HoneyBBQ
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Post by HoneyBBQ on Dec 19, 2014 13:39:06 GMT -5
Oh, and you only live on gains? That's an interesting idea.
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Lizard Queen
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Post by Lizard Queen on Dec 19, 2014 13:42:42 GMT -5
"If you save a reasonable percentage of your take-home pay, like 50%, and live on the remaining 50%, you’ll be Ready to Rock (aka “financially independent”) in a reasonable number of years"
From Mr Money Mustache's link. ![](http://syonidv.hodginsmedia.com/vsmileys/rofl.gif) I mean, I guess there are people who live on 50% take home. But: -this ignores that a large % of people's salaries goes to retirement (pre tax, not take home) - expenses change dramatically when you stop working in many cases\ - I could go on... The guy, and his wife, were software engineers in a fairly LCOL area. Their 50% of take home would have been what my DH and I grossed together. But, if you want to pick it apart, the take home actually means after taking taxes out. He considers both retirement savings and principal pay down on a house as part of the savings rate. It makes the math a lot more complicated, but also makes your savings rate look higher than it would if your denominator was your gross income.
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Lizard Queen
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Post by Lizard Queen on Dec 19, 2014 13:45:13 GMT -5
That's 5% after inflation. Pretty reasonable assumption, IMO. I always ignore the company match. There are too many ways to be screwed out of it--vesting schedule, dropping in hard times, timing of when it is transferred, etc. It also seems to be ignoring SS. Someone making 50K could get a third of their expenses replaced with SS. The guy only worked for 10 years. He does mention SS, but i'm not sure how much that would really be after only 10 years of contributions. Don't they calculate it on your 35 highest years? That's a lot of zeros in there.
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Deleted
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Post by Deleted on Dec 19, 2014 14:02:26 GMT -5
It also seems to be ignoring SS. Someone making 50K could get a third of their expenses replaced with SS. The guy only worked for 10 years. He does mention SS, but i'm not sure how much that would really be after only 10 years of contributions. Don't they calculate it on your 35 highest years? That's a lot of zeros in there. I'm still back on this... 10% get's you to retirement in 51 years. That's over 70 for someone who starts at 20.
I'm saying that with the 5% match and SS, someone making 50K and saving 10% consistently his entire career should be able to shave that 51 years down considerably.
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Lizard Queen
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Post by Lizard Queen on Dec 19, 2014 14:13:52 GMT -5
The guy only worked for 10 years. He does mention SS, but i'm not sure how much that would really be after only 10 years of contributions. Don't they calculate it on your 35 highest years? That's a lot of zeros in there. I'm still back on this... 10% get's you to retirement in 51 years. That's over 70 for someone who starts at 20.
I'm saying that with the 5% match and SS, someone making 50K and saving 10% consistently his entire career should be able to shave that 51 years down considerably. It depends upon on how much or how little he can live on. That's what the graph shows. (And you do know, there's a lot of people out there who think SS won't be around when they're old enough for it.)
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gooddecisions
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Post by gooddecisions on Dec 19, 2014 14:14:27 GMT -5
That's ignoring the 5% company match and assuming only a 5% return during the working years. A 5% match is far from the given. It's much more likely if you get a match at all it's 50% of 6% or 3% total. Anyway, I think some of you are missing my point. It was never affordable and having a cell phone doesn't make a significant difference. And, while I use my HSA as part of my retirement planning, that is not the purpose of an HSA. It's to help cover the cost of what isn't covered under the high deductible plans- which are now more expensive than ever.
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AgeOfEnlightenmentSCP
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Post by AgeOfEnlightenmentSCP on Dec 19, 2014 14:17:48 GMT -5
Salon? "Pension Rights Center"? Pass. People like this view retirement as a right / entitlement when in reality it is a personal responsibility and challenge. If you don't put enough aside, you're going to suffer. That's the sum total of the "problem".
This article is really setting us up for the REAL problem: the government is angling to steal our retirement funds. They have two problems looming, they're going to have to pay our creditors, and some people haven't put enough aside for retirement and SS won't be enough- if its there at all. One solution (this isn't theory, btw- it was proposed) is to swap your retirement account assets for a government bond.
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shanendoah
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Post by shanendoah on Dec 19, 2014 14:18:22 GMT -5
It also seems to be ignoring SS. Someone making 50K could get a third of their expenses replaced with SS. The guy only worked for 10 years. He does mention SS, but i'm not sure how much that would really be after only 10 years of contributions. Don't they calculate it on your 35 highest years? That's a lot of zeros in there. If I remember correctly (and I could be wrong) MMM and wife worked for 10 years in the Toronto area. They moved to CO after "retiring" early. She's now doing some real estate stuff, so maybe they are now contributing to SS, but I wouldn't count on it. They aren't likely to draw anything from SS. However, they might be drawing something from Canada's system.
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Deleted
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Post by Deleted on Dec 19, 2014 14:20:42 GMT -5
I'm still back on this... 10% get's you to retirement in 51 years. That's over 70 for someone who starts at 20.
I'm saying that with the 5% match and SS, someone making 50K and saving 10% consistently his entire career should be able to shave that 51 years down considerably. It depends upon on how much or how little he can live on. That's what the graph shows. (And you do know, there's a lot of people out there who think SS won't be around when they're old enough for it.) Yeah, there's a lot of people out there that think a lot of things.
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Deleted
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Post by Deleted on Dec 19, 2014 14:23:26 GMT -5
That's ignoring the 5% company match and assuming only a 5% return during the working years. A 5% match is far from the given. It's much more likely if you get a match at all it's 50% of 6% or 3% total. Anyway, I think some of you are missing my point. It was never affordable and having a cell phone doesn't make a significant difference. And, while I use my HSA as part of my retirement planning, that is not the purpose of an HSA. It's to help cover the cost of what isn't covered under the high deductible plans- which are now more expensive than ever. I guess I am missing the point. All I'm seeing is someone making 50K can't afford to save sufficiently for retirement. ![](http://syonidv.hodginsmedia.com/vsmileys/idunno.gif)
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Lizard Queen
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Post by Lizard Queen on Dec 19, 2014 14:25:25 GMT -5
It depends upon on how much or how little he can live on. That's what the graph shows. (And you do know, there's a lot of people out there who think SS won't be around when they're old enough for it.) Yeah, there's a lot of people out there that think a lot of things. I don't know. My statements said something about only 75%. It's probably less now. Who the hell knows what the people in Washington will do about it in the next 20 years. ![](http://syonidv.hodginsmedia.com/vsmileys/idunno.gif) . All I know is that I'm not going to count too heavily on the yahoo s in Washington to fix anything.
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Deleted
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Post by Deleted on Dec 19, 2014 14:38:06 GMT -5
Yeah, there's a lot of people out there that think a lot of things. I don't know. My statements said something about only 75%. It's probably less now. Who the hell knows what the people in Washington will do about it in the next 20 years. ![](http://syonidv.hodginsmedia.com/vsmileys/idunno.gif) . All I know is that I'm not going to count too heavily on the yahoo s in Washington to fix anything. I'm sure it will be reduced or means tested (although, I've never seen anything on my statement saying to expect only a certain percentage), but I think it will be around a long time yet. Even if someone only gets $800/month that still replaces a third of take home for a 50K worker saving 10% and having around 25% going to income and payroll taxes. For high income earners SS isn't really anything to think about, but low income it can be significant.
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midjd
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Post by midjd on Dec 19, 2014 15:31:11 GMT -5
I think the projections are that they'll only be able to meet 75% of the obligation beginning in the late 2030s -- and that's with no changes to the current regulations. So either they're going to extend the retirement age, raise the FICA rate, or implement some other restrictions, OR in another 25 years they might have to reduce the current projected benefit a bit.
SS may be a bit different when we retire than it is now, but it will still be there.
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Plain Old Petunia
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Post by Plain Old Petunia on Dec 19, 2014 16:12:59 GMT -5
But that person making 50K doesn't need to save $17,500/year to be saving adequately for retirement (assuming we're not talking someone that is trying to play catch-up). He was never saving $17500. $7,500 401k + $5,000 IRA + $5,000 HSA = $17,500.
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gooddecisions
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Post by gooddecisions on Dec 19, 2014 16:17:11 GMT -5
He was never saving $17500. $7,500 401k + $5,000 IRA + $5,000 HSA = $17,500. Sigh, I know how to do math. The HSA or FSA in this scenario isn't for retirement. It's to cover insurance expenses the insurance plan doesn't cover. Yes, we're all on YM, so that's what we use it for, but most people actually use it to pay their regular health care expenses today because they don't have the huge emergency savings account to pay it out of pocket.
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Plain Old Petunia
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Post by Plain Old Petunia on Dec 19, 2014 16:24:41 GMT -5
$7,500 401k + $5,000 IRA + $5,000 HSA = $17,500. Sigh, I know how to do math. The HSA or FSA in this scenario isn't for retirement. It's to cover insurance expenses the insurance plan doesn't cover. Yes, we're all on YM, so that's what we use it for, but most people actually use it to pay their regular health care expenses today because they don't have the huge emergency savings account to pay it out of pocket. No spent money goes into the HSA or FSA, only saved money. If I'm going to put 5k into my HSA or FSA, I have to figure out how to spend 5k less elsewhere.
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gooddecisions
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Post by gooddecisions on Dec 19, 2014 16:40:02 GMT -5
Sigh, I know how to do math. The HSA or FSA in this scenario isn't for retirement. It's to cover insurance expenses the insurance plan doesn't cover. Yes, we're all on YM, so that's what we use it for, but most people actually use it to pay their regular health care expenses today because they don't have the huge emergency savings account to pay it out of pocket. No spent money goes into the HSA or FSA, only saved money. If I'm going to put 5k into my HSA or FSA, I have to figure out how to spend 5k less elsewhere. Exactly, so if Joe is lucky, he can use his reimbursement to not go further in debt and if he's really lucky he can afford to get the kids some Christmas presents after this significant chunk of income is earmarked for healthcare and future income needs. But, Joe is not lucky, his pockets are empty and people are ripping on him for having a cell phone and internet service.
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movingforward
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Post by movingforward on Dec 19, 2014 16:43:41 GMT -5
I couldn't finish the article. Halfway through it I started hearing Charlie Brown's teacher talking to me. Seriously, it sounded like a bunch of dribble to me....
Is it weird that I don't really know any of these poverty stricken senior citizens I keep reading about? I know senior citizens that don't have MUCH. They don't live a glamorous retirement but they have SOMETHING and something is better than nothing. Even if a middle class person only saves 10% of their income - after 30-40 yr they will have some money. I know a lady who never made more than 40K her entire life. She is retiring next year at the age of 67. She doesn't have a ton of money saved but she never lived high on the hog to begin with. She economized all her life so I doubt retirement is going to be much different than her life has always been other than not having to set the alarm.
In general people will make a million excuses as to why they can't save. Two middle class people can make the same salary (give or take a few thousand) and one will save thousands of dollars more than the other. My BFF and I are a great example of this. We roughly make the same amount of money (I make 58K and she makes 63K), we pay the same rent, drive cars that are very similar, work for employers that offer roughly the same medical and retirement benefits and are both SINKs. I manage to save 28% of my income. She saves about 5% of her income and this is actually pre-tax money through her 401K. Absolutely nothing else gets saved.
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Plain Old Petunia
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Post by Plain Old Petunia on Dec 19, 2014 16:58:19 GMT -5
I don't know. My statements said something about only 75%. It's probably less now. Who the hell knows what the people in Washington will do about it in the next 20 years. ![](http://syonidv.hodginsmedia.com/vsmileys/idunno.gif) . All I know is that I'm not going to count too heavily on the yahoo s in Washington to fix anything. I'm sure it will be reduced or means tested (although, I've never seen anything on my statement saying to expect only a certain percentage), but I think it will be around a long time yet. Even if someone only gets $800/month that still replaces a third of take home for a 50K worker saving 10% and having around 25% going to income and payroll taxes. For high income earners SS isn't really anything to think about, but low income it can be significant. SS is significant to me. I earned 53k this year at my job, another 2k from a part-time gig, so I'm a member of the group being discussed.
I figure my nest egg will replace about half of my income, SS benefits another quarter. The final quarter will come from no longer saving for retirement, no longer paying FICA taxes, and reduced mortgage. (Either a smaller mortgage or no mortgage at all).
Take away the SS benefits and I will not starve, but I certainly will feel that pinch.
I do have a smart phone and internet, but no cable. My smart phone bill is cheap, but that darn internet keeps creeping up.
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movingforward
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Post by movingforward on Dec 19, 2014 17:01:55 GMT -5
I think most middle income people will need some sort of SS to supplement their retirement. I don't see SS disappearing but I could be wrong.
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justme
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Post by justme on Dec 19, 2014 17:27:18 GMT -5
It won't go away - there's still 13.4% (something like that) from every worker. The problem is the number of baby boomers outnumbering the workers and the trust fund going broke sometime in the 2030 decade. So after that they'll only have what's coming in. The baby boomers will eventually die though the question is when? Today''s 20somethings will only be in their 50s then so still a decade plus from pulling out money. Though I suppose the birth rate isn't so high now, but I wonder what the ratio will be. QUICK! Everyone start popping out kids now so you can have SS. ![](http://images.proboards.com/new/tongue.png)
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Angel!
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Post by Angel! on Dec 19, 2014 17:27:30 GMT -5
$7,500 401k + $5,000 IRA + $5,000 HSA = $17,500. Sigh, I know how to do math. The HSA or FSA in this scenario isn't for retirement. It's to cover insurance expenses the insurance plan doesn't cover. Yes, we're all on YM, so that's what we use it for, but most people actually use it to pay their regular health care expenses today because they don't have the huge emergency savings account to pay it out of pocket. Couple of things come to mind:
How many people actually run into $5K expenses/year? But ignoring that, you still have a 25% savings rate which is kind of ridiculous for anyone but a YMer. That still leave ~2K/month which really isn't that bad. If there are kids, they are going to owe 0 taxes & still get a refund.
It seems like you came up with a ridiculously extreme example & it still isn't that problematic. And they could easily reduce savings to 15% & still be doing really well when it comes to savings.
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Deleted
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Post by Deleted on Dec 19, 2014 18:06:38 GMT -5
Sigh, I know how to do math. The HSA or FSA in this scenario isn't for retirement. It's to cover insurance expenses the insurance plan doesn't cover. Yes, we're all on YM, so that's what we use it for, but most people actually use it to pay their regular health care expenses today because they don't have the huge emergency savings account to pay it out of pocket. Couple of things come to mind:
How many people actually run into $5K expenses/year? But ignoring that, you still have a 25% savings rate which is kind of ridiculous for anyone but a YMer. That still leave ~2K/month which really isn't that bad. If there are kids, they are going to owe 0 taxes & still get a refund.
It seems like you came up with a ridiculously extreme example & it still isn't that problematic. And they could easily reduce savings to 15% & still be doing really well when it comes to savings.
This was my thought too. Unless hypothetical Joe or one of his kids has some serious medical issues I don't get how he'd be burning through 5K year above insurance. I've never even had access to an HSA and the FSA limit is $2500, but there is no way I'd ever put that much in unless I knew something big was coming up. I put $1000 in this year because I knew I was going to have expenses of ex the first couple months I could claim and I'm still trying to figure out what to do with the last $300. Normally we're at about $500/year out of pocket for the kids and I.
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tallguy
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Post by tallguy on Dec 20, 2014 0:58:47 GMT -5
Sorry, yes, that was more what I meant. Hard to save 18k if you make 35k. Apologies. Are you challenging MPL? Because if anyone can do it, I think it would be her.
Personally, I would bet on...me. ![](http://images.proboards.com/new/wink.png)
From June of 2011 through January of 2013 I had a 19-month stretch where I put more new money into retirement accounts than I made. And each of the last four years my 401k contributions exceeded my total other spending for the year. Admittedly, I had to pay certain expenses (property tax, insurance, Roth contribution) out of savings and other funds, but in 2013 for example I put $29,500 into 401k and Roth while making about $36,000. Living expenses were around $18-19,000.
Now granted, not many median-income people are in the position to be able to make it that much of a priority (I did have other funds available) and VERY few can actually follow through with it, but it is true that knowledge and discipline together can take you a very long way.
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