How does the average person retire?

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There are always threads on FWF and Bogleheads where people evaluate their retirement portfolio and savings plan. People max out their 401k, IRA, HSA, 529 plan, etc and still don't think they will have enough to retire, even if their net worth is in the millions.

The average person in their 40s or 50s lives paycheck to paycheck, has a few thousand in credit card debt, no emergency fund, rents, has a car payment, buys the latest iPhone every year, goes to the emergency room for primary care, and doesn't have a 401k or pension. How do they ever retire? Work until they die? Do they depend on welfare or will their children support them?

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because you're misleading by only quoting a title and not the actual content

rufflesinc (Aug. 09, 2016 @ 9:34a) |

Saying specifically to look under the title is "only a title".... Wow, I give up.

(Not to mention, you say to quote the ... (more)

Bend3r (Aug. 09, 2016 @ 9:40a) |

then why don't you edit your post to include the whole content?

rufflesinc (Aug. 09, 2016 @ 10:00a) |

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after slashing expenses, they move into a relative's back bedroom & live off SS.

Or, work until you're physically unable, then spend down your assets below the Medicaid limit and have them pay for long term care.

They move in with their kids who then support them.

Save your pennies, deadbeat!

It's much easier to get government benefits (i.e. social security disability, medicaid, SNAP, etc.) when you are considered elderly (aged 60+)

xabo said:   after slashing expenses, they move into a relative's back bedroom & live off SS.
  Yeah but how does that relative retire? 
People max out their 401k, IRA, HSA, 529 plan, etc and still don't think they will have enough to retire, even if their net worth is in the millions.
They actually mean they won't be able to retire with a certain lifestyle. How much do you think these booglers are trying to spend each year in retirement?

matrix5k said:   
The average person in their 40s or 50s lives paycheck to paycheck, has a few thousand in credit card debt, no emergency fund, rents, has a car payment, buys the latest iPhone every year, goes to the emergency room for primary care, and doesn't have a 401k or pension. How do they ever retire? Work until they die? Do they depend on welfare or will their children support them?

  I've often wondered the same thing. And to go a step further, I've seen people in their late 50's in this same situation "wanting" a bigger or newer house and locking themselves into a 30 year mortgage. Huh....??

rufflesinc said:   
xabo said:   after slashing expenses, they move into a relative's back bedroom & live off SS.
  Yeah but how does that relative retire? 
People max out their 401k, IRA, HSA, 529 plan, etc and still don't think they will have enough to retire, even if their net worth is in the millions.
They actually mean they won't be able to retire with a certain lifestyle. How much do you think these booglers are trying to spend each year in retirement?

  Green for use of the word booglers.

prosperity said:   
matrix5k said:   
The average person in their 40s or 50s lives paycheck to paycheck, has a few thousand in credit card debt, no emergency fund, rents, has a car payment, buys the latest iPhone every year, goes to the emergency room for primary care, and doesn't have a 401k or pension. How do they ever retire? Work until they die? Do they depend on welfare or will their children support them?

  I've often wondered the same thing. And to go a step further, I've seen people in their late 50's in this same situation "wanting" a bigger or newer house and locking themselves into a 30 year mortgage. Huh....??

Obviously they have no intention of ever actually making every payment and owning the property outright after 30 years.  They just want to live in it for as long as they can before they get transported in a van that looks like an ambulance (but really isn't one) to a neglectful nursing facility where old people go to die.  I'd rather be an eskimo and float away on a raft when I get old than have to endure what older poor Americans experience in their later years.  Time stops for nobody.

DTASFAB said:   
prosperity said:   
matrix5k said:   
The average person in their 40s or 50s lives paycheck to paycheck, has a few thousand in credit card debt, no emergency fund, rents, has a car payment, buys the latest iPhone every year, goes to the emergency room for primary care, and doesn't have a 401k or pension. How do they ever retire? Work until they die? Do they depend on welfare or will their children support them?

  I've often wondered the same thing. And to go a step further, I've seen people in their late 50's in this same situation "wanting" a bigger or newer house and locking themselves into a 30 year mortgage. Huh....??

Obviously they have no intention of ever actually making every payment and owning the property outright after 30 years.  They just want to live in it for as long as they can before they get transported in a van that looks like an ambulance (but really isn't one) to a neglectful nursing facility where old people go to die.  I'd rather be an eskimo and float away on a raft when I get old than have to endure what older poor Americans experience in their later years.  Time stops for nobody.

  My sub is U shaped with a nursing facility in the middle of the U (the tops of the U goto the main road). Every few days you'll hear sirens and think something exciting is happen. THen no, it's just an ambulance rolling up to the nursing facility. The parking lot is always empty too.

They become the burden of their children and tax payers due to their lack of planning, knowledge, and self-control when they were young.

Wonder how my younger co-workers with families making <$32,000 can meet current expenses let alone save for retirement. High deductible family heath insurance just increased to $12,900 annually (up 27% this year)
A 63 year old coworker with VA insurance needed emergency treatment and didn't even have $1,100 to pay his portion of the medical bills. No doubt he will be working until he expires.
Several recent surveys suggest that nearly half of working age people expect to receive an inheritance that will support them later in life.
My children are out of luck as I plan to spend my last dime on the day I die.

begunn said:   My children are out of luck as I plan to spend my last dime on the day I die.
That sounds like an interesting plan.  Have you worked out all the details yet?

DTASFAB said:   
begunn said:   My children are out of luck as I plan to spend my last dime on the day I die.
That sounds like an interesting plan.  Have you worked out all the details yet?

  If you've got as much credit as the average FWFer, I'd say aiming for zero is a sign of laziness.  I'd aim for unpaid CC bills well into 6 figures.

matrix5k said:   The average person in their 40s or 50s lives paycheck to paycheck, has a few thousand in credit card debt, no emergency fund, rents, has a car payment, buys the latest iPhone every year, goes to the emergency room for primary care, and doesn't have a 401k or pension. 
  And often, not always, but often is is their own fault.  People used to live below their means and save money.  Now everyone feels cable tv, an expensive smart phone plan, nice car, etc are the "necessities".  A lot of people that have no savings, could have had savings if they had prioritized it rather than living in the moment.

The average person is an idiot. Your goal is to be above-average and save for early retirement. It is do-able.

The contrast is the early retirement crowd that is checking out of the game in their 30's and 40's living quite comfortably and traveling the world. Much of it has to do with spending habits and lifestyle choices.

Cars are also the bane of the middle class. There was that thread a few days ago where that guy wanted to lease and then decided to finance a car after putting down 6k when he should have just bought a 6k car.

codename47 said:   The contrast is the early retirement crowd that is checking out of the game in their 30's and 40's living quite comfortably and traveling the world. Much of it has to do with spending habits and lifestyle choices.


You cannot retire in your 30s or even 40s based on spending ND lifestyle, and it's laughable to be able to travel the world

Not sure what ND lifestyle means but there are whole communities of people doing or aspiring to do what CN47 posted. It's doable if you are serious about it.

matrix5k said:   How do they ever retire? Work until they die? Do they depend on welfare or will their children support them?
 

  Move-in with their FWF cousin/uncle/neice etc. Some rely on inheritance from their frugal parent/grandparent etc.

gremln007 said:   Not sure what ND lifestyle means but there are whole communities of people doing or aspiring to do what CN47 posted. It's doable if you are serious about it.
  ND was typo for "and"

How is it doable if you are making median entry level income ?

begunn said:   Wonder how my younger co-workers with families making <$32,000 can meet current expenses let alone save for retirement. High deductible family heath insurance just increased to $12,900 annually (up 27% this year)
A 63 year old coworker with VA insurance needed emergency treatment and didn't even have $1,100 to pay his portion of the medical bills. No doubt he will be working until he expires.
Several recent surveys suggest that nearly half of working age people expect to receive an inheritance that will support them later in life.
My children are out of luck as I plan to spend my last dime on the day I die.
 

FYI, VA isn't insurance. It's a series of benefits. Huge misconception with regard to the VA. They won't pay for everything, contrary to popular belief. There are a host of boxes you need to check off - for example, you need to be enrolled and have been seen in VA primary care recently, it needs to be a true medical emergency (i.e. they aren't going to pay for you if you went to the ED with a stubbed toe), etc.

I myself am saving upward of 30% of income, maxing out 401(K) and IRA. Having no kids and being single makes it easier, but obviously I don't have family to fall back on when I get older and/or live long enough to need help.

People do have longer working years now. Used to be, you were close to dead by retirement age.

rufflesinc said:   
codename47 said:   The contrast is the early retirement crowd that is checking out of the game in their 30's and 40's living quite comfortably and traveling the world. Much of it has to do with spending habits and lifestyle choices.


 

You cannot retire in your 30s or even 40s based on spending ND lifestyle, and it's laughable to be able to travel the world

  I did. But I define 'retired' as unemployed but making a few bucks here and there from FWF tactics and my modest nest egg. Traveling the world is the easy part due to bank/credit card bonus and MS. And a partner to split the bills with.

I do agree most people won't be able to do it. Having children and/or a non-working spouse is going to make it a lot harder. Plus all the increased spending expectations that accompany all that.

The chart in this article is pretty scary. Median net worth of all age groups is under 200k, and I'm pretty sure they don't all have pensions. Excluding home equity it's under 50k.

http://www.fool.com/investing/general/2015/05/17/americans-avera... 

TravelerMSY said:   
rufflesinc said:   
codename47 said:   The contrast is the early retirement crowd that is checking out of the game in their 30's and 40's living quite comfortably and traveling the world. Much of it has to do with spending habits and lifestyle choices.


 

You cannot retire in your 30s or even 40s based on spending ND lifestyle, and it's laughable to be able to travel the world

  I did. But I define 'retired' as unemployed but making a few bucks here and there from FWF tactics and my modest nest egg. Traveling the world is the easy part due to bank/credit card bonus and MS. And a partner to split the bills with.

I do agree most people won't be able to do it. Having children and/or a non-working spouse is going to make it a lot harder. Plus all the increased spending expectations that accompany all that.

  Do you have a still-working spouse, or do you mean having two incomes during your working years made it easier for both of you to retire?

TravelerMSY said:   
rufflesinc said:   
codename47 said:   The contrast is the early retirement crowd that is checking out of the game in their 30's and 40's living quite comfortably and traveling the world. Much of it has to do with spending habits and lifestyle choices.


 

You cannot retire in your 30s or even 40s based on spending ND lifestyle, and it's laughable to be able to travel the world

  I did. But I define 'retired' as unemployed but making a few bucks here and there from FWF tactics and my modest nest egg. Traveling the world is the easy part due to bank/credit card bonus and MS. And a partner to split the bills with.

 

  What do you put on the credit apps when you're "unemployed"

There's an option for 'retired' on credit apps.

As for the partner, I just meant that it's easier when you split expenses rather than live by yourself. At least when you're childless and gay. A hetero partner would inevitably cost more if it means you're having children.

I'm a data point of one and pretty far from the median case.

http://www.forbes.com/sites/janetnovack/2012/02/14/why-you-might...
"Among the retired population, the median income was $30,480 and the median spending, $31,365."

$30k isn't a ton of money. But its enough to live on. Also considering a lot of people over 65 own their homes free and clear.

The average social security check is $1300. Thats half way to the 30k.

Add in money people have in retirement savings (401k/IRA), pension benefits, working, and other income generating assets (real estate, business, dividends) and its not really as dire as the "nobody saves anything and everyone is broke story" that makes for scary news headlines.

jerosen said:   http://www.forbes.com/sites/janetnovack/2012/02/14/why-you-might... 
"Among the retired population, the median income was $30,480 and the median spending, $31,365."

$30k isn't a ton of money. But its enough to live on.

 

  I'd like to see how one saves enough working 10 years making 50k to have 30k income in early retirement.
 Also considering a lot of people over 65 own their homes free and clear.
and that

Usually inheritance: a house from legatee to sell, plus last generation savings accumulated from years when it was possible to accumulate with meaningful interest, etc. Otherwise government policy encourages working until dying the old way, or going on various bureaucratic dependencies. Social Security is not enough and has not kept up with the true cost of elderly living for years.

You can start thinking about retiring when you have around 25 times your annual expenses in savings. This will allow for a 4% annual withdrawal rate, which is pretty safe with an income-oriented portfolio including common stocks paying around 3% and preferred stocks paying around 6%. Even if inflation picks up, the total return on your common stock plus dividend growth and SS will likely keep you in the black almost indefinitely.

The nice thing about the 25x tar-get is it is based on your expenses rather than your working income. The fact that one earns $150K while working does not preclude living on $30K while retired. It's just a matter of priorities. If you prefer to tie up your money in big houses, new cars and fancy clothes, get used to working.

cleanbeat said:   You can start thinking about retiring when you have around 25 times your annual expenses in savings. 
  I'd like to know how to save up 500k in 10 years at 50k income.

Big voting block the elderly, if things get too bad for too many of them I'm sure our politicians will start means testing SS so those who were lucky enough to save some of their income can bail out those unlucky enough to have blown all their cash on car leases and boats.

ganda said:   Big voting block the elderly, if things get too bad for too many of them I'm sure our politicians will start means testing SS so those who were lucky enough to save some of their income can bail out those unlucky enough to have blown all their cash on car leases and boats.
  That's what happens when lenders can't deny loans when the loan period extends into their retirement.

rufflesinc said:   
cleanbeat said:   You can start thinking about retiring when you have around 25 times your annual expenses in savings. 
  I'd like to know how to save up 500k in 10 years at 50k income.

  By my calculations, starting from scratch with 4% annual yield growing by 4% per year (many dividend-paying stocks increase dividends by 10% per year), you would need to save $39,500 per year.  You will have contributed $395K while the portfolio earns $105K.

The main problem with this plan is the short timeframe.  It takes more than ten years for compounding to have a significant impact on your results.

For example, using the same parameters you would have over $1.5MM after twenty years, of which you will have contributed $790K.

After 30 years?  $4.9MM, of which you will have contributed $1.2MM.

Bottom line: start early.

Note: edited to reduce income assumption.

cleanbeat said:   
rufflesinc said:   
cleanbeat said:   You can start thinking about retiring when you have around 25 times your annual expenses in savings. 
  I'd like to know how to save up 500k in 10 years at 50k income.

  By my calculations, starting from scratch with 6% annual yield growing by 4% per year (many dividend-paying stocks increase dividends by 10% per year), you would need to save $35,200 per year.  You will have contributed $350K while the portfolio earns $150K.

  i don't understand what that means

Long story short... I'm retiring from the NYPD (SGT) on New Years Eve 2017. When I was hired 26 years ago, the promise was a gov't funded pension @ 1/2 salary of highest 3 year average. They kept their word. I have never paid for a medical/dental/rx plan for my wife or myself in all these years, except for small co-payments and no co-payments for the dental plan. But the NYPD is a throwback to the old days on gov't funded pensions. My retirement pension will be very good plus I will begin collecting SS IN 5 months at 66 yo. The political climate in this country and in NYC for law enforcement is a disaster and the last 3 years (DiBlasio) are in the toilet. So if you toil in a gov't job at least in NYState, you can do well. The rest of the law enforcement community in the US is not as well off. So I will probably have a comfortable retirement as I have very few debts,and had starting planning about 6 years ago. As a FWF follower and contributor, I don't spend wantonly. I have a very small mtg on my home and wife has a 2015 Hyundai Elantra and I drive a 2013 Camry. I also have my classic 66 GTO I bought new way back. My kids are in their 30's.Most important thing I have learned about retiring is it has to be planned well in advance. I also have x # of sick and vacation days which my union has "ordered" me to use now so as not to have them owing me days via a paycheck which is taxable. So I plan on using up all the days...another gov't benefit, but I must say over the years, I earned it. But liberalism in NYC has killed the city in spite of our statistics on crime that the mayor touts. It's all phony and I don't know how Commissioner Bratton can state that crime is down. I am in the trenches. My old neighborhood on the Lower East Side, which was pretty stable, is now being turned into a slum. The mayor and is followers have bought the vacant land and are now building low income section 8 apts in the middle of a stable neighborhood. It's like this all over the city. I moved upstate 9 years ago and glad I did.

Skipping 119 Messages...
Bend3r said:   
rufflesinc said:   
 because you're misleading by only quoting a title and not the actual content

  Saying specifically to look under the title is "only a title".... Wow, I give up.

(Not to mention, you say to quote the whole thing and then just quote the first sentence which is political drivel and don't quote the rest of the paragraph which has the only content...)

  then why don't you edit your post to include the whole content?



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