Ben Stein on retirement planning

Ben's House (Ben Stein's website) ^ | November 28, 2004 | Ben Stein

[Constitutionalist Conservative]

Try this on for size. You’re seventy five years old. You live in the comfy home you’ve always lived in. You play golf in good weather. In bad weather, you travel to where it’s warm and sunny. When your grandchildren call, you take them out on the lake in your new boat. Your wife takes classes in the local college and paints. This is your life in retirement and it’s everything you always hoped and dreamed it would be.

Or, try this scenario: you are seventy-five years old. You live in a tiny apartment with the smell of boiled cabbage and noisy neighbors all around. You live in a scary neighborhood and you dare not go out after dark. Eating at restaurants is just a dream. Your apartment is too small to have your kids or grand kids visit. If you get sick and you have to spend time in nursing care, you don’t know how you’ll afford it. Your life is pure fear.

The fact is that if you are a baby boomer, one of the 77 million racing towards retirement, you have -- to a large extent--your choice of which of these retirement outcomes is yours. You get the good outcome or something like it if you start early, get a sensible, solid financial advisor, make a solid sensible plan for retirement savings, stick to it through thick and thin, accumulate diversified savings of stocks, mutual funds, bonds, real estate, variable annuities and foreign investments. You should accumulate an amount equal to roughly fifteen to twenty times what you need annually to live on–with allowances for pensions and social security. It’s a tall order, and it’s a bit scary to think about, but if you even come close to it, you get to have that great retirement life.

The point is, making sure you have a swell retirement is up to you. Not to Uncle Sam, usually not to your employer, not to your kids. You have to max out your IRA’s, your Keoghs, your 401K’s and do it sensibly, and then some. And you have to start with that all important plan.

Or, you can just be the happy go lucky grasshopper in your working years, not think about retirement, and then later, you get to live in terror. Which sounds better to you? I thought so. No matter how old you are, get started now and do the best you can.

Oh, you should know I am honorary spokesperson for National Retirement Planning Week. And, yes, I get paid for preaching to you. But your doctor also gets paid to tell you to stop smoking and eat green leafy vegetables. That doesn’t make us wrong.

[G.Mason]

Back at you, and yours. ;)

Of course one could save for retirement, like we did, and move to Citrus County, Florida where the best restaurant is The Outback Steak House, and eat at home mostly.

Seems there are no shortage of Applebee's and other assorted fast food junk palaces with kids that are determined to say ... "no problem" when you ask for something.

No problem? You work for $2 bucks per hour and tip, you bring me a glass of water and when I say thanks, you say "no problem"?

Poor little dears. I had no hint that it was a problem.

[MarxSux]

In some states, there is that expectation. Saving for retirement has to come later. Sigh.

[Phantom Lord]

What state do you live in and how do they "force" you to contribute to your kids college education?

And don't say through taxation for state universities.

[narby]

If everybody stashed away all their extra cash for their retirement, what would the economy look like?

Perhaps like the old Soviet economy, where everybody had a ton of money in the bank, but nothing worth buying?

There would be nothing worth investing in either, because no one would spend their money, just "invest" it in now worthless entities.

Thank goodness for the folks out there who shop till they drop. They may be spending their retirement, but they make the world go round for everybody else.

[Phantom Lord]

Bottom line, people are not saving anything NEAR they should. The government needs to offer more incentive otherwise "senior programs" will bankrupt this country.

It is not the proper function of government to incentivize savings. What the government should do is greatly reduce (and eliminate some) taxes on savings and investment vehicles.

[exnavychick]

Hee...we are in the exact same boat, (four kids, one on the way), so I know what you mean. Just the thought of paying tuition for one was enough to get us looking hard at our options and crunching numbers. Also, our family is FAR from affluent, so we know we can't even dream of help from anyone else. My grandparents (mom and dad's both) have done quite well for themselves through proper planning, so I intend to emulate them as best I can. My mother's parents made all their funeral arrangements 30 years ago. All my mom and her sibs have to do is execute their wishes and grieve. I hope to plan half as well, long-term!

[Graybeard58]

It is my plan also.

Never waver - It works. I am 59 years old and have been retired for 5 years.

I don't live an extravagant life but I do pretty much whatever I want to do.

[Mannaggia l'America]

What we have ultimately decided to do is save for retirement, rather than for college funds.

I am doing something similar. While I am putting some money aside that I have sort of earmarked as a college fund, it's not in a 529 plan or anything that would prevent me from using it for another purpose.

If you should decide to change your mind later and contribute to their college tuition, you can make early withdrawls from an IRA for education expenses. The withdrawls are not subject to the 10% penalty, although they will be taxed as income.

[Phantom Lord]

I vacation on Topsail several times a year. It has gone through some drastic changes the past 3 to 4 years. Love it down there. Play golf at North Shore and travel inland a little to Olde Point and Castle Bay.

[exnavychick]

Well, an expectation is different from law. So, which is it? I would love to avoid a state that has found yet another way to tell me what to do with my savings.

[johnnycap]

Good thinking, it worked for my six brothers and sisters and I and we all have 13 college and post-grad degrees now.

[sitetest]

Dear exnavychick,

Sensible policy.

When your children apply to college, the standard financial aid calculation will take into account using a percentage of their savings, and the savings you've earmarked for them to use for college.

However, that same calculation may not take into account your retirement savings.

Thus, if by the time your children have reached age 18, and are ready to ship off for college, if you have, say, $100,000 saved for college education, then the folks who compute financial aid eligibility will expect you to use a percentage of that $100,000 each year while your children are in college.

But if the $100,000 is all in 401(K)s and IRAs, then the folks who compute financial aid eligibility cannot factor those savings into the calculations.

As a result, your children will be eligible for more financial aid, and your children will be eligible for better student loan programs.


sitetest

[Phantom Lord]

Perhaps like the old Soviet economy, where everybody had a ton of money in the bank, but nothing worth buying?

Where did you get the idea that soviets had tons of money in the bank?

As far as what would the economy look like if everyone saved enough for retirement? How about a federal budget of half what it is now and ALL citizens having larger paychecks both because of lower taxes and because of greater business activity.

[E. Pluribus Unum]

It should not be a matter of dying with a pile of money in the bank.

I hope you like the smell of boiled cabbage.

[exnavychick]

I'm glad to know that I'm not totally crazy, lol. Some people have all but accused us of neglect for our stance on the subject.

[Phantom Lord]

Never waver - It works. I am 59 years old and have been retired for 5 years.

My father retired at 57. He could have retired at 49 but my mother wouldn't let him.

[RightWhale]

I plan on breaking even when I die.

There is only one way to do that. Try to not leave a huge mess someone has to clean up.

[Graybeard58]

You might survive 6 months after you retire, or you might live 30 years. The amount you are going need to break even is gonna vary somewhat based on which scenario you end up with. Have a crystal ball or a psychic you trust?

You are exactly right. If I knew how long my wife and I are going to live I could figure out when it would be safe to start tapping the principle on investments.

Since I don't have a crystal ball I have to plan as if we are going to live forever.

[JohnnyZ]

What we have ultimately decided to do is save for retirement, rather than for college funds.

Oh hell yeah, right on, the more you save for college the more college expects you to pay. The kids will be fine, and you can always help them pay off loans when they're out of college.