The retirement crisis is bad for everyone, especially these people

[Yo_Mama_Been_Loggin]

The country is facing a retirement crisis, but some Americans are worse off than others.

Workers in the top 20% of earnings distributions have half of all retirement wealth in both 1992 and 2010, compared with the bottom group, which saw its share fall from 3% to 1% between those years, a recent analysis at The New School’s Schwartz Center for Economic Policy Analysis (SCEPA) found. The share of workers in the bottom fifth of the earnings distribution with no retirement savings jumped from 45% to 51% in those 18 years.

The study looked at employees between 51 and 61 years old in 1992 and 51 to 56 years old in 2010 and divided their earnings based on lifetime labor market earnings, taking into consideration individual retirement accounts and employer-sponsored plans (like 401k plans). Survey findings were also matched with tax records and plan summary descriptions.



The findings reveal Americans, especially lower-income workers, nearing retirement are in dangerous territory. But some individuals within all types of lifetime earnings rates — high and low — are in trouble. In both 1992 and 2010, the top 10% of savers in each earnings distribution quintile had between 10 and 20 times as much in retirement assets as those in the bottom 10% of their groups. In the lower three quintiles of workers, the bottom 10% of each had nothing at all saved.

“Unlike income inequality which is distorted by skyrocketing incomes for the 1%, inequality in retirement wealth reflects the bottom falling out for low and moderate earners,” said Teresa Ghilarducci, director of SCEPA’s Retirement Equity Lab, and a co-author of the study.

https://www.msn.com/en-us/money/retirement/the-retirement-crisis-is-bad-for-everyone-especially-these-people/ar-BBVSsDs?li=BBnb7Kz

[msongs]

1. low interest rates are disaster for people with retirment savings nt

[customerserviceguy]

2. But

low interest rates go hand in hand with low inflation rates.

The best thing to do is to save as much as you possibly can, and stay out of risky stuff. Make your monthly savings your increase in your retirement account, and you won't get burned. I used a money market fund paying squat during my last job, but I never lost money any month.

In the winter of 2018, when I rolled it out of my 401K and into an IRA, I used a "retirement 2020" fund that was invested mostly in bonds, and I lost $1.5K of my money, more than what I put into it every month! The stock market is for suckers.

[A HERETIC I AM]

4. I would be very interested to look at that fund.

Do you by any chance have the 5 letter "ticker"? It will end in the letter "X". Or even just the name and fund family.

[customerserviceguy]

6. Can't find it right now

but it was at Vanguard. Maybe I got in at the wrong time, and out at the wrong time, but I'm done with risk.

Edited to say, I found it, it was VTWNX.

[A HERETIC I AM]

8. How familiar are you with that Mutual Fund?

I realize it's late and we probably won't be able to have a conversation about this (or maybe we will) but I am really curious how famliar you are with this type of fund, why you chose it, who recommended it and why did you get out so quick?

VTWNX is what is known as a "Fund of Funds" meaning that the positions the mutual fund holds are other mutual funds. Since it is a Vanguard product, all the funds in the portfolio are other Vanguard funds.

Target Date funds like this one are specifically designed, as is stated in their prospectus, to evolve toward more fixed income holdings as the target date nears. Currently the largest position (almost 32% of the entire portfolio) is with Vanguards Vanguard Total Stock Market Index fund (VTSMX) which is 98% large US Based corporations.

Here is the Morningstar report on VTWNX.

Maybe I got in at the wrong time, and out at the wrong time,

I'm sorry to say, but based on their total returns for the last ten years, that is without a doubt the case. You got in, it went down and you panicked.

You have my sympathies, but if you had just sat still, you would be up somewhere between 6 and 8% on your initial investment.

[customerserviceguy]

10. I figured

it would be safe for someone targeting retirement in only two years. Yes, I was already retired at the time, but I figured it would be safe.

Yes, staying in would have paid off. I had no idea of that at the time I bailed. But, you cannot buy the past.

I'm done with risk. Period.

[Igel]

5. My father died thinking as you did.

The stock and bond market was for suckers.

On the other hand, for 25 years he benefited nicely from it, locking in high rates in the '80s that caused his lump-sum distribution to skyrocket before early redemptions reduced his annual net interest amount. What killed his IRA was an unscrupulous trader who decided to ignore written instructions in favor of churning for the sales commissions.

My father's IRA was formally closed late last year after my mother's estate was close to settling. I rather hope that it happened after the stock market mini-crash. Stocks weren't sold; they merely moved from IRA-status to taxable privately-held status.

[customerserviceguy]

7. Well, if you're in at the right time, and out at the right time

it can work for a person. I have lousy timing luck, the only time I owned a home was one I bought in 1979, before things came crashing down. My ex ended up with the place when we split up in 1984, the place was worth about what the mortgage was, so I walked away from it.

[A HERETIC I AM]

9. Wait.....what?

My father's IRA was formally closed late last year after my mother's estate was close to settling. I rather hope that it happened after the stock market mini-crash. Stocks weren't sold; they merely moved from IRA-status to taxable privately-held status.

By what mechanism did this happen? And what do you mean by "taxable privately-held status." since the IRA was privately held in the first place?

Did he surrender the assets out of the IRA and move the holdings in-kind to a regular investment account? If that happened, I'm curious why (of course, it is none of my business and you are quite free to tell me to fuck off) as it would incur a rather substantial tax hit for one single year.

[jxla]

3. Sources

https://www.economicpolicyresearch.org/insights-blog/the-persistence-of-extreme-retirement-inequality

https://www.economicpolicyresearch.org/images/docs/research/retirement_security/Ret_inequality_policy_note_FINAL.pdf