When Is It Enough? (Retirement Funds)

[DMRick]

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I will agree that people "spend" far too much - just because they can.. Curb the frivilous spending and you're already miles ahead of the game..

I spend too much, just because I can..and I love every minute of it LOL.
PS the white microwave is at Walmart, for $48. The brand was GE.

 

[DMRick]

This quote by the American Insititute of Certified Public Accountants poll quoted above:

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Nearly one in four Americans, or 23 percent has not yet begun to save for retirement. Although almost half of Americans- 47 - percent - indicate they have started saving, they also admit they have a long way to go.

Makes me think things are better than I thought. Who are the Americans they are talking about? Are they talking about ALL Americans, including newborns? Did they include the 90 year olds? Did they include those living in poverty, or on welfare? If that is ALL Americans, and 77% have begun to save for retirement, we aren't doing so bad.

So to sum it up: Nearly one in four Americans haven't started saving for retirement..but that means Nearly 3 in four have..and if that's ALL Americans..well that's pretty good.
47 (nearly half) - I assume that's 47% of the 77% who are saving for retirement..say they have begun saving for retirement but have a ways to go..mostly the under 35 crowd.

This is just why I don't like polls.

 

[C.Ann]

I spend too much, just because I can..and I love every minute of it LOL.
PS the white microwave is at Walmart, for $48. The brand was GE.

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Yeah - and I know HOW you "spend because you can" and that doesn't count..

$48 - huh? Is that on sale? Last time I checked it I think it was $54 or $58 or something like that.. I'll have to check it out if I get over there this weekend.. Thanks!

 

[disneysteve]

Who are the Americans they are talking about? Are they talking about ALL Americans, including newborns? Did they include the 90 year olds? Did they include those living in poverty, or on welfare?

I'm sure that if you get the demographic data, they are talking about working Americans, so no, that wouldn't include newborns or those already retired.

On a vaguely related topic, I read an article recently suggesting that the negative national savings rate isnt as bad as it sounds because it includes those who have already retired who are now living on their savings and thus have a negative personal savings rate. As the elderly population grows, which it is doing quite steadily, the number of people with negative personal savings rates also grows which throws off the national numbers.

 

[dvcgirl]

This quote by the American Insititute of Certified Public Accountants poll quoted above:

Makes me think things are better than I thought. Who are the Americans they are talking about? Are they talking about ALL Americans, including newborns? Did they include the 90 year olds? Did they include those living in poverty, or on welfare? If that is ALL Americans, and 77% have begun to save for retirement, we aren't doing so bad.

So to sum it up: Nearly one in four Americans haven't started saving for retirement..but that means Nearly 3 in four have..and if that's ALL Americans..well that's pretty good.
47 (nearly half) - I assume that's 47% of the 77% who are saving for retirement..say they have begun saving for retirement but have a ways to go..mostly the under 35 crowd.

This is just why I don't like polls.

At the end of the poll it stated that they polled 1,000 adults. Since this is a poll for retirement savings they would not have polled retired adults...they would have polled working adults. I suppose that they could have polled people on welfare, but since that is intended to be a temporary program and in theory those people will want to retire someday too, well why not include them?

Every single study on this topic shows that we're *way* behind as a nation with respect to retirement planning and saving. 56% of those over 55 had less than 50K saved. So sure, perhaps 75% has *something* saved for retirement, but in general, it isn't even close to being enough. In most cases "something" turns out to be very little. And there have been reports out there that 1/2 of all workers who switch jobs these days cash out their 401Ks instead of rolling them over. Since those of us in our 20s-30s-40s are likely to have many jobs during our working life, this is an incredibly dangerous financial habit to get into.

Hopefully some of those folks in that 55+ group have pensions because with just 50K saved at that point they will be taking a considerable pay cut if they ever planned on retiring. But the harshest reality is that many won't retire in that group. They'll work until they can't work any longer, possible until the very end of their life.

Only 1 in 5 will have a defined pension plan in the not too distant future. And those who think that their pension plans/retirement benefits are rock solid could be in for a nasty surprise in the future. Many people who have been in retirement for years are seeing benefits cut. Most were promised things like prescription coverage for life, or supplemental health care coverage to go along with Medicare. Benefits are being cut, or retirees are being asked to contribute a monthly premium to continue coverage. It's happening all over the place, and is likely to get worse as the Baby Boomers go out and these pension funds can't handle paying out to so many people at one time.

GM, once the safest pension package around, just did this, and it was seen as a really *big* deal, and will open up a floodgate of similar rulings. They cut one billion dollars to retiree benefits. Retirees now have to pay a premium (estimated at $752 a year) to keep their health benefits. Now, doesn't soudn like a lot right? Maybe not for a new retiree, but what about a guy who has been retired for 20 years? His income is much lower....and it will hurt. The Baby Boomers are going to put a great deal of stress not just on federal goverment programs like SS and Medicare, but also local and state pension funds, union pension funds and of course private pension funds.

 

[dvcgirl]

I'm sure that if you get the demographic data, they are talking about working Americans, so no, that wouldn't include newborns or those already retired.

On a vaguely related topic, I read an article recently suggesting that the negative national savings rate isnt as bad as it sounds because it includes those who have already retired who are now living on their savings and thus have a negative personal savings rate. As the elderly population grows, which it is doing quite steadily, the number of people with negative personal savings rates also grows which throws off the national numbers.

The National Savings rate also doesn't include capital gains or home equity. However, I think that key with the NSR is to look at the trend, which has gone steadily for the last 15 years.

 

[disneysteve]

The National Savings rate also doesn't include capital gains or home equity. However, I think that key with the NSR is to look at the trend, which has gone steadily for the last 15 years.

Oh, I agree that the trend has been downward, but I also see some validity to the other side of the argument. The percentage of households who invest in the stock market is at a record high. The percentage of households that own their home is at a record high. So a lot of money that would previously have been counted as savings is now tied up in home equity and capital gains. Not including that money as "savings" has a bigger impact on the NSR today than it did 10 or 20 years ago.

And, as the article I referred to mentioned, an aging population means more people living more years in retirement when they have negative savings as they live off their nest egg.

Certainly, Americans on the whole are saving too little and spending too much, but it is possible that because of changes in society, the rulers we use to measure those things may not be as accurate as they once were.

 

[mickeyfan2]

I'm sure that if you get the demographic data, they are talking about working Americans, so no, that wouldn't include newborns or those already retired.

On a vaguely related topic, I read an article recently suggesting that the negative national savings rate isnt as bad as it sounds because it includes those who have already retired who are now living on their savings and thus have a negative personal savings rate. As the elderly population grows, which it is doing quite steadily, the number of people with negative personal savings rates also grows which throws off the national numbers.

I read this too. I forget what the savings rate was for those who were working.

 

[mickeyfan2]

Oh, I agree that the trend has been downward, but I also see some validity to the other side of the argument. The percentage of households who invest in the stock market is at a record high. The percentage of households that own their home is at a record high. So a lot of money that would previously have been counted as savings is now tied up in home equity and capital gains. Not including that money as "savings" has a bigger impact on the NSR today than it did 10 or 20 years ago.

And, as the article I referred to mentioned, an aging population means more people living more years in retirement when they have negative savings as they live off their nest egg.

Certainly, Americans on the whole are saving too little and spending too much, but it is possible that because of changes in society, the rulers we use to measure those things may not be as accurate as they once were.

ITA

I was just watching a show and they said that homeowner's networth is 34xs that of renters. So having home ownership at a all time high is a very good thing. Also DH told me he read that 42% of all homes sold last year were secoond homes.

 

[DMRick]

Certainly, Americans on the whole are saving too little and spending too much, but it is possible that because of changes in society, the rulers we use to measure those things may not be as accurate as they once were.

I don't remember a time when they said Americans on the whole are saving a lot. And I go back a ways LOL.
It is true that the old time pension plans are falling by the wayside, It is true that savings is down. I don't dispute that. We are living longer, so we need more..no argument there. But to have saving for retirement take over our lives? We have a friend that took early retirement. He also had all his eggs in one basket (GE stock). When it nosedived, he was sick. I mean really really sick. He still had enough to retire, just maybe not as much as he had hoped. But he made himself so sick with worry, that he actually ended up in the hospital. He had read all the woe is me articles. He was positive they would sink in despair. Well, being prepared is one thing..but making yourself sick with dread instead of looking forward to retirement, gets nobody anywhere. You do the best you can with what you have.If you have to work past retirement, it's not the end of the world. Some people actually like their jobs. Many become consultants after they retire to keep some income coming in. It's not like, if you don't plan well, you will eat cat food (we all love that one, don't we LOL). Most can still and may want to work. Heck, some will say that keeps them young. But I don't think you should save and worry to the point that your life isn't enjoyable now.

 

[disneysteve]

I forget what the savings rate was for those who were working.

I don't know the answer to that, but here are a couple of quotes from the article.

"Yale University economics professor William D. Nordhaus made that argument in 2002 congressional testimony, saying that, once assets were included, the savings rate for the 1990s would have been a robust 25 percent."

and

"European countries count capital gains and home appreciation when they calculate personal savings."

So when articles say that Americans are saving less than those in other countries, they may be comparing apples to oranges if the savings rates are being calculated in very different ways.

 

[disneysteve]

I don't remember a time when they said Americans on the whole are saving a lot.

We have a friend that took early retirement. He also had all his eggs in one basket (GE stock).

According to the Bureau of Labor Statistics, the personal savings rate from 1974 to 1984 was 10%. It fell to 4.8% by 1994, and was minus 0.7% for 2005.

As for your friend, I hate to be blunt about it, but someone who put their entire retirement savings into one stock is nuts. There is no financial planner in the world who would recommend that to anyone. I hope he eventually diversified his holdings and is in a more stable situation now.

ITA that retirement savings should not take over our lives. I think we have all agreed repeatedly that there needs to be balance. We need to enjoy our lives every day because we don't know how many days we get. Also, retirement isn't the only thing to save for. There are lots of short-term goals too. We are currently putting money aside for DD's Bat-mitzvah in 2008, a "new" car for me about the same time, DD's college education in 10 years, our summer vacation to Israel in 4 months and numerous other things. I'm also looking into an investment property with my cousin. So you can't just be focused on the end game of retirement.

 

[dvcgirl]

According to the Bureau of Labor Statistics, the personal savings rate from 1974 to 1984 was 10%. It fell to 4.8% by 1994, and was minus 0.7% for 2005.

As for your friend, I hate to be blunt about it, but someone who put their entire retirement savings into one stock is nuts. There is no financial planner in the world who would recommend that to anyone. I hope he eventually diversified his holdings and is in a more stable situation now.

ITA that retirement savings should not take over our lives. I think we have all agreed repeatedly that there needs to be balance. We need to enjoy our lives every day because we don't know how many days we get. Also, retirement isn't the only thing to save for. There are lots of short-term goals too. We are currently putting money aside for DD's Bat-mitzvah in 2008, a "new" car for me about the same time, DD's college education in 10 years, our summer vacation to Israel in 4 months and numerous other things. I'm also looking into an investment property with my cousin. So you can't just be focused on the end game of retirement.

That's the key on the savings rate...the trend. 10% is a whole lot more than -0.5%. Totally agree that retirement savings can't become the entire focus of ones life....and it isn't when it becomes automatic. While I do think that the national retirement dilemma will affect us all in many ways, all that we can do personally is save what we can and hope for the best when it comes to future policy, taxes and so on. No matter how bad things get in the future for this nation, those of us who are well prepared will obviously feel the sting much, much less than others.

Like you Steve, we also save for shorter term goals....for us this is mostly vacations and a future vehicle. That kind of savings is even fun because the goal is only a year or two away. We're saving for a trip later this year, and then a splurge cruise in the spring of 08. And since our one SUV is pushing ten years old, we've started to save for a future vehicle....hopefully we won't need one for another 5 years or more, but better to start to save now.

 

[DMRick]

As for your friend, I hate to be blunt about it, but someone who put their entire retirement savings into one stock is nuts. There is no financial planner in the world who would recommend that to anyone. I hope he eventually diversified his holdings and is in a more stable situation now..

A lot of GE workers did that (that would not be us). They truly believed in their company. He's still holding onto the same single stock. He's not alone.

According to the Bureau of Labor Statistics, the personal savings rate from 1974 to 1984 was 10%. It fell to 4.8% by 1994, and was minus 0.7% for 2005.

Steve:
I have a really hard time understanding this. If 3 our of four adults are now saving for retirement (according to another poll mentioned), how can we be minus 0.7%? Is this poll saying that 10% saved from 74 - 84 (I thought all our savings was going into gas in the early 70's LOL)? Were those the only high years? And why was the Bureau of Labor keeping those stats?

 

[dvcgirl]

A lot of GE workers did that (that would not be us). They truly believed in their company. He's still holding onto the same single stock. He's not alone.


Steve:
I have a really hard time understanding this. If 3 our of four adults are now saving for retirement (according to another poll mentioned), how can we be minus 0.7%? Is this poll saying that 10% saved from 74 - 84 (I thought all our savings was going into gas in the early 70's LOL)? Were those the only high years? And why was the Bureau of Labor keeping those stats?

Consumer Debt...is the answer. The average American now carries what...9-10 grand in CC debt. I don't have any, you don't have any.....millions of us don't, and yet the average is that high. And so, while we may be saving like crazy, others are spending even crazier....bringing us to a negative net savings level.

Also, many here have admited that they are sort of "blended" when it comes to their finances. Some have money in retirement, but they also have CC debt, home equity loans....which negates what they are "saving" in that national tally. This is why this trend is such a big deal. We're spending more than we're putting in the old bank. Back in the 70s the savings percentage was 10%,and I think folks from that era are mostly retired, or are retiring now....and their retirements reflect their efforts. The same will not be the case 30 years from now.

 

[disneysteve]

Consumer Debt...is the answer. The average American now carries what...9-10 grand in CC debt.

Exactly. Let's say you earn 45K, the national median. If you put 3% of income in your 401K to get the company match, that means you saved $1,350 in a year. But if in the same year, you spent a week in WDW and charged $2,000 to your CC that you are paying the minimum on each month, have you actually saved anything? No. Your net savings is minus $650.

Americans are putting money into savings with one hand and taking it out with the other. On a couple of different tv shows, I've seen them interview people who have thousands in credit card debt even though they have more than enough money in the bank to repay that debt. The folks just insist on keeping the money in the bank earning 2 or 3% interest even though they are paying 18 or 20% interest on the credit cards. Someone earlier said we are a nation of financial idiots. I think that probably applies here.

Between 2002 and 2004, Americans borrowed $400 BILLION against their home equity. Now, some of that went to intelligent use, like home improvement or purchasing a 2nd home - things that will increase personal wealth. But lots of it went to consumer spending. New cars, vacations, plasma tvs, etc. So if someone put 10K in their 401K but took out a 50K home equity loan to spend on stuff, they really haven't saved anything even though their 401K balance went up.

 

[DMRick]

So if any of the rest of you are still with us..when is it enough for you? Or are you now afraid it will never be.

 

[DMRick]

Steve, I'm sure I'm included in that person who has a large cc debt. if they just look at what the debt is in any given month. You prob are too. But we pay it off..how do we know others don't? Are the many polls that get tossed around, looking at the same people month to month? Although every month I look like I have large CC debt, since that's how I pay for most everything.

 

[disneysteve]

Steve, I'm sure I'm included in that person who has a large cc debt. if they just look at what the debt is in any given month. You prob are too. But we pay it off..how do we know others don't? Are the many polls that get tossed around, looking at the same people month to month? Although every month I look like I have large CC debt, since that's how I pay for most everything.

That's a good question. Yes, if you just look at a snapshot of our accounts, at any given time we may have a balance of a few thousand dollars, but we pay them in full when the bills come. I've always assumed the figures we hear only refer to those who are carrying balances over time. I'm sure the companies are able to track that. Does anyone know how that works? Where is arminnie?

 

[nboicepardee]

interesting thread....wanted to hear more!