I almost called this “EBRI Says Workers Are “Clueless” About Retirement Needs” but then that would have given the whole thing away too soon.

The issue we are discussing today comes to us from MacroMaven’s Stephanie Pomboy, via Alan Abelson in Barron’s. The subject: Our vastly underfunded public and private retirement system(s).

It seems there is a surprising disconnect between reality and what the respondents in the Employee Benefit Research Institute (EBRI) latest retirement survey seem to believe. Workers have a rather unwarranted expectation of actually being able to afford retirement — despite seeing their retirement savings rate shrink. In 2009, it fell from 65% to 60%.

Here’s Abelson with the specifics:

“Perhaps something like 40% of workers may not be saving because they believe assets — their house or portfolios, for example — will once more increase in value. In that regard, she speculates that it is significant that the last time households saved so little for retirement was when the stock market hit its peak in 2007 (and, of course, housing hadn’t yet crashed), and the only time they saved less was in 2004, when stocks bounced back strongly from the dot.com collapse.

If workers are really making this kind of bet, she believes, it would be good news, near term, anyway. For it would avoid the big hit to spending necessary to bring savings into alignment with current net worth. To return to an 8% rate, she reckons, would require a savings increase — or a spending decrease — of $513 billion. Nice piece of change, any way you look at it.

However — and, of course, there’s always a however — if the rebound in net worth proves illusory and the Fed can’t reflate assets on the household balance sheet, then, Stephanie sighs, “we’re in a dilly of a pickle.” And the price of delusion, she fears, will be dear. According to the EBRI survey, a “staggering 27% of workers have saved less than $1,000 toward retirement.”

She can only hope the 27% are young’uns right out of school, sharing apartments and still scraping to come up with the rent. Alas, the survey doesn’t break down the numbers by age.

If, by chance, the panel is representative of the nation as a whole, she winces, with 54% of the labor force over 40, “the figures are truly alarming. Doubly so given the increasingly retractable nature of pension promises.”

Ordinary people can be excused to some extent for not grasping how deep a financial hole they’re in. But that doesn’t hold for banks, Stephanie asserts, whose “affliction is no less acute.”

She cites the notion that reserving for losses no longer need be done and, by way of evidence, notes that a $10 billion reduction in the banks’ loss provisioning last year was a major contributor to their gain in fourth-quarter earnings. Further, loan-loss reserves cover barely over half — 58%, to be exact — of loans past due.

And to make matters worse, at the end of last year, 51% of commercial-bank assets were tied to real estate. Obviously, not a very desirable exposure with housing back in the dumps. And finally, there’s the possibility that banks are forced to mark to market all the toxic securities they carry at cost. If they were to follow the example of the FDIC, which in a sale last week marked down a batch of kindred securities, they’d have to take a 50% haircut.

What might this mean? I expect over the next decade, there will be significant changes to Social Security.  We’ll save that discussion for another time . . .

>

Source:
Kiss Zero Interest Goodbye?
ALAN ABELSON
Barron’s March 22, 2010
http://online.barrons.com/article/SB126903941736164847.html

Category: Investing, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

36 Responses to “Delusions of Retirement Adequacy”

  1. tawm says:

    I have funded a traditional IRA for my wife and I every year. However, I am not converting to a Roth IRA for fear that the eventual supposedly-tax free future payout will be “means-tested” — that it will be taxed twice. Three times or more if one counts inflation. What is the incentive to save in this environment?

  2. Chief Tomahawk says:

    ” And finally, there’s the possibility that banks are forced to mark to market all the toxic securities they carry at cost. If they were to follow the example of the FDIC, which in a sale last week marked down a batch of kindred securities, they’d have to take a 50% haircut.”

    If THAT happens… (by the way, it’s notable the FDIC’s markdown was most likely but a tiny slice; imagine if all the crap hits the market at the same time!!!)

  3. –”..According to the EBRI survey, a “staggering 27% of workers have saved less than $1,000 toward retirement.”

    She can only hope the 27% are young’uns right out of school, sharing apartments and still scraping to come up with the rent. Alas, the survey doesn’t break down the numbers by age…”

    “Alas, the survey doesn’t break down the numbers by age…”–from, above, Post

    That is purposeful obfuscation–it, the age-related response info, is, certainly, part of the data that was collected..
    And, it was, probably, left in the dark so as not to, further, inflame the growing schism between the BBoomers and Gen.s X & Y..
    ~~
    “She cites the notion that reserving for losses no longer need be done and, by way of evidence, notes that a $10 billion reduction in the banks’ loss provisioning last year was a major contributor to their gain in fourth-quarter earnings. Further, loan-loss reserves cover barely over half — 58%, to be exact — of loans past due…
    …banks…mark to market all the toxic securities they carry at cost. If they were to follow the example of the FDIC, which in a sale last week marked down a batch of kindred securities, they’d have to take a 50% haircut.”–ibid.

    http://www.text-lyrics.com/lyrics___/Sheryl%20Crow/Strong%20Enough/
    has to be the perfect Anthem for our Stockholm Syndrome Society…
    http://www.lewrockwell.com/orig9/longcore5.1.1.html w/ def. and tangential explaination..

  4. maynardGkeynes says:

    We should have the discussion about Social Security sooner rather than later, because SS is in fact most people’s only “retirement program.” It’s also why most people don’t save, and despite the self-serving rantings of the mutual fund industry that people will need some ridiculous percentage of their current income to retire, I think that most people are acting rationally. If benefits are maintained at anything near current levels, SS is actually a rather generous program, particularly if people wait until age 70.5 to retire. The problem we have today is that too many people (a majority in fact) start SS at age 62, which is a big mistake if you plan to live on it. The other big mistake is the Tea Party types desire to scrap SS, when it’s basically the only thing those folks have going for them as they age. This, I don’t understand. Obviously, they are being misled.

  5. The problem we have today is that too many people (a majority in fact) start SS at age 62, which is a big mistake if you plan to live on it.

    If you are over 60 and just got laid off, this is almost your only choice, sadly.

  6. Doc at the Radar Station says:

    SS will continue to be a 3rd rail that isn’t going to get cut much at all. Look for another 1982-like fix with higher taxes if anything-just my opinion. I agree with maynardG above that the mutual fund industry (and others) oversell the amount that people need to put aside. I don’t have the link, but I saw a chart of the average retiree’s income a few weeks ago. It was about 1/3 SS, 1/3 private/public pension, 1/3 assets of their own.

  7. Fritzskelly says:

    What it means is that there will be pain… which nobody wants to talk about.

    Individuals get to choose spending vs. saving. Unfortunately, the Madison Avenue marketing machine has won the battle and created a culture that makes you an asshole if you don’t have the latest phone or a car that parks itself.

    Boom times ahead for the trailer park owners down by the river.

  8. Fredex says:

    “the Tea Party types desire to scrap SS”

    First I’ve heard of that.

  9. Bala says:

    I went to a cocktail party (called the “Recession Game Night”) this past weekend. Oddly, much of the discussion was focused on this very subject. There was no shortage of stories, opinions, and proposed solutions. Furthermore, I hear from friends, far and wide, discussing a similar theme. In my opinion, more people (however privately) are seriously considering ‘walking away’. Its the most readily available and realistic solution.

    “Dude, I should just walk” started as a joke….. now its become a mantra.

    (p.s. The second most talked about ‘solution’ is leaving the country. Its pretty much a common wisdom the US ain’t no longer the land of opportunity.)

  10. Marcus Aurelius says:

    Fritzskelly:

    Exactly how can a nation of people with lopsided debt/income ratios and declining earnings power save anything for retirement?

  11. Fritz–

    like what this guy was getting on about..(?)
    “…Yep, I’m a loser. Got no friends to speak of that I go do things with, walk out the door and the things happy to see me are just dumb animals critters lookin’ for food and Sandy the Goat with that plaintiff “milk me” bleat. No gainful employment… the wife works, y’know. The skill sets I would be willing to share with others are not in any great demand, I don’t do chitchat well, and any conversation lasting over two minutes segues into shit that makes people highly uncomfortable, such as the skyrocketing rate of birth defects in Fallujah… couldn’t be all that depleted uranium ordnance now, could it?

    I’m just plain anti social and I would have a higher tolerance for ignorance if there wasn’t so damn much of it everywhere you god damn go. A stark reality blinds me to the bright side of life when I come into contact with 99 out of 100 humans – today a Census lady came to the door – musta been 80 years old, had trouble walking and I thought how fucking sad it is that she’s forced to go after money – to collect info for the same system that used her up and said “fuck you very much”. And God help me not look at other people’s cart contents or method of payment when I go to the poison outletgrocery store…”
    http://www.comradesimba.com/blog/?p=667
    ~~
    also, to the point about “When to take SS payments?”
    has anybody bothered to check the Mortality Tables? Last I checked, it takes ~15 years to ‘earn back’ the amount, dollar on dollar, that is foregone by waiting the 3 years between 62 and 65.
    65 + 15 ~80 .. Something tells me that a $ at 62 has a higher Utility than one @ 80, to say nothing of its purchasing power, or, even, the existance of the scheme(SocSec), itself..

  12. george matkov says:

    In the short run, people are actually acting rationally. Returns on savings are zero so any savings you have are actually losing in value. The Fed’s zero interest policy into the indefinite future (do you really believe they are going to raise rates for the next 10 years?) guarantee that saving is for suckers. I think there is a general intuition that there is massive, even complete, repudiation of debt somewhere down the road. I don’t have any answers but politicians since Reagan have been elected for promising something for nothing and they will continue to do so as long as the masses continue with their ‘magical thinking.’

  13. willid3 says:

    and the main reason almost every one will depend on SS is simple. we have just seen an example of it. it depends on when you retire whether you have enough in savings, or even have it for very long (remember that small decline in the stock market? which is where every one that has a 401k is in? care to guess how well those who had to retire did last year?). and can you really safe enough money in an environment where 1/2 of your savings can disappear in 12 months, and recovering from that can take a decade or more, if its even possible?

    if retirement is based on age (because your profession doesn’t allow for those that age or near, or business doesn’t want to have any one that age), you retire based on that not when you want to. and it won’t matter how the stock market is doing.
    while SS I am thinking can be fixed by doing nothing more than removing the loop hole for income over 106K, and might even be able to reduce the rates for all based on doing that.

    depending on a 401k for retirement is a game of chance, or Russian roulette, with some one else controlling the game.

  14. willid3 says:

    and the corporate squeeze on their employees hasn’t helped with retirement either, and eventually it will crush their profits too!
    http://www.nakedcapitalism.com/2010/03/extolling-the-corporate-squeeze-of-workers.html

  15. Chief Tomahawk says:

    Anyone see this gem Mish found yesterday?

    http://www.foxbusiness.com/story/markets/industries/transportation/nd-update-caterpillar-health-bill-cost-company–million/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+foxbusiness%2Flatest+%28Text+-+Latest+News%29

    Caterpillar objects to the Obama Healthcare reform because it will “cost their company $100 million.” Okay, sounds BAD for business. But the same article also explains how Caterpillar is sucking the government teat via subsidies obtained via the 2003 Rx benefit program:

    “The company said the potential extra costs would primarily come from provisions to tax the federal subsidies the company now receives for providing prescription-drug benefits to retirees and their spouses.

    Since the Medicare drug program was enacted in 2003, Caterpillar and more than 3,500 companies that already provided drug benefits for retirees have received tax-free subsidies from the federal government as an incentive to maintain their drug programs.

    The subsidies average $665 per person covered under a company-sponsored prescription program, according to benefits consultant Towers Watson, which recently completed a study on the health-care legislation’s effects.

    Watson Towers estimates federal taxes on the drug subsidies would amount to $233 per person receiving drug benefits under such programs.”

    No wonder the estimated costs of the senior drug program kept being revised upwards by the Government Accounting Office! Anybody and everybody has piled in to have the Feds foot the bill.

  16. Josh says:

    We’ll save that discussion for another time . . .

    Give us a heads up before you start that discussion and I’ll do a bit of research for you. Social security has been structurally changed numerous times since inception, including 1982 as noted in a comment above. Ages have been raised, input taxes have been raised, contribution limits have been raised, you name it. I once saw a table with the structural changes over time, and I’ll try to find it for you if you give us a heads up.

  17. DMR says:

    “The Delusion of Retirement” would be a better title. It’s the remaining 73% who have been deluded into spending their 30s and 40s squirreling away money for a mirage of golf carts, bingo, and gated communities.

    If we instead spend our time to:

    (1) Find a satisfying career that so that we don’t feel like running away from it at age 65. If we are happy working (even part-time) into your 70s, we’ll need much less money to retire.
    (2) Buy a house within our means in a community that we connect with and enjoy living in. We won’t feel the urge to rush away to some exotic locale for 20 years with zero earnings.
    (3) Form strong friendships, connect with our family and give our kids a good education, and enjoy satisfying hobbies/activities and take regular vacations. The more fulfilling our working life, the less we’ll need to spend in old age to make up for inadequacies at a time when we don’t have an income.

    then the money we’ll need to maintain lifestyle into old age turns out to be far far less than what the retirement calculators predict. 401K, pensions, social security, etc. become good tools at that point to plan for it.

  18. freethinker says:

    Most Americans believe God is involved in their everyday lives and concerned with their personal well-being, though the well-educated and higher earners are less likely than their counterparts to believe in such divine intervention, a new study suggests.

    •32 percent agreed with the statement: “There is no sense in planning a lot because ultimately my fate is in God’s hands.”

    http://www.livescience.com/culture/belief-in-god-americans-100310.html

  19. RW says:

    To expand on MEH’s point, it can be a worthwhile strategy taking SS benefits early if your plan is to invest them. For example if we assume a benefit of $800/mo at age 62 and of $1,000/mo at age 65 and caluculate when the two income streams will equal each other under different ROI assumptions we get the following (hope the blog sw keeps the formatting):

    Yearly Int rate 0% 1% 2% 3% 4% 5% 6% 7%
    Age 62 Benefit $800 $800 $800 $800 $800 $800 $800 $800
    Age 65 Benefit $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000
    Crossover Month 143 155 169 188 213 249 309 460
    FV starting @62 $144,000 $166,379 $196,955 $241,237 $311,107 $437,753 $737,744 $2,338,593
    FV starting @65 $144,000 $166,379 $196,955 $241,237 $311,107 $437,753 $737,744 $2,338,593
    Age @ crossover 76.9 77.9 79.1 80.7 82.7 85.7 90.7 103.4

    No point in calculating a discount over 7% because the result is far longer than any human lifespan: The age 65 stream never catches up. However, this does not include a yearly COLA which can close the gap somewhat; e.g., if you factor a 3% yearly COLA into the 5% rate scenario then the crossover tightens by about 50 months.

    There are other factors complicating this too including taxes which can actually go up if you add SS income sooner rather than later so the table above is not really true-to-life but it illustrates the principle well enough: In the right plan early SS disbursal may make a lot of sense.

  20. RW says:

    Damn! sw removed all but one leading space in the table; oh well.

  21. maynardGkeynes says:

    @RW: As you probably know, the payments for SS are now actuarially fair, so theoretically, it doesn’t matter when you retrire, especially if you are single. However, the Boston College retirement center, which I highly recommend visiting, has concluded that for “typical” married families (wife younger, lower lifetime wages), having the husband start at age 62 is a huge mistake based on the NPV of expected lifetime payments. The intuition is that wives will generally be living longer than husbands and will be living off of the higher survivor benefit rather than their own benefit. Thus, anything that reduces the husband’s benefit has to be considered over the time of the joint survival, as opposed to the actuarial calculation for the husband alone. The optimal retirement age for men is sensitive to age and income factors, but the BC study strongly advises that men should wait until age 70.5 to retire, if possible of course, to maximize lifetime benefits for the couple. The difference between taking SS early vs late is not trivial, but huge, on the order of hundreds of thousands of $$ in terms of NPV of expected benefits.

  22. globaleyes says:

    Defict spending is a national dis-savings plan so it makes sense that many folks have little retirement savings. Uncle Sam has been siphoning off savings for almost 45 years!

  23. maynardG,

    you go with: “…the payments for SS are now actuarially fair…”

    be careful, nothing, relating to SocSec, has the sufficient aspects to be confused with proper Insurance..
    http://www.thefreedictionary.com/actuarial

    see:
    “…There is no Social Security Trust Fund.

    Every year a simple arithmetic notation is made somewhere in the federal government. It is the difference between two numbers:

    1. The sum of all Social Security payroll taxes withheld from all employees and submitted to the U.S. Treasury.
    2. The sum of all Social Security benefits paid.
    Throughout the history of Social Security, the first number has been larger than the second. Throughout the history of Social Security, the population has been led to believe that the first number has been securely stuffed into a cookie jar somewhere, to be repaid, with interest, to the employee when he retires. Only the first statement is true. In actuality, to date, the first number has been the source of funds for the second number. The difference between the two sums has been summarily spent on other forms of federal spending, and it has been spent the month it was collected.

    So why even keep track of the difference? Why, so the federal government can report to the American public that it has carefully accounted for the FICA taxes collected that were spent on other government programs by recording these expenditures as an interest-bearing loan to the Treasury from the Social Security Administration and calling it the Social Security Trust Fund!

    If you draw a circle around the entire federal government behemoth, the Social Security System is INSIDE THAT CIRCLE! Politicians have told us for decades that all excesses in FICA taxes collected above benefits paid have been painstakingly “invested” in U.S. Treasury notes in the Social Security Trust Fund’s behalf. How stupid do they think we are? Hauling wheelbarrows full of U.S. Treasury Notes from the U.S. Treasury to another element of the federal government, the Social Security Administration in Baltimore, is an “investment”? For years, on the Cato Institute’s web site dedicated to the Social Security fiasco ( http://www.socialsecurity.org ), there have been articles trying to explain this nonsense. The best one I have read offered, in so many words, this explanation:…”
    ht tp://ww w.lewrockwell.com/orig5/hale1.html
    ~~
    further:
    http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=true+nature+of+Social+Security
    ~~
    past that, your info, pulled from the static construct of ‘caeteris paribus’, by BC, does not countenance the point, elucidated by RW, of “Opportunity Cost of Capital”–forgone ROI on available Cash Flows..

    LSS: No Offence, but it, that type of Report, is little more than Prole Feed designed to keep Ma & Pa whistlin’ http://www.lyricsspot.com/amy+diamond-tomorrow+annie+s+song-lyrics-638620.html while they continue to forget this eternal Truism http://www.pink-floyd-lyrics.com/html/time-dark-lyrics.html

  24. maynardG,

    you go with: “…the payments for SS are now actuarially fair…”

    be careful, nothing, relating to SocSec, has the sufficient aspects to be confused with proper Insurance..

    see:
    “…There is no Social Security Trust Fund.

    Every year a simple arithmetic notation is made somewhere in the federal government. It is the difference between two numbers:

    1. The sum of all Social Security payroll taxes withheld from all employees and submitted to the U.S. Treasury.
    2. The sum of all Social Security benefits paid.
    Throughout the history of Social Security, the first number has been larger than the second. Throughout the history of Social Security, the population has been led to believe that the first number has been securely stuffed into a cookie jar somewhere, to be repaid, with interest, to the employee when he retires. Only the first statement is true. In actuality, to date, the first number has been the source of funds for the second number. The difference between the two sums has been summarily spent on other forms of federal spending, and it has been spent the month it was collected.

    So why even keep track of the difference? Why, so the federal government can report to the American public that it has carefully accounted for the FICA taxes collected that were spent on other government programs by recording these expenditures as an interest-bearing loan to the Treasury from the Social Security Administration and calling it the Social Security Trust Fund!

    If you draw a circle around the entire federal government behemoth, the Social Security System is INSIDE THAT CIRCLE! Politicians have told us for decades that all excesses in FICA taxes collected above benefits paid have been painstakingly “invested” in U.S. Treasury notes in the Social Security Trust Fund’s behalf. How stupid do they think we are? Hauling wheelbarrows full of U.S. Treasury Notes from the U.S. Treasury to another element of the federal government, the Social Security Administration in Baltimore, is an “investment”? For years, on the Cato Institute’s web site dedicated to the Social Security fiasco ( http://www.socialsecurity.org ), there have been articles trying to explain this nonsense. The best one I have read offered, in so many words, this explanation:…”
    ht tp://ww w.lewrockwell.com/orig5/hale1.html
    ~~
    further:
    http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=true+nature+of+Social+Security
    ~~
    past that, your info, pulled from the static construct of ‘caeteris paribus’, by BC, does not countenance the point, elucidated by RW, of “Opportunity Cost of Capital”–forgone ROI on available Cash Flows..

    LSS: No Offence, but it, that type of Report, is little more than Prole Feed designed to keep Ma & Pa whistlin’ http://www.lyricsspot.com/amy+diamond-tomorrow+annie+s+song-lyrics-638620.html while they continue to forget this eternal Truism http://www.pink-floyd-lyrics.com/html/time-dark-lyrics.html

  25. cognos says:

    DMR — That’s a great post. I couldnt agree more. And you make those points in unique and rich ways. “Not retiring at 65″ may turn out to be so much better for everyone. Robert Morgenthau anyone?

    The basic statement focused on by SP and AA is — “staggering 27% of workers have saved less than $1,000 toward retirement.”

    This is SO EASILY explained -

    1. People work for organizations with pensions (state and local govt: police, fire, teachers, military, or some unions). I’ll bet you this “survey” isnt pension adjusted.
    2. Young people — duh!
    3. Spouses or people who plan to become spouses — duh!
    4. Early entrepreneurs

    How many of the 27% do those 3 categories explain? I’d say they might explain 80-90%… but lets say they only explain half. Then 13% of people have no meaningful retirement savings.

    Again, so what? That’s what social security is there for. The bottom 13% will be retiring off “only” social security — ooh. Are you scared yet? Abelson has lost it in the last few years. No wit. No insight. Its tragic when a major investment publication focuses on such minutae with such regularity. I havent enjoyed his column in 5 years. (Which is why I read blogs like http://www.ritholtz.com. Regularly better than Barrons.)

  26. torrie-amos says:

    fwiw, i’ve been reading articles like that for 25 plus years, standard stuff, like how too lose 10 lbs in 7 days…………if you read a newspaper from 100 years ago they would have a similar article some time during the year

  27. cognos,

    I understood DMR as saying: ~”We build ‘our Retirement’ ever day of our Lives, and, if We don’t act like self-centered/self-serving short-sighted ***holes, We may not need to buy into the Agitprop that tells us: ~”denude your Youth to feather your decrepitude”..

    though, this: “Abelson has lost it in the last few years…”, I don’t understand. To me, Abelson is one of the few things, in Barron’s, worthy of a AA-rating..
    ~~
    sorry for the ‘double-post’, above, thought it would have been ‘moderated out’..

  28. Dow says:

    While we’re on the topic of Social Security, why isn’t the cap tied to Senate salary? Why do they get the benefit of income above the cap?

  29. maynardGkeynes says:

    @Dow: They don’t get the benefit of income above the cap. Their benefits are based on the max earned at the cap, not at what they may have actually earned above that.

  30. maynardGkeynes says:

    @MarkeHoffer: I meant only that under the present formula the NPV the benefits if you retire at 62 is the same as the NPV of retiring at 70.5 on an life expectancy basis. The solvency of the SS Trust fund is a different issue.

  31. willid3 says:

    dow, i still wonder there is a cap to begin with. it makes it so that only those earning the least fund it. and increase the required tax rate to even try to fund it. if the removed the cap all together, they could reduce the rate over all, and put it on the road to recovery

  32. Pat G. says:

    Pay off your debts then consider saving. Tomorrow is promised to no one so take SS when you can as even it might not be around tomorrow. Being able to retire adequately is based on one’s perception of what they may need and how to fill in the holes.

  33. maynardG,

    I hear ya, it’s why I prefaced it w/ “No Offence”..also, I wasn’t, really, trying to impute anything into your comment..

    I get that what you posted was your intent..Thanks for clarifying.

  34. kaleberg says:

    That’s right. Workers should be saving more, but they shouldn’t count on their assets, their home or portfolio, o fund their retirement. If they can’t rely on their assets, what exactly should they do with their savings? Maybe they should be giving the money to politicians and lobbyists to support Social Security and maybe extend it. After all, that’s what the big boys in the private sector do. Social Security is just our societal excuse for giving goods and providing services to the old and infirm. The folks heading the rich and powerful collectives aren’t the only deserving ones.

  35. Target2025.com says:

    Perhaps we should begin with the simplest thing of all: It is not savings; it is investing. Adequacy suggests enough; inadequacy suggests defeat; potential on the other hand offers hope.

    We allow ourselves to be put in a position where we believe that what we are investing is actually going to be there each and every time we check the statement. And when we do check, if we ever do review those quarterly statements, we expect out-sized gains. Most folks have lost sight of what a 401(k) plan is supposed to do and how it is supposed to achieve.

    First: I requires consistent contributions, without interruption and increasing incrementally year over year and for a very long time. Starting early simply means beginning with less of a contribution while starting late means investing more than you think you need – or think you could possibly afford.

    Second: It requires time to allow markets to turn down (actually a good thing from the point-of-view of suggestion number one) and regain lost ground. While an upwardly mobile market is always exciting, it is much more so when you were buying more for less in the downturn.

    Third: Assume risk.

    Fourth: Get your financial house in order. If you are heading towards retirement and you are saddled with debt, still paying for a mortgage, haven’t anticipated your kids moving home or your parents moving in, and/or have medical issues that could be solved with a better lifestyle, no retirement wealth can withstand that sort of financial assault.

  36. wunsacon says:

    I posted a snark here to/@ MEH. The WordPress filter ate it. It’s okay if it never shows up. But, if it ever does, for the record, it was a backhanded compliment.