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URL:  http://boards.fool.com/ltseems-to-me-to-be-difficult-to-save-when-25010045.aspx

Subject:  Re: The Net Worth of American Households Date:  1/7/2007  8:21 PM
Author:  WendyBG Number:  19336 of 35400

<Seems to me to be difficult to save when you're not earning. Unless they include all unearned savings also (i.e. something like saving some of your investment proceeds from a given year.)>

Of course, they include all income. Interest and dividends are an important part of retirees' income...if they were wise enough to save and invest, so they aren't just living hand-to-mouth, on Social Security.

It's unwise to retire, unless you know that you can live on less than your non-salary income. How can you know? You can keep accurate budget and expenditure numbers, and live below your means (LBYM) for years. You can do calculations, which project expected earnings from your investments (good resources at Motley Fool and www.fidelity.com).

If you plan to retire before you receive Social Security and Medicare, especially if you retire before age 59.5, you have to be sure that your nonretirement savings will produce enough income to cover all your living expenses, most notably private health insurance. (There is one way to tap into retirement accounts, without a penalty, before age 59.5 -- substantially equivalent distributions -- but I think that's a bad idea.)

Incidentally, I don't consider my investment income to be unearned, whatever the IRS may call it.

Do I spend less than my investment income? You bet I do. I've been a dedicated LBYMer, my entire life. I spend less than my taxable income...and that doesn't count the income in my retirement accounts.

When the government tallies up income, they include all income. The table includes retirement income, too. Where could they get the data for "all income"? Well, the IRS just happens to be a branch of the government :-).

Wendy

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