Retirement Savings not just a Millennial problem

[whatsup13579er]

Piggybacking off of the Millennial Retirement thread. It is not shocking that millennials aren't saving for retirement because their parents probably never taught them.

56% of Americans have less than $10,000 saved for retirement, including 52% of Gen Xers and 45% of Boomers. That is a huge problem.

75% of people over 40 are behind in saving for retirement. These people are really behind the 8 ball as they have missed out on years of compounding interest. Albert Einstein - "Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it. Compound interest is the most powerful force in the universe."

Also, their goal of having 5% saved based off of your income is staggeringly low IMO but a good place to start.

This is a really good article if you ignore the paragraph where they push the mythical, lazy gender pay gap. That's a topic for another thread that has been debunked here several times in the past.

http://time.com/money/4258451/retirement-savings-survey/

 

[JRHawk2003]

Yeah. I am working until 70 and really downsizing. So that when I retire I will have about no bills.

 

[Funky Bunch]

My plan is to house a couple of college girls to help pay the mortgage when I retire.

 

[hawkifann]

Piggybacking off of the Millennial Retirement thread. It is not shocking that millennials aren't saving for retirement because their parents probably never taught them.

56% of Americans have less than $10,000 saved for retirement, including 52% of Gen Xers and 45% of Boomers. That is a huge problem.

75% of people over 40 are behind in saving for retirement. These people are really behind the 8 ball as they have missed out on years of compounding interest. Albert Einstein - "Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it. Compound interest is the most powerful force in the universe."

Also, their goal of having 5% saved based off of your income is staggeringly low IMO but a good place to start.

This is a really good article if you ignore the paragraph where they push the mythical, lazy gender pay gap. That's a topic for another thread that has been debunked here several times in the past.

http://time.com/money/4258451/retirement-savings-survey/

This is how we have a too-large slice of the populace who say the stock market is only for the rich.

 

[IsaacHarrison]

Yes, I don't think any generation should be looking at another and critiquing retirement savings (From CNBC article):

As of 2013

Mean retirement savings of families between 56 and 61: $163,577
Median retirement savings of families between 56 and 61: $17,000

https://www.cnbc.com/2018/04/23/how...etirement-savings-and-how-much-they-need.html

 

[millah_22]

Because their parents never taught them? Or because wages are stagnant while people that make $17.00 criticize those who make $12.00 an hour for wanting $15.00 while CEOs bring in millions.

 

[Run&Blade]

I have noticed if you don’t have a big chunk of cash saved by about the time you are 50, you are pretty much F’ed.

Your money just isn’t doing to double that many more times when you hit 50.

I kind of think of it like this, save like crazy until you are about 54, let interest double that amount and hopefully tap out at 62.

I run excel simulations and saving another percent or two doesn’t really help you much at retirement time once you are at 50.

 

[FranklinHawk]

I invest my retirement in lottery tickets, any day now it's gonna pay off bigly!

 

[whatsup13579er]

Because their parents never taught them? Or because wages are stagnant while people that make $17.00 criticize those who make $12.00 an hour for wanting $15.00 while CEOs bring in millions.

Wages have been stagnant for 40 years? It is more understandable for young folks to not have any retirement savings. There are lots of factors. There is no excuse for the fact that 45% of those 55+ have basically no retirement savings.

I'd love to see the correlation between kids with no savings and parents with no savings. I started saving early on because my dad sat me down and explained why I needed to, even with my $28k per year entry level position.

And quit blaming others for being successful. It's a stupid argument. CEO's of large companies demand large salaries. Flipping burgers at McDonald's doesn't.

 

[CJ Beat Hard]

My plan is to house a couple of college girls to help pay the mortgage when I retire.

If you need help around the house I will gladly be the lifeguard

 

[hawkifann]

I have noticed if you don’t have a big chunk of cash saved by about the time you are 50, you are pretty much F’ed.

Your money just isn’t doing to double that many more times when you hit 50.

I kind of think of it like this, save like crazy until you are about 54, let interest double that amount and hopefully tap out at 62.

I run excel simulations and saving another percent or two doesn’t really help you much at retirement time once you are at 50.

One add-on point here is that while you (or someone) should be paying attention the retirement accounts and re-balancing periodically (and likely reducing risk as you near retirement), it's also important not to over-react to drops in the market. I know a couple guys now looking at working past 65 because in 2008 when things crashed, they panic sold low and lost their a$$es. They then sat out too long and to the point of Run&Blade's post, if you're effectively starting over past 50, you're in a world of hurt. They compounded things by getting back in late and missing a good chunk of the run up. Even when your investment horizon is getting shorter and shorter, do your best not to panic your way out of decades of growth.

 

[millah_22]

Wages have been stagnant for 40 years? It is more understandable for young folks to not have any retirement savings. There are lots of factors. There is no excuse for the fact that 45% of those 55+ have basically no retirement savings.

I'd love to see the correlation between kids with no savings and parents with no savings. I started saving early on because my dad sat me down and explained why I needed to, even with my $28k per year entry level position.

And quit blaming others for being successful. It's a stupid argument. CEO's of large companies demand large salaries. Flipping burgers at McDonald's doesn't.

Millenials have been in the work force for 40 years?

 

[Sooner-Be-Dead]

I would suggest we contribute more toward Social Security since that's what keeps most people afloat in retirement. Don't leave it up to employees and employers to make the right decisions. But since that's not happening, we're pretty much f'd as a society.

 

[Run&Blade]

I Know a couple people that got scared after the post Y2K correction and vowed to never get in stocks again.

They sold low and likely put everything in low tried capital preservation ever since.

A simple course in retiring/investing probably would have saved a few people’s financial lives.

 

[whatsup13579er]

Millenials have been in the work force for 40 years?

What is the Boomers excuse for not having any retirement savings? 45% don't. They've been in the workforce 30-40 years and are the parents to the non-saving millennials.

Saving is less of a "how much money do you make" question and more of a "what are your life choices" question.

I work with low income, mostly elderly people every day. Most of the time (not all of the time) they made a lifetime of bad decisions and they love to tell you about them.

 

[whatsup13579er]

I Joni’s a couplle peoplectbat got scared after the post Y2K correction and vowed to never get in stocks again.

They sold low and likely put everything in low tried capital preservation ever since.

A simple course in retiring/investing probably would have saved a few people’s financial lives.

Financial planning should be a required high school class. Obviously the Boomers have failed that life class and are passing it on to their children.

 

[Sooner-Be-Dead]

I Know a couple people that got scared after the post Y2K correction and vowed to never get in stocks again.

They sold low and likely put everything in low tried capital preservation ever since.

A simple course in retiring/investing probably would have saved a few people’s financial lives.

That's partly why the 401k system of retirement won't work for a large percentage of the population. That and low contribution rates by employees and employers.

 

[millah_22]

What is the Boomers excuse for not having any retirement savings? 45% don't. They've been in the workforce 30-40 years and are the parents to the non-saving millennials.

Saving is less of a "how much money do you make" question and more of a "what are your life choices" question.

I work with low income, mostly elderly people every day. Most of the time (not all of the time) they made a lifetime of bad decisions and they love to tell you about them.

I don't know what their excuse is. I was responding to the 1st sentence of the OP.

"It is not shocking that millennials aren't saving for retirement because their parents probably never taught them."

FWIW, I agree with you that CEO's and burger flippers deserve different pay, but I also believe cost of living has sky rocketed and pay has not reflected that. I don't think it's an issue of knowing how to save/invest, I think it's an issue of having the means to do it while making your next rent check, meal, diapers, etc. whatever people's expenses are for the month. There are only so many places to cut back while other expenses rise.

My wage comment also was more about someone making $17.00/hr (not that much) critisizing someone how makes $12.00 (not that much) for wanting $15.00 (not that much) is that everyone is focused on blaming the wrong people.

For example, Jeff Bezos is now worth $150 billion dollars. Imagine had he invested even $50 billion into his employees salaries and benifits. He'd still have $100 billion. However the managers that make $17.00 still hate on the warehouse staff that only make $13.00, while Their boss has $150 billion.

 

[BrunoMars420]

Financial planning should be a required high school class. Obviously the Boomers have failed that life class and are passing it on to their children.

I honestly think the screw ups of the boomers are helping the millennials on the saving for retirement front. Especially after 08/09

 

[prlyles]

One add-on point here is that while you (or someone) should be paying attention the retirement accounts and re-balancing periodically (and likely reducing risk as you near retirement), it's also important not to over-react to drops in the market. I know a couple guys now looking at working past 65 because in 2008 when things crashed, they panic sold low and lost their a$$es. They then sat out too long and to the point of Run&Blade's post, if you're effectively starting over past 50, you're in a world of hurt. They compounded things by getting back in late and missing a good chunk of the run up. Even when your investment horizon is getting shorter and shorter, do your best not to panic your way out of decades of growth.

Trying to time the market is a fool's game. That said, you should never invest money that you think you may need in the next 5 or so years. That will give you enough time to ride out a downturn without having to sell low.

 

[MepoDawg#]

Part of the problem is around 25% of those saving using 401(k) don’t take full advantage of employer match. That’s free money. That’s not counting those who don’t use 401(k) at all.

My company and many others open an account for you and put in a safe harbor amount, usually 3%. Plus matching of you take advantage. We also get profit sharing twice per year, one is cash, the other is 401(k). My per year employer contribution has been 8%-12% depending on profit sharing. But I get 3% guaranteed for safe harbor, 1.25% matching if I do 5%. Not to mention the $30k undergrad and $30k for masters, yes total of $60k, they’ll pay if your willing to go to school while working.

 

[Herkster5]

That's partly why the 401k system of retirement won't work for a large percentage of the population. That and low contribution rates by employees and employers.

But the truth really is, could the employee not sacrifice 5%-7% of their paycheck every month, from the time they start being employed? Hell, once you start, you never know what you're missing. I ran a simple retirement scenario on bankrates website, with all fictitious information, of course.
Current age: 24
Retirement age: 65
Annual Household Income: $35,000 (reasonable starting wage, right? At least for someone that went to college for something)
Annual Retirement Savings: 5% (not including any match)
Current Retirement Savings: $0
Expected income increase: 2%

This projects a balance at retirement of $446,825 (estimated 7% growth during working years, 4% in retirement years)

Throw in the assumption of a 3% employer match and that number moves to $714,919

5% of $35,000 isn't rap, $1,750 a year, $145 a month. If you started doing it before your first paycheck, you wouldn't know the difference between having and not having that $145 a month.

 

[Sooner-Be-Dead]

But the truth really is, could the employee not sacrifice 5%-7% of their paycheck every month, from the time they start being employed? Hell, once you start, you never know what you're missing. I ran a simple retirement scenario on bankrates website, with all fictitious information, of course.
Current age: 24
Retirement age: 65
Annual Household Income: $35,000 (reasonable starting wage, right? At least for someone that went to college for something)
Annual Retirement Savings: 5% (not including any match)
Current Retirement Savings: $0
Expected income increase: 2%

This projects a balance at retirement of $446,825 (estimated 7% growth during working years, 4% in retirement years)

Throw in the assumption of a 3% employer match and that number moves to $714,919

5% of $35,000 isn't rap, $1,750 a year, $145 a month. If you started doing it before your first paycheck, you wouldn't know the difference between having and not having that $145 a month.

Easy for me to say 5% is no biggie, but $1,750 is a lot if you're making $35k in a city where an apartment costs $1k/mo.

Why do so many companies get away with only kicking in 1-3%? That's a bigger joke.

 

[hawkifann]

Trying to time the market is a fool's game. That said, you should never invest money that you think you may need in the next 5 or so years. That will give you enough time to ride out a downturn without having to sell low.

Correct. In that scenario, as you approach retirement you're methodically adjusting out. If the markets crash, you'll probably sell some out as you stay on your schedule, but you wouldn't want to suddenly panic and make the next two year's worth of phase out right then as a panic. Dollar-cost average in, dollar-cost average out.

 

[Hawkeye_311]

No need to worry the Democrats and Socialist will be coming for your retirement savings soon enough.

 

[SoDakHawk]

I have noticed if you don’t have a big chunk of cash saved by about the time you are 50, you are pretty much F’ed.

Your money just isn’t doing to double that many more times when you hit 50.

I kind of think of it like this, save like crazy until you are about 54, let interest double that amount and hopefully tap out at 62.

I run excel simulations and saving another percent or two doesn’t really help you much at retirement time once you are at 50.

Define "big chunk of cash"? Just wondering. Also, I am thinking where you live also dictates how much you should have saved because the cost of living varies from place to place.

 

[hawkifann]

I Know a couple people that got scared after the post Y2K correction and vowed to never get in stocks again.

They sold low and likely put everything in low tried capital preservation ever since.

A simple course in retiring/investing probably would have saved a few people’s financial lives.

On the flip side of stupid, I knew a guy who worked for Wachovia here in Charlotte who maxed out his HELOC for cash to put on WB when it went down to around $12. It was ridiculous and everyone was telling him that at the time...but he was convinced 100% that WB was going to survive and go back to thriving. Pretty sure when WB fully converted to WF, the share price was around $5-6/share. Not sure how he ultimately came out, as he left Charlotte a year or two later, but I know that was hanging on his neck for a good long time.

 

[BioHawk]

I have noticed if you don’t have a big chunk of cash saved by about the time you are 50, you are pretty much F’ed.

Your money just isn’t doing to double that many more times when you hit 50.

I kind of think of it like this, save like crazy until you are about 54, let interest double that amount and hopefully tap out at 62.

I run excel simulations and saving another percent or two doesn’t really help you much at retirement time once you are at 50.

What do you define as "a big chunk of cash"?

 

[Herkster5]

Easy for me to say 5% is no biggie, but $1,750 is a lot if you're making $35k in a city where an apartment costs $1k/mo.

Why do so many companies get away with only kicking in 1-3%? That's a bigger joke.

I'd say the wage would be comperable to the location in which you are working. I'd assume, which is probably a bad idea, that an entry level business type job (Nationwide, EMC, Travelers, Wells, Principal, etc) would put you in that $30-35k range, where you can find reasonable rents from $600-$1000 a month. Now, move that job to San Fran, does it pay more? I'd guess it probably does.

 

[artradley]

Saving 10% from the start of your working years was something my parents "told" me, but didn't really "teach" me. Until I was in my 40's I was spending everything I made. I was lucky in that we had fortuitous timing in the real estate market and made a bunch of profit on a couple of houses we had in New Jersey, and at 45 I got a job with a very nice 401k plan (I put in 12%, they put in 8%) so I'm not bad right now.

But I'm trying to do a better job with my kids. I opened a ROTH for both of them when they turned 18, put in $5k, and setup auto-deposit from their checking accounts. I then sat them down and explained all of the expenses you will continue to have in retirement, and showed them how much their ROTHs could be worth if they continue to contribute over the next 40 years and LEAVE IT ALONE. I plan to continue to review things with them annually, especially when they are done with college and in the workforce.

 

[artradley]

But the truth really is, could the employee not sacrifice 5%-7% of their paycheck every month, from the time they start being employed? Hell, once you start, you never know what you're missing. I ran a simple retirement scenario on bankrates website, with all fictitious information, of course.
Current age: 24
Retirement age: 65
Annual Household Income: $35,000 (reasonable starting wage, right? At least for someone that went to college for something)
Annual Retirement Savings: 5% (not including any match)
Current Retirement Savings: $0
Expected income increase: 2%

This projects a balance at retirement of $446,825 (estimated 7% growth during working years, 4% in retirement years)

Throw in the assumption of a 3% employer match and that number moves to $714,919

5% of $35,000 isn't rap, $1,750 a year, $145 a month. If you started doing it before your first paycheck, you wouldn't know the difference between having and not having that $145 a month.

You did not take into consideration inflation. Over the next 40 years you have to assume around 3% inflation.

 

[Herkster5]

Inflation already is taken into consideration in the calculator, at a rate of 2.9%, or so it says.

Regardless, that isn't much to sacrifice if you know that you could be sitting on $500k at retirement. I wonder what that calculator would show if you increased your contributions by 1% every year, and capping at 15% as your max. Probably over a million, I'd bet, right?

 

[Sooner-Be-Dead]

According to this BLS survey, only 51% of 56% of employers match 401k contributions. So congrats if you're in the ~30% who get a match in a 401k plan. Lucky dogs.


According to the Bureau of Labor Statistics, the typical or average 401K match nets out to 3.5%. Their 2015 National Compensation Survey found that of the 56% of employers who offer a 401K plan (a sad statistic in itself):

• 49% of employers with 401K plans match 0%
• 41% match a percentage of employee contributions between 0-6% of salary.
• 10% match a percentage of employee contributions at 6% or more of salary.
• The median is a 3% match.

 

[artradley]

What is the Boomers excuse for not having any retirement savings? 45% don't. They've been in the workforce 30-40 years and are the parents to the non-saving millennials.

Saving is less of a "how much money do you make" question and more of a "what are your life choices" question.

I work with low income, mostly elderly people every day. Most of the time (not all of the time) they made a lifetime of bad decisions and they love to tell you about them.

As a 61-year-old, I was raised at a time when most people assumed they would have both Social Security and a pension, and health care was cheap. If they inherited something from their parents and had a house paid off, they assumed they'd be in pretty good shape.

Most Boomers were well into adulthood before the reality started to hit that pensions were not going to be an option, and that health care was going to be a major expense. By time they understood the new reality they had a mortgage and some kids who are sucking every $$$ of their income, so it was hard to a)mentally adjust to the fact that you were on your own for retirement, and b)make the financial adjustments in their lives necessary to save more of their income.

Some made the adjustment, many did not.

 

[artradley]

According to this BLS survey, only 51% of 56% of employers match 401k contributions. So congrats if you're in the ~30% who get a match in a 401k plan. Lucky dogs.


According to the Bureau of Labor Statistics, the typical or average 401K match nets out to 3.5%. Their 2015 National Compensation Survey found that of the 56% of employers who offer a 401K plan (a sad statistic in itself):

• 49% of employers with 401K plans match 0%
• 41% match a percentage of employee contributions between 0-6% of salary.
• 10% match a percentage of employee contributions at 6% or more of salary.
• The median is a 3% match.

And the first couple of jobs that I had with 401k's had about a five year vesting period for their match. If you left before the five years you lost all or some of the match. So the percentage of people with vested money in their 401k from an employer match is probably well below 30%.

 

[hawkifann]

Define "big chunk of cash"? Just wondering. Also, I am thinking where you live also dictates how much you should have saved because the cost of living varies from place to place.

This idea is a big part of the problem. A million dollars seems like a ton, 4-5 million seems like more than you'd ever need (and maybe it would be). There are so many variables.

If I'm a single guy, no kids living back in the Des Moines burbs making $75k and I have no plans to marry and my retirement goals are to have a small house paid for already and just continue to live my normal, local lifestyle, then I'm going to want to save enough so that I can make something like $60k per year off the nest egg. That guy is going to want to have something a little north of $1.5M saved up to ensure the money lasts, should he live 20-30 years post retirement.

On the flip side, if another couple lives in a more expensive area and spends their peak earning years in the combined $150-250k range and their retirement goals are to be able to get out a lot to shows, concerts, dinners out with friends at nice places, travel, trips to see the grandkids, etc., they're going to want to make sure they have $150k or more per year to support that lifestyle. That couple is going to want to retire with $4-5M.

Neither path is wrong, you just have to understand what your goals are, what your potential is and then balance out the "live now" vs "live later" line. That now vs. later is a really key concept as well. Obviously, with stats like we're seeing in these threads, a lot of people are too much in the now.....but then I also know people who live on bare minimum now really trying to save for later. We never know when our time will be up. I try to find a balance. I want to put money away for a retirement that is hopefully long and full of travel and grandkids, but who knows. I might drop next week, so I do try to enjoy the now as well.

 

[millah_22]

No need to worry the Democrats and Socialist will be coming for your retirement savings soon enough.

Isn't Paul Ryan the one that wants to cut Social Security?

 

[Run&Blade]

Define "big chunk of cash"? Just wondering. Also, I am thinking where you live also dictates how much you should have saved because the cost of living varies from place to place.

A big chunk varies by person. If you put 10% away fr most of your adult life that is a big chunk for that person, regardless of what they make.

If you saved your entire life then that is a big chunk because it took a commitment for a long time.

Doesn’t really matter you make, if you don’t save consistently during your working years you will not be able to retire at a lifestyle that compares to the one you are currently living.

All I am saying is waiting until you are in your late 40’s or 50’s is not a good idea and you will not be able to “catch” up.

 

[Run&Blade]

Another thing to consider is retirement expenses.

I will not be paying a mortgage.
I will not be paying for my three kids college, smart phones, food, clothing, vacations, cars, insurance. That is a giant slice of what we spend now.

I will not be saving a big chunk of my monthly income for retirement.

Amazing how cheap a trip looks when you don’t have to buy 5 of everything.

 

[Smalls4IA]

I Joni’s a couplle peoplectbat got scared after the post Y2K correction and vowed to never get in stocks again.

They sold low and likely put everything in low tried capital preservation ever since.

A simple course in retiring/investing probably would have saved a few people’s financial lives.

Financial planning should be a required high school class. Obviously the Boomers have failed that life class and are passing it on to their children.

It's part of 21st century skills and is required in at least the state of Iowa. It is good that it's taught but you must not have much experience with high school kids or forgot how much you cared when you were that age.