Observations on life

A third of people have nothing saved for retirement

“Cost of living and day-to-day expenses” are these truly reasons not to save for retirement? Well, I guess if you ask Elizabeth Warren and company she would say people are struggling and cannot afford to save. Oh yes, there are some people like that. However, when you see how people spend their money either statistically or merely by observation, it’s pretty clear most people could save if they were so inclined.

For example, say you smoke and it costs you a mere $7.00 a day; give up smoking and you have about $210 a month to save. Do that for 30 years and you will have $174,806 at only a 5% return. Bump up the return to 8% and you have $323,052 😎

imageTell me that the vast majority of Americans can’t find something that allows them to shift an average of $7.00 a day in unnecessary spending to saving. The trick of course, and you have heard this many times before, is to pay yourself first. Set your saving first, then set your standard of living with what’s left … even if it hurts for a while. This is made easier if you use a pre-tax vehicle like a 401k or IRA.

 

A third of people (36%) in the U.S. have nothing saved for retirement, a new survey shows.

In fact, 14% of people ages 65 and older have no retirement savings; 26% of those 50 to 64; 33%, 30 to 49; and 69%,18 to 29, according to the survey of 1,003 adults, conducted for Bankrate.com, a personal finance website…

… Other recent research confirms that many people aren’t saving enough for their golden years. About 36% of workers have less than $1,000 in savings and investments that could be used for retirement, not counting their primary residence or defined benefits plans such as traditional pensions, and 60% of workers have less than $25,000, according to a survey of 1,000 workers from the non-profit Employee Benefit Research Institute and Greenwald & Associates.

Many people realize that they are not on track in saving for retirement, and the two most important reasons they give are cost of living and day-to-day expenses, says Jack VanDerhei, the institute’s research director…

via A third of people have nothing saved for retirement.

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5 replies »

  1. Smoking is only a small part of the issue. Our young folks love to party. How much money is spent on going “clubbing” or at bars over a weekend. Also the “I want it now” theory. They do not want to wait till they can afford it or even think “do I really need it”. They want the latest of everything NOW. Just put it on credit or sacrifice spending on the necessities instead. Our young folks are swimming in debt. I had a young fellow working for me years ago (married, 2 children) who did not contribute to our 401K program because he “could not afford it”. I told him he could not afford not to, but he disagreed. He used to stop every Friday night on the way home from work for Happy Hour. I asked him how much he spent each Friday and he said usually $20/week. That is $80/month they he could have put in the 401K and our company had a fabulous plan that matched dollar for dollar. That was about $160/month that he could have gotten by not doing the Happy Hour. Most large companies have done away with pensions so without a 401K account and the perils of Social Sec. they will be working for the rest of their lives. I have been retired 9 years, have a pension and a great 401k and for now SS. Sure glad I looked ahead to what would be needed to live a good retirement.

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  2. I agree with what you have said about Americans not saving enough for retirement.
    The example about saving the $7 dollars a day by not smoking is a little misleading. I really don’t know what cigarettes cost because I haven’t bought them in over 40 years but let’s use your figures and the future value over 30 years of $323K @ 8%. First,an 8% over 30 years sounds a bit rich but what matters is the real rate of return which factors in inflation. What is $323K going to look like in 30 years? Not too much to get excited about but it will help. Most of the benefit will come from not having to buy expensive emphysema meds or lug around an oxygen tank.

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    • I never bought a pack of cigarettes (I watched my father die of emphysema) but I see them for $7.00 or so on a regular basis. I don’t think 8% over many years is that unrealistic. It’s what many pension plans used after all. You’re right about the real return though, but of course that would apply to any investment.

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