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I didn't vote in the poll because the two answers available are both extreme - there is no middle ground, that is, no nuanced answer provided. Among the nuances:
1. A lot depends on how old we are. If a person is, say, 55 or above, it's a pretty good bet Social Security will still "be there" for them. On the other hand, if one is 25 it's much more of a crap shoot.
2. The qualifying phrase "if it's plenty to live comfortably" is pretty vague. The higher range of Social Security benefits (at least 35 years of FICA wages at fairly generous levels) is indeed enough to live comfortably, PROVIDED THAT one's definition of comfort is reasonable. For people used to living high on the hog, with country club memberships, designer clothes, and a couple of BMW's in the garage, it wouldn't be "comfortable".
3. Why is the negative answer expressed in such extreme form? I would not want to rely on SS alone either because I think it would be taking too much of a risk and it's better not to have all one's eggs in one single basket, but the answer (as worded) seems to imply a disbelief that SS will even be there and I don't share that disbelief. I think there is the possibility of an eventual reduction in benefits but that is not the same as SS "not being there".
Wait a minute...so now, you all are saying that not only should I not count on Social Security, but that I also shouldn't count on my 401k??? What the hell am I supposed to do then?.
No, WE are not saying that. ONE PERSON said it. SHEESH.
The world is getting worse, anything could collapse as it did in the Great Depression. You have rosy glasses on, which might be ok and might not. The problem is we just don't know.
But to overly worry about it, well it doesn't help and this kid seems to be doing quite well in my opinion.
Actually, even if we had a Great Depression II, a mix of 60% stocks and 40% bonds would have come out with positive returns.
I just checked, and an investment in the S&P 500 Stock Index from January 1, 1929 to December 31, 1948 would have returned 3.09% annualized and 1.33% after inflation. Not great, but positive. But if you had mixed bonds into the picture, you probably would have done better.
The worst 10 year data I found for a 50/50 stock/bond portfolio would have been 2.4% for the 10 year period ending in 1938. The worst 20 year period for 50/50 portfolio was for the period ending in 1948, a return of 3.6%. Diversified portfolios hold up. If they can't even manage to do this well in the future, we will all have bigger things to worry about.
actuially for a retiree the worst time frames were those who retired in 1965/1966. they would have failed trying to pull 4% inflation adjusted for a 30 year time frame.
20 years of dead stock markets followed by double digit inflation was about as bad as it gets when spending down.
if you notice the common denominator to all those worst time frames is a nominal return return under 2% but in real return the results were even worse..
michael kitces did some heavy duty numbers crunching and found that over any rolling 30 year retirement time frame if the average real return fell below 2% over the first 15 years of that retirement than a 4% inflation adjusted withdrawal will go broke with no human intervention cutting spending at some point or stopping the inflation adjusting.
Last edited by mathjak107; 11-03-2014 at 02:43 AM..
Actually, even if we had a Great Depression II, a mix of 60% stocks and 40% bonds would have come out with positive returns.
I just checked, and an investment in the S&P 500 Stock Index from January 1, 1929 to December 31, 1948 would have returned 3.09% annualized and 1.33% after inflation. Not great, but positive. But if you had mixed bonds into the picture, you probably would have done better.
The worst 10 year data I found for a 50/50 stock/bond portfolio would have been 2.4% for the 10 year period ending in 1938. The worst 20 year period for 50/50 portfolio was for the period ending in 1948, a return of 3.6%. Diversified portfolios hold up. If they can't even manage to do this well in the future, we will all have bigger things to worry about.
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