Sometimes I see these kinds of articles and am blown away. To put it in perspective, the article does say that relatively few companies even offer the plans these days. Nevertheless, how much are people saving on their own? Does anyone know those numbers? If the numbers are similar, what are the long-term implications of having a nation where many people have nothing saved for retirement?
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A lot of the younger employees in my office - meaning they've graduated college in the last 5 years, believe they just can't afford to do save even $25/paycheck. They have really high rent (our office is in NYC), a ton of student loans with unfavorable interest rates, and the cost of living is really really high here. It's a scary thought, and I know a lot of them think they can make it up when they get older.. but the statistics show that contributions before 35 will have huge impacts in the long run. A lot of it is choice, but it's also a lot about salaries not being proportional to cost of living around our big cities.
Years ago I worked for a company and we had a meeting with HR, the 401 administrator held up a cup of Starbucks coffee and said, "if one put away the $ amount that this coffee costs, there would be X amount of dollars in 25 years", forget the exact amount but it was eye opening.
It's definitely harder to save now, especially with student loans looming large over my generation's heads. Some friends have $100K+ in debt, makes it next to impossible to save money if you also want a house, kids, etc.
I'm at 9% or so with up to 6% matched. I can probably afford to bump that up but its tight right now with our mortgage and daycare, among other expenses.
I think I read our generation will need about $1.2-$1.5 million in assets per person for a comfortable, 30 year retirement. That's still only $40k-$50k per year which will be worth a lot less in 35 years. That will probably cover property tax, various bills, and the occasional vacation.
Scary.
Forget afford. Just, what SHOULD you spend on. I make a good living, and I brew my own coffee in a travel mug ~4/5 days. On the days Im too busy, I use gift cards from Dunkin Donuts which have a net price of $1.70 per cup.
The boomer generation has shit savings. Very consumer oriented plus stagnant real wage growth for everyone but the top earners. I think younger generations are really scarred by the 2008- recession. People are saving more vs. consumer spending (nothing you can do if you get blown up on staples or medical). Here is the US personal savings rate over time.
Of course the problem now is that for various reasons (I think income inequality in particular), expected returns are not great in stocks and laughable for interest bearing investments.
Damn!!! Way to go!!! 8 years should give you another 500k at least!
Kind of getting nervous about it
There are legislative movements to push the retirement age out further, which potentially waters down the job market even more.
Bottom line is, we either need to bolster Social Security and legislate shorter careers and workweeks, or face a future of constantly high unemployment and a seriously broke-ass generation of Seniors in their kids basements and on the streets.
I teach a consumer math course in high school and try to emphasize to the students that there are two classes of people - the investor class and everyone else. They owe it to themselves and their children/grandchildren to make the small sacrifices to join the investor class. I try to show them that life is better in that class. Yet I still see plenty of kids who get their first job after high school making $12/hr and the first thing they do is buy a pickup with a $700/month payment, and even more on insurance.
I don't blame them either - they've learned their values from the older generations.
Since I read that book in my mid 20s we have open savings accounts and retirement accounts everywhere we've worked, we happen to work for a great organization that contributes 10% on our behalf and we also take a vantage of a cash matter plan but I'm finding that is becoming more and more rare these days
I think the general rule is to save 10% of your income, but everyone I've met with from financial advisors to insurance guys have told me I'm going to need more like 20%. It's doable but budgeting is hard. Lean heavily on my wife to keep our finances in order because she's better at it than I am
We might have an universal base income, as automation takes over various jobs
And companies said FU and took them away...
I am fortunate to have 2 of them.
Kind of getting nervous about it
You need to force yourself to save. Pay yourself first, consider it as a bill just like any other you must pay and budget your life accordingly.
When saving/investing for long term you have three factors; the amount saved, the rate of return, and time you have saved. Of those three assuming you invest wisely/conservatively time will have the largest impact because of the power of compounding.
You literally can't get those years back and even smaller amounts invested early in life will reap large rewards because of compounding.
With a calculator once I showed my nephews how if they invested a regular monthly amount from twenty years old until thirty and for some reason never added to it (not that they shouldn't) they would have a greater amount at sixty-five than if they wait to start investing that same amount when they were thirty and did so regularly until they were sixty-five.
Kind of like the old lesson, if you worked a job for a month and were offered a thousand dollars a day or a penny a day doubled each day which would you take?
Those early years of building up some sort of long term retirement savings are too precious to waste. Do yourself a favor and start saving something each month even if you have to start small and build on that. Pay Yourself first!
I made some huge moves in terms of percentage gains with some blue-chip stocks lately, but I just don't have enough cash saved up to really move the needle
we are going to have a generation of americans who are going to retire with literally nothing except Social Security ..
My wife and I just had our first child in October, so I will need to see how that changes my finances; I am going to do my best to cut frivolous expenses (bars and restaurants) from my budget in order to avoid lowering my contributions towards my retirement.
I really want out of this rat race. Hopefully if I keep this up I can retire in my mid 50s.
+1
It's a great feeling to be able to walk around a piece of property knowing that you own it free and clear.
Our kids (4 and 7) will be able to go to a public university unless we have a significant turn of events that drain our resources. That is how we have chosen to live and we are also very blessed that we both have well paying jobs.
We may not go on exotic vacations and we don't drive fancy new cars. We may not even buy the daily coffees either. For my sacrifice, I hope I don't have to bail out all the people who didn't save like we did.
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And companies said FU and took them away...
I am fortunate to have 2 of them.
That's my point. Pension plans should be mandated by law. At least for larger employers. Most people don't have the time, expertise, and often the financial ability, to save on their own.
we are going to have a generation of americans who are going to retire with literally nothing except Social Security ..
Yep. And then they'll start going after that.
though it only takes one crash to instantly wipe out years of gains, so people relying right now on money in investments to be there (and be there at an appreciating level) in 10 years (for example) should exercise at least a little caution.
The biggest impact for me will be putting three kids through college.
My trick was to put the raises I got into my 401(k) every year. Since I already lived off of the previous year's salary I knew I could do it without making sacrifices to the budget. Over time I got to the max contribution, and we were able to increase the family's budget. It wasn't even that long either.
A lot of the younger employees in my office - meaning they've graduated college in the last 5 years, believe they just can't afford to do save even $25/paycheck. They have really high rent (our office is in NYC), a ton of student loans with unfavorable interest rates, and the cost of living is really really high here. It's a scary thought, and I know a lot of them think they can make it up when they get older.. but the statistics show that contributions before 35 will have huge impacts in the long run. A lot of it is choice, but it's also a lot about salaries not being proportional to cost of living around our big cities.
I'm finishing up school in NY this year but I don't know how intent I am on staying here. Saving is my number one priority but from all my friends paying rent with respectable starting jobs it seems like a hard task to accomplish. I don't think I'm opposed to moving elsewhere at this point, unless I decide to live with relatives for a year or two.
I max out my 401K each year, but I feel that anything beyond the "free money" should go into another fund. It's something I want to look into this year.
If putting 4% of my salary into 401K maxes out my company match, maybe it's smart to take the rest of it and invest elsewhere.
I agree that almost everyone can save something, but many people are suffering from stagnant wages and staggering debt. Automation, outsourcing, and insourcing (H1-B visa) are eliminating millions of jobs, creating increased competition for those that remain. That decreases wages.
Debt is also soaring. Student loan debt is now $1.4 trillion nationally, and the average 2016 gradate had $37K in loans. The average monthly car payment passed $500 last year for the first time, and rents and the cost of medical care have skyrocketed.
These problems will only worsen because of the looming crisis with public pensions. Shortfalls in expected investment returns for pensions must be made up either by cutting services or increasing taxes. But most taxpayers in the private sector will never receive a pension. They will therefore suffer these hardships without receiving any benefit. Any tax increase will make it harder for everyone to save. There will be a generational fight about this issue.
Pension Problems - ( New Window )
I max out my 401K each year, but I feel that anything beyond the "free money" should go into another fund. It's something I want to look into this year.
If putting 4% of my salary into 401K maxes out my company match, maybe it's smart to take the rest of it and invest elsewhere.
IMO I think it would be wise to set up something like a ROTH for anything above what your company is willing to match. Gives you more alternatives and control of your money, and you won't get hit with taxes on that money when pulling it out once you are in retirement.
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that felt they couldn't afford to buy a cup of coffee at Starbucks every day and it probably totaled 2/3s of the room
Forget afford. Just, what SHOULD you spend on. I make a good living, and I brew my own coffee in a travel mug ~4/5 days. On the days Im too busy, I use gift cards from Dunkin Donuts which have a net price of $1.70 per cup.
The boomer generation has shit savings. Very consumer oriented plus stagnant real wage growth for everyone but the top earners. I think younger generations are really scarred by the 2008- recession. People are saving more vs. consumer spending (nothing you can do if you get blown up on staples or medical). Here is the US personal savings rate over time.
Of course the problem now is that for various reasons (I think income inequality in particular), expected returns are not great in stocks and laughable for interest bearing investments.
It's such a massive savings to bring your own lunch and coffee when working in the city. Probably everywhere, but I think it's exacerbated here.
I agree that almost everyone can save something, but many people are suffering from stagnant wages and staggering debt. Automation, outsourcing, and insourcing (H1-B visa) are eliminating millions of jobs, creating increased competition for those that remain. That decreases wages.
Debt is also soaring. Student loan debt is now $1.4 trillion nationally, and the average 2016 gradate had $37K in loans. The average monthly car payment passed $500 last year for the first time, and rents and the cost of medical care have skyrocketed.
These problems will only worsen because of the looming crisis with public pensions. Shortfalls in expected investment returns for pensions must be made up either by cutting services or increasing taxes. But most taxpayers in the private sector will never receive a pension. They will therefore suffer these hardships without receiving any benefit. Any tax increase will make it harder for everyone to save. There will be a generational fight about this issue. Pension Problems - ( New Window )
George Will on pensions? That's like calling on Dr. Kervorkian to treat the flu.
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In comment 13368849 jeff57 said:
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And companies said FU and took them away...
I am fortunate to have 2 of them.
That's my point. Pension plans should be mandated by law. At least for larger employers. Most people don't have the time, expertise, and often the financial ability, to save on their own.
Disagree about a mandate. We already have a mandated pension program, called social security. What you're advocating is that someone will simply be unable to decide that they dont want to contribute to an employer based pension. Money doesnt come out of nowhere -- if an employer must fund a pension, it will pay a little less (evidence: currently some employers are competitive for workers by offering lower pay but a pension).
What about people who are waiters for a few years before going to law school? Should they be forced to save 10% of $20k when that $$ will be a pittance vs. their post-education careers? What about people who never intend to retire? What about people who have other, immediate needs?
I just dont think a one sized fits all approach works. I think pensions are great. I also think this isnt 1955, and there are a lot more risky/abusive tactics by companies that make pensions riskier. What happens when you put your future in the hands of the company, and they underfund, take risky bets, and eventually go under? What happens when there is a run on the PBGC? Or PBGC has to charge so much that it's a material drag on returns?
It's such a massive savings to bring your own lunch and coffee when working in the city. Probably everywhere, but I think it's exacerbated here.
Yup. I try to do it (did it today) but sometimes I get lazy. Im at my best when I just buy some turkey, a loaf of bread, and a bag of apples and leave it in the office. I find it hard to eat for under $8 unless Im getting pizza. Usually more than $11. Adds up.
Also, someone mentioned $800 phones. I literally do not understand how people of modest means can outfit a family with 4 iPhones.
The only ones that will come out smelling like roses are the political class and their cronies.
By the time someone racked up student loans debt, car payments, home mortgage, and credit card debt they are pretty much fucked for life.
I won't toot my horn with numbers but none of the above applies to me, just a general observation.