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June 20, 2011


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It seems like this is going to be a major mental shift. I can already see it coming fpr my parents and relatives. People will have to learn and adjust to working for their entire lives. This is not all that different from those who have farming or other types of subsistence lifestyles. Retirement is a luxury. Many places do not afford such a luxury. In the us/western world, we take it for granted. That reality will probably be shattered soon. Congrats on your progress. I feel like im in that 80% but not by much. But given what others are dealing with, I just feel that much more lucky.

We are in the same boat as you. If we retire at 65, we will be a lot ahead. If we retire at 58, we would be a little ahead (assuming we save as planned). If we retire at 52, then we would be a little behind. It also depends on what you want out of retirement too. If the plan is 'to survive', which means not travel or have a ton of freedom, then my comment would also change.

I have been retired since 1992, retired at the age of 58 and it has been wonderful.
What I have noticed in my own family is that there has been a large generational shift in the importance of saving money for the future.
My parents generation were savers - they experienced the great depression and WWII.
My generation were savers - that had great role models that installed the reasons why saving is so important.
My children's generation are also savers and have done very well indeed and are right on track.

My adult grandchildren's generation however is a whole different ballgame. They seem to be the "Want All" generation that emphasize that life has to be all FUN, and that nothing should be allowed to get in the way of enjoying life - saving for the future is a concept that isn't even on the radar for them. Their credo is "Let the good times roll"

We are in the "a lot ahead" and "20 years or more before" categories.

DH & I started planning for retirement shortly after we got married in our late 20s. We planned on being "financially independent" by age 40. We saved every penny we could, being frugal, but never wanting. By the time we hit our 40s, we found we were in our peak earning years. So we continued to work to increase our savings. I retired several years ago at age 55, DH is still working, albeit parttime. He is planning to fully retire later this year or next.

Our philosophy was that you can never save too much. By always saving, sometimes over 50% of our net income, we've accummulated twice our "number". We will live very comfortably in our old age.

Ive tried to strike a balance between saving nothing and spending it all as i go and worrying so much about having enough money in old age that I spend my youthful years depriving myself. When i stared my very first full time job in 1982 I adopted a " pay yourself first " mantra that i read about in financial mags, making sure that I fully funded all the retirement plans that were available, first reg IRA, then 401 k and ESOP plans, right up to the HSA plans that are available today. But after that, hell yeah i spent the rest. The online calculators tell me that I'm ahead of the game , now in early semi-retirement, if my conservative projections pan out. That might be a big IF, but why worry about what you cant control.

We got our first "real" jobs right out of college and started putting money away in my 401(k) as soon as I was eligible 4 months later. We waited another 2 years before opening our Roth IRA's. I figure we have done the best we could and are either "on track" or "a little ahead" at this point.

When I do quit my day job to blog and freelance full time, we may be taking a little hit but our Roth IRA's will stay fully funded and my husband may open his 403(b) to make up for me no longer having a 401(k)...

20 years is not enough. Plan for 35 years....really. Then, as you have been saving regularly and investing over the years, the power of compounding should have worked in your favor...thus allowing you to retire in less time that your 35 year time horizon!

Of course, this plan basically assumes that people will start saving for retirement from their 20's. Which, in my view, should be on the minds of people right out of college, though we know that's not often the case. It's a matter of getting a good financial education and guidance from a young age.

Having said all this, it's remarkable to me that people start planning 2 years before retirement. How unfortunate that many otherwise bright people simply didn't have the role models or tools to plan earlier.

"Our philosophy was that you can never save too much."

How true! Once you embark upon the idea of living frugally, even though you could live extravagantly if you wanted to later on in life you will find it's hard to change old habits. Living frugally doesn't mean that when you're retired that you have to stay in youth hostels when you travel overseas. Spending quite a bit of money on a very exciting vacation when you are retired is the very reason that you have been saving hard while you were working. We have found that you learn so much by visiting far off countries. Geography and History were always boring when I was at high school, but learning by being there and travelling around, watching the locals, learning about their customs and lifestyle, listening to guides, and visiting the important places brings those subjects alive.

The other thing about overdoing the saving when you are younger is that eventually, because of the power of compounding over time, instead of having to worry about not outliving your money, you may find, as we have, that the more you have, the lesser the risks that you have to take with your investments in order to generate sufficient income.

Last week for example I reconfigured our portfolio so that we no longer even own any mutual funds of any kind. Everything is now in laddered CDs, Investment grade corporate bonds, and Municipal bonds that will be held to maturity. That way our principal gets returned as they each mature, meanwhile we receive a combination of tax deferred and tax exempt income that is 4 times greater than the annual income we had at retirement, and that's without including two pensions and two SS checks. It's also really nice not to have to worry about what happens in the financial markets every day. All I have to do now is to remember to reinvest the income as it arrives, on the day it's due every month.

That's far better than not saving enough, having to take greater risks, and keeping your fingers crossed that you money will last longer than you do.

My concern is that people who expect to work all their lives may not be able to do it due to illness. It would be terrible to spend one's final years ill and poor. Furthermore, interest on savings has been so low for so long, and the stock market is not terribly trustworthy these days. If I stop buying everything but the barest basics of daily living, my savings are still being eaten away every day by inflation to a nightmarish degree. I can't believe how this is not pointed out more in financial advice articles.

Jenna you are spot on. And necessities of living (basic car, clothes, food) all dramatically outpace pay increases.most people fall further behind each year despite working harder.

Of the above commenters, except old limey, i wonder how many are including social security and what age (roughly) that we're talking about.

My maternal & paternal grandparents were the night & day example of retirement for me. One set always lived frugally and probably owned their home by the time retired. The other set ran out of money quickly and had to move in with my parents and their siblings, rotating between homes, for a couple years. I'm glad that my parents have passed on the responsible side of their parents' financial practices! And thankfully, I feel confident that my parents are planning responsibly for their retirement, which would be one less thing for which I have to plan.

I'm only 3 years into my career, but I started contributing from my first paycheck. (That was the only benefit I had on Day 1...I had to wait a month for medical!) For now I'd say I'm probably "on track," but I'd like to really start to ramp up my contributions over the next few years.

I agree with @Squirrelers that planning for 35 years seems far more comfortable than 20 years. (I have a great grandmother who lived to 101!) And since I have several decades to retirement, and I'm not sure what Social Security will look like at that point, I'll be striving to save up enough that I would be fine without it.

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