Saving for the future

[Gailete]

Seems steep but is probably necessary.

It seems especially steep to folks that always have to have the newest and the best. Many of those so very 'necessary' items if only half of them were purchased and the half saved was put away to grow will make a big difference when it comes to retirement. But for many that money won't be there as they spent it on other things that seemed more important at the time.

[disneysteve]

a person needs 25X to retire

The 25x is a little misleading.

I don't think it's misleading at all. Jim didn't say 25 times your income. He said "25X". The question is, "What is X?". The usual answer is that X is your anticipated living expenses in retirement. It doesn't matter how much you earn. What matters is how much you spend. You want to have 25 times your expenses so that you can follow the 4% withdrawal rate in retirement.

[ZZZ]

The rate is entirely subjective. If you can get to a number where you can withdraw less than 4% per year, you increase you chances of having money all through retirement. Plus, anything left over will pass on to kids/family/friends.

The 4% is a good estimate for most people. But if you can push your nest egg farther up so you can withdraw 3.5%, 3%, etc, you can pull your retirement dollar farther.

That being said - don't get to retirement at 65 with 5 million dollars and a dream of backpacking across Europe. Enjoy your youth... just don't enjoy it at the expense of your retirement.

[Gailete]

Unless a rich uncle that I know nothing about dies and leaves me several million, I won't be hitting retirement with anything anywhere near the numbers that retirement projectors tell us we need. I became disabled in my early 40's and even though I run a small business on line, it doesn't allow much for stashing away. But when thinking about retirement needs, now I look at what I get for SS, my part of my ex's retirement (which goes up another $200 if he dies before me), and what we have stashed in our retirement accounts, and then I think of what our expenses are for a year. Currently, between my SS and if I stopped my business cold turkey (which I have no intention of doing), we have one year of living expenses tucked away in our retirement accounts. I'm looking forward to seeing it hit 2 years and then 3 etc. I also look for opportunities to save and opportunities to get extra cash coming in. Got a surprise this week when a place that I'm an affiliate at sent me $25. I hadn't gotten anything from them in over 2 years. But it will go into my Roth IRA. Any unexpected money goes into my retirement account. As my hubby is younger than me, I always push most of the money into my accounts so that if needed we can tap into it without penalty. In another couple months I should be getting another $100 from AdSense that I will be putting into the IRA as well.

I am quite aware that we will have it tight in retirement just like it has been tight for most of our life, but we also plan on doing what we can for as long as we can. My on line store is a form of occupational therapy for me as well as a big help with expenses, so I will be doing that until I just absolutely can't anymore.

I guess what I'm trying to say is, it doesn't matter what the theories are about how much to have in an account before you retire. If you don't have the ability to get that amount tucked away, then you do what you can and know that many so called retirement activities wouldn't be open to you. Not that they are to us now. I'm very glad that I was able to travel extensively when in college and got to do a lot of interesting things that I no longer can do. I don't see our lives changing in any significant way other than a continual downward spiral physically.

[Zedon]

When calculating this 15% savings do you count SS withholding or pension withholding?

[snafu]

Zedon, I would consider any pension withholdings, 401K deduction part of the 15% rule of thumb but am aware that a lot of employer pension plans in the past disappeared into the big pit of 2008-2011 mess. Federal and state governments are in big trouble over 'unfunded liability' of which a huge percentage is the sums owed to those drawing pensions and those who will expect monthly pensions in the future.

The reality of retirement means that after working for about 35 years we will need to have funds to support ourselves for 35 years of retirement. The 'experts' suggest that the initial 10 yrs of retirement are the most expensive, likely to need 80% of the income your last working year. The 2nd 10 years are more home/family based and a period of reducing/downsizing less expensive. The last 5 years are the most expensive of all if retirees require assisted living or nursing home care. It all suggest we need to do whatever is necessary to maintain good health, reduce debt so as to be debt free when we leave employment, be prepared to work longer if we haven't funds to support our senior years. I notice a lot of seniors have expanded their hobbies into a home based business.

[feh]

When calculating this 15% savings do you count SS withholding or pension withholding?

No, you don't.

[Zedon]

No, you don't.

That makes it a little more daunting, I hadn't counted SS but did count the pension withdrawal, they take 8% out of my check for pension which I had counted. I save another 7.5% but am financially unable to save much more for now. I guess I'll need to make some big changes to my standard of living to hit that goal.

[TBH]

I guess what I'm trying to say is, it doesn't matter what the theories are about how much to have in an account before you retire. If you don't have the ability to get that amount tucked away, then you do what you can.

This is so important.

So many people look at the recommended numbers and feel hopeless, and so they do nothing.

If you can't do as much as is recommended, then do what you can and work on ways to get closer to the ideal. If you just can't save 15% or even 10%, then save what you can. You'll be so much better off if you saved 5% than if you saved 0%. Save 5% now and do your best to get up to 6%, then 7%, and so on.

In our household, we are behind because my DH didn't start saving til his late 30s. His income also hasn't grown much over the past 10 years, and he is unwilling to change jobs. We don't have nearly the amount recommended for him for his age. He's 50, and has only about 2X his income saved. (My retirement accounts are in better shape because I started saving in my early 20s and I'm a more aggressive investor than he is.)

I just try to keep working on getting his savings where it needs to be, and try not get discouraged or give up.

[humandraydel]

That makes it a little more daunting, I hadn't counted SS but did count the pension withdrawal, they take 8% out of my check for pension which I had counted. I save another 7.5% but am financially unable to save much more for now. I guess I'll need to make some big changes to my standard of living to hit that goal.

I haven't read the whole thread, but I get the feeling people are using the terms loosely. "Pension" typically means a company controlled and sponsored plan which is a liability of the company. The risk is that if the company goes bankrupt, so can the pension plan. However, if you contribute to the "pension", it may be more like a 401k plan where the money is yours at retirement. Do you know which plan yours is?

[Gailete]

I know my 'pension' is the old fashioned kind through the Teamsters. I do get paperwork from them each year which they are required to do because their cash/investments on hand aren't enough in the long term at this point. Since there is nothing I can do about that, I use the money as it comes and if it stops someday, we will cope (it is a fraction less than $100) as I only get the divorced spouse portion of my ex's pension. I don't think he had any savings towards retirement though other than the pension and what he figured he would get via SS. I want more than that and my SS, so I keep plugging away. Just got to put another $50 in my Roth IRA as my in-laws gave it to me for sorting out their Medicare D plan for them. I wasn't expecting it and it wasn't part of the budget so in the retirement fund it goes.

Unexpected money you can't think long about or you will ALWAYS find some other place to put it or spend it. So just tell yourself (those of us in the situation of not having enough to stick in retirement vehicles each year) that any unexpected money that comes your way goes immediately into your retirement fund. It is actually surprising how often those events can happen.

[Zedon]

I haven't read the whole thread, but I get the feeling people are using the terms loosely. "Pension" typically means a company controlled and sponsored plan which is a liability of the company. The risk is that if the company goes bankrupt, so can the pension plan. However, if you contribute to the "pension", it may be more like a 401k plan where the money is yours at retirement. Do you know which plan yours is?

I work for the state of CA. So if they go bankrupt or the voters vote in some retroactive pension reform I will not be getting what I am expecting. What most people I talk to don't realize is that we workers have a mandatory contribution rate of 8% to get the pension. Most people think the pension is "free" just for working for the state. When I ask them if they want an 8% tax on top of everything else they start getting the point. I figure I better start getting more serious about my own saving since I don't know what shape we will be in when I retire in 20-25 years.