In the coming decades, how much of retirement income will be completely DIY? (beach, long-term)
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Look how often people leave jobs, a pension wouldn't work with today's workforce, pensions are not portable
Not true. ERISA and its amendments require vesting for defined benefit plans (pensions) as well as for other plans. An actuary has to calculate the value of the benefit, however, so that makes it more complicated. Also, in some plans, the benefit formula works so that you gain a lot more by staying longer.
I'll be 32 next month. It's conceivable that I won't be retiring for another 30-35 years, and I've only been in the professional workforce for about eight years. With that said, I've seen some changes.
When I hired in at Northrop Grumman in 2010, the company had just done away with the pension for new hires. My dad hired in at the same facility a few years back and qualified for the pension. New hires just got a 401k.
Over time, they began to outsource work done at that site, with fewer full time employees, and a greater reliance on contractors. Most of the contracting firms offer no benefits of any kind.
I've changed jobs several times since then. No company offers a pension, and it seems that fewer seem to offer any retirement savings plan or company match at all. My current employer matches just 3% as an annual lump sum. Due to timing of when I was hired, I still haven't received any matching funds, and I've been here twenty months. The plan is completely DIY.
Who knows if, or what form, SS will take in another couple of decades. The political winds are currently shifting against SS and other government services seniors rely on. Medicare is in worse shape.
How do you think the next few decades will go?
This doesn't sound a lot different than when I started working in the late 1980s. My first employer offered neither a pension nor a 401k plan when I joined. Later on they added a 401k, but there was no match. At my second employer they still had a pension plan when I joined, but that was torpedoed about a year later. All of my employers since have had only a 401k with a small match, 2%-3% of salary.
I felt pretty certain that I would never see a dime from Social Security. All of the projections were dismal and depressing, so I just concentrated on what I could control. Put $$ in my 401k, paid off my car, paid off a (small) student loan, bought a modest house, got a housemate, paid off the house, etc.
Thankfully, I've had pretty good health coverage at all of my employers, and a couple even paid for long-term disability insurance.
Most people wouldn't want a pension, outside of the idea that someone else pays for it...
Look how often people leave jobs, a pension wouldn't work with today's workforce, pensions are not portable
Why not? Yes you are also paying for it with your employer providing a fixed amount just like 401K's with a match. However my main point is that even with a pension you can still have a 401/403 portfolio to provide your with a fixed income and also a nest egg portfolio in retirement. Many do that. True pensions are not portable and that is why they are often still provided in the public sector especially for jobs where recruitment and retention are important and the employer values minimal turnover.
For a teacher or any public employee with a state pension you can change counties, cities etc and retain your pension without missing a beat.
Rule #1 is never underestimate. 12 years ago 1.2 mil + SS at 65 was OK to retire at 55. I figured, heck, I would have to actually try to spend it all before I died (so I thought). But much of that vanished rapidly due to exhorbitant health insurance, escalating HOA's, food 40% up in price, continuously increasing electricity costs, and services (like landscaping, pool maintenance, contractors) all 2 - 3X what they cost just 10 years ago. CD's paid 5 - 6%; today they are useless. BTW, I lost zero dollars in the '08 crash.
So 30 years from now? I'd say you'll need 4 mil minimum to have 2 modest homes so you can have optimal climate 12 months a year, a 4 - 5 year old nothing special vehicle, and enough to weather any unseen price increases in the essentials.
I'd start with that plan. You may have to alter it years ahead. As we've seen recently, costs are difficult to predict one decade out, let alone 30 years. As my older brother always said..."you never have enough." No truer words were ever spoke.
I wouldn't get too hung up on whether or when you'll get matching contributions. You're biggest advantage is your age. Contribute to your retirement plan up to the limit or until it hurts and never touch it until retirement. If you can afford to, start a Roth in addition to your 401 and put something, anything in it every year. Don't get cute and try to hit a home run with a single stock or a risky fund. Put 100% in a broad index with a low expense ratio, don't worry about the market's ups and downs and retire in style.
I am going to stick with the S.S. angle here. This is a much wider subject than just SS because SS is interconnected into our economy too deeply to remove it. Many things tie into it but in essence: Social Security is not going anywhere. The older I get the more I understand.
Ask yourself can a Nation afford to lose the spending of an increasingly older population? Millennials we will comprise the largest generation since Boomers. Most voters are older seniors who can't/won't/don't have to work. Due to the change in the labor market look at how much student loan debt has increased exponentially in such a short period of time. Even if we maintain the same trillion dollar student loan debt balance this suppresses economic activity in many sectors such as healthcare, real estate and other people employed by fields that cater to disposable and discretionary income. This contracts the economy to all but the shareholders of either the Fed backed bonds or handful of private loan companies. Most Big Banks no longer service student loans but they profit off of the interest. I'm not sure of the percentage of total income that it generates for them however but it's not the majority certainly.
Social security is the only income that cannot be garnished by debt collectors. Insolvency has no bearing upon it. These rules are not set in place for ethical reasons. This is to protect the economy.
So the bottom line is let's say today (Fact Sheet: Aging in the United States) seniors comprise 15% of the population. Today Seniors comprise 15%. By 2060, it will be a whopping 25%. Hypothetically, let's say that student loan debt becomes more manageable and balances drop for a variety of reasons while education rates remain the same. It does not matter. 401ks of Millennials were already collectively diminished during their working years. That is lost money that is not being spent in their golden years. That is 1 trillion dollars that went to a piece of paper that was used to negotiate in (conservatively speaking) 20% of opportunities for Starbucks Barista, McDonald's Hamburger flipper, TGI Friday's waitress. etc.
Let's say only 20% of Millennials with student loan debt actually pay off their loans by 30 instead of 40 or 50. There are Doctors and Lawyers who say they still have loans close to retirement age. This does not make sense for the economy. Part of the reason is the cost of child rearing which is also rising. There is too much economic pressure for the average American. The pace of technology automating jobs and the inability of our species to keep up mentally with our own innovation.
The economy is slowly contracting which is evident in our stagnating employment participation rate as well as sluggish GDP growth. Many experts continue to say "the fundamentals" of our economy are strong but that is the same thing they said in 2006/2007 before all went to hell in a hand basket.
The only things preventing a full out great depression were many of the government spending programs active created by FDR and LBJ. The government is propping up the economy and keeping it afloat. Because of course it made America look weak having the same problems as any other nation when things go in the ****ter on the tides of capitalism. In a true capitalism model people would DIE and STARVE. We will never have true capitalism so Social Security will remain. Because if you were to remove that spending then Medical, Retail, Real Estate and other industries would take a hit, a chain reaction will occur leading to layoffs of the generation who are in their working years at the time SS is removed. So they themselves will not vote SS to be removed because it affects their job security.
There are 3 million+ nurses supposedly in the U.S. today. If Social Security is removed and let's say these Seniors either die or decline any life saving healthcare or procedures to preserve their life because they don't want to live the next 10 years in shelters being abused and eating cat food. Hypothetically let's say they lose 10% of their guaranteed customer based (very conservatively speaking) which are seniors close to death. These are PRIVATE medical institutions being subsidized by government programs essentially. When part of that subsidy (SS) is removed which will lead to more Seniors "pulling the plug" on themselves, guess what some of these places will do, they will tell 10% of Nurses we don't need you anymore. Seniors are the largest consumers of healthcare. Nobody wants to live old in pain, alone and in poverty. They will stop taking medications, and do everything to end it. I'm sure similar things happened during the Great Depression.
Last edited by Bodie_Bunk; 03-02-2018 at 08:28 AM..
If Japan removed Social Security today for any particular reason, their entire economic system would collapse. And their healthcare economy is not even that huge compared to ours. It is actually smaller than it should be, because most Japanese elderly are functional until an older age. So they are still doing daily things like buying groceries themselves, laundry, walking around and even driving at the age of 100. Without them entire cities and municipalities would cease to exist. Millions of dollars that fund infrastructure projects would vanish.
In developed nations - Social Security is a must. It is paid into mostly by the employee and it's payments are only appreciated by inflation. It is not that costly of a program to maintain but it will be very expensive to society to lose it.
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