"Millennials may need to double how much they save for retirement"

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Rainmaker41
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"Millennials may need to double how much they save for retirement"

Post by Rainmaker41 » Fri Jan 13, 2017 9:03 am

I guess I'm not paranoid after all, since the market is out to get me. Is 25-30% the new 10-15%? If so, rather than being well prepared for retirement, I might only be tolerably prepared.

https://www.washingtonpost.com/news/get ... a7ea341a3a

http://time.com/money/4607398/why-mille ... omers-did/
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Re: "Millennials may need to double how much they save for retirement"

Post by ryman554 » Fri Jan 13, 2017 9:10 am

I'm not going to get into future predictions, which is what all these really boil down to.

what's interesting is that this is posted the same day which indicates that the millennials are actually doing the best in terms of savings (at least from a budget analysis): they are best prepared to weather a (minor) $500 emergency:

http://money.cnn.com/2017/01/12/pf/amer ... f-savings/

I make no comment on the meager numbers there.

Teach your kids to save for emergencies and live below their means -- savings rates will come.

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Re: "Millennials may need to double how much they save for retirement"

Post by Rainmaker41 » Fri Jan 13, 2017 9:14 am

I'm not too surprised Millennials have more cash on hand as a percentage of their income, spending, or what have you. I graduated college into the jaws of the Recession, and as a result have a tendency to hoard cash. I can only assume that is at least somewhat representative of my generation. I'm always amused by studies that show Millennials 'don't spend enough' and how that will be bad for the economy. I mean hey- we are only reacting rationally to stimuli.

http://thegbrief.com/articles/are-mille ... r-cash-636
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Re: "Millennials may need to double how much they save for retirement"

Post by bigred77 » Fri Jan 13, 2017 9:16 am

Its all sensationalism.

The message is basically "this time it really is different".

If millennials need to save 25% of their incomes over 40 years in order to retire then retirement is dead. Maybe 5% of millennials (and that's probably too high a number) are capable and willing of doing that.

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Re: "Millennials may need to double how much they save for retirement"

Post by livesoft » Fri Jan 13, 2017 9:20 am

Rainmaker41 wrote:I guess I'm not paranoid after all, since the market is out to get me. Is 25-30% the new 10-15%?
Did I read the same WaPo article as you did? The one I read said that the old rate necessary was 6.4% and the new rate necessary is 14.4%, so I don't see much of a problem here.
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Re: "Millennials may need to double how much they save for retirement"

Post by Da5id » Fri Jan 13, 2017 9:22 am

livesoft wrote:
Rainmaker41 wrote:I guess I'm not paranoid after all, since the market is out to get me. Is 25-30% the new 10-15%?
Did I read the same WaPo article as you did? The one I read said that the old rate necessary was 6.4% and the new rate necessary is 14.4%, so I don't see much of a problem here.
I'm with livesoft. WaPo article encouraging people to save ~15% doesn't sound radical.

Mind you, this is similar to the 3% is the new 4% in the various SWR threads.

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Re: "Millennials may need to double how much they save for retirement"

Post by MI_bogle » Fri Jan 13, 2017 9:27 am

Well, it's radical to suggest 15% savings, when compared to the reality of the average American.

But probably about 1/2 of the savings rate typical of posters on this board.

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Re: "Millennials may need to double how much they save for retirement"

Post by Rainmaker41 » Fri Jan 13, 2017 9:27 am

Ah- the Time article gives 25% if Social Security went 'poof', but that is an exercise trying to gaze into the crystal ball. Still, if 15% was the old benchmark, and returns are lower going forward, the new benchmark will still be higher. On the other hand, that begs the question of whether 15% was the 'true' past benchmark, or just the number given to induce people to save something less than that. Tell people to target 15%, and maybe they reach 7%; tell them 25%, and maybe they reach 14% on average?
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Re: "Millennials may need to double how much they save for retirement"

Post by niners9088 » Fri Jan 13, 2017 9:32 am

I remember reading many very similiar articles over the last few years about 3-4% is the new normal, and how did the markets perform? Historical performance is still the best indicator of future behavior.

Given this I believe in the next 30-40 years there will be dips and highs with plenty of opportunities for millennials to dollar cost average and make typical returns.

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Re: "Millennials may need to double how much they save for retirement"

Post by Lindrobe » Fri Jan 13, 2017 9:37 am

I think that comparing the percentages that one saves for retirement is not reflective of how much one is actually saving. My husband and I are both millennials. We both max our 401k and Roth. For me, the $23,500 that I save during the year between the two is equal to about 38% of my income. Husband's salary is much higher, so it is only about 18% of his income. In the end, we are both saving the same amount.

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Re: "Millennials may need to double how much they save for retirement"

Post by livesoft » Fri Jan 13, 2017 9:39 am

I would ilke to see a report from millennials on their parents who are retired or retiring now. I'd like to see millennials ask their parents how much they saved and invested every year so that they could reach this stage of their lives "retired" or "retiring now." I will bet that for most of them, the amount didn't even average 10% annually, yet those parents still retired. I think it would make a great media story about "Millennials Interview Parents On Retirement: Mom? Dad? How Did You Do It?"
Last edited by livesoft on Fri Jan 13, 2017 9:42 am, edited 1 time in total.
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Re: "Millennials may need to double how much they save for retirement"

Post by Da5id » Fri Jan 13, 2017 9:41 am

Lindrobe wrote:I think that comparing the percentages that one saves for retirement is not reflective of how much one is actually saving. My husband and I are both millennials. We both max our 401k and Roth. For me, the $23,500 that I save during the year between the two is equal to about 38% of my income. Husband's salary is much higher, so it is only about 18% of his income. In the end, we are both saving the same amount.
Their default assumption is that one's retirement expenses are somehow proportional to one's income, hence in a vacuum his savings need to be higher. If you happen to know that isn't the case, of course you know better than them. What is really relevant in addition to projected market returns (guesses), projected social security (guesses, particularly for those far from retirement), is your assumed costs in retirement. Also guesses :) So save what you can while enjoying life as you go :)

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Re: "Millennials may need to double how much they save for retirement"

Post by Lindrobe » Fri Jan 13, 2017 9:46 am

Da5id wrote:Their default assumption is that one's retirement expenses are somehow proportional to one's income, hence in a vacuum his savings need to be higher. If you happen to know that isn't the case, of course you know better than them. What is really relevant in addition to projected market returns (guesses), projected social security (guesses, particularly for those far from retirement), is your assumed costs in retirement. Also guesses :) So save what you can while enjoying life as you go :)
I see your point and agree that this is probably true for some people.

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Re: "Millennials may need to double how much they save for retirement"

Post by jimb_fromATL » Fri Jan 13, 2017 9:50 am

Lindrobe wrote:I think that comparing the percentages that one saves for retirement is not reflective of how much one is actually saving. My husband and I are both millennials. We both max our 401k and Roth. For me, the $23,500 that I save during the year between the two is equal to about 38% of my income. Husband's salary is much higher, so it is only about 18% of his income. In the end, we are both saving the same amount.
Just saw a news article somewhere on TV this morning that the average millennial spends a bigger percentage of their budget for coffee than for retirement funding.

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Re: "Millennials may need to double how much they save for retirement"

Post by dsmil » Fri Jan 13, 2017 9:56 am

Cuts to social security and mediocre market returns are definitely possibilities in the future. I think that we'll see most people working longer, rather than saving more, because many people are either not able to or not willing to sacrifice in order to save more. For Bogleheads, most of us plan for mediocre returns in order to protect ourselves, so we should be fine.

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Re: "Millennials may need to double how much they save for retirement"

Post by zaboomafoozarg » Fri Jan 13, 2017 10:03 am

I save 50-60% just to be safe. That might be what's needed to retire by the 2040's.

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Re: "Millennials may need to double how much they save for retirement"

Post by Atilla » Fri Jan 13, 2017 10:20 am

Millennials planning for retirement also need to consider that they will be heading into their peak earning/tax-paying years at the same time the boomers are hitting peak retirement.

Old age entitlement programs are looking at incoming revenue vs. promises made running at multiple trillion dollar shortfalls that are going to be paid for one way or another-through lower benefits, higher taxes and/or more debt. Better start saving, because it is what it is.
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Re: "Millennials may need to double how much they save for retirement"

Post by hille141 » Fri Jan 13, 2017 10:35 am

All I see is opinions the market will return lower rates. After all, the market cannot continue to sustain the same returns we have seen over the last 30 years. Based on what? I like the 100+ year track record as a guide over future "expert" projections.

According to a recent study by Acorns, 35% of 24-35 year olds spent more on coffee than they did on investing for retirement. The main problem is savings rate, not rate of return (or even fees). Many are capable of saving 15%+ for retirement, few are willing to do so. The draw of the next new iPhone is too strong.

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Re: "Millennials may need to double how much they save for retirement"

Post by awizard » Fri Jan 13, 2017 10:38 am

This is my favorite part:

"Among plan changes BlackRock suggests: higher default rates for employee contributions, requiring employees to contribute more to get the full match, auto enrolling older workers in “catch-up” programs that allow them to save more tax deferred, and making loans and early withdrawals more difficult."

So lets put more on the employees. How about suggesting that employers should match to higher amounts or better matching past $1 for $1.

Overall, I think it is wise for us young folks to be saving a higher percentage regardless. I think this helps with uncertainty down the road. You can always enjoy the extra cash if it is not needed. However, if you dont have it your screwed.

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Re: "Millennials may need to double how much they save for retirement"

Post by Gropes & Ray » Fri Jan 13, 2017 10:46 am

As others have pointed out, the supposed "doubling" is to go from 6.4% to 14.4%. Since we generally recommend a minimum of 15% around here, they are saying you can save less!

One point I think we should make is that most 401ks I have seen require 5 or 6 years to vest the match. Given the way employers treat Millennials (and the way we treat employers), I would say you should never expect to get the match.

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Re: "Millennials may need to double how much they save for retirement"

Post by Levett » Fri Jan 13, 2017 10:47 am

The most amazing assumption is that millennials who want to work will find productive work (from which they can save and invest) for however long they wish to work.

Try this for a thought experiment.

http://www.theatlantic.com/magazine/arc ... rk/395294/

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Re: "Millennials may need to double how much they save for retirement"

Post by Lindrobe » Fri Jan 13, 2017 10:48 am

Gropes & Ray wrote:One point I think we should make is that most 401ks I have seen require 5 or 6 years to vest the match. Given the way employers treat Millennials (and the way we treat employers), I would say you should never expect to get the match.
I totally agree :D I likely will not stay at any job for more than 3-5 years.

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Re: "Millennials may need to double how much they save for retirement"

Post by Da5id » Fri Jan 13, 2017 10:50 am

awizard wrote:This is my favorite part:

"Among plan changes BlackRock suggests: higher default rates for employee contributions, requiring employees to contribute more to get the full match, auto enrolling older workers in “catch-up” programs that allow them to save more tax deferred, and making loans and early withdrawals more difficult."

So lets put more on the employees. How about suggesting that employers should match to higher amounts or better matching past $1 for $1.
You know that the money for a match is not magically appearing, but rather is part of total employee compensation. It is unclear that most millennials will prefer the "hidden" compensation of a higher match vs the more immediately gratifying higher salary?

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Re: "Millennials may need to double how much they save for retirement"

Post by awizard » Fri Jan 13, 2017 10:51 am

The other tidbit employers do is make you wait months or even a year before you get any match to your contribution. Matching should start the same day you start to contribute.

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Re: "Millennials may need to double how much they save for retirement"

Post by awizard » Fri Jan 13, 2017 10:57 am

Da5id wrote:
awizard wrote:This is my favorite part:

"Among plan changes BlackRock suggests: higher default rates for employee contributions, requiring employees to contribute more to get the full match, auto enrolling older workers in “catch-up” programs that allow them to save more tax deferred, and making loans and early withdrawals more difficult."

So lets put more on the employees. How about suggesting that employers should match to higher amounts or better matching past $1 for $1.
You know that the money for a match is not magically appearing, but rather is part of total employee compensation. It is unclear that most millennials will prefer the "hidden" compensation of a higher match vs the more immediately gratifying higher salary?
I never discussed what the employee wants or where the money comes from to support the system. I just find it ironic that some people, BlackRock, are focused on finding ways to require the employee to save more. I would bet that savings rates to 401Ks would increase if the match was more generous vs. requiring them to save more to get the same match. At some point I would question why I should save to a 401K if, for example, you had to save 10% to get a 2% match. Now offer me a 10% match for 5% save and I would max that sucker out. :sharebeer

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Re: "Millennials may need to double how much they save for retirement"

Post by Gropes & Ray » Fri Jan 13, 2017 11:08 am

401ks are also not very attractive because of the high fees. At $5,500 (and $11,000 for a couple) anyone making less than $60k (or $120k for a couple) can use IRAs, and use the 401k only for whatever meager match is offered, and probably wind up over a 15% savings rate. Personally, that is exactly what I do. I can hit 20% savings by just funding my 401k enough for the full match, and then funding my Roth IRA and a spousal IRA. If we are going to lament underfunded 401ks, we need to know how much is going in the IRA.

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Re: "Millennials may need to double how much they save for retirement"

Post by MindTheGAAP » Fri Jan 13, 2017 11:09 am

awizard wrote:
Da5id wrote:
awizard wrote:This is my favorite part:

"Among plan changes BlackRock suggests: higher default rates for employee contributions, requiring employees to contribute more to get the full match, auto enrolling older workers in “catch-up” programs that allow them to save more tax deferred, and making loans and early withdrawals more difficult."

So lets put more on the employees. How about suggesting that employers should match to higher amounts or better matching past $1 for $1.
You know that the money for a match is not magically appearing, but rather is part of total employee compensation. It is unclear that most millennials will prefer the "hidden" compensation of a higher match vs the more immediately gratifying higher salary?
I never discussed what the employee wants or where the money comes from to support the system. I just find it ironic that some people, BlackRock, are focused on finding ways to require the employee to save more. I would bet that savings rates to 401Ks would increase if the match was more generous vs. requiring them to save more to get the same match. At some point I would question why I should save to a 401K if, for example, you had to save 10% to get a 2% match. Now offer me a 10% match for 5% save and I would max that sucker out. :sharebeer
Funny timing - my wife (American) the other day was comparing how American companies, as a whole, care about what you do on a professional level and she was contrasting this with the European companies who appear (to her) have more of a complete livelihood focus.
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Re: "Millennials may need to double how much they save for retirement"

Post by Rodc » Fri Jan 13, 2017 11:17 am

The first link seems to be based largely on high current valuations. Millennials should not care a hoot about current valuations since they have little invested now at these valuation and the majority of their new investments will take place in the future. One market crash and valuations will be reset. Over my lifetime I have invested every month since leaving school and some of those monthly investments were a low valuations, 1990, 2003, 2009, some at high valuations, 2000, 2007, and many in between. This will almost certainly be true for Millennials. Valuations today are not a major concern to someone early in accumulation.

The second seems to be based on slowing growth in the developed world, but if more of the world moves from being third world to first world, or even to second world, billions of new investors with consumer desires, and investing dollars will potentially unleash growth.

Now how will this really play out? I have no idea. But these two articles do not put forth strong arguments that Millennials should be losing sleep about their future ability to amass a decent retirement portfolio.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: "Millennials may need to double how much they save for retirement"

Post by Grt2bOutdoors » Fri Jan 13, 2017 11:20 am

Da5id wrote:
awizard wrote:This is my favorite part:

"Among plan changes BlackRock suggests: higher default rates for employee contributions, requiring employees to contribute more to get the full match, auto enrolling older workers in “catch-up” programs that allow them to save more tax deferred, and making loans and early withdrawals more difficult."

So lets put more on the employees. How about suggesting that employers should match to higher amounts or better matching past $1 for $1.
You know that the money for a match is not magically appearing, but rather is part of total employee compensation. It is unclear that most millennials will prefer the "hidden" compensation of a higher match vs the more immediately gratifying higher salary?
Ask anyone if they would prefer prefer private sector employment to that of a public sector job that offers lower pay but better benefits. Let me know what the consensus is, I think you'll be surprised.
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Re: "Millennials may need to double how much they save for retirement"

Post by Rodc » Fri Jan 13, 2017 11:21 am

Gropes & Ray wrote:401ks are also not very attractive because of the high fees. At $5,500 (and $11,000 for a couple) anyone making less than $60k (or $120k for a couple) can use IRAs, and use the 401k only for whatever meager match is offered, and probably wind up over a 15% savings rate. Personally, that is exactly what I do. I can hit 20% savings by just funding my 401k enough for the full match, and then funding my Roth IRA and a spousal IRA. If we are going to lament underfunded 401ks, we need to know how much is going in the IRA.
Well, if as upstream in this thread, many/most people change jobs every few years you just roll over to a low cost IRA, and pretty soon most of your money is invested at low cost.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: "Millennials may need to double how much they save for retirement"

Post by Grt2bOutdoors » Fri Jan 13, 2017 11:22 am

awizard wrote:The other tidbit employers do is make you wait months or even a year before you get any match to your contribution. Matching should start the same day you start to contribute.
+1, the reason they do that is part cash flow planning and part human resources to retain the employee.
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Re: "Millennials may need to double how much they save for retirement"

Post by Maverick3320 » Fri Jan 13, 2017 11:25 am

livesoft wrote:I would ilke to see a report from millennials on their parents who are retired or retiring now. I'd like to see millennials ask their parents how much they saved and invested every year so that they could reach this stage of their lives "retired" or "retiring now." I will bet that for most of them, the amount didn't even average 10% annually, yet those parents still retired. I think it would make a great media story about "Millennials Interview Parents On Retirement: Mom? Dad? How Did You Do It?"
A lot of millenials' parents had defined benefit pensions.

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Re: "Millennials may need to double how much they save for retirement"

Post by Slacker » Fri Jan 13, 2017 11:29 am

livesoft wrote:I would ilke to see a report from millennials on their parents who are retired or retiring now. I'd like to see millennials ask their parents how much they saved and invested every year so that they could reach this stage of their lives "retired" or "retiring now." I will bet that for most of them, the amount didn't even average 10% annually, yet those parents still retired. I think it would make a great media story about "Millennials Interview Parents On Retirement: Mom? Dad? How Did You Do It?"
Not quite a millennial (several years too old) - my parents saved around 30%, plus have pensions (65% of pay), plus are working in their 70s still (more than one job each). This is to support a life style that includes paid for cars, $400/month rent, free medical for life, no gambling, no smoking, no drugs, drinking maybe a six pack a week and never taking vacations. They also supplement their income with several completely paid off rental properties.

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Re: "Millennials may need to double how much they save for retirement"

Post by dad2000 » Fri Jan 13, 2017 11:35 am

I read stuff like this all the time.

I'm certain that I've saved more than 99% of my age group for retirement, yet many articles or calculators suggest I may come up short. So what does that mean? That 99% of my cohort will be eating cat food?

Society will somehow adapt, or life won't be worth living.

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Re: "Millennials may need to double how much they save for retirement"

Post by Da5id » Fri Jan 13, 2017 11:35 am

Grt2bOutdoors wrote: Ask anyone if they would prefer prefer private sector employment to that of a public sector job that offers lower pay but better benefits. Let me know what the consensus is, I think you'll be surprised.
I personally am happy to take deferred compensation/more in 401k match/etc. But I assume companies aren't silly when designing compensation packages, and that they get better yield of employees with higher top line salaries. Kind of like how airlines have optimized for lowest cost on search engine rather than best overall experience. If it were the case that 401k plan quality was a big criteria for people looking for jobs, surely 401ks wouldn't be with such terrible providers...

I think the public sector gravy train is also going downhill, as the costs of generous pensions of the past have come due and are making government re-think pensions...

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Re: "Millennials may need to double how much they save for retirement"

Post by INDUBITABLY » Fri Jan 13, 2017 11:40 am

awizard wrote: I never discussed what the employee wants or where the money comes from to support the system. I just find it ironic that some people, BlackRock, are focused on finding ways to require the employee to save more. I would bet that savings rates to 401Ks would increase if the match was more generous vs. requiring them to save more to get the same match. At some point I would question why I should save to a 401K if, for example, you had to save 10% to get a 2% match. Now offer me a 10% match for 5% save and I would max that sucker out. :sharebeer
BlackRock is, of course, interested in extracting those sweet, sweet management fees. Matching contributions cost employers (their real customers) money, while hectoring plan participants into putting more of their own money into expensive plans is basically free.

Seeing as that entire Time article reads like a BlackRock press release, I would disregard everything in it.
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Re: "Millennials may need to double how much they save for retirement"

Post by Grt2bOutdoors » Fri Jan 13, 2017 11:40 am

Da5id wrote:
Grt2bOutdoors wrote: Ask anyone if they would prefer prefer private sector employment to that of a public sector job that offers lower pay but better benefits. Let me know what the consensus is, I think you'll be surprised.
I personally am happy to take deferred compensation/more in 401k match/etc. But I assume companies aren't silly when designing compensation packages, and that they get better yield of employees with higher top line salaries. Kind of like how airlines have optimized for lowest cost on search engine rather than best overall experience. If it were the case that 401k plan quality was a big criteria for people looking for jobs, surely 401ks wouldn't be with such terrible providers...

I think the public sector gravy train is also going downhill, as the costs of generous pensions of the past have come due and are making government re-think pensions...
With the exception of those municipalities that are currently experiencing financing issues, I have not seen a widespread effort to slow the gravy train down in public sector, if anything there is a false sense of comfort and they are keeping the plans as status quo. Only when there is a raging fire do they bring out a 10 second ABC fire extinguisher which we know has little to no effect on quelling the issue. Moreover, the waiting line to get a job with public sector employment has never been longer, it's virtually impossible to get terminated from such a job.
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Re: "Millennials may need to double how much they save for retirement"

Post by triceratop » Fri Jan 13, 2017 11:41 am

livesoft wrote:I would ilke to see a report from millennials on their parents who are retired or retiring now. I'd like to see millennials ask their parents how much they saved and invested every year so that they could reach this stage of their lives "retired" or "retiring now." I will bet that for most of them, the amount didn't even average 10% annually, yet those parents still retired. I think it would make a great media story about "Millennials Interview Parents On Retirement: Mom? Dad? How Did You Do It?"
Obviously, I'm a millenial, so I'll start. My dad's preferred form of retirement was to obtain a federal government job in software with a 5% pay increase over his previous private sector job, observe that those who retired seemed to die quicker, and then declare that he never wanted to retire since work was cushy enough. It makes sense. Anyway, with Social Security at ~$3k/mo. and coupled with TSP/401k investments and real estate investments he could easily retire.

Mind you, that doesn't stop me from pulling my hair out that he owns terrible funds in his 401k and should roll over to the TSP, or at least a tIRA. Or the fact that my mom has her IRA in cash, barely willing to buy a CD.

So that is one data point. My response was to save 40-50% of gross income; my older millenial brothers (1) do not contribute to 401k even with 6% match (2) max 401k + tIRA. Not all millenials...
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Re: "Millennials may need to double how much they save for retirement"

Post by Grt2bOutdoors » Fri Jan 13, 2017 11:45 am

INDUBITABLY wrote:
awizard wrote: I never discussed what the employee wants or where the money comes from to support the system. I just find it ironic that some people, BlackRock, are focused on finding ways to require the employee to save more. I would bet that savings rates to 401Ks would increase if the match was more generous vs. requiring them to save more to get the same match. At some point I would question why I should save to a 401K if, for example, you had to save 10% to get a 2% match. Now offer me a 10% match for 5% save and I would max that sucker out. :sharebeer
BlackRock is, of course, interested in extracting those sweet, sweet management fees. Matching contributions cost employers (their real customers) money, while hectoring plan participants into putting more of their own money into expensive plans is basically free.

Seeing as that entire Time article reads like a BlackRock press release, I would disregard everything in it.
BTC is one of the lowest cost players, if anything what they are saying is more inline with other industry participants including Mr. Bogle who says returns will be lower. All things equal, if returns are lower than historical measures, then more savings is needed or less spending is guaranteed. You can't draw blood from a stone. One should keep an open mind when it comes to their own financial standing, do what is best for you, not is what is best for an entire group - don't be a lemming. Stop following the crowd, if you need to save 30% to make your goals a reality, don't listen to your friend telling you 15% is just fine, obviously it's not since you did your own calculations. Why do you think alot of the folks on this forum are uber savers?
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Re: "Millennials may need to double how much they save for retirement"

Post by ZeroWealth » Fri Jan 13, 2017 11:55 am

livesoft wrote:I would ilke to see a report from millennials on their parents who are retired or retiring now. I'd like to see millennials ask their parents how much they saved and invested every year so that they could reach this stage of their lives "retired" or "retiring now." I will bet that for most of them, the amount didn't even average 10% annually, yet those parents still retired. I think it would make a great media story about "Millennials Interview Parents On Retirement: Mom? Dad? How Did You Do It?"
I can tell you about my parents: My dad is early 70s and worked for civil service (DoD) for 35+ years and half of his retirement goes to my mom as per divorce agreement. He won a small lottery (sub-$1m) a few years ago and pays his mortgage with the dividends so he's doing okay. My mom is mid-60s and won't be able to retire until early 70s because all of her retirement (also civil service) went to my dad as per divorce agreement (weird arrangement). She's dependent upon his retirement, so when he passes, her financial situation is going to become a lot bleaker.

You can save for decades and think things are well and good, then divorce comes along and stirs the whole pot. I'm sure there's plenty of others with similar situations, but my family is a good example of how retirement didn't quite work out how they imagined it would from a financial perspective.
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Re: "Millennials may need to double how much they save for retirement"

Post by ZeroWealth » Fri Jan 13, 2017 11:58 am

jimb_fromATL wrote:Just saw a news article somewhere on TV this morning that the average millennial spends a bigger percentage of their budget for coffee than for retirement funding.

jimb
I just got back from Starbucks, but I also got paid today and saw my maxed Roth 401(k) contribution being withheld, so I'll remove myself from the average millennial pool. :D
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Re: "Millennials may need to double how much they save for retirement"

Post by Slacker » Fri Jan 13, 2017 11:59 am

Maverick3320 wrote:
livesoft wrote:I would ilke to see a report from millennials on their parents who are retired or retiring now. I'd like to see millennials ask their parents how much they saved and invested every year so that they could reach this stage of their lives "retired" or "retiring now." I will bet that for most of them, the amount didn't even average 10% annually, yet those parents still retired. I think it would make a great media story about "Millennials Interview Parents On Retirement: Mom? Dad? How Did You Do It?"
A lot of millenials' parents had defined benefit pensions.
The parents of my wife (my wife being a millenial) both had generous pensions. I don't know what their savings rate was, both are retired now though and one of them has a pension that is somewhere in the neighborhood of 85% of their working salary. The other is around 50-65% AFAIK.

If pensions were as prevalent today at the same benefit levels of the past (disregarding the reality of funding such pensions), millenials certainly wouldn't need to worry about "doubling" what they save for retirement.

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Re: "Millennials may need to double how much they save for retirement"

Post by bigred77 » Fri Jan 13, 2017 12:00 pm

livesoft wrote:I would ilke to see a report from millennials on their parents who are retired or retiring now. I'd like to see millennials ask their parents how much they saved and invested every year so that they could reach this stage of their lives "retired" or "retiring now." I will bet that for most of them, the amount didn't even average 10% annually, yet those parents still retired. I think it would make a great media story about "Millennials Interview Parents On Retirement: Mom? Dad? How Did You Do It?"
My parents' (divorced) saving rate was probably sub 5% and their investing acumen was/is non-existent.

Luckily they both have a paid off primary residence and can live their desired lifestyle on SS payments. One has about 50k total in an IRA. The other has maybe 30k in an IRA and a paid off rental property worth about 50k-60k.

They get bye just fine but I'm sure they would appreciate a little extra money.

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Re: "Millennials may need to double how much they save for retirement"

Post by ZeroWealth » Fri Jan 13, 2017 12:04 pm

Gropes & Ray wrote:As others have pointed out, the supposed "doubling" is to go from 6.4% to 14.4%. Since we generally recommend a minimum of 15% around here, they are saying you can save less!

One point I think we should make is that most 401ks I have seen require 5 or 6 years to vest the match. Given the way employers treat Millennials (and the way we treat employers), I would say you should never expect to get the match.
My company is a 6 year vest, and I can tell you nearly every one of my fellow millennial friends do not stay at the same company for more than 2-3 years. Ours is a generation of job hoppers, whether it's due to the economy (job change = salary bump), the culture (feelings of entitlement or boredom?), or something in the water (my current theory), many millennials won't see a match in their lifetime unless they stick it out somewhere.
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Re: "Millennials may need to double how much they save for retirement"

Post by Rainmaker41 » Fri Jan 13, 2017 12:22 pm

livesoft wrote:I would ilke to see a report from millennials on their parents who are retired or retiring now. I'd like to see millennials ask their parents how much they saved and invested every year so that they could reach this stage of their lives "retired" or "retiring now." I will bet that for most of them, the amount didn't even average 10% annually, yet those parents still retired. I think it would make a great media story about "Millennials Interview Parents On Retirement: Mom? Dad? How Did You Do It?"
My (retired) parents noticed that I pay attention to investing, retirement planning, etc. and asked me to take a look at their accounts. I found that their spending needs are currently met by their (mostly fixed in nominal terms) employer pensions & Social Security. They view their 401k & IRA assets as self-insurance against health care shocks, long-term care needs, hedge against inflation eroding their pensions, etc. I presume this will not be the case for most Millennials in retirement...

The main thought I had was that the target date mutual fund rolled over from an educational 403b to a same-brokerage IRA had a less than pleasing ER. I did a back of the envelope calculation showing the annual difference a lower ER at Vanguard would make, which they were pretty pleased with. I also used a few basic annuity estimators to show that their de-facto asset allocation was around 50:50 stock:bond, if their pensions were counted as bonds, so their AA is arguably more conservative than I and they had initially thought it was.

How did they do it? I gather they fretted about retirement and saved for it accordingly. They weren't active investors, and didn't pay a great deal of attention to the whole affair; they just kept contributing to their pensions and several index funds and never sold anything in panic. I don't know what their savings rate was, but I suspect it was not trivial. Without realizing it, they were mostly Bogleheads already; the biggest pot is one large corporation 401k with mostly institutional S&P 500 shares. My dad remarked that he was always astounded to hear intelligent colleagues at work talk about 'getting out of the stock market' during downturns as though they were beating the system. He just ignored it all from what I can tell.

For me, the takeaway is that without a good and consistent savings rate, any other optimizations or investing strategies of any kind will be woefully insufficient.
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Re: "Millennials may need to double how much they save for retirement"

Post by meaghansketch » Fri Jan 13, 2017 12:37 pm

As an (on the cusp) millennial (born 1982), these are the retirement plans at the jobs I've worked:
(this is just counting my longer-term, white-collar, in-front-of-a-computer desk jobs)
-No plan
-No plan
-Eligibility after 9 months, no match, load funds (that you paid the load on), high cost funds, company laid off 90% of staff including myself shortly after I became eligible (this was 2009)
-No plan
-No plan

I have more or less hit somewhere around the 15% mark every year only through maxing my IRA every year and saving any extra I was able in a taxable account.

The problem in many cases that employers aren't offering enough of a match, it's failing to offer plans at all.

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Re: "Millennials may need to double how much they save for retirement"

Post by ZeroWealth » Fri Jan 13, 2017 1:11 pm

meaghansketch wrote:As an (on the cusp) millennial (born 1982), these are the retirement plans at the jobs I've worked:
(this is just counting my longer-term, white-collar, in-front-of-a-computer desk jobs)
-No plan
-No plan
-Eligibility after 9 months, no match, load funds (that you paid the load on), high cost funds, company laid off 90% of staff including myself shortly after I became eligible (this was 2009)
-No plan
-No plan

I have more or less hit somewhere around the 15% mark every year only through maxing my IRA every year and saving any extra I was able in a taxable account.

The problem in many cases that employers aren't offering enough of a match, it's failing to offer plans at all.
This almost identically matches my story as well (born in 82 as well). I've only had one previous employer who offered a 401k and it was laughable at best. My current employer offers an okay plan (including a Roth 401(k)) but has that 6 year vesting window. I'm at the point in my career where this is going to be my long-term job, so I'm looking forward to reaping the matching benefits in a few years.
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Re: "Millennials may need to double how much they save for retirement"

Post by nedsaid » Fri Jan 13, 2017 1:24 pm

Rainmaker41 wrote:I guess I'm not paranoid after all, since the market is out to get me. Is 25-30% the new 10-15%? If so, rather than being well prepared for retirement, I might only be tolerably prepared.

https://www.washingtonpost.com/news/get ... a7ea341a3a

http://time.com/money/4607398/why-mille ... omers-did/
One factor, depending on the part of the country you live in, is the cost of housing. It is zooming where I live which makes saving for retirement that much harder.
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Re: "Millennials may need to double how much they save for retirement"

Post by MI_bogle » Fri Jan 13, 2017 1:27 pm

bigred77 wrote:
livesoft wrote:I would ilke to see a report from millennials on their parents who are retired or retiring now. I'd like to see millennials ask their parents how much they saved and invested every year so that they could reach this stage of their lives "retired" or "retiring now." I will bet that for most of them, the amount didn't even average 10% annually, yet those parents still retired. I think it would make a great media story about "Millennials Interview Parents On Retirement: Mom? Dad? How Did You Do It?"
My parents' (divorced) saving rate was probably sub 5% and their investing acumen was/is non-existent.

Luckily they both have a paid off primary residence and can live their desired lifestyle on SS payments. One has about 50k total in an IRA. The other has maybe 30k in an IRA and a paid off rental property worth about 50k-60k.

They get bye just fine but I'm sure they would appreciate a little extra money.
Similar for me... dad is retired and has less than zero knowledge of finances, although he always lived below means and was responsible fiscally, at least in terms of never spending more than he made. Just has NO idea about investing, what he has, how it works, etc. Thank god his employer (public university) had a great matching program, otherwise he probably wouldn't have much outside SS. Still calls his defined contribution plan "his pension" and bristles whenever I ask him for details such as how much his advisor costs him (answers alternate between "not much" and "I don't know"), what's his "pension" is invested in, or questioned why he needed to buy whole life insurance from Ameriprise at age 66 when he didn't make any income anymore, or have dependents that relied on his income. He lives on SS and modest distributions from his DC plan, which is probably about 80% of his working salary, from cobbling together what I've painfully extracted

Mom is still working, and decided to get serious about assessing her financial situation a couple years ago. She has always had a low savings rate (maybe 5-10%), but does live below her means. She'll probably be able to maintain her current lifestyle if she works til 70 to delay SS and amps her savings rate up a bit. Or she could scale back a bit on her spending and retire at 67 and work on her side business part time as long as she feels up to it

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Re: "Millennials may need to double how much they save for retirement"

Post by vitaflo » Fri Jan 13, 2017 1:36 pm

I'm pretty sure 15% savings has always been the "recommendation" even if it's not always expressly said. Consider the SS wage base is $118,500. 15% of that is ~$18,000 or, the max you can put into a 401k per year. Also consider that at 15% savings rate, it takes ~43 years until FI. Given most people graduate college at 22, 43+22=65, or about the age most people consider retirement.

I've always felt that all of that was set up for a reason, mainly to adhere to a 15% savings rate. So I'm not sure much has changed at all (whether people follow this or not is another story of course).

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