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Source: WSJ

Category: Asset Allocation, Investing, Think Tank

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.

15 Responses to “Nervous About Nest Eggs”

  1. Derektheunder says:

    Nice, it’s good to see these numbers broken down by age group.

    The percentage that think <$250K will be enough for retirement: FTW!!

    • mrflash818 says:

      The percentage that think <$250K will be enough for retirement: FTW!!

      For me, the fact so many are either poor, or did not save for retirement and will end up poor because of it, is even more depressing (the “What’s on hand” graph).

  2. rd says:

    Has anybody evaluated the effect of the language of the question? Need is different from want.

    My understanding is that about 94% of workers are covered by Social Security and 44% to 50% of baby boomers are covered by a defined benefit pension plan:

    So, it seems to be reasonable that 40% to 50% of the population believe that they don’t need much savings in retirement if their costs are about the same or less than they are while they are working and raising a family. It seems reasonable to expect that a median income earner who has worked 30+ years for an employer with a DB and has paid FICA taxes will be able to get a pretty high percentage of their working income in retirement from SS and their pension.

    For somebody like myself who has never worked for an employer with a DB plan and who makes significantly more than the median household income over the last 20 years of his career, not having savings would mean a dramatic step down in purchasing power and would probably leave me worse off than the median earner who has worked 30 years to get a pension. So these graphics don’t paint a complete picture.

    About 40% of the over 55 age group have over $100k saved and over 20% have over $250k saved which are not unreasonable numbers when you look at the population with DB plans.

    I don’t the situation is as dire as everybody paints it to be unless the right-wing extremists are successful in dramatically reducing Social Security.That could result in a replay of Paris 1789 if the over 50 crowd were hit hard by it. I expect we will see retirement savings by Generation Y and Millenials increasing a lot over the next 30 years as DB plans are eliminated.

    • BennyProfane says:

      Yes, many Boomers are vested in DB plans, but, I doubt that the average income from those plans is very substantial, because so many didn’t reach the peak “earning” years of those plans (basically, their fifties – the value of most DB plans spike dramatically by the year at that time). Many, if not a majority, were downsized or laid off or just changed jobs, out of necessity. The most comfortable will be millions of public workers, who were allowed nice payouts much earlier in old age. But, I doubt their numbers are high as a percentage.

      “It seems reasonable to expect that a median income earner who has worked 30+ years for an employer with a DB and has paid FICA taxes will be able to get a pretty high percentage of their working income in retirement from SS and their pension.”

      Private pensions? Maybe 60%. Public? Possibly 100%, and, there are examples of 100%+. Problem is, the 30 year worker is rare, these days. Very rare. And to tell you the truth, show me a company that “graduates” a lot of 30+ year employees into wonderful pensions, and I’ll show you a company that is in trouble. Sorry, but, that’s a company that is just rewarding their workers to play it safe for a long time and mark time to a certain age.

    • bears man says:

      While I appreciate your statement regarding the proclivities of “right wing extremists”(not really) irrespective of your political views, I believe that your statements and calculations here are, at a minimum naive, and at worst disturbing. Even if you believe that so many of the about to retire generation is vested in DB plans, in case you hadn’t noticed, the overwhelming majority of such plans, both public and private, are underfunded and are projected to be solvent only with averaging 7-8% returns over the next thirty years. Good Luck with that!
      Furthermore, also if you are betting on a solvent Social Security check coming every month, and even if you think that an essentially bankrupt US government will be able to continue to afford excessive cost of living adjustments forever, the unfortunate fact is that the entire bulk of “cash” that is the property of the social security administration is currently “invested” in various denominations of US treasuries. We are already paying out nearly a third of a trillion $$ a year in interest payments on federal debt and that is at 0.1-2.5% interest rates. What happens when those rates increase even to 2-5%? We owe, as a nation, over 16 trillion dollars, and that does not even count our unfunded liabilities. Whether you are a right wing crazy, or a left wing socialist, er, ah, I mean progressive, the numbers don’t work. There is no way we can pay that back. So when the governments defaults, either directly, or through inflation, or through establishing a gold standard at 10,000$ an ounce, or whatever, the average retiree’s $25,000 a year social security check is not going to pay the rent, let alone much else.
      Good morning,it’s time to wake up.

  3. joeisen says:

    The “what’s on hand” table excludes what for some people is their major asset: their primary residence. There’s no reason to take that off the table when considering resources available for retirement since they can sell for needed cash and then rent housing. And, that would equalize renters and owners in the table for a more accurate distribution of wealth.

    • rd says:

      Good point. Net replacement income needed after SS + pension and net savings needed beyond home equity minus transaction costs are the two real starting points for the discussion.

    • BennyProfane says:

      “The “what’s on hand” table excludes what for some people is their major asset: their primary residence.”

      I’m convinced that this is why home prices are so sticky, relative to incomes, in so many places. The Boomers laddered up to this major asset price level, and refuse to admit that it was a personal pyramid scheme gone sour six years ago, maybe never to be resurrected.

      “There’s no reason to take that off the table when considering resources available for retirement since they can sell for needed cash and then rent housing.

      In case you haven’t noticed, that isn’t working out too well for millions and million of Americans at the moment. They can’t sell, or, sell for what they think the thing is worth, or, worse yet, for what the minimum is they have to sell it for, before the transaction is costing them big bucks. Only 30% of homes are owned outright, and, trillions of dollars are owed on the other 70% in the form of HELOCs that would be very difficult to resolve if that generation wanted to downsize. They have no cash to bring to the closing table. And, then what? Either they buy again, but, to really cash in on whatever equity in the deal, a Greenwich resident would have to move to a so-so town in Florida or North Carolina. That’s not happening or will happen. Older people are staying put and many want to to stay close to relatives and a social network. So, they will die in the MacMansion, if they can afford the upkeep (that’s a huge if). If the Boomers were going to downsize, you’d be witnessing the whole golf course community thing in warm climes and not so warm climes going nuts right now. Nope, ain’t happening either. The Boomers bought them ten to twenty years ago, fantasizing an old age in paradise, and now, in some places, you can get them for a song.
      But, rent? Please. Well, not voluntarily. Sure, many will rent, but because they have to. Don’t expect Mr. and, especially, Mrs. Boomer to downsize to a rental from the MacMansion with smiles on their faces. They’ll be doing it to survive.

  4. ota says:

    SS even at the maximum doesn’t seem like enough to live on unless your drawing down your principle at today’s interest rates without risk.

  5. FrViper says:

    Can we talk? As a 16 year retiree: defined benefit 52% of annual income; social security 21%; personal savings withdrawal 27%.
    Expenses: taxes 21%; house mortgage+utilities 21%; Medical 11% (healthy); charity 7%; insurance- home+cars 10%; living expenses 25%; rental expense 5% (having one house, rent to warmer climate in winter).
    Personal savings is the ‘bonus’ to our life style and we’ve gone through 1/3, but, they say, mortgage and travel start to slow down after 75.

  6. DeDude says:

    The scary part to me is the difference between how many people expect to bail themselves out of their failure to save for retirement (70%) by working, compared to how many retirees actually have a pay check (25%). A large number of people will be waking up to a cruel reality. Its not enough to be able and willing to work, you have to be able to find a job.

  7. bigal says:

    Retirees with little or no savings are the next group that will do the low income jobs that nobody else wants to do. Today these jobs are done by immigrants who are trying to better themselves like the generations before them did so that they can have their children educated so that they do not have to work in crap jobs like they did. I do not see another wave of immigrants since the wall is being built along our southern border.

    Low saving retirees will be motivated like the immigrants, if I work, I live another day.

  8. sellstop says:

    When asked why he robbed banks Willie Sutton said, “Why, that’s where the money is.”

    Where is the money today? The top 1-5% have most of it. All of that money printing/credit creation/govt. debt that started with Ronald Reagan’s pledge to cut government spending was skimmed out of the economy and is lining the pockets of the very rich. The money is there. How do we get it back into circulation? If we don’t like “printing” new money, we need to get the old money back in circulation.

    In the old days we just stormed the castle, killed the guards and ransacked the secret hiding places for the bags of gold. (The Good Earth, by P. S. Buck, highly recommended for the economic lessons)

    I am not sure what we can do today. Unless we all get really hungry and desperate…. We all seem to be bound by the rules of our free enterprise creed that we all took when we signed up for our 401k plan.
    And by our confusing the U.S. Constitution and Adam Smith.