# Frontline: The Retirement Gamble **URL:** \ **Category:** In My Humble Opinion\ **Created:** [April 24, 2013, 5:59pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611 "2013-04-24T17:59:49Z")\ **Posts on this page:** 18\ **Page:** 2
**Author:** ![Quimby](https://avatars.discourse-cdn.com/v4/letter/q/22d042/32.png) [@Quimby](https://boards.straightdope.com/u/Quimby)\ **Post date:** [April 25, 2013, 2:50pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/21 "2013-04-25T14:50:21Z")
401(k)s were never really designed to be retirement accounts and now that data is starting to come in from people who used them for a big chunk of there career, they are showing to be woefully inadequate vs. a traditional pension system. I have been debating pulling out of mine but I feel I am kind of trapped because the Tax hit I would take would hurt. ---
**Author:** ![Dogzilla](https://avatars.discourse-cdn.com/v4/letter/d/e480ec/32.png) [@Dogzilla](https://boards.straightdope.com/u/Dogzilla)\ **Post date:** [April 25, 2013, 3:41pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/22 "2013-04-25T15:41:37Z")
> [@Icarus](#): > > Well, there is a lot going on in your post, but to answer some of it…For someone who graduates college and steps into some sort of professional career with a professional salary, starting right off with a 401k and maxing out their contribution - accumulating over $1,000,000 is very reachable. For someone NOT earning a professional salary from a young age - and NOT starting to contribute right at the start - then no, $1,000,000 would be very very very difficult. > > Now, why do you need that much? The assumption that you are going to have significantly lower expenses at retirement is not true for everyone. For a lot of people, they would need to have almost as much as they were making while working. So, to generate that from a retirement account you need a pile of money. They typical draw down is recommended at 4%. So, for those people, they have to have enough sitting there so that only 4% equals their annual income they were are making at retirement. If you wanted $60,000 a year in retirement, you would need $1,500,000 to start. (Setting aside Social Security, and assuming you are leaving an inheritance. It’s not always wise to try to time the draw down by dividing the whole amount up by the number of years you plan on living - what if you happen to live 10 years more? OOOPS!) $60,000 a year in _retirement_? Dude, I don’t even make that NOW and I have _two_ jobs. Most people I know don’t make that kind of money (I’d guess that’s somewhere around 60% of the people I know). Thanks for reading my post and trying to respond. I think I’ve got my answer, which you didn’t really say overtly, but the assumptions\* in your post (and some of those that followed) pretty much told me what I was thinking and that is: No. These discussions are _not_ for people like me. The more I read and research, the more clear that conclusion becomes. I don’t care what is or isn’t true for everyone; I am not planning everyone’s retirement. I care about what is true for _me_. And what appears to be true for me will be: cat food and social security. Although cat food is kinda pricey sometimes; I might have to supplement with dumpster diving. I will also probably not be able to retire and keep pets at the same time. - Regarding the assumption that anyone who went to college and entered a professional position should be in the position of investing and saving for retirement. Yes, unless you are talking to a journalism major, in which case, I’d probably do better if I’d spent the last 25 years working at McDonald’s. Not all college degrees result in the big bucks that give you enough margin in your budget to gamble with investing. Pair that with not being married and not having another income with which to plan and it looks to me like I’m going to be SOL, especially if SSI and Medicare fall apart. ---
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [April 25, 2013, 3:43pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/23 "2013-04-25T15:43:28Z")
> [@Debaser](#): > > The real ripoff is the 12% or so that we all are forced to pay into Social Security. If I were allowed to invest that on my own I’d be a millionaire already. So you’re saying that if you’d saved 12.4% of your salary all along and invested it, you’d be a millionaire already. So why didn’t you? 😃 At any rate, my basic take on this is that the percentage of people who have the combination of smarts, time, and energy to manage their own investments successfully is in the single digits. For the vast majority, the forced discipline of being required to pay into Social Security now and having a guaranteed if stingy pension when one’s working days are over means they won’t be entirely dependent on offspring and/or charity when they retire. ---
**Author:** ![The\_Lurker\_Above](https://avatars.discourse-cdn.com/v4/letter/t/dc4da7/32.png) [@The\_Lurker\_Above](https://boards.straightdope.com/u/The_Lurker_Above)\ **Post date:** [April 25, 2013, 5:26pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/24 "2013-04-25T17:26:49Z")
> [@Shagnasty](#): > > The main problem (or conspiracy) occurs when your employer signs up with a 401K plan that only offers mutual funds but no index funds as investments. Those are surprisingly common and cheat workers out of billions of dollars a year collectively while making it appear like they are doing them a favor. Yeah some work plans can be really, really bad. I’m in Canada and the 401k-equivalent my employeer offered was so bad I refused to take it. They did have index funds, but when I finally got the salesperson to actually show me the expenses for all the offerings I was stunned. The bare-bones _money market_ fund was charging 1.55% :eek:. You can imagine the rates on the rest of the funds. To get roughly the same portfolio of index funds as in my personal account would have cost 12 times as much! There’s no motivation for the fund company to offer better though, since I am the **only** person eligible for the plan not to sign up. I did explain it to HR and other interested parties that with the high expenses (and high fees to move money out into a reasonable plan) I was actually better off not taking the (tiny) employer match and investing on my own. ---
**Author:** ![basefifty](https://avatars.discourse-cdn.com/v4/letter/b/cdc98d/32.png) [@basefifty](https://boards.straightdope.com/u/basefifty)\ **Post date:** [April 25, 2013, 6:58pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/25 "2013-04-25T18:58:26Z")
It’s amazing how many people will clip coupons to save $1 but at the same time are paying hundreds or thousands of dollars of fees per year for basically nothing. It’s one of the biggest scams there is. I guess the lack of transparency is why it continues - you get your statement at the end of the year and if your balance has increased you are happy. I’d recommend funds like Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX). Expense ratio of 0.05%. No reason to pay much more than that. ---
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [April 25, 2013, 7:17pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/26 "2013-04-25T19:17:16Z")
I’ve posted a lot before on how much I like and admire what Vanguard does. Even their company structure is designed to minimize overhead; the company itself is owned by their own funds. I was delighted when my employer switched 401k plans and now has their plan run by Vanguard with the option to invest in Vanguard funds. Too bad there’s no employer match (yet). ---
**Author:** ![Icarus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/icarus/32/72_2.png) [@Icarus](https://boards.straightdope.com/u/Icarus)\ **Post date:** [April 25, 2013, 7:25pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/27 "2013-04-25T19:25:26Z")
> [@Dogzilla](#): > > $60,000 a year in _retirement_? Dude, I don’t even make that NOW and I have _two_ jobs. Most people I know don’t make that kind of money (I’d guess that’s somewhere around 60% of the people I know). Well, you kinda asked who needed $1,000,000 and how could they get there - that’s what I was answering. I get that there are lots of people making less than $60,000 a year - but for professionals in large urban areas there are lots of people who make that amount. Sorry if that’s not your world (I guess). ---
**Author:** ![Dogzilla](https://avatars.discourse-cdn.com/v4/letter/d/e480ec/32.png) [@Dogzilla](https://boards.straightdope.com/u/Dogzilla)\ **Post date:** [April 25, 2013, 7:31pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/28 "2013-04-25T19:31:59Z")
> [@Icarus](#): > > Well, you kinda asked who needed $1,000,000 and how could they get there - that’s what I was answering. I get that there are lots of people making less than $60,000 a year - but for professionals in large urban areas there are lots of people who make that amount. Sorry if that’s not your world (I guess). Thanks for the clarification, but our exchange sort of illustrates my point. The financial planning advice that’s out there seems to be a one-size-fits-all sort of planning advice, but most of us are simply not in that position. There is no advice for people in my position, or servers and bartenders, or even professionals in urban areas who just don’t make much money. Social workers would be a good example. They are generally college-degreed professionals who might even have a Master’s in social work, but most are lucky to hit $40 or 50K in their lifetime. All of the advice I read says “You better have a million or you might as well not retire. But sign up for our plan. Give us your money. Trust Wall Street.” So I didn’t really ask who needs $1 million, I asked WHY _I_ need $1 million. I’m still not sure why I do or why this advice keeps being trotted out when one size obviously does not fit all. ---
**Author:** ![Yllaria](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/yllaria/32/3452_2.png) [@Yllaria](https://boards.straightdope.com/u/Yllaria)\ **Post date:** [April 25, 2013, 7:35pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/29 "2013-04-25T19:35:04Z")
> [@Dogzilla](#): > > . . . The more I read and research, the more clear that conclusion becomes. I don’t care what is or isn’t true for everyone; I am not planning everyone’s retirement. I care about what is true for _me_. And what appears to be true for me will be: cat food and social security. Although cat food is kinda pricey sometimes; I might have to supplement with dumpster diving. I will also probably not be able to retire and keep pets at the same time. . . . Well, you did say that your house would be paid off before you retire. Not everyone manages that, and it’s a big, big deal. The mortgage is usually everyone’s biggest expense, at least while they’re healthy. ---
**Author:** ![Dogzilla](https://avatars.discourse-cdn.com/v4/letter/d/e480ec/32.png) [@Dogzilla](https://boards.straightdope.com/u/Dogzilla)\ **Post date:** [April 25, 2013, 7:43pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/30 "2013-04-25T19:43:04Z")
> [@Yllaria](#): > > Well, you did say that your house would be paid off before you retire. Not everyone manages that, and it’s a big, big deal. The mortgage is usually everyone’s biggest expense, at least while they’re healthy. Thank you! Apparently, that’s a huge part of this mythical $1million that I apparently need to retire. So that’s why I laid out so many personal details. I can now lop that off my non-existent million. 😃 Assuming I don’t get greedy and trade up for a bigger house and still have a mortgage at retirement. (Which is not likely; my house is just fine by me and despite the housing bubble popping, I still have made money on my initial investment.) ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [April 25, 2013, 7:46pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/31 "2013-04-25T19:46:16Z")
> [@Dogzilla](#): > > The financial planning advice that’s out there seems to be a one-size-fits-all sort of planning advice, but most of us are simply not in that position. The financial planning advice that is out there on the internetz is by necessity one-size-fits-all. They cannot tailor the article specifically to you. Some people can comfortably retire with $200K savings. Some can’t. By my calculations I need around $4M to be comfortable (but one of my requirements is leaving a reasonable amount to my kids, one of whom is on the Autistic spectrum). Everyone is different. ---
**Author:** ![Doctor\_Jackson](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/doctor_jackson/32/32_2.png) [@Doctor\_Jackson](https://boards.straightdope.com/u/Doctor_Jackson)\ **Post date:** [April 25, 2013, 8:00pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/32 "2013-04-25T20:00:12Z")
> [@Dogzilla](#): > > $60,000 a year in _retirement_? Dude, I don’t even make that NOW and I have _two_ jobs. Most people I know don’t make that kind of money (I’d guess that’s somewhere around 60% of the people I know). > > Thanks for reading my post and trying to respond. I think I’ve got my answer, which you didn’t really say overtly, but the assumptions\* in your post (and some of those that followed) pretty much told me what I was thinking and that is: > No. These discussions are _not_ for people like me. These discussions are for people like you, assuming you are a person who would rather not work until you die because you have no other choice. Put aside the numbers and look at the logic behind them - the more you save and the earlier you start the more likely you can retire at some point. If you don’t need $60k per year in retirement because you learned to live on less than that during your working life, cool! That means you don’t need a $1.5MM nest egg. Perhaps you can get by on half that, or some other number. Only you can determine what you need. You will need SOMEthing to live off, though. Having a hard number goal will help you get there and payroll deduction is the easiest way to stay disciplined. Just so you know I can relate, there have been times when I could barely make ends meet. I’ve been 2 weeks from foreclosure. I never, so longas I was employed, completely stopped funding my 401k. Many times I have told my wife “When we retire we’ll be fine. The 20 years until then may kill us…” ---
**Author:** ![Debaser](https://avatars.discourse-cdn.com/v4/letter/d/3da27b/32.png) [@Debaser](https://boards.straightdope.com/u/Debaser)\ **Post date:** [April 26, 2013, 12:24pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/33 "2013-04-26T12:24:23Z")
> [@Broomstick](#): > > Maybe YOU could be a millionaire doing that, but the SS is there for those who don’t have those mad financial skills, which is the overwhelming majority of people out there. Did you miss the part where I said I invest in index funds? That’s the exact opposite of having “mad financial skills”. Do you know what an index fund is? If you think the “overwhelming majority” of people in this country wouldn’t be millionaires by investing 30% or so of their income in index funds over the course of their lives then you are just flat out wrong, BTW. (I’m assuming 15% saved, plus the 15% or so from SS combined to be 30% on an average workers wages of $50,000.) ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [April 26, 2013, 5:37pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/34 "2013-04-26T17:37:35Z")
> [@Debaser](#): > > If you think the “overwhelming majority” of people in this country wouldn’t be millionaires by investing 30% or so of their income in index funds over the course of their lives then you are just flat out wrong, BTW. (I’m assuming 15% saved, plus the 15% or so from SS combined to be 30% on an average workers wages of $50,000.) Barring an economic miracle or severe inflation which would make a mockery of a million, this is impossible. There is only so much wealth to go around without a radical increase in productivity. Which isn’t to say there wouldn’t be any economic growth: there might be some economic growth, or there might not be much at all, or there could be a cycle of overly risky investment followed by another crash. But there would almost certainly not be a several hundred percent increase in the economy, with the resulting profits distributed evenly enough that even those barely making middle class wages would become millionaires from it, all caused by simply lowering taxes a bit while at the same time reducing the money flow toward retirees. Which isn’t to say that I think SS rates should remain the same: from my perspective, it’s pretty much a wash. I’m not going to pretend that SS is going to either save me or hurt me. If they had lowered taxes to rates that would only support the bare minimum lifestyle for retirees when I had started working, I would have not complained. Now that I have been paying these rates for a couple decades, that’s another story. ---
**Author:** ![Dogzilla](https://avatars.discourse-cdn.com/v4/letter/d/e480ec/32.png) [@Dogzilla](https://boards.straightdope.com/u/Dogzilla)\ **Post date:** [April 26, 2013, 6:09pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/35 "2013-04-26T18:09:39Z")
> [@Debaser](#): > > Did you miss the part where I said I invest in index funds? That’s the exact opposite of having “mad financial skills”. Do you know what an index fund is? > > If you think the “overwhelming majority” of people in this country wouldn’t be millionaires by investing 30% or so of their income in index funds over the course of their lives then you are just flat out wrong, BTW. (I’m assuming 15% saved, plus the 15% or so from SS combined to be 30% on an average workers wages of $50,000.) I don’t know very many people who could afford to give up 30% of their income to investments. I know I have a hard time just keeping my total savings/investment level somewhere around 10-15%. And I couldn’t do that at all until I was well into my 30s. That’s 10-15 good investment years I lose out on because there just wasn’t enough wiggle room in the budget. ---
**Author:** ![lieu](https://avatars.discourse-cdn.com/v4/letter/l/c2a13f/32.png) [@lieu](https://boards.straightdope.com/u/lieu)\ **Post date:** [April 26, 2013, 6:15pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/36 "2013-04-26T18:15:55Z")
**Dogzilla** , I’ve enjoyed everyone’s replies but yours especially struck a chord. I hope when you get a chance to watch it closer that you do find something helpful in there. Your work ethic and attempt to set things right ahead is pretty damn moving, friend. Good luck to you. ---
**Author:** ![Dogzilla](https://avatars.discourse-cdn.com/v4/letter/d/e480ec/32.png) [@Dogzilla](https://boards.straightdope.com/u/Dogzilla)\ **Post date:** [April 26, 2013, 6:45pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/37 "2013-04-26T18:45:45Z")
> [@lieu](#): > > **Dogzilla** , I’ve enjoyed everyone’s replies but yours especially struck a chord. I hope when you get a chance to watch it closer that you do find something helpful in there. Your work ethic and attempt to set things right ahead is pretty damn moving, friend. Good luck to you. Thank you. I’m doing my best to offset my choice of vocation. I knew I’d always be broke when I chose to major in journalism, but I really didn’t know what that _meant_ when I was 18. 🙂 ---
**Author:** ![Dorjan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dorjan/32/12440_2.png) [@Dorjan](https://boards.straightdope.com/u/Dorjan)\ **Post date:** [April 26, 2013, 7:53pm UTC](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611/38 "2013-04-26T19:53:02Z")
A Journalist, you say? Hopefully you have a good book in you waiting to be written. Maybe it’ll even be a bestseller, or at least provide a moderate extra income. [Previous page](https://boards.straightdope.com/t/frontline-the-retirement-gamble/656611.md?page=1)