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The simple answer is that financial literacy and discipline is severely lacking in the USA and many other countries. IF they have the money, they spend it, If they don't have it they put in on credit. Between housing, cars (big one), superfluous consumer goods, eating out etc, the saver is almost a freak of nature.
My company was just bought by another so I have 2 401k's this year. I asked how to set it up to max out my 401k without going over and HR and the provider did not have a clue and it is like I am some sort of freak of nature. I ended up having to manually calculate my contributions made thus far, subtracting them from $19500 then dividing by the number of remaining pay periods. They were not set up for that.
Yes, 'freak of nature' describes it well. It's frustrating for those of us who are and your example is a perfect illustration of that. Our deferred comp. committed at work made some changes to our plan. Some made sense but others were really stupid. But you can't talk to these people on the committed. They make decisions so as to cover their own butts. I bet I understand the funds in our plan better than all of them.
I see these statistics and they're always misleading. Nobody stays at one company their entire career anymore. Most people (including myself) have 401ks from multiple employers, that we rollover to IRA's when leaving the company. Why these IRA numbers aren't included in the calculations are beyond me.
Aside from that, too many people live paycheck to paycheck in this country. They live above their means and want the latest and greatest of everything. They aren't willing to delay gratification somewhat in favor of a long term goal. For those reasons, they're constantly struggling, irrespective of their income levels.
There's definitely a lot of truth to all of this. But also consider people who move from employer to employer can also be moving from one low wage no benefit employer to another.
Retired Baby Boomer here. For most of my working life, there was no Roth, no IRA, no 401k, not even a regular savings plan at work that had a match. These tax advantaged vehicles came very late in my working career.
While the standard comment is that employers provided pensions to us, in reality the amount of pension income is very small unless you were a government or railroad worker. "The median annual pension benefit ranges between $9,262 for private pensions to $22,172 for a state or local pension, and $30,061 for a federal government pension and $24,592 for a railroad pension."https://www.newretirement.com/retire...o-you-compare/
The fact that I could afford to retire at all is due to having been raised by parents who lived during the Depression who stressed wants versus needs.
I was taught to save, not spend. Never buy anything the first time you see it. Take the time to think about it. If it's gone when you go back, that's ok. You lived without it before, no major crisis here.
Birthdays and holidays are opportunities to celebrate with family and friends; presents and things are not needed to wish each other happy birthday. Just a hug is needed. [pre-covid obviously].
Maybe more hugs and fewer I-phones would help.
I definitely think the generation that lived through WW2 and the Great Depression really understood the value of saving. Unfortunately, these values always fade out until another horrible calamity takes place. Strongly valuing deferred gratification never seems to stick for more than a generation or two.
I definitely think the generation that lived through WW2 and the Great Depression really understood the value of saving. Unfortunately, these values always fade out until another horrible calamity takes place. Strongly valuing deferred gratification never seems to stick for more than a generation or two.
Of course, the soft kids of today didn’t have September 11th, a Great Recession financial crisis, a worldwide pandemic followed with a second “once in 100 year” financial shock that was the fastest decline ever recorded~
Also, at the risk of being scolded for bringing generational discussion into it…certain generations inherited world class infrastructure built by Eisenhower, and what they’re handing off to be fixed isn’t exactly top notch. One could argue the orange rind is squeezed pretty good. In other words, investment has been replaced with entitlement programs as the lines on those two categories shifted as they were the dominant voting block.
Now this is the fate of all empires, so I don’t know how much of it is “blame the older people” and how much is the unfortunate natural progression. We rise only to fall.
Lots of small employers don't have 401k type plans. Not everyone works for a big company or the government. Something like 50% of the workforce doesn't have access to a 401k. That shouldn't be an excuse not to save and invest, but it is a legitimate problem. And it usually it's the lowest paid segment of the workforce the hardest.
We really need uinversal 401ks. I don't think employers should be forced to match, but it would be very easy to set them up based on the federal government's TSP plan for its employees. It really would not be that expensive, either.
I would be on board with every citizen getting one. Then perhaps there could be a forced 6.2% employee contribution that their employer would match. It could grow…undisturbed for a few decades, and they might have a nice drawdown to live out their golden years~
Many of us are so far ahead of what we even earned in the 1970s so not sure where this 29% is coming from ..
My wages were up 10x since the 1970s
When I graduated and up until the the very recent boom labor market I was consistently being offered $15/hr as a chemist/scientist with an MSc and even when I graduated extensive experience. It is like the wages of the 70's stuck around and didn't even adjust for inflation. That is what motivates me to be on a FIRE budget so when the labor market turns around again and companies are back to offering $15/hr contract no benefits I have the option of giving them the finger and retiring early or switching fields.
When I graduated and up until the the very recent boom labor market I was consistently being offered $15/hr as a chemist/scientist with an MSc and even when I graduated extensive experience. It is like the wages of the 70's stuck around and didn't even adjust for inflation. That is what motivates me to be on a FIRE budget so when the labor market turns around again and companies are back to offering $15/hr contract no benefits I have the option of giving them the finger and retiring early or switching fields.
In 1974 when I got my first full time job minimum wage was 2 bucks so even that is up more than 7 x here.
So something is wrong with that we are up 29% since the 1960s post
I would be on board with every citizen getting one. Then perhaps there could be a forced 6.2% employee contribution that their employer would match. It could grow…undisturbed for a few decades, and they might have a nice drawdown to live out their golden years~
Ahh brilliant idea! Why hasn't anyone thought of this before!? When someone is born we could assign a unique ID # to keep track of it. And maybe we take out a little extra (say 1.45%) to put towards health coverage during those golden years. I think we're really on to something here!
Retired Baby Boomer here. For most of my working life, there was no Roth, no IRA, no 401k, not even a regular savings plan at work that had a match. These tax advantaged vehicles came very late in my working career.
While the standard comment is that employers provided pensions to us, in reality the amount of pension income is very small unless you were a government or railroad worker. "The median annual pension benefit ranges between $9,262 for private pensions to $22,172 for a state or local pension, and $30,061 for a federal government pension and $24,592 for a railroad pension."https://www.newretirement.com/retire...o-you-compare/
The fact that I could afford to retire at all is due to having been raised by parents who lived during the Depression who stressed wants versus needs.
I was taught to save, not spend. Never buy anything the first time you see it. Take the time to think about it. If it's gone when you go back, that's ok. You lived without it before, no major crisis here.
Birthdays and holidays are opportunities to celebrate with family and friends; presents and things are not needed to wish each other happy birthday. Just a hug is needed. [pre-covid obviously].
Maybe more hugs and fewer I-phones would help.
My parents were born in the mid 20’s and grew up during the Great Depression. My father wouldn’t touch the markets. He was frugal to a fault and managed to save a surprising amount of money on a modest income and with six kids.
To this day I have ingrained habits because of their experiences during that time. Some are kind of silly at this point, like the urge to finish my dinner plate regardless whether I am full or not.
Ahh brilliant idea! Why hasn't anyone thought of this before!? When someone is born we could assign a unique ID # to keep track of it. And maybe we take out a little extra (say 1.45%) to put towards health coverage during those golden years. I think we're really on to something here!
sounds good!!!
The only small difference in this “genius” idea is it wouldn’t be pay as you go so the money would actually grow and fund national investment hence my joke/emphasis on actually growing undisturbed~
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