Reply #17: so much dreck and so little time [View All]

[hfojvt]

First, the rarely discussed rule of thumb is a crock of doodoo. You need 10 times your final pay in your 401K. Yeah, who wants you to believe that? Maybe people who get paid to manage 401K accounts.

Hmmm. Who wrote this piece of alarmist crap again? Jane White. And what does she do? "President of Retirement Solutions LLC"

What's next Huffpo? Maybe an article from Jiffy Lube about how I need to change my oil every 1,000 miles? Maybe an article from AFLAC about how most workers do not have enough protection if they are hurt and miss work?

Okay, enough cute analogies. Why is the article full of crap? As I mentioned, the rule of thumb. Why do they think somebody needs a retirement nest egg of $610,000 for a median income of $61,000? Because their unrealistic goal is that people need to make 75% of their pre-retirement income in order to maintain their standard of living.

First, I find that kinda insulting. They sort of assume that nobody can live on less than $45,000 a year when the fact is that something like 40 million families are already doing so.

Not only that, but they seem to ignore many key facts about retired people. First, that their taxes are lower. No more FICA taxes, not on your retirement income. So $40,000 for a retired person is the equivalent of $43,313 for a working person. Then there is the fact that a retired person may no longer have house payments and childcare expenses and - they don't have to save for retirement any more. Then there are work related expenses - gone. No more spending gas money to drive 20 miles a day, less meed for new clothes for work, and less laundry and/or dry-cleaning expenses. Less cost for meals now eaten at home instead of at a food-vendor.

Then there are taxes. Consider two incomes $60,000 and $80,000. To one extent the second person makes $20,000 more than the first. Except that the extra income is taxed. 15% for federal, 6.45% for state and 7.65% for FICA for a total of $5,820. So the difference falls to $14,180. If the first person is not paying FICA taxes at all then the difference falls to $9,590. If the second person is also paying 4% for their retirement (which is mandatory where I work) then the difference falls to $6,390.

The retirement advisor figures it is a horrible thing if somebody making $50,000 a year is forced to live on a mere $40,000 a year. Omigosh, it is a huge hit to their standard of living. Well, that kinda assumes that the person likes their job, and if they like their job then why should they worry about retiring? The reason I look forward to retiring is because I really do not like my job, and this has been true of every job that I have had. So it is a huge step up to my standard of living to not have to spend 45 hours a week, plus commute and decompression time, doing crap that I hate. Given a choice between a) living on $10,000 a year or b) doing my job so I can have $14,000 a year, I would find some way to live on $10,000 without a moment of hesitation.