6 ms·

C'mooon > The IRA won’t make anyone rich. A calculator on the site estimates that if you’re 22 years old and making $14 an hour–saving around $120 a month–you

C'mooon > The IRA won’t make anyone rich. A calculator on the site estimates that if you’re 22 years old and making $14 an hour–saving around $120 a month–you could end up with around $230,000 by the time you’re 65 1. $14 / hour? The median household (yes, I know, household, but wait) income is the highest it's been since at least 1985 [1] at $59k/year. So $14 is definitely a bit lower than "normal". 2. Saving $120/month on that salary is saving just 5%! Nobody is suggesting saving 5% is appropriate. 10% is the bare minimum anyone recommends. Doing that, an IRA at 65 would be worth > $763,000, enough to spend $30k each year for the rest of their lives. Standard statement I feel like I always need to make: this is in no way a defense of our economic system. We absolutely need to raise taxes on the highest earners. We probably need a wealth tax as well. But we middle classers need to cool it with the defeatist attitudes. The poor have it hard. We, for the most part, do not. We spend too much and save too little. If you've got a car loan, eat anything but rice and beans, drink anything but water, have cable tv, a > $30/month cell phone bill, and complain about being broke, you've got some very obvious improvements you can make to get out of that dilemma. [1] https://en.wikipedia.org/wiki/Household_income_in_the_United_States https://en.wikipedia.org/wiki/Household_income_in_the_United...

grecy 8y ago
> 1. $14 / hour? The median household (yes, I know, household, but wait) income is the highest it's been since at least 1985 [1] at $59k/year. So $14 is definitely a bit lower than "normal". If we take that household income to mean it's two earners, they're each earning $14.75/hr ... (assuming a standard 2000 work year), which is 40 hrs/wk for 50 weeks
- the_gastropod 8y ago
  Some households have two earners. Most do not. The average is 1.3 earners per household. https://www.bls.gov/opub/btn/volume-6/use-with-caution-interpreting-consumer-expenditure-income-group-data.htm https://www.bls.gov/opub/btn/volume-6/use-with-caution-inter...
  - mdorazio 8y ago
    Right, so that's a median per-worker wage of around $22/hour. But $14/hour is right in the middle of the 2nd and 3rd income quintiles [1], meaning a solid 40% of Americans don't even make that much. It's not a very strong argument unless you're OK with current poverty and lack of retirement ability trends for large swathes of the country. [1] https://www.taxpolicycenter.org/statistics/household-income-quintiles https://www.taxpolicycenter.org/statistics/household-income-...
    - the_gastropod 8y ago
      Read the title of the article again ;-) Most Americans can retire. And there's this pretty broad movement to rationalize middle class earners failing to save. For those earning under ~25k/year, I agree: it's challenging. Especially if they've got medical problems or other extenuating circumstances to deal with.
      - sharkmerry 8y ago
        Under 25k/year pre or post tax?
      - mdorazio 8y ago
        Not disagreeing with the article title, just with your assessment of what "normal" means in the context of earnings for Americans. I think we just have different ideas about what segment of the population that term should apply to.
tcbawo 8y ago
Fixed costs have gotten too high, and these prices are inelastic. I think the only way to fix it is wage inflation across the board.
- bdcravens 8y ago
  > I think the only way to fix it is wage inflation across the board. And to convince people to spending so much. The new iPhones will be announced next week. How many will buy a $1000 phone yet not have $1000 saved for any kind of emergency?
  - RickJWagner 8y ago
    Yes, exactly. Also: How do those "FIRE" millenials manage to retire at 30? By living WELL below their means. It's no a lifestyle for everybody, but it demonstrates that money skills can be learned.
- rule_follower 8y ago
  How to accomplish this without exacerbating continued asset & fixed cost inflation?
NTDF9 8y ago
> The IRA won’t make anyone rich. A calculator on the site estimates that if you’re 22 years old and making $14 an hour–saving around $120 a month–you could end up with around $230,000 by the time you’re 65 So no room for 2 years of education or a drop year for health issues or layoffs or travel or starting a risky business?
- the_gastropod 8y ago
  Look, it's just math. Of course there's room for these things. Learning to consume just a little less than you currently do grants you a ton of flexibility.
  - marshray 8y ago
    Just out of curiosity, do you have kids?
RyanCavanaugh 8y ago
$30,000/year 43 years from now will be sub-poverty living. Based on prior inflation, you're looking at $6,600/year
- the_gastropod 8y ago
  These are inflation-adjusted numbers. https://www.investopedia.com/terms/f/four-percent-rule.asp https://www.investopedia.com/terms/f/four-percent-rule.asp
ChuckMcM 8y ago
I think FastCompany and Forbes run a variant on this article every year. I guess that it is a way to scare more people into saving more. For me, the question anyone should ask is this, "If I needed $2,500 right now, could I get my hands on it quickly and reliably?" That number has gone up a bit but it is the 'emergency cash' number of old which would cover "a major car repair", "bailing out of jail", "the entire medical deductible in one payment" etc. It is the equivalent of "If life throws you a curve ball can you catch it or are you going to get knocked on your butt by it." [1] If you can't answer yes to that question then it is important to recognize that you are operating without safeguards which puts you at risk of cascading financial difficulties. And if you can't answer yes to that question to have to ask things like "am I paying for Netflix? More than a bar budget phone? Do I eat out? Do I eat pre-prepared foods rather than making my own? Am I getting the most use/wear out of the things I buy like clothes, vehicles, etc?" Basically assess each thing you spend money on and look for ways to reduce that expense or eliminate it. As a fun anecdote I talked with a young adult who felt it was too much to ask to give up Netflix/Amazon Prime (for the streaming), I showed them they could buy a DVD player for $35 and check out movies and old television shows for free from the public library. It wasn't something they had opened their mind up to. But once they looked hard at things they found a bunch of stuff that they could change and that helped them get finances into a much better order. I like the Mr Money Mustache site for ideas on ways to cut down your 'burn rate' as well. [1] This can also be covered by a credit card, if you don't have any credit card debt, which is to say you have a credit card with a $2,500 credit limit but it (and no other card you have) carry a balance. Basically if you pull the trigger you'll add a monthy expense for the next 'n' months to get back out of the hole you just made.
L_Rahman 8y ago
It's staggering that this is the top voted comment. > car loan most of America doesn't have any way of getting to jobs without one > eat anything but rice and beans most people need fundamental nutrients from vegetables just to be able to survive, these vegetables tend to be more expensive than less healthy things > a >$30 month cell phone bill internet access gates opportunity in American and for many people their cell phone (which they cannot afford to pay for up front and therefore must lease) and its data plan is there only gateway to the rest of the world > drink anything but water, have cable tv (or assuming Netflix) any right to a Gatorade after shooting hoops at your dilapidated public park on a hot day, any right to 30 mins of entertainment after working your mind numbing job that drains of you all life > You've got obvious improvements you can make to get out of that dilemma. Why? Why is the right to a just life gated by the requirement to surrender basic humanity? Who is this we? A toss off link to a Wikipedia article? The Census Bureau itself says American household income is the same since 1987 [1] while cost of housing, education and healthcare goes 2x-3x in the last decade alone [2] How does a world view like this even get formed? [1] https://img.washingtonpost.com/wp-apps/imrs.php?src=https://img.washingtonpost.com/blogs/wonkblog/files/2013/09/MedianHouseholdIncome.png&w=1484 https://img.washingtonpost.com/wp-apps/imrs.php?src=https://...) [2] http://slatestarcodex.com/2017/02/09/considerations-on-cost-disease/ http://slatestarcodex.com/2017/02/09/considerations-on-cost-... This place baffles me sometimes.
- ryandrake 8y ago
  This idea that having a car and eating more than beans and water means you’re spending too much comes from those (slightly fanatical) Money Mustache followers. I agree that we should not advocate for a world where we have to sacrifice a middle class lifestyle in order to retire middle class.
  - the_gastropod 8y ago
    If you're broke. If you're in debt, you absolutely should be making some sacrifices to get out of debt. Once you have some money saved, feel free to spend on the luxuries you most desire.
skookumchuck 8y ago
The referenced calculator is: https://saver.oregonsaves.com/home/educational-tools/simple-retirement-calculator.html https://saver.oregonsaves.com/home/educational-tools/simple-... "The assumed investment rate of return before you retire is set at 4%, compounded annually." The S&P500 has an average rate of real return of 7%, which makes an enormous difference.
Buldak 8y ago
>eat anything but rice and beans ... This reads like a descent into satire.
- EADGBE 8y ago
  I prefer Pork and Beans myself. But perhaps people who eat Pork and Beans are supposed to be poor?
derekp7 8y ago
As far as the amount to save, I've always figured that about 7.6% will get you the same pre-tax income at retirement assuming net growth of 7% (after 45 years of work -- age 20 - 65) minus FICA (since you don't pay FICA on 401k withdrawals or investment interest income). You can also probably get by with less in retirement, if you have a house paid for by then and don't drive as much. But you will have to pay some amount a month for medicare, so that should be factored back in. If you assume 5% growth, then you will need to save about 14% of your income. Here, I'm using the average returns of the stock market minus inflation should get you 7%.

grecy 8y ago

> 1. $14 / hour? The median household (yes, I know, household, but wait) income is the highest it's been since at least 1985 [1] at $59k/year. So $14 is definitely a bit lower than "normal". If we take that household income to mean it's two earners, they're each earning $14.75/hr ... (assuming a standard 2000 work year), which is 40 hrs/wk for 50 weeks

the_gastropod 8y ago
Some households have two earners. Most do not. The average is 1.3 earners per household. https://www.bls.gov/opub/btn/volume-6/use-with-caution-interpreting-consumer-expenditure-income-group-data.htm https://www.bls.gov/opub/btn/volume-6/use-with-caution-inter...
- mdorazio 8y ago
  Right, so that's a median per-worker wage of around $22/hour. But $14/hour is right in the middle of the 2nd and 3rd income quintiles [1], meaning a solid 40% of Americans don't even make that much. It's not a very strong argument unless you're OK with current poverty and lack of retirement ability trends for large swathes of the country. [1] https://www.taxpolicycenter.org/statistics/household-income-quintiles https://www.taxpolicycenter.org/statistics/household-income-...
  - the_gastropod 8y ago
    Read the title of the article again ;-) Most Americans can retire. And there's this pretty broad movement to rationalize middle class earners failing to save. For those earning under ~25k/year, I agree: it's challenging. Especially if they've got medical problems or other extenuating circumstances to deal with.
    - sharkmerry 8y ago
      Under 25k/year pre or post tax?
    - mdorazio 8y ago
      Not disagreeing with the article title, just with your assessment of what "normal" means in the context of earnings for Americans. I think we just have different ideas about what segment of the population that term should apply to.

tcbawo 8y ago

Fixed costs have gotten too high, and these prices are inelastic. I think the only way to fix it is wage inflation across the board.

bdcravens 8y ago
> I think the only way to fix it is wage inflation across the board. And to convince people to spending so much. The new iPhones will be announced next week. How many will buy a $1000 phone yet not have $1000 saved for any kind of emergency?
- RickJWagner 8y ago
  Yes, exactly. Also: How do those "FIRE" millenials manage to retire at 30? By living WELL below their means. It's no a lifestyle for everybody, but it demonstrates that money skills can be learned.
rule_follower 8y ago
How to accomplish this without exacerbating continued asset & fixed cost inflation?

NTDF9 8y ago

> The IRA won’t make anyone rich. A calculator on the site estimates that if you’re 22 years old and making $14 an hour–saving around $120 a month–you could end up with around $230,000 by the time you’re 65 So no room for 2 years of education or a drop year for health issues or layoffs or travel or starting a risky business?

the_gastropod 8y ago
Look, it's just math. Of course there's room for these things. Learning to consume just a little less than you currently do grants you a ton of flexibility.
- marshray 8y ago
  Just out of curiosity, do you have kids?

RyanCavanaugh 8y ago

$30,000/year 43 years from now will be sub-poverty living. Based on prior inflation, you're looking at $6,600/year

the_gastropod 8y ago
These are inflation-adjusted numbers. https://www.investopedia.com/terms/f/four-percent-rule.asp https://www.investopedia.com/terms/f/four-percent-rule.asp

ChuckMcM 8y ago

I think FastCompany and Forbes run a variant on this article every year. I guess that it is a way to scare more people into saving more. For me, the question anyone should ask is this, "If I needed $2,500 right now, could I get my hands on it quickly and reliably?" That number has gone up a bit but it is the 'emergency cash' number of old which would cover "a major car repair", "bailing out of jail", "the entire medical deductible in one payment" etc. It is the equivalent of "If life throws you a curve ball can you catch it or are you going to get knocked on your butt by it." [1] If you can't answer yes to that question then it is important to recognize that you are operating without safeguards which puts you at risk of cascading financial difficulties. And if you can't answer yes to that question to have to ask things like "am I paying for Netflix? More than a bar budget phone? Do I eat out? Do I eat pre-prepared foods rather than making my own? Am I getting the most use/wear out of the things I buy like clothes, vehicles, etc?" Basically assess each thing you spend money on and look for ways to reduce that expense or eliminate it. As a fun anecdote I talked with a young adult who felt it was too much to ask to give up Netflix/Amazon Prime (for the streaming), I showed them they could buy a DVD player for $35 and check out movies and old television shows for free from the public library. It wasn't something they had opened their mind up to. But once they looked hard at things they found a bunch of stuff that they could change and that helped them get finances into a much better order. I like the Mr Money Mustache site for ideas on ways to cut down your 'burn rate' as well. [1] This can also be covered by a credit card, if you don't have any credit card debt, which is to say you have a credit card with a $2,500 credit limit but it (and no other card you have) carry a balance. Basically if you pull the trigger you'll add a monthy expense for the next 'n' months to get back out of the hole you just made.

L_Rahman 8y ago

It's staggering that this is the top voted comment. > car loan most of America doesn't have any way of getting to jobs without one > eat anything but rice and beans most people need fundamental nutrients from vegetables just to be able to survive, these vegetables tend to be more expensive than less healthy things > a >$30 month cell phone bill internet access gates opportunity in American and for many people their cell phone (which they cannot afford to pay for up front and therefore must lease) and its data plan is there only gateway to the rest of the world > drink anything but water, have cable tv (or assuming Netflix) any right to a Gatorade after shooting hoops at your dilapidated public park on a hot day, any right to 30 mins of entertainment after working your mind numbing job that drains of you all life > You've got obvious improvements you can make to get out of that dilemma. Why? Why is the right to a just life gated by the requirement to surrender basic humanity? Who is this we? A toss off link to a Wikipedia article? The Census Bureau itself says American household income is the same since 1987 [1] while cost of housing, education and healthcare goes 2x-3x in the last decade alone [2] How does a world view like this even get formed? [1] https://img.washingtonpost.com/wp-apps/imrs.php?src=https://img.washingtonpost.com/blogs/wonkblog/files/2013/09/MedianHouseholdIncome.png&w=1484 https://img.washingtonpost.com/wp-apps/imrs.php?src=https://...) [2] http://slatestarcodex.com/2017/02/09/considerations-on-cost-disease/ http://slatestarcodex.com/2017/02/09/considerations-on-cost-... This place baffles me sometimes.

ryandrake 8y ago
This idea that having a car and eating more than beans and water means you’re spending too much comes from those (slightly fanatical) Money Mustache followers. I agree that we should not advocate for a world where we have to sacrifice a middle class lifestyle in order to retire middle class.
- the_gastropod 8y ago
  If you're broke. If you're in debt, you absolutely should be making some sacrifices to get out of debt. Once you have some money saved, feel free to spend on the luxuries you most desire.

skookumchuck 8y ago

The referenced calculator is: https://saver.oregonsaves.com/home/educational-tools/simple-retirement-calculator.html https://saver.oregonsaves.com/home/educational-tools/simple-... "The assumed investment rate of return before you retire is set at 4%, compounded annually." The S&P500 has an average rate of real return of 7%, which makes an enormous difference.

Buldak 8y ago

>eat anything but rice and beans ... This reads like a descent into satire.

EADGBE 8y ago
I prefer Pork and Beans myself. But perhaps people who eat Pork and Beans are supposed to be poor?

derekp7 8y ago

As far as the amount to save, I've always figured that about 7.6% will get you the same pre-tax income at retirement assuming net growth of 7% (after 45 years of work -- age 20 - 65) minus FICA (since you don't pay FICA on 401k withdrawals or investment interest income). You can also probably get by with less in retirement, if you have a house paid for by then and don't drive as much. But you will have to pay some amount a month for medicare, so that should be factored back in. If you assume 5% growth, then you will need to save about 14% of your income. Here, I'm using the average returns of the stock market minus inflation should get you 7%.