FREE NEWSLETTER

Saving Your Life

Richard Quinn

I GREW UP IN a lower-middle-class family. We lived in a small apartment where I slept on the living room couch. My father sold cars for a living.

Today, my living standard is quite different. On average, 97% of retirees my age have less income and assets than my wife and me. Our friends are in similar economic circumstances. If they weren’t, they couldn’t live where we do.

The minimum needed to live in our condo community is $24,000 a year. That covers property taxes and homeowners’ association fees. Many of our neighbors spend the winter at their homes in Florida. A significant percentage of residents in our community are widows, indicating they had family assets sufficient to stretch over two lifetimes.

In short, we’re all pretty much out of touch with the economic reality of most Americans our age. That may be true of some HumbleDollar readers, as well. Occasionally, we need a reality check. We need to appreciate what walking in the shoes of a typical retiree might be like.

I’m regularly brought back to reality by participating in several Facebook groups for retirees and near-retirees. In a recent exchange, a woman mentioned that she and her husband raised a family of six on $35,000 a year. I noted that $35,000 for a family of six is considered poverty.

She replied that they don’t spend what they don’t have, and the only debt they ever had was a mortgage—now almost paid off. She then said it might be poverty to some, but they feel rich.

Meanwhile, in a discussion on my blog, one retiree commented: “I never made more than $35K during my 27 years of employment. I had 7 years that I was not employed, and my only income was a small military pension. My total income in 27 years of work was $310,000. I retired at age 50 in 2006 and in 2018, at age 62, I started [Social Security] retirement benefits. My wife and I are living on 70% of our monthly income. Our emergency fund is over $10,000 now, a first in 43 years of marriage. I never have understood all the so-called experts that say you better have $2 million in retirement savings or you will be screwed. Millions of families and retirees prove the experts wrong every day.”

I also occasionally review comments on AARP’s website. What you read is mostly pleas for higher Social Security cost-of-living adjustments, complaints about living on a fixed income and general comments about the inability to pay bills. I’m not sure how to react. Do these seniors deserve our empathy—or is it fair to question how they led their lives to reach this state?

Our Free Newsletter

Many people enter retirement by cutting expenses, including not eating out. They trim other costs as they can. Is that the goal of an enjoyable retirement? Maybe not. But for many, it’s a necessity.

Keep in mind that the median household income for those 65 and older is about $47,000 a year. According to the Federal Reserve, the median retirement account balance for households headed by someone age 65 to 74 is $164,000, while the average—which is skewed higher by those with large accounts—is $426,000.

Surveys say 58% of Americans own stocks, including in their 401(k) or IRA, with stock-owning families holding a median $40,000 worth of shares. All this is a far cry from the $1 million that’s thrown around as the sum needed for retirement.

For many seniors, a lifelong strategy of saving and investing could have made retirement less stressful. While income is undoubtedly a factor in our ability to save and invest, so is financial literacy.

The minimum initial investment required to open a mutual fund account is low and sometimes zero. More Americans could invest by buying stock funds and reinvesting their fund distributions, but they don’t.

Fear of losing money and the shock of 2008 haven’t helped. Those who claim they lost their retirement savings back then likely panicked and abandoned the stock market, thereby locking in their losses.

So far, 2022 may be reinforcing this fear of investing. That’s a shame because it puts future retirement security at risk. Yes, saving and investing is more difficult at lower incomes, but it’s nearly always possible. Prioritizing saving over spending is essential, as is starting early and sticking with a plan—preferably for 40 years or more.

Richard Quinn blogs at QuinnsCommentary.net. Before retiring in 2010, Dick was a compensation and benefits executive. Follow him on Twitter @QuinnsComments and check out his earlier articles.

Do you enjoy HumbleDollar? Please support our work with a donation. Want to receive daily email alerts about new articles? Click here. How about getting our newsletter? Sign up now.

Browse Articles

Subscribe
Notify of
17 Comments
Inline Feedbacks
View all comments
ishabaka
ishabaka
5 months ago

This is the first time and first place in the history of hominids where the number one nutritional problem of the poor is obesity.

Richard Gore
Richard Gore
5 months ago

Not sure what point you are trying to make. The two individuals you profiled seemed quite happy with their lot even though their retirement savings were much less than what you think is adequate. Perhaps, the message is to be to happy with what you have as opposed to always striving for more.

R Quinn
R Quinn
5 months ago
Reply to  Richard Gore

if you are happy or at least content living within your means such as it may be, then you are probably right. However, I think those two people may be the exception.

Peter Blanchette
Peter Blanchette
5 months ago

It is amazing that the financial condition of many retirees is not worse than it is. Were it not for SS there would be rebellion in the streets. The most dominant method of saving for retirement thru employers is the 401K. Only about a quarter of small businesses(there is something like 30 plus million small businesses in US) offer a 401K and if they do they have high fees causing people who use them to pay a significant amount in fees over 20 or 30 year periods, taking up to 20 to 25% of future savings over an extended savings time frame. My brother-in-law is an atty and at his firm the 401K has fees between 1.5 to 2 %. That does a job on any savings over a long period of time. On top of that the 401K is far from the best vehicle to promote long term saving habits. It asks millions of people with no investment background to become Warren Buffet. That is why large corporations pay their executives in stock and bonuses and generous pensions. After all, they are too busy to be playing with 401K investment choices. Even Ted Benna who is credited(or cursed) with coming up with the tax innovation that companies now use to fund 401K vehicles downsized his life 20 years at the age of 56 to save 50% on his retirement spending. If anybody you know does not have a pension you can thank Mr Benna. In 2015 well over 50% of tax returns were filed with an Adj Gross income of $50K or less. That kind of income over such a large span of the population does not enhance the ability of large numbers of people to save tons of money for life after retirement. But of course if only they would cut out the Starbucks coffee everything would be different.

https://www.plansponsor.com/only-28-of-small-businesses-offer-a-401k/

https://www.barrons.com/articles/401-k-inventor-ted-benna-says-the-retirement-plan-has-gone-awry-51555759800

Philip Stein
Philip Stein
5 months ago

Richard, your comment about pleas on AARP’s website for higher Social Security cost-of-living adjustments (COLAs) jumped out at me for two reasons.

First, COLAs are meant to match inflation and maintain the purchasing power of your Social Security benefit. You can’t get a COLA greater than the rate of inflation. That is really asking for a benefits increase.

Second, I wonder if those making such pleas realize that any benefit increases would come from the paychecks of the current generation of workers and their employers. Wouldn’t this make it more difficult for those younger workers to save for their own retirements?

R Quinn
R Quinn
5 months ago
Reply to  Philip Stein

Both valid points and no, they either don’t realize it or don’t care.

David Golden
David Golden
5 months ago

Great article. Speaking of human behavior, what’s with the insatiable appetite to compare? Absolutely guilty myself though something tells me it mostly leads to negative emotional outcomes. Not sure what sources peg your family in the 97% percentile but a favorite is DQYDJ.

AmeliaRose
AmeliaRose
5 months ago

Yes, there are more of us than people think. As others have said, it’s about choices, but it’s also about luck. I’ve always lived below my means thanks to my parents, who lived through the Depression and were good examples for me. I went back to school in my 40s and got a computer science degree at the right time, then found a good job that pays a pension. I’ve been fortunate.

Thomas Taylor
Thomas Taylor
5 months ago
Reply to  AmeliaRose

I think fortunate is a very good word and I know choices and luck has played a part in my journey. My parents were born in the 1920’s and raised five kids who were born between 1950 and 1964. They worked hard and never made a great deal of money. My dad spent 30 years in the Navy. They set a good example for us all, but my four siblings just seemed to struggle their whole lives. The talented and smart one got caught up in a lifetime of drugs and alcohol (now sober but the damage is done) and the oldest was married and divorced five times. They have no savings and live on Social Security. While the baby of the family has since passed from cancer, she and my other sibling had their own issues throughout life and had little savings, if any. I make no judgments on their lives and I help when and where I can but I’m glad I’m not in their shoes, although I see and understand their struggles. My 89 year old mother-in-law is now living with us because she can’t live alone anymore and she only has Social Security as well. She didn’t own the house she was living in and certainly can’t afford an assisted living facility or in home care.

R Quinn
R Quinn
5 months ago
Reply to  AmeliaRose

Fortunate is a good word. I too have been fortunate, but there are many people who waste good fortune and advantages they have been given.

parkslope
parkslope
5 months ago
Reply to  R Quinn

I agree that there are far too many people who waste their good fortune and advantages. Where I think we differ is that you seem inclined to think they have no one to blame but themselves while I don’t think anything is accomplished by blaming them for their failures. The magnitude of the problem is so widespread that we need to get out of a blame mindset and focus on effective and compassionate solutions.

R Quinn
R Quinn
5 months ago
Reply to  parkslope

Human nature is so complicated I’m not sure there are solutions to many issues, compassionate or otherwise. Consider the numerous programs, laws, tax codes at all levels of government designed to help and incentivize people to act in their best interest and yet …

Last edited 5 months ago by R Quinn
Ormode
Ormode
5 months ago

There made be a lot more of us than people think. If you live well below your income, you will blend in. I have been retired for 8 years, and I still only spend about 40% of my income, and I haven’t even touched my retirement accounts.
I still have a budget, which I usually don’t spend anyway. I guess I’m still saving for my old age! At least I won’t have to worry about LTC.

Rick Connor
Rick Connor
5 months ago

Dick,
Thanks for a fine article tackling an important topic. Walking in another’s retiree’s shoes can be enlightening. Doing taxes for seniors with modest or low income is enlightening. People seem to find a way to make ends meet on limited SS. Many combine households across generations, or with siblings, or other relatives.

I also see the other side sometimes, retirees who had middle class incomes but are financially adept, have saved and invested, and are in fine financial shape. It’s not always easy to tell one from the other at first glance.

R Quinn
R Quinn
5 months ago
Reply to  Rick Connor

Makes you wonder what makes the difference between those who figure it out and those that don’t.

Last edited 5 months ago by R Quinn
polamalu2009
polamalu2009
5 months ago

Judging by your photo we are probably close in age so our folks were part of that generation that lived through the depression and fought in what my dad referred to as The Big One WW II. Frugality, saving and hard work were drilled into us. Dad would find physically demanding menial labor jobs for me and my brother every summer and on holiday breaks from school. Digging ditches and working on automobile assembly lines convinced me I’d better hit the books if I wanted to avoid a lifetime of backbreaking labor or constant exposure to chemicals and paint fumes. It’s not politically correct to point out the choices that people make and how their lives turn out but the old fashioned values of being able to support yourself, getting married then having kids, and living below your means usually assures a modicum of success and a secure retirement.

R Quinn
R Quinn
5 months ago
Reply to  polamalu2009

I was born in 1943 and I totally agree with you.

There is so much in our lives that is about choices. Sure, there are folks who are given a bad hand and will always struggle, but for most it’s the decisions they make.

Many people seem to have lost perspective and rather complain about how tough things are today. As you noted, times were a lot tougher many times in our past – including inflation by the way and the virtual non-existence of health insurance before WWII.

I wish schools spent more time teaching practical history, civics and financial literacy.

Free Newsletter

SHARE