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[2020] A little stock market sense

jorcus

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The Federal Reserve’s Survey of Consumer Finances tracks retirement savings data for different age groups in the U.S. According to the most recent survey that was completed in 2019, the average retirement savings by age breaks down like this:

  • $426,000 for those aged 65 to 74
  • $357,000 for those aged 75 and older
As you can see, those numbers are well below the $1 million mark. They represent how much the average person 65 and up have saved in retirement accounts, including 401(k) plans and Individual Retirement Accounts (IRAs).

If you look at median figures, the numbers change even more. The median represents the middle number in a group of numbers. The Federal Reserve data shows that 65 to 74-year-olds have a median of $164,000 in their retirement accounts while those 75 and older have $83,000 saved for retirement.

A few thoughts on this.

It looks like this is per individual and not per household. I would say if you were an individual between 65 and 74 with a decent SS check and $426 k you are probably doing ok if you are debt free. Lets take a walk back and see what affects these numbers.

401Ks and IRA's were passed by congress in the late 70's and corporations started to implement them in the early 80's. The first generation to fully participate in 401k s is just coming to retirement now. If you were participating in a comp[any 401k from day 1 and your were 21 years old in 1981 you would be 63 years old now. The amount you could contribute was also much lower than it is now so as years go on I expect account balances to grow.

Male vs Female participation rates. In income disparity between Males and Females was pretty wide. Some households have and had stay at home mothers. The gap has closed over the years but of those coming to retirement age You would probably see a large 401k for the spouse that worked the most. And a much lesser one for the stay at home person. Those are going to skew median numbers but less so in the coming years.

The older cohort of adults over 75. Of course they will have less in 401ks and IRAs. They did not exist when they started to work and they have to withdraw money due to RMDs. They may still have the money but it is not in the tax deferred accounts. Or maybe they spent it. They are more likely to have some defined pension plan than the younger group.

The effects of inherited IRA/401k accounts. The boomers coming of retirement age are starting to inherit the accounts of spouses and parents. This is a big factor as the money passes quickly after death as long as benifciaries are named. Keep those up to date on your accounts. It is a big factor in generational wealth.

The barbell spending effect of retirement. In general people spend a lot when the first retire then slow down then spend a lot on healthcare at the end. There was a pull forward into an already crowded baby boomer cohort due to the Covid epidemic. The number of recent retirees should slow down going forward, but for now there are a lot of younger retired people spending money on stuff while they can, if they can.

Yes there is a large population of people with no or little savings that drag these numbers down. It is a big issue for certain.
 
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Brett

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Account was recently moved from TD Ameritrade to Schwab. With TD when a dividend ck was sent information was also sent that said what company y was paying a dividend.
With Schwab I received a ck but no information. Is this the norm with Schwab? Does anyone else have a problem with this? Considering I have several dividend paying companies this makes no sense to me.
Bart

Dividends, interest and captial gains are identified and automatically deposited in my Schwab accounts.
The company should be identified, if it's not on the check then look at the account history / transactions
 

Icc5

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Dividends, interest and captial gains are identified and automatically deposited in my Schwab accounts.
The company should be identified, if it's not on the check then look at the account history / transactions
Yes, I can go through and figure it out but what do I pay Schwab for if not for service. Makes me feel I'm doing their job especially since TD was putting the information on the statement part of the check. I had the same problem with TD when a bond paid off and the check came without any information. It was for a large amount with no reference at all.
 

rapmarks

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Yes, I can go through and figure it out but what do I pay Schwab for if not for service. Makes me feel I'm doing their job especially since TD was putting the information on the statement part of the check. I had the same problem with TD when a bond paid off and the check came without any information. It was for a large amount with no reference at all.
I never received a check. Always stayed in the account to reinvest or just sit there. One of the reasons I left Merrill lynch was that they required us to have what they said was a credit card but was a debit card. So if I used it,I was withdrawing from my savings instead of from my income.
 

Brett

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Yes, I can go through and figure it out but what do I pay Schwab for if not for service. Makes me feel I'm doing their job especially since TD was putting the information on the statement part of the check. I had the same problem with TD when a bond paid off and the check came without any information. It was for a large amount with no reference at all.

Have you thought about getting dividends directly deposited into your Schwab account and then transferring the money online to your checking account?
It's very easy to link accounts
 

DrQ

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America's retirement timebomb: Hardship withdrawals from pension funds have TRIPLED in the last five years - as workers grapple with higher living costs​

  • With the exception of 2020, hardship withdrawals have incrementally increased
  • In 2020 account holders could make penalty-free withdrawals thanks to CARES

77048601-12677285-In_2018_about_2_1_percent_of_households_with_a_401_k_withdrew_mo-a-1_1698353453108.jpg
 

Brett

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U.S. Economy Grew a Strong 4.9%, Driven by Consumer Spree That May Not Last
https://www.wsj.com/economy/us-gdp-economy-third-quarter-f247fa45

dispos.png



"U.S. economic growth surged this summer at the fastest pace since 2021, as consumers spent at a blockbuster rate that will
be difficult to sustain. Consumers keep driving GDP even as business investment lags.


"The pace of spending will ease in the coming months. Business investment also stalled. Meanwhile, rising long-term interest rates wars in Ukraine and the Middle East, and the possibility of a partial government shutdown could cause economic cracks to emerge


"So far the economy in 2023 has proved resilient, with forecasters’ projections for a slowdown going unrealized. Many economists now expect a cooling, instead of a recession
 

Icc5

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A few thoughts on this.

It looks like this is per individual and not per household. I would say if you were an individual between 65 and 74 with a decent SS check and $426 k you are probably doing ok if you are debt free. Lets take a walk back and see what affects these numbers.

401Ks and IRA's were passed by congress in the late 70's and corporations started to implement them in the early 80's. The first generation to fully participate in 401k s is just coming to retirement now. If you were participating in a comp[any 401k from day 1 and your were 21 years old in 1981 you would be 63 years old now. The amount you could contribute was also much lower than it is now so as years go on I expect account balances to grow.

Male vs Female participation rates. In income disparity between Males and Females was pretty wide. Some households have and had stay at home mothers. The gap has closed over the years but of those coming to retirement age You would probably see a large 401k for the spouse that worked the most. And a much lesser one for the stay at home person. Those are going to skew median numbers but less so in the coming years.

The older cohort of adults over 75. Of course they will have less in 401ks and IRAs. They did not exist when they started to work and they have to withdraw money due to RMDs. They may still have the money but it is not in the tax deferred accounts. Or maybe they spent it. They are more likely to have some defined pension plan than the younger group.

The effects of inherited IRA/401k accounts. The boomers coming of retirement age are starting to inherit the accounts of spouses and parents. This is a big factor as the money passes quickly after death as long as benifciaries are named. Keep those up to date on your accounts. It is a big factor in generational wealth.

The barbell spending effect of retirement. In general people spend a lot when the first retire then slow down then spend a lot on healthcare at the end. There was a pull forward into an already crowded baby boomer cohort due to the Covid epidemic. The number of recent retirees should slow down going forward, but for now there are a lot of younger retired people spending money on stuff while they can, if they can.

Yes there is a large population of people with no or little savings that drag these numbers down. It is a big issue for certain.
I think you you hit a home run in your assessment of what is happening and why the numbers show as they do. I'm 73 going on 74 and fit right into your explanation as does my 68 year old wife. I look at other family members both a little older and younger and with your explanation of funding fit right in.
Bart
 

DrQ

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Americans Can’t Stop Spending. Five Reasons Why.

A mix of job security, high savings and skepticism about the future are keeping U.S. consumers’ wallets open​

 

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Americans Can’t Stop Spending. Five Reasons Why.

A mix of job security, high savings and skepticism about the future are keeping U.S. consumers’ wallets open​



"Americans’ prolonged spending spree has confounded economists and resulted in a surging U.S. economy."
What is keeping their feet off the brakes?

"A strong labor market, resilient savings stockpiles and rising values of their homes have consumers feeling good and willing to spend. Despite complaints about high prices, they
are taking their children to concerts, packing movie theaters, booking luxury vacations, buying cars and covering the costs of rent and dinners out."
 

geist1223

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How much of this spending is on Credits Cards with their high Interest Rates? Sooner or later somebody is going to have to pay the Piper.
 
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PigsDad

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How much of this spending is on Credits Cards with their high Interest Rates? Sooner or later somebody is going to have to pay the Piper.
I know you have seen headlines read that consumer debt is at an "all-time high", but they don't take into account inflation -- if everything stayed exactly the same, we would always be at an "all-time high" in dollar amounts unless we had deflation, which has rarely happened.

In reality, we are at a relative low in historical terms of consumer debt as a percentage of disposable household income:

1698708534608.png


What is fueling the economy is that most households spent way less during the covid years while employment was still high, and now they have excess savings that they are spending (and employment is still high). People are generally feeling good with having jobs and excess savings, which is a good combination for consumer spending.

Kurt
 

Brett

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How much of this spending is on Credits Cards with their high Interest Rates? Sooner or later somebody is going to have to pay the Piper.

I know you have seen headlines read that consumer debt is at an "all-time high", but they don't take into account inflation -- if everything stayed exactly the same, we would always be at an "all-time high" in dollar amounts unless we had deflation, which has rarely happened.

In reality, we are at a relative low in historical terms of consumer debt as a percentage of disposable household income:



What is fueling the economy is that most households spent way less during the covid years while employment was still high, and now they have excess savings that they are spending (and employment is still high). People are generally feeling good with having jobs and excess savings, which is a good combination for consumer spending.

Kurt

I'll agree that spending, full employment and savings are "propping up" the economy
 

jorcus

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PigsDad said,

"What is fueling the economy is that most households spent way less during the covid years while employment was still high, and now they have excess savings that they are spending (and employment is still high). People are generally feeling good with having jobs and excess savings, which is a good combination for consumer spending."

I would add wage inflation to this. Between the struggle to obtain workers and big union contracts there are a lot of people making good money right now.
 

4TimeAway

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Its no fun to pay your bills. Just take out more loans, spend freely and don’t worry about it. If only we could print money. Sorry that skirts economics and politics… Whoops…

The commercial on the beach, sailing on your sailboat in perfect health with your spouse if you put in 2%-6% of your payroll is just marketing. Working until 70, renting a place to live and just getting by seems like the typical existence ahead for most.

I suppose we have only ourselves to blame, it not so hard to live below your means and invest the difference. When it comes to offspring, making sure they understand work, money and investing seems like the best way forward, but have you even heard a child want to learn from their parents?

I suspect middle income in expensive cities will do as poorer immigrants have don’t for generations… Live together in multigenerational homes. Those 30+ year olds living at home these days seem to lack motivation to earn money, especially if their parents have significant net worth.

The motivated youth, seem to be happening is people leaving expensive towns and settling in lower cost of living places where housing is 1/3 that what they were paying. This has shifted to lower- and lower-income people fed up with $2,000 a month converted garages or living with their parents.
 

rapmarks

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Its no fun to pay your bills. Just take out more loans, spend freely and don’t worry about it. If only we could print money. Sorry that skirts economics and politics… Whoops…

The commercial on the beach, sailing on your sailboat in perfect health with your spouse if you put in 2%-6% of your payroll is just marketing. Working until 70, renting a place to live and just getting by seems like the typical existence ahead for most.

I suppose we have only ourselves to blame, it not so hard to live below your means and invest the difference. When it comes to offspring, making sure they understand work, money and investing seems like the best way forward, but have you even heard a child want to learn from their parents?

I suspect middle income in expensive cities will do as poorer immigrants have don’t for generations… Live together in multigenerational homes. Those 30+ year olds living at home these days seem to lack motivation to earn money, especially if their parents have significant net worth.

The motivated youth, seem to be happening is people leaving expensive towns and settling in lower cost of living places where housing is 1/3 that what they were paying. This has shifted to lower- and lower-income people fed up with $2,000 a month converted garages or living with their parents.
Your remarks about past generations of immigrants really hit home.
Recently found Facebook page about my great grandparents who were living in Chicago in 1880’s, both sets. Saw census pages and marriage license, etc. I thought about how far their grandchildren and great grandchildren have come, mostly college educated, business owners. Doctors, lawyers, teachers. , they really knew how to save.
I understand my grandparents owned several rental properties but lost all but three in the depression. My grandfather died in his forties in 1941 . My grandmother was 43, she lived off his small pension, rent from two places, and my aunts help. She was very frugal, never got government assistance, would never consider that and of course would never consider dating either. She never held a job other that keeping the books for rentals.
I think that great grandparents had sons living with them even after they got married . Saving was very important.
 

4TimeAway

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It is shocking how little one "needs" in reality.

Madison Ave has destroyed our souls.

Can you imagine the freedom of simple living and beging content?
 

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It is shocking how little one "needs" in reality.

Madison Ave has destroyed our souls.

Can you imagine the freedom of simple living and beging content?

Not only can I imagine it, I am currently living it.

Here's the problem: If everyone lived like my wife and I, the economy would utterly collapse. Unemployment would be higher than 50% -- because nobody would buy Glade plug-ins, Hot Pockets, or participate in the "Lexus December to Remember." They wouldn't ask their doctor if "Dumboplax" is right for them. (I swear they're just pulling letters from a Scrabble game these days.) There would be no state lottery. Celebrity gossip magazines would fold en masse. Most of the entertainment industry (including the evening news) would have to switch to something useful -- like mopping floors.

Entire industries would evaporate. And what little remained would be forced to downsize as people consistently chose the non-plastic-wrapped, not-brightly-colored, not-full-of-high-fructose-corn-syrup options.

I suspect that for every person living like my wife and I, 100 must live the "American dream, keeping up with the Jones', consumer debt slavery" life in order to keep the economic carousel spinning. It's not lost on us that we get to enjoy the most robust distribution network in human history -- without actually paying for it. I'm surprised that no law has been passed to discourage people from saving, and reward spending. Levy fines for keeping a budget, and similar.
 

4TimeAway

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We enjoy cooking and simple things, but our lifestyle is not inexpensive or limited.

We do look forward to having less stuff own us and we have started to work on selling assets (time bandits and more accurately called liabilities).

In my mind, we're using timeshares to allow us to not buy more homes, cars and all the crap that comes along with it.

RV’ing is the other idea we have, but we already "own" a trailer and truck.


WHY are things so easy to buy and so hdanm hard to get rid of, let alone sell?
 

Sugarcubesea

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Mine, too, but when the income stops, the fear of outliving one's savings takes front and center, and any middle class senior with any sense sooner or later realizes this ... and joins the "Happy Hour Special" crowd when dining out, among other cost-saving measures.

My brother-in-law, who recently passed away, was burning through $10,000/month in an assisted care facility for the past 3 years. That scares the .... out of me, even more so when factoring in inflation over the next 10 years before I may be in that situation.

Maybe I am just spending too responsibly.
My mother in law really needs to go to an assisted care facility, but because her doctor wrote down all of the care she needs 24/7, all of the assisted care facility's told the family the cost would be between $11K and 18K per month. At 94 she does not have that much money left to spend a few years in a assisted care facility. So for the last 3 years, her children ages; 68 to 78 are taking care of her at her condo with a nurse coming in 5 days a week at a cost of $2,500 a month
 

dago

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My mother in law really needs to go to an assisted care facility, but because her doctor wrote down all of the care she needs 24/7, all of the assisted care facility's told the family the cost would be between $11K and 18K per month. At 94 she does not have that much money left to spend a few years in a assisted care facility. So for the last 3 years, her children ages; 68 to 78 are taking care of her at her condo with a nurse coming in 5 days a week at a cost of $2,500 a month
Yikes, I guess I can consider myself fortunate. My wife (75 YO) is in a Memory Care facility at $257 a day. A lot less than 11K a month.
 
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