Posted on 11/10/2004 6:17:26 PM PST by LouAvul
I'll work at some job or other until I die. My father worked until the very month of his death when he was too sick. The saddest thing to me is hearing that my rather elderly aunt and uncle are refinancing their home to try to pay down credit cards. I've become convinced that the only way to save enough to retire well is to live totally debt-free. I tossed all my credit cards and don't miss them.
I agree .
See post 35, thx.
I invested for more than 30 years and rode the 90s boom in tech stocks and switched to safer and more conservative stocks when I retired in Dec. 1999.
I got out just in time but it was no stroke of genius on my part. Just luck that I retired and backed off the tech boom just before the NASDQ went down hill.
I started working in the cotton fields when I was 10 years old and knew even then that I am basically a lazy person. So I worked and saved and invested so I could pursue my real passion someday.....Being lazy.
Too Funny!!!
You may want to check your keyboard - I suspect it could file a paternity suit against the DNC fax line. ;-)
Dear Poohbah,
Once you retire, and need to draw a regular income from your investments, if you keep everything in equities, a short-term decline in the market of, say, 30%, can really put you upside-down.
If you had $500K, and were down to $350K, either you'd need to increase your draw percentage to about 11.5% to keep taking your $40K, or you'd need to dial back to about $28K per year until you recovered. 11.5% is a bit more than the actual average long-term return on equities.
Now, imagine this:
Start Year 1: $500K. Total return: 10%, $50K. Income taken: 8%, $40K. End Year 1: $510K. Great!
Start Year 2: $510K. Total return: -20%, -$102K. Income taken, 8% of start, $40K. End Year 2: $368K. Not so great.
Start Year 3: $368K. Total return: -10%, -$37K. Income taken, 8% of $368K, $30K. End Year 3: $301K. Yikes!
Start Year 4: $301K. Total return: 40%, 120K. Income taken, 8% of $301K, $24K. End Year 4: $397K. Not as bad.
Start Year 5: $397K. Total return: 20%, 80K. Income taken, 8% of $397K, $32K. End of Year 5: $455K.
The average annual return, here, is 10%. But because we're taking such a high percentage of the AVERAGE return, we get really killed in the bad years, and don't quite make it back up in the recovery years. If we'd gotten a straight 10% per year, we'd have about $550K after five years, and incomes starting at $40K and finishing at about $43K.
But because of volatility, and because we were taking too high a percentage of the original amount, we wind up with less money than when we started, and suffer a lot of income volatility.
Bear markets happen. Declines of 30% in the market aren't terribly unusual. It often takes a couple or more years to get it all back.
That's why folks change their investment mix when they start drawing an income.
Finally, I didn't suggest that folks "go to a bond fund."
If you have $500K or $1 million, and you have A fund, one single fund or equity, of any sort, you aren't properly invested. But if you're about to retire, shifting a significant portion of your assets to bonds, preferred stock, etc., is appropriate.
sitetest
It's worse than that. A LOT of people have a NEGATIVE net worth!
I have no sympathy. We live with substantial sacrifices today, in order to save for retirement. Our lifestyle is not as good as many who have incomes 1/5th of ours. I plan to do everything I can to put an end to Social Security and if that sounds harsh, well too bad. I know that we are capable of doing what it takes to plan for retirement and those who don't get it need to pay for their mistakes.
There is a simple, rational, and fair solution, and that is to raise the retirement age further.
There is nothing sacred or magical about the age of 65. Retirement at age 65 comes to us courtesy of Otto von Bismarck, who introduced pensions for government workers in the 1800's. His actuaries calculated that the average German civil servant died at age 65, so presto! Pass that milestone, and you get a pension.
The retirement age should rise and fall with changes in life expectancy. Your grandfather (on average) got five or ten years of Social Security; why should you pay in a comparable amount over your career, and yet get the support of the State for fifteen or twenty years after you retire?
-ccm
I am in my early forties and have been planning for retirement since I was 23 years old. No quarter for the grasshoppers - we ants have no sympathy.
Yes, older people might have to sell the house and move somewhere where taxes are lower. That's why St. Louis for instance is seeing a population increase again, after so many years of decline. The oldsters are selling the McMansion with its $5000/year tax bill for a smaller bungalow or condo in the city with a $1000 a year tax bill (or less.) Their houses have appreciated enormously and so they're essentially financing their retirement off the sale of their homes.
If the real estate market busts, however, watch out. Those who've already sold will be in good shape; those looking to cash out in 10-15 years or so will be in deep trouble.
Better yet, max it out annually. If you can't afford to max it out, your living expenses are too high.
RE: the government confiscating $45,000 a year from me is going to help me save for my retirement.
But don't you see, it's not so YOU can fund your retirement, it's so the guy who took out a 2nd on his house at age 50 to service his 50,000 credit card debt which he incurred from marble countertops, a new boat, annual trips overseas and spoiling his kids can fund HIS retirement! Haha, suckers! /sarcasm
Here in the Milwaukee area, a nice 4-bedroom ranch can have $5k taxes... nevermind a McMansion. It sucks!
Hell, I live out in the country, 30 miles from MKE, in a small, 2-bedroom older ranch on a 1/4-acre lot, and my taxes are ~$1900. NOTHING aorund here has $1,000 taxes. I dream of what you're describing!
Where do you get your figures? $350,000; should take care of you.
In my view, Soylent Green is the solution for old people who've frittered their life away and haven't saved enough for retirement.
In Florida we have something called 'Save Our Homes' that limits the increase in assessed housing values by I think 3% to keep those of us who stop moving from getting taxed out of our homes.
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