To those who want individual retirement accounts could you explain to me this...

[techs]

I have never heard it answered satisfactorily so here's your chance.
Even if it were possible to come up with the correct amount you will need per year of retirement (and that is really difficult because even a minute difference in a single assumption like inflation) how would you answer these questions:
How many years will you be retired?
Do you plan on the average lifespan? Or do you need enough just in case you live longer than 99 percent of people, say 95 years old? The difference is like another 15 years.
How can you plan for this? At retirement do you take out only enough per month based on living til 80 or 95? It's a HUGE difference. Living to 95 would mean you would be retired for twice as long.
If people had individual retirement accounts wouldn't almost everyone need to save for an age of 95 or else there would be tens of millions of retired people who had no income?
If you need to save enought to last til 95 wouldn't you need to put away a very large amount of money every year while your were working? Isn't it true that even the lower middle class would have to put so much money in they would essentially be living way below poverty and the current middle class would have to living in poverty?
And wouldn't everyone have to take out longterm disability insurance since SS wouldn't cover it?

 

[Meuge]

I guess the idea is to overplan.

 

[Engineer]

Definitely overplan.

One question that I would need answered is would these personal retirement accounts be protected from creditors such as hospitals, etc. in case of huge medical bills? One could be completely wiped out from all of their savings in such a case. I don't think that the accounts should be allowed to be wiped out for such purposes. Sure, you have to make payments, etc., but to take your livelihood that was to be used for the rest of your life doesn't cut the mustard.

Other questions above...I guess "to each is own"....

 

[smack Down]

Personal accounts are just a scam to prop-up the stock market when rich bady boomers start to cash out. Where regular SS is a scam to give money to all bady boomers.

 

[Future Shock]

Originally posted by: Engineer
Definitely overplan.

One question that I would need answered is would these personal retirement accounts be protected from creditors such as hospitals, etc. in case of huge medical bills? One could be completely wiped out from all of their savings in such a case. I don't think that the accounts should be allowed to be wiped out for such purposes. Sure, you have to make payments, etc., but to take your livelihood that was to be used for the rest of your life doesn't cut the mustard.

Other questions above...I guess "to each is own"....

Heck, my ex-wife went after my pre-marriage IRA accounts as part of our DIVORCE, let alone medical bills...there needs to be some sanctity of that resource if we are going to be planning on eliminating social security's security...

Future Shock

 

[Engineer]

Originally posted by: smack Down
Personal accounts are just a scam to prop-up the stock market when rich bady boomers start to cash out. Where regular SS is a scam to give money to all bady boomers.

Don't know about that, but I did think the same about the stock market being propped up (or expanded) as companies, such as IBM, look at killing off pensions and going to 401k style retirements. Could be interesting....

 

[zendari]

The same problems exist for Social Security. How many retirees can you expect in the year 2020? How are you expected to pay for those retirees? What if retirees live 10 years longer starting in 2010? How are you going to cover the budget crisis? If everyone lived to 95 the system wouldn't be able to fund all the retirees who are supposed to be dead according to budget. How are the poor who are paying 7.4% of income going to bear a 10% share of income in the future if people live too long?

 

[Jhhnn]

They don't have the answers, techs. Nobody does.

Maybe they'll just make it mandatory that your investment broker send a cyanide pill along with your last dime. Probably not- it'd cut into the profit margin...

Nice obfuscation from Zendari... don't answer the question, ask a different one...

 

[Engineer]

Originally posted by: zendari
The same problems exist for Social Security. How many retirees can you expect in the year 2020? How are you expected to pay for those retirees? What if retirees live 10 years longer starting in 2010? How are you going to cover the budget crisis? If everyone lived to 95 the system wouldn't be able to fund all the retirees who are supposed to be dead according to budget. How are the poor who are paying 7.4% of income going to bear a 10% share of income in the future if people live too long?

If the same problem exists, as you suggest, for both types of accounts...why switch from one problem to another?

(other than just to take the money out of the politicans hands and place it into their rich buddies' on Wall Street pockets?)

 

[1EZduzit]

I'm too old for an IRA to do me much good, but the key is to invest every year for as long as you can. I've sen some charts and if you are young enough to invest the max amount every year for at least 30 years then just DO IT!! You can'tr lose if you can afford to set the money away.

 

[techs]

Originally posted by: 1EZduzit
I'm too old for an IRA to do me much good, but the key is to invest every year for as long as you can. I've sen some charts and if you are young enough to invest the max amount every year for at least 30 years then just DO IT!! You can'tr lose if you can afford to set the money away.

It's a shame youth is wasted on the young. Try telling a 25 year old to put away 3-4 grand on a 35,000 dollar salary. Most will laugh in your face.
Which is why older and more experienced heads were forced to provide Social Security.

 

[Engineer]

From CNN/Money...

(just in time for your post techs)...

NEW YORK (CNN/Money) - Americans are at risk of outliving their retirement savings, according to a new survey.

Findings from the Fidelity Retirement Index issued Tuesday show that the typical American household is on track to replace approximately 59 percent of its projected pre-retirement income.

Since the index uses the median, or midpoint value from the findings, that means an equal number of respondents will do better or worse than 59 percent.

Fidelity recommends households be prepared to replace at least 85 percent of their pre-retirement income.

That means if a household earns $100,000 annually, it should be prepared to generate at least $85,000 a year during retirement.

Younger American workers aged 25 to 40 -- the least prepared age group in the survey -- are on track to replace about 55 percent of their pre-retirement earnings, the survey found.

Workers aged 41 to 54 are the best prepared and can expect to replace about 63 percent of their pre-retirement income, and those aged 55 and older trail slightly behind and are on track to replace about 62 percent.

"The harsh reality is that many Americans are woefully unprepared for retirement. They simply aren't saving anywhere near enough -- and many are not investing their retirement savings wisely," Fidelity Brokerage Company President Ellyn A. McColgan, told an audience at the National Press Club in Washington Tuesday

Bumping up personal savings
The Fidelity survey found that the typical American household has saved $18,750 for retirement and expects to cover the majority of retirement costs through Social Security and pension benefits.

But with rising retiree medical costs and longer anticipated life spans, Americans need to bump up their personal savings if they want to be ready for retirement, Fidelity said.

Some 16 percent of working Americans haven't even started saving for retirement, the survey found.

For those who have started saving, younger adults aged 25 to 40 typically put away $92 a month for retirement and have saved $9,000, while adults between the ages of 41 and 54 have saved more than $30,000. Their monthly contributions are double that of their younger counterparts at $187, according to the index.

Pre-retirees aged 55 and older typically have $60,000 in retirement savings and contribute $229 each month to that goal, according to the results of the survey.

McColgan also said companies need to play a larger role in demystifying the retirement planning process and encouraged retirement plan sponsors to provide education and guidance as well as automate enrollment process so workers can fully participate in company-sponsored plans.

More than 1,900 households with full-time workers above the age of 25 earning $20,000 or more a year were interviewed for the survey.

 

[Specop 007]

Originally posted by: smack Down
Personal accounts are just a scam to prop-up the stock market when rich bady boomers start to cash out. Where regular SS is a scam to give money to all bady boomers.

Well that about takes the cake for dumb post in this thread.

Yeah, the stock market is failing isnt it. It really needs to be propped up.

 

[Specop 007]

Originally posted by: techs
I have never heard it answered satisfactorily so here's your chance.
Even if it were possible to come up with the correct amount you will need per year of retirement (and that is really difficult because even a minute difference in a single assumption like inflation) how would you answer these questions:
How many years will you be retired?

No one can answer that, its a silly question. You might as well ask "When will you die" because its the same thing.

Do you plan on the average lifespan? Or do you need enough just in case you live longer than 99 percent of people, say 95 years old? The difference is like another 15 years.

You overplan. Be it in how much you want to have or how long you will live. Either way, you want a buffer "just in case"

How can you plan for this? At retirement do you take out only enough per month based on living til 80 or 95? It's a HUGE difference. Living to 95 would mean you would be retired for twice as long.

"Take out"? If you invest well and wisely, you shouldnt have to touch much of your base investments. Granted, it will vary by year and vary by lifestyle, but if your wise you dont need to touch your base investments. Essentially, live off the returns. For example, if you have $500,000 at retirement (Not an unreasonable goal for those sufficiently motivated) at a 10% return your getting 50k a year. In retirement you should easily be able to live on 50k a year *if* you planned wisely coming up to that point (retirement).

If people had individual retirement accounts wouldn't almost everyone need to save for an age of 95 or else there would be tens of millions of retired people who had no income?

No, see above. If you plan wisely you dont need to touch much of your base investments. Yes, you get a trickle from it and use larger portions when needed, but none the less.....

If you need to save enought to last til 95 wouldn't you need to put away a very large amount of money every year while your were working? Isn't it true that even the lower middle class would have to put so much money in they would essentially be living way below poverty and the current middle class would have to living in poverty?
And wouldn't everyone have to take out longterm disability insurance since SS wouldn't cover it?

Thats because people dont think of what their money is doing after they retire. Most people seem to think that when they retire then get all that money they saved in cash and shove it under the bed.
Not so. You can continue to invest that money as you see fit. Most will invest conservatively (Rightly so), but the point is if you retire with say $350,000 you dont just end up with $350,000 in cash, you end up with $350,000 in investments which is continuing to make money. Do people account for the return on their investments after they retire? No. Some of the more savvy people will actually have their retirement savings continue to increase even after they have quit working.

 

[CSMR]

Originally posted by: techs
I have never heard it answered satisfactorily so here's your chance.
Even if it were possible to come up with the correct amount you will need per year of retirement (and that is really difficult because even a minute difference in a single assumption like inflation)
How many years will you be retired?
Do you plan on the average lifespan? Or do you need enough just in case you live longer than 99 percent of people, say 95 years old?

I don't know much about the proposed legislation but you can certainly get round this ver easily.

For example invest money in a pension company who will pay you a certain amount each year - perhaps even inflation adjusted - until you die. The company then takes the risk of your living a long time. It is insurance againt living a long time effectively. There are such options for private pensions in the UK and probably everywhere. In fact it is completely normal. They can be and often are more complex than this.

So overplanning is not necessary. Which is good to know if you are poor.

 

[Engineer]

Originally posted by: Specop 007

Originally posted by: smack Down
Personal accounts are just a scam to prop-up the stock market when rich bady boomers start to cash out. Where regular SS is a scam to give money to all bady boomers.

Well that about takes the cake for dumb post in this thread.

Yeah, the stock market is failing isnt it. It really needs to be propped up.

Well, it isn't exactly booming...at least currently (6.5% below it's high which was 11,722 exactly 6 years and 1 day ago).

The market may indeed see trouble, as he indicated, as the boomers move their stock positions to a more guaranteed investment strategy. With billions of dollars under their belt (even if underfunded for retirement), the boomers could represent the biggest pullout of the market in years. Is it likely that they will pull it all out? Maybe not, but the possibility is there.

 

[techs]

Originally posted by: Specop 007

Originally posted by: techs
I have never heard it answered satisfactorily so here's your chance.
Even if it were possible to come up with the correct amount you will need per year of retirement (and that is really difficult because even a minute difference in a single assumption like inflation) how would you answer these questions:
How many years will you be retired?

No one can answer that, its a silly question. You might as well ask "When will you die" because its the same thing.

Do you plan on the average lifespan? Or do you need enough just in case you live longer than 99 percent of people, say 95 years old? The difference is like another 15 years.

You overplan. Be it in how much you want to have or how long you will live. Either way, you want a buffer "just in case"
So you plan a buffer to live to say 87? Then what if you live to 95?

How can you plan for this? At retirement do you take out only enough per month based on living til 80 or 95? It's a HUGE difference. Living to 95 would mean you would be retired for twice as long.

"Take out"? If you invest well and wisely, you shouldnt have to touch much of your base investments. Granted, it will vary by year and vary by lifestyle, but if your wise you dont need to touch your base investments. Essentially, live off the returns. For example, if you have $500,000 at retirement (Not an unreasonable goal for those sufficiently motivated) at a 10% return your getting 50k a year. In retirement you should easily be able to live on 50k a year *if* you planned wisely coming up to that point (retirement).
Wow. You don't know too much about this. No one can afford to put away enough to live on the interest and not use the principal. In 30 years your 50,000 would be worth what, say, 10,000 in todays dollars? Plus your 10 percent return on investment doesn't talk at all about years you earn little or no money on your investment. In fact if invest conservatively this year you would have gotten like 3.5 percent.
And all the while you keep talking about earning 10 percent interest. Laughable.
Anyway talking about todays dollars is not valid. You need to figure out based on a number of factors like inflation, return on investment, how much you put in each year. Its an amazingly complicated process. You would also have to future cast a large number of variables.
I have seen no one who can reasonably say how much to put away if your 25 now.
And I have never heard anyone talk about living on their interest alone. No one.

If people had individual retirement accounts wouldn't almost everyone need to save for an age of 95 or else there would be tens of millions of retired people who had no income?

No, see above. If you plan wisely you dont need to touch much of your base investments. Yes, you get a trickle from it and use larger portions when needed, but none the less.....
See above for the answer.

If you need to save enought to last til 95 wouldn't you need to put away a very large amount of money every year while your were working? Isn't it true that even the lower middle class would have to put so much money in they would essentially be living way below poverty and the current middle class would have to living in poverty?
And wouldn't everyone have to take out longterm disability insurance since SS wouldn't cover it?

Thats because people dont think of what their money is doing after they retire. Most people seem to think that when they retire then get all that money they saved in cash and shove it under the bed.
Not so. You can continue to invest that money as you see fit. Most will invest conservatively (Rightly so), but the point is if you retire with say $350,000 you dont just end up with $350,000 in cash, you end up with $350,000 in investments which is continuing to make money. Do people account for the return on their investments after they retire? No. Some of the more savvy people will actually have their retirement savings continue to increase even after they have quit working.
Actually you would need to withdraw your principal since it would be impossible to put away enough to live on your interest. Even if you did you would get increasingly less each year in interest adjusted for inflation. By that I mean, using your 10 percent figure, that ten years later the interest on 350,000 would have been eroded by inflation at 3 percent a year to half what it was when you started.

Lastly let me add this. In 1935 people would have been talking about having maybe 25,000 in their retirement account when they retired and would have said how can you not live on 2,500 a year? By throwing out a number that looks huge today it hides the real value of what you will have to live on.
And we still have my original question. Wouldn't you need to save enough money to live til your are 95? And if people didn't do that would't we have tens of millions of the oldest seniors with no income?

 

[Specop 007]

Your right techs, I dont know anything about it.

So I'll go ahead and make my plans and follow them, and you can just hope for the best. Good luck to you.

 

[techs]

Originally posted by: Specop 007
Your right techs, I dont know anything about it.

So I'll go ahead and make my plans and follow them, and you can just hope for the best. Good luck to you.

Thanks.
Let me summarize. I ask how you can plan your retirement based on an indeterminate number of years you will live and your answer is retirees will be so rich they can afford to live off their interest no matter how long they live.
Which is clearly nonsense and unsupported by any facts.

 

[Corn]

Originally posted by: techsWow. You don't know too much about this. No one can afford to put away enough to live on the interest and not use the principal. In 30 years your 50,000 would be worth what, say, 10,000 in todays dollars? Plus your 10 percent return on investment doesn't talk at all about years you earn little or no money on your investment. In fact if invest conservatively this year you would have gotten like 3.5 percent.
And all the while you keep talking about earning 10 percent interest. Laughable.

Hahaha! Laughable indeed!

I'm 40 years old. I started investing in my 401K at 22 years old and have put away the maximum allowed each and every year.

This year, my 401K earned my yearly salary * 2.5 (this does not include my wife's 401K either)

Granted when I retire I'll be a little more conservative in my investments, but the plan is to live solely off my interest income. I could retire reasonably comfortably now, but I'm expecting a new addition to my family (Corn Jr. is due in a couple weeks) so I plan to give another 10 years to employment before I retire.

Obviously as with anything in this life, there are no guarantees. But I spend 15 minutes a day working for my investments and this 15 minutes greatly increases my odds.

 

[MonkeyK]

Originally posted by: CSMRI don't know much about the proposed legislation but you can certainly get round this ver easily.

For example invest money in a pension company who will pay you a certain amount each year - perhaps even inflation adjusted - until you die. The company then takes the risk of your living a long time. It is insurance againt living a long time effectively. There are such options for private pensions in the UK and probably everywhere. In fact it is completely normal. They can be and often are more complex than this.

So overplanning is not necessary. Which is good to know if you are poor.

Your proposed solution (an annuity) sounds a lot like SS, just without the associated disability and survivor benefits...

And while it is true that you can add those benefits to an annuity (and probably should if you are counting on it for when you are no longer working for whatever reason), what do you think the effect will be on your return?

 

[MonkeyK]

Originally posted by: Corn

Originally posted by: techsWow. You don't know too much about this. No one can afford to put away enough to live on the interest and not use the principal. In 30 years your 50,000 would be worth what, say, 10,000 in todays dollars? Plus your 10 percent return on investment doesn't talk at all about years you earn little or no money on your investment. In fact if invest conservatively this year you would have gotten like 3.5 percent.
And all the while you keep talking about earning 10 percent interest. Laughable.

Hahaha! Laughable indeed!

I'm 40 years old. I started investing in my 401K at 22 years old and have put away the maximum allowed each and every year.

This year, my 401K earned my yearly salary * 2.5 (this does not include my wife's 401K either)

Granted when I retire I'll be a little more conservative in my investments, but the plan is to live solely off my interest income. I could retire reasonably comfortably now, but I'm expecting a new addition to my family (Corn Jr. is due in a couple weeks) so I plan to give another 10 years to employment before I retire.

Obviously as with anything in this life, there are no guarantees. But I spend 15 minutes a day working for my investments and this 15 minutes greatly increases my odds.

I applaud your financial acumen and hope that others may be inspired by it. However, I would rather not count on most doing as well as you.

 

[zendari]

Originally posted by: Engineer

Originally posted by: zendari
The same problems exist for Social Security. How many retirees can you expect in the year 2020? How are you expected to pay for those retirees? What if retirees live 10 years longer starting in 2010? How are you going to cover the budget crisis? If everyone lived to 95 the system wouldn't be able to fund all the retirees who are supposed to be dead according to budget. How are the poor who are paying 7.4% of income going to bear a 10% share of income in the future if people live too long?

If the same problem exists, as you suggest, for both types of accounts...why switch from one problem to another?

(other than just to take the money out of the politicans hands and place it into their rich buddies' on Wall Street pockets?)

1 "problem" gives people choice and freedom. 1 does not.

 

[Specop 007]

Originally posted by: techs

Originally posted by: Specop 007
Your right techs, I dont know anything about it.

So I'll go ahead and make my plans and follow them, and you can just hope for the best. Good luck to you.

Thanks.
Let me summarize. I ask how you can plan your retirement based on an indeterminate number of years you will live and your answer is retirees will be so rich they can afford to live off their interest no matter how long they live.
Which is clearly nonsense and unsupported by any facts.

I gave you an answer, which you turn around and say "But no one does that" "The numbers arent accurate" "factors may change"

Well let me address your points very bluntly.
No sh1t.
Its a gamble. You cant predict the future any better then I can. If we could we could figure what we need to the penny, but we cant. Now, since you wont accept the in place procedures for planning for the future, why should I bother debating it with you? But simply, you are right. No one knows what happens, which is why we estimate.

As for "living off the interest" that was a simplification. No, you dont strictly live off the interest, but the point is your retirement investments continue to provide a return, so to say when you retire what you have is what you get isnt entirely accurate.

 

[Engineer]

Originally posted by: MonkeyK


I applaud your financial acumen and hope that others may be inspired by it. However, I would rather not count on most doing as well as you.

I applaud his financial achievement also, but as you point out (as does the article I posted in the first 20 posts), most people just can't/won't do it.

With a negative savings rate in the US, I doubt that will change much in the short term either.

I've only been in 401k for 11 years now. I only wish that I could have been in it for 20 as those years between 85 and 95 were booming for market investors. I'm not doing badly, but I could have had so much more if I could have been investing during that timeframe.