Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Right now I am 30 years of age and have $12k saved up in a 401k account. I currently have 14% of my gross income contributing to it out of every paycheck (including company match). So I have $879 per month being contributed to the 401k. One year ago it was only about $1,500 saved up in the account.
Now, according to the SSA website, my monthly benefit of Social Security will be $2,179, which is about $26K per year. Now, I plan to have no mortgage payment by then. And I won't have any commuting expenses either, because I wouldn't be working. And I would cut back on general spending as well. So I ran through the calculations and determined that I could live just fine off of $26K during retirement. I would plan to retire at the age of 67 and die at the age of 82.
So why the hell am I wasting $628 per month of my own payroll into a 401k account, when I could be accumulating that cash NOW like crazy and work toward the goal of owning a home outright sooner, and accumulating cash sooner? Especially when Social Security benefits would keep me afloat just fine in retirement. I mean, I don't care to live a luxurious lifestyle in retirement. I just want to live modestly. Also, I could tap into the home equity.
Furthermore, my parents are multi-millionaires and I have four younger siblings. Obviously, I would never count on an inheritance, but even so, it gives me a little more comfort, even if I only get 20% of the pie.
I understand that by 2033, the Social Security benefit will be only 77% of the full benefit, if no changes are made to the law. However, I am optimistic that over the next 19 years, the program will be fixed.
I mean, millions of retirees today are living solely off of Social Security, so why can't I, when I retire too? The math works out just fine in my budget. What's the risk?
Utilities (gas, electricity, water)
House maintenance
Car (gas, maintenance, tax, insurance)
Insurance (home & contents)
Property tax
TV
Food
Federal tax
State tax
Health insurance
Co-pays and meds
Phone & internet
....
Utilities
House maintenance
Car (gas, maintenance, tax, insurance)
Insurance
Property tax
TV
Food
Federal tax
State tax
Health insurance
Co-pays and meds
....
Do you want to 'live' or just 'get by'?
I don't need health insurance, because Medicare and Obamacare will take care of me.
I could move to a state with no state income tax and low property taxes like Florida. Big deal.
You have no idea what will happen in your life between now and your retirement. There is no way to predict whether what your SS projection shows now will actually materialize. A lot can happen between now and then. Of course, no one knows what value money saved now will have in 30 years. However, it is likely that money will still have value. Everything else is a crap shoot. Having a reserve of financial assets provides the luxury of choice, which when you are looking at how to provide for the last third of your life will be the only luxury that will likely really matter. Tying up a big chunk of cash in an illiquid asset such as a house is generally not the best way to grow that money. Many people find they do better by financing a house (especially when rates are low and the interest is tax deductible) and using their cash to acquire other assets, such as investments in a 401k plan. Your 401k investment is pre-tax money, which is another advantage it provides.
You are, of course, entirely free to do as you see fit. But you need to plan for the unknown, and more money is always better than less when unexpected things happen in life.
In 37 years, there may not be any "Social Security" benefits. Also, how do you know you're going to die at 82? You could live to be 100! Or you could die tomorrow!
Medicare covers the extreme basics --- you better hope you're very healthy when you're in your 60s, 70s, 80s. And it doesn't include pharmacy (and some medications can cost hundreds of dollars a month!)
In 37 years, "Obamacare" will likely be gone.
$26K may cover the bare minimums now, but in 37 years, it may not cover even 3 months of living.
You're 30 years old and have a lot of time to plan for your retirement and save money and do what you have to do in order to have a comfortable life later on. Don't depend on something that could be long gone history (Soc Sec and Obamacare) by the time you retire.
There are many senior citizens who have just their social security who are not able to afford the basic necessities such as food and medicine. You should continue to invest in your 401K. However, I would suggest decreasing the amount so that you can afford to buy a house.
I understand that by 2033, the Social Security benefit will be only 77% of the full benefit, if no changes are made to the law. However, I am optimistic that over the next 19 years, the program will be fixed.
So you're going to bet your financial future on... wait for it.... the American political system? You have GOT to be kidding me.
I'm taking my retirement into my own hands - it's the only way I can be sure I'll have any retirement at all. If I get any Social Security (and of that I am highly doubtful as a 24-year old) it'll be a bonus.
--Lots and I mean LOTS of people are simply not able to work until age 67 or even 60. Many folks are booted out of the work force in their 50s,or at least booted out of decent paying employment. I have a 59 year old (college educated) friend like this. Hasn't been able to hold down a decent paying job for any length of time for the past 10 years. Still thinks he's going to work until 70. Ended up declaring bankruptcy and is completely broke and currently very marginally employed at 2 very part time jobs, sharing a 1BR apartment with a roommate who collects disability, and he is currently not able to pay the rent and will likely be evicted. Don't let this be you. The line between well off and struggling is much thinner than you think. I have seen it first hand.
--Medicare is NOT Free. The premiums go up almost every year and they come out of your SS check. There are LOTS of medical costs that are not fully covered by Medicare. There are lots of articles on the web talking about how couples will need to currently have $250K put away for medical costs in retirement. I think that number can be reduced with a healthy diet and exercise, but it can't be completely eliminated.
--I hear you complain about how you don't particularly like your job NOW. Do you really think you're going to like working in 20 or 30 years?
--If you really think living modestly is ok with you, then why wouldn't you do that now and save the difference? If you don't want to do that now, what makes you think you're going to want to do it at 65? Your habits and attitudes about money and lifestyle are not likely to change. I have seen it first hand with my friend whom I mentioned above. He keeps trying to live like he's the lower end of middle class. The reality is he goes back and forth between working class and working poor. He doesn't want to admit it's not likely going to get any better for him.
--Once you've attained a basic lifestyle, which you have, increasing your lifestyle doesn't really make you much happier. So, if you're not happy now, there's a good chance at least some of that dissatisfaction stems from other things besides a lack of material comfort.
--Saving, above all, gives you OPTIONS. When you don't have options....to walk away from an employment situation you don't like, to move to a different apartment because you have neighbors from hell, to travel, vacation, or otherwise give yourself a break because of limited funds....life quickly becomes a drag.
You may want to read this thread about people with pensions who still saved despite having defined benefit pensions:
A $12K balance with $879 per month invested will be $580,322 in 20 years if you just keep investing that amount and get 8% (an optimistic projection, but not wildly so) and will be worth $1,449,988 in 30 years. And I didn't even include any employer matches in the account! This also assumes you don't increase the amount, which means it should gradually become easier to save that amount over time so that you can slowly increase your lifestyle if you want.
Last edited by mysticaltyger; 10-25-2014 at 11:39 AM..
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
