"I've Wasted a Lifetime of Money -- Now, How Can I Retire?"

Here's a retirement question recently submitted to MSNBC:

I recently turned 60. I have a small retirement fund with the company for which I work, roughly 27 to 28K at this point. I DO NOT want to work past 65 or 66. Is there any way to turn my financial mess around? I have never seriously thought of retirement and the need for money until recently. My philosophy was spend it if you've got, because you can't take it with you. Not sound financial thinking. Is there any hope?

My answer: Maybe. Do you like dog food?

Ok, so that was harsh. But remember, we're not talking about a poor person who tried to do his best and just couldn't make it. This is a guy who wasted forty income-producing years (and probably had a decent time doing so) and now wants a quick fix so he can retire on time. he didn't even think about retiring or planning for it until recently. What planet is this guy from?

Unfortunately, this guy isn't alone. In fact, he's not far from average when it comes to retirement savings -- many people simply aren't saving enough. What are these people thinking? I tell you, I'm simply in wonder at the lack of planning from most people when it comes to retirement.

I bring this subject up over and over again just to remind each of you reading this (not to mention reminding myself) how important it is to save for retirement -- to set a retirement number now and save for it so you can retire when you want to and how you want to.

For more thoughts on retirement, see these posts:

• 10 Retirement Pitfalls

• Savings Smackdown: Which is Better -- Pre-Paying a Mortgage or Saving for Retirement?

• Don't Plan on Working Longer to Make Up for Small Retirement Savings

Comments

[MFJ]

I've never had a dog so I'm not sure how much dog food costs, but is it really a cheap alternative to say Rice, Oatmeal, Ramen, etc? I always hear people complaining how expensive it is to feed their dog, so was just curious if you hit hard times if dog food would actually by an option :-)

[Chris]

I don't think anything is cheaper than Ramen! Especially if you buy it in bulk from Costco, I think you can eat for a few cents a day.

This gets me: "I DO NOT want to work past 65 or 66"

But: "My philosophy was spend it if you've got, because you can't take it with you"

Isn't this a classic example of someone refusing to accept the consequences of their actions? I'm sure he doesn't WANT to work past 66, but he decided to give that up a long time ago by ignoring his retirement. What's the saying, you have to sleep in the bed you make?

[Jake]

Seriously, "do you like dog food?" What kind of answer is that? Not exactly "love your neighbor". Jesus had very specific things to say about people who were outspoken about the appropriate amount to tithe but were so flippant about people in poor circumstances, regardless of whether those circumstances were from poor luck, poor sense, or even sin.

Not to mention that you make no mention of the fact that retirement on 5 years salary IS POSSIBLE depending on the guy's circumstances.
(1) How much is he getting from social security per year?
(2) Is his house paid for?
(3) What's his current income (i.e. how much can he save over five years)?
(4) What kind of retirement lifestyle does he need/expect? How capable is he of changing his expectations?

For all you know, this guy has been making enough to get $20k/year social security, he just paid off the house his kids grew up in, he is making enough money that he could save a substantial nest egg over 5 years to supplement SS income, and he is not expecting to live the same kind of lifestyle post retirement. In such a situation, he may be able to downsize his home and save money to build even a $400k nest egg over 5 or 6 years -- Combine $16k of income at a 4% withdrawal rate with the $20k he might be getting from Social Security, and it's POSSIBLE that he could retire at a $36k/year budget at age 65 or 66.

Is that the most likely scenerio? No. But you shouldn't make so many assumptions about the guy's situation, especially if you're going to use those assumptions as an excuse to be sarcastic.

[Tim]

the good thing for this guy is the fact he will be able to get social security, so he's probably not in bad shape.

ramen has next to zero nutritional value unless you add veggies and meat into it. there's always some college student who dies of starvation, b/c they just ate ramen. i'd go for the dog food, because it is high in fat and protein and most assuredly could sustain someone.

[FMF]

Jake --

I find it interesting that people with harsh criticism often don't identify themselves (by leaving an email or website link.)

Also, I'd be very interested to see some of those "very specific things Jesus had to say about people who were outspoken about the appropriate amount to tithe but were so flippant about people in poor circumstances due to poor sense." I don't know of any, but since there are "very specific" examples, I'd love to hear them.

Or if you prefer, I can quote you several Proverbs about the fool, the sluggard, and the lazy and what happens to them.

[Lord]

Dog food isn't that cheap, at least good dog food.

Now he could have a seven figure income and own real estate and save enough in the remaining years to provide for a comfortable though not rich retirement, but that is rather unlikely. More likely he has a lot of debt and will be forced to declare bankruptcy.

Really, people do retire like this all the time. He will have to move to a low cost area of the country, or abroad, if not already there. SS provides about 25% of a high income and about 40% of a low income. If he can't afford to own, then rent, and if not rent, then look for some subsidized low income housing. Then again, working may not look so bad next to the alternative.

[Travis Williams]

Most people do not realize that they won't get enough from Social Security to continue their current lifestyle into retirement. I think it would be a good idea for someone in this situation to go talk to a few bankers and get some suggestions as to how they could invest into some sort of retirement account.

Someone with six years and 28K to invest could substantially increase this in the six year period.

Maybe we need to start some financial training for the younger generations that are facing the great possibility of no Social Security when it is their time to retire.

[Jake]

I generally don't like leaving my email address floating around, but I did send you an email regarding tithing fairly recently, so you probably still have my contact info. In which case you know my full name and where I work, for starters.

The specific Biblical reference? Matthew 23:23-24 -- "Woe to you...you hypocrites! You give a tenth ... But you have neglected the more important matters of the law—justice, mercy and faithfulness. You should have practiced the latter, without neglecting the former. You blind guides! You strain out a gnat but swallow a camel."

I think that the "gnat" you're "straining out" is the well articulated stance you've taken on tithing, and the "camel" you're "swallowing" in this post is love and sympathy for a neighbor who has made bad decisions and finds himself facing bad prospects in old age. If you go out of your way to represent Christ (as you do on this blog by repeatedly talking about your tithe), you should be careful to be a good reflection of his attitude towards others. God knows I've done much worse, but in each case I kept erring until somebody kept me accountable for the arrogance I was exhibiting. Hopefully I am providing you with accountability, although I don't mean to do so in a counterproductive way. Prehaps I have been too confrontational.

If my tone is too sharp, please forgive it, but take away the main part of my message -- Jesus was very specific about the hypocricy of focusing on your tithe and neglecting "the more important matters of the law", namely one's attitude towards (ALL) others. He put this criticism right next to the more popular "whitewashed tomb" passage. There is a connection -- if your attitude towards others is anything but love, people will perceive your "religion" as arrogant and empty, and I think that you are a genuine and good person who is willing and capable of reflecting Christ much more purely than this post did.

[FMF]

Jake --

FYI -- If you put down your email, I'm the only one who sees it.

I can accept your point of view and see where you're coming from. I never looked at that verse from that standpoint (I always thought of it referring to people who "deserved" mercy, etc. -- not someone who was deliberately foolish.) Then again, how many times have I been undeserving and been shown mercy? Quite often, I'm afraid. So I guess you are correct. I'll accept the rebuke. ;-)

That said, what's our legitimate response to foolish people who ignore basic money management principles (and biblical guidelines regarding money for that matter) and then want/expect to meet unrealistic goals (such as retiring quickly?)

Shouldn't there be some consequence to ignoring the truth and then expecting a good outcome? After all, "justice" is right in that verse with "mercy," isn't it?

[Victor]

Don't worry, he's got a special weapon. He's got 73 million buddies in the same boat and together, they'll vote to increase taxes so their social security checks and Medicaid coverage will be the best in the world. Because there'll be more of them than you, they'll win and there isn't anything you can do about it other than perhaps leave the country and take your money with you.

[Jack]

Real easy... the guy can move to a third world county and still maintain his means of living.

[Lazy Man and Money]

"I can quote you several Proverbs about the fool, the sluggard, and the lazy and what happens to them."

Hey, leave the Lazy out of this ;-).

[EMF]

Someone with average income and having paid into Social Security throughout their career would get about $1287/month at age 65. Wait until age 70, and it rises to about $1821/month. Want to get a better idea, actually read the Social Security Statement that the government sends you every year. Difference of only about $534/month for waiting another 5 years to retire. Not much, except when you're eating dog food. Why does he think he's entitled to retire at age 65 or 66?

He should downsize his standard of living NOW and start saving like crazy. This year the IRS limits for contribution is $20,500 for someone over 50. If he has a 401k and the plan allows him he should max it out. He shouldn't contribute to a Roth IRA unless he's maxed out his 401K.

If he works another 5 years and saves the max, that's about $130k. If he withdraws $10K/year tax deferred then he has about $25000/year with an average Social Security benefit, but that's mostly free of federal income taxes. His savings run out in about 13 years at age 78. Assumes that his savings and withdrawals adjust for inflation.

If he works another 10 years and saves the max, that about $180K. With an average SS benefit and the $10K/year from savings he's not at about $32000/year, still mostly tax free, and his savings last 18 years, until the age of 88. Maybe 78 is about the average life expectancy, but if that's all you plan for then there's a 50% chance that you'll outlive your savings.

Maybe he can get by if he works longer than he thinks and saves like crazy. But in any case he's going to have to downsize his lifestyle or die sooner.

[Elena]

"if your attitude towards others is anything but love, people will perceive your "religion" as arrogant and empty"
I personally see his posts (and religion) as arrogant and empty all the time... Those Sunday teething (or whatever that thing is called) posts make me skip the Sunday finance section all together. Lately I stopped watching this blog, and now I only go for a few posts that call my attention somehow.

BTW, my husband is almost 60, he has about $15,000 retirement savings. Only he lost everything in the divorce from his first ex and had to take everything out of his savings and 401 to be able to pay his rent and child support, he almost declared bancrupcy but decided to tough it out. So, at about 45 years old his his savings and his old life were gone, he spent several year emotionally recovering, and when I met him he was 49, had a few boxes of books and clothes, an old broken down car, no regular employment, about $30,000 debt, and no savings. Now he is 57, with no debt, about $15,000 retirement savings, and a house. So we are getting there, but just barely. When I started to read this blog entry I was hoping to see some advice on what option a person of his age has to still be able to retire eventually, but all I got was the dog food advice. Of well. Tomorrow it will be back to teething I bet...

[Elena]

P.S. The author of the blog probably doesn't even have a dog, or he would know how much that food cost. I mix grits, pasta, and rice with my dig's food to stretch it out a bit...

[Minimum Wage]

"Do you like dog food?" This sounds like something Dogbert would say (seriously).

Look for subsidized low-income housing? Good luck with that! The biggest subsidies for housing go to homeowners. Where I live, 9,000 peole applied for Section 8 subsidies and only 3,000 people got them, and one-third of the Section 8 units are expected to go unsubsidized in the next six years.

Poor Americans won't have to move to a third world country, we'll have third world living standards right here!

[Rich Schmidt]

"I DO NOT want to work past 65 or 66."

That part, in my mind, moves this person squarely into the category of, "If a man will not work, he shall not eat" (2 Thessalonians 3:10). If a person finds themselves UNABLE to work and with no savings due to their own foolishness, we help them. But if they are simply UNWILLING to work, then we lovingly kick them in the seat of the pants to get them moving so they can provide for themselves (and for others who are in true need). The Bible gets pretty specific about certain people NOT to give handouts to.

But as others have pointed out, perhaps this person's situation is such that they can still make it. Perhaps they own their home outright. (Doubtful, given their "spend it if you've got it" philosophy.) Perhaps their income is high enough that they can still save substantially. Perhaps.

[Jake]

I posted my email addy for you this time.

"I always thought of it referring to people who "deserved" mercy"

If you deserve it, it's not mercy.

"Shouldn't there be some consequence to ignoring the truth and then expecting a good outcome? After all, "justice" is right in that verse with "mercy," isn't it?"

Yes, and his consequence is that he's now in a bad financial situation. I'm not asking you to bail him out! I don't think that you or I should be the ones handing out the consequences for ignoring the truth, and I think that a merciful attitude is always appropriate for a Christian to exhibit, regardless of what the offender has done. My philosophy is that judgement belongs to God and that I am to show God's love and mercy while not judging others. I am in no place to judge.

[Jake]

"If he works another 5 years and saves the max, that's about $130k. If he withdraws $10K/year tax deferred then he has about $25000/year with an average Social Security benefit, but that's mostly free of federal income taxes. His savings run out in about 13 years at age 78. Assumes that his savings and withdrawals adjust for inflation.

If he works another 10 years and saves the max, that about $180K..."

Something about this math doesn't work out.
(1) If he saves "the max" for twice as long, how does he end up with less than twice as much money? Are you assuming a NEGATIVE return on investment? If the max is 20,500 and he works 10 years, he could save $205k, and even at a 5% annual return on investment, he would have $250k.
(2) If he starts with $130k (after working 5years), and spends down $10k a year, would he really run out after 10 years on average? If he got a 5% ROI every year (prehaps by buying a CD ladder and some long term bonds at current rates), his money would last for 21 years, i.e. until age 86.

Just food for thought.

[Lord]

Subsidized senior housing is available, but typically only in lower cost, less desirable areas. Anywhere else will have long waiting lists and may be unaffordable even with subsidies. That is price of failing to plan.

[Jack]

>> That said, what's our legitimate response to foolish people who ignore basic money management principles (and biblical guidelines regarding money for that matter) and then want/expect to meet unrealistic goals (such as retiring quickly?)

>> Shouldn't there be some consequence to ignoring the truth and then expecting a good outcome? After all, "justice" is right in that verse with "mercy," isn't it?

Translation: I'm never wrong. And look, I'll twist the words of the Bible to prove it.

What a hypocrite: tells people they need to "tithe" and give to religious institutions on the one hand, then throwing sand in the face of people in need with the other.

To heck with your stupid tithing and baloney religious posturing. If your attitude is the result of religious indoctrination, better to never donate another penny to religious hypocrites like the website owner.

Spare us your nonsense bible twisting. Your response was stupid and hypocritical, as so many of them are.

[EMF]

To Jake:
The $130K after 5 years is approx. what he would have taking the $28K he has now and saving $20.5K for 5 years. Where I went wrong was in calculating what he would have after 10 years, and that figure would be around $230K. As far as ROI, I'm stating these in 2007 dollars, and assuming that by contributing the max which is indexed for inflation the contributions will be roughly 20007 dollars. Withdrawals at retirement would also be indexed for inflation as he would pull out the value of personal exemption + standard deduction which is indexed for inflation. Investing in bonds should keep up with inflation and maybe a couple of percentage points, but not enough to significantly stretch it out over the relatively short time that we're covering. So he's in better shape: by working until 70, saving like crazy, and living modestly he could cover retirement into his 90's, with about a 5% risk of outliving his money. Assuming he has average social security benefits, no debts, and his house is paid off. (From the writeup, I expect it's true about social security but not the rest of his financial picture)

To all who have scored points about FMF stand on tithing and/or his dog food comment:
FMF essentially took back the dog food comment in the next paragraph. As far as tithing is concerned, I disagree with it. My siblings tithe faithfully and are very religious, and their finances and retirement prospects are dismal. I think the bible is a versatile book, it can be made to support any position. FMF with a bit of effort probably could find other parts of it to support his position. Maybe the parable of the talents? But no, he accepted Jake's rebuke, but the rest of you had to pile on.

As far as pity for those who are in a difficult situation because of their own poor decisions, laziness, and/or greed -- let's save the pity for those who are truly in a bad situation through no fault of their own. How about expecting some personal responsibility from the rest? Maybe seeing him eat dog food or ramen will inspire others to be personally responsible.

[FMF]

Readers:

Just so we're all on the same page here:

"Jack" uses several names on this website (scattered on many posts) in an attempt to make it seem like there are several people disagreeing with me. I'm sure there are several disagreeing with me, but he's accountable for posts for at least three different people -- all of whom have had very negative comments. Either that or there actually are three negative people commenting all using the same computer.

You can factor that in to your perception on the meaningfulness of his thoughts.

[plonkee]

All the sympathy in the world (like all the tea in China) isn't going to get this guy able to retire comfortably when he's 65.

It doesn't matter what the Bible says, what Jesus says, what the Prophet Mohammed says or for that matter what Jake says unless one of them is going to subsidise him.