Millennials want to retire by 61, but most have nothing saved

[Rusty Shackelford 414]

The growth is taxed as ordinary income in a traditional IRA.
https://www.thebalance.com/individual-retirement-accounts-3193216

Cool, but the subject was ROTH IRAs, not traditional

[Okie State 3848]

Cool, but the subject was ROTH IRAs, not traditional

The subject was Roth vs. Traditional and why it's good strategy to have both.

[Okie State 3848]

Way to hijack the thread.

You serious, Clark? The thread was dead and has had some good discussion since.

[SuingToGetAMessageBoard? 3861]

14 minutes ago, Rusty Shackelford said:

Cool, but the subject was ROTH IRAs, not traditional

lulz.  so you misread the last 20 posts leading to this chaos.

[Rusty Shackelford 414]

Yea the last 20-30 posts have been chaos whether intentional or not, and I am trying to clear that up here.

IDGAF about scoring or saving internet points on this thread.

[horn4life 3784]

The student loan debt shifted onto younger gernerations by the per capita spending reductions across the nation are nothing short of criminal IMHO.

I think you can pretty much ask any generation whent hey want to rtire and find out thay don't have remotely near enough money. Unfortunately for a very long time we as a political nation have decided investing in the future is not a worthy cause on a variety of avenues. 

[Nice Guy Eddie 13529]

1 hour ago, horn4life said:

The student loan debt shifted onto younger gernerations by the per capita spending reductions across the nation are nothing short of criminal IMHO.

I think you can pretty much ask any generation whent hey want to rtire and find out thay don't have remotely near enough money. Unfortunately for a very long time we as a political nation have decided investing in the future is not a worthy cause on a variety of avenues. 

When I was at UT in the late 80s/early 90s, tuition was effectively free given the subsidies from the state govt.   While perhaps the subsidy was too much then, it's ridiculous that taxpayer dollars don't assist more with education. It's one of the few govt programs that pays for itself.  Undereducate the young long enough and fewer businesses will move or start here.  

[Cheeseweasel 26438]

3 minutes ago, Nice Guy Eddie said:

When I was at UT in the late 80s/early 90s, tuition was effectively free given the subsidies from the state govt.   While perhaps the subsidy was too much then, it's ridiculous that taxpayer dollars don't assist more with education. It's one of the few govt programs that pays for itself.  Undereducate the young long enough and fewer businesses will move or start here.  

Boomers got theirs. Fuck everyone else.

Pretty much their attitude with everything in America.

[Sbbruin 21900]

1 hour ago, Rusty Shackelford said:

Yea the last 20-30 posts have been chaos whether intentional or not, and I am trying to clear that up here.

IDGAF about scoring or saving internet points on this thread.

Well I'm trying to determine the conversion rate of my internets to after-tax retirement dollars, and you aren't helping.

[Js1 85631]

3 minutes ago, Sbbruin said:

Well I'm trying to determine the conversion rate of my internets to after-tax retirement dollars, and you aren't helping.

[Cheeseweasel 26438]

4 minutes ago, Sbbruin said:

Well I'm trying to determine the conversion rate of my internets to after-tax retirement dollars, and you aren't helping.

[bmbmd 1027]

The closer I get to retirement, the more opposed to it I am.  I like my job, I'm good at it, and it pays better than retirement.  I've cut down quite a bit, but still work more than forty hours.  I'll miss it when I'm gone, and I pray to God that I'll know when it is time. 

[Cheeseweasel 26438]

Just now, bmbmd said:

The closer I get to retirement, the more opposed to it I am.  I like my job, I'm good at it, and it pays better than retirement.  I've cut down quite a bit, but still work more than forty hours.  I'll miss it when I'm gone, and I pray to God that I'll know when it is time. 

Read the "wives and the stupid shit" thread daily. It will keep you at the office and out of retirement.

[SwanderedTalent 5761]

2 hours ago, Nice Guy Eddie said:

The social security surplus will cease to exist in 2034.  At that point, it will be taking in less than it needs to pay out monthly.  what happens?

That's in only 15 years, which is why it's such a huge topic of conversation in politics. We could be talking about Trump's tax returns or a nobody freshman Congressional rep from New York who's young and has a great rack, but thank goodness this is a country that takes its potential problems seriously. You remember how viciously Trump and Clinton went back and forth on their detailed plans to address this during the debates in 2016-- man! That was some good policy debate.

[Nice Guy Eddie 13529]

1 hour ago, Cheeseweasel said:

Boomers got theirs. Fuck everyone else.

Pretty much their attitude with everything in America.

Us Gen-Xers  got lucky that we still mainly had the Greatest Generation in charge when we were young.  They talked a big game about small govt, but they still believed in giving back.  

 

1 hour ago, SwanderedTalent said:

That's in only 15 years, which is why it's such a huge topic of conversation in politics. We could be talking about Trump's tax returns or a nobody freshman Congressional rep from New York who's young and has a great rack, but thank goodness this is a country that takes its potential problems seriously. You remember how viciously Trump and Clinton went back and forth on their detailed plans to address this during the debates in 2016-- man! That was some good policy debate.

The logical move would be to slightly increase the fica ss  tax rate or raise the max wage base but that would equate to a tax increase which we can have. 

[Celery Man 21012]

just since it looks like there are other dumbasses like myself talking about roth vs traditional, and this was a thing that I didn't realize for a while, and if I'm wrong someone tell me because I'm 15% into index funds and try not to look when shit is hitting the fan - your company's match goes into a traditional even if you're putting your contribution into a roth.

[Okie State 3848]

just since it looks like there are other dumbasses like myself talking about roth vs traditional, and this was a thing that I didn't realize for a while, and if I'm wrong someone tell me because I'm 15% into index funds and try not to look when shit is hitting the fan - your company's match goes into a traditional even if you're putting your contribution into a roth.

This is correct. At least at my company.

[DaysOff 7978]

Yea the last 20-30 posts have been chaos whether intentional or not, and I am trying to clear that up here.

IDGAF about scoring or saving internet points on this thread.

Everyone's goal should be to earn too much to be eligible for Roth IRA contributions.

[Anastasis 23471]

Just now, DaysOff said:

5 hours ago, Rusty Shackelford said:

Yea the last 20-30 posts have been chaos whether intentional or not, and I am trying to clear that up here.

IDGAF about scoring or saving internet points on this thread.

Everyone's goal should be to earn too much to be eligible for Roth IRA contributions.

Last time I was eligible for Roth contributions I was in grad school and too poor to make the contributions on a regular basis. My Roth has like 3 grand in it. LOL. 

[Larry T. Spider 1747]

Public educator slowly backs away from this thread...

[Okie State 3848]

Oh here we go. Surly 1% incoming.

[Rusty Shackelford 414]

Everyone's goal should be to earn too much to be eligible for Roth IRA contributions.

https://www.nerdwallet.com/blog/investing/backdoor-roth-ira-high-income-how-to-guide/

[Archer 474]

You can roll a regular IRA into a Roth with no income restrictions. It does become more complicated with an existing traditional IRA balance (pro rata rules). 

Edited February 12, 2019 by Archer

[Llano Estacado 1257]

Last time I was eligible for Roth contributions I was in grad school and too poor to make the contributions on a regular basis. My Roth has like 3 grand in it. LOL. 

There’s no limit on backdoors though (that’s what she said). Pre or Post Tax TIRAs, you could always convert every year, or 5 years, or at some dollar figure X, correct?

As long as the tax man is satisfied when you make the conversion, or is my understanding FUBAR’d?

[Texas Town 18]

14 hours ago, Llano Estacado said:

 

There’s no limit on backdoors though (that’s what she said). Pre or Post Tax TIRAs, you could always convert every year, or 5 years, or at some dollar figure X, correct?

As long as the tax man is satisfied when you make the conversion, or is my understanding FUBAR’d?

 

Yes, there are limits.  You can contribute up to $5,500 in 2018 and $6,500 if over 50 years old (looks like this amount will be increased by $500 for 2019). You can contribute more than these limits each year, but the IRS penalizes you 6%. I think you have until the Federal income tax deadline to make your contribution for that tax year, i.e. until April 2019 for your 2018 Roth contribution. 

I may have misunderstood your question, but...Keeping the tax man happy becomes more complicated if your Roth conversion includes pre-tax funds (i.e. from a Rollover IRA). Read up on the pro-rata rule. Any pre-tax IRA money you convert to Roth needs to be taxed at your Fed income level. For example, if 50% of your total IRA funds are pre-tax, then the IRS requires you pay Fed income tax on 50% of your Roth conversion. There is paperwork involved to document, adjust and track pre-tax balances moving forward. Before you do a Roth conversion its cleaner to "roll in" any pre-tax IRA funds into your 401k. 

[Beau Vine 54471]

On 2/11/2019 at 10:20 AM, Nueces River Rat said:

This right here needs to be a big focus by today's college students BEFORE they start screaming at Politicians at their local state legislature or Washington to give them more access to money via grants or increased loan borrowing limits with subsidized interest payments.  

Colleges have been bellyaching about the cut backs on state funding for years, but that doesn't keep them from building some pretty costly bling for which the funding is passed on to the students via tuition revenue bonds.  Why?  Because the administrations of these colleges know Washington or (fill in your state capital) is not going to touch student loans or grants because it's almost like Social Security for Seniors.  They know how the game is played and they increase tuition and fees (mostly fees now) to capture those increases in aid the Feds and States generously give to students because they know students and their families are a voting bloc they will not screw with when it comes to free or reduced cost money.  They also know the focus on the cost of the bureaucracy and bling is almost non existent, so they will continue to game students and their families until someone with a very loud microphone starts calling out these schools. 

I'd really like to see the State Comptroller exam  every public school district and university system in this state  and make them justify their current bureaucracy and costs for building projects.  I'm not saying today's students should be going to school in portable building like facilities or in ghetto like conditions.   But dammit there is some serious bullshit going on, IMO.

You're not wrong, but this needs to be a federal thing, because doing it at the state level puts that state at a disadvantage.  And Texas already loses too many students to out-of-state public universities.  (Yes, my daughter goes to one.)

[Spankytoes 1743]

In truth, Millennials gets a lot of shit for all the wrong reasons when it comes to retirement. The average household income in America is $61,372.00 per year. So let’s assume that the husband makes $55,000.00 per year and the wife makes $35,000.00 per year for an annual household income of $90,000.00. Considering today's job market, and baby boomer’s refusal to leave jobs, that’s a pretty high estimate.

The husband and wife max out their 401K contributions at $38,000.00. Husband gets another $2,200.00 from his employer on a 4% match and wife gets another $1,400.00 from her 4% match. Their annual contributions would be $41,600.00 per year. If they remain constant in their savings with an average return of 6% for 37 years (Age 30 – 67), they will end up with $5,971,276.18, which is an excellent nest egg.

But, the reality is that is hardly achievable. If you are contributing $38,000.00 of your salary to max out your contributions, you are left with a gross of $52,000.00. Assuming that the average taxes are 16.03%, your net annual take home would be $45,043.00 claiming 0 deductions. (Also assuming you live in Texas and do not have to pay a State Tax) Then, you have further revisions such as insurance. If you are paying $8,400.00 annually for insurance ($700/mth. for family), your net is further reduced to $36,643.00 per year or $3,053.58 per month. Unless you’ve inherited a house, at least half of that will be eaten up by your mortgage, property taxes and homeowner’s insurance. So you have to figure out how to live off $1,500.00 a month, or $375.00/week to subsidize your transportation, food, entertainment, incidentals, maintenance, kids, etc. Not to mention, needing savings to remain liquid. And you certainly can’t afford credit cards without earning interest or have high school loans to pay off.

Even if you live frugally, and earn almost $30,000.00 more than the average annual household income, it’s improbable that you will be able to sustain that level of retirement contributions. Especially as a 30 year old with a family, whose immediate needs outweigh the possibility that you will live to 67 and beyond. In reality, you will need to cut your retirement contributions in half to have some breathing room. That will essentially dwindle your nest egg to $3,000,000.00, which is on the border of what will be enough money to retire with due to inflation and increased medical costs once you leave the workforce. You also have to suppose that you will receive raises to offset the differential and remain employed without a large gap, which may be out of your control.

[ztejas 43552]

Not disclosing anything but in a similar vein I don't contribute to my 401k (even though employer matches up to 4%) because right now, money tomorrow is worth so much more than money 30 years from now for me. Especially non-guaranteed money. 

You can tell me that its tax free and that my employer matches, but the caveat of it not being in my checking account is too much of a hurdle. 

I'll start worrying about retirement when I'm making enough to contribute without majorly affecting my discretionary spending and saving.

 

[TwiceHorn 31614]

3 minutes ago, ztejas said:

Not disclosing anything but in a similar vein I don't contribute to my 401k (even though employer matches up to 4%) because right now, money tomorrow is worth so much more than money 30 years from now for me. Especially non-guaranteed money. 

You can tell me that its tax free and that my employer matches, but the caveat of it not being in my checking account is too much of a hurdle. 

I'll start worrying about retirement when I'm making enough to contribute without majorly affecting my discretionary spending and saving.

 

You need a better job.

[Okie State 3848]

I get that it's tough for some people to save due to a variety of reasons, but giving up an employer match is absolutely the worst decision you can make.

 

On an $80K salary, a 4% contribution would cost you $133/paycheck.

[Sbbruin 21900]

5 minutes ago, ztejas said:

Not disclosing anything but in a similar vein I don't contribute to my 401k (even though employer matches up to 4%) because right now, money tomorrow is worth so much more than money 30 years from now for me. Especially non-guaranteed money. 

You can tell me that its tax free and that my employer matches, but the caveat of it not being in my checking account is too much of a hurdle. 

I'll start worrying about retirement when I'm making enough to contribute without majorly affecting my discretionary spending and saving.

 

You need to rethink this strategy.  You are going to be a Walmart greeter at 75.

[HRSchenker 2275]

I'm not really eligible for a backdoor roth IRA anymore ever since I rolled over my old 401k, otherwise I'd have to pay a ton of taxes for the conversion. Would it be worth it to convert traditional to roth and pay the taxes up front or continue to contribute to the traditional IRA without the deduction?

16 hours ago, Celery Man said:

just since it looks like there are other dumbasses like myself talking about roth vs traditional, and this was a thing that I didn't realize for a while, and if I'm wrong someone tell me because I'm 15% into index funds and try not to look when shit is hitting the fan - your company's match goes into a traditional even if you're putting your contribution into a roth.

15%? Hopefully you're older than 50. The company match goes into the traditional one because you haven't paid taxes on it. Tax man is gonna get his money one way or another and putting the match in the roth would be double tax free (badass but not allowed by current IRS rules).

[TwiceHorn 31614]

Just now, Sbbruin said:

You need to rethink this strategy.  You are going to be a Walmart greeter at 75.

Yep, apart even from the match or the tax advantage, starting saving early is the biggest leg up you can have.

[Cheeseweasel 26438]

19 minutes ago, Spankytoes said:

 annual household income of $90,000.00. 

The husband and wife max out their 401K contributions at $38,000.00. 

You might want to check your math. No way is someone who is making 90k (pretax/preinsurance/pre medicare/pre social security) saving 38k.

Their take home is probably 60k (at best), minus 38k = 22k. You are saying they are living off of $1,833 per month?

[drewlaws 126]

9 minutes ago, Cheeseweasel said:

You might want to check your math. No way is someone who is making 90k (pretax/preinsurance/pre medicare/pre social security) saving 38k.

Their take home is probably 60k (at best), minus 38k = 22k. You are saying they are living off of $1,833 per month?

He is referring to pre-tax IRA or 401(k) contributions.

You're right though... tough to max out at that income level, especially with a family, even in a LCOL area.

[Nice Guy Eddie 13529]

If a couple can max out their 401ks with a combined salary of 90K, then they are in an unique status of .001% of the population.    I don't think many can save 40% of their income into retirement plans.   That may actually be a really bad idea for someone to do that.  I assume that couple is living in a crappy apt, and perhaps will buy their first home at age 65 with their $5M.

Its much more common that another same income couple is saving 15K total.  Or actually its more than likely that they're saving close to 0.

[SuingToGetAMessageBoard? 3861]

44 minutes ago, Cheeseweasel said:

You might want to check your math. No way is someone who is making 90k (pretax/preinsurance/pre medicare/pre social security) saving 38k.

Their take home is probably 60k (at best), minus 38k = 22k. You are saying they are living off of $1,833 per month?

 

26 minutes ago, drewlaws said:

He is referring to pre-tax IRA or 401(k) contributions.

You're right though... tough to max out at that income level, especially with a family, even in a LCOL area.

The whole point of his post is that someone at that level isn't able to contribute that much.

[Spankytoes 1743]

45 minutes ago, Cheeseweasel said:

You might want to check your math. No way is someone who is making 90k (pretax/preinsurance/pre medicare/pre social security) saving 38k.

Their take home is probably 60k (at best), minus 38k = 22k. You are saying they are living off of $1,833 per month?

I said a household annual income of $90,000. $90,000 - $38,000 = $52,000 gross. I agree with your second sentence. That was the main idea of my entire post.

[Cheeseweasel 26438]

4 minutes ago, Spankytoes said:

I said a household annual income of $90,000. $90,000 - $38,000 = $52,000 gross. I agree with your second sentence. That was the main idea of my entire post.

Ah. Got it. Thanks.

[Spankytoes 1743]

14 minutes ago, Nice Guy Eddie said:

If a couple can max out their 401ks with a combined salary of 90K, then they are in an unique status of .001% of the population.    I don't think many can save 40% of their income into retirement plans.   That may actually be a really bad idea for someone to do that.  I assume that couple is living in a crappy apt, and perhaps will buy their first home at age 65 with their $5M.

Its much more common that another same income couple is saving 15K total.  Or actually its more than likely that they're saving close to 0.

Right, which is exactly what I'm saying. While the math isn't perfect, it is very difficult for a family of 4 to live comfortably off $3,053.58 a month. Even if you cut your retirement contributions to $19,000.00 per year, you're only raising your disposal income to less than $6,000.00 per month. That's much easier to live frugally on. But, you've cut your retirement nest egg by more than half due to compound interest rates. To make this viable, you have to shun credit cards, new cars and be in relatively good health. Otherwise, you will burn through your savings pretty quickly as life issues come up.

[Nice Guy Eddie 13529]

If you can consistently save for a 401k, you can end up with a decent balance at retirement.  It may not be enough to live in a mansion, and you may need to have saved outside of the 401k but it's not bad.

I ran some quick numbers of saving $10K (with match) annually for 40 years, 7% growth and a 1% fee on the balance gets you to ~$1.7M. 

As I wrote before, the flaw in this formula is assuming growth at the end.  the balance at the end of Year 29 (out of 40) is 825K.  then if you can get 7% growth for the final 11 years, you end up at 1.7M.   If that is a bad decade, you're screwed.

[Spankytoes 1743]

2 minutes ago, Nice Guy Eddie said:

If you can consistently save for a 401k, you can end up with a decent balance at retirement.  It may not be enough to live in a mansion, and you may need to have saved outside of the 401k but it's not bad.

I ran some quick numbers of saving $10K (with match) annually for 40 years, 7% growth and a 1% fee on the balance gets you to ~$1.7M. 

As I wrote before, the flaw in this formula is assuming growth at the end.  the balance at the end of Year 29 (out of 40) is 825K.  then if you can get 7% growth for the final 11 years, you end up at 1.7M.   If that is a bad decade, you're screwed.

Are you supposing for a single person or a married couple? $1.7m for a married couple retiring at 67 with a life expectancy of 92 isn't going to cut it. That's $32,000 per year + whatever may be left in the Social Security coffers. Medical care and taxes will eat through that pretty quickly.

[Texas St. Armadillos 1381]

$32k per person.  An older couple can't live on $64k per year with (presumably) a paid off home?

[Spankytoes 1743]

2 minutes ago, Texas St. Armadillos said:

$32k per person.  An older couple can't live on $64k per year with (presumably) a paid off home?

Was just coming to edit that. Yes, $64,000 total. Same statement.

Sure, you can. If you are in good health, are OK with no luxuries and don’t travel.

Edited February 12, 2019 by Spankytoes

[ztejas 43552]

1 hour ago, Sbbruin said:

You need to rethink this strategy.  You are going to be a Walmart greeter at 75.

Assuming our ecosystem and global economy haven't collapsed by 2070 that doesn't sound terrible. 

I guess I can go to the cloak room if I want to have this discussion past this point, though. 

[Nice Guy Eddie 13529]

4 minutes ago, Spankytoes said:

Are you supposing for a single person or a married couple? $1.7m for a married couple retiring at 67 with a life expectancy of 92 isn't going to cut it. That's $32,000 per year + whatever may be left in the Social Security coffers. Medical care and taxes will eat through that pretty quickly.

I was thinking more from a single person but most married couples aren't even saving 10K/annually.  However even if its a couple, $32K from a 401k, and then add dual SS benefits, they can have a nice retirement.  Maybe its not yachts and private planes, but add a paid-off house, and there isn't a struggle in the average US community.

[Cheeseweasel 26438]

17 minutes ago, Spankytoes said:

Are you supposing for a single person or a married couple? $1.7m for a married couple retiring at 67 with a life expectancy of 92 isn't going to cut it. That's $32,000 per year + whatever may be left in the Social Security coffers. Medical care and taxes will eat through that pretty quickly.

You need to consider that a 1.7m nest egg will continue to grow. Rule of 4% says that if you have 1.7m, you can take out 68k per year without touching the principal. 

[Spankytoes 1743]

1 hour ago, Nice Guy Eddie said:

I was thinking more from a single person but most married couples aren't even saving 10K/annually.  However even if its a couple, $32K from a 401k, and then add dual SS benefits, they can have a nice retirement.  Maybe its not yachts and private planes, but add a paid-off house, and there isn't a struggle in the average US community.

A single person would be fine

[Cheeseweasel 26438]

13 minutes ago, Spankytoes said:

A single person would be fine

As a person who reads the 'wives and the stupid shit they do/say' thread, you are right on.

[Spankytoes 1743]

56 minutes ago, Cheeseweasel said:

You need to consider that a 1.7m nest egg will continue to grow. Rule of 4% says that if you have 1.7m, you can take out 68k per year without touching the principal. 

I'm not sure how that math works. Conventional wisdom says that you should rely on at least 70% of your end game salary to maintain the same standard of living. If we assume a 2% wage increase annually from the age of 30, your household income at 67 would be $223,200 per year. That means you will need to withdraw $156,240 per year to maintain the same standard of living as a base. You're simply reallocating funds. Instead of paying for gas and increased car maintenance to travel to a job, you have to invest more into life insurance policies and medical needs since they aren't subsidized by an employer. Inflation is figured at a 2% per year rate as well. So $156,240 in 2040 would be like $90,620 in today's dollars. At a stagnant rate, you will burn through $1.7m in 11 years. If you become more frugal in your old age, which defeats the purpose of being frugal in your peak earning years, you could maybe stretch things to 14 years if you remain in relatively good health. If you retire at 67 in 2040, you had better hope that you don't live past 82 when the money runs out. That's why so many retired people take other jobs to help subsidize their wages. 

Any thing less than $2.5m for a married couple is anxiety inducing. (Assuming you retire in 2040)