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This thread started as a response to: > The 401k generation will begin think about retiring in the next few years. Most will discover that their 401K, despite

This thread started as a response to: > The 401k generation will begin think about retiring in the next few years. Most will discover that their 401K, despite maximum contributions, will be insufficient to retire on. The maximum individual contribution—not counting employer contributions—is $22,500. Or if you’re over 50, it’s $30,000. If You’re maxing out your 401k, you’ll pass $71k after working just a few years. To retire with just $71k after working a typical career of 40 years, you’d have to save less than ~$600/year. In other words, saving $600/year—~4% of a minimum wage salary—is enough to surpass this median $71k number after a 40 year career and a conservative 5% avg return. I suspect most of these people have other savings.

toomuchtodo 3y ago
> I suspect most of these people have other savings. Please show me the data, because all available public sources indicate this is not the case, and in my travels, the data confirms my conversations with these cohorts (because I am very curious). If they have other savings not showing up in the data, what and where is it? We cannot simply assume it exists. Hope is not a strategy.
- the_gastropod 3y ago
  Well, for starters, we can look at the median net worth of Americans, which in 2019 was between $250k and $310k for the age groups we’re talking about here. Is that enough? Still probably not, but it’s a heck of a lot more than just $71k. https://www.federalreserve.gov/econres/scf/dataviz/scf/chart/#series:Net_Worth;demographic:agecl;population:all;units:median;range:1989,2019 https://www.federalreserve.gov/econres/scf/dataviz/scf/chart...
  - toomuchtodo 3y ago
    If your net worth includes your primary residence, and you can't live off the equity, it is not retirement savings. It is dead capital, as you must live somewhere. Certainly, we can include it in your estate and net worth, but that's more pertinent to whomever is next of kin, not the person who needs cashflow for groceries, fuel, utilities, healthcare expenses, and so on. What the metrics represent is important, otherwise we are blinded to ground truth. I must strongly emphasize that vehicle equity is not retirement savings if you must keep the car for mobility. Home equity is not retirement savings if you must have a place to live and there is nowhere to downsize to, unless we are expecting 55+ to sell their homes and live in a van down by the river, burning through their housing proceeds and hopefully dying before it is exhausted.
    - the_gastropod 3y ago
      I think it’s still perfectly relevant. Retirees who own their homes have lower expenses than those that must pay rent. If your net worth is 100% equity in your wholly owned home, social security will go a much longer way than someone with $71k in a 401k who must still pay rent. I don’t know what point you’re trying to make here. Is US retirement a mess? Yes. But I don’t think the magnitude of bleakness is quite as high as you’re describing. While hardship exists, and I think we’d probably agree that there needs to be a much better safety net in place for people, I think it’s also true that many capable people neglect to save enough for the future. And, to be honest, I think often it’s because of rhetoric like yours. People are hopeless, and just give up trying. Reality is not that grim. Saving even $1M in a 401k over 40 years has been attainable for most people by following the boring “save 10%” strategy.
      - danaris 3y ago
        But a higher net worth due to having equity in a home is not the same as having fully paid off your home. There's just not enough information in such statistics to make such a determination one way or another. You're welcome to assume that retirees have paid off their mortgages, but it's a wholly unsupported assumption, given just the information in this thread. If you want anyone else to give it credence, cite some sources for it.
        the_gastropod 3y ago
        https://fivethirtyeight.com/features/how-many-homeowners-have-paid-off-their-mortgages/ https://fivethirtyeight.com/features/how-many-homeowners-hav... Most Americans over 65 own their homes outright without mortgages.
        nradov 3y ago
        Equity is equity. It's net worth that matters regardless of any mortgages. If a retiree has a mortgage payment then that's just one more housing expense to factor into retirement planning along with property taxes, maintenance, etc. For retirees with low interest mortgage it would be foolish to pay those off. And retirees who have substantial equity but need cash for living expenses can always take out a reverse mortgage.
- c22 3y ago
  It's stashed in their depreciating vehicles and equity in their houses.
ryandrake 3y ago
I know far too many people (albeit all younger than me) who readily admit to having zero savings--retirement or otherwise. These aren't destitute minimum wage workers. They're professionals with decent jobs, often whose employers have 401(k) programs. They just don't participate in them. They deliberately don't because they want to spend today and not lock up their money for an uncertain future. About half think they're going to die before retirement, and the other half have an overly rosy expectation of a future safety-net to help them. They are betting (unwisely IMO) that the USA will give in and not let an entire generation die on the street.
- the_gastropod 3y ago
  I have close friends with this mentality, and it frustrates me to no end. 6-figure earners with severe learned helplessness.

toomuchtodo 3y ago

> I suspect most of these people have other savings. Please show me the data, because all available public sources indicate this is not the case, and in my travels, the data confirms my conversations with these cohorts (because I am very curious). If they have other savings not showing up in the data, what and where is it? We cannot simply assume it exists. Hope is not a strategy.

the_gastropod 3y ago
Well, for starters, we can look at the median net worth of Americans, which in 2019 was between $250k and $310k for the age groups we’re talking about here. Is that enough? Still probably not, but it’s a heck of a lot more than just $71k. https://www.federalreserve.gov/econres/scf/dataviz/scf/chart/#series:Net_Worth;demographic:agecl;population:all;units:median;range:1989,2019 https://www.federalreserve.gov/econres/scf/dataviz/scf/chart...
- toomuchtodo 3y ago
  If your net worth includes your primary residence, and you can't live off the equity, it is not retirement savings. It is dead capital, as you must live somewhere. Certainly, we can include it in your estate and net worth, but that's more pertinent to whomever is next of kin, not the person who needs cashflow for groceries, fuel, utilities, healthcare expenses, and so on. What the metrics represent is important, otherwise we are blinded to ground truth. I must strongly emphasize that vehicle equity is not retirement savings if you must keep the car for mobility. Home equity is not retirement savings if you must have a place to live and there is nowhere to downsize to, unless we are expecting 55+ to sell their homes and live in a van down by the river, burning through their housing proceeds and hopefully dying before it is exhausted.
  - the_gastropod 3y ago
    I think it’s still perfectly relevant. Retirees who own their homes have lower expenses than those that must pay rent. If your net worth is 100% equity in your wholly owned home, social security will go a much longer way than someone with $71k in a 401k who must still pay rent. I don’t know what point you’re trying to make here. Is US retirement a mess? Yes. But I don’t think the magnitude of bleakness is quite as high as you’re describing. While hardship exists, and I think we’d probably agree that there needs to be a much better safety net in place for people, I think it’s also true that many capable people neglect to save enough for the future. And, to be honest, I think often it’s because of rhetoric like yours. People are hopeless, and just give up trying. Reality is not that grim. Saving even $1M in a 401k over 40 years has been attainable for most people by following the boring “save 10%” strategy.
    - danaris 3y ago
      But a higher net worth due to having equity in a home is not the same as having fully paid off your home. There's just not enough information in such statistics to make such a determination one way or another. You're welcome to assume that retirees have paid off their mortgages, but it's a wholly unsupported assumption, given just the information in this thread. If you want anyone else to give it credence, cite some sources for it.
      - the_gastropod 3y ago
        https://fivethirtyeight.com/features/how-many-homeowners-have-paid-off-their-mortgages/ https://fivethirtyeight.com/features/how-many-homeowners-hav... Most Americans over 65 own their homes outright without mortgages.
      - nradov 3y ago
        Equity is equity. It's net worth that matters regardless of any mortgages. If a retiree has a mortgage payment then that's just one more housing expense to factor into retirement planning along with property taxes, maintenance, etc. For retirees with low interest mortgage it would be foolish to pay those off. And retirees who have substantial equity but need cash for living expenses can always take out a reverse mortgage.
c22 3y ago
It's stashed in their depreciating vehicles and equity in their houses.

ryandrake 3y ago

I know far too many people (albeit all younger than me) who readily admit to having zero savings--retirement or otherwise. These aren't destitute minimum wage workers. They're professionals with decent jobs, often whose employers have 401(k) programs. They just don't participate in them. They deliberately don't because they want to spend today and not lock up their money for an uncertain future. About half think they're going to die before retirement, and the other half have an overly rosy expectation of a future safety-net to help them. They are betting (unwisely IMO) that the USA will give in and not let an entire generation die on the street.

the_gastropod 3y ago
I have close friends with this mentality, and it frustrates me to no end. 6-figure earners with severe learned helplessness.