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Does anyone else think the vehicles to save for retirement are complicated and cumersome?
No more complicated and cumbersome than constantly worrying about money and having financial problems! The problem is that most Americans would rather sit on the couch eating Cheesie Poofs and watching Family Guy than to come home at night and read about financial matters. It still surprises me when grown people can't tell the difference between an asset and a liability. They think having a nice new car or a boat will add to their asset column. It doesn't.
How many Americans take the time to learn about self-directed IRA's where you can have far greater control over the types of investments you are able to particiate in - and investments that they have greater control over, such as real estate, loans, etc.
Last edited by Buckhead_Broker; 02-13-2008 at 09:14 AM..
OK folks, I've read these posts for about a year or so. Either it's the crowd that this forum attracts or somewhere along the path people didn't learn how to save for the future. So, what is it?
Did many of you never learn about planning for your future?
Was there just not enough income to save for the future?
Was it not important to save for the future?
Why is it that so many people facing retirement are so ill-prepared after 30-40years of working?
I think there are alot of reasons.
-The US Dollar has been inflated away over the past few decades. You use to be able to buy a house and raise a family on 1 income, obviously thats not possible in many parts of the country now.
The media always talks about "low inflation", but what they "report" just isn't true. Real inflation is certainly higher than 2-3-4% a year. It's probably been 5-6-7-8% a year for the past 10-20 years at least.
If you only make 3-4% annual wage increases (if that) and inflation is a few percent above that, you're losing ground every year. It eats into your savings, eats into your home equity, you never really get ahead. To say nothing of big medical expenses, college which has been increasing much higher than most peoples salaries.
-It's sad, but some people are just very poor with saving and planning ahead.
I know a college professor, very smart women. She's in her early 70's, and she has absolutely nothing. Buys $2 shoes. Has rented her whole life. No home equity. No real savings. She's moved around 10-12 times in the same general area since, the 70's.
I wonder sometimes why people don't accumulate more as times goes on. Some of it is, you just can't think ahead. You're going to live a long time, but you can't think ahead past tomorrow, or a week from now a month from now.
I've seen relatives do this. They try to get in on these "hot" deals, going on a gameshow or something, trying to win $30 or $40,000. Even if you win, the money will be gone in a few years, then what? Or getting into timeshare deals or something. They can't seem to break out of short term thinking, even though they'll live a long time. Why not save up and buy real estate when the economy is down, and own a real asset.
-Not understanding debt or interest.
I know people that love coupons and freebies, and yet they've got credit card debt or home equity debt, it doesn't make any sense. Why would you care about saving $5 or $10, when you're paying hundreds or thousands a year in interest. It's kind of crazy.
-Credit card debt, paying minimum payments. You're going to get killed.
You're not paying the minimum, you're paying the maximum amount you can to credit card companies every month you do it. It's going to take 12 or 15 years to pay off if you keep doing it.
Well, I have had the great fortune to know quite a few folks on both sides, those who have a good and financially sound retirement (including me) and those who barely scrape by.
Without being long winded the major attributes differentiating those two groups are the ability to plan, budget, self discipline to refrain from marketing hype and fiscally adaptable to changing situations. These are the main items I see differentiating the two groups.
No more complicated and cumbersome than constantly worrying about money and having financial problems! The problem is that most Americans would rather sit on the couch eating Cheesie Poofs and watching Family Guy than to come home at night and read about financial matters. It still surprises me when grown people can't tell the difference between an asset and a liability. They think having a nice new car or a boat will add to their asset column. It doesn't.
How many Americans take the time to learn about self-directed IRA's where you can have far greater control over the types of investments you are able to particiate in - and investments that they have greater control over, such as real estate, loans, etc.
Amen! I know people in Buckhead who buy a 1960s ranch for $500,000, tear it down and build a new house on the lot, finance it to the max, and impress all the neighbors with their fine new house, but they can't even afford to furnish it. What's wrong with living in a more affordable home (albeit, less impressive) and putting away some of the money you save by not having a $900,000 mortgage, so that when you retire you don't have to eat cat food?
Amen! I know people in Buckhead who buy a 1960s ranch for $500,000, tear it down and build a new house on the lot, finance it to the max, and impress all the neighbors with their fine new house, but they can't even afford to furnish it. What's wrong with living in a more affordable home (albeit, less impressive) and putting away some of the money you save by not having a $900,000 mortgage, so that when you retire you don't have to eat cat food?
A good example of living in debt for show and to impress others, without any regard for the future.
Amen! I know people in Buckhead who buy a 1960s ranch for $500,000, tear it down and build a new house on the lot, finance it to the max, and impress all the neighbors with their fine new house, but they can't even afford to furnish it. What's wrong with living in a more affordable home (albeit, less impressive) and putting away some of the money you save by not having a $900,000 mortgage, so that when you retire you don't have to eat cat food?
I understand. But I'd venture to say that those bad habits go on all over town - not just Buckhead. My Momma used to say - "keep everything in proportion", meaning you shouldn't buy more house than you can afford to furnish nicely, or you shouldn't drive a Mercedes and live in a mobile home!
By the way, to buy a $500,000 lot and have a $900,000 mortgage would not be "financing it to the max". Actually, it would only be about a 60% loan to value - a banker's dream!
Amen! I know people in Buckhead who buy a 1960s ranch for $500,000, tear it down and build a new house on the lot, finance it to the max, and impress all the neighbors with their fine new house, but they can't even afford to furnish it. What's wrong with living in a more affordable home (albeit, less impressive) and putting away some of the money you save by not having a $900,000 mortgage, so that when you retire you don't have to eat cat food?
I can identify with that! Everyone tells me that when I sell this 90 year old farmhouse that the new owner's will probably bulldoze it and put up a McMansion.....going deeply into debt to do it......how stupid, when, for a small fraction of that cost(money, time, stress) they could just remodel.....but that wouldn't impress their friends.
They could also learn to live with less "perfection" and subsequently, more money....like I did.
You have a much greater risk tolerance then many people approaching retirement. This is a strategy that could work or could help create the title of this thread. What would your situation have been if you pulled the equity out two years or even a year ago? Perhaps now is the time to do it since the market has so much up side. A year ago it had so much downside potential that was realized.
Well ... it's not something I would do if I was planning to retire in a couple of years. But, since I won't be retiring for at least 20 years ... I don't think cashing out some of your home equity to boost the retirement account is necessarily a bad idea if there's a good point spread between the cost of the debt and the investment return, as I previously mentioned.
Of course, there are risks but ... isn't retirement these days pretty much based on risk? Afterall ... the whole concept of the 401K is essentially based on stock market returns. You don't build much of a 401K retirement staying in safe investments forever.
Not that I'm advocating getting into the market now either ... I pulled out of stocks last summer and probably won't get back into stocks for at least another year. I think we have a lot more downside to go before stocks start going up again ...
But, when it looks like this bear market is over ... I could see cashing out some equity to invest in stocks as a pretty good idea. Or, maybe just selling the house all together (of course when the housing market comes back) ... since we want to move to another location eventually anyway.
... isn't retirement these days pretty much based on risk? Afterall ... the whole concept of the 401K is essentially based on stock market returns. You don't build much of a 401K retirement staying in safe investments forever.
I agree that 401k portfolios are risky, as is any vehicle that is stock market based.
However not all 'retirement' is based on the stock market.
There are plenty of retirement pensions that are completely removed from stock market involvement.
And there are many solid investment vehicles that likewise have nothing to do with stocks / bonds / munnies / mutuals.
I think life is too short to spend your free time reading about financial matters. We go for walks, enjoy the arts, and visit with our friends, children and grandchildren in our free time. You can be well prepared for retirement if you start planning early, have a good amount of equity in your home, save, stay out of debt, do some low risk investing and spend less than you make...not rocket science by any means.
We refuse to make worrying about money the center of our lives. Having money enough to provide for a nice life is important - but spending your time being paranoid about finances, and worse yet, being paranoid about others who aren't saving as you think they should, is not the kind of life that I care to live.
Feeling the need to amass millions and millions of dollars might be fine for some - but we are simple people with simple needs who want only to live well, not ostentactiously.
Last edited by Cattknap; 02-17-2008 at 01:02 PM..
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