What happens to those who don't invest?

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cbr shadow
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What happens to those who don't invest?

Post by cbr shadow »

I grew up in a suburb of Chicago in an upper-middle class area and went to college in the midwest. I've always "worried" about my finances and saved a good amount, married someone who was financially responsible, learned about investing, etc. I think we're in good shape financially, but not amazing shape (especially when compared to lots of posts I see on this forum).
Almost all of our friends (maybe all) barely contribute to their retirement if at all. These are college educated people in their early 30's who make reasonable incomes and have the ability to save/invest but don't at all. Several have a negative net worth (due to student loans) which doesn't seem to be of concern. If they don't change anything dramatically what will happen to them in the future?
I imagine this isn't just my group of friends, since it's a pretty diverse crowd and most are from middle or upper-middle upbringings. If this sample is somewhat typical for my age group, what does this say about the future of my generation?
Before someone suggests it, this isn't a post to toot my own horn.. By most standards we're doing well but people on this forum wouldn't be shocked by our bank statements.
BlackStrat
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Re: What happens to those who don't invest?

Post by BlackStrat »

I've been wondering this same thing for years now. A good friend (in his 50's) told me he had $80k saved up for retirement and I just couldn't fathom how long he expects that to last.

[OT comment removed by moderator prudent]
LateStarter1975
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Re: What happens to those who don't invest?

Post by LateStarter1975 »

Nothing will happen to them if they continue to not invest. They will likely depend on social security for most of their income. A few of them might get some windfalls (inheritances) but even with just social security, they will just be fine. Of course they will have to cut their lifestyle in retirement or maybe work a lot more. These days, for some people, 70 years is the new middle age.
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sk.dolcevita
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Re: What happens to those who don't invest?

Post by sk.dolcevita »

Remember that median household income is about $58,000. That is smack in the middle of the band we call middle class. A typical family having two children, daycare/education expenses, healthcare expenses, etc. just doesn't have enough money left to save. Such is the perfidious nature of retirement planning that depends on tax deductions (e.g. 40n's, IRA's, etc.) - there is just not enough left over after you have have paid middle class living expenses for a family of four. Based on my informal survey, I believe one needs to have a pre-tax household income of $70,000+ to start making use of such plans.

The only way a typical middle class family of four living in reasonably sized city can save for retirement is by demoting themselves to the lower economic class band (I hate to use the word poor here) and stop pretending they are middle class. That's a tough act.
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KlingKlang
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Re: What happens to those who don't invest?

Post by KlingKlang »

Good question. A significant number of people who don't plan nevertheless manage to 'luck out' in life: inheritance for themselves or a spouse, large pension or severance package, even winning a lawsuit, disability settlement, or the lottery. If they have been employed their whole lives they will receive Social Security and Medicare. Others are talented at mooching off of (ex)spouses, parents, siblings, children, or friends. With all of the social programs (welfare, housing) and charities available you have to get a court order to starve to death in this country, so almost everyone manages to squeak by somehow.
traveler90
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Re: What happens to those who don't invest?

Post by traveler90 »

A lot of people my age (upper 20s) seem pretty content with the expectation of working until 70. I think a few more years of working will change their mindset.
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Re: What happens to those who don't invest?

Post by qwertyjazz »

Work as long as you can - social security - family support if available - state assistance programs
They scrape by
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Re: What happens to those who don't invest?

Post by Jack FFR1846 »

If there were a new baby boom, those who are now having those babies would be fine as they'd be supported by their kids (assuming social security continues as it is today). If the birth rate stays at just replacement rates, then the amount they'll get from social security will likely be far less than any of us expect to get, even with the expected 2034 reductions. I suppose a lot of them will work until they literally die on the job.
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corysold
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Re: What happens to those who don't invest?

Post by corysold »

traveler90 wrote:A lot of people my age (upper 20s) seem pretty content with the expectation of working until 70. I think a few more years of working will change their mindset.
I wonder if this is generational. My dad is almost 70 and is a teacher and has said he has no plans to ever retire, despite being able to if he chose, he likes what he is doing too much.

My wife is 37 and a teacher and is counting the days until she can retire at 57.
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TomatoTomahto
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Re: What happens to those who don't invest?

Post by TomatoTomahto »

corysold wrote:
traveler90 wrote:A lot of people my age (upper 20s) seem pretty content with the expectation of working until 70. I think a few more years of working will change their mindset.
I wonder if this is generational. My dad is almost 70 and is a teacher and has said he has no plans to ever retire, despite being able to if he chose, he likes what he is doing too much.

My wife is 37 and a teacher and is counting the days until she can retire at 57.
It might be generational. DW still works, although we don't really need the money. Every now and then she gets fed up, but it passes, especially when she gets to solve complex puzzles with lots of moving parts (i.e., staff, technology, funding). I became a SAHD, and on balance I think it was a worthwhile thing to do, but to be honest, I consider it a personal sacrifice for the greater familial good; I enjoyed my work.

I am shocked at the number of very young people who don't ever expect to get satisfaction from working and are trying to figure out how to retire asap. It's probably a good thing, because I believe that in the future, a meaningful job/work will be considered a luxury available only to very few.

As to what happens to those who don't invest; many are probably fine. It's purely anecdata, but I marvel that the drunk driver is so often the only survivor in fatal accidents.
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livesoft
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Re: What happens to those who don't invest?

Post by livesoft »

The same thing that always happens: These folks will inherit money from their parents, they will work until age 67, and they will collect SS. They are living the dream and will be fine.
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691175002
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Re: What happens to those who don't invest?

Post by 691175002 »

Note that a house should be considered a retirement asset, so anyone paying down a mortgage is technically saving (the principal repayments). Even with no liquid retirement assets, a 300-800k property provides rent-free living and can be sold.
Nick341981
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Re: What happens to those who don't invest?

Post by Nick341981 »

livesoft wrote:The same thing that always happens: These folks will inherit money from their parents, they will work until age 67, and they will collect SS. They are living the dream and will be fine.
I doubt it. Most baby boomers will take out reverse mortgages and leave nothing but a pile of bills to their kids
livesoft
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Re: What happens to those who don't invest?

Post by livesoft »

Nick341981 wrote:Most baby boomers will take out reverse mortgages and leave nothing but a pile of bills to their kids
Hey, don't give me any ideas. :)
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Nick341981
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Re: What happens to those who don't invest?

Post by Nick341981 »

691175002 wrote:Note that a house should be considered a retirement asset, so anyone paying down a mortgage is technically saving (the principal repayments). Even with no liquid retirement assets, a 300-800k property provides rent-free living and can be sold.
Except for the fact that in a lot of states(Texas is a good example) you don't ever really own your house, you just rent it from the county and the Teachers mafia, I mean, Teachers Union. I'm a minimalist and have an average house, I couldn't imagine trying to retire with a 300 to 800k house that will have around a 30k property tax bill annually.
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Re: What happens to those who don't invest?

Post by Carefreeap »

Nick341981 wrote:
livesoft wrote:The same thing that always happens: These folks will inherit money from their parents, they will work until age 67, and they will collect SS. They are living the dream and will be fine.
I doubt it. Most baby boomers will take out reverse mortgages and leave nothing but a pile of bills to their kids
Yup, Mom died with a negative estate (-$400,000) and Dad will punish me with having to shovel out two garages full of junk out of his girlfriend's house.

Thanks a lot!
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blueberry
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Re: What happens to those who don't invest?

Post by blueberry »

KlingKlang wrote:Good question. A significant number of people who don't plan nevertheless manage to 'luck out' in life: ...the lottery.
Sorry I have to call BS on significant number of peeps winning the lottery!

The people I have known who have 'made it' without investing, and I come from a blue collar background so know quite a few, have done so via subsidized housing, disability (esp. amongst construction workers who do damage themselves over the years), shared housing often with extended family, medicaid. They don't travel and don't leave an inheritance, and don't fret over fed rate increases.
alfaspider
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Re: What happens to those who don't invest?

Post by alfaspider »

Nick341981 wrote:
691175002 wrote:Note that a house should be considered a retirement asset, so anyone paying down a mortgage is technically saving (the principal repayments). Even with no liquid retirement assets, a 300-800k property provides rent-free living and can be sold.
Except for the fact that in a lot of states(Texas is a good example) you don't ever really own your house, you just rent it from the county and the Teachers mafia, I mean, Teachers Union. I'm a minimalist and have an average house, I couldn't imagine trying to retire with a 300 to 800k house that will have around a 30k property tax bill annually.
I suppose you are exaggerating for effect, but property taxes are about $10k annually for a $500k house here in Texas. The flip side is no state income tax.
Last edited by alfaspider on Wed Dec 14, 2016 4:22 pm, edited 1 time in total.
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Re: What happens to those who don't invest?

Post by catdude »

My mom had a friend / co-worker who never saved or invested. She eventually retired, to a life of constant stress about money; there was never enough of it. Eventually she dropped dead of a stroke. Mom figured that it was the financial stress that killed her.
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Nick341981
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Re: What happens to those who don't invest?

Post by Nick341981 »

alfaspider wrote:
Nick341981 wrote:
691175002 wrote:Note that a house should be considered a retirement asset, so anyone paying down a mortgage is technically saving (the principal repayments). Even with no liquid retirement assets, a 300-800k property provides rent-free living and can be sold.
Except for the fact that in a lot of states(Texas is a good example) you don't ever really own your house, you just rent it from the county and the Teachers mafia, I mean, Teachers Union. I'm a minimalist and have an average house, I couldn't imagine trying to retire with a 300 to 800k house that will have around a 30k property tax bill annually.
I suppose you are exaggerating for effect, but property taxes are about $10k annually for a $500k house here in Texas. The flip side is no state income tax.
It's all about location, location, location. I'm not exaggerating when I say property taxes for that same 500k house would be 3 times as high where I live. Look up Pearland Texas property tax rates. It varies but still miss one tax bill on your paid off house and you will find out real quick who owns it. :wink:
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Re: What happens to those who don't invest?

Post by Nick341981 »

Delete
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bradshaw1965
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Re: What happens to those who don't invest?

Post by bradshaw1965 »

sk.dolcevita wrote:Remember that median household income is about $58,000. That is smack in the middle of the band we call middle class.
Have to be somewhat careful with the median household income since it includes retirees, students, etc.

Married couples with children under 18 years of age, according to the Census Bureau's Current Population Survey (Table HINC-04), made an average household income of $107,054 in 2013 and a median household income of $85,087.
...
The median income of married couple families peaks at $94,780 in the 45-to-49 age bracket and the average income peaks at $118,190 in the 50-to-54 age bracket.
http://www.cnsnews.com/commentary/teren ... age-107054

Not making a policy statement or commenting on the linked article but the numbers quoted are census numbers, which unfortunately have moved but checked when the post was made.
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Re: What happens to those who don't invest?

Post by DVMResident »

Most people, in the US, store the bulk of their wealth in their house via the 'forced' savings of paying off a mortgage. Not as efficient as investing, but savings none the less. Moreover, a paid off mortgage plus SS is a decent standard of living. I'd even call it a high standard of living from a historical perspective.

The tricky part going forward is applying the model in the modern, highly mobile, ephemeral globalized environment.
Nick341981
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Re: What happens to those who don't invest?

Post by Nick341981 »

Carefreeap wrote:
Nick341981 wrote:
livesoft wrote:The same thing that always happens: These folks will inherit money from their parents, they will work until age 67, and they will collect SS. They are living the dream and will be fine.
I doubt it. Most baby boomers will take out reverse mortgages and leave nothing but a pile of bills to their kids
Yup, Mom died with a negative estate (-$400,000) and Dad will punish me with having to shovel out two garages full of junk out of his girlfriend's house.

Thanks a lot!
If it makes you fill better you do and will have a lot of company. I saw an article the other day that said the baby boomer generation will be the first to leave nothing behind to their kids for the most part.
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Re: What happens to those who don't invest?

Post by Rainmaker41 »

DVMResident wrote:Most people, in the US, store the bulk of their wealth in their house via the 'forced' savings of paying off a mortgage. Not as efficient as investing, but savings none the less. Moreover, a paid off mortgage plus SS is a decent standard of living. I'd even call it a high standard of living from a historical perspective.

The tricky part going forward is applying the model in the modern, highly mobile, ephemeral globalized environment.
^^^ This. We can debate the merits of investing vs buying a house, look at the specifics of this or that situation, but there is no denying the role of home ownership in the American culture on wealth accumulation. We see lots of situations where a person has 'no' retirement savings, but they have social security benefits and a paid off house (that might be more house than they really need). Sure, they would have been better off in retirement had they bought a smaller house in the first place and invested the difference. The question is, would they have actually saved that difference, or spent it?
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Re: What happens to those who don't invest?

Post by alfaspider »

Medicaid nursing homes :shock:
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munemaker
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Re: What happens to those who don't invest?

Post by munemaker »

I wondered that about friends of ours who did not invest.

One couple both have government jobs, ended up with 2 government pensions/social security and retired before I did. I am guessing they are taking home close to what they did before retiring, when you factor out SS payments and union dues.

The other couple inherited a lot of money, retired early and are living way better than they ever did when they were working.

It seems to just come together for a lot of people, obviously not everyone.
blueberry
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Re: What happens to those who don't invest?

Post by blueberry »

alfaspider wrote:Medicaid nursing homes :shock:
Are they different? My grandma shared a nursing home room, paid for by selling her house, with someone on medicaid. They were treated exactly the same.
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CoAndy
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Re: What happens to those who don't invest?

Post by CoAndy »

I notice a lot of younger employees only investing up to the company match. Many also purchase $40-$50,000 vehicles. Mind boggling.
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Re: What happens to those who don't invest?

Post by mickeyd »

If they don't change anything dramatically what will happen to them in the future?
I keep reading articles that indicate that boomers are not saving for retirement. I have been reading these articles for well over 15 years. I used to scoff at them because we have saved and invested enough to have "won the game."

Part of investing in equities is the willingness to assume risk. For those unable, or unwilling, to make such risk assumption there is no reward.

For many boomers it is already too darn late! :(
Last edited by mickeyd on Wed Dec 14, 2016 4:48 pm, edited 1 time in total.
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ray.james
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Re: What happens to those who don't invest?

Post by ray.james »

sk.dolcevita wrote:Remember that median household income is about $58,000. That is smack in the middle of the band we call middle class. A typical family having two children, daycare/education expenses, healthcare expenses, etc. just doesn't have enough money left to save. Such is the perfidious nature of retirement planning that depends on tax deductions (e.g. 40n's, IRA's, etc.) - there is just not enough left over after you have have paid middle class living expenses for a family of four. Based on my informal survey, I believe one needs to have a pre-tax household income of $70,000+ to start making use of such plans.

The only way a typical middle class family of four living in reasonably sized city can save for retirement is by demoting themselves to the lower economic class band (I hate to use the word poor here) and stop pretending they are middle class. That's a tough act.
Agree, I believe that is how initial wealth is built. However if everyone did the same, there will be rampant deflation that will not end well. I have come to conclude wealth is neither created nor destroyed but moves from one balance sheet to another(spenders to savers and companies and back to smart savers). May be I should start reading economics books to understand this.

I do think one should be grateful, so many people buy luxury goods and save less; or else "saving class" investments would not grow by much. I might be selfish here :confused

edit: Also a lot of people invest/save differently. Home, rentals, CD's, universal life policies etc.,Investing need not be just stocks/bonds.
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Nate79
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Re: What happens to those who don't invest?

Post by Nate79 »

Separating the terms investing and savings I'll give examples from my family.

Grandparents - land, farms, equipment, home, CD's, savings accounts, Social Security. That's it.
Parents - After all the drops in the stock market not interested in stocks so mostly CD's, savings accounts, home, farms, land
Relatives in the 20-30s. - paycheck to paycheck, paying off home but no money due to very low income levels. How can you invest when you don't even have any savings? Working for small employer and don't even have access to 401k.
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Re: What happens to those who don't invest?

Post by qwertyjazz »

Nick341981 wrote:
691175002 wrote:Note that a house should be considered a retirement asset, so anyone paying down a mortgage is technically saving (the principal repayments). Even with no liquid retirement assets, a 300-800k property provides rent-free living and can be sold.
Except for the fact that in a lot of states(Texas is a good example) you don't ever really own your house, you just rent it from the county and the Teachers mafia, I mean, Teachers Union. I'm a minimalist and have an average house, I couldn't imagine trying to retire with a 300 to 800k house that will have around a 30k property tax bill annually.
It is amazing to me how taxes can be higher and regulation (for the individual paying for every little thing) more in a state like Texas then in NY. You really have to look at the fine print and not just look at the headlines as to where to live.
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stemikger
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Re: What happens to those who don't invest?

Post by stemikger »

Good post. I don't have much to add except "Good Luck with that". I came from a family that were really bad with finances and I watched how the end came played itself out. It wasn't a pretty picture then and it isn't now. For the record, I am not a high income wage earner, but always made it a point to max out my 401K. I would move to a smaller home and/or cut my lifestyle as needed. Saving for retirement was always my number one priority.

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Re: What happens to those who don't invest?

Post by Maverick3320 »

sk.dolcevita wrote:Remember that median household income is about $58,000. That is smack in the middle of the band we call middle class. A typical family having two children, daycare/education expenses, healthcare expenses, etc. just doesn't have enough money left to save. Such is the perfidious nature of retirement planning that depends on tax deductions (e.g. 40n's, IRA's, etc.) - there is just not enough left over after you have have paid middle class living expenses for a family of four. Based on my informal survey, I believe one needs to have a pre-tax household income of $70,000+ to start making use of such plans.

The only way a typical middle class family of four living in reasonably sized city can save for retirement is by demoting themselves to the lower economic class band (I hate to use the word poor here) and stop pretending they are middle class. That's a tough act.
I don't think it's as dire as you say it is. A family of 4 with that low of an income is going to qualify for all sorts of tax benefits, if not outright welfare benefits. Further, does this family of 4 have daycare expenses forever? Unless they are paying for private school, their daycare/education expenses are going to drop drastically when the children hit school age. A lot of families at this income level also have 0 for childcare expenses (stay at home parent). Healthcare subsidies are pretty high at that income as well.
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Re: What happens to those who don't invest?

Post by fpr4 »

sk.dolcevita wrote:Remember that median household income is about $58,000. That is smack in the middle of the band we call middle class. A typical family having two children, daycare/education expenses, healthcare expenses, etc. just doesn't have enough money left to save. Such is the perfidious nature of retirement planning that depends on tax deductions (e.g. 40n's, IRA's, etc.) - there is just not enough left over after you have have paid middle class living expenses for a family of four. Based on my informal survey, I believe one needs to have a pre-tax household income of $70,000+ to start making use of such plans.

The only way a typical middle class family of four living in reasonably sized city can save for retirement is by demoting themselves to the lower economic class band (I hate to use the word poor here) and stop pretending they are middle class. That's a tough act.
We currently make slightly north of $70k and having just recently left making around $58k, I can attest that this is survival level income. Especially if your medical costs (outside of skyrovketing premiums) are anything other than absolute zero.

I think people would also be surprised at what level a household making between $40-$70k is taxed. There are a lot of taxes that people ignore (because all people can seem to wrap their intellect around is federal income tax rate).

Like I said, we gross around $75k and after paying healthcare costs and all forms of taxation, I would estimate we have somewhere unter $40k left to spend.

Forget investing. I'll bet many of these people can't afford proper insurance.

Half of the households in this country are just flat out struggling to keep existing.
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Re: What happens to those who don't invest?

Post by Nick341981 »

qwertyjazz wrote:
Nick341981 wrote:
691175002 wrote:Note that a house should be considered a retirement asset, so anyone paying down a mortgage is technically saving (the principal repayments). Even with no liquid retirement assets, a 300-800k property provides rent-free living and can be sold.
Except for the fact that in a lot of states(Texas is a good example) you don't ever really own your house, you just rent it from the county and the Teachers mafia, I mean, Teachers Union. I'm a minimalist and have an average house, I couldn't imagine trying to retire with a 300 to 800k house that will have around a 30k property tax bill annually.
It is amazing to me how taxes can be higher and regulation (for the individual paying for every little thing) more in a state like Texas then in NY. You really have to look at the fine print and not just look at the headlines as to where to live.
What amazes me more is the amount of people that can't put two and two together to figure out that yes, Texas does have a state income tax, they just take it through insanely high property taxes. They also can't figure out that because Texas has insanely high property taxes it's a horrible state to retire in because for 99.9% of the population your income will be a fraction of what it was when you were working but your property taxes will stay the same regardless. Anybody that socked most of their money into thier 500k McMansion instead of investing it will be doing some serious downsizing unless they plan to move to a state with a state income tax such as Colorado.
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Re: What happens to those who don't invest?

Post by Grt2bOutdoors »

stemikger wrote:Good post. I don't have much to add except "Good Luck with that". I came from a family that were really bad with finances and I watched how the end came played itself out. It wasn't a pretty picture then and it isn't now. For the record, I am not a high income wage earner, but always made it a point to max out my 401K. I would move to a smaller home and/or cut my lifestyle as needed. Saving for retirement was always my number one priority.

Where there's a will, there's a way.
There's a saying "those who are raised eating steak, lobster and caviar are unable to subsist on a sandwich." What will happen? They will starve.
I on the other hand am happy as a clam eating sandwiches, but if need be can acclimate to eating highly nutritious beans (once they've been soaked overnight :wink: ).
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Re: What happens to those who don't invest?

Post by fpr4 »

Maverick3320 wrote:
sk.dolcevita wrote:Remember that median household income is about $58,000. That is smack in the middle of the band we call middle class. A typical family having two children, daycare/education expenses, healthcare expenses, etc. just doesn't have enough money left to save. Such is the perfidious nature of retirement planning that depends on tax deductions (e.g. 40n's, IRA's, etc.) - there is just not enough left over after you have have paid middle class living expenses for a family of four. Based on my informal survey, I believe one needs to have a pre-tax household income of $70,000+ to start making use of such plans.

The only way a typical middle class family of four living in reasonably sized city can save for retirement is by demoting themselves to the lower economic class band (I hate to use the word poor here) and stop pretending they are middle class. That's a tough act.
I don't think it's as dire as you say it is. A family of 4 with that low of an income is going to qualify for all sorts of tax benefits, if not outright welfare benefits. Further, does this family of 4 have daycare expenses forever? Unless they are paying for private school, their daycare/education expenses are going to drop drastically when the children hit school age. A lot of families at this income level also have 0 for childcare expenses (stay at home parent). Healthcare subsidies are pretty high at that income as well.
Most of these assertions are inaccurate. There are no "welfare benefits" after you pass $50k household income. There is no EITC. There's none of that. The healthcare subsidies are in the, what, $200 range? The subsidies are designed to keep your healthcare premium costs right around 10% of your income. 10% of your income is a hell of a lot at $58k.

Admit it or not, there is a baseline cost to simply existing. And having come from around a $60k household income in 2015 with 1 in childcare, I can tell you that the burden is real. And there sure as hell aren't any tax credit or "welfare" handouts to be had at that income level.
alfaspider
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Re: What happens to those who don't invest?

Post by alfaspider »

Nick341981 wrote:
alfaspider wrote:
Nick341981 wrote:
691175002 wrote:Note that a house should be considered a retirement asset, so anyone paying down a mortgage is technically saving (the principal repayments). Even with no liquid retirement assets, a 300-800k property provides rent-free living and can be sold.
Except for the fact that in a lot of states(Texas is a good example) you don't ever really own your house, you just rent it from the county and the Teachers mafia, I mean, Teachers Union. I'm a minimalist and have an average house, I couldn't imagine trying to retire with a 300 to 800k house that will have around a 30k property tax bill annually.
I suppose you are exaggerating for effect, but property taxes are about $10k annually for a $500k house here in Texas. The flip side is no state income tax.
It's all about location, location, location. I'm not exaggerating when I say property taxes for that same 500k house would be 3 times as high where I live. Look up Pearland Texas property tax rates. It varies but still miss one tax bill on your paid off house and you will find out real quick who owns it. :wink:
I suppose that's one more reason not to move to Pearland. I'm in city of Houston.
alfaspider
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Re: What happens to those who don't invest?

Post by alfaspider »

blueberry wrote:
alfaspider wrote:Medicaid nursing homes :shock:
Are they different? My grandma shared a nursing home room, paid for by selling her house, with someone on medicaid. They were treated exactly the same.
I suppose it will depend on the state, but in many places the only nursing homes that will take indigent medicaid patients are not places you want to end up.
Rainmaker41
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Re: What happens to those who don't invest?

Post by Rainmaker41 »

I live in DC. Between rent and utilities (internet, but not cell phone included), my housing costs are $500 per month at the most. Based on casual apartment searching, I could easily spend twice that amount and still have 'cheap' housing.

I make the conscious choice to have dirt cheap housing shared with a couple other guys, and that takes care of my Roth IRA right there. I am not a high earner at all. If I had a kid I'd be screwed. My cheap housing would not be suitable for a child.

Where am I going with this? I think it isn't possible to look at low and high earners the same way. I really have to scrimp to save. When I read about corporate lawyers making $150,000 who don't save... let's just say that I am bemused at them and proud of myself at the same time.

So if we are talking about low earners I have a lot of sympathy for structural reasons. If we are talking about high earners I don't. The trick is, it seems most people use the 'nothing left over to save' line. Put scrimpers who save next to high earners who don't, and it starts to look a bit silly.
Last edited by Rainmaker41 on Wed Dec 14, 2016 5:24 pm, edited 2 times in total.
Nick341981
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Re: What happens to those who don't invest?

Post by Nick341981 »

alfaspider wrote:
Nick341981 wrote:
alfaspider wrote:
Nick341981 wrote:
691175002 wrote:Note that a house should be considered a retirement asset, so anyone paying down a mortgage is technically saving (the principal repayments). Even with no liquid retirement assets, a 300-800k property provides rent-free living and can be sold.
Except for the fact that in a lot of states(Texas is a good example) you don't ever really own your house, you just rent it from the county and the Teachers mafia, I mean, Teachers Union. I'm a minimalist and have an average house, I couldn't imagine trying to retire with a 300 to 800k house that will have around a 30k property tax bill annually.
I suppose you are exaggerating for effect, but property taxes are about $10k annually for a $500k house here in Texas. The flip side is no state income tax.
It's all about location, location, location. I'm not exaggerating when I say property taxes for that same 500k house would be 3 times as high where I live. Look up Pearland Texas property tax rates. It varies but still miss one tax bill on your paid off house and you will find out real quick who owns it. :wink:
I suppose that's one more reason not to move to Pearland. I'm in city of Houston.
I wouldn't recommend it. I'm just here because it's a central location for my wife and I as far as our jobs. When we retire in a few years we are out of here.
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gwe67
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Re: What happens to those who don't invest?

Post by gwe67 »

Nick341981 wrote:
qwertyjazz wrote:
Nick341981 wrote:
691175002 wrote:Note that a house should be considered a retirement asset, so anyone paying down a mortgage is technically saving (the principal repayments). Even with no liquid retirement assets, a 300-800k property provides rent-free living and can be sold.
Except for the fact that in a lot of states(Texas is a good example) you don't ever really own your house, you just rent it from the county and the Teachers mafia, I mean, Teachers Union. I'm a minimalist and have an average house, I couldn't imagine trying to retire with a 300 to 800k house that will have around a 30k property tax bill annually.
It is amazing to me how taxes can be higher and regulation (for the individual paying for every little thing) more in a state like Texas then in NY. You really have to look at the fine print and not just look at the headlines as to where to live.
What amazes me more is the amount of people that can't put two and two together to figure out that yes, Texas does have a state income tax, they just take it through insanely high property taxes. They also can't figure out that because Texas has insanely high property taxes it's a horrible state to retire in because for 99.9% of the population your income will be a fraction of what it was when you were working but your property taxes will stay the same regardless. Anybody that socked most of their money into thier 500k McMansion instead of investing it will be doing some serious downsizing unless they plan to move to a state with a state income tax such as Colorado.
A friend in Texas (no state income tax) has a house assessed at $563,210 (actual value is higher) with taxes of $12,371. A friend in Illinois (state income tax) just sold a house for $445,000 with taxes of $15,624. You can't generalize about this.
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fishmonger
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Re: What happens to those who don't invest?

Post by fishmonger »

Nick341981 wrote:
qwertyjazz wrote:
Nick341981 wrote:
691175002 wrote:Note that a house should be considered a retirement asset, so anyone paying down a mortgage is technically saving (the principal repayments). Even with no liquid retirement assets, a 300-800k property provides rent-free living and can be sold.
Except for the fact that in a lot of states(Texas is a good example) you don't ever really own your house, you just rent it from the county and the Teachers mafia, I mean, Teachers Union. I'm a minimalist and have an average house, I couldn't imagine trying to retire with a 300 to 800k house that will have around a 30k property tax bill annually.
It is amazing to me how taxes can be higher and regulation (for the individual paying for every little thing) more in a state like Texas then in NY. You really have to look at the fine print and not just look at the headlines as to where to live.
What amazes me more is the amount of people that can't put two and two together to figure out that yes, Texas does have a state income tax, they just take it through insanely high property taxes. They also can't figure out that because Texas has insanely high property taxes it's a horrible state to retire in because for 99.9% of the population your income will be a fraction of what it was when you were working but your property taxes will stay the same regardless. Anybody that socked most of their money into thier 500k McMansion instead of investing it will be doing some serious downsizing unless they plan to move to a state with a state income tax such as Colorado.
100% agree. I live in NH (high property taxes, no income or sales tax). It works out for us because wife and I both have good incomes, and our taxes don't increase with every raise or bonus. We'll be moving to Taxachusetts in retirement (decades away).

What is even more illogical is people in border towns that live in NH (high property taxes), but work in VT (high income taxes). You're just giving money away
Gropes & Ray
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Re: What happens to those who don't invest?

Post by Gropes & Ray »

Carefreeap wrote:
Yup, Mom died with a negative estate (-$400,000) and Dad will punish me with having to shovel out two garages full of junk out of his girlfriend's house.

Thanks a lot!
What is the quote about that? Something like: "When I die, I want people to say, 'Gee, that guy owed me a lot of money!'"

But anyway, Social Security, SSI, Medicare, Medicaid, LIHEAP, SNAP, Link Up/Lifeline, property tax abatement, reverse mortgages, food banks, churches/charities, family.......
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mlebuf
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Re: What happens to those who don't invest?

Post by mlebuf »

People with less wealth at retirement live fewer years and don't enjoy what most of us would consider a good quality of life. This brief article by Scott Burns provides an overview: https://assetbuilder.com/knowledge-cent ... gevity-gap
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montanagirl
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Re: What happens to those who don't invest?

Post by montanagirl »

People I know who don't invest in the market have rentals to support them in old age. One contractor told me, since he was self employed he wouldn't have SS coming to him. :wink:

He bought my first house for a rental.
goldendad
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Re: What happens to those who don't invest?

Post by goldendad »

My experience is they live off their children or other relatives.
livesoft
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Re: What happens to those who don't invest?

Post by livesoft »

qwertyjazz wrote:It is amazing to me how taxes can be higher and regulation (for the individual paying for every little thing) more in a state like Texas then in NY. You really have to look at the fine print and not just look at the headlines as to where to live.
Just a note on the fine print: Property taxes are higher in NY than in TX for the same size house. I've lived in both states. Plus NY has a state income tax, but TX does not.
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