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Define living expenses. A lot of people think thats a brand new car and every shiny gadget the feel they should have. People always seem to have money for what they want but never for what they need.
or I find another abandoned dog or cat, or so forth. And out the money goes. I can certainly imagine myself old, because I am old. Old and broke.
Taking in pets is not a necessity. If you're not saving anything, it's a luxury you can't afford.
Same goes for stray people who get themselves into various kinds trouble and expect others to bail them out. It's often part of a self destructive cycle that no one else can change but themselves.
It has been my philosophy for the bolded part not to come true in my life time. I do things now, even it means not saving everything I possible can for when I turn 70. I am trying to set myself up so that I can do some sort of work in retirement.
Nothing wrong with that, but no one is in complete control. You need to have a Plan B if your Plan A doesn't work out.
Less than 20k is not enough to make any meaningful contributions. Even moderate ones can only be made at this level if you live with a room mate and don't have kids.
It's obviously true that it's easier to save if you're making 70K than if you're making 20K...but this attitude that making 20K isn't enough for "meaningful contributions" is wrong, wrong, wrong, and self defeating, IMO.
The habit of saving has very important psychological benefits. Saving something is always better than saving nothing.
Investing 1K per year (83.33 per month) at 8% still yields 125K after 30 years and 293K after 40 years. Those amounts are not a lot but a heck of a lot better than nothing.
Last edited by mysticaltyger; 02-15-2014 at 02:30 AM..
People don't save for good reason, that would be the fact that they have been inundated for over half a century to spend and spend, grow the economy, grow it more each year, more than the rest of the world, MORE, MORE, that was the rallying cry of the "worlds greatest economy," and now, we are admonished to save, never mind the fact of the resulting contraction.
The contraction needs to happen if it's based on running up debts. It's painful in the short run, but eventually things readjust. In fact, consumer debt levels are lower now than in 2008. It's been a painful adjustment and there's more to come, but the world didn't end.
This applies to me. I don't even expect to make it to my late 60s to retire. Lol. I don't even want to think of myself being in my 70s old and tired and unable to do anything.
If you don't expect to make it, you have 2 very likely outcomes and they both suck:
1. You don't make it and you die young (probably because you didn't take care of yourself. 70% of our health problems in America are due to poor diet and lack of exercise...that is no exaggeration).
2. You DO make it to 70, but you are broke. You're alive but just existing.
People who EXPECT to have long, healthy, and prosperous lives are more likely to actually have them because they acquire the necessary habits to achieve these things.
If you view such goals as impossible, you'll probably be right. It's self fulfilling.
He didn't save enough because he had to keep up with the Joneses and now he has to work where as he could enjoying his 50's retired.
I know someone who is in his late 50s in a similar conundrum. He didn't live all that high on the hog with the typical examples people mention (houses & cars)....but he is what I would call a "fritterer". He frittered money away $10 here and $10 there. Changed jobs a lot. Spent a few years in Europe in his 20s and working under the table to make just enough to get by and have fun (instead of building a career). Spent a lot going out for drinks, eating out etc. At one point, he was unemployed but spent $700 on food in a month. I was like "Holy sh*t. That's almost how much I pay in rent!". He answered me defensively. If I really push him, he'll admit he's made some bad choices....but he puts 80% of it on stuff "out there" and 20% on himself. The reality is that ratio should be reversed.
As for money? Just the lack of interest on savings and now worthless CD's have put a crimp in a lot of retirees budgets. (You don't put money in anything risky if its what you plan to live on and you are actually already retired.)
Speak for yourself. Savings accounts and CD's that don't pay anything ARE risky. By definition. If they are not keeping up with inflation (and they're clearly not, even at today's low headline inflation rate, which is likely understated), then you're just losing money year after year to inflation. It's better to invest in a mix of stocks and bonds and get hit every once in a while but have the good years make up for the occasional bad ones. Mutual funds that invest in a mix of stocks (40%) and bonds (60%) like Vanguard Wellesley Income (for conservative investors like yourself) come to mind.
I have a 61 year old friend who's still working. He has a nearly 100% stock portfolio because bonds don't pay anything for the reasons you stated (although I'm sure he does have something in savings). We just had this very discussion at dinner tonight. He says the risk you take with stocks is worth it and that he would not have just crossed the $1M net worth line if he had not invested aggressively. Personally, 100% in stocks is too much for me, but I do have more than 75% of my retirement funds in stocks and another 20-25% in bonds (fairly aggressive for a bond fund).
Bottom line is that complete security doesn't exist and never did. And trying to attain complete security for your principle actually makes you more financially unstable, not less.
Last edited by mysticaltyger; 02-15-2014 at 02:40 AM..
Even people living in cheaper parts of the country have a hard time because who happens to normally have an additional $6k a year to put towards an IRA?
Yes, it's definitely tough to max out your 401K AND an IRA at the same time and very few people just "happen" to have that 6K laying around.
But that's the point. Most folks have to make a concerted effort to either earn that extra 6K or make a concerted effort (both mental and physical) to keep their expenses very low to save that 6K (or a combination of both). It's a very active kind of thing. There doesn't ever just "happen" to be 6K laying around to put in an IRA (at least not for the 99%). The problem is, most people don't want to think about how to save those extra bucks or they don't want to find the second job, figure out how to earn more in their current job/career, etc.
... because it's not necessary to sacrifice and deprive yourself in your early years in order to find happiness and fulfillment in your later years. It is much more useful to just discipline your life so you can live on less then six figures and never get accustomed to what lavish applications of money can buy in the first place.
Seems like a false dichotomy to me. Why not do some of both? Many people would view your lifestyle as a "sacrifice" that would make them "unhappy". I think it's complete rubbish...but this is how people think. If more people lived modest lifestyles as you do, they could save the difference and easily retire with plenty of financial security (more than you have), in many cases long before their 60s.
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Speak for yourself. Savings accounts and CD's that don't pay anything ARE risky. By definition. If they are not keeping up with inflation (and they're clearly not, even at today's low headline inflation rate, which is likely understated), then you're just losing money year after year to inflation. It's better to invest in a mix of stocks and bonds and get hit every once in a while but have the good years make up for the occasional bad ones. Mutual funds that invest in a mix of stocks (40%) and bonds (60%) like Vanguard Wellesley Income (for conservative investors like yourself) come to mind. 
