<p>It’s perhaps inartully expressed, but what I’m talking about is people who spend too much of their incomes (and consequently have inadequate savings). They start focusing on retirement too late in life, and too close to the decline in their earnings, and don’t have enough saved when they hit retirement. Regrettably, I think the percentage of people in this category is a very large majority…probably over 85% of people, I would guess. </p>
<p>Obviously, earning a high return on invested assets can make a big difference in your retirement standard. But the size of that “difference” depends mightily on how much you’ve saved relative to your late life living standard, and how long ago you saved it (giving your investment acumen time to make an impact). </p>
<p>So my basic thesis is that people’s self-funded retirement portion is more dependent on their savings pattern than it is on their investment success (excluding catastrophic losses from bad decisions). </p>
<p>Living under your income (and under your retirement income in particular) is a great way to be sure that you remain financially comfortable as long as possible. When your spending exceeds your income, you need to borrow or raid your capital and it can’t grow and your assets steadily shrink instead of growing. It’s not rocket science. If you can cause your principal to grow, you have more cushion that you can spend or save, but to me the key is still living below your “means.”</p>
<p>Additionally, being able to save more on a particular amount of income means that you have learned to live below your means, which will also be handy when you retire. I practice, as best I can, consumption smoothing; the goal is to live “as well” today as when we retire. But, if I miscalculated and got it wrong, I’d rather have extra money to live on in retirement and less today – if nothing else, the kids can enjoy it after we’re gone.</p>
<p>ETA: posted while @HImom was posting, didn’t mean to repeat what she said.</p>
<p>It’s one of the basic premises of finance actually. </p>
<p>Many of my relatives are much richer than we are but several of them live very economically (except of course spending big for their kids educations and to visit said kids). They have a nicer house and better cars and vacations but really don’t spend nearly as much as their incomes would allow them to. On the other hand, have another relative that doesn’t earn as much but eats out nearly every meal and brings home food when not dining out. Needless to say, that other relative has little to no savings compared to the relatives who live below their means.</p>
<p>Half of my TIAA is in a version that will allow me to take a lump sum for a 2% penalty when I retire. Don’t ask me how; it was chosen for me by my employer.</p>
<p>More generally, although I wish everyone luck, I think those of you who are looking for a 10%+ return over the long term are being very optimistic. Hard to know, though; I think we are in completely uncharted waters.</p>
<p>EMM1, I think that’s the TIAA traditional that I was talking about. If you want to move it to another investment before you retire, you have to do it on a 10-year schedule. I’m not sure what the options are at retirement - I know that you can take the lump sum or annuitize it. I imagine that you can still do the 10-year withdrawal.</p>
<p>DH and I are professors, dstark. But I think that TIAA is available to other people who work for non-profits.</p>
<p>Iglooo, I think that the liquid option might be available only for IRAs, not 403b. If you are 59-1/2, you can move some of your retirement money out of 403b’s (the part that you contributed yourself and its returns) and do whatever you want with it. I know that DH and I did this with some money and rolled it over into IRAs. It might have been rolled over to TIAA from another company. I know we took some money out of CREF and moved it to Vanguard and to the private money manager. </p>
<p>I just received “Nextville” (Amazing Places to Live the Rest of Your Life) by Barbara Corcoran with Warren Berger (2008 - a little dated, but relevant). Also her prior national bestseller “If you don’t have big breasts, put ribbons on your pigtails and other lessons I learned from my mom” Also known as Use What You’ve Got.</p>
<p>Author was dyslexic, grew up with 9 siblings. Started a real estate office with $1000 loan from boyfriend and built it up to $4 billion business.</p>
<p>Humor and wisdom. </p>
<p>There is another old book I have in the house about Right Sizing - thinking about different phases of your life and how to de-clutter in a thoughtful manner.</p>
<p>When you think about these major decisions (where to live in retirement for one), it is re-assuring with input from others. Knowing yourself is important, and also thinking about contingencies like poorer health.</p>
<p>Absolutely agree about living within means and patterns of saving. Keeping eyes and ears open to what is going on - processing information and how it is relevant to you.</p>
<p>Just heard a pharmacist (graduated in 2005) who earns about $115,000 a year (on Dave Ramsey radio program) - he put his student loans on a 30 year payment plan and moved into a bigger home while he and his wife had two kids (also sizable mortgage). Absolutely he should have paid off his student loans aggressively. He has accrued nine more years of interest on those loans.</p>
<p>H and I paid off his $7000 student loans in first year. We have never had credit card or auto debt. I am very cost-conscience with meals out or bringing something home - often I cannot make some of this stuff for less, or I supplement bringing home a main dish and make the sides. Now that the kids are at college on scholarship and with adequate funding to pay expenses, we can focus on preparing more for retirement. I want to re-enter paid employment for the next 10 years - have skills - just have to convince someone to ‘take a chance’ - have two industries in mind that continually have job openings. Can continue to do all the other ‘chores’ until hired. </p>
<p>In the mean-time, praying Novenas. Parents’ house in small town OOS priced for sale (same with friends’ parents house also in small town OOS - her taxes are higher, $8,000/year).</p>
<p>I inherited a small TIAA-CREF account from my mom when she died. I wish I could add to it, but I don’t think I can. Because my mom was over 70, she was taking the minimum draw, so I have to as well. It comes in an annual check on December 3…and pays for our Christmas presents!</p>
<p>She has been gone for ten years, and we have gotten about $1000 a year each year. Not bad on a principal of about $25,000.</p>
<p>No, my mom was not a professor. She was an administrative assistant at a dental school.</p>
<p>I was a staff person at a university for 3 1/2 years, and the school illegally had TIAA/CREF for faculty but not full time staff (while the sister schools did). Could have filed a class action lawsuit, but didn’t want to hurt university and also want to maintain my professional standing. They include everyone now, but I would have put in and had the university match.</p>
<p>If I went to work for the state again, I could buy back my time into retirement (if you had less than 10 years in, they made you withdraw your money). Who knows how costly it would be to ‘buy in’. But in this town most unlikely for me to work for the state again.</p>
<p>SOS, I worked in a different state for 7 years as a teacher. I was able to buy back only 2 years because I worked for a private agency 5 years of that time. The years I bought back were. 1978-1980. It cost me $20,000 to buy those years back in 2011.</p>
<p>Yes I heard on Dave Ramsey last week where a teacher was contemplating buying back years, and the original $8000 was going to cost her a big chunk, I think $40,000 - $50,000 range. The problem with some teacher annuities/teacher retirement is that surviving spouse may not benefit. Sometimes better to have money put into other investments. In this case, teacher wanted to retire at 62. </p>
<p>My sis can retire at 62 with partial teacher retirement; if her health is good I am going to encourage her to work the extra years (since she is only working part time). Her part time years count as regular years.</p>
<p>I would have left my money in the retirement system of AL (RSA) if I could have - pretty well managed. I do have a little money in a state investment, so I get RSA newsletters. My MIL gets teacher retirement from WI and IA, and those are pretty well funded pensions.</p>