This leapt out at me from a recent U.S. News & World Report article:
"Nearly two thirds of workers 55 and older have less than $100,000 saved for their golden years, according to a recent study by the Employee Benefit Research Institute."
See
So when they no longer work, will they, by your definition in another thread, be wealthy?
Elizabeth Richardson
"Elizabeth Richardson" wrote
I never used the word "wealthy" in the other thread ("Saving and Invest"). Also, you seem to be conflating "not working" with "not having to work." To respond further to your assumptions, which are not mine and which do not make sense to me, just muddies the waters further.
What leapt out at me is that so many of them are still making it by okay. The optimism in the article was almost disturbing.
"Most people are not saving enough for retirement, but hey it'll be okay, you'll get by" would have been a better title.
I drew different conclusions from this article:
Often we or at lest the people I converse with on this sort of topic, focus on a "lump sum" of what we'll need. I'm a young person myself infact according to Canada's laws I can work for another 39 years before mandatory retirement age and 41 years before I have to stop contributing to retirement "tax deferred" plans. So I base financial planning on lump sums i.e.. house downpayment, car purchasing. I do this with retirement planning as well, factoring in expected rates of returns, inflation figures, health costs, inflation of housing prices etc. I have a lump sum I would like to have when I am 60 and when I am 65.
However the article suggested there may be other options for small but reliable income sources. Nothing wrong with a part time job 15 hours a week, or making money from your hobby. Perhaps volunteering will get you a tax deduction of sorts. To me the article states there are many ways to draw income in your retirement years other than your savings and investments.
I found it to be a hopeful sort of arcticle, at least for my present state.
I can see that. I was being a little dramatic, but my point was that there are many "doom and gloomers" on one extreme and this article seems to lean a little towards the other extreme. Its a welcome change (not necessarily a healthy one) but both extremes could use a little realism-shift towards the middle.
On a related note, I picked up an interesting fact last week at a continuing education seminar: Wal-Mart is the single largest employer of senior citizens in the world!!! This is largely because people have undersaved for retirement.
I will have something wrong "with a part time job 15 hours a week" when I'm 65 if it translates into being a Wal-Mart greeter. No offense, but you can keep your hope, I'll keep my savings.
FWIW ... "Effective Dec. 12, 2006, employees in Ontario are no longer required to quit working at age 65. This amendment to the Ontario Human Rights Code prevents seniors from facing age discrimination at work and makes mandatory retirement illegal in the province.
Bankers love the concept of mandatory retirement, or any other form of retirement. It means big money for the banks, who regularly fire up ads such as, "What are you doing after work?" And, "You're 20, you should be thinking of retirement."
The big season for bankers is the February run-up to the deadline for RRSPs, when they try to scare the daylights out of people by warning them if they don't have $800,000 - or $500,000, or $1 million - socked away when they turn 65 they soon will be pushing their worldly goods ahead of them in a cart or living in a walk-up, eating cat food."
Retirement is big business for banks. Bankers believe people hate their jobs as much as bankers hate theirs, so they set out to convince people that retirement - Freedom 55 ... Take This Job and Shove It - is the solution to worry and the road to happiness."
"kastnna" wrote
Agreed.
I was thinking about it and do wonder whether those with less than $100k saved perhaps had a house mostly paid for.
Anybody done any number crunching or had any experience with reverse mortgages?
Its a novel idea, but I haven't heard enough about them to have a valid opinion on the matter.
Elizabeth:
some analytical insight into these issues.
October 2005 IB #35
For full paper in PDF format, click here (60 KB).
Introduction
If individuals continue to withdraw completely from the labor force in their early 60s, a large and growing number will be hard pressed to maintain an adequate standard of living throughout retirement. Economic and demographic pressures are gradually eroding key sources of retirement income at the same time that increases in life expectancy mean that people can expect to live for 20 years, on average, after they stop working. And averages do not tell the whole story. Nearly one third of women and almost one fifth of men will live into their 90s.
.... One would think that the higher benefits are particularly important for women, who on average have much longer life expectancy. Unfortunately, women, even more than men, tend to claim Social Security benefits as soon as they become available. The question is why?
This brief summarizes the incentives facing older women when claiming their Social Security benefits. The analysis shows that single women and married women face very different choices. For most married women, the Social Security benefit structure actually encourages them to grab their benefits as soon as possible. These incentives reinforce the tendency for wives, who are usually younger, to retire when their husbands do. Early claiming may maximize the wife's Social Security "wealth," but it also encourages them to stop working, creating a loss of earnings and 401(k) savings and extending the period over which they need support in retirement.
see also:
Here is a good starting point to learn about them:
Yes, a reference to that paper came up several months ago. It, and the ensuing discussion, changed my mind about when I would begin taking SS payments. It is a good article.
But, my comment in this thread had to do with Elle's response in another thread suggesting those who choose not to no longer work can be defined as "well off". Since retirement is a choice to no longer work, by Elle's definition, all retirees are well off. I was just poking at such a generalization.
Elizabeth Richardson
"Elizabeth Richardson" wrote
If my words said what you claim above, then I think you would not have had to change them. I wrote that "one definition of 'well off' is having had enough success to no longer work, AFAIC." I never used the word "retire" or any of its derivatives, and my statement indicates there are other definitions of "well off."
I do not agree "retirement" is as cut-and-dry a choice as you claim above. Companies downsize; people get terminated at later ages; people become old and unhealthy and cannot work effectively; more. Many self-described "retirees" live in poverty.
Lastly, you wrote about your own financial situation. Were you trying to say you do not consider yourself "well off"? If so, fine, but I am not going to debate your opinion of your own situation, or the meaning of a term as subjective as "well off."
-- Ron
Even if a person understands completely that they are making no principal and no interest payments and the consequences of such an arrangement I still think the practice is highway robbery. Geez ... imagine what you'd owe on an amount of say 100,000 at say 8% after say
5 years ... ouch. Year 1 ... 108,000; year 2 ... 116, 640; year 3 ... 125, 971; year 4 ... 136,048; year 5 ... 146, 932.
It looks too complicated, so the homeowner isn't going to do well. The mortgage becomes due when the owners move out, say to a nursing home or assisted living.
It might be better for the homeowners to sell and downsize or move to a rental unit.
-- Ron
OK sorry I misunderstood your intent.
I am glad, if the discussion here guided someone to a better life outcome.
The answer is - you wouldn't owe anything. You also would not owe anything if you lived for 50 years under this arrangement. If/when you die or move out, the house is sold and the proceeds are used to pay off the loan. If the proceeds are not enough to cover the payoff on the loan - too bad for the lender, that is all he gets.
Turning it around, if a person is unable or unwilling to work, and their house equity is their only sizeable asset, and they are unable or unwilling to move, what other comparable source of income would you suggest?
If you look at the FAQ, you'll see the loan is repaid from the house. The lender can't require the funds come from another source.
Not everyone has a big house.
I'm not saying a reverse mortgage is for everyone, but it very well be just what some folks need.
Elizabeth Richardson
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