Millennials want to retire by 61, but most have nothing saved

[North Austin 10]

4 minutes ago, TxEx99 said:

Good to know.  I may have to sit down with an accountant soon and discuss how that would work for me.  

Two words.. 

Home office. 

[Larry T. Spider 1740]

9 hours ago, Anastasis said:

 

Yeah, until that third little accident happens. We had the second out of diapers and within a few days the pee stick of truth reared it’s head. At all good, he’s actually my favorite.

 

I thought parents didn’t have favorites. Fuck. I knew they like my brother more. Probably because he isn’t an asshole like me.

[Okie State 3687]

Yeah you can kiss that idea goodbye.  Maybe after they graduate from college.

I don't expect to gain all of it back, but no way we'll be spending what we do now.

[Sbbruin 21567]

Uncle Sam has a great plan to get some work and life experience, college money (the Post 9/11 G.I. Bill is fantastic), and get the travel bug out of you. You'll get lots of exercise too.
I think a really good plan for a responsible kid without much financial support to get an education without loans is to join the military, knock out as many online core classes as possible (at a real school) using tuition assistance while you're in, and finishing your bachelor's and most or all of a master's using the GI bill. If you play it right, you could be mid/late 20s with a graduate degree, no student loans, eligibility for a no-down-payment VA home loan, maybe a little money saved up, and some military service on your resume. It would take focus, but it can be done.

[Incredulity 11141]

9 hours ago, TxEx99 said:

Good to know.  I may have to sit down with an accountant soon and discuss how that would work for me.  

If you do this have your paperwork/documentation locked down.  When/if audit comes they are going to go right after home office deduction.

[Brew 2917]

A home office deduction makes virtually no difference on your tax return if it is taken properly. There are reasons to go contract employee if you can, a home office deduction isn’t one of them.

[Guest Lobo]

Saving enough to grab at least the employer match is a no-brainer, despite all the other noise surrounding pre-tax defined contributions/ERISA/etc.  

What not enough attention is paid to is how many employers still make that match in company stock and how many employees just keep it there despite your right to change it toot-sweet to other investment offerings within the plan.  

[Tailleur17 361]

16 minutes ago, Lobo said:

Saving enough to grab at least the employer match is a no-brainer, despite all the other noise surrounding pre-tax defined contributions/ERISA/etc.  

What not enough attention is paid to is how many employers still make that match in company stock and how many employees just keep it there despite your right to change it toot-sweet to other investment offerings within the plan.  

That and the target date funds. Switched my 401k to Vanguard index funds once I realized the fees on those were pretty high. 

[Deej 76080]

I was shocked to find out only like 5 employees in our office put in enogh to get the maximum match from our employer. WTF? 

[52-80 18962]

6 hours ago, Deej said:

I was shocked to find out only like 5 employees in our office put in enogh to get the maximum match from our employer. WTF? 

avocado toasts aint cheap

[phdhorn 6224]

I'd be shocked to find that there were even 5 to boot.

Most people can't afford to sock away $$ to 401K's, no matter how "smart" it is.  They  need that money to live on.  Just saw a stat from Vanguard that says only 10% of people (can afford to) do that.  Yeah, it's no-brainer smart, but impossible for most.

[Deej 76080]

16 minutes ago, phdhorn said:

I'd be shocked to find that there were even 5 to boot.

Most people can't afford to sock away $$ to 401K's, no matter how "smart" it is.  They  need that money to live on.  Just saw a stat from Vanguard that says only 10% of people (can afford to) do that.  Yeah, it's no-brainer smart, but impossible for most.

But these are the same folks that drink two, $6 coffees a day, go out to lunch every day, get a new phone every year, and shop online more than they actually work. 

[Captainant 26861]

6 minutes ago, Deej said:

But these are the same folks that drink two, $6 coffees a day, go out to lunch every day, get a new phone every year, and shop online more than they actually work. 

[Deej 76080]

Sorry. Just referring to more than a handful of people in my office. I find it crazy that so few take advantage of free money when they obviously have resources to do so.

[phdhorn 6224]

41 minutes ago, Deej said:

But these are the same folks that drink two, $6 coffees a day, go out to lunch every day, get a new phone every year, and shop online more than they actually work. 

Yeah, probably a lot of them.  But also a lot who simply can't sock away the money.  We were among those for a long time, and we didn't live like the Kardashians.  Most of my friends aren't anywhere near the full max. 

It's a good idea but actually I think one reason companies do this (as an incentive) is that budgetwise, their actuaries have told them you can rely on a very meager % of people maxing out.  Otherwise they'd probably not do it as much.

[TwiceHorn 30715]

49 minutes ago, Deej said:

58 minutes ago, Captainant said:

Sorry. Just referring to more than a handful of people in my office. I find it crazy that so few take advantage of free money when they obviously have resources to do so.

Yeah, I had a colleague, otherwise smart guy, that was bemoaning the state of his retirement constantly (his own damn fault), and thinking that he should find a job with a higher salary.  Where we were, the 401k was FULLY FUNDED by the employer.

He'd be drooling over a 15-20% pay raise at another firm that didn't pay as much health insurance and had a zero-match 401k.  Plus, this guy was a single dad, and, kudos to him, his kid was his main priority by a long shot over work and our firm was very tolerant of that where a lot of places, probably most, would not be (the guy was actually in the office maybe half or 2/3 of any given workweek and his billed hours would get him canned at most firms).

We kept having to remind him that the excess salary was actually LESS than the 401K contribution and that went directly to solving his retirement problem, whereas he had already demonstrated a lifetime's worth of inability to save.

Edited July 22, 2018 by TwiceHorn

[Spankytoes 1787]

3 hours ago, Deej said:

But these are the same folks that drink two, $6 coffees a day, go out to lunch every day, get a new phone every year, and shop online more than they actually work. 

Yup. It’s all about choices. They are the first ones to chide you for living cheaply too, as if you are somehow denying yourself life’s pleasures. I’ll see how they feel when I leave Target and they’re holding the door for me. If a 20-something can sock away $100 a month into a Roth IRA, which is giving up 5 coffees at Starbucks a week, you are better off than a 30-something putting in $500 a month. 

[Celery Man 20535]

There are people who can't really save aggressively in their 401k.  There are also a ton of people (thinking about typical youngish childless millennials, but not trying to frame this as a "millennial" problem) who could but don't and don't feel like they could.  Its a lot harder to go from using all of your monthly income to saving a percentage of your monthly income than it is to begin your budget/spending habits from a smaller portion of that pie (with some going to retirement) and saving from there.  Also harder to get a raise and start living on less (begin saving at a healthy rate once you get to a certain point).  If I could offer one bit of advice to people starting out, it would be just do 15% from the beginning into your 401k.  At least 10.  If you get to a situation where you're having a hard time making rent (not affording avocado toast, to run with that example), then you can ratchet it back.  Or you can pull it back and start saving instead for a down payment, but not living out of that budget (and switching back to retirement once you meet that goal).  It's hard to cut your lifestyle back.

 

Also if you have your mom's 10 year old Honda Accord free and clear and you start your job out of college making $65k, don't go out and buy a new Mazda 3 with a monthly payment just because you're an adult now and you want to buy a new car.  It's just going to be a similar used car in 15 seconds.

 

Isn't there some sort of thing with 401k programs where, if employees don't take advantage of them, it has an effect on the amount that owners/senior employees can save?  I think this part -

Quote

Top-heavy plan requirements must be met. 

A plan is top-heavy for any plan year for which the total value of accrued benefits or account balances of key employees is more than 60% of the total value of accrued benefits or account balances of all employees. Additional requirements apply to a top-heavy plan, including the requirement that non-key employees receive a minimum contribution and the requirement to satisfy an accelerated vesting schedule for employer contribution accounts.

Most qualified plans, whether or not top-heavy, must contain language that meets the top-heavy requirements and that will take effect in plan years in which the plans are top-heavy. These qualification requirements for top-heavy plans are explained in section 416 of the Internal Revenue Code.

The top-heavy plan requirements do not apply to SIMPLE 401(k) plans.  Additionally, the top-heavy rules do not apply to a plan that consists solely of safe-harbor 401(k) contributions.

 

[52-80 18962]

how about corporate education?  i onboarded with a huge global company with *extensive* orientation and yet dont remember them ever going through the retirement enrollments, profit sharing, discount stock purchase, etc etc etc.  

 

i know there were occasional retirement-planning workshops, but those are purely voluntary and the people in them would either already be financially astute, or old, desperate, and needing to catch up.

 

all it takes is 30m-1hr to show some basic projectionss and hammer in these kids head thats its literally free money... in case theyre not getting this education at home.

[Okie State 3687]

Our onboarding definitely went through all of the options and encouraged us to take advantage of them.

[Spaulding Smails 1548]

My company has 58 employees (including myself).  We're in construction, but we pay very well when compared to our peers.  We offer health/dental/life insurance, PTO, and a 401(k) with a 4% company match.  Most of which is not common in our industry, especially for a company of our size.  And I have a whopping five employees who take advantage (again, including myself) of 401(k).  Less than 10%.  Two hourly field employees, two office employees and me.  53 employees are essentially giving up free money.  And we did a big company-wide retirement workshop with our 401(k) provider when we rolled this out in early 2017 and include several pages underscoring the need to save in our new-hire packet.

The majority of people don't think about retirement.  They are truly living paycheck to paycheck.  And no amount of help can force them to change their habits.

[North Austin 10]

On 7/22/2018 at 12:49 PM, Deej said:

But these are the same folks that drink two, $6 coffees a day, go out to lunch every day, get a new phone every year, and shop online more than they actually work. 

You seem to have omitted posting on message boards for some reason...

[Johnny Sack 8397]

On 7/22/2018 at 6:45 AM, 52-80 said:

avocado toasts aint cheap

I eat it several times a week.  It’s real cheap if you take the 3 minutes to make it yourself.  

[Okie State 3687]

So is coffee yet I see people walking in with Starbucks every day. I'd say they're paying for quality and/or convenience, but we know that's not true.

[Aqua Buddha 13897]

On 7/22/2018 at 8:56 AM, TwiceHorn said:

Yeah, I had a colleague, otherwise smart guy, that was bemoaning the state of his retirement constantly (his own damn fault), and thinking that he should find a job with a higher salary.  Where we were, the 401k was FULLY FUNDED by the employer.

He'd be drooling over a 15-20% pay raise at another firm that didn't pay as much health insurance and had a zero-match 401k.  Plus, this guy was a single dad, and, kudos to him, his kid was his main priority by a long shot over work and our firm was very tolerant of that where a lot of places, probably most, would not be (the guy was actually in the office maybe half or 2/3 of any given workweek and his billed hours would get him canned at most firms).

We kept having to remind him that the excess salary was actually LESS than the 401K contribution and that went directly to solving his retirement problem, whereas he had already demonstrated a lifetime's worth of inability to save.

If you want to help your kid, don't be a millstone on them when you're old.  While this thread is about millennials and their money problems, almost everyone I know in their 40's and 50's is bitching about their parents and their money problems.  

[TwiceHorn 30715]

34 minutes ago, Aqua Buddha said:

If you want to help your kid, don't be a millstone on them when you're old.  While this thread is about millennials and their money problems, almost everyone I know in their 40's and 50's is bitching about their parents and their money problems.  

Well, yeah, because they're boomers.  But generally, if your parents were profligate spenders and poor savers, they're going to pass that on to you (although you can change that trajectory), and it's going to be a double whammy, because you won't learn good financial habits and you will probably have to cover a goodly chunk of their retirement.  So, thanks, Mom & Dad, for covering my education and your own retirement!

 

My Mom was a fairly epic cheapskate and I think a tempering influence on my Dad, who wasn't nearly as money-conscious.  I still filter just about every expenditure over a few hundred dollars that isn't strictly a necessity through a kind of Mom-filter (Do I really need this?  What's it going to do to the budget/savings for a year, etc.).   I let myself and wife have a spot more fun with money than my Mom did, yet am still pretty conservative.  I also try to run things through a "materialism" filter, as in, is this purchase just rank materialism or does it serve some other purpose besides just acquiring stuff.  Wife is not particularly good with money, but she enjoys bargain hunting as a major component of her shopping thing, so I am grateful for that.

Edited July 24, 2018 by TwiceHorn

[FondrenRoad 4378]

On 7/22/2018 at 8:29 AM, phdhorn said:

I'd be shocked to find that there were even 5 to boot.

Most people can't afford to sock away $$ to 401K's, no matter how "smart" it is.  They  need that money to live on.  Just saw a stat from Vanguard that says only 10% of people (can afford to) do that.  Yeah, it's no-brainer smart, but impossible for most.

Young people say they cant afford it, but at the same time they base their lives off take home pay rather than yearly salary, so most of them actually can. You do have to do it early, and in your first real job, before you have time to get accustomed to higher take home pay.  Back when I started working, I barely made anything, but put nearly 1/3 of my income into a 401k anyway. It made budgeting tight, but was well worth it in the long run. 

[Nice Guy Eddie 13267]

A couple of points:  maxing out your 401k is never maxing the match.  It's only if you hit the 18.5 or 24.5 for those over 50+.  Second, the retirement problem isn't going to occur when millennials start to retire, it's starting now and will really hit home when Gen X wants to retire.   Gen X will be first generation where almost all of the generation are fully responsible for their own retirement, including healthcare.    some boomers fit under the same issue but they also have many people that still have pensions and healthcare packages.    

 

[Macanudo 12649]

On 7/20/2018 at 10:21 PM, Okie State said:

I do not currently max out at the $18.5K, but it's close. With the employer contributions I'm at around $30K-$35K/year. That's probably a lot to some people and peanuts to others. I feel pretty good about where I'm at, but am far from Surly 1% range.

 

I do know people my age who max out at $18.5K, but they have a higher combined income with their spouse than I do. We're pretty much saving as much as realistically possible for us. Once the kids are out of daycare, we can save more.

 

 

Your employer is making a 12-17K contribution per year?   Yeah, that's not even close to normal.  Either you are highly compensated and they have a 5-6% match/ER contribution or you work for a better company than I do.   We have a 6% match (above average by 50%) and an Er contribution of 3%.  

[Okie State 3687]

Your employer is making a 12-17K contribution per year?   Yeah, that's not even close to normal.  Either you are highly compensated and they have a 5-6% match/ER contribution or you work for a better company than I do.   We have a 6% match (above average by 50%) and an Er contribution of 3%.  

5% 401k match, variable (usually 2-3%) stock contribution based on share performance during the year (requires 1% employee 401k contribution), and another variable contribution to a 'cash balance' account that is dependent on your age and years of service. Everyone gets the cash balance whether you contribute to your 401k or not.

I would not say I'm highly compensated. Probably average for my profession.

[Nice Guy Eddie 13267]

43 minutes ago, Okie State said:

5% 401k match, variable (usually 2-3%) stock contribution based on share performance during the year (requires 1% employee 401k contribution), and another variable contribution to a 'cash balance' account that is dependent on your age and years of service. Everyone gets the cash balance whether you contribute to your 401k or not.

I would not say I'm highly compensated. Probably average for my profession.

Average S&P500 CEO earns 13M/year.  Do you consider them highly compensated, or just average for their profession?

[Okie State 3687]

Average S&P500 CEO earns 13M/year.  Do you consider them highly compensated, or just average for their profession?

Alright, I'll just leave it at I would not consider myself highly compensated. Better?

[Nice Guy Eddie 13267]

4 minutes ago, Okie State said:

8 minutes ago, Nice Guy Eddie said:

Average S&P500 CEO earns 13M/year.  Do you consider them highly compensated, or just average for their profession?

Alright, I'll just leave it at I would not consider myself highly compensated. Better?

Yes.  

[SuingToGetAMessageBoard? 3861]

I get 0% match.  You guys are lucky.

[52-80 18962]

Anadarko has a good retirement package:  first 6% 401k fully matched with immediate vesting.  plus another 4% with 3y vesting.  and then fully free 6% (for, say, a 35 year old) in a separate retirement account.  

 

That's 16% free money, totaling 22% of salary towards retirement, and only costs the employee 6% out of pocket.  

[drt 631]

I get 3% from the company regardless, but no match.

[NotActuallyALonghorn 4956]

My company matches half of what I put in up to 7% (so max is 3.5%) and then a separate 3-5% at the beginning of each year, but it's been 5% every year I've been there. Immediately vested. So for 7% I get 15.5% total. Not bad, but not like some of these.

Edited July 24, 2018 by NotActuallyALonghorn

[Telegraph_it 3350]

I’m moving to a company that does 0% but I get equity. Let’s hope his pays off. 

[jdhorn92 1524]

On 7/20/2018 at 9:52 PM, Telegraph_it said:

When you guys say you max out your 401k do you mean saving $18.5k a year or max to get the match?

I hear so many people say they max out their 401k but I think are they really saving 15-25% of their income in 401k?

$18.5 a year is maxing it out to me. Read 401K millionaire years ago and that has been my plan, we'll see how it turns out.  If you can't (for whatever reason) do $18.5 then you aren't maxing it out imo.  One may have budget constraints or a top heavy plan where $18.5 is not doable, but to me maxing it out is putting the maximum allowable by the IRS for your age. At 50 (a couple more year for me), the max goes north of $20K.

Edited July 25, 2018 by jdhorn92

[Anastasis 23191]

up to 6% at 1.25x match.  I thought that was pretty fucking good until reading some of the plans posted here. 

[Wally Fairway 5465]

 

[Macanudo 12649]

On 7/24/2018 at 12:42 PM, Okie State said:

5% 401k match, variable (usually 2-3%) stock contribution based on share performance during the year (requires 1% employee 401k contribution), and another variable contribution to a 'cash balance' account that is dependent on your age and years of service. Everyone gets the cash balance whether you contribute to your 401k or not.

I would not say I'm highly compensated. Probably average for my profession.

It 's not what you think it highly compensated.  It's what the IRS says is.    $120,000 and above. 

[Lhorn 4862]

4 hours ago, Wally Fairway said:

 

Don't know who she is.  On the one hand much of her message is that people need to be in the frame of mind that their retirement is THEIR responsibility and no one is going to do it for you which is a good message.  On the other hand there are no tangible recommendations on how to do this and she also seems rather preachy for someone that says she was in a position to have to clean someone's closet for money a year ago, so how much of an authority can be be.

[clapclapclap 8998]

If you are a short person stuck sitting behind her at a crowded movie, that's a lot of hair.

[Lhorn 4862]

If you are an average size or tall person at a fireworks display or air show, that's a lot of hair. 

Seems to be inspired by Sideshow Bob

Edited August 14, 2018 by Lhorn

[52-80 18962]

9 hours ago, clapclapclap said:

If you are a short person stuck sitting behind her at a crowded movie, that's a lot of hair.

[Okie State 3687]

This thread motivated me to go ahead and max my annual 401k contribution. I can only adjust the percentage withheld from each paycheck instead of an annual dollar amount. I have to contribute each pay period in order to get the match. What happens if I go over the $18.5K?

 

These are all Roth 401k contributions.

 

 

[Wally Fairway 5465]

1 hour ago, Okie State said:

This thread motivated me to go ahead and max my annual 401k contribution. I can only adjust the percentage withheld from each paycheck instead of an annual dollar amount. I have to contribute each pay period in order to get the match. What happens if I go over the $18.5K?

 

These are all Roth 401k contributions.

Don't - you will have a problem with the IRS. Keep close track, if your employer somehow doesn't have a cap in their system and make sure you shut it down to zero when you reach the limit.

[Okie State 3687]

Don't - you will have a problem with the IRS. Keep close track, if your employer somehow doesn't have a cap in their system and make sure you shut it down to zero when you reach the limit.

That's the problem...apparently my company doesn't cap it. Sounds like this is going to be a slight pain in the ass.

 

Any idea what the IRS does? I was told earnings on those dollars over the limit are taxed. Wonder if I could withdraw anything that went over.

[Okie State 3687]

Quick Google tells me you have until that year's tax filing deadline to withdraw the over contribution. If it's a tax deferred contribution, it will be added back to your taxable income. I assume if it's Roth, nothing happens as it's already been taxed. If you don't withdraw by the deadline, you're SOL and will be taxed again once you withdraw it in the future.