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Jamie Dimon says, “The American dream is disappearing—and half the public no longer believes in it”.
Soaring costs of housing, child care, education, and health care are making it harder than ever for the middle class to achieve their dream. Pew research study found that while 64% of upper-income Americans say the American dream still exists, 39% of lower-income Americans say the same – a gap of 25 percentage points. About two-thirds of adults ages 65 and older (68%) say the American dream is still achievable, as do 61% of those 50 to 64. By comparison, only about four-in-ten adults under 50 (42%) say it’s still possible for people to achieve the American dream.
Many in their fifties are part of the “sandwich” generation, supporting their children as well as their parents or other elderly relatives. This takes a toll on their career, income levels and savings for retirement. Health care and long term care costs are constantly rising. How could they hope for a dream retirement?
Even if one had diligently saved and invested over the years, unknown events can derail a retirement. A serious market downturn could affect you financially. It is not all about money, though. Serious health issues, loss of a spouse, divorce, children needing financial help, and many other unforeseen events can set back a happy retirement.
While I have done a fair bit of thinking and preparation to have a happy retirement, nothing is certain. Evaluating potential unforeseen risks has been a challenge.
How do you define your dream retirement? How will you prepare for it? Or just do the best you can, be flexible and go with the flow?
I’d like to advocate for a better “T.A.D.” that looks beyond the money we each have, how many houses, what kind of car, pension or not, where we’re traveling to, what age we retire, what Medicare plan we have, etc. These things won’t matter much if we remain deeply embedded what feels like an ever-expanding tinder box of domestic and global instability and resulting insecurity (which comes in many forms, including $35T in U.S. national debt and growing with no turnaround in sight). Indeed, there’s no other country I’d rather be a citizen of, I pretty much know what I can and can’t control, etc. This bigger picture concerns me far more for the generations to come and what realities they will face, regardless of their dream, wherever they live. So, to all those out there that are trying to make a positive difference today or any day, my gratitude to you and your efforts and results.
Apologies for starting your week with a bit of a rant. We now return you to our regular program. How ‘bout those Lions…..errr…SS COLA increase?
I share your concerns especially for my children and grandchildren. But HD is directed more toward personal financial matters.
I’d love to see a study that compared what a “Dream Retirement” has been 1/4 century at a time.
The lead-in to this essay was about “the American Dream”. MS Copilot was able to identify for me some elements commonly attributed to the American Dream–home ownership, equitable economic opportunity, and a sense of financial security. It seems to me that those like me who are now approaching retirement–the last of the Boomers–enjoyed advantages over those coming after because we were more likely to have had jobs providing defined benefits (even if mixed with defined contributions), and because decently paid trade jobs were more widely available. The millennials and Gen Z see the economy they’re coming up in as more of a casino, and I can’t tell them they’re wrong. Currently, having even the possibility of security in retirement requires more discipline and savvy at an early age compared to previous decades.
American dream is defined in many ways. If defined as “if you work hard you’ll get ahead,” just 27% in a new ABC News/Ipsos poll say the American dream still holds, down sharply from 50% when the question first was asked in 2010. See link
https://abcnews.go.com/Politics/american-dream-reality-people-poll/story?id=106339566
American Dream can still be achieved. Only if the person is willing to sacrifice. Analysis of “Wants vs Needs” on every item that can affect the budget. Instant gratification is not part of the American Dream.
I’ve read that because of shortages of tradesmen they are easily clearing six figures. More than I ever made as a Physical Therapist and Certified Athletic Trainer with a Masters degree retiring six years ago.
Thanks David. I’ve heard such things. A distant relative in Florida did well for himself as a plumber, at one time owning a business with over a dozen employees. He was also in the right place at the right time to be successful with flipping houses, which no doubt helped. Another distant relative in Iowa seems to have spent over a decade trying to get a firm footing in the lower rungs in the trades. So it seems that path, like the college degree path, has its chutes and ladders and your mileage may vary.
Only around 50% of Americans in the private sector ever had a pension and largely concentrated in certain industries. Plus a pension only has value coupled with long employment in the plan – with a profitable and stable employer.
Changing jobs every 4-6 years as is typical means a pension is of little or no value anyway. The issue of no pensions is a red herring.
If a person was willing to play by the old rules of jobs and long tenure (or be a government employee) a pension is very valuable as I can attest.
Otherwise to day’s workers have a better chance with all the tax advantaged saving vehicles. Of course, all that must be embraced and used effectively for decades. And yes, exercise discipline.
Why do you exclude public sector workers every time you quote a statistic about pensions? I believe that if you include all American workers the number with pensions used to be in the 60s. Government workers still have pensions – as of 2018 94% of full-time state and local government workers had access to DB pensions, and 83% participated.
Because government workers are different and yes, nearly all do have a DB pension and some very generous – paid for by taxpayers who are funding the government workers pension and trying to fund their own. Government employment is different in many ways.
“Because government workers are different”
Workers are workers, whether they work for the government, a megacorp, a start up or a factory. You distort the picture when you quote statistics for a subset.
Government worker with pension here. Two things: (1) I contribute (a lot) to my own pension, and it’s an involuntary deduction from my paycheck. My contribution is currently around $1500/month. My employer matches it. (2) Government workers are also taxpayers.
Government workers at least in some fields could make a lot more money in the private sector but choose the public sector for quality of life, secure benefits, or simply a desire for public service. Perhaps there are ways the numbers and benefits should be trimmed, but we are not freeloaders.
How do I define my dream retirement? Exercising, reading, and eating healthy daily, traveling to other countries, and serving others. How will I prepare for it? By continuing to exercise, read, eat healthy, and save financially. I have done a lot of preparation already, especially financially through saving. It is interesting to read about other’s dream retirement, especially when it comes to health and finances. I say this because I know a lot of people (including relatives) who did not plan for retirement and then expect to have a dream retirement (e.g., social security would support all their financial needs and they would still be energetic and healthy even though they weren’t active and ate poorly). Because of my education (both formal, that is college, and informal, via personal reading) and my personal experiences, the chances of retiring financially well and physically healthy are pretty slim if no preparations are taken. For instance, I have read several longevity books (also financial books, and textbooks on Wellness, Exercise Physiology, etc.) and find them inspirational because if a person prepares well for retirement (both for physical health and financially), then they have a much higher chance of living their dream retirement. Of course, the opposite (not preparing) often leads to an unfulfilled retirement. I often tell my college students, I want to live to 100 and be healthy (overall) at that age. If I don’t prepare, the chances are slim to none. However, If I do prepare my chances increase greatly. I am well aware though, God may have other plans, and I may leave this world early or not be able to do the things I want (e.g., travel, serve others, exercise, etc.), which I am fine with, but I don’t know God’s plan and thus I plan to control those factors which I have control over (e.g., whether to exercise, eat healthy, save for retirement, etc.). Thus, to live my dream retirement I often think about this phrase, which can be applied to so many things, especially finances…”There are things you can control and things you cannot control…focus on those things you can control and be aware of those you cannot”.
This is a good summary of how we should approach this. “Focus on what you can control” should be the mantra.
I believe there is too much attention to things like “dream retirement”. There are benefits to working and benefits to retirement and they are different for different people. Rather than dream of retirement, dream of creating financial independence. Do that through diligent saving and investing throughout your work life, lean heavily toward stock and bond index funds and allocate based on your age and risk tolerance. If done over a few decades, all will be as you hope…
At 64 I fatigue easily. Still active, but not nearly the energy from say 15 years ago. At 62 my wife is retired, so I plan to work with benefits until 67 when she is eligible for Medicare. She has a handful of health issues. I am fairly healthy, so we aren’t currently chasing expensive health care concerns.
I enjoy working, and have a good job with great co-workers, an excellent boss, and a good company.
Recently I’ve increased my travelling and would like to continue that, but I cannot travel at the speedy pace I had 10 years ago.
My widowed mother passed away recently leaving a moderate inheritance. I don’t think I’d quit work even if I had received enough to do so, and I certainly didn’t. But it is comforting to have a cushion, reserve funds.
All that to say that today, my vision (dream?) of retirement is in no way close to what I imagined during most of my working years because of the energy loss. I feel flexibility is key. It’s impossible to plan around every contingency, nor expect every curveball that comes your way. If you are retired, be grateful for that, and do your best to enjoy every day you are given. If you are working, be thankful for that, and use the opportunity to build relationships. Regardless of your personal situation, carpe diem, be active yet restrained, generous yet frugal, and intentionally seek joy in all circumstances.
Looks like we need to redefine dream retirement for us every few years as life circumstances change. There has been many changes from what I envisioned years before. So “intentionally seek joy in all circumstances”, is a great philosophy.
Good thoughts. And take heart, speedy travel is overrated. Slow it down and enjoy.
Personal belief and it is slightly abstract….I believe retirement is a shift or a glide path, not a point in time or life. Old stigmas will have you believe that you work your 40-50 years, then there is a lackluster “party” in a breakroom with a sheet cake and a gold watch is presented to you. At that POINT, you are retired. You live off a pension (or investments) and social security, complain about fixed income, and putter around your home until you and your spouse pass one day. Literally, one day, you are chipping away at work and the next day, you are home figuring out what in the world to do with your time (maybe golf, maybe gardening).
That may be true for some still, and many more in the past, but it will not be for me. I do not dream of a DAY or point in time where there is such an abrupt change, like a light switch getting swiftly flicked off.
For me….it will be a slower, malleable and flexible shift. There will be multiple points of inflection. Here are a variety of retirement points on MY glide path. Each point represents a new chapter, a shift in responsibility or opportunity. In essence, something is getting more manageable or less stressful. Sometimes there is a little loss involved or an opportunity ending, but for the most part, life becomes more joyful or manageable at each inflection point.
First inflection point – home downsizes – Retirement will START at age 45ish (with my wife and I both still working)…which many will call ridiculous. How can we “retire” and both still work? I reply, “by working less.” With a downsize, we will have less to manage (no more inground pool to sap my summer hours), less square footage means lower taxes and utilities, fewer bathrooms to clean, less junk in a basement to manage. And our finances will be more flexible, as we will have no mortgage again, not too mention lower maintenance costs and property taxes. We may even have some extra money after our current home sale to add padding to our retirement savings or take a memorable international, extended family trip of 60-90 days before the kids get too much older.
Next inflection point – one spouse COULD stay home and we are coast fi. This will be around 49-51. My wife will be able to shed her increasingly stressful banking career. We won’t need her income, and as long as I can provide 60-70k of self-employed income consulting, we will be fine and able to maintain our current life. This is also a super advantageous time to reduce our income. Again, at this point, we are coast fi. The kids will soon be in college, and a reduced income could significantly increase their need-based aid and/or Pell grants. The grants/aid piece could change; we are in NO way banking on it, but it would be a great bonus if that’s still around then. We can also 100% afford medical insurance and our lifestyle on 60-70k, so we won’t NEED assistance. But I wouldn’t turn down Medicaid or ACA subsidies if we qualify. Our state has expanded Medicaid, and at 60k for a family of 4, we would have almost free healthcare (about 1-2k, which would cover ALL out-of-pocket expenses). If that isn’t an option, well pick up an ACA plan and use it as a business write-off. Bonus points if we get any subsidy there. So, here we went from 2 spouses working to 1. The other spouse can maintain the house and most of the chores and/or find a “fun part-time gig”. My wife talks about being a part-time flipper (buying pallets of returned goods and selling them) or a party planner.
Next inflection point – BASIC financial independence (ask work to take 2-4 EXTRA weeks of unpaid leave a year). Age 50-52. We wouldn’t have so much money we would want to retire completely, but we would have enough that if I lost my main income or had health issues and couldn’t work, we could pay all needed bills. No travel or throwing big parties or eating out weekly or upgrading the family car or paying for kids weddings, JUST the basics. Talk about taking a load off. Day to day, it doesn’t seem like much has changed but this is huge. No longer worrying about “what if I lose my career”. That freedom will allow me to ask for more flexibility at work. Instead of waiting to be 100% retired, my wife and I could take an extra extended budget trips or two a year. We are experts at stretching our travel dollar and would love to explore Eastern Europe or South America or road trip to national parks, take a month doing humanitarian work, or a month doing a big home project together or take long train rides to less popular cities with cheap amenities. I can afford to ask for special treatment because I wont really care too much if I get let go.
Next inflection point – I drop to part-time/and/or side hustle. Age 54-59. At this point, I would keep a handful of ideal clients and work at most 30 hours a week with 8 weeks off annually. With each passing year, I would aim to add a week off until I get to 16 weeks off. If I still enjoy what I am doing, I’ll keep going but may drop my hours to 20 max a week. Also, around this time frame, my wife and I have discussed buying a 2-unit home. We happily lived in one for 12+ years in our 20s and early 30s. It was a nice side income; we picked people we enjoyed living alongside, and there was someone to grab our mail and look after the house when we traveled. The extra tax write-offs and lower general cost of living were great perks, too. I look at this phase as a transition to a slowing down phase. Essentially, it is our honeymoon phase. Get out and enjoy the world and our freedom. Go to a movie on a Tuesday afternoon, visit France, take a cruise, join a scooter gang.
If things change from 45-59, like big tax code changes, market meltdown, or a spouse gets sick or passes, we move through our phases slower. We COULD stay buckled down and save hard and try to retire at 52-57 but, we don’t crave a SINGLE point in time to be done. Also, that feels riskier to us, the odds of delays from market factors are higher, and there are fewer income sources for diversification.
Next inflection point – being FULLY financially independent (can cover all basics AND lives extras). Age 60-62. We can let go of any part time work or side gigs or income properties and still travel as we like and have money for activities and meals out now and then. I may still choose to keep working part-time or a fun gig like financial coaching but I don’t have to.Extra money will go towards giving the kids early “inheritance” to start them off in life more OR save a little if we need to relocate to a higher cost of living city to be near adult children (if they move away) or maybe save a little to move to a senior centric community (I read they have pretty high HOA fees).
Next inflection point – being a grandparent – (First grandkid at age 62-67) – This may be the time when I quite consulting for good. Also, we will slow down our travels a little. We want to offer support taking the grandkids SOME. I do not at all desire to be full time daycare, but taking them 1 or 2 days a week for 4-6 hours would be great. Or watching them after school / helping pick up or drop them off to daycare, and having everyone stay for dinner a few times a week would be awesome to us. Also, around this point the lower-earning spouse will start taking social security, so that will replace some consulting/part-time gig income and give us another source of income.
Next inflection point – Higher earning spouse takes social security. Age 70-73 (if the age gets bumped up). At this point, I never worry about where the markets are at again. Good chance we decide to simplify around now as well. If we still have a multiunit, we will consider selling and relocating to a senior-centric community. May also look to set up a qlac annuity to simplify my wife finances in the event I pass early. If all the grand kids are in school, we may try to up our cruises to more exotic places like an Alaskan cruises or Mediterranean cruises for easier travel (health permitting).
Next inflection point – the slow go years – Age 74+ or later (god willing). Keep build friendships at a senior community, get a small dog, cook for our family as much as we can while we can and host as much as we can. Enjoy slower paced hobbies. Gift while we are alive (set up the grand kids a bit).
Well thought out road map for your retirement!
Key to all of this, I think, is managing our expectations and that is very hard to do. I know several who had big plans for retirement, and when things did not work out, ended up feeling miserable.
I agree. A person has to be flexible because life has a way of throwing us curve balls, sometimes when we least expect it.
I don’t think the American dream is dead at all, rather the aspirations of what that may be may have gotten out of hand.
Our dream regarding homes, vehicles, life style and the accumulation of stuff and leisure time even retirement age, may be unrealistic. It certainly is not consistent with most of the world.
I just read today that 80% of the world population has never been on a plane.
Agree, many things people desire today are unrealistic but such desires are shaped by external influences. When the reality sets in, they realize it is not possible. Owning a home and having children, which was part of American dream for decades, may be out of reach for many now.
Whose dream? Yours? Your parents? Your first boss? The consumer product salesperson/marketer? The socio- political movements that along with advertising and TV gave you the American dream in the first place? Did reciting the pledge of alligence in your classroom have any sway in turning you into the older adult you are today?
Everyone’s dreams are personal of course. I try to resist mine being what I’ve been sold on TV or in lifestyle articles. Maybe I will one day take a cruise but I fully expect to be trying to buck the system when I do rather than being compliant herded.
Great advice to believe in yourself, and achieve your own dreams instead of worrying about what society tells you. Not easy to have that inner strength to buck the system!
Content. Is how I summarize the thought of retirement. I will be blessed with pensions and S.S. that will be the same as or working income. If people go through life content with what they have, they be content with what they have. I’m a keep it simple and don’t overstress kind of guy
When my daughter was in high school she went to Honduras to help build a school. She was shocked at how little the children had, but even more so by how happy they were.
One of the best lessons a US teenager can learn.
In 1984 I visited Port Au Prince, Haiti and learned about the ovarian lottery before I had even heard the term. “There but for the grace of God…….”
Perfect approach even if life throws curved balls at you. That requires a well developed sense of what really matters in life.
I have been living a dream retirement for nearly 15 years obtained by working for the same company with a pension for nearly 50 years to age 67 and also having a 401k plus 70 or so years of saving and investing.
The non-financial aspects of retirement have also been met with travel and especially the ability to spend time with children and grandchildren
Retirement is a very new phenomenon. For most of human history people worked until they were physically unable to work any longer, and usually died first. Pensions date from Bismark’s Germany in 1889 – only a little over a hundred years ago. US Social Security dates to 1935 – less than a hundred years ago. The very idea of a “dream” retirement is therefore a novelty and may well be out of reach for a lot of people.
I have already written about my current life in a retirement community. I was fortunate to have a well-paid job, as I didn’t start saving seriously until my late 30s. However, I maxed out my 401k and saved outside it as well. I could still encounter a life-altering medical diagnosis, the end of Social Security and/or Medicare or major inflation.
Actually the first pension plan in the US was 1875. My former employer started its plan in 1911. But you’re right, real retirement only happened with growing life expectancy.
There will not be an end to Social Security or Medicare. You seem to have planned well, why do you occasionally mention a concern of running out of money?
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Running out of money may not be especially likely, but with a no-COLA pension and projected cuts to SS, not to mention high inflation if tariffs go into effect, it’s certainly possible.
Retirement is a novel idea, it was considered a luxury until the 50s when the US rebuilt the world economy. Prior to the 50s, you worked until you couldn’t and then you lived with a child or went off to a home for the aged (poor house).
If we asked people about retirement, the American Dream, with that framing, what do you think the responses would be?
What is lacking from the Pew article is a comparison with previous surveys on this issue. The results of the Pew survey are also different from those of a survey by YouGov.
A June 2023 poll found that 61% of Americans say there is such a thing as the American Dream, up 18 percentage points from 43% in July 2022.
https://today.yougov.com/politics/articles/45934-more-americans-believe-american-dream-now
I think there is a difference in the two surveys. Pew survey asked people if they can achieve American dream. But YouGov asked if they believe in American dream. Yes, you believe in it, but achieving it is getting much harder.
The YouGov survey also found that:
“More Americans also find the American Dream personally attainable in 2023 than they did in 2022. Today, 44% think the American Dream is very or somewhat attainable for them; in 2022, 29% did.”
I see your point now. However, 2022 coming out of pandemic may not be a good year to compare.
This link shows how it changed from 2010 to 2024. Big drop over longer term.
https://abcnews.go.com/Politics/american-dream-reality-people-poll/story?id=106339566
The linked Pew article doesn’t define the details of the “American Dream.” For retirement, considering the challenge of saving for a decades-long span of not working, if we imagine a lifestyle significantly above the one we can presently support, if may well be just a dream, rather than a possibility.
In my mind this topic ties in with Jonathan’s “Those who follow” forum topic. Believe me when I say that there are plenty of current retirees struggling to get by. Many failed to plan for retirement and I have seen many deplete their savings by helping adult children. And then there’s the luck factor.
I’m also a believer in envisioning where you want to be. I’m going to plagiarize a paragraph from Douglas Tester’s recent article:
In 1852, Henry David Thoreau celebrated the keeping of a journal. While Thoreau was writing about personal journaling, his thoughts apply to keeping a financial diary: “The contemplation of the unfinished picture may suggest its harmonious completion. Associate reverently and as much as you can with your loftiest thoughts. Each thought that is welcomed and recorded is a nest egg, by the side of which more will be laid.”
And did I mention the luck factor?
Luckily, you did. 🙂