Some perks of retirement are being past kids college expenses (in most cases) and no longer saving for Retirement . As discussed many times here, Healthcare is a BIG factor.
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In other words, the difference between capital and labor. Capital is more powerful than labor in todayâs economy, so the capitalist class (those who have enough capital to produce the income they can live on) will generally have more financial security and flexibility than the labor class (those who need to sell their labor to generate the income they can live on).
Most people, other than those who inherit or receive large amounts of capital from their parents, will be in the labor class upon entering adulthood. The usual goal for retirement (exiting the labor class, which does not always happen voluntarily) is to save and invest enough to enter the capitalist class by the time of retirement. However, many people will retire in the dependent class, where they will be dependent on others (family, charity, or the government in the form of Medicare and Social Security).
Obviously, the FIRE practitioners and the âmillionaires next doorâ intend to or will enter the capitalist class much earlier than the traditional retirement age of 65. Note that having frugal spending habits that result in lower personal cost of living (i.e. well below their labor income) helps both having more money to save and invest, as well as lowering the amount of capital needed to produce the income needed to retire.
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Very good points. I love the simple way you lay it out.
Capital is important to retiring and being comfortable for most. Some retirees can certainly live on less than their working wage by shifting their lifestyle too. A smaller, cheaper house. A used car instead of new. Less eating out, etc. Of course those are individual and personal decisions.
I personally made a decision to work hard and save for my own retirement. I see too many people with means, that choose instead to spend every penny and not worry about tomorrow. Depending on lifeâs circumstances at the end, perhaps they made a good choice by spending it all on the way. On the other hand, perhaps in different circumstances retirement wonât be much fun. I guess in the end none of us can see our own future and know what our long term needs will end up being. Iâd rather try to get prepared though and if I donât use it then my kids will benefit.
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âIn other words, the difference between capital and labor. Capital is more powerful than labor in todayâs economy, so the capitalist class (those who have enough capital to produce the income they can live on) will generally have more financial security and flexibility than the labor class (those who need to sell their labor to generate the income they can live on).â
I think of this as when youâre young you trade your time for money and as you age, and if youâve been able to accumulate enough wealth, you trade your money back for time.
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Weâve always made a point to live beneath our means. Now we live quite well, and I have done quite well, but there was always an emphasis on savings / investing vs. just keeping up with the Jonesâs. Never been in tot he fancy cars, boats, flying first class, staying at the Ritz, etc. Know many who have earned quite a bit but have spent it. They just donât have the savings gene. We certainly have taken nice trips and I enjoy buying quality (which generally means more expensive) things for our home, but they last and we keep them forever. Typically keep a car 10+ years. Just how we live. Now that weâre on the back end , or approaching that, weâve been able to pay for high quality, private university for kids out of savings / cash flow and still have enough to retire comfortably. Havenât done it yet but could at any point. Kind of waiting for my wife to finish teaching.
To my earlier point, now that the snowball is built, and a decent amount removed from harms way but still experiencing modest growth, market gains become significant and can easily equal or exceed my actual earnings. Having a balance of growth vehicles (equity market based) and predictable income streams ( fixed income portfolios and annuities) allows for comfortable growth with protection and some guarantees.
The interesting thing is a show my wife the figures which clearly indicate we can walk away whenever we want, but thereâs hesitancy (primarily hers) built in due to preconceived ideas of when you are supposed to retire. Her parents were very traditional and followed the age 65 thinking (medicare, full SS, etc). Iâve always owned my business, so none of that really means anything to me. Itâs just about numbers.
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Capital has always been more powerful than labor. Due in large part to the magic of compounding and fact that capital works 24/7/365. Biggest difference today is the decreased relative value of unskilled labor.
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I agree with many of the recent posts on this thread. I nodded vigorously to the â income is not an indicator of overall wealthâ sentiments.
My husband has been dealing with an amusing situation (to me, not him) with a bank weâve done business with for over a decade. He wants to switch our mileage plus credit card for another one that would give us a substantial mileage bonus. However our income doesnât match our net worth. We are a FIRE family who focused on the first part (financial independence) who were able to comfortably retire very early. It seems this financial institution doesnât deal with many people in our situation because something that shouldâve been resolved quickly is taking weeks. My husband has been frustrated but can (kinda) laugh because he says he has the time.
And a loud, âyes(!)â to living beneath your means. Practicing frugal living and conscious spending can make a huge difference in wealth accumulation. Some people mistakenly believe itâs a life of deprivation, but in reality itâs seeing value beyond how much something costsâŠand acknowledging âwants versus needsâ.
One of the most gratifying outcomes of our lifestyle/financial choices is seeing our kids adopting a lot of those choices as young, working adults.
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And a loud, âyes(!)â to living beneath your means - Ditto
We never had desire to âkeep up with the Jonesâ⊠thatâs an odd concept for us, and probably same for most of the folks following this thread. Along the way we did have some bumps in the road with our jobs, so it was VERY good that we had taken the cautious saver path.
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I like that you put that in italics.
My favorite phrase to my kids is âwe donât live that wayâ. Why? Because they have friends and know people that live way too high or above their means. My kids also donât need to know what our âmeansâ our. While their stepmom treats them well, she also brags a lot to them about how much money she has and makes. I think this is some sort of insecurity she has, as she didnât get married until close to 40 so her wealth and hard work is how she has been able to measure her success and/or helped her self esteem maybe. I canât say for sure but I donât want people to know what I have or not have. I just donât like being flashy and I donât need people counting my money or not. Iâd honestly much rather they think I donât have it than I do. We live on a budget, we have savings, and we do little projects on our house every year, but never go crazy. Bottom line, we blend in. I donât feel the need to live large.
You just never know as you put it when youâll hit a bump in the road and you have to be prepared for it.
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Iâd say we lived beneath our means and were more frugal than a lot of our peers (friends/colleagues/parents of our friendsâ kids). We live in a pretty affluent ecosystem, so a bunch of them also probably make more than I do. In the last couple of years, Iâd say we are living at our means. As someone pointed out, we no longer have to pay for school or college, so we are I guess putting away money for health care and helping the kids and maybe additional real estate (either CA to be near kids and increase state taxes or FL to be warm and maybe eliminate state taxes).
We donât live on a budget. Iâve never really known how to do that. But generally we were relatively frugal for our socio-economic class. The only financial problems we have now are really first world problems as a result.
One issue I may have I would love to see how you have handled/would handle. I have a brother who is a nice person but is economically a mess. He was a musician and tennis pro â pretty talented at both but tough ways to make a living because he is incompetent at hustling. So, my father and I were able to help him get a job as a public school music teacher in NJ for 20+ years. He retired and moved to Tennessee when my mother moved there to be with my much younger sister, her surgeon husband and their kids (who were still at home). He lives 25 minutes away from my sister and my mother but has a much nicer apartment than he had in NJ at significantly lower cost. He gets if NJ teachersâ pension and health care and will be eligible for medicare this year. I donât think he currently gets social security. It is difficult to get information from him about his financial condition, but for years as a single person with a modest apartment, he would max out his credit cards and then pay interest until my parents periodically bailed him out. He had surgery this past week and was going to stay at my sisterâs house until she tested positive for COVID in a rapid test (false alarm). We visited for the weekend (my momâs 97th bday and Motherâs Day). We purchased groceries for him (in two batches) and drove them out there on Friday and again on Saturday. On Motherâs Day, my sister suggested he take an Uber in and she would drive him back (her husband was on call, we were shopping for the party and picking up my mother, her teenage daughter would be cooking). He was mad that someone wouldnât pick him up and was very upset at the $20 he would have to pay on Uber. If he is really close to the edge financially and goes over the edge (he spends $600 a year on lottery tickets that he diligently tracks and makes who knows what other stupid financial decisions), do the siblings support him (which would mostly be me). We have always felt that there was some kind of learning difficulty there â he never sees the big picture and is angry that somehow the world is out to trick him. But, do you keep your neer-do-well-ish siblings afloat financially? Would you? How do you and your siblings handle this kind of situation?
I asked my mother to increase the amount of her modest estate that goes to him and put his share in trust for him (with my other sister as trustee). My hope is that this would supplement his pension and SS and give him enough to play tennis and golf and watch the Yankees and NY Giants (his primary passions in life). But, what if there isnât enough?
This will be me and already is to an extent. My siblings are a mess financially and I always have to bail them out. They donât listen. But they are family so what can you do.
Hard to help someone who wonât help themselves.
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Money issues are rarely about money. I wouldnât be bailing brother out, and we didnât help bail out my SIL when she was alive. I mean, youâre not helping him with food, really. Sounds like he has plenty of money for necessities and instead yâall are helping supplement his tennis and golf habit.
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Ah, @Shawbridge, I swear, nearly any family with at least 3-4 adult kids has one who has cast themselves in that role. I know, closely, several families where one adult kid either appeared normal through HS, but made bad choices as a young adult and went off track and remained there. Itâs as if the first bad choice awakened a certain helpless victim mentality that was never overcome. I know others where the sibling, like yours, even appears relatively normal as an adult-has a job etc.- but just never handles money well.
With the off track young adults, one family-the parents eventually stopped helping, but a sibling bought a home for one to live in; another family-the parents bought a home for the sibling to live in; still another family- the sibling moved in with Mom after Dad died, when Mom died, the other kids let that sibling live there over a decade because no one wanted to kick them out to sell the house, knowing that kid would show up at their door any time anything was needed.
Even more difficult is your situation where the person appears capable, but even the siblings mentioned above consider themselves adults who should be in charge of their own lives and decisions and none seemed at all phased by letting others provide them a place to live.
It makes me think of some seniors I watched head down a slow track to dementia, they still wanted autonomy, but had lost executive function ability, yet there was no way to control them at that point.
All that said, i donât know the right choice, but I know I would struggle to give my hard earned money to someone who made foolish choices and also would accept no advice. Iâd need to do it in ways that at the very least mean my dollars went for the intended purpose, like pay for the Uber rather than give him $20.
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@Youdon_tsay, at the moment it is not money as far as I know. I just fear that it will be. The financial part of my brother is probably a function of a cognitive problem that has existed forever. He just doesnât get the big picture. So, when he was learning to read, he could read each word but not understand the sentence. He told me when we were there that there is a car wash that you can purchase a monthly pass that entitles you to use it as many times as you want it in a month. He will only purchase it in some months because in those months, he takes his car to the car wash every day because (well, I canât quite explain the logic but he has paid for it). When in the supermarket, he will get a receipt with special offers. He goes back to purchase these and says, âThey are making me buy those things.â So, he looks like an adult but somehow doesnât think like an adult.
I think if he manages his money he should have money for tennis and probably golf. He is single living on a NJ teacherâs pension and will have SS and a supplement from my motherâs estate. Without his financial info, I figured out before he moved to Memphis how much it would cost to rent an apartment and how much it would cost to play tennis/golf and I thought he could afford it. There was a local country club that he could join (though it went out of business in COVID that was reasonably affordable. But he is playing on municipal courts etc. He was a tennis pro and although he has not taken care of his health, he is still a very accomplished player.
@rickle1, agreed, although the issue may be that he just canât connect the dots. Itâs not dementia or a stroke. He has always been like that. I was pleased we were able to help him a job he could do and was pretty good at (though he often angered his bosses).
So, @somemom, he appears capable but somehow just is not. Subsidizing someone who should be able to take care of himself financially would be frustrating but I do worry that he will at some point just show up at my doorstep (and heâs a hoarder to boot). You are probably right that many families have this problem. Right now, it is no big deal for me to pay for groceries when he is recovering from surgery. We would probably do that for other folks as well. But, providing an ongoing subsidy when he is buying lottery tickets etc. would be hard to do.
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somebody that has a nice NJ pension should be able to live ok in TN. Iâd speak with my sibs about finding him a personal finance class, perhaps at a community college.
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In order for there to be real behavioral change, he needs to acknowledge his shortcomings in financial maturity / responsibility and set in motion an action plan to improve. This would include financial education / counseling and a major change in habits.
If heâs not willing to do that, and stick to the plan, you will not see the behavioral change you desire. If it were me, I would attach strict parameters to any assistance I provided unless I was willing to just chalk it up for never ending / ongoing financial support. I do that for my mom and have for twenty years. Sheâs not going to change and we made a decision to support her many years ago. Donât like it but itâs reality. Personally I wouldnât do that for my brothers or my kids. I would hold them accountable or not help. We actually used the situation to teach our kids from a young age how important it is to become financially independent and how to make that happen by creating good financial habits. Teaching them about credit and savings and investing and living beneath their means. Already seeing dividends as they set out in the world and are making excellent decisions.
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I think the hardest is to set boundaries, I have many patients who support their mothers or a child. Yet the person spends money irrationally. Years back, I suggested to the parents that they have access to the sonâs bank account (heâs about 55 now). He ate out a lot, got manicures and expensive clothes. Mom refused to do this. Another bought a place for her daughter, but they pay rent and most bills. Another got an apartment for their son, but they didnât take control of the finances and he stopped paying rent. He lives with them and makes their life miserable. He eats whatever he wants in the fridge, even if it is marked âDo not eat, for the party tomorrow â. In that case, I suggested getting a second fridge and putting a lock on it. Oh well.
Often the person has a diagnosis of a bipolar disorder. Others just have no money sense. Most recently, the sister and BIL took over the saving account of the sister, as she lost at least $30,000 to scams. She gives out her social security number, shifts insurance plans to something awful, etc (BIL a took 2 days to straighten this out.). She is furious with them. Yet, they own the condo she lives in. Little appreciation. Such people complain they are being treated like a child, but they act like an undisciplined kid. They do what they want and expect to be bailed out.
I could go on and on, but you get the idea.
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Minority opinion - Iâd help a family member who wasnât helping themselves, within limits.
Iâve seen âtough loveâ turn into some really sad scenarios and the person didnât learn from it as was hoped. Interestingly - in some of those cases - a (later discovered) learning disability was involved. For a few, getting that treated as an adult has helped. Iâm a big believer in therapy if the person would consent to get it.
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From what youâve described, I donât think âtough loveâ or a financial class is going to help. He seems to have a cognitive or mental health issue that impacts his decision making and logic. The lottery ticket issue may be a gambling addiction, it may also be related to the inability to plan for anything in the future, possibly also cognitive or mental health related.
In some ways, he sounds similar to my aunt and uncle, both bipolar. Spending uncontrollably at times, subject to mood swings and irrational bursts of anger⊠Eventually neither was able to live on their own.
I donât have a good answer here but I can definitely empathize. Itâs very difficult to see someone that you care about live in a way that is unhealthy - whether financially, health-wise or emotionally.