I hear there's a special on one of those in Costa Rica...
Anyway, I don't disagree that saving money is good. I think saving too much for retirement is bad. Presumably you can't raid your IRA to take that hunting trip.
I hear there's a special on one of those in Costa Rica...
Anyway, I don't disagree that saving money is good. I think saving too much for retirement is bad. Presumably you can't raid your IRA to take that hunting trip.
Hope is the denial of reality
If you want to retire early while you can still enjoy it...Originally Posted by Loki
If you're saving 20% of your income, you're saving more than enough to live on comfortably. You're cutting back on fun today just so you can have more fun when you're not physically or mentally able to appreciate it.
Being able to retire by 55 for example would be great (and yes I know I can't draw down the 401k at that age) and having a sizable nest egg is the only way that will work.
Why would you want to retire by 55? Are you engaged in boring, back-breaking labor? I'd be bored if I was just sitting at home. I don't intend to retire until I can't work anymore.
Hope is the denial of reality
I'm shooting for 40!
And then what?
Hope is the denial of reality
A descent into decadent hedonism. Isn't that the whole point of retirement?
You'll get bored of it, you'll see.
Hope is the denial of reality
That would only be an indication that I wasn't being decadent enough. I'd just need to up my game. See if I can single-handedly bring Slaanesh into existence.
The issue, Dread, is that your capital gains are also taxable as income. So, yes, you're increasing your principal by making it pre-tax, but all of your capital gains (which are likely to be the bulk of your retirement assets) are taxed at your income tax rate. The calculations vary from person to person. If you're making too little money when you're young, it's probably better to put money into a Roth IRA. If you're making more money, a 401(k) is better because of your argument above. If you're making a lot of money, though, then retirement savings should mostly be in taxable accounts to capture the lower rate on long term capital gains. Obviously for any intelligent investor you're likely to see a mix of all three depending on investment horizons, hedging policy/market risk, etc.
If all you're saying is the last line, I think everyone here agrees with you. But frankly the vast majority of Americans save far too little for retirement, so I don't think your concerns are particularly relevant. The vast majority of long term assets for an individual are likely to be used for housing and retirement. Sure, it's good to have a decent chunk of change in a taxable, liquid account for emergencies and the occasional large expenditure (cars, vacations, etc.), but that should pale compared to the amount of money one would want to have set aside for retirement.
Also, as previously mentioned, contributions (though not capital gains) in a Roth IRA can be pulled out at will, tax free. This adds an enormous amount of liquidity and flexibility to tax-protected investments.
I'm not really sure what you're trying to get at here, to be honest.
I don't spend much time around most Americans.The ones I do spend time around either don't save at all or hoard their money. I don't think either is a good idea. I don't see the sense of saving so much money for retirement that one ends up living well below one's means (in particular, living in run-down apartments, buying cheap food, not going on real vacations). I'd be the first to say that you shouldn't live beyond your means, but the opposite scenario seems to be downright stupid: you're artificially lowering your quality of life today by far more than you'll raise it in the future by having too much money.
Hope is the denial of reality
Agreed. I think most of the people (except Wraith?) here would also agree. It just didn't seem like that was your argument earlier in this thread.
The argument was that saving too much, particularly when the savings take a very illiquid form, is stupid.
Hope is the denial of reality
I was just bantering before, not making a point. But pushed into it, I'd disagree with Loki's rule that anyone who's saving 20% of their income is saving too much. There's no hard percentage for 'saving too much'. The right amount of savings depends on the person. I don't think Dreadnaught's savings rate is necessarily excessive, especially since it's near my own. Besides that, saving too much is almost certainly preferable to saving too little.
Also, due to compound interest, money you save today can be spent on much more hedonistic excess later.
I'm doing 13% into 401k as my financial adviser suggested it (I started saving later than I would have liked so I'm making up for lost time).
Brevior saltare cum deformibus viris est vita
When are you more likely to enjoy hedonistic excesses: when you're 25-30 or when you're 50?
And Wraith, I fully understand that people in certain industries earn more money than they know what to do with.
Last edited by Loki; 02-04-2013 at 01:43 PM.
Hope is the denial of reality
We'll all be living till about 600 by then anyway.
When the sky above us fell
We descended into hell
Into kingdom come
From what I've seen it's about 50-50. Just hafta get the kids out of the house and find a nice swingers' club that arranges trips abroad.
50 seems like a second adolescence only much better due to money, security and more experience with enjoying yourself in various ways. As long as your quality of life isn't too low in your 30s, working towards a fantastic 50s may not be completely insane. Hard to put numbers to the best strategy; people have very different incomes and expenses and at a certain point many people can be pretty happy with their lives with plenty of money left over. Our current monthly expenses are less than a third of just my monthly income and we're having fun. Admittedly there'll be weddings and honeymoons and vacations and mortgages and kids etc etc but in a dual income household you have a good shot at saving a great deal of money even so.
I agree with you in principle, just not necessarily with your numbers. My dad is a man who artificially lowered his (and our) QoL for much of his and our lives. Very unfortunate. Then again he really seems to be enjoying his 50s
"One day, we shall die. All the other days, we shall live."
Spoken like a young guy.
Brevior saltare cum deformibus viris est vita
Whenever I don't have a job, and thus have the time for depraved hedonism.
That's not what I was saying at all. Closer to one of my subpoints would be: some people don't need to spend tons of money to get what they want.And Wraith, I fully understand that people in certain industries earn more money than they know what to do with.
True enough. It's not meant to be a critique of everyone.
Hope is the denial of reality
Taxed at your income tax rate at retirement.If I'm making so much money when I'm 65-70 that I'm in an upper tax bracket, well then so be it and I hope the government enjoys continuing to make cheese and missiles with my money.
Because I enjoy leisure time more than work. I see my parents still working when they would rather be spending time with grand kids, travelling and catching up on a lot of reading.
I may end up doing volunteer work for part time, or even paid part time work but I do not want to be working 40+ hours a week if I don't have to.
I don't think you'd enjoy leisure time as much if that's all you had. The grass is always greener and all that.
Hope is the denial of reality
The 25% bracket for couples starts at $70k; I haven't figured it out exactly, but you probably meet the 15% overall rate pretty quickly (around $80k?). I don't know about you, but I'll need my retirement income to be quite a bit higher - to pay for healthcare, housing, travel, and taxes, not to mention bribing my grandchildren. I get that SS is supposed to supplement some, but remember that some SS income can be taxable, and even if it isn't it doesn't add up to much. In fact, since I'm currently a low-paid lab monkey (with hopefully much higher income prospects in a few years), there's likely to be a significant gap between our current effective tax rate and our retirement effective tax rate, with the latter being significantly higher.Taxed at your income tax rate at retirement.
Furthermore, if you are indeed in the lower two tax brackets, your long term capital gains taxes are zero. That's still a significant savings between income tax rates and capital gains tax rates. (I don't get your logic above either, about 'letting' the government have excess taxes if you're moderately well off. I can't imagine you actually mean it - if there's an easy and legal way to significantly reduce your tax bill in retirement, wouldn't you take it, irrespective of your income??)
Deferred taxes work great for modest incomes, and 401(k)s and non-Roth IRAs are probably going to be the main retirement savings vehicle for most people for good reason. But for the upper-middle class, it makes sense to put some into a taxable account to hedge your bets and give you some unrestricted income that you know will be taxed at a fairly low rate.
I guess what I'm trying to say is that everyone's situation is different and tax-deferred accounts are not always the best option. I think I agree with Wraith above - there aren't any cardinal rules for savings you can apply across the board. It all depends on the situation and the goals of the individual.
We both agree there is no universal right answer. But I just want to point out-- you're forgetting that IRA's have a contribution limit of $5,500/year. 401ks have a $17,500/year. With a company match, 401ks can offer a substantial amount of tax-deferred savings.
Some of us are in fields where we're probably going to be in a higher tax bracket at 60 than at 30.
Hope is the denial of reality
Roth IRAs actually have no effective contribution limit any more. You can roll over any amount of money you want from a 401(k) into a Roth IRA, as long as you pay taxes on it. And taxable accounts, of course, have no limits at all.
Too many Americans have only three months living expenses reserved, and would be in the poor house after a lay-off, a medical emergency, or local Disaster.
The folks who "borrow and spend" are young workers, parents, homeowners, small businesses, college grads, middle income earners -- with encouragement from financiers/credit card companies/lenders.
It's not just a 'savings' problem but a COL and wage problem. Add growing number of employers that hire only part-time/temp/contract work, don't offer any savings or retirement plans, let alone health insurance or family leave....millions of employed people are barely keeping up.
If you intent to speculate, Costa Rica government already announced measures to tackle speculation.
This was caused by monetary policy. By trying to keep a desirable "strong" dollar, inflation was exported and that made foreigners cheaper. Some people say there is no connection between unemployment and inflation, but study in the EU showed that there is no immediate effect, but cumulative effect.Too many Americans have only three months living expenses reserved, and would be in the poor house after a lay-off, a medical emergency, or local Disaster.
The folks who "borrow and spend" are young workers, parents, homeowners, small businesses, college grads, middle income earners -- with encouragement from financiers/credit card companies/lenders.
It's not just a 'savings' problem but a COL and wage problem. Add growing number of employers that hire only part-time/temp/contract work, don't offer any savings or retirement plans, let alone health insurance or family leave....millions of employed people are barely keeping up.
See PDF: Traditional versus New Keynesian Phillips Curves
http://www.ijcb.org/journal/ijcb12q2a3.pdf
US had exported so much inflation with the policy of "hegemony of dollar" that now there is a huge imbalance in the job market. Indeed, every embargo, every economic sanction is conducted with the idea of making foreign economies to cause devaluation of currency or to cause inflation. The net result is the current market imbalance that caused so much unemployment as jobs went overseas, precisely to the countries that were "attacked" in the past.
You also may like to read this report about IMF:
http://www.ieo-imf.org/ieo/files/com...rt_SPANISH.pdf
IMF pushed measures that sank several countries, pushed the equivalent of an embargo or economic sanctions, and now they are having incoming jobs and economic growth. The more this policy continues, the worse the future of unemployment will be. And the economic correction has not even started. Obama has been trying to contain the effects, while dollar policies continue.
Last edited by ar81; 02-05-2013 at 04:37 PM.
Freedom - When people learn to embrace criticism about politicians, since politicians are just employees like you and me.
Millions of employed people have terrible savings habits and no self-control when it comes to spending.
Hope is the denial of reality
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