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January 15, 2011

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Sheesh.... that should be an example to all of us as to what NOT to do. As FMF has shown us it's all about the spending gap.

@FMF - you should make a hall of fame on people who did it right and one on those who didn't... we all know where this guy would be.

The quick and dirty calculator at ssa.gov says Michael will receive about $1526/mo. This is reduced from the $2100 he could receive by waiting til full retirement age of 66.

I hope this article serves as a warning to anyone who believed that Social Security alone can provide a decent retirement. It may be enough to keep you from starving, but barely. A very sad story.

I agree that this is a sad story of people who lacked forethought. I found the last comment particularly tragic that she wasn't going to "worry about it." I agree losing sleep over it is a bad situation to be in, but to be perpetuating the crisis by not doing anything about it seems ridiculous.
The data about 3 in 4 boomers taking benefits at 62 which were drastically reduced made me wonder if this will effect the solvency of Soc Sec. Does this data point mean that it may not go bankrupt by 2020 or 2040 or whatever the latest forecast is? If boomers aren't accessing maximum benefits in the droves that were predicted, could the program last longer, even with extended life spans?

If he's use to that lifestyle, I bet it will be hard to break from it now via a budget.

I have to wonder if he'll go into massive credit card debt to supplement his lifestyle...

I would like to have this guys income and show him and people like him how it is done. It is ridiculousness to have a 100k income and have not much of anything at the end of ones working years.

To indio - 1526/mo today for a 62 yr old is actuarily equal to the $2100 for the 66 yr old. The higher figure assumes 4 more years of working (therefore, deposits) and 4 fewer years of payments. There's virtually no impact to the SS system itself given either choice.

I've run into people like this as well. I recently met a couple that made a lot of financial mistakes over the years. They are buried in debt in their late 50s and completely upside down on their house. They used to make very good money as well, but with the tough economy and job market, now they're barely getting by. I took them as a case study in what NOT to do financially. They spent every penny they earned and then some.

If he was in management I can understand his situation. Probably great at charts, budget projections for the sales force and unrealistic expectations for their volume quotas.

If he was in sales and well respected he should have been back to work soon after the hammer fell. Too bad he didn't plan for his future.

Ya don't have to be this niave to be in this situation. I know of people who had a portfolio for retirement but since they lost there job and are part of the 99ers who could not find a job, they took the hit and burned through there retirement and unemployment. Here they are at 60 no job, no unemplyment,burnt out 401k, can't collect SS and what are they to do.

Sad

SAD

Do you guys see a trend however in today's generation, or ones subsequent to this example's (61 yrs old) that are on a different, better track?

With the growth of personal finance blogs, more financial news, publications, etc, I get that impression - but is it just me? What are your thoughts?

@Sunil: Yes and no. Personal finance advice is becoming more mainstream, which is absolutely helping more Gen-Y'ers (and hopefully future generations), but at the same time, the majority just don't learn anything about personal spending/saving habits until.. well, until they either have a lot of catch-up to do or are screwed.

Hardly sad. He was a fool. But, I'm sure there will be a massive bailout of the BOOMERS since most are so ill-prepared for retirement and they'll vote incumbents that will see things their way. Heck, what is another 5% or 10% tax on Gen X or Y? Then again, despite the dire predictions of catastrophie about boomers, most have wealthy parents and they stand to inherit lots of $$.

Does anyone see the responsible people who actually saved their money having to pay for all of these people who will be living in poverty in their 'retirement'?

I just think this is going to be another bailout once enough of these people retire with no money and cannot afford it.

I can see whats happening here and I don't like where its going...

All I have to say is:

What a big loser!
=============

I took my SS at age 62, it is now $1,387/month ($1,276/month after medicare). I challenge anyone to rent an apartment, pay for utilities, purchase food, gas, & healthcare, own a car, and live a minimal lifestyle on that.

Maybe the daughter that he put through college will come to his rescue - some hope!

When I collected my first SS check in 1996 we had been comfortably retired for four years and the extra windfall coming in prompted me to sell my old '81 Honda Prelude to my daughter's girlfriend for a couple of hundred dollars and purchase a beautiful, 5 year old, classic, Black Opal, 1991 Mercedes 560SEL that I still love and drive today.

I don't have one ounce of sympathy for this guy, he, and probably more like him, are going to really regret their past actions before too long.

Brent: I see a future problem of people who plan ahead for a secure retirement winding up with nothing from Social Security because of a push to make it means tested. If it happens, it will be particularly aggravating, but slightly better than the alternative or relying on the government for my retirement.

I don't feel bad for the guy with $5000 in savings. I do feel bad for the woman who is not worrying about it. She did everything right: she scrimped to raise her two kids by herself, she worked all her life, when she got laid off she went back to school, and now no one will hire her because they think she's too old -- but of course they'll never say that, so she has no recourse. Minimum wage is nowhere near enough to live on. Exactly what is she supposed to do? I'd do what she's doing, put my head down, keep trudging and try not to think about it, because that's the only way to keep going. (Been there, done that, in a completely different type of trouble.) And I'll bet that for every grasshopper there are at least a dozen ants who have been stepped on through no fault of their own.

Most of the baby boomers I know are saving for their kids' college and for retirement. That's what we're doing, and all the numbers I run say we'll be OK. I do worry, though. Big business keeps running up obscene profits by paying third-world wages while charging first-world prices, and who exactly will be there to buy anything when all the jobs are gone?

fuchsia,

I think you have painted a very broad picture of big business "paying third world wages". I happen to work for a very large company and we (as well as our competitors) pay very good wages. What is hurting our growth (and also causing to have cutbacks) is that the cost of doing business has gone up with substantially higher medical costs, high corporate taxes (compared to other countries) and a growing mountain of government regulations/requirements. The U.S. government has done little to nothing to try and draw business away from other countries.

I have been to many 3rd. world countries and, in Bali in Indonesia in particular, which we visited about 5 times we got to know locals very well, in fact well enough to be invited back to where they lived for a meal as well as being invited to attend some of their religious ceremonies. You may be surprised to know that they were very poor, but also very happy, because all of their family & friends lived the same way that they did.
In America, as well as in most European countries, there are very large middle classes that have lifestyles that require far more money than the very large poor classes in the 3rd. world.
Here we are bombarded by the advertising media encouraging everyone to spend, spend, and spend, and those with little will power succumb to it rather than living below their means and accumulating savings for their retirement. Through the media we also all see what the good life has in store and the temptation is to go for it whether you can afford it or not. It's a whole different environment in a country where the vast majority are poor and almost everyone is in the same boat.
It's tough to live in a country like the USA if you happen to be at the bottom of the heap, whether it was truly your fault or whether it was not. How can we possibly provide jobs for the least skilled and least educated among us? The fact is that a pair of hands in a 3rd. world country is every bit as capable as a pair of hands in a very wealthy country - that's why we now have fewer manufacturing jobs in the USA than we did in 1940, even though our population has doubled. It's hard for me to see full employment coming back again - just look at the very high percentage of some of the minorities that fail to graduate from the high schools of many of our large cities - what kind of work can they do and what kind of future will they have other than turning to crime.

I have to wonder if the 61 year old guy's overspending habits and divorce don't stem from the same mentality. I think overspenders are more likely to be divorced. We also know the divorced have much less wealth than those who get married & stay married.

Divorce is not by itself a prescription for eventual poverty but it can certainly wreck a couple's finances especially if it is bitterly contested and results in very high legal costs. I have said many times on this blog that one's first three priorities in life should be 1)Get your education right the first time, 2)Get your career path right the first time, and 3)Get your lifelong partner right the first time.

Unfortunately it isn't as easy as it sounds as the ultra high divorce rate, large number of degrees in fields that have little work application, and the high drop out rates from high school attest.

Looking back on my successful and happy life of 76 years I realize how valuable were all of the great role models that I was surrounded by during my early and formative years, growing up in England in the 40's and 50's, but the England of today is a far cry from the England of my youth, just as America has also undergone great changes from the time of "the Greatest Generation" of the young men and women that went off to fight in WWII.

This reminds me of one of my parent's doctor partners in his practice. His partner is about 60 years old, has been a practicing doctor for about 25 years, but only has $4000 saved up. It really is amazing!

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