Retirement goal changed due to inflation?

[Deleted member 28227]

I was trying to be helpful, not start an argument.

Now where is the fun in that

 

[npaden]

Yeah... working for a small business is basically screwing yourself for retirement unless you have an ownership stake.

Some of the best retirement plans I've seen are small businesses. But also I would agree that most don't even have any type of plan at all. One plan that I do some work for contributes 18% of the employees salary period. No match, just they contribute 18%. That's the best plan I've ever seen personally.

 

[Deleted member 28227]

So don't max it out and just do the 15%. My 15% and 20% includes the employer portion.

Ah... that makes sense.

and is kinda my point. Yes some people have a crazy lifestyle and will need a lot in retirement, some people are very frugal. That said for the average person leaving within their means there is definitely a mean "likely" value, maybe not in $ but in percentage.

So to that end, in your mind, 15% of gross household income is kinda the 'safe' bet?

 

[TN2shot07]

Some of the best retirement plans I've seen are small businesses. But also I would agree that most don't even have any type of plan at all. One plan that I do some work for contributes 18% of the employees salary period. No match, just they contribute 18%. That's the best plan I've ever seen personally.

Damn, I never advocate to take a job for the benefits but that’s awesome

 

[Deleted member 28227]

Some of the best retirement plans I've seen are small businesses. But also I would agree that most don't even have any type of plan at all. One plan that I do some work for contributes 18% of the employees salary period. No match, just they contribute 18%. That's the best plan I've ever seen personally.

Yeah that's nuts!

What are the tax implications for employers? For instance I believe the total max employer + employee is $61k. So I'm surprised that I've never seen an employer that has a plan that's like 85k salary + 40k a year in your 401k or something like that.

 

[SAJ-99]

Some of the best retirement plans I've seen are small businesses. But also I would agree that most don't even have any type of plan at all. One plan that I do some work for contributes 18% of the employees salary period. No match, just they contribute 18%. That's the best plan I've ever seen personally.

Very rare. Almost unicorn status.

The bottom line is that I would guess about 75% of Americans aren’t saving enough for retirement. Mostly because they don’t have a high enough income to do so given the projected life span. That includes 20% that have no plan at all and figure they will die on the job. We have seen this coming for a long time and collectively have done nothing about it. We have been saved/delayed by the last 10 yrs of stellar equity returns.

 

[npaden]

Ah... that makes sense.

and is kinda my point. Yes some people have a crazy lifestyle and will need a lot in retirement, some people are very frugal. That said for the average person leaving within their means there is definitely a mean "likely" value, maybe not in $ but in percentage.

So to that end, in your mind, 15% of gross household income is kinda the 'safe' bet?

Your last sentence is what I was trying to say. Somewhere in the 15% to 20% of household income including employer contributions should have most people in a pretty good spot IF they start at it early enough. If you wait until 35 or 40 before you ramp up to that you are going to behind and fighting to catch up.

I've recently had a few discussions on your second sentence. Savers save and spenders spend. Often savers focus so much on saving that when they retire they have a hard time shifting to spending. It is hard for a lot of folks to make the switch from a lifetime of living below their means as they are saving for retirement to then go out and live it up once they retire. These types of people tend to end up with generational wealth that is passed down to their children (and generally their children don't have any issues spending it and it is gone in a generation or two at the most). And we all know spenders who are just never going to have enough for retirement no matter what because they just can't seem to save hardly anything. I would much rather err on the side of having accumulated wealth that I can't spend than not having enough to make ends meet or being able to do the things I want to do when I retire.

 

[npaden]

Very rare. Almost unicorn status.

The bottom line is that I would guess about 75% of Americans aren’t saving enough for retirement. Mostly because they don’t have a high enough income to do so given the projected life span. That includes 20% that have no plan at all and figure they will die on the job. We have seen this coming for a long time and collectively have done nothing about it. We have been saved/delayed by the last 10 yrs of stellar equity returns.

Now I'm wanting to argue I guess. I would say that for many (not all) it isn't anything to do with what their income level is. I see many people with a high income that are not saving anything for retirement. I see plenty of people that have moderate incomes that are saving their 15% for retirement and should be perfectly fine for retirement. Including a few with no employer retirement plan and borderline low income. I would argue that spending habits rather than income has more to do with being able to save for retirement.

 

[SAJ-99]

Now I'm wanting to argue I guess. I would say that for many (not all) it isn't anything to do with what their income level is. I see many people with a high income that are not saving anything for retirement. I see plenty of people that have moderate incomes that are saving their 15% for retirement and should be perfectly fine for retirement. Including a few with no employer retirement plan and borderline low income. I would argue that spending habits rather than income has more to do with being able to save for retirement.

We can argue causes all day, there are many. The income tables @wllm1313 posted show that the household income distribution and savings rules make saving enough for retirement a tough job. The system isn’t set up for the workers other than to tax them.

 

[gwhunter]

So to that end, in your mind, 15% of gross household income is kinda the 'safe' bet?

So I don't frequent HT nearly enough to keep up with these fast moving threads, but the personal finance stuff has really been my only other area of interest outside of hunting (besides family, of course). It just so happens HuntTalk (and subsequently OYOA) is what sparked my interest in western hunting.

What sparked my interest in the personal finance stuff was the "Financial Independence Retire Early" (FIRE) crowd. Namely, Mr. Money Mustache (there are others of course, JLCollins, MadFientist, GoCurryCracker, etc.).

What I see as the large difference between conventional "personal finance advice" (which had me always thinking I would never make enough to retire) and the philosophical assumptions of the FIRE movement (which right off the bat hooked me because I realized I could retire early on almost any income) are the ideas of moving away from income and percentages of income that you are investing and instead focusing on spending.

You don't need to worry, in a technical sense, over percentage of income that you are investing as long as your long term focus is on will I amass enough to last indefinitely? I don't think I've seen it on any of the finance posts on HT that I lurk, but the idea of the 4% rule and once you have 25x your yearly spending saved you are "set" to retire. All of this is based on the Trinity study indicating over a 30 year period of retirement you are very unlikely to ever run out of money(even in periods of hyper-inflation) as long as you are drawing down your investments at a rate of 4%.

What this does is make you look at "how long you want to work?" instead of "how much percentage do I need to invest?" This does, in turn, actually make you look at "what percentage you need to invest" but from a different angle. If you are investing 15% of your income (and spending 100% of the rest), it will take around 40 years to retire without running out of money. Invest more(or spend less), less years working. This has made me look at my spending in a way that every dollar spent prolongs my work life. Makes you think twice about buying the 2022 pickup when yours still drives fine, but is starting to get rusty and has a few dents.

https://www.mrmoneymustache.com/wp-content/uploads/2012/01/years_to_retirement.png

 

[SAJ-99]

So I don't frequent HT nearly enough to keep up with these fast moving threads, but the personal finance stuff has really been my only other area of interest outside of hunting (besides family, of course). It just so happens HuntTalk (and subsequently OYOA) is what sparked my interest in western hunting.

What sparked my interest in the personal finance stuff was the "Financial Independence Retire Early" (FIRE) crowd. Namely, Mr. Money Mustache (there are others of course, JLCollins, MadFientist, GoCurryCracker, etc.).

What I see as the large difference between conventional "personal finance advice" (which had me always thinking I would never make enough to retire) and the philosophical assumptions of the FIRE movement (which right off the bat hooked me because I realized I could retire early on almost any income) are the ideas of moving away from income and percentages of income that you are investing and instead focusing on spending.

You don't need to worry, in a technical sense, over percentage of income that you are investing as long as your long term focus is on will I amass enough to last indefinitely? I don't think I've seen it on any of the finance posts on HT that I lurk, but the idea of the 4% rule and once you have 25x your yearly spending saved you are "set" to retire. All of this is based on the Trinity study indicating over a 30 year period of retirement you are very unlikely to ever run out of money(even in periods of hyper-inflation) as long as you are drawing down your investments at a rate of 4%.

What this does is make you look at "how long you want to work?" instead of "how much percentage do I need to invest?" This does, in turn, actually make you look at "what percentage you need to invest" but from a different angle. If you are investing 15% of your income (and spending 100% of the rest), it will take around 40 years to retire without running out of money. Invest more(or spend less), less years working. This has made me look at my spending in a way that every dollar spent prolongs my work life. Makes you think twice about buying the 2022 pickup when yours still drives fine, but is starting to get rusty and has a few dents.

https://www.mrmoneymustache.com/wp-content/uploads/2012/01/years_to_retirement.png

Whatever gets someone to think about saving for retirement is good. But 64% savings rate? You either make $500k/yr or live on ramen noodles.

 

[Deleted member 28227]

If you wait until 35 or 40 before you ramp up to that you are going to behind and fighting to catch up.

If you are 65 today then you were 23 when the 401k was "invented" and 41 when the Roth was invented.

So Joe Biden et al. basically had no choice but to start when these were invented.

I'm only bringing it up because in some respects our current investment models are actually pretty new. A 401k is to boomers as cypto is to millennials. Maybe when I'm 65 I will be telling you kids they need to pile into the newest cypto and everyone will take for granted that there was a time when we all weren't doing it.

And I mean before Mr. Gore invented the internet how did you guys find out about stuff like 401ks and Roth IRAs anyway?

 

[hank4elk]

W

If you are 65 today then you were 23 when the 401k was "invented" and 41 when the Roth was invented.

So Joe Biden et al. basically had no choice but to start when these were invented.

I'm only bringing it up because in some respects our current investment models are actually pretty new. A 401k is to boomers as cypto is to millennials. Maybe when I'm 65 I will be telling you kids they need to pile into the newest cypto and everyone will take for granted that there was a time when we all weren't doing it.

And I mean before Mr. Gore invented the internet how did you guys find out about stuff like 401ks and Roth IRAs anyway?

We had real benefits with pensions and 457 plans, that also ate shit in 08' and no one went to jail.

 

[EYJONAS!]

I should've payed more attention on school.

Still waiting for my doge to hit. That dream appears to be about over though.

 

[SAJ-99]

And I mean before Mr. Gore invented the internet how did you guys find out about stuff like 401ks and Roth IRAs anyway?

Your employee told you. Pre 401k (defined contribution) almost everything was a pension (defined benefit). Mandatory enrollment in DC wasn’t until 1998 I think. And most of the time the default asset was cash. Over the last 20 yrs DB has gone almost extinct, especially in corporate world. Only public service jobs and heavy unionized workforces have DB plans. The main difference between the two is it transferred market risk from the company/employing body (who had to fund any shortfall if markets didn’t hit expected return) to the individual, who now has to make investment elections and bears the risk of things go south.

We had real benefits with pensions and 457 plans, that also ate shit in 08' and no one went to jail.

All those pension plan payments are guaranteed if company goes under. They move to PBGC, where the taxpayer eats the shit sandwich.

 

[Mallardsx2]

I also cautuion people to not save too much as well. You can do VERY well if you start doing 15% early. But the longer you wait the more you have to contribute.

shake that mortgage by 55 and you’ll be all set for the “rule of 55”….

When I turn 55 I’m throwing the computer In the trash and I’ll answer to no man ever again until I’m dead…

 

[gwhunter]

Whatever gets someone to think about saving for retirement is good. But 64% savings rate? You either make $500k/yr or live on ramen noodles.

I think that is what was very eye opening to me about the FIRE movement was the notion of frugality (notice I didn't say being cheap) and it's impact on your savings vs spending rate. There are frequent writeups in the FIRE community about Average Joe &Jill who are both public school teachers each making $50k/year who were able to live (and live comfortably) on only 1/2 their income (and invest the other half in low-cost index funds) and be retired after 15 years. It doesn't take ramen noodle style living, rather choices about housing, transportation, and food that end up eating away at our income when the majority of those things are wants, rather than needs.

It's an analysis of whether or not a newer car(or 2), more expensive house, or eating out for multiple meals per week creates greater happiness in your life over the opportunity to be required to work less at your job.

It isn't rooted in the notion of "you millennials need to give up your Starbucks because that is what's making you poor". Just the idea that all purchase decisions are small, but cumulative, impacts on our ability to creat wealth.

For just a basic thought exercise, a $5 coffee 5x per week everyday on your way into the job, everyday for 30 years could have become $225,000 had it been invested in a low fee index fund. That's the ability to withdraw $10,000 per year in perpetuity. Not ramen noodle type changes. Rather a decision on what is more important, this purchase or my freedom from forced work.

 

[hank4elk]

Your employee told you. Pre 401k (defined contribution) almost everything was a pension (defined benefit). Mandatory enrollment in DC wasn’t until 1998 I think. And most of the time the default asset was cash. Over the last 20 yrs DB has gone almost extinct, especially in corporate world. Only public service jobs and heavy unionized workforces have DB plans. The main difference between the two is it transferred market risk from the company/employing body (who had to fund any shortfall if markets didn’t hit expected return) to the individual, who now has to make investment elections and bears the risk of things go south.

All those pension plan payments are guaranteed if company goes under. They move to PBGC, where the taxpayer eats the shit sandwich.

My pension is totally solvent and I got another 3% cola this year, public employees assoc. We fund a fund to fund colas in off years.
Now the new employees eat shit. But it's better than most any private sector working stiff deals these days.

 

[Europe]

My

Your

If

My post to you fellows is just a bit of sharing, nothing else

My husband was insistent that we own our own businesses and to invest our profits in buying industrial warehouse's that we could rent. Preferably on the waterfront. His thought was shipping goods between countries was never going to stop and should increase, plus the short term storage charges for those goods and since they were not making anymore waterfront property, the property should increase in value, but that was back in late 1950's early 1960's

His second strategy, was the one I laughed at and told him it would not even keep up with inflation over the years, but I was wrong ! He bought gold when it was at 35 dollars an ounce . Adjusted for inflation it would be worth 335 dollars an ounce today. but it actually closed today at around 1950 an ounce.

Glad he didn't listen to me.

 

[Nick87]

Yeah... working for a small business is basically screwing yourself for retirement unless you have an ownership stake.

I went from working for a worldwide company to a local one with ~18 employees pay and bennies are the same. Actually more per hour with the small company. Just one example but just sayin, it does happen.