<p>As a country, we are not saving enough.</p>
<p>For those that are borrowing to send their kids to college, you better think of the long term ramifications.</p>
<p>401k plans don't work enough for most people.
Social security isn't going to cut it.</p>
<p>You need to save between 8-10 times your last yearly pay before retirement to have enough money to get you to life expectancy. </p>
<p>So watch that college debt.</p>
<p>Can you afford to go through life with so much anxiety? Seriously, I've seen a</a> whole list of threads full of worry about a lot of issues here on CC, such that I think the real problem is not the issues (some of which are important, and some of which are not) but rather the worries gaining purchase on one parent's thought processes. I don't think it's constructive be so consumed by worry.</p>
<p>I think there is something between consumptive anxiety and careless or carefree attitudes about money and saving.</p>
<p>It makes sense to be careful and thoughtful about ones money, not to overspend or overborrow or overconsume.</p>
<p>OTOH, it doesn't make sense to live with complete delayed gratification either, and to sock all ones money away for the future, since we have no idea what the future holds. Often times, the present needs supercede the future, in different circumstances.</p>
<p>Happy Medium, is my mantra.</p>
<p>tokenadult, people need information. They don't have the information. </p>
<p>It's kind of like getting an education. Is it better to be educated or not?</p>
<p>Once they have it, they can do what they want with it.</p>
<p>Many parents have insufficient funds for their children's education due to misfortune, not indiscretion. I think the assumption that those who "overborrow" for college are doing so b.c. they are/were irresponsible is a gross oversimplication. Many parents, frankly, are forced to overspend/borrow to put their children through college by their own circumstances. </p>
<p>The survival rate for a small business is at an all-time low; and the rate at which small businesses file for Chapter 11 reached an all-time high recently. Additionally, there has been a tremendous increase in the number of families filing for bankruptcy; roughly 50% of whom do so because of medical expenses. Of these, 50% have health insurance. Such circumstances hardly represent financial indiscretion. They represent parents working hard to do the right thing, and getting screwed with their pants on in the process. </p>
<p>In light of the volatility of our economy, and the afore-mentioned inadequacies of social security and 401ks, a child's education may represent the most profitable investment parents can make in such situations. They won't be able to afford to retire unless:</p>
<p>1) they experience a miraculous financial recovery, or;</p>
<p>2) their child can afford to support them.</p>
<p>There are some good points in post #5, and I think my rather different (from some parents on CC) attitude toward spending money on our children's education comes from living in a different country for six years. Where my wife grew up everyone was POOR, and there wasn't a trace of a government-mandated retirement income system in those days. Parents there thought, and still think, that there best investment in their OWN future is to invest in their children's education. I know a lot of American parents who are afraid to think that way, perhaps because they fear that their children will be ingrates, but I have seen successful examples of th kind of thinking that prompts investment in education not only overseas but also right here in America. Yeah, it would be great to be already fully vested for a retirement of ease and luxury, but meawhile we spend the money we have on what we think is our most important task as parents--on making sure our children have good educations that broaden their future possibilities. Other than that, I don't fill my life with worry about the future. I've heard in several different decades that people in my generation would be poor in their old age, all by way of urging various changes in government policy, but I think doing right by my children goes a long way toward protecting my future.</p>
<p>My neighbor hasn't retired and she is 92!
I doubt if I will live that long- but we plan on 2nd careers not retiring
and if worst comes to worst we can sell our property and live someplace like Ghana where cost of living is lower</p>
<p>I watched it and thought it was lame. Not a word about tapping into home equity which is the largest asset for most people and usually entails much more house than you need in retirement. Scale back and move to a lower cost location and you cut the cash needs substantially and put $$$$$ in your pocket.</p>
<p>"You need to save between 8-10 times your last yearly pay before retirement to have enough money to get you to life expectancy."</p>
<p>I thought that you were only supposed to withdraw 4-5% of your retirement fund each year after retirement, which implies that people should save at least 16 times their final yearly salary, assuming that they will need 80% of that salary. This ignores Social Security, of course.</p>
<p>Barrons, at least somebody watched it.</p>
<p>I don't know where the 80% of the finaly salary comes from. If you earn $40k, I can see it. But not if you earn $200k. House paid for? Check. No more summer camps, music lessons, etc.. Check. College tuition paid for? Check. So why if a person's final paycheck was $200k, would that person need $160k per year to live on?</p>
<p>dstark: I watched it. I too do have a problem with financial planners telling people you need 80% of your salary to live. Even right now you don't need 80%. Just look at your take home pay. In most instances it will be lower than 80% of your gross salary.</p>
<p>What they should tell people is 80-100% of your yearly expense replacement.</p>
<p>I watched most of the program and do not find it lame in the least. Barron's suggests that a retired couple merely sell their home, downscale and move to a lower cost area of the country. That is fine if you live in the NE, Cali or some other high priced area. However the program focused on very middle class families who are not in that situation and are able to retire with no company pension and a 401k account of less than $100k. This time is approaching for millions of people approaching retirement age and they are now in a fix.</p>
<p>To presume that all American's will be able to cash in on that $500,000+ home equity just shows how clueless Barron's is. He may be in that position, I am in that position(just barely) But the median home sale price this quarter was only 217900 nationwide and 179,900 and 158,800 in the midwest and south respectively. There is not much equity to be had for folks at or below the median. </p>
<p>The hugh quantities of wealth ready to be passed down to the next generation are the estates of aging parents. However most of these assets are in the hands of the top 5% wealthiest families and we know what just happened to takes on those assets. Wiped out of the tax code. If my wife and I were to die tomorrow our son would inherit an estate in excess of $3,000,000 tax free and to add salt to the middle class tax payer, the capital gains which we would have to pay on these assets would be wiped out too because they are passing through probate. Our son's tax basis would be that $3,000,000.</p>
<p>Sorry about this last "rant", but most middle class people just do not understand how much at a disadvantage they are and how many advantages the wealthy are offered by Uncle Sam.</p>
<p>originaloog: "Sorry about this last "rant", but most middle class people just do not understand how much at a disadvantage they are and how many advantages the wealthy are offered by Uncle Sam."</p>
<p>This is the theme of David Cay Johnston's book, Perfectly Legal - The Covert Campaign to Rig Our Tax System to Benefit the Super Rich - and Cheat Everyone Else. Johnston is a Pulitzer Prize-winning financial journalist for the NY Times. I have not read the book, although I've bought it as a gift, but I have heard him on the radio. One of his claims is that no one in Congress has understood the tax system since Wilbur Mills.</p>
<p>I agree with originaloog's post. </p>
<p>The other problem is inflation. That can be a hidden tax. I don't know how inflation came to be accepted as a given, and that it is ok. Inflation hurts savers. It hurts most retirees. </p>
<p>Anyway, I like this link. </p>
<p>Put in your after tax income, and start playing around.</p>
<p>I would put in an inflation rate of about 3% and an after tax return of 4% for starters. Maybe expect to live to around 82 (Maybe a little longer for women).</p>
<p>Then you can play a little with the numbers.</p>
<p>Social security helps. You can add that into the mix.</p>
<p>Obviously, you don't need a $200,000 income in today's numbers to live in most places so you can estimate what income you do need. Remember to use after-tax numbers.</p>
<p>
[quote]
Obviously, you don't need a $200,000 income in today's numbers to live in most places so you can estimate what income you do need. Remember to use after-tax numbers.
[/quote]
</p>
<p>Do you NEED a $200,000 income in today's numbers to live anywhere?</p>
<p>Edit: Oh, and point taken about watching the college debt. That could have a huge impact, depending on how long one took to pay it off and how old the parent is when the loans are taken out.</p>
<p>dstark, </p>
<p>Retirement income is taxed, isn't it, except for certain IRAs? Why did you put in after-tax income?</p>
<p>The best thing you can do for yourself is keep fit and happy. My aunt worked part time until age 80, played tennis, drove to work, has a great outlook on life and a new beau! My son thinks she could be a Landsend model. She always had and has a happy outlook and a good joke. She is my role model.</p>
<p>By my own personal experience, my friends who have retired are not so happy at least not at the start. Maybe they will learn to enjoy it?</p>
<p>Force of habit, and consistency to use the calculations. </p>
<p>I try to calculate what my after tax expenses are now (taking my kids' expenses out of the equation) and adjust them over the years for inflation. </p>
<p>For example, if I need $60,000 a year after taxes, I will enter that in the box.</p>
<p>Then if I am going to retire in 15 years, I put that in the next box. Then I can put 17 years until I die in the next box. I use a 3% inflation number and a 4% after tax number. It's just my estimates. Then I get what I need. I don't trust social security so I don't put those numbers in. I'd rather err on the side of caution.</p>
<p>If I need $60,000 a year after tax and inflation is 3%, then I need 61,800 after tax after 1 year. </p>
<p>All numbers are estimates. I may die tomorrow. (That would suck).</p>
<p>It's just a guide, but I think a helpful guide.</p>
<p>The financial experts on the show are doing similar calculations.</p>
<p>Edit: If you enter a before-tax yield in the last number, you are going to over estimate your income. You don't get the before-tax yield. You receive the after-tax yield.</p>
<p>you may want to visit this retire early site.</p>
<p><a href="http://www.retireearlyhomepage.com/%5B/url%5D">http://www.retireearlyhomepage.com/</a></p>
<p>It has many tools. One of them is Generation-X Retirement Calculator</p>