Two retirement articles

[MrsPete]

But you CAN balance the act.

I started putting retirement money away at 21 when I qualified for a 401k. I bought my first house at 20. And by 30 I'd been to most countries in Europe, Thailand, China and Japan. By the time my kids were born, we had six figure retirement accounts - by the time they were in elementary school, the mortgage was paid off. And my kids have been in four countries other than the U.S. (not including Epcot ).

Today's seniors are expressing regrets about money that previous generations didn't. Previous generations were more likely to get pensions in addition to Social Security - and have fairly limited wants. Todays seniors want a retirement with travel and activity. They don't want a reduced standard of living. And that takes more money than they think it will. "Doing more" today often means "spending more."

Yes, I agree with the term "balance". When we were young and first-married, we scrimped and saved every penny -- it was necessary at that point -- but we were just thrilled to be married and in our own house. We were blissfully happy, even though we had old bedsheets tacked up as curtains and shared one car. We became mortgage-free just before I was 40, which was when our kids were in early elementary school. That gave us the freedom to travel more with the kids, and now that college is upon us, we're not worried about how to pay the bills.

All the experts tout the same line about retirement: Start saving young, and you don't have to put away much each month. It's very possible to do that AND to travel, etc.

 

[dvcgirl]

I've been reading about this nightmare for the last 20 years. And the picture never improves, in fact, it's gotten worse....much worse. People assume that they'll need 350K, yet they're not even remotely close to having saved that amount.

Everyone who isn't saving or can't save just assumes that "I'll work until I die". But that's pretty easy to say at age 30-40-50. But what if they can't work? For health reasons or otherwise?

And of course, this issue of paltry retirement savings coincides with the coming fiscal meltdown of the entitlement programs. Just when Americans will need those programs the most, they won't be there as promised. It's a huge hurdle....and one that getting closer every day.

 

[eliza61]

Yes, I agree with the term "balance". When we were young and first-married, we scrimped and saved every penny -- it was necessary at that point -- but we were just thrilled to be married and in our own house. We were blissfully happy, even though we had old bedsheets tacked up as curtains and shared one car. We became mortgage-free just before I was 40, which was when our kids were in early elementary school. That gave us the freedom to travel more with the kids, and now that college is upon us, we're not worried about how to pay the bills.

All the experts tout the same line about retirement: Start saving young, and you don't have to put away much each month. It's very possible to do that AND to travel, etc.

The only issue with that for many young people (and this is just feedback I get from the freshman college girls that I advise) is that it's extremely hard to do that.

Disclaimer: I am not young but any stretch of the imagination, so anyone out there in their 20's feel free to virtual slap me.

So, alot of the kids (20 some things) in my local cc are probably working and going to school. Very few are thinking "what I need to retire" pretty much they are absorbed with tuitions, car notes or insurance, extraneous etc.
Now a few do know the value of savings but very fewof them believe they will be able to finish school debt free. and although we have the benefit of time on our side to recognize that "scrimp and save" may payoff in the long run. I see their eyes glaze over when you mention maybe "not" going to the shore for summer vacay in order to save money.

Sure all the "experts" tout the save often and early but as anyone asked the question of why so few do it? and sorry I do not buy the line that 150 million americans are lazy "entitled" individuals.

I look at the 30 some things I work with. Their reality is one of a Mortgage, car payment, student loans, very flat salary and child care expenses. then we tell them they must not have any credit card debt and they have to save for college and retirement. then we are shocked when people don't do it. Personally I'm shocked if anyone can do it.

My youngest son is a senior, the last 2 months we've been on the college visitation tour. Now, he wants to go away to school so I totally agree there are cheaper alternatives but, tuition at the schools he's looked at.

Rutgers (in state with room and board)24000
Towson (out state/room board) 29000
Seton Hall (in state private) ~47000
St Joseph (out of state private)

Once again, I totally realize that he could go to community college and it would be cheaper but I also recognize the fact that for many parents like myself would love for my son to experience college. I was fortunate to attend the University of Pittsburgh and Carnegie Mellon so I naturally want my kids to have that wonderful experience.

So I definitely understand the decisions that lead to some one not saving until well into their late 30's

 

[eliza61]

I've been reading about this nightmare for the last 20 years. And the picture never improves, in fact, it's gotten worse....much worse. People assume that they'll need 350K, yet they're not even remotely close to having saved that amount.

Everyone who isn't saving or can't save just assumes that "I'll work until I die". But that's pretty easy to say at age 30-40-50. But what if they can't work? For health reasons or otherwise? And of course, this issue of paltry retirement savings coincides with the coming fiscal meltdown of the entitlement programs. Just when Americans will need those programs the most, they won't be there as promised. It's a huge hurdle....and one that getting closer every day.

Which leads to all kinds of other hurdles.
1) Older workforce holding onto jobs longer, less work available for younger workers.
2) Health care cost are getting more and more expensive and our pensioners are seeing more and more of companies no longer even covering healthcare for it's retirees.

I'm probably one of the few who think medicare and social security will be around for a very long time simply because there is no other option. We are living longer and longer and if seniors no longer get healthcare from their employers and no way can they afford private insurance, what's the alternative? they aren't going to magically no longer get sick so the only resource left to them is the federal gov.

 

[bettymae1121]

I'm 35, DH is headed towards 40. Between us, we've got about 100k in our 401k's and I still think we're behind! I was smart enought to start my 401k when I joined my company at age 23, but only put in 3% to get the full company match and anual lump sum contributions (another 8% annually most years). a few years ago I upped it to 6% and just a few months ago upped it again to 10%. Still, better late than never.

And I'm still better off than many of my friends who are the same age. One is unemployed and taking sub teaching jobs to make ends meet (no benifits and certainly no money to save for retirement) one works for the state but only heaven knows if the state pension will be there for her as promised, meanwhile her husband is unemployed again for the 3rd time in 4 years, and they have two young kids, two house payments (they are trying to rent the condo the husband owned before getting married as they can't sell it for any amount of money), and student loans. A third friend is working two jobs and going in to more student debt to get a 2nd masters, she has 3 kids of her own plus a step daughter, and her husband is under-employed. They can barly make the mortgage payment, they rely on their tax refund every year to catch up on bills.

Go figure, only DH and I are doing "well" and we're the only ones without college degrees. Not having those student loan payments helped tons, as did waiting to have kids (though that wasn't by choice, we've been trying since we got married 6 yeas ago, just took this long to get it right!). We're at the point now that we'll be out of CC debt in a few years, with only the mortgage to worry about. But it's as much luck as it is hard work and smart decisions, like most we're one layoff away from having to make some very tough choices.

All my friends are smart and hard working. They are not skipping retirement savings to blow it on vacations every year. They need every dime they earn to keep their heads above water.

 

[MrsPete]

The only issue with that for many young people (and this is just feedback I get from the freshman college girls that I advise) is that it's extremely hard to do that.

I don't think it's reasonable to expect college students to save for retirement -- they're doing well to stay out of debt -- but as soon as they start working, that's when they need to start saving. You've seen the stats about how putting away a very small amount EARLY compounds into a comfortable savings.

Literally, that can be done by brown-bagging lunch, by skipping a meal out every week, etc. Most of the recently-out-of-college young professionals I know could do this -- if it were a priority. Most of them live in MUCH nicer places than I did just out of college, have MUCH nicer cars than I did just out of college, and go on multiple vacations each year. $50/month isn't out of their reach. I'm not talking about people who are wasting $$$$$ -- I'm just saying that the average person can put aside a small amount every month.

 

[crjack]

I've been reading about this nightmare for the last 20 years. And the picture never improves, in fact, it's gotten worse....much worse. People assume that they'll need 350K, yet they're not even remotely close to having saved that amount.

Everyone who isn't saving or can't save just assumes that "I'll work until I die". But that's pretty easy to say at age 30-40-50. But what if they can't work? For health reasons or otherwise?

And of course, this issue of paltry retirement savings coincides with the coming fiscal meltdown of the entitlement programs. Just when Americans will need those programs the most, they won't be there as promised. It's a huge hurdle....and one that getting closer every day.

dvcgirl, I always enjoy your posts and insight. (Also Crisi, Mrs Pete and eliza61)

I wanted to get your thoughts on the potential impact of the "underemployed" on the long term economy.

We know several people (family/close friends) who lost high level jobs over the last few years. All are now employed again but not one is close to their old salary. While they are happy to be working again, it is impossible for them to contribute the way they used to into their retirement accounts.

The number of underemployed is so hard to track but I think over the next decade or so we will see the impact in that area as well. (less disposable income, higher need for entitlement programs, etc)

 

[dvcgirl]

Which leads to all kinds of other hurdles.
1) Older workforce holding onto jobs longer, less work available for younger workers.
2) Health care cost are getting more and more expensive and our pensioners are seeing more and more of companies no longer even covering healthcare for it's retirees.

I'm probably one of the few who think medicare and social security will be around for a very long time simply because there is no other option. We are living longer and longer and if seniors no longer get healthcare from their employers and no way can they afford private insurance, what's the alternative? they aren't going to magically no longer get sick so the only resource left to them is the federal gov.

Oh, I think that Social Security and Medicare will be around in some format, but not like they exist today. It's not possible, because we as a nation can't afford it. Entitlements and Defense make up 2/3s of the federal budget. The scary thing is that we're going to sit on our hands and do nothing until we're in a full blown crisis.

What I think will happen....what I think I've always know will happen, is very simple. Many of us will get less than we were promised with Social Security. There will likely be means testing. Those of you who have children....we don't, but have heard about the FAFSA from family and friends. You know, where the government decides what you should be able to pay towards college for your children.

And many times what they tell you is not even remotely close to what you can afford. Either because you haven't saved, or they aren't factoring in what part of the country you live in....that kind of thing.

This is what is going to happen with SS and Medicare. With Social Security, you'll just get a check based on your earnings over your working lifetime. That's how it works now, but a new formula will be applied. Same with Medicare....except the new formula applied will determine how much *more* you'll have to pay than you would now if you are retired.

 

[dvcgirl]

dvcgirl, I always enjoy your posts and insight. (Also Crisi, Mrs Pete and eliza61)

I wanted to get your thoughts on the potential impact of the "underemployed" on the long term economy.

We know several people (family/close friends) who lost high level jobs over the last few years. All are now employed again but not one is close to their old salary. While they are happy to be working again, it is impossible for them to contribute the way they used to into their retirement accounts.

The number of underemployed is so hard to track but I think over the next decade or so we will see the impact in that area as well. (less disposable income, higher need for entitlement programs, etc)

The U6 number....which I think finally ticked down under 16% is, in my opinion anyway, a number that truthfully represents unemployment. That number includes the underemployed (people who can't find enough work), but also people who have just given up looking for work.

I do think that the economy will improve, and that the unemployment rate will come down. But I think that it will take awhile. And I think that many of the jobs that do "come back" won't be as high paying as they were before we got into this mess. Even during the "boom", wages were flat for the last decade. When unemployment was under 5% in the middle of the last decade, a lot of those jobs were lower paying service sector/retail jobs. More and more Americans are having to cobble together two or three jobs, part and full-time in order to get by. I think that we'll see more of that going forward.

 

[runwad]

I know this working till "80" thing is making its way around the younger crowd. I work with a gal who is 26 and she's not bothering saving in our 401k because she has to work till she's "80 anyway" her words. Plus and I'm not sure if this next statement is correct but she says past jobs that she's had she only got access to the money she put in the 401k not the earnings or match since she left before she was vested. Not too many work the amount of years it takes to get vested,5(?)so that's another reason for not getting in the 401k. I can't imagine working at 80