Retirement Advice From Those Who Learned the Hard Way

[PcflEZFlng]

Hyundai AC - - it depends on what the underlying issue is. But when was running 15 to 25 year old cars and the AC got weak, it was usually low on refrigerant and I'd recharge it myself. Typically took a $15 can of R134A (available at any auto parts store and some big box stores). It wasn't a permanent fix but it would give me another 2, 3, or 4 years of coolness. Just a thought....

Thanks, but already tried that. No bueno.

 

[Ralph Sir Edward]

What’s new is the asset inflation that most BBs don’t have to deal with as they bought their homes prior to the vast majority of the asset inflation and are actually advantaged due to the marked real estate asset price inflation. It makes a huge difference in the real world and is one of the reasons my generation, and particularly the younger Y/Z generations, has more difficulty saving money.

I remember debating one of our older sets of friends back in 2010 about this exact topic. At that time I was making double what he was making every year and he was lamenting this fact. They bought their nicer home in a nicer neighborhood for around 200k roughly seven years before we bought our smaller home in a less ritzy area for 389k in 2008. Almost twice the price in seven years. Our mortgage payment was more than double what his payment was at the time. That difference basically ate up the the vast majority of our income delta after taxes at the higher income level is taken into account coupled with double the mortgage payment - for a home that was smaller and in a less desirable area as well. Homes in his neighbor were another 100-120k which was beyond what we could afford at the time.

Asset price inflation way beyond CPI, on top of stagnant real wage inflation, is eating away at savings rates. It will get worse until we actually decide to solve for these problems at a macro level.

Future retirees plan to work longer, partly due to savings shortfalls

According to a new survey by the nonprofit Transamerica Center for Retirement Studies, 55% of workers plan to work after they retire. That includes almost 20% who plan to work full time and more than a third who plan to work part time. Even more eye-opening: a staggering 15% of all workers...

finance.yahoo.com

The Baby Boom was not monolithic. It stretched from 1946 to 1964. Those BBs at the beginning of the boom got the unappreciated houses. Those towards the end got appreciated houses at 18% interest rates. The houses went from $20,000 in 1970 to $60,000 in 1980. And mortgage rates went from 7% to 18% in 1982. (And just for fun, the "oil patch" went into a full Depression. Houston wnet from 2% employment to 20% unemployment - after 20% of the population had abandoned the city. House prices dropped 50% there.)

The difference in inflation is artificial. The 1970's CPI included the price of houses. In the early 1980's, it was removed from the CPI.

 

[PcflEZFlng]

The Baby Boom was not monolithic. It stretched from 1946 to 1964. Those BBs at the beginning of the boom got the unappreciated houses. Those towards the end got appreciated houses at 18% interest rates. The houses went from $20,000 in 1970 to $60,000 in 1980. And mortgage rates went from 7% to 18% in 1982. (And just for fun, the "oil patch" went into a full Depression. Houston wnet from 2% employment to 20% unemployment - after 20% of the population had abandoned the city. House prices dropped 50% there.)

The difference in inflation is artificial. The 1970's CPI included the price of houses. In the early 1980's, it was removed from the CPI.

We were in the category of the later BB. Buying our first home in 1982 was painful, with a 15% FHA loan. It was a 'starter' house for $65K that we could barely afford with our two-earner income. We also bought our first CA house in 1989, at the tail end of an enormous real-estate boom and right before prices crashed. Houses bought after 1988 stayed underwater in our area for a full ten years throughout the 1990s in a particularly depressed economy. Our real-estate equity didn't recover until the early 2000s, a full twenty years after we first bought.

Just out of curiosity, five years ago I did a comparison between our situation in 1989, buying our home with the prevailing interest rate and with our income, compared to what the same house was worth in the 'present' (2018), the prevailing interest rate in 2018, and presumed 2018 income for the same jobs and experience we had in 1989. What I found was that the 2018 couple was disadvantaged for the same-percentage down payment (larger percentage of yearly income), but advantaged for the monthly payment (smaller percentage of monthly income). Much of the advantage was due to the much-lower prevailing interest rates in 2018 vs. 1989, whereas the down-payment disadvantage was because incomes weren't keeping up with home price inflation.

But as an everyone knows, 2018 was before the exceptional rapid rise in home values since then. Interest rates have also risen substantially in the past year as well. As difficult as it was for us for our first twenty years, I can't imagine how anyone starting out now could ever afford a home. As mentioned upthread, developers aren't building starter homes (at least here) today.

 

[joestein]

Why does the wife have to only conform with the husband's wishes to stay home and mow the lawn. Any good marriage involves compromise on both sides. That may have been a key indicator of deeper problems in the marriage.

If he really hated travel, perhaps the wife could go with girlfriends or relatives. There are many solutions if there is willingness to compromise.

For years I have been saying that I want to go on a Safari in Africa. My wife doesn't want to go (though she is warming up to the idea lately) and told me I should go with myself or some friends. I countered that I would just hire an local woman to escort me.

 

[CalGalTraveler]

@joestein Its nice you want to travel with your wife.

FWIW...I have an upcoming trip to Ireland with my brother because my husband must work. DH is fine with that and will meet up with me later on the trip for a cruise to Norway.

I believe in the saying that the most important investment you make is to make a good decision on your lifelong spouse.

 

[joestein]

We were in the category of the later BB. Buying our first home in 1982 was painful, with a 15% FHA loan. It was a 'starter' house for $65K that we could barely afford with our two-earner income. We also bought our first CA house in 1989, at the tail end of an enormous real-estate boom and right before prices crashed. Houses bought after 1988 stayed underwater in our area for a full ten years throughout the 1990s in a particularly depressed economy. Our real-estate equity didn't recover until the early 2000s, a full twenty years after we first bought.

Just out of curiosity, five years ago I did a comparison between our situation in 1989, buying our home with the prevailing interest rate and with our income, compared to what the same house was worth in the 'present' (2018), the prevailing interest rate in 2018, and presumed 2018 income for the same jobs and experience we had in 1989. What I found was that the 2018 couple was disadvantaged for the same-percentage down payment (larger percentage of yearly income), but advantaged for the monthly payment (smaller percentage of monthly income). Much of the advantage was due to the much-lower prevailing interest rates in 2018 vs. 1989, whereas the down-payment disadvantage was because incomes weren't keeping up with home price inflation.

But as an everyone knows, 2018 was before the exceptional rapid rise in home values since then. Interest rates have also risen substantially in the past year as well. As difficult as it was for us for our first twenty years, I can't imagine how anyone starting out now could ever afford a home. As mentioned upthread, developers aren't building starter homes (at least here) today.

Just looking at the house I bought in 2001 and sold in 2021. I sold the house for a little more than 2X what I paid for it. However, while the downpayment was double, the actual monthly payment was considerably less in 2021 - by almost 20%. I mean the monthly payment on double the mortgage was 20% less than I paid on my mortgage - due to low interest rates.

That is not even taking into account that salaries are much higher these days or that the stock market is up by many multiples. I made upper 20s (and I was one of the highest paid I knew - most made mid 20s) out of school in early 90s. These days, they are getting 60s to 80s as accountants out of school.

So, in many ways, housing was exceptionally cheap and the rise in prices was not out of line (at least by me). The only reason it has become unaffordable is due to the rise in interest rates - it would still be going up if you could get mortgages at 2.5%.

I do think that prices in desirable areas will stay flat with a slight possible decrease at these rates. Once rates decrease (and they will eventually) - watch out (at least in the desirable areas)

 

[DrQ]

Millions of high-earning Americans to lose popular 401(K) tax deduction - here’s what it means for YOU​

• Workers aged over 50 making catch-up contributions to their 401(K)s will only be able to funnel them into a Roth account from next year
• It means they will be taxed upfront - rather than when they withdraw the money

High-earning Americans to lose popular 401(K) tax deduction

Changes to a popular 401(K) tax deduction are set to hit millions of high-earning Americans from next year.

www.dailymail.co.uk

 

[billymach4]

We were in the category of the later BB. Buying our first home in 1982 was painful, with a 15% FHA loan. It was a 'starter' house for $65K that we could barely afford with our two-earner income. We also bought our first CA house in 1989, at the tail end of an enormous real-estate boom and right before prices crashed. Houses bought after 1988 stayed underwater in our area for a full ten years throughout the 1990s in a particularly depressed economy. Our real-estate equity didn't recover until the early 2000s, a full twenty years after we first bought.

Just out of curiosity, five years ago I did a comparison between our situation in 1989, buying our home with the prevailing interest rate and with our income, compared to what the same house was worth in the 'present' (2018), the prevailing interest rate in 2018, and presumed 2018 income for the same jobs and experience we had in 1989. What I found was that the 2018 couple was disadvantaged for the same-percentage down payment (larger percentage of yearly income), but advantaged for the monthly payment (smaller percentage of monthly income). Much of the advantage was due to the much-lower prevailing interest rates in 2018 vs. 1989, whereas the down-payment disadvantage was because incomes weren't keeping up with home price inflation.

But as an everyone knows, 2018 was before the exceptional rapid rise in home values since then. Interest rates have also risen substantially in the past year as well. As difficult as it was for us for our first twenty years, I can't imagine how anyone starting out now could ever afford a home. As mentioned upthread, developers aren't building starter homes (at least here) today.

I am a late stage BB. Still working. Did not purchase my first home (Coop in NYC in Queens until 1998) . The one good thing was that at least I was able to ride down on the lowering interest rates as my first mortgage was 6.5% then refi to a 15yr at 3.125%. Paid that off sold and got out of Dodge (NYC).

 

[rapmarks]

Millions of high-earning Americans to lose popular 401(K) tax deduction - here’s what it means for YOU​

• Workers aged over 50 making catch-up contributions to their 401(K)s will only be able to funnel them into a Roth account from next year
• It means they will be taxed upfront - rather than when they withdraw the money

High-earning Americans to lose popular 401(K) tax deduction

Changes to a popular 401(K) tax deduction are set to hit millions of high-earning Americans from next year.

www.dailymail.co.uk

I am pretty sure when Roth‘s started, taking our income together,we earned too much to invest in one.

 

[PigsDad]

I am pretty sure when Roth‘s started, taking our income together,we earned too much to invest in one.

We utilized the backdoor Roth for many years before we retired -- there was no income limit with that, but it only really worked if you did not have a Traditional IRA.

Kurt

 

[DrQ]

Looks like another pension may be in danger:

Yellow Corporations Failure to Fulfill Payment Obligations Raises Concerns and Threatens Employee Benefits​

Yellow Corporations Failure to Fulfill Payment Obligations Raises Concerns and Threatens Employee Benefits

On July 18, 2023, Yellow Corporation, a prominent transportation company, made headlines for its failure to fulfill a crucial payment

beststocks.com

 

[winger]

Actually the last line is just as important, or even more important.

In a fiat currency world, owning enduring assets will end up imputing income as the years go by. That is the trick of buying a house, as long as you don't treat it as an ATM.

Cars, no so much; but over the last 20 years they have gotten much more durable and reliable. Still driving my 2012 Hundai, looks good and runs just fine.

My 2014 Hyundai (low miles, orig owner) had more recalls (aka "Campaigns") then our other three pre-2003 vehicles combined.

Actually, I just scheduled an all day appt to take care of two of these.

 

[joestein]

I am pretty sure when Roth‘s started, taking our income together,we earned too much to invest in one.

I am pretty sure when Roth‘s started, taking our income together,we earned too much to invest in one.

I am pretty sure that the vast majority of workers do not even contribute the max to their 401Ks - I doubt many use the catch up. Those who do can probably afford it.

 

[SmithOp]

I am pretty sure that the vast majority of workers do not even contribute the max to their 401Ks - I doubt many use the catch up. Those who do can probably afford it.

Bingo! The median 401k savings is $65k.

Average Retirement Savings in 2025: How Do You Compare? | The Motley Fool

What's the average retirement savings? We dug into the statistics to find out the average retirement savings by age, income, race, and more.

www.fool.com

My sister is 68 and still working, has steadily refused to save even though I have been after her for 20 years to at least get her company 401k match. Just can't change some people that spend spend spend on all the crap you can't take with you.

 

[Tia]

Interesting, think I saw those making 600K were saving more. Which makes sense as should have more disposable income .

Bingo! The median 401k savings is $65k.

Average Retirement Savings in 2025: How Do You Compare? | The Motley Fool

What's the average retirement savings? We dug into the statistics to find out the average retirement savings by age, income, race, and more.

www.fool.com

My sister is 68 and still working, has steadily refused to save even though I have been after her for 20 years to at least get her company 401k match. Just can't change some people that spend spend spend on all the crap you can't take with you.

 

[Patri]

My sister is 68 and still working, has steadily refused to save even though I have been after her for 20 years to at least get her company 401k match. Just can't change some people that spend spend spend on all the crap you can't take with you.

I hope she doesn’t turn to you for support in the years ahead. I’m 68 and still working because I love it. I wouldn’t have to. We are totally set for retirement. I’m a tightwad so I don’t understand your sister’s mindset either.

 

[rapmarks]

I am pretty sure that the vast majority of workers do not even contribute the max to their 401Ks - I doubt many use the catch up. Those who do can probably afford it.

We always contributed the max to Ira and 403b. The last year we were teaching, the state came up with a new plan to change the multiplier for each year’s credit. However, we had to buy into it. It cost us each thirty thousand, which was half my salary. Taking it from my salary saved on taxes ,so from October to May we each had over three thousand withheld each month, in addition to the Ira, 403b, 12% retirement, we were living on 70’s paychecks. But within five years, we broke even. i Went from 35% of my last five year average to 59% so it was a no brainer as long as we didn’t kick the bucket before we broke even.

 

[PigsDad]

We always contributed the Mac tomira and 403b. The last year we were teaching, the state came up with a new plan to change the multiplier for each year’s credit. However, we had to buy into it. It cost us each thirty thousand, which was half my salary. Taking it from my salary saved on taxes ,so from October to May we each had over three thousand withheld each month. in addition to the Ira, 403b, 12% retirement, we were living on 70’s paychecks. But within five years, we broke even. i Went from 35% of my last five year average to over 60%.

Sound similar to our last few years of employment before we retired. By that time, we had our house paid off and no other loans or leases so our living expenses were quite low. We were both over 50, so we qualified for catch-up contributions for both 401k and IRA. In addition, our company (we worked for the same company) had just started to offer the "Mega Backdoor ROTH" (as some people had started to call it) where you could contribute after-tax dollars of up to $17K to your 401k above and beyond the regular contribution limits, and then that money was siphoned to our ROTH 401k account. So our breakdown was this (as best I remember it):

$19K - 401k regular contribution (pre-tax)
$6K - 401k catch-up contribution (pre-tax)
$17K - 401k "Mega Backdoor ROTH" contribution (after-tax)
$6K - Backdoor ROTH contribution (after-tax)
$1K - Backdoor ROTH catch-up contribution (after-tax)
a little over $5K - 401k company match into the pre-tax 401k account

So in total, I was putting a little over $54K into retirement savings per year. And my wife was doing the same for a total close to $110K/year into retirement savings. Our take-home paychecks were smaller than they had been for decades, but as I said, our expenses were low so it worked out fine. Doing that level of contribution for the last several years before retirement certainly added a big boost to our accounts, and was a key factor in retiring at 56.

Kurt

 

[Sugarcubesea]

And on the other hand, many people end up with health issues soon after they retire and are not able to do all those expensive things they had imagined. I've seen way too many people who have lived so frugally just to end up dying or have serious health issues soon after they retired. It is a balance, but don't forget to live and do some things while you are young and not push everything off to "when you have time to enjoy it", because you may not.

Kurt

That happened with my father, he saved his whole life and had a list of what he wanted to do in retirement, and only had a few years till cancer took him and in those few years of retirement the only big thing he did was we drove to Hershey Park in PA ( my father was born in Durea, PA) with my son when he was 4 and my mom and we stayed a week in PA and had a wonderful time and that was the only thing he was able to do before he got sick

 

[Sugarcubesea]

Yes. Since my back injury and subsequent spine surgery my husband has been a saint, giving me a new appreciation of our relationship.

@WinniWoman , I'm so sorry you have been dealing with back and spine surgery, I have back issues (have had them since my 20's) and long trips in the car are now becoming a problem for me, take good care of yourself, I know firsthand how deliberating a bank issue can be...

 

[Sugarcubesea]

I was fortunate to work for companies with decent 401K matches. I don't know who so deeply ingrained it in me -- but I always lived by the rule if someone was offering you free money, figure out a way to take it. Regardless of what else financially might have been going on in my life. I always contributed the max amount to my 401K that I could -- that my company would match. I offer the same advice to my children (and I suppose anyone else that will listen). Here we are at 65 and able to retire "on our own" - meaning what we saved we can now support ourselves on. Social security is a nice boost - but with what we saved we can be comfortable, hopefully not a burden to our children, and hopefully leave them a little something when we're gone.

I'm always amazed at the employees at my company that make good money that choose to put zero into their 401K, my company has a 5% match and it kills me that they are throwing away free money. I have worked since I was 18, it was not until til I was in my early 50's that I worked for a company that had a 401K and I have been saving in one since...Since I started at the company I'm currently at in 2015, I not only max out my 401K but my 401K catch up account and my HSA account

 

[Sugarcubesea]

We live in the Midwest, in a county with a low cost of living and a shorter life expectancy than average. Waiting to "do the fun stuff" often results in people dying before it happens. On the other hand, many people here work until the week of their death here because so many live below the poverty line.

@louisianab , I also live in the Midwest, in the same state as you and both my father and his father died early, my grandfather retired on a Friday and was dead the following Monday, never collected one Pension check from Ford or one SS check...I'm still working but very blessed that I have a lot of vacation time and I'm using my timeshares to enjoy every minute

 

[Sugarcubesea]

Millions of high-earning Americans to lose popular 401(K) tax deduction - here’s what it means for YOU​

• Workers aged over 50 making catch-up contributions to their 401(K)s will only be able to funnel them into a Roth account from next year
• It means they will be taxed upfront - rather than when they withdraw the money

High-earning Americans to lose popular 401(K) tax deduction

Changes to a popular 401(K) tax deduction are set to hit millions of high-earning Americans from next year.

www.dailymail.co.uk

I'm really bummed about this because next year my salary when this goes into effect, I will be $1.00 over the limit and will have to put my catch up in a Roth

 

[DrQ]

Looks like another pension may be in danger:

Yellow Corporations Failure to Fulfill Payment Obligations Raises Concerns and Threatens Employee Benefits​

Yellow Corporations Failure to Fulfill Payment Obligations Raises Concerns and Threatens Employee Benefits

On July 18, 2023, Yellow Corporation, a prominent transportation company, made headlines for its failure to fulfill a crucial payment

beststocks.com

US trucking company Yellow shuts down operations, Wall Street Journal reports​

US trucking firm Yellow shuts ops, to file for bankruptcy, Teamsters say

Cash-strapped U.S. trucking company Yellow Corp has ceased operations and is filing for bankruptcy after failing to reorganize and refinance over a billion dollars in debt, the Teamsters Union said on Sunday.

www.reuters.com

 

[Luvtoride]

I'm always amazed at the employees at my company that make good money that choose to put zero into their 401K, my company has a 5% match and it kills me that they are throwing away free money. I have worked since I was 18, it was not until til I was in my early 50's that I worked for a company that had a 401K and I have been saving in one since...Since I started at the company I'm currently at in 2015, I not only max out my 401K but my 401K catch up account and my HSA account

Do your co-workers really tell you they don’t contribute to the 401k or are you in a payroll position where you see the details?

I just retired from my company that has a Pension Plan (non- contributory by employees) and a very generous 401k match of up to 7% for the first 6% employee contributes after 10 years of service.

I was never aware of any of my co-workers participation in the 401-k but I’m sure there were some that couldn’t/ didn’t contribute the full amounts.

I’m not sure how the average worker retires with that “average” amount of $65k invested in their 401k (stat from another post here). Maybe why some of my older colleagues are still working and plan to continue until 70 years old.


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