The New Reality...is actually to blame someone else.

[accolay]

Came across another "woe is me, it's not my fault" money article about broke retirees. I feel bad for them, and for some I'm sure it really isn't their fault, but I suspect for a lot of them they started to think about their retirement finances the day before they retired.

http://www.msn.com/en-us/money/retirement/the-new-reality-of-old-age-in-america/ar-AAsBlPT?li=BBnb7Kz&ocid=mailsignout

For 21 years....She said she paid regularly into a 401(k) account that, at one point, was worth more than $40,000.By the time she left the company in 2008, however, its value had fallen to $2,000.Molnar said the company’s owner thought he was doing his 100 employees a favor by managing their retirement accounts.

So many problems, I don't know where to start.

[FIREySkyline]

After 21 years she at one point made it to $40k? Lol.

[PhrugalPhan]

Bad stories like this from the Washington Post are now the norm, not the exception.  That paper has gone downhill so far it gets by on name recognition only any more.  And yes, I used to happy subscribe for years, but its been a number of years since I bothered.

[joonifloofeefloo]

I can see where they're coming from.

When I listen to my parents -wise, frugal, conscientious, smart, careful people- I can absolutely understand how they were indeed duped. "A house is an investment... Buy individual stocks... Hand your finances over to an investment expert..." It's a wonder to me anyone ended up with anything!

Our generations are much luckier. We have more/different information -from a much wider range of people and experiences (internet!)- and can make decisions with more knowledge. We're not smarter; we just have more info than previous generations did, not to mention more opportunities.

[wenchsenior]

I can see where they're coming from.

When I listen to my parents -wise, frugal, conscientious, smart, careful people- I can absolutely understand how they were indeed duped. "A house is an investment... Buy individual stocks... Hand your finances over to an investment expert..." It's a wonder to me anyone ended up with anything!

Our generations are much luckier. We have more/different information -from a much wider range of people and experiences (internet!)- and can make decisions with more knowledge. We're not smarter; we just have more info than previous generations did, not to mention more opportunities.

Yes, I think Millennials and younger take for granted the incredible amount of info easily available on the internet today, and the multiple sites and sources that you can use to cross check it.  Most people learn basic finance in their 20s and 30s, which is when they are working, having kids, and buying houses (or used to be).  In my 20s in the 1990s, the internet was brand new, still on dial up, and financial info was only available through gate keepers such as brokers (self interested) or financial planners (who you had to investigate, but that wasn't easy either).  You could certainly read basic finance books, which I did, but if you weren't a big reader, you might have been susceptible to bad advice from anyone....family, co workers, friends, sales people, etc. 

I have a lot of sympathy.  I look at my older relatives, many of whom ran successful business and made very good money...and even they had some strange misconceptions about the mathematically best ways to invest.  These were not dumb people.

[Indexer]

For 21 years....She said she paid regularly into a 401(k) account that, at one point, was worth more than $40,000.By the time she left the company in 2008, however, its value had fallen to $2,000.Molnar said the company’s owner thought he was doing his 100 employees a favor by managing their retirement accounts.

I don't think we are getting the whole story here. From 40k to 2k? The owner of a company doesn't normally manage each person's 401k. That is... wow... never heard of that before. The owner might have worked with the 401k provider to pick the available investment options, but it's still up to the employees to pick their options. I don't know of a 401k provider who would let an owner do that. The legal liability on the owner and the 401k provider would be insane! In addition, 401ks normally have mutual funds as investments. Mutual funds aren't perfect, but they are diversified. They don't normally drop 95%. The only way I see that happening is if she invested 100% in company stock; happened to people with Enron, Wachovia, etc. However, this is a daycare with 100 employees. I doubt they have stock.

What probably happened is that she took out the money. I spent it all doesn't sound as good as the manager lost it all.

[ETwagon]

Commenting on this very Washington Post article...

http://livingstingy.blogspot.com/2017/09/should-we-reward-failure.html

[MrsPete]

Yes, I think Millennials and younger take for granted the incredible amount of info easily available on the internet today, and the multiple sites and sources that you can use to cross check it. 

I have to disagree.  Sure today's young people have instant /easy access to information to help them make good financial choices -- but when I was younger and realized that I needed to learn all I could about money, I turned to the library.  I read everything I could on frugal living, investments, budgeting, couponing, real estate, pensions, Social Security and more.  Was it as convenient as laying on my own sofa clicking from website to website?  Of course not, but it was available. 

[MrsPete]

I don't think we are getting the whole story here. From 40k to 2k? The owner of a company doesn't normally manage each person's 401k. That is... wow... never heard of that before  ... What probably happened is that she took out the money. I spent it all doesn't sound as good as the manager lost it all.

I thought the same thing.  Even if she didn't, how do you manage to deposit money for 21 years and only have 40,000?  That means she was depositing about $100/month or $25/week.  How could anyone expect to retire on that small investment? 

[koshtra]

Well, the other thing about people retiring now is that during their formative years the Democrats had what looked like a permanent majority in Congress, even the Republican Party was to the left of the present Democratic Party (economically speaking), and the general feeling was that it was just a matter of time until we had a country like Denmark, where the taxes are high and it's hard to save much money, but you really don't need to save money, because you're going to be looked after. Work would just be for meeting your present living expenses and buying fun stuff. I'm at the tail-end of that generation, and I certainly formed that impression. Saving for retirement was a quaint thing people did before WWII. It wasn't something modern people did.

[joonifloofeefloo]

I have to disagree.  Sure today's young people have instant /easy access to information to help them make good financial choices -- but when I was younger and realized that I needed to learn all I could about money, I turned to the library.  I read everything I could on frugal living, investments, budgeting, couponing, real estate, pensions, Social Security and more.  Was it as convenient as laying on my own sofa clicking from website to website?  Of course not, but it was available.

First we'd have to realize (as you note) that we need to learn all we can about money. Not everyone realizes this. I didn't. Like my parents, I bought into what was being fed to me at school, in our neighbourhood, and through our local newspaper:

1. To get wealthy, become a doctor a lawyer. When you do, spend big.
2. Otherwise, be very frugal so you can get by from month to month for the rest of your life.

Since we weren't doctors or lawyers, we were experts at penny-pinching, but that doesn't get one very far. My parents' generation and mine, in our culture, had no exposure to ideas like index investing, that lower-income people could also invest (vs save), that housing markets stall and crash, etc (where we lived, the oldest house was only 100 years old, and my parents had been only a few years in the country when they were "taught" about its real estate).

I don't blame anyone that doesn't have the lightbulb go on as a result of cultural information + personal epiphany.

I actually did stumble across the business section of my library around age 18, and was captivated by presentations on ethics and entrepreneurship (both of which I took to heart). I read a lot , but I didn't find the library books on investing til I was 33...and even then only because an adviser directed me to that section. Facebook feeds, international news coverage, etc, blow a person's knowledge base wide.

All of us here are lucky for what we know.

[Paul der Krake]

Bad stories like this from the Washington Post are now the norm, not the exception.  That paper has gone downhill so far it gets by on name recognition only any more.  And yes, I used to happy subscribe for years, but its been a number of years since I bothered.

Strongly disagree. The Washington Post is a great paper and the current political environment has only increased its investigative power. They are up there with the New York Times and the Wall Street Journal.

It's a story that speaks of an ailment touching millions of Americans. Regardless of blame, which this article stops well short of assigning to anyone, it's important news.

[former player]

I can see where they're coming from.

When I listen to my parents -wise, frugal, conscientious, smart, careful people- I can absolutely understand how they were indeed duped. "A house is an investment... Buy individual stocks... Hand your finances over to an investment expert..." It's a wonder to me anyone ended up with anything!

Our generations are much luckier. We have more/different information -from a much wider range of people and experiences (internet!)- and can make decisions with more knowledge. We're not smarter; we just have more info than previous generations did, not to mention more opportunities.

Agreed.  Everyone on this forum has education and information way above the norm even for today, let alone the past.

And, lets be clear (although unpopular): there is a significant proportion of people in almost any population that have below average intelligence and education and don't have the time, energy or capability (whether intellectual or otherwise) to sort out the wheat from the chaff on investments and pensions.  They should not be left to the mercy of a self-interested financial sector who will legally rob them blind if given the opportunity. 

[Laura33]

ITA with the limited perspectives in some of the comments here.  The people we are talking about appear to be older Boomers, born post-war.  For many of their formative years, the economy was booming, and the ethos was you worked hard and kept your head down and put a little aside for emergencies and such, and you'd be taken care of with pension and/or SS.  If you wanted to invest, you didn't have any choice but to work with a broker, who recommended and chose stocks for you.  But commissions were very very large (I remember my mom paying something like $600 once), so really only the rich invested.  The MC put their money in CDs and savings bonds.  But interest rates were pretty high (compared to the last @15-20 years), so they could get by ok.  And the whole idea of personal finance being an area with a thousand different authors was nonexistent; you could go to the library and find a few, but since there was so much reliance on pensions and SS, the idea of "personal" finance didn't even really exist.

For many of these folks, the 401(k) wasn't even an option for most of their lives.  I am 15-20 years behind the folks in the article, and I didn't even have a 401(k) as an option until '94 (and I've never had a match).  And the choices?  Hah!  The best were standard mutual funds with 1-2% fees (because until maybe the past decade almost no one was paying attention to all the "hidden" fees and the impact of expense ratios).  The worst was the one company that required me to put all my money in company stock -- again, not exactly outside the norm; it wasn't until post-Enron that there was sufficient public pressure to do away with that.

What happened to these folks is that the world changed, and they didn't notice or adjust.  Sure, some saved (my mom did), but that was largely viewed as an extra margin of safety.  The generation behind them (me) grew up watching pensions disappear and constant politicking over SS cuts and realized we couldn't rely on anyone but ourselves; but these guys are the ones whose pensions were being cut or who were being laid off when they were already 50 and couldn't do much about it.  At the same time, interest rates dropped dramatically and for over a decade -- great for people like me, who were young professionals when direct investing through mutual funds became more widespread and cheaper, but horribly damaging to people who were raised to believe in the "safety" of bonds and CDs.  And SS benefits were constantly tinkered with, again over decades, through changing standard retirement date, taxing benefits in some cases, and messing with the inflation adjustment formula.  The result is as the article shows:  benefit levels have not come even close to keeping up with the "real" cost of living for retirees.

Were there things these guys could have done differently?  Of course - hindsight is always 20/20, and it's easy to judge them by today's standards and conclude they were stupid and deserve to lie in the bed they made.  All I can say is that these guys really don't sound too different from my grandparents and great-grandparents; my relatives were just lucky enough to live in an era where pensions and SS were enough to live in reasonable comfort and security, and having a few CDs and bonds on the side threw of a nice bonus of cash for the occasional extra.

[joonifloofeefloo]

...and don't have the time, energy or capability (whether intellectual or otherwise) to sort out the wheat from the chaff on investments and pensions.

Yes, I was thinking later, too: As if the parents I knew -each working and raising 4 to 10 children- had time and energy to ponder and sort through the developing financial concerns and options, lol! The one I knew that did give it a go lost each round, to those who did have time to strategize how to steal from trusting folks.

[Michael in ABQ]

ITA with the limited perspectives in some of the comments here.  The people we are talking about appear to be older Boomers, born post-war.  For many of their formative years, the economy was booming, and the ethos was you worked hard and kept your head down and put a little aside for emergencies and such, and you'd be taken care of with pension and/or SS.  If you wanted to invest, you didn't have any choice but to work with a broker, who recommended and chose stocks for you.  But commissions were very very large (I remember my mom paying something like $600 once), so really only the rich invested.  The MC put their money in CDs and savings bonds.  But interest rates were pretty high (compared to the last @15-20 years), so they could get by ok.  And the whole idea of personal finance being an area with a thousand different authors was nonexistent; you could go to the library and find a few, but since there was so much reliance on pensions and SS, the idea of "personal" finance didn't even really exist.

For many of these folks, the 401(k) wasn't even an option for most of their lives.  I am 15-20 years behind the folks in the article, and I didn't even have a 401(k) as an option until '94 (and I've never had a match).  And the choices?  Hah!  The best were standard mutual funds with 1-2% fees (because until maybe the past decade almost no one was paying attention to all the "hidden" fees and the impact of expense ratios).  The worst was the one company that required me to put all my money in company stock -- again, not exactly outside the norm; it wasn't until post-Enron that there was sufficient public pressure to do away with that.

What happened to these folks is that the world changed, and they didn't notice or adjust.  Sure, some saved (my mom did), but that was largely viewed as an extra margin of safety.  The generation behind them (me) grew up watching pensions disappear and constant politicking over SS cuts and realized we couldn't rely on anyone but ourselves; but these guys are the ones whose pensions were being cut or who were being laid off when they were already 50 and couldn't do much about it.  At the same time, interest rates dropped dramatically and for over a decade -- great for people like me, who were young professionals when direct investing through mutual funds became more widespread and cheaper, but horribly damaging to people who were raised to believe in the "safety" of bonds and CDs.  And SS benefits were constantly tinkered with, again over decades, through changing standard retirement date, taxing benefits in some cases, and messing with the inflation adjustment formula.  The result is as the article shows:  benefit levels have not come even close to keeping up with the "real" cost of living for retirees.

Were there things these guys could have done differently?  Of course - hindsight is always 20/20, and it's easy to judge them by today's standards and conclude they were stupid and deserve to lie in the bed they made.  All I can say is that these guys really don't sound too different from my grandparents and great-grandparents; my relatives were just lucky enough to live in an era where pensions and SS were enough to live in reasonable comfort and security, and having a few CDs and bonds on the side threw of a nice bonus of cash for the occasional extra.

I look at my parents who have been retired for a few years, they represent the oldest of the baby boomers (my dad doesn't quite make the cutoff technically). Both worked pretty solid middle-class jobs, my dad a blue-collar manufacturing job and my mom a white-collar office job. When they finally retired in their 60s I think their total savings, less home equity was only about $150-200k. Their home has gone up from $32,000 when they bought it in 1978 to easily over $300,000 today based on what some houses down the street have sold for recently (booming Portland, OR area) and most of that is equity. I remember in the last 90s my mom complaining about how the CEO of her company was selling his stock and telling everyone how great the company was while the share priced dropped. Meanwhile, my mom and thousands of her coworkers were restricted from selling their company stock and lost 50-75% in a year or two. One of her coworkers planned to retire and was counting on his company stock which was worth a few hundred thousand. By the time he was finally allowed to sell it the share price had gone from the $30s to single-digits, wiping out the equivalent of a decade or two of savings. She had a pension but took the lump sum at retirement instead and she didn't trust the company not to go under or find some way to screw it up over the next few decades.

They're both getting SS now and doing ok. They've got enough money to do some travel and my dad can still tinker around with his couple of classic cars (those are probably worth close to $100k themselves these days). However, had they done some of the things that seem almost second nature to me they probably could have retired with twice what they ended up with. Those of us who are in our 20s and 30s look at Enron and wonder how people could have almost their entire nest egg in a single company stock. We don't realize that was considered acceptable at the time and in many cases might have been the only option available. We're lucky to have the benefit of hindsight.

[koshtra]

Another thing? Inflation. It hit 13% when I was in my formative years. Planning ahead seemed like a chump's game: hoarded money simply dissolved, and you wanted to borrow as much money as you could -- it was worth a lot more now than it would be when you had to pay it back.

It was only a few years, but it left a deep impression on a lot of us.

That said, of course there were some shrewd, frugal people who made bank. My dad was one of them, a proto-Mustachian to whom I'm deeply grateful every day... but he was definitely a queer duck, out of step with the times: people made fun of his beater cars and his rental houses, bought cheap and fixed up on weekends. Now they wonder how a dirt poor kid who worked as a high school and community college science teacher can afford to have a nice house on the hill and vacations in Hawaii and be helping his grandkids through college... It's not very mysterious, viewed close up. But it took bucking the zeitgeist.

[joonifloofeefloo]

Yeah, there are always early adopters, outliers, lucky ones...folks that stumble upon info earlier than the majority... That doesn't make the rest stupid, lazy, etc.

[wenchsenior]

Yes, I think Millennials and younger take for granted the incredible amount of info easily available on the internet today, and the multiple sites and sources that you can use to cross check it. 

I have to disagree.  Sure today's young people have instant /easy access to information to help them make good financial choices -- but when I was younger and realized that I needed to learn all I could about money, I turned to the library.  I read everything I could on frugal living, investments, budgeting, couponing, real estate, pensions, Social Security and more.  Was it as convenient as laying on my own sofa clicking from website to website?  Of course not, but it was available.

I did actually say that in my post.  And I learned through reading books, just as you did.  But then...I was a 'reader' by personality inclination.  You'd be surprised how many people either can't or just don't absorb info well through reading.  Not everyone learns the same way, nor does everyone assign the same degree of accuracy or trust to all info sources.   

 My father and several of his brothers, and their father, and his father, were all  highly successful business men who amassed a fair amount of inter-generational wealth.  I doubt most of them ever cracked a book after they were forced to in college. None were readers, and my father struggles to stay focused on anything longer than a newspaper article.  All of them were taught to go to 'experts' (ie brokers) because there were too many conflicting written sources.  All of them grew up before index funds, and had the mentality that the stock market was a casino, and even though I've had many many convos with my father about looking for low fee investments that track the market, he continues to believe what he grew up learning.

Again, these are not dumb people. They are successful business people with college degrees, who don't like to read, and very likely can't easily retain info from reading.  For those of us who read constantly, this seems weird, but I don't think it is uncommon.

[MrsPete]

I have to disagree.  Sure today's young people have instant /easy access to information to help them make good financial choices -- but when I was younger and realized that I needed to learn all I could about money, I turned to the library.  I read everything I could on frugal living, investments, budgeting, couponing, real estate, pensions, Social Security and more.  Was it as convenient as laying on my own sofa clicking from website to website?  Of course not, but it was available.

First we'd have to realize (as you note) that we need to learn all we can about money. Not everyone realizes this. I didn't. Like my parents, I bought into what was being fed to me at school, in our neighbourhood, and through our local newspaper:

1. To get wealthy, become a doctor a lawyer. When you do, spend big.
2. Otherwise, be very frugal so you can get by from month to month for the rest of your life.

Since we weren't doctors or lawyers, we were experts at penny-pinching, but that doesn't get one very far. My parents' generation and mine, in our culture, had no exposure to ideas like index investing, that lower-income people could also invest (vs save), that housing markets stall and crash, etc (where we lived, the oldest house was only 100 years old, and my parents had been only a few years in the country when they were "taught" about its real estate).

I don't blame anyone that doesn't have the lightbulb go on as a result of cultural information + personal epiphany.

I actually did stumble across the business section of my library around age 18, and was captivated by presentations on ethics and entrepreneurship (both of which I took to heart). I read a lot , but I didn't find the library books on investing til I was 33...and even then only because an adviser directed me to that section. Facebook feeds, international news coverage, etc, blow a person's knowledge base wide.

All of us here are lucky for what we know.

Disagree.  When I was a kid, I realized that my grandparents no longer worked /that they lived off investments and Social Security.  I saw people at church and in the community who were elderly and no longer worked.  I saw that some of them were comfortable, while others struggled.  I understood that I would one day work and save for my own elderly years (at that point I had no concept of retiring early).  When I started working, I at first questioned the Social Security deductions, but I quickly caught on -- and I sought out information to figure out just where all that money was going.  When I started my first professional job, I read all the materials given to me and understood 401Ks. 

It's not luck.  It's paying attention. 

[MrsPete]

And, lets be clear (although unpopular): there is a significant proportion of people in almost any population that have below average intelligence and education and don't have the time, energy or capability (whether intellectual or otherwise) to sort out the wheat from the chaff on investments and pensions.  They should not be left to the mercy of a self-interested financial sector who will legally rob them blind if given the opportunity.

Now that's true.  Not to disparage them, but I have about half a dozen kids in my current senior class who are genuinely dumb as rocks.  I can see them working hard at physical labor jobs, but they are genuinely not capable of long-term planning for retirement.  However, to continue to say things that are true-but-unpopular, I don't think it's going to be a real problem for them:  They are equally uninformed about their own health and safety, and I don't see them living past middle age. 

Without taking away their rights to life, liberty and the pursuit of happiness, how can society protect them ... from themselves? 

[MrsPete]

... I doubt most of them ever cracked a book after they were forced to in college. None were readers ... taught to go to 'experts' (ie brokers) because there were too many conflicting written sources ... Again, these are not dumb people ...

But you're saying they knew that they should seek out information; they just chose not to find it in written form.  They were not unaware, and -- if pushed -- they were aware that the material was aware in written form.  They were not without information. 

[joonifloofeefloo]

It's not luck.  It's paying attention.

I'm saying we're lucky, too, that we noticed, that this is what our brains happened to latch onto, to pay attention to early enough in life.

My stomach turns when people regard their financial security as self-made, as a result of being "better than" the person standing next to them, rather than as a happy accident of latching. (And I understand your stomach may well turn when I refer to all of us here as lucky for tuning in in time!)

What I naturally paid attention to when I was young was things like poverty in hard-working people, so in my teens I moved full-time to developing a program to ease that in my community. There I noticed the lack of physical care and loneliness in the seniors around me, so I took up [low paying] senior-care work. Then I noticed the laws that sabotaged people who were helping each other, so I worked to change some of those. And so on.

I wasn't not paying attention; quite the opposite. I wasn't stupid or lazy, etc. I was paying attention, and working hard, just like my parents and the neighbours of their generation. Just none of us stumbled upon this "excessive squirrelling" piece.

[LiveLean]

Not sure I buy the arguments here about intelligence and education and how/what people read as essential for building wealth.

I have a 76-year-old uncle with an 8th grade education who is an auto mechanic and the handiest man alive. I don't think I've ever seen him read anything other than the occasional newspaper. But he invests most everything he makes into rental properties and probably has more than a dozen at this point. He built his current house on nights and weekends throughout the 1980s -- no subs; he did it all. He's never had a mortgage or car payment or any other debt. He's owned hundreds of cars that he's bought at auctions, fixed and driven for a while, then sold for a profit. He's still working hard because he loves what he does and is incapable of sitting still. When he visits, he finds something in my house to fix or upgrade. (I wish he visited more often.)  I'm guessing when he dies 20 years from now he'll leave a massive estate, though aside from a motorcycle collection he has no trappings of wealth.

For all of these Washington Post woe-is-me stories, I'm guessing there are quite a few people like my uncle who, like folks of previous generations, did not rely on an employer or the government to care for them at any point.

[wenchsenior]

... I doubt most of them ever cracked a book after they were forced to in college. None were readers ... taught to go to 'experts' (ie brokers) because there were too many conflicting written sources ... Again, these are not dumb people ...

But you're saying they knew that they should seek out information; they just chose not to find it in written form.  They were not unaware, and -- if pushed -- they were aware that the material was aware in written form.  They were not without information.

Yes, they did.  My point was, people start from different places in terms of raw intelligence, personality, inclination, learning styles, what early information they absorb about money and how to manage it.  My father's family all did ok despite not perhaps always learning the optimal info in the optimal way.  My mother's side came  from a blue-collar working class family, with a union job and a small pension.  They were frugal, but they had very little left over, so the priority was always to pay off or not go into debt and THEN to worry about saving for a rainy day.  "Investing" wasn't even on their radar.  That was something you did if you already had money, not something yuou did to make money.  A lot of low income people absorb that mentality in their formative years, which is hard to break out of.

My husband is the same way.  He came from poverty.  He never heard about IRAs or 401Ks or investing, and his family didn't work jobs that offered them most of the time.  He thought 'investing' was stock-picking, which he assumed only financial experts did, and he would never be a financial expert so it wasn't his to know.  He didn't KNOW any people who saved for retirement until he attended college (after a stint in the blue collar working world and the military).  Even now, decades later, I manage our money because he has anxiety related to it, and also a feeling that it isn't 'real'.  Btw, he's now a scientist with multiple advanced degrees. 

Early conditioning, even in intelligent people, is hard to overcome.  And half the country's citizens are below-average intelligence.

[ixtap]

In my experience, people who did not seek out information in libraries do not seek out information on the internet. They prefer kat videos and griping.

[pbkmaine]

Having worked as a financial planner for many years, I can tell you that there’s a lot of magical thinking out there. They will get an inheritance. Or they will downsize and use home equity. Or the stock market will return 25% per year forever. Something will happen that will fix everything, so they won’t worry about it today.

[wenchsenior]

Not sure I buy the arguments here about intelligence and education and how/what people read as essential for building wealth.

I have a 76-year-old uncle with an 8th grade education who is an auto mechanic and the handiest man alive. I don't think I've ever seen him read anything other than the occasional newspaper. But he invests most everything he makes into rental properties and probably has more than a dozen at this point. He built his current house on nights and weekends throughout the 1980s -- no subs; he did it all. He's never had a mortgage or car payment or any other debt. He's owned hundreds of cars that he's bought at auctions, fixed and driven for a while, then sold for a profit. He's still working hard because he loves what he does and is incapable of sitting still. When he visits, he finds something in my house to fix or upgrade. (I wish he visited more often.)  I'm guessing when he dies 20 years from now he'll leave a massive estate, though aside from a motorcycle collection he has no trappings of wealth.

For all of these Washington Post woe-is-me stories, I'm guessing there are quite a few people like my uncle who, like folks of previous generations, did not rely on an employer or the government to care for them at any point.

I agree. It helps, but there are many traits and experiences that go into success in any given area of life, not just financial.   

It helps to think of hobbies or careers that you don't have any interest in or aptitude for, and turn the situation around on yourself for comparison.  E.g., I don't have the traits or inclination or upbringing to be a 'gearhead'.  Cars weren't of interest to my family, except as raw transportation.  I don't think in terms of spatial relationships.   I'm not naturally attracted to physics or engineering or electronics as a discipline, and found physics a challenge in HS and college.  I wasn't exposed to any gearheads growing up, though I was exposed to lots of nice cars.  I'm not attracted to the 'sexiness' of cars or machines in general, which might help me overcome my other limitations.  Etc etc. 

Now, if I HAD to be a gearhead to survive, I would (eventually) have attempted to learn to be one. But I would have done it grudgingly, unhappily, and with little confidence.  Best case scenario, I would have succeeded in my first modest attempts to fix my first car, gained a bit of confidence, and not been so put off to attempt the next task.  But it is also possibly I would always remain subpar at it, and uninterested, and always been inclined to avoid it unless forced. 

[former player]

Not sure I buy the arguments here about intelligence and education and how/what people read as essential for building wealth.

I have a 76-year-old uncle with an 8th grade education who is an auto mechanic and the handiest man alive. I don't think I've ever seen him read anything other than the occasional newspaper. But he invests most everything he makes into rental properties and probably has more than a dozen at this point. He built his current house on nights and weekends throughout the 1980s -- no subs; he did it all. He's never had a mortgage or car payment or any other debt. He's owned hundreds of cars that he's bought at auctions, fixed and driven for a while, then sold for a profit. He's still working hard because he loves what he does and is incapable of sitting still. When he visits, he finds something in my house to fix or upgrade. (I wish he visited more often.)  I'm guessing when he dies 20 years from now he'll leave a massive estate, though aside from a motorcycle collection he has no trappings of wealth.

For all of these Washington Post woe-is-me stories, I'm guessing there are quite a few people like my uncle who, like folks of previous generations, did not rely on an employer or the government to care for them at any point.

Everything you say about your uncle suggests to me that despite the 8th grade education (which is not that uncommon for people of his age even in developed countries) he has a highly developed applied intelligence (successful, self-starting auto mechanic requires considerable problem-solving skills on top of the basic and not-so-basic levels of knowledge), is able to apply that intelligence to more than one specialised field (built his house as well as all the mechanicking) and has worked hard.  Your high regard for him comes through very clearly and he sounds pretty special to me too.

[FI4good]

Lets not be too harsh on the oldies, in the Uk there was no way to invest in the stock market unless you had a large lump sum to invest in the 70's most brokers had a capital barrier below which it "wasn't worth their bother"

Endowment policies sold by assurance firms with mortgages would probably be most peoples exposure to the markets.   

The "big bang" happened in 1984 after legislation in 83' the competition started opening doors for normal people to own stocks , i seem to remember it was telephone only when i first started trading in 1992 and you got straight through to someone in the london exchange on the dealing floor.

Eventually you could buy shares over the counter in a bank in about 1995 and the certificates would be posted to you or held electronically. I can't quite remember when online dealing in the UK came along as i was drunk for a lot of 1997 through 2011 .

Remember when judging the oldies there were a lot of barriers and capital requirements before plebs like me were allowed access to "a rich mans game" with some that mindset has stuck .

Obviously the USA has always been more financially liberal , it'd be interesting to find out how things were there for every day folk .

[marty998]

Before the days of cheap online stockbrokers (the first one here - Commsec - only started in 1997) the old stockbrokers were charging 1% for brokerage, and yeah, you'd have to call them up and ten they'd allocate you into IPOs as well where they'd earn up to 4% in placement fees (some still do).

Hitting you with 1% on the way in and 1% on the way out on every trade, which the brokers recommended you trade often, was really the only option.

How quickly times have changed.

[scottish]

I started in the '80s.    Back then the way to go was mutual funds.   Everything was very stacked against the small investor.   In the 90's discount brokerages became popular.   I bought one of the first ETFs on the Toronto stock exchange (tracking the TSE60), but I had no real idea of its significance.

The notion of beating the market was common, and not viewed as a sales pitch by a financial manager.    Books like 'A Random Walk Down Wall Street' were viewed as questionable at best and regularly mocked by businessmen such as Warren Buffet.

The internet changed everything, but it was still hard to get good advice in the 90's.   I can completely understand how someone from my generation with a failed pension plan, or no pension plan would be in deep trouble today.

The only reason I did ok was that I understood exponential growth curves and I insisted that there must be some way to take advantage of them as a small investor.   It took 15 years to get to 250K, which included the experience of failed mutual funds (first hand experience of survivor bias), bad stock advice (China Noble anyone?), and Gordon Pape.    After that it became easier.   Especially post-Gordon Pape.  :-)  (Gordon Pape used to annually publish a mutual funds buyers guide.   Anyone remember that?)

[Debts_of_Despair]

Meatloaf?  In a Crock-Pot?!  That's when you've really hit rock bottom.

[Blonde Lawyer]

No matter how frugal and better off we all are, we need to pay attention to stories like these because they will impact us.  This will shape the economy - the job market, wages, the housing market, healthcare.  Also, what tolerance do we have to seeing our family and our neighbors suffer.  Will you let your parents eat cat food? If not, these issues have to be part of our long term planning too. 

Doing divorce law is interesting.  It's a small part of my practice but I've had maybe 10 cases so far.  TWO were doing well financially and prepared for retirement pre divorce.  Another two had possible pensions that would fill in for their lack of savings so they might have been okay too.  The other 6 - paycheck to paycheck.  Maybe $10k in savings that would be eaten by their divorce.  These people were all in their 40s+ too.

It's going to be our problem, like it or not.

[Imma]

Not sure I buy the arguments here about intelligence and education and how/what people read as essential for building wealth.

I have a 76-year-old uncle with an 8th grade education who is an auto mechanic and the handiest man alive. I don't think I've ever seen him read anything other than the occasional newspaper. But he invests most everything he makes into rental properties and probably has more than a dozen at this point. He built his current house on nights and weekends throughout the 1980s -- no subs; he did it all. He's never had a mortgage or car payment or any other debt. He's owned hundreds of cars that he's bought at auctions, fixed and driven for a while, then sold for a profit. He's still working hard because he loves what he does and is incapable of sitting still. When he visits, he finds something in my house to fix or upgrade. (I wish he visited more often.)  I'm guessing when he dies 20 years from now he'll leave a massive estate, though aside from a motorcycle collection he has no trappings of wealth.

For all of these Washington Post woe-is-me stories, I'm guessing there are quite a few people like my uncle who, like folks of previous generations, did not rely on an employer or the government to care for them at any point.

I'm not from the US, but this story reminds me how my ancestors would provide for themselves back in the days (pre-1970s). They were all subsistence farmers or blue collar factory workers. They were working a lot, poor, and providing for lots of kids. Their pension plan was generally to buy a house or a small farm with a small mortgage and pay it off. Once you're retired, you move in with one of your children and rent out the house, or one of the kids takes over the farm and you live there for free until your death. I'm guessing this was common everywhere around the world until about 50 years ago. Often, the kid that had the 'burden' of the parents living with them would get a larger share of the inheritance. Eldery people lived in poverty and were completely dependent on their children, but at least they owned property. If they had the opportunity to save a little bit more, they would maybe buy a second property or put some money or gold under the matrass. No one trusted banks in those days and they'd never heard of stocks. Middle class people might have bought government bonds, but my ancestors were barely able to read and write. 

My parents were boomers and they grew up in a completely different world than their parents did. They trusted the companies they worked at for decades would provide their pensions, together with the government. Many company pension schemes have been stripped down over the years. Our equivalent of social security is much lower than it was a couple of decades ago and the age you can start claiming it is rising. My mum's a younger boomer, she's around 60. She will get a lot less money in retirement than she expected. Back when she started to work, her company pension scheme would allow her to retire at 60 and she would get social security at 65. Now both won't start until 67. Back in the days, married women automatically contributed less to their company scheme because they'd profit from their husbands pensions. My parents divorced long ago. When she married and bought her first house, inflation and interest % were double digits and paying off a mortgage was seen as stupid. She's starting to realise now that paying off is much more interesting in this day and age, but by now it's too late. She'll have a mortgage until she's 85.

My mother was always frugal and works in finance, but it was hard for her to adapt to this new era. I don't think you can blame people for that. My in-laws were much worse: they never had any savings at all because they thought government and the company they spent  their entire career working for would provide for them. They are a bit older now and they are poor and will always be poor. So my mum isn't actually that bad off.

I was sceptical of this eternal mortgage debt even before it was fashionable (as a clever know-it-all teenager who ran the numbers) but back then I was told 'we'll see when you are an adult, you'll understand then'. I came of age in 2008 so that understanding never came. They still think I'm a bit silly to want to be completely debt free: mortgage debt isn't a real debt like credit card debt to them. 

[StarBright]

For 21 years....She said she paid regularly into a 401(k) account that, at one point, was worth more than $40,000.By the time she left the company in 2008, however, its value had fallen to $2,000.Molnar said the company’s owner thought he was doing his 100 employees a favor by managing their retirement accounts.

I don't think we are getting the whole story here. From 40k to 2k? The owner of a company doesn't normally manage each person's 401k. That is... wow... never heard of that before.

My boss holds our money and tries to time the market for us (guess what? - he's really bad at timing the market). He switched providers in 08 and I'm sure it was because of his paternalistic urge to keep us all in cash - which he then recommended to his employees. He has held on to our contributions for up to 6 months because he was sure the top was in. It drives me crazy and is illegal but I've complained enough that I'm afraid he is going to drop the 401k program all together if I keep bringing it up.

Not quite the same as the lady interviewed but never underestimate the small business owner who is sure he's the smartest guy in the room.

[Imma]

For 21 years....She said she paid regularly into a 401(k) account that, at one point, was worth more than $40,000.By the time she left the company in 2008, however, its value had fallen to $2,000.Molnar said the company’s owner thought he was doing his 100 employees a favor by managing their retirement accounts.

I don't think we are getting the whole story here. From 40k to 2k? The owner of a company doesn't normally manage each person's 401k. That is... wow... never heard of that before.

My boss holds our money and tries to time the market for us (guess what? - he's really mad at timing the market). He switched providers in 08 and I'm sure it was because of his paternalistic urge to keep us all in cash - which he then recommended to his employees. He has held on to our contributions for up to 6 months because he was sure the top was in. It drives me crazy and is illegal but I've complained enough that I'm afraid he is going to drop the 401k program all together if I keep bringing it up.

Not quite the same as the lady interviewed but never underestimate the small business owner who is sure he's the smartest guy in the room.

I hope you're not putting too much money in that account ... I know that it's tax deferred, but if it's a rather big amount of money I'd rather pay taxes. The tax man is more predictable than a market-timing idiot.

[StarBright]

For 21 years....She said she paid regularly into a 401(k) account that, at one point, was worth more than $40,000.By the time she left the company in 2008, however, its value had fallen to $2,000.Molnar said the company’s owner thought he was doing his 100 employees a favor by managing their retirement accounts.

I don't think we are getting the whole story here. From 40k to 2k? The owner of a company doesn't normally manage each person's 401k. That is... wow... never heard of that before.

My boss holds our money and tries to time the market for us (guess what? - he's really bad at timing the market). He switched providers in 08 and I'm sure it was because of his paternalistic urge to keep us all in cash - which he then recommended to his employees. He has held on to our contributions for up to 6 months because he was sure the top was in. It drives me crazy and is illegal but I've complained enough that I'm afraid he is going to drop the 401k program all together if I keep bringing it up.

Not quite the same as the lady interviewed but never underestimate the small business owner who is sure he's the smartest guy in the room.

I hope you're not putting too much money in that account ... I know that it's tax deferred, but if it's a rather big amount of money I'd rather pay taxes. The tax man is more predictable than a market-timing idiot.

Probably more than I should, but it isn't maxed. Enough to help with taxes and to meet the matching/profit sharing thresholds.

I'm saying we're lucky, too, that we noticed, that this is what our brains happened to latch onto, to pay attention to early enough in life.

My stomach turns when people regard their financial security as self-made, as a result of being "better than" the person standing next to them, rather than as a happy accident of latching. (And I understand your stomach may well turn when I refer to all of us here as lucky for tuning in in time!)

+1 to this. And honestly just luck.

I consider myself so lucky that 1. I had a parent who told me to save for retirement back when I was in highschool and 2. lucky to have finished grad school before the great recession started and 3. lucky to have come of age in an internet world where I had the value of all this knowledge available from the comfort of my home. Take anyone of those sheer luck-of-the-draw things away and I might not be in the same (good) position I'm in now.

[joonifloofeefloo]

Yeah... And we could all end up at a similar end to the folks in the article! We've all had good luck so far, but this is a relatively brief period, and we may have bad luck too.

Maybe the economy collapses... Maybe the house we put $300k into over 30 years is attacked by brand new, sudden climate scenarios...   

Will we have been stupid to have put our hope and money into a given dwelling and the stock market? I don't think so.

Those of us benefiting from luck right now are doing the best we can with the information we have right now. We continue paying attention, we continue our most diligent efforts to ensure our long-term security...but if a wild card appears, it would be incorrect for the next generation to call us stupid, blaming, etc.

Hopefully they'd say, "I know JooniFlorisploo and MrsPete and StarBright did their very best with the information they had. They read and researched and discussed... They applied critical thinking to the various ideas they were exposed to. They saved and socked away. Turned out, the economic system they were betting on didn't work out. That sucks big time."

[JetBlast]

I have a lot of sympathy for the people in this article and others like them, but some of the quotes were a little disheartening.

The ones who go on these ritzy, ritzy cruises to all these islands in Maine, I don’t know how they got all that money. Maybe they were born into it

The rich help the rich, and I’m starting to think that not enough will fall down to us

There’s a pervasive attitude that most rich people are born into it, despite that being less true now than ever, and that if you’re not born to wealth all you can do to get by is look to the largesse of the lucky few that are born to money. This belief is toxic for reaching financial independence, but seems to still be ingrained in many friends of my age group. In a few decades these articles will be written about them, and mostly it’s because they believe the system is rigged so there’s no point in trying.

[joonifloofeefloo]

I agree, JetBlast. It's frustrating and disheartening to hear those pieces. I hear them from people in my life, too -people who received and blew inheritances, had much higher income than me, etc. They can't explain to themselves how I got my money, even when I tell them.

[ixtap]

I agree, JetBlast. It's frustrating and disheartening to hear those pieces. I hear them from people in my life, too -people who received and blew inheritances, had much higher income than me, etc. They can't explain to themselves how I got my money, even when I tell them.

I have a relative with a 5k sq ft house, more Jeeps than drivers, etc, who insists it is because we don't have kids.

[mm1970]

What happened to these folks is that the world changed, and they didn't notice or adjust.  Sure, some saved (my mom did), but that was largely viewed as an extra margin of safety.  The generation behind them (me) grew up watching pensions disappear and constant politicking over SS cuts and realized we couldn't rely on anyone but ourselves; but these guys are the ones whose pensions were being cut or who were being laid off when they were already 50 and couldn't do much about it.  At the same time, interest rates dropped dramatically and for over a decade -- great for people like me, who were young professionals when direct investing through mutual funds became more widespread and cheaper, but horribly damaging to people who were raised to believe in the "safety" of bonds and CDs.  And SS benefits were constantly tinkered with, again over decades, through changing standard retirement date, taxing benefits in some cases, and messing with the inflation adjustment formula.  The result is as the article shows:  benefit levels have not come even close to keeping up with the "real" cost of living for retirees.

This matches what I see.  My relative just said last night that he is very lucky.  He chose a lower-paying public utility job (because it was 9 to 5) vs a  higher paying shift job at a plant, when he got out of the Army at 20.

Now he's in his 70s, going through major surgery and treatment for bone cancer.  He has a generous pension, Medicare, very very good supplemental insurance through his former employer.  Plus he was frugal and saved a lot of money.

I wonder if I'm being too frugal.  My family raised me to be that way.  We were poor.  I fear running out of money.  It's a thing with me.

[former player]

I have a lot of sympathy for the people in this article and others like them, but some of the quotes were a little disheartening.

The ones who go on these ritzy, ritzy cruises to all these islands in Maine, I don’t know how they got all that money. Maybe they were born into it

The rich help the rich, and I’m starting to think that not enough will fall down to us

There’s a pervasive attitude that most rich people are born into it, despite that being less true now than ever, and that if you’re not born to wealth all you can do to get by is look to the largesse of the lucky few that are born to money. This belief is toxic for reaching financial independence, but seems to still be ingrained in many friends of my age group. In a few decades these articles will be written about them, and mostly it’s because they believe the system is rigged so there’s no point in trying.

But if you take that "rich people were born into it" idea and look at it from the bottom of the working-class end of things, then "rich" doesn't mean the 1% it means the comfortable half of the economic equation, and lets be honest, most of that comfortable half were born to it, either financially or in social attitudes (eg the value of education).  Social and financial mobility is not great even in the USA.  It is relatively easy, if you don't have much of an education, or connections, or someone showing you the way, to be stuck at an entry-level job all your life, and then you end up relatively poor in old age almost whatever you do.  It is the exceptions, always, who make big changes in their financial and social status from where they started.  So like Jet I have a lot of sympathy for the people in the article.  Not so sure about Jet's friends - there will always be some people who have advantages and then refuse to take advantage of them.

[ixtap]

I honestly feel like these younger baby boomers got screwed. Individual retirement accounts didn't exist when they started working and now they get scoffed out for not embracing them as soon as they became available to them. That doesn't even count the ones who never had access to 401ks.

That being said, did I understand correctly that one of those couples travel works in their RV and maintains a home??

[accolay]

I agree, JetBlast. It's frustrating and disheartening to hear those pieces. I hear them from people in my life, too -people who received and blew inheritances, had much higher income than me, etc. They can't explain to themselves how I got my money, even when I tell them.

I have a relative with a 5k sq ft house, more Jeeps than drivers, etc, who insists it is because we don't have kids.

Don't ever underestimate the human ability to lie to themselves.