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I read daily about seniors who can’t pay their bills in retirement, who say it’s unfair for them to pay property taxes for schools, who say they deserve higher SS COLAs etc.
Some people, through no fault of their own, because of uncontrollable misfortune, did not have the ability to save and build retirement income at whatever level they were throughout life. But those folks are far from the majority.
So what happened that after forty years of working so many seniors seem poorly positioned to live in retirement?
We know retirement is coming (if we are lucky), we know inflation will always be with us, we know someday a spouse or partner will have to live on their own, we know taxes are a real thing living in a large society. We know or should that Social Security alone does not provide an adequate income.
I say we know all that, but might it be that many people don’t know or choose to ignore or apply wishful thinking? I did a little research and found that people often avoid planning for retirement because it feels abstract, complicated, and easy to postpone. Immediate distractions may be short-term financial pressure, lack of clarity about how much they will need, and the assumption that they can “figure it out later” or keep working indefinitely.
Some people are naturally more future-oriented because they find it easier to tolerate uncertainty, delay rewards, and think in systems rather than immediate events. Others are more present-focused because their environment rewards quick wins, and because the future feels too uncertain to plan around confidently. And some are so presently consumed with money issues, the future is not considered.
All this is a big mistake of course as the HD community knows well. For me, concern for the future has always been as strong as concern for next month. Perhaps too much so at times.
What is it that allowed you to plan and act in your long-term best interest?
We are not the right audience to ask retirement planning questions to. We all knew that retirement would come if we were so blessed and that we needed to make sure that we had sufficient savings. Most of us have pensions and SS which makes a world of difference that many private sector retirees no longer have.
Our county started a 5% match for employees’ 401k accounts. In a staff meeting, I encouraged my staff to take advantage of this fantastic benefit. The most common feedback I got was that they could not afford it. Therein lies the problem.
The problem is they think they can’t afford it when the fact is they can’t afford not to participate.
I used to have some union workers say they wouldn’t participate because they didn’t want the company using their money. The union leaders were very frustrated at such people.
Yeah, I heard that a lot. It was very frustrating.
I think people that eat well and exercise regularly would ask a similar question about people who treat their body poorly. Why don’t they do what they know is good for them?
Unfortunately knowing what is good for us in the long term, and having the motivation to do it today, are very different things.
Yeah, but saving your change in a jar each evening should be easier than exchanging a BigMac for a Kale salad wouldn’t you think? 😇. I guess not.
You should always use cooking oil in the pan before cooking kale; makes it easier to scrape into the garbage!!!!!!!
The only kale in our house goes into Portuguese kale soup where the taste is lost among the chorizo.
A mom and dad who taught me to be disciplined, hard-working, independent, and balanced in terms of living for today and planning for tomorrow. And a wife who benefitted from a similar upbringing in her household.
Other factors at work, too, but that foundation was invaluable.
Good health, good luck, and being born at the right time. I got through the first 77 years of my life without any disabling conditions and was able to work until age 70 (in fact, I still have a small amount of earned income each year.) I went back to school in the ’80’s, when grants and scholarships were available to women who would eventually enter the workforce and got a bachelor’s degree in physical therapy with a student loan that I paid off in 6 months. Now the entry level degree for PT is a doctorate and new grads often shoulder loans totaling in the hundreds of thousands. I started saving for retirement in my employer’s 403B as soon as it became available. We lived a frugal lifestyle and I was able to support a family of 6 while my husband was a stay at home Dad. Two of our kids were disabled, and there were many programs at the time available to help us support our kids at home. Our frugal habits seem to be permanently embedded in our current lifestyle. So even, as government support for our adult disabled child is falling apart, (our oldest daughter died at age 20) we have still been able to make a plan for a 3 person retirement with savings that we have accumulated from a single income.
Good health, good luck, but I’m not sure about being born at the right time. Every generation has challenges and opportunities.
My father was 19 when the depression hit, my mother 11. I was born in the middle of WWII. My parents didn’t have it easy in the post war period. I started work with a high school education. I think there are as many, even more opportunities out there today even given current prices and unlike my generation there is no military draft to disrupt their lives.
it was also a great time to be a white male in the US. That’s an important fact.
No denying that, but the fact remains, we have a lifetime to get the best results with the cards we are given. We can’t blame it all or claim it all to be the result of circumstances.
True. Vietnam cut many lives short and ruined others’ lives, but the fortunate or wise ones took advangage of the GI bill which paid for an education that they couldn’t otherwise afford. I guess it’s like the glass half empty/full discussion.
Being called to active duty in 1968 changed my life. I never left the US those two years, but it did result in me going to college and using the GI bill for school money and living expenses while raising a family. Carpe Diem, but with an eye on the future.
Employment stability with a large company with good benefits. I was fortunate to join a great Fortune 500 company, 10 years into my career. They offered an employer paid pension, a great 401k plan with a matching contribution that went as high as 117% of employee’s contributions (based on years of service) and a stock purchase plan. As a young father at the time, I realized that taking advantage of these benefits would be important to supporting my family and eventual retirement.
I was lucky (and Automated as Mark’s adjacent Forum article stated) to have a 34 year career with this company, maintaining these benefits for just about the entire time until my retirement 3 years ago. No magic formula, just persistence and patience to plough thru my career with a goal in sight.
That’s pretty much my career as well. Only difference is I spent 50 years and started right after high school in the mail room.
What allowed me to plan and act on that plan? The set-it-and-forget-it of payroll deductions into the Thrift Savings Program (the 401k for federal workers). Saving money you never see, and investing it into low cost index funds. It helped to have steady, decent-paying professional work for most of my career as a fed – something that today’s younger gig workers may not have. Saving the maximum amount plus the 5% match plus over-50 additional contributions just added up over the years. Nothing sexy, but it matches the HD approach.
That’s the key for sure. Just curious, what do you mean 50 additional contributions? Lump sums beyond payroll deductions?
He is referring to the additional “catch up” amount allowed after he turned 50 yo.
Ah, I missed the “over 50” I just saw the 50. Thanks for pointing it out.
Yes. Increases the amount contributed by about one-third. In a rising market, the catch-up contributions really accelerated the investing.
The building trades in my area are heavily unionized. The employers have agreed to provide defined benefit pensions. Additionally, the contractors provide contributions to supplemental pensions based on hours worked. Of course, many non-union employers provide good pensions as well. Such employees are lucky to have other people looking out for them.
Left to their own devices, individuals don’t do nearly as well. The challenge is how to help those who don’t seem to help themselves. Auto enrollment in defined contribution plans is a good start, and the availability of income annuities inside those plans is also great.
How about school? We don’t expect kids to master readin’ writin’ and arithmetic without formal education, so why do we expect young adults to know about personal finance without being taught in school?
You have a good point, but there is also a measure of individual responsibility to learn as well. I bet most HD readers never had formal financial education. I sure didn’t.
I didn’t either, still, the bug that bit us just doesn’t land on most people. We need to find ways to get others infected.
For me it was a combination of two related things. First, poor role models (my parents) and wanting to NOT be like them. Second, being a fundamentally anxious person by nature. I wanted to provide a more secure upbringing for my kids than I had experienced. I am not a risk-taker when it comes to finances. So being prudent about the future, including our retirement, fit right into all that.
Pretty much my story as well.
Great post Dick! Growing up in the 1950’s, my mom got me started on the ‘savings kick’ by opening a savings account at our local bank, where I’d insert ‘dimes” I “earned” through chores (cleaning, painting, mowing the lawn, washing the family car, etc) into a passbook. When it got filled, I’d deposit it into my passbook account. Fast forward decades later, I continued that habit by maximizing contributions to the company 401k plan, lRA’s, and investing outside the retirement plans. We ‘did without’, as my grandparents and parents had taught me, until we actually needed and could afford things. That lifestyle allowed us to retire when the opportunity came around, and worked out perfectly for us. I can’t understand how people today go into deep debt to purchase frivolous items and services that aren’t really needed, and don’t save, care, or plan for their future. I totally agree with your financial philosophy presented in many of your past and ongoing articles on Humble Dollar! Great work!
Dick,
I will address the first part of your post. Many people are truly living paycheck to paycheck due to various factors. However many that claim so:1) don’t understand the difference between wants and needs that translates to living within their needs, and/or 2) do not know how to delay gratification.
Very true
Dick, this is a favorite topic of yours, and it’s one that I think about as well. For a number of years, I intentionally tried to tactfully open the retirement planning conversation with younger folks, with mixed results. A few appreciated the effort, but many shied away from the subject. These days, I still look for opportunities to be helpful, but I try to pick the moment more carefully. And I’m trying not to be bothered by the fact that I know some folks that are close to me are on a path to a dim future.
Your comment about your concern for the future as well as present strikes a chord. I often think about my activity in those terms, and try to devote effort and time to each, not only in finance, but also to health, relationships and so on. I fall short of being a wonderful example or how to achieve balance, but I organize my thinking along those lines. I know we are not unique, but there are many who miss the future planning part.
Research centered on personality traits is interesting, and may shed some light on the answer. Here’s a lay article on conscientiousness, the helpful trait that drives us to do what we ought.
You’re right, it is a favorite topic, perhaps a slight obsession. I spent nearly fifty years of my life trying to get a workforce to focus on this and other related areas of insurance and financial protection with limited success.