Author Topic: 14 years as a retirement columnist, still doesn't understand how it works  (Read 5562 times)

StockBeard

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http://www.marketwatch.com/story/what-ive-learned-over-14-years-of-covering-the-depressing-but-crucial-topic-of-retirement-2017-09-29?siteid=yhoof2&yptr=yahoo

Quote from the "gather data" section (emphasis mine):
"You could estimate, for instance, how much of your salary you have set aside or will have set aside when you retire. Or you could calculate what percent of income your assets, including Social Security, will produce in retirement. Shoot for at least 80%."

Yup. 14 years writing on the topic, still thinks it's about reaching a percentage of your work income, rather than one's expenses.
I stopped reading after that.

SnackDog

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Given the typical savings rate of his readers is around 6% and another 15% goes to the tax man, most will need about 80% of their pre-retirement income to maintain spending levels. 

Cranky

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Realistically, most people spend most of their income.

And I think that most people who believe that their expenses will magically go down after retirement are kidding themselves.

kayvent

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I read that article too the other day. Some bits were tolerable.

EarthSurfer

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Most people actually know their income, but few know their real expenses. I suspect that financial advisors focus on the income because they can get a hard number from someone's tax return or pay stub.

As others have mentioned, the typical person spends most of what they make.

Plugra

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That article was tedious.

I wish these writers would just interview a few people who managed to do it right .... people who thought about their living expenses during their younger working years and figured it out, and are now comfortably retired. There must be, I dunno, a few million such people out there.

kayvent

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Most people actually know their income, but few know their real expenses. I suspect that financial advisors focus on the income because they can get a hard number from someone's tax return or pay stub.

As others have mentioned, the typical person spends most of what they make.

This is incorrect. At least in Canada. This topic came up in my world because of the 2016 Census. Basically if you ask people their income (gross or net, doesn't matter) they tend to under-report. There is a host of theories why.




Thinking about this article gets me to question a few things. I get this with much of the financial sources I track.

The writer writes "No, Iím not retiring. But I am moving on." I have to wonder....does he not have enough money to retire or is he just working for the lols? Fourteen years as a retirement columnist for MarketWatch and other publications? If this guy is not rolling in surplus cash, I'd take his advice with a grain of salt.

I also have the same feeling with Motley Fool. There are people who have been with the company for years. Why exactly are they not retired? Why do they shutdown their portfolios that don't well and only advertise the ones that do well?
« Last Edit: October 03, 2017, 05:28:04 PM by kayvent »

Raenia

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I skimmed over the article, but the part that caught my eye was when he dismissed the 4% SWR and recommended 2% instead.  No wonder no one can afford to retire, if you need 80% of your final year's salary per year at a 2% withdrawl rate!

Dicey

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Too bad he didn't take the time to get to know us. It might have changed his perspective and even lightened his mood. Except financial gloom and doom is what greases the wheels of the retirement investment industry. They're never going to point out the happy people who are doing well, but we know who we are :-)

oldladystache

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Quote
And we know this for a fact: No 401(k) equals no retirement savings.

Wow. So I guess I'm fooling myself about being retired on my taxable investments.

NorthernBlitz

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Re: 14 years as a retirement columnist, still doesn't understand how it works
« Reply #10 on: October 04, 2017, 09:12:13 AM »
http://www.marketwatch.com/story/what-ive-learned-over-14-years-of-covering-the-depressing-but-crucial-topic-of-retirement-2017-09-29?siteid=yhoof2&yptr=yahoo

Quote from the "gather data" section (emphasis mine):
"You could estimate, for instance, how much of your salary you have set aside or will have set aside when you retire. Or you could calculate what percent of income your assets, including Social Security, will produce in retirement. Shoot for at least 80%."

Yup. 14 years writing on the topic, still thinks it's about reaching a percentage of your work income, rather than one's expenses.
I stopped reading after that.

Who knows if it's what he thinks.

He may think that this is a good rule of thumb (I bet most people don't save more than 20% of their income).
He may think that going for 80% of income is better than a very detailed analysis that has to then make big assumptions about future healthcare spending.
He may think that the vast majority of people don't have any idea what their annual spending is.
He may think that spending is the real way to go, but saying 80% of current income gets him more assets under management and higher commissions.

Quote
I skimmed over the article, but the part that caught my eye was when he dismissed the 4% SWR and recommended 2% instead.  No wonder no one can afford to retire, if you need 80% of your final year's salary per year at a 2% withdrawl rate!

2% seems very low.

I can see someone wanting to get down to 3 - 3.5% if they think that they will be living off the portfolio for 50-60 years, are very worried about health care costs, or they want to accumulate generational wealth because they are worried about job scarcity for their children / grandchildren. With a 50% savings rate and a 7% return on the portfolio, going from a SWR of 4% to 3.3% (i.e. 25x to 30x spending) takes less than two years (not that bad). Getting to 50x (SWR 2%) spending takes almost 7 years.

Suggesting 2% SWR really seems like this guy is mostly interested in securing more a$$ets under management (read: commi$$ion).
« Last Edit: October 04, 2017, 09:13:51 AM by NorthernBlitz »

Just Joe

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Re: 14 years as a retirement columnist, still doesn't understand how it works
« Reply #11 on: October 04, 2017, 10:37:09 AM »
To me articles like this are like mainstream media outlets discussing Linux. It rarely happens.

Mainstream media talking about mainstream solutions that usually come with a management pricetag. A nod to their advertising department?

Or you can go the MMM route and roll your own solutions and further adapt it over time with self-study and forum discussion.

Maybe the average journalist doesn't understand this any more than the average media consumer? Or the average consumer might not accept or appreciate roll your own solutions?

Some of the tech blogs (lite) do the same with topics like Linux. They do all sorts of articles about Windows and proprietary software solutions but seldom if ever mention that a person could switch to FOSS and Linux and do the same tasks for free with an existing computer already sitting on their desk.

Cassie

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Re: 14 years as a retirement columnist, still doesn't understand how it works
« Reply #12 on: October 04, 2017, 04:44:32 PM »
We are living on half of what we made while working. We also have a ton of fat we could cut if necessary like traveling, eating out, entertainment, cable, etc. Some expenses do go down but some go up like healthcare.

iris lily

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Re: 14 years as a retirement columnist, still doesn't understand how it works
« Reply #13 on: October 18, 2017, 08:55:21 AM »
http://www.marketwatch.com/story/what-ive-learned-over-14-years-of-covering-the-depressing-but-crucial-topic-of-retirement-2017-09-29?siteid=yhoof2&yptr=yahoo

Quote from the "gather data" section (emphasis mine):
"You could estimate, for instance, how much of your salary you have set aside or will have set aside when you retire. Or you could calculate what percent of income your assets, including Social Security, will produce in retirement. Shoot for at least 80%."

Yup. 14 years writing on the topic, still thinks it's about reaching a percentage of your work income, rather than one's expenses.
I stopped reading after that.

I agree, that is a good metric for kicking the advice to  curb. When the basic premise is wrong, not worth reading the rest of it.

There are still books about personal finance in the public library that counsel "assuming a return of 10% on your investments..."

I feel like I was out in the wilderness of low expectations  back in the day (I am old!) when I told financial people " hey, I would be happy woth 5%."
« Last Edit: October 18, 2017, 08:57:26 AM by iris lily »

iris lily

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Re: 14 years as a retirement columnist, still doesn't understand how it works
« Reply #14 on: October 18, 2017, 08:59:24 AM »
We are living on half of what we made while working. We also have a ton of fat we could cut if necessary like traveling, eating out, entertainment, cable, etc. Some expenses do go down but some go up like healthcare.

Our driving expenses have gone up in retirement.  We drive more, go more places. Other expenses have gone up, too.

Back when we were working, and we worked within a miles of our house, we didnt drive much.

Agreed that these retirement assumptions arent especially useful for those who understand their finances.

Cassie

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Re: 14 years as a retirement columnist, still doesn't understand how it works
« Reply #15 on: October 18, 2017, 11:25:25 AM »
We are driving a lot less because we live 1.5 miles from downtown so frequently walk down there for festivals, etc. WE are spending a lot more on entertainment, eating out etc because we now have the time, energy and money. Much less is spent on clothes as we rarely get dressed up.

MrsPete

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Re: 14 years as a retirement columnist, still doesn't understand how it works
« Reply #16 on: October 22, 2017, 08:26:59 AM »
He describes his job as "the most depressing job in America".  Huh?  He thinks writing about retirement is more depressing than putting down unwanted animals?  worse than telling mothers their sons have died in Afghanistan?  more depressing than working with recidivist prisoners?  or does he mean it's harder than manual labor -- maybe slaughtering chickens?  Clearly he doesn't have his finger on the pulse of the American people? 

Writing about retirement could be a great job!  Shoot, you and I are doing it for free on this site.  Aside from the basic-basics like start saving early or the 4% rule, he could interview people who are either doing really well or really poorly -- don't we all like to read case studies?  He could interview people who are making unusual choices; for example, people who are living in RVs or people who've gone overseas.  He could investigate ways to streamline your expenses in retirement.  He could write about the most retirement-friendly cities in which to live.  He could write about whether sharing one car in retirement is realistic.  He could write about senior citizen discounts.  He could write about free /low cost entertainment.  He could write about how to travel inexpensively.  He could write about how to set up your estate so as to give your kids as much /the government as little as possible.  He could write about how to move in with your kids, while keeping everyone happy.  He could write about traveling with grandchildren.  He could write about keeping yourself in good health and paying for health care (isn't that pretty much everyone's biggest retirement concern?).  SO MANY THINGS he could write about that aren't just nobody's saving

Dude, the problem isn't your job.  It's that you're not a very good journalist. 

Realistically, most people spend most of their income.

And I think that most people who believe that their expenses will magically go down after retirement are kidding themselves.
Agree with the first. 
Eh, not so much the second. 

Quote
And we know this for a fact: No 401(k) equals no retirement savings.

Wow. So I guess I'm fooling myself about being retired on my taxable investments.
Yeah, that was the second thing that really caught my eye /made me say, "Is this guy really a retirement expert?"  I agree that 401Ks are an easy way to save (because once you set it up, it's automatic), but are they the only game in town?  No way.

Just Joe

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Re: 14 years as a retirement columnist, still doesn't understand how it works
« Reply #17 on: October 22, 2017, 05:53:53 PM »
Writing about retirement when he may not be able to retire might be depressing... ;)