Thoughts on retirement savings in the US

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Discussions from another thread on retirement accounts got me thinking about the retirement savings data in the US. It’s a pretty sad state of affairs looking at the available data. Anecdotally conversations with friends and family of various ages and incomes support the data. I thought growing up poor it was only lower income people not saving. However as my wife and I have climbed up the socioeconomic ladder we’ve learned middle and upper middle class people aren’t much different. Across the board every generation and demographic, on average, is not doing well in this area. I figure most are investing very little and/or cash it out regularly.

Not looking for financial advice just curious on folks’ thoughts?
 
If you start saving/investing early, as soon as you start working, and invest wisely, then over your 40+ years of working career the power of compound earnings works for you and you'll have no problem accumulating enough wealth to retire. Even if you make a modest income and save only 10% of it, you will be fine so long as you start early and continue it throughout your career.

The problem is, most people don't do that. Instead of saving, they spend more than they make and get into debt. It's easy to get sucked into conspicuous consumption: you have to buy a fancy car/house/boat, get a fancy new phone every year, etc. simply because you can afford it. Why not drive a modest reliable car, live in modest housing, and save the difference? The longer you wait, the harder it is, until at some point it becomes impossible as there simply isn't enough time left.

The sad part is that the "ants" (people who did save) are probably going to pay for these "grasshoppers" (financially irresponsible and unprepared). It's not fair because the ants were responsible and lived modestly in order to prepare. But the grasshoppers outnumber the ants, and grasshoppers will vote for a living.
 
Agree
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While it seems lots of people invest in the stock market, I run into lots of people all the time that seem to just invest in whatever their company offers or just savings account or CDs.

I don't think people grasp how good/bad interest can be. Once they're heavily in debt it's almost impossible to dig out of it, and once you have some savings and the stock market goes up, you can make a large amount that keeps growing over the years.
 
Usually I am happy to be middle of the road / average. If I can beat that, all the better. But current stats on avg/median 401k amounts is such a low bar that beating it is not saying much.
 
If you start saving/investing early, as soon as you start working, and invest wisely, then over your 40+ years of working career the power of compound earnings works for you and you'll have no problem accumulating enough wealth to retire. Even if you make a modest income and save only 10% of it, you will be fine so long as you start early and continue it throughout your career.

The problem is, most people don't do that. Instead of saving, they spend more than they make and get into debt. It's easy to get sucked into conspicuous consumption: you have to buy a fancy car/house/boat, get a fancy new phone every year, etc. simply because you can afford it. Why not drive a modest reliable car, live in modest housing, and save the difference? The longer you wait, the harder it is, until at some point it becomes impossible as there simply isn't enough time left.
My experience has been lower classes do not save or invest at all. Believing winning the lottery is the only avenue to wealth which is what I was told growing up. Middle classes do some investing but very little. Typically the employer match only. Most end up cashing out to fund other priorities (I use the term loosely.) So they are saving just not long term.
 
Usually I am happy to be middle of the road / average. If I can beat that, all the better. But current stats on avg/median 401k amounts is such a low bar that beating it is not saying much.
Just beating the average doesn't mean anything if the average amount means eating beans in retirement. I wouldn't even bother looking at what the average is, the key number is to figure out how much you need in retirement and aim for not, not what other people have as that's a woefully low number.
 
Just beating the average doesn't mean anything if the average amount means eating beans in retirement. I wouldn't even bother looking at what the average is, the key number is to figure out how much you need in retirement and aim for not, not what other people have as that's a woefully low number.
Which is why I said it was such a low bar—implying it did not mean much. In other areas of life, being average means being normalx-here, it would mean normal too but not in a healthy way.
 
My experience has been lower classes do not save or invest at all. Believing winning the lottery is the only avenue to wealth which is what I was told growing up. Middle classes do some investing but very little. Typically the employer match only. Most end up cashing out to fund other priorities (I use the term loosely.) So they are saving just not long term.
Yeah, the people I knew that bought lottery tickets all the time never seemed to have any money. One of them did tell me once they won 5k but I think what they didn't tell me was how much they had spent to win that 5k. They were the type that bought lottery tickets all the time, I'm going to guess maybe $50-$100 a week or more? They always seemed to be buying scratch tickets.

The thing that most people miss out on is that once you have a nice nest egg, it really grows in the later years, probably not that much in the first 5-10 years. But that's about the time period when people cash out their savings for a car/boat/divorce or other issues like unemployment. There's a big difference in savings between one that's been accumulating for 20-30-40 years vs one that has had 10-15 years less to grow.
 
Some folks impulsively buy crap they really don’t need and budget very little towards retirement. Always have the latest and greatest Apple iPhone but don’t consider where they will be and their financial picture in 35 years.

I do feel sorry for people with an illness , family member with illness or unexpected disaster like tornadoes in Kentucky, fires in California, etc... that was beyond their control and can easily wipe out their retirement savings.

Here in Florida I see lots of fancy trucks pulling fancy boats, I wonder how their retirement situation looks ?

Wife and I have:
2 company pensions
2 company 401Ks
2 IRAs
2 brokerage accounts
2 Social Securities down the road
1 military pension
.
 
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Yeah, the people I knew that bought lottery tickets all the time never seemed to have any money. One of them did tell me once they won 5k but I think what they didn't tell me was how much they had spent to win that 5k. They were the type that bought lottery tickets all the time, I'm going to guess maybe $50-$100 a week or more? They always seemed to be buying scratch tickets.

The thing that most people miss out on is that once you have a nice nest egg, it really grows in the later years, probably not that much in the first 5-10 years. But that's about the time period when people cash out their savings for a car/boat/divorce or other issues like unemployment. There's a big difference in savings between one that's been accumulating for 20-30-40 years vs one that has had 10-15 years less to grow.

I can't speak to other states but I can NY. An acquaintance was a former NYS attorney for the NY lottery. Inventory control was a huge deal for obvious reasons. There was an underbelly to this control as well. More winners were purposely sent to those areas in economic decline. The enticement for more sales to those who can least afford it was the goal. Can't say they still do that to this day, but ....

For me, I knew I would be in LE for about 20-25 years before new career time. I put away 15-20% of before-tax salary yearly. I spread between 45% Vanguard Wellington (stable since about 1920's) Admiral shares; 25% large cap US; 20% mid-cap US; and 10% US bond fund. I'm sure a pro could have gotten me a greater overall return, but I tell ya, the fees in my accounts are minuscule and that extra money added in over 20 years adds up.

I'm interested to see what CD rates become after the 3 or 4 2022 Fed interest rate increases. I would like to set up 50k or so creating a ladder of CD so once established, each month one is maturing. Need the $$ take it, if not roll it back into another term. The interest rates for a while have made this not so worth while.
 
I put away 15-20% of before-tax salary yearly. I spread between 45% Vanguard Wellington (stable since about 1920's) Admiral shares; 25% large cap US; 20% mid-cap US; and 10% US bond fund. I'm sure a pro could have gotten me a greater overall return, but I tell ya, the fees in my accounts are minuscule and that extra money added in over 20 years adds up.
The data suggest otherwise actually. Indexing has historically preformed better than the vast majority of actively managed accounts.
 
What amazes me is some of the poor financial advice that is given to people. My personal favorite bad advice that I’ve heard muddled from several people is “There is no point in saving if you are in debt.” I’m not sure where they are hearing that, but it is garbage advice.

I especially heard that advice earlier on in my career from people with student loan debt. Many of whom weren’t putting anything away, not even taking the 5-10% 401K match!

Now, in our mid-30s and about 10-12 years into our careers, sure they have a bit less student loan debt ($30-40K), but they only have $20-50K saved for retirement (if they are lucky!). Those of us who started saving earlier and deprioritized debt repayment have a bit more student loan debt ($70-80K) but also have roughly half a million in savings.
 
That sounds like an excuse to keep spending and building more debt.
I'd agree.

I wonder if it's said by those who don't trust the market, and thus wouldn't be taking advantage of growth there. If one was limited to whatever small growth was offered at the local bank, then no wonder why saving would seem foolish, as a loan has faster "growth" than a savings account.
 
For me, I knew I would be in LE for about 20-25 years before new career time. I put away 15-20% of before-tax salary yearly. I spread between 45% Vanguard Wellington (stable since about 1920's) Admiral shares; 25% large cap US; 20% mid-cap US; and 10% US bond fund. I'm sure a pro could have gotten me a greater overall return, but I tell ya, the fees in my accounts are minuscule and that extra money added in over 20 years adds up.

I'm interested to see what CD rates become after the 3 or 4 2022 Fed interest rate increases. I would like to set up 50k or so creating a ladder of CD so once established, each month one is maturing. Need the $$ take it, if not roll it back into another term. The interest rates for a while have made this not so worth while.
That's actually not too bad of a mix. My only advice would be to dump the Vanguard Wellington and just go with a pure S&P 500 index fund or maybe a Nasdaq or total stock market fund. Compared to the S&P 500, it has lagged badly even looking at the 5-10 year return. I do remember hearing about that fund and it was probably great in its day but it doesn't seem to be that good anymore.

I would also dump the bond fund, I gave up on them years ago, they never did what they claimed to do and all you were really doing was locking in a lower rate of return. But if you're close to retirement, there's probably no point getting rid of it. Basically they're supposed to do better when the market was down but the bond funds I had pretty much did the same thing and tracked the stock market only the returns were lower and when the market was down, they were also down so I got rid of bond funds as that seemed to just lock in a low rate of return.
 
CD’s are at a pathetically low rate….0.7% is losing money for you but the banks are licking their chops. They give you .7%, inflation is 6% off the bat your down 5%. Banks turn around and lend it out a 3-4%. There are funds that target your retirement year. The drawback to them is the high management fee. I used their example and invested in funds that mimic the target funds and only change the portfolio every 5 yrs. I have had great success this way.
 
What amazes me is some of the poor financial advice that is given to people. My personal favorite bad advice that I’ve heard muddled from several people is “There is no point in saving if you are in debt.” I’m not sure where they are hearing that, but it is garbage advice.

I especially heard that advice earlier on in my career from people with student loan debt. Many of whom weren’t putting anything away, not even taking the 5-10% 401K match!

Now, in our mid-30s and about 10-12 years into our careers, sure they have a bit less student loan debt ($30-40K), but they only have $20-50K saved for retirement (if they are lucky!). Those of us who started saving earlier and deprioritized debt repayment have a bit more student loan debt ($70-80K) but also have roughly half a million in savings.
I tend to agree. Not an advocate of debt by any means. However I lean toward investing earlier rather than paying off debt faster. Neither is wrong so long as you eventually do both.
 
I can't speak to other states but I can NY. An acquaintance was a former NYS attorney for the NY lottery. Inventory control was a huge deal for obvious reasons. There was an underbelly to this control as well. More winners were purposely sent to those areas in economic decline. The enticement for more sales to those who can least afford it was the goal. Can't say they still do that to this day, but ....

For me, I knew I would be in LE for about 20-25 years before new career time. I put away 15-20% of before-tax salary yearly. I spread between 45% Vanguard Wellington (stable since about 1920's) Admiral shares; 25% large cap US; 20% mid-cap US; and 10% US bond fund. I'm sure a pro could have gotten me a greater overall return, but I tell ya, the fees in my accounts are minuscule and that extra money added in over 20 years adds up.

I'm interested to see what CD rates become after the 3 or 4 2022 Fed interest rate increases. I would like to set up 50k or so creating a ladder of CD so once established, each month one is maturing. Need the $$ take it, if not roll it back into another term. The interest rates for a while have made this not so worth while.
I invest similarly...use vanguard index funds (s&p 500, health care, energy, total stock market, bond fund). Low fees and it’s tough to beat the market for even professionals. It’s turned in an impressive 25% return the last few years, can’t complain about that. I just do 10% of my salary. On top of that I have a pension coming that should pay me 65% of my salary. I also have a federal pension coming that will pay me (not much), maybe $7,000 grand a year. And I’ll have something coming in from social security. I have rental property too, but I’m not loving that life. Can’t stand the stress of worrying about things breaking, etc.

Where I screwed up is I bought a mini mansion last year. The thing is 20 years old and it’s killing me. Big mistake. $24,000 dollar roof last summer. Looks like I have some sort of chimney/heating problem now. Need two new AC units this spring, that’ll run at least $15,000 grand. Taxes are over a $1,000 a month. Heat is costing somewhere around $500 a month. Big mistake. The only saving grace is it’s a hot town and in the past year I’ve owned it the value has increased $200,000...but how long is that going to last?

In the end I guess it doesn’t really matter. Man plans, god laughs.
 
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