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View Diary: The Scandal of Our Retirement System (117 comments)

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  •  Yeah, the 4 percent estimate..... (4+ / 0-)
    Recommended by:
    elwior, JVolvo, Notreadytobenice, MGross

    is what our post-retirement fund uses.

    The 2 to 3 million still sounds high to me, though, unless you're trying to match income level before retirement -- 80k to 120k.

    4 percent would be 40k on a million dollars, or 30-something after taxes, which would be OK in combination with SS, if you have no mortgage.

    And, yeah, you should have some cash on hand to handle the bad years when you don't want to have to touch your principle.

    It also depends on your lifestyle and partner's earnings, obviously.

    •  assuming there is a partner (1+ / 0-)
      Recommended by:
      elwior

      I note many advisers are now arguing with the old figure of 60%-80% of pre-retirement income as medical costs in retirement are so much higher than before retirement, frequently enough to equal kids in college + a house mortgage.  I am seeing some articles now advising a target of 100%.

      •  Hell, one could probably find an "adviser" (4+ / 0-)

        who would tell you you need to save enough to generate 120% of your salary. Maybe even 200%. Can't be too careful, y'know.

        It's nuts.  Yes, if you have a catastrophic illness, you may have steep medical bills.  But for the average person, spending in retirement is much less than during work. For starters, one doesn't have to save for retirement once you're retired.

        And, with the savings recommended by some advisers, that's a substantial fraction of your income right off the bat.

        Keep in mind that the more money a financial adviser has to manage, the more money he or she makes.  Hence, it's in their interest to goad someone to save (i.e., fork over) as much as possible.

        It's somewhat like asking a car salesman if you need a new car.

        I would recommend talking to several people who are in retirement about their spending relative to their work income. I suspect you'd get a better idea of how much your spending may change than you would looking to a financial adviser for a rule of thumb.

        •  having dug myself out of $1M in medical and (4+ / 0-)
          Recommended by:
          Joieau, patbahn, RUNDOWN, barbwires

          personal debt since 2007, the chances of disability for manual professions is much greater than it is for "white collar"clerical positions.  In my case, I have a dozen or so meds with one costing me $640/month alone.  To not plan for catastrophic medical expenses is foolish and to assume your spending will be less is also not a given.  If nothing else, the "sandwich" generation finds itself responsible for its parents' care while having the empty nest re-feathered by returning children who also find themselves having to ask parents for assistance.

          Having planned for their children's advanced education, this new generation now finds itself also having to kick in for the grandkids' education as well.

          Since I have been retired since 2007, I think I have a pretty good handle on retirement costs.  

          •  I think it's pretty humorous (3+ / 0-)
            Recommended by:
            RUNDOWN, Alice in Florida, Bush Bites

            for anyone to "advise" working people to save 100% or more of their income during their working years in order to have a nice old age. If that is indeed necessary in order to have a retirement that isn't abject poverty, then we need to do some serious work on our economic system in general to make it so that people old and young can live and function here.

            Of course, getting INTO a million dollars' worth of debt is beyond a majority of the citizens of this country anyway, so they'll never have to dig themselves out of such a debt. Median income in this country is ~$40,000 per year. That means half of people who work hard all their lives make less than that. How do you live while "saving" 120% of that for your retirement? That's silly.

            •  try a 3 month hospital stay (3+ / 0-)
              Recommended by:
              Joieau, patbahn, barbwires

              Going into $1M debt is not that hard to do, especially if you own a small business and get the double whammy of not being on the ground in your business and so watch it go from profitable to a money vacuum while you are in the hospital for an extended stay.

              I think the 120% savings rates was quoted to illustrate that most people who restrict themselves solely to job generated wages are unlikely to save enough to retire on.  The 120% rate shows that investors either have to scale back their expectations of retirement or else find ways to ramp up their income.  The highest average savings rate for the US was around 5%, I think (from memory) while 1% to 2% is more common (and is also not that common for most people)

              One example of how to alter your retirement plans is to consider becoming an ex-pat.  For example, Panama has one of the more attractive packages to encourage middle income Americans to settle there for their "golden years".  Another example is to revamp your expectations or develop a side business which you can continue even into your retirement years  

              •  Best medical care anyone in my (1+ / 0-)
                Recommended by:
                patbahn

                family ever got was when we went in saying up front we had no insurance or money. Worst medical care - all the way to malpracticed to death by a consortium of erstwhile 'specialists' was when we DID have insurance. A million dollars' worth.

                There is a portion of the medical care delivery system in this country that has long understood that you can't get blood from a stone. So there's other ways to pay their legitimate bills, and their illegitimate bills get covered by the patients they can ding for the excess. You're right that nobody 'saves' enough for a rich retirement if they haven't always been rich. But since the chances of anyone who works hard and lives a regular life in this country where the median income is the real poverty level ever reaching the ripe old age of 62-70 are so slim, there simply isn't an incentive to never marry or have children, never have a home, never have a vehicle and eat generic boxed mac and cheese for 40 years just so they can be rich in retirement.

                I think retirement 'planners' have no clue how most people here live. But I hear you on ex-pat. Soon as my husband joins me in SS retirement, we're outta here.

              •  and they reformed bankruptcy (1+ / 0-)
                Recommended by:
                JerryNA

                used to be you could wipe the slate.

    •  Example (2+ / 0-)
      Recommended by:
      elwior, ramblin engineer

      To get a "work" pension similar to my current one and assuming a quite generous 4% interest input by the actuary, I would have had to purchased an annuity costing @$600,000.

      That would, of course, have been a fixed pension, not the index linked one I have.

      To save that amount, I would have had to put aside 53% of my final salary each year of my working life. Inflation and promotions meant I had not earned that amount each year so in the early years I would have had to save about twice my annual salary. So throughout my working life it meant all my salary would go towards buying that pension privately. (This discounts my employer putting in roughly the same amount)

      Of course my and my employer's money went into a very large pot holding all of the (in my case London local government office) staff's contributions to scheme.

      We will work, we will play, we will laugh, we will live. We will not waste one moment, nor sacrifice one bit of our freedom, because of fear.

      by Lib Dem FoP on Sun Dec 01, 2013 at 08:40:28 PM PST

      [ Parent ]

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