Sorry, only millionaires can retire

yahoo ^ | 11-10-04 | Paul B. Farrell

[LouAvul]

Hey boomers, if you're close to retirement run to Wal-Mart now and put in your application. And if you still have time before retirement, be forewarned. Keep that application handy.

Why? Because you have no choice but to work right up to the day the kids put you in long-term care or a mausoleum.

Seriously: Professional financial planners tell us we need a million bucks to retire today, multimillions in the near future. Unfortunately, the average American has a paltry net worth of $15,000 exclusive of home equity.

And things are going from bad to worse. A few years ago I ran across a study by the American Savings Council and the Employee Benefit Research Institute. Was anybody saving for retirement? Not many: Only 35 percent were 'Planners,' folks saving enough to retire comfortably.

The rest? Bad news: 13 percent were 'Deniers,' saving nothing; 15 percent were 'Impulsives,' consumers who save if there's anything left over after they buy that hot new toy; 20 percent were 'Strugglers,' who don't trust the market so they won't save much; and 18 percent were in the 'Cautious' category who know they're grossly unprepared.

Get it? Two out of three Americans had some kind of lame excuse for not planning their retirement: "I'm cautious, I'm struggling, I'm too impulsive, I'm in denial and can't save." Excuses, excuses, excuses. No wonder America's savings rate dropped from eight percent just 20 years ago to one percent today.

.......snip..........

And do not count on, privatization of Social Security to help you. That's another joke. If you're lucky playing the market with your dinky 2.4 percent Social Security account, you might make an extra couple hundred bucks a month. But don't count on it. Market risks may make things worse than the current system of guaranteed payments.

[ErnBatavia]

I dunno...maybe some lessons in 'self responsiblity' would be in order, instead.

I'm not going into any detail on this forum, but I've proven that one can do just fine on a fifth of one's former income...IF (and that's the big 'if') one starts thinking about retirement 25 years before that day comes.

Get your house paid for! Don't buy that cool-looking boat just because the neighbor has one! Plan ahead!

Wifey and I got married in 1979, and from day one we both lived our lives under the assumption that "Social Security will not be there for us, and we will NOT count on it".

[ptlurking]

For you guys and gals in your early 20's...start saving today!!!

If your company offers a 401k plan...take advantage of it!

$349 a month invested for 40 years @ 6.9% return gets you
to $1 Million dollars.

[Poohbah]

Professional financial planners tell us we need a million bucks to retire today, multimillions in the near future.

Bulls**t.

The average rate of return on growth mutual fund investments is 12%. Deduct 4% for inflation. That means you get 8% of your principal for income without decreasing your capital.

8% of $500,000 is $40,000. If you can't live on that, you have a problem.

Financial planners will tell you "invest into the millions" because that gives them a bigger portfolio to play with.

[billhilly]

"It isn't my fault I am sacking away tons of cash (at the age of 31, only).."

How much does your ton weigh?

[ptlurking]

Correction...$392 a month invested for 40 years @ 6.9% return gets you to $1 Million dollars.

Sorry!

[KC_for_Freedom]

Good points. But I imagine many older folks eager to retire are looking at their bank accounts and getting nervous. They haven't saved enough but don't want to keep working. For them, socialism is the answer.

Of course, having someone else pay is always a nice solution, but the rest of the country may no approve of the socialism. So most of my friends who have not saved enough for retirement plan on working until they drop. (Not that theres anything wrong with that.)

[Siamese Princess]

How will people save more when their taxes are raised 40 - 50%?

That's one of the problems in a nutshell. The more the government "does" for you, the less able and willing you are to do for yourself. The more taxes you pay (allegedly on your behalf) the more you are dependent on the government to return the money to you in the form of benefits and entitlements.

Social Security originally was not a pension program, only a little something to prevent complete destitution. It only became a pension program beginning in the 1970s. So, in the 1960s, SS didn't pay much but the tax was light so you could easily save up. Now, the tax is much heavier and every dime the government takes from you is one less dime you can sock away or invest on your own. This forces greater dependency on the government -- isn't socialism grand?

[Graybeard58]

let me guess.....government pension of some sort with glorious medical benefits....

Wrong.

[CurlyDave]

First: America must cut Social Security benefits and raise taxes by 40 percent to 50 percent.

Second: Is there a brilliant microeconomic solution: ... You ... are ... not ... saving ... enough!

And just how does the first piece of advice help with the second?

Mr. Farrell must be a particular kind of moron.

[Prime Choice]

Great! Do what's right for you.

Thanks! And more power to you, FRiend. Enjoy your retirement!

[Chuckster]

OK so let me get this straight: I paid about $30K in taxes last year and you say I need to pay another $12K to $15K, right? Well, call me a dunce but I just don't see how the government confiscating $45,000 a year from me is going to help me save for my retirement.

I'll be eligible for SS benefits in five years, but I won't need it; unless of course the government decides to nick my income another thousand bucks a month as you say they must.

Explain to me again how this is going to help. Oh, I see. By confiscating my income so I cannot retire as planned, some other shlub who didn't bother to think beyond the next six pack will benefit. Now that's conservative thinking!

Everyone would be well advised to just pretend that the SS program does not exist and make other plans.

[xrp]

It doesn't weigh as much as a ton of feathers.

[Reeses]

i started saving since i was like 8

I started smoking when I was 8, so I wouldn't have to worry about it! :-)

[Iam1ru1-2]

I think the minimum wage should be $25 an hour, and all medical benefits should be paid by all employers, and a retirement fund should be mandatory for all business for their employees which a mandatory 15% should be taken out of each paycheck BEFORE TAXES, and an IRA available to all employees through their employment of which the first 5% paid by the employee would be matched by their employer, and new mothers should get 1 year paid leave, after which the father should get 1 year paid leave, and that at retirement, Gov't should provide free medical care, including all medication. Transportation should be provided by the government, if anybody at retirement age is unable to drive. Gas coupons should be provided for all retired people who have vehicles when they reach retirement age. Of course, there should be one catch. Anybody making more than $500,000 would not be eligible for any of this. All employers payment into insurance, wages, paid leave, retirement plans, IRA contributions into employee plans should be deducted from their taxable wages. Also all business audit costs should be deducted from their taxable wages. (/sarcasm>

[Henchman]

1. Social Security is NOT a retirement fund and never was.
2. People make life choices, some are good and some are bad. People should expect to reap the rewards of those decisions and not expect other to pay for them if their decisions were wrong.
3.The US was founded as and is a Capitalist System. If you don't like it, move. Canukistan is a little to the North. A budding People's Republic, I hear.
4. In a capitalist society there will always be some rich and some poor, with a large middle class. In a Socialist Society, there is a huge number of poor and the rich stole theirs from the poor.
5. You had an opportunity to get an education, skill, move if need be for a better job, and to vote. If you didn't take advantage of what the US has to offer, don't ask me to pay for it.
6. You come into this world with $-0- and leave the same way. Every thing in between is a gamble, so you might as well take a chance. If you didn't take a chance, don't blame others.
7. If your chance didn't pan out, take another chance. Remember, if at first you don't succeed, try, try, try again.
8. It's never too late.
9. Take responsibility for yourself.
10.I love retirement and I am not going to pay for yours.

[jimthewiz]

You're right. It is impossible to find a 30-40 period where the market did not far outperform the pitiful 2% return of ss.

[sitetest]

Dear Poohbah,

Well, not quite.

The long-term return on equities is about 10%. But that includes a lot of short-term volatility.

By the time someone retires, he's going to want to have a portfolio invested that will produce somewhat less volatility. Getting a total return of 8% is maybe doable.

So, the retiree takes about 4% income, and whatever's left over protects against inflation.

Which means if you want $40K per year, you need about a million bucks.

And someone who is 25 now won't be eligible for full Social Security benefits for 42 years. In that time, even modest inflation could triple or quadruple the cost of living.

Meaning, that 25 year old should really try to have a few million on which to retire.


sitetest

[cherry]

well, how then?

[longtermmemmory]

gee, friday is for soylent green.

what next duty to die centers?

(/s)

[Poohbah]

The long-term return on equities is about 10%. But that includes a lot of short-term volatility.

Simple: invest in the long-term. You'll still win out, as long as you're disciplined about your spending.

But going to a bond fund because of volatility concerns is pretty damn stupid.

And someone who is 25 now won't be eligible for full Social Security benefits for 42 years. In that time, even modest inflation could triple or quadruple the cost of living.

I kept the amounts in constant dollars.

Yeah, you wind up with a few million then-year dollars, but you're investing in now-year dollars to begin with, which means you have $500K constant-year dollars.