Why aren't you saving money for retirement?

Discussion in 'Community Discussion' started by ActionableMango, Mar 5, 2017.

  1. ActionableMango macrumors G3

    ActionableMango

    Joined:
    Sep 21, 2010
    #1
    I run a retirement calc once a year when I do my taxes. Typically I'm about right on track for recommendations--some times a little bit behind and sometimes a little bit ahead.

    What concerns me is that the calc also compares my retirement saving to my peers, nationally and in the area. Despite being barely on track, I am way, way, WAY ahead of the average. I thought, surely this cannot be right. So I started talking to friends only to find out that many have very little, like not even one month's worth of pay. Some haven't started saving for retirement at all, and we are in our 30's and 40's. One said he'll just work forever, another said that saving for retirement is for old people.

    These are not poor people. Some make much more money than I do. They are solidly middle class with all of the middle class luxuries you'd expect... nice TVs, multiple vehicles, cable with all the packages, nice computers, tablets, phones, expensive hobbies, etc, etc.

    Is this widespread? I worry about a "grasshopper/ant fable" scenario where if so many people don't save for retirement, the government will step in and take away from those of us who did.
     
  2. hallux macrumors 68030

    hallux

    Joined:
    Apr 25, 2012
    #2
    10% of my paycheck goes into a 401k. I never even see that money, it's an automatic pre-tax deduction. I'm closer to 40 than I am to 30 and have a little over 2.5 years' salary in my 401k and if the market keeps going as it is I should fill out the 3rd years' salary by the end of the year (+5.8% YTD change so far).

    I have a couple other accounts that contain almost 6 month's salary. I dip into that MAYBE once a year but now with my car paid off (until I decide to replace it) I won't need to touch that.
     
  3. Wowereit macrumors 6502a

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    Germany
    #3
    You've basically answered your own question.
     
  4. JackieInCo Suspended

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    Jul 18, 2013
    Location:
    Colorado
    #4
    I plan on using my house for retirement. On retirement, I plan on selling the house, moving to an apartment and living off the money from the sale. The value on my house has more then doubled in the last two years without doing anything to it.
     
  5. senseless macrumors 68000

    senseless

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    Pennsylvania, USA
    #5
    I wonder if people with greater anxiety levels actually turn out to the best savers. Some people don't worry about the future and others are constantly fortifying the nest.
     
  6. Spink10 Suspended

    Spink10

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    #6
    Which retirement calculator do you use?
     
  7. esaleris macrumors 6502

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    Oct 18, 2005
    #7
    I'm in your age bracket and I've run across the same issue. The stats for those in mid-30s are a bit mind-boggling.
    • I make the assumption that none of the funding labeled "entitlements" - the 50% of our national federal budget that is Social Security, Medicare, etc. - will be available when I retire. So the conclusion you make is that you will completely self-fund your retirement.
    • The second assumption that I would make is that the federal and state tax rate is likely to be higher when I'm older. So as I earn more, more money will be taxed. That's kind of the only way the government can effectively "subsidize" those who need help - through those programs.
    • The third assumption I make is that none of my savings vehicles (401(k) or Roth IRA can be absconded by the government - so tax is the only way I can "lose" income.
    If you make these assumptions, the power of what you do is back in your hands. There's a blog that I find somewhat annoying - Mr. Money Mustache (http://www.mrmoneymustache.com) - that talks about retiring early and how to manage money. Yes, some good pointers, but I also think he tries to be a little sensationalist with his articles. But may be helpful for you to think about other ways to manage your money.

     
  8. ActionableMango thread starter macrumors G3

    ActionableMango

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    Sep 21, 2010
    #8
    Fidelity has a built-in calc that is convenient since they have all of my retirement accounts anyway and so they have a lot of data that a non-account calculator wouldn't have. The Fidelity one is great because it runs my savings against hundreds of scenarios so I get probabilities like how badly off I will be if everything goes to crap right before I retire, income tax rates change, etc. It is very detailed compared to basic free calcs online, so if you have a retirement account somewhere, I would check with them first.

    Alternatively, there are free calcs online where you plug in all the numbers manually. I don't use them so these aren't really recommendations, but just results from a quick check:

    https://www.nerdwallet.com/investing/retirement-calculator
    https://www.fidelity.com/calculators-tools/fidelity-retirement-score-tool
     
  9. Apple fanboy macrumors Penryn

    Apple fanboy

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    #9
    Saving for retirement or anything else isn't very popular. The amount of people who have less than a months salary saved is frightening.
    Look how many adverts you see for loans, versus how many you see for savings.
    I don't know what's going to happen when my generation retires. But I do know it will be worse for my children's generation.
     
  10. ActionableMango thread starter macrumors G3

    ActionableMango

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    Sep 21, 2010
    #10
    In my dad's time if you had a second mortgage, that was a sign you were in deep trouble.

    Today we call second mortgages "home equity lines of credit" and use them to buy crap. I am guilty of this myself. :( My retirement savings may be on track, but my liquid savings is very poor.
     
  11. Apple fanboy macrumors Penryn

    Apple fanboy

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    #11
    Finished my mortgage at 33. Not planning on having a second.
     
  12. ActionableMango thread starter macrumors G3

    ActionableMango

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    Sep 21, 2010
    #12
    Good for you! Obviously you didn't get a 30-year loan unless you bought your house at 3 years old. That would be some forward thinking. :p
     
  13. Apple fanboy macrumors Penryn

    Apple fanboy

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    #13
    25 year loan (which is the standard here).
    Just made overpayments whenever I had spare cash, worked a lot of overtime, and bought when I was in my mid 20's.
    Basically went without for a longtime of the 'essentials'. But it was worth it in the long run.
     
  14. bradl macrumors 68040

    bradl

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    Jun 16, 2008
    #14

    To come back to your original question - and yes, I'll put my hand up as for being part of the cause - the problem is short term thinking: otherwise known as living in the moment, and wanting instant gratification.

    I was that way in the mid-late 1990s, as at the time I was single, had a good paying job, and was just saving money and living within my means. But all of the saving that I did didn't help a bit when it came to wealth thinking. What I mean by that is that it is one thing to get the money in and saved; it is a completely different thing to find a way to keep the money and have it make more money for you.

    This is the problem people in their late teens to late 20s have. They think about keeping the money from their paychecks in their bank account and that's that. They not only do not think much about 401ks, 403bs, IRAs, etc. etc., but also want some of the luxuries that money could bring, with most of those luxuries being tangible.

    Additionally, with not partaking in wealth thinking, they also are not futureproofing their lives. In short, children, any life events, etc. But that comes with the maturity for the people at that time.

    When they really start to settle down is when they start to think about that, and that may come early, or late, with later being more prominent. It wasn't until my mid-30s that I really had to think about it, and by then, it was too late. I remember hearing .. I want to say it was Suze Orman - say that if you started a 401k in your 20s versus starting in your 30s, by the time you hit 65 or so when you could start to live from it, there would be approximately $1 - $2 million difference between how much money you'd have in it if you started it in your 20s versus your 30s. And unless you already have the money to be really aggressive on the 401k in your 30s to make up that gap (which then would be ironic, because you already had and kept the money to begin with), that is lost money that time can not make up. That's the price to pay for living in the moment and having short-term thinking/instant gratification. No amount of work will make up that amount of time, let alone money.

    I would worry less about what the government will do, with the exception of Social Security. When the Baby Boomers start to draw their retirements out of the markets and SS, that is where we'll see the problem really compound. But as far as the rest, the problem we have is living in the world of instant-everything. Until those with instant gratification learn the concepts of wealth thinking and the theory of compounding, the problem will continue.

    Old but still very valid concept for you to think about. Which would you rather have: $1 million up front, right now, or 1 penny per day, doubled each day for 30 days?

    BL.
     
  15. C DM macrumors Sandy Bridge

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    Oct 17, 2011
    #15
    It's really how things should work, and it's good to hear that it's how they can work in at least some places. It's a bit crazy to be in areas where housing prices are through the roof (to say the least) and short of being quite wealthy it's fairly improbable to be mortgage-free.
     
  16. Apple fanboy macrumors Penryn

    Apple fanboy

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    #16
    It's doable. I was living in London which is one of the most expensive places to live on the planet when I first bought. Sadly people think they need a car loan or the latest smart device. I made a house a priority.
     
  17. bradl macrumors 68040

    bradl

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    Jun 16, 2008
    #17
    In your defense, living in London worked out to be better, despite being expensive.

    That worked out because you have the tubes to get around, which eliminated the need for a car. That's what I missed the most when I was in Melbourne or Sydney. a $25 monthly pass got me around on every train, tram, or bus in the entire city, so I had no need for a car.

    Unfortunately, not so much the case in most of the US. Chicago, Washington DC, Portland, and San Francisco will work out for that, but those are just as expensive as London (a 700 square foot apartment would go for $2500/month in SF), which prices out a lot of people, and even with those places you may still need a car for some things.

    But moving further out of the city necessitates the need for a car, so one would need to sacrifice either savings to have an expensive but small home and proximity, or proximity for a bigger, cheaper home, but requiring a means to get into the city; and the further out you go increases the need for that means of transportation..

    BL.
     
  18. rdowns macrumors Penryn

    rdowns

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    Jul 11, 2003
    #18
    Been seriously saving for retirement since I'm 32, two years after I bought my first condo. I work with an Ameriprise Financial Advisor and now, just shy of 55, I have enough to retire on which doesn't include my condo or play stock market account (I hold a lot of AAPL I bought at under $11 plus other stocks).

    Great feeling knowing I could tell my boss to go **** himself any time. He's lucky I like him and my work. :D
     
  19. -aggie- macrumors P6

    -aggie-

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    #19
    I started saving from the day I got my government job in 1989, and paid back my 6 years military to increase my retirement last year. My last ex and her family were a bunch of people who solely rely on social security and think you work until you die. It's what great to be done with them!

    Oh, and I retired last August. It's great not having to get up at 5:15am to go to work!
     
  20. bradl macrumors 68040

    bradl

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    Jun 16, 2008
    #20
    I'm on a similar path.

    My home-based business is really starting to take off, so I'm building it up to the point where when I make 1.5 times the income from my job, I'll be job-optional and can quit whenever I choose. Yes, that will mean losing any employer matching on my 401k, but that will easily turn into a rainy-day fund should I ever need it, or may funnel all of it into my family's life insurance policy.

    Speaking of, that's another thing that most people in their 20s don't tend to think about. We think we're still invincible then that any life insurance policy isn't needed; I know I thought that. Thankfully, all of that changed the week after my first child was born (I say week, because one is still adjusting to having a baby in the family), when we took out policies for all of us.

    My point: once life starts to take over, one starts to play catch up, though the sooner one starts, the easier it gets.

    BL.
     
  21. hallux macrumors 68030

    hallux

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    Apr 25, 2012
    #21
    lol, I'm worth more dead than alive. Between my life insurance benefit from my employer (1x annual salary) and some other policies that could be bought every few years to expand my benefit with no medical check-up needed. It was coverage my parents started when I was born and the add-on benefits cost so little it just made sense to buy most of them. Plus, it holds a cash value and I can cash that in early if I need some liquidity. The same guy that I have those policies through also helps me manage my 401k elections and a couple other investments I made 10 years ago.
     
  22. Plutonius macrumors 604

    Plutonius

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    #22
    You should have plenty of time for @ravenvii's WW game then :).
     
  23. rdowns macrumors Penryn

    rdowns

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    #23
    Nice to see you around stranger.
     
  24. AlliFlowers Contributor

    AlliFlowers

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    Jan 1, 2011
    Location:
    L.A. (Lower Alabama)
    #24
    I'm looking at retirement next year. My pension covers half my salary, and I don't hit social security for a few years. Good thing I also started my own plan, which can cover the difference for those few years.

    It's something everyone needs to work on the minute they get their first job.
     
  25. A.Goldberg macrumors 68020

    A.Goldberg

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    Jan 31, 2015
    Location:
    Boston
    #25
    I've been saving money essentially since I was born. At this point in my life I currently don't have a ton of expenses. I share an apartment with my GF, car is paid for, zero debt, no student loans, and I have everything I need in life. No kids, in my late 20's.

    It's scary to think how thin of a safety net people have. I suppose some people just rely on credit alone for emergencies. I'm sure the thought of retirement isn't even on many people's radar.
     

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