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[Ryst Helmut]

Just thought some might find this useful...a reality check for some I'd wager.


Six Bad Reasons Not to Save for Retirement
September 9, 2007

Folks will use any excuse not to save.

According to the Commerce Department's Bureau of Economic Analysis, the national savings rate is perilously close to zero. Many people seem to think this is just fine.

Even if they aren't socking away any money, these folks figure they are on track for a comfortable retirement.

But are they?

Consider six popular excuses for not saving.
� 1 "I still have plenty of time."


If you're in your 20s, retirement might seem too distant to worry about.

Yet, if you delay saving until your 30s or 40s, it can be awfully tough to accumulate your desired nest egg.

For instance, if your goal is to amass $1 million by age 65, you would need to sock away $858 a month starting at age 25, according to the savings-goal calculator at www.dinkytown.com1. But if you put off saving until age 35, your required monthly savings jumps 70% to $1,455.

What if you wait until age 45? The number soars 219% to $2,739. These figures assume a modest 4% annual investment return, but also no inflation.

The longer you postpone saving for retirement, the less help you'll get from the financial markets, so more of your nest egg has to come from the raw dollars you sock away. Delaying can also mean missing out on an employer's matching contribution to a 401(k) or 403(b) plan. That match might be worth 50 cents for every $1 you invest.

Indeed, older workers often regret that they didn't start saving earlier. Among those aged 45 to 64, 71% wished they had begun saving when they had their first full-time job, according to a survey conducted for Thrivent Financial for Lutherans.

In fact, when these folks were asked what advice they would offer to younger generations, 86% said they would counsel them to start saving for retirement as soon as possible.
� 2 "My house is worth a bundle."


Over the three years through 2004, many families saved pitifully little and took on heaps of debt. Nonetheless, over that stretch, the typical family's net worth grew an inflation-adjusted 1.5% to $93,100, according to the Federal Reserve's Survey of Consumer Finances.

A big reason: Many families saw their homes soar in value, thanks to the real-estate boom earlier this decade. Recently, of course, home prices have softened in many parts of the country.

But even if your home has maintained its value, don't use that as an excuse not to save. The fact is, it is tough to retire on your real-estate gains.

Sure, if you live in San Francisco, you could free up a lot of home equity by moving to North Dakota. But how many people will make that sort of move?

More realistically, you might stay in the same city or town, but trade down to a smaller home. That should free up some home equity that could then be spent. Problem is, the smaller home you desire might not be a whole lot cheaper than your current place -- and the real-estate commission and other expenses involved in moving will eat into your gain.

Alternatively, you could tap your home's equity through a reverse mortgage. The costs, however, can be staggering, so I would view this as a last resort.

To see just how much a reverse mortgage might cost, try the calculator at www.reversemortgage.org2, paying particular attention to the "loan summary" section.
� 3 "My investments are doing great."


Some people reckon they don't need to save much, because their investments have performed so well in recent years. This contention parallels a frequent criticism of the official savings rate, which is that it doesn't include capital gains.

But before you buy such arguments, think about the investors who retired in the late 1990s after clocking big gains during that decade's bull market. Their portfolios had ballooned in value, so they figured they had enough to retire.

Trouble is, the great returns of the 1990s effectively borrowed from the future -- and the bill came due during the 2000-2002 bear market. The lesson: Yes, it feels good when the stock market races ahead of the economy's growth rate.

But those sorts of gains aren't sustainable, so you shouldn't use them as an excuse to cut back your savings rate.
� 4 "I'll receive a fat inheritance."


In 2005, the Internal Revenue Service received 39,500 estate-tax returns that reported gross estates of $1.5 million or more. These returns were mostly for people who died in 2004.

That year, there were 2.4 million deaths in the U.S., according to the Centers for Disease Control and Prevention. In other words, just 1.6% of these folks left behind $1.5 million or more.

The bottom line: You may indeed inherit a truckload of money. But the vast majority won't.
� 5 "I have a pension."


If you're entitled to a traditional defined-benefit pension, that's wonderful. But are you sure you're eligible?

According to a survey by the Employee Benefit Research Institute and Mathew Greenwald & Associates, 62% of workers expect that, once retired, they or their spouse will receive a traditional pension.

Yet only 41% of these households currently have a defined-benefit pension plan. It seems many Americans are counting on receiving a pension, even though they aren't eligible today and even though these plans are disappearing fast.
� 6 "I'll work in retirement."


The Thrivent Financial survey found that, among those aged 45 to 64, 43% intend to work in retirement.

I think that's great. Working in retirement will give you extra income, while also offering some intellectual stimulation and a sense of purpose.

Still, this alone isn't a solution to America's retirement-savings woes. Working part time might be appealing in your 60s.

But by your 70s, it may have lost much of its allure and your health may not allow it.

At that juncture, you will have to support yourself without the help of a paycheck -- and that means you will likely need a heap of savings.

[Fresh Prince]

All well and good if you can afford to save.

[Ryst Helmut]

[jlb]

If you're working in Korea and not paying off credit card debt or student loans and not saving money, then you've got some problems. My parents are classic examples of these "excuses" and I'm not planning to make the same mistake. Compound interest, all the way! Let it do the work, not me.

[manlyboy]

*taps shirt pocket*

Got the winning lottery ticket right here, pal!


My old man adheres to the Dennis Leary hypothesis that the years at the end of your life are the worst. They're the wheelchair, kidney dialysis years. "You can have those years. We don't want 'em". Spend your money while you can, because sooner or later someone or something is going to come along and take it off you anyway.

I always thought it was a damn cool philosophy.

Conversely, it has only just begun to dawn on me that I'm going to have to take care of the old geezer when he retires.