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Usually someone can manage $50/month. When I see people who cry poor walking around with the latest iPhone model, I know someone either gave them that phone -or- they decided they had to have it and managed to buy it (or steal it). Or, they're spending their money in some other way, for entertainment, going out on the town, mani/pedis with fake nails, multiple tats (always ready for 1 more), etc. There's always some other thing that feels more important than saving.
The amount to get started doesn't have to be $500/month. It could be 1/10 of that just starting out. The point is to get in the habit of putting something away every paycheck and increasing the amount *as one can do so*. Not doing so, is merely an excuse.
For my first savings account, I deposited $2. I was 7 or 8 yrs old at the time. It's the behavior of saving that is life-changing.
I understand your point about the values of saving, ect.
However, I would disagree that’s always a good approach. When I was in school and didn’t have much money, I think Sometimes there is so much demand on your sources of income it’s counter productive and just spreading you too thin by chasing retirement. You need to actually focus the money to make actual changes. When I was a college kid with nothing, I did that by paying for transportation costs to school or books. Taking $20 and throwing it towards my 401k for use in 50 years would have absolutely been suboptimal. It would be harming the short term mission and I’d almost argue it would be better used even on a meal out just for morale or even from a perspective of eating. When you don’t have money, saving $10 a week for retirement isn’t going to do anything compared to the outsized impact of damage it can cause.
That’s a long way of saying, saving for retirement only makes sense to the extent you have a base built to actually launch an effective strategy from. I also think (going back to one of my other posts) that sometimes it’s not a cost side problem. For about 1/3 of the population or more, it’s an income problem. Sure, for people in the middle or upper end, I’d agree they lack discipline to give up small luxuries but some people don’t actually have luxury to give up.
Even once I had my first professional job, I would have never saved in my 401k beyond the company match at that time because there was aggressive need for money in other areas, like getting into the housing market or further training costs for my career.
At some points, saving for retirement is just like siphoning money out of a growth company with dividends…you’re literally snuffing out the growth and causing more damage than the benefit you’re getting of being paid (or in this case, saving for retirement).
Telling a person in the bottom third to save for retirement is like telling a 350 pound person they should start running 1 mile every day to lose weight. There’s a lot of steps that need to happen before you’re in a position to start that.
Last edited by Thatsright19; 08-19-2021 at 02:32 PM..
I know people aren't in favor of "mandates", but I think this is necessary here. Too many people don't take retirement savings seriously enough. Think of it similar to social security contributions. You don't have a choice, you get used to a certain run rate per paycheck and then you don't think about it anymore.
I don’t know why you’d mandate. Some companies don’t offer a match, or if they do, it is minimal. A lot of people might prefer to have a Roth IRA than put more into a workplace retirement account that won’t match and may not have as many investment options. I can and do set my bank account to draft monthly to the IRA, so I don’t think about that any more than I think about my workplace contributions.
I don’t know why you’d mandate. Some companies don’t offer a match, or if they do, it is minimal. A lot of people might prefer to have a Roth IRA than put more into a workplace retirement account that won’t match and may not have as many investment options. I can and do set my bank account to draft monthly to the IRA, so I don’t think about that any more than I think about my workplace contributions.
My 401k gives the option of borrowing against it without tax penalty, which I don't believe the Roth IRA does.
I don't have a Roth IRA but I do have a traditional IRA. I started the traditional IRA in 1980 when I realized that I would receive a $10.00 larger refund on my federal taxes if I had made $3.05 less. Since I worked as a teller at a savings & loan that offered IRA's starting as low as $1.00 I drew up the paperwork, had the branch manager sign off on it, and deposited $3.05 into the account. I got my increased tax refund, and my IRA account which I have not funded since at least 1993 has grown to the mid 6-figures thanks to my stock market acumen.
However, I would disagree that’s always a good approach. When I was in school and didn’t have much money, I think Sometimes there is so much demand on your sources of income it’s counter productive and just spreading you too thin by chasing retirement.
When I was young I wasn't "chasing retirement." I wasn't even thinking about retirement. I was saving my money so I had the money to purchase the things I really wanted. Like a TV for my bedroom when I was 13, as one example. The lessons I was learning were to delay gratification in the short term to work for something that actually was meaningful to me in the longer term.
I didn't chase retirement in my 20s, 30s or 40s either. I put money away from each paycheck, so I'd have it as needed. Some in savings, some in 401K and/or an IRA. Saved for a downpayment on a house. Eventually bought a house. A new car, travel, etc. Those are things people commonly want, and I was no different.
An approach that keeps one out of consumer debt, to the extent possible, and only takes on debt when the debt is in their favor (like a mortgage on an appreciating property), is a good approach IMO.
And utilizing specific retirement savings options is just plain smart, and it can be painless.
IRAs in any combinations plus 401k type plans in any combination in total should all have one aggregate limit. Ie the 401k limit of 58k and ira of 6k you should be able to put 64k in either or, or split however you want.
I don't know anyone who gets to retirement and wishes they had less money, wishes they hadn't saved, wishes they had frittered it all away.
100% spot on, lottamoxie!
In my in-laws case, they were married and had 2 kids by the time they were 24, so any extra money went to childcare costs. They never pooled their resources, insisting on "him" and "her" handling of expenses and were both awful with budgeting. Extravagantly expensive hobbies on his part and shopping sprees, smoking and gambling on her part, all played a role.
In their early fifties, they declared bankruptcy shortly before he passed away.
I recall being privy to a conversation in HR with the higher ups where they indicated that our benefits (employer contributions) were “too rich”. Because those of us peons really shouldn’t be able to sock away a million dollars?
Made me even more motivated - despite their cutbacks.
We had “life” happen to us as well - and didn’t start saving in earnest until age 45. My spouse did not have a 401K - so I saved enough in mine as if he did.
And while we were just a tad short of a million at 65/retirement - we continued to earn after retiring.
Thankful we don’t have to touch it thanks to Social Security and a small pension.
I know people aren't in favor of "mandates", but I think this is necessary here. Too many people don't take retirement savings seriously enough. Think of it similar to social security contributions. You don't have a choice, you get used to a certain run rate per paycheck and then you don't think about it anymore.
Nope. Something close to 90% of people will enroll and stay with it with autoenrollment.
I've absolutely, positively, had enough with all the mandates we have in our lives.
Investing an extra 3% a year over a working lifetime makes a significant dent in savings for those who don't save.
The other thing I could get behind is making it much easier for people to move their money to an IRA, especially if small amounts are involved. Some plans don't want to keep you in their plan if your balance is less than 5K and they'll send you a check, etc. That stuff needs to stop. Moving your money to an IRA after you leave your employer needs to be seamless, and/or you should just be able to keep your money in a default plan, perhaps administered by the state.
My HR department talked to employees until they were blue in the face to amp up their savings in the 401K plan - when the employer was backing off doing so after the recession. Every year they would do a huge campaign during the open enrollment period with very poor results.
I think there needs to be either Investing 101 classes or something to push people to do more. People simply did not respect the fact that their retirement really was on them. This was an employer who opted out of Social Security in the 1980’s….. and most of the employees who were hired after 2010 had a much reduced pension plan.
When the 401K plan at work allowed for diversifying into TD Ameritrade accounts - very few people took advantage. Just a handful in a population of 500 employees. My spouse and I jumped on it. My spouse being the self-educated investor and me being the breadwinner.
People simply do not understand investing. They also underestimate how much they will need - in retirement and until they leave this earth.
You can’t encourage investing if the employee doesn’t understand it.
Usually someone can manage $50/month. When I see people who cry poor walking around with the latest iPhone model, I know someone either gave them that phone -or- they decided they had to have it and managed to buy it (or steal it). Or, they're spending their money in some other way, for entertainment, going out on the town, mani/pedis with fake nails, multiple tats (always ready for 1 more), etc. There's always some other thing that feels more important than saving.
The amount to get started doesn't have to be $500/month. It could be 1/10 of that just starting out. The point is to get in the habit of putting something away every paycheck and increasing the amount *as one can do so*. Not doing so, is merely an excuse.
For my first savings account, I deposited $2. I was 7 or 8 yrs old at the time. It's the behavior of saving that is life-changing.
Who says someone didn't save $50? As a matter of fact, that's what I had. And when I had more, I invested more. . The problem is when these people make these claims using amounts of money that just aren't realistic and do in a manner that somewhat blames the other person for not being "smart" enough. That meeting where I heard that; it was a retirement planning meeting. Most of the folks in there were 50+. and it was around 2015, not 1980. Telling someone "if only you'd invested money you didn't have 30 years ago, then you'd be rich today" doesn't help them one bit. People in that room needed practical advice on what to do with what they had and the working years they had left, not what they should have done while still in high school.
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