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Emmigration makes some key points that a goal of retirement can be a margin of error of comfort. It is that margin that can make you extremely credit worthy.
The issue here is that there are loaners who are more than happy to loan money to those who are not truly credit worthy. Remember the mortgage loan problem not too long ago?? Reverse mortgage is another gold mine. Bankers would be more than happy to sign one off for reverse mortgages and if a senior spent himself/herself out of home later, it's their tough luck!
One of my relatives came across an inheritance which helped to pay off her mortgage. We were surprised to learn few years later that she had taken a substantial HELOC to spend on what we considered wasteful home renovations. Then another surprise came that the banker informed her that they had undercharged monthly interests for almost 2 years so the loan balance went up to make up for the bank past error. I would like to give the bank the benefit of the doubt but had to wonder whether it was of their interest to 'discover' the error so late!!!
It is also not uncommon for people to get a big loan or to be heavily in debt out of necessity due to unforeseen events in their life (illness, accident, divorce etc). How big of a comfort margin that one needs? One can go from credit worthy to unworthy in a short time.
Again, IMO, the emphasis in a retirement forum is what to do about the current situation and the 'may not be too bright' future and not on what one should have, could have etc
There is no fix for this unless the government takes all our money and then doles it out equally to everyone.
Do you want that ?
That may solve income inequality but it will not solve life style inequality. And isn't that the what bothers the libs? People make choices and given the same amount of "money in" some folks will do well with it and others will waste it all partying and end up in poor housing, riding a bike. And no, I do not want income equality unless people work as equally hard as I did and have made good decisions. Then the equality thing will take care of itself.
There are winners and losers in every game. There will be some subset of people who, through little fault of their own, end up wiped out. Medical issues are the biggest culprit, but unless you want to change this through health insurance policy, it's virtually inevitable.
I'm not talking about Creflo Dollar style prosperity theology or something silly like that, but simply that many people need to look at retirement planning from the perspective of increasing available funds, not just assuming a consistent (or nearly consistent with COLA style increases) wage.
I was making $24k with no benefits of any kind on 1/1/2014. Less than 16 months later, I'm making about $58k with bonus. Count in the value of my paid vacation, sick time, and holidays, and I'm up to effectively 250% of my prior wage.
At $24k, there was barely enough for essentials, much less any discretionary income for investing. At my current wage, there is money to save and invest, as well as far more for today's pleasure. If my income goes up to $75k (where the next job up from me starts out), I'll probably invest 60% of that and take the other 40% to spend.
You are right Emigrations, when we are still working we have to look at all the possible ways to increase the income, AS WELL AS, reduce the outflow. People who succeed are often the people who realize that we have to make the hard choices that others are not willing to make, especially early on, but it's never too late to start. Moving to a city with better employment as you have, going back to school to learn more marketable skills, working two jobs, living in a small apartment until they get themselves out of debt, learning to cook and shop on a limited budget, get a roommate to defray expenses, skip the designer bags and brand new cars, all are good STARTING POINTS. Then pay off debt (if you can't afford the payment - SELL IT!), refuse to borrow, don't be led into get rich quick schemes, work hard, and take advantage of opportunities when they present themselves.
While I believe that Dave Ramsey may have things a bit over-simplified, he has basically the right idea. Live frugally and pay off debt, get your emergency funds in place, and save for the future. I realize the idea of delayed gratification is pretty boring, not very sexy, but it works. That's not to say you have to deny yourself everything, just remember that moderation with the occasional splurge makes those splurges all the more special.
I say all this with full recognition of the disasters that may befall us, but if we followed these plans before the disaster, we would be a lot better off post-disaster. The following rant is not directed at folks here who are struggling through unavoidable situations, but at friends I have entering retirement age with far less than optimal savings and still they spend big bucks on fancy manicures, travel to places they've already been where they do no more than sit on a beach by day and get drunk by night. I can do that without paying airfare and hotels, no matter how cheap you get the room! Why are they bemoaning their lot (and they do, constantly!) when they are pi$$ing away their opportunities to improve their situation?? Because it's easier and more comfortable to complain than to rein in their impulse spending and educate themselves on simple financial skills necessary to give themselves a happy, reasonably well-funded retirement. Or friends who completely ignore the concept of a budget and spend money storing property they couldn't sell for even one month of storage fees, people who pay to eat out almost everyday rather than cook something simple for themselves, people who refuse to maintain their vehicles (the largest purchase they've ever made) and drive it into the ground before it's even paid off, or people who pay the minimum on their credit card balances so they can spend their income on things that they cannot remember two months later. So I'm frustrated when I can see the answers to their problems are right in front of them, but no one wants unsolicited advice, so my response when they complain..."Are you asking for me to help you sort this out?" No they're not...okay then I'll change the subject.
Poster is single and in their 20's, might add perspective to reply of topic; "Income Inequality and Senior Citizens"
A lot of L_I_F_E happens in subsequent yrs.
It is nice / prudent to plan and speculate, but there WILL be some changes to Plan A.
True... hard work and diligence offers higher chance of success, but no guarantees.
As mentioned in some postings... You really see a lot of income inequality in senior housing. ALF / SNF / and condos... Kind of like going back to Jr High (cliques). I am amazed at how many senior facilities I visit where people are moving OUT! (can no longer afford, or are sick of being treated as per 'wealth index' or as a 'money sponge'. (Nickel and Dimed in the thousands every month)).
Very much yep. Was on track to retire at 50 -- a personal goal of mine. Was set to occur in 2009. Guess what happened 2007/2008?
Yeah. We didn't lose as much as others because we were rearranging some of our portfolio and was sitting on cash. BUT -- lose we did, and I didn't get my wish. It's okay. Still healthy, still working. Stayed in and we made it back. YAY, success story!
BUT -- I did see a number of people around our age lose pretty much everything. At our age, a job loss often means it much harder to find a new one.... at that point it was nigh impossible. Job loss, can't find new, went through the savings, started on the retirement savings to live on, that got taxed out the wazoo, refied the house to get cash, no job had to get a crazy loan, house value plummeted, mortgage kept going up.....add to that health troubles.....
Each of these things as a temporary measure is easily get overable. Put them all together it makes the perfect storm of YOWZA.... and not in a good way. In hindsight, you can see the missteps and mistakes made, but at the time, it was a temporary measure, an Okay, let's do this NOW, but in 6 months when we're back on our feet..... but that back on their feet either never came or came way too late to save the day.
So yeah -- there is income inequality. I'm going to have a nice safe retirement in comfort and very probably leave a tidy little sum for my relatives. I don't feel guilty about it. There was a great deal of work involved, and a great deal of luck. Pretty much no one starts a business with no business plan or mission statement, that is IMMEDIATELY profitable from day one, and just keeps on working it for years and years. According to the net worth scale someone linked a while back, I am in the top 7%...
But that doesn't mean the people who don't have this are less. Or stupid. Or... what ever. Because -- in reality -- it was my mom.
My dad died at 57, mom was 53. He was in his peak earning years, and after marrying off two daughters and putting them through school, he was down to me, and the money was rolling in to be saved.... and he didn't get to earn it. Mom, who was a housewife, got a job at a library to cover health insurance, and earn a little money... and she got that because she was a loyal volunteer and they knew her capabilities. She hadn't worked since 1948.
Their house was going to fund their retirement.... and would have nicely, but some planning commission decisions have made that side of the street...moot. It's commercial, but they won't approve anything commercial to be built. And the restrictions on what they want to be built and how it is to be built means that her "$600K" acreage, is essentially worthless because no one wants it at any price.
So my mom ended up on SNAP. Granted it was only 16 bucks a month, and that bought her her favorite milk. We gave her gift cards to her favorite food stores. It was a sad thing to go to those stores and use them up after she died....
And if our taxes have to go up in order fund safety net programs for people, well, I'll gladly sign that check. Because, although I'm not signing it for mom anymore, I'll be signing it for other people's moms....
If I had my life to live over again, I would have got a job with the government and stayed there. Just like the OP and his wife. Back in the day, who knew the private sector would screw over its employees royally by destroying promised retirement benefits? Who knew the Wall Street crooks would destroy the financial system and we would experience a Great Recession to rival the Great Depression, with massive layoffs, and huge structural shift in the labor market decimating wages permanently?
Govt employees weren't losing their jobs nearly at the rate private sector experienced, although state govts were laying off. For the most part, the recession bypassed govt employees so they didn't lose their jobs when they were too old to be employable and too young for SS, and thus the need to drain retirement accounts, go into foreclosure, and pay income tax, to boot. Fortunately, I remained employed through this period. Eventually lost my job at age 67-1/2, but it wasn't due to the Great Recession.
Having gone through the recession of the early 80's, I took a job with the richest law firm in the state, figuring if they were laying off, well, then, it was all over. Also, two years later, had the opportunity to get a job with local county govt. Liked the environment of the law firm, pay and benefits were equal at that time. So, I turned down the county job.
Fast forward to early 90's, this rich law firm closed its defined benefit pension plan, didn't grandfather the older workers, so my projected retirement benefit was CUT 75% with no compensating cash deposit offset to the newly established defined contribution plan. Meanwhile, the county instituted a new lookback into its pension calculations, which had I taken that job, would have provided me a benefit 10x my current minuscule retirement benefit, and retiree health coverage, AND I would have walked out the door with about $200k cash. No lie. Some highly-paid county employees were leaving with a million dollar payout.
So, we don't always have crystal balls. We do the best we can with the information we had at the time. And, sometimes choose wrong.
I'm doing OK because I saved and invested aggressively to compensate for the pension loss calamity - but I would be doing sooooooo much better - had I just taken that county job when offered.
Who knew?
Last edited by Ariadne22; 03-25-2015 at 02:14 PM..
One of the best posts I've read on City-Data in a long time, in any forum. It is astute, perceptive, thoughtful, and takes in the big picture. (The bolding is mine, not LauraC's.)
However I can't resist getting into the "stay at home mother" issue. I don't think there's a thing in the world wrong with being a stay at home mom per se, although I recognize the potential described by LauraC for women to get into financial trouble later on in life because of it. For many women, however, the downside did not manifest itself:
1. Not every woman divorces or suffers the early death of a husband.
2. If the husband was responsible, life insurance was in place to take care of his family in the event of his untimely death. That's what life insurance is all about.
3. If the husband was a good earner, the wife and children will be taken care of financially in the divorce settlement. (Yes, that's a big "if").
There are upsides to mothers staying at home, as well, for both the child(ren) and the mother. Too many children raise themselves in our society. Being a latch key kid is not a good thing, in general.
Also, the burden on mothers who both work full-time and raise children is simply incredible, in my opinion. How so many cope with the stress of their plates being constantly over-full, the lack of sleep, the worry about what their children may be up to, etc., without going bonkers is beyond me. My hat is off to them, but in many (not all) marriages there is a better path.
It's not a bad thing in itself, and the choice is a noble one, but the odds are 50/50 for you making it to retirement with that husband even if you think he's the best thing since sliced bread when you marry him.
"Marriage and divorce are both common experiences. In Western cultures, more than 90 percent of people marry by age 50. Healthy marriages are good for couples’ mental and physical health. They are also good for children; growing up in a happy home protects children from mental, physical, educational and social problems. However, about 40 to 50 percent of married couples in the United States divorce. The divorce rate for subsequent marriages is even higher."
"Despite increased labor force participation rates among women and reforms under the Employee Retirement Income Security Act, widowhood remains an important risk factor for transition into poverty, although somewhat less so than 20 years ago. Women widowed at younger ages are at greatest risk for economic hardship after widowhood, and their situation declines with the duration of widowhood. We also find that women in households that are least prepared financially for widowhood are at greatest risk of a husband's death, because of the strong relationship between mortality and wealth."
If I had my life to live over again, I would have got a job with the government and stayed there. Just like the OP and his wife. Back in the day, who knew the private sector would screw over its employees royally by destroying promised retirement benefits? Who knew the Wall Street crooks would destroy the financial system and we would experience a Great Recession to rival the Great Depression, with massive layoffs, and huge structural shift in the labor market decimating wages permanently.
Govt employees weren't losing their jobs nearly at the rate private sector experienced, although state govts were laying off. For the most part, the recession bypassed govt employees so they didn't lose their jobs in huge numbers when they were too old to be employable and too young for SS, and thus need drain retirement accounts, go into foreclosure, and pay income tax, to boot.
Having gone through the recession of the early 80's, I took a job with the richest law firm in the state, figuring if they were laying off, well, then, it was all over. Also, two years later, had the opportunity to get a job with local county govt. Liked the environment of the law firm, pay and benefits were equal at that time. So, I turned down the county job.
Fast forward to early 90's, this rich law closed its defined benefit pension plan, didn't grandfather the older workers, so my projected retirement benefit was CUT 75%. Meanwhile, the county instituted a new lookback into its pension calculations, which had I taken that job, would have provided me a benefit 10x my current minuscule retirement benefit, and retiree health coverage, AND I would have walked out the door with about $200k cash. No lie. Some highly-paid county employees were leaving with a million dollars payout.
So, we don't always have crystal balls. We do the best we can with the information we had at the time. And, sometimes choose wrong.
I'm doing OK - but I would be doing sooooooo much better - had I just taken that county job when offered.
Who knew?
Many local governments are now shedding employees.
You know I read these posts and I can't help but reflect back when I was in high school. Now I'm going to date myself here, but this was in 1960, and I remember my choices for going to college were predominantly to become a teacher or a nurse. Now at that time, neither of those two things interested me, and I was lost as to "what to become". (most girls went to college just to find a husband)
So I went to college and was taking liberal arts classes trying to give myself more time to find my calling. As it turned out, I had to quit school after two years because my mom was financially abandoned by my father and she had 4 small children, one mentally retarded, and had little marketable skills herself.
So I had to find a full time job quick to help support my family, which I did for many years without much in marketable skills myself. I was not thinking about retirement in those days and there was certainly no money to save. My priorities at that time was keeping food on the table, and finding a mate, which I did in my late 20's. I don't want to bother anyone with my boring life story, but just to say, it took a number of years before retirement ever starting entering my my thought process. I was just too busy trying to make ends meet, make a better living, and always up to my eyeballs in renovations of some sort. (I perused real estate as a means to get ahead)
It is easy for me at this juncture to look back and say what I should have done, and what things I should have been thinking about, but when your young, your head in not in the same place it is when you get older. Your simply not as smart, because it sometimes takes living your life to learn lessons. I was fortunate, and always very industrious and aggressive. I finally after trying different jobs found my calling. I was an entrepreneur, a risk taker, and had an excellent business mind and could manage people well. Who knew?????
So, sometimes it takes time to find yourself. Today of course it very different for women. All careers are open to them. I think any kid who graduates high school, and knows from the get go what they want to do for the rest of their life is fortunate. With me, I found it to be a process of elimination. After working in one field, I decided, "well, count this one out" and moved on to something else. That is until I finally arrived at something I liked, and was really good at (and had accumulated enough money through real estate to finance it).
Good parenting helps I am sure. Teaching kids the importance of education, maintaining good grades, saving and living within your means can be a real asset for kids starting out. I never had any of that with my family. My father was a successful builder and while the family was together, we were what I guess would be classified as well off. But neither parent was frugal, and just signing my report card was an inconvenience I think. I had no rules or structure in my life growing up, but luckily I was born with some good innate common sense, so I didn't do foolish things.
So the point of this long story is. Yes, LauraC's check list for how to have the perfect life, and never make mistakes is right on, sometimes you falter because it only takes one misstep along the way. Sometimes your born to less than ideal parents who do little to help prepare you for your own life's journey (and some are hardly role models themselves), so you are out of the gate pretty green. Sometimes that love of your life who you thought was the perfect mate turns out to be a womanizer. Always getting it right is not so easy while in the journey, but very easy to say after the journey is over.
Last edited by modhatter; 03-25-2015 at 01:38 PM..
Agree 100%. It seems that the only remaining choice for the senior set is the last one
and the opportunity to exercise that choice is quite limited. There is not much of a chance for retirees to borrow, jacking up credit card debts etc.
Agree 100% again. However, IMO, the question or discussion I'd like to see at a retirement forum is how do we (as individuals and society) address the reality of huge income inequality in senior citizen population? If anything, I'd expect the income gap to continue to widen based on the current income trend, the disappearing of private pension plans (and possibly public PP in the near future) and the future uncertainty regarding SS and Medicare solvency.
My opinion, for the people who made bad choices early in life (which I think is the bulk of people in this predicament), is by the time they are seniors it's too late to address it. Their path was in play when they took the wrong fork when they were younger. I see it with friends and relatives. One has 3 children with different men she wasn't married to and has a physical menial job. She's a nice person and good at her job. She tries to take care of her kids but it's too late and she's only in her 30s. The men are behind on their child support. Her parents in another state had to take in one kid. What is she going to do when she can't physically do the job she does now? It's her entire job experience. They'll probably all wind up living with her elderly parents who themselves didn't foresee that their retirement income would have to be stretched so thin to cover so many people.
The other, has had 3 serial husbands, didn't try to better herself when she was in her 20s and held a part of the year job, didn't work after she was laid off in her late 30s and knew the layoff was coming, and had a baby at 40, twenty years apart from her first kid. Her current husband does manual labor but isn't physically well and her late in life baby turned out to be a special needs kid (now in his teens). She also isn't physically well, now, with serious medical conditions. They live paycheck to paycheck and are always behind in their bills. What is she going to do when they both hit retirement age or the husband dies? But here's what I mean about dwindling choices. Her decision not to improve herself in her 20s or work in her 30s is going to mean less for her in retirement. Her baby at 40 is not going to be able to leave the nest when he's 20 and she hits retirement age or contribute to household income. She also can't leave her very expensive state with excruciating property tax, because with those taxes, come all kinds of things in school for her special needs kid. Because they have no money they have to make "minimum payments" and buy frequent smaller amounts of things (like heating oil). We know that winds up being more expensive in the long run. They have to have things constantly repaired because they can't afford new things. Her problems at 65 will have been set in stone from all of her bad choices that started more than 30 years earlier. I have no idea what she will do when she is retirement age.
And I don't think either example above is unusual.
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