Social Security or annuities or paying full fare for schools

Parent Cafe
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<p>Many struggle with the questions…should I pay full fare or ask my kid to go to a cheaper school? How does this affect my retirement?</p>

<p>I like this article…it show how much SS can be worth. How much it would cost to buy an annuity. If you pay an extra 100,000 for a school, how much does it cost you in retirement income?</p>

<p>For some people…these issues are not a big deal. But for most…these issues are a big deal. And of course…we can’t predict the future…and some don’t care as much about the financial payoff of a college education…and for some people there is a financial payoff. And then there is the whole social class thing.</p>

<p>These can be complicated issues.</p>

<p>Anyway…I like this article…</p>

<p>Fifty year olds that don’t have anything saved and are borrowing money for their kids’ educations…you better start saving.</p>

<p>[could-you-retire-without-social-security:</a> Personal Finance News from Yahoo! Finance](<a href=“http://finance.yahoo.com/focus-retirement/article/111640/could-you-retire-without-social-security?mod=fidelity-readytoretire&cat=fidelity_2010_getting_ready_to_retire]could-you-retire-without-social-security:”>http://finance.yahoo.com/focus-retirement/article/111640/could-you-retire-without-social-security?mod=fidelity-readytoretire&cat=fidelity_2010_getting_ready_to_retire)</p>

<p>"We can do some math.</p>

<p>According to ImmediateAnnuities.com, a 66-year-old man would have to pay $128,000 for an annuity providing him with income of $10,000 for life. A 66-year-old woman would have to pay even more, about $138,000.</p>

<p>That’s for an income of $10,000 a year. If you think you’ll need $40,000 a year to live on, naturally you’d need to set aside four times as much, or about $550,000.</p>

<p>And this would only be for a straight annuity, with absolutely no inflation protection at all.</p>

<p>Few life insurers provide inflation-protected annuities. New York Life offers something close: an annuity that increases payments by a certain percentage each year. This won’t protect you from runaway inflation. But at least an annual increase of, say, 3% will give you some cushion.</p>

<p>I asked the company how much a 66-year-old would have to pay for an annuity paying $10,000 a year, with a 3% annual increase.</p>

<p>The answer? About $180,000. It’s about the same for men and women.</p>

<p>Right now, the average retiree is getting about $14,000 a year from Social Security. To buy a similar income stream on the open market, a 66-year-old would have to pay about $250,000. Someone getting the maximum benefit, $28,000 a year, would need to pay about $500,000.</p>

<p>It’s something to bear in mind as we debate cutting Social Security. Most Americans are already grossly underprepared for retirement and have saved far too little.</p>

<p>According to the most recent survey by the Employee Benefits Research Institute, a think tank specializing in the topic, fewer than half of workers have even saved $25,000, and only a third have saved as much as $50,000. Forty-four percent have saved less than $10,000, and a quarter have basically saved nothing at all.</p>

<p>To put these numbers in context: Someone with $25,000 can buy an annuity (with the 3% annual bump) paying maybe $1,400 a year. Someone with $50,000 can raise that up to $2,800 a year. That works out to an income of $54 a week. Good luck with that."</p>

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<p>at age 50, a person/couple, really needs to look to INVESTING rather than saving.</p>

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<p>It was a very good article. In general, people have very little understanding of what it takes to provide a stable monthly income, and yet most people in their 50s are not going to have pension payments. </p>

<p>Very scary to hear parents talking of raiding their IRAs or decreasing 401K contributions to fund college.</p>

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<p>haven’t we learn our lessons? </p>

<p>If 50% of the people do not have enough for their retirement. Are they going to work until they die? - NOT.</p>

<p>Want to take a guess as who will pay for their retirement? - Those who saved. The GOV will put extra tax on 401K and IRA withdraws. Or take the SSI away from those who have certain amount of 401K + IRA.</p>

<p>LP, one must have a saving first before investing. When I only have $20 in the bank, how am I going to think about investing?</p>

<p>PS, I persoanlly think all these talk about needs to save for retirement are for those in the financial business to make a couple more $. They take your $$ to make their $$$$. If not one saves, they will be out of business.</p>

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<p>It is scary reading about the families who are paying out of their retirements, getting loans as high as they can for themselves & their kids to send them to “dream U.” This puts so much pressure on their kiddos and themselves and makes a comfortable retirement in the near future a pipe dream.</p>

<p>Pretty frightening, actually. Life without any reliable pension and without significant savings is a very bleak prospect indeed. Families are being urged constantly to get their little darling into the “best U,” no matter the cost. This is part of the no deferred gratification culture–we want everything NOW and only the best, regardless of ability to pay or consequences.</p>

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<p>Well, we know that $20 bucks in savings is not going to take you anywhere or get you much of anything. However, sometimes we can get lucky and get multiples of $20, when we invest. </p>

<p>College is sometimes like this. We can make a chancy education investment in hopes that education will pay off in diamonds.</p>

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<p>Longprime, I hadn’t thought of the comparison before, but it sounds all too much like students (and parents) who think their kid is going to hit it big in sports and all their money woes will be over. College certainly has a better payback (I’d rather my kid expected to succeed because of a college education than sports skills!), but I often wonder what the expectation is for families who are borrowing to the hilt to send their kid to an elite college for a completely impractical major… They can’t think their kid is going to earn the money back somehow. Or do they?</p>

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<p>Huh? This makes no sense to me. Unless your employer is offering a fully guaranteed full-up pension, or you’ve inherited substantial wealth, you need to save for retirement. </p>

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<p>Ah yes, that M-R-S degree. :wink: :smiley: :wink: :D</p>

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<p>We know a young person who had her heart set on MIT. She got a full-ride offer at another great school but she prevailed on her single mom to send her to MIT with NO funding instead. She & mom are having regrets. Another friend guilted his parents into paying for him to go to Santa Clara instead of one of the other schools where he got more merit aid at a significant sacrifice for the parents. Who knows whether it will “pay off,” or make all of them have more recriminiations down the line?</p>

<p>The M-R-S degree is no longer any guarantee of anything, as many of the marriages don’t last much longer than it takes to dry the ink and even if they do, then they can combine their debts/loans.</p>

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<p>The only things that might make one college worth more than another are a) prestige and b) connections. b is probably more important than a in most cases because a student is likely to have a better record at a less prestigious school which might counterbalance the difference in prestige.</p>

<p>By those criteria, MIT MIGHT be worth a substantially larger investment. Paying a lot more for Santa Clara is simply an outright waste of money.</p>

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<p>Dunno, have spoken with some who were very satisfied with Santa Clara & got their engineering BS & MS in 4 years because of all the AP & other credits they entered with, but they had a very punitive polilcy about absences FOR ANY REASON (or so they told us–have since heard it is different for their athletes). S turned them down because of their punitive absence policy. I’ve been told they are good for placement of engineers who want to work nearby.</p>

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<p>The question is not whether Santa Clara is a good place to be in the abstract. I’m sure that some students have a swell time there and get good jobs at the end of their sojourn. The question is whether, ex ante, one can predict that a Santa Clara degree will be worth substantially more than one from another non-elite institution which costs substantially less. I continue to believe that there is no reason to believe that a Santa Clara degree is worth any more than one from (fill in the blank–choose some other non-elite fairly selective school) which offers merit aid.</p>

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<p>This behavior is so foreign to me that I have to ask, who is urging this? I’ve never seen it in friends, family, or our financial pros. Does it come from the media?</p>

<p>I’m not disputing that it exists, I’ve just never seen it. Where does such pressure come from? In our circles, people tease or roll their eyes behind our backs when they hear Son attends a $55K school. Only when they hear about his full-ride does it become acceptable.</p>

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<p>My kids won’t be challenged unless they go to school with their peers. Ok…they can go to a school with people above them too…although…there are very few people above my kids in abilty. So scratch that…My kids can go to a school with their peers.</p>

<p>DougBetsy…think about it…below this thread…there is a list of similar threads.</p>

<p>Threads like, “Full rides or schools paying for a large amount of tuition.”
There are plenty of threads like this.</p>

<p>Should I borrow $100,000 to go to a school of my dreams (although, I know very little about the school)…or get merit aid and go to my state school with the same bunch of losers I went to high school with.</p>

<p>The same losers and 30,000 new losers.</p>

<p>I promise you there are people like this in real life. Seeing these people…It’s the cost of living in an upper middle class neighborhood. It might be the cost of living in an upper class neighborhood, but I usually just walk through those neighborhoods as they are a mile or two away from where I live. And I don’t want to get arrested for wearing the wrong clothes, so I walk fast in those neighborhoods. I refuse to carry a purse and I don’t use botox. And I don’t see the upper class kids too much because they go to private schools. </p>

<p>Looking at the similar thread list…which we can see when we post…I see I already started a thread…“Annuities and Social Security”. </p>

<p>My memory is going…</p>

<p>I still like the first story I linked in this thread. :)</p>

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<p>The original first post, gives 3, ‘or’ . Too bad there isn’t an ‘and’ or an ‘and/or’. </p>

<p>Currently debating how much should we place into, annuity or stock account or mutual fund. We currently have some of each but what is the mix? </p>

<p>Difficult OP. I made sure that we will be ‘fairly’ secure before committing college investment.</p>

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<p>“The original first post, gives 3, ‘or’ . Too bad there isn’t an ‘and’ or an ‘and/or’.”</p>

<p>Well LongPrime…you can use your imagination and pretend there is an and in the original post.</p>

<p>It is difficult.</p>

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<p>My parents never had to struggle with this question because they were guaranteed pensions, and it was a given that their children would attend California public colleges. There’s been a fundamental shift in the financial landscape over the last generation. :(</p>

<p>It would be interesting to know how CC families in the aggregate–who are far more concerned with sending their student to a “good” or “right fit” college than the average family–are addressing the balance between retirement and college savings. I’ve read posts in the past from parents who know that they are going to be working longer (possibly never retiring) in order to make it possible to send their children to outstanding colleges. Others, though it’s generally not stated explicitly, make retirement the priority. A fortunate few don’t have to choose, and others don’t have enough money to make the choice.</p>

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<p>Rereading Too Big to Fail, Andrew R. Sorkin.</p>

<p>We (USA and Western Capitalism) were lucky to avoid a complete collapse of the economic system as we know it. We still have a long ways to correct the finance bubble. Of which “SS, Annuities, and Full fare for schools” are only pieces of the puzzle. </p>

<p>Perhaps it will be “only the Tea Party” can solve our problems.</p>

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<p>I read a scary statistic that was in a handout given to H when he want to a pre-retirement planning seminar that as of 2005, only 1 in 4 adults contemplating retirement had $10,000 or more in savings (it didn’t site a source)! If true, that really blows me away. It could well be considerably worse now, as layoffs and unemployment could have greatly eroded savings for folks.</p>

<p>OK, found a more current citation. CNN says that as of 2010, 43% of workers have less than $10K in savings for retirement (up from 39%). <a href=“http://money.cnn.com/2010/03/09/pf/retirement_confidence/[/url]”>http://money.cnn.com/2010/03/09/pf/retirement_confidence/&lt;/a&gt;. Those who have less than $1000 jumped from 20% in 2009 to 27% this year! Only 16% indicated confidence in ability save enough for comfortable retirement.</p>

<p>54% of workers with some form of savings have less than $25,000 stowed away! These are very concerning numbers, especially as social security seems shakier & shakier to rely upon going forward.</p>

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<p>H and I began saving for the kids’ college and retirement with our first jobs. Both sets of parents didn’t. When college time came, we sat the kids down and showed each what we had for them, and they proceeded from there.</p>

<p>Son chose a great OOS public U that gave him a nice scholarship and was highly ranked in his major. He graduated w/o debt and several thousand left in his acct. for seed money.</p>

<p>D will graduate in May. She chose a wonderful private that gave a big scholarship. She will have over $10,000 for her seed money.</p>

<p>We never lived as our income indicated we could. We also never stopped putting money away for retirement, in addition to pensions we will earn for employment, because we never trusted there would be SS.</p>

<p>H will retire in Oct., 2013, I in June of 2014, both at the age of 60. We realize we are very lucky.</p>

<p>Had the kids chosen to go where there was no merit, they would have had debt. They are glad they chose the way they did.</p>