I enjoyed your post and agree wholeheartedly, @Nhatrang and honestly I do think it is related to this thread - the rich get richer and generational wealth. I see it with my kids and their peers. My kids even recognize and acknowledge the benefits they imbue coming from a home where parents can give them helpful advice on a myriad of things including saving and investing and career decisions. They have close friends that don’t benefit from that guidance and insight.
As far as @IxnayBob’s and others’ comments on entrepreneurship and risk taking in one’s career, and tying it back to the discussion on healthcare, having a much better and fairer healthcare system not tied to employment would go a long way in both decreasing the gap between haves and have nots and in stimulating more small start ups as well as more job creation if folks know they could find decent, affordable healthcare without being tied to a large employer.
I have been reading stories on here and find them interesting. I haven’t read all 16,280 posts but I have read many of them. Our story is slightly different at least of what I read. My wife and I have are 57 and 55 and have a D20 graduating high school in May. We certainly make more than what the average that was in the original post but generally a lot less than the people on this thread. I work for the state(IL)and wife works part time at a library. We both would get a pension, have Roth IRA’s and I have deferred comp.My wife’s plan is to work till 60. I can’t imagine me working past her retiring. My daughter has gotten into Illinois and Minnesota and cost, at least right now, is almost the same. Either way we can afford that. We plan to downsize after she goes to college. To be honest we might tend to go towards where are daughter, an only child, would go. This wouldn’t happen with both our mothers alive, My MIL is turning 90 and wife rotates with her siblings and takes care of her once a week. TBH at this point if something happens to her it wouldn’t be shocking. my mom recently got diagnosed with Alzheimer’s. she can’t drive anymore but besides that is doing well. As with all this our retirement could change. My in-laws were financially frugal and as of right now MIL is pretty well off.
I was always think back about my father. He was never sick and at 59 he was diagnosed with cancer. He died before he was 63. My parents traveled a little before had gotten sick but I believe they would of traveled more after he retirement. He had talked about retiring before he got sick. That was over 26 years ago. My mother has never gone on a trip or has left the state since. I guess my point is maybe you should retire if you can because at some point there will be a time you can’t travel or move.
On a side note my mom has saved some money for my daughter’s college fund (her only grandchild). My daughter told her she would only take the money if she visited. My mom agreed.
It is just like many areas, where the opportunity to earn the needed merit is easier with fewer barriers for those from higher SES families on average. Yes, some from lower SES families overcome the barriers that they face, and those from higher SES families still need to use their opportunities in front of them to earn merit, but for the same level of talent/ability/motivation, those from higher SES families are more likely to earn the needed merit.
“Wealthy” parents (in terms of money, time, knowledge, connections, etc) will always be able to do more for their kids. Its one of the things that often drives the quest for “wealth” in the first place.
Taking it back to this thread, my son has a lot more in savings (including retirement savings) than I did at his age. More than I did when I was 5 years older than he is now (maybe older as I went to grad school and I don’t really remember what savings I had when). He graduated with no debt, has a car that is paid for and he can run into the ground (which may take another 10 years) and was able to save everything he made in high school and college. He understands and appreciates the benefits that provides.
Our S has more in savings now than we did at his age between H & me combined. We also gave him a lot more financial help than we ever had. He is also extremely motivated and works a full time and part time job and travels extensively both for work and fun. We feel very fortunate to be in a position to be able to help him and D.
At Bogleheads, somehow the SECURE Act changes (imo, frankly minimal except for the elimination of Stretch IRAs) has been confounded with the issue of a “tax torpedo” caused by market gains and aggressive tax deferred saving. In a nutshell, many people are realizing that their large traditional IRAs will put them in a higher bracket in retirement than they expected.
In any case, don’t think of your traditional IRAs as “yours,” they are co-owned by you and the government.
It’s something worth modeling while you can still change your contributions.
@Nrdsb4 We’re in Texas, and $765,000 doesn’t seem that low to me, since they exclude social security, which they note could be $2-3k/month.
I would like to retire early. All of the calculators use 80-90% of last year’s income as the amount needed per year to cover expenses, which seems excessive to me, particularly at my income level. When I retire, I will have no debt. I’m a modest spender and even travel cheaply so I’ve budgeted my retirement expenses at far lower than 80-90% of my expected salary the year before retirement. The biggest unknown is healthcare. I have at least 12 years to go, so we’ll see how that one plays out.
The methodology of that article is kind of messed up:
They assume 0% return on your pile of money, which seems silly.
Both of my kids have way more retirement savings at this point than I had, but in my defense for the first 8-10 years I worked at companies with pension plans (although I was never there long enough to vest in any of them) and I didn’t have access to a 401k until the mid 90’s, and the IRA contribution back then was only $2K/year.
In other words, when counting the value of your assets, adjust traditional retirement accounts that have not yet paid taxes by estimated taxes due upon withdrawal.
For new contributions to tax sheltered retirement accounts, remember that traditional pays taxes at the back door, while Roth pays taxes at the front door.
That is an interesting reversal. BUT, to make it proper comparison, I would think one should also count the missed gain if one paid taxes in advance by not contributing to IRA or converting to Roth. How does it come out? We converted to Roth years ago and I guess saved on taxes according to the Bogleheads. But we also lost tons since a lot of cash went to paying taxes on conversion that could have been invested. If they tripled, I may have more left after paying taxes at current, higher rate. I don’t regret converting. It wasn’t a monetary decision.
That’s called a “side fund” analysis, and it gets complicated by any number of factors. If tax rates stay the same/u and the tax drag on your taxable account is de minimus, you will come out even. But, with the possibility of tax brackets changing, the odds of having to file Single in the future, the question of estate taxes, etc., we are now contributing to a Roth 401k. We are also doing some conversions, slowly.
Suppose that your tax rate is 25% both now and later (to simplify things, even though it will probably not be the same at both times). Suppose also that your investment choice doubles between now and later.
With $1 of pretax income now:
Traditional: Put it in a traditional IRA, it grows to $2, then you take it out paying $0.50 tax to get $1.50 after tax.
Roth: Pay $0.25 tax now, put the remaining $0.75 in a Roth IRA, it grows to $1.50, which you take out later.
I.e. $1.50 at the end in both cases. Of course, if tax rates differ between now and later, the results could differ from each other.
I am also in Texas. I still think it seems low. There is, as you said, a very big unknown that could really put a kink in those kinds of plans: “healthcare.”
That page says that “The average yearly expenses for someone over the age of 65 in the U.S. is $51,624,” and presumably adjusts by state cost of living. It is likely that most of the forum demographic has significantly higher yearly spending than $51,624 (adjusted by state cost of living), so the numbers will seem low.
Yes, medical care can be a big unknown, particularly in the context of potentially six figure surprise bills.
Early retirees also need to worry about the possibility of ACA being invalidated in court or ACA plans becoming unavailable because insurance companies stop offering them. But even Medicare retirees need to be concerned about the medical costs that Medicare does not cover (Medicare covers a little less than 60% of medical spending on the >65 age group).