Retirement Advice From Those Who Learned the Hard Way

[am1]

Maybe I don't understand this chart, but it seems that wages have stayed constant with prices. So, if wages went up 11X (if I read the chart correctly) then anything that went up less than 11X should be a relative deal while things that increased more 11X are harder to afford.

Average house in 1964 - $18,900
Average house in 2018 - $326,400 (17X) - certainly less affordable

However, I am sure that the vast majority of homeowners in 1964 were single earners. So, if you have a dual earner (which many families have today) - does that change the equation? I never would have bought my first home in 2001 if it was only my salary.

A lot more "needs" now. A lot easier to spend excess money now. New iphone every year, avocodo toast, cucumber water, food apps, multiple cars, pricey concert and sporting event tickets etc.

 

[joestein]

A lot more "needs" now. A lot easier to spend excess money now. New iphone every year, avocodo toast, cucumber water, food apps, multiple cars, pricey concert and sporting event tickets etc.

Absolutely.... life was much more bare bones in the 70s. I was just chatting with my wife's cousin's husband about a restaurant we have gone to since we were kids. I mentioned that I used to wander into the kitchen and talk to the cooks to entertain myself when waiting for a table. He said he did the same thing. Today every kid has a phone or tablet to entertain themselves. Wandering into the kitchen would be almost unimaginable.

The point being that we got by with much less. We entertained ourselves.

 

[joestein]

No, I ask those kids if they'd like any dirt on the annoying relative in their life. Because I have plenty and am willing to share.

"Go ask Uncle Annoyance about the time he got hair plugs, a Member's Only jacket, a gold razor-blade on a chain, a brand new Camaro, and then divorced his wife and ran off with the babysitter."

Uncle Annoyance was always a royal pain. Just because the only thing we said at the time was "yeah, whatever," doesn't mean we weren't paying attention.

That is a bit too specific.

 

[joestein]

Planning for retirement, when you are just starting out.

Use capital to minimize cashflow needs - as a plan and a habit.

Learn to cook - and do it! You may cook in a larger quantity and freeze the excess. Not enough time? Buy a crockpot and learn to use it. There are many other time savers.

Little bills add up. Minimize those little bills.

Get a education in a subject with clear and obvious economic value. Don't follow your heart - follow your wallet.

There are many free things in life. Find them out and enjoy them.

Learn to bargain hunt. Bargains are not cheap things, per se, They are things of value that for temporary reasons, are out of favor. This also holds true for investments. Recessions and bear markets are great times to buy core holdings.

Ignore the Jones. You'll pass them in middle age and have a better second half of life.

AND REMEMBER THIS - Money today is a fiat currency. Inflation will always occur to a greater or lesser extent. Don't take my word for it, read the historical charts.

Wish I followed your first line. Took me 15 years to really start.

 

[HitchHiker71]

Wish I followed your first line. Took me 15 years to really start.

I went to school for finance and economics. I learned early on about the power of compound interest. Assuming a 10% return - if someone starts saving 10k per year at age 25 and stops at age 35 - saving 100k total - and another person starts saving 10k for the rest of their life - assuming a 10% annual return (which is a bit optimistic these days), the latter will never catch the former. That is the power of compound interest over time. I therefore promised myself I would save 100k between the ages of 25 and 35 - which I did. It wasn't necessarily a straight 10k per year - that was pretty tough at age 25 honestly - but we came close at least.

 

[ScoopKona]

I went to school for finance and economics. I learned early on about the power of compound interest. Assuming a 10% return - if someone starts saving 10k per year at age 25 and stops at age 35 - saving 100k total - and another person starts saving 10k for the rest of their life - assuming a 10% annual return (which is a bit optimistic these days), the latter will never catch the former. That is the power of compound interest over time. I therefore promised myself I would save 100k between the ages of 25 and 35 - which I did. It wasn't necessarily a straight 10k per year - that was pretty tough at age 25 honestly - but we came close at least.

This is the way.

I knew this, too. But spent that time backpacking around the world and living in Key West. So I had to do it the hard way. If I was lucky enough relive my youth, I still would have backpacked -- and even longer this time. Five full years around the globe. Hit the Century Club before the age of 30. But stay in Key West for a couple of years and then move to someplace with a low cost of living and high wages so I could work my real estate scheme 10 years earlier.

 

[b2bailey]

A lot more "needs" now. A lot easier to spend excess money now. New iphone every year, avocodo toast, cucumber water, food apps, multiple cars, pricey concert and sporting event tickets etc.

I have to laugh at my granddaughter and pity her husband. In her budget, pedicures and "waxing" are essential items.

 

[Ralph Sir Edward]

Wish I followed your first line. Took me 15 years to really start.

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.

 

[PigsDad]

Maybe I don't understand this chart, but it seems that wages have stayed constant with prices. So, if wages went up 11X (if I read the chart correctly) then anything that went up less than 11X should be a relative deal while things that increased more 11X are harder to afford.

Average house in 1964 - $18,900
Average house in 2018 - $326,400 (17X) - certainly less affordable

However, I am sure that the vast majority of homeowners in 1964 were single earners. So, if you have a dual earner (which many families have today) - does that change the equation? I never would have bought my first home in 2001 if it was only my salary.

Also take into account that the average house size has more than doubled since 1960. You really can't make an apples to apples comparison and declare that people in 1962 had it way better than people today (even though a certain person on this board loves to do so).

Kurt

 

[HitchHiker71]

Also take into account that the average house size has more than doubled since 1960. You really can't make an apples to apples comparison and declare that people in 1962 had it way better than people today (even though a certain person on this board loves to do so).

Kurt

Even if we assume the average home size has doubled, that doesn't justify a 17x increase in price since 1964 as indicated when compared to the stagnant wage inflation issue. Not even anywhere remotely close in reality.

 

[jp10558]

A guy I worked with bought new cars every couple of years. He liked the new car smell. I lamented with another like minded coworker, wishing I could trade my 10 year old car in for a new one. He stopped me and said, “ask him how much he puts away into deferred compensation.” I knew the answer already …. Nothing.

I used to buy a new car every 3 years. I also put money into my 401k. This was because I've seen family members have all sorts of unexpected expenses and just not have a vehicle when they needed it buying 10 year old cars. I didn't want to randomly miss work, potentially for a while while finding a replacement used car. Also, I was spending probably 1.5 hours a day in my car, which was a lot of my awake time not working. Why would I want to be uncomfortable for that time dealing with noises, AC being broken (this is better now, but man for a long time a used car meant no AC), bad shocks etc?

Now, with WFH (well work from anywhere) I have kept my current car over 5 years and have no plan to trade it in. Because now I don't actually have to go anywhere every day, and if I do need to go in, it's not a fixed day or time. So why not keep a car till it breaks? I'm in it very little in comparison, so even if it starts wearing out - it's more like the tiny plane seat I'm in for a few hours every year or 5 when I fly for vacation.

I agree that having a beater is cheaper - but it's still not all that reliable (IDK, through the 2012 era cars, they might be better now, hard to know the future). Or maybe we're just repeatedly unlucky. That said, I live out in the boonies where some things are cheaper (like land taxes).

I do find it interesting the number of people on a timeshare forum saying scrimp and save and never have any experiences to retire with lots of money and do all the fun stuff then. I'll tell you what I saw in my family - once you're 70, it's pretty hard to travel. It's a struggle that it just wasn't when you were 30 or even in your 40s.

 

[jp10558]

One of the worst timeshare tours I ever had was a older couple. The wife desperately wanted to travel. The husband's only interest in life was maintaining his lawn. I think half the neighborhoods in North America have some version of this man. He was the most stultifyingly dull person I have ever encountered. Money was on autopilot. They didn't have a care or a responsibility in the world. And he was going to mow his law and care for his lawn -- and not his wife -- until he dropped dead.

That isn't a marriage. It's a prison sentence.

I don't understand how people that different end up married, and if they changed over the years why they stay married.

 

[ScoopKona]

I don't understand how people that different end up married, and if they changed over the years why they stay married.

Intellectual incuriousity. They stop learning. And start dying.

 

[sue1947]

I do find it interesting the number of people on a timeshare forum saying scrimp and save and never have any experiences to retire with lots of money and do all the fun stuff then.

I don't think we (or at least I) are saying to "never have any experiences". We are saying, spend money on what is important. Be mindful about it. You can have plenty of experiences in a thrifty way. I camped or cooked in my motel room or packed a lunch for a picnic etc. Hiking with friends and carpooling to the trailhead doesn't cost much money vs a night out at a restaurant or bar and I enjoyed it a whole lot more. The cost of a theme park? just not worth it for me. I can take that money and spin it into multiple additional days exploring a beach or park some place new. Bottom line: I learned early or maybe just prefer to entertain myself. Paying to participate in something was the exception vs the rule. I can research an area to find things of interest, or hook up with a local Audubon club to join them on field trips. They then point me to other places to explore etc.
For me, as a planner (and I think most successful timeshare folks are planners), I enjoy the research almost as much as the destination. Using timeshares to avoid the expenses of meals as well as the options to get some great bargains has been a real benefit. In most of my longer road trips, the most expensive nights have been the few motel stays. If I was still using motels, I wouldn't be able to afford to travel as much, or be limited to closer locations.

 

[Ralph Sir Edward]

I used to buy a new car every 3 years. I also put money into my 401k. This was because I've seen family members have all sorts of unexpected expenses and just not have a vehicle when they needed it buying 10 year old cars. I didn't want to randomly miss work, potentially for a while while finding a replacement used car. Also, I was spending probably 1.5 hours a day in my car, which was a lot of my awake time not working. Why would I want to be uncomfortable for that time dealing with noises, AC being broken (this is better now, but man for a long time a used car meant no AC), bad shocks etc?

Now, with WFH (well work from anywhere) I have kept my current car over 5 years and have no plan to trade it in. Because now I don't actually have to go anywhere every day, and if I do need to go in, it's not a fixed day or time. So why not keep a car till it breaks? I'm in it very little in comparison, so even if it starts wearing out - it's more like the tiny plane seat I'm in for a few hours every year or 5 when I fly for vacation.

I agree that having a beater is cheaper - but it's still not all that reliable (IDK, through the 2012 era cars, they might be better now, hard to know the future). Or maybe we're just repeatedly unlucky. That said, I live out in the boonies where some things are cheaper (like land taxes).

I do find it interesting the number of people on a timeshare forum saying scrimp and save and never have any experiences to retire with lots of money and do all the fun stuff then. I'll tell you what I saw in my family - once you're 70, it's pretty hard to travel. It's a struggle that it just wasn't when you were 30 or even in your 40s.

On the other hand, having to have to have a job in your 70s is a real struggle too.

Different people have different ideas of fun. Not all of it costs money, but some does. From where I live, I can do the following rock and gem stuff: Pan for gold, hunt for semi-precious gem stones, fossil hunt for any age from the Cambrian to the Tertiary. I can go to the American Rose Society National Garden. I can explore caves. There are lakes and rivers to enjoy. Tropical plant societies, and all sorts of other horticultural societies. All in a 300 mile radius from my house. Some free, some for modest cost. Or watch raptors from my backyard. Lots of shrikes this time of year.

 

[joestein]

Even if we assume the average home size has doubled, that doesn't justify a 17x increase in price since 1964 as indicated when compared to the stagnant wage inflation issue. Not even anywhere remotely close in reality.

Actually - wages went up 11X, so houses went up an additional 6X or 54%.

Wages were not stagnant, REAL wages were stagnant - but that should already take inflation into account. Of course, houses are an example of something that went higher.

 

[geist1223]

Two decisions I made early that have had very positive effects:
1. Stay with the Military for Active Duty and Reserves. This has provided some retirement income. And the Tricare for Life Medical Insurance is great.
2. When I became an attorney I chose not to go into Private Practice. I chose to be a Government lawyer - JAG Corps, District Attoneys Office, and working for State Workers' Compensation Fund as an inhouse Trial Counsel. While most (but not all) of my classmates that went into Private Practice made more than I did each year they for a variety of reasons are still working. I am 69 and I retired at 58.75. In the long run I am more financially secure.

 

[ScoopKona]

2. When I became an attorney I chose not to go into Private Practice. I chose to be a Government lawyer - JAG Corps, District Attoneys Office, and working for State Workers' Compensation Fund as an inhouse Trial Counsel. While most (but not all) of my classmates that went into Private Practice made more than I did each year they for a variety of reasons are still working. I am 69 and I retired at 58.75. In the long run I am more financially secure.

My favorite economics professor, for the last class of the year, which almost nobody attended did "how to become a millionaire, guaranteed -- 10 examples."
This was example #1 -- military, stay in for 20, government, stay in for 10-20, two pensions, loads of benefits, probably a few million in easily liquidated funds for the fun stuff.

 

[1Melanie]

I used to buy a new car every 3 years. I also put money into my 401k. This was because I've seen family members have all sorts of unexpected expenses and just not have a vehicle when they needed it buying 10 year old cars. I didn't want to randomly miss work, potentially for a while while finding a replacement used car. Also, I was spending probably 1.5 hours a day in my car, which was a lot of my awake time not working. Why would I want to be uncomfortable for that time dealing with noises, AC being broken (this is better now, but man for a long time a used car meant no AC), bad shocks etc?

Now, with WFH (well work from anywhere) I have kept my current car over 5 years and have no plan to trade it in. Because now I don't actually have to go anywhere every day, and if I do need to go in, it's not a fixed day or time. So why not keep a car till it breaks? I'm in it very little in comparison, so even if it starts wearing out - it's more like the tiny plane seat I'm in for a few hours every year or 5 when I fly for vacation.

I agree that having a beater is cheaper - but it's still not all that reliable (IDK, through the 2012 era cars, they might be better now, hard to know the future). Or maybe we're just repeatedly unlucky. That said, I live out in the boonies where some things are cheaper (like land taxes).

I do find it interesting the number of people on a timeshare forum saying scrimp and save and never have any experiences to retire with lots of money and do all the fun stuff then. I'll tell you what I saw in my family - once you're 70, it's pretty hard to travel. It's a struggle that it just wasn't when you were 30 or even in your 40s.

Cutlass supreme was bought new and was well cared for until we gave it away after our son cut his teeth on it as a new driver. We also kept a newer model for long distance drives. (My husband loved tinkering with it because you could with those cars, not so much anymore.) The only thing wrong with it was it wasn’t “new.” I guess it was a style thing. You know how women can be. Fortunately, I could walk to work if I had to unless it was snowing which was rare. We started timesharing and traveling in our 30s at least 3-4 times a year. (I had generous vacation benefits. My husband was self employed. Our rental business was/is managed by a property manager.) We weren’t denying ourselves anything. We don’t have an extravagant lifestyle but are very comfortable. Suze Orman is my hero. She always says “pay yourself first.” I embraced that idea. Before timeshare we traveled on packages. Now that we are retired, we do the snowbird thing and do a tour or a cruise once or twice a year often combined with timesharing. Our son was 4 when we started timesharing. Most of our vacations were places he wanted to go, now it’s all about us. I believe most who own timeshare are all about creating memories for our kids and loved ones.

 

[1Melanie]

1st rule in investing - always pay yourself first! Except for a period in our 30's when we were at the heights of paying for private school for our kids and had maximum child rearing expenses and were living predominantly on a single income - we have always maxxed out our voluntary retirement savings plans every year. We continue to do so today. This year the maximum with the catch-up contributions (since we are over age 50) is 30k per plan (22.5k max plus 7.5k catchup) - for a total of 60k into our 401k plans. We do have one consolidated mortgage debt on one of our three rental properties - and one car payment at this time - but other than that - we have no debt to speak of at present. Our home is paid in full - and we have an active HELOC against our home for 350k so that if we want to invest in anything (like more rental properties for example - or other major home improvements) we can do so at any time. We are in our early 50's right now and I don't anticipate retirement as an option until age 65 at present, all things being equal, which they rarely are over time.

On the subject of macro retirement savings, I am somewhat shocked at the number of people who don't invest into their voluntary retirement plans at all - especially those in the BB generation that don't have anywhere near enough savings to survive in retirement in reality.

New Data Reveal Inequality in Retirement Account Ownership

The Survey of Income and Program Participation shows how many people are saving for retirement.

www.census.gov

View attachment 79033

Two decisions I made early that have had very positive effects:
1. Stay with the Military for Active Duty and Reserves. This has provided some retirement income. And the Tricare for Life Medical Insurance is great.
2. When I became an attorney I chose not to go into Private Practice. I chose to be a Government lawyer - JAG Corps, District Attoneys Office, and working for State Workers' Compensation Fund as an inhouse Trial Counsel. While most (but not all) of my classmates that went into Private Practice made more than I did each year they for a variety of reasons are still working. I am 69 and I retired at 58.75. In the long run I am more financially secure.

I retired from State Government after 30 years. Biggest expense was medical but I had so much sick leave I had a healthy VEBA that paid my medical until I was Medicare eligible. We have several attorneys in Child Support, many who preferred a regular paycheck vs depending on self employment. Government work isn’t glamorous but honest and at times rewarding. It’s not how much you earn but what you do with what you earn that matters.

 

[bizaro86]

I do find it interesting the number of people on a timeshare forum saying scrimp and save and never have any experiences to retire with lots of money and do all the fun stuff then. I'll tell you what I saw in my family - once you're 70, it's pretty hard to travel. It's a struggle that it just wasn't when you were 30 or even in your 40s.

I have timeshares so I can afford to have the travel experiences I want with my kids while we/they are young, and still save/invest for the future.

 

[CalGalTraveler]

A guy I worked with bought new cars every couple of years. He liked the new car smell. I lamented with another like minded coworker, wishing I could trade my 10 year old car in for a new one. He stopped me and said, “ask him how much he puts away into deferred compensation.” I knew the answer already …. Nothing.

Little bills add up. Minimize those little bills.

Completely agree. Running ICE cars into the ground has been our MO. We still have a 2004 and 2006 BMW. Prior to that we had a Honda Accord that we held for 20 years. Also going for cheaper gas.

EVs may change this equation. We figure we will need to lease for several years to get the tax and commuter benefits of the foreign EV e.g. an Audi. We will dispose before the battery dies therefore leasing is also better.

 

[PcflEZFlng]

Completely agree. Running ICE cars into the ground has been our MO. We still have a 2004 and 2006 BMW. Prior to that we had a Honda Accord that we held for 20 years. Also going for cheaper gas.

EVs may change this equation. We figure we will need to lease for several years to get the tax and commuter benefits of the foreign EV e.g. an Audi. We will dispose before the battery dies therefore leasing is also better.

Same MO for me, but I'm very near the tipping point for an EV. I'm still driving a 2007 Hyundai Sonata that I got a great deal on when it was only 6 months old with 13K miles on it. I commuted in it for 10 years and since then have been driving it as much as possible during retirement, while sparing our newer 2015 Honda Accord from some of the wear-and-tear. Even that car is now 8 years old (54K miles on it, and still drives like new). However, the Hyundai's AC no longer works, and I'm not willing to spend the $$ to fix a 16-yo car. I've been eyeing EVs for awhile now but holding off until the ranges got better. Now they're at the point where I may finally pull the trigger.

 

[DrQ]

Completely agree. Running ICE cars into the ground has been our MO. We still have a 2004 and 2006 BMW. Prior to that we had a Honda Accord that we held for 20 years. Also going for cheaper gas.

EVs may change this equation. We figure we will need to lease for several years to get the tax and commuter benefits of the foreign EV e.g. an Audi. We will dispose before the battery dies therefore leasing is also better.

That was our MO too. I had a good (2015) highway "cruiser" that had about 50K miles on it which I was also using to commute.

I figured to preserve the cruiser and purchased the 2019 Bolt EV as the commuter car to keep the daily wear and tear off the cruiser. Then COVID happened and I stopped commuting for three years, man plans and God laughs. We still use it as our around the town/metro area car. The battery was replaced under a recall last Fall. This car should last a long time.

I just replaced the cruiser with my retirement car (GV70) because I wanted to be able to do some light towing which I could not do on the cruiser. Also the telematics on the cruiser were based on 3G tech which is being retired. I hate traveling by air and would rather drive than fly and the new driver assist features really reduce my workload with the HUD adding to driver safety. The GV70 only gets highway miles, so it should last a good long time and I purchased a 10 year extended bumper to bumper warranty as I am in for the long haul with this car. I change oil at 5000 miles (Mobile 1) and keep proactive on maintenance items. I was able to finance at 3% without having to pay over the sticker price and the money I didn't take out of investment is in an annuity growing at 7%, so my arbitrage is a positive 4% over the life of the loan. I was also able to get top dollar on the trade-in last summer.

With the absence of a calamity, I don't see replacing these cars for at least 15 years.

 

[DrQ]

How RETIREMENT can tank your credit score, putting you at risk of higher insurance premiums or being denied access to assisted living facilities - and how you can prevent it from slumping​

• Experts warn about credit score pitfalls to avoid in retirement
• Closing old accounts can hurt scores, even if the accounts are no longer used
• Credit scores can impact insurance and healthcare options in retirement

How retirement can tank your credit score

Credit scores factor into a variety of insurance and heathcare decisions, and can impact premiums and even affect whether a person is accepted to an assisted-living facility.

www.dailymail.co.uk