# Is saving for retirement a good idea? **URL:** \ **Category:** Great Debates\ **Created:** [August 15, 2010, 4:30pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335 "2010-08-15T16:30:56Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![begbert2](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/begbert2/32/3357_2.png) [@begbert2](https://boards.straightdope.com/u/begbert2)\ **Post date:** [August 16, 2010, 6:00pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/41 "2010-08-16T18:00:18Z")
I don’t really expect to work past 50 in my current profession. I don’t plan to die at 55. I’d rather have too much money when I’m old than too little. Thus, I save for retirement. It’s pretty simple, really. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 16, 2010, 6:52pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/42 "2010-08-16T18:52:30Z")
> [@Hakuna\_Matata](#): > > That is why I suggested the stock market as opposed to other vehicles for retirement. Stocks over time have traditionally returned 6-10% which hopefully outpaces inflation. Putting the money into a savings account will not do that, the money needs to be invested, not just saved. Of course nothing is guaranteed, but stocks have the best shot, then real estate in my opinion. If CD’s had a decent return you could ladder them, I have known people who do that, but I haven’t ever done it. Just need to find something that is acceptable to your level of risk and go from there. And you need to change the mix of investment vehicles as you age. I agree that stocks are great for someone starting out, but when the market was higher we moved into more stable dividend producing stocks for a portion of our portfolio. We still lost money, since it is good to have at least some of your portfolio in riskier investments, but you don’t want to have to sell a lot of volatile stuff at the bottom when you get to retirement age. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 16, 2010, 6:54pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/43 "2010-08-16T18:54:18Z")
> [@Try2B\_Comprehensive](#): > > I love it when a financial plan comes together. I love it when we make more in a month on our investments than our kids make in a year. Let’s ignore the months when we lose that amount. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 16, 2010, 6:57pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/44 "2010-08-16T18:57:45Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Well, it sounds like a good idea in principle, but the net effect would be to shift the burden of caring for old people off the government and on to the private sector. > > I can’t imagine too many employers running out to hire a bunch of old people who cost an order of magnitude more to insure than twentysomethings and can’t use computers. > > OTOH, I think gradually upping the SS retirement age might be worth it. The big problem is that people coming out of college have a hard enough time getting jobs. Forcing geezers like me to stay for another decade or so will make it worse. Given hiring freezes and layoffs, there is hardly anyone at my work with less than five years, and most with a lot more. That isn’t a good situation. ---
**Author:** ![Dangerosa](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Dangerosa](https://boards.straightdope.com/u/Dangerosa)\ **Post date:** [August 16, 2010, 8:41pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/45 "2010-08-16T20:41:36Z")
> [@Voyager](#): > > The big problem is that people coming out of college have a hard enough time getting jobs. Forcing geezers like me to stay for another decade or so will make it worse. Given hiring freezes and layoffs, there is hardly anyone at my work with less than five years, and most with a lot more. That isn’t a good situation. And it isn’t a good situation for the company either. It creates a stagnant corporate culture and a place where things are done because “they’ve always been done that way.” High turnover isn’t good, but no turnover isn’t good either. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 16, 2010, 10:11pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/46 "2010-08-16T22:11:35Z")
> [@Dangerosa](#): > > And it isn’t a good situation for the company either. It creates a stagnant corporate culture and a place where things are done because “they’ve always been done that way.” > > High turnover isn’t good, but no turnover isn’t good either. That’s what I meant, so I agree. 🙂 When I was at Bell Labs we hired a lot of Ph.Ds, and the standard interview included a thesis review, where they presented their dissertation work. Whether we hired them or not we got a very good picture of what was going on in universities at the time. Since the field we were working in was relatively new, getting new graduates was vital. One problem with Silicon Valley is we trend to trade people around between companies, since it is cheaper to interview someone working next door than interview any college students besides ones at Stanford or Berkeley. ---
**Author:** ![Leaper](https://avatars.discourse-cdn.com/v4/letter/l/4bbf92/32.png) [@Leaper](https://boards.straightdope.com/u/Leaper)\ **Post date:** [August 16, 2010, 10:30pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/47 "2010-08-16T22:30:12Z")
I created a related thread [here.](http://boards.straightdope.com/sdmb/showthread.php?t=574764) Basically, it seems to me that if you’re going to get a million bucks to retire on, you need to both start in your 20’s (barring a high salary job like medicine) and not have ANY employment or income hiccups that last more than two years, tops. Lower income/unemployment that lasts more than a couple of years, recession, starting in your 30’s or later? Since you become basically unhire-able by your 40’s or so, you’re _screwed._ ---
**Author:** ![sevenwood](https://avatars.discourse-cdn.com/v4/letter/s/6de8d8/32.png) [@sevenwood](https://boards.straightdope.com/u/sevenwood)\ **Post date:** [August 16, 2010, 10:50pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/48 "2010-08-16T22:50:47Z")
> [@Leaper](#): > > Since you become basically unhire-able by your 40’s or so, you’re _screwed._ ??? That wasn’t my experience. Granted, I was in my forties twenty years ago, but still… ---
**Author:** ![Superhal](https://avatars.discourse-cdn.com/v4/letter/s/b4bc9f/32.png) [@Superhal](https://boards.straightdope.com/u/Superhal)\ **Post date:** [August 17, 2010, 12:34am UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/49 "2010-08-17T00:34:07Z")
Didn’t see this mentioned yet: One of the big keys for a 401k or IRA is that the money is tax deferred. If you started a savings account today, you aren’t actually depositing $1. You are actually depositing 70 cents (after income taxes.) A retirement account gives you the entire $1 to save and get interest from. Then, after X years, you can withdraw it. The difference in interest on $1 vs 70 cents is big, even though you end up paying the 30% later. For example, if you paid the 30% in income tax in year 30 rather than year 1, your additional interest income would likely be close to double. ---
**Author:** ![salinqmind](https://avatars.discourse-cdn.com/v4/letter/s/3ec8ea/32.png) [@salinqmind](https://boards.straightdope.com/u/salinqmind)\ **Post date:** [August 17, 2010, 1:11am UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/50 "2010-08-17T01:11:58Z")
I know an oldster (well, in his 50’s) who just doesn’t worry about the future. Whistling a happy tune, goes to work at his low level job, has nothing much saved, spends it when he has it. Plans on somehow getting by. His fallback plan after he retires: “I’ll get a part time job bagging groceries if I have to.” :rolleyes: Well, that’ll be fun, what with the arthritis, bad heart, bum knee, or bad back that 9 out of 10 people over 65 seem to have. Is this grocery store going to hire him, or a 16 year old full of energy? I wish I could be like that - no fears, no worries, leaving it in gods hands. :rolleyes: ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [August 17, 2010, 1:17am UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/51 "2010-08-17T01:17:08Z")
No, of course saving isn’t a good idea. I mean, maybe the money won’t even be there when you retire. Or maybe money won’t even be meaningful then (we might all go back to hunting and gathering, then where will your ‘money’ be, ehe??). Maybe the world will end in 2012 and then you will have saved for nothing! Plus, the government will surly bail you out and provide for your nice, cushy and comfy old age. Me? Oh, I’ve been saving for retirement since I was a kid. Maxed 401K contributions, mutual funds, IRA’s, even some stock/bonds/T-Bills. I know, I know…foolish of me when all those bad things might happen to my money, plus the government will be there to take care of me, no doubt. We’ll probably all end up in exactly the same place, comes old age…I’ll just be paying more taxes, is all. 😛 Don’t worry…be happy! I’m sure it will work out for you non-saver types in the end… -XT ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [August 17, 2010, 1:59am UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/52 "2010-08-17T01:59:06Z")
> [@Leaper](#): > > I created a related thread [here.](http://boards.straightdope.com/sdmb/showthread.php?t=574764) Leaper, I’m going to respond to your question from the other thread - but here since it seems to fit better. You asked: > [@Age discrimination in employment - serious? Continuing issue?](https://boards.straightdope.com/t/age-discrimination-in-employment-serious-continuing-issue/550429/5): > > I should add that one of the reasons this got me thinking is that I read somewhere that you can’t retire on less than a million bucks or so. Given that most people start working at around age 21 or so, so if this sentiment is true, you have less than 20-30 years to make a million dollars plus. I can’t see how this leaves much, if any, margin for error. If you lose more than, say, two or three years to a bad economy, bad decisions, or what have you, are you completely screwed? You probably won’t be screwed, but getting into investment strategies is not for this thread (at least not for me). Let me say that I have ridden investments up and down twice this decade and have seen them come back. Friends who pulled out in a panic are not so happy. If you start early, time is on your side. There are really two things to be concerned with - saving and investing to get your required nest egg - making sure that it lasts for your entire lifespan For the first, you have to start saving and investing - lots of web sites to help with that. For me, the eye opener and incentive to invest for retirement was when someone pointed out that if you save a given amount yearly for ten years from 20-30 and let it ride or save the same yearly amount for thirty years from 35-65 - the magic of compound interest leaves you with about the same amount at 65. For the second, you need to determine if the money will last. Hakuna Matata might join in here, but a good site for both is the [Early Retirement](http://early-retirement.org/forums/) forum. To help answer the ‘will it last’ question, it also has FireCalc, a ‘Monte Carlo’ caculator that will run 100 or more history based simulations of the economy and tell you how many times you would have run out of money. Investment advisors charge big bucks for that sort of analysis. Regarding the ‘magic million’ Nest Egg, it might be good if you are retiring this year, but if you are 20 years out it is not a good number. A very crude way to calculate it is _Nest Egg = (Desired income - Social Security) \* 25_. Then at retirement, each year, you spend 4% of your nest egg. If you want to retire this year at the US median income of 50K and will have 20K in SS - then you’ll need 750K set aside. If you are going to retire in 20 years, then you’ll need to adjust for inflation - living on 30K + SS now might take 50K + SS in 2030 - which means you’ll need the magic million. (These are very simple examples, the web abounds with more sophisticated tools like [FireCalc](http://firecalc.com/).) ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [August 17, 2010, 4:39am UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/53 "2010-08-17T04:39:54Z")
I’d be careful regarding the ‘magic million’. That’s a number that asumes that you’re solidly in the middle class, and that you want to maintain your lifestyle well into your retirement. For most people, it’s a goal they’ll never meet. If you’re in the low middle class, and you’re making 40K per year and raising a family on it, you’re not exactly living like a king. And you’re not going to be saving a million dollars, either. The idea of putting away big money starting in your 20’s is totally unrealistic. Unless you’re already in the upper middle class and your parents paid for your education and you’re starting off with a good job in a decent home/apartment. So for the one person in 50 this applies to, good on ya. But for the average person, their 20’s and maybe even their 30’s are going to be spent just digging themselves out of debt, paying off the cost of an education, starting up their own household and saving up for a down payment on a home. Most middle class people don’t realize the ability to truly start saving reasonable amounts of money until they are in their mid 30’s or early 40’s. And for lower middle class people, not even then. But the lower middle class people are already living low lifestyles. For them, they’re most likely to retire on modest savings earned primarily in the last decade before retirement, plus government retirement benefits. The prudent ones will have paid off their homes and can either continue to live in them, or sell them and use the money to rent an apartment, or take out a reverse mortgage to turn them into an annuity. And that’s enough to stay in that low lifestyle. Their problem comes in when trying to place a spouse in a nursing home, or when suffering from an expensive condition. Then they become wards of the state pretty much, with all the dull bleakness that implies. ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [August 17, 2010, 2:18pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/54 "2010-08-17T14:18:22Z")
Doesn’t anyone expect a pension anymore? Get a job with a pension and your investments start looking more like gravy than a race to the ‘magic million’. Just sayin’ ---
**Author:** ![markdash](https://avatars.discourse-cdn.com/v4/letter/m/ba8739/32.png) [@markdash](https://boards.straightdope.com/u/markdash)\ **Post date:** [August 17, 2010, 3:14pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/55 "2010-08-17T15:14:17Z")
> [@Try2B\_Comprehensive](#): > > Doesn’t anyone expect a pension anymore? Get a job with a pension and your investments start looking more like gravy than a race to the ‘magic million’. Just sayin’ No, I don’t think anyone expects a pension anymore. Hell, people whose jobs promised them pensions 20 years ago probably don’t expect pensions. And in fact, people who are currently drawing pensions probably shouldn’t expect pensions. With so many governments facing fiscal insolvency, don’t be surprised if these pensions are chopped way down in the next 10 years or so. ---
**Author:** ![sevenwood](https://avatars.discourse-cdn.com/v4/letter/s/6de8d8/32.png) [@sevenwood](https://boards.straightdope.com/u/sevenwood)\ **Post date:** [August 17, 2010, 3:47pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/56 "2010-08-17T15:47:10Z")
> [@Try2B\_Comprehensive](#): > > Doesn’t anyone expect a pension anymore? I’ve never worked for a company that offered a pension plan (and I’m 62). For me that was actually a good thing, as I’ve also never worked at any particular company long enough to be able to qualify for a pension if they had one. The places I worked at all either offered nothing (in which case I contributed to my own IRAs) or a 401(k) plan to which I’d contribute to as much as I could. I’ve always regarded a 401(k) plan on which the company contributed matching funds as a two-for-one sale on money. ---
**Author:** ![Rysto](https://avatars.discourse-cdn.com/v4/letter/r/ecccb3/32.png) [@Rysto](https://boards.straightdope.com/u/Rysto)\ **Post date:** [August 17, 2010, 4:07pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/57 "2010-08-17T16:07:07Z")
I’m personally pretty down on company pension plans, especially defined benefit plans. They’re a great deal until the company goes bankrupt and unfunded pension liabilities are never made up. This happened to my uncle, and plenty of people at Nortel. ---
**Author:** ![DoctorJ](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/doctorj/32/2904_2.png) [@DoctorJ](https://boards.straightdope.com/u/DoctorJ)\ **Post date:** [August 17, 2010, 4:43pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/58 "2010-08-17T16:43:47Z")
> [@Skammer](#): > > If you’re not putting enough into your 401(k) to get the full company match (if your employer has one) you’re throwing money away. True. My employer matches my contributions 2-1 up to 5% of my salary, so you’d better believe I’m getting all of that. But I’ve gone back and forth about whether I should put more in beyond the match. I maxed it out for the first 3 year or so I was working, but I’m 34 years old, so it’s a full 25 years before I can touch it without penalties. Ten years from now I may decide to start my own business, or take a year off to travel or write a book, or who knows what. So now I’m just putting in enough to get the full match and putting the rest in a Sharebuilder portfolio. I hate to miss the extra growth from the pre-tax dollars, but I also want money I can get to when I need it. I think it can be a mistake to save too much for retirement. My wife’s grandparents are good examples; they pinched every penny for years, dreaming about all the traveling they’d do when they retired. And that’s exactly what they did–they’ve been to Hawaii, Panama, a cruise to Alaska, all kinds of neat places. And they hate every second of it. They waited until they got too old and cranky to enjoy it. So I’ve learned to be unapologetic about spending money to travel while I’m still young and healthy and non-cranky enough to appreciate it. Like everything else, it’s all about balance. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [August 17, 2010, 5:32pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/59 "2010-08-17T17:32:09Z")
> [@Sam\_Stone](#): > > I’d be careful regarding the ‘magic million’. That’s a number that asumes that you’re solidly in the middle class, and that you want to maintain your lifestyle well into your retirement. For most people, it’s a goal they’ll never meet. If you’re in the low middle class, and you’re making 40K per year and raising a family on it, you’re not exactly living like a king. And you’re not going to be saving a million dollars, either. > > The idea of putting away big money starting in your 20’s is totally unrealistic. Unless you’re already in the upper middle class and your parents paid for your education and you’re starting off with a good job in a decent home/apartment. So for the one person in 50 this applies to, good on ya. > > But for the average person, their 20’s and maybe even their 30’s are going to be spent just digging themselves out of debt, paying off the cost of an education, starting up their own household and saving up for a down payment on a home. > > Most middle class people don’t realize the ability to truly start saving reasonable amounts of money until they are in their mid 30’s or early 40’s. And for lower middle class people, not even then. > > But the lower middle class people are already living low lifestyles. For them, they’re most likely to retire on modest savings earned primarily in the last decade before retirement, plus government retirement benefits. The prudent ones will have paid off their homes and can either continue to live in them, or sell them and use the money to rent an apartment, or take out a reverse mortgage to turn them into an annuity. And that’s enough to stay in that low lifestyle. Their problem comes in when trying to place a spouse in a nursing home, or when suffering from an expensive condition. Then they become wards of the state pretty much, with all the dull bleakness that implies. Perhaps I should not have used the term ‘magic’, but the 1 million figure was from Leaper’s post. I think I showed that it is not necessarily correct - it depends on how much you think you’ll need after Social Security. It is difficult to save and big money may be unrealistic in your 20’s, but saving some money regularly is important. If people start out saying “I don’t make enough to save for retirement”, they have given up. Let’s hope they vote socialist - if only we had such a party :rolleyes: My grandparents were lower middle class - firmly in the shift-work, blue collar segment. They raised 3 kids, tithed 10% to the church and saved. When they retired, the church helped them out. Not sure how much that happens these days, even if you tithe. The point is, if they could tithe 10%, then why can’t people save today? Probably too many shiny things we think we need, my grandparents didn’t have to have cell phones, big screen TVs or frequent new cars. ---
**Author:** ![Hello\_Again](https://avatars.discourse-cdn.com/v4/letter/h/85e7bf/32.png) [@Hello\_Again](https://boards.straightdope.com/u/Hello_Again)\ **Post date:** [August 17, 2010, 5:59pm UTC](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335/60 "2010-08-17T17:59:48Z")
> [@jasg](#): > > [The idea of putting away big money starting in your 20’s is totally unrealistic. Unless you’re already in the upper middle class and your parents paid for your education and you’re starting off with a good job in a decent home/apartment. So for the one person in 50 this applies to, good on ya. A person who puts away a steady small sum of money, like $100/month, in their twenties will end up financially ahead of someone who started in their 30s with a higher savings rate – even if the Mr. Starts-at-20 has some years where they do not contribute at all. “reinvest the dividends” and “compound interest” are two important concepts, y’all. A person who puts away $100 at 3% yield, will have $32,000 after 20 years, assuming the contribution never gets larger and they never make a better rate of return than 3%. By comparison, a person who puts away $200 for 10 years, will have 27,000. In other words at age 40 Mr. Starts-at-20 will have more money than Mr. Starts-at-30, even though Mr. S@30 put in twice as much of his paycheck. [Previous page](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335.md?page=2) [Next page](https://boards.straightdope.com/t/is-saving-for-retirement-a-good-idea/550335.md?page=4)