Author Topic: How to help non-savers see the light?  (Read 4177 times)

MVal

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How to help non-savers see the light?
« on: May 12, 2016, 02:34:47 PM »
Do you know of a good website or short video that is very basic to help someone who has never saved for retirement understand the importance of it and how it works? My good friend is in her late 50s and has never saved for retirement and I'm very concerned for her. When I asked her what she's contributing to her 401K at her new job for the year, she said, "I don't know, like $1,000?" I am so worried for her that she doesn't even know how hard she's needing to save right now and I need a very easy to understand, appealing form of media to help her understand how deep of shit she's in if she doesn't save. She seems to want to start saving, but doesn't understand how 401Ks work or anything like that at all. She's an artist and not a math person. A lot of the MMM articles are too complicated for her to start with, I think, so I'm looking for something else.

Retire-Canada

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Re: How to help non-savers see the light?
« Reply #1 on: May 12, 2016, 02:41:20 PM »
Do you know of a good website or short video that is very basic to help someone who has never saved for retirement understand the importance of it and how it works? My good friend is in her late 50s and has never saved for retirement and I'm very concerned for her. When I asked her what she's contributing to her 401K at her new job for the year, she said, "I don't know, like $1,000?" I am so worried for her that she doesn't even know how hard she's needing to save right now and I need a very easy to understand, appealing form of media to help her understand how deep of shit she's in if she doesn't save. She seems to want to start saving, but doesn't understand how 401Ks work or anything like that at all. She's an artist and not a math person. A lot of the MMM articles are too complicated for her to start with, I think, so I'm looking for something else.

I don't know about websites, but you could ask her if she's figured out her retirement benefits [SS if you are in the states and any pension income she might have] and what her retirement budget is going to look like. If she's interested in the subject you could help her work through both of those which would highlight the gap between benefits/pension and what she needs to live on that would have to come from savings or a PT job.

If she's not interested in talking about it than I'd say leave it alone. You can't save a person who isn't interested in being saved.

MVal

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Re: How to help non-savers see the light?
« Reply #2 on: May 12, 2016, 02:43:35 PM »
Do you know of a good website or short video that is very basic to help someone who has never saved for retirement understand the importance of it and how it works? My good friend is in her late 50s and has never saved for retirement and I'm very concerned for her. When I asked her what she's contributing to her 401K at her new job for the year, she said, "I don't know, like $1,000?" I am so worried for her that she doesn't even know how hard she's needing to save right now and I need a very easy to understand, appealing form of media to help her understand how deep of shit she's in if she doesn't save. She seems to want to start saving, but doesn't understand how 401Ks work or anything like that at all. She's an artist and not a math person. A lot of the MMM articles are too complicated for her to start with, I think, so I'm looking for something else.

I don't know about websites, but you could ask her if she's figured out her retirement benefits [SS if you are in the states and any pension income she might have] and what her retirement budget is going to look like. If she's interested in the subject you could help her work through both of those which would highlight the gap between benefits/pension and what she needs to live on that would have to come from savings or a PT job.

If she's not interested in talking about it than I'd say leave it alone. You can't save a person who isn't interested in being saved.

Yes, you're right about that! I know she has no clue about how much she'll spend in retirement or her SS benefits. I'll try to encourage her to start there.

Driko

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Re: How to help non-savers see the light?
« Reply #3 on: May 12, 2016, 10:40:42 PM »
Youtube has a few of them. How to Retire Early: The Shockingly Simple Math is one that is pretty basic and the math principle still applies whether you want to retire early or not.

Heckler

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Re: How to help non-savers see the light?
« Reply #4 on: May 12, 2016, 11:54:13 PM »
Late 50's  - hardly early!

We have friends who are spendypants spenders.  Her father was frugal and saved a lot, then died in his mid fifties with a pile o cash unspent.   They are determined to spent like its the last day on earth.  My point is, to each his own.  Let it be. 

Jim2001

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Re: How to help non-savers see the light?
« Reply #5 on: May 14, 2016, 12:25:14 PM »
Run her through a "simple math" case study.  It's easy to do on a white board with hypothetical numbers, or if she will share, use hers.

Assume you make $50K a year and save $1K a year. 
That means your living expenses are $49K a year.  Can we agree on that?
Let's assume you have $100K saved for retirement.
Let's also assume you qualify for $20K a year in SSI benefits. 
So, you need to find $29K a year in income to retirement because your $100K will last just over three years. 
When were you planning on retiring?

I had that "casual" conversation with a friend back around 2000 and have only talked about money once since, sometime around 2008.  She called me last fall and asked if I could come over and take a look at her 401k, because she thought it might be time to "take a look at how it was invested" i.e. rebalance.  I was shocked!  She now has a portfolio worth more than $1M.  When I asked her when she got serious about saving, she reminded me about that day in her office 15 years earlier. 

BlankCheck

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Re: How to help non-savers see the light?
« Reply #6 on: May 15, 2016, 12:58:28 AM »
Run her through a "simple math" case study.  It's easy to do on a white board with hypothetical numbers, or if she will share, use hers.

Assume you make $50K a year and save $1K a year. 
That means your living expenses are $49K a year.  Can we agree on that?
Let's assume you have $100K saved for retirement.
Let's also assume you qualify for $20K a year in SSI benefits. 
So, you need to find $29K a year in income to retirement because your $100K will last just over three years. 
When were you planning on retiring?

I had that "casual" conversation with a friend back around 2000 and have only talked about money once since, sometime around 2008.  She called me last fall and asked if I could come over and take a look at her 401k, because she thought it might be time to "take a look at how it was invested" i.e. rebalance.  I was shocked!  She now has a portfolio worth more than $1M.  When I asked her when she got serious about saving, she reminded me about that day in her office 15 years earlier.

Do you have any idea of how much she makes?  $1M is quite a stockpile in 15 years, no matter how much one saves or how well one invests.  Just curious, as I make a decent salary myself and save incessantly, and a $1M portfolio in that short a time is quite impressive.

And, wow, nice job getting her started.  You seriously changed this person's life.  I do believe there are people who have it in them to build a nest egg, but are just never taught how.  This should be a good thread.
« Last Edit: May 15, 2016, 01:01:12 AM by BlankCheck »

Heckler

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Re: How to help non-savers see the light?
« Reply #7 on: May 15, 2016, 08:46:08 AM »

Do you have any idea of how much she makes?  $1M is quite a stockpile in 15 years, no matter how much one saves or how well one invests.  Just curious, as I make a decent salary myself and save incessantly, and a $1M portfolio in that short a time is quite impressive.

And, wow, nice job getting her started.  You seriously changed this person's life.  I do believe there are people who have it in them to build a nest egg, but are just never taught how.  This should be a good thread.


http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Compound interest my friend.  15 years, 7%, $37,000 per year if you start from 0

Only $32/year if you're starting with $50 in the kitty. 
« Last Edit: May 15, 2016, 08:48:27 AM by Heckler »

BlankCheck

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Re: How to help non-savers see the light?
« Reply #8 on: May 15, 2016, 09:57:48 AM »

Do you have any idea of how much she makes?  $1M is quite a stockpile in 15 years, no matter how much one saves or how well one invests.  Just curious, as I make a decent salary myself and save incessantly, and a $1M portfolio in that short a time is quite impressive.

And, wow, nice job getting her started.  You seriously changed this person's life.  I do believe there are people who have it in them to build a nest egg, but are just never taught how.  This should be a good thread.


http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Compound interest my friend.  15 years, 7%, $37,000 per year if you start from 0

Only $32/year if you're starting with $50 in the kitty.

But where does 7% come from?  The annualized S&P return since 2000, with dividends reinvested, is just over 4%.  https://dqydj.com/sp-500-return-calculator/

To get that return, you'd have to have an AA 100% in stocks.  And while I know this is a site dedicated to frugality, $37k/yr is a lot to be able to save on a salary of $50k.  I don't think Jim2001 was saying $50k was the salary of the person in question, but that's why I was curious.  She must be making pretty decent money, it would seem.
« Last Edit: May 15, 2016, 10:00:14 AM by BlankCheck »

MustacheAndaHalf

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Re: How to help non-savers see the light?
« Reply #9 on: May 15, 2016, 04:43:33 PM »
You might combine the social security statement with "what would happen if you were 65 today, and retiring?"

For someone with only a slight interest in investing, I'd suggest "The Investment Answer" book that's only ~96 pages long.  Quick read, but packs a lot of useful information.

Jim2001

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Re: How to help non-savers see the light?
« Reply #10 on: May 19, 2016, 08:21:40 PM »

Do you have any idea of how much she makes?  $1M is quite a stockpile in 15 years, no matter how much one saves or how well one invests.  Just curious, as I make a decent salary myself and save incessantly, and a $1M portfolio in that short a time is quite impressive.

And, wow, nice job getting her started.  You seriously changed this person's life.  I do believe there are people who have it in them to build a nest egg, but are just never taught how.  This should be a good thread.

I didn't and don't know her salary in 2000, the $50K was just an example that people can relate to since we hear in the press that the average income in the US is around $54K.

When we got together last year, her salary was in the $100K ball park and her husband's is significantly less (and he keeps a separate retirement account).  I'm not sure what her starting 401K balance was in 2000, but I am pretty confident she had something. It is just a standard Fidelity 401K.  She got a 6% company match and contributed the max.  Also remember, we live in LA, so this was done in a high cost of living area and they have kids in college right now.

Cathy

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Re: How to help non-savers see the light?
« Reply #11 on: May 19, 2016, 09:26:13 PM »
...But where does 7% come from?  The annualized S&P return since 2000, with dividends reinvested, is just over 4%.  https://dqydj.com/sp-500-return-calculator/ ...

She didn't dump a lump sum into the stock market at the start of 2000 and then not contribute another dollar for 16 years. Most likely, she contributed at a regular pace over the years, perhaps even accelerating contributions as she became more accustomed to saving.
« Last Edit: May 19, 2016, 11:09:26 PM by Cathy »

Scandium

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Re: How to help non-savers see the light?
« Reply #12 on: May 20, 2016, 06:29:22 AM »
...But where does 7% come from?  The annualized S&P return since 2000, with dividends reinvested, is just over 4%.  https://dqydj.com/sp-500-return-calculator/ ...

She didn't dump a lump sum into the stock market at the start of 2000 and then not contribute another dollar for 16 years. Most likely, she contributed at a regular pace over the years, perhaps even accelerating contributions as she became more accustomed to saving.

Well, if she had $200k in 2000 and contributed $18k/year (yes I know the limits were lower then), she'd have around $1 mill now. And a  CAGR of over 10%. (Yes, somebody that just had money sitting from 2000 would have a CAGR of 4.46% (100% US).

https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&mode=2&startYear=2000&endYear=2015&initialAmount=200000&annualOperation=1&annualAdjustment=18000&inflationAdjusted=true&annualPercentage=0.0&rebalanceType=1&portfolio1=Custom&portfolio2=Custom&portfolio3=Custom&TotalStockMarket1=50&TotalStockMarket2=100&IntlStockMarket1=50

BlankCheck

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Re: How to help non-savers see the light?
« Reply #13 on: May 21, 2016, 07:09:50 PM »
Thanks Jim.  Ballpark $100k, plus a starting balance and a 6% company match definitely makes that do-able.  Good for her.

Although I guess that was actually the wrong question, as her salary doesn't matter much given the limits on how much you can put into a 401k annually.  Scandium's numbers seem to make sense.


It's amazing how few people have any interest at all in saving or investing.  At least among the people I know.  I am forever grateful to the people who helped me early on.  And in all cases, I was the one who asked them for advice.  Nobody I know has ever asked me for advice, despite the fact that they know I do pretty well.  Maybe they just think I make a ton of money and it just happily accumulates in my checking account. 

I've softly hinted at times to people that I'm willing to offer some of my experience, but nobody cares.  And I'm certainly not going to push anything on anyone.  But the utter lack of curiosity or concern that people have, at the expense of their life-long financial health, is depressing.  I wish people could have that light-bulb moment, or whatever.

stashgrower

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Re: How to help non-savers see the light?
« Reply #14 on: May 22, 2016, 12:00:34 AM »
Nice one, Jim! When people are ready to hear something, a little push can change a lot.