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Sort of an imaginary "coulda, shoulda, woulda" topic. For many, too little too late...they're in the soup and Monday morning quarterbacking won't help them. For others it never was applicable to them so it doesn't matter, unless they enjoy frightening themselves with horrible speculations that won't come to pass. For others who might actually be facing that situation...chances are they aren't coming here to figure out what to do about it.
Expecting to retire by saving "dollar bills" is a disaster in the making.
The same train wreck is fast approaching: http://www.usdebtclock.org/
The U.S. “Death” clock
National Debt: $22.5+ Trillion (in dollars)
U.S. Federal Spending : $4.452 T (in dollar bills)
U.S. Federal Deficit : $1.034 T (in dollar bills)
U.S. Debt Service : $0.372 T (in dollar bills)
((congress is borrowing more than it pays in interest))
. . . .
Debt per capita : $68,418
Debt per taxpayer : $183,032
. . . . https://www.federalreserve.gov/faqs/currency_12773.htm
Q: How much U.S. currency is in circulation?
A: There was approximately $1.70 trillion in circulation as of January 31, 2019. This figure includes Federal Reserve notes ($1,655.2 billion), U.S. notes ($0.2 billion), currency no longer issued ($0.2 billion), and coins outstanding ($47.2 billion).
U.S. Population = 329,217,343
Estimated $5,042.26 per capita in circulation
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gotta start saving when you are young.
started FT work at age 15
No time for college (I was caring for my parents by then)
I got (3) jobs and banked 100% of my main job and lived off the PT job income. (until age 30)
Meanwhile... my HS classmates were still in college living off Mommy and daddy, or just getting started. (*& I had 30 yrs 'additive experience' before age 30). Fortunately, being a 'farm kid', I had learned a lot of skills long before age 15.
I run into so many people who are retirement age that tell me they don't have a dime saved and plan to move in with their kids when they can't work anymore. These are middle-income people who worked non stop since about 1980.
So I did some calculations: If they started working in 1980 and made $10,000 a year to start and put 10% of that in a mutual fund that was 70% stock and 30% bond they would have $650,000 today.
If that person was never promoted during their career and only got cost of living increases and finished with a salary of $35K today, their social security would be $1350 at age 66 (full retirement age). Take 4% out of the $650,000 and you have $2166.00 a month, add Social Security and you have $3516.00 a month. If married double that figure.
Even a poor person who made no more than $35,000 a year can retire comfortably if they just would have saved 10% of their gross salary a year., can't they?
If only life were that simple, eh? No layoffs or terminations. No years during recessions where there are wage freezes. No wanting to buy a house or having a big car repair the same year you have a big medical expense. No relatives that need assistance. No kids are born. No big house repairs...no new roof needed. No vacations that cost more than a couple of hundred dollars. Ahhhhhh...the good life.
But that's not reality.
People should save more than they do, generally. But many don't have much expendable income. I don't begrudge a working girl earning $28,000 spending $100 on a splurge to have her nails done. That's not MY thing, but something happens to a person who works hard but never has anything special, or an occasional splurge.
I remember earning $30,000 years ago. I brought home, what...maybe $26,000? Although I was frugal, I could not have saved 10%, after expenses...I'd found a cat, so I had vet bills, car repairs & registration & maintenance & gas & inspection, rent, cable, phone, bus fare sometimes, groceries & household expenses, occasional out to lunch w/friends, modest entertainment budget (very modest), clothes & shoes. I was also trying to build up an emergency savings account (this comes before retirement, and when depleted, needs to be built again), saving for a small house or condo, travel by car to another state once a year to visit relatives, Christmas cards, Christmas gifts for office/boss/nieces, modest furniture. A splurge would have been nice towels on sale, or a new bedspread on sale, or a work outfit on sale. I saved 1% to the company's retirement plan. I increased to 3% a few years later, then to 5%, then to 10%, and finally, contributed the max (by then I was earning enough to do that) (as well as started contributing to a Roth, in addn to 401k max). If I had remarried, I might have been able to save more. If I'd had kids, I not only would not have been able to save 10% for my retirement, I think I would have qualified for food assistance. But I didn't have kids.
I knew nothing about investing. So when I was middle aged, I started reading about it. People should be taught the basics in high school, IMO. It's NECESSARY for financial health.
Take all this together...low income, no education in money/finances/budgeting/family planning = not prepared for the senior years, unless things change significantly along the way for that person. Also bear in mind, the male vs. female situation was different, esp decades ago. Females were, in fact, paid much less than males for just about everything. So when a man figures, well I could have saved $X dollars, don't forget to do those calculation on 70% of that income, since that's what a female in your job would have been paid. And when guys say, "By the age of 15, I had learned all sorts of skills," remember that girls were taught nothing useful outside of cooking/housekeeping skills, in most families, since it was assumed they'd marry and have kids. I had to teach myself when I was an adult the basic of plumbing repairs, mowing lawns, and the things that my brother had been carefully taught by the age of 10.
IF a person saved $250/month, every month and invested in an S&P index fund and never touched it, over 40 yrs that fund would, on average, grow to nearly $2M. The trick of course is the amount of time for compounding and the consistency of investing.
It makes you realize it doesn't take huge amounts of $$$ if you can start early because compounding does the heavy lifting. Even if someone could only manage to save/invest 1/2 of that or even 1/4, it would still eventually amount to something that could be considered decent savings over time, it would give people a retirement nest egg that doesn't only rely on SS benefits.
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Bracing for the flames. But ultimately it's a choice, whether you choose to decide or not. That's what is known as pay yourself first.
I doubt it would do any good to flame you for a lack of empathy and understanding. If you believe the myth that everyone can better their situation, I probably can't convince you otherwise even though the math makes it impossible; there just aren't enough seats at the high table. It is true that being industrious substantially increases your odds of making it further up the socioeconomic scale. It does nothing to fix the overall system.
Where is it written that everyone needs to reproduce and raise kids? That is something many of us limited and in addition postponed until we had established careers and suitable income.
Agree, that was exactly my point. If you cant afford to have children, dont have them and certainly dont have many if ones job/income situation is unstable.
IF a person saved $250/month, every month and invested in an S&P index fund and never touched it, over 40 yrs that fund would, on average, grow to nearly $2M. The trick of course is the amount of time for compounding and the consistency of investing.
It makes you realize it doesn't take huge amounts of $$$ if you can start early because compounding does the heavy lifting. Even if someone could only manage to save/invest 1/2 of that or even 1/4, it would still eventually amount to something that could be considered decent savings over time, it would give people a retirement nest egg that doesn't only rely on SS benefits.
I was going to point out that today's dollars that would be about $613K after 3% annual inflation- but at a 4% withdrawal rate that would be about $2,000 a month in today's dollars- not a bad supplement at all to the typical SS check.
I was going to point out that today's dollars that would be about $613K after 3% annual inflation- but at a 4% withdrawal rate that would be about $2,000 a month in today's dollars- not a bad supplement at all to the typical SS check.
Compound interest is powerful.
This is compounded growth. It's not compound interest.
Interest at today's low rates is just not that strong.
Some sarcasm, but a serious question. At every level of advancement to earn more money, there are less jobs.
You're looking at it incorrectly. It is all about value-add: when individual employees add more and more value, they earn more and more money. No employer will say "sorry, our company has added all the value we wish to add in the eyes of our customers so stop adding value so we can freeze your compensation."
Moreover, it is a simple matter of working for yourself, where your value add potential and hence your earnings potential are unlimited.
Quote:
Originally Posted by ReachTheBeach
In our current model of capitalism, it is mathematically impossible for everyone to make enough to fund their own retirement.
I realize this isn't the economics forum, but your statement is 100% false.
I invite you to post a mathematical proof of your assertion. I'll give you a hint: don't try to prove the math using standard undergraduate calculus as you'll spin your wheels. You'll be better off using topological mathematics (specifically differential topology) in your attempt - you'll get farther but if you're rigorous, you'll prove to yourself fairly quickly that you were wrong in the first place. See Gerard Debreu's & Kenneth Arrow's mathematical proofs of general equilibrium and partial equilibrium, for which each received a Nobel Prize in Economics.
The rest of your post shows a similar lack of economic literacy.
Last edited by RationalExpectations; 08-02-2019 at 09:23 AM..
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