When Is It Enough? (Retirement Funds)

I think far too many people are banking on inheritance for their own retirements....I know that my own sister is....

Not me, I keep telling my Mom to spend it all, take trips, have fun, just please, please, include me and the kids! :wave: And we have done some really FUN things, that my children will never forget!

I would rather save for my own retirement, buy my own home, save for my kids education than ask my parents to help....but many others out there have a far different opinion....
 
dvcgirl said:
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.
I wonder, did the study go on to say if the people interviewed did or didn't have a pension plan? The four biggest employers (State of NY is one) in our area all offer a very good pension...and if those people were interviewed, I would think between pensions and also SS (as it is now) they would be convinced they will have a good retirement.
 
DMRick said:
I wonder, did the study go on to say if the people interviewed did or didn't have a pension plan?
The way I read it they were not considering pensions. Do the 40% may only need $25K to have a happy retirement if they get a good pension and SS.

DMRick said:
The four biggest employers (State of NY is one) in our area all offer a very good pension...and if those people were interviewed, I would think between pensions and also SS (as it is now) they would be convinced they will have a good retirement.
This would be a good retirement, not world travels but not eating cat food.

A year or two ago I was a survey on how were you planning on funding your portion of retirement (not SS or pension) and they got 3 answers that were chosen by ~33% of the participants. The 3 answers were inherit, win lottery and save. So only 1/3 rd of the people were planning for it the other 2/3 rds were looking for a windfall. Some will win the lottery and some many actually get a large enough inheritance, but they will not be the majority of the 2/3 rds group.
 

Wow I just decided to take a peek over here and read this whole thread. At the rate we're going DH and I will never retire. I really am scared of that but we're only 25 so maybe we have time to change. Anyone have any recommended reading for financial planning? We'd love to consult someone but I am sure there is a fee attached to that and that's not where we're at right now, but I do know that we need to be doing more. Also I'd like to learn about how to diversify our accounts and what types are good at what points in your life. We're pretty young so we should have some time but I am paranoid that we won't get as far as we want to. Right now our main savings is an ESPP my huband does and 401k contributions which I believe we have some sort of match for. I have the 401k divided into two different accounts but I am pretty sure they aren't aggresive enough for our age. I am a VERY nervous invester though, so I don't know how aggressive I can personally handle. I know that the market fluctuates but the thought of working so hard and not having tons anyhow, the thought of losing it all leaves me very frightened. Any advice or places to start getting some info would be appreciated.

On a side note, C.Ann you give me hope that we will be able to retire at some point and that it can be done on a modest budget. I do know that money isn't everything but I really don't want to be a burden to my kids.


Becky
 
disneysteve said:
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.

I went to their website. The Employee Benefit Research Institute, and here is a breakdown of their results. The total includes *all* savings and investments....but does not include home equity or defined pension plans.

Here's what they have to say......



Will More of Us Work Forever? The 2006 Retirement Confidence Survey
April 2006
EBRI Issue Brief #292
Paperback, 28 pp.
PDF, 1,166 kb
Employee Benefit Research Institute, © 2006
Print Page
Download Issue Brief PDF pdf

Executive Summary

• This Issue Brief reports findings from the 16th annual Retirement Confidence Survey® (RCS), which suggests that many American workers are not ready to undertake the task of financial planning for their own retirement and face the prospect of having to work far longer than they expect.

• Key indicators steady: Key indicators of retirement planning have held steady in recent years. The proportion of workers saving for retirement continues at 7 in 10 (70 percent), while those who report having attempted to calculate their savings needs for retirement remains at 42 percent.

• Modest savings: More than half of workers saving for retirement report total savings and investments (not including the value of their primary residence or any defined benefit plans) of less than $50,000 (52 percent). However, the large majority of workers who have not put money aside for retirement have little in savings at all: Three-quarters of these workers say their assets total less than $10,000 (75 percent).

• Expected benefits unlikely to materialize: Many workers are counting on employer-provided benefits in retirement that are increasingly unavailable. Only 40 percent of workers indicate they or their spouse currently have a defined benefit plan, yet 61 percent say they are expecting to receive income from such a plan in retirement. Likewise, workers are as likely to expect (37 percent) as retirees are to receive (40 percent) retiree health insurance through an employer, despite the fact that the number of employers offering this benefit is declining.

• Unrealistic replacement ratios: Worker suppositions about their financial needs for retirement are often based on what appear to be unrealistically low income replacement ratios. While a majority of workers say they prefer a standard of living in retirement that is the same or better than in their working years (59 percent), half think they can maintain a comfortable retirement on 70 percent or less of their preretirement income (50 percent).

• Ability to keep working? Some workers may have unrealistic expectations about how long they can continue to work. The average retiree today retired at age 62, but the average worker expects to retire at age 65. At the same time, workers are more than twice as likely to expect to work for pay in retirement (67 percent) as retirees are to have actually worked (27 percent).

• Some confidence levels not realistic: The RCS continues to find that one-quarter of workers are very confident about their financial security in retirement (24 percent), while more than 4 in 10 are somewhat confident (44 percent). However, at least some of those who say they are very confident may be overconfident. Twenty-two percent of very confident workers are not currently saving for retirement, 39 percent have less than $50,000 in savings, and 37 percent have not done a retirement needs calculation.

• Auto-enrollment well received: To boost participation, employer plans could be further enhanced by adding automatic options. A majority of employed workers favor automatic enrollment (69 percent), automatically increasing the percentage of salary contributed when an increase in pay is received (65 percent), and automatically investing contributions for the employee (59 percent). Plan participants and nonparticipants are equally likely to favor each of these automatic features.
 
ZPT1022 said:
At the rate we're going DH and I will never retire. I really am scared of that but we're only 25 so maybe we have time to change.
Becky - sit down and take a deep breath. You make it sound like all hope is lost at the tender age of 25. You're just getting started. And you are already way ahead of most of your peers because you are contributing to your 401K.

First, subscribe to Money or Kiplinger magazine and start reading that regularly. There was a post here a day ago to get Kiplinger for like $5 for 3 years so I'd take advantage of that.

Second, you are right that at your age you really should be aggressive with your investments for retirement. No reason you shouldn't keep 100% of your 401K in stocks at this point. You do need some diversification. Some money in large company stocks, some in small companies and some in International companies to start. And be sure to avoid the common mistake of loading up your 401K with company stock. In general, no more than 10% of your portfolio should be in any one company.

Just remember, historically nothing has outperformed stocks over the long term. To be conservative at your age would put you at much greater risk of not meeting your retirement goals than would being aggressive now. Yes, the market fluctuates - goes up, goes down - but over the long haul it has always gone up and no reason to think that will change anytime soon.
 
dvcgirl said:
I went to their website. The Employee Benefit Research Institute, and here is a breakdown of their results. The total includes *all* savings and investments....but does not include home equity or defined pension plans.

Here's what they have to say......
So basically what the research showed is that most people don't have a clue.

22% are very confident about retirement but are saving nothing.

61% expect pension income even though only 40% actually have a pension plan.

50% think they can maintain their current lifestyle on 70% or less of what they currently earn.

I wonder who they surveyed. Was it a national sample? What was the average age of the participants? Average income level? Average educational level?

Overall, some scary stuff.
 
ZPT1022 said:
Wow I just decided to take a peek over here and read this whole thread. At the rate we're going DH and I will never retire. I really am scared of that but we're only 25 so maybe we have time to change. Anyone have any recommended reading for financial planning? We'd love to consult someone but I am sure there is a fee attached to that and that's not where we're at right now, but I do know that we need to be doing more. Also I'd like to learn about how to diversify our accounts and what types are good at what points in your life. We're pretty young so we should have some time but I am paranoid that we won't get as far as we want to. Right now our main savings is an ESPP my huband does and 401k contributions which I believe we have some sort of match for. I have the 401k divided into two different accounts but I am pretty sure they aren't aggresive enough for our age. I am a VERY nervous invester though, so I don't know how aggressive I can personally handle. I know that the market fluctuates but the thought of working so hard and not having tons anyhow, the thought of losing it all leaves me very frightened. Any advice or places to start getting some info would be appreciated.

On a side note, C.Ann you give me hope that we will be able to retire at some point and that it can be done on a modest budget. I do know that money isn't everything but I really don't want to be a burden to my kids.


Becky

You're very young, 25 is just starting out...so you shouldn't be so worried. There are many, many people in their 40s and 50s who wish they could turn back the clock to age 25 so they could have put more away.

You should do some calculations to at least get even a vague idea of what you will need. There are plenty of calculators out there on the net to help you determine this. Just google for "retirement planning calculators", and you'll get a zillion hits.

You are doing all the right things.....contributing to the 401K, ESPP, but you need to know if you are doing enough. I think a lot of people are doing a little something here and there, but as the study I posted shows, most aren't doing nearly enough. Also, once you contribute to the point where you get the full employer match, you can look at starting a Roth IRA. At your age, you really want to be taking advantage of as many tax-advantaged investment vehicles as possible. That's the real lost opportunity for folks who start too late. Even if they can save a ton and even surpass the 401K and the Roth, the rest ends up in taxable accounts.

I'd recommend Jane Bryant Quinn's latest book for an overview of financial strategies. I like her philosphy..."Saving and investing should be simple, regular, automatic and boring." I've also heard her say that the average American puts far more effort into planning a one week vacation than they do in planning a 30 year retirement. I think that on this Disney Planning board that this is something we could probably all agree with.

Her new book, "Smart and Simple Financial Strategies for Busy People" will really guide you through this entire topic...and it's a nice easy read. In her book she goes explains why you need to be aggressive at your age, but goes on to explain that today's investment vehicles are so incredibly diversified and so, we're not talking about all of our eggs in one basket.
 
How's this for an answer: As much as I have when I reach retirement age.

I don't plan to retire early. For one thing, we'd eat up most of our retirement income in medical insurance payments. So until I can qualify for Medicare (or its successor), I'm not retiring. I may not work my current job for the next 30 years, but I'll do something. And if Medicare goes bankrupt, I'll probably have to work until I die. (My financial planner is shocked at this attitude - but I'd rather plan on working until I'm 70 than plan on retiring at 55 and not being able to. If things look different at 55, I can change my mind.

That doesn't mean we aren't funding a retirement, and should have something in that 2-6 million range when we retire - if we don't see an economic crisis in the next 30 years (the last one caused a little setback). I put money into my 401k, my husband does the same, plus an IRA, plus deferred comp, and we have external non-retirement tagged investments as well. If I'd stop funding our retirement today, we'd almost hit that number with just our 401ks if we got an 8% return.

It would be nice if I could retire with plenty of money to travel, play golf, etc. But I'm not going to put life on hold to make sure I can do that. And getting my kids through college is more important than a bus ride through Europe when I'm 70.

I can, and intend to, trim back expenses considerably from where they are now in retirement. We won't have a mortgage (we won't have one of those in a few months), won't have college expenses. With both of us not working, we won't need two cars (I hate to drive). We won't be saving for retirement any longer. We will also downsize our home to something townhomey with no yardwork (but association fees).
 
disneysteve said:
So basically what the research showed is that most people don't have a clue.

22% are very confident about retirement but are saving nothing.

61% expect pension income even though only 40% actually have a pension plan.

50% think they can maintain their current lifestyle on 70% or less of what they currently earn.

I wonder who they surveyed. Was it a national sample? What was the average age of the participants? Average income level? Average educational level?

Overall, some scary stuff.

Here's what they say about the sample......


retirement confidence survey The RCS is the country's most established and comprehensive study of the attitudes and behavior of American workers and retirees towards all aspects of saving, retirement planning, and long-term financial security. Sponsored by the Employee Benefit Research Institute (EBRI), the American Savings Education Council (ASEC), and Mathew Greenwald & Associates (Greenwald), the annual RCS is a random, nationally representative survey of 1,000 individuals age 25 and over.

The survey contains a core set of questions that is asked annually, allowing key attitudes and self-reported behavior patterns to be tracked over time. Sample questions include: how confident are Americans about their retirement income prospects, including Social Security and Medicare; how much money have they saved for their future and where are they putting their money; who they turn to for retirement investment information and advice; and why individuals are not saving more and what would motivate them to do so. The RCS also strives to be timely by covering issues that are of current interest to policymakers and retirement benefits specialists; past examples include participant education in 401(k) plans and understanding of IRA eligibility.
 
dvcgirl said:
nationally representative survey of 1,000 individuals
I always wonder about this. How can you get an accurate indication of anything by surveying just 1,000 people? For a survey like this, you need a variety of ages, a variety of occupations, people with and without kids, various geographical regions (city, suburban, rural, etc.), a variety of income ranges. Just doesn't seem possible to get worthwhile data with so few people.

I still think the data is interesting, just looking at it as a survey of 1,000 people, rather than considering it to be representative of the country as a whole.
 
disneysteve said:
I always wonder about this. How can you get an accurate indication of anything by surveying just 1,000 people? For a survey like this, you need a variety of ages, a variety of occupations, people with and without kids, various geographical regions (city, suburban, rural, etc.), a variety of income ranges. Just doesn't seem possible to get worthwhile data with so few people.

I still think the data is interesting, just looking at it as a survey of 1,000 people, rather than considering it to be representative of the country as a whole.

Yes, it is a small sample, and I don't know who the EBRI is...or what agenda they might have. But since I haven't seen any headlines lately that say...."Americans on target to retire in style!!" I'm thinking that the results are probably pretty accurate ;).

Really, none of the news has been good on this topic. The national savings numbers are abysmal, even if they don't include capital gains. And it's not the number itself there, it's the trend...that we're saving less and less...less and less with each year.....and spending more. Defined pension plans are disappearing left and right, and that's likely to continue. Social Security is likely to change, and it won't be a positive change...and Medicare is in *big* trouble. Add it all up, and it means that we all need to be personally responsible for as much as we can when it comes to saving and investing. All those institutions that you used to be able to count on no matter what.....they are disappearing before our eyes.
 
disneysteve said:
I always wonder about this. How can you get an accurate indication of anything by surveying just 1,000 people? For a survey like this, you need a variety of ages, a variety of occupations, people with and without kids, various geographical regions (city, suburban, rural, etc.), a variety of income ranges. Just doesn't seem possible to get worthwhile data with so few people.

I still think the data is interesting, just looking at it as a survey of 1,000 people, rather than considering it to be representative of the country as a whole.
Actually statistics does back a survey of this size. I think it would be more helpful to have done surveys within age groups of about 10 years to get a better picture.
 
I took a course on American politics once in college. We talked a little bit about polling, and my instructor said that you can get amazingly accurate results from seemingly small samples of people. As long as the pollsters know what they are doing when getting their sample group put together, a 1,000 person sample can be just as accurate as a 10,000 person sample.
 
Chicago526 said:
my instructor said that you can get amazingly accurate results from seemingly small samples of people. As long as the pollsters know what they are doing when getting their sample group put together, a 1,000 person sample can be just as accurate as a 10,000 person sample.
I wasn't really debating the point. I've just always been fascinated by the fact that it works.

I'm certainly not debating the conclusions: that most Americans are not saving enough and have unrealistic expectations.
 
disneysteve said:
I wasn't really debating the point. I've just always been fascinated by the fact that it works.

I'm certainly not debating the conclusions: that most Americans are not saving enough and have unrealistic expectations.

Oh, I wasn't saying you were, I just wanted to share what I knew about polls/surveys and sample groups! :)

I definatly think their conclusions are good, most people aren't saving enough for retirement! I wouldn't minde seeing the demographics of their sample group, but I'm sure the conclusions were accurate.
 
Dory's Twin said:
I think far too many people are banking on inheritance for their own retirements....I know that my own sister is....

Not me, I keep telling my Mom to spend it all, take trips, have fun, just please, please, include me and the kids! :wave: And we have done some really FUN things, that my children will never forget!

I would rather save for my own retirement, buy my own home, save for my kids education than ask my parents to help....but many others out there have a far different opinion....


I think you are correct. After talking to a lot of different people including family members, a lot of people expect to fund their retirements by inheriting from parents and grandparents. In our family alone I think there will be some disappointment when the inheritance does not happen quite like they hoped or wished.

ETA: I think your parents are doing a great job of spending their money and involving your family in wonderful vacations and such. Speaking from experience I treasure all the FUN things our family did together before my parents were both dead. The memories last a lifetime and cash is gone very easily in most cases.
 
"Becky - sit down and take a deep breath. You make it sound like all hope is lost at the tender age of 25. You're just getting started. And you are already way ahead of most of your peers because you are contributing to your 401K."

I mostly just wish we were farther ahead and had thought about things before this year. Maybe it is watching our moms (my Dad died when I was 11, DH's dad died 2 years ago) who are vastly unprepared and have their homes as their biggest assets and that is frightening. We fully expect to be responsible for their care at some point down the line and we are adamant about NOT doing that to our kids. We will of course do what we have to and what we can for our moms but really it would have been better if we didn't have to. Also we are of the school of thought that saving for our elder years is more important than paying the kids college in full for them. Of course we will help as much as possible but student loans are there for a reason and plenty of people have gone far despite having them. And what's not to say that we can't help pay them either?

"First, subscribe to Money or Kiplinger magazine and start reading that regularly. There was a post here a day ago to get Kiplinger for like $5 for 3 years so I'd take advantage of that."

Thanks I will have to check on that. I know my skills are rusty in that department but it is so important to know

"Second, you are right that at your age you really should be aggressive with your investments for retirement. No reason you shouldn't keep 100% of your 401K in stocks at this point. You do need some diversification. Some money in large company stocks, some in small companies and some in International companies to start. And be sure to avoid the common mistake of loading up your 401K with company stock. In general, no more than 10% of your portfolio should be in any one company."

Do you count ESPP's in that 10% figure? We don't tend to think of that in the same vein as the 401k's. The way DH's company does the ESPP they run for a six month term and we set it up so we automatically sign up for the next term. They take the stock's price at the beginning of the term and the end and whichever is cheaper they then buy it with the money alloted during your term at a discount of 15% off the lowest price. I hope I'm explaining that clearly. We only have a small amount (like 4%) going into that but it's already added up to a few thousand. We can cash in the ESPP at any time so we look at that as something we could also use for emergency money (like the time my son had $1000 in copays in a month if we had needed to it was there). Our 401k has NO company stock since we have that in the ESPP account. The 401k is divided evenly in two growth funds. I totally went moderate with our picks and it seems I should be going more aggressive. What is a typical % balance with stocks and other funds?

"Just remember, historically nothing has outperformed stocks over the long term. To be conservative at your age would put you at much greater risk of not meeting your retirement goals than would being aggressive now. Yes, the market fluctuates - goes up, goes down - but over the long haul it has always gone up and no reason to think that will change anytime soon."

I keep trying to remind myself of that. Hopefully we are doing the right thing and if I continue to educate myself on these issues we will only keep doing better. It's just scary when I look at the calculators of how much we would likely need to retire at 65 and it's saying things in the millions and I go and look at another calculator and it says to acquire that much we should be saving approximately 1/3 of what my DH makes each year which is a bit much considering where we are in life. Hopefully when he receives his next promotion (he is due soon) things will be a lot better and we will be able to put more aside. Also we don't own our own house yet, we're in a co-op because I don't feel we have enough savings to buy yet. I so don't want to be that person who has their heater break and is down at the Home Depot getting a new HD charge card so we can buy and install that heater. Or roof, or septic system or whatever it happens to be. I want that money in the bank and available to pay in cash because if you don't have it you shouldn't spend it. Well that is our feeling regarding credit cards at least. We just watch everyone around us and they charge charge charge and it is like, wow, stop and think of what you are doing to yourself. And I don't mean people who like rewards cards but pay every month I mean the people who ALWAYS carry a balance. Ok I am rambling and I still have a few more posts to look at. Thank you very much Steve for all of your advice- I will take any I can get. :)
__________________
 
"I think you are correct. After talking to a lot of different people including family members, a lot of people expect to fund their retirements by inheriting from parents and grandparents. In our family alone I think there will be some disappointment when the inheritance does not happen quite like they hoped or wished."

When DH's dad died I can't tell you how many people assumed he got a large inheritance. We had people point blank ask us how much it was. Ummm, a pocket watch. Seriously. Oh and even more people said, "so now that you've got your inheritance are you going to finally buy a house?" We were like, what inheritance? I don't think you can count on it. Sure I don't think anyone would complain about getting one but you can't rely on that. Also I know that this sounds awful but I don't intend to leave my kids a huge inheritance. While they are still small we are worth quite a bit in insurance (millions) but we feel that that is only fair to the person who was not planning on raising three kids and suddenly acquires that task. Or if one of us should predecease the other we would want the survivor to be comfortable and able to raise the kids the way we would have together. Or close to it. However once the kids are grown and the house is either paid for or mostly paid for we will scale that back. No need to give anyone incentive to want us dead ;) Also I have to say that the one family member I've seen die with a sizable estate, man oh man there was so much bickering about it. It was ugly. Court was involved. I stayed out of it because I was only 17 but still got to hear enough and I just thought it was nasty. I'd like to think better of my family but why give them the opportunity? Maybe I'll just leave it all to charity- Give Kids the World sounds good. :thumbsup2
 





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