The financials of retirement planning after a long-term, consistent income decline. (pension plan, divorce)
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The prevailing line of thought among many retirement planners is that one's income generally increases with age, hitting a peak, then maybe a slight decline for a few years immediately before retirement. However, with the impact of the last recession, many workers were laid off from reasonably well-paying positions and still have not recovered nearly ten years on.
I've seen this play out frequently here in northeast Tennessee and southwest Virginia. Many mining and manufacturing workers were laid off in the previous recession. This area skews older than average, so many of those workers were in their 40s and 50s then. The older batch of those is nearing retirement today and I would say most haven't hit their previous salaries.
Many of these people were easily making $50,000 or more - while low by this forum's standards, is actually pretty good money here in Appalachia. My father was making in the mid $40k range and was up to the mid $50k range with overtime in manufacturing before being laid off. After the layoff, he got hired in at a call center, starting around between $30k-$35k, and is barely up to $40k now. Many are commuting much longer distances to work, so you also have that overhead.
It seems like these issues have gotten short shrift in the retirement press. What would your strategy be if you faced a long term, consistent income decline?
Thinking about this, I don't see any advantage in changing one's strategy just because he's making less money in the later parts of his career. Actually the money saved early on has more effect than late money because the former gets longer to earn compound interest.
One just saves as much as he can, invests as well as he can, and that's it. Earning less in the last parts of a career means there will be less money in the bank, I don't see how strategy adjustments can change that. Outside of just working more years to cover the necessary ground at the reduced pace.
I wish I could come up with a better way to do it, but so far I can't think of anything.
The prevailing line of thought among many retirement planners is that one's income generally increases with age, hitting a peak, then maybe a slight decline for a few years immediately before retirement. However, with the impact of the last recession, many workers were laid off from reasonably well-paying positions and still have not recovered nearly ten years on.
I've seen this play out frequently here in northeast Tennessee and southwest Virginia. Many mining and manufacturing workers were laid off in the previous recession. This area skews older than average, so many of those workers were in their 40s and 50s then. The older batch of those is nearing retirement today and I would say most haven't hit their previous salaries.
Many of these people were easily making $50,000 or more - while low by this forum's standards, is actually pretty good money here in Appalachia. My father was making in the mid $40k range and was up to the mid $50k range with overtime in manufacturing before being laid off. After the layoff, he got hired in at a call center, starting around between $30k-$35k, and is barely up to $40k now. Many are commuting much longer distances to work, so you also have that overhead.
It seems like these issues have gotten short shrift in the retirement press. What would your strategy be if you faced a long term, consistent income decline?
It's played out to an extent in my own situation. Personal and household income peaked 10 years ago, when I was a bit north of 40. Now to be fair, both the peak and current incomes exceed your folks' numbers by a fair amount. But keep in mind the COL factor of CA vs the Mid South. In any case, let me put it this way, I'm the last person on Earth who should consider any Roth conversions. The chances of me winning a jackpot are greater than the chances of having higher income in elder years than early middle years. Now to be fair, miserly living since the Great Recession onset has helped us to build a substantial war chest. As Mathjak often reminds us, the longer one has to survive retirement the greater the chance of ah sh___s. Hence, the war chest. But still, we are going to have to mind our pennies during our dotage.
Last edited by BayAreaHillbilly; 03-01-2017 at 04:16 PM..
One of dad's coworkers and fishing buddies is mid-50s. He was making a decent living until the plant shutdown in 2008. Several years later, a foreign drug outfit bought the plant and ran it for a couple of years, then that outfit folded. Pay was less than the original company and there were no benefits. His wife died unexpectedly in the last year or so, so whatever income she had is now gone.
The guy is now working the firearms counter at the southwest Virginia Cabela's. I can't imagine that paying much. Fortunately the kids are out of the house and he lives cheap (hunts and fishes a lot which helps with the grocery bills), but you have to wonder how many of these folks will make it, and why there is so little thought in the media about their plight.
I ask, not facetiously, if Cabela's offers employee discounts. I have my own version of the "back to hunting and gathering" contingency. I reckon many others also have similar contingencies. If I were in that boat, I'd be ALL OVER working at Cabela's or similar.
I worked and saved early on, then due to health/medical reasons had to go through my retirement accounts and ended up homeless, living under a bridge next to the railroad tracks. Then Welfare helped me to recover to SSDI. I am now 53. I have had small part time jobs earning what I can while I can keep my SSDI {thanks Bush Jr.}. I am actually looking to re-enter the workforce, which will lose me my SSDI, but will allow for more retirement savings and boost my overall SS.
MOH is shortly to be 58 and just 5 short years ago was earning 65% over minimum wage, but as minimum in my states heads towards that *magical* {so they think} $15/hr, MOH's wages have stayed the same but actually now is just barely over the new minimum wage for a junior health care job. MOH has a second job just above minimum wage as a grocery store cashier, and makes almost exactly the same as the health care job.
But: we live in a floundering economy area that is fairly stable, though it is seeking new direction. $12 USED to be "golden".
AND: I have worked hard and tirelessly to get MOH out of bankruptcy, and our credit rating improved, and get us a new house, and are on track to pay it off in less than 5 years, savings in the bank, and saving as much as possible for retirement. We are looking into investing into some RE rentals in a warm climate, where housing is cheap, and COL is about the same/less than here. We could sell our house and buy 3-4 properties there. {and NO, our house is NOT a $500k McMansion, it is area standard for a "starter" house.}
AS someone said above, work hard, live below your means, live frugally, save as much as you can, and MAYBE you can do well in retirement. I think the way we have it planned our retirement will be better than our working years.
Well, OP, the scenario you describe is pretty much mine. Never recovered from lay-offs, etc. during the recession inspite of years of trying. Eight, to be exact .
I always thought, years ago anyway, that I'd have a nice pension, work until 70 for the max SS, own a nice home when I retired. None of that happened.
Lost everything, and I mean everything...retirement savings, pension, vehicles, most personal items...all of it because there were no jobs to be found to even apply to. I relocated and continued to try to recover financially but found only part-time or contract work and no benefits of any kind.
Five more years passed and I decided to retire at 62 because I was exhausted with it all.
During all this we learned to live frugally and prioritise and discovered a joy and contentment, though at times stressful, in simple living. We know how to live cheap and be happy and so our SS checks will be enough if need be.
I know my story is not unique and there are many who chose early retirement due to long-term under or un-employment.
I finally accepted last year that I would never recover and live financially the way I did pre-2009. It just was not going to happen and so I let go of the frustrating effort of the ''black hole'' job hunt.
I feel much better for it, but I do find myself searching the job boards out of curiosity. It's a hard habit to break after 8 years, but I'm done.
At least for now...
I ask, not facetiously, if Cabela's offers employee discounts. I have my own version of the "back to hunting and gathering" contingency. I reckon many others also have similar contingencies. If I were in that boat, I'd be ALL OVER working at Cabela's or similar.
What sort of a store is Cabela's? In other words, what do they sell there?
Thinking about this, I don't see any advantage in changing one's strategy just because he's making less money in the later parts of his career. Actually the money saved early on has more effect than late money because the former gets longer to earn compound interest.
One just saves as much as he can, invests as well as he can, and that's it. Earning less in the last parts of a career means there will be less money in the bank, I don't see how strategy adjustments can change that. Outside of just working more years to cover the necessary ground at the reduced pace.
I wish I could come up with a better way to do it, but so far I can't think of anything.
As for them personally, I'm not sure they've really thought it through. Mother is still able to work and earns in the low $30k range, but is not in great health and is probably going to retire and take SS at 62 - hopefully work part-time. He's likely to keep working until at least 65.
They have several small pensions from various companies they worked at, plus some small savings, and SS. If she cuts back her spending (she has hundreds of pairs of shoes - one bedroom was hoarded to the waist with mostly empty packaging before I cleaned it out), I think they will be fine, especially if they get rid of this enormous house and yard. They have no expensive hobbies or tastes - simple folks.
What's crazy is that they have elementary education degrees, but were unable to find teaching jobs in the immediate area back in the early-mid 80s. He got on at the local chemical plant, which paid far better than teaching at the time. He was making $40k in 1991 and is barely making that now. They got a teaching job in a rural town between Columbia and Charleston SC when I was a kid - they hated it, their parents guilt-tripped them by talking about how they'd never see me and moved back. Had they simply stayed there and kept teaching until they could move to a more desirable area, they would be in a much more secure position. That local chemical plant actually pays less starting mechanics less now than it did two decades ago - meanwhile, the minimum K-12 teacher salary here in Kingsport is like $41k. Times sure have changed.
But probably hundreds of thousands, if not millions, of members of that generation were in the same spot. Men who worked in manufacturing and other more traditional "manly" fields, either because they were uneducated or because it simply paid better than traditional white and pink collar work starting out, were often disproportionately downsized in the recession, have had their incomes cut, etc. A lot of that frustration came out with Trump support.
But probably hundreds of thousands, if not millions, of members of that generation were in the same spot. Men who worked in manufacturing and other more traditional "manly" fields, either because they were uneducated or because it simply paid better than traditional white and pink collar work starting out, were often disproportionately downsized in the recession, have had their incomes cut, etc. A lot of that frustration came out with Trump support.
Plenty of white collar jobs also fell into that category as well.
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