or a decent used car... But you need to get to work tomorrow and the next day and the next, and you might be able to get by without a car for a day or two but not for long. So you go into one of those "we finance anyone" dealerships and pay too much for a more expensive car than you wanted/needed because that's the only way to replace your car before you lose your job for lack of transportation. Only now you're paying more for insurance too, because you need full coverage (and those shady lenders often require a very low deductible that you or I would never consider) and because in many states pricing is based on zip code so just by living where poor people live your rate is higher than that of your middle class counterparts. Or you buy more house than you can really afford because it is still cheaper than rent and doesn't go up every year, and then struggle to make the payments. It has been a decade or so since renting was cheaper than buying in my area, and low income borrowers often make poor loan choices for lack of information, lack of down payment, or because they're buying "fixer upper" properties that don't qualify for prime loans. But when rent is going up 10-20%/year, every year, while your income remains unchanged, locking in a fixed housing payment looks like a good choice.

There are undoubtedly places most, if not all, families can cut back. But in a million little ways our system is set up to make being poor more expensive than being middle class or well-off.

Surprised nobody has mentioned this but one option is to move to an area of the world where the USD goes very, very far. Mexico, Central America, some parts of South America.

That's something my husband and I have talked about doing. Assuming our parents are gone by the time we retire and our kids scatter to the wind as they intend to, neither of us envisions staying where we are now. And coming from a low cost-of-living area, the idea of leaving the country for a place where the USD has better buying power is more attractive than heading to a domestic retirement destination where our money won't even go as far as it does here.

 

[sonnyjane]

Surprised nobody has mentioned this but one option is to move to an area of the world where the USD goes very, very far. Mexico, Central America, some parts of South America.

I have a few ex-pat friends but there are legalities to consider. For sample in Mexico you can't buy property without being a Mexican citizen. They will do long-term leases but you don't own the home or land until you're a citizen. After living there for 10 years, they finally completed the process of being a citizen.

Places like Nicaragua and Costa Rica caught on to the fact that Americans were retiring there and have started really upping their prices. Still cheaper than say, California or New York by far, but they aren't the steals that the used to be.

 

[mnrose]

Surprised nobody has mentioned this but one option is to move to an area of the world where the USD goes very, very far. Mexico, Central America, some parts of South America.

It's very hard to do when you are, say, 75 and lived your whole life in one country...maybe never even traveled outside the country. My MIL has traveled only to Mexico, and then only border towns to buy meds. There is simply no way she's picking up and moving to another country! DH and I have considered it (for reasons other than financial as we have the economic means to continue living here) but then we think about what it REALLY means. My husband's sister and her husband have moved to New Zealand, and they get home once ever 2-3 years to see friends and relatives. I don't want to see my kids "only once or twice" a year or less! So, realistically, it's not happening. For people who have no family, I can see why it would be more possible, but even then, they probably have friends they would like to see.

 

[Hikergirl]

Surprised nobody has mentioned this but one option is to move to an area of the world where the USD goes very, very far. Mexico, Central America, some parts of South America.

We don't have plans to move out of the country when dh retires but we do have plans to move out of NY.

 

[aprilgail]

We don't have plans to move out of the country when dh retires but we do have plans to move out of NY.

I retired at 50 and have plans to move out of NY eventually- but right now my daughter just graduated high school so I am giving it a few years until I move- plus right now I have my 89 yer old mom with me who can't live alone and I really can't move her away from all her Dr's so I am sort of stuck here for now. Hopefully I will never be in a position where my pension is gone since it is supposed to be with me my entire life and I never paid into social security through my job so I am not dependent that still being there in my future- I collect my pension at 50 and then railroad retirement (sort of like social security only better) at 60.

 

[tvguy]

Surprised nobody has mentioned this but one option is to move to an area of the world where the USD goes very, very far. Mexico, Central America, some parts of South America.

Or just look for some of the lower cost cities in the U.S. My wife's Grandfather lived his entire life in Chicago and St. Louis, but retired to Albion Illinois due to the low cost of living. In the summer he got produce for low prices, and they canned in the summer to use in the winter. And they ate a lot of fresh caught fish. Neighboring Grayville, and Evansville, Indiana are other examples of places right here in the USA where housing is very affordable.

 

[GaSleepingBeautyFan]

My parents have not saved much for retirement. They do own their house outright and have medicare and get social security checks. Luckily they did just get a lump sum of money from a house that Dad fixed up and sold afterward. That will help them financially for awhile.

They are in their 70's.
My Dad is fighting 3 different cancers. At some point, my sisters and I figure he will lose that battle that has been going on for the past 4 years. So far Medicare has covered most of it.

Mother is insisting she will live on her own if that happens but we aren't sure how well that would work out. In our case, if they run out of money one of us will most likely take her in and all of us would pitch in and help with medical bills and such.

 

[MickeyMinnieMom]

I think the short version in the U.S. is: relatives, social security, medicare, medicaid.

I had a business school prof several years back advise that we assume none of the government programs will be there by the time we retire -- this is how he does his planning as an economist specializing in financial crises around the world.

 

[longboard55]

The thing that bothers me, and I am sure someone will quote me some article on finance, but I see a lot of people taking early SS who can not afford the pay cut they will take. If you have nothing working till 70 will give you a lot bigger check.

 

[Skippy918]

Some of those are common "poverty traps", though. Your car needs more work than it is worth, but you don't have enough cash on hand for either the repairs or a decent used car... But you need to get to work tomorrow and the next day and the next, and you might be able to get by without a car for a day or two but not for long. So you go into one of those "we finance anyone" dealerships and pay too much for a more expensive car than you wanted/needed because that's the only way to replace your car before you lose your job for lack of transportation. Only now you're paying more for insurance too, because you need full coverage (and those shady lenders often require a very low deductible that you or I would never consider) and because in many states pricing is based on zip code so just by living where poor people live your rate is higher than that of your middle class counterparts. Or you buy more house than you can really afford because it is still cheaper than rent and doesn't go up every year, and then struggle to make the payments. It has been a decade or so since renting was cheaper than buying in my area, and low income borrowers often make poor loan choices for lack of information, lack of down payment, or because they're buying "fixer upper" properties that don't qualify for prime loans. But when rent is going up 10-20%/year, every year, while your income remains unchanged, locking in a fixed housing payment looks like a good choice.

There are undoubtedly places most, if not all, families can cut back. But in a million little ways our system is set up to make being poor more expensive than being middle class or well-off.



That's something my husband and I have talked about doing. Assuming our parents are gone by the time we retire and our kids scatter to the wind as they intend to, neither of us envisions staying where we are now. And coming from a low cost-of-living area, the idea of leaving the country for a place where the USD has better buying power is more attractive than heading to a domestic retirement destination where our money won't even go as far as it does here.

Another poverty trap is payday lending. A friend's brother ended up in insane amounts of debt because of this. He ended up having to declare bankruptcy because his debt got out of control.

 

[Cannot_Wait_4Disney]

This may be true but a recent report came out that said low income people spend 40% of their money on "luxuries" which I really think means other than basic necessities. If this is true, helping people learn to make better financial decisions could help them start to save even a little bit.

Problems with this study and those that are reporting it. Mostly those reporting it not giving their readers the full information.
1. What we think normally think of luxury, we think of state of comfort and extravagant living. Which when it comes to something you buy you interpreted rightly would roughly be Something we splurge on after the necessities are bought. That's what we would normally think right? Right
Well that's a very very good guess.
But nevertheless WRONG!!!!
The study didn't define a luxury in that manner. The study explicitly defined luxuries as goods or services consumed in greater proportions as a person's income increases and necessities as those goods or services that make up a smaller proportion of spending as a person's income increases.
Here are some items the study defines as luxuries.
Spending on any vehicle. Not just spending 50k on an SUV or 100k on that mercedes. A $1000 Dave Ramsey beater is considered a luxury by the study. But wait. Gas and motor oil and supplies for the luxury are necessities. HAHA. Oh and public transportation. That's a luxury too. So spending any money getting to work is a luxury, except for the gas. Oh and for those that walk, well your clothes aren't a necessity either. But neither are they a luxury. Mc D's is a luxury. Oh and the subject of this thread, saving for retirement? That's a luxury. By the way rent is a necessity, money spent on owning a home is a luxury. So the two biggest savings vehicles for most of us, home ownership and retirement, are indeed luxuries according to the study.

2. And now we get to the reporting of the study. Here are some things I've seen.
Low income people spend 40% of their money on luxuries (no disclosure of the change in definition)
It turns out that all Americans, regardless of income, spend a large percentage of their income on luxuries.
The study also found that luxury items appeal to everyone, rich or poor, as people from all wage brackets spend a significant percentage of their salaries on the finer things in life. (no disclosure of the definition change)

All these articles would lead one to believe the lower 5th need lessons in how to spend their money. But No. Just no. No no no no. Nooooooo. The study didn't find anything of the sort. What the study found was that low income people spend 40% of their money on things people tend to spend a greater share of their income on as income rises. Nothing more.

I even found an article that tried to explain why the poor spend 40% on extravagant luxuries instead of investing it wisely. Unfortunately, the article missed the key thing. According to this study, investing it wisely IS A LUXURY!!!

 

[Hikergirl]

The thing that bothers me, and I am sure someone will quote me some article on finance, but I see a lot of people taking early SS who can not afford the pay cut they will take. If you have nothing working till 70 will give you a lot bigger check.

For some they take it early because they need the income before they turn 70. My neighbor's dd was just laid off from her job, she is 62 or 63 and unfortunately has no savings for retirement so she needs to start taking her SS. So I guess its a matter of some people can't afford to not take it early either.