Observations on life

You’re thirty-five and something just dawned on you, you forgot something 😁

That something is that you have not started saving for retirement. Is all lost? Well, pretty darn close. 

Here is an example calculation from CNNMoney. Note that to get close to a goal of 85% income replacement, including Social Security, the person would have to save 25% of income each year for the next thirty years. (I maintain you need 100% income replacement and the ability to continue saving to retire with your pre-retirement standard of living.)

The message is clear, if you have not started aggressively saving for the future, give up something you don’t need and start saving and investing wisely … or you are screwed and will be saying things like this person living on Social Security as a recent commenter did:

its bad enuf that the amt received is truly not enuf to live on..esp if u have to, due to financial issues, file early..i feel that just because a person files early..that once they do turn 65 or 66 ..whatever it is now..that their benefits be increased to what they would have received if they did wait..i think what the rule is now..is unfair..this needs to be changed.. there are alot of older people struggling out there



9 replies »

  1. Only about 20% of American households break the six figure mark. With a little planning I think you can live on 50% to 60% or less, instead of the 85% you quote. Things to do to cut costs in retirement.
    1. Make sure your house is paid off. Downsize your home, or sell it for a huge profit and move to a low cost area. #2
    2. If you live in a high cost of living area, move to a cheaper area, because you are not tied to an area for a job, anymore..
    3. Do not spend money on anything except the basics. No eating out, no dry cleaning, who are you trying to impress.
    4. Drive your car until it has over 200,000 miles. Then buy only used cars you can pay cash for. Use public transportation, if
    available, I use the city bus for all my in town transportation $20 per month, I have not purchased gasoline since July 2014.
    I have not had a car payment since 1986 and since then have never spent more than $5,000 on a car.
    5. Nothing new, unless it is for the upkeep of your house. Most things can be found cheap at thrift stores, yard sales or pawn
    shops and Ebay.
    6. Stream TV off the internet $20 for Netflix and HULU or get it for free with a power antenna, savings $75 per month.
    7. Zero all debt before retirement.
    8. If you need money, and have something of value that you have not used in 6 months, sell it.

    There are many choices you can make to cut your costs in retirement. My wife and I have lived in Montana from 1995 to 2015 on less than $20,000 per year. Moving from a high cost of living area in Hampton, VA , where $35,000 per year was a struggle to live on in 1995.
    And we do eat out a couple times per month, no more than $25, each time and we take vacations every few years to see family. I have not worked since 2006. Planning is all it takes.


    • And that’s all you expect after years of work, to sit home and go backwards for the rest of your life where your only activity is watching TV.

      I don’t want to sell my house, I don’t want to move. I want to go out to eat, to travel the world, to spend money on grandchildren and after waiting nearly fifty years, to buy the car of my dreams.

      I want to be sure my wife has a good income if she survives me, to keep giving to charity, to maintain my home properly, etc, etc, etc.

      Thinking of retirement as a time to do with less or without or to worry about next months bills or a financial emergency putting one in the poor house is not my idea of fun or any reason to retire.

      We should not be viewing retirement as a time to start sacrificing, but rather we should be sacrificing some wants and desires while working so we can live in retirement.


      • Your problem is you assume way to much. My wife and I traveled over 6,000 miles from June to Sept and visited family in NY, TX, OK and ND. I did not say you had to sell your home, I just think your numbers are way off. To not factor in pensions gives you false numbers. I enjoy life and my wife will do just fine, because life insurance and Social Security will more than pay for her monthly needs and wants. Some people have learned to live on way less than others. Who is going backwards, I live well on a $20,000 pension and will be getting a 65% increase in my income when I turn 62, in 2 years and start receiving social security. My monthly costs are $1,200 and that includes $400 in food. In 2018 I will have $1635 per month left after my bills and food are paid. I am not going backwards, I just know how to manage what money I have.


      • I was not talking about me per se. I was illustrating that many people don’t want to cut back their lifestyle as you suggest. Of course you factor in pensions and all other possible income. I am saying that over the long term you need 109% replacement to start. Then you must deal with inflation over the years AND deal with an income for a surviving spouse who likely will deal with a significant loss in income when one spouse dies.

        Someone is going backward if they are forced to change their standard of living when they retire. If they desire to do that that’s fine, but if it’s a necessity that’s not good from my perspective. I could not live on less that my full base income before retirement without giving up a lot. I planned for 48 years while working so I could live the way I lived while working. In addition, there needs to be a cushion for emergencies. For example, last year it was a few thousand in health care bills. This year so far it has been replacing a washer and dryer and helping out one child in a difficult situation.


      • I failed to mention that relatively few Americans have a pension and that number declines each year. The private sector has largely abandoned the traditional pension and even at its peak less than half of Americans has a pension so yes, it is necessary to save and save early.


      • With so many not having a pension, we need to fix Social Security now. I read a report that an increase in the tax of 2.8%, that is 1.4% for worker and employer would fix the shortfall. That is only $30 per month for each $25,000 in income.
        Raising the tax the same percent as the COLA could be a way to do this. We have to realize that 50% of workers never make more than $50,000 per year, many a lot less and rely on Social Security to keep them out of poverty. We know past history has shown Americans are not savers, even those that save for retirement on average have only $60,000. The low wages and high cost of living make it hard for many to save. I know when I had 4 kids at home with just $25,000 per year income there was nothing left to save. In retirement I am able to save $300 per month. That is how I am able to pay cash for cars and the $500, gas range and $800 refrigerator, I had to buy last year.


      • The 2.8% comes from the SS Trustees report, but it is not a small impact and could hurt the economy. To some people it would be a significant pay day hit and would mean that employers were giving a 1.4% raise likely taking away from an actual cash raise. The question is should the younger working population pick up the full burden of fixing Social Security. They are already being hit heavily by their rising share of health care costs. I know many working people who pay $500 to $800 a month in premium through their employer and then have a $7,000 deductible.

        Although it would be a total fix, I say anyone who starts SS receiving the maximum benefit should not be eligible for a COLA for the first five years collecting a benefit and then only every other year. If you earn over $100,000 you should be able to save and invest to supplement Social Security.


      • Only 20% earn over $100,000 per year, what about the other 80% or the 50% that earn way less than $50,000 per year. If they cannot afford a 1,4% SS tax increase, how are they going to have any retirement savings. I would go further no increase on the spousal benefit, until the worker that paid taxes dies, because no taxes were paid on that benefit amount. If we do nothing to fix SS, I guess everyone can take a 21% to 25% cut in benefits starting in 2034. I bet that will have a much bigger impact on the economy than a 2.8% raise in the tax today.


      • The taxes are designed to pay for all the benefits including spousal benefits as part of the actuarial calculation. It’s just that they have not been raised to keep up with demographics and other changes.

        Have no fear, no politician will allow SS to not pay full benefits.


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