The 18% Rule or Supersize it?

[tabs]

Either you save 18% of your income in your 401K or your gona be sayin, "Supersize that for ya" till U die.....

Looks like what yo Daddy has for a Retirement is gona be a thing of the past with the GREAT MAJORITY of Americans HAVING to work till they die...

There just isn't enough of saving going on in America, and since Corporations motto is to use U till your all used up, then discard U without a care....

With the advent of the 401K replacing the Company Retirement Plan the ONUS of saving is now upon the worker since the employee now contributes 51% of his/her retirment savings...and of course the responsibility of investing the moniews is left to the employee who has enough trouble just managing to balance his/her check book...

The American Standard of Living is going to decline rapidily in the next decade or two....

[WolfeMacleod]

I could not imagine not doing what I do untill I die. I don't want to retire.

[tabs]

The idea of having a Golden Retirement where you live happily ever after is just an illusion that was valid for only a brief moment. For the Baby Boomers the reality is going to be much darker...

[Porsche-O-Phile]

Have to agree.

This is going to sound horrible, but I remember being told as a child by my dad that my generation was the first one in history that was going to live less well than its parents. So far it has proven true in many ways.

Although we've been very fortunate in some ways (we haven't had a draft - not yet anyway, we haven't had a major war - not yet anyway (perhaps some would consider the Iraq war "major", depends on perspective), we don't live under the spectre of nuclear annhiliation any more, etc.) a lot of things really ARE worse for us. At risk of making this sound like a "Gen X B1tch Session", let me outline a few points:

Think about it: Most people in our generation don't know how to (or can't, because they don't make enough) save meaningfully for retirement. I think it's absolutely true that we will not have anything from Social Security and most of us will find we're in posession of a mediocre retirement fund during our so-called "golden years". Personally I don't see how I can retire until I'm about 75 or so. Maybe that will change (I hope it does!) but at the moment, looking at 401k projections, there's simply no way around it. If costs continue to rise or the markets under-perform, the outlook is even worse.

Most people have to borrow insane sums of money just to get a college degree. A college degree in and of itself is no longer considered a path to success - it's simply "getting one's ticket punched" so you don't have to work at Wal Mart. Truly sad. This is promulgated firstly by employers that require a four-year degree just to file legal briefs or have someone answer telephones (why?) and secondly by an obfuscation of university as "education" versus "job training". A lot of universities believe their obligations end with preparing someone just enough so that they can probably find a non-Wal Mart type job upon graduation. We have people coming out of school now with four-year degrees that can't spell, can't effectively communicate, can't think critically and can't think "big picture". They're damn good at MySpace and XBox though. . . Basically, if you can write a check (backed by debt) for $100k, you get your piece of paper. This devalues the degrees of those individuals that actually worked for them. Little, if any distinction is made between graduates of "McSchools" and really GOOD schools - except by the most discriminating of employers, and more often than not, they DON'T bother to take the time to discriminate - they just need a warm body to fill a seat. Everyone loses.

Most people can't realistically afford a home (without insane/weird financing that leaves them struggling under crushing debt for many many years (30, 40+ years now) or exposed to unacceptably high risk). Most people can't even afford to raise a family (no joke! I know several people that have admitted this to me!) I know I'd have a hell of a time with it - it's no small factor in my decision not to have children! In terms of the price you pay - financially, in terms of time, in terms of career limitation, etc. it simply is really hard to justify it being "worth it". Very common sentiment among 20-somethings and 30-somethings (even some 40-somethings now). . .

Most people will never understand the meaning of "job stability" (it now means, "I didn't get let go today - lucky me").

The majority of us come from broken homes (divorce rate 65% and climbing).

The majority of us will be without health insurance at some point in our lives.

The opportunities that were available to generations past to pull onesself out of middle-class mediocrity and "make it" now have taller-than-ever barriers to entry and the penalties for failure are greater than ever. For example, a person can no longer simply try their shot at opening a business and pursuing the American Dream with the attitude of, "if you fail, just pick yourself up and try again". Wrongo. Now, if your business happens to fall on hard times or otherwise fail, you're on the hook for any/all debt for eternity (thanks to new b/k reform) and your almighty credit score is trashed, so you have no chance of "trying again" - not for 10 years. You have to be awfully creative or very wealthy to begin with in order to circumvent these problems - or very lucky with your business venture. Seems to me we should be ENCOURAGING entepreneurship, not discouraging it.

The barriers to wealth (in the form of taxation, regulation, vulnerability to lawsuits, etc.) are greater than ever before. It's almost easier to just stop at a certain point and say "if I earn any more than this, it's too much of a liability". Not what was the case for our parents' and grandparents' generations. . . Back then, unlimited earning potential was a hallmark of American life. Not so black & white any more. . . If I earned more than say, $100k a year and my wife earned the same, I'd be hard-pressed to believe it was really "worth it" to pursue more due to the tax rates and the fact that it just makes you more of a target. It shouldn't really be this way. The notion should be "fair share".

Another thing that concerns me greatly is the attitude of my generation. It seems that what is valued is material goods and acquisitions, not earning them. There's a huge "I want it now" sort of entitlement mentality that leaves them vulnerable to manipulation - it sparks people to run up huge debt-based spending loads, gets people in over their heads in "sucker mortgages", gets people to take out $100k in student loans just to get a middle-class job. Not cool! There needs to be a balance of "You want it? Go get it!" and frugality/willingness to work for something and put some pain and sweat into something that is kind of lacking.

I find work ethic to be somewhat mediocre in the majority of cases. I think there is (sadly) a prevailing mentality that says "there really isn't much to be gained by going the extra mile" a lot of times, so people just default to doing the minimum they need to in order to not get fired. I find this attitude particularly revolting.

Attention spans are shorter, focus is poor and dedication is very scattered. Seems to me that the ability to knuckle down, focus on a task and put 100% into it to attain it was a hallmark of previous generations. Say what you will about "productivity numbers being up", but I think that's overwhelmingly attributable to technology. Sorry, but when some (outsourced) software engineers are responsible for the vast majority of American worker productivity, there's a problem. Seems to me a lot of technology has SUBSTITUTED drive and work ethic, not been ADDED to it. Not the way it should be. Now better computers and software just free up workers to chit-chat more and dick around on the Internet more. Is this really "better"?



Sorry for the rant (wasn't intended to be), just the original topic got me thinking about how screwed my generation is as a whole. I can only strive to keep myself head-and-shoulders above the rest. If I just "be like everyone else", the outlook is pretty bleak. So far I guess I've done okay with that.

[tabs]

and just think your gona have to take of Mom and Dad in their Golden years cause their savings doesn't match their life span....

[Porsche-O-Phile]

Probably true, although I've got the advantage that I'm on the left coast, they're on the other coast and my deadbeat brother is still living with them at age 33. The way it's going, he'll be their "caretaker", since I doubt he'll end up working anytime soon (he hasn't in about 4 years). Don't really know if that's an "advantage" or not. . . If it is from the point of view of having someone else out there to care for them, then I guess I'll take it.

More likely I'll end up footing the bill for a lot of their care, since I'm the only one earning anything. That sets up the "opportunity" for my sibling to embezzle a lot of my money and continue to leech for a living, only it'll be off of me AND my parents, not just him raiding their retirement and getting to live for free in their place.

Wonderful situation that is. Fortunately mom & dad have a number of good years remaining - maybe they'll grow a spine between them in the meantime and kick his sorry arse out and save me the potential aggrivation down the road of having to deal with making sure that money earmarked for parental care really goes there. . .

The other good thing is that dad has a decent pension. Those have become a thing of the past now. . .

[KFC911]

Originally posted by tabs
Either you save 18% of your income in your 401K...

Hmm...my 401K cap has always been 16%....

Jeff, I sure don't have an answer, but your post is a pretty good reflection of what a lot of gen-x'ers face imo... On the other hand, if you're a 'go getter' (and it seems like you are), in spite of everything you posted, you CAN, and WILL be successful!

[Tervuren]

Originally posted by tabs
and just think your gona have to take of Mom and Dad in their Golden years cause their savings doesn't match their life span....

Probably true, but I wouldn't trade it for what they've invested in me!

Providing the market doesn't chrash, retirement I should be ok. I started at 17 with $5,000 of what I would of bought a Porsche 968 with. I don't make a lot per year, but I keep my expenses to basicly food, and things related to the Porsche 944. Every couple months I might spend $30 on something like a Harmonica, car model, RC car part, whatever.

I managed to put about 1/3rd of last years income into savings.

[turbo6bar]

We have a fiscally irresponsible government in power. We don't have a good example to follow. The act of not saving is already dangerous, but then we take on debt to buy more depreciating, non-income producing assets. Good idea, eh?

Perhaps the 18% rule should also mention coveting thine shotgun to protect said 18%, lest the supersizers come for a free dinner...

[KFC911]

Where are you guys getting 18% from? I thought the 401K cap has always been 16%...at least that's been my experience (at more than one company)...

[gaijindabe]

Originally posted by Porsche-O-Phile
Most people can't even afford to raise a family (no joke! I know several people that have admitted this to me!) I know I'd have a hell of a time with it - it's no small factor in my decision not to have children! In terms of the price you pay - financially, in terms of time, in terms of career limitation, etc. it simply is really hard to justify it being "worth it". Very common sentiment among 20-somethings and 30-somethings (even some 40-somethings now). . .

This is more of a matter of priorities and expectations. It has never been "easy" and it never will be.



As for modern retirement - by the standards of human history - it is a pretty silly concept.
A worthy goal is to retire early, collect free money at 62 and live well into your 80s? Who thought this up? Who really thinks it could work large scale for more than a generation or two?

[tchanson]

Why not post the link to the Frontline program that aired last night that you're quoting statistics from, Tabs?

It was excellent, and sobering. Entire episode can be viewed online later this week.



Tim

[widebody911]

On Wall Street today, Friskies (FRSKY) futures were up on heavy trading volume...

[coloradoporsche]

Baby boomer retirement plan:

Plan A: Wait for parents to die and see what kind of estate they get from the Greatest generation. For many it will be significant.

Plan B: If plan A fails, use voting strength to increase taxes on younger workers to beef up their entitlements.

I think the boomers are pretty safe. It’s the 30-somethings like me that should be really, really worried.

[Porsche-O-Phile]

I think the boomers are pretty safe. It’s the 30-somethings like me that should be really, really worried.

We are. I think we're the first generation to REALLY be sold out by our parents in the history of this country. The only thing that will save us is if we're collectively smarter and more motivated than they were.

The part that really worries me is that I just don't see it. . .

[turbo6bar]

30-somethings can enact Plan C: 2x4 to back of boomer's head. Cut out the middleman in all this. 30-somethings, me included, aren't smart enough, though.

[masraum]

I think the yearly cap is 15k, but my company will allow me to go up to 75% per check (obviously until I hit the yearly cap). The high max is nice come bonus time.

[Tobra]

Originally posted by Porsche-O-Phile
We are. I think we're the first generation to REALLY be sold out by our parents in the history of this country. The only thing that will save us is if we're collectively smarter and more motivated than they were.

The part that really worries me is that I just don't see it. . .

Sold out by your parents? That is just utter BS. Sold out by your elected officials is more like it, which started long before I was born, and has been going on in earnest in California for about 25 years.

[Porsche-O-Phile]

Who elected those people again?

Edit: I'm not entirely disagreeing with your statement that elected officials HAVE sold us out, but I also find the notion that our parents' generation isn't at least partially culpable to be absurd.

[KFC911]

Originally posted by masraum
I think the yearly cap is 15k.....

You are indeed correct...I just thought I was at a 16% rate for the whole year. That 16% max rate just happened to be the same at all three corporations that I have been with since 401Ks were implemented back in the mid 80s. Just like FICA....once you hit the limit for the year, you're maxed out...