Author Topic: WOW! It's amazing how little people have saved  (Read 8452 times)

Rich M

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WOW! It's amazing how little people have saved
« on: March 27, 2013, 03:19:01 PM »
I know I'm rehashing this old story but NPR had an interesting piece on it today.

http://www.npr.org/2013/03/27/175262508/planning-for-retirement-when-savings-falls-short

Here is a summary:

According to recent census figures, Americans ages 55 to 65 had about $45,000 in savings and assets, not including their homes. In another survey, by the Employee Benefit Research Institute, 57 percent of American workers said they have less than $25,000 in total savings and investments.


NPR suggested some interesting ideas such as selling the house, moving to a cheaper area and getting a roomate--and even working a part-time job during retirement.

There was even mention of a guy was had a career as an engineer, getting a job at Home Depot. 
WOW!  This is a huge price to pay for not saving and living more simply during the early working years.





dragoncar

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Re: WOW! It's amazing how little people have saved
« Reply #1 on: March 27, 2013, 10:34:12 PM »
Not sure if schadenfreude or depressed.

GreenGuava

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Re: WOW! It's amazing how little people have saved
« Reply #2 on: March 28, 2013, 02:13:17 AM »
As someone who works with plenty of engineers, yep, I believe it.  If my life depended on spending my entire paycheck on things, I'm not sure I could do it in a believable fashion.  Somehow they do it and want more. 

JamesAt15

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Re: WOW! It's amazing how little people have saved
« Reply #3 on: March 28, 2013, 03:52:02 AM »
Not sure if schadenfreude or depressed.

There is a certain chill, and a feeling of "there but for the grace of God go I."

It is entirely too easy to never think about such things and just assume that the future will take care of itself, and something will work out to keep us living our assumed lifestyle indefinitely. I know I didn't give it much thought until I came across MMM, and I imagine most of my friends and associates were the same.

shedinator

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Re: WOW! It's amazing how little people have saved
« Reply #4 on: March 28, 2013, 06:20:02 AM »
So... this isn't a conversation about mustachian members of the LPA? I was all set to pick up some tips for my friend Katrina...

mpbaker22

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Re: WOW! It's amazing how little people have saved
« Reply #5 on: March 28, 2013, 08:19:49 AM »
Hmm.  I haven't read the article, but I wonder how many of these people have pensions and social security payments that will cover their living expenses.  If I was 65 and had a guaranteed pension and SS payments totaling a few thousand a month, I wouldn't be worried about only having 50K in the bank. 
This also leads to the problem of what does it mean to be guaranteed.

matchewed

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Re: WOW! It's amazing how little people have saved
« Reply #6 on: March 28, 2013, 08:26:53 AM »
Here's the full report from the EBRI for those of you interested in reading that sort of thing.

galaxie

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Re: WOW! It's amazing how little people have saved
« Reply #7 on: March 28, 2013, 08:39:42 AM »
I'm glad they sorted by age when doing the stats, at least.  So often these articles say something like "the average American has less than $X saved for retirement!" but you find out that they included everyone of working age. 


It's made worse by the fact that compounding interest is an exponential process, so the average over time is going to be much less than even the halfway point.  Unless you save enough monthly that your deposits (linear) dominate the returns your money is earning (exponential) consistently until you retire, I guess.

mpbaker22

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Re: WOW! It's amazing how little people have saved
« Reply #8 on: March 28, 2013, 09:01:55 AM »
Here's the full report from the EBRI for those of you interested in reading that sort of thing.

Not sure how to view these stats.  I'm sure the average person wants to spend the same or more in retirement.  But, for example, I wouldn't 'need' a car in retirement, so I could cut 20% of my budget.  I'd consider that a significant decrease.
There are other examples, like I would expect to dip into savings before 50 (because I plan on retiring), but that would show up looking bad on their graphs because it would indicate taking retirement funds before retirement.
I would sum up that many of these graphs speak to the bad finances of a normal person, but don't apply to mustachians.

matchewed

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Re: WOW! It's amazing how little people have saved
« Reply #9 on: March 28, 2013, 09:33:33 AM »
Quote
Not sure how to view these stats.  I'm sure the average person wants to spend the same or more in retirement.  But, for example, I wouldn't 'need' a car in retirement, so I could cut 20% of my budget.  I'd consider that a significant decrease.
There are other examples, like I would expect to dip into savings before 50 (because I plan on retiring), but that would show up looking bad on their graphs because it would indicate taking retirement funds before retirement.
I would sum up that many of these graphs speak to the bad finances of a normal person, but don't apply to mustachians.

Yeah that's a legitimate question and concern. It may seem a bit self (group?) righteous to say but Mustachians are fairly unique when considered against the general population. We probably represent an extremely small section of the population at large. So reading something which is supposed to represent that general population makes it so we have to consider it carefully when seeing what it may say about us as a group.

It's why I left the full report without commentary. I'm still digesting and evaluating what it may or may not say about me or us.

rtrnow

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Re: WOW! It's amazing how little people have saved
« Reply #10 on: March 28, 2013, 11:56:25 AM »

There was even mention of a guy was had a career as an engineer, getting a job at Home Depot. 
WOW!  This is a huge price to pay for not saving and living more simply during the early working years.

I head the end of this story on npr. Total agreement about the lack of savings, etc. However, the Home Depot guy was framed differently on the radio broadcast I heard. They were talking about finding an enjoyable job in retirement. So while this guy may have needed the money (or not I don't know), he actually liked working part time at HD.

I expect to work in retirement too. Granted I plan to "retire" before I'm 40 so it's different, but I plan on having a part time job somewhere I enjoy working and benefit from an employee discount too.

The_Dude

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Re: WOW! It's amazing how little people have saved
« Reply #11 on: March 28, 2013, 12:07:37 PM »
Here's the full report from the EBRI for those of you interested in reading that sort of thing.

Thanks for linking.  I've only had time to do a quick skim through of some of the materials but I found the widening gap between worker's expected retirement age and actual to be very interesting.  In short, everyone's expectations about the retirement age are steadily rising while the actual median retirement age has barely moved which can create a disastrous situation for folks who design their lifestyle and saving around those extra expected working years. 

Quote
One reason for this gap between workers’ expectations and retirees’ experiences of retirement age is that many
Americans find themselves retiring unexpectedly. The RCS has consistently found that a large percentage of retirees
leave the work force earlier than planned (47 percent in 2013) (Figure 36), and many retirees who retired earlier than
planned cite negative reasons for doing so, including health problems or disabilities (55 percent), changes at their companies, such as downsizing or closure (20 percent), or having to care for spouses or other family members (23 percent).
Others say changes in the skills required for their jobs (9 percent) or other work-related reasons (20 percent)
played a role. Some retirees do mention positive reasons for retiring early, such as being able to afford an earlier
retirement (32 percent) or wanting to do something else (19 percent), but just 7 percent offer only positive reasons.

I added the bold & underline
« Last Edit: March 28, 2013, 12:09:53 PM by The_Dude »

mm31

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Re: WOW! It's amazing how little people have saved
« Reply #12 on: March 28, 2013, 12:39:08 PM »
I hope they didn't really use straight averages for these calculations, a median is much better.

arebelspy

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Re: WOW! It's amazing how little people have saved
« Reply #13 on: March 28, 2013, 12:47:24 PM »
This thread title is ambiguous.





I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

matchewed

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Re: WOW! It's amazing how little people have saved
« Reply #14 on: March 28, 2013, 12:50:03 PM »
Ah Time Bandits, that movie should have given me nightmares as a kid. Made me want to have Sean Connery as my dad for a few months.

Rich M

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Re: WOW! It's amazing how little people have saved
« Reply #15 on: March 28, 2013, 08:28:34 PM »
hilarious arebelspy! :)

SwordGuy

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Re: WOW! It's amazing how little people have saved
« Reply #16 on: March 29, 2013, 10:02:54 AM »
A significant part of me questions the value of applying so much scientific rigour to learn the opinions of people who spent little to no mental effort to form them.  In what way is what a bunch of ill-informed goobers think will happen of any value for determining whether I am making good retirement plans?

Or whether they are, for that matter.

matchewed

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Re: WOW! It's amazing how little people have saved
« Reply #17 on: March 29, 2013, 10:23:55 AM »
Quote
A significant part of me questions the value of applying so much scientific rigour to learn the opinions of people who spent little to no mental effort to form them.  In what way is what a bunch of ill-informed goobers think will happen of any value for determining whether I am making good retirement plans?

Or whether they are, for that matter.

A good question I think.

The value may not be for you. And while some sections of the report are opinion based some of it is actual numbers. As for the value of the report as a whole I'll just quote directly from their site -

 
Quote
The mission of the Employee Benefit Research Institute (EBRI) is to contribute to, to encourage, and to enhance the development of sound employee benefit programs and sound public policy through objective research and education.

EBRI was founded in 1978 with a declaration of three principles:

    Employee benefit plans serve an essential function in the United States economy by providing citizens with opportunities to achieve financial security.
    An ongoing need exists for objective, unbiased information regarding the employee benefit system, so that decisions affecting the system may be made based on verifiable facts.
    The members of the Institute determined that their common business interests will be furthered by having the Institute develop and disseminate such information. In all its activities the Institute shall function strictly in an objective and unbiased manner and not as an advocate or opponent of any position.

This is one of those things where studying how well people are saving as a whole, or how well employers are helping people save can influence policies. It's almost like if private industries and individuals took more responsibility for the financial stability of themselves/employees we would perhaps have less contentious discussions about social safety nets.

Also if you're not measuring how do you know if something like a policy (whether private or public) is effective?

 

Wow, a phone plan for fifteen bucks!