Ad: "If you're making $50K/yr, you need to have saved $1.5 MILLION to Retire" (??)

[The Cleaner]

This is an ad I got the other day. Now tell me, who the hell has 1.5 million saved up? The average middle class American is struggling to pay the bills and get out of debt, let alone save this much in a 401K. You'd have to set the withdraw amount at like 15% which of course leaves you with a lesser paycheck.

This is ridiculous. Nobody can save up that much in today's world. Hell I've been laid off several times and have now gone a few years without work due to med problems. I'm sure I'm not the only one.

[ixion]

1. exactly. I talked to a financial planner a few weeks back, got a big laugh...

sometimes I think some people live in a fantasy world.

[baby_bear]

2. Just who is living in the fantasy world?

Is it we middle class earners, or the financial planners? I haven't figured this
out yet.

I've been in the same government job for 22 years and have been contributing to
a 401(k) all the time. No way, even contributing the maximum allowed, could I
possibly get to 6 figures in savings by the time I can retire (which is probably
never).

Maybe we are all living in a fantasy world.

b_b

[murray hill farm]

14. Bologna!

I lost everything I had in my retirement acct when the stock maket dove in 2000...I worked for a few more years and then decided to just retire...moved to mexico and lived there for five years on a small pension...lived in a small house, but lived in paradise...sold my house there in early 2006 and moved to Georgia, bought a small house in Brunswick for 25,000, fixed it up a little...and live here still..and will continue to, but now with soc security and medicare. For the most part, I feel rich. went to Ireland in November and took a cruise in Dec. Why can I do this? I have a house payment that including taxes and very good ins. is $145 a month...works for me! If big house on the golf course is what one needs to be happy in retirement, this wont work for ya! But no one "needs" a couple of mil to retire. Mainly what people need for happiness and security is to figure that they do not need big homes and things to be happy..and that for the most part, leaving that idea behind will free you to figure out just what it is in life that does make for happpiness. For me, it is in loving my little home and neighborhood, developing a wonderous back yard and gardens, really getting into my community and the causes I so believe in, but never had the time or attention for in the past...this is happiness. Sometimes when I drive past the huge multimillion dollar homes on St Simons Island, what I feel most for the people who own those homes is just pity..for what they are missing in life by dedicating their lives to such things as their huge homes.

[Coyote_Bandit]

19. Most financial professionals

cannot justify handling accounts of less than $100,000. Many no longer handle accounts less than $1 million. Multinational banks that manage investment (and retirment) accounts routinely move accounts between $1 and $5 million to a central location where they are handled by entry level managers that work in a call center. These same multinationals will provide a personal office and staff to a client with an account of $15 million or more.

The financial industry benefits itself long before it benefits its clients. It has always been that way.

[Warpy]

34. Dunno, the financial planner I inherited

is now a VP and travels to meet me about 4 times a year.

I didn't inherit enough to pay inheritance taxes last year.

[Coyote_Bandit]

43. My comments

were based on my experiences in my past life working as an investment portfolio manager for both a large multinational bank and a smaller privately held money management firm. I began that career in an entry level position at a large multi-national servicing accounts valued below $5 million. Our office was one of a handful of offices around the country. I officed with about 20 other account managers. We each traveled quarterly to meet with various account holders. We had some very sophisticated proprietary software and worked to standardize account holdings. Later I worked in a privately held firm. Income was strictly fee based and account management was highly personalized. At the time I left, the company was in the process of raising its minimum account size to $1 million. Why? Fewer accounts, higher revenues per account, fewer demands for personnel and other resources.

Compensation for money managers is usually about 1% annually of the account value. Or $1,000 on a $100,000 account. Expenses for research, computer systems to facilitate direct trading, and liability insurance are very high. A competent money manager can expect to earn about $100,000 or so annually and is usually responsible for less than 500 accounts. The fee for using Blomberg for trading and research is about $25,000 MONTHLY.

Brokers are compensated on a commission basis which provides them an incentive to churn the account.

Financial planners are compensated in a number of ways. Some charge a flat fee for planning services. Usually they receive some commission for various trades - or purchases of various insurance products. Sometimes they work for companies that provide them a base salary. Sometimes they work for companies that compensate them based upon the value of assets under management.

As with most things there are both good and bad money managers, brokers, and financial planners.

Same could be said of attorneys and CPAs that are involved in the process of planning and drafting documents that provide for an inheritance. Those are the folks that are responsible for structuring transfers and addressing possible tax consequences. I am also licensed to practice law and I must say that most attorneys simply are not well prepared to do the complex estate tax planning often required. Even with my experience and background in the field I would be reluctant to do so.

[Warpy]

33. The ones I like are the ones who tell me how rich I'd be

if I'd had the discipline to start saving $2000/year when I was 20.

When I was 20, my annual income was about $2600.

Dream world is RIGHT.

[gratuitous]

3. Oh come on, pinch a few pennies

Let's see, $50,000 a year, don't spend a dime, why it would only take you about 30 years to sock $1.5 million away! Do you really need to eat, or wear clothes, or live in some kind of shelter?

Somehow, I get the sneaking suspicion that financial planners think that the "solution" to this "problem" will include signing over the Social Security Trust Fund to them.

[deadmessengers]

4. You don't earn interest?

Where the hell are you putting your money that it's not earning compound interest? You're getting screwed.

[gratuitous]

8. Oh, okay

At what, 3%, is that what the financial institutions are paying? Trim it down to a mere 22 years or so.

[deadmessengers]

16. Just a bit more than that

Like, a little over triple. The S&P 500 has gone up, on average, since 1920, roughly 10% per annum. Some years (the Bush recession of 01&02, most recently) it went down, and some years (the Clinton boom of 95-99) it did far better, but over the long term, that 10% number is about right.

Someone saving 7500/yr (that's 15% of 50k), earning on average 10%, will have 1.5 million dollars in 31 years - hardly an unrealistic retirement age.

[LSK]

21. how are people so clueless about money issues????

5% is typical of most CDs. Lots of money markets are around there too. Stocks average a better rate of return over the long haul.

Everyone should know this type of stuff, but unfortunately, people don't educate themselves on how to grow money.

I dont want to get on your case, but for your own sake, please spend some time reading investments books or websites.

http://www.smartmoney.com

http://finance.yahoo.com/retirement

Seriously, you have to know this kind of stuff.

[deadmessengers]

30. Great ideas

I would add these to the list, as well:

http://www.clarkhoward.com - I learned a TON from this guy's website and radio show. His advice on money is absolutely invaluable.

http://www.democraticunderground.com/discuss/duboard.php?az=show_topics&forum=327 - our very own personal finance and investing forum. There are some very financially savvy people here, and it's not a bad idea to consider their opinions when making your own financial decisions.

[tammywammy]

32. Ohhh, I love the Clark Howard show too

I always listen to it. :)

[IdaBriggs]

40. Its driving me CRAZY!

Its not like the information isn't out there, but people just don't seem to think it applies to them! ARGH!!!

:banghead:

[gratuitous]

44. Well, if I ever get some money

I'll see what I can do about investing it in certificates of deposit and investing in the stock market. But until I overcome these niggling addictions to eating and wearing clothes and sleeping with a roof over my head, I think the Good Lord will vouchsafe me from the curse of wealth.

[Robson]

12. Exactly

The New York money people are salivating at the thought of being able to skim off and manipulate another HUGE pot of money ..... just as they do today with their billions in compensation and fees for contributing essentially very little to the economy. They are leaches just like those that get paid protection money.

Check out their results with the new Bush Inc bankruptcy bill that only applies to average people and not the wealthy or to corporations. Another story though.

[SammyWinstonJack]

29. And george is the biggest leach of all! In fact I think that must be the

bu$h family's greatest achievement, leach off of other peoples' money. They certainly don't earn any money honestly, through hard work, like the vast majority of hard working Americans do. Bunch of damn leaches!

[Robson]

38. Agreed 100%

I'm tired of old money, big money and the multinational corporate world controlling who gets elected, and once elected what gets voted upon, and how it's voted, and when and where we go to war, and those that want to hit the parent lottery by paying no estate taxes....while the huddled masses in America pay most of the costs.

Most of all.........I'm tired of all this bushshit that comes out of this administration.


So if you are making 50K a year....you should have started saving long before you entered first grade.

[dsc]

5. That is ludricrious

Unless your expenses actually go up in retirement or inflation goes through the roof that is nothing short of absurd. To live on interest alone, forget about being able to draw down principle, you would only need a 3.33% interest rate. Add in the ability to draw on principal and you would need about half of that or less.

[pscot]

6. Hey. Give up one double, tall non-fat mocha

a day and you're almost there.

[Singular73]

7. So the key, if you are new to 401Ks...

Throw all raises that you get into the 401K, until your contribution is maxed out, then a Roth IRA afterwords.

Its not how much you make, its how much you spend.

[deadmessengers]

20. *dingdingdingding*

You win the "common sense" prize. The key to a comfortable retirement is to simply spend less than you earn, and to put that money into low-risk investments. Saving 15% (pretax) for someone making 50k/yr should be a no-brainer - if you can't live on 42,500/yr, you're suffering from severe affluenza and need to cut back a bit.

[Singular73]

27. Obviously.

My point was to sink raises into 401K's/IRAs. Pay yourself first. Pay your bills second.

[deadmessengers]

31. I couldn't agree more.

[StrictlyRockers]

28. I can live like a "king", in the Bay Area on less than $10,000.00 a year.

How you define "king" is relative to you, but here is how I define it, generally.

1. Nice room in a nice house or apartment with cool housemates

2. Central heating in winter, thermostat set to 68º

3. Ride bike everywhere - have small car or shared car used less than once per week

4. Cell phone

5. Internet access

6. Medicine

6. Spending cash to do whatever I want that I can think of

I can live like a "king" on very little money.

[LSK]

23. actually, throw into Roth IRAs 1st unless your company has matching

Roth IRAs are tax free in retirement. Who knows what the tax rate will be 20 or 30 years from now.

[SammyWinstonJack]

37. Raises?

:rofl:

[The_Casual_Observer]

9. They always say shit like that to make you feel bad. The reality

is that they would love to get their hands on your money & piss it away in the stock market.

[Rosemary2205]

10. That is doable.

$1000 a month at 6% will get you 1 million in 37 years. So a 20 yr old could be a millionaire by age 57.

Use this tool. http://partners.leadfusion.com/tools/kiplinger/savings01/tool.fcs

All this assumes no scumbags Enron you and that you are capable of socking away $12,000 a year.

[trogdor]

11. 50,000 * 30 - 1,500,000

So, in order to stay retired for 30 soul-sucking years (age 95 - get real!), with no other source of income, not even Social Security, you'd need $1.5 million.

Now, the reality.

You won't need $50,000 if you're smart. Hopefully, your mortgage and credit cards are paid off, your kids are grown and out of the house, and you just bought yourself a really bulletproof car - why do you think all those old geezers cruise around in a Mercury Grand Marquis, or some similar old-school land boat?

P+I on my mortgage is around $800/month. That's $9600/year I wouldn't need to raise anymore.
Figure that your kids cost you a similar sum, if not more, while they're living with you.
If you're not working, your gasoline bill will plummet. I think Mom puts 5000 miles/year on her car, max. She just traded in a 1998 Chevy Lumina LTZ (leather seats and everything) with about 40,000 miles for something smaller. Lucky bastard who gets that used car.

So I'd guess you only need around $30,000/year to live at least as well as you did when you had kids and a mortgage.

30,000 * 30 = 900,000
30,000 * 20 = 600,000 (let's face it, if you make it past 85, you're doing really good.)

So there's the math.

[Rosemary2205]

15. Warning

It's been my experience that taxes and insurance on real estate end up costing more than the Principal and Interest after about 20 years. By the 30 year mark, when the house is long paid off my taxes and Insurance payments alone are equal to my entire PITI when I first bought the house. The maintainance costs on my home have also started to go way up near the 15 and 30 year marks.

[trogdor]

22. Of course, I'm assuming constant dollars.

The $1.5 million number from the financial weenie probably isn't, or it shouldn't anyways. My point is, expenses should go DOWN significantly when you reach retirement age, for the reasons I indicated. Taxes and insurance of a grand a month won't bite as hard 30 years from now as it would now because of inflation. The problem is that people aren't burning their mortgages anymore; rather, they're using their houses as ATM machines, which is BAD, really bad. A paid-off home represents, as I mentioned, around ten grand a year of retirement income.

[The_Casual_Observer]

17. That assumes that you actually had 50,000 a year to spend in the

first place. Take away income taxes, Medicare taxes & payroll taxes, however, you would need to add a little something for the new tax rate you would be in while withdrawing the 401k money, but it's a lot less than what you pay while working.

[liberalpress]

13. If you're making $50K/yr, you need to have saved $1.5 MILLION to Retire

Never made that much, don't have that much. I'm good

[LSK]

18. they are assuming you would keep the same lifestyle in retirement

Where in fact you hopefully have paid off your house and therefore have no mortgage or rent payment.

Also you might be downsizing as the kids have moved out and hopefully are done with college.

Also keep in mind that you dont have to save the whole 1.5 million, a lot of it is earned with compound interest and investments. Go find an investment calculator to see how this works.

[kineneb]

24. that assumes you stay healthy

loose your health and job, and that money goes "poof" in a very short time... then you wind up living on SS (or if you are not retirement age- SSDI), with Medicare and Medicaid... getting free food at the once monthly give-away, visiting the food pantry, hoping nothing breaks because you can't afford to fix it...

What "retirement"? Live now. You may not get a chance later.

[Vinca]

25. Retirement?????????????

:rofl: :rofl: :rofl: :rofl: :rofl:

[OutNow]

26. Well, I have to say I agree with the financial planners

The sad situation is that many of us that are just retired and have a defined benefit pension will be the last generation of people that will have a chance to have a decent retirement. Our kids will have a very difficult time. No pension, many without health care benefits even while they are working, forget about health care benefits when they are retired.

I am working with my son and daughter-in-law to help them understand the situation they face. The first lesson is that it is not their fault. The unrelenting assault on workers in the last 30 years, mostly by Republicans, has taken a terrible toll. Union membership is a small fraction of what it was in the 50s. I trace the decline starting with the smashing of the PATCO strike by Reagan back in the 80s.

But the second lesson, that comes right after the first lesson, is that even though the macroeconomic situation sucks and is not their fault, our kids must implement a retirement plan. They have no choice. They must save 10% of their earnings. They must live below their means. I've helped set up a Roth IRA for my son and help out where I can.

The bottom line is, while we work on the political and economic problems caused by the radical right into the 2008 election and beyond, we must also plan for our future and our kid's futures by saving and investing as much as possible.

Bring the troops home now!

[missingpeace]

35. As the old adage goes...

There are 2 ways to be rich. Make more or desire less.

[IdaBriggs]

36. Hogwash. Pick up a financial planning book. Learn about "compound interest"

when its NOT working for the credit card companies. Learn about things like "10% solution" (where you automatically pay yourself FIRST with 10% of your income), and then be amazed at what a little education can do for your finances.

Some of my favorite sources include "The Wealthy Barber" who explains the beauty of compound interest, mutual funds and easy to use investment strategies in a very simple way and "Smart Women Finish Rich" which explains why WOMEN have to pay more attention to their financial futures (because we usually outlive men) or its "companion" book "Smart Couples Finish Rich." All of these sources are available in book form, audio form, VCR and DVD lectures -- just pick how you learn (reading, viewing, or listening) and boom! You are on your way!

The Updated version of "The Wealthy Barber, Updated 3rd Edition: Everyone's Commonsense Guide to Becoming Financially Independent" by David Chilton is available USED on Amazon for $2.68 (plus shipping), while "Smart Women Finish Rich: 9 Steps to Achieving Financial Security and Funding Your Dreams (Revised Edition)" by David Bach will still cost you $7.02 (plus shipping).

Then go over to www.fool.com and start playing with some of their "calculator tools" -- some of which are scary! -- to get some more "money management skills."

There are also tons of other folks out there who want to explain to you how money can managed to work in your favor; I recommend the two I've mentioned because I found them to be very coherent, but I'm sure other folks have their favorites, too. The bottom line is that its *NEVER* too late to start getting your financial house in order, but the earlier you start, the easier it is.

Oh, and if you are going to tell me you "can't do it" on your salary (assuming you are working, as opposed to being disabled or something), I am going to laugh in your face! You see, I have a sister who put herself through college working as a waitress making under $18K a year. Having finally achieved her degree, she promptly became a single mother, and never used it. (Insert eye roll here.) Anyway, because my husband sat her down early and got her educated about managing her money, in the last NINE YEARS while WORKING AS A WAITRESS (and having another child, with no child support EVER) and no financial help from anyone else, she has managed to do the following:

Save $15K for a down payment on a house

AND

Save $18K for her son's college education (by putting $100 a month away since he was an infant -- he's NINE now!)

And she won't tell us how much she's got squirreled away in either her retirement (which is "doing well"), or her emergency nest egg (and we don't ask, because she's a grown up who keeps her credit cards either at zero or low, has a good running car, lives in a nice neighborhood with great schools, and is obviously doing well for herself).

No, she's not a maniac about "saving money" -- she doesn't even notice that she's "saving" for her and her children's future because the $100 for the college fund and however much she's been putting away for the house for the last few years automatically come out as "bills" every month, and she just runs her family budget accordingly.

I believe she runs her accounts through our local credit union so she's not paying any "super duper fees" or anything; I'm proud of her (although I wish she would use that degree she worked so hard for, sigh).

So, don't say something is impossible just because you've chosen not to do something. Staying ignorant is always an option, and you are more than welcome to do so.

Or you can quit saying IMPOSSIBLE! and start making a difference in your life TODAY!!!

The choice is yours. :shrug:

[Tierra_y_Libertad]

39. Here's the way we did it - without saving $1.5million.

1. - we paid off all of our interest bearing debts except our mortgage.
2. - we pay cash for everything we need or want. If we don't have the cash, we save until we do.
3. - we figured out how much income we would have after retirement and started living on that amount.
4. - everything else went to retirement savings plans at work, or IRA's
5. - we decided what we wanted in retirement i.e. a nice house in a rural area with acreage, no bills, enough money to indulge ourselves in what we like. Note: We are cheap dates. Both readers, so a quiet place to read good books is pretty much what we do. Note: Not for everyone. If you're a person who delights in "doing" a lot of things then you have to plan for that. You're not likely to be happy being sedate when you turn 55 if you're not now.
6. - we're both not impressed, or interested, in having new bright shiny toys to impress the neighbors with. We use it until wears out.

Result: We live in a rather "upscale" house in a beautiful area on 3 acres of woods and meadows. I have a '93, bottom of the line, Toyota pickup that I bought new and have put less than $500 (other than maintenance)in. My wife has a '91 Tercel, same story. Original prices new - $13,000 and $5000.

But, we chose not to have kids. Both of us worked for the government and have pretty good pensions and my wife collects SS.

Before we retired, we were making about $76,000 (combined) per year. We now make about $56,000 per year (including $6000 per year from a self sustaining IRA - we take out less than it makes) and are quite comfortable. And, we actually have more spendable income than we did while working.

My advice, if anyone cares, is to start thinking about retirement and what you want as soon as you can. There is simply no way to get there without planning, and saving, for it.

Having said all that, I'm amazed that most people, even frugal people, can afford to retire if they have kids to raise and aren't making a ton of money.

[LSK]

42. that is almost EXACTLY my plan

[driver8]

41. I keep telling my wife that we'll retire to a "double-wide" in Bakersfield.

We have a financial planner and we put money away, but I don't know if I'll ever get to retire.

It's scary.