On the bright side, they die younger, so they'll spend less time being poor ;(

I didn't see any historical comparison but I wonder how different this is from past generations. I'm not sure what they mean by this though: That risk has been driven by depressed earnings, depressed asset values and increased health-care costs - not investment assets, right? Cause that's at an all-time high and if they were investing during the recession they'd have seen a great return the past decade. Same with housing, those assets continue to grow post-recession, it's obviously region-dependent but my local housing market is up 10% in the past year alone.

Re: this point: 74 percent of Americans planning to work past traditional retirement age - is that a bad thing, necessarily? 62, 65, 68 years old doesn't represent what it did 50 years ago, people are living longer and thus working longer, when you see how often people drop dead within a year of retirement I'm not so sure it's a bad thing that people are working into retirement.

Health care is the big elephant in the room, obviously. But to me, that just means people have to plan better for retirement. When you see how little people actually budget and save for retirement it's clear they're not even doing the basics needed to cover themselves, let alone their health care costs. I think in most cases it's a matter of poor budgeting and not enough savings.

Always looking on the bright side of life eh?

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"The great pleasure in life is doing what people say you cannot do."

This really shouldn't come as a surprise. The wealthy have been getting much wealthier and the middle class has been steadily losing ground since the mid 1970's, even more so more recently.

That risk has been driven by depressed earnings, depressed asset values and increased health-care costs - not investment assets, right? Cause that's at an all-time high and if they were investing during the recession they'd have seen a great return the past decade.



I don't think they are talking about people who have a lot of investments. 50% of American adults don't own stocks.

Many people in the lower middle classes cannot afford to invest in the market etc. If they own real estate it is in less desirable places. Or they have no role models to do so. Like you I don't see depressed asset values as playing a part. What am I missing?

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They constantly try to escape from the darkness outside and within
Dreaming of systems so perfect that no one will need to be good T.S. Eliot

They should.

and a nice house with a swimming pool

Me too

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They constantly try to escape from the darkness outside and within
Dreaming of systems so perfect that no one will need to be good T.S. Eliot

I feel bad for people that have worked all of their lives and end up this way:



I am a CPA in a small town in Ontario and see this all the time. Retired people, struggling to make ends meet and particularly when one spouse has died. I see them having worked their entire lives, raised their families and having paid taxes, only to have to watch every cent for their entire retirement years. It was an eye opener for me as I am within 10 years of retiring to ensure I don't end up in the same boat.

No surprise. Most middle class either don't have the money to save or they don't know how to save.Now even if they do save, they hold their money tightly and don't want to gamble in the market or invest with a financial salesman.

I strongly believe that personal finance should be taught in high school. How to budget, how credit cards work, how a 401k works, how marketing convinces people wants are needs (everyone needs an iphone!).

The article seems focused on the demise of traditional pension plans and it looks like it was written by a consultant in that space. The usual position is that this is being caused by the demise of traditional pension plans. That is part of it but pensions are unsustainable for the most part with huge future and legacy costs. What tends to be glossed over is that people don't save enough period. They didn't save enough when pensions were common and their behavior didn't change even when pensions started going away. I spent most of my career in the retirement plan space and have worked on multiple initiatives to try to get employees to save more in plans (automatic enrollment, education, bigger match, etc). None of it has much impact. For many employees, any money the company puts into retirement plans for them gets taken as soon as it's available through loans or early distributions. Then they'll leave and if the pension becomes available, they sometimes cash that out too.

It wasn't just low paid employees either, most of them were in a manufacturing environment so it's not minimum wage work. People just have trouble thinking of the future and tend to focus on today. We'd have locations where employees would leave for another $1 an hour at a competitor down the street and give up the pension and generous 401(k) match. They'll be much worse off in the future but that's not what they're focused on. People retiring today are seeing the consequences of decisions made decades ago.

Not sure how to solve for it though. Even if you bring back traditional pensions, they were never meant to replace an entire salary. Most generous ones would top out at maybe 50-60% of a salary in the private sector and that's if someone spends an entire career at a company (40 years). Add that to Social Security and that person would be comfortable but this example is in the minority. Most people got much smaller pensions and were supposed to save on their own as well but didn't. Now the burden is entirely on the employee through 401(k)s and such. It's somewhat cheaper for the company but that's not the primary reason pensions went away. With pensions, the entire burden of risk is on the company to pay out promised benefits and they have to plan for that burden decades out. With a 401(k), they can just project what the employer contributions will cost them in the present. This trend likely isn't to change and if people won't change their own behavior and save more then don't know what a solution would even look like.

but what is the cause?

At least in the US, I think retirement at 62 or 65, was kind of a fluke for the Baby Boomers
Many Boomer retirements were facilitated by defined benefits pensions that have largely been eliminated or significantly cut back. Without these pensions, most people cannot save enough in 401Ks. realistically you need to almost max out your 401K ($18,500 per year) to end up with enough money. Couple that with many 401Ks do not have the best investment options and they still require some level of investment knowledge to have any chance of success, and then still it depends on what the market does.

I think the 40% is an understatement; this number will increase significantly over the next 25 years. I am early/mid 40s, have invested in Roth IRA and 401K since I started working full time at age 24, I make a six figure income and I have just about $500K in retirement savings (I do have significant home equity and substantial "non-retirement" savings I am not counting here, so I am a bit better off than this sounds). Considering I will need at least $2 million to retire (and this is based on assumption I will get SS and healthcare will still be subsidized), I feel like I am in a marginal position at best to retire at age 62, but I also think I am better off than about 90% of people my age.

No, DON'T get the swimming pool, save an extra $100 a month. Don't pay for premium cable, save an extra $50 a month. Live within your means - and besides debt payments retirement saving should be first line item on any budget, which no one does. Too many people who're financially inept and don't or won't sacrifice a bit now to protect their future. Social Security is so far from a 'safety net', it's a starting point, but people don't think of it that way.

What are you doing differently from them to ensure you don't end up in the same boat?? Surely you can tell us a bit about some of their bad financial decisions etc.??

but what is the cause?



In Canada, its similar. The older middle class workers at the big car and tobacco plants as an example, would have pensions that would be combined with the social pensions we have to provide a comfortable retirement. They changed a lot of the defined benefit plans to defined contribution plans and people weren't contributing and are now short of funds.

The real issue is why they weren't contributing to the defined contribution plans, or planning for retirement? I think that as wages increased, people just spent more than they used to. With less taken off their checks because of no pension plans, they had more money in their pockets and retirement was always so far away. I think people spend more without the foresight of what happens when the paychecks stop. A large part of the problem is of their own doing, living beyond their means and that is likely going to get worse.

"No, DON'T get the swimming pool, save an extra $100 a month. "

I can pretty much guarantee that almost none of those 40% have swimming pools.


"Live within your means "


This is the obvious answer.
Its the conservative answer.
Its also not a realistic answer. Not in today's culture, and no one has any interest in changing it. The powers that be don't want you to save. They want you to spend. They also want you to be in debt.


My Dad's a baby boomer. He sucks with money. Always has, always will. The only reason he's not impoverished is because he was lucky enough to have pensions from two government jobs he had. That and the fact that his wife's cancer didn't cost too much money, though they had to take out a second mortgage on their money pit to pay for it.


Anyway, the GOP wants to do away with SSI, so that'll likely fix everything.




In all seriousness, Brownie, I'm with you. It drives me nuts when I see so many people not saving. I live in a neighborhood of half million dollar houses. My wife and I don't have kids and likely make more than most of the neighbors our age. We have the cheapest cars, go on the least expensive vacations, and are slower about putting upgrades on our house than the rest. We are also the only ones who will have our house paid off by 2030. The rest are looking at >2040.

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-----------------------------Baron Von Speedypants
-----------------------------RunTraining articles here:
http://forum.slowtwitch.com/...runtraining;#1612485

Of course as a saver you are better off with everyone else being a consumer. The more they spend the more the economy grows and the more your investments rise.

If everyone lived within their means we might be looking at a lower quality of life for all since the means of the savers would have grown less and thus can't go as far...and companies with slower growth would have less to invest in innovation.

Economies are complicated.

I think some places (states?) have changed the rules where employers can have the default 401k option as enrollment. You have to opt out in order to not be enrolled. This makes a huge difference in the percent of people who sign up. I've worked with people who didn't even sign up at a high enough level to get the full company contribution. Trump has also made some changes to 401k to allow smaller companies to pool together to get cheaper plans.

I agree completely with budgeting/etc. but you seemed to be ignoring that some people don't own stocks not because they don't have a budget or they are spending unwisely, but because they are poor. For example, the average pre-school teacher makes about $33k per year. There's not a lot of fat to invest.

Ummm say what? If you put $18,500 from 30-65 @ 7 percent a year you’re over 2.5 million.

You would have to have one hell of a drawdown on 2.5 million to not be way over okay.


Even 7500 a year gets you over a million, add in SS and you would be doing okay.

In theory your bills should be significantly less once you retire. House is most of the time paid off, cars paid off or downsize to one car. Etc.

yep and since they cherish that small amount they can save, do they want to gamble in the market?

It's allowed in all states as far as I know for private sector. I worked on implementing auto enrollment as well other plan design changes - start at some lower amount like 3% and then automatically increase it until they reach the point of maximum company match. It's a somewhat sad state when you have to count on people's laziness to get them to save but that's life... What would then happen is that we'd see an uptick in loans once people realized they had money in their 401(k)'s.

Sure, those are both true statements. I do think it's actually realistic - to an extent - to say that people CAN and WILL save more in the future. I've seen studies on opt-in vs opt-out when it comes to retirement contributions and it's shocking how much more people will put away when the payroll default is to put 5% or whatever into a 401k, or to take current contributions and increase by 1% automatically every 6 months until they're at 10%. These are things employers are looking at now and hopefully it gains more steam. The best way for us to avoid a retirement crisis once these big generations of pensioners bite the dust is to help prompt people take care of themselves.

See above; use opt-out as the default for contributions and we'll all be in better shape for retirement. Further, public pensions are bankrupting or severely crippling cities all around the country, they're not the answer.


Who, exactly, is saying this? Makes me think of Paul Ryan when he ran with Romney, he had a Medicare and SSI plan that retooled both so they'd survive past the baby boomers. It was spun as a grandma-killing slash to government, no one wanted to actually look at the proposals. I've seen many proposals for SSI reform, some include an increase in benefits age, some include an option to personally invest the money rather than paying into the government pool. None, that I know of, propose doing away with SSI.


And you'll be better off in retirement, too, most of the people driving around in the fancy cars with the big homes are in debt up to their eyeballs. Read 'The Millionaire Next Door', it's pretty shocking how many average, working-class people are wealthy while supposed 'rich Wall Street' types can't pinch two pennies together. Just like weight loss: it's easy in theory to save (as long as you're at least making a living wage, which isn't always the case), in practice most people suck at it and don't have the discipline. Hell my wife and I aren't great at it, which is why we put 12% away before we get a dime and we never ever carry credit card debt. Forces us to living within our means even if we don't always want to.