Fifty percent of people CANNOT save enough for retirement.

[WHAMPOM]

Originally posted by: Genx87
So your theory is based on the historical growth of the stock market will be impossible to keep going. Thus instead of even trying we will stick it into a program that earns an automatic negative rate of growth because it is backed by the govt, it must be safe?

If our life expectancys suddenly jump 20 years in the next 50 years, why shouldnt we be expected to work longer? If my life is going to on avg jump to 95 years then why would I want to sit around for 30 of it twiddling my thumbs?

You know when SS was created I am pretty sure the avg life expectancy of people was about 65-70 years of age tops. Thus nearly 50% of the people were automatically excluded from the program. Maybe we should get back to the roots of the program and push the benefits age out to 76 years of age, which is what the designers of the program obviosuly intended to do.

GET YOUR FACTS RIGHT! 1920 55 average life span. 1930 57 Avg. life span and 1937 S.S. finally passed into law. Retirement partial at 62, full at 65.

Demographics change, if the program cant change with it, then it is destined to ruin.

2006 average life span 78, by your logic, partial retirement should start at age 85 and full retirement compensation at 90.

 

[Genx87]

Originally posted by: WHAMPOM

Originally posted by: Genx87

Originally posted by: techs

Originally posted by: Genx87

Originally posted by: techs

Originally posted by: Genx87
So your theory is based on the historical growth of the stock market will be impossible to keep going. Thus instead of even trying we will stick it into a program that earns an automatic negative rate of growth because it is backed by the govt, it must be safe?

If our life expectancys suddenly jump 20 years in the next 50 years, why shouldnt we be expected to work longer? If my life is going to on avg jump to 95 years then why would I want to sit around for 30 of it twiddling my thumbs?

You know when SS was created I am pretty sure the avg life expectancy of people was about 65-70 years of age tops. Thus nearly 50% of the people were automatically excluded from the program. Maybe we should get back to the roots of the program and push the benefits age out to 76 years of age, which is what the designers of the program obviosuly intended to do.

Demographics change, if the program cant change with it, then it is destined to ruin.

Wow. A reasoned argument. And part of which I agree with. We do need to raise the retirement age. In fact the retirement age should be pegged to the average life expectancy and rise in tandem.
You're first part about the stock market is completely, totally WRONG.
As I said even if we get the same growth as we did over the last 40 years we still can't pay for retirement.
And your RIDICULOUS statement that SS is program of "negative" growth is so false as to be ludicrous. SS is pegged to salaries. When salaries grow, the SS fund increases.
SS is tied to the ACTUAL incomes of Americans. And the cost of living is actually very closely tied to what people actually earn. You have to love the beauty of SS. It eliminates the risky and artificial linkage of retirement money to investment growth and ties it to workers salaries which are for more reliably linked to actual cost of living.

I'd like you to show me how investing 14.6% of my income into an account that has an avg annual return of 10% wont be enough to retire on over a 40 year span.

What are the avg yield on the bonds SS uses? And is that an accurate picture to paint of the system? The govt borrowing from itself, and paying interest to itself is a return?

About the best you come up with is you lost to inflation.

And the simple fact the system cant sustain itself should be reason enough to understand it is seeing a negative return.

Why would you want to work for so long? Isn't working for 50+ years long enough?

What else am I going to do? Sit around waiting to die? Maybe I am different from you, but when I take a day off, usually by the end of the day I am bored out of my mind. Multiply that by 30 years and you get my drift. You can only take so many vacations before that loses its luster.

Yeah, the people against SS only want you to hear their cannily crafted sound bites. When you actually look at SS it is a beautifully designed, completely logical and necessary program.
When you look at, say, the Bushies retirement accounts idea in detail you see it does nothing to save SS, destroys the American economy, and fails to provide for retirement for tens of millions of Americans. And would cause a fiscal and social disaster of unprecedented proportions.

What is so beautiful about it? It was a ponzi scheme setup to tax Americans to pay for things under the guise of a social program. If you think that is beautiful as in a perfect scam, I agree with you.

Are the thrift savings programs federal and congress gets an utter disaster as you paint them out to be? Your fearmongering over individual accounts is pure ignorance.

I'd like you to show me how investing 14.6% of my income into an account that has an avg annual return of 10% wont be enough to retire on over a 40 year span.
Just taking your most onerous point, 10 percent? What type of drugs are you taking?
And even at 10 percent you can't save for maybe 40 years of retirement.
Why would anyone post something like you did? Its clearly impossible.
Oh yeah, why would you think employers will give you THEIR share of the SS payments if SS were stopped? They haven't and they wouldn't. Inf act in most cases they won't continue to give you your share either.

You could be one of the most obtuse people I have seen on this msgboard lately, and that is really saying something.

10% is the avg annual return of the stock market for the past 80+ years. 10% a year is where I am getting my "avg" return for the next 40 years from.

Your inability to understand that we are talking about SS vs private accounts is amazing. Obviously the 14.6% which magically matches what SS costs, is already taken out of your salary, thus I am saying taking that and investing it in the stock market will give a better retirement than SS.

btw if I made 50,000 a year for the next 40 years with a 10% annual return put into an individual account.

I would retire with 3.9 million dollars. If I live for 30 years after that the minimum assuming I never see a single cent in appreciation on that investment, I would live off a 10,800 dollar a month retirement plan.

Do you think I can expect to see an 11,000 a month check from SS? And if so, what is the tax rate going to be to support such a lifestyle?

I am going to rain on your parade. Damn near 70% of stock market investors loose money. An amazing 5% are big money investors that make so much, that it knocks the average back to the plus side.

The money taken out isnt going to be invested in individual stocks but run like the Thrift savings program.

 

[Legend]

Originally posted by: WHAMPOM

Originally posted by: Genx87

Originally posted by: techs

Originally posted by: Genx87

Originally posted by: techs

Originally posted by: Genx87
So your theory is based on the historical growth of the stock market will be impossible to keep going. Thus instead of even trying we will stick it into a program that earns an automatic negative rate of growth because it is backed by the govt, it must be safe?

If our life expectancys suddenly jump 20 years in the next 50 years, why shouldnt we be expected to work longer? If my life is going to on avg jump to 95 years then why would I want to sit around for 30 of it twiddling my thumbs?

You know when SS was created I am pretty sure the avg life expectancy of people was about 65-70 years of age tops. Thus nearly 50% of the people were automatically excluded from the program. Maybe we should get back to the roots of the program and push the benefits age out to 76 years of age, which is what the designers of the program obviosuly intended to do.

Demographics change, if the program cant change with it, then it is destined to ruin.

Wow. A reasoned argument. And part of which I agree with. We do need to raise the retirement age. In fact the retirement age should be pegged to the average life expectancy and rise in tandem.
You're first part about the stock market is completely, totally WRONG.
As I said even if we get the same growth as we did over the last 40 years we still can't pay for retirement.
And your RIDICULOUS statement that SS is program of "negative" growth is so false as to be ludicrous. SS is pegged to salaries. When salaries grow, the SS fund increases.
SS is tied to the ACTUAL incomes of Americans. And the cost of living is actually very closely tied to what people actually earn. You have to love the beauty of SS. It eliminates the risky and artificial linkage of retirement money to investment growth and ties it to workers salaries which are for more reliably linked to actual cost of living.

I'd like you to show me how investing 14.6% of my income into an account that has an avg annual return of 10% wont be enough to retire on over a 40 year span.

What are the avg yield on the bonds SS uses? And is that an accurate picture to paint of the system? The govt borrowing from itself, and paying interest to itself is a return?

About the best you come up with is you lost to inflation.

And the simple fact the system cant sustain itself should be reason enough to understand it is seeing a negative return.

Why would you want to work for so long? Isn't working for 50+ years long enough?

What else am I going to do? Sit around waiting to die? Maybe I am different from you, but when I take a day off, usually by the end of the day I am bored out of my mind. Multiply that by 30 years and you get my drift. You can only take so many vacations before that loses its luster.

Yeah, the people against SS only want you to hear their cannily crafted sound bites. When you actually look at SS it is a beautifully designed, completely logical and necessary program.
When you look at, say, the Bushies retirement accounts idea in detail you see it does nothing to save SS, destroys the American economy, and fails to provide for retirement for tens of millions of Americans. And would cause a fiscal and social disaster of unprecedented proportions.

What is so beautiful about it? It was a ponzi scheme setup to tax Americans to pay for things under the guise of a social program. If you think that is beautiful as in a perfect scam, I agree with you.

Are the thrift savings programs federal and congress gets an utter disaster as you paint them out to be? Your fearmongering over individual accounts is pure ignorance.

I'd like you to show me how investing 14.6% of my income into an account that has an avg annual return of 10% wont be enough to retire on over a 40 year span.
Just taking your most onerous point, 10 percent? What type of drugs are you taking?
And even at 10 percent you can't save for maybe 40 years of retirement.
Why would anyone post something like you did? Its clearly impossible.
Oh yeah, why would you think employers will give you THEIR share of the SS payments if SS were stopped? They haven't and they wouldn't. Inf act in most cases they won't continue to give you your share either.

You could be one of the most obtuse people I have seen on this msgboard lately, and that is really saying something.

10% is the avg annual return of the stock market for the past 80+ years. 10% a year is where I am getting my "avg" return for the next 40 years from.

Your inability to understand that we are talking about SS vs private accounts is amazing. Obviously the 14.6% which magically matches what SS costs, is already taken out of your salary, thus I am saying taking that and investing it in the stock market will give a better retirement than SS.

btw if I made 50,000 a year for the next 40 years with a 10% annual return put into an individual account.

I would retire with 3.9 million dollars. If I live for 30 years after that the minimum assuming I never see a single cent in appreciation on that investment, I would live off a 10,800 dollar a month retirement plan.

Do you think I can expect to see an 11,000 a month check from SS? And if so, what is the tax rate going to be to support such a lifestyle?

I am going to rain on your parade. Damn near 70% of stock market investors loose money. An amazing 5% are big money investors that make so much, that it knocks the average back to the plus side.

Where did you hear this?

Because most mutual funds have made 9% avg interest in the past 80 years. That doesn't sound like losing money to me.

http://flagship4.vanguard.com/VGApp/hnw...1&FundIntExt=INT&DisplayBarChart=false

Put a linear approximation on that curve and you get nearly 2.6x your investment returned every decade. So for 40 years, that's 45.7 times your initial investment. So you're saying that if I invested 25,000 in 1966 and that today it's worth 1.14 million, that I've lost money? That's very interesting.

WTF are they teaching people at school? Ohhhh, scary stock market. Better spend money on nit naks.

 

[Legend]

Originally posted by: techs

Originally posted by: Genx87

Originally posted by: techs

Originally posted by: Genx87
So your theory is based on the historical growth of the stock market will be impossible to keep going. Thus instead of even trying we will stick it into a program that earns an automatic negative rate of growth because it is backed by the govt, it must be safe?

If our life expectancys suddenly jump 20 years in the next 50 years, why shouldnt we be expected to work longer? If my life is going to on avg jump to 95 years then why would I want to sit around for 30 of it twiddling my thumbs?

You know when SS was created I am pretty sure the avg life expectancy of people was about 65-70 years of age tops. Thus nearly 50% of the people were automatically excluded from the program. Maybe we should get back to the roots of the program and push the benefits age out to 76 years of age, which is what the designers of the program obviosuly intended to do.

Demographics change, if the program cant change with it, then it is destined to ruin.

Wow. A reasoned argument. And part of which I agree with. We do need to raise the retirement age. In fact the retirement age should be pegged to the average life expectancy and rise in tandem.
You're first part about the stock market is completely, totally WRONG.
As I said even if we get the same growth as we did over the last 40 years we still can't pay for retirement.
And your RIDICULOUS statement that SS is program of "negative" growth is so false as to be ludicrous. SS is pegged to salaries. When salaries grow, the SS fund increases.
SS is tied to the ACTUAL incomes of Americans. And the cost of living is actually very closely tied to what people actually earn. You have to love the beauty of SS. It eliminates the risky and artificial linkage of retirement money to investment growth and ties it to workers salaries which are for more reliably linked to actual cost of living.

I'd like you to show me how investing 14.6% of my income into an account that has an avg annual return of 10% wont be enough to retire on over a 40 year span.

What are the avg yield on the bonds SS uses? And is that an accurate picture to paint of the system? The govt borrowing from itself, and paying interest to itself is a return?

About the best you come up with is you lost to inflation.

And the simple fact the system cant sustain itself should be reason enough to understand it is seeing a negative return.

Why would you want to work for so long? Isn't working for 50+ years long enough?

What else am I going to do? Sit around waiting to die? Maybe I am different from you, but when I take a day off, usually by the end of the day I am bored out of my mind. Multiply that by 30 years and you get my drift. You can only take so many vacations before that loses its luster.

Yeah, the people against SS only want you to hear their cannily crafted sound bites. When you actually look at SS it is a beautifully designed, completely logical and necessary program.
When you look at, say, the Bushies retirement accounts idea in detail you see it does nothing to save SS, destroys the American economy, and fails to provide for retirement for tens of millions of Americans. And would cause a fiscal and social disaster of unprecedented proportions.

What is so beautiful about it? It was a ponzi scheme setup to tax Americans to pay for things under the guise of a social program. If you think that is beautiful as in a perfect scam, I agree with you.

Are the thrift savings programs federal and congress gets an utter disaster as you paint them out to be? Your fearmongering over individual accounts is pure ignorance.

I'd like you to show me how investing 14.6% of my income into an account that has an avg annual return of 10% wont be enough to retire on over a 40 year span.
Just taking your most onerous point, 10 percent? What type of drugs are you taking?
And even at 10 percent you can't save for maybe 40 years of retirement.
Why would anyone post something like you did? Its clearly impossible.
Oh yeah, why would you think employers will give you THEIR share of the SS payments if SS were stopped? They haven't and they wouldn't. Inf act in most cases they won't continue to give you your share either.

What drugs are YOU taking. Go out an use a retirement calculator. If you put in 7,000 a year starting at age 20, 10% interest, 3% inflation (net 7%), you'd have $2,000,000 at retirement at age 65.

http://www.bloomberg.com/analysis/calculators/retire.html

Live off interest, that's 200,000 a year average. What is SS going to give you? Magical Beans?



Now someone like me could invest very aggressively. Let's do $25,000 a year starting at age 23 (what I'm doing). I'd have $7,100,000 at retirement.


With private accounts, everyone wins.

 

[Legend]

First off can you expect to get the level of growth in your investments Americans achieved over the last 60 years? Certainly not. World War 2 saw the destruction of the entire industrial capacity of industrialized nations. It left all the european countries in huge debt to the US. Countries with low wage labor had no money nor expertise to build factories. Plus the US has gone from a developing nation of higher growth to a developed nation of lower growth. So the US has enjoyed an unprecedented period of growth over the last 60 years.

The Economy has been growing faster in the past 20 years.

Okay, but let's assume that happens. Why can't I invest in foreign stock? Oh wait, I can.

 

[Sureshot324]

When the baby boomers start retiring and everybody is trying to sell their investments at once, that's when we'll have problems.

 

[BlancoNino]

Lets also not forget that trashing SS will help save the fed. gov. money.

Lets also not forget that investing in private accounts helps the overall economy function.

 

[Legend]

Originally posted by: Sureshot324
When the baby boomers start retiring and everybody is trying to sell their investments at once, that's when we'll have problems.

People shouldn't sell their investments instantly, but live off interest or at a rate slightly higher. Our economy is now global, and doesn't entirely depend on the baby boomers.

 

[Engineer]

Originally posted by: BlancoNino
Lets also not forget that trashing SS will help save the fed. gov. money.

Lets also not forget that investing in private accounts helps the overall economy function.

Two points: SS is actually a short term "cash cow" as it provides over 150 billion in surplus money each year. Congress won't touch it, IMO, until they have to.

Also, either money to SS or private accounts will get to the economy one way or another. The government will spend it into the economy or the investments will be placed into the economy. Regardless of how well government spends the money, it's still going directly into the economy in one shape or fashion.

 

[Moonbeam]

Maybe instead of a retirement they will save enough to buy sniper equipment and hunt people for food and sustenance when they get old.

 

[sandmanwake]

How many people have cable tv? Multiple tv's? How many cars? How many children?

 

[ericlp]

Gratest invest you can make is in your home. Pay that off and your pretty much home free!

Waiting for SS to kick in is a dream. More then likely if your 40 years today it will not be around for another 20 - 30 years. I don't expect to live that long anyway and want to enjoy what I got left ... This national average is great if your in excellent health. Tho what about the people that are screwed up already?

Personally I think the average life expectancy will start dropping as soon as we slowly toxicinate ourselves and the planet. I think this is already starting to happen and the government doesn't want you to know as the more people die off with out touching SS the better off they are since ... Well, it's kind of like that roach policy. They check in but they don't check out.

 

[Jadow]

no matter what their income is, I have to believe if someone saves 15 - 20% of their gross income each year from age 25 to 65, they should have a very comfortable retirement, unless they're some kind of spending freaks.


Furthermore, if people save less, 5-10% but they get their mortgage paid off when they retire, I also think they would have a decent lifestyle in retirement. They won't be traveling to Europe, but they could participate in the community they live in, eat out, buy presents for the grandkids, etc...

 

[Jaskalas]

Originally posted by: techs
Lets clear up a misconception. Half of Americans cannot save and invest enough for their retirement even accounting for the average retirement age.
Here's how it works.
Assuming the SS level (40 percent of your working salary) and Medicare is the amount you need to keep a roof over your head, food and medical care.
First off can you expect to get the level of growth in your investments Americans achieved over the last 60 years? Certainly not. World War 2 saw the destruction of the entire industrial capacity of industrialized nations. It left all the european countries in huge debt to the US. Countries with low wage labor had no money nor expertise to build factories. Plus the US has gone from a developing nation of higher growth to a developed nation of lower growth. So the US has enjoyed an unprecedented period of growth over the last 60 years.
Even if that were NOT true and growth were the same as it has been the last 40 years over the next 40 years you can't save enough for retirement.
Its simple.
How many years of retirement do you save for? 10? 20? What if you live to 95 and retire at 72? Thats 23 years. At 40 percent that number cannot be reached unless the average American saves somethingl like 80 percent of their income during their entire working life.
But say you save for the average life expectancy. Retire at 72 and live til 80. But what will be the life expectancy even 20 years from now? Unknown.
And if you only save for the AVERAGE life span than what happens if you live even one more year? You are broke.
When you add the ridiculous notion of saving for an indeterminate number of years of retirement to the absolute necessity of never going broke since you would be unable to work you come up with the only answer. You must save for the lifespan of, say 90 percent of the highest age people live. Which puts you into the 90's. And only millionaires can save that much. And that leaves 10 percent of the retired population, those in their 90's broke.

And what happens if we do indeed destroy SS? We would have tens of millions of elderly with no more money. And then the government would have to step in and help them.
Unless seniors living and dying in the streets will acceptable to our "Christian" Nation.

I like how you think it's the "Christian Nation" that is behind this problem Tech, you partisan tool. I see a lot of complaints, why do you not post solutions and fixes? Would you advocate complete communism then to fix it?

At some point, we as a country might realize money is finite and we cannot promise infinite amounts to everyone. If we have trouble here at home, my first step would be reducing and eventually cutting all foreign aid in an attempt to keep feeding our people here at home. If the starving people of Africa are worth our money, then maybe the soon to be starving people here at home are worth it too and as our wealth as a country continues to shrink, we might want to reconsider our priorities.

In a vane attempt to spark ideas on the subject.

 

[Sureshot324]

Originally posted by: Legend

Originally posted by: Sureshot324
When the baby boomers start retiring and everybody is trying to sell their investments at once, that's when we'll have problems.

People shouldn't sell their investments instantly, but live off interest or at a rate slightly higher. Our economy is now global, and doesn't entirely depend on the baby boomers.

Most retirees haven't saved enough to live off of interest alone. The economy may be global, but the baby boom effected pretty much the entire western world, and that's a very large chunk of the world economy.

 

[Brovane]

Originally posted by: techs
Lets clear up a misconception. Half of Americans cannot save and invest enough for their retirement even accounting for the average retirement age.
Here's how it works.
Assuming the SS level (40 percent of your working salary) and Medicare is the amount you need to keep a roof over your head, food and medical care.
First off can you expect to get the level of growth in your investments Americans achieved over the last 60 years? Certainly not. World War 2 saw the destruction of the entire industrial capacity of industrialized nations. It left all the european countries in huge debt to the US. Countries with low wage labor had no money nor expertise to build factories. Plus the US has gone from a developing nation of higher growth to a developed nation of lower growth. So the US has enjoyed an unprecedented period of growth over the last 60 years.
Even if that were NOT true and growth were the same as it has been the last 40 years over the next 40 years you can't save enough for retirement.
Its simple.
How many years of retirement do you save for? 10? 20? What if you live to 95 and retire at 72? Thats 23 years. At 40 percent that number cannot be reached unless the average American saves somethingl like 80 percent of their income during their entire working life.
But say you save for the average life expectancy. Retire at 72 and live til 80. But what will be the life expectancy even 20 years from now? Unknown.
And if you only save for the AVERAGE life span than what happens if you live even one more year? You are broke.
When you add the ridiculous notion of saving for an indeterminate number of years of retirement to the absolute necessity of never going broke since you would be unable to work you come up with the only answer. You must save for the lifespan of, say 90 percent of the highest age people live. Which puts you into the 90's. And only millionaires can save that much. And that leaves 10 percent of the retired population, those in their 90's broke.

And what happens if we do indeed destroy SS? We would have tens of millions of elderly with no more money. And then the government would have to step in and help them.
Unless seniors living and dying in the streets will acceptable to our "Christian" Nation.

Ever hear of compound interest or the rule of 72? Research those two terms and get back to us.

 

[Jeff7]

Originally posted by: Moonbeam
Maybe instead of a retirement they will save enough to buy sniper equipment and hunt people for food and sustenance when they get old.

The Soylent Retirement Plan.

 

[IronWing]

Just a thought. Not a well developed one at this point but I'll chuck it out anyway.

When 401k programs gained widespread use the stock market took off. Price to earnings ratios climbed and never came back down. Permanent inflation in the stock market appears to be one outcome of 401k investors dumping billions into the market every month regardless of market conditions.

If we were to take a sizable portion of SS contributions and invest them into the market under a TSP-like index fund scheme could we expect to see further inflation in the market with even higher price to earnings ratios, ultimately leading to lower returns as more money chased the same investment opportunities?

 

[nageov3t]

45% of people believe that the rapture will occur within their lifetime.

think there's a connection?

 

[Engineer]

Originally posted by: ironwing
Just a thought. Not a well developed one at this point but I'll chuck it out anyway.

When 401k programs gained widespread use the stock market took off. Price to earnings ratios climbed and never came back down. Permanent inflation in the stock market appears to be one outcome of 401k investors dumping billions into the market every month regardless of market conditions.

If we were to take a sizable portion of SS contributions and invest them into the market under a TSP-like index fund scheme could we expect to see further inflation in the market with even higher price to earnings ratios, ultimately leading to lower returns as more money chased the same investment opportunities?

Actually, the P/E ratios have come down very well the last few years on very high profit growth compared to very modest to flat (over the last 6 years) market growth. The S&P 500 P/E ratio is down to 17.5 ish. Historically, 20 or below seems to be the marker.

 

[MonkeyK]

Originally posted by: Legend

Originally posted by: WHAMPOM

I am going to rain on your parade. Damn near 70% of stock market investors loose money. An amazing 5% are big money investors that make so much, that it knocks the average back to the plus side.

Where did you hear this?

Because most mutual funds have made 9% avg interest in the past 80 years. That doesn't sound like losing money to me.

http://flagship4.vanguard.com/VGApp/hnw...1&FundIntExt=INT&DisplayBarChart=false

Put a linear approximation on that curve and you get nearly 2.6x your investment returned every decade. So for 40 years, that's 45.7 times your initial investment. So you're saying that if I invested 25,000 in 1966 and that today it's worth 1.14 million, that I've lost money? That's very interesting.

WTF are they teaching people at school? Ohhhh, scary stock market. Better spend money on nit naks.

I agree with you that "Damn near 70% of stock market investors loose money." is a dubious claim (though perhaps 70% of investors that do their own investing in individual stocks might be more believable)

But why does everyone suck at math? 1.09^40 = 31.4, not 45.7 (compounding exagerates errors)

but even this is not good reasoning since it does not take inflation into account. When I say 1 million, it sounds like a lot of money. But that one million is a future value, worth much less today (or in your example, that 25,000 is a past value and worth much more today). It is much easier to understand an amount if we factor out inflation by just subtracting anticpated inflation from anticated returns. So if you expect a mutual fund to return 9% and expect infation of 3%, calculate your earnings at 6% and you will be able to comprehend the result in terms of what you spend today.

In the above example, assuming mutual funds return 9% and inflation at 3% annually,
1.06^40 = 10.28 * 25,000 = 257,000
which would not be much of a living.

 

[Brovane]

Originally posted by: MonkeyK

Originally posted by: Legend

Originally posted by: WHAMPOM

I am going to rain on your parade. Damn near 70% of stock market investors loose money. An amazing 5% are big money investors that make so much, that it knocks the average back to the plus side.

Where did you hear this?

Because most mutual funds have made 9% avg interest in the past 80 years. That doesn't sound like losing money to me.

http://flagship4.vanguard.com/VGApp/hnw...1&FundIntExt=INT&DisplayBarChart=false

Put a linear approximation on that curve and you get nearly 2.6x your investment returned every decade. So for 40 years, that's 45.7 times your initial investment. So you're saying that if I invested 25,000 in 1966 and that today it's worth 1.14 million, that I've lost money? That's very interesting.

WTF are they teaching people at school? Ohhhh, scary stock market. Better spend money on nit naks.

I agree with you that "Damn near 70% of stock market investors loose money." is a dubious claim (though perhaps 70% of investors that do their own investing in individual stocks might be more believable)

But why does everyone suck at math? 1.09^40 = 31.4, not 45.7 (compounding exagerates errors)

but even this is not good reasoning since it does not take inflation into account. When I say 1 million, it sounds like a lot of money. But that one million is a future value, worth much less today (or in your example, that 25,000 is a past value and worth much more today). It is much easier to understand an amount if we factor out inflation by just subtracting anticpated inflation from anticated returns. So if you expect a mutual fund to return 9% and expect infation of 3%, calculate your earnings at 6% and you will be able to comprehend the result in terms of what you spend today.

In the above example, assuming mutual funds return 9% and inflation at 3% annually,
1.06^40 = 10.28 * 25,000 = 257,000
which would not be much of a living.

Ok lets crunch some numbers here

If your goal is say 1 Million at retirement. Lets assume a 3.1% long term inflation rate. A 3.1% inflation rate is the long term rate from 1925-2005 for inflation. Lets say you are 25 and expect to work for 40 years. You will need about 4 Million in todays dollars to equal the buying power that 1 million will be 40 years in the future. So if you put away $715 a month for 40 years and with a 10% rate of return you will have 4 Million in 40 years. Now this also assumes that you put away a constant $715 a month for the entire 40 year duration. Usually with 401K contributions the contributions climb as your income climbs.

 

[msparish]

I pity your future retirement techs, and here is why:

Assumptions:
Start working at 22
Retire at 68
Die at 95
Salary at 22 is $40000
5% raises until 50, rate of inflation after that
Contribute 6% of salary to 401k with 50% match
Invest 7% of salary (about what the employee contributes for SS taxes)
Cost of living in retirement $30000 (in today's dollars)
At retirment, rate of return on investments decreases (e.g. moving the money into safer investments)
Rate of inflation 3%

For the historical average of 10% return (and 5% return after retirement):
At retirment, about $1.75 million
At death, about $1.4 million

Both of thos figures have the effects of inflation built in. Without the effects of inflation built in, you have about $7 million at retirment and about $12 million at death (yes, your bank account continues to grow after retirment).

How about if your rate of return is lower?

For 8% before retirement and 4% after:
At retirement 1.1 million
At death 330,000

Again, that is with the effects of inflation built in. When you retire and die, your bank accounts will actually read about $4.3 and $2.8 million respectively.

Besides, even if you feel that the US has tapped its potential for economic growth and we will not see the same returns as the past 80 years...invest in China. Invest in India. Invest in the rest of the developing nations.

To say that a great majority of people cannot finance their own retirment is rediculous. This is a very average person, who could provide a very nice retirement for himself by saving a very small percent of his money.

 

[Fern]

Originally posted by: techs
Lets clear up a misconception. Half of Americans cannot save and invest enough for their retirement even accounting for the average retirement age.
Here's how it works.
Assuming the SS level (40 percent of your working salary) and Medicare is the amount you need to keep a roof over your head......

You lost me at that point. Most peeps I know at retirement age (and I see quite a few, I am a tax preparer in what is largely a retirement area) own their homes debt-free.

So, if paying for "a roof over their heads" is implicit in this calc, it's bogus right off the bat IMHO.

Fern

 

[daniel49]

I have four children and am the only income earner in the family.

I will have my house paid off in 6 years...cars paid off all ready.
I started 401k in my early 30's
My job now also provides a pension and a 401k ( earned about 16% after fees for a return in the last year)
and there will be some social security eventually.
All but one kid is out on thier own.

And if that doesn't get me through i'll sell my baseball cards and move in with my kids

My point is it can be done if you discipline yourself to do it.