NYT: Our Ridiculous Approach to Retirement

[jannyk]

Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts. The specter of downward mobility in retirement is a looming reality for both middle- and higher-income workers. Almost half of middle-class workers, 49 percent, will be poor or near poor in retirement, living on a food budget of about $5 a day.

To maintain living standards into old age we need roughly 20 times our annual income in financial wealth. If you earn $100,000 at retirement, you need about $2 million beyond what you will receive from Social Security. If you have an income-producing partner and a paid-off house, you need less. This number is startling in light of the stone-cold fact that most people aged 50 to 64 have nothing or next to nothing in retirement accounts and thus will rely solely on Social Security.

If we manage to accept that our investments will likely not be enough, we usually enter another fantasy world — that of working longer. After all, people hear that 70 is the new 50, and a recent report from Boston College says that if people work until age 70, they will most likely have enough to retire on. Unfortunately, this ignores the reality that unemployment rates for those over 50 are increasing faster than for any other group and that displaced older workers face a higher risk of long-term unemployment than their younger counterparts. If those workers ever do get re-hired, it’s not without taking at least a 25 percent wage cut.

It is now more than 30 years since the 401(k)/Individual Retirement Account model appeared on the scene. This do-it-yourself pension system has failed. It has failed because it expects individuals without investment expertise to reap the same results as professional investors and money managers. What results would you expect if you were asked to pull your own teeth or do your own electrical wiring?

http://www.nytimes.com/2012/07/22/opinion/sunday/our-ridiculous-approach-to-retirement.html

[riverbendviewgal]

1. amen

and let me tell you that those "advisors" are not thinking of their clients but of their own profits. I KNOW...as a widow.

Most people are not informed or luckily like me get informed later..

[Fresh_Start]

2. the fallacy was that it was intended to make workers have a better retirement

the truth was it was a method for wall street to get a bigger cut of the workers incomes while providing no benefits whatsoever

[dkf]

3. Or maybe the problem is that we have no respect for savers and investors.

If you don't believe in corporate profits then there is no point in investing and then there is no way to retire.

That is the reality.

[The Magistrate]

7. The Technical Term For That, Ma'am, Is Bullshit

The fact of the matter is that people who work for wages are not paid enough to be able live the life they expect as Americans, and put aside substantial savings as well.

[dkf]

10. That is the attitude that sets people up for a very difficult future.

I hope you were smarter than that in real life.

[The Magistrate]

11. No, Ma'am, That Is A Cold Fact Of Life For Working People

People are not paid enough; too great a portion of the value created by labor is siphoned off to those possessed of capital. There is nothing wrong with our economy and society that would not be cured, and damned quickly, by paying working people considerably more money, more of the value they themselves, and no one else, create.

"Romney loves America like a tick loves a dog."

[cbrer]

13. Cold hard facts

Or any fact for that matter, are wonderful in their self reinforcement and self evidence.

Love your tag line.

[The Magistrate]

14. Thank You, Sir

The sort of attitude expressed above just gets right up my left nostril....

[myrna minx]

4. K&R

[hollysmom]

5. this is a good, but not perfect article.

I posted that very article on another board yesterday. It is good for putting the fear of god in people. Not one of my friends saved enough money in their retirement and/or savings for the future, which is why I have no one to travel with in retirement, my friend are broke if not barely making it. I don't think one of them had 100K in their account which is why one 79 year old friend works to this day, and she is lucky she can find a job/. Others are looking for jobs but can not get hired.

I agree that 401K management sucks. Although I do believe the amount they say you need to retire on is usually about half what they say unless you are seriously ill when you retire. Or it could be that I am thrifty (cheap). The management fees are overblown for very little work and the administrators have no vested interest in the investments doing well, with smaller company usually the exception because you can reach the president and complain. plan managers will stick people in losing funds for kick backs and other people try and rob their companies 401K by not paying out on requests, the government is slow to respond and these people get away with it for years. (had a friend with that problem, she only got that money back because she got so poor she qualified for free legal aid and they sued the company in court. )

The laws have changed over the years, like a company can not invest 100% in their own stock, like when Color Tile went into bankruptcy and all the employee stock was invested in Color Tile and they lost everything.

[magical thyme]

8. it doesn't matter how thrifty you are, or how much you set aside

if your industry crashes out from under you when you are pushing 50, you will likely end up forced to live on your retirement savings long before you reach retirement age.

I was on track for a decent retirement according to all the articles. I didn't cause the high tech crash or 9/11, but those 2 in a row ended my career when I was just about to turn 50. I've been more out of than in employment since. My entire savings is blown, I've taken on student loan debt to retrain for healthcare, which supposedly was growing, but isn't.

The good news is I still own my house outright. And I'm healthy so far. My food budget already is $5/day, except on the very rare days I allow myself to eat lunch in the hospital cafeteria. And I'm able to grow most of my fruits and veggies.

[hollysmom]

9. bad things happen to good people

no rule is set in cement.
Owning the house free and clear was a big help for future expenses. Most of the people I know with financial problems after being laid off have taken equity loans on their house for college tuition for their children or just for luxuries they wanted.

Saving is not the answer to everything, but it sure helps over no savings.

I wish you luck, how nice about growing your own fruit - my nephew is starting a homegrown food trading site. Like he makes jam and trades for corn. Of you are interested, you can check it out on http://www.chowswap.org/. right now there are only entries in Portland, ore but if more people use it and tell their friends, it could grow to other areas. NOTE: this is not a profit making site, he created it for his convenience, no ads or selling of information.

[freethought]

6. The recession and sluggish recovery has only made it worse

Your unemployment runs out. You can't find a job and may be among those who have been unemployed long-term, more than 2 years. How do you keep yourself afloat. You cash in the 401K despite the penalties that are taken out in taxes.

I'm sure millions have done this. The only hope is that they can get work and start over again. What other options are there?

[LeagueShadows24]

12. education and responsibility

We need to educate people on how to save for retirement and the basics of investing. People need to take responsibility. The more we try to do it for people, the more we move toward a country where people don't develop personal responsibility.