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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 457188  
Subject: How will Americans retire? Date: 7/22/2012 12:29 PM
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http://www.nytimes.com/2012/07/22/opinion/sunday/our-ridicul...


Our Ridiculous Approach to Retirement
By TERESA GHILARDUCCI
New York Times, July 21, 2012

...

Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts. The specter of downward mobility in retirement is a looming reality for both middle- and higher-income workers. Almost half of middle-class workers, 49 percent, will be poor or near poor in retirement, living on a food budget of about $5 a day. ...

To maintain living standards into old age we need roughly 20 times our annual income in financial wealth. If you earn $100,000 at retirement, you need about $2 million beyond what you will receive from Social Security. If you have an income-producing partner and a paid-off house, you need less. This number is startling in light of the stone-cold fact that most people aged 50 to 64 have nothing or next to nothing in retirement accounts and thus will rely solely on Social Security....

...unemployment rates for those over 50 are increasing faster than for any other group and that displaced older workers face a higher risk of long-term unemployment than their younger counterparts. If those workers ever do get re-hired, it’s not without taking at least a 25 percent wage cut. ...

...only 52 percent of Americans expressed confidence that they will be comfortable in retirement. ...
[end quote]

I think that many people are in denial and that 52 percent may be too high.

People who lose their jobs over 50 will have a hard time getting a job that pays enough to buy health insurance, let alone get a job that provides health insurance as a benefit. People who have disqualifying pre-existing conditions may be denied health insurance at any price (this may or may not change in 2014).

People who have not spent enough time in the work force to qualify for Social Security (mostly stay-at-home Moms) won't even have Social Security to fall back on. Of those who did not contribute enough to qualify for Social Security, singles and divorcees and widows will face grinding poverty. Widow(ers) will still qualify for Social Security, which was one of the original goals of the system.

I personally think that eventually there will be a means test for Social Security. Those of us who worked and contributed for many years, even in our teens, will have our benefits cut based on means.

The demand side of the consumer economy will shrivel when half the senior population is struggling to put food on the table.

Wendy
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Author: DrBob2 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398759 of 457188
Subject: Re: How will Americans retire? Date: 7/22/2012 2:29 PM
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If you earn $100,000 at retirement, you need about $2 million beyond what you will receive from Social Security.

How did they get to $2 million. If you and you spouse both worked (at least off and on) then it is reasonable to assume SS payments of $4K/month or $48K/year. To make up the other $52K at 4% withdrawal

52K/0.04 = $1.3 million

DB2

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Author: Gingko100 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398763 of 457188
Subject: Re: How will Americans retire? Date: 7/22/2012 2:54 PM
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You are assuming two incomes and two SS benefits, which isn't what they state in the article I don't believe.

I am assuming I need at least $2M, and probably more considering LT care issues.

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Author: desertdaveataol Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398764 of 457188
Subject: Re: How will Americans retire? Date: 7/22/2012 3:09 PM
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Thank you for recommending this post to our Best of feature.

Of those who did not contribute enough to qualify for Social Security, singles and divorcees and widows will face grinding poverty.

IIRC you need a minimum of ten quarters of paying into the system to qualify for the minimum payout. This may have changed, it's been awhile since I paid any attention to that part of the system.

When we were in business I made sure to alternate the person on the reporting forms so that both my wife & I would qualify. It would have been silly for both of us to have worked in the store for 23 years and had only one of us qualify for SS.

I personally think that eventually there will be a means test for Social Security. Those of us who worked and contributed for many years, even in our teens, will have our benefits cut based on means.

Just one more kick in the teeth for those who worked hard, saved and invested wisely.

The demand side of the consumer economy will shrivel when half the senior population is struggling to put food on the table.

People who know about such things (Goofyhoofy) tell us that the sweet spot for advertisers is the 24 to 48 year olds (I could be miss-remembering his numbers) as they tend to be the ones who buy the most stuff. As the baby boomers become seniors the consumer demand shrinks with them.

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398781 of 457188
Subject: Re: How will Americans retire? Date: 7/22/2012 8:18 PM
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I personally think that eventually there will be a means test for Social Security. Those of us who worked and contributed for many years, even in our teens, will have our benefits cut based on means.

==============
Just one more kick in the teeth for those who worked hard, saved and invested wisely.


depends on the details... already a Sort of means-test -- SS is taxed away based on other income.

due to some investing mistakes last year, about 80% of my SS in was taxable ... didn't feel at all like a kick in the teeth

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Author: salaryguru Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398784 of 457188
Subject: Re: How will Americans retire? Date: 7/22/2012 8:51 PM
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The decline of unions and pensions has a lot to do with this situation.

I retired very comfortably thanks to my retirement accounts and other investments. But replacing pensions with 401(k)s never seemed like smart national policy to me. Sure, what you need to do to invest successfully is not that complicated, but understanding when, what and why takes some research and understanding . . . and some discipline that does not seem to be common. Without knowing the what, when and why or having the discipline to execute, personal investment accounts do not do well. It doesn't make sense to me to require every worker in every field to understand investments. It is incredibly counter productive to have every worker spend time learning to be an investor if that's not part of their job.

And now we see the results of this grand experiment of replacing pensions with individual retirement investment accounts. We didn't train every worker and they don't have any money.

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Author: PolymerMom Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398786 of 457188
Subject: Re: How will Americans retire? Date: 7/22/2012 9:06 PM
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. . and some discipline that does not seem to be common.

So true! I had lunch w/ an old friend last week. She told me about a relative who received about $1.3 million for company stock when the company was bought out. He proceeded to go into day trading, rather unsuccessfully. He finally gave half of what was left to his wife to manage - after she bugged him enough times.

PM

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398788 of 457188
Subject: Re: How will Americans retire? Date: 7/22/2012 9:18 PM
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...I personally think that eventually there will be a means test for Social Security. Those of us who worked and contributed for many years, even in our teens, will have our benefits cut based on means....


In addition to the taxation of social security, social security is already means tested since the benefits paid do not increase proportionally as your earnings and social security taxes paid increase.

Very roughly as your income, and social security taxes paid, doubles then your social security benefit only goes up by about two thirds.

Using the default values for this simplistic quick calculator here are the benfits at various income levels for someone who stoped working in 2011 the benefits would be;

http://www.socialsecurity.gov/cgi-bin/benefit6.cgi

$25,000 $929
$50,000 $1,413
$75,000 $1,898
$100,000 $2,139

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Author: chkNYC Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398793 of 457188
Subject: Re: How will Americans retire? Date: 7/22/2012 10:46 PM
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To maintain living standards into old age we need roughly 20 times our annual income in financial wealth. If you earn $100,000 at retirement, you need about $2 million beyond what you will receive from Social Security

I don't understand this reasoning. If one earns $100,000 at retirement but lives an LBYM life-style, the living standard would be considerably lower.

So it's what you need to spend to maintain the life-style that matters -- not what you earn.

Christina

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398799 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 1:10 AM
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Hi salaryguru,

But replacing pensions with 401(k)s never seemed like smart national policy to me. Sure, what you need to do to invest successfully is not that complicated, but understanding when, what and why takes some research and understanding . . . and some discipline that does not seem to be common.
Pensions are nothing but deferred annuities. Most companies that offered them in the past (and even today) had them managed & invested & scheduled for payout according to standard annuity schedules & standards.

Nothing has changed. The individual today can 'self-invest' for the same results themselves, or direct their retirement funds to annuity companies that do *EXACTLY* what was previously done by the employers.

The fact that so many people piss away their money speculating and praying for home-runs is a problem... but its a problem individuals want the opportunity to take.

Dave

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Author: steve203 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398801 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 1:22 AM
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Most companies that offered them in the past (and even today) had them managed & invested & scheduled for payout according to standard annuity schedules & standards.

The difference in who is accountable to whom.

In a defined benefit pension, the company holds the fund manager accountable for performance, because if the manager does a poor job, the company has to put more money in the fund.

In the older style defined contribution plan, the company paid in the money, but wasn't concerned with how well the manager did.

In a 401K, most of the money comes out of the employee's pocket, so there is less for the employee to invest on his own. If the fund manager does a poor job, the company isn't concerned and the employee can't do anything about it. A piece of "his money" went to money heaven.

Steve

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Author: rharmelink Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398803 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 2:06 AM
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If the fund manager does a poor job, the company isn't concerned and the employee can't do anything about it. A piece of "his money" went to money heaven.

Is that the same money heaven that pensions go to when companies and municipalities declare bankruptcy, when their managers do a poor job?

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398807 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 2:51 AM
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Hi Steve,

In the older style defined contribution plan, the company paid in the money, but wasn't concerned with how well the manager did.

In a 401K, most of the money comes out of the employee's pocket, so there is less for the employee to invest on his own.


No, the amount of funds available is/was/has been the same in any/all cases. There's only ever so much in the payroll budget, period. When the company had to alot funds to the pensions, there was less to pay out in salaries. When pensions went away, the budget just shifted to salaries (inflating across the board, so going unnoticed) with employees then responsible for their own retirement funds discretion.

The shifting from employer managed to employee managed had no effect on the amounts, in general.

Dave

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Author: salaryguru Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398809 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 3:17 AM
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Nothing has changed. The individual today can 'self-invest' for the same results themselves. . .

That's not nothing. The individual can 'self-invest' in an annuity. But that means they can also invest differently. And that, in case you have been asleep for the past couple of decades, is a very big difference.

People who have educated themselves about investing . . . people who have researched the options . . . people who have worked to distinguish the impact of asset allocation . . . people who have learned to understand their own financial risk tolerance and classify investments along a risk-reward continuum . . . for them, you might claim that nothing has changed. For the vast numbers of American workers, things have changed very dramatically. And the results we are seeing from all the broke 401(k)s today is proof of that.

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Author: PSUEngineer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398829 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 10:13 AM
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To maintain living standards into old age we need roughly 20 times our annual income in financial wealth.

It should be 20 times expenses, not income.

PSU

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Author: steve203 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398831 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 10:24 AM
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When the company had to alot funds to the pensions, there was less to pay out in salaries.

Please show me a case where elimination of a company paid pension, or any other company paid benefit, was fully reflected in a raise in the employee's pay. I have already provided an example, at Lucent, where reduction of a retiree health insurance benefit went entirely to CEO bonus.

Steve

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398843 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 11:14 AM
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I retired very comfortably thanks to my retirement accounts and other investments. But replacing pensions with 401(k)s never seemed like smart national policy to me.

If pensions were required to have 100% funding with individual ownership then 401ks likely would die out for large corps.

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Author: determinedmom Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398844 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 11:52 AM
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To maintain living standards into old age we need roughly 20 times our annual income in financial wealth. If you earn $100,000 at retirement, you need about $2 million beyond what you will receive from Social Security.

This makes no sense. First, it should be based upon expected expenses during retirement not on your income during employment.

Second, even under the writer's scenario why on earth would it be $2 million beyond SS?

Third, a fairly standard withdrawal rate is 4% per year of your starting portfolio (adjusted for inflation).

So really a better way to look at is:

Let's say you had $100,000 income while working and expect retirement expenses of $60,000 a year and you expect to receive $20,000 a year from SS and have no pension leaving a shortfall of $40,000. Then you would need $1 million to equal a starting withdrawal of $40,000 a year.

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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398846 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 12:05 PM
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Wendy:

Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts.

Dear God, I hope that's not true! We got whacked badly in our IRA's and 401k's in 2008, but still ended up with more than that! Thankfully, both being over 65, we both have Social Security coming in.

People who have not spent enough time in the work force to qualify for Social Security (mostly stay-at-home Moms) won't even have Social Security to fall back on.

If you mean they worked fewer than 40 quarters in the SS system, I suspect that may be true. (People should go to the government's web site to see how THEY will do, of course.)

One helpful point: When a spouse wants to start SS, assuming they are at the necessary age, or at least at 62 (which was the age we both started SS), they can choose to collect on their own set "credits", or choose to start collecting as the spouse of the other, depending on which would offer the most. (My wife gets about half as much as I do, for example, as my spouse, but, on her own, she would have been getting maybe one third of that because she stopped working to care for our children many years ago, even though she did put in her 40 quarters.)

Yes, I suspect there will have to be a "means" test at some point for people who are really well off but who are still seeking SS, whether or not that's "fair" according to some people.

One final point: Far too many people depend on "what they hear" or rumors for projected SS status. They need FACTS, available only from the official government sire or from the SS office.

Vermonter

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398847 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 12:10 PM
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Hi Steve,

Please show me a case where elimination of a company paid pension, or any other company paid benefit, was fully reflected in a raise in the employee's pay

You wouldn't be able to see it immediately, because all salary markets pay out 100% of the market demand to fill the required number of positions. When all companies simultaneously experience an immediate relief of expense, that does not necessarily reflect in an equally immediate increase in wage demand to fill positions, *HOWEVER* it reflects in all companies having a bigger wage arsenal to use in competition for the better employees.

This competition, over time (based on typical employee turnover periods,) gradually pushes the real rate of compensation back up, to consume all of the 'windfall' the employers had received by the cessation of the expenses.

Of course, the same thing happens in reverse, when the government grants a sudden increase of employee benefits which reflect in a sudden increase of employer expenses. Wages drop to meet the higher costs (thus the employees gain a net of nothing,) but not faster than turnover rates allow employers to safely adjust wage offerings.

TANSTAAFL.
Dave

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Author: WilliB Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398855 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 12:45 PM
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Baby boomers will never retire, except for the fortunate few with generous pension plans and the unfortunate few who qualify for disability. If your invenstment plans depend on hoards of retiring boomers, you should probably think that through a little more.

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Author: gameguru Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398861 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 1:10 PM
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Yes, I suspect there will have to be a "means" test at some point for people who are really well off but who are still seeking SS, whether or not that's "fair" according to some people.

This has been a core belief of my personal retirement plan for at least 15 years - when I first started saving for retirement, I remember looking at my paycheck and noting how much SS tax was coming out and thinking: "That is money I'm paying for someone else's retirement. I'll never get it back." A personal goal of mine has always been to get to the point that I can earn more than the maximum SS-taxable income (currently $110,100), so that at least some portion of my income doesn't get "vanished". Personally, if I could opt out of SS right now and call everything I've put in for decades a loss, but never have to pay another penny toward SS, I would take that deal. They can't offer such a deal, because it would be too harmful for all the people who currently or will very soon rely on SS benefits.

All that to say that I think the author of the article is correct to advise planning for retirement with no assumption of SS income, especially for anyone who will be retiring more than 15-20 years from now, or if you earn more than, say, 1.5-2x the maximum SS-taxable level.

But, I've also begun thinking about what a means test will imply for higher-income workers. They tend to be the ones who will understand the full implications of such benefit reductions, and so will demand ever-higher salaries to make up for the shortfall in retirement. If you think the gap between high- and low-wage earners is large now, it will be ratcheted up even more once such a policy is implemented! Most likely there would be a "income-bracket dark spot" where no one earns a certain level because it would be above the means test but not add enough to replace the loss of future SS income. I've always believed that it is important for the well-off to bear the largest burden because they have the most to lose (and so should be willing to pay to protect), but I also now believe that means testing will essentially "break" the status quo system (which probably needs breaking anyway, or at least major retooling), and it is going to be very difficult to predict how things will go under rules for which most people were never planning.

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Author: steve203 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398862 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 1:17 PM
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You wouldn't be able to see it immediately, because all salary markets pay out 100% of the market demand to fill the required number of positions. When all companies simultaneously experience an immediate relief of expense, that does not necessarily reflect in an equally immediate increase in wage demand to fill positions, *HOWEVER* it reflects in all companies having a bigger wage arsenal to use in competition for the better employees.

Sounds like a "faith based" play, like supply side economics.

lessee...January 1980, before pension costs were offloaded on employees, average hourly wage, adjusted for inflation was $16.49. June 2012, pay has soared to...$16.80.

http://www.data360.org/dsg.aspx?Data_Set_Group_Id=773&co...

And how much of that big 31 cent/hr increase is due to productivity increases, and how much is trickle down in compensation for the curtailment of benefits?

Steve

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Author: salaryguru Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398873 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 4:10 PM
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You wouldn't be able to see it immediately, because all salary markets pay out 100% of the market demand to fill the required number of positions. When all companies simultaneously experience an immediate relief of expense, that does not necessarily reflect in an equally immediate increase in wage demand to fill positions, *HOWEVER* it reflects in all companies having a bigger wage arsenal to use in competition for the better employees.

Okay, but "bigger wage arsenal" does not imply higher wages to existing workers. That arsenal is more often spent on executive bonuses or expanding workforce under growth conditions.

This competition, over time (based on typical employee turnover periods,) gradually pushes the real rate of compensation back up, to consume all of the 'windfall' the employers had received by the cessation of the expenses.

Obviously, that has not happened for the US workforce. What has happened is the gap between executive vs worker compensation has grown dramatically. What has happened is that job growth moved to developing nations. That has left American workers competing for a declining number of jobs and that provides corporations with the opportunity to decrease wages rather than increase them.

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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398874 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 4:34 PM
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At our peak (more than 15 years ago), we made about $100K combined. When we both left work several years later (I was laid off, she had to leave to care for her mom), we had to live on maybe 1/3 of that income for a year or two. We were careful shoppers, avoided expensive hobbies, bars, etc.

We started SS at age 62 and have managed just fine on that plus a few K per year that I gradually take out of my IRA when we need it. Of course, I still work at my IRA, too, trying to maintain it earning money and/or dividends, and that diminishes the pain.

LBYM is the key.

Vermonter

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Author: tim443 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398875 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 4:48 PM
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LBYM is the key.

Vermonter


You are almost telling my story. My last working year (other than a couple of part time gigs since) was 2000-01 and I made $120K from the job in Germany and another $30K from my military pension. We had just finished the last university tuition and living expense thingy for the "kids" and paid cash for our new home and Volvo.

It took a bit more than a couple of years to get the high living habits out of the system but we seem to have hit the right level and haven't had to touch the savings in nearly four years. Ironically I turn 65 next month and get a raise (Old Age Security). Sixty-five is not as big a thing in Canuckia as it is south of the border but I guess it qualifies me for cheaper tickets at the movies for the 3-4 times per year that we go? ]];-D

I will admit it is easier to go up in lifestyle than it is to go down.


Any <having his grocery budget destroyed by company> mouse

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398876 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 4:53 PM
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Sixty-five is not as big a thing in Canuckia as it is south of the border but I guess it qualifies me for cheaper tickets at the movies

That it? It seems most places these days in Southern Canada (that place below the U.P.) give seasoned citizens some form of discount for dining and entertainment.

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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398877 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 5:28 PM
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<Baby boomers will never retire, except for the fortunate few with generous pension plans and the unfortunate few who qualify for disability.>

When a baby boomer loses his/her job, it is harder to find a new one. The period of unemployment is longer. Statistically (averaging over many people) even people who are active members of the work force (neither retired nor disabled) will spend more time unemployed -- effectively retired, though not voluntarily.

Wendy

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398881 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 6:10 PM
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Okay, but "bigger wage arsenal" does not imply higher wages to existing workers.
Probably true in most cases. As I explained, andy effects to wages would come at the rate of natural turnover, when competition for worker quality applies. Of course, by that time other competitive forces may also come to bear.

That arsenal is more often spent on executive bonuses or expanding workforce under growth conditions.
... and/or a dozen other potential places the directorship believes will best suit the competitive advantages for that company.

The important point is that in a competitive environment, the "slack" is always re-employed toward performance in order to survive.

This competition, over time (based on typical employee turnover periods,) gradually pushes the real rate of compensation back up, to consume all of the 'windfall' the employers had received by the cessation of the expenses.
Obviously, that has not happened for the US workforce.

You must be assuming that the slowing of the wage drop isn't a reflection of a *RELATIVE* wage gain (if not an absolute wage gain) that would otherwise have slid even faster.

What has happened is the gap between executive vs worker compensation has grown dramatically.
Irrelevant, except for wealth envy. If the 'gap' made an enterprise less competitively advantaged than their challengers the gap would disappear.

What has happened is that job growth moved to developing nations.
True, and its very realistic to assume that the export of job growth may have actually been *SLOWED* by industry having less mandatory wage expense in retirement management.

That has left American workers competing for a declining number of jobs and that provides corporations with the opportunity to decrease wages rather than increase them.
I'm not sure "opportunity" is the appropriate word... its not like industry's shareholders give the company directors much choice in that regard.

Cheers,
Dave

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Author: tim443 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398883 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 6:26 PM
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That it? It seems most places these days in Southern Canada (that place below the U.P.) give seasoned citizens some form of discount for dining and entertainment.


Hawk,

Clearly I haven't done the research yet. I was of course referring to the big whoop the USians do about medicare. In Canada the healthcare system doesn't change because you turn 65 ... well actually that isn't completely true as some provinces have a Pharmacare thingy they do if you don't already have supplemental healthcare insurance (which I do).

http://www.gov.ns.ca/health/pharmacare/

Many restaurants around here have a seniors menu which at careful study is probably actually a rip-off as they give you a smaller plate for 10% less than the normal one. Many of those are 55 plus which makes sense as you want to get as many as possible in on it. }};-()

Some of the stores I walk by on my evening walk have something like "Seniors Tuesday" with 10% off being the norm.


Tim

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Author: qazulight Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398885 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 6:40 PM
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http://stockcharts.com/h-sc/ui?s=$USD&p=W&b=5&g=...

Dave,

I have been bullish on the wages of workers going forward. I am also bullish on the 401K's for the 30 years olds in the work force today.

However, if you look at the chart, you can see that the dollar is moving up toward the 10 year simple moving average while the one year average coils itself around the 4 years. More importantly it appears that the 10 year average is finding a bottom.

However, the USD index is probably not the most important index anymore, the trade weighted index is probably a better one.

The last time I checked it, the dollar was stronger than it was 15 to 20 years ago. However, that appears to be changing.

If we start exporting oil, or natural gas, I believe it will be difficult to keep the dollar from gaining strength, and this will tend to dampen manufacturing, which will keep manufacturing job growth in check. However, mining job growth may go up dramatically because the hydrocarbons we are finding are labor intensive to recover, ship and refine.

Cheers
Qazulight

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Author: salaryguru Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398887 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 7:05 PM
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sg: Okay, but "bigger wage arsenal" does not imply higher wages to existing workers.

Dwd: Probably true in most cases. As I explained, andy effects to wages would come at the rate of natural turnover, when competition for worker quality applies. Of course, by that time other competitive forces may also come to bear.


Apparently, you lost track of what the topic of this thread was (How will Americans retire?) or what your original claim was [Dwd: When pensions went away, the budget just shifted to salaries (inflating across the board, so going unnoticed) with employees then responsible for their own retirement funds discretion.]

So now you are simply admitting that steve was right to question your original claim. American workers did not trade corporate pension contributions for increased salary when companies dropped pension plans for 401(k)s. Of course that was obvious to anyone who was working in corporate America and paying attention when the switch happened.

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Author: notehound Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398891 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 7:21 PM
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LBYM...

I dread trying to convince DW to go along with the following lifestyle adjustments, all of which I could tolerate to help conserve capital:

1. Give up cable TV and switch to a cheaper phone service.
2. Rent out the basement "in-law suite" or move down there ourselves, renting out the upstairs.
3. Close-off and stop heating/cooling the 4 bedrooms we don't use.
4. Subsist on eggs/toast for bkfst, PBJ sandwiches for lunch and rice/beans for supper.
5. Drink water instead of soft drinks/wine/juices.
6. Trade the fancy (paid-for) gas guzzlers for used Hondas or Hyundais.
7. Turn off the darn lights!
8. Wash clothes weekly instead of daily.
9. Stop with giving fancy gifts already!
10. Fire the maids and clean ourselves.
11. Dump the landscape crew and hire a neighborhood kid (I have severe allergies and I can't do it - otherwise I would).
12. Use dish cloths instead of paper towels.

I would have a hard time convincing she-who-must-be-obeyed that it is not necessary to "keep up appearances" and that just because a person once commanded a high salary, that doesn't mean they "deserve" to always live "according to the standard to which they previously became accustomed."

Savings doesn't ensure a certain lifestyle any more. Not with negative yield replacing former estimated returns!

;-)

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Author: tim443 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398892 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 7:47 PM
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I dread trying to convince DW to go along with the following lifestyle adjustments, all of which I could tolerate to help conserve capital:

1. Give up cable TV and switch to a cheaper phone service.

Didn't happen, the deal is she gets her cable I get my high speed internet.

2. Rent out the basement "in-law suite" or move down there ourselves, renting out the upstairs.

Nope, we moved to a condo.

3. Close-off and stop heating/cooling the 4 bedrooms we don't use.

Condo fees include heat and hot water and we have a guest suite right on our floor that can be rented for $40 a night.

4. Subsist on eggs/toast for bkfst, PBJ sandwiches for lunch and rice/beans for supper.

So much drama, home cooked food is still relatively cheap since we rarely hit the restaurants... which is really the biggest saving. We will buy a huge pork loin at Costco and use a sharp knife to turn it into a massive number of boneless pork chops and I am a believer in "Cook once eat twice" (or more) with slow cooker meals or big stews... a freezer is the best investment ever if properly used.

5. Drink water instead of soft drinks/wine/juices.

I allow myself a case of beer a month and neither of the "kids" would dare show up for a visit without a bottle of Vodka for Grandma bought at a fifth the price of what it costs up here.

6. Trade the fancy (paid-for) gas guzzlers for used Hondas or Hyundais.

Our one little Volvo bought just before we retired 11 years ago has only 128000 Km on it.

7. Turn off the darn lights!

I'm the lights Nazi in the family. }};-D

8. Wash clothes weekly instead of daily.

Hot water included in condo fees but once a week two loads usually does us.

9. Stop with giving fancy gifts already!

No luck there after years of promises, the recent loss of her mom may (but I doubt it) change things.

10. Fire the maids and clean ourselves.

We never had a maid though I'm sure she would love one.

11. Dump the landscape crew and hire a neighborhood kid (I have severe allergies and I can't do it - otherwise I would).

Good luck with the neighbourhood kid bit but the condo does a nice job and we are on the fifth floor. The gardening is done by some volunteers who couldn't give it up.

12. Use dish cloths instead of paper towels.

Hmmm I haven't even tried verbalizing that one though I do try to set an example (ignored).


Tim

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Author: whafa Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398894 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 7:52 PM
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1. Give up cable TV and switch to a cheaper phone service.
2. Rent out the basement "in-law suite" or move down there ourselves, renting out the upstairs.
3. Close-off and stop heating/cooling the 4 bedrooms we don't use.
4. Subsist on eggs/toast for bkfst, PBJ sandwiches for lunch and rice/beans for supper.
5. Drink water instead of soft drinks/wine/juices.
6. Trade the fancy (paid-for) gas guzzlers for used Hondas or Hyundais.
7. Turn off the darn lights!
8. Wash clothes weekly instead of daily.
9. Stop with giving fancy gifts already!
10. Fire the maids and clean ourselves.
11. Dump the landscape crew and hire a neighborhood kid (I have severe allergies and I can't do it - otherwise I would).
12. Use dish cloths instead of paper towels.


Why do you hate America?

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Author: steve203 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398901 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 8:25 PM
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American workers did not trade corporate pension contributions for increased salary when companies dropped pension plans for 401(k)s.

Of course not. Contending that they did is, like the broader "supply side economics" argument, that money taken from the majority and handed to the 1% will then be deployed by the 1% to the best benefit of the people from whom the money was taken, is "faith based economics"

Definition of FAITH: firm belief in something for which there is no proof

http://www.merriam-webster.com/dictionary/faith

Steve

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Author: rharmelink Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398904 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 9:14 PM
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For me, LBYM allowed me to "retire" at 49:

1. Give up cable TV and switch to a cheaper phone service.

Basic cable TV was paid for by association dues ($300 per month for cable TV, heating, air conditioning, water, landscaping, snow shoveling, etc.). The only additional utilities I had were electricity and phone (bare bones). My living costs, excluding food, ran about $500 per month. Easy to pay for with my 20-hour-per week job, even though I maximized my 401K contributions.

Although I do do NetFlix. Have a backlog of thousands of disks in my offline DVD queue and over 400+ movies in my streaming queue.

2. Rent out the basement "in-law suite" or move down there ourselves, renting out the upstairs.

I just had a small one-bedroom condo. The average house these days has triple the living space per person as housing in the 1950's. I paid off the mortgage early while working part-time.

3. Close-off and stop heating/cooling the 4 bedrooms we don't use.

No need. Not nearly that much wasted space in a 1-bedroom condo.

4. Subsist on eggs/toast for bkfst, PBJ sandwiches for lunch and rice/beans for supper.

How about just stopping with prepared foods and constantly eating out. It can be relatively cheap to prepare meals at home, especially if mostly sale items are bought.

Just got corn on the cob 10/$1 a while back. I get stuffed eating two. The butter I put on it probably cost more than the corn. Delicious and easy to eat out of the microwave -- just 4 minutes per ear, husk on.

Eggs recently were a dozen for under a buck. I like to poach them in the microwave and add a little cheese (recently 16 slices of pepperjack or American for $0.99). So 3 eggs with two slices of cheese ran about 40 cents. Could add a few slices of garlic bread under the broiler for another 15 cents.

Peaches and plums, 2#/$0.99. Green/Red/Yellow peppers, 3/$1. Watermelon, 10 cents a pound. Green beans, 79 cents a pound. Cherries, $1.29 a pound. Green/Red/Black grapes, 89 cents a pound. Celery, Radishes, Cauliflower, and Broccoli are often on sale. As are onions. Potatoes can sometimes be a 5- or 10-pound bag for $1.

Last week, got 2 Papa Murphy's large pepperoni pizzas at $5 apiece. A real bargain. Got about 4 meals out of each. Had two last month for the same price.

Yum.

5. Drink water instead of soft drinks/wine/juices.

Probably a lot healthier. I get the Hawaiian punch sugar free single serve packets so I have something to take with my potassium (tastes awful). That's about 8 liters of flavored water for $1.

6. Trade the fancy (paid-for) gas guzzlers for used Hondas or Hyundais.

I haven't owned a car since 1984. Haven't driven one since about 1990.

7. Turn off the darn lights!

No worries.

8. Wash clothes weekly instead of daily.

Already done.

9. Stop with giving fancy gifts already!

I figure gifts are mostly for kids. Most of the adults in my life can afford things they NEED.

10. Fire the maids and clean ourselves.

Takes care of itself with a 1-bedroom condo.

11. Dump the landscape crew and hire a neighborhood kid (I have severe allergies and I can't do it - otherwise I would).

Association dues paid for it. Also got an outdoor pool in the summer and an exercise room (right across the hall) with spa and sauna. I used to read the paper in there every morning, but haven't gotten a newspaper in decades.

12. Use dish cloths instead of paper towels.

No worries.

----------------------------------------------------------------------

In the last year, I've downloaded about 1600 free books from Amazon for my Kindle. Can't keep up with them. Most are actually pretty good. I've only run into a few real stinkers with loads of editing issues.

Never liked traveling, which might be a big desire for a lot of young retirees.

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Author: rharmelink Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398905 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 9:24 PM
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PS: Even though I maximized my 401K contributions, FICA got a lot more. I'd love to give up any SS benefits and get those back, to have an IRA account that would be 2-3 times the size it is now.

My initial plan was to retire to a state with no income taxes, to reduce taxes on withdrawals from the IRA. But since 2006, I've had a 6-year total of less than $2K in state and federal income taxes due. And no FICA taxes. In my last working years, I was paying about $12K per year in FICA/State/Federal income taxes (on a part-time job).

So I guess I'm no longer a contributing member of society.

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Author: notehound Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398907 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 9:41 PM
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Why do you hate America?

Whafa,

You just gave me the best belly-laugh I've had in a long time.

Now that I've got a target on my back, I'm afraid I'll have to start watching out for the drones seeking out us enemies of "the American way of life!"

:-)

-Still chuckling.

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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398917 of 457188
Subject: Re: How will Americans retire? Date: 7/23/2012 11:41 PM
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You wouldn't be able to see it immediately, because all salary markets pay out 100% of the market demand to fill the required number of positions. When all companies simultaneously experience an immediate relief of expense, that does not necessarily reflect in an equally immediate increase in wage demand to fill positions, *HOWEVER* it reflects in all companies having a bigger wage arsenal to use in competition for the better employees.

Sounds like a "faith based" play, like supply side economics.


Got it. Trusting economic theory that has been repeatedly proven correct to also apply in this case, is "faith".

Does this mean that trusting political theory that has never worked to work this time, is "realism"?

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Author: sailrmac Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 398987 of 457188
Subject: Re: How will Americans retire? Date: 7/24/2012 4:08 PM
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The lack of discipline resulted in people not living below their means and saving nothing for retirement. Sure knowing enough to stick half in a bond fund and half in a stock fund contributes but the reality is most people don't forgo current needs and desires to improve future utility. It is that responsibility we as a society should be incouraging. Indeed a lot of people consistently spend not just everything they make but more than that. When possible they used their homes as ATM's to support that habit. Now they have just stopped paying their debts and are defaulting on those loans. But it's the man, the big bad lenders fault.

We of course are the enablers. Through laws and systems we put in place to first encourage them to buy things they can't afford and then to delay and even forgive debt payments.

Put that way it's a little less sympathetic. It doesn't garner as many votes nor sound as good on the major media outlets.

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