<p>Were retirement accounts and brokerage accounts not included in the numbers people have saved for retirement?</p>
<p>In 1975, you could buy a decent place for 100,000 in SF. But that is 38 years ago. That’s a long time ago. Shocking, isn’t it?</p>
<p>I think that tax rates will rise over time which makes the Roth attractive. I really don’t care about the current tax hit; ideally the gains will be a lot more than the contributions.</p>
<p>“The S&P 500 is up about 130% in the last four years.”</p>
<p>And it’s down 5% over the last five years. For those with the ability and inclination to “buy and sell the right investments at the right time” it’s been a great twenty years. The overwhelming proportion of the population doesn’t fall into that category.</p>
<p>If people were good at valuation and market timing then there wouldn’t be any underwater mortgages … would there?</p>
<p>Even if you own free & clear or are keeping up with the mortgage payments, it doesn’t mean one can take profit out of a potential sale.</p>
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<p>I looked through the citation in the Senate report (citation #2) and could not find the mention of the $10,000 figure at all. I did find other numbers though, but they typically had caveats. I saw the term “savings and investments” used - I don’t know whether or not that included retirement accounts. I saw a caveat for savings in that it didn’t include home equity or pensions in one number. The citations in the Senate report were quite poor - they just cited a document or a website with a bunch of documents or a website that doesn’t exist. The exact title and a page number would be helpful - instead I have to go through the whole article to find something that isn’t there.</p>
<p>BTW, this is something that I typically run into with articles like this and why I want to know the definitions of the terms being thrown around. Sometimes you can’t get a definition of the terms which makes the article of little use for an educated discussion.</p>
<p>We’ve suspended contributing to my DH’s 403B while kid is in college to pay for his tuition but are still funding a Roth plus DH has a defined pension plan which he only had to contribute to the first 10 years when he became fully vested. Of course, it’s possible the NY State gov’t pension system might someday not exist, but he’s close to retirement now and the state has changed it for those hired after him several times and just added a new tier for future hires.</p>
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<p>My perusal of the five-year chart says that you would have been fine with dollar-cost-averaging over the last five years.</p>
<p>But I do think that everyone has to manage their investments, as painful as it may be to learn how to do that. Or trust the professionals. I have a hard time trusting the professionals myself.</p>
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<p>There might be. I don’t like the poor liquidity and transaction costs of the housing market. Some do but I like to be able to hit Sell at Market when I want out. My opinion is that you can sell anything at some clearing price. You might just not be happy with the price.</p>
<p>My first thoughts about pension were 35 years ago when I worked in Asia and some of us were discussing pension contributions in Singapore which used to be huge - perhaps 4 times the employer/employee SS contributions in the US at that time. </p>
<p>It was then that someone explained a concept which made a lot of sense - assume you work for 35 years and need to plan for retirement for a similar period. On a very rough basis, assume a dollar you save during your productive years keeps its value when you cash it in, ie. you can buy roughly the same basket of bread, gas, etc. when you use it, not much more or less. Get a rough feel of how much less you’ll use per year post retirement compared to your working era - say half. This leads to an approx calculation that for every $300 you earned, you use $200 and put aside $100 for the numbers to work out. (In Singapore, at that time, I believe the rate was a bit higher, but for young people). Of course the balance can be tweaked by working more years (hence decreasing the # retirement years too), looking at other considerations like the nature of expenses pre- and post (eg. house & kids expenses), tax rates, etc. but the bottom line was I began to believe that putting aside 15-20% (or even less than that if only through Soc Sec) was based on overly optimistic assumptions. </p>
<p>It’s always a hard puzzle - does a young person who’s real (inflation adjusted) dollars have a good chance of rising with experience sacrifice quality of life in his early employment years to save or get the most that money can buy when they still have youth and ramp up the savings when there’s more discretionary money? I know many people don’t have the luxury of considering these scenarios, but for those who have reasonably good jobs like DW & I, and hopefully the kids, this is an interesting exercise. (DS, the only one out of school is definitely of the school of thought that youth happens once and the experience should be maximized)</p>
<p>My wife is from Singapore and has a CPF account so I’m familiar with their savings programs. Of course she hasn’t contributed to it but I was wondering if it would be worthwhile to dump in a lump-sum contribution as the rate of return is pretty good compared to US savings rates and it provides some currency diversification.</p>
<p>The question on what young adults with good jobs should do is a good one. I think that investing skills should be developed as soon as possible so that you can at least do as well as possible with what you have available. My experience, though, is that young adults generally don’t care to learn this stuff. They have a lot to learn as it is and a focus on career growth isn’t a bad thing. Having some fun isn’t a bad thing either.</p>
<p>S1 and DIL are contributing to their 401(k) plans. They are 22 & 23. We did the same thing – but cashed out DH’s a few years later for money to help pay for grad school. At least it was money we didn’t have to borrow.</p>
<p>I find the retirement calculators interesting – besides the outrageous return they assume, they also (for the most part) don’t toss in the value of SS or DB pension plans. If I didn’t know better, I’d think we were up a creek.</p>
<p>Only one of my siblings has a 401(k). The others have nothing, and all are approaching 50. Scary stuff.</p>
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<p>Almost all financial experts will tell you to never withdraw money from a 401K. With rare exceptions, all 401K withdrawals are taxable as ordinary income. An additional 10% early distribution penalty tax will be assessed if you have not reached at least age 59 ½ when you take your distribution.</p>
<p>So, let’s say you withdrew $60K from your 401K to pay for grad school. After paying taxes and penalty, you are left with about $36K. You would have been better off borrowing the money.</p>
<p>“I find the retirement calculators interesting – besides the outrageous return they assume, they also (for the most part) don’t toss in the value of SS or DB pension plans. If I didn’t know better, I’d think we were up a creek.”</p>
<p>Every retirement calculator that I’ve ever used has the option of including ss or pensions. That being said since a lot of people do not have pensions, its pretty hard to retire without at least a couple of million saved.</p>
<p>DS is stopping by later this week to mooch off of our Turbotax program.
It’s his first full year of ‘real work’ and he is anxious to see if he will owe or get a refund.</p>
<p>He also mentioned that he wants to go over his pension plan statements and optional 403b plan that he has yet to sign up for. I’m happy that he is interested in learning about this stuff. He knows that if he makes some good decisions now, his life will be easier later.</p>
<p>Regarding people who haven’t saved enough for retirement and have to work into their 70’s (or later), they’re assuming they’re going to be in good health and can continue to work. But what happens if they can no longer work or become disabled?</p>
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<p>Absolutely. Good for him!</p>
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<p>The reason you could get 10% on a money market account was because inflation was greater than that. Mortgage rates were 9% and by 1981 peaked at over 18% !!! Try buying that $200k house with an 18% mortgage. We bought our first house in 1981 in Oakland CA, because we couldn’t afford a 1 br condo in San Francisco and started looking in Berkeley and even that was too expensive. Finally found a nice house in Oakland for $120k ("In the hills?? No, in the “flats” - the conversation we had endlessly with friends) but our bank subsidized mortgage payment on the $100k mortgage was over $1300/month. The only “good thing” going on back then was we knew housing prices would keep going up, so it made sense to buy something no matter what the cost, even if it meant taking a cash advance on our credit cards to close. That certainty of ever increasing housing prices was well embedded in the national psyche by 2007 when it stopped being true.</p>
<p>I just took a look at my pension and social security statements between the two I have contributed (with an employer match) over $500,000 the last 31 years. </p>
<p>I do not see why that should not be enough for a decent retirement income. Even if we assume an annual average return of 5%. My IRA has had a better average return than that during the same period.</p>
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Not true, at least in my state.</p>
<p>There is a line item in the budget of about $1.6 <em>billion</em> dollars per year that is paid out of general revenue (i.e., my taxes) into the state pension fund. This is about 5% of the state’s yearly budget.</p>
<p>Many if not most public pensions are horribly underfunded - $20 billion+ in my state. That money has to come from somewhere eventually, or pensions are going to have to be altered. At the current level of payments it is expect to be fully funded in 20 or 30 years, but a lot can change in that time.</p>
<p>Public workers also don’t pay into SS, so that 9% witholding is offset by 2/3 by not having to pay FICA taxes.</p>
<p>One thing I don’t ever see these articles talk about is inheritances. I wonder how much money our parents’ generation has that we will inherit.</p>
<p>“I just took a look at my pension and social security statements between the two I have contributed (with an employer match) over $500,000 the last 31 years.
I do not see why that should not be enough for a decent retirement income.”</p>
<p>That sure seems like it would be enough, just when you listen to investment advice, they always seem to advise a lot more. I’m tired of contributing to my 401K, but I always feel obliged to max it out. We have a good amount already in there, 7% employer contribution and a decent pension (looks stable for now). I would love to just throw every extra cent we have into paying off mortgage debt for some rentals we bought, even though they are pretty low interest loans. We are just so brainwashed into putting money in the 401Ks.</p>
<p>“Public workers also don’t pay into SS,”</p>
<p>That is not quite true. Most public employees do pay into SS. It is true that teachers in some states don’t pay into SS and cannot collect SS but the vast majority of public service employees pay SS tax.</p>