65 % of americans not preparing for retirement.

[Seasoned Oak]

https://www.cnbc.com/2018/03/15/bankrate-65-percent-of-americans-save-little-or-nothing.html.

This is a topic that deserves discussion and was mentioned in another unrelated thread ,so I thought id start a thread on it. It does NOT need to be political in nature. I see this headline every year.
I find it ALARMING!! So it seems we are OK with 65% of the population living out their last years on social services.Since it gets so little discussion and I don't see much in the way of fixes discussed. I think SS is a forced insurance/savings program, a very necessary one as most americans it appears need to be FORCED to save for retirement. Would be nice to be able to opt out but if that were allowed many of the biggest contributors would leave. What say YOU?

 

[EatenByLimestone]

If that net wasn't there, would people save?


There has to be some result to the keeping up with the jonses culture we have. New car, vs retirement in 30 years...

 

[Seasoned Oak]

If that net wasn't there, would people save?
There has to be some result to the keeping up with the jonses culture we have. New car, vs retirement in 30 years...

The "net" isn't going away so may as well plan accordingly.
Since a large chunk of the public is "taken care of " in one way or another eventually by the Govt.,there should be a contribution system that also includes everyone. SS contribution systems leave out a huge pool of potential donors that pay nothing (or very little) into it. Like a consumption tax, since were all consumers. Can be tweaked to be very fair to all. Also can be very small since its broad based. Only problem I see is the fund possible getting raided(spent) instead of invested once again.

 

[Alpine1]

No less than 30% of my monthly wage is spent in retirement saving, work accident insurance and healthcare. It’s compulsory here, I’m taxed BEFORE I get paid. When I was young, I thought it was a legalized robbery of my earnings. Now that I’m older and a little wiser, I’m glad I saved enough for my retirement, that healthcare is almost free and so on.
This is a tough topic anyway.

 

[Seasoned Oak]

No less than 30% of my monthly wage is spent in retirement saving, work accident insurance and healthcare. .

That's a pretty good deal. I doubt if that would cover Healthcare alone here. My Health insurance (2 people) is $30K a year alone.

 

[Dantheman300z]

This is an interesting thread, and look forward to more opinions.

 

[EatenByLimestone]

I noticed they don't give any info about the ages of those polled. Depending on how established they are, the results could easily be skewed. Poll a bunch of people in their 20s, and I'd be shocked if 5% could afford to save 10%, much less 20%.

Poll 40 year olds, I bet those numbers change drasticly.

 

[Highbeam]

I believe the American ss system should remain the way it is. Minor tweaks to maintain the status quo. It is a small defined benefit pension and NOT some sort of emergency welfare safety net. This pension was always meant to be barely adequate and for most Americans it is. Consider ss as the first income stream.

Those of us discussing this on an Internet forum are thankfully above average. I see the problem is a savings rate problem. Savings rate takes into account stupid high spending and stupid low saving. I am teaching my kids to aim for 50% of net.

I am hopeful that we can get healthcare figured out with the next administration. Even a stable Obamacare is better than a wildcard.

 

[peakbagger]

Folks like to fondly remember defined benefit pension plans and think they were a panacea for all the current issues. It wasnt and was fundamentally flawed. For everyone who made it to retirement there was a large number of folks that never made it. Unlike IRAs they weren't portable, folks were stuck working for the same company for their entire career even if they hated the work as the plans were loaded to reward longevity. Contrary to popular belief the plans were not funded from past contributions by the company, the vast majority of the payouts for current retirees were from current profits. Fine if the company was growing and the the number of retirees was low compared to the employee base companies muddled through. It wasnt until after a string of high profile plans going bust that the government created the Pension Benefit Guarantee Corp to backstop the plans and required companies to meet reserve requirements. Unfortunately business had a lot of friends in congress and they were allowed to set unreasonably high investments returns to justify keeping low reserves. The result were companies decided defined benefit plans are a liability and have been dumping them on PBGC generally vastly underfunded so the whole defined benefit option is going belly up.

There is a fundamental disconnect that politicians are unwilling to admit is that the system cant function with the population living longer than they worked. There were successful attempts to put in the current graduated retirement age but they didnt keep going. The maximum SS income rate also wasnt indexed as much as it needed. Given that the economy has shifted to capital gains based income the government should have been charged SS taxes on it. Frequent stock trading, could easily be surcharged which would slow down volatility on wall street and raise a lot of revenue. When I was growing up most folks were pretty well worn out by 62 and most didnt make it to age 70. Their pensions werent indexed for inflation and after six or 7 years this lack of indexing really cut into their retirement income even if they were alive. Folks are far more healthy these days as a whole and the SS retirement age has to go continue to go up gradually. If someone wants to retire early they have the option they just need to save more voluntarily.

Both parties have elected to kick the can down the road but the conservatives have been working for years on the "nuclear" option which is "starve the beast". Basically starve the government for cash by cutting revenues from taxes and starving the IRS from resources to collect. At some point very soon the choice will need to be made between the young and the old to cut the social contract to keep basic services running. The only reason the government is functioning currently is China and the rest of the world is buying our bonds and the interest rates are low enough that the interest payments are killing the US. The latest tax cut is just the latest version of this and already the conservatives are screaming that the deficit they voted for will mean that big cuts in entitlements have to be made.

I know a lot of folks who much rather would buy the new SUV, the camp on the lake and the big vacations every year then voluntarily fund their future. I see the ads for free seminars on how to hide assets of the elderly, so they can get free ride from medicaid. I also have known several folks who deliberately abused their parents by transferring assets and then doing what they had to keep the parents at home until the 5 year clock stopped ticking to claw back assets and then they dumped them in the system. They tend to be the ones who yell the loudest about lost entitlements.

I was lucky my dad did investing as a hobby and was ahead of the curve on a lot of the current options, Our family was what would be called lower middle income, my dad worked full time plus did a did a side job a couple nights week and as soon as we us kids didnt need babysitters my mom worked night shift, yet he managed to save up enough for a comfortable retirement. When I was growing up I got to watch Wall Street week with Lou Rukeyser. I didnt understand it all, but learned enough. He was doing deferred compensation long before that option was called an IRA. I figured out pretty quickly that SS is basically welfare, its not there to be a comfortable retirement its there to provide the bare minimum so someone doesn't starve. I didnt plan on it being there when I retire and it still may not be at my full retirement age (7 years from now if I want to work that long). If I had to stop working on Monday I could live comfortably until age 70 before I file for SS and even then I could live without it.

As soon as I was earning enough money and worked for firms that would let me do 401Ks, I did so. I also did IRAs and when Roth's came out I switched to them. When the government opened up the options for IRA re characterizations, I took advantage of them and once I had access to Roth 401s, I switched over to them. I am far better off with the current system then in the old days. I have switched jobs both voluntarily and involuntarily and in the majority I have had access to IRAs, so to carry the plans with me The one company I worked for that had pension plan for a few years shut down the plan and it ended up a the PBGC. In theory I might get $300 a month when I turn 70. A similar stint at a company prior to that one where I earned far less with a 401K and a company match is now worth 70K. I could buy a 12 year deferred annuity with that 70 K today and it would generate more than $300 a month 12 years from now.

 

[Prof]

I agree that much of the problem is "keeping up with the Jones" mentality. I have a choice when I go to buy a truck--spend 10-20K on a used one or 40K on a new one. As a society, we have become too comfortable with debt. On my way to work I sometimes listen to Dave Ramsey--kinda turned me on to a no debt lifestyle. I do have a mortgage, but I am aggressively paying this down. When it is time to buy something, I decide on what to get by how much cash I can put on the barrel. Often my kids here "no" when they want something that isn't in the budget--but they have college savings accounts. I spend plenty of money and have some nice things, but my decisions are not dictated by society. Heck, the Honda CRV I drive to work has zip ties holding the bumper together--my coworkers make fun of me and my wife asks every so often when we will get a new car. It really depends on when the Honda stops running, not what it looks like.

 

[EatenByLimestone]

Don't buy an annuity. They're horrible ideas, unless you're the one selling it.


If only Bush was able to privatize the 3% (I think that was the number.)of contributions he wanted to with social security. The market has done nicely.

I'm not sure what ss will look like if I live to retirement. Individual savings and propor planning, as far as I'm concerned, is the closest one can come to security in retirement.

 

[EatenByLimestone]

Prof, my truck is a beater too. I was recently asked the color, I replied, starting to resemble rust. Lol

 

[begreen]

That's a pretty good deal. I doubt if that would cover Healthcare alone here. My Health insurance (2 people) is $30K a year alone.

Why is it so high? I never spent that much for a family of 4. Not even close.

 

[Dantheman300z]

Ditto begreen's question.

 

[MikeK]

I noticed they don't give any info about the ages of those polled. Depending on how established they are, the results could easily be skewed. Poll a bunch of people in their 20s, and I'd be shocked if 5% could afford to save 10%, much less 20%.

Poll 40 year olds, I bet those numbers change drasticly.

I kick myself for not saving when I was younger. In my early 20's I worked a lot of hours and made 20k per year, but really my expenses were minimal. Even if it was a very small amount I would have been way ahead. Unfortunately I was very ignorant. The only way I knew to save then was to put it in savings in the bank, not checking. That would have been a start. I hope I can teach my kids to do better.

My car is 2001 Honda Civic. Great little car, gets 37 mpg or better, but had been in some benders before I got it. Has new tires, is maintained, and I hope it gets me many more trips to work.

There is definitely some good info on retirement saving out there. I really like Dave Ramsey's baby steps. I really think he nails it. If I had known them at 18 I would have been leap years ahead of where I am now. Thank goodness I learned, although slowly.

I also think it would help to teach these personal financial basics in high school. Another thing that could be included in such a class would be the basics about health insurance options, what the terms are, shopping for a plan, etc.

 

[RobbieB]

I planned all my life and retired at 59 four years ago.

Save early and save often -

 

[Seasoned Oak]

Why is it so high? I never spent that much for a family of 4. Not even close.

I guess its risk related. Mine is 50% higher than my wifes, probably because I had a heart attack and wear a leg brace. And also because they can.
Just a few years back before we were forced it carry insurance it was 10% of the price today. For many years I paid for my own HC expenses out of pocket. I don't see the genie going back in the bottle any time soon .The same company that owns the local Health Insuance company owns all the hospitals and clinics too.

 

[Highbeam]

I kick myself for not saving when I was younger. In my early 20's I worked a lot of hours and made 20k per year, but really my expenses were minimal. Even if it was a very small amount I would have been way ahead. Unfortunately I was very ignorant. The only way I knew to save then was to put it in savings in the bank, not checking. That would have been a start. I hope I can teach my kids to do better.

My car is 2001 Honda Civic. Great little car, gets 37 mpg or better, but had been in some benders before I got it. Has new tires, is maintained, and I hope it gets me many more trips to work.

There is definitely some good info on retirement saving out there. I really like Dave Ramsey's baby steps. I really think he nails it. If I had known them at 18 I would have been leap years ahead of where I am now. Thank goodness I learned, although slowly.

I also think it would help to teach these personal financial basics in high school. Another thing that could be included in such a class would be the basics about health insurance options, what the terms are, shopping for a plan, etc.

Anything that they would have taught us about health care back in high school would be totally useless now. Heck, they tried to tell us to eat margarine too! If they taught something as simple as compound interest (both ways, assets and liabilities) it would really help.

Dave Ramsey is good for beginners but mr money moustache is where the real stuff is.

 

[Seasoned Oak]

As a society, we have become too comfortable with debt.

I guess the general population is looking to the Federal Govt as a role model with this issue. I'm adverse to debt ,once deep in debt now about debt free. I'm not sure its the right decision for me, but since I have young children and a fairly young wife I dont want them to struggle if I check out early so I'm leaving them with assets instead of debts. Also it so much less stress and nice not to pay interest for anything anymore. It used to be thousands a month for interest alone. Id rather buy assets with that money or enjoy life with it.

 

[begreen]

I concur. This book should be required reading for all high school seniors -
https://www.amazon.com/dp/0140167153/?tag=hearthamazon-20

 

[peakbagger]

The vast majority of folks I run into are clueless on financial planning and management in the short term and long term. Some of them got roped in Edward Jones and dont realize that their good friend the agent, makes money every time they convince their client to buy and sell. Its better than nothing but sure isn't the ideal. The schools skipped financial planning and in most families "dad" handled it. Even in my family I am the only offspring that really actively manages their money.

Many folks think buying lottery tickets is financial planning .

 

[Seasoned Oak]

Many folks think buying lottery tickets is financial planning .

Those folks are all around me. Probably a part of the 65%ers.
I only know a handful of people who are really sharp with their finances. Not to say many don't earn a big salary ,they just don't hold on to any of it. My BIL earns an avg salary but id say he is worth well over 1m in financial assets. His unearned income long ago surpassed his salary at work.

 

[Dantheman300z]

What do you mean by unearned income long ago?

 

[EatenByLimestone]

I'd imagine he's talking about income derived from sources other than his job. For instance, dividend income.

 

[greg13]

I think for the most part basic greed on everyone's part is to blame.
How many business have pensions any more? why? profits & costs.
How many people can afford to save what they should for retirement? why? costs driven by profit. Gas here has gone up 20 cents in the past 2 days. It seems to me that the world is driven by profit and they seem to not care about us little guys.
Add in the keeping up with the Jones mentality and we are all doomed.Most kids today have no idea of what work is and plan on starting at the top making $100k /yr. and since they can't find a job that's one more hand in the pocket looking for money.