By what age do you need to provide financially for the rest of your life?

[Leaper]

By what age do you think a person needs to be relatively financially secure before it’s too late for them to do anything significant (defined any way you like) about it, barring severe events like lottery-winning?

On one hand, in these days of credit card debt running rampant, there are entire industries and pundits built around getting people out of holes much deeper than a lot of people have experience with at some pretty advanced ages. Sure, it’s hard, and requires deep thinking, sacrifice, and work, but it doesn’t seem impossible.

OTOH, one could argue that given the prevalence of layoffs in the modern (American) economy, and the fact that people 40+ almost never get hired for anything like a meaningful job (if anecdotal evidence in newspapers and what posters on this very board say are any indication), the “deadline” age could be as low as 30-35.

Thoughts?

[Machine_Elf]

Wow. This will vary hugely depending on individual circumstances. If someone has a decent income, but is a spendthrift, then there’s room to make big changes in expenditures and start saving lots of money. I have a good friend who I’d guess is earning somewhere between $70-$100K, but he often complains about not having any cash. But he’s got a big-ass truck, a sportscar, two motorcycles, and a luxurious big-ass boat that gets towed behind that big-ass truck. And a mortgage. He’s been through several cars over the past decade. He always seems to have the latest and greatest computer hardware. IOW, given his income level, if he could slash his expenditures, he could probably start saving/investing a significant amount of money.

OTOH, if someone is barely squeaking by on a $30K income, it’s going to be much harder to get expenses to come in way below that amount. But it can be done, if you live frugally. No sparkling new SUV for you; you’ll get by with a used, high-mileage Civic. No brand-new 4-bedroom home with a 3-car garage and a pool; maybe you get a 3-bedroom ranch, 40-50 years old, with a one or two-car garage. Choose to have two kids (and the money to raise them) instead of four kids you can barely clothe and feed. Shop at thrift stores, and hand clothes down from one kid to the other. Do these things, and you can probably still save a decent nest egg for retirement.

I’ve heard experts saying that even at age 50, it’s not too late to start saving for retirement. You may not retire wealthy, but you’ll have something to supplement your SS income. If you’re 50 and you work until you’re 70, and manage to invest $5000 a year in an IRA, you could end up with a $350K nest egg by the time you’re 70 (and working until 70 means bigger SS income). Even if you only put away $1000 a year, you still end up with around $70K, thanks to the miracle of compounding. If you leave the latter amount invested in equities, it could provide you with an extra $7000 of income each year of your retirement (assuming no stock market crash during your retirement); put it in bonds, and you’ll still get $3500 a year, a useful if modest supplement to your SS.

If you’re well past 50, still have major debt and/or haven’t started saving for retirement, there’s little time to make compounding work in your favor; your golden years are going to be pretty austere.

[lisiate]

@Machine_Elf

I’ve heard experts saying that even at age 50, it’s not too late to start saving for retirement. You may not retire wealthy, but you’ll have something to supplement your SS income. If you’re 50 and you work until you’re 70, and manage to invest $5000 a year in an IRA, you could end up with a $350K nest egg by the time you’re 70 (and working until 70 means bigger SS income).

While compound interst is great I think you’re over-egging things to say that it can turn $100,000 ($5,000 a year *20 years) in savings into $350,000 in only 20 years. At 5% I figure you’d have around $165,000 after 20 years of saving at 5,000 a year. To get $350,000 you’d need a rate of 12% compounding - which puts you in the realms of Madoff type investments.

[Machine_Elf]

@lisiate

While compound interst is great I think you’re over-egging things to say that it can turn $100,000 ($5,000 a year *20 years) in savings into $350,000 in only 20 years. At 5% I figure you’d have around $165,000 after 20 years of saving at 5,000 a year. To get $350,000 you’d need a rate of 12% compounding - which puts you in the realms of Madoff type investments.

I used a ROR of 10%, which is roughly the historical rate of return of the stock market. I realize now that my spreadsheet shows 21 years of investment rather than 20. Assuming 10%, and 20 years of investment instead of 21, dial the final nest egg down to $315K.