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Reduce your spending and you'll need less to retire. Everyone likes to think that they're going to spend money like crazy once they're retired, but that is generally not the case. It is well documented that people spend less money once they retire, which makes perfect sense. A lot of the money people spend every year is a result of having to work in the first place.
There's the risk. The longer you wait to collect the chances of diminished loot in the box increases.Originally Posted by 20X11
If you're investing in a something that only pays interest, you'll likely never make it with interest rates these days. True investments will likely grow significantly over time. Mutual funds, etc.
Liberals never met a slippery slope they didn't grease.
-Me
I wish technology solved people issues. It seems to just reveal them.
-Also Me
This is very true.
My Mom is quite elderly. She spends very little money these days.
I think one of the key factors for a comfortable retirement is doing everything you can to have the house paid off and zero debt.
I also strongly agree with starting as young as possible. I had a few dollars in a savings account when I was 26 years old. That particular year, I had more income than I had planned for and was going to need to write a check to the IRS on April 15th. Instead, I took the money from my savings account and put it in an IRA. What started as $1500 in 1994 is now worth about $9000. I haven't added any money along the way and I haven't actively managed the Janus account where I stashed the money. If you do the math, I'm averaging about a 15.5% return over the last 22 years. The other thing is that the penalties for raiding a retirement account have kept me from spending the money on toys along the way.
I've also made a pretty decent return on different houses I've owned over the years. The key to making money in real estate is never having to sell except when YOU decide. I would've lost money on most of them at one point or another if I was forced to sell at an inopertune time.
Now... I just save as much as I can and hope for the best! Not counting on Social Security. Planning to downsize my house when I retire and buy whatever I can afford for cash with the equity from my existing house.
Last edited by NFATrustGuy; 02-21-2017 at 21:15.
No longer accepting new Trust clients. Pretty much out of the law business completely.
I LOVE talking about finances and generating income. I don't give financial advice, but I do love to motivate people and help them understand the reality of money compared to the way society fools us throughout life. With that said, I'll provide another little tidbit of encouragement.
A lot (most?) people are suckered into these dumb ideas that they need millions of dollars before they can comfortably retire. A LOT of that is because everyone thinks they should be spending ungodly amounts on education (college) for their kids. The other part is because people think that their level of spending will be the same when they retire as it is now. A financial adviser is likely to tell you that a safe withdraw rate to live off of your saved money is 4%. This isn't false, I'm just laying the ground work here. If you tell that to someone who is middle aged and has a family, they start adding up their current monthly expenses...
Mortgage: $2,000
Car loans: $1,000
Utilities: $200
Cable/Internet: $150
Family cell phone plan: $300
Groceries: $1,000
Day care: $1,500
Credit card debt: $500
Student loans: $500
Just that "basic" stuff already lands you at $7,150 a month.
To find out the amount you need to save in order to withdraw 4% to provide your current monthly expenses, you multiply your monthly expenses by 300.
$7,150 x 300 = $2,145,000
You explain that to someone who is 35 and above and only has maybe $100,000 in a 401k from having worked for 20 years already and they're likely to have a heart attack.
It would take over 21 years of making $100,000 a year at a 100% savings rate to make 2.145 million dollars. Most people in the US may not ever even make 2.1 million dollars in their lifetime, let alone have 2.1 million dollars just from the extra amount of money they've saved here and there over their working career.
Back to what NFA guy said. If you can manage to eliminate your consumer debt (credit cards, auto loans, student loans), and be mortgage free by the time you retire you'll be in good shape.
Let's go back to that over simplified list of monthly expenses I provided earlier. Now you're whatever retirement age (completely up to you) and your kids are grown and out of the house. You made some important life choices and made sure that you paid off your mortgage, car loans, and student loans. The kids are out of the house, they have their own cell phone plan, you aren't paying for day care, and are only feeding and heating two people. Now the list looks like this.
Mortgage: $0
Car loans: $0
Utilities: $200
Cable/Internet: $150
Family cell phone plan: $100
Groceries: $500
Day care: $0
Credit card debt: $0
Student loans: $0
Monthly - $950
$950 x 300 = $285,000
This example is simplified, but not at all extreme. Even if you're 50 right now, you can figure out a way to get your hands on $285,000. It might not be easy, or intuitive, or even fun, but you can do it. It gets easier to get to that number the younger you are when you start. If you can't, even a part time job will be able to tackle $950 a month.
The financial literacy of people (in this country and around the world) is very sad. Retirement hits some people like a freight train, and that's too bad because it's a train that everyone has had most of their lives to figure out a plan to step off the tracks before it arrived.
Last edited by Irving; 02-21-2017 at 21:54.
Thanks for that Irv, very encouraging!
I don't want to sound preachy here, but the other thing I see all the time is folks bitching about 'the man' keeping them down. A very VERY small percentage of the population retires comfortably just because they inherited sufficient wealth to do so. The vast majority of retirement success stories start with planning, hard work, sacrifice, delayed gratification, etc.
I get sick of listening to people who claim they don't make enough money to save for retirement and then in the next breath show me their boat, atv, pics from a week-long vacation, etc. They also spend big bucks on cell phones and cell phone plans, internet, satellite TV, new cars (usually leased) and so on.
Some of this is ignorance--which goes along with what Irving said, but much of it is greed and immaturity. Everybody thinks they *deserve* to live their version of the high life. They wanna keep up with the Joneses. What they don't know is that the Joneses are frequently flat-ass broke!
I end up listening to the Dave Ramsey show because it's on when I'm taking my evening shower. I like what he has to say for the most part, but even if you don't like him, the message from most any of these financial self-help gurus is similar:
1. Take responsibility for where you're at.
2. Commit to living on less than you earn
3. Figure out some way to make extra money to pay off your debt faster.
4. Save for retirement because you can't count on anyone else to do it for you.
Surrendering my soapbox now...
No longer accepting new Trust clients. Pretty much out of the law business completely.
It's often much easier to eliminate expenses (in the short term) than it is to make more money. Sometimes it takes a different frame of reference to tackle something that otherwise seems insurmountable.
*Assuming you (Hurley) were being serious and not sarcastic.
To add to that, while Dave Ramsey has a good thing going, him and Suze Orman are for beginners. They aren't wrong at all, but people can get out of debt and progress in life MUCH faster. National voices like theirs have to tailor to their audience who are almost completely financially illiterate and would immediately change the channel if someone dared suggest saving 20% of their savings, let alone 50%+.
One of the biggest obstacles for getting people to understand how to manage money is that people assume that if they lower their expenses, even to spend below what they make!, that their standard of living will drop off the map. I've personally done it and can tell you that is the completely opposite of the truth. I think Dave Ramsey has some plan called the Seven Steps or something and that is a pretty good thing to dive into.
On a side note, as many of you know, I drive around a significant portion of the day. I usually spend that time listening to (or reading when I'm parked) different personal finance resources. There is a LOT out there and a lot of it will blow your mind. If anyone is interested in something, but doesn't know where to start, let me know and I'll find some where to point you that may be a good fit.
The three things that people talk most about are stocks/investing, real estate, and entrepreneurship. Just framed in that context, one might think to themselves, "The stock market terrifies me, I don't want to be a landlord, and I'm not some 19 year-old programming genius, so what exists out there to improve my situation that fits ME?!" I'm here to tell you that there is something that will interest you, no matter who you are. In addition, you have to know that stocks/investing doesn't mean you have to be a shark day trader, real estate doesn't mean you have to take calls about clogged toilets at 2am, or even have tenants, and being an entrepreneur doesn't mean you have to come up with a new idea.
Oh no, not sarcastic at all.It's often much easier to eliminate expenses (in the short term) than it is to make more money. Sometimes it takes a different frame of reference to tackle something that otherwise seems insurmountable.
*Assuming you (Hurley) were being serious and not sarcastic.
We made a very tough decision about a year ago, to have the wife stay at home with the boys. Between both of us commuting across town, and paying for daycare, along with my ever changing schedule due to the new job, it just made more sense.
We did lose some money, and have had to endure some financial stress living on one income, but in the long run I feel it's going to be for the best.
With my salary comes a pretty decent retirement, so your post was quite encouraging, as I haven't had much room to think about retirement.
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