The typical American couple has only $5,000 saved for retirement

[RKP5637]

http://www.marketwatch.com/story/the-typical-american-couple-has-only-5000-saved-for-retirement-2016-04-28

When American companies began switching from traditional pensions to self-directed 401(k)-like plans in the 1980s and 1990s, it was supposed to lead to a golden age of retirement security. No longer would workers be at the mercy of the company’s generosity or of Social Security’s solvency; workers themselves would be responsible for saving enough for a comfortable retirement.

Some 30 years later, the results are in: The median working-age couple has saved only $5,000 for their retirement, according to an analysis of the Federal Reserve’s 2013 Survey of Consumer Finances by economist Monique Morrissey of the Economic Policy Institute.

Even as the traditional company-funded pension has nearly disappeared and even as Social Security benefits are being slowly eroded, most workers haven’t saved enough to offset those losses to their retirement income. Seventy percent of couples have less than $50,000 saved.

It turns out that giving a tax break to middle-class Americans doesn’t do much to increase their retirement savings. Why not? Because their basic living expenses consume most of what they make each month, so they have little left over. Account balances suffered in the Great Recession because the stock market crashed and many people who lost jobs raided their 401(k) to pay the rent and buy the groceries.

[4dsc]

1. 35+ years of failed conservative economics

and yet the average Democratic PArty member cannot bring him/herself to making that a focal point in their campaign.

[yeoman6987]

18. But the numbers are all over the place

A few weeks ago it was 140,000 and now 5,000. 5,000 seems awfully low.

[Hoppy]

34. Fuck. I ain't even got that.

[ananda]

42. I think this represents the great majority ..

.. of those not in the top 10%.

[Hortensis]

55. It obviously includes all ages, and population

growth means many are young. Aren't millennials now supposed to be as numerous as boomers, or larger?

Where it is spot on is all those who had been saving for retirement before and had to stop because they needed all their income just to meet their living expenses. Also all those whose rate of saving never increased with raises that never happened and those who never "moved up" to more expensive homes-as-retirement-investments.

Then there are those whose saving is delayed because getting their first good-paying job was delayed by recession and/or they're paying off debts, large among those student loans.

Oh, and let's not forget the incredibly low rate of return on savings accounts that makes accumulating money to invest that way a losing proposition.

[mike_c]

130. the article says "the median aged working couple...."

The meaning of that phrase is clear: it means the age at which half of all working couples are younger and the other half is older.

Unfortunately, I don't think that's what the author meant to say-- I think he/she meant "the median couple of working age," which is something different. The latter phrase means that half of all couples of working age have $5,000 or less in retirement savings, not that a couple of median working age is likely to have only $5,000 or less saved for retirement. The first phrase, as written, focuses on the age of couples with insufficient retirement savings. The second emphasizes the number of couples having insufficient savings, a far more meaningful statistic. Journalists often misuse terms like median, mean, etc.

[Rex]

71. Where did someone say 140k?

I'd like to see that.

[snot]

143. I've never before seen/heard any number anywhere near $140,000.

[Wednesdays]

152. Links?

[Demonaut]

2. I've raided mine multiple time, where does the 10% penalty go?

[RKP5637]

4. Good question! n/t

[Yupster]

76. To the US treasury

I guess you could say you're helping to reduce the deficit.

[RKP5637]

77. Thanks! n/t

[puffy socks]

135. To fund Benghazi hearings.

[Adrahil]

3. I actually like my 401K, but...

Many folks will not save unless they are forced to, or it is done in such a way as they din't see it as savings. My sister has SQUAT saved up. Yet last year she and her hubby decided they just HAD to have a big ole Harley to ride in the weekends. Mso into debt they go! Great Choice!

[Orrex]

8. I'm sure that's true, but...

broadly speaking, uncontrolled luxury spending is not the problem.

The overwhelming majority of people struggle with month-to-month expenses and simply don't have the resources to set aside a useful sum each month.

And when the do manage to save a little, their furnace will give out, or their transmission will blow, or a million other crises completely out of the individual's control will wipe them out all over again.

[Adrahil]

13. I hear ya....

I only had my own experience to go by. Growing up, my parents were terrible with money. We weren't poor, but we never saved, and any disposable income was spent frivolously. And when that emergency expense came, there was no money for it. I rejected that paradigm (though it is surpisingly hard), but my sister has broadly embraced it.

Now I know that there are those folks who literally have no disposable income. But even if they have pensions that they never directly fund, that money is essentially forcibly saved FOR them, if you get my meaning.

So, 401Ks work for me, but I think they don't for many, many people.

[Orrex]

35. Yeah, that's about the size of it.

A few years back we lucked into a once-in-a-lifetime windfall that lifted us out of an otherwise inescapable cycle of deepening poverty, and we've been doing better and better since then. But it took that boost to get us going, or else we'd still be there (or worse).

We're conscious of our good fortune literally every day, realizing that few people are so fortunate.

[still_one]

25. That is the problem. Some really cannot afford it. However, if someone saved 100/month in an IRA or

401K plan, due to the magic of compounding, after 40 years, that 1200/year investment would grow to 250K to 350K or more depending on where the money was invested.

The advantage of the tax deferred savings is that it will have minimal impact on their take home pay, because that money isn't taxed against them until they withdraw.

The problem of course is those who for one reason or another didn't start saving soon enough, or save at all.

There could be very good reasons for it. Unforeseen expenses, such as medical expenses, or other emergency situations which prevented any savings from occurring.

That is why the ACA was important. While it is far from ideal, compared to what was there before, it at least removes one hurdle

As you pointed out in your first sentence, many folks will not save unless forced to. They have never been educated on basic financial matters, and that is a real issue.

To address social security running out of funds, increasing the CAP would solve that, but that would take an act of Congress.

[Adrahil]

28. I completely agree. +1. NT

[Yupster]

78. Some people can't to be sure, but

most people wouldn't miss $ 50 per month which most employers will match.

[Drahthaardogs]

107. How can you tell someone to save when they cannot meet daily expenses?

And I am not speaking for myself. I am actually one of the 10%-ers but I started young, had a good job, and I lived below my means. However, good jobs are hard to find and young people today are really hard pressed to save. I really feel sorry for the youth of today.

[1939]

117. Long before 401-K

In my early twenties, I made the decision that every raise I got (longevity increase, cost of living increase, and promotion) that i would add half of the increase to my monthly savings. I didn't get discouraged through market swings (especially the dismal 1970s), I just kept investing. Sure, my net worth plummeted in 2008, but i just let it ride and it came back better than ever. You do better on dividends than you do on interest and you get favorable tax treatment now.

[snot]

144. I took full advantage of 401(k)'s when available –

but with some employers, they weren't offered; and when they were, the investment options were lacklustre and fees high. Fortunately, I also saved what I could in IRA's and otherwise – but then 1/4 of my savings vanished in the 2008 crash, and my spouse was disabled; so we are struggling to get by.

I was glad to see recently that people have started filing lawsuits over how crummy many 401(k) plans were. But that, as too often, is closing the barn door late.

[still_one]

146. I am very sorry what happened to you, and as I mentioned, there are people who cannot

do it because of unforeseen circumstances. That is why healthcare for everyone is vital, and the ACA was a step in the right direction, but even with that, as in your case, things still can fall apart, which is why more has to be done to cover those situations, for those that fall between the cracks.

A lot of 401Ks that were offered had outrageously high management fees, some as high as 2%. I know people who worked for United Airlines all their lives, and essentially lost their pension, and at their age they couldn't start over.

Problem with lawsuits is they usually take years, and while they can sometimes recover something, it usually isn't a 100%.

[snot]

159. Agreed, thx.

[GulfCoast66]

145. I see that as well

But many, many people have no prospect of earning more than 15$ an hour. You can not save for a retirement on that.

Which is why we need greatly increased SS payments.

[taught_me_patience]

5. We have a consumer driven society and most waste too much money

I mostly blame people for their poor saving habits. Here is a good example... Americans spend more on eating out than on groceries:

[seabeckind]

7. Yeah, blame the people.

Too bad the graph doesn't show the effect of multiple jobs, multiple wage earners,

and time available to prepare meals.

[LoverOfLiberty]

46. There are plenty of families where both parents work

and prepare meals. Heck, if you do the majority of it during a day off it takes much less time after working all day.

I don't disagree that it is very difficult for some families, but that graph is not explained because families have no time to prepare meals.

[seabeckind]

51. Can't argue with that logic.

Like I said, blame the victim. It's all their fault for not taking some personal responsibility.

By gosh, if they didn't spend so much time sleeping they could easily prepare the meals.

[LoverOfLiberty]

57. I know plenty of "victims"

who haven't saved a dime but eat out all the time, have the latest cell phones and flat screen TVs and complain about how its impossible to save.

Look, I don't disagree with you that there are people in this country who face these problems. But to suggest that people chose to spend money at restaurants instead of cooking at home because they have not time to prepare meals is an excuse. People chose to spend more money for luxury or convenience, and that is their right. But I'm going to point it out and say that they have chosen not to save money.

And for context, I get up at 3am Mon-Fri and get home at 4pm and still make dinner for my family every night.

[seabeckind]

58. Oh, I'm sure you do.

The victims I know don't have those things.

Breaking news.... flat screen tvs are cheap. Very, very cheap.

The old ones are even cheaper at goodwill.

[LoverOfLiberty]

94. You've insinuated I've not told the truth

I have not motivation to lie to you or anyone else on the Internet.

Good day.

[seabeckind]

96. I did nothing of the sort.

Take the chip off your shoulder.

I don't believe you have experienced a wide encounter with much of the public.

[LongtimeAZDem]

64. +1 (nt)

[Skittles]

137. we are not allowed to talk about those people here

[taught_me_patience]

114. Many times the victim needs to be blamed

I owed a business where my employees made $15-20 per hour. Every single one of them had a macbook, yet I was able to run my entire business on a $100 chromebook. Most ate out multiple times a week. All had the new Iphone or Galaxy, where a $200 phone would be completely adequate for their purposes. My restaurant example is the best example of money wasting, though, because there is a significantly cheaper and more healthy alternative... it just takes a little more work. When I was young and working 70hr/week, I'd often make dinner of a high fiber tortilla, scrambled egg, fat free cheese, and salsa + microwaved broccoli. About $2 and took 5 min to make. It was part of the reason I as able to save 150k to start a business in my early 30's. Too many make excuses instead of changes in their lives.

[bhikkhu]

155. To some extent, but then if everybody did the same...

the same as me, at least, all the nations restaurants would fold up, the cable companies would shut down, the automakers would go under, the clothing retailers and appliance companies would soon follow, along with the cell phone makers, all the beverage companies, book and magazine publishers, convenience stores, and so on and so forth. Having been raised to be frugal (and having an income most of my young life that required it), the list of things that I don't buy new or don't buy at all is very long.

I could criticize people for not saving as much as I do, but if I were the norm it would be a very different economy we lived in.

[Squinch]

115. That is the case for some people, even many,but we are a society in which many of the members think

that luxuries are necessities.

Cars are huge, which means gas bills and repair bills are huge, and the average household owns more cars than the previous generation did. By and large we own a lot more clothing than the last generation. $500 purses and shoes are everywhere. The average new house size has tripled, and now we think that every offspring needs to have his or her own room. The size of engagement rings has tripled in the last generation. Many people spend $400-$500 for a new phone and even more for a new laptop every second year. Private college enrollment has gone way up, along with the costs for those private colleges. I could go on forever with more areas where we think we NEED something that was never needed before.

I am not talking about poor people who really cannot save, and there are plenty of them, and we do need to address their needs.

But there is a segment in the middle of the economic scale of whom many members are kidding themselves, and who absolutely suck at managing money. When you are in that middle level, saving for retirement is often considered to be an "I'll get to it when I get to it" expense. Fact is, the retirement should be funded before any of the things above.

NOTE: Please don't flame me for blaming the victim, because that's not what I am doing.

[seabeckind]

122. I think that too often people make judgments about other people

that are based upon a very small sampling. Very small. They see very little of America outside their immediate domain.

The average age of cars on the road is 11.4 years. That's the average. My newest car is 19 years old.

The median family income in the USA is just under $52k, statistically the same as 2014, but in 2013 the median was 8% lower than in 2007. (wiki)

Just under 20% of the families in the USA are under the poverty level.

One out of 4 households don't have internet access.

The average cost of center daycare is $972 a month.

Yes, I agree, there are people who have caused their own plight. But there are many, many more who are victims of the economic inequality in this country thru absolutely no fault of their own. They aren't obsessed with keeping up with the Joneses, they are struggling to survive.

(added) The media shows pictures of the people lined up to get the newest iPhone but they never show the people who are using a 10 yo flip phone. My phone is 5 years old and I needed more capability for my work. My wife's is 10 years old.

I'll repost this picture from below:

[Squinch]

125. And there is nothing in your post that disagrees with anything I have said.

[seabeckind]

127. I wasn't disagreeing with you.

Just pointing out that the situation is much more complex.

The social security system was set up at a time when people were in much the same position we are today. They had no savings because they were spending so much to survive. Sure, there were some who ahead but they were the exception, not the rule.

We are well past the time to start looking for solutions. And implementing them.

[Squinch]

131. No. The situation that I described for the segment of our society I was describing is not complex.

I am not talking about the people who are spending all their money to survive. As I clearly stated.

[shopgirl]

138. Couldn't Agree More

I have been incredibly lucky. I work part-time and don't make much money, but my husband has done very well financially and I have been the beneficiary of that. He also believes that he has been lucky. He works in high tech sales. He is under a lot of pressure, and he puts in long hours. Still, both of us realize that there are a lot of people who work difficult jobs, often very physical jobs, for a lot less money.

I, too, know people who live beyond their means. People who make poor decisions. And, truth be told, one of the reasons that my husband and I have been able to save to the degree that we have, is because we have always lived way below our means. Even now, we eat out infrequently, we always buy on sale, etc. I guess it's a reaction to when we were first married and had nothing.

But to some degree, I think that is all beside the point. The only reason we have been able to save is because we have had a high income. I think it is disingenuous to suggest that if only people give up their cell phone or internet connection, they, too, could save a lot of money. I think that's insulting to people who are working hard just to survive. I guess what I'm saying is that it takes a lot of income to save the kind of money that financial advisors say is necessary to have a secure retirement. I can understand why someone would feel like they can't possibly save enough so why not enjoy the little luxuries in life. Never mind those who have medical bills, a spouse who can't work anymore or any of the other life events that can upend those who thought they planned for everything.

We do not have children, so that has allowed us to save even more. I have so many friends and family members with kids, and it is very difficult for them to save in any meaningful way.

It's just too easy to blame people when the deck is stacked against them.

[ChisolmTrailDem]

72. By the time you factor in all the costs that go into preparing meals at home, it's probably...

...just as practical to go out and eat.

Personal cost factors that go into preparing a meal at home:

• Time
• Cost of fuel (and wear/tear on vehicle)
• Cost of groceries (have you seen grocery prices lately?)
• Cost of water to prepare meal
• Cost of electricity/fuel to cook meal
• Cost of water and electricity to clean up after meal (unless hand cleaned, then just water)
• Did I say time?

Versus just going and buying your groceries at a local restaurant where all these costs are also factored in but where you spend considerably less of your time in order to eat. And, it's very convenient.

Personally, I think I have a good mix of both preparing meals at home and going out for eats.

[SheilaT]

92. Time, yes. But the other costs

still are much lower than most eating out.

[forthemiddle]

102. Although I don't recommend them for every meal

You can not tell me that a Stouffers dinner is more expensive than a restaurant meal. They don't require any of the elements (besides electricity for the microwave) and are available at every store.
As I said, not the optimal dinner, but if you do the lean cuisines, or equivalent they are relatively cheap and healthy. They also take no time at all.

Bags of frozen veggies are almost always less than $2.00 a bag, for multiple servings. Pasta is cheap, buy chicken on sale, and you are set. None of that takes a huge amount of time, and are healthier than McDonalds.

[Travis_0004]

104. Cost of water?

Are you filling up a swimming pool when you cook?

People are free to do what they want, I dont really care.

In less than 90 minutes I make a weeks worth of lunches and a few dinners, cost is probably 3-4 bucks a meal, and that is for chicken, porkchops, rice, some mixed vegetables and peppers. Im not sure where you can get a healthy meal for under 4 bucks.

[ChisolmTrailDem]

108. What is the purpose of this:

"Are you filling up a swimming pool when you cook?"

[Travis_0004]

119. I dont think water is a significant cost when cooking.

[mythology]

141. I can cook enough for 2 to 5 meals in 30 minutes or less

Buying a packaged salad takes less than 5 minutes to prep with adding some raw carrots, cheese, etc.

Making a menu based on the sales to save money isn't hard, and cooking double so you can freeze some doesn't really add much extra time.

Eating out is an enormous cost. There is no evidence that it saves money to eat out.

[RazBerryBeret]

79. As a working Mom with 2 teenage sons

It is more healthy to cook at home which I do 5 nights a week but it's not always cheaper. I swear there are decent restaurant choices that are actually cheaper than stopping to buy groceries for 4 people.

[tavernier]

142. Amen.

And often you can get a second meal out of a generous restaurant choice.

[SheilaT]

91. We need a third line showing population growth over that time period.

Did people start spending more per capita on groceries? On restaurants? Or did it stay about the same. Without taking population increase into account, that chart only shows that people are spending just about as much at restaurants and bars as at grocery stores. Interesting, but not the whole picture.

What do those lines look like at different income levels? Or different part of the country. Every time I read about people who live in NYC it appears that a significant percentage of them never cook. They'll use their oven to store sweaters, and never turn it on.

There are going to be rural areas where people almost never eat out. And so on.

[MissB]

110. We save a ton.

I've stated this so many times before. DH and I are both engineers. His degrees were paid for; I took out student loans for mine. He bought a house not long after graduation (for the low price of $56k in Portland, Oregon.)

We've both worked for single employers for our careers. I have a pension; his company switched to a 401k over 25 years ago. He's always put away the max in the 401k. With market fluctuations, we tend to lose YEARS of contributions depending on how far the market drops. The gains are better than that. I contribute separately to a 457. Our kids have 529s.

We sold our original house and bought another one in Portland in a much better district. The house is nearly paid off. We have no car payments.

Know what? We are freaking lucky. And privileged. Our kids are healthy, we are healthy, we've never had a job loss or a reduction of income (except when I stepped out to raise the kids for a few years.)

I call it less hard work and more blind luck. It doesn't take a lot of effort (once the degrees are earned) to set aside the maximum pretax when you are working in a good paying field. Buying/selling a house at the right time is also damned lucky (that $56k house would sell for over $800k now; our current property would go for much more than that.) It is a privileged position to be in. I can't frugal my way to a better financial state- I started in a good financial state and added a dash of frugality.

Kids these days spend $25k-$30k a year for a typical state university. That's a six figure education. How much of a hole do kids start out in nowadays? Luckily for them, they can only borrow a total of $27k total for undergrad through the federal gov.

[SomethingFishy]

118. That's not really a good example as BARS are included.

You posted total sales of groceries against total sales of food and liquor. You want to see a more accurate chart, include retail liquor stores in the "grocery" line and see what happens.

[seabeckind]

6. The 401k idea was pure thievery in a couple ways.

First of all it provided corporations with the means to deny any loyalty to the workers who worked to build the company, to make it what it was.

They could just turn their backs and walk away. No pension liability at all. Close the factory and off to cheap labor. Even better when that labor didn't require SS investments, health insurance, or any other of those pesky regulatory limitations under the good ole American flag.

Combine that with the big merger and acquisition strategy of asset harvesting and it was a windfall for the investment class.

Which brings me to the second benefit: it provided a wonderful source of money for the Wall Street engines.

Not only does the company no longer have to invest in their workers, they can use those worker's deferred income to make even more money.

Win, win all around.

The shyster who came up with the idea was a nefarious genius.

[RKP5637]

9. It was a shyster move, but yet many tout it as great. It's a feeding tray right into wall street.

The first one I was in when it first started was loved by the company I worked for, well, the CEO. The CEO was buddies with the investment company we were all forced to invest in. The funds were horrible. The CEOs loved it.

At another company the fund selection was picked by juveniles in the company because they thought the guy promoting the investment firm was cute. They were horrible funds. Finally that got resolved.

Also, I don't know how it is now, but one was locked into funds for at least a month, no changes and minimal selections. The only fund I was ever able to get into that was decent was an Index 500 Fund.

I was really fed up with being forced often into crap investment companies. Maybe that has now changed, no idea.

[taught_me_patience]

12. You realize that wall street makes more on pension fees right?

You need a pension administrator (fees) that invest money into the same funds we do (same fees). Most 401ks have very low load index funds to invest in.

[seabeckind]

15. My gosh, that changes everything!

The only thing missing from your argument is the thing about how the guy with $5000 in his 401 is making soooo much money from the bloated stock market so he should be thrilled that some hedge fund guy is making $5B a year.

And gee, he's saving so much in fees.

[Adrahil]

17. A lot of people do NOT relaize that.

pernsions still invest, but a lot of folks don't realize the huge hit they are taking of pension managemetn fees because most never see that. The actual returns on pension investements are often pretty low, but since it's an "everyone in, no one out" system, they tend to spread the risk and losses. Also, since it is a usually a manadatory participation, many people think of them as "free", though they aren't of course.

Pensions also are from an era where employees work for the same place for decades. That's pretty rae these days, and even if you can vest relatively early, the pension return hit for short timers is often substantial.

[seabeckind]

20. The pension fees are borne by the pension funds

and are an overhead to the fund. Not the pensionee.

The money in the pension is a deferred income, not an actual investment by the worker. It is an investment made by the company for the worker in lieu of paying him.

You are trying to conflate two totally different things.

(added) In the real pension environment, if the worker walked away before becoming eligible for the pension, the hit was usually not getting anything from the company.

That deferred income was just paid to the guy who had loyalty to the company.

[Adrahil]

31. Where do you think that money comes from? NT

[seabeckind]

47. I just told you.

Not the worker.

In a defined pension environment, the worker agrees to be paid less while working in order to receive an income from the company (or its agent) after he is vested in the pension and leaves the company.

[Adrahil]

50. Right, so the worker pays indirectly....

So many folks seem to think that if they don't see the charge on a statement, they aren't paying it. They are.

[seabeckind]

54. The worker pays ------- ZERO.

He enters into a contract that says:

If I work for you for 30 years, you agree to continue to provide me an income for the rest of my life.

Any means the company uses to fulfill their side of that contract is THEIR side of the contract.

The worker's side is: 30 YEARS of labor.

(added) You wouldn't be trying to move the goal post with a deflection, would you?

[SickOfTheOnePct]

66. Depends on the job

in my current job we have a pension, and a payment comes out of my paycheck every payday for it.

[seabeckind]

73. Very true. I worked for one company that did that.

At least partially. The company set money aside in my name and I could augment it if I chose.

My points in this thread were about the non-contributory, traditional pensions. A rarity today.

Sorry for any confusion.

[SheilaT]

99. Not all "traditional", meaning back in the day,

pensions were all non-contributory. It depended on the company.

The real up side, back then, of a pension that the worker also contributed to, was that when the worker left the job, he could take his contribution out. Whatever the company had put in stayed behind, of course.

Keep in mind that even back in what ever period of time constituted the golden age of pensions, probably fewer than half of all workers were covered. Often the vesting time was at least ten years. And if you left the company, you left the pension behind forever. And companies have long deliberately underfunded those pensions, as I know all too well, and have ruthlessly cut the actual pensions the workers are receiving.

At least a lot of companies have moved to automatically enrolling employees in the 401k programs, which is a big start.

And I, too, notice how many people have the latest smart phone, other electronic devices, a brand-new SUV of some kind, eat out all the time, pay for everything with the debit card, are living paycheck to paycheck and complain how it's IMPOSSIBLE to save a penny.

[seabeckind]

109. I included a link below to a piece about the history of retirement

and extracted a couple of statistical points.

During that golden age (for workers, the gilded age for corporations started in 1980) the pension rate was just under 50%. But that drove a wage competition that was good for everyone.

As far as your observation, I must run in much different circles. I know many at the top or the middle class scale and have few problems and those at the bottom with much lower expectations.

It's the ones in the middle that I think fit your description. They don't make enough to qualify for the upper but won't admit to the fact that they have slipped out of the middle class promise that they saw their parents achieve.

What in the world is wrong with using a debit card?

[SheilaT]

140. Right, even in the golden age the pension rate was under 50%.

So it's almost pure mythology that there was a time when all workers could look forward to retiring after thirty or forty years with a good pension.

The wage competition ended in the early 1970s. Do you remember Nixon's wage and price controls imposed in August, 1971? I remember them quite clearly, because I was affected by them. And wages, depending on exactly how you're looking at them, more or less peaked in 1971 or 72 for the working class. Probably not a coincidence.

I agree that those at the top -- again depending on where the line is drawn -- have far fewer worries about retirement, simply because they're likely to have more money in the first place. But then I read the stories about those who earned six figures all of their working career, spent every penny, didn't bother to contribute to the 401k at work, and are suddenly startled to realize they won't be able to survive on Social Security alone.

I was married some 25 years to a man whose parents were quite well off and who gifted us with money every year. Which we saved and invested. As we did with any bonus money he ever got. I was a stay-at-home mom, and his paycheck was rarely much more than the median. But because we saved so much, once the marriage came to an end I walked away with a tidy nest egg. Most people in our situation would probably have spent that money on a bigger home in a fancier neighborhood, on pricier cars, on luxurious vacations. Instead, I'm able to live a modest (and trust me about the modest part) life in a city I chose to move to when that marriage came to an end. I can travel a bit, go out with friends, and generally have a good life.

I know that over the years we didn't have that much more than so many, but we were committed to saving and planning ahead. Perhaps more to the point, we lived on a median or perhaps a bit less than median income.

My observation about debit cards is this: those who use them for every single purchase seem to be spending all of their money paycheck to paycheck. In addition, many places have a $5.00 or so minimum, so if for instance you only want a pack of gum, you'll be buying a bunch more stuff just to reach that minimum. Carry at least some cash.

Of course, by observation is firmly in the realm of anecdote, and it's certainly possible that there's research out there that those who use debit cards for most of their spending are better money managers. Somehow I doubt it.

Anyway, I do not want to be coming across as argumentative, simply as presenting my point of view and a bit of the reasons behind it.

[Adrahil]

134. Even if it doesn't show up on your stub...

You are paying indirectly. Your employer sure thinks of your compensation package as a unit.

[still_one]

30. Just talk to those with United Airlines when the defaulted on their pension plan

[Adrahil]

36. When I left the government 12 years ago....

I had job offers from two companies.... One had a defined benefit plan, the other a good 401K. I eventuall chose the job from the 401K company. Good choice. 3 years later, the company, in trouble, disestablished the pension and employees got a meager lump sum payment. I mean, it was pathetic.

[RKP5637]

40. Yep, that's often what happens, the company goes belly up or raids the funds. n/t

[seabeckind]

56. Sounds like an excellent opportunity for bankruptcy!

Pay a few attorneys,

change the ownership of the company (on paper),

reopen under a new name,

and voila!!!

Get a business loan, and do it again!!!

Taxpayer be damned.

[RKP5637]

63. Yep! It's a business plan for some companies! n/t

[seabeckind]

74. Twinkies-Maker Hostess Plans A $2.3 Billion Stock Offering

The plan is emerging after big changes at Hostess: its business is smaller and leaner; it has far fewer employees; and those employees are no longer represented by a union.The plan is emerging after big changes at Hostess: its business is smaller and leaner; it has far fewer employees; and those employees are no longer represented by a union.

Announcing a deal with Gores Holdings Inc., Hostess says the stock offering will put its value at about $2.3 billion, a figure that's 10.4 times the baker's estimated 2016 Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of approximately $220 million.

The stock plan is a new chapter for Hostess, which was once in Chapter 11 bankruptcy protection and which in late 2012 announced that it was laying off 18,500 employees and shutting down.

http://www.npr.org/sections/thetwo-way/2016/07/05/484781794/twinkies-maker-hostess-plans-a-2-3-billion-stock-offering

[RKP5637]

75. The previous CEO/henchmen drove the company into the ground. Outmoded

plants, lack of innovative technologies. The old company was raked for profit.

[seabeckind]

80. Hedge fund harvest

A couple times. The CEOs got some pretty awesome parachutes.

For background for some who aren't aware of the history:

Hostess is bankrupt … again
by David A. Kaplan JULY 26, 2012, 9:00 AM EDT

The critical issue in the bankruptcy is legacy pensions. Hostess has roughly $2 billion in unfunded pension liabilities to its various unions’ workers — the Teamsters but also the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (which has largely chosen not to contest what Hostess wants to do — that is, to get out of much of that obligation).

http://fortune.com/2012/07/26/hostess-is-bankrupt-again/

[RKP5637]

90. I can't recall all of the details now, but one of the CEOs and his henchmen had a history

of doing this and it was very profitable to them. I lived near one of the large bakeries and used to shop at one of their outlets.

They really put their employees through the ringers. I was always amazed so many of the employees were clueless as to what was going on. TPTB made it sound like it was all the employees fault, when really the CEO/henchmen had been raiding the company for cash and had no interest in the future of the company. As I recall, they went off to another company apparently with intent to do the same shenanigans.

[seabeckind]

95. I think Bain was knee deep in these harvests.

Happened to many companies

There was a good piece some years ago about Simmons.

But in the mid-1980s, Simmons caught the attention of a new type of investor. The businesses that stormed corporate America in recent years under the banner of private equity were not always called private equity firms. In the 1980s, they were known as leveraged buyout shops. Their strategy is essentially unchanged, however: they try to buy undervalued companies, using mostly borrowed money, fix them up and sell them for a fast profit.

Because they pile debt onto the companies they buy, the firms free up their own cash, allowing them to make additional investments and increase their potential profits.

Simmons’s first trip through the revolving door of private equity came in 1986. Like the latest trip, it was not a pleasant one for employees, but the buyers did just fine.

William E. Simon, a private equity pioneer and a Treasury secretary under President Richard M. Nixon, was the man with the golden touch. In 1986, his investment firm, Wesray Capital, and a handful of Simmons’s top managers acquired the company for $120 million, the bulk of which was borrowed. After selling several businesses to pay back some of the money it had borrowed, Wesray cashed out in 1989. It sold Simmons to the company’s employee stock ownership plan for $241 million — twice what it paid just three years earlier.

The deal was a fiasco for the employees. As part of the buyout, Simmons stopped contributing to its pension plan, since the stock ownership plan shares were meant to pay for the employees’ retirements. But then the bottom fell out of the housing market and Simmons, with its large debt, stumbled. Its pensions crumbled as the value of the stock plan shares plunged.

http://www.nytimes.com/2009/10/05/business/economy/05simmons.html?_r=0

[RKP5637]

98. Thank you, yes, exactly!!! And what really irks me, they try to make everything sound like it's

the employees fault, while they are in the backroom counting up the cash and getting ready to split.

[still_one]

26. Also, many 401Ks today allow for self-directed 401Ks, where the participant chooses the fund, ETF,

or even individual stocks or bonds to invest in. Of course that means the individual needs to educate him or herself, but that is a good thing I think

[Adrahil]

38. Mine isn't quite that flexible...

But we have access to a pretty wide variety, including my old favprite, ye olde S&P 500 index fund.

[still_one]

86. Good. I hope the fees are low

[Yupster]

81. These will become less available

in the near future.

A major brokerage firm just insisted its brokers move its self-directed 401k's to vendor plans like Fidelity, etc like most people already have.

They're afraid of the liability it gives them where they cannot oversee the investment choices if the person can buy everything. Right or wrong, the companies are very afraid of lawsuits right now.

The new fiduciary standard has firms, large and small scratching their heads. We can recommend to a person suitable investments, but how do we know which investment is in the client's best interest? Ask us in five years and we'll tell you which one was in the client's best interest but how are we supposed to know that now?

It's really thrown the whole industry into turmoil.

[Hoyt]

22. I hear you, but it also allows workers to say "screw you" and walk away from the employer.

[seabeckind]

23. And then what?

Reality.

There aren't that many employers.

[enid602]

67. money

I worked for a company for 22 years. I liked to think of the 401(K) plan as my 'FU money.' Facing retirement, I'm glad I made that investment, and that I was careful to pay off my mortgage.

[LoverOfLiberty]

49. You have failed to explain why

they overwhelming majority of the people who can contribute to 401ks fail to do so. I get it that you don't like them but they do work if they are available and they are available to a lot of people who chose not to use them.

[Yupster]

82. I think another problem is people who do contribute, but

leave the job two years later and cash in their 401k.

I know 40 year old people who have had four different 401k's and now have zero in retirement because they cashed each one in when they changed jobs.

In order for a 401k to work, you also need a cash reserve.

[taught_me_patience]

126. People don't understand how it adds up over time

The 200 a month starts adding up when t you're talking about time frames of 20to 30years. It the short term,it seems like nothing.

[Brickbat]

10. And next month there will be a MW article with the sadz about how we don't spend enough.

[RKP5637]

11. Yep! That's the F'en game in the US. n/t

[Nay]

24. Ain't it great? The poor working bastard gets to hear how fucking stupid he

is for spending money on lattes and football games, but if everybody stopped buying unnecessary shit there would be no such thing as the "American economy" and all the companies selling crap would go the fuck out of business.

And don't get me started on how every psychological trick known to a Harvard PhD is used to create a culture where your 'stuff' defines you, but by God, if you fall for this ruse disguised as a society, you deserve to starve to death when you get old because you didn't manage to save 30% of your pitiful salary.

Now, Mr Nay and I have plenty of money saved, a house paid off, nice vacations, etc., but it's because we NEVER LISTENED to the prevailing culture. We're basically minimalist hippies with only one or two areas where we'll spend some extra dough. It's served us well. Most people who grow up in this prevailing culture believe what the culture tells them and abide by it (this is true of ALL cultures). Don't want people to overspend? Don't have a culture of overspending. Don't want people caught in CC debt? Don't issue CC to people under a certain (high) income level. Don't want a culture of excess? Don't put Trump, the Kardashians, and prosperity gospel churches on the TV. It's easy. But it has to be a cultural change, not an individual one.

[Squinch]

158. I disagree with this. I don't think there will ever be a cultural change that makes our culture

one that doesn't encourage ridiculous spending and unnecessary acquisition.

But as individuals, if we want to save for retirement, we have to be grown up enough not to buy into the idea that our stuff defines us. And does any of us really buy stuff because we are selflessly propping up the economy? I don't really buy that.

Again, I am not talking about those who truly are unable to save. Yes, there are many of them, and we do need to address that. But I am talking about a different economic group than those people.

You are essentially saying, and I agree with you, that there is a segment of society that does not save for their retirement because of peer pressure to buy stuff. I think you are correct.

But you seem to think that those people are not responsible for their plight and that "society" needs to fix it. That's where I disagree with you strongly. I think that if you are buying shit you can't afford because of peer pressure or societal pressure, you're an idiot and you need to grow up and stop doing that.

And I do get that you are saying that you already know this, because you and your husband have never fallen for the message of "buy, buy, buy."

[Squinch]

156. Yeah, but so what?

There are magazine articles that tell me I have to keep my house spotless and cook real well. I don't do either of those either.

[dembotoz]

14. yep living paycheck to paycheck produces no savings

i used to be middle class now perhaps upper lower or middle lower

gonna work til i die

[RKP5637]

16. And there are millions and millions in the US in the same situation, yet their voices go

unheard. And seldom do we hear of this on M$M, which generally provides a sanitized politically correct view of everything. Hence, they promote a distorted view of 'hey everyone, we're all doing well, ain't the USA great!' The entanglement of M$M, politics, corporations and wall street is horrific in the US. Most people have no voice at all. They are led to think they do, but the power/money brokers really control the US, not 'we the people' IMO.

[Ilsa]

19. And the investment guy on the radio says I need $1M

to retire. Yikes. I don't think I can get there.

[seabeckind]

21. He needs you to invest $1M

so HE can retire.

He doesn't care what you do as long as you keep giving him money.

[Yupster]

83. You need to change investment guys

There are many very good ones out there.

[taught_me_patience]

124. Do away with the guy and buy a target fund

It's a nice balanced portfolio run by a machine with almost no fees.

[RKP5637]

29. It's rough. Money flies out the window quickly when the paycheck stops. My dad, years

ago, retired with about 50 to 60% of his regular paycheck plus full health care for both him and my mother.

[edhopper]

27. Two words

Wage stagnation. Many don't have any extra $ to save.

[RKP5637]

33. Exactly!!! And the prices keep going up and up. Just the grocery bills for two are getting

staggering. And the markup on many drugstore OTC items has to be well about 80% IMO. One of my friends was a buyer for grocery store chains and he said people are getting severely ripped off with grocery bills, that the markup is exorbitant.

[edhopper]

45. Yes

People forget how much Americans now spend on all medical expenses.

[SickOfTheOnePct]

68. There may be big markups on individual items

But the grocery industry overall has a profit margin of ~2%-3%.

[RKP5637]

70. Yep, here's an interesting article on that.

http://smallbusiness.chron.com/profit-margin-supermarket-22467.html

[Still In Wisconsin]

32. For me it comes down to this: do I put my "extra" money toward my kids' education or

do we save it for our own retirement? Can't do both... so I will never retire. Not being dramatic, it's just the way it is.

[RKP5637]

37. And "if" jobs are even available. Job pickings get pretty slim for retirees. Probably

the best would be for those totally independent from a corporate type structure. If young today, I would focus on being independent as much as possible.

[still_one]

59. Perhaps. The advantage of putting a little money away in a tax deferred savings vehicle, is that

money used to save for retirement isn't counted as part of your income, and the impact on your take home pay may be minimal.

For example, if someone saved 100/month in an IRA or 401K plan, due to the magic of compounding, after 40 years, that 1200/year investment would grow to 150K to 350K or more depending on where the money was invested.

Of course a lot of things depend on your age.

In my view you should not undercut your retirement savings over your child's education.

For your child's college, there are a lot of vehicles available. Life Insurance, Junior College, state colleges, student loans etc.

While people need to be careful, a good certified financial planner can be an important guide to one's options

[LS_Editor]

39. So they won't be retiring.

I thank my lucky stars for my inheritance. It allows me to have some comforts others can only hope for. It's brutal out there.

[ancianita]

41. Austerity by design. The .01% don't believe humans contribute to humanity when they're comfortable.

This won't change until we go after them. They hide behind Big Walls, though.

[RKP5637]

43. Yep, it's not by chance this is happening, it's the design of the system, and IMO it's

no accident. I think more Americans are waking up to how F'ed over they are, but hopefully more are waking up.

[ancianita]

48. The Wokes' hesitancy to fight comes from being weakened by soothing messages to WAIT.

In "the waiting room," they are fed snacks, entertainments, chaplain cheerleaders and other distractions.

Unwoke people wait, never called, in that waiting room all their lives, for a future that they imagine but which never comes.

[RKP5637]

61. Exactly!!! "for a future that they imagine but which never comes." n/t

[RKP5637]

44. My thought on this is many live in denial. Retirement is a long way off and cost of

living in the US is high. Hence, a lot of denial and procrastination. ... that said, many can't afford to save for retirement.

[Igel]

52. Which points out one problem.

I assume by "couple" they mean household. No matter.

Median working age includes those 19 years old and those 62 years old

At 20 I had $0. At 55, we had $60k. "Median" means mixing in young and old, rich and poor. Since some of those--a lot actually--are colle aged, I don't know what to make if these numbers.

[LoverOfLiberty]

53. "Many" doesn't explain most

which if this article is to believe, is indicative of people choosing not to save.

[still_one]

62. The earlier people start to save whether for retirement or their child's education, the more options

they have.

The problem is for those who haven't done so, for whatever reason, and have lost the flexibility of time.

[Yupster]

84. We set up a college fund for our kid the month he was born

This week I just closed the 529 accounts and sent the last bit off to his college to pay fall tuition.

This will be the first semester of his sophomore year.

Now he didn't have to go to this school, and he's doing well so far, and we'll be able to pay for the rest of his time so I'm not complaining, but it did make us laugh that 19 years of saving paid for a year and a half of college.

[still_one]

85. Agreed. 529's have issues also, but it sounds to me that you did good, but so much effort and time

for a year and a half of school is depressing

[seabeckind]

60. This calls for a picture, words cannot do it justice.

[AntiBank]

121. +10000 brilliant graphic

[CrispyQ]

65. It's been several years, but I read an article that stated

Americans are trinket rich but equity poor. We have flat-screen TVs, smart phones, & nice furniture & cars but no equity.

on edit: My family has experienced three good paying IT jobs shipped to India in the last 15 years. I'm almost 60. I'll never make wages like that again.

[RKP5637]

69. Yep, same with many of us. My job today in IT today would be in some other country. n/t

[edhopper]

87. Another thing related is the war on savings

even if a senior has a few hundred grand saved for retirement, they can't just put it into a safe interest baring account. if they want any return, they have to go for riskier investments.

At 4% or 5% they might have an extra 10K- 15K a year, now the same amount will get them only a few thousand. So they either have to spend down, or risk it in the market.

[RKP5637]

93. Yep, my local bank pays about .01% interest. And FFS, they try to make this sound like a great

deal. Insanity! One way is to use robots to manage everything, like with Wealthfront.com https://www.wealthfront.com/ or similar.

[Yupster]

106. The low interest rates are a trap

The government has trapped itself.

It knows it needs to raise interest rates. The original idea of cutting them to nothing was to encourage people to borrow money to buy a car or a house and get the economy going. It was supposed to be a short term stimulus. Now it's eight years later and the rates are still low.

Seniors are hurt the most. Instead of getting $ 700 a month from their CD interest, not they're getting $ 37.24 That missing $ 600 isn't showing up in restaurants and shoe stores. The government is also not getting to tax the $ 700 interest.

So why doesn't the government just raise the rates.

They can't. They've trapped themselves. The government owes $ 19 trillion, mostly in short term loans. It borrows another $ 30 billion or so a month.

If interest rates go up just 3 %, the extra interest cost to the US budget would eventually be $ 570 billion a year. Since we don't have an extra $ 570 billion a year, we are forced to keep interest rates at basically 0 %. No one knows what the government will do when interest rates eventually does go up. How do you come up with an extra $ 570 billion a year?

[seabeckind]

128. The fed interest rate is not for consumers.

It is more a facet of trickledown.

By making taxpayer funds available to companies, it was hoped they would invest in this country.

They don't. And if anyone suggests raising that rate, they scream about the hit on the economy.

The one Main street hasn't seen improved.

The corporations have been getting fat on the carrot. Time for a stick.

[senseandsensibility]

147. Thanks for bringing this up.

No one ever mentions this. It's almost as blacklisted as in the corporate media as talking about labor history or some such thing.

[edhopper]

150. there are strong unions still in the media

and I think people working there have lost touch with what most people face in their jobs without unions.

[One_Life_To_Give]

88. Portability and 4.6yr avg term of employment

Now that so few of us actually work for the same employer our entire lives. There is almost none of us who hit the minimum term of employment to be part of those old pension plans. Not to mention the Co's that learned to dump their employee's after 9yrs so they didn't qualify. There may be much room for improvement. But the old retirement plans don't work in a world of short term jobs. BLS stats show only 4.6yrs on average. This isn't our daddies and granddaddies job market.

[seabeckind]

89. Piqued my interest so I googled retirement info

and found this fascinating piece:

A Timeline of the Evolution of Retirement in the United States

http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1049&context=legal


1950 – 9.8 million private-sector workers (25 percent of all private sector workers) are covered by a pension plan.

1970 – 26.3 million private-sector workers (45 percent of all private-sector workers) are covered by a pension plan.

1980 – 35.9 million private-sector workers (46 percent of all private-sector workers) are covered by a pension plan.

1990 – 39.5 million private-sector workers (43 percent of all private-sector workers) are covered by a pension plan. 11.5 million private-sector workers are covered only by defined contribution plans.

[dumbcat]

97. It seems that a lot of people

are not capable of sustaining there own lives without financial and other assistance.

[roamer65]

100. For most it's children versus a 401K.

That is why the numbers are so low, along with declining wages and salaries.

[RKP5637]

101. Yep! Exactly! Many can't save no matter how much they want too. But still they are

blamed rather than an unworkable system for many.

[HassleCat]

103. Yes, but they have assault rifles.

So they'll be fine.

[RKP5637]

105. Yeah! Very likely! n/t

[Sen. Walter Sobchak]

111. The 401k makes a commercial airline pilot of everyone

without the benefit of desire, training or experience.

When I got a 401k for the first time I went looking for advice and went to the most investment savvy person I know who pretty much laughed in my face and told me he wasn't doing his own retirement planning because he didn't have the time or knowledge.

[RKP5637]

112. Yep, it's far more complicated than many understand. And most lay people trade

on emotions rather than logic. And some day traders think they'll hit the lucky one and get rich quick. Today, it's best to use robotic investment tools IMO.

[taught_me_patience]

113. You can just choose the target date fund

and get a nice balanced portfolio of stocks, bonds, and foreign investment. 401ks are required to offer them now. I have an MBA in finance and just choose the vanguard 2050 fund for my 401k. No fuss no muss.

[Squinch]

116. I did that for three years. Lost a ton of money. Went to a combination of unmanaged

index funds (also with Vanguard) and am doing fine.

I don't like those target date funds.

[roamer65]

120. I tend to believe these numbers.

In 2014, 51 percent of wage earners in the US made $30k or less.

How do you do a 401k on that low of a income? My guess is most often they don't.

[seabeckind]

123. But, but, look what they could save on taxes.

[Yupster]

157. Low income people should choose the Roth 401 k option

Most plans have that option.

No point choosing a tax deferred plan if you don't pay any income taxes.

[RKP5637]

132. Exactly what's going on. And then TPTB try to make people feel quilty. The US is a warped

society.

[AngryAmish]

129. Yup, we are fucked.

I get to retire In a month...maybe next week. But I am the exception by far. I have friends who got into their 40s before having 5l in the bank.

[heresAthingdotcom]

133. Newly Retired....

I lost my job about 18 years ago.... from a company where I worked for about 3 years. I was unemployed for 15 months and during this time I retooled myself.

I got a job interview, got the job and a paycheck.... making $35,000 a year. I'm 50 years old. The day I started to work I had about $700 to my name. I didn't have enough to pay ALL the monthly bills one more time..... and after starting to work I did everythingI could to keep this job.... working late at night. working weekends ... anything I was asked to do I did it.

That was more than 16 years ago. I retired on March 31, 2016.... yep about 3 months ago.....

so, when I retired I was making $65,000 a year. I have about $115,000 dollars in the bank. I have a 401k worth $77,000 and several IRAs with a value combined of $78,000 . Over the 16 years I purchased and now have 8,100 shares of the companies stock which has fluctuated in value to $140,000 and is now valued at about $81,000 as the stock has lost about 40% in value the past few years....

but, the stock pays a .28 cent a share dividend or about $9,000 a year. The house is paid for the car is paid for, a 2009 Honda Civic with about 34,000 miles. I have NO debt....

and I accomplished this in 16 years while not making an awful lot of money in a year.

I don't have a fancy house. I don't have a fancy car. I don't have anything fancy in my life right now... no trips to any where... as my focus has been to Retire.....

... because I was unemployed once and that experience taught me one thing..... I am the one person that has to make certain I'm in good shape when I retire......

Yes I did land a good job with a fairly good salary and I was lucky in other ways....

So I've been retired now for 3 months and have all kinds of time to write silliness on the internet.... and hope that Hillary Wins in November.... I am a volunteer and a contributor... I live in Tennessee and will be making several trips to North Carolina and Virginia to knock on doors and I CHALLENGE anyone reading this to do the same..... KNOCK ON Doors and get people registered to vote, informed to vote and challenged to vote on November 8th......

[RKP5637]

136. K&R !!! n/t

[Yupster]

139. Do you feel like you have too much money in one company's stock?

You could have that same money in 20 different companies that all pay dividends.

[Rhiannon12866]

148. Thanks for sharing and for all you're doing!

And welcome to DU! It's great to have you with us!

[seabeckind]

151. What were the particulars about this "retooling"?

Perhaps a little info about the ex-job and the new talents would help.

I do believe this part:

"write silliness on the internet."

[raven mad]

149. Someone has THAT much? n/t

[bhikkhu]

153. There are many different ways to count that

I know back before the recession I had lost a good job with a 401k, and took a less-good job. Between the two I had to cash in my 401k and stretch it out for awhile to make ends meet, often only $15 or so a month between my paycheck and fixed expenses. Any unplanned things came out of the extra from the 401k, and with two young kids there were many unplanned things.

But, I was able to keep my bills up and even do some credit repair, and keep my house. Through 6 years of scraping by, I built about $40k in equity in my house. I count that as retirement savings, though the article does not.

I also spent some time getting more serious and better trained in my field, and switched to a much better job when the economy came back. Things are better now, and I do plan to be able to retire with some decent options at a normal point, ten years or so from now.

[RKP5637]

154. Yep, definitely, there are many ways to count it and lots of variables. n/t