How much should you save for retirement ?

[bogey21]

The better way might be for a minimum tax based upon revenue.

I'm OK with that. The reason I chose Reported Earnings as opposed to Taxable Earnings is that it is a number that Management wants to maximize because (1) it is reported to Shareholders and (2) often Management's bonuses are based on it. The benefit of using revenue is that the percentage would (should?) be a very low number...

George

 

[bluehende]

I get that they need to make money but they do whatever it takes to do so. Many people I know that worked for bid companies had their jobs eliminated as they aged into their 50's. It's pretty common.

I worked for a major company and was officially laid off at 51. I volunteered as my mother was sick and my brother and I were trying to give 24/7 care from 2 hrs away. The severance of 1 yr and being able to collect a reduced pension made it possible. Most of the others from that layoff and the 3 we had in the years before were the older crowd ( I will add all the deciders were of that age also). Our group was a barbell with half being older and half being younger due to product dynamics over the decades. A few of the younger crowd were useless. They got laid off and the rest always came from the older crowd. We always heard this was to save money due to pension reasons and health care reasons. The company was self insured.
This conversation always fascinates me. I retired with about 6 fold my income away. That was in 2007. Yep it quickly became 3 fold. 6x is a little low by my calculation for 51 but doable with our lifestyle. No mortgage and not big spenders. Luckily we did not ignore other rules of thumb. We had 5 yrs of cash on hand. We waited it out and even put more into the market as we could. The thought was if the market continued down I was screwed so why not go all in. With the market going up around 6 fold we are quite comfortable now.

Now if we could only get back to those 5% money markets with out crashing the market......good luck with that.

 

[HitchHiker71]

That is horrible. Many companies simply want to replace higher salaries with lower ones.

Yes, what most companies do is lay off the older folks - giving them some kind of minimum exit package - and then relabel the rehire position with a different title with different responsibilities, at least on paper, to avoid the regs, and hire in someone else at 50% of the salary of the older person that they laid off. My current firm also does not perform annual reviews any longer, and does not give out cost of living increases any longer, only merit increases tied to promotion and/or performance at the sole discretion of the manager/director. This is a great way to keep costs under control for sure.

 

[stmartinfan]

We've been careful savers and both have corporate pensions plus maximum SS (delayed collecting until 70). We can live a comfortable life without needing to spend down our savings much. But one of our two daughters has a disability which will never allow her to work enough to make a real income and her SS disability payments will barely cover rent when she moves out of our house. We planned ahead by buying a long term care policy to help protect our inheritance for her, but are now facing a hugh premium increase and threats of increases to come. (The long term care companies are in big trouble and clearly trying to ditch enrollees.). With our savings we can cover extended care without the insurance but that means we're gambling with her future. It's a tough decision to make.

 

[am1]

When it comes down to it what is wrong with laying off the higher paid and they only a few years left to work (usefulness) to the company? Other then for the individual being laid off.

 

[Conan]

In October I pulled a lot of money from the market, later today, I will be speaking with financial advisor about reinvestment. Don’t need income. Bond rates too low and won’t buy into bond fund.
I know I lost on a lot of growth over past six months, but what do I do now

I’ve accepted the popular wisdom and limit my buying and selling to whatever it takes to stay within a half percent of domestic equity 51% and non-US equity 12%. The remaining 37% is supposed to be 32% bonds and 5% cash but I lost my nerve and got stuck at 25% bonds and 12% cash.

My biggest concentrations are in low-fee Fidelity FSKAX and FSMAX domestic, Vanguard VFIAX domestic, Vanguard VWILX international, and Vanguard VWENX balanced.

Frankly I would have done better putting 99% into VWENX which charges a .16% annual fee (16 cents per $1,000) and currently allocates 57% US equity, 9% non-US equity, 30% fixed income, and 4% cash. Its total annual returns through April 8, 2021 are 8.72% in 15 years, 10.08% in 10 years, 11.75% in 5 years, and 6.09% year-to-date.

VWENX's worst year this century was 2008 (-22.3%) which it recovered in 2009 (+22.2%) and 2010 (+10.9%).
My allocation did a little better in 2008 (-17.3%) but I didn't recover as well in 2009 (+13.5%) and did about the same (+11.2%) as VWENX in 2010.

I’ll add the Morningstar links to VWENX’s portfolio and past performance.

VWENX – Portfolio – Vanguard Wellington™ Admiral™ | Morningstar

VWENX Portfolio - Learn more about the Vanguard Wellington™ Admiral™ investment portfolio including asset allocation, stock style, stock holdings and more.

www.morningstar.com

VWENX – Performance – Vanguard Wellington™ Admiral™ | Morningstar

VWENX Performance - Review the performance history of the Vanguard Wellington™ Admiral™ fund to see it's current status, yearly returns, and dividend history.

www.morningstar.com

 

[easyrider]

When it comes down to it what is wrong with laying off the higher paid and they only a few years left to work (usefulness) to the company? Other then for the individual being laid off.

Nothing if it voluntary. Everything if its not voluntary.

When you say "few years" to me that means about 3 years. When a person is let go in their 50's it is probably closer to 10 years than 3 years regarding a time to exit to retirement. Usually this type of job elimination happens in times of economic downturn which compounds the financial stress of the older person whose job has been eliminated.

The best income years are used to calculate SS benefits. When those years are eliminated the SS benefit usually decreases.

Bill

 

[am1]

Nothing if it voluntary. Everything if its not voluntary.

When you say "few years" to me that means about 3 years. When a person is let go in their 50's it is probably closer to 10 years than 3 years regarding a time to exit to retirement. Usually this type of job elimination happens in times of economic downturn which compounds the financial stress of the older person whose job has been eliminated.

The best income years are used to calculate SS benefits. When those years are eliminated the SS benefit usually decreases.

Bill

But if a company is in an economic downturn then they should do all they can to stay afloat. Voluntary or not. Governments may not like it as then someone else (possibly them) has to support the older worker going forward. 3 years or 10 years makes no difference compared to someone who still may be around in 20-25 years.

 

[PigsDad]

In October I pulled a lot of money from the market, later today, I will be speaking with financial advisor about reinvestment. Don’t need income. Bond rates too low and won’t buy into bond fund.
I know I lost on a lot of growth over past six months, but what do I do now

I would first talk to your financial advisor about the reasons you exited the market in October in the first place. Was it because you thought the market had topped out (market timing), or because you were getting nervous about your exposure (risk level), or because you needed the cash (investment mix), etc. That would help them determine what your goals are going forward with your investments and build a plan that you can feel comfortable with and not feel the need to pull the plug on it on a whim. Just my thoughts.

Kurt

 

[easyrider]

But if a company is in an economic downturn then they should do all they can to stay afloat. Voluntary or not. Governments may not like it as then someone else (possibly them) has to support the older worker going forward. 3 years or 10 years makes no difference compared to someone who still may be around in 20-25 years.

I'm certain those affected will not agree with you on this. I know I don't.

Bill

 

[Conan]

[Someone] has to support the older worker....

In the U.S. we call it socialism for the rich and free enterprise for the poor.

Socialism for the rich and capitalism for the poor - Wikipedia

en.wikipedia.org

.

 

[SmithOp]

Yes, what most companies do is lay off the older folks - giving them some kind of minimum exit package - and then relabel the rehire position with a different title with different responsibilities, at least on paper, to avoid the regs, and hire in someone else at 50% of the salary of the older person that they laid off. My current firm also does not perform annual reviews any longer, and does not give out cost of living increases any longer, only merit increases tied to promotion and/or performance at the sole discretion of the manager/director. This is a great way to keep costs under control for sure.

I was lucky, I made it to 57-1/2 before the axe came down. My exit package included 6 months salary. I was planning on retiring at 58 anyway, so I wasn’t too broken up about being replaced with an H-1B Visa hire from India.

 

[am1]

I'm certain those affected will not agree with you on this. I know I don't.

Bill

Obviously them aside as I mentioned earlier. But the big picture it is what is best for the company, young employees and the economy.

 

[joestein]

Yes, what most companies do is lay off the older folks - giving them some kind of minimum exit package - and then relabel the rehire position with a different title with different responsibilities, at least on paper, to avoid the regs, and hire in someone else at 50% of the salary of the older person that they laid off. My current firm also does not perform annual reviews any longer, and does not give out cost of living increases any longer, only merit increases tied to promotion and/or performance at the sole discretion of the manager/director. This is a great way to keep costs under control for sure.

My firm always gave out cost of living increases. This past year, they were greatly reduced. Somehow, I see this as the new normal.

 

[klpca]

I was lucky, I made it to 57-1/2 before the axe came down. My exit package included 6 months salary. I was planning on retiring at 58 anyway, so I wasn’t too broken up about being replaced with an H-1B Visa hire from India.

Exactly this. It's just ridiculous.

 

[MrockStar]

I know that being 61 and having 39 years of Maint/military experience in Electronics/customer support, I am at the top of my game and a huge asset to my company and the customers we support. Also we are experiencing a huge brain drain with all the current retirements. So this my not be the case with all businesses, but i support and defend all older workers as long as they bring valuable skills and value to the company.

 

[CalGalTraveler]

What will exacerbate the age trend will be when corps start to lay off younger white collar workers in entry and mid-level jobs. AI and RPA (Robotic Process Automation) will take away jobs. The next 10 - 20 years will look very different as these technologies are adopted.

The Robots Are Coming for Phil in Accounting (Published 2021)

Workers with college degrees and specialized training once felt relatively safe from automation. They aren’t.

www.nytimes.com

 

[Brett]

What will exacerbate the age trend will be when corps start to lay off younger white collar workers in entry and mid-level jobs. AI and RPA (Robotic Process Automation) will take away jobs. The next 10 - 20 years will look very different as these technologies are adopted.

The Robots Are Coming for Phil in Accounting (Published 2021)

Workers with college degrees and specialized training once felt relatively safe from automation. They aren’t.

www.nytimes.com

I read that article, - white collar automation has been around for decades, it's now accelerating.
In banking and finance positions were eliminated by automated processes and the ability to perform online transactions.
I'm glad I got out years ago


.

 

[Goldi]

What will exacerbate the age trend will be when corps start to lay off younger white collar workers in entry and mid-level jobs. AI and RPA (Robotic Process Automation) will take away jobs. The next 10 - 20 years will look very different as these technologies are adopted.

The Robots Are Coming for Phil in Accounting (Published 2021)

Workers with college degrees and specialized training once felt relatively safe from automation. They aren’t.

www.nytimes.com

Yep this is happening at Big Pharma where I worked. First they shipped 115 accounting jobs to the Ireland affiliate and all US 115 financial employees had to either quit, retire or find another job within the company. Big Pharma accounting employees in Ireland will loose their jobs once the robotic accounting automation project is completed.
I was fortune because at the same time my job was moved to the Ireland affiliate, the company offered an early retirement package. I jumped on that offer. I have no regrets and feel very fortunate.

 

[Conan]

Excerpt from Thursday's NY Times
----------
Investing Made Simple for Beginners and Everyone Else

"I know you may not believe me, but managing your money can be simple.”

That’s the way I began the conversation I had with each of my children when they got their first real jobs and had questions about retirement plans and how they were going to prepare for their financial futures.

Boiled down, it amounted to this:

Start with the essentials. Make sure you have three to six months of living expenses saved in case of an emergency, as well as the best insurance you can afford for your health and important possessions. Only then should you turn to investing.

Because stocks have outperformed bonds, cash equivalents (like certificates of deposit) and real estate over the long term, equities are where you want to have most of your money while you are young.

What percentage of your assets should be in stocks? Well, years ago, a common rule of thumb was: Subtract your age from 100 and that will give you the right number. So 30-year-olds were told to have 70 percent of their money in stocks. That figure was fairly conservative, and eventually some experts began saying subtract your age from 110, which would have made the number 80 percent in stocks at age 30.

But people are living longer, and I think that 110 figure is still low. So my suggestion is to subtract your age from 120, which means if you are 30 now, 90 percent of your money should be in stocks.

Which stocks? To keep things simple, don’t even ask that question: Only invest in index funds....
----------
Link to entire article (Paywall)

Investing Made Simple for Beginners and Everyone Else (Published 2021)

Managing your money for the long run can be easier than you might imagine.

www.nytimes.com

 

[PigsDad]

What percentage of your assets should be in stocks? Well, years ago, a common rule of thumb was: Subtract your age from 100 and that will give you the right number. So 30-year-olds were told to have 70 percent of their money in stocks. That figure was fairly conservative, and eventually some experts began saying subtract your age from 110, which would have made the number 80 percent in stocks at age 30.

But people are living longer, and I think that 110 figure is still low. So my suggestion is to subtract your age from 120, which means if you are 30 now, 90 percent of your money should be in stocks.

Just my opinion, but I don't like the "subtract your age" formulas when talking about retirement investment mixes. Given that one will not be touching retirements funds until they are retired, and given the historical fact that equity investments have outperformed bonds in any 10 (or is it 15?) year period, why would one need to start adding bonds to one's investment mix to reduce risk until they are 10-15 years away from retirement?

Personally, our retirement assets were 100% equities until we were about 53, and that is a huge reason why we are way ahead of the game in our retirement numbers. We probably should have started shifting our mix a bit earlier than that, and I admit we got a bit lucky waiting, but I never saw a need to be so heavily invested in bonds as these common rule of thumb formulas suggested when we were in our 20's, 30's or 40's. I wanted as much of my retirement money invested in the highest growth possible (without trying to time the market, which I firmly believe is a fool's game in the long run).

Anyone agree with me, or was I completely foolish and just lucky?

Kurt

 

[Brett]

Just my opinion, but I don't like the "subtract your age" formulas when talking about retirement investment mixes. Given that one will not be touching retirements funds until they are retired, and given the historical fact that equity investments have outperformed bonds in any 10 (or is t 15?) year period, why would one need to start adding bonds to one's investment mix to reduce risk until they are 10-15 years away from retirement?

Personally, our retirement assets were 100% equities until we were about 53, and that is a huge reason why we are way ahead of the game in our retirement numbers. We probably should have started shifting our mix a bit earlier than that, and I admit we got a bit lucky waiting, but I never saw a need to be so heavily invested in bonds as these common rule of thumb formulas gave when we were in our 20's, 30's or 40's. I wanted as much of my retirement money invested in the highest growth possible (without trying to time the market, which I firmly believe is a fool's game in the long run).

Anyone agree with me, or was I completely foolish?

Kurt

I agree with you
I was 80% - 90% in equities until retirement then each year switched some tax deferred equity investments to bonds and CDs
I also switched some taxable mutual funds to short term bond funds

 

[Conan]

Anyone agree with me, or was I completely foolish and just lucky?

Kurt

Not foolish, but you did have some good luck.

A person who was 100% in an S&P 500 portfolio lost 40 to 50% of their savings in 2008.
Yes, if they held on for 2009-2010 they broke even for the three years 2008-2009-2010.

After which they had zero return for 2011, assuming they held on for the 2-day 10% drop of August 4-5, 2011.

If you were in the market in 2008, did you buy, sell, or hold?
How about in 2011?

Anyway, that NY Times article per the rule of 120 allows 100% stock at age 20, 90% at age 30, and 80% at age 40.

 

[PigsDad]

Not foolish, but you did have some good luck.

A person who was 100% in an S&P 500 portfolio lost 40 to 50% of their savings in 2008.
Yes, if they held on for 2009-2010 they broke even for the three years 2008-2009-2010.
If you were in the market in 2008, did you buy, sell, or hold?

So I was 100% in the market (and continuing to contribute to retirement funds) in 2008 and for the following 11 years (when I turned 53), then I started to shift some to more conservative investments. The equities market out-performed the bond market in the 10-year period including the 2008 crash, which just strengthens my point of questioning the need to have bonds in one's mix if you are not close to retirement.

Kurt

 

[amycurl]

Poverty is not a character flaw; it's a structural aspect of capitalism.

I appreciate those of you who have been (gently) trying to point this out in this thread.