I love the headline, as if retiring with 1M or more is common. News flash, that's the reality of 80% of America. Hell, where I grew up, people mostly just relied on social security. Retirement wasn't lavish, but they still enjoyed it.
I get the feeling that financial advisors push high savings / low spending for retirement so hard because they get a 1%+ cut of assets under management, and there's nobody complaining when their client dies with a pile of money. It's one thing to be responsible, but it's easy to over do it.
Social security is basically poverty wages at this point. Back in the day it went further, and people didn't live as long. Nowadays a 65 year old might reasonably expect to live into their 80s if not 90s with advances in healthcare, that takes a lot of funding.
Plus some of us would like something to leave for our kids/grand-kids, although I get that's not a priority for everyone. Personally my family on both sides came up from hooverville levels of poverty in the depression to middle class post WWII, to my parents being the first in their families to get advanced degrees and making it into the upper middle class. I'm a recipient of inheritance from both of said generations which has seriously improved my quality of life, it's my duty to at least maintain that status for my immediate family, and given that the lower rungs of the socioeconomic ladder are fewer and further between than they used to be, that means leaving substantial amounts to my kids/grandkids. Maybe in another generation or two we'll have enough familial wealth to live off the interest if we want. Sooner if I'm lucky.
I can only speak for myself, but I have ~ 15 years working under my belt and my SS will be anywhere from 43-54k / yr depending on whether I wait till 70 to file. That's certainly not poverty wages, especially when you consider that most households have two earners.
Social security is meant to give you a baseline of living expenses. I'd argue it pays enough to live a dignified life in retirement, but maybe not a rich one. As I said, I know a lot of older folks living off social security in my home town, and it is doable, but it's not lavish.
I view it as a very good inflation indexed annuity to help insure against longevity risk, but I personally won't need it and won't really be that affected if it's cut by 30% as they're threatening.
Most people retiring today were born before 1960, and you can draw SS as early as 62. The math still works out anyway. A 67 year old living to 87 isn't as uncommon as it used to be.
You can retire earlier but if you want to retire earlier (and have no reason to believe you may not live long) you probably shouldn't start drawing social security until your full retirement age unless you need to.
They should really have a synopsis for non-subscribers. Might help pull in new subscribers-as why subscribe to something if you don’t know what you’ll get? Compounded by the hell of modern subscription cancellation.
(I recently got an Economist subscription and it’s way better than expected, but I would have never known has I not bit the bullet…)
This. As someone living in Japan, I would love an option to drop a dollar to read the economist or such for a day.
I rarely subscribe as, between work and a new son, rarely have time to keep up to date on a particular site, and the background stress of paying for something I'm not using is frustrating.
The Economist is good as is The New York Times (although different). I probably wouldn't (and haven't) gotten the WSJ in addition to either of those unless I really felt the need for a daily financial publication.
Being asked to pay money for "journalism" is insulting when you consider that readers are the product. Most of the money is made from sponsored content masquerading as unbiased news articles and advertisements.
Try to see the regular payment, as a sort of inverted slice of ransom. Which the public can withdraw en mass, the moment they feel betrayed. Creating a kind of attachement of the employee to the employer (You).
"Mr. Jones’s retirement account took a hit in 2008 and never recovered. Spooked by the S&P 500’s 38.49% decline in 2008, he sold his stocks and invested in a stable value fund that earned about 1% a year, said the couple’s son-in-law, Jon Older, a doctor who has managed the portfolio since 2018. Dr. Older moved 35% of the balance into a low-cost stock index fund and the rest into an intermediate Treasury bond index fund."
So he missed out on one of the best stock market rallies in history out of ignorance and fear. Ouch.
> So he missed out on one of the best stock market rallies in history
not alone though...every VC who poured $30 million into a cashflow-negative startup eight years ago has also missed out on turning it into $100 million with the click of a mouse
I know someone who became an angel investor after they retired maybe 15 years ago as sort of a combination hobby and investment mechanism. He is by no means starving but he told me that he could have saved himself a whole lot of trouble and money by just putting the investment dollars into a NASDAQ index.
(He does still do some angel investing but only in a small number of companies he feels particularly strongly about.)
$100 for cellphone from one of the major carriers. Yes, there are bargains out there but there are also reasons to go with the majors.
Personally, I dropped cable a few years ago but I just don't watch live TV now. If you're going to get something like YouTubeTV you're not saving that much over cable TV. (And I assume the person is also paying for Internet.) And the fact is that someone like my dad is not messing around with streaming TV.
Streaming TV is a different experience than cable but it's not THAT hard. I push one power button and my TV, soundbar and streaming device power up. That same button shuts everything down when I'm done watching. If they ever get out of sync, pressing the home button forces things back in sync.
The interface for YoutubeTV looks an awful lot like the interface for a cable guide. There's a small learning curve but it can't take more than 15 minutes to understand 90% of what you'd ever want to do.
$73 a month all in is a heck of a lot less than the $90 plus taxes and fees + cable box rental fees (per tv) plus sport network and local network carriage fees, DVR fees, etc. Last time I looked, I couldn't get 2 TVs with an equivalent package for less than $140 from my cable company and that included a contract and the need to renegotiate every 12-24 months.
I think you made my point for me. Look, my dad, who is otherwise quite sharp, still doesn't really grok the difference between text messages and email even though I have to go through this every few months, most recently this morning. He doesn't know and doesn't want to know anything more complicated than turning on the TV and changing the channel.
Note that many of these folks have much less than $1m in savings though most seem to own houses and one probably has decent income from rental properties. So overall--perhaps not surprising given this is the WSJ, these folks are not exactly scraping by off social security even if they're not "wealthy" either.
Life expectancy at 65 is something like 85 - 20 years. You can divide the savings by 20 and get some sort of expected possible burn rate if you dig into capital.
These aren't really the "sob stories" I would be looking for.
I suppose an alternative take is that the moral is, even if you don't have $1m+ in the bank, it's not actually the end of the world--especially if you own a house.
That's the much MUCH better way to look at it - too many people see these "you must have ten billion dollars saved for retirement by age 25" and just give up.
It's not a pass/fail exam, and amount saved is useful (and the biggest one is reducing or removing your housing expense through ownership; though once you're old enough it may be worth considering how many years of renting you could buy for the price of the house, and what that would include).
$1 million will be a king's ransom compared to Gen X's retirement plans
last time I checked known stats on Gen X retirement savings, the national average was under $100k...Gen X is the first generation that is almost entirely dependent on 401k
for bonus points, Gen Xers in large cities are more likely renters than owners, so they won't even be able to sell a property to prop up the low 401k balance
the Gen X retirement bailout is probably already unavoidable and will be in the trillions
everyone says its fine because they love what they do and will do it forever...do they really think there will be a hot market for 67 year old React devs?
3. Without corresponding tax increase or cuts elsewhere, inflationary
Taxes are the last reason people don't have enough in retirement. If you only have 100k saved up in a traditional 401k, and say you're doing pretty well in the 22% income tax bracket overall so that over time gets taxed down to 78k, over the course of a 20 year retirement that's just $1100.00/year in taxes. That's what, a few weeks' groceries? Taking those taxes away by contrast will be extremely inflationary and lead to people losing more money to inflation than they saved in taxes.
Stating that tax cuts are inflationary assumes that the government is able to put the money to better use than individuals. Have in mind that when the government taxes your money, it also spends it - but instead of spending in productive pursuits, it often spends it in a way that doesn't lead to increase production and, thus, inflation.
No, it's assuming whatever the government does with it won't cause a generalized inflation spike.
Let's say the government wastes all the tax revenue building a next-generation aircraft carrier that's so incompetently constructed it collapses in drydock before it can ever set sail.
That won't cause the price of everything to go through the roof, except perhaps locally where the money is spent.
And actually, the government can often put the money to better use than individuals. Is there incompetence, corruption, and wasteful government spending? Of course. But two things can be true at the same time. I'd like to see an individual try to build a bridge, repair a road, or open a public school off of their tax savings.
IIUC, and am certainly not an expert, some of these can apply in practice for those with lower retirement incomes. That's not to say it's not a struggle at these levels, of course; the challenge might be cost of living vs dollars in the account, rather than taxes.
So (3) would definitely help that group (as sibling mentions, it's also inflationary). Bernie Sanders and others have proposed raising benefits for current retirees recently, even while Social Security needs to be shored up. With the Republican House it can be argued this is mostly political theater (disclaimer: I vote for Democrats and am usually a Bernie fan.) tl;dr like you mention this probably won't happen.
(2) Social Security is 50% taxable between $30-45k and 85% taxable above $45k. IIUC, couples over 65 get a slightly raised standard deduction of $29,200, so if they only have social security they're paying 0 and half-tax up to $74,200, which if my math is right will be an effective tax rate of around 3-4%.
Some states may tax retirement benefits; due to the above these can be higher than the Federal taxes.
(1) There's Roth for this, though I recognize not everyone has the means or planning. But I mention this in the context of +1'ing Trad 401(k) taxes not going away... Roth lets the government pull future revenue into the present to be spent now. Also, Dems would probably bring up a fairness angle as to which groups contributed to 401(k)s and how this would be more regressive than an across-the-board cut.
But regardless of whether it's 401(k) or other income, the Federal tax rates can be quite progressive. The 2023 12% bracket for couples goes all the way up to $89,500, so adding the standard deduction a couple can make $118,000 and still be in the 12% bracket (effective federal tax will be around 8-9%). Though the more that they make under this point, the more it pushes their social security into taxable ranges...
If the couple has long-term gains from a taxable investment account, there is a 0% LTCG bracket up to $89k as well, meaning so long as they have no other income, a couple can realize six figures of gains every year and pay no federal tax on them.
> the Gen X retirement bailout is probably already unavoidable and will be in the trillions
State governments are going to get huge bailouts too. Most state pension funds are way underfunded. The my state's DOT pension is <60% funded, and that's assuming 7+% average returns.
Yes. We’ve written too many checks that we can’t possibly hope to cash.
If the fed gets in the way of the fiscal policy makers and their spending, they will obliterate it - it only exists because of a law passed by congress anyway.
They can always change the law and tax your Roth withdrawals...
I think the best bet is to do what everyone else is doing. They can't fuck everyone and keep their heads and keep their jobs. What do Millenials and Gen Z's retirement contributions look like? How's the picture gonna change as the Boomers die? Gen Z?
You don't wanna be the minority with a 401k when everybody else has a Roth and you don't wanna be the minority with a Roth when everyone else has a 401k. When push comes to shove the political minority will get fucked first. Alternatively, you can do something so off the wall and uncommon that you're a "small fish" and they don't care to tax you.
That’s fine we’ll just expropriate the Boomers hoarded wealth as they churn.
The fiat currency numbers are not a fundamental, immutable feature of reality. The obsession with loss of hallucinated values is a bit unsettling. As if entirely ephemeral fiat economics has latched onto the same biological nature as religious conviction in gods.
Better to legislate the fake money as needed than let hundreds of millions get disenfranchised, especially in the country of 3 guns per adult.
I get the feeling that financial advisors push high savings / low spending for retirement so hard because they get a 1%+ cut of assets under management, and there's nobody complaining when their client dies with a pile of money. It's one thing to be responsible, but it's easy to over do it.