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This is What Life Without Retirement Savings Looks Like

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  • This is What Life Without Retirement Savings Looks Like

    https://www.theatlantic.com/business/archive/2018/02/pensions-safety-net-california/553970

    While I'm no fan of Social Security, I realize this is why we have it.  It also makes me wonder when America will wake up and start teaching Personal Finance 101 in public schools.

  • #2
    I mean what did these people think would happen. The 2/3 not contributing to 401k is pretty scary. Yet go to your areas hip place and every night it'll be packed with people eating out and spending money they can't afford.

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    • #3
      Definitely a sad reality. I'm sure there are physicians that need to work into their 70s as well. My grandma (non-physician) is in a similar predicament although a bad gambling habit combined with 2008 wiped out her $250k retirement fund.

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      • #4
        It's just going to get worse over time. Of the 1/3 of people who are bothering to save for retirement, they are not saving much. I can't remember the exact numbers but most people have less than 10k saved, if I remember correctly. It's crazy.

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        • #5
          Until we accept that the vast majority of people think very short-term and we cannot change this, we’re going to have problems with retirement savings.  Participation in retirement savings plans is going to have to be forced (like it is in Australia) if we want things to change.

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          • #6
            --"as a house cleaner, a home health aide, a telemarketer, a librarian, a fundraiser—but at many times in her life, she didn’t have a steady job that paid into Social Security. She didn’t receive a pension. And she definitely wasn’t making enough to put aside money for retirement."--

            This article describes difficult situation for millions of Americans (both retirement age and younger).  Many people in this country live in poverty, without any way out, most not by their choosing. No amount of financial literacy will fix this.  Its the way American society is developing currently.  Of course she can move out of California and I'm sure can find a senior living place for <$1000/mo rent.

            Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st century. 
            http://www.pnas.org/content/112/49/15078


             

             

             

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            • #7
              You hear pundits decrying the "Nanny State", but maybe its my chosen career that's led me to become very pro-Nanny State.  Auto-enroll/Forced retirement savings, Auto-enroll basic state healthcare, automatic voter registration, soda tax, regulate & tax vices, and so on.  Our society clings so fiercely to independence in every aspect of public life - why?  Circumstances always point back to the majority of people thinking short-term and doing whatever feels good.  Then someday we wind up paying more to mend it after the fact than we would have just offering basic social welfare programs in the first place.  All these people who didn't save for retirement, who will still be looking for paid work in their old age will most certainly vote.

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              • #8
                People like to question whether or not it's a good idea to retire using the 4% rule when you have 25 years' worth of expenses saved. But the fact is many, many people don't even have one year's expenses covered.

                If you're wondering if your $2.5 Million in retirement savings is adequate, or if you should wait until you're closer to $3.33 million, recognize that you're in better shape than at least 95% of potential retirees, and more than $2 Million ahead of the average.

                Cheers!

                -PoF

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                • #9




                  People like to question whether or not it’s a good idea to retire using the 4% rule when you have 25 years’ worth of expenses saved. But the fact is many, many people don’t even have one year’s expenses covered.

                  If you’re wondering if your $2.5 Million in retirement savings is adequate, or if you should wait until you’re closer to $3.33 million, recognize that you’re in better shape than at least 95% of potential retirees, and more than $2 Million ahead of the average.

                  Cheers!

                  -PoF
                  Click to expand...


                  Yes but I don’t care what their retirement is like unless it affects mine.  

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                  • #10







                    People like to question whether or not it’s a good idea to retire using the 4% rule when you have 25 years’ worth of expenses saved. But the fact is many, many people don’t even have one year’s expenses covered.

                    If you’re wondering if your $2.5 Million in retirement savings is adequate, or if you should wait until you’re closer to $3.33 million, recognize that you’re in better shape than at least 95% of potential retirees, and more than $2 Million ahead of the average.

                    Cheers!

                    -PoF
                    Click to expand…


                    Yes but I don’t care what their retirement is like unless it affects mine.  ????
                    Click to expand...


                    There's the rub....

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                    • #11




                      You hear pundits decrying the “Nanny State”, but maybe its my chosen career that’s led me to become very pro-Nanny State.  Auto-enroll/Forced retirement savings, Auto-enroll basic state healthcare, automatic voter registration, soda tax, regulate & tax vices, and so on.  Our society clings so fiercely to independence in every aspect of public life – why?  Circumstances always point back to the majority of people thinking short-term and doing whatever feels good.  Then someday we wind up paying more to mend it after the fact than we would have just offering basic social welfare programs in the first place.  All these people who didn’t save for retirement, who will still be looking for paid work in their old age will most certainly vote.
                      Click to expand...


                      The problem with some of that is that it removes individual liberty, one of the founding principles of this country.  Contrary to your argument, I would argue that it is precisely the government taking more ownership of social programs that is leading to our fiscal decline and inability to pay things off in the future.  And that is irrespective of the party in power, mind you.  I'll give you that an opt out retirement program (one of the few things that actually increases savings) still offers individual choice and liberty.  But the more you move to this nanny state you describe the more you take away basic individual accountability and, by definition, use the government to take (at gunpoint if necessary) someone else's money so that you can have it.  That is immoral.  If people want to think short term, let them.  They should be held accountable for those decisions.  The soda tax actually holds people accountable to externalities they create through worsened health and higher healthcare spending - I would argue this needs to be broadened, as the bigger determinant of health outcomes are behaviors rather than the healthcare system.  But putting the government in charge of our healthcare is an absurd notion IMO.  No other segment of the economy is as wasteful with money and inefficient with policies - by a long shot.

                      At a meeting years ago Jack Bogle read a letter from a Vanguard member who had been investing for 20+ years and was a millionaire.  The man never earned more than $25k in any year his whole life.  Success can be had with little income.  It's not the random jobs people have or social security - it's about choices.  The more programs that we construct to address the consequences of poor decision making the more we incentivize and support those bad decisions.  Is it really so amazing that people cherish their independence?

                      As an aside, this article clearly has an agenda as laid out with its top-down solutions at the end.  It also messes up facts and isn't clear on others.  Real wages have NOT been stable at 1970's levels.  They also use the decline of defined benefit plans and growth of defined contribution plans to imply something bad is going on.  On the contrary, when your pension is tied to one company's success I would argue that your retirement is much more at risk than if the individual is in control of their own investments and invested in a broadly diversified portfolio.  Ask a GE employee if they would have preferred to be investing in defined contribution plans or defined benefit plans.  They also keep describing the "rise of more unstable" jobs and imply that this destroys one pillar of retirement (personal savings), but they do an abysmal job of explaining what that means in percentages or dollar terms.

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                      • #12
                        I have empathy, but little sympathy for these two women. I dispute the notion that people are typically in this situation through no fault of their own.

                        The first woman meandered through life and and never took responsibility for her earnings. The second woman undoubtedly committed tax fraud by grossly understating her tip income. She would have received SS earnings credit on those tips, greatly increasing her SS benefit.

                        This is no different than many other people who make conscious choices. For the first year after high school I was making 20 cents more than minimum wage (shift differential) working in a light bulb factory. I made major changes, joined the navy, went to college on the GI Bill and worked hard. I also saved money every year, even when I was a lowly seaman in the Navy. I went back for a visit after 20+ years. The same people at that factory were still there barely making minimum wage. What little they made was reduced by the money the spent on booze and/or pot. I don't even have any empathy for them.

                        A study I saw recently showed that in 401k plans with employer matches only 60% of 401k participants contribute enough to get the full company match. This is true even for well educated professionals. At a recent employer, I was shocked to find a substantial minority of colleagues did not contribute up to the 100% employer match. The excuse was always "I can't to afford to". Yet, these same people would have two late model luxury sedans and/or SUVs, boats, motorcycles, took expensive vacations, etc...

                        So spare me the Socialist Nanny State drivel. You can't fix stupid and I don't mean intelligence or education. My father didn't go past the eighth grade, because he had to quit to help my widowed grandmother feed his brother's and sisters. He wasn't the smartest man around but my parents raised five kids on well less than the family median income and still managed to save for a modest retirement.

                        So pardon me if I don't think we need the government to bail out people for their own lack of responsibility.

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                        • #13
                          Sometimes these folks are parents of doctor children who have a boatload of debt and their own young children to think about and then have to literally fund their parents. Sometimes these parents are in poor health too. This comes up time to time in the FB Women's group.

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                          • #14
                            Regardless of where you stand on "Nanny states" or whether you feel empathy for people who did not save enough for retirement, a trip around the world will show that countries who do not have adequate social support for all of their citizens have higher crime and the wealthy in those countries need to expend considerable resources to protect their wealth from the have-nots.  I would rather not have to live in a gated community with round the clock security guards to protect myself/my house.  I would also rather all Americans have some basic social safety net, to include the basics of healthcare, affordable housing, and affordable healthy food--I see too many patients whose problems I can't fix because they stem from a lack of basic social resources.

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                            • #15
                              The problem with forced retirement savings is that participants will do what one of the women in the article did, who "lost" her investments in 2008.  Obviously she had an awful SOR but what she didn't sell would have tripled in value by now.  Although 401(k) participation in the US is shockingly poor, there are plenty of people who withdraw it at a penalty who never should have contributed in the first place.

                              Same issue with automatic voter registration/compulsory voting.  If you're uneducated and/or don't care about anything other than which politicians are best for your bank account, please DON'T vote.

                              We live in a country where people won't tolerate giving Grandma a license to die in complete abject poverty, so the safety nets and enabling are here to stay.  I do wonder if universal basic income would be a more efficient alternative to our insolvent Social Security and broken disability/Medicaid systems we have today, which not only fail to encourage responsibility, but actually punish people for working.

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