MarketWatch: Many young people shouldn’t save for retirement
Re: MarketWatch: Many young people shouldn’t save for retirement
The article makes some sense but seems unlikely to work in practice. The idea is if you can live off $30,000, you maintain living off that amount no matter how much you make, so you don’t save when you’re young and only making $30,000 and you do save as you get older and make more, and continue to spent that much into old age. I doubt most people would be able to keep a low standard of living their whole lives if they had the option. This sounds like something good in theory but not workable in practice.
Re: MarketWatch: Many young people shouldn’t save for retirement
The article makes perfect sense! As long as one can perfectly predict the future for many decades out. When you start your work life in your early 20s, just create a spreadsheet with one row for every future year and enter the income you will have that year. Then with some simple math, you can work out how to even out your spending and life style over the rest of your life. Simple! Why didn't anybody think of this before?
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Re: MarketWatch: Many young people shouldn’t save for retirement
Perfect sense? The math is wrong …Ocean77 wrote: ↑Sun Oct 02, 2022 12:51 am The article makes perfect sense! As long as one can perfectly predict the future for many decades out. When you start your work life in your early 20s, just create a spreadsheet with one row for every future year and enter the income you will have that year. Then with some simple math, you can work out how to even out your spending and life style over the rest of your life. Simple! Why didn't anybody think of this before?
They are using the rate of interest for returns. It finishes the value of investing.
Not sure about you, but I won’t live in the neighborhoods I did when you get anymore. Not safe enough.
And what about hiccups in your career. Sure assume a smooth ride if you will but circumstances may arise that you which you had a nest egg to fall back on.
Re: MarketWatch: Many young people shouldn’t save for retirement
I'm sorry it wasn't clear enough that my entire post was sarcasm.typical.investor wrote: ↑Sun Oct 02, 2022 1:16 amPerfect sense? The math is wrong …Ocean77 wrote: ↑Sun Oct 02, 2022 12:51 am The article makes perfect sense! As long as one can perfectly predict the future for many decades out. When you start your work life in your early 20s, just create a spreadsheet with one row for every future year and enter the income you will have that year. Then with some simple math, you can work out how to even out your spending and life style over the rest of your life. Simple! Why didn't anybody think of this before?
They are using the rate of interest for returns. It finishes the value of investing.
Not sure about you, but I won’t live in the neighborhoods I did when you get anymore. Not safe enough.
And what about hiccups in your career. Sure assume a smooth ride if you will but circumstances may arise that you which you had a nest egg to fall back on.
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Re: MarketWatch: Many young people shouldn’t save for retirement
+1z3r0c00l wrote: ↑Sat Oct 01, 2022 12:15 pm I could see not saving much until 30 except for a solid emergency fund. Why not use your youth to enjoy life and travel? I work with many older people, a solid number of them save millions that they never get to use due to early illness. They regret not doing more when they were young and healthy, and the money is useless to them. 1 in 10 men won't see 55, one in five won't live to see the common retirement age of 65.
Various health issues making physical activity (including travel) hard at 55+ are indeed common. The issues of old age and the effects of deteriorating health on activities and the enjoyment of life are really underestimated by the young (including me when I was young).
Other than getting the company match (if any), I don't see saving for retirement as a high priority for young people. It makes more sense to save for a home, travel, start a family, etc.
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Re: MarketWatch: Many young people shouldn’t save for retirement
I get both sides of the coin. Spent plenty and regret nothing in my 20s. However the saving patterns I set then (max 401k + Roth) from day 1 helped me get where I am. My parents instilled the basic philosophy and this forum has done the rest from 30+.
It is very easy (for me) to fall into bad spending habits. Luckily housing and cars are 100% paid off and never went extravagant.
If I didn’t have the discipline earlier, my lifestyle creep would be at a different level now (Range Rover + massive mortgage). I don’t think it is at all easy to go from spendy in 20s to saver in 30s and 40s. Just behaviorally doesn’t work that way. Ymmv…
It is very easy (for me) to fall into bad spending habits. Luckily housing and cars are 100% paid off and never went extravagant.
If I didn’t have the discipline earlier, my lifestyle creep would be at a different level now (Range Rover + massive mortgage). I don’t think it is at all easy to go from spendy in 20s to saver in 30s and 40s. Just behaviorally doesn’t work that way. Ymmv…
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Re: MarketWatch: Many young people shouldn’t save for retirement
A lot of young adults I know would like to believe that it's not important to save until you're older. They want to spend every penny they earn on buying a big house, having a big family, with all the perks. Problem is that the spending habits you establish early in your relationship/marriage tend to stay with you forever.
Re: MarketWatch: Many young people shouldn’t save for retirement
Kinda?nigel_ht wrote: ↑Sat Oct 01, 2022 5:58 pm If you plug in age 22, retire at 67, $50K/$15K, 5% real and needing 70% of your salary you get this result:
"Based on the information you provided, when you retire at age 67, you may have a retirement savings balance of $1,083,600. Your estimated monthly expenses are $2,917 ($35K) and you could expect a monthly income of $3,612 in retirement."
Change it to $150K/$30K and needing 80% of your salary and you get this:
Based on the information you provided, when you retire at age 67, you may have a retirement savings balance of $2,167,200. Your estimated monthly expenses are $10,000 ($120K) and you could expect a monthly income of $7,224 in retirement.
Now richer...that kinda depends on whether we are looking at starting or terminal portfolio value and whether person number 2 spends $7,224/month or $10,000...
Tell me how having $2.1M isn't richer than $1.1?
Tell me how a monthly income of $7,224 isn't richer than $3,612?
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Re: The dumbest article ever written
Several people have mentioned in this thread that they agree with the article and that young people shouldn't save. Then they go on to mention getting the match as if it is a given. Note that the article explicitly stated that young people shouldn't save, including forgoing any match.JackoC wrote: ↑Sat Oct 01, 2022 11:51 amThe key and common exception is if an employer retirement plan matches your savings. Leaving that money on the table to consume or even save elsewhere is almost never justified IMO,Wanderingwheelz wrote: ↑Sat Oct 01, 2022 10:08 am There is a very good point made towards the end of the article, which is in effect we need to save more when we have higher incomes later in life so that we can spend more of our lower income when we are younger. Being free of a mortgage is one example of how this works. Once the mortgage is retired, does one spend more on vacations and such? Or does one invest the new-found cash flow?
One really hopeful take-away from the article is that having a satisfying retirement isn’t predicated on having made tax-deferred retirement contributions in one’s 20s and 30s. The trick is to save a lot during one’s peak earning years.
The economists who wrote this article, and others of similar bent I've read, assume you shouldn't take any risk when investing. They use the risk free rate, and the fact that it is negative real, as part of their justification for not saving.
Last, I think the main assumption is that one gets so much joy out of consumption that they are willing to work to age 67 to fund it. This is opposed to a lower consumption level funded by a shorter working career and more time freedom.
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Re: MarketWatch: Many young people shouldn’t save for retirement
I read the article a few minutes before seeing this thread. Yeah, it's not very profound, it also (IMO) could be pretty detrimental, giving young adults (even those who have the means) an excuse to put off developing a habit of saving. I bet in-laws would have agreed with the premise (they absolutely had the means to save when they were in their 30's) and that perspective has not served them well now that they are "normal" retirement age (mid 60's).spth wrote: ↑Sat Oct 01, 2022 10:42 pm I don’t think the article was clickbait, but I also don’t find it very profound.
Isn’t this the point of any debt (student loans, mortgage, car loan)?
I’m guessing most people don’t save much before 35.
People might even take a break from saving when kids are in college or when unemployed.
And SS does cover a large percentage of living expenses.
And if needed, keep working.
And in case you can’t keep working, make sure to have life and disability insurance.
Most on this forum are middle aged, high earners who should be saving. Many of the rest are former middle-aged high earners.
Re: MarketWatch: Many young people shouldn’t save for retirement
"Someone who makes $50K but saves $15K will probably end up richer and more satisfied than someone who makes $150K and saves $30K a year…"nigel_ht wrote: ↑Sat Oct 01, 2022 4:02 pmI think savings rate is often more indicative of future financial success than absolute numbers…smitcat wrote: ↑Sat Oct 01, 2022 2:00 pm"A) Their gross saving rate is 30+% or above"
Focusing on savings rates or even savings at all without consideration for the earnings side is like focusing on savings rather than expenses for FIRE.
As you have pointed out quite accurately the key is multiple of expenses in retirement not the multiples of salary at any one point in time.
Someone who makes $50K but saves $15K will probably end up richer and more satisfied than someone who makes $150K and saves $30K a year…
If you’re used to a $35K lifestyle then the portfolio from saving $450K over 30 years probably leads to a better outcome than being used to a $120K lifestyle with a $900K based portfolio…
Same for FIRE. Higher incomes tend to come with higher lifestyle baselines.
I think on the topic of saving for retirement while young what I tell my kids is to at least capture the match while saving as much as reasonable both in and outside of tax exempt.
Unless trying to FIRE. Then they need a very high savings rate regardless of income…30%+ gross is a good target.
I think KF’s family shoots for FI as soon as possible so it’s just like FIRE without necessarily retiring early.
Balance is the key at any age - but you certainly do not need to save $45K per year at $150K earnings to have the same savings rate as $15K at $50K.
Best thing about also concentrating on earnings as well as savings is lifestyle can creep a bit and you are still ahead.
"I think KF’s family shoots for FI as soon as possible so it’s just like FIRE without necessarily retiring early."
If they did that they would have been retired in their 40's or early 50's.
YMMV
Re: MarketWatch: Many young people shouldn’t save for retirement
$1.1M taking $2,917/month - 30 years later (1992-2022) balance is $5.1MJoeRetire wrote: ↑Sun Oct 02, 2022 7:12 amKinda?nigel_ht wrote: ↑Sat Oct 01, 2022 5:58 pm If you plug in age 22, retire at 67, $50K/$15K, 5% real and needing 70% of your salary you get this result:
"Based on the information you provided, when you retire at age 67, you may have a retirement savings balance of $1,083,600. Your estimated monthly expenses are $2,917 ($35K) and you could expect a monthly income of $3,612 in retirement."
Change it to $150K/$30K and needing 80% of your salary and you get this:
Based on the information you provided, when you retire at age 67, you may have a retirement savings balance of $2,167,200. Your estimated monthly expenses are $10,000 ($120K) and you could expect a monthly income of $7,224 in retirement.
Now richer...that kinda depends on whether we are looking at starting or terminal portfolio value and whether person number 2 spends $7,224/month or $10,000...
Tell me how having $2.1M isn't richer than $1.1?
Tell me how a monthly income of $7,224 isn't richer than $3,612?
https://www.portfoliovisualizer.com/bac ... tion3_1=20
$2.1M taking $10,000/month - 30 years later (1992-2022) balance is $2.5M
https://www.portfoliovisualizer.com/bac ... tion3_1=20
Flipped:
$1.1M taking $3612/month (20% increase in lifestyle on top of 30% income reduction - $43K/year originally $35K/year) - terminal balance $3.2M
https://www.portfoliovisualizer.com/bac ... tion3_1=20
$2.1M taking $7224/month (25% reduction in lifestyle on top of 20% income reduction - $86.6K/year originally $120K/year) - terminal balance is $6.4M
https://www.portfoliovisualizer.com/bac ... tion3_1=20
So...as I said, depends on whether we are looking at starting or terminal portfolio value and whether person number 2 spends $7,224/month or $10,000. If the second person continues with a $10K/month spend then the first person will end up with a higher terminal balance. $5.1M/$3.2M is richer than $2.5M.
This is how a janitor can leave $6M to charity.
https://www.cnbc.com/2016/08/29/janitor ... rtune.html
/shrug
You can pick some other time period if you like but I think generally speaking the outcome should remain about the same...PV unfortunately doesn't do 1966.
Last edited by nigel_ht on Sun Oct 02, 2022 8:50 am, edited 1 time in total.
Re: MarketWatch: Many young people shouldn’t save for retirement
I think you do have to save $45K but haven't mathed it out...I think that SS will generally have a bigger impact the smaller your portfolio.smitcat wrote: ↑Sun Oct 02, 2022 8:05 am Balance is the key at any age - but you certainly do not need to save $45K per year at $150K earnings to have the same savings rate as $15K at $50K.
Best thing about also concentrating on earnings as well as savings is lifestyle can creep a bit and you are still ahead.
If you like working you don't have to stop. I think some folks just like being FI as quickly as possible because you never know what might happen..."I think KF’s family shoots for FI as soon as possible so it’s just like FIRE without necessarily retiring early."
If they did that they would have been retired in their 40's or early 50's.
YMMV
Re: MarketWatch: Many young people shouldn’t save for retirement
"I think you do have to save $45K but haven't mathed it out...I think that SS will generally have a bigger impact the smaller your portfolio."nigel_ht wrote: ↑Sun Oct 02, 2022 8:42 amI think you do have to save $45K but haven't mathed it out...I think that SS will generally have a bigger impact the smaller your portfolio.smitcat wrote: ↑Sun Oct 02, 2022 8:05 am Balance is the key at any age - but you certainly do not need to save $45K per year at $150K earnings to have the same savings rate as $15K at $50K.
Best thing about also concentrating on earnings as well as savings is lifestyle can creep a bit and you are still ahead.
If you like working you don't have to stop. I think some folks just like being FI as quickly as possible because you never know what might happen..."I think KF’s family shoots for FI as soon as possible so it’s just like FIRE without necessarily retiring early."
If they did that they would have been retired in their 40's or early 50's.
YMMV
Here are a few reasons....
- at $50K your SS benefits will be about half of what they will be at $150K (SS Quick benefits calculator)
- at $150K your taxes each year will be about 3X that of a salary of $50K (Smartassett payroll calculator)
- at $150K your 401K and/or pension matches will be much higher as well
I have been at both levels and savings do not have to pace earnings when pay is higher.
"If you like working you don't have to stop. I think some folks just like being FI as quickly as possible because you never know what might happen..."
Perhaps - but the fact remains that he did not reach FI until 60 (spouse older than that) even with lower spending and higher savings. It takes an overall strategy to reach FI.
Re: MarketWatch: Many young people shouldn’t save for retirement
"This is how a janitor can leave $6M to charity.nigel_ht wrote: ↑Sun Oct 02, 2022 8:28 am$1.1M taking $2,917/month - 30 years later (1992-2022) balance is $5.1MJoeRetire wrote: ↑Sun Oct 02, 2022 7:12 amKinda?nigel_ht wrote: ↑Sat Oct 01, 2022 5:58 pm If you plug in age 22, retire at 67, $50K/$15K, 5% real and needing 70% of your salary you get this result:
"Based on the information you provided, when you retire at age 67, you may have a retirement savings balance of $1,083,600. Your estimated monthly expenses are $2,917 ($35K) and you could expect a monthly income of $3,612 in retirement."
Change it to $150K/$30K and needing 80% of your salary and you get this:
Based on the information you provided, when you retire at age 67, you may have a retirement savings balance of $2,167,200. Your estimated monthly expenses are $10,000 ($120K) and you could expect a monthly income of $7,224 in retirement.
Now richer...that kinda depends on whether we are looking at starting or terminal portfolio value and whether person number 2 spends $7,224/month or $10,000...
Tell me how having $2.1M isn't richer than $1.1?
Tell me how a monthly income of $7,224 isn't richer than $3,612?
https://www.portfoliovisualizer.com/bac ... tion3_1=20
$2.1M taking $10,000/month - 30 years later (1992-2022) balance is $2.5M
https://www.portfoliovisualizer.com/bac ... tion3_1=20
Flipped:
$1.1M taking $3612/month (20% increase in lifestyle on top of 30% income reduction - $43K/year originally $35K/year) - terminal balance $3.2M
https://www.portfoliovisualizer.com/bac ... tion3_1=20
$2.1M taking $7224/month (25% reduction in lifestyle on top of 20% income reduction - $86.6K/year originally $120K/year) - terminal balance is $6.4M
https://www.portfoliovisualizer.com/bac ... tion3_1=20
So...as I said, depends on whether we are looking at starting or terminal portfolio value and whether person number 2 spends $7,224/month or $10,000. If the second person continues with a $10K/month spend then the first person will end up with a higher terminal balance. $5.1M/$3.2M is richer than $2.5M.
This is how a janitor can leave $6M to charity.
https://www.cnbc.com/2016/08/29/janitor ... rtune.html
/shrug
You can pick some other time period if you like but I think generally speaking the outcome should remain about the same...PV unfortunately doesn't do 1966.
https://www.cnbc.com/2016/08/29/janitor ... rtune.html"
Yes, exactly and agreed - anyone can do it, as long as you do two things.
- don't spend much at any age
- pick a few very profitable stocks and hold them as long as possible.
I am curious - which ones of the above (or both) are you doing?
Re: MarketWatch: Many young people shouldn’t save for retirement
Lol…watched my parents do the former and personally doing the latter.
Despite a much higher income I think we’re going to have about the same retirement portfolio that they did. Our excuse is 3 kids vs 1 and we have been much more spendy than necessary on them.
Spoiled they are…but trying to get them up to the next rung with opportunities and life experiences we didn’t have growing up in immigrant families.
We’ll see how that goes.
Re: MarketWatch: Many young people shouldn’t save for retirement
Got it. If you spend 70% less for 30years you might end up with more in some situations.
Not my definition of "richer", but whatever works for you.
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Re: The dumbest article ever written
1. I skipped reading the article actually. And I don't think there's anything wrong with that when the article just presents somebody's opinion and not really a lot of fact. If somebody authoritative is giving facts, yes read the article before commenting, it's annoying when people don't. In a case like this I think it's fine to just respond to the opinions of other posters or 'forum consensus' as you perceive it. And my opinion is that younger people should save when and for things it's clearly advantageous, like getting 401k matches and various intermediate non-retirement goals (building a reserve against unemployment, pay down exist debt, save to buy the next car for cash, etc) but the idea that saving for *retirement* beyond that is important in 20's/early 30's not as much. That depends a lot psychological aspects and to a lesser extent but sometimes also overestimates of expected return (at 6% real return saving a little very early has significantly more impact than at 3% real).Nate7out wrote: ↑Sun Oct 02, 2022 7:43 am1. Several people have mentioned in this thread that they agree with the article and that young people shouldn't save. Then they go on to mention getting the match as if it is a given. Note that the article explicitly stated that young people shouldn't save, including forgoing any match.JackoC wrote: ↑Sat Oct 01, 2022 11:51 amThe key and common exception is if an employer retirement plan matches your savings. Leaving that money on the table to consume or even save elsewhere is almost never justified IMO,Wanderingwheelz wrote: ↑Sat Oct 01, 2022 10:08 am There is a very good point made towards the end of the article, which is in effect we need to save more when we have higher incomes later in life so that we can spend more of our lower income when we are younger. Being free of a mortgage is one example of how this works. Once the mortgage is retired, does one spend more on vacations and such? Or does one invest the new-found cash flow?
One really hopeful take-away from the article is that having a satisfying retirement isn’t predicated on having made tax-deferred retirement contributions in one’s 20s and 30s. The trick is to save a lot during one’s peak earning years.
1. The economists who wrote this article, and others of similar bent I've read, assume you shouldn't take any risk when investing. They use the risk free rate, and the fact that it is negative real, as part of their justification for not saving.
2. As I said at end of 1, the expected return does have some impact, only rationally. And to what rate people should assume, the expected risky return some discount to that, the riskless return? I don't think that's so clear. It's clearly unpopular to use the riskless return because it dispels mirages of 'getting rich' just by being frugal on a modest income. Whether it's actually wrong I'm not as sure. Also a lower return is a reason to eg. 'buy a 50' yacht now not a 100' yacht with your great returns later'. It's not a valid reason not to save for retirement, to live as you have when you can no longer work and your pension (public or private) is less than your work income. A lower return if it persisted would eventually mean saving *more* for retirement over your whole life. If 'an economist' actually says to save less overall for retirement because expected return is low, they are not much of an economist.
Last edited by JackoC on Sun Oct 02, 2022 11:49 am, edited 1 time in total.
Re: MarketWatch: Many young people shouldn’t save for retirement
We have spent reasonably at every age - shooting for balance for the entire trip.nigel_ht wrote: ↑Sun Oct 02, 2022 9:19 amLol…watched my parents do the former and personally doing the latter.
Despite a much higher income I think we’re going to have about the same retirement portfolio that they did. Our excuse is 3 kids vs 1 and we have been much more spendy than necessary on them.
Spoiled they are…but trying to get them up to the next rung with opportunities and life experiences we didn’t have growing up in immigrant families.
We’ll see how that goes.
Way before the internet and when these topics were fashionable, we saved at reasonable rates as well. Only later on did we realize that concentrating only on savings and not earnings is looking at half of the checkbook and not the other half. Best to maximize both and not set rules and boundaries that will restrict the ability to do both.
FWIW - it's much easier to end up with a bunch of money if you do not spend anything. But what was the purpose then?
Re: MarketWatch: Many young people shouldn’t save for retirement
Article has lots of problems and I’m having trouble organizing my thoughts. A few things:
1) It never makes sense to pass up the employer match in the 401k. Using the articles logic, it makes more sense to get the match and pay the 10% early withdrawal penalty every year than it does to just avoid it.
2) The idea of consumption smoothing doesn’t make sense to me because consumption habits are not smooth. When I was 25 my consumption habits involved beer and girls. At 36 my consumption habits include child rearing expenses. Based on my records I will have more costs in the first 12 months of my child’s life associated with him than I spent on myself in the year I was 23 which was the first year I lived on my own. Daycare alone is $750/mo more than I was paying in rent at age 23.
3) The idea of saving for a home or car vs. retirement when young sounds nice, but there’s always an opportunity to save for an additional consumption item. It’s not like by the time you turn 35 you never need a new car, never need a bigger house. You can always continue to save towards future consumption spending.
4) re: 2 and 3 much of my increased income in my so called “high earning years” is being spent on new consumption pieces. On a nominal level we are saving he same amount of money monthly at age 36/37 that we did at age 28/29. It’s just that our expenses are more than double what they were when we were 28/29.
It sounds to me like the article is geared towards a time in the past…where you got married and had all your kids by 22 and by the time your 40 the kids are out on their own and you don’t have those expenses anymore. People are starting families later than ever which means their expenses are increasing just when this article says you should start saving for retirement.
1) It never makes sense to pass up the employer match in the 401k. Using the articles logic, it makes more sense to get the match and pay the 10% early withdrawal penalty every year than it does to just avoid it.
2) The idea of consumption smoothing doesn’t make sense to me because consumption habits are not smooth. When I was 25 my consumption habits involved beer and girls. At 36 my consumption habits include child rearing expenses. Based on my records I will have more costs in the first 12 months of my child’s life associated with him than I spent on myself in the year I was 23 which was the first year I lived on my own. Daycare alone is $750/mo more than I was paying in rent at age 23.
3) The idea of saving for a home or car vs. retirement when young sounds nice, but there’s always an opportunity to save for an additional consumption item. It’s not like by the time you turn 35 you never need a new car, never need a bigger house. You can always continue to save towards future consumption spending.
4) re: 2 and 3 much of my increased income in my so called “high earning years” is being spent on new consumption pieces. On a nominal level we are saving he same amount of money monthly at age 36/37 that we did at age 28/29. It’s just that our expenses are more than double what they were when we were 28/29.
It sounds to me like the article is geared towards a time in the past…where you got married and had all your kids by 22 and by the time your 40 the kids are out on their own and you don’t have those expenses anymore. People are starting families later than ever which means their expenses are increasing just when this article says you should start saving for retirement.
Re: MarketWatch: Many young people shouldn’t save for retirement
A sad truth is that many young people might be finding it very difficult, if not impossible to save for retirement. A couple of things have changed since I was a young man. Two of the biggest and most important expenses are housing and transportation, unfortunately the low cost options for both have mostly been taken away. The reasons behind this are the topic for another thread but cheap housing and cheap transportation are much less available today. Reminds me of the guy who would run for Mayor of New York City as a candidate from The Rent Is Too Darned High Party.AnnetteLouisan wrote: ↑Sat Oct 01, 2022 6:31 am [Moved into a new thread from: In Retirement, You May Not Need to Spend So Much --admin LadyGeek]
MarketWatch has a piece today, the gist of which is that you don’t need to save until you are older. Not sure if it’s a similar argument to what is in the NYT article but it’s quite regrettable.
I’m sure it’s what many people prefer to hear, especially these days with inflation so high, but it’s very far from the truth. I could tell you stories about people I know who didn’t save regularly and consistently throughout their working lives but I don’t want to engage in poverty porn. Suffice it to say, their situations are bleak.
I had modest salaries through much of my career and I was able to save a lot because I lived in nice but lower cost housing and I mostly drove older cars. Not sure I would be able to do today what I did back then. So today, you need a roommate.
A fool and his money are good for business.
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Re: MarketWatch: Many young people shouldn’t save for retirement
Lifecycle smoothing for retirement savings may work in hypothetical models but it will not work in real life. How many studies show that those who wish to retire at a normal age of say 65 actually retire earlier due to job loss, illness, disability which prevents them from full employment such that they are effectively retired? The assumption that private sector workers have continuous employment and/or savings rate is not borne out with facts.
I think failing to save early on will compound the probability of a poor and unnecessary outcomes later, when you really do need the savings.
From my own personal experience, I’m not sorry I sacrificed early on, even when I was unemployed over a year I was thankful I did save. Those who publish these reports, haven’t gone through a full lifecycle themselves with real life actual experience to examine the true risks of following such a practice.
It’s almost malpractice in a sense - would you wait till a third of your car’s life to go by before changing the oil or doing preventative maintenance?
I think failing to save early on will compound the probability of a poor and unnecessary outcomes later, when you really do need the savings.
From my own personal experience, I’m not sorry I sacrificed early on, even when I was unemployed over a year I was thankful I did save. Those who publish these reports, haven’t gone through a full lifecycle themselves with real life actual experience to examine the true risks of following such a practice.
It’s almost malpractice in a sense - would you wait till a third of your car’s life to go by before changing the oil or doing preventative maintenance?
Last edited by Grt2bOutdoors on Sun Oct 02, 2022 10:35 am, edited 1 time in total.
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Re: MarketWatch: Many young people shouldn’t save for retirement
The world doesn't change as fast as the media would like you to beliieve. Working from home and retiring at 40 isn't the new norm. Not saving for one's own retirement without a pension is a fools errand. Bills eventually need to be paid. Water seeks it's own level.
Re: MarketWatch: Many young people shouldn’t save for retirement
nedsaid,nedsaid wrote: ↑Sun Oct 02, 2022 10:12 am
A sad truth is that many young people might be finding it very difficult, if not impossible to save for retirement. A couple of things have changed since I was a young man. Two of the biggest and most important expenses are housing and transportation, unfortunately the low cost options for both have mostly been taken away. .
I had modest salaries through much of my career and I was able to save a lot because I lived in nice but lower cost housing and I mostly drove older cars. Not sure I would be able to do today what I did back then. So today, you need a roommate.
It is very simple.
If someone choose to live like their income peers aka average American, they would save close to nothing. Average American saves less than 5% of their gross income.
The only way to save to do not live like your income peers.
My son lives with roommates. He saves 1 year of expense every year.
KlangFool
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Re: MarketWatch: Many young people shouldn’t save for retirement
Of course if the “average” is saving 5% that means many are saving more and many save nothing/have negative net worth. I don’t believe you’ll find too many people just saving 2 or 3% of their income. They either save nothing/spend more than they make, or save at a relatively regularly recommended 10-15% clip.KlangFool wrote: ↑Sun Oct 02, 2022 10:33 amnedsaid,nedsaid wrote: ↑Sun Oct 02, 2022 10:12 am
A sad truth is that many young people might be finding it very difficult, if not impossible to save for retirement. A couple of things have changed since I was a young man. Two of the biggest and most important expenses are housing and transportation, unfortunately the low cost options for both have mostly been taken away. .
I had modest salaries through much of my career and I was able to save a lot because I lived in nice but lower cost housing and I mostly drove older cars. Not sure I would be able to do today what I did back then. So today, you need a roommate.
It is very simple.
If someone choose to live like their income peers aka average American, they would save close to nothing. Average American saves less than 5% of their gross income.
The only way to save to do not live like your income peers.
My son lives with roommates. He saves 1 year of expense every year.
KlangFool
And of course many lower to mid income people don’t really need to save. A person making $35k-$40k a year as a secretary at town hall is getting social security and a pension. They probably are replacing 100% of their income without extra savings in retirement.
Last edited by Jags4186 on Sun Oct 02, 2022 10:36 am, edited 1 time in total.
Re: MarketWatch: Many young people shouldn’t save for retirement
Californiastate,Californiastate wrote: ↑Sun Oct 02, 2022 10:31 am
The world doesn't change as fast as the media would like you to beliieve. Working from home and retiring at 40 isn't the new norm. Not saving for one's own retirement without a pension is a fools errand. Bills eventually need to be paid. Water seeks it's own level.
My income peers (Median annual income of 150K) do not have enough savings to pay for $600 high school club fee in one lump sum. They need an installment plan. Let's not talk about saving for retirement. We need to start with saving for the emergency fund for the average American first.
KlangFool
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Re: In Retirement, You May Not Need to Spend So Much
As much as it seems impossible to believe these days, buying investments isn’t spending. It’s actually a tried and tested way to have even more money that before you bought the investment.AnnetteLouisan wrote: ↑Sat Oct 01, 2022 4:01 pmVery true. Downshifting is hard, but it can be a fascinating process to pare down, break habits and discover what you truly need and value, and it can even be fun (as long as it’s optional).JoeRetire wrote: ↑Sat Oct 01, 2022 3:23 pmHmm. I understand your theory.AnnetteLouisan wrote: ↑Sat Oct 01, 2022 9:09 am I have a theory that says you should spend more in crappy times (illness, unemployment, bummer situation of whatever kind) than when things are going well for you, because you need it more in bad times. So in my view it isn’t age related. Sometimes you need a little extra being good to yourself and sometimes you don’t.
But I worry that being "a little extra good to yourself" becomes a habit that's hard to break. Like "I deserve it" can be hard to overcome. I know lots of folks who have gone down that road and suffered in retirement because of it.
I did it from 2006-2011, first mostly in contemplation of a recession I saw coming, then to be at one with the spirit of the times (although I was doing well but the country wasn’t and it became gauche to overspend), and then continuing on for self mastery (because a smart friend expressed horror at amounts I was dropping at a particular store on a particular kind of item where I tended to overspend). Also because i got feedback that my gifts, good tips and treating others at restaurants came across as showing off. So I said, ok fine!!! I don’t have to then. And then I pared back more to buy a house, and then still more during Covid.
It was actually very empowering, unlike folks who sadly have to do it because they are forced to. There’s a lot of good quality these days at low price points. It’s freeing to liberate yourself from the influence of advertising to a large extent. You can still spend but it’s your choice not a compulsion. Could I have done it if I hadn’t had a little fun overspending first? Maybe not.
Now I have this killer $37-45k budget on a $310k income and spend my money on investments. : D
I think a lot of us struggle with this. Spending is actually saying bye-bye to the money, usually forever, rather than harvesting gains from the purchase at some later date.
Being wrong compounds forever.
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Re: MarketWatch: Many young people shouldn’t save for retirement
Psychology of spending is just so interesting. Started listening to Ramits latest podcast (thanks Annette) haven’t finished yet.
Take two grads with the same starting point in life, income, job, location/housing etc. There will be one that saves more and the other the spends more. I think it’s 100% based on family background and experience. On the one hand traits like delaying purchases and satisfaction are good imo, on the other hand pushing you/your friends to enjoy each weekend in your 20s (clubbing, restaurants, weekend trips to Vancouver etc) is really living life.
Like others have said balance is the key. I was able to do everything I wanted in my 20s. One of the reasons is I lived at home after graduating, never rented and went to home ownership after marriage. If my kids can/are willing to do the same, they could see the same boost in 20s. I also recognize living out/alone can lead to different experiences too and will support the kids whichever path they take. The housing one sticks out for me - made a huge difference to my early finances being able to fund retirement to the IRS limits while having loadsa fun in a new city with new friends. I feel lucky, next gen may not be able to balance all the balls the same way & perhaps retirement savings slips!
If I were really to analyze the math I would have to deduct say 10 years of 401k savings (e.g. 150k - 400k incl growth) from my current net worth. It wouldn’t make a huge difference, but the key is it’s not binary. If I did not fund 401k at all, there is very little chance I would have jumped to max 401k state + extra savings etc to get the rest of my net worth. Just would not have happened! I would have increased my standard of living for sure, spent more on cars/housing for sure and not been in a position to ‘catch up’.
Best advice I’ve ever heard here for grads is spend a third, save a third. That’s it, that’s the goal even if kids don’t quite make it, having that aggressive goal will keep them on a FI path to success
Take two grads with the same starting point in life, income, job, location/housing etc. There will be one that saves more and the other the spends more. I think it’s 100% based on family background and experience. On the one hand traits like delaying purchases and satisfaction are good imo, on the other hand pushing you/your friends to enjoy each weekend in your 20s (clubbing, restaurants, weekend trips to Vancouver etc) is really living life.
Like others have said balance is the key. I was able to do everything I wanted in my 20s. One of the reasons is I lived at home after graduating, never rented and went to home ownership after marriage. If my kids can/are willing to do the same, they could see the same boost in 20s. I also recognize living out/alone can lead to different experiences too and will support the kids whichever path they take. The housing one sticks out for me - made a huge difference to my early finances being able to fund retirement to the IRS limits while having loadsa fun in a new city with new friends. I feel lucky, next gen may not be able to balance all the balls the same way & perhaps retirement savings slips!
If I were really to analyze the math I would have to deduct say 10 years of 401k savings (e.g. 150k - 400k incl growth) from my current net worth. It wouldn’t make a huge difference, but the key is it’s not binary. If I did not fund 401k at all, there is very little chance I would have jumped to max 401k state + extra savings etc to get the rest of my net worth. Just would not have happened! I would have increased my standard of living for sure, spent more on cars/housing for sure and not been in a position to ‘catch up’.
Best advice I’ve ever heard here for grads is spend a third, save a third. That’s it, that’s the goal even if kids don’t quite make it, having that aggressive goal will keep them on a FI path to success
Last edited by Wannaretireearly on Sun Oct 02, 2022 10:47 am, edited 2 times in total.
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Re: MarketWatch: Many young people shouldn’t save for retirement
Living with roommates was the one thing I was not willing to do. I always wanted my own place.KlangFool wrote: ↑Sun Oct 02, 2022 10:33 amnedsaid,nedsaid wrote: ↑Sun Oct 02, 2022 10:12 am
A sad truth is that many young people might be finding it very difficult, if not impossible to save for retirement. A couple of things have changed since I was a young man. Two of the biggest and most important expenses are housing and transportation, unfortunately the low cost options for both have mostly been taken away. .
I had modest salaries through much of my career and I was able to save a lot because I lived in nice but lower cost housing and I mostly drove older cars. Not sure I would be able to do today what I did back then. So today, you need a roommate.
It is very simple.
If someone choose to live like their income peers aka average American, they would save close to nothing. Average American saves less than 5% of their gross income.
The only way to save to do not live like your income peers.
My son lives with roommates. He saves 1 year of expense every year.
KlangFool
So it isn't like I lived the high life. I had a high savings rate and lived frugally. Making the point that housing and transportation are more expensive are more expensive now than 40 years ago. I suppose if I had never traveled and always had roommates, I would be retired by now. But there are quality of life issues as well.
A fool and his money are good for business.
Re: MarketWatch: Many young people shouldn’t save for retirement
Jags4186,Jags4186 wrote: ↑Sun Oct 02, 2022 10:35 am
Of course if the “average” is saving 5% that means many are saving more and many save nothing/have negative net worth. I don’t believe you’ll find too many people just saving 2 or 3% of their income. They either save nothing/spend more than they make, or save at a relatively regularly recommended 10-15% clip.
And of course many lower to mid income people don’t really need to save. A person making $35k-$40k a year as a secretary at town hall is getting social security and a pension. They probably are replacing 100% of their income without extra savings in retirement.
"Of course if the “average” is saving 5% that means many are saving more and many save nothing/have negative net worth."
The correct conclusion is
A lot of people are savings close to nothing. Only a small minority are saving a lot more than 5% in order for this to average to 5%.
For example, if 75% of the population saves nothing (0%), you need 25% of the population saves 15% to average out to 5%.
KlangFool
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Re: MarketWatch: Many young people shouldn’t save for retirement
Statistics like that can be so deceptive. Lots of people live off trusts, life insurance, pensions, disability, annuities, gifts, the state, legal settlements, dividends, rentals, sales of stock, lotto winnings, grants, spouses, spousal SS, divorce proceeds, inheritance, royalties, etc. They would probably all count as unemployed and not saving.
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Re: MarketWatch: Many young people shouldn’t save for retirement
I lived at home until I could save enough to move out, even when I had a low salary. I also drove a beater of a car until it literally died off a highway. I drive an old car today because mechanically it’s still in decent shape. To say I wasn’t responsible or self-sufficient is a bunch of garbage espoused by the consumerism agenda. Not all behaviors are actually good for one’s soul or life either. In the old days, you stayed home until you either earned enough, saved enough or got married. The other choice, is to rent in an undesirable part of the neighborhood. Another form of sacrifice if you can believe it. There’s no easy street for most people.nedsaid wrote: ↑Sun Oct 02, 2022 10:12 amA sad truth is that many young people might be finding it very difficult, if not impossible to save for retirement. A couple of things have changed since I was a young man. Two of the biggest and most important expenses are housing and transportation, unfortunately the low cost options for both have mostly been taken away. The reasons behind this are the topic for another thread but cheap housing and cheap transportation are much less available today. Reminds me of the guy who would run for Mayor of New York City as a candidate from The Rent Is Too Darned High Party.AnnetteLouisan wrote: ↑Sat Oct 01, 2022 6:31 am [Moved into a new thread from: In Retirement, You May Not Need to Spend So Much --admin LadyGeek]
MarketWatch has a piece today, the gist of which is that you don’t need to save until you are older. Not sure if it’s a similar argument to what is in the NYT article but it’s quite regrettable.
I’m sure it’s what many people prefer to hear, especially these days with inflation so high, but it’s very far from the truth. I could tell you stories about people I know who didn’t save regularly and consistently throughout their working lives but I don’t want to engage in poverty porn. Suffice it to say, their situations are bleak.
I had modest salaries through much of my career and I was able to save a lot because I lived in nice but lower cost housing and I mostly drove older cars. Not sure I would be able to do today what I did back then. So today, you need a roommate.
Are things difficult today? Yes, everything costs money, lots of it particularly related to healthcare, education and housing. Follow up to that is savings in general. The four horsemen. Notice I didn’t include vacation and entertainment in there. I’m not a fan of the YOLO crowd.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Re: MarketWatch: Many young people shouldn’t save for retirement
Priorities need to be defined. Sacrifices need to be made. The wants of today shouldn't sacrifice the needs of tomorrow.KlangFool wrote: ↑Sun Oct 02, 2022 10:36 amCaliforniastate,Californiastate wrote: ↑Sun Oct 02, 2022 10:31 am
The world doesn't change as fast as the media would like you to beliieve. Working from home and retiring at 40 isn't the new norm. Not saving for one's own retirement without a pension is a fools errand. Bills eventually need to be paid. Water seeks it's own level.
My income peers (Median annual income of 150K) do not have enough savings to pay for $600 high school club fee in one lump sum. They need an installment plan. Let's not talk about saving for retirement. We need to start with saving for the emergency fund for the average American first.
KlangFool
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Re: MarketWatch: Many young people shouldn’t save for retirement
I would not go so far as to say “lots”. I would say that observation is based upon the company you keep. I had worked at an old main line bank where I ran into many of the “moneyed” crowd which went back several generations - names that could be directly tied back to many brands you would be acquainted with by name or advertising. They were working to have gainful employment but not because they needed to. Out of 50,000 employees I’d say there were less than 1% of those sorts of folks, the rest were working to live.AnnetteLouisan wrote: ↑Sun Oct 02, 2022 10:45 am Statistics like that can be so deceptive. Lots of people live off trusts, life insurance, pensions, disability, annuities, gifts, the state, legal settlements, dividends, rentals, sales of stock, lotto winnings, grants, spouses, spousal SS, divorce proceeds, inheritance, royalties, etc. They would probably all count as unemployed and not saving.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Re: MarketWatch: Many young people shouldn’t save for retirement
nedsaid,
You had stated that you know that the world had changed. But, you refuse to acknowledge that in current environment, living with roommates may not be optional.
This is very normal. Average young American assumes that they could live like their parents. But, they do not realize that it is no longer true. Ditto for their parents. They do not realize that their children could no longer afford the same lifestyle.
KlangFool
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Re: MarketWatch: Many young people shouldn’t save for retirement
Jeez. Even I have limits to frugality.KlangFool wrote: ↑Sun Oct 02, 2022 10:55 amnedsaid,
You had stated that you know that the world had changed. But, you refuse to acknowledge that in current environment, living with roommates may not be optional.
This is very normal. Average young American assumes that they could live like their parents. But, they do not realize that it is no longer true. Ditto for their parents. They do not realize that their children could no longer afford the same lifestyle.
KlangFool
I suppose if I was doing this today, I would have roommates but that wasn't the situation I faced back then. We all adjust according to the times and make decisions among the options we have at the time.
Didn't want to get into it but only wanted to hint at it. Housing and transportation are expensive largely because of policy decisions that society has chosen to make. That is a whole other discussion and I will leave it that.
A fool and his money are good for business.
Re: MarketWatch: Many young people shouldn’t save for retirement
Yeppers. I still purchased plenty of music cd’s.Wannaretireearly wrote: ↑Sun Oct 02, 2022 2:49 am I get both sides of the coin. Spent plenty and regret nothing in my 20s. However the saving patterns I set then (max 401k + Roth) from day 1 helped me get where I am. My parents instilled the basic philosophy and this forum has done the rest from 30+.
It is very easy (for me) to fall into bad spending habits. Luckily housing and cars are 100% paid off and never went extravagant.
If I didn’t have the discipline earlier, my lifestyle creep would be at a different level now (Range Rover + massive mortgage). I don’t think it is at all easy to go from spendy in 20s to saver in 30s and 40s. Just behaviorally doesn’t work that way. Ymmv…
Re: MarketWatch: Many young people shouldn’t save for retirement
You can be creative, flexible, and industrious which will open up all kinds of opportunities.KlangFool wrote: ↑Sun Oct 02, 2022 10:55 amnedsaid,
You had stated that you know that the world had changed. But, you refuse to acknowledge that in current environment, living with roommates may not be optional.
This is very normal. Average young American assumes that they could live like their parents. But, they do not realize that it is no longer true. Ditto for their parents. They do not realize that their children could no longer afford the same lifestyle.
KlangFool
I bought a home before 30 and rented out part of it - the next home was a two family that I rented out the larger section.
My daughter and her fiancée bout a home that needed work and are just completing that now within about a year.
They are still doing savings but there are plenty of way to build wealth without saving larger % of your payroll.
Similarly, they both have alternate part time jobs unconnected to their main job for diverse incomes.
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Re: MarketWatch: Many young people shouldn’t save for retirement
https://www.pewresearch.org/fact-tank/2 ... epression/Grt2bOutdoors wrote: ↑Sun Oct 02, 2022 10:48 amI lived at home until I could save enough to move out, even when I had a low salary. I also drove a beater of a car until it literally died off a highway. I drive an old car today because mechanically it’s still in decent shape. To say I wasn’t responsible or self-sufficient is a bunch of garbage espoused by the consumerism agenda. Not all behaviors are actually good for one’s soul or life either. In the old days, you stayed home until you either earned enough, saved enough or got married. The other choice, is to rent in an undesirable part of the neighborhood. Another form of sacrifice if you can believe it. There’s no easy street for most people.nedsaid wrote: ↑Sun Oct 02, 2022 10:12 amA sad truth is that many young people might be finding it very difficult, if not impossible to save for retirement. A couple of things have changed since I was a young man. Two of the biggest and most important expenses are housing and transportation, unfortunately the low cost options for both have mostly been taken away. The reasons behind this are the topic for another thread but cheap housing and cheap transportation are much less available today. Reminds me of the guy who would run for Mayor of New York City as a candidate from The Rent Is Too Darned High Party.AnnetteLouisan wrote: ↑Sat Oct 01, 2022 6:31 am [Moved into a new thread from: In Retirement, You May Not Need to Spend So Much --admin LadyGeek]
MarketWatch has a piece today, the gist of which is that you don’t need to save until you are older. Not sure if it’s a similar argument to what is in the NYT article but it’s quite regrettable.
I’m sure it’s what many people prefer to hear, especially these days with inflation so high, but it’s very far from the truth. I could tell you stories about people I know who didn’t save regularly and consistently throughout their working lives but I don’t want to engage in poverty porn. Suffice it to say, their situations are bleak.
I had modest salaries through much of my career and I was able to save a lot because I lived in nice but lower cost housing and I mostly drove older cars. Not sure I would be able to do today what I did back then. So today, you need a roommate.
Are things difficult today? Yes, everything costs money, lots of it particularly related to healthcare, education and housing. Follow up to that is savings in general. The four horsemen. Notice I didn’t include vacation and entertainment in there. I’m not a fan of the YOLO crowd.
Looks like more young adults are living with their parents now than at any time since such data was collected (apparently 1976). At least in my experience, it is a lot more socially acceptable now to live with your parents as a legal adult then it was when I was growing up.
Re: MarketWatch: Many young people shouldn’t save for retirement
Peers are people similar to you - you need to find folks similar to you but with other good ideas rather than comparing yourself to folks that do not participate in any reasonable savings or wealth building.KlangFool wrote: ↑Sun Oct 02, 2022 10:36 amCaliforniastate,Californiastate wrote: ↑Sun Oct 02, 2022 10:31 am
The world doesn't change as fast as the media would like you to beliieve. Working from home and retiring at 40 isn't the new norm. Not saving for one's own retirement without a pension is a fools errand. Bills eventually need to be paid. Water seeks it's own level.
My income peers (Median annual income of 150K) do not have enough savings to pay for $600 high school club fee in one lump sum. They need an installment plan. Let's not talk about saving for retirement. We need to start with saving for the emergency fund for the average American first.
KlangFool
You will only learn and grow when you stretch - not when 'competing' with non performers.
Re: MarketWatch: Many young people shouldn’t save for retirement
I lived with my parents for what seemed like quite a while - about 35 years back or so.stoptothink wrote: ↑Sun Oct 02, 2022 11:21 amhttps://www.pewresearch.org/fact-tank/2 ... epression/Grt2bOutdoors wrote: ↑Sun Oct 02, 2022 10:48 amI lived at home until I could save enough to move out, even when I had a low salary. I also drove a beater of a car until it literally died off a highway. I drive an old car today because mechanically it’s still in decent shape. To say I wasn’t responsible or self-sufficient is a bunch of garbage espoused by the consumerism agenda. Not all behaviors are actually good for one’s soul or life either. In the old days, you stayed home until you either earned enough, saved enough or got married. The other choice, is to rent in an undesirable part of the neighborhood. Another form of sacrifice if you can believe it. There’s no easy street for most people.nedsaid wrote: ↑Sun Oct 02, 2022 10:12 amA sad truth is that many young people might be finding it very difficult, if not impossible to save for retirement. A couple of things have changed since I was a young man. Two of the biggest and most important expenses are housing and transportation, unfortunately the low cost options for both have mostly been taken away. The reasons behind this are the topic for another thread but cheap housing and cheap transportation are much less available today. Reminds me of the guy who would run for Mayor of New York City as a candidate from The Rent Is Too Darned High Party.AnnetteLouisan wrote: ↑Sat Oct 01, 2022 6:31 am [Moved into a new thread from: In Retirement, You May Not Need to Spend So Much --admin LadyGeek]
MarketWatch has a piece today, the gist of which is that you don’t need to save until you are older. Not sure if it’s a similar argument to what is in the NYT article but it’s quite regrettable.
I’m sure it’s what many people prefer to hear, especially these days with inflation so high, but it’s very far from the truth. I could tell you stories about people I know who didn’t save regularly and consistently throughout their working lives but I don’t want to engage in poverty porn. Suffice it to say, their situations are bleak.
I had modest salaries through much of my career and I was able to save a lot because I lived in nice but lower cost housing and I mostly drove older cars. Not sure I would be able to do today what I did back then. So today, you need a roommate.
Are things difficult today? Yes, everything costs money, lots of it particularly related to healthcare, education and housing. Follow up to that is savings in general. The four horsemen. Notice I didn’t include vacation and entertainment in there. I’m not a fan of the YOLO crowd.
Looks like more young adults are living with their parents now than at any time since such data was collected (apparently 1976). At least in my experience, it is a lot more socially acceptable now to live with your parents as a legal adult then it was when I was growing up.
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Re: MarketWatch: Many young people shouldn’t save for retirement
I wish I had had some financial education earlier in life beyond avoiding debt. Still, I think we started catching on soon enough to teach our children to get started saving/investing much earlier than we did. Their professional careers are going to be very different and perhaps harder in some ways than ours have been.
Telling young people to not begin saving/investing is terrible advice and probably unethical. I do see more and more mass media representations of basically working until you die as a "plan". I don't want that to be my or my children's only option. I might choose to work until I die but I don't want to be forced into that as the only way to survive.
Telling young people to not begin saving/investing is terrible advice and probably unethical. I do see more and more mass media representations of basically working until you die as a "plan". I don't want that to be my or my children's only option. I might choose to work until I die but I don't want to be forced into that as the only way to survive.
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Re: MarketWatch: Many young people shouldn’t save for retirement
I was out at 16 and never came back. All my (4) birth siblings were also out after high school and that seemed to be the case for pretty much everybody I grew up with in the late 90's to mid 00's. My younger step-sisters; my parents kicked out one earlier this year (at 28) and now are threatening to kick the other out (she's about to turn 20, they have VERY good reason to get her out of their home) - it seems as if all of their friends still live at home. I can't say my little circle is representative of the entire country, but the data seems to suggest that it (living with parents as adults) is getting more prevalent and accepted.smitcat wrote: ↑Sun Oct 02, 2022 11:33 amI lived with my parents for what seemed like quite a while - about 35 years back or so.stoptothink wrote: ↑Sun Oct 02, 2022 11:21 amhttps://www.pewresearch.org/fact-tank/2 ... epression/Grt2bOutdoors wrote: ↑Sun Oct 02, 2022 10:48 amI lived at home until I could save enough to move out, even when I had a low salary. I also drove a beater of a car until it literally died off a highway. I drive an old car today because mechanically it’s still in decent shape. To say I wasn’t responsible or self-sufficient is a bunch of garbage espoused by the consumerism agenda. Not all behaviors are actually good for one’s soul or life either. In the old days, you stayed home until you either earned enough, saved enough or got married. The other choice, is to rent in an undesirable part of the neighborhood. Another form of sacrifice if you can believe it. There’s no easy street for most people.nedsaid wrote: ↑Sun Oct 02, 2022 10:12 amA sad truth is that many young people might be finding it very difficult, if not impossible to save for retirement. A couple of things have changed since I was a young man. Two of the biggest and most important expenses are housing and transportation, unfortunately the low cost options for both have mostly been taken away. The reasons behind this are the topic for another thread but cheap housing and cheap transportation are much less available today. Reminds me of the guy who would run for Mayor of New York City as a candidate from The Rent Is Too Darned High Party.AnnetteLouisan wrote: ↑Sat Oct 01, 2022 6:31 am [Moved into a new thread from: In Retirement, You May Not Need to Spend So Much --admin LadyGeek]
MarketWatch has a piece today, the gist of which is that you don’t need to save until you are older. Not sure if it’s a similar argument to what is in the NYT article but it’s quite regrettable.
I’m sure it’s what many people prefer to hear, especially these days with inflation so high, but it’s very far from the truth. I could tell you stories about people I know who didn’t save regularly and consistently throughout their working lives but I don’t want to engage in poverty porn. Suffice it to say, their situations are bleak.
I had modest salaries through much of my career and I was able to save a lot because I lived in nice but lower cost housing and I mostly drove older cars. Not sure I would be able to do today what I did back then. So today, you need a roommate.
Are things difficult today? Yes, everything costs money, lots of it particularly related to healthcare, education and housing. Follow up to that is savings in general. The four horsemen. Notice I didn’t include vacation and entertainment in there. I’m not a fan of the YOLO crowd.
Looks like more young adults are living with their parents now than at any time since such data was collected (apparently 1976). At least in my experience, it is a lot more socially acceptable now to live with your parents as a legal adult then it was when I was growing up.
Re: MarketWatch: Many young people shouldn’t save for retirement
I was not out of HS by 16 but was working at that time. I did live at home during my PT attendance in college and for a few years after that all while I was working. My brother went into the Navy after HS so I was the only kid at home. Most of my friends were either full time at colleges away from home or moved out.stoptothink wrote: ↑Sun Oct 02, 2022 11:48 amI was out at 16 and never came back. All my (4) birth siblings were also out after high school and that seemed to be the case for pretty much everybody I grew up with in the late 90's to mid 00's. My younger step-sisters; my parents kicked out one earlier this year (at 28) and now are threatening to kick the other out (she's about to turn 20, they have VERY good reason to get her out of their home) - it seems as if all of their friends still live at home. I can't say my little circle is representative of the entire country, but the data seems to suggest that it (living with parents as adults) is getting more prevalent and accepted.smitcat wrote: ↑Sun Oct 02, 2022 11:33 amI lived with my parents for what seemed like quite a while - about 35 years back or so.stoptothink wrote: ↑Sun Oct 02, 2022 11:21 amhttps://www.pewresearch.org/fact-tank/2 ... epression/Grt2bOutdoors wrote: ↑Sun Oct 02, 2022 10:48 amI lived at home until I could save enough to move out, even when I had a low salary. I also drove a beater of a car until it literally died off a highway. I drive an old car today because mechanically it’s still in decent shape. To say I wasn’t responsible or self-sufficient is a bunch of garbage espoused by the consumerism agenda. Not all behaviors are actually good for one’s soul or life either. In the old days, you stayed home until you either earned enough, saved enough or got married. The other choice, is to rent in an undesirable part of the neighborhood. Another form of sacrifice if you can believe it. There’s no easy street for most people.nedsaid wrote: ↑Sun Oct 02, 2022 10:12 am
A sad truth is that many young people might be finding it very difficult, if not impossible to save for retirement. A couple of things have changed since I was a young man. Two of the biggest and most important expenses are housing and transportation, unfortunately the low cost options for both have mostly been taken away. The reasons behind this are the topic for another thread but cheap housing and cheap transportation are much less available today. Reminds me of the guy who would run for Mayor of New York City as a candidate from The Rent Is Too Darned High Party.
I had modest salaries through much of my career and I was able to save a lot because I lived in nice but lower cost housing and I mostly drove older cars. Not sure I would be able to do today what I did back then. So today, you need a roommate.
Are things difficult today? Yes, everything costs money, lots of it particularly related to healthcare, education and housing. Follow up to that is savings in general. The four horsemen. Notice I didn’t include vacation and entertainment in there. I’m not a fan of the YOLO crowd.
Looks like more young adults are living with their parents now than at any time since such data was collected (apparently 1976). At least in my experience, it is a lot more socially acceptable now to live with your parents as a legal adult then it was when I was growing up.
Re: MarketWatch: Many young people shouldn’t save for retirement
I agree trying to target the discussion at 'the average person' and endless arguing about the situation of that hypothetical person: pointless. Most statements make some kind of assumption (generally on this forum above median income white collar, college) and that's actually necessary to have a meaningful discussion IMO, some kind of narrowing down, though confusing if the assumptions aren't stated, and there will always be pushback that it's 'out of touch to not include everyone'. But below a certain level you don't really have to save much, at any age, as long as public programs of various kinds don't get greatly cut back (which is beyond the scope here). Social Security is much closer to what you were making, and even including 'working years' bottom and next to bottom quintiles of US households by income have about the same consumption (it's more public benefits and less labor income for the bottom one), and the third quintile isn't greatly more. 'How are you going to maintain your living standard in retirement?' is mainly, not exclusively but mainly, an above median issue. Then as you suggest all kinds of special personal situations enter into in for the portion of the population to which it has more general relevance. Not opining about rights/wrongs of public policy or 'other people'. Aggregate stats aren't very relevant.AnnetteLouisan wrote: ↑Sun Oct 02, 2022 10:45 am Statistics like that can be so deceptive. Lots of people live off trusts, life insurance, pensions, disability, annuities, gifts, the state, legal settlements, dividends, rentals, sales of stock, lotto winnings, grants, spouses, spousal SS, divorce proceeds, inheritance, royalties, etc. They would probably all count as unemployed and not saving.
Re: MarketWatch: Many young people shouldn’t save for retirement
There's nothing new in this "research." This was discussed previously in this thread: viewtopic.php?p=5794937
My thoughts on the paper discussed in that thread apply equally here:
The words "rational" and "optimal" are doing an awful lot of work in this paper. The notion of uncertainty, though, seems nonexistent - the word comes up exactly once, and it's a throwaway line to simply dismiss it altogether: "We also abstract from uncertainty about future wages, which may induce precautionary saving even at young ages." Oh and children (and presumably any number of other life/market/career events) are also simply "abstracted" away.
So, great, if a 22-year-old knows with certainty what his/her life and career, and interest rates (and maybe also stock market performance) will look like for the next 40+ years, then he/she doesn't need to save much at the beginning. But what advice do the authors of this "research" have for a 22-year-old in the reality-based world?
You can get any result you want by adjusting inputs, definitions, and assumptions. Whether the output is useful is a different question. In this case, I'm afraid it's worse than worthless.
My thoughts on the paper discussed in that thread apply equally here:
The words "rational" and "optimal" are doing an awful lot of work in this paper. The notion of uncertainty, though, seems nonexistent - the word comes up exactly once, and it's a throwaway line to simply dismiss it altogether: "We also abstract from uncertainty about future wages, which may induce precautionary saving even at young ages." Oh and children (and presumably any number of other life/market/career events) are also simply "abstracted" away.
So, great, if a 22-year-old knows with certainty what his/her life and career, and interest rates (and maybe also stock market performance) will look like for the next 40+ years, then he/she doesn't need to save much at the beginning. But what advice do the authors of this "research" have for a 22-year-old in the reality-based world?
You can get any result you want by adjusting inputs, definitions, and assumptions. Whether the output is useful is a different question. In this case, I'm afraid it's worse than worthless.
Re: MarketWatch: Many young people shouldn’t save for retirement
The economy needs them to spend. It needs them to save to buy houses from the older generation. It needs them to work until they die.Mike Scott wrote: ↑Sun Oct 02, 2022 11:35 am Telling young people to not begin saving/investing is terrible advice and probably unethical. I do see more and more mass media representations of basically working until you die as a "plan".
It falls apart if they don't do these things.
Maybe they don't want to do these things. Maybe they need to be persuaded.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
- CyclingDuo
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- Joined: Fri Jan 06, 2017 8:07 am
Re: In Retirement, You May Not Need to Spend So Much
Agree. Glad to see the merged version was rescinded.bobcat2 wrote: ↑Sat Oct 01, 2022 11:32 am So now this thread is discussing 3 articles on 3 different topics.
and from MarketWatch - Many young people shouldn’t save for retirementCyclingDuo wrote: ↑Sat Oct 01, 2022 11:00 am - In Retirement, You May Not Need to Spend So Much by Peter Coy (September 28, 2022)
- Retirement May Be Even More Expensive Than You Think by Paul Brown (July 13, 2014)
CyclingDuo
I nominate this thread as the most confused Bogleheads thread ever.
BobK
I did read the Market Watch article and wasn’t sure if I would find fault with it or not. All I could do was compare my own circumstances going back to my 20’s & 30’s. I graduated with student loan debt that had double digit interest rates attached to the loans. Living in a HCOL area (NYC) and keeping up with the payments scared me enough to live on the cheap and attack the loan payments in earnest which meant I wasn’t saving for retirement, house down payment, etc.. .
I managed to get the student loans paid off which allowed me to start saving and investing at age 28. Being a two income household helped us be able to save in our latter 20’s and throughout our 30’s.
I guess we will see how it works out in comparison for our own children as we made sure they graduated with no debt. We had them start saving in their late teens as well as throughout their 20’s with a portion of those savings in retirement accounts which is unlike the advice in the Market Watch article. We’ll see how it all works out, but color ourselves in favor of setting aside a certain percentage for retirement even in the early years. The article didn’t particularly change my mind on that bias.
CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel |
"Pick a bushel, save a peck!" - Grandpa
- AnnetteLouisan
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Re: MarketWatch: Many young people shouldn’t save for retirement
… “the state, SS, pensions, disability, spouses…” - I think saying lots of people live off these 5 is accurate statistically, regardless of your social circle. Add in the others on my list and it’s definitely lots. I didn’t even mention people who live off their parents or other family members.Grt2bOutdoors wrote: ↑Sun Oct 02, 2022 10:53 amI would not go so far as to say “lots”. I would say that observation is based upon the company you keep. I had worked at an old main line bank where I ran into many of the “moneyed” crowd which went back several generations - names that could be directly tied back to many brands you would be acquainted with by name or advertising. They were working to have gainful employment but not because they needed to. Out of 50,000 employees I’d say there were less than 1% of those sorts of folks, the rest were working to live.AnnetteLouisan wrote: ↑Sun Oct 02, 2022 10:45 am Statistics like that can be so deceptive. Lots of people live off trusts, life insurance, pensions, disability, annuities, gifts, the state, legal settlements, dividends, rentals, sales of stock, lotto winnings, grants, spouses, spousal SS, divorce proceeds, inheritance, royalties, etc. They would probably all count as unemployed and not saving.
How were you able to decide who of your employees was working to live?
Re: MarketWatch: Many young people shouldn’t save for retirement
I was aghast at the suggested approach for the life-cycle model.
* Live beneath your means
* Consistently save
* Enjoy life along the way
This.
* Live beneath your means
* Consistently save
* Enjoy life along the way