savings, net worth, retirement-what do you do?
I have to apologize to a few here because what was a discussion about leasing cars turned into much more. I did enjoy the conversation and so I thought I would bring it to the group overall.
This article from CBSmarketwatch.com mentioned that most folks weren't saving enough before the big bull market and now with the big bear market, they STILL aren't saving enough to retire on time. When you consider how precarious Social Security is likely to be, this becomes very scary.
CBSmarketwatch
Some choice quotes...
Next...
net worth
This site has 1998 data about net worth. How do you think you are doing?
It makes an interesting point..
This is all good and well except only 30% have a 401k and what percentage of them max it out?
Maybe you say, well but I can't save because of my income. Use this calculator to see what your net worth should be based off your age and income. It also has some cool quotes from "The Millionaire Next Door"
net worth calculator
It also mentions seven factors repeatedly used by millionaires.
1. They live well below their means.
2. They allocate their time, energy, and money efficently, in ways conducive to building wealth.
3. They believe that financial independence is more important than displaying social status.
4. Their parents did not provide economic outpatient care. [(EOC) (i.e., parents did not provide substantial cash gifts to their children)]
5. Their adult children are economically self-sufficient.
6. They are proficient in targeting market opportunities.
7. They choose the right occupation."
Sort of like how people in the losing weight thread aren't mentioning their actual weights, body fat percentages, you don't have to say any details to participate.
I tend to be VERY frugal. I try to live well below my means and often find that others place artificial limits on what they MUST spend. This race to keep up with the Jones gets even worse when no one is saving towards retirement. The Jones have a new boat, toybox trailer, and big SUV to haul it around with, but they have no retirement contributions.
Me, I pretty much refuse to get into the race. I'll putt around in a paid for item before I'll finance something. That doesn't mean I necessarily go around with less, but I do take a decidedly alternative path.
However I see lots of folks that spend large quantities of their income each month on really nothing in particular. I'm young enough to still now quite a few DINKS. (double income no kids) They seem to blow hundreds a month on car payments, DVD's, videogames, toys (boats, jetskis, quads, etc.) They all make very good money income-wise. (I know plenty who are say 70-100k+ in their income. However it seems almost no one invests, just consumes. Credit finances everything to boot.
I don't have a 401k, though at one time I had a 403b which is the means of supplimenting a public employee pension, which is what I happen to have and to which I have to contribute. I dissolved the 403b after I decided to invest for myself instead of getting a smaller return for letting others invest for me.
As the one article mentioned, it isn't hard to get into the race, but it seems like many don't educate themselves, or care to make the sacrifices to get to their retirement.
If there is little to nothing of social security left after the boomer generation, and likewise most people are under-accumulating wealth because they are consuming instead of saving for retirement, that adds up to a pretty ugly scenario in my book. Likewise if only the rich save a true amount of their income, and thus become richer. Does that really mean they are being oppressive? If I open a Starbucks and 1000 fools a day give me the $3 they should have put towards their 401k's at the tune of $100 per month, am I oppressive? When I put not only their $100 instead of spending it, and add my own savings, am I oppressing them?
Are you saving what you should? Are you oppressing anyone?
If you get to your retirement goals and others don't, who's fault is it?
Nick
This article from CBSmarketwatch.com mentioned that most folks weren't saving enough before the big bull market and now with the big bear market, they STILL aren't saving enough to retire on time. When you consider how precarious Social Security is likely to be, this becomes very scary.
CBSmarketwatch
Some choice quotes...
Quote:
So listen closely: If you're serious about retiring, you need a quantum shift in your brain. America needs to start putting aside twice (that's right, double) what it's been saving, at least 8 percent of income. Maybe then you'll be able to retire, maybe not early, but sometime.
Start thinking like the wealthiest Americans. A U.S. Trust Corp. study says that on average, they save 22 percent of their income. You gotta think different if you want to retire.
So listen closely: If you're serious about retiring, you need a quantum shift in your brain. America needs to start putting aside twice (that's right, double) what it's been saving, at least 8 percent of income. Maybe then you'll be able to retire, maybe not early, but sometime.
Start thinking like the wealthiest Americans. A U.S. Trust Corp. study says that on average, they save 22 percent of their income. You gotta think different if you want to retire.
Next...
Quote:
But the gods and the government won't do it for you ... unless you cooperate. Increased limits on 401(k)s and IRA is no panacea, because as we've learned from the Employee Benefits Research Institute EBRI, only 35 percent of Americans are saving enough. The net assets of the average America are only $35,000, largely in home equity.
Moreover, EBRI says most middle-income Americans (making roughly $30,000 to $60,000 a year) aren't even taking advantage of what's offered now. A whopping 49 percent have no retirement accounts. None! Only 30 percent have a 401(k) and just 12 percent have an IRA, while another 9 percent have both a 401(k) and an IRA.
But the gods and the government won't do it for you ... unless you cooperate. Increased limits on 401(k)s and IRA is no panacea, because as we've learned from the Employee Benefits Research Institute EBRI, only 35 percent of Americans are saving enough. The net assets of the average America are only $35,000, largely in home equity.
Moreover, EBRI says most middle-income Americans (making roughly $30,000 to $60,000 a year) aren't even taking advantage of what's offered now. A whopping 49 percent have no retirement accounts. None! Only 30 percent have a 401(k) and just 12 percent have an IRA, while another 9 percent have both a 401(k) and an IRA.
net worth
This site has 1998 data about net worth. How do you think you are doing?
It makes an interesting point..
Quote:
Fifth, it doesn?t take much to be in the race. Many of today?s workers will accumulate assets that will put them firmly in the top 5 or 10 percent of households simply by maxing out on their 401(k) plan.
Fifth, it doesn?t take much to be in the race. Many of today?s workers will accumulate assets that will put them firmly in the top 5 or 10 percent of households simply by maxing out on their 401(k) plan.
This is all good and well except only 30% have a 401k and what percentage of them max it out?
Maybe you say, well but I can't save because of my income. Use this calculator to see what your net worth should be based off your age and income. It also has some cool quotes from "The Millionaire Next Door"
net worth calculator
It also mentions seven factors repeatedly used by millionaires.
1. They live well below their means.
2. They allocate their time, energy, and money efficently, in ways conducive to building wealth.
3. They believe that financial independence is more important than displaying social status.
4. Their parents did not provide economic outpatient care. [(EOC) (i.e., parents did not provide substantial cash gifts to their children)]
5. Their adult children are economically self-sufficient.
6. They are proficient in targeting market opportunities.
7. They choose the right occupation."
Sort of like how people in the losing weight thread aren't mentioning their actual weights, body fat percentages, you don't have to say any details to participate.
I tend to be VERY frugal. I try to live well below my means and often find that others place artificial limits on what they MUST spend. This race to keep up with the Jones gets even worse when no one is saving towards retirement. The Jones have a new boat, toybox trailer, and big SUV to haul it around with, but they have no retirement contributions.
Me, I pretty much refuse to get into the race. I'll putt around in a paid for item before I'll finance something. That doesn't mean I necessarily go around with less, but I do take a decidedly alternative path.
However I see lots of folks that spend large quantities of their income each month on really nothing in particular. I'm young enough to still now quite a few DINKS. (double income no kids) They seem to blow hundreds a month on car payments, DVD's, videogames, toys (boats, jetskis, quads, etc.) They all make very good money income-wise. (I know plenty who are say 70-100k+ in their income. However it seems almost no one invests, just consumes. Credit finances everything to boot.
I don't have a 401k, though at one time I had a 403b which is the means of supplimenting a public employee pension, which is what I happen to have and to which I have to contribute. I dissolved the 403b after I decided to invest for myself instead of getting a smaller return for letting others invest for me.
As the one article mentioned, it isn't hard to get into the race, but it seems like many don't educate themselves, or care to make the sacrifices to get to their retirement.
If there is little to nothing of social security left after the boomer generation, and likewise most people are under-accumulating wealth because they are consuming instead of saving for retirement, that adds up to a pretty ugly scenario in my book. Likewise if only the rich save a true amount of their income, and thus become richer. Does that really mean they are being oppressive? If I open a Starbucks and 1000 fools a day give me the $3 they should have put towards their 401k's at the tune of $100 per month, am I oppressive? When I put not only their $100 instead of spending it, and add my own savings, am I oppressing them?
Are you saving what you should? Are you oppressing anyone?
If you get to your retirement goals and others don't, who's fault is it?Nick
Comments
we started with dual incomes as of last week, so it's going to take a bit of getting used to, but we should start seeing our net value skyrocket. especially if we live anything like we have been.
One of the problems is Social Security itself. Our founding fathers never intended the government to help provide for our retirement. Phasing it out would be nearly impossible, though. From my understanding, the program wasn't even supposed to be permament when it was created. It would be nice if I didn't pay $100 out of every check to fund SS. I could invest that money myself.
If SS ends before I collect it, I will honestly and truly SUE the government. My taxes offer an implicit guarantee of future benefit. If I don't see it, I swear to you...there will be a lawsuit. I don't plan on collecting it until at least 70. I'm sure that's where it will be by my time to collect.
I contribute 7.5% of my salary to my public school retirement. Plus the IRA....plus Social Security when it's time. I should be OK. I'll retire at 87% of my highest salary for life. Not bad.
Originally posted by trumptman
I don't have a 401k, though at one time I had a 403b which is the means of supplimenting a public employee pension, which is what I happen to have and to which I have to contribute. I dissolved the 403b after I decided to invest for myself instead of getting a smaller return for letting others invest for me.
Although you are my personal finance guru, trumptman, I have to question what seems to be your total reliance on real estate for accumulating wealth.
1. Stocks have traditionally had substantially higher growth than real estate
2. Real estate may have some tax advantages, but 401(k)/403(b) plans are by definition 100% tax shelters
3. Real estate investment are great because you get to use Other People's Money, but most retirement plans do have matching funds
4. Real estate has bubbles just like the stock market, and I'd hate to be dependent on one market segment when I'm 45 and it burst
I never want to "retire "
Are you crazy..
Retirement is for old people who have given up on life..
just joking...the big 40.
I am a painter now, I work everyday & deeply love it.
God willing I will be painting till I am 110 years old.
& then I will have some wild sex with a sheep-droid & die with a paintbrush in my hand....
Originally posted by aquafire
Who gives a fig.
I never want to "retire "
Are you crazy..?
Retirement is for old people who have given up on life..
just joking...I " retired " from teaching & Ed-Psych when i reached the big 40.
I am a painter now, I work everyday & deeply love it.
God willing I will be painting till I am 110 years old.
& then I will have some wild sex with a sheep-droid & die with a paintbrush in my hand....
As far as money goes.....I live like a church mouse, but who cares? ..you can't take it with you anyway.!
Originally posted by BRussell
Although you are my personal finance guru, trumptman, I have to question what seems to be your total reliance on real estate for accumulating wealth.
1. Stocks have traditionally had substantially higher growth than real estate
2. Real estate may have some tax advantages, but 401(k)/403(b) plans are by definition 100% tax shelters
3. Real estate investment are great because you get to use Other People's Money, but most retirement plans do have matching funds
4. Real estate has bubbles just like the stock market, and I'd hate to be dependent on one market segment when I'm 45 and it burst
I suppose you would question Gates on his overreliance on Microsoft stock to accumulate wealth?
I don't know if I will continue to invest in ONLY Real Estate forever. Perhaps someday I will "diversify" but for I have to create that base that drives my growth and I am doing it in Real Estate.
Stocks do have higher growth but you have to consider how they measure growth. Suppose for example that real estate grew 5% in one year, and stocks grew 10%. If I had $30,000 invested in the stock market, I now have $33,000 when matching the market growth.
However with real estate the 5% is price appreciation. Say I used my $30,000 and it purchased two $150,000 houses with 10% down. They have appreciated 5% which means the houses combined are now worth a total of $315,000 or $157,500 each. In otherwords for putting in $15,000 each house has gone up $7,500. What is my return on my initial investment? 50%!
So yes they say the houses only returned 5% but that is based on the total price, not my money invested. I made a 50% gain based off my own money invested. Likewise this is just the first year. What would the final return be on that initial $15,000 after say 20 years?
I suppose I could get a 50% gain in the stock market, but I simply am not as well educated with regard to picking stocks to get that kind of growth. I simply apply what I know.
Real Estate is not tax sheltered as well as 401k's but 401k's are not inflation hedged like real estate. My rents will pretty much follow inflation. My $1000 rent charged today in 2003 dollars will likely be the equivelent to that in inflation adjusted dollars in the future. I don't have a link to calculate what a dollar today will have to equal when I retire but the rents should adjust accordingly. For example my parents bought their house in 1978. The mortgage payment was large by 1978 standards because it was $208 dollars a month. In 2003 that looks miniscule thanks to inflation.
To get the same thing out of a 401k, I would have to grow my 401k a fair amount each year and hope that the power of compounding works. (It does, don't worry) However what most folks really hope for is that they have enough money, and enough growth at the end that they can live off the interest and not have to draw down their principle.
This is where I feel I have a distinct advantage in Real Estate. Suppose you have a million dollars in your 401k when you retire. If you get a 5% return that year on your investments, you get $50,000 to live on for that year without drawing down your principle. Considering your house is paid off, etc that should get you by, but what the heck is $50,000 going to be equivelent to 25-30 years from now? Will it be like $25k today? That to me seems very limiting. You have to find a way to live off the growth.
The difference with real estate, the rents. My real estate can be worth a million in todays dollars and be paid off. It will continue to grow and appreciate. Instead of trying to live off that growth, I can live off the inflation adjusted rents.
So I have a million and you have a million. Each goes up 5%. You have to live off your 5%. I keep the 5% and live off the rents. That is why I like real estate.
You are correct that 401k's have matching funds. However while I accumulate wealth with real estate, I still have a job as a teacher. That job has me contribute to a pension which the state has to pay out to me later at a percentage of my highest 3 years averaged. I forget the percentage but I don't think it is as high as SDW's 87%. For me I think it is about 75%. So I will have a pension guaranteed for life. Since I have the real estate I can likely choose a lower pension pay out, but higher spousal survivor payout when I die.
The upside of the pension is it is guaranteed in payout. The downside of course is that the benefit is gone once we (wife and I) die. 401k's and 403b's are better in that regard but they are not guaranteed in their payouts and growth. However they are yours and you can pass them on.
So I think that I get the best of both worlds for now. I have a guaranteed benefit until I die. The real estate should easily cover the 25% of missing income lost due to retiring. In fact according to my planning the pension will be the supplimental income and the real estate rents should easily be several times more per month. We can pass on the real estate to our children and grandchildren since we cannot pass on the pension. Pretty good mix.
Last point, real estate can have bubbles like stocks but it would be pretty hard to have the kind of fall in prices that stocks can get. We have seen and read about (hopefully not experienced) stocks going from $100 a share to under a dollar. Yes I suppose I could get in trouble if houses go from $100,000 to $1,000 but I don't consider that likely to happen.
Nick
Originally posted by Towel
That wealth calculator breaks down at low ages. According to it, an "average" wealth accumualtion for me exceeds the sum total of all my income to date. All three years worth, post-college, anyway. But then, I'm one of these freaks who's going to be educated 'till I'm about 40, then finally get a job that will let me live the good life and save for retirement at the same time.
Towel, I went to college. You went to college. However you do realize that not everyone does though right?
Assuming you graduated at 22 and are now post-college 3 years, say 25, you have only been working 3 years at that pay level. However others have been working since 18 years old which would give them 7 years of work and wealth accumulation.
I had several friends who had already purchased houses before I graduated in 5 years. (I is smartified) Thus they were accumulating wealth while I was accumulating student loans.
Nick
I don't understand 401k-ese.
Nick
OUCH!
planning
Nick
Originally posted by trumptman
However I see lots of folks that spend large quantities of their income each month on really nothing in particular. I'm young enough to still now quite a few DINKS. (double income no kids) They seem to blow hundreds a month on car payments, DVD's, videogames, toys (boats, jetskis, quads, etc.) They all make very good money income-wise. (I know plenty who are say 70-100k+ in their income. However it seems almost no one invests, just consumes. Credit finances everything to boot.
Its interesting that you mention this because my wife and I actually are DINKS. We also plan on staying that way for the rest of our lives (well the no kid part at least - but we could start a whole new thread on that) - and I think we're the exact opposite of what you see. We put away around 30% of our yearly salary and most of our friends are putting massive amounts away 40%+ (which is crazy to me).
I thought people our age (mid 20s) were getting smarter, but I guess there's still a lot of them out there that throw away all their money.
Considering that we don't have to save for a college fund, our student loans are gone and we won't ever have the extra expense of kids, I think our 30% is probably on the safe side of things.
Thanks for the links Nick. They've been very informative.
I must admit that it's been increasingly more confusing as one gets older and has to deal with real world finances (i.e. mortgages and bills).
Would be nice to be in my twenties again!
And a close friend of mine has reminded me that even though it is important to plan, one should remember to live. Although it's a tough balance. I never know how much I should be in debt...or if I should ever be.
As they say, you can't take it with you when you die.
And I sometimes wonder if I will ever finish those bloody mortgage payments.
Lately I've been thinking more and more about enjoying life for the moment. That happens when you start heading towards 40!
Originally posted by trumptman
Assuming you graduated at 22 and are now post-college 3 years, say 25, you have only been working 3 years at that pay level. However others have been working since 18 years old which would give them 7 years of work and wealth accumulation.
[irrelevant]
You're absolutely right, but the wealth calculator doesn't adjust age at all. If you enter "18" it still uses the same formula and makes you feel really far behind before you even get started. Actually, the formula makes little sense. (Age * income) is supposed to give some estimate of your lifetime earnings, and 10% of that should be your wealth. But not adjusting for working years means that it assumes your wealth accumulates relatively more slowly as you age, which is the opposite of the usual pattern. The skew is even greater since most people tend to earn more (and save more - absolutely and relative to income) as they get older. If you graph out the calculator's wealth accumulation over time (origin = age of first job and zero wealth), it would be a straight line that intersects the y-axis at some large number (income * age of first work). In reality, it's usually more of an exponential curve that starts at the origin and really picks up speed as you enter middle age. Only when the two lines intersect (40-50 for most people?) would the calculator be of any worth. It overestimates wealth before that and underestimates it after. Bah. Silly to spend time thinking about the flaws in a pop-economics formula, but I couldn't help myself. Nice way to wake up the brain in the morning, at least.
[/irrelevant]
Originally posted by SDW2001
Our founding fathers never intended the government to help provide for our retirement. Phasing it out would be nearly impossible, though. From my understanding, the program wasn't even supposed to be permament when it was created. It would be nice if I didn't pay $100 out of every check to fund SS. I could invest that money myself.
Our founding fathers also had slaves and lots of land and made real distinctions between landed gentry and workers, serrvants and slaves.
they also never thought about going to the moon . . . should we therefor do away with NASA . . . after all that comes out of my paycheck.