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This is what all those pieces of advice seem to forget. Like this seminar I attended one time where I was told "if you had invested $500 per months since 1980, you would have $1 1/2 million now."
Well that's fine advice to tell me what I should have done (at the time 35 years before), but also ignores the fact I wasn't make $500 a month back then, much less having it to invest. When I started making enough to have that kind of investment money, I did, but it was a long, long way from 1980.
Same thing applies even today. It does no good to tell someone only making $30K a year to invest $6000 of it because they don't have $6000 left after paying rent, utilities, and food.
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 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~
I'm not in favor of forced contributions. Too much force as there is right now. But I am in favor of automatic enrollment of 3% of pay with autoescalation of 1% per year if pay goes up, with the employee able to opt out before the auto-enrollment kicks in (without too many hoops to jump through to disenroll).
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~.
I know you'll probably think I'm trivializing those horrors, but they were a walk in the park compared with the Great Depression and World War 2. If you're unaware of that, it just proves how soft we've become. There was also a worldwide pandemic between WW1 and WW2, so many of the people who lived through the Great Depression also lived through a pandemic as well.
I would say a poor educational in finance in high school.
...and at home.
When we had a business, the young kids who worked for us didn't even want to pay a small amount for health insurance, let alone invest for their future. They only lived from paycheck to paycheck.
I would never advise against saving for retirement, and taking advantage of time and compounding…
However, your numbers are skewed and ignoring the difference in value of money over time.
Because if someone started at age 25, and retired today, that means they would have started to invest $6,000 a year 35 years ago, which was in the mid 1980s….scraping together $6,000 per year at age 25….was a very large sum of money then when the average person probably made around $20,000 or so.
Someone investing $6,000 today, to get to a million three will find out that is not a lot in 2055.
You’re thinking in terms of the $6,000 and $1,300,000 being the same dollar versus dollar. $6,000 may not seem like a lot (to you) today, and $1,300,000 may sound like a decent sum today to you…but will it be anything to get excited about in 2055? No.
Well said. You also have to consider the great recession. Those fortunate enough to keep their jobs and still contribute during that time were lucky. I struggled for YEARS. I know a formerly very successful guy who now has to work at age 82 because the recession wiped him out. I worry daily about if I'll have enough to retire, and thats with maxing my 401k the past 5 years and continuing to do so the next 15 years. No way I'll retire early, thats for sure. My minimum number in today's dollars would be $2 million. I won't make it.
I know you'll probably think I'm trivializing those horrors, but they were a walk in the park compared with the Great Depression and World War 2. If you're unaware of that, it just proves how soft we've become. There was also a worldwide pandemic between WW1 and WW2, so many of the people who lived through the Great Depression also lived through a pandemic as well.
First of all, I’m a huge fan of history and know all about ww1,ww2, and the Spanish flu. And yes, those were obviously the 3 largest death spikes of the 20th century.
I don’t feel the need to stack rank the horrors different generations have experienced. But if I was forced down that path, I think it’s fairly easy to make the case that 2 to 4 events of the last 20 years, would crack the top 10 of the worst events in American history. The 21st century hasn’t exactly been a frolic through the daisy fields. You can minimize it by saying there were events that were worse. However, 9/11, 2 financial shocks, a world pandemic, and *ducks* an insurrection that tore at the fabric of peaceful transfer of power and the republic itself certainly fits the bill to me for difficult times.
And yes, I do think it’s trivializing to say events like the ones I described are a “walk in the park”. It’s a needless comparison. It’s like telling someone who got raped that some people have been raped 3 times. Or your family member was murdered? Oh, but these people had 2 family members murdered.
There’s no point to trivialize monumental events to try and make the claim a generation is “soft”. Especially given that it’s likely the first generation in many who are likely to have less stability and wealth (per fed data) than the generations before them (2 historic financial crisis tend to do that). Hey brother, can you spare a dime?!
Tell someone who lost everything in the rust belt during the Great Recession that there suffering wasn’t real or somehow lessor because of the grapes of wrath. To what end?
Last edited by Thatsright19; 08-19-2021 at 10:38 AM..
I'm not in favor of forced contributions. Too much force as there is right now. But I am in favor of automatic enrollment of 3% of pay with autoescalation of 1% per year if pay goes up, with the employee able to opt out before the auto-enrollment kicks in (without too many hoops to jump through to disenroll).
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.
You’re thinking in terms of the $6,000 and $1,300,000 being the same dollar versus dollar. $6,000 may not seem like a lot (to you) today, and $1,300,000 may sound like a decent sum today to you…but will it be anything to get excited about in 2055? No.
By my calculations. By 2055, the yearly investment in a ROTH will be $10,500. So $6k in 2055 will be $3k (still plenty, not life changing) and $1.3m will be $700k, or a net worth only about 20% of the population are currently able to achieve. It'll still be something.
By my calculations. By 2055, the yearly investment in a ROTH will be $10,500. So $6k in 2055 will be $3k (still plenty, not life changing) and $1.3m will be $700k, or a net worth only about 20% of the population are currently able to achieve. It'll still be something.
That’s only half of the problem I pointed out.
And I didn’t say it was nothing. I said it wasn’t anything to get excited about in 2055. Assuming you calculated it properly, and it will feel like 700k in today’s dollars then, that would kick someone off 28 to 30k a year in today’s dollars, which….isn’t anything to get excited about.
I merely was pointing out how these types of figures that get thrown out are often misleading and wrong because it ignores the value of the dollars by talking in nominal terms rather than real terms indexed back to a particular year.
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.
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