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This is over-hyped. Professionals who want out will overwhelmingly figure out how to save more, regardless of whether their investment returns are 5% or 9%. Mos

This is over-hyped. Professionals who want out will overwhelmingly figure out how to save more, regardless of whether their investment returns are 5% or 9%. Most people are working for much more than a paycheck (though I believe they often fail to realize that), and stop working for far more varied reasons than achieving financial independence or a fully vested retirement plan. Sure, this will move some people at the margins, but most people will stop working from physical or mental frailty, to move across the country to be with grandchildren, or to preserve their limited energy to do things that they find more compelling than work. To the extent that they need to, they'll find lower-cost ways to live, probably including down-sizing, living with their adult children, renting rooms, or other informal arrangements within their communities.

gymbeaux 3y ago
It’s not over-hyped. If you play around with the numbers, the ~$22k per year (increases a little each year usually) you can put in a 401k is insufficient to retire on, even if you start at age 20 and max it each year till 55… unless the stock market goes up, up, up. One flaw is that you can only contribute that $22k to retirement if you have an employer and that employer offers a 401k plan to employees. Most do, but it also discourages entrepreneurship and gig work (which can be lucrative). Without a 401k, we are limited to contributing $6k/year to an IRA, which only has a tax deduction if you make less than $85k or so per year. Meanwhile 15% or so of our paychecks go towards social security, which many believe won’t exist in 20 years, regardless of contributions you made. Finally, the cost of retiring heavily depends on two things- healthcare and housing. Many Americans remain employed until 65 when they are eligible for Medicare as their employer-provided health insurance is all they can afford. Prior to Obamacare, these individuals would simply be uninsured, but now it’s “insured but it’s ridiculously expensive” without their employer. As for housing… it’s common to sell a single family home for X and use X/Y of that money to buy a smaller townhome or condo to live in until the day you die. This can work out well, adding tens or hundreds of thousands of dollars to the retirement account, but it relies on the person owning the home, having significant equity in the home if it’s not fully paid off, and being willing and able to sell the house and downsize. The system is broken and in this software engineer-heavy forum, I think it’s easy to forget that we make more money than most Americans. Heck, we make more money than most humans.
- nradov 3y ago
  No one retires at age 55 unless they already have substantial wealth. The expectation is that you continue contributing until you retire at about age 67.
- BeetleB 3y ago
  > It’s not over-hyped. If you play around with the numbers, the ~$22k per year (increases a little each year usually) you can put in a 401k is insufficient to retire on, even if you start at age 20 and max it each year till 55 Over the last 35 years, that would have netted you about $3M in today's dollars. You could argue that's not enough to retire on at 55 (although I'm sure many can), but if you keep it up to 65 that's $6M. Easily enough to retire on.
  - symlinkk 3y ago
    Not to mention Social Security kicks in once you hit your 60s.
    - gymbeaux 3y ago
      Is SS in the constitution? Show me where social security payments are an American right guaranteed by the federal government.
  - thunky 3y ago
    Right, but that's also assuming the person is 100% invested in the stock market all the way up to their retirement. That's a lot of risk.
    - ska 3y ago
      Sure, but more conservative and balanced approach still puts you in really decent shape. 4mm instead of 6 maybe. So that's not the problem, the problem is with the idea that you start max contribution in your 20s and keep it up. To a first approximation, nobody does this. The real way that people run into trouble with voluntary saving (tax sheltered or no) being relied on is something like this: 20s : bad salary, don't save much 30s : making better money but getting married and having a couple of kids 40s : man those kids are expensive, putting college funds together, saving a little bit. oh well at least we're building house equity. 50s : huh, we should think about saving. finally can live a bit though. 60s : oh crap, no way to catch up

gymbeaux 3y ago

It’s not over-hyped. If you play around with the numbers, the ~$22k per year (increases a little each year usually) you can put in a 401k is insufficient to retire on, even if you start at age 20 and max it each year till 55… unless the stock market goes up, up, up. One flaw is that you can only contribute that $22k to retirement if you have an employer and that employer offers a 401k plan to employees. Most do, but it also discourages entrepreneurship and gig work (which can be lucrative). Without a 401k, we are limited to contributing $6k/year to an IRA, which only has a tax deduction if you make less than $85k or so per year. Meanwhile 15% or so of our paychecks go towards social security, which many believe won’t exist in 20 years, regardless of contributions you made. Finally, the cost of retiring heavily depends on two things- healthcare and housing. Many Americans remain employed until 65 when they are eligible for Medicare as their employer-provided health insurance is all they can afford. Prior to Obamacare, these individuals would simply be uninsured, but now it’s “insured but it’s ridiculously expensive” without their employer. As for housing… it’s common to sell a single family home for X and use X/Y of that money to buy a smaller townhome or condo to live in until the day you die. This can work out well, adding tens or hundreds of thousands of dollars to the retirement account, but it relies on the person owning the home, having significant equity in the home if it’s not fully paid off, and being willing and able to sell the house and downsize. The system is broken and in this software engineer-heavy forum, I think it’s easy to forget that we make more money than most Americans. Heck, we make more money than most humans.

nradov 3y ago
No one retires at age 55 unless they already have substantial wealth. The expectation is that you continue contributing until you retire at about age 67.
BeetleB 3y ago
> It’s not over-hyped. If you play around with the numbers, the ~$22k per year (increases a little each year usually) you can put in a 401k is insufficient to retire on, even if you start at age 20 and max it each year till 55 Over the last 35 years, that would have netted you about $3M in today's dollars. You could argue that's not enough to retire on at 55 (although I'm sure many can), but if you keep it up to 65 that's $6M. Easily enough to retire on.
- symlinkk 3y ago
  Not to mention Social Security kicks in once you hit your 60s.
  - gymbeaux 3y ago
    Is SS in the constitution? Show me where social security payments are an American right guaranteed by the federal government.
- thunky 3y ago
  Right, but that's also assuming the person is 100% invested in the stock market all the way up to their retirement. That's a lot of risk.
  - ska 3y ago
    Sure, but more conservative and balanced approach still puts you in really decent shape. 4mm instead of 6 maybe. So that's not the problem, the problem is with the idea that you start max contribution in your 20s and keep it up. To a first approximation, nobody does this. The real way that people run into trouble with voluntary saving (tax sheltered or no) being relied on is something like this: 20s : bad salary, don't save much 30s : making better money but getting married and having a couple of kids 40s : man those kids are expensive, putting college funds together, saving a little bit. oh well at least we're building house equity. 50s : huh, we should think about saving. finally can live a bit though. 60s : oh crap, no way to catch up