Your thoughts on this article: "If You Have Savings In Your 20s, You're Doing Something Wrong"

[eliza61]

I don't think it really matters. Sure, you don't enter your 30's with $500,000 in your IRA. But, you don't have $0 in it, either.

I mean, if you can't invest ANYTHING in your 20's, what makes you think you'll be able to start in your 30's once you start having very expensive obligations like spouses, kids, mortgages, etc.

Lol easy Gumbo, i'll admit there are tons of things I did in my 20's that I didn't do in my 30's. why wouldn't you be able to??? In my early 20's dh and I lived in Portugal, we had no kids, no obligation. We simply had different priorities. Dh had a job, I pretty much played and we darn sure didn't stress about what would happen when we were 60. When we decide to have kids, late 20's we came back to the states ( with maybe a few grand) got an apartment and kept it moving? I didn't have a IRA?? I definitely didn't have investments. I had not even heard of an IRA when I was 20

Heck, when my dh finally took the leap to start his own firm, not only did we sell our little investments we were a half million in the red from a small business loan.

Now we never really had debt outside of that mainly because growing up as a kid people didn't have cc's and my parents paid for my college so I didn't have loans.

I can't really say when we started thinking about retirement savings big time, we both have jobs with full pension, so maybe that was our safety net. I do know it was not when I was 20 or 25

Ok, I'm the odd duck

 

[Gumbo4x4]

Lol easy Gumbo, there are tons of things did in my 20's that I didn't do in my 30's. why wouldn't you be able to??? In my 20's dh and I lived in Portugal, we had no kids, no obligation. Dh had a job, I pretty much played and we darn sure didn't stress about what would happen when we were 60. When we decide to have kids, late 20's we came back to the states ( with maybe a few grand) got an apartment and kept it moving? I didn't have a IRA?? I definitely didn't have investments. I had not even heard of an IRA when I was 20

Heck, when my dh finally took the leap to start his own firm, not only did we sell our little investments we were a half million in the red from a small business loan.

Different time though. You don't really think anyone that age today hasn't heard of an IRA or 401K, do you? And not everyone is going to be a successful entrepreneur. Most of us are going to grind it out "for the man".

Point is this - I'm 48. I make more than triple what I made at 28, quadruple what I made at 22. In my 20's, I ran around like crazy. Used every single vacation day for travel. When work got slow & we were on 4-day weeks, I'd ask for Friday off one week & Monday the next so I could take a 4-day weekend to go fishing in TN or party on Bourbon Street. And it was still WAY easier to save then than now. Way easier.


You were able to fall back on a combination of a pension & many years of high income to overcome spending everything in your 20's. I'm happy for you. But, it's not a plan I'd advise anyone currently in their 20's to use.

 

[eliza61]

Different time though. You don't really think anyone that age today hasn't heard of an IRA or 401K, do you? And not everyone is going to be a successful entrepreneur. Most of us are going to grind it out "for the man".

Point is this - I'm 48. I make more than triple what I made at 28, quadruple what I made at 22. In my 20's, I ran around like crazy. Used every single vacation day for travel. When work got slow & we were on 4-day weeks, I'd ask for Friday off one week & Monday the next so I could take a 4-day weekend to go fishing in TN or party on Bourbon Street. And it was still WAY easier to save then than now. Way easier.


You were able to fall back on a combination of a pension & many years of high income to overcome spending everything in your 20's. I'm happy for you. But, it's not a plan I'd advise anyone currently in their 20's to use.

Lol, I'm starting to think the Jimmy Buffett margarita-ville plan ain't as bad as it sounds. it can make me wanna drink

What do I know I'm almost 58 and I still don't know what I want to be when I grow up

 

[Colleen27]

My gut reaction is that it is little more than clickbait, and undoubtedly successful at that, but I agree with Eliza that it does raise some good points about out "live to work" mindset and the priorities we expect even from the youngest adults. I was broke in my early 20s but some of my fondest memories were made during those years on crazy shoestring budget road trips, going to concerts with friends, and otherwise spending what little money I had in rather irresponsible ways. And I didn't seriously start saving for retirement until 30, although I wasn't entirely without assets - we bought our home that year, draining all but our tiny IRAs to do so.

Will I regret that choice at 90? Only time will tell. At this point we're doing okay, not great but better than average, on the savings front. We have substantial home equity thanks to a fortunate accident of timing. And I'm heading into a second career that will boost our income considerably after living many years on a single income. At this point, I have no regrets about being a spender rather than a saver in my early/mid 20s. Yes, money saved in your 20s has more time to grow. But compound interest isn't the only measure of time's value, and running away for a weekend to see a particular museum exhibit or music festival isn't the same sort of experience at 50 or 60 as at 20.

 

[NancyIL]

I never said I hit it big on an investment. I said I worked. And I did. I went into a STEM field, got paid quite well, lived on about 20K a year and banked the rest. I also had a couple of part time jobs that I took mostly for fun reasons, but I banked that money, too. After 12 years (I graduated college at 21) I'd banked/invested over a million dollars (not counting investment gains) just by living frugally and working my butt off. No inheritance, no investment, no stock options. I still live very low to the ground, except for traveling, so my nest egg continues to grow. I withdraw at a rate lower than the growth, adjusting my spending for down market times.

Had I had a bunch of "fun" in my 20's, as the author does, and not saved, I'd be in the reverse boat, having to work into my old age. So saying that saving in your 20's is doing it wrong is ridiculous. You can save a ton in your 20's because it's one of the last times in your life that you aren't encumbered by family, college savings, kids expenses, mortgages, etc. You can either use your 20's as party time, as the author is doing, or you can knuckle down and build a solid future for yourself that will give you more options at a younger age than you could otherwise have.

People do it every day and on a lot less money than I was making. MrMoneyMustache has a whole website devoted to the topic. I just did it long before he made it into a "thing." I knew I didn't want to work the rest of my life, thought, "How do I make that happen?" and did it. Nothing special, other than avoiding debt, avoiding unnecessary spending, and having a valued and well paid skill set.

I was just checking to see if someone had posted Mr. Money Mustache's response: http://www.mrmoneymustache.com/2015...etting-rich-in-your-20s-youre-doing-it-wrong/

 

[NancyIL]

Mr. Money Mustache has responded... http://www.mrmoneymustache.com/2015/09/29/if-youre-not-getting-rich-in-your-20s-youre-doing-it-wrong/?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed:+MrMoneyMustache+(Mr.+Money+Mustache)

Oops...I missed seeing your post earlier when I posted!

 

[Gumbo4x4]

I was just checking to see if someone had posted Mr. Money Mustache's response: http://www.mrmoneymustache.com/2015...etting-rich-in-your-20s-youre-doing-it-wrong/

Good response & I'm glad he attacked the biggest flaw in the original article (her hopelessly doomed plan to party her way into a better salary).

 

[morgan98]

I am late to this thread, but I do not believe you are doing something wrong if you have savings in your 20's. I have been gainfully employed since my college graduation in 1993. In my 20's, I was investing in my career and made substantially less than I do now. However, I still enjoyed life AND managed to save.

I did contribute to a 401k (even if not at the same rate as now) and always paid myself first by diverting some of my check into a savings account before any was spent.

However, I will say that I did not have champagne tastes on a beer budget. I had a new car..it was a manual transmission Toyota Tercel. I have upgraded my car since then, I also bought clothes, but maybe not at quite as high end stores as I do now. I did enjoy going out and went to concerts, that were reasonable within my spending limits. I also went on a few vacations, again not luxury.

I agree with others, learning to live within your means and enjoy yourself is something good to learn at younger ages. It is hard to wake up one morning and decide that you are going to become an aggressive saver. Easier to learn moderation early, in my opinion.

 

[Colleen27]

Good response & I'm glad he attacked the biggest flaw in the original article (her hopelessly doomed plan to party her way into a better salary).

I didn't read the original article, being rather reluctant to go for such obvious clickbait, but I did read the MMM response and then had to go back to see if he was mischaracterizing the original because it seemed too blatantly stupid to be believed. I could wrap my mind around the part of the article that was posted here, but I can't fathom how anyone considers partying a career-advancement plan!

 

[Praying Colonel]

I thought of this thread when I read the following article:

New Grads Won’t Be Able to Retire Until 75, Study Finds
by Arielle O’Shea
Rising rents and increasing student loan debt have pushed the retirement age to 75 for college graduates, according to a new NerdWallet study. That’s an increase from NerdWallet’s last analysis, which used 2012 data and predicted an average retirement age of 73 for the Class of 2013.
Compared to the current average retirement age of 62 [1], today’s college graduates will work 13 years longer. And, with an average life expectancy of 84 [2], they’ll spend only 9 years in retirement.
NerdWallet’s research is based on a 23-year-old new graduate earning the current median starting salary of $45,478 [3].
Quick facts on young graduates:

• Average student loan debt: $35,051 [4]
• Student loan repayment plan: 10 years
• Average yearly loan payment: $4,239

I'm glad I probably won't be around to hear the author of the original article whine about how she's in her mid 70s and can't afford to retire.

 

[eliza61]

I thought of this thread when I read the following article:

I'm glad I probably won't be around to hear the author of the original article whine about how she's in her mid 70s and can't afford to retire.

lol, yeah the thing is PC, these are the same studies that swear everyone needs 1 million dollars in order to retire. Yet I know a boat load of people who have far less and retired and happy and not eating dog food.

Actually I lost two of my twenty somethings in my department recently, they left a very good paying job as chemist (70K min a year) to take a chance and start their own vineyard, lol in southern NJ no less.

I totally admire their courage to take a chance and roll the dice on a dream. better imo than the 75 year olds who sit around and whine about their regrets.

But then if the dis budget board had looked at my dh and mines balance sheets when we were 30, you guys would have predicted we'd be working to 90 also. Not only did we not have any savings, we were about 300K in debt from dh starting his own business and definitely living month to month.

I'm retiring next October, not yet 60.

I wouldn't worry. If I had to place a bet, I'd bet the author will be fine.

 

[tvguy]

lol, yeah the thing is PC, these are the same studies that swear everyone needs 1 million dollars in order to retire. Yet I know a boat load of people who have far less and retired and happy and not eating dog food.

Actually I lost two of my twenty somethings in my department recently, they left a very good paying job as chemist (70K min a year) to take a chance and start their own vineyard, lol in southern NJ no less.

I totally admire their courage to take a chance and roll the dice on a dream. better imo than the 75 year olds who sit around and whine about their regrets.

But then if the dis budget board had looked at my dh and mines balance sheets when we were 30, you guys would have predicted we'd be working to 90 also. Not only did we not have any savings, we were about 300K in debt from dh starting his own business and definitely living month to month.

I'm retiring next October, not yet 60.

I wouldn't worry. If I had to place a bet, I'd bet the author will be fine.

Life style is sooo much of the equation. My mom retired at age 62 and enjoyed 28 years of financial secure retirement live just on her social security check....her $400 a month pension was her money for trips. She left her retirement savings to me.
Looking at what DW and I are bringing home now after taxes...and what our full retirement age social security checks will be in 8 years....it's like $400 less a month.

I guess it would be easier if we knew how long we were going to live so we could budget for it.

 

[Colleen27]

lol, yeah the thing is PC, these are the same studies that swear everyone needs 1 million dollars in order to retire.

And they always come either directly from financial services companies that will be happy to take your money to help you in your quest to retire a millionaire, or from publications that feature those companies as their major advertisers and quote their representatives as experts in said articles. While I'm sure it is true that many Americans are undersaving, I feel like with a lot of the "how much you need to retire" advice it is wise to consider the source.

 

[eliza61]

Life style is sooo much of the equation. My mom retired at age 62 and enjoyed 28 years of financial secure retirement live just on her social security check....her $400 a month pension was her money for trips. She left her retirement savings to me.
Looking at what DW and I are bringing home now after taxes...and what our full retirement age social security checks will be in 8 years....it's like $400 less a month.

I guess it would be easier if we knew how long we were going to live so we could budget for it.

Hey TV, I think you hit the nail on the head. I read a very interesting article, I think it was in the philly Inquirer that said the exact thing. A few studies were done that seems to point out even if a kid at 20 has no savings, if he is use to living below his means and is content with that NO matter what he has saved 8/10 will be pretty successful in retirement.

i spent the last 16 months reading, reading and more reading on retirement because I knew I was going to pull the trigger. two things stand out, one if you believe these articles we are all doomed. every day its about how millions are sooo unprepared for retirement, yet according to the SS administration thousands retire every day. now of course every ones comfort zone is different. mine retirement plans have changed radically mainly because I'm now single but I use to think I would be living "la vida loca" when I retire, lol now I realizing spending my winter in a small southern beach area in a small low maintenace condo is about as wild and crazy as I'm getting.

and two, every "expert" has a book you can buy. lol


I gave up on longevity, lol my dad's sister just turned 100 this year but on the flip side, since 2012 I've lost my baby brother, my husband and a good friend all to cancer ll before they were 55. it's a crap shoot

 

[crisi]

lol, yeah the thing is PC, these are the same studies that swear everyone needs 1 million dollars in order to retire. Yet I know a boat load of people who have far less and retired and happy and not eating dog food.

Actually I lost two of my twenty somethings in my department recently, they left a very good paying job as chemist (70K min a year) to take a chance and start their own vineyard, lol in southern NJ no less.

I totally admire their courage to take a chance and roll the dice on a dream. better imo than the 75 year olds who sit around and whine about their regrets.

But then if the dis budget board had looked at my dh and mines balance sheets when we were 30, you guys would have predicted we'd be working to 90 also. Not only did we not have any savings, we were about 300K in debt from dh starting his own business and definitely living month to month.

I'm retiring next October, not yet 60.

I wouldn't worry. If I had to place a bet, I'd bet the author will be fine.

The million dollars thing (or more) has to do with a safe withdrawal rate. (I think you know this, but for others this may be the first time they come across this concept). If you have $1M, you can "safely" take out 4% a year, which is $40k. The rest stays in and grows (at an estimated 8% growth rate). Because next year there will be 3% inflation and you'll need to pull out $41200 because apples are now $1.50 a pound. Then there is fudge in there for Monte Carlo simulations so you die broke, but don't go broke before you die. Some years you need to pull out more, some years the stock market does worse.

I've maxed out social security, so the government tells me I can expect about $25k a year if I don't pull until I'm 65. So with $1M in retirement accounts, and social security, I'd have $65k a year (todays dollars). I wouldn't eat dog food. But I'm also not very likely to be able to snowbird in my late 60s and early 70s on $65k, or take a summer to see Europe, spend my retirement years on a golf course, or fly to visit grandchildren across the country on a whim.

And if you are 25 and betting against Social Security, you have to do it on your own. So you have $40k a year to live on if you aren't going to run out of money. That isn't a lot, and that's todays dollars. The math for someone in their 20s - a million dollars will still be $40k a year at a 4% withdrawal rate - but inflation will have made $40k worth a lot less by the time they are 65 - is pretty dismal.

The average household income is around $60k, so the $1M makes sense with Social Security. For people who earn and spend more than the average income, they'll want to save more. If you don't max out Social Security because you don't work enough quarters or your income is low, you'll get less in Social Security (assuming you are counting it, some do, some don't). If you live on less today, and don't plan on changing your lifestyle in retirement, you'll need less money.

 

[Dakota731]

(at an estimated 8% growth rate)

What do you put your money into after retirement that has 8% growth? I don't want my money in the stock market at that time because of the risk but CD rates are so much lower so what do you due to be safe?

 

[Dakota731]

If you have $1M, you can "safely" take out 4% a year, which is $40k.

I guess that won't count for early retirement though, is that right? My husband is weighing his options. But we won't have insurance then and speaking to friends who have retired before 65 and are paying $1000 a MONTH for Obamacare taking up 1/3 third of their income right off the bat! It's a lot to think about.

 

[crisi]

What do you put your money into after retirement that has 8% growth? I don't want my money in the stock market at that time because of the risk but CD rates are so much lower so what do you due to be safe?

That assumes you put your money in the stock market. If you don't want to do that, you'll need a lot more money because the return comes with risk.

 

[crisi]

I guess that won't count for early retirement though, is that right? My husband is weighing his options. But we won't have insurance then and speaking to friends who have retired before 65 and are paying $1000 a MONTH for Obamacare taking up 1/3 third of their income right off the bat! It's a lot to think about.

Same formula works for early retirement, you just need to make sure that your spend includes health insurance if you retire before Medicare kicks in. So you'll need more money. But do keep in mind that the ACA gives you credit for not having much income - not assets - income. So if you only take out $40k a year, your income would go down and you'd qualify for a discount under ACA. That's how a lot of early retirees are making it work. (ACA has been a boon for early retirement).

(I have ACA insurance for a family of four. Its a high deductible plan - we play less than $600 a month - it was more expensive from my previous employer. You can shop your state's health care exchange and get a good idea on price - which is good to do while planning retirement. Healthcare costs tend to outpace inflation, so keep that in mind).

Another way to look at it is that every $100,000 in savings is worth $4k a year. So if you want to retire early and expect $12k a year in additional insurance costs, you need an extra $300k saved. Probably plus some because of that "health care costs outpace inflation" problem.

 

[eliza61]

What do you put your money into after retirement that has 8% growth? I don't want my money in the stock market at that time because of the risk but CD rates are so much lower so what do you due to be safe?

You don't have to do all stocks, in fact diversity is your best bet. invest in some low risk vehicles but you do need the stocks. you need something that will let you beat inflation

So right now I have investments that are about 70/30 mix of stocks/bonds. now some folks think that is high for a person who is retiring in 8-12 months but I'm thinking long term. I still have a good probability of living 35 years so I want to get high returns up front but I also have about 3 years living expenses in safer vehicles,

As crisi said if you want total safe returns you've got to have some way to make up for your buying power shrinking.

Now the aca is working for me, also like Crisi I've found a couple of insurers that will give me a plan at about ~650 bucks a month, which means I can retire early since one reason folks work until 65 is due to having to wait until medicare kicks in.