Frontline- The Retirement Gamble

[snafu]

Did anyone watch PBS. Frontline titled 'The Retirement Gamble'
It was disheartening to see how few truly understood their future, their need for retirement saving or understood the basic principles of investing.

Was it better when the employer automatically deducted retirement holdings and in all too many cases used that money to support the business. When the business failed, whatever the reason the employee lost their job, their benefits and accrued retirement all in one fell swoop.

[Like2Plan]

It's been a while since I watched it. My take away was expenses matter. I am hopeful that a recent Supreme Court decision might help with that.

[disneysteve]

It was disheartening to see how few truly understood their future, their need for retirement saving or understood the basic principles of investing.

I haven't seen the show but I think this statement is very true today. The vast majority of people are completely clueless. They don't comprehend why they need to save. If they are saving, it is usually not nearly enough. And they are usually invested either way too conservatively (everything in a money market account) or way too aggressively.

Another huge problem is the 401k loan provision and the Roth early withdrawal rules. These rules have made it possible, and practically encouraged people to draw out what savings they do accumulate to spend on anything and everything, from the purchase of a home to college tuition to vacation to home renovations to paying down credit card debt to buying a new car.

People need to get the message that they need to save for retirement. They need to save a lot. They need to save 15+% of their income. They need to start early and leave that money in there untouched for the duration. It is for retirement and nothing else ever. No loans. No early withdrawals. If you can't afford something without raiding your retirement savings, you shouldn't be buying it.

[Fishindude77]

Not all businesses are evil and do unscrupulous things like have been mentioned.

As a business owner, my partners and I were concerned employees were not adequately preparing so we set up a real nice 401K plan with a significant employer match percentage. Employees are automatically enrolled in the program at the full match, in a "balanced" fund, unless they choose to opt out. We also have voluntarily contributed profits to their retirement funds every year the company hit it's financial targets, averaging approx. 5% of their annual incomes year in, year out. In addition we put financial tips in the newsletters, offer financial counseling with a professional for free, and have occasional training sessions to encourage saving and retirement planning.

Some have prospered using this program, but sadly enough, many don't get it. We still see 401K's raided occasionally, some refuse to contribute or participate in programs, some contribute very little, etc. Seems like the majority interested in the training or consulting are those that are already financially savvy, or those within a year or two of retirement.

[ua_guy]

No, I haven't seen the program, but I'll put it on my watch list.

401k -type retirement plans are still relatively "new". They were virtually unheard of in the early 1980's except for the very rich.

I don't know how people used to save for retirement. I watched my grandparents and others' grandparents all retire on pensions and social security. Other than nominal SS contributions through their paychecks, I don't recall that they put other money aside specifically for retirement, but they did own their homes. With the exception of one grandmother, they all passed relatively "early" in their early 70's.

The reality is, the burden of retirement is now on the employee, even with things like 5% employer matching contributions. We all know that's not going to get us through our Golden years, so like Steve said, now we're taking 15-20% right off the top of our incomes to gamble for an adequate retirement. Right off the top of incomes that are also increasingly burdened by the shifting and increasing cost of healthcare. Right off the top of incomes that haven't followed productivity or education.

Plain and simple. We're ****ed. I'm saving as much as I can, and I'm putting other priorities on hold to do it, but my overall confidence is low that it will be enough, or that it will work out as planned. The only reason I keep doing it is on the chance that it's the only thing I have.

[Weird Tolkienish Figure]

The end result?

A lot more people will work a lot later than they planned. De factor retirement age will eventually be in the mid 70's.

[disneysteve]

I don't know how people used to save for retirement. I watched my grandparents and others' grandparents all retire on pensions and social security. Other than nominal SS contributions through their paychecks, I don't recall that they put other money aside specifically for retirement

My father turned 65 in 1988. He never exactly retired but did cut back significantly in his later years, especially after his first heart attack in 1986.

He was self-employed (family business) so there was no pension. No 401k. Traditional IRAs were around and he did fund one of those. Outside of that, he had savings and investments. CDs back when interest rates were high, savings bonds, and also individual stocks. In later years, he also started investing in FNMA bonds. I don't think he ever got involved in mutual funds. They weren't as big a thing back then.

He died in 1992. My mom, who was a homemaker, has lived just fine on SS and the income thrown off by the investment portfolio he built when he was alive. She's now 85 and wants for nothing.

[corn18]

I can offer my perspective as a guy that didn't get it until a few years ago.

I knew darn well I needed to save. I knew that by not saving, I had no hope of having a comfortable retirement, even with a military pension. I put my head in the sand and ignored addressing the issue at all. Every time I put some money aside for retirement (bonus check once and inheritance twice), I spent it all within 5 years and was back to zero savings. Every time I started a TSP or 401k contribution, I stopped it within 2 years because I didn't have enough income to cover my expenses. The answer to retirement was I ignored it completely. We were screwed, I knew we were screwed, but I did nothing to fix the issue. I can't explain that behavior. Maybe it's because that's how I was raised. Maybe it's because I had no hope so I gave up before I even tried. Who knows.

The root cause of why I was in this perpetual state of non-savings was not an income problem, it was a spending problem. Why should I give up owning a new car now to save for something 30-40 years away? I know now that was stupid. To be honest, I knew then it was stupid. But the short term satisfaction always outweighed the long term commitment. The retirement alligator was not close enough to my canoe to be perceived as a threat.

The fix was hanging out with SA. I know that sounds trite, but reading SA every day, responding to posts and getting thrashed by the veterans helped me realize how stupid I was. Reading the book The Millionaire Next Door offered me a solution. Those two led me to retirement planning, setting savings goals and then implementing a plan to get there. Still scares the crap out of me because all the models I run and the data I enter into my planning worksheet indicate I am still screwed, but I have a 50% chance of getting there if I save more (by reducing spending) and then continue my war on lifestyle creep.

I am now hopeful.

Tom

[ua_guy]

I can offer my perspective as a guy that didn't get it until a few years ago.

I knew darn well I needed to save. I knew that by not saving, I had no hope of having a comfortable retirement, even with a military pension. I put my head in the sand and ignored addressing the issue at all. Every time I put some money aside for retirement (bonus check once and inheritance twice), I spent it all within 5 years and was back to zero savings. Every time I started a TSP or 401k contribution, I stopped it within 2 years because I didn't have enough income to cover my expenses. The answer to retirement was I ignored it completely. We were screwed, I knew we were screwed, but I did nothing to fix the issue. I can't explain that behavior. Maybe it's because that's how I was raised. Maybe it's because I had no hope so I gave up before I even tried. Who knows.

The root cause of why I was in this perpetual state of non-savings was not an income problem, it was a spending problem. Why should I give up owning a new car now to save for something 30-40 years away? I know now that was stupid. To be honest, I knew then it was stupid. But the short term satisfaction always outweighed the long term commitment. The retirement alligator was not close enough to my canoe to be perceived as a threat.

The fix was hanging out with SA. I know that sounds trite, but reading SA every day, responding to posts and getting thrashed by the veterans helped me realize how stupid I was. Reading the book The Millionaire Next Door offered me a solution. Those two led me to retirement planning, setting savings goals and then implementing a plan to get there. Still scares the crap out of me because all the models I run and the data I enter into my planning worksheet indicate I am still screwed, but I have a 50% chance of getting there if I save more (by reducing spending) and then continue my war on lifestyle creep.

I am now hopeful.

Tom

Not to change focus, but when/at what age did you actually start saving meaningfully for retirement?

[Like2Plan]

The reality is, the burden of retirement is now on the employee, even with things like 5% employer matching contributions. We all know that's not going to get us through our Golden years, so like Steve said, now we're taking 15-20% right off the top of our incomes to gamble for an adequate retirement. Right off the top of incomes that are also increasingly burdened by the shifting and increasing cost of healthcare. Right off the top of incomes that haven't followed productivity or education.

So true.

[corn18]

Not to change focus, but when/at what age did you actually start saving meaningfully for retirement?

47 yikes