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?

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

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