Retirement |

Dean of Elfery

Anyone in need of a chuckle this morning after the weekend’s events need only view the first minute or so of John Oliver’s take on retirement plans and financial advisers.

Here’s a link to the referenced Elf Spotting certificate … in case anyone’s interested.

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Retirement Regrets

There’s nothing really surprising in this survey of regrets current and future retirees have about their current or future retirement.

Too little saving and too much debt account for two-thirds of the responses with the other third split about equally between None (the correct answer) and “Something else” (which screams out for some elaboration, given that it’s a pretty big share of the responses).

Low financial literacy and our consumer culture (buying things you don’t need with money you don’t have) work against those with the best intentions and, in the end, this is kind of like the obesity epidemic where, “eat less, exercise more” is easier to say than do.

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More Retirees at Risk

Via this Marketwatch story detailing the latest U.S. retirement survey data comes the chart below depicting how less than half of U.S. retirees will be able to maintain their standard of living after they pick up their golden watch and their last paycheck.

Of course, one easy solution to this worsening problem is to lower your standard of living (i.e., spend less) while you’re working so that the transition into your golden years is much easier, but that’s kind of an un-American thing to do.

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Retiring Early is Un-American

It wasn’t immediately clear that the usage of the word “Un-American” in the title above was appropriate, that is, until reading this definition at Wikipedia:

Un-American is a pejorative term of U.S. political discourse which is applied to people or institutions in the United States seen as deviating from what are widely perceived to be fundamental American cultural and political values

Now, there are clearly no politics involved here. Rather, it is the deviation from well established cultural values, namely, ratcheting up your lifestyle at least as fast as your income rises, that makes those who choose to spend much less than they earn during their working years a candidate for retiring early as detailed in this USA Today story.

As with most journeys, retiring early starts with a few simple steps, the most important being this: You have to calculate – there’s no getting around it, really – how much you’ll need to fund your lifestyle for as long as you (and your partner) will live. This won’t be easy because you don’t know just how long that will be.

But what you do know is this: Retiring early means calculating more years into the equation — say, 30 instead of 20. For the average American household, that could mean saving an extra $400,000 or so on top of what you might already need for a traditional retirement plan.

Once you know your “number,” there are only two other steps to commit to memory: Start saving and stop spending. Put another way: Live not just within your means, but well below, says Rick Miller, president of Sensible Financial Planning in Waltham, Mass.

Living “well below” your means really is un-American – it goes against the fundamental American cultural values of consumerism and debt.

I’ve often said that a large part of the U.S. economy is driven by people buying things they don’t need with money they don’t have and, while some may point to that as being a great post-World War II success story, it results in millions upon millions of people who might never be able to call it quits as part of the traditional work force.

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For the first time since before the financial crisis, more Americans think they’ll have enough money to be comfortable in retirement than not according to the latest Gallup survey.

On its face, this is not very surprising given the dramatic rise in stock prices and home prices over the last year or so, developments that are pretty hard not to notice if you’ve given retirement even a passing thought. The latter is probably more important since, for better or worse, housing plays an outsized role in the finances of most American families.

It would appear that, more than anything else, we’re confident that the Federal Reserve will be able to keep asset prices inflated and that confidence may be misplaced.

Not surprisingly, how people think about retirement is quite different depending on how close to it you are as confidence goes down in the survey as age goes up with only 45 percent of those aged 50 to 64 answering yes to the question while 48 percent said no.

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