Boomers reaching the end of their financial lines

[McLovin]

I live in an area where a lot of people “live large.”

Things like $300-400k backyard redos, $100+ cars, designer this and that, are common.

Some just have a lot of money, but a lot have been living behind their means, for years.

A few of our friends are like that. I know roughly what the husbands make, and also some idea of their debts.

Even going back 20 years, it didn’t seem sustainable to me. But, they DID sustain it, for decades. I’d tell my wife (who would see her friend show up with a $5,000 purse, etc) that they were on a road to ruin, but she never fully believed me. I don’t really blame her, the party never seemed to end.

But I could see what they were doing. Basically, the husband would have have a good job and decent income (say, $300k range), but they’d live like someone making $1 million. So to do that, basically every penny that came in the door was spent on mindless consumption. Literally nothing towards savings, no 401k, no accumulating of income producing assets, nothing.

It actually works. As long as the work income keeps coming in.

But what it neglects, of course, is that some day you’re gonna have to stop working.

One of our friends is finally hitting the wall. Pushing late 60s now, business is ending in the next 3 years, huge house payment with no equity, no cash and no assets.

His job will continue for a relatively short time (6 months to 3 years, during which he still works 50 hours a week), but after that he’s unemployed.

Now the panic is setting in.

The question that fascinates me is this: What the hell did you think was going to happen? I seriously can’t come up with any answer for that.

Anyone know someone in that position? What were they thinking? What eventually happened to them?

[pwd72s]

Grasshoppers and Ants

At 79, glad I was an ant.

[cstreit]

I don't understand that mentality. Did they just assume they would die before retirement? ...or just work until they were dead? ...or that somehow they could go from $300k/year to $35k per year on SS?

[herr_oberst]

I know a woman whose father died. He left a mountain of debt, the house had been refinanced many times, vehicles that were worth far less than what was owed, motorcycles, toys, clothes, living the life. All paid for with debt. His wife had no interest in how the household finances worked. My friend had to pull that mess apart and come up with a plan of action for her mom - who was in total denial about suddenly having no money and having to move from a huge house and all the trappings to a tiny apartment with a check from the government Social Security office every month.

Here's the thing: This woman is quite smart and makes well over 6 figures, she's been the target of headhunters many times in her career, and in spite of going through that hell with her dad and mom, lives her life the same way as her parents did - brand new car every year, clothes, trips, remodels; anything she wants she buys. The last thing she puts money toward is retirement, and now she's in her mid to late fifties. Thank the gods she's not my problem. There's surely trouble a'brewin'.

Consumerism run rampant. Just one more major, unsolvable problem that we've created as a society.

[craigster59]

I work with a guy, known him over 30 years. Always living paycheck to paycheck, terrible credit, the whole nine. He swears he owns his house but if you go on Realtor.com or Zillow it shows the house was last sold in 1981, two decades before he moved in.

He met a gal in Vegas (I think she was a pro escort) that is waaaay above his pay grade. He married her and had a kid at 62. Then wifey decides she wants to direct a film and he throws $250k at that, compliments of his autistic son's $500k trust that he got as a settlement for an accident at his school.

He retired last year but continues to work under the table (our union only allows 40 hours a month after retirement, if you go over you lose that months pension check). To tell you the truth I think he does side work to get away from his overbearing, Jimmy Choo shoes and Coach purse wearing wife. He's screwed.

[LWJ]

McLovin describes my neighborhood.

I was out this am with a leaf blower, a chainsaw, and a skillsaw.

Most all my street doesn’t mow their lawn. Or cut trees. Of change a faucet.

They pay for these services. I pocket the difference.

It is not insignificant.

[look 171]

Growing up lower middle class may have something to do with learning how to save for the rainy days or put some away for the future. My father worked his tail off as a jeweler to put a roof over our heads. I see and was actually pretty cheap until the past 10-15 years is when I started to spend money on my family such as big and longer trips overseas. For some, they have no role model the things they see are that mom and dad spent on various expensive items, enjoy life on the big income and never realized that it will coming to a halt one of these days.

[Bill Douglas]

Yes, it's frightening some people's mindset.

GF was talking about a neighbourhood being full of rich people. I said "Well they're not actually. They feel obliged to buy a new BMW each year (heavens forbid, we're all buying Mercedes this year - did you not get the email) to show the neighbours how well they are doing." And most of them work for banks and insurance companies. So NOT a big income, just comfortable.

[JavaBrewer]

Admittedly my wife and I fell into that trap 30 years ago, living above our means. We had young kids and indulged on family trips, nice lifestyle, and building memories. I finally go serious about investing and 401k with employer contribution about 15 years ago. Despite having a paid for home and no debits we will be living pretty damn frugal in our 70’s which actually does not sound that bad.

[masraum]

Originally Posted by JavaBrewer

Admittedly my wife and I fell into that trap 30 years ago, living above our means. We had young kids and indulged on family trips, nice lifestyle, and building memories. I finally go serious about investing and 401k with employer contribution about 15 years ago. Despite having a paid for home and no debits we will be living pretty damn frugal in our 70’s which actually does not sound that bad.

It's a shame that most young people don't get it earlier. It would be so much easier if you did it early.

I don't remember the exact numbers, but I've seen something like this dozens of times over the years.

Get a job and invest a small amount between the ages of 25-45, then stop investing.
Get a job and wait until you're 45 to start investing and invest the same amount as above but until you're 65. Same amount taken out of your paycheck over the same 20 year span, but at the end, the person that invested when they were young will have a handful of millions, and the person that waited will have a few hundred thousand. Gotta love compounding over time.

[flatbutt]

One must lay down in the bed they've made. There is absolutely no reason for anyone at any level to live in such ignorance. No. check that. Not ignorance. Stupidity.

[tdw28210]

Originally Posted by JavaBrewer

Admittedly my wife and I fell into that trap 30 years ago, living above our means. We had young kids and indulged on family trips, nice lifestyle, and building memories. I finally go serious about investing and 401k with employer contribution about 15 years ago. Despite having a paid for home and no debits we will be living pretty damn frugal in our 70’s which actually does not sound that bad.

You figured it out. Congrats. Frugal, once it is habit, isn't that painful. You also have to decide how much you want to leave behind. I've seen hefty sums be the fuel for the indulgences of the heirs rather than the wealth creators, which always makes me a little sad for them.

[Hard-Deck]

Being rich, and being wealthy are not the same thing.

[hcoles]

Yeah, what do they think is going to happen? People easily live into their 90's.
When you're 85 you still have 10 years to go.
I guess the relentless advertising for consumption works.
Is this happening in other countries?

[aschen]

I am confused by somebody smart enough to obtain a 300k salary but lacking the discipline to save or invest. What kind of positions pay that much and dont require business/financial savy?

Most of the people I hang out with are engineers and in the general sense are the opposite, cheap skates even. Know lots of 40-50 yo engineers with paid off homes and won't finance a car.

[McLovin]

Originally Posted by aschen

I am confused by somebody smart enough to obtain a 300k salary but lacking the discipline to save or invest. What kind of positions pay that much and dont require business/financial savy?

I know, that’s what’s so puzzling to me. People who do this come from all sorts of businesses and professions. Most are pretty smart and competent people in most aspects of life, except finances.

It’s not like this is a truck that comes out of nowhere and mows you down.

You can see it coming down the road literally decades in advance.

My theory is that it’s just how many people are wired. I think a huuuuge part of it is genetics. And some from how you were raised. They just have a huge blind spot as to their financial future.

How easily you are influenced by others, and how much the “approval” or “respect” of others matters to you makes a big difference. It can drive people to financial insanity/suicide.

[McLovin]

What’s weird to me is I’m wired the exact opposite.

My wife is convinced that people who see me walking to the coffee shop think I’m homeless.

[GH85Carrera]

Back in the early 1980s there was an oil boom and the "oiles" were tossing money around like it was nothing special. Then the oil boom became a oil bust, and brought down Penn Square bank and made national ripples and many other bank failures.

We had a few members with multiple new Porsches and huge houses and they all just dropped out of the club. They were spending money and leveraging everything to borrow more money. I bumped into one of them a few years later driving a POS of a Pinto and working at a gas station convenience store. It seems most of the oiles had not saved a cent, and were spending more than they made. So it is not a new thing.

I can't imagine trying to live above my means. I know my wife would not put up with it. We are making more than we spend and she has been retired for many years now.

[zakthor]

I can't tell who is living beyond their means. Most cars on the road seem to be 50k+ which seems completely crazy to me.

Buuut... the other thing I've seen that is a lot more tragic, people scrimp and save their entire lives, maxing out 401k, no debt, thrift store clothes and manager's special bread for 15 years saving that $3. The discipline and foresight let them build up a healthy pot of money and they blow it all on some idiotic thing. Investing in gold or bitcoin, a house remodel gone wrong, a divorce, big medical expense. Is quite possible to blow through a lifetime of savings in a week or a year.

Lot of people are good at the long term steady savings but don't really understand the nature of volatility and fleeting nature of stability.

[MMARSH]

I'll be the first to admit when I was a young 24 year old entering the work force. The last thing on my mind was what or how I'd be living when I was 70. I'm fortunate that I got into a field with a pension and medical for life and mentors advised me to also invest into our 401K when I first started. Other then that, over the years I wasn't to concerned about retirement. I wasn't frugal, I was racing a Porsche, but I didn't buy new cars or trailers either.

I just retired about 6 months ago, right when I turned 55, Due to no union dues and not paying into retirement and my 401K, I bring home more money now then I was when I was working and just got a letter that it's going up due to COLA. I haven't touched my 401K. My wife has the same deal as me and will retire in about 2 years.

I can say I didn't really appreciate the value of my retirement until I was much older and started seeing what the OP was saying. Seeing people HAVE to work till they are 70 in order to keep some semblance of their lifestyle. Although i dont make 300K a year in retirement, I feel extremely fortunate that we are not only able to make ends meet, but we are able do all the things we want to do without any financial worries. It's a tremendous feeling of security.