When Is It Enough? (Retirement Funds)

[Chicago526]

Same here. I have many patients still working full time jobs in their 70's and even quite a few in their 80's. Its sad because many of them have various medical problems but have no choice but to keep on working until they die beause they simply couldn't afford to live otherwise.

Is this due to a lack of planning on their part, or just life not giving them the ability to save enough to retire?

 

[MrsPete]

Another thing that could happen is they will punish those who did save and prepare for retirement by reducing SS benefits or raising taxes on capital gains and investment income to raise money to pay for more social programs to support those who didn't prepare adequately.

Yeah, I think that's very possible --as well as unfair since we all paid into that big Social Security pot.

 

[bellarella]

The 70% is percent of gross pay.

And you are correct about your example, though I don't know anyone who is saving 50% of income - that's kind of an extreme example but makes the point.

Also, keep in mind that most of these calculators don't include social security benefits or any pension you might have. The calculators are still fun to play with - see what effect working an extra year or two would have, or change the income percentage by a point or two.

Yes, the 50% was an extreme example, I did do it on purpose to illustrate the point. Actually I hope that when I go back to work DH and I hope we will be saving 50% of our take home pay (I don't count that part that Uncle Sam takes in figuring our %age). We are currently socking away about 20% of our post tax pay (and a higher %age of our take home pay) and the hope is when I go back to work that all of my pay will be savings.

 

[disneysteve]

Yes, the 50% was an extreme example, I did do it on purpose to illustrate the point. Actually I hope that when I go back to work DH and I hope we will be saving 50% of our take home pay (I don't count that part that Uncle Sam takes in figuring our %age). We are currently socking away about 20% of our post tax pay (and a higher %age of our take home pay) and the hope is when I go back to work that all of my pay will be savings.

Well then 50% isn't such an extreme number if you are referring to take-home pay. We do about 40% of take-home now. Once DD is on her own, we should be able to up that figure.

 

[mickeyfan2]

The banks have been doing this for awhile now, and I guess I should say in our area, it's no longer an easy type of loan to get. We have three houses on our street right now (well, two, one was finally resold for a pittance..$13,000!) that are bank owned from reverse mortgages. The elder people who lived there stopped doing any kind of maintenance (they had no incentive, since the house wouldn't be going to their inheritance), and the homes have fallen into disrepair. The one two doors from me was actually leveled when the people were able to buy it so cheaply and built a brand new house in it's spot. Good for us!
The other two are a mess (I just saw one, at an open house..the other looks forlorn from the outside). The bank sends people to mow and then shovel (they have been for sale for a long time) and they are paying the taxes, but it was no bargain for them. We have a realtor in the family, and she says it's not the bargain it used to be for the banks (again, I only know about our area). I think assuming a house will continue to appreciate in these circumstances, is a lot to assume. I can see very little advantage for an elderly person (which is who you think they would give the loans to) to hold onto a house that needs upkeep, versus going into housing where that is taken care of for them.

Very interesting point. Not one I had considered. See what we can learn from personal experience vs just books, magazines and the like. I am hoping to do a reverse mortgage, but I think DH would be against selling. If I was left alone, it would go right on the market.

 

[mickeyfan2]

My parents are considering a reverse mortgage..I agree the fees are high...but I don't understand where you state "they will only loan you 80% of the value, so you lose 20% right there." Also, that you wouldn't "give the bank 20% in equity." Our understanding was that you could tap 80% of the equity with a reverse mortgage, but when the house is sold in the future, the bank would be repaid (the 80% amount) and the 20% would go to the homeowners. So the 20% is not really lost, is it?
Thanks for your help!

No it is not lost. If the house sells for more the remainder goes to the seller or the heirs. The thing is that the house must be sold or the person who wants to keep the home in the family has to payoff the loan.

 

[DMRick]

No it is not lost. If the house sells for more the remainder goes to the seller or the heirs. The thing is that the house must be sold or the person who wants to keep the home in the family has to payoff the loan.

Is it also true, that if the house doesn't go for what is owed, the balance is owed by heirs if their is an estate? The people on our street had no family, and it's obvious they didn't care what happened to the house..and they had no problem sharing that info.

 

[mickeyfan2]

Is it also true, that if the house doesn't go for what is owed, the balance is owed by heirs if their is an estate? The people on our street had no family, and it's obvious they didn't care what happened to the house..and they had no problem sharing that info.

No the risk is one the bank.

 

[DMRick]

No the risk is one the bank.

Then I can see why these reverse loans would be harder to get. The bank is really taking a chance..not every house sells for more down the road.

 

[mickeyfan2]

Then I can see why these reverse loans would be harder to get. The bank is really taking a chance..not every house sells for more down the road.

How I understand it is the bank charges a fee and hopes you don't stay in the house too long. They make out best on shorter loans and can loose if the person lives far longer than expected. The payments last until the person leaves the home. It is not for everyone and may not be available everywhere. It is just another tool that one can consider.

 

[DVC Sadie]

Another thing that could happen is they will punish those who did save and prepare for retirement by reducing SS benefits or raising taxes on capital gains and investment income to raise money to pay for more social programs to support those who didn't prepare adequately.

Both dh and I think you are absolutely correct in regards to people who have planned and saved will be punished by HUGE tax increases and no SS. BTW, we did save 50% of our income for many, many years so we could retire very early.

 

[dvcgirl]

My parents are considering a reverse mortgage..I agree the fees are high...but I don't understand where you state "they will only loan you 80% of the value, so you lose 20% right there." Also, that you wouldn't "give the bank 20% in equity." Our understanding was that you could tap 80% of the equity with a reverse mortgage, but when the house is sold in the future, the bank would be repaid (the 80% amount) and the 20% would go to the homeowners. So the 20% is not really lost, is it?
Thanks for your help!

No, it's not lost forever...I meant that you can only borrow the up to 80% of the equity in your home. For homes worth more than a certain amount it would be less than 80%. And like I said, some of these independent companies aren't federally insured over a certain amount. I just don't like them personally....but I'm also not the kind of person that gets attached to a particular house, or a particular place for that matter.

 

[Julia M]

Another thing that could happen is they will punish those who did save and prepare for retirement by reducing SS benefits or raising taxes on capital gains and investment income to raise money to pay for more social programs to support those who didn't prepare adequately.

I absolutely believe that my dh's SS benefits will be reduced or eliminated, because he has a pension and we have saved (ie, maxing out our 401K's).

It really irritates me. For example, dh ha chosen to stay in a more stable job, rather than bouncing around, going for the higher pay and possible stock benefits, because of a good pension. (he returned to this company and was "grandfathered in" on vacation and retirement). We have chosen not to "move up" to a bigger house. We HAVE chosen to save, and live somewhat conservatively.

On the other hand, my dh and I are planning our retirement assuming we will get no social security. If we do, that's great. And I'm confident we'll STILL be better off without it, than the people who will qualify for it.

Julia

 

[sandraB]

Yep. Though they're dying out, pensions are great. As a teacher, my paycheck is small, but my husband and I consider my financial contribution to be as valuable as his for two reasons:

1. I have a pension, which makes retirement easier. Though some companies have screwed their pension holders after retirement, working for the state is about as safe as you can get in the pension world.

2. I am always off work when the kids are out of school, so it saves big bucks for us in child care costs. Summer care alone costs thousands!

Teaching isn't always easy,but it is a great job for a mom who wants to do a good job with her family but who also wants a paycheck.

To be honest, I have allways wanted to be a teacher, and loved supply work.

I have a background in engineering, but never worked because I stayed home with my boys.

I guess I really didn't realize how beneficial a pension was....wow


We have never really had to pay much in childcare, because I have allways been home afterschool, and now our oldest is turning 12, so we will only have afterschool for one.


Thanks for the advice, I do appreciate it. Sandi

 

[dvcgirl]

Another thing that could happen is they will punish those who did save and prepare for retirement by reducing SS benefits or raising taxes on capital gains and investment income to raise money to pay for more social programs to support those who didn't prepare adequately.

Coincidentally enough, a research group that does a retirement savings confidence study each year came out with their results today....here's the news. 68% of all workers are confident that they'll have a comfortable retirement, and yet more than half of *all* workers have saved less than $25,000. I have no idea what people think is going to happen.


WORKFORCE
Retirement savings insufficient
BY EILEEN ALT POWELL
Associated Press

The majority of American workers think they'll retire comfortably, but most aren't saving nearly enough to do so, according to a new study.

The Employee Benefit Research Institute's annual retirement confidence survey, released Tuesday, found about 68 percent of workers are confident they'll have enough money for a comfortable retirement, up slightly from 65 percent in 2005.

At the same time, more than half of all workers say they've saved less than $25,000 toward retirement, according to the Washington, D.C., based research group. Even among workers 55 and older, more than four in 10 have retirement savings under $25,000.

' `Overconfidence' is the word that comes to mind,'' said Jack VanDerhei, coauthor of the study.

He said the poor savings performance was especially troubling because it comes as many employers are eliminating defined benefit plans -- better known as pensions. Many companies also are eliminating retiree healthcare coverage or asking retirees to contribute more for it.

''It's clear that people currently working should factor into their retirement planning the long-term trend away from traditional defined benefit pensions,'' VanDerhei said.

Not all was doom and gloom in the report. More than 70 percent of workers say that they or their spouses have saved something toward retirement.

 

[disneysteve]

Even among workers 55 and older, more than four in 10 have retirement savings under $25,000.

I think this is the most disturbing line in the report. 40% of workers close to the typical retirement age of 65 basically have nothing saved which means either they will be unable to retire or will be living on just Social Security if that is possible for them.

I do wonder how they calculate this, though. Are 401K balances included or just savings they've done on their own? That could make a big difference for some.

 

[punkin]

Coincidentally enough, a research group that does a retirement savings confidence study each year came out with their results today....here's the news. 68% of all workers are confident that they'll have a comfortable retirement, and yet more than half of *all* workers have saved less than $25,000. I have no idea what people think is going to happen.


Please, please, please tell me that the low saving is weighted to the younger workers. I know I didn't have $25K saved when I was under 30 (too many school loans and just plain stupidity)

I can't imagine anyone over 40 having less than $25K saved. That's just crazy.

My own savings are not what I would like (as anyone who read my posts would know), but such a low level of savings scares me. Will we have senior citizens eating cat food and living on street grates?

My DH's grandparents are in their late 80s and they are very comfortable having saved their whole lives. His mother, however probably has nothing saved and will have to work her whole life (or I'm going to have to fund her retirment )

Just scary. That's all.

 

[punkin]

I do wonder how they calculate this, though. Are 401K balances included or just savings they've done on their own? That could make a big difference for some.

I hope you are right, but I think 401(k)s are savings. If you are saving for retirement (which is what this survery considered), you have to count IRAs, 401(k)s and KEOGHs. Those are going to be the vehicles people use for retirement savings.

 

[disneysteve]

I hope you are right, but I think 401(k)s are savings. If you are saving for retirement (which is what this survery considered), you have to count IRAs, 401(k)s and KEOGHs. Those are going to be the vehicles people use for retirement savings.

I guess what I was thinking was this: Currently, more than half of our savings are outside of our retirement plans since all we qualify for is IRAs, which limits us to $8,000/year in "retirement" savings. But lots of that "non-retirement" savings will be used for retirement too. In this survey, that money probably wouldn't count.

 

[punkin]

I guess what I was thinking was this: Currently, more than half of our savings are outside of our retirement plans since all we qualify for is IRAs, which limits us to $8,000/year in "retirement" savings. But lots of that "non-retirement" savings will be used for retirement too. In this survey, that money probably wouldn't count.

Good point. I guess I misunderstood you. I really would like to see the basis for the survey. For example, If someone has millions in actively traded investment accounts but no "retirement" savings in IRAs does that mean they are not saving?