Retirement

[bogey]

Do you old folks have a retirement plan in place? How much money will you have saved for your retirement? I'm 60 and it's weighing on my mind. I'm wondering if I'm going to have enough retirement $ saved up.

[SAUTO]

My best advice from an old man was to never finance anything for more than 15 years.

Thats why everything I own is paid for.

[Randallflagg]

Originally Posted by cwhocares

The advice I received when I was 19 (50 years ago) was pay yourself first. $5-$50 whatever, each week and that compound interest is your friend. You don't a new car every 5 or 6 years. You don't need a boat, jet ski. You need to think about the future NOW and be responsible with your money. In short, DON'T TRY KEEPING UP WITH THE JONES!!!!! Be frugal in everything you do.

You and I are not that far apart in age (I'm 71). However, when you and I were young, you could actually make money with a savings account. usually 6% interest. Today? 1% seems to be the norm. Damned shame really.....

[Rain Man]

The best advice I ever got was from my dad. When I was a teen and about to head out to the car, he would often say, "Don't have a wreck."

I'm not really sure why he felt it necessary to say that, but he often did, and I think it was really good advice.

[ChiTown]

Best advice I got was from my very first Boss after I graduated College. He said “never blow off returning a call. You never know what sort of opportunity might come up in any given conversation” I stuck with that advice my whole life, and it ended up putting me in a very comfortable financial position because of it. Sometimes, you just have to be available to answer the call, and to remember that opportunities exist everywhere.

[Bugeater]

Originally Posted by Rain Man

I once worked with a guy whose father was a CEO of a large company. This guy was required to work until he was 40, and he did that. He was a good coworker. He then retired when he turned 40 and just does fun stuff now.

Being born into a rich family has distinct advantages.

I hate that guy.

[New World Order]

Originally Posted by Rain Man

The best advice I ever got was from my dad. When I was a teen and about to head out to the car, he would often say, "Don't have a wreck."

I'm not really sure why he felt it necessary to say that, but he often did, and I think it was really good advice.

[lewdog]

Originally Posted by BigRedChief

you think people don’t know that they should save more and spend less?

Most people don't. And by the time most people realize the need, they've missed a decade or more of compounding interest which seems lost on many, including you based on your comments regarding linear progression of money. Cops, nurses and those making $50k can absolutely have a decent chunk of change by the time retirement hits. Takes only about 10% of their pay but the key is starting early.

A 25 year old person putting $5k per year into a retirement fund, @6% growth until they are 65 years old (40 years) will have $825,000 after those 40 years.

A 45 year old person putting $10k per year into a retirement fund, @6% growth until they are 65 years old (20 years) will have $399,000.


Both of these people put $200k into their retirement funds.



Compounding interest is an amazing thing.

[SAUTO]

Originally Posted by ChiTown

Best advice I got was from my very first Boss after I graduated College. He said “never blow off returning a call. You never know what sort of opportunity might come up in any given conversation” I stuck with that advice my whole life, and it ended up putting me in a very comfortable financial position because of it. Sometimes, you just have to be available to answer the call, and to remember that opportunities exist everywhere.

I tell everyone that works for me this. They don't understand.

ANSWER THE PHONE PEOPLE.

[cwhocares]

Originally Posted by cooper barrett

Did they sell you term life to go with your copy of The Millionaire Next Door?

Anyone remember A.L. Williams?

Term Life is the best way to go. Using an insurance policy as an investment is a poor return on your money.

[cwhocares]

Originally Posted by BigRedChief

you think people don’t know that they should save more and spend less?

I think most people know this but, it's being disciplined enough to do it. I know people that have an employee match of 5% and don't do it. Either because they don't understand or they live paycheck to paycheck. Either way it's their own fault.

[Rain Man]

Originally Posted by Bugeater

I hate that guy.

Yeah, I can see that. He once took a girl to Wimbledon for a date. We're not talking long-term girlfriend. We're talking date.

He was actually a nice guy, though. He would often try to confirm that his dad wasn't the CEO while he was growing up, so he didn't grow up rich. But I think maybe he grew up extremely affluent and became part of a true rich family when he was in his teens or something.

And by the way, his younger sister looked like a playboy model. I don't know if she had work done, but she had a figure that does not occur in nature.

[Fat Elvis]

Originally Posted by cooper barrett

You are so full of ****ing shit,You're the guy who sold Wal-mart stock to buy a lawn tractor.

Real fact if you invested a one time investment of 10% of your salary in 1965 in Berkshire-Hathaway and never touched it that one investment would be worth today an paltry AKA chicken scratch, amount of $10.4M. with no dividend payments

If you invested just $1600.in Walmart (100 shares) in 1970, todays value after splits would be about $12.4M with an annual dividend of over $400k.

In 1980 an investment of less than $1K (24 shares) in Kimberly Clark would be worth $1M today and $3.88 dividend on 886 shares ($3500).

All of these investments are not out of reach on the average school teachers salary, even in 1965.


I think you can see that putting your savings in Cap Fed and earing 6.5% is going to have you eating out of a soup kitchen when you get old, but investing in dividend growth stocks will have you eating caviar with Robin Leach on your own yacht without touching your investment...

Go ahead. School me, I gotz 2 knwz!.

Your argument has a bunch of "ifs" and a whole lot of luck. Tell me, how many people actually bought Berkshire Hathaway in 1965? Not many. Hindsight is 20/20. And the reality is that buying Berkshire Hathaway in 1965 would be considered financial insanity at the time. No one could of predicted how successful Warren Buffett would become. Here's a guy who plowed his money into an industry that was in decline and failing after WWII. He'd originally planned on selling his stake in Berkshire Hathaway, but changed his mind after Seabury Stanton (the majority stakeholder) offered to pay $.12/share less than the original tendered offer. Warren Buffett bought a majority of shares in Berkshire Hathaway so that he could turn around and fire Seabury Stanton for going 1/8 of a dollar under the original tender. To any rational investor at the time, that is complete and total insanity. Spiting people isn't a very good investment strategy.

Except in the singular case of Berkshire Hathaway.

It is kind of like hitching your financial future to a guy who claims he will make you rich by buying up Blockbuster Video and firing the CEO. That was Berkshire Hathaway in 1964/65.

But lets assume you were one of the "fools" who trusted Warren. The return on your investment has been pretty much unparalleled. Over the first 50 years of Berkshire Hathaway (under Buffett) it had a return of 1,379,476% compared to 2,607% for the S&P 500.

What is the probability that *you* had the insight to put your money there? Really pretty slim. That is a fact, otherwise there would be a whole hell of a lot more billionaires than there are today.

You like to point out examples of specific companies that have done well, and "if only" you had invested a bunch (relatively speaking) money into them a long time ago, you'd be rich. The problem is, more often than not, *you're* not going to pick a singular winner. The reality is that more companies fail (even large ones) than thrive over the long haul. Since 1955, 88% of the companies that made up the S&P 500 (at the time), no longer exist. They were solid, top of the line, world class companies. And they have a market value of $0 today.

So investing money--and actually making money--isn't nearly as easy as you'd like to make it out to be. So you're left with two options if you are talking about investing for retirement: either you get really, really stupidly lucky and invest in a company like Berkshire Hathaway on the ground floor, or you diversify your portfolio spreading your risk and lowering your return in the process. Option 1 is akin to gambling, and that isn't a very good investment strategy (though it has worked out well for a few people); Option 2 requires both capital and time. Money compounding at a 6.5% (S&P 500) rate grows a whole lot slower than money compounding at a 21% rate (Berkshire Hathaway). That is why--as I have demonstrated earlier--to retire after 45 years with $1.4M (using your wage figures), you have to start out investing over 70% of your income in your retirement. That ain't gonna happen.

I'm not saying don't save for retirement. I'm saying saving for retirement is a lot harder than you make it out to be if you want the type of nest egg you've talked about. And that is why so few Boomers have a whole lot saved up for retirement.

Dividend and growth stocks are not a guarantee to retirement riches like you infer. If you invested the same money that you would of invested in Walmart into a more established dividend and growth stock, JC Penny, you'd have next to $0 today.

If instead of Kimberly Clark, you'd invested in Kodak, your early returns would of left Kimberly Clark in the dust--it was the smart move--but today, once again, you'd have nearly $0.

Its pretty easy to say, I'd have a million dollars if I invested in XYZ company 40 years ago. Its a lot harder to say (and be right) I'll have $10 million dollars if I make a small investment in this ABC company today.

You also have to consider the economic/corporate climate that the Boomers entered into the job market. Back then, you really didn't have to "save" for retirement. Companies, after decades of service, used to make sure their loyal employees were taken care of in retirement via pensions. It was one of their ways of keeping good workers. Loyalty used to mean something. In the 1980s, that changed. So you're looking at a lot of Boomers who missed out on roughly 20 years of investing--and compounding interest on their investments.

FWIW, I'm 52 and I imagine I will be able to retire somewhat comfortably (and by comfortably, I don't think $1.4M is as much money as people tend to think it is), even early if I so choose. While I do have some exposure to the stock market (mostly BRK.b), most of my net worth is tied up in tangible assets with little debt as I have a lot lower tolerance for risk than when I was younger.

[Munson]

I started my Roth IRA back in 2009, and have contributed varying amounts over the years. Some years it was only a few hundred dollars, other years it was a few thousand dollars. I wasn't all that concerned about it as long as I put something in every year.

But over the last couple years I've had a major reality check and became 100% serious about my retirement. My parents struggled financially after spending decades of doing everything right. It stressed me out to the point that I couldn't sleep and felt physically ill from worrying about them all the time. But things have finally gotten better for them over the last 6 months, and caused my stress level to even out.

My plan is to contribute the $5,500 maximum to my Roth IRA every year. I have an ambitious goal of having $100K combined in my retirement and bank accounts in a few years when I hit age 40. I would really like to have $100K in my Roth IRA alone, but that will be a stretch. Also, I need to start a 401K through my employer.

I'll get a pension starting at age 59.5 from a previous job. It's only $300/month, but it is better than nothing.

I'm making smarter decisions on major purchases. For example, I just reached the end of a lease on my Acura last month. Instead of leasing another Acura (which I could've easily done), I ended up buying a nice used Honda for under $10,500. And I don't think I'll ever buy or lease a new car again. I'll let other people eat the depreciation.

I should be able to make some nice gains over the next decade as long as I don't screw it up.

[cooper barrett]

Very good information to those beginning to save.

There is no too early to start saving but it's not just throw money at it every month as no investment has a set returns unless it's at 20% of your target 6%. There are costs and restrictions so my advice to my kids and their SO's was to get educated early about investing. Not savings but investing.

Compond interest is a great thing and the sooner the better, but remember that in 2008 a whole lot of people saw their 401K tank by 40% so that $825K was really $500K.

Originally Posted by lewdog

Most people don't. And by the time most people realize the need, they've missed a decade or more of compounding interest which seems lost on many, including you based on your comments regarding linear progression of money. Cops, nurses and those making $50k can absolutely have a decent chunk of change by the time retirement hits. Takes only about 10% of their pay but the key is starting early.

A 25 year old person putting $5k per year into a retirement fund, @6% growth until they are 65 years old (40 years) will have $825,000 after those 40 years.

A 45 year old person putting $10k per year into a retirement fund, @6% growth until they are 65 years old (20 years) will have $399,000.


Both of these people put $200k into their retirement funds.



Compounding interest is an amazing thing.

[cooper barrett]

Are you able to take a lump sum on the pension and if so, may I suggest reseaching an annuity with that cash.
I know someone who recentlly did that and they were pleasently suprised. I do not know the tax ramifications but for my friend's situation, he said it was a no brainer.

Originally Posted by Munson

I started my Roth IRA back in 2009, and have contributed varying amounts over the years. Some years it was only a few hundred dollars, other years it was a few thousand dollars. I wasn't all that concerned about it as long as I put something in every year.

But over the last couple years I've had a major reality check and became 100% serious about my retirement. My parents struggled financially after spending decades of doing everything right. It stressed me out to the point that I couldn't sleep and felt physically ill from worrying about them all the time. But things have finally gotten better for them over the last 6 months, and caused my stress level to even out.

My plan is to contribute the $5,500 maximum to my Roth IRA every year. I have an ambitious goal of having $100K combined in my retirement and bank accounts in a few years when I hit age 40. I would really like to have $100K in my Roth IRA alone, but that will be a stretch. Also, I need to start a 401K through my employer.

I'll get a pension starting at age 59.5 from a previous job. It's only $300/month, but it is better than nothing.

I'm making smarter decisions on major purchases. For example, I just reached the end of a lease on my Acura last month. Instead of leasing another Acura (which I could've easily done), I ended up buying a nice used Honda for under $10,500. And I don't think I'll ever buy or lease a new car again. I'll let other people eat the depreciation.

I should be able to make some nice gains over the next decade as long as I don't screw it up.