Prognostication and tax law

[wiggin]

Again, find a tax advisor.

Won't help; they don't have crystal balls - and I wouldn't trust one who claimed to know what would happen. Tax advisers are pretty useless early in one's life unless you have a really complex situation. I imagine that I'll probably want an accountant when I'm getting closer to retirement, just to figure out things like the optimal withdrawal mix in a given year, setting up more complex instruments to avoid estate taxes and help out my family, that sort of thing. But until then, my taxes are pretty clear for now - and they don't have a fucking clue about the future.

So you didn't like the Time article either, okay. You think people planning retirement want a free lunch? Does your employer contribution count in that? Think how employers could be "freed up" if they didn't have 401-Ks to match or manage.

Dude, who wouldn't want a free lunch? The point is that risk-free pensions cost a lot more money than a company can afford to fund (and are a huge risk not just of the system but of the individual company, which is a lot more likely to go under). 401(k)s et al similarly require more money than people are willing to spend, but at least they are personally on the hook for their decisions. Either people have to accept lower compensation or lower pensions - or they need to shoulder some of the burden themselves. A life of leisure for 30-40 years after only working for 40-some years is awfully hard to pay for unless one is very disciplined. *shrugs* People have to realize that.

Of course folks are fearful of outliving their money! Just ask retirees or those near retirement whose nest egg was busted the last couple of years, without another 20 years of full employment to make up the gap. Many are grocery baggers and Walmart greeters now, or staying in their jobs until 70-75. No, there aren't "easy instruments to fix this" or it would be done by now.

Bullshit, people just don't manage their money well. An annuity coupled with social security should be enough to cover basic expenses; everything above that is gravy that can fluctuate with market conditions. People didn't save enough or think through their needs well enough to supplement their 'guaranteed' income (e.g. social security); not my problem.

It's interesting, the young people who have such faith in their 401-K and IRA with market swings 30 + years forward, when the whole scheme hasn't been around for 20 years yet. That was my reason for linking the Time article....

Uhm, I don't 'have faith' in the system, that's why I'm oversaving and diversifying. Furthermore, you're wrong - the 401(k) was put into place thirty years ago, not 20, and IRAs are older - being enacted in 1974. Roths are pretty new (since the late 90s), which is why I brought them up.

[GGT]

Won't help; they don't have crystal balls - and I wouldn't trust one who claimed to know what would happen.

But you ask people in this forum?

Tax advisers are pretty useless early in one's life unless you have a really complex situation. I imagine that I'll probably want an accountant when I'm getting closer to retirement, just to figure out things like the optimal withdrawal mix in a given year, setting up more complex instruments to avoid estate taxes and help out my family, that sort of thing. But until then, my taxes are pretty clear for now - and they don't have a fucking clue about the future.

My CPA is my tax advisor. They're familiar with existing tax laws, pending changes coming down the pike, federal and state nuances, and even anticipating personal changes that can have a tax break.

Dude, who wouldn't want a free lunch? The point is that risk-free pensions cost a lot more money than a company can afford to fund (and are a huge risk not just of the system but of the individual company, which is a lot more likely to go under). 401(k)s et al similarly require more money than people are willing to spend, but at least they are personally on the hook for their decisions. Either people have to accept lower compensation or lower pensions - or they need to shoulder some of the burden themselves. A life of leisure for 30-40 years after only working for 40-some years is awfully hard to pay for unless one is very disciplined. *shrugs* People have to realize that.

No such thing as a free lunch, or a risk-free pension, or a risk-free retirement. I think people want to see retirement as a possibility instead of working until the day we die. That's not necessarily a "life of leisure for 30-40 years". Another option is for employers to give workers more money in salary and wages, scrap the matching contribution, and let them save it with interest tax free. Would be nice if interest rates were better than 1% or so....

Sure, it would first be taxable as income, but that's simpler than what we've got going on now, with equations and algorithms, deductions and deferments. It's crazy that's why we even need human resources departments, congressional manipulations, tax shelters, tax attorneys or tax advisors (CPAs).

Bullshit, people just don't manage their money well. An annuity coupled with social security should be enough to cover basic expenses; everything above that is gravy that can fluctuate with market conditions. People didn't save enough or think through their needs well enough to supplement their 'guaranteed' income (e.g. social security); not my problem.

Bullshit? An annuity plus SS should be enough to cover basics? Where are you getting your facts, Dude? Maybe some didn't save much, or relied too heavily on SS, but millions did everything they were supposed to and still got creamed.

http://www.usatoday.com/money/perfi/...ion02_CV_N.htm

Uhm, I don't 'have faith' in the system, that's why I'm oversaving and diversifying. Furthermore, you're wrong - the 401(k) was put into place thirty years ago, not 20, and IRAs are older - being enacted in 1974. Roths are pretty new (since the late 90s), which is why I brought them up.

They've only been replacing employer defined benefit pension plans for 20 years or so. And you don't need to lecture me about IRAs...I started my first one in the 80s, probably long before you were born. Your "faith" is in our financial market system (same as others' before the meltdown), figuring max contribution and diversification is going to protect you in retirement (same as others' before the meltdown). Good luck with that.

[Lewkowski]

Bullshit? An annuity plus SS should be enough to cover basics? Where are you getting your facts, Dude? Maybe some didn't save much, or relied too heavily on SS, but millions did everything they were supposed to and still got creamed.

I think most people who saved 15% of their income and diversified appropriately should be fine.

[Hazir]

I have sunk pretty much every cent I don't have in cash into the bricks of my homes. I'm 47 now, the next 16 years I will have time to save enough for retirement. I think that in a bad month we put aside 25% of what comes in. Still, I have doubts which are not that different from Gigi's

[GGT]

I think most people who saved 15% of their income and diversified appropriately should be fine.

Depends on the state, retirement age, top wage during working years, and how much they'd paid out in housing and transportation, medical bills, health insurance, child-rearing, tithing to church or charity while trying to save for retirement. Also depends on if they have a pension, what their SS payments are in retirement, whether they own/rent their home, utility costs, Medicare payments and OOP medical bills.

Many current retirees are using almost half their "fixed income" in health-related costs. Current young workers can spend 80% of their income on living costs, especially if single and in an expensive urban area.

Hazir, at least you'll have some rental income in Istanbul, if needed, and decent health care in Amsterdam that won't bankrupt you in retirement.

[wiggin]

My CPA is my tax advisor. They're familiar with existing tax laws, pending changes coming down the pike, federal and state nuances, and even anticipating personal changes that can have a tax break.

Yes, and I won't have a CPA until I have a complicated situation (say, retirement or near retirement). They're pretty useless at prophecy - I'm not really asking for any better from the forum, but what strategies people should use to cope with the uncertainty in government tax policy.

Bullshit? An annuity plus SS should be enough to cover basics? Where are you getting your facts, Dude? Maybe some didn't save much, or relied too heavily on SS, but millions did everything they were supposed to and still got creamed.

Uhm, the simple fact is that SS and some annuities are defined benefit instruments that adjust to inflation and/or wage growth. I have my doubts about SS (which is why I'm not figuring it in my personal projections), but defined benefit plans have the advantage of pushing longevity risk onto someone else - either the insurance/financial company holding the annuity or the government. Obviously, it comes at a price - either limited government support and FICA/etc. payments, or a high initial deposit for an annuity (which, under normal market conditions and life expectancies, would give me a higher return outside an annuity). Thus, I wouldn't recommend defined benefits for everything, but they're a nice way to supply basic needs while allowing for higher growth for the rest of your savings.

People did not do what they were supposed to. I'm tired of hearing sob stories of retirees with 65% of their assets in stocks who took a huge dive in the recession. Firstly, they shouldn't have had that much exposure to stocks. Secondly, they should have been sitting on 1-2 years of cash to ride out the downturn. Thirdly, the behavior of idiots like those talked about in your article is the worst sort of momentum investing that's a good way to lose lots of money. They're not playing by the rules, they're ignoring them. I have no patience for irrational exuberance. Someone who did what I suggested at retirement could have left their portfolio largely alone during the downturn to ride out the recession, while relying on cash, income from their defined benefit instruments, and fixed income securities.

They've only been replacing employer defined benefit pension plans for 20 years or so. And you don't need to lecture me about IRAs...I started my first one in the 80s, probably long before you were born. Your "faith" is in our financial market system (same as others' before the meltdown), figuring max contribution and diversification is going to protect you in retirement (same as others' before the meltdown). Good luck with that.

I believe 27 years ago fully half of US companies offered a 401(k). http://www.ebri.org/pdf/publications...0205fact.a.pdf

Anyways, who said anything about 'max contributions'? I fully assume that once we're earning two full incomes, we'll max out our tax-protected accounts and save more on top of that. I mean to oversave.

I have sunk pretty much every cent I don't have in cash into the bricks of my homes. I'm 47 now, the next 16 years I will have time to save enough for retirement. I think that in a bad month we put aside 25% of what comes in. Still, I have doubts which are not that different from Gigi's

16 years isn't very much time; the reason why most people are encouraged to save the most early on is because it allows for more asset growth. Given the pretty low cost of financing a house nowadays, wouldn't it make more sense to put every cent (aside from minimum mortgage payments) into a higher yielding retirement account? Of course, I don't know your specific situation, but I've come to the conclusion it's rarely worth it to try to pay off a mortgage early - or to buy so much house you can't afford other savings. Hell, most of the time it's worth it to just rent, though that gets difficult with a large family.

Depends on the state, retirement age, top wage during working years, and how much they'd paid out in housing and transportation, medical bills, health insurance, child-rearing, tithing to church or charity while trying to save for retirement. Also depends on if they have a pension, what their SS payments are in retirement, whether they own/rent their home, utility costs, Medicare payments and OOP medical bills.

It's called a budget.

Many current retirees are using almost half their "fixed income" in health-related costs. Current young workers can spend 80% of their income on living costs, especially if single and in an expensive urban area.

80%?!? Are you kidding me? Even on my measly stipend I'd only be spending about 50% of gross to support both me and my wife if she was unemployed (I'd be spending closer to 30% if I was single; rent-paying roommates can be useful for that). That's with some pretty nice perks - a car, buying whatever food I want, cable, a nice apartment, etc. I could easily drop my expenses to a fraction of my current expenses.

Sure, my particular city is a lot cheaper than, say, NYC - but so are most places. For that matter, most young workers are making far more than my stipend.

And even if your 80% figure is right, that's fine - let them save the other 20%, that should give them quite a lot of options when they're 70.

I'm not saying it's easy to save for retirement - it requires perseverance, discipline, and sacrifice. And some people can definitely get screwed in tough economic times - those who are forced into early retirement, those who lose a pension through no fault of their own (e.g. Enron), etc. But conservative strategies can generally mitigate most of these issues. Sure, your quality of life might not be quite what you were hoping for, but you'll get by. The large numbers of Americans who aren't equipped to deal with the downturn largely weren't being smart about their savings in the first place.

[GGT]

Yes, and I won't have a CPA until I have a complicated situation (say, retirement or near retirement). They're pretty useless at prophecy - I'm not really asking for any better from the forum, but what strategies people should use to cope with the uncertainty in government tax policy.

Suit yourself, but I'd say moving to another country adds another complication to your situation.

Uhm, the simple fact is that SS and some annuities are defined benefit instruments that adjust to inflation and/or wage growth. I have my doubts about SS (which is why I'm not figuring it in my personal projections), but defined benefit plans have the advantage of pushing longevity risk onto someone else - either the insurance/financial company holding the annuity or the government. Obviously, it comes at a price - either limited government support and FICA/etc. payments, or a high initial deposit for an annuity (which, under normal market conditions and life expectancies, would give me a higher return outside an annuity). Thus, I wouldn't recommend defined benefits for everything, but they're a nice way to supply basic needs while allowing for higher growth for the rest of your savings.

Read up on annuities. Forbes had an article just today, listing pros and cons, many aren't tied to inflation, and you can't pass them onto heirs without a special rider. There are also articles about the insurance industry creating new products to insure 401-Ks (much like FDIC or PBGC).

*When I talk about these things, I'm also thinking of millions who worked up to barely middle class, with no pension plan or profit sharing or 401-K. Even saving 15% of their lifetime earnings + SS payments won't necessarily cover "basic living expenses".

People did not do what they were supposed to. I'm tired of hearing sob stories of retirees with 65% of their assets in stocks who took a huge dive in the recession. Firstly, they shouldn't have had that much exposure to stocks. Secondly, they should have been sitting on 1-2 years of cash to ride out the downturn. Thirdly, the behavior of idiots like those talked about in your article is the worst sort of momentum investing that's a good way to lose lots of money. They're not playing by the rules, they're ignoring them. I have no patience for irrational exuberance. Someone who did what I suggested at retirement could have left their portfolio largely alone during the downturn to ride out the recession, while relying on cash, income from their defined benefit instruments, and fixed income securities.

Some did, some didn't, don't be so hasty in painting everyone with a broad brush. It's not a sob story for a 40 yr old executive who gets laid off, loses health insurance after expensive COBRA runs out, and gets prostate cancer. It's not a sob story for a 50 yr old janitor whose hours get cut to part-time and he can't afford health insurance, or his heart meds.

I didn't write the Time article, but all those stories put in personal stories. Call them what you will. Even one of our more conservative members here has bought a new house, new car, new furniture, taken several vacations, and has admitted he's got no retirement savings yet. Maybe he'll have a run of bad luck and you can call that a sob story, but not everyone thinks bad things may happen when they're young.

(You and I are probably more vigilant and anal about those things than other members I can think of. That might be an interesting thread, come to think of it....)

I believe 27 years ago fully half of US companies offered a 401(k). http://www.ebri.org/pdf/publications...0205fact.a.pdf

Anyways, who said anything about 'max contributions'? I fully assume that once we're earning two full incomes, we'll max out our tax-protected accounts and save more on top of that. I mean to oversave.

Fine, the other half didn't offer them, and that's a lot of companies and millions of employees.

I happened to work for a large hospital system that had an opt-out of SS, with its own defined-contribution/defined-benefit pension plan. It had operated for many years quite well, and employees were very happy with it (several even retired on it) until the supreme court decided it was against the constitution to opt-out of SS. Many unhappy and angry people who lost several quarters of eligibility for future SS, even though we got our money back with interest when the fund had to close.

It's called a budget.

Sure, but if 25-30% goes toward housing, 10-20% toward health insurance or medical costs, another x% off college loans, add in an auto and insurance, plus food.....depending on the area, job, and age, saving 15% (as Lewk suggested) can be a budget buster. That's why many young college grads are living back at home with their parents. That's why many people are underfunded for retirement, or think they can make it up "later".

80%?!? Are you kidding me? Even on my measly stipend I'd only be spending about 50% of gross to support both me and my wife if she was unemployed (I'd be spending closer to 30% if I was single; rent-paying roommates can be useful for that). That's with some pretty nice perks - a car, buying whatever food I want, cable, a nice apartment, etc. I could easily drop my expenses to a fraction of my current expenses.

Sure, my particular city is a lot cheaper than, say, NYC - but so are most places. For that matter, most young workers are making far more than my stipend.

And even if your 80% figure is right, that's fine - let them save the other 20%, that should give them quite a lot of options when they're 70.

Simply relaying things I've read. Probably depends on school loans, generous family who can give nice wedding gifts, as well as attitudes about saving. Not every new college grad lands a $50,000/yr right out of school, with employer perks, or lives in town with family, or has family that gives kitchen supplies or smart phones at Christmas....etc. Some kids start out heavily in debt, with no assistance from family, and can only get a job at Starbucks.

I'm not saying it's easy to save for retirement - it requires perseverance, discipline, and sacrifice. And some people can definitely get screwed in tough economic times - those who are forced into early retirement, those who lose a pension through no fault of their own (e.g. Enron), etc. But conservative strategies can generally mitigate most of these issues. Sure, your quality of life might not be quite what you were hoping for, but you'll get by. The large numbers of Americans who aren't equipped to deal with the downturn largely weren't being smart about their savings in the first place.

You're misunderstanding, my quality of life is okay (because I was anal), but I look around my town at recent college grads floundering, the elderly afraid, newly retired looking for work again, manufacturing that left, pensions that got busted. My state in general (which can't meet its bond obligations and is broke, btw) and millions in the country weren't "equipped" for this Great Recession, let alone for retirement. Some even followed what was considered a moderate strategy, but they've blown thru savings, borrowed from 401-Ks, lost their homes, can't find a job, and basically lost a decade. That's why it's an unusual time, with so many people adjusting to a new normal and STARTING OVER.

[wiggin]

Suit yourself, but I'd say moving to another country adds another complication to your situation.

And an American CPA won't be able to help with this, either. You need an expert on the tax treaty between the two countries and both countries' frequently-changing tax systems. Those are few an far between, but of course I'll get one if the situation warrants it. I think this is a little far afield, though, no?

Read up on annuities. Forbes had an article just today, listing pros and cons, many aren't tied to inflation, and you can't pass them onto heirs without a special rider. There are also articles about the insurance industry creating new products to insure 401-Ks (much like FDIC or PBGC).

*shrugs* Of course you have to be careful in selecting them. Adjustments for inflation mean a lower return, but there are lots of applicable products out there. I'm not worried about using an annuity as a legacy - it's just to cover basic expenses and hedge longevity risk. The rest of my money will be more than enough (and to be honest I'm not too concerned with leaving a large estate anyways).

*When I talk about these things, I'm also thinking of millions who worked up to barely middle class, with no pension plan or profit sharing or 401-K. Even saving 15% of their lifetime earnings + SS payments won't necessarily cover "basic living expenses".

Social Security actually covers most basic living expenses if you're at lower middle class. Combined with modest savings, it's not too bad. It's all relative, here - one man's retirement might cost a lot more than another's.

Some did, some didn't, don't be so hasty in painting everyone with a broad brush. It's not a sob story for a 40 yr old executive who gets laid off, loses health insurance after expensive COBRA runs out, and gets prostate cancer. It's not a sob story for a 50 yr old janitor whose hours get cut to part-time and he can't afford health insurance, or his heart meds.

I didn't write the Time article, but all those stories put in personal stories. Call them what you will. Even one of our more conservative members here has bought a new house, new car, new furniture, taken several vacations, and has admitted he's got no retirement savings yet. Maybe he'll have a run of bad luck and you can call that a sob story, but not everyone thinks bad things may happen when they're young.

(You and I are probably more vigilant and anal about those things than other members I can think of. That might be an interesting thread, come to think of it....)

I already mentioned that I admit there are some legitimate hardship cases, and there's definitely a place for government support of the disadvantaged in extraordinary times (e.g. extended unemployment/health benefits etc.). But just looking at capital flows makes me think that most people are just stupid.

I happened to work for a large hospital system that had an opt-out of SS, with its own defined-contribution/defined-benefit pension plan. It had operated for many years quite well, and employees were very happy with it (several even retired on it) until the supreme court decided it was against the constitution to opt-out of SS. Many unhappy and angry people who lost several quarters of eligibility for future SS, even though we got our money back with interest when the fund had to close.

And your point...?

Sure, but if 25-30% goes toward housing, 10-20% toward health insurance or medical costs, another x% off college loans, add in an auto and insurance, plus food.....depending on the area, job, and age, saving 15% (as Lewk suggested) can be a budget buster. That's why many young college grads are living back at home with their parents. That's why many people are underfunded for retirement, or think they can make it up "later".

Simply relaying things I've read. Probably depends on school loans, generous family who can give nice wedding gifts, as well as attitudes about saving. Not every new college grad lands a $50,000/yr right out of school, with employer perks, or lives in town with family, or has family that gives kitchen supplies or smart phones at Christmas....etc. Some kids start out heavily in debt, with no assistance from family, and can only get a job at Starbucks.

Okay, let me crunch my numbers exactly for you. Assuming my wife doesn't have a job and we're paying her student loans and insurance:
Rent: 38%
Medical costs: 11% (this is a guess based on what I think it would cost to add her to my plan and our approximate premium/copay spending now)
Other insurance: 3.5%
Food/expenses: 22% (generous)
Loans: 9% but we'd get back quite a bit in taxes, so call it 7%.
Total: 83.5%

That's assuming we'd keep our pretty nice digs and my shitty income. Taxes would be pretty small given our income and marital status - so we'd probably still have 5ish% to sock away. It wouldn't be hard to lop a 3-4% of gross off our rental expenses, and 2% of gross off our food expenses, so we're talking 10% extra now. Not where it should be, but a good start. Also, given that the loans (8% of gross) are what enabled the wifey to have the current job, it's a bit misleading to include them.

Let's assume I'm single - I have the numbers I was using then, and they're much better:

Rent: 17.5%
Medical costs: 1% (maybe)
Other insurance: 8% (being married has its advantages)
Food/expenses: 11%
Loans: 0
Total: 37.5% of gross

Of course, taxes would be higher, maybe getting to a combined rate of 20% (including state taxes), but that still leaves a whopping 40% of my salary to play with. Now, I didn't actually have that much money back when I wasn't married - I paid a lot of money for travel, some luxuries, and paid off some debt. But it would not have been particularly difficult to save - I saved about 10% of my salary a year despite the fact that I knew that my salary would be 4X higher and then some as soon as I graduated. I could have easily doubled that by being more conservative with my spending.

If I had a real job, halve those percentages. If my wife had a real job (which she does), cut them in 3. It's not hard to save money. It just requires careful priority-setting. (Note I'm not talking about genuinely poor people who really can't make ends meet. I don't expect them to save much. That's not a hallmark of the young urban college graduate, though, unless they got a useless degree, in which case I have no sympathy.) Even making $40k a year is plenty for a young single person in most cities, and a decent college degree should get you that. Average student loan load is something like $20k with generally decent interest rates and repayment plans - figure about $200-250/month. That's not so crushing.

You're misunderstanding, my quality of life is okay (because I was anal), but I look around my town at recent college grads floundering, the elderly afraid, newly retired looking for work again, manufacturing that left, pensions that got busted. My state in general (which can't meet its bond obligations and is broke, btw) and millions in the country weren't "equipped" for this Great Recession, let alone for retirement. Some even followed what was considered a moderate strategy, but they've blown thru savings, borrowed from 401-Ks, lost their homes, can't find a job, and basically lost a decade. That's why it's an unusual time, with so many people adjusting to a new normal and STARTING OVER.

As above, I think people are idiots who are momentum investors, unreasonably optimistic about returns and risk. They bought too much house or underfunded their pension plans. They didn't keep adequate reserves. They overleveraged. They had far too high consumption rates and far too low savings rates.

A company that was run the way most households are run would be broke very quickly.

[GGT]

And an American CPA won't be able to help with this, either. You need an expert on the tax treaty between the two countries and both countries' frequently-changing tax systems. Those are few an far between, but of course I'll get one if the situation warrants it. I think this is a little far afield, though, no?

Nothing in the next five years is far afield, no.

....

Social Security actually covers most basic living expenses if you're at lower middle class. Combined with modest savings, it's not too bad. It's all relative, here - one man's retirement might cost a lot more than another's.

I already mentioned that I admit there are some legitimate hardship cases, and there's definitely a place for government support of the disadvantaged in extraordinary times (e.g. extended unemployment/health benefits etc.). But just looking at capital flows makes me think that most people are just stupid.

You're forgetting that the "middle class" has seen wage stagnation/erosion for a couple of decades, unable to keep up with escalating costs for things like health insurance, housing, transportation. Most everyone has moved down one rung on the ladder. That only helps the lower middle class who became the working poor. Yes, it's all relative, that's what I've been saying.

And your point...?

That what you think is working in your 20s may not be working decades later. That it's not just about prognosticating taxes but also fundamentals.

Okay, let me crunch my numbers exactly for you. Assuming my wife doesn't have a job and we're paying her student loans and insurance:
Rent: 38%
Medical costs: 11% (this is a guess based on what I think it would cost to add her to my plan and our approximate premium/copay spending now)
Other insurance: 3.5%
Food/expenses: 22% (generous)
Loans: 9% but we'd get back quite a bit in taxes, so call it 7%.
Total: 83.5%

That's assuming we'd keep our pretty nice digs and my shitty income. Taxes would be pretty small given our income and marital status - so we'd probably still have 5ish% to sock away. It wouldn't be hard to lop a 3-4% of gross off our rental expenses, and 2% of gross off our food expenses, so we're talking 10% extra now. Not where it should be, but a good start. Also, given that the loans (8% of gross) are what enabled the wifey to have the current job, it's a bit misleading to include them.

Fine, but your medical costs just went up 15%. Or maybe you tithe 10%. Sorry, no movies or dinners out for you, let alone heat/water/gas/phone/cable (or did 38% of housing include those things?), not if you want to save 15% of your income!

Let's assume I'm single - I have the numbers I was using then, and they're much better:

Rent: 17.5%
Medical costs: 1% (maybe)
Other insurance: 8% (being married has its advantages)
Food/expenses: 11%
Loans: 0
Total: 37.5% of gross

Of course, taxes would be higher, maybe getting to a combined rate of 20% (including state taxes), but that still leaves a whopping 40% of my salary to play with. Now, I didn't actually have that much money back when I wasn't married - I paid a lot of money for travel, some luxuries, and paid off some debt. But it would not have been particularly difficult to save - I saved about 10% of my salary a year despite the fact that I knew that my salary would be 4X higher and then some as soon as I graduated. I could have easily doubled that by being more conservative with my spending.

Don't forget, a large part of what you saved lost value in the market. But goody for the single man who pays 1% of his income on health insurance and medical costs, including glasses and dentistry.

If I had a real job, halve those percentages. If my wife had a real job (which she does), cut them in 3. It's not hard to save money. It just requires careful priority-setting. (Note I'm not talking about genuinely poor people who really can't make ends meet. I don't expect them to save much. That's not a hallmark of the young urban college graduate, though, unless they got a useless degree, in which case I have no sympathy.) Even making $40k a year is plenty for a young single person in most cities, and a decent college degree should get you that. Average student loan load is something like $20k with generally decent interest rates and repayment plans - figure about $200-250/month. That's not so crushing.

Sigh, even grads with degrees in finance had a hard time finding a job in their field for a few years, many decided to get a masters or MBA. Plenty of people are hiding out in continued education, with more loans, hoping like hell when they're done the recession is over, and their field is hiring.

It's not that saving is crushing for everyone, but that millions of people DID get crushed, even when they saved. You have to put it into context.

As above, I think people are idiots who are momentum investors, unreasonably optimistic about returns and risk. They bought too much house or underfunded their pension plans. They didn't keep adequate reserves. They overleveraged. They had far too high consumption rates and far too low savings rates.

Sounds like many CEOs, actually. Or Donald Trump. Or Hollywood. Or state or municipal budget directors and legislators.

A company that was run the way most households are run would be broke very quickly.

No they wouldn't. They'd hire a team of lawyers and lobbyists, file for bankruptcy protection, push for congressional favors, restructure or set up a merger, get a tax payer government bail-out of some sort, and continue the same cycle. The media would cover it as a great recovery for savvy business practices, and financial journalists would encourage average people to buy stock shares for their retirement portfolios.

[wiggin]

Fine, but your medical costs just went up 15%. Or maybe you tithe 10%. Sorry, no movies or dinners out for you, let alone heat/water/gas/phone/cable (or did 38% of housing include those things?), not if you want to save 15% of your income!

15% of 11% is about a 1.5% increase out of my gross pay. *shrugs* 'Tithing' and other charitable contributions are voluntary parts of spending; if someone can't afford them, they shouldn't be spending them (in fact, maybe they should be recipients of charity?). Movies and dinners out are luxuries that we rarely use. Utilities were included in food/expenses and don't amount to much if you're working on a budget... not to mention that this is an unrealistically harsh situation taking our current expenditures and applying it to a situation where we're making a third as much as we really do.

Don't forget, a large part of what you saved lost value in the market. But goody for the single man who pays 1% of his income on health insurance and medical costs, including glasses and dentistry.

Depends on what I invested it in, now, doesn't it? Either way, the assets are still assets unless I redeem them, which I have no intention of doing.

I'm not sure why you're surprised about the 1% figure. I have no prescriptions, routine doctors visits are free in-house, dentist cleanings are free twice a year in-network (and since I take care of my teeth and health I don't need more involved stuff), and I replace my glasses maybe every 4 or 5 years. Remember we're talking about the archetypal young, urban college graduate - they rarely have significant health costs. If I spend a few hundred bucks on healthcare a year, I'm surprised. (Note: the numbers would be higher with a wife mostly because I'd have to pay her premium on my plan and because she has one prescription that would cost about $200/year.)

Sigh, even grads with degrees in finance had a hard time finding a job in their field for a few years, many decided to get a masters or MBA. Plenty of people are hiding out in continued education, with more loans, hoping like hell when they're done the recession is over, and their field is hiring.

You think an undergrad degree in finance is useful? Especially today, after the collapse of the whole industry? Anyways, we're not talking about right now - I admit right now is exceptional from an employment perspective (though most of the engineers I know have had little trouble getting jobs).

Look, most people who go to expensive private universities get useless degrees in English or whatever. The available job openings for someone with those skills is far exceeded by the number of trainees.

[Hazir]

I didn't mention that what I saved is on top of what we're supposedly are going to get in social security (state pension) and a pension from a pensionfund set up by our respective employers. If all that doesn 't go belly up alltogether what I'm doing privately is on top of that. Having the houses (a house) has a huge advantage; your fixed expenses are incredibly low compared to what other people are spending on just staying warm and dry.

Over the last 20 years investments in anything other than bricks have had either zero or negative results. Both the investments that should be considered risky (shares in a particular company) and investments that carried a considerable lower risk (participation in a global investment fund). The absolute killer was the house in Istanbul, bought for less money than most people spend on a used car, now worth ten times that and bringing in enough money for me to party there without drawing on my income in Amsterdam.

What really messes with my groove writing this is that the SO sabotaged getting into gold 7 years ago.

[GGT]

....


I'm not sure why you're surprised about the 1% figure. I have no prescriptions, routine doctors visits are free in-house, dentist cleanings are free twice a year in-network (and since I take care of my teeth and health I don't need more involved stuff), and I replace my glasses maybe every 4 or 5 years. Remember we're talking about the archetypal young, urban college graduate - they rarely have significant health costs. If I spend a few hundred bucks on healthcare a year, I'm surprised. (Note: the numbers would be higher with a wife mostly because I'd have to pay her premium on my plan and because she has one prescription that would cost about $200/year.)

I'm surprised that just because you're in a university hospital network, you assume all young people (ages 18-30) have 1% costs like you do, with "free" doctor visits, dental and vision coverage. Or that just because you don't have a health condition or prescriptions, no one else would, or if they do it's just for BC or something.

You think an undergrad degree in finance is useful? Especially today, after the collapse of the whole industry? Anyways, we're not talking about right now - I admit right now is exceptional from an employment perspective (though most of the engineers I know have had little trouble getting jobs).

Look, most people who go to expensive private universities get useless degrees in English or whatever. The available job openings for someone with those skills is far exceeded by the number of trainees.

I'm not critiquing your choices, your future retirement. If everyone had a life like you, made choices like you, was a supersaver with a degree in demand, a job with presumed longevity and security, the world would be peachy keen! Your posts are peppered with broad statements that are bothersome---you're tired of stupid people with sob stories, their bad decisions aren't your problem, all anyone has to do is persevere and follow a budget, English degrees are useless, people who lost money in the market were just doing it wrong, you plan to amass 5 million by retirement, if you can do it then anyone can....but that's not realistic.

[wiggin]

I'm surprised that just because you're in a university hospital network, you assume all young people (ages 18-30) have 1% costs like you do, with "free" doctor visits, dental and vision coverage. Or that just because you don't have a health condition or prescriptions, no one else would, or if they do it's just for BC or something.

My wife's health insurance is way better than mine - she's not restricted to a network, has her HSA filled up by her employer to cover deductibles and premiums, gets full dental, some vision... and has family covered for free. She works for an evil corporation, too. I'm on a shitty student health plan that's very restrictive and doesn't cover nearly what it should.

My point is that many young urbanites don't have high health bills - that's why so many of them elect not to pay for health insurance, it's just not worth it.

I'm not critiquing your choices, your future retirement. If everyone had a life like you, made choices like you, was a supersaver with a degree in demand, a job with presumed longevity and security, the world would be peachy keen! Your posts are peppered with broad statements that are bothersome---you're tired of stupid people with sob stories, their bad decisions aren't your problem, all anyone has to do is persevere and follow a budget, English degrees are useless, people who lost money in the market were just doing it wrong, you plan to amass 5 million by retirement, if you can do it then anyone can....but that's not realistic.

Which of those broad statements was wrong, again? Though I would argue I never said the 'people who lost money in the market were doing it wrong.' I said that people who were ruined by the market downturn were doing it wrong; everyone lost money; well, almost everyone.

People make poor choices; it's one of the hallmarks of human nature.

[GGT]

My wife's health insurance is way better than mine - she's not restricted to a network, has her HSA filled up by her employer to cover deductibles and premiums, gets full dental, some vision... and has family covered for free. She works for an evil corporation, too. I'm on a shitty student health plan that's very restrictive and doesn't cover nearly what it should.

A thread for another day, or file it under Healthcare (Insurance) Reform. Talk about subsidies or "free money".....

My point is that many young urbanites don't have high health bills - that's why so many of them elect not to pay for health insurance, it's just not worth it.

Yes, I understand. Young invincibles and all that. Nobody thinks they'll have a car crash, break bones, get burned, rack up thousands in medical bills.

Which of those broad statements was wrong, again? Though I would argue I never said the 'people who lost money in the market were doing it wrong.' I said that people who were ruined by the market downturn were doing it wrong; everyone lost money; well, almost everyone.

People make poor choices; it's one of the hallmarks of human nature.

Mostly assuming others' problems don't or won't affect you. They will, they do. It's great when people make good choices and weather downturns, but rather myopic to think we can be insulated from those who got into trouble or hard times.

[Being]

... but rather myopic to think we can be insulated from those who got into trouble or hard times.

Myopic or inhumane? Or, the new American Dream?

[GGT]

Myopic or inhumane? Or, the new American Dream?

Convenient denial? Not sure. Been a lot of whining lately how unemployment benefits or welfare subsidies "spoil" the populace and make us lazy. I don't agree with that, but it is true that our safety nets have an unintended consequence: it keeps struggling or needy people out of sight, out of mind.

Food stamp debit cards means no long bread lines or beggars on every corner. Homeless shelters mean less tent cities or wandering cart people. On-line applications for housing assistance masks the real need (recall the Atlanta debacle where 30,000 showed up for some 400 open slots). Internet job searches hides the faces of the millions looking for work. Only large jobs fairs or applicant lines a city block long make the news. Only thousands showing up at convention centers for charity healthcare paints a visual picture.