Considering the steadfast ideology of no new taxes among many of our elected officials, is it possible that our politicians will simply let the fund go bankrupt? Their position would be: "There aren't enough funds coming in, so benefits will have to be reduced accordingly." This approach would allow the politicians to say it's not their fault, but rather simply a consequence of the design of the system. We will have to all tighten our belts to weather the bubble caused by the baby boomers all retiring.
Jonathan, your courage and attitude are an inspiration. My hat is off to you. I have been absorbing and following your wisdom for so many years that I wish it could continue forever. I wonder if there is any opportunity to publish your writings in a collection. Maybe even the WSJ would allow you to document all the wonder insight you have provided. When you leave us your legacy will continue on long into the future. Thank you for providing such a positive influence on my life and many others.
Great article Ken. My wife and I also retired well before 65 because our jobs were adversely impacting our health. We were very fortunate in that we worked for a company that allowed one to retire and receive a pension after 30 years. That was always our goal and we started an aggressive savings plan in our early thirties to enable us to get there. Interestingly enough, I was an avid reader of Jonathan Clements articles on investing in index funds and that is where all our savings went. That investment strategy allowed us to assume that the historical growth of the market would on average be around 6 or 7%. We built our saving plan using that average. One might ask, how did we know what was needed and if we were on track? Well I looked at our annual spending for several years. I then built a spreadsheet that plotted that spending until our mid 90's. Our spending was projected to grow 3% annually and I threw in periodic major expenditures that happen to everyone over time, i.e. new car, new house, medical expenses, etc. I then projected how much our savings needed to grow to stay well ahead of our spending, recognizing at some point, work income would end, and at that point our pension, savings, and social security would have to offset the spending. It was a great way to see how we were doing annually. Most years were great because our savings stayed ahead of our projections. But, that was not always the case, my spreadsheet showed us falling behind during the market swoons. During those periods, we didn't touch our investments, we assumed the historical average would eventually prevail. When the market came back, so did our progress against the required projections. I guess you can say we are a perfect example of what Jonathan had shared for many years: invest in index funds, maintain a balanced portfolio, and trust that over time the market will yield its average. We will always be grateful to Jonathan for sharing his infinite wisdom. In relation to your article of being able to retire before the job does one in, in all likelihood one will need to be a dedicated saver and a disciplined spender. Having surplus funds as you reach your 60's gives one flexibility to live the remaining years of your life in relative peace.
I am perplexed with the perception that our youth or disadvantaged folk think the world is unfair or biased against them. Where did that notion come from? My experiences tell a different story. I see people working two and three jobs to get ahead. I see teenagers working and contributing their time to worthy causes. To me the world is as it always was, those with ambition and guidance will find their way, those that are lost just need a little encouragement, support, and opportunity to find their way. The desire to succeed and be productive is human nature. Those of us who have been successful have the means and resources to help those who have not. It is worthwhile and very satisfying to give back and help others who are struggling to succeed.
Jonathan, congrats on your decision. Dispensing wisdom does not have to be measured or quantified in retirement, rather I hope you can enjoy the accomplishment and gratitude you receive from others that benefit from your knowledge. Your articles in the WSJ about staying the course and being comfortable with riding the market using index funds were just the message I was looking for many years ago to guide my investment strategy. As a result my wife and I were able to retire 8 years ago at 56. Thank you.
I am curious, can someone estimate what kind of income and savings rate a 22 year old needs earn to have to save $22500/year in a 401K? Forty some years ago when I started working, saving 15% of your income was considered a great a savings rate. One has to earn $150K/yr to save $22.5/yr if the 15% savings rate is used. Various articles on the web indicate the average income of a twenty year old is closer to $50K/yr.
Please recognize I am not knocking the concept of saving as much as you can as early as you can, but I think this article might have more appeal to younger folks if the numbers used were more in line with the world our twenty year olds live in.
I would run from any philosopher that advocates: “Lucky fools do not bear the slightest suspicion they may be lucky fools,” It's much too negative and condescending. I would much rather believe the Roman philosopher Seneca, who stated: "Luck Is What Happens When Preparation Meets Opportunity". I suspect that if one looks at any situation where they believe they were lucky, they will find Seneca's observation very much in play.
Comments:
Considering the steadfast ideology of no new taxes among many of our elected officials, is it possible that our politicians will simply let the fund go bankrupt? Their position would be: "There aren't enough funds coming in, so benefits will have to be reduced accordingly." This approach would allow the politicians to say it's not their fault, but rather simply a consequence of the design of the system. We will have to all tighten our belts to weather the bubble caused by the baby boomers all retiring.
Post: The dilemma of fixing Social Security. Quinn has a few ideas focused on fairness for future and current retirees
Link to comment from November 6, 2024
Jonathan, your courage and attitude are an inspiration. My hat is off to you. I have been absorbing and following your wisdom for so many years that I wish it could continue forever. I wonder if there is any opportunity to publish your writings in a collection. Maybe even the WSJ would allow you to document all the wonder insight you have provided. When you leave us your legacy will continue on long into the future. Thank you for providing such a positive influence on my life and many others.
Post: On the Clock
Link to comment from August 17, 2024
Great article Ken. My wife and I also retired well before 65 because our jobs were adversely impacting our health. We were very fortunate in that we worked for a company that allowed one to retire and receive a pension after 30 years. That was always our goal and we started an aggressive savings plan in our early thirties to enable us to get there. Interestingly enough, I was an avid reader of Jonathan Clements articles on investing in index funds and that is where all our savings went. That investment strategy allowed us to assume that the historical growth of the market would on average be around 6 or 7%. We built our saving plan using that average. One might ask, how did we know what was needed and if we were on track? Well I looked at our annual spending for several years. I then built a spreadsheet that plotted that spending until our mid 90's. Our spending was projected to grow 3% annually and I threw in periodic major expenditures that happen to everyone over time, i.e. new car, new house, medical expenses, etc. I then projected how much our savings needed to grow to stay well ahead of our spending, recognizing at some point, work income would end, and at that point our pension, savings, and social security would have to offset the spending. It was a great way to see how we were doing annually. Most years were great because our savings stayed ahead of our projections. But, that was not always the case, my spreadsheet showed us falling behind during the market swoons. During those periods, we didn't touch our investments, we assumed the historical average would eventually prevail. When the market came back, so did our progress against the required projections. I guess you can say we are a perfect example of what Jonathan had shared for many years: invest in index funds, maintain a balanced portfolio, and trust that over time the market will yield its average. We will always be grateful to Jonathan for sharing his infinite wisdom. In relation to your article of being able to retire before the job does one in, in all likelihood one will need to be a dedicated saver and a disciplined spender. Having surplus funds as you reach your 60's gives one flexibility to live the remaining years of your life in relative peace.
Post: Why I Retired
Link to comment from July 1, 2023
I am perplexed with the perception that our youth or disadvantaged folk think the world is unfair or biased against them. Where did that notion come from? My experiences tell a different story. I see people working two and three jobs to get ahead. I see teenagers working and contributing their time to worthy causes. To me the world is as it always was, those with ambition and guidance will find their way, those that are lost just need a little encouragement, support, and opportunity to find their way. The desire to succeed and be productive is human nature. Those of us who have been successful have the means and resources to help those who have not. It is worthwhile and very satisfying to give back and help others who are struggling to succeed.
Post: How I Got This Way
Link to comment from May 31, 2023
Jonathan, congrats on your decision. Dispensing wisdom does not have to be measured or quantified in retirement, rather I hope you can enjoy the accomplishment and gratitude you receive from others that benefit from your knowledge. Your articles in the WSJ about staying the course and being comfortable with riding the market using index funds were just the message I was looking for many years ago to guide my investment strategy. As a result my wife and I were able to retire 8 years ago at 56. Thank you.
Post: The Other Enough
Link to comment from March 11, 2023
I am curious, can someone estimate what kind of income and savings rate a 22 year old needs earn to have to save $22500/year in a 401K? Forty some years ago when I started working, saving 15% of your income was considered a great a savings rate. One has to earn $150K/yr to save $22.5/yr if the 15% savings rate is used. Various articles on the web indicate the average income of a twenty year old is closer to $50K/yr. Please recognize I am not knocking the concept of saving as much as you can as early as you can, but I think this article might have more appeal to younger folks if the numbers used were more in line with the world our twenty year olds live in.
Post: A Path to $10 Million
Link to comment from February 15, 2023
I would run from any philosopher that advocates: “Lucky fools do not bear the slightest suspicion they may be lucky fools,” It's much too negative and condescending. I would much rather believe the Roman philosopher Seneca, who stated: "Luck Is What Happens When Preparation Meets Opportunity". I suspect that if one looks at any situation where they believe they were lucky, they will find Seneca's observation very much in play.
Post: Lucky Fools
Link to comment from December 4, 2022