To retire comfortably, under-40 workers need to seriously bulk up savings | Hacker News Reader

To retire comfortably, under-40 workers need to seriously bulk up savings

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88 pointspetethomas172 comments

I realize this probably won't be the most popular of opinions around places like this one, but the more I think about it, the more I conclude that leaving everyone to individually save for their own retirement is not the best of ideas.

There are far too many variables in the system for most people to navigate successfully for 40 years straight, even if they are earnestly trying. You could have an extemely well diversified portfolio and still lose money when The Market as a whole tanks as a result of bad decisions of other people. You could have money saved up in multiple savings accounts or bonds and be out of luck when a government you didn't vote for fucks up and causes a period of hyperinflation. I'm not even mentioning things utterly out of individual control like a war resulting from an invasion by an aggressive, more powerful neighbour.

Implementation details such as retirement age are very important, of course, but a from mile-high view, providing a decent if not extraordinary living standard to millions of people seems exactly like the type of infrastructure and public good projects governments are normally the best option for.

/jarek, who nevertheless has more private savings right now than "a quarter of those surveyed"

But many of those same factors affect public pensions. The existence of defined benefit schemes, as opposed to defined contribution schemes, itself causes economic problems, including the bankruptcy of large firms. While there is risk in any investment, defined benefit simply imagines that it doesn't exist. Even traditional Ponzi scheme style public pensions are susceptible to drops in population growth.

Any plan that is not fully funded, in cash, is not a pension - it's a bet - a bet that someone (else), somewhere, sometime, will assume the risk if it goes south. Those who offer "public" pensions are the worst offenders - everyone knows the taxpayer will be on the hook for it - it's easy to promise the world to a public employee when it's not coming out of a bottom line.

Then again, a plan fully funded in cash is a bet that you have enough money, skill, and/or luck to keep its real value, after any inflatiatory and investment influences, equal to or above what you will need when you retire.

I'm curious why you'd be eager to trust the government with this big responsibility when you used a government-caused period of hyperinflation as an example of why this is hard for people to succeed at on their own.

Government provision does not have to be based upon savings. In its simplest form it is just an obligation (of the current working generation towards the elderly), and if this is not tied to monetary figures then it is much less vulnerable to financial turmoil and trickery.

What happens when there are many more elderly than current working people?

The article suggested planning for 30 years in retirement. If that follows a working life of 40 years which follows a childhood of 25 years, then each working person is supporting 1.5 dependents. Assuming a steady-state population; if you have a baby boom followed by a baby bust followed by another baby boom, it gets worse. That's a big obligation.

I find it useful to remember that finance can only solve problems to the extent that it changes what people do in the real world. What is retirement savings, but a way for older people to convince younger people to do work for them? Money is a persuasive way of doing that, but regardless it's older people depending on younger people to take care of them.

Compare these scenarios: - people save for retirement, so many old people are have money to spend. Lots of young people go into occupations that help old people because that's where the money is. - the government provides pensions, so many old people have money to spend. Lots of young people go into occupations that help old people because that's where the money is.

Either way, the real-world effect is the work that young people do.

There are always risks and they can't be wished away. The government could change the pension plan. (But note that in the U.S, social security is very well defended in Congress, and more older voters makes it more secure.) Or the price of services that old people need could go up because there are fewer workers or because they dislike the work.

As an individual, having above-average savings helps, but by definition everyone can't be above-average. If all retirees double their savings and supply is fixed then inflation is inevitable. To a first approximation the only real-world solutions are to increase the number of workers (immigration or increased birth rate) or to to increase productivity so fewer younger workers are needed.

As has already been said, private finance simply does not fix this problem, although it does increase the scope for the working generation to avoid their obligations - through stock market crashes and bouts of inflation.

In fact that is pretty much what all such crashes are - savers losing out to the producers. Although not widely acknowledged it is practically policy to promise (in both the state & private sector) gravity defying returns and then let savers down with short sharp shocks. The actuarial assumptions for pensions are returns in the region of 6-8%. The only way savings on average can reach these returns is if there is amortized monetary inflation of 6-8% or 4-6% in real terms if you generously give 2% for productivity. This is of course significantly more than the modal average inflation rate, whence the need for 'corrections'.

The unaddressed issues are do pensions perform better than worse than average (consider during the boom private equity was routinely making 20% returns leaving less on the table for everyone else)? And what about borrowers who borrow not to invest, but because of urgency (not a significant amount of money after houses became state backed investments, which leaves gamblers, current accounts and cash in circulation to try to balance that see-saw).

It's not so much that I trust the government a lot, it's just the best option when looking on a large scale.

Governments, and other people in general, can always screw you over. By "trusting" the government, you are just cutting out the middle men who give you a false sense of security and imperviousness to other people's actions and take a commission.

We'll the alternative to personal responsibility (that is, being personally responsible for your own retirement funds) is a massive ponzi scheme.

There is no chance that people could be "forced to save" as that has always turned into another tax in every place it's been implemented.

And who wants to retire? I'll retire when I'm dead, until then I'm gonna be busy doing stuff(work or otherwise). And I'm saying this as someone who's got no money.

And governments are not good at this sort of thing. Take the Irish government for example(my home country), ran a massive surplus for years during the boom, saved a nice little nest egg. It was supposed to be for public pensions(actually not supposed to, it WAS).

Then in 2008 they gave it to the banks. THEY GAVE IT TO THE BANKS!!!!!

edit: I concede that not everyone wants to work until they're in the grave.

> I'll retire when I'm dead

Unless you die prematurely, no... You'll retire when you're too tired to do stuff, or when your health doesn't allow you to, or when you become unable to care for yourself in many other ways. Mostly it's not up to you when you stop "doing stuff" - even less if it's about earning money (who would hire an able and willing to work 60-70-yo these days? - realistically).

I accept that not everyone else has the same outlook as me, but I plan to do the sustainable thing.

What old people who can't do anything anymore have done for millenia before social security and "retirement". Have my children take care of me.

Well that's plan B, plan A is to become very wealthy from the things I create and live off that.

And who said someone has to hire me? There are plenty of people here who work for themselves (or at least their customers). With webapps they don't even know what you look like, you could be a 90 year old dressed as Gandalf and it wouldn't matter as long as the sites good.

You're assuming that your children will be able to, will be wealthy enough to, will be willing to, will be alive long enough to do that. Also you're assuming that you will be mentally capable of working in your 60's. That's a lot of assumptions which I wouldn't be comfortable with in my life.

Not trying to say everything bad will happen, but that's a lot of assumptions... at some points you might be left with no support from yourself or family - and a lot of people find themselves in situations like that.

I was with you until the last bit, that's pure bullshit.

The bank bailout is really a bailout of people who took on mortgages they couldn't afford. People like your neighbours. Maybe even YOU. The alternative was to let nature take it's course: call in a million mortgages. Voters wouldn't like that...

No sorry your wrong, I didn't(and a huge number like me) take on a mortgage I couldn't afford, and we shouldn't be asked to pay for others mistakes (I'm not anyway, emigrated last year).

It did not bail out ordinary people who had borrowed a little too much, these people are getting doubly screwed over. Paying extra taxes (which the governemt is raising, a large part of which is going to the banks) and they still have to pay back the loans on homes that are now in negative equity, on which rates have risen.

If nature were allowed to take it's course, the people who lent the money(other EU countries as it turns out) would have to take a hit(accept that they won't be getting all their "investment" back.

You can't just call in a loan, you know, contracts and all that, and why would the lender even want to do that? Who wants an unsellable thing like a house in Ireland(you can't sell them nowdays, no ones buying) instead of SOME of their money back.

So the current state of things in Ireland is homeowners that are in negative equity(everyone who borrowed since 2000 essentially) are prisoners. They can't sell, can't leave, they just have to take it(and both the government and the banks know this). And I'm sure the voters don't like that.

The bank bailout is the Irish government, instead of going double or nothing on bank loans to property developers, going half or nothing. They prevent the banks balance sheet from collapsing while at the same time taking on discounted bad loans that they think might make a profit. Evidence: http://www.irishtimes.com/newspaper/commercialproperty/2010/...

The houses haven't been built yet, and the guy has the loan out for them before he had permission for the plan, nevermind to build, and will now seek permission to build after the loan has been transferred to NAMA.

3400 homes at 2007 for sale prices is 3,400 x 300,000 = 1,020,000,000 euro.

This looks to me like they are building 3400 houses using government bailout money in the hope there will be some return on the initial investment. The property developer doesn't seem to be giving the original investment back. I am no expert, so my impression may be incorrect and the cheerleading tone of the article really confuses me.

I do not think people who took out mortgages they could not afford are blameless in this, they helped to drive the ridiculous prices. Property snakes and ladders.

To get back on topic, I can't imagine where the Irish Government, banks included, can expect to safely store money enough to provide for the retired population.

That's basically why Social Security was first introduced, and I think it still makes some sense. Looking at it in the other direction, it's more or less a fact that a large proportion of people won't save for retirement. Therefore, you have three choices: 1) a bunch of destitute and possibly homeless old people; 2) some sort of after-the-fact spending to provide emergency services/shelter/care for destitute elderly; or 3) some sort of mandatory pension system to make sure elderly don't become destitute in the first place.

People generally find #1 unpalatable, so the practical choices are #2 versus #3: do we set up some sort of general pension system to make sure elderly make at least a bare minimum income to stay off the streets (currently $20k/yr or so), or do we instead set aside money to spend on housing and caring for destitute elderly, e.g. through government-run nursing homes?

We also have government run nursing homes and plenty of destitute old people live in them. But, even for a selfish person SS is not exactly a terrible idea. Consider, pensions and SS have a huge benefit over traditional forms of investing.

Imagine setting one up a pension for a group of savvy investors. As you near retirement you pool your money with 10,000 other people and all split the dividend each month (based on what % you put in). As people start to die off there is a smaller pool of receptions who keep getting a larger monthly check. Granted you lose the ability to give money to your spouse/children when you die, but you don't need to worry about outliving your savings. (Assuming the fund is not mismanaged etc.)

PS: There are many problems with SS, but when you consider it's inflation adjusted it represents a vary large and vary safe investment. (Run a Monte Carlo Analysis assuming you are only willing to accept a 1% risk of running out of money at 100 and a safe retirement takes a huge nest egg.)

That structure is often called a Tontine. It's illegal, because after a while it's basically a massive monetary reward for offing your fellow investors.

Hah, just watched the movie Charade last night where exactly this happens.

Yep, that's a major bug with the simple implementation.

The simple solution is to cap the benefit and and use a large enough pool that no single death ever makes a big difference on it's own. Which gives you something like "Long Term Care Insurance" is basic a bet that you will live long enough to need it, which is subsidized by those who don't. The benefit is also fairly small so a reasonably large company is not going to try and collect.

> Therefore, you have three choices:

You missed the one that was used for all of human history:

4. Family ties, raise your kids well and establish that they should support you in old age. Bonus: Also gives an incentive to keep strong, healthy families together.

Downside: using children as your old age insurance policy gives an incentive to have as many children as possible within your means on an already overpopulated planet.

> ...as many children as possible within your means on an already overpopulated planet.

I did some casual research on this - long story short, I think the planet will support at least around 600 billion people fine. You need to speed up nitrogen cycles for food, which we can already do. Energy is the big bottleneck right now, but fusion or whatever comes afterwards will likely make energy almost-free. Further out, molecular engineering and nanotechnology looks incredibly promising...

...anyway, the world isn't really so densely populated. I couldn't find the exact paper while googling, but you could fit all of the world's population in a fairly small state (Maine?) with the same population density as present-day Paris.

More people means more great people, more innovation, more good stuff happening faster. Nitrogen cycles, food, pollution are the bottlenecks. But population 600 billion should be fine and the world will be prosperous if we get there.

Advocating the past's policies with the future's hoped for or even expected technology is not really what I'd call responsible. At the current time we're not close to having the technology that would let a metropolis the density of Paris feed itself without depending on a comparatively sparsely populated area at least thrice again the size.

That position is a reasonable one and I respect it, but I disagree. Necessity is the mother of invention, and technology is usually developed in response to need. Thus, "don't expand until the technology is there" is a bit of a catch-22: Population growth will drive demand and funding for new ways to solve the challenges that come with it.

Also, population 600 billion doesn't happen overnight - we're almost certainly in good shape for the next 50-100 years, I'd argue the decline in population in some Western countries is a much greater threat to prosperity, health, and happiness than any increase in population could be.

> Necessity is the mother of invention, and technology is usually developed in response to need.

This is some position I respect but disagree with. For one reason: it is pure observation bias.

Those who fail to invent at the face of Necessity take the hit, hunker down and die in anonymity. On the other hand, the ones who prevail have their names written in history as legendary inventors and innovators. Rinse a repeat over a couple thousand years and everybody knows that "Necessity is the mother of invention, and technology is usually developed in response to need".

Malthus is highly misunderstood as having stated that doom in unavoidable. What he actually said is that unconstrained population growth will eventually be forcibly constrained by hard physical and ecologic limits. I'd rather have rational planning or cultural taboos limit the max human population in any given region.

I don't disagree with invention and creativity and a role of a problem in motivating the two -- I can't, really, having ended up writing a couple of odes to it on HN in the past.

However, I prefer my necessities not to involve potential humanitarian catastrophes. The steam engine, the rapid advancement of powered flight technology, and Google were all created in response to a need, but none of these needs were of the "young people will starve and old people will be left desolate if we don't come up with something" variety.

We're not short on need for cheaper energy right now; I don't think we ever were. (More efficient agriculture is a slightly more complex subject due to political reasons.) Maybe someday we will be at a point where we can safely adopt a policy of encouraging lots of children, but right now it seems a little irresponsible.

I don't want a planet where most of its natural resources are dedicated to maintaining a massive population. I'd much rather have a world where human influence is strong within its own sphere but leaves most ecosystems as pristine as possible.

Greater human population is antithetical to biodiversity and low pollution. That should probably be a greater ethical imperative than maximizing population numbers.

I would love to see a blog post on this.

There's another historical alternative:

5. When an old person becomes useless, drug him senseless and throw him off a cliff.

Allegedly this was customary among the ancient Sardinians in pre-Roman times. The drug they used on the elderly before killing them induced a sinister grimace, giving root to the expression "sardonic grin":

http://www.telegraph.co.uk/science/science-news/5344257/Myst...

Facetiousness aside, that's a neat anecdote, but the point stands. Original commentor said there were three options - destitute and possibly homeless old people, after the fact emergency spending, or some sort of pension system. That ignores family/community ties, which is in my opinion a much better solution. You can disagree, but not even presenting it as an option is either being disingenuous or missing a really obvious potential solution.

The government can't mandate interdependent families and communities. Those either happen or they don't. They can mandate social security.

Interestingly, the government can also mandate compulsory euthanasia for the elderly.

> Interestingly, the government can also mandate compulsory euthanasia for the elderly.

I can't see it happening with short-term elections to office.

I guess I tend to group that with the other missing fourth option, "hope everyone saves for retirement". I agree that yes, ideally, people would all find some way to take care of themselves for retirement, whether out of savings, or with family, or some other method. But empirically, in modern societies a lot of elderly end up penniless and alone, so the question is what we do about that.

In Thomas Paine's Agrarian Justice, he uses similar logic was well (in part; his main argument is that improving land doesn't entitle you to the land, but only to the improvement, and that a reasonable land-tax can address this). He also anticipates Malthus by considering a future steady-state population.

http://www.thomaspaine.org/Archives/agjst.html

While it may not be the best of ideas, you have to balance it with freedom and the value of self-reliance. Social Security as it is only helps further the growth of the nanny state while also limiting our freedom to do with our own money as we see fit.

As a side note, Government should never be in the business of "Public Good" projects. Time and time again, government has shown that it cannot be trusted.

Do you consider mass vaccinations of mid 20th century a public good project? Do you consider them a failure?

Public safety.

The problem with having the government do it is that they can be collectively less responsible. Think about it: instead of having a system you trust, you need to have a system that 51% of the voting public trusts. When that voting public consists disproportionately of old people, that means a system that pays out more than it can afford to, and redistributes income from young to old.

In other words, you get what we've got, which doesn't even work.

Basically, if you're not either a Wall St trader, or in a government retirement plan, or a company owner, then you're screwed.

Quote from the article:

"In other words, if you have saved just $25,000 -- and remember, that describes about half of all workers -- you are less than 2 percent of the way toward your goal. Your future definitely doesn't include cable."

My situation is that I have diligently saved 12-14% of everything I've ever earned, in the 12 years I've been in the US, into a 401K.

Sadly in those twelve years, I've endured 2% mutual fund fees and two market crashes, all of which hit my savings pretty hard. In fact, I lost money after inflation is taken into account.

So at 42, I basically need to build something I can sell and assure myself of some income over a reasonable time period. In my case as an engineer, I need to build a software company.

I also need to stay healthy, live as cheaply as possible, and shed as many expenses as possible once I get nearer to retirement. Boat or RV living looks like a great way to do that. Certainly paying the fixed costs of a house or apartment is going to be a killer for those on a small income.

I am not a financial advisor, but don't put everything into a 401k. Only put the minimum required to get your employer's matching contribution (if anything). But the rest of your intended retirement savings into an IRA, where you can completely control what your money is invested in.

Hell you are probably better off putting a bunch of money into an index fund that tracks the S&P500 and paying less expenses than the 401k funds do, for the same or better performance.

Make sure you are still saving a sizeable amount of money in a traditional, FDIC backed savings account, for emergencies.

I am not a financial advisor, but I am a personal finance writer.

This is well intentioned, but too reductive.

All 401(K)/403(B) plans are not the same. Mine is managed by the vanguard and has microscopic fees.

Similarly, all investors are not the same. I don't think it's necessarily sane to sock money into an S&P 500 index fund, especially one that's capitalization weighted.

As much as it sucks to say this...the best way to deal with your finances is to get an advisor. A lot of them are leeches, but good ones exist.

The emergency fund idea is a great one though. I'm partial to keeping 3 months of expenses in cash and another 9 months in highly liquid, low volatility securities.

I know that I should find a financial advisor to help my wife and I plan what to do with our growing incomes. However, I have no idea how to pick a good financial advisor and keep hearing how bad many of them are. Any advice on this subject, even if it is just a reference to a decent guide?

I used to work in financial software and very much disagree with aspiringsensei's advice. There's a huge adverse selection problem with financial advisors: the ones who are any good at managing money can make far more at Goldman Sachs, which tends to leave the people who don't really understand what they're doing advising the retail investors. The advice my sister got when she talked to a "good" (recommended by her employer) financial advisor was atrocious: it was based mostly on the theory that large dividend-paying companies never go out of business, which seems rather ironic considering he worked for Merrill Lynch, a large dividend-paying company that nobody would imagine would go out of business, and yet...went out of business in 2008.

I'd start by educating yourself on the mechanics of the market. Read A Random Walk Down Wall Street, read Benjamin Graham, read Warren Buffett. Learn to read an income statement and a balance sheet, and look at some historical stocks with income and assets in mind. Figure out how you would manage your money if you had infinite time. Then if you want, hire a financial advisor that manages money the same way you would, except has the time that you don't to actually investigate companies and keep an eye on their financial performance.

Also, keep in mind that an index fund is effectively free financial advice (that you always follow) from every market participant. Essentially, you're saying "I don't have time to make my own investment decisions, so I'm going look at the average of what everyone else is doing, and do that." That average will include everything from Goldman Sachs money managers and Warren Buffett down to retail investors and financial advisors. It's capitalization-weighted though, so the people with the most money's "votes" count the most, which is usually what you want.

I don't think we'll come to agreement. There are bad FA's out there. Your wife got bad advice, and bad advice is out there. I certainly agree that a lot of FAs are meatsticks who should be locked away.

But I think our dissonance comes from a place you might not expect. I view the prime contribution of a financial advisor to be the construction and adherence to a financial plan with clearly stated assumptions and goals.

I don't think most investors can do this on their own, and I don't think reading "A random walk down wall street" will help them.

Personal investors are poorly served by a mentality which suggests aiming for the highest total return is their goal. They should instead seek to generate a return which will provide for their needs.

Also, equal weight indexes tend to broadly outperform cap-weighted indexes, fyi.

Here are some good questions to ask yourself, questions your advisor should ask you, and questions you should ask your advisor.

If you can get clear answers to all this stuff, you're doing pretty well.

full disclosure: I work for this organization. Interested to hear what you think about the site & etc.

http://www.cfainstitute.org/about/investor/Pages/questions_a... http://www.cfainstitute.org/about/investor/Pages/questions_a... http://www.cfainstitute.org/about/investor/Pages/questions_a...

"I'm partial to keeping 3 months of expenses in cash and another 9 months in highly liquid, low volatility securities."

I'm curious...what highly liquid, low volatility securities are you in right now? The best I've been able to do is a high-yield online savings account, but I'd love to know if there's something better.

I put this question to my advisor two weeks ago, and his point was that right now, if you're talking about something that you reasonably fear will be short-term (which is the entire point of emergency funds), there's nothing better enough than a saving account right now to make it worthwhile. Getting even 2% vs. .5% for two or three years just isn't that significant on a couple tens of thousands of dollars, the difference is swamped by future uncertainties either way. Either way you're pretty much going to be able to take out what you put in.

I'm partial to treasurydirect's t-bills program. No fees (except if you sell early) and short maturity.

If you're under the FDIC insurance limit, I've generally found savings accounts to pay more for the same safety. For example, ING Direct currently pays 1.10%, versus 0.15% for the 1-mo and 3-mo t-bills.

I use a CD ladder for this purpose. Twelve one year CDs, each maturing on different months, set to automatically reinvest unless we decide otherwise. Works well for the people who need to have their emergency money a bit harder to get too, too. We just like getting slightly higher interest.

My 401k is an index fund. Or a couple of them, rather.

I dunno what other people's 401k plans look like, but I've got about as much flexibility to invest as I do with my Roth IRA, and pay less in fees. A lot of that's because I knew more about finance when I set up the 401k, so I was already on the index-fund bandwagon and didn't pick it because, say, my dad had an account at the same firm.

Fund selection and account type are mostly orthogonal. The reason to decide between a 401k, IRA, Roth IRA, or individual account are tax and withdrawal considerations, not investment decisions. Then you make investment decisions within the account based on where you want your money to go.

Withdrawal options are interesting. I always get conflicting information (from financial advisors no less!) about the options for early withdrawal from a Roth IRA. I think I'm finally comfortable (after confirming specifically with my Roth IRA provider) saying that you can withdrawal from your Roth IRA as long as it's only capital invested, and not money earned on that investment.

As spammy of a title as it is, Ramit Sethi's "I will Teach you to be Rich" book is a great no-bullshit look at understanding your personal finances.

That's my understanding too, for the Roth IRA.

So you are correct about the original contribution thing. There is also an option to start early withdraws on investment appreciations as well. It gets complicated, but basically you can start making regular withdraws (once a month I think, always of the same amount) penalty free.

Index funds that charge 2%? There are insane ones out there, but that seems way high based on a bit of time with Google, which included one page that claimed the average management fee for actively traded funds was somewhat less.

I'm wondering where you're getting the 2% figure from, since I didn't mention it and the parent post didn't mention it. Maybe the grandparent-post?

The lowest of my actively-managed funds has an expense ratio of about 0.5%; the highest is around 1.5% (it's an international fund for some diversification). My index funds are typically around 0.05%, which is a factor of 40 less than 2%.

Oops, great-grandparent. Should have looked at the names, the flow of the conversation fooled me.

AFAIK you might be in the minority of 401k investors, as far as investment choice/freedom and fees goes.

In my experiences the choices have mostly come down to "you can pick one of these 12 funds".

I think my choices may also come down to "you can pick one of these 12-ish [actually, I think it's more like 20] funds", but most of the funds are index funds. In general I've found the selection pretty adequate for my needs, since I'd probably be putting it into index funds anyway, and there're only so many indexes out there. My only quibble is that there's not all that much international diversification possible - but my 401k limit isn't anywhere near my total savings, so I can just put outside money towards that.

similar experience, similar thoughts, same age, same background and I made the move beginning this year

where to?

After 15 years of engineering/engineering management at various corporations I started this January a LED lighting company. It is a big step, but I am hopeful that in the long run it will be the better choice. See my profile for the company link.

My startup is working on exactly this problem. Our customer development reinforces that people - of all ages - know intellectually that they're supposed to save. But they have no idea how to start, or if they've started, if they're actually on track to have a decent retirement.

You can request an invite for our preview at http://www.blueleaf.com and shoot me an e-mail to sachin@blueleaf.com with HN in the subject and I'll make sure you get in before we launch. If there are any pony requests - "someone should really do [x]" - I'd love those too, even if you're not interested in our preview.

So this is cool, looks like a great app. Will it be as a service only, or will you offer customers the chance to buy the software and run it on their own hardware? I for one am leery of giving out all of my financial data.

Webapp only for the foreseeable future. The security/privacy is something we've spent a lot of time and effort on. (Our CTO is a crypto by trade with a focus on financial applications: http://www.eecs.harvard.edu/~cat/ ) Thanks!

Mint.com has millions of users who have provided that information. That said, in the medium to long term we're working on a unique solution that will permit you to keep your usernames and passwords only on your local computer while keeping the less sensitive data (transaction history, balances, etc.) on our servers.

Does your service work with Non-American (Canadian in my case) financial institutions?

I told the financial adviser that administers my 401K at my current job that "it's clear that putting money in a 401K makes Wall Street rich, it's not clear that it's making me rich."

There's a serious breakdown of trust between Main Street and Wall Street, and it's got (at least) three angles: (i) I'm not confident that money I invest in retirement plans is going to grow, or even keep it's value, (ii) I'm not sure that the "system" currently knows how to distribute capital to places where it will promote prosperous business (if it did, investment funds would be making money...) and (iii) I'm worried that giving money to Wall Street is like giving it to an enemy that's going to actively make my life worse: it's going to go into lobbying to keep Washington D.C. corrupt an ineffective and it's going to be used as a club to force businesses to eliminate jobs in the U.S. and ship them out elsewhere.

Given that business, government and such doesn't have a vision that makes sense five years down the road, never mind 25 or so when I retire, it's hard to avoid a "carpe diem" attitude and to simply try to minimize your use of financial services: spend what you make, don't borrow or save.

I've noticed some people here are enthusiastic about index funds; now, "seldom is heard a disparaging word" about index funds, but personally I think they're a lot more harmful than hedge funds could ever be.

I mean, index funds just spray money indiscriminantly at companies that are lucky enough to be on some list. It gives the big shareholders a great opportunity to collect rents, but it means that investors aren't doing there job -- why does an investor deserve to get a return on capital? Because they do some thinking about where they can put their capital to get a good return. If you don't do that thinking, you don't deserve any return... Just as if if you've got some job and you don't do your job... You don't deserve a paycheck.

"Bubblenomics" made index funds look brilliant from 1980-1999, but in the long term, I think mass investement in index funds is one of the major reasons why Wall Street doesn't work...

The interesting thing about index funds is that the better they work, the worse they work. If everybody put their money into an index fund, then nobody would be actively researching stocks, and the valuations reflected in the index would be wildly out of whack with respect to the true values of the stock. But if nobody puts money into an index fund, then we have a lot of people chasing high returns, a very efficient price-discovery system, and index funds that should return the exact mean of all your actively-managed funds.

As a very broad heuristic, I take the size of the financial industry to be a pretty good indicator of the efficiency of index funds. When the financial industry is large, you have many eyes actively looking over stocks, an efficient market, and index funds that should track the performance of the underlying assets well. When the financial industry is small, you have fewer eyes keeping an active watch on stocks, and so you're often better off becoming one of them than sticking everything into a dumb index fund. Right now, the financial industry is still pretty large.

As another interesting heuristic, I've found that oftentimes the best asset class to invest in is the one that everybody is certain is a bad investment. In the early 2000s, that was probably precious metals; in 2007, it was cash. Both asset classes have zoomed up since then. You don't want to invest in asset classes that people are actively looking at and decide are bad investments, though (eg. penny stocks). You want asset classes that people just take on faith to be bad investments.

I find your arguments somewhat convincing, but I've got the feeling that the "size of the financial industry" is one of the major reasons why it's not working. The housing bubble, for instance, shows that it can make very bad decisions -- I wonder if there is more money seeking a place to invest than there are places where the money can be profitably invested.

There was some prominent economist (Greenspan? Krugman?) who agreed with you, and blamed the recent string of bubbles on a "global savings glut", caused mainly by Asian development and the high savings rates of the newly-wealthy Asian middle class.

Anyway, I think there's a lot of truth to that, but you've got to work with the zeitgeist you're given. When the financial industry is large, index funds perform well relative to actively managing your own money. They may still perform poorly on an absolute scale. When capital is abundant, rates of return for everything go down.

You could also broaden things a bit to look at the economy as a whole. One of the reasons I'm interested in entrepreneurship is that capital is abundant, labor is abundant, and so logically the scarce resource would be their complement: innovation. You'd expect rates of return for entrepreneurship to skyrocket in a low-capital-cost, low-labor-cost environment like today. Which seems to be the case. Innovation has a high barrier to entry though: you need to have the skills and foresight to make something happen that wouldn't otherwise happen. It seems, perhaps, that the best rates of return come from investing in education in a narrow field of specialty that's broadly applicable to many emerging technologies.

This article needs to be printed everywhere, at all times.

I have no idea how some of the people I see every day are going to save up the $1.5 million (in today's money) they'll need to retire. Half of 'em can't even pay off their credit card bills every month.

I think the basic answer is they won't, which is a sad sad answer.

I don't think it has to be all bad. The article is talking about people saving enough money to live purely off their savings for 30+ years without working, which seems like a kind of silly goal. Why would someone spend something like half of their adult lives not working? At that age, I expect I'll either have enough presence of mind that I'll be doing some sort of work (even if reduced), or else I'll be senile/decrepit, in which case I definitely hope I don't drag out my end for 30 years. The idea of planning for 30 years of complete idleness seems crazy.

Rather than retiring at a specific fixed age, it makes more sense to me to retire at a specific time-til-death or health status: say, when you're down to 10 years of life expectancy, or too sick to work, whichever comes first. Actually I think 65 was probably chosen because it was once roughly the age where those things were true.

While this is true, I think my answer still stands even if you plan on retirement for only 10 years. It doesn't really matter, they don't have enough income to live how they're living now, let alone having extra to support themselves once they are no longer working.

does everyone want to retire...ever?

I'd say that especially the types of people who hang out here would get completely bored stiff if they did ever retire.

The work we do (programming etc) can be done into your 80s,90s,etc. Sure, people will probably want to slow down a bit, and when sight starts failing etc but it's not like we're sportsmen or builders or anything strenuous.

I want to "retire" so that I can work on things that i think are interesting without having to figure out how to monetize them.

figuring out how to monetize things is interesting ;) But I do see your point.

I want to retire in only one sense: I don't want to worry about money, and I want to be free to go do stuff. Anything.

My 80- to 90-year-old relatives are in nursing homes with failing minds and bodies. That will happen to almost all of us eventually, and your quality of life then depends on paying for quality care. No matter how much you love your work, there will probably come a time when you need to support yourself from savings, not salary.

I suppose it's not legal in most places, but I think if I reached an extent of failing mind where I was unable to do any sort of productive work, even part-time, I'd take the euthanasia option. What's the point of just sitting around senile in a nursing home for years on end?

I do still agree some significant savings are needed, e.g. for the case where your mind is still reasonably good, but you need physical assistance. But this article is talking about thirty years of living off savings! I definitely do not want to live thirty years of my life in which I'm completely unable to do anything but sit in a nursing home living off my savings.

Perspective is relative, my friend. Your mind, then, will be very different than it is now.

For that matter, unless you are a true believer in an afterlife, for most of us, every day above ground beats the alternative.

Definitely don't agree with the last point, if it isn't accompanied by a minimum of mental awareness and quality of life. Certainly the (thankfully, few) elderly people I've known who died after a long, drawn out decline were quite unhappy about it. My grandfather lived 10 years past going blind, breaking his hip, and going increasingly senile, and spent about the last five years of that time constantly asking why God wasn't letting him go when it was his time to go. Doesn't sound appealing to me.

I think everyone I know over 65 has given whatever do-not-resuscitate/no-life-support/etc. directives they can, and would give more if it were allowed. The single most common fear I've heard people of that age express is not a fear of dying, but a fear of living too long past the point where their health runs out.

Right. This is why curing aging is just about the best thing we could do from both an economic and humanitarian perspective.

Look at facts. The vast majority of the elderly die of their health and not suicide.

Annecdotally, my grandfather, 102 years old, is a bit senile at this point yet still chases women, sings whenever he likes, and is generally an upbeat fellow. My wife has late stage Huntington's Disease and yet still enjoys simple pleasures. I share a dread future with my wife yet I am still here as well.

Happiness can be found in the most desperate of conditions.

Despite DNRs and such, there are many and simple ways to end our own lives. And, yet, the vast majority live them to the end.

Take this conversation, set it aside for 20 years, then tell me how you feel. I suspect the combination of marriage and children will change your outlook.

My retirement strategy is to die young. If I start making a lot more money or my cost of living magically decreases over the next decade I might reconsider this but otherwise I don't think social security is going to provide any quality standard of living. If I can't continue to work (which I don't mind doing) I plan to check out. (sad but true)

Thinking the same thing here. If I'm not able to work I'm not sure how able I'll be to enjoy much else anyway.

This whole model of slaving away your healthy years in the hope you'll still have the savings and the strength to enjoy life after 70 seems like a scam to me. My plan is to work less each year but keep on working. This isn't so bad if you do work you enjoy.

Learn Spanish and move to South America.

... then watch the previously low cost of living skyrocket as everyone does this and brings their money with them.

This actually works wonderfully if he buys up a lot of property. When everybody moves in and brings their money with them, land values shoot through the roof, and the people who owned that land make out like bandits. Folks who owned small orchards in Silicon Valley in the 1950s made out like bandits (assuming they managed it well), as did people who bought humble ranch-houses in the Boston suburbs in 50s and 60s.

He could be the Astor of Curaçao!

Wow, that's actually a really tempting idea. (Starts making plans to buy up half of Buenos Aires.)

Big cities in developing countries are expensive too. A better idea would be to find some beach property in South America; the continent is developing and getting older as well, so lots of people are retiring to the sea-side (as I said, big cities are expensive).

In the south of Brazil you won't find many bargains left, but I've read that lots os europeans are buying houses in the northeast (the infrastructure is a lot worse there, but it's 3.000km closer to Europe).

Ask the cubans that were forced to leave how much they got for their land. One of the things that people take for vantage and dont realize is the stability of the US government. I'm not saying that mexico is on course for collapse but the police have lost control of the north border

I think the US needs to seriously start rethinking its system. What's the use of being so rich if you need to contemplate retiring to another country or dying early after you stop working?

Please look at Europe and Canada. They have their problems, sure, but they take care of their old and sick. And they do it with less money!

If you are poor and old in Canada, you will not get the quality of life you want from the public system alone.

You will get the medical care you need, and won't go without food, shelter and basic care.

Your understanding of life and things never changed before? Recall your beliefs 10 years ago. Now imagine 30 years passed - there is a very good chance that your desire to live will be strong. You will be miserably calling your current selfish self "an idiot" for not saving up while trying to meet ends on the government money.

No offense really, but some people can't extrapolate their own personality even 5 years ahead. Trust me, you will change with age, everybody does. Hopefully it won't be too late to start saving then...

I'm open minded about the future. I think the problem for people my age (30-ish) is that the entire time we've been working real wages are flat or negative. We've never had a chance to get ahead of the game. I make more money than most of my friends, lots of them have student loans to deal with too, and it's hard to project a way to save even $200k-$300k over the next 30 years. Of course I could cut my expenses, move into a cheaper place, eat lots of ramen, but that's just choosing to live poor now instead of later. So for now I'm making the choice to be poor later.

Yep, this is it. I have at least two friends from college that have spent over a year trying to find work. "Defeated" doesn't even begin to properly describe how they feel.

So true :)

My present self is cursing my 20s self for having spent a load of time traveling and running up lifestyle inflation debts, basically boozing it up non-stop.

On the other hand, I have some really good experiences and memories.

But I've been incredibly focused on reducing debt and building equity for the past year or so, and I don't see that changing.

I'm just glad I woke up while I still have 35 years to repair the damage, I have my health, live in a country with affordable healthcare, etc.

Okay, it takes effort to make me suspend my rule against politics on HN, but I have my limits. If you are some kind of troll, I nominate you for an Academy Award.

First: Social security is solvent, it will be solvent for years, and to fix it will require a minor tax increase decades from now. Quit believing propaganda.

Second: Our future budgetary problems are nonetheless real. But they are all about health care. If you really want to worry about balancing budgets in 2040, worry about that. Social Security is fine and will continue to be fine unless somebody deliberately fucks it up. (By talking like a fatalist, as you do, you inadvertently help the cause of the people who are trying to fuck it up; that is why we are having this little chat.)

Third: The major problem in the USA today is that we have a massive excess of productive capacity. Not only can the country afford to feed, clothe, house, and entertain you quite nicely, but our biggest problem is that after we did this we might still have too much capacity. The economy is not well designed for such a situation, and it needs fixing.

(Aside: The fix is called "stimulus", literally known as "printing money". People won't spend money? Make them spend it now. Create new money and give it away; make the old money move by threatening to inflate it away in the future. That nobody in power understands this, or that they pretend not to, is an epic failure of education and/or governance; the consequence will be millions of impoverishments and, likely, early deaths, perhaps even your own. Tragedy sucks.)

To the extent that the country does not choose to feed, clothe, house, and entertain you and everyone around you, it is a problem of government, economics, and politics. It is not that we are physically incapable. It is that we are not so organized.

The solution is to organize.

Where will "the money" come from? Money is not a physical thing, like platinum. It's some numbers in a spreadsheet by which we keep score: If your number is higher, you get to control more about what the economy does.

If you wake up and discover that all the money belongs to a handful of people who have gamed the ruleset by which money is distributed, and that they are failing to use their giant pile of money to direct the economy to keep everyone else fed, clothed, housed, and entertained to the correct extent: You change the rules, or you stop playing the game.

By many orders of magnitude, the best option is to change the rules. Or, rather, to change one rule, to turn one knob that was designed to be turned: Raise taxes on the people with the money.

That anyone contemplates suicide rather than go down fighting for this simple rule change is a triumph of modern propaganda.

Get up out of the fetal position and be an American, for the love of all that is holy.

Do you think that every rich person has simply gamed the system and that none of them have actually earned their money? To make a blanket accusation against every rich person and simply say that their taxation is the cure is nowhere close to being an American.

First: Social security is solvent, it will be solvent for years, and to fix it will require a minor tax increase decades from now. Quit believing propaganda.

Solvent in the sense that next month's check won't bounce? Or solvent in the sense that if it were an independent entity entitled to its current revenue streams, and nothing else, you'd happily buy someone's future SS income at 100 cents on the dollar?

Or, wait, solvent in the sense that if I had a balance sheet that looked like theirs, and I made the promises they make, I wouldn't be going to jail?

Solvent in the sense that there's enough money to pay full benefits until the late 2030's or early 2040's without any changes. And solvent in the sense that minor adjustments to benefits or taxes will fix it beyond that.

http://www.brookings.edu/multimedia/video/2009/0514_social_s...

The accounting profession has created a term for entities that are almost solvent, and can almost pay off their debts. The term is "insolvent."

It's dangerous to have entities for which the clock is running out. What we should aim for is the opposite: a social security system that's gradually accumulating assets, and can eventually use that to offload its risks (by, for example, paying a life insurance company to assume some of its obligations).

That way, 1) we know how much things cost, and 2) our problems are gradually getting solved. Now, we have the opposite situation.

I vote and I follow politics closely. I haven't totally given into the idea it's hopeless but I'm deeply skeptical about the ability for democracy to solve these problems. We have a progressive President who enjoys a majority in congress and he's still not able to enact a really progressive agenda. I'm starting to feel like the system is completely rigged. The people voted for change and all they're getting is Republican filibusters preventing most of it from happening. It's a subversion of democracy. Even if you win elections certain factions in this country are going to prevent progress.

But that's sort of the point. I don't have a problem with this article which is largely good advice but I think it's useless. Everyone knows what he's saying is true yet people aren't saving.

As someone whose friends are predominantly in their 20s I can tell you people generally give 2 excuses...

1. "One of these startups will eventually work and I know I'll cash out on at least 1 big IPO before I retire so it doesn't matter"

2. "I don't know anyone whose saved for retirement and the average american household owes 20% more than they make. So the Government will have to do something and even if I don't have enough money I'll be taken care of"

So the bottom line is people are in denial and you can print this article up and tape it to their heads and it still isn't going to fix that problem

3. If I do save, it will all be taxed off me to pay for those who didn't.

Here in the UK, the last government started levying a tax on the pension funds, and the present government hasn't revoked it. So people who have guaranteed pensions paid for by the taxpayer, out of tax revenues, are doing so off the backs of those in the private sector who save for their retirement. It disgusts me.

One can make this "off the backs" argument about any tax. Why is the tax you describe worse than other taxes, or isn't it?

Yes, it is worse. Already private sector workers know, despite record levels of NI, we cannot expect the State to look after us in our retirement. To tax us further to secure the votes of the unionized public sector is the worst sort of political cynicism.

$1.5m is a bit high for the average case. The median household income in the United States today is about $50k, so if you estimate 80% of your income for retirement, that's $40k. The conditional life expectancy of a 65-year-old is ~17 yrs, and inching up very slowly, so maybe will be 20 years in a few decades. So that's $800k in today's money, modulo investments.

And that's assuming zero contribution from social security. Even if social security gets chopped at some point, I don't expect it to go all the way to $0; people working today and paying in will probably get some payout. Even if it's only $10k/yr, that reduces the needed savings to $600k.

Granted, most people don't have anywhere near $600k either, so it might be arguing between whether they need to save infinity or 2*infinity more than they currently are.

Yes, but your math only works if you don't exceed the life expectancy... if you want to be reasonably sure to have money into your 90s, you'll need more.

You also have to factor in the risk of deceases and injuries. You may have to be forced into early retirement.

A good start is to not live beyond your means. Having consumer debt that you can't pay off every month is going to put you in a deep, deep hole.

suppose everyone did the exact opposite. they saved like crazy and only spent enough to survive.

then the economy collapses for lack of consumption, no!?

something seems deeply wrong here.

You've hit upon the most important and possibly most overlooked point in macroeconomics. At the level of the whole economy, modulo things like inventory, there's no way for aggregate savings to be anything other than aggregate consumption + investment. Every good or service is produced by someone and consumed by someone else. If you don't have both parties, there's no transaction.

When you "save" money, it's essentially a claim check against someone else's income. It's a way of recording that you contributed more than your fair share to the economy this time, so at some time in the future, you have the right to consume more than your fair share.

If everybody contributes more than their fair share, who's using up the excess? And then if they all go to cash in their claim checks at the same time - say, when the baby boomers retire - who'll produce the goods and services needed to satisfy those claim checks?

I haven't implemented this myself (yet), but perhaps the solution (for an individual) is to store value through scare resources (eg gold and other precious metals, maybe land) rather than through money (ie stored labour).

It still has the same problem: the price of gold goes up as everyone purchases claim checks denominated in it, and then crashes as everyone tries to cash out those claim checks for the goods and services they need to live.

The real solution is to store value in resources that increase the productive capacity tomorrow, so that when everyone tries to cash out their claim checks tomorrow, there will still be enough goods to satisfy them all. In other words, investment. The problem is that an investment is only a good investment when it increases the productive capacity for something that people actually want tomorrow. It does no good for everyone to invest in houses when they really need health care upon cashing out those claim checks.

And there are often technological barriers that prevent dollar investments from being productive. You can pump all the money into biotech research that you want, but you're still not going to get a cure for cancer until someone actually cures cancer. Innovation has a random element that isn't always amenable to throwing money at the problem.

People often wonder why the U.S. economy did so well after WW2, compared to the Depression before and the 1970s malaise afterwards. IMHO, it was because the large amount of pure scientific research undertaken during the war created a large stockpile of fundamental scientific breakthroughs that were ready to be exploited. All the hard, risky parts of innovation were already done, funded by the War Department, and so companies could readily transform surplus cash into innovations that made people's lives better in the future.

A lot of things are likely to change over the next few decades, so I wouldn't bank on retiring in the same way that people have done in recent history. The whole notion of retirement is actually quite a modern concept, which really only arose within the last century (http://en.wikipedia.org/wiki/Retirement). There's going to be more automation which will mean that people can work for longer, and I suspect that the whole notion of what it means to "work" will change.

> There's going to be more automation which will mean that people can work for longer, and I suspect that the whole notion of what it means to "work" will change.

why doesn't automation eliminate the need for work?

Automation has greatly reduced the amount of agricultural work, and jobs today which we regard as central to the economy are also likely to be eventually automated. Probably what constitutes "work" will change, and things we regard as recreational today may become "work".

frankly I think retiring in the U.S. just won't be a viable option for many people...the cost of living is just too high.

I mean think about it....to retire properly, you need to pretty much put away all your spare money for decades.

What I think will happen, is people will just start retiring to other countries where the cost of living is so small, that you can live comfortably on 10-15K a year.

I've heard that Costa Rica has a thriving American retiree community for exactly that reason.

Costa Rica is safer and more stable than many other countries in the region, but even so, it's not just Costa Rica. Mexico, Panama, Nicaragua and many other Latin American countries are apparently seeing more and more US retirees.

Top two hits from a pretty naive Google search:

http://www.ehow.com/about_5488519_places-retire-latin-americ...

http://articles.moneycentral.msn.com/RetirementandWills/Reti...

Which in the longer term will drive up the cost of living in Costa Rica.

Perhaps in 20 years the US will be that country.

Not without dramatic social upheaval. Imagine going through a deflationary period where it makes economic sense to walk away from every single mortgage in the US? I don't think I'll be interested in living here right then.

The cost of living in most places outside of the coasts is very reasonable. I currently live in the Metro DC area and most people here retire to PA, WV, or farther to the midwest.

What do you expect midwestern retirees to do ? They're not earning coastal wages all their lives.

Many just retire in place. If you own your home outright (common in the midwest for retirees), and Medicare is covering your healthcare, your annual living expenses are pretty low. Food, property taxes, gas, and entertainment--- you can probably live on $10k/yr, which is half what social security pays.

The whole thing gets a bit less scary if you decide to retire at 75, rather than 65, which is not a problem if you take care of yourself, and don't have a physically demanding job (which most of us don't). You need 1/3 less money and have ten years longer to get it.

You might not have a choice, though. Better be prepared for other scenarios (bad health, etc).

$1.5M is a ridiculously high target. If you retire at age 60, you have a 20 year life expectancy (males) and 24 years for females. With $1.5M you can spend $50k a year for thirty years without even factoring in continued earnings on that money or $20k/year in social security payments. Once you do factor those in, you'll die with more than the $1.5M you started with in retirement funds.

Right, and you'd have to save over three thousand dollars, every single month, for forty years, to reach that goal.

This math is grossly oversimplified...you're assuming zero interest. I'm on a train and can't do the math right now, but compounding interest + other variables like employer 401k contributions, tax shelters, etc make a huge difference when doing this calculation.

Interest rates won't hover near 0% forever.

Getting returns of 2% a year, drops that down to $1300/month.

Still steep for most people, but much more achievable, and 2% return is pretty conservative.

Of course you would not save for your retirement using a savings account.

Maybe someone needs to start paying those under-40 workers what they're worth. Perhaps salary increases should be considered annually in context of ACTUAL cost of living increases, not fairy tale inflation figures? Well, executives are having no problem hanging onto their savings. Actually, oh - they're hanging on to our savings. Maybe it will start trickling down soon!

the hardest part for me to truly believe, since i'm currently in my 20s and enjoy work, is that i'll have to retire. is it true that when i get old i won't be able to program/manage or find some kind of reasonably enjoyable and sustainable employment? will my flaws, such as physical and possibly memory constraints, out weigh my virtures, such as experience and knowledge? there's so much unknown to getting old and i am so confident and able right now. do i really need to be scared of old age?

Things change.

It's not about being scared, it's about being prepared. It's about making sure you have the choice as to whether or not you'll be working when you are 70, 80, 90, or whatever age you start to feel old.

Do you live to work, or do you work to live?

doesn't this problem reduce to the availability of labour?

i'd like to see a thorough accounting of how much labour is required to maintain: our food supply, our residential properties, basic services, etc.

and i'd like to see that compared to current price of these things, to see if they make any sense.

it makes no sense to me that as we've progressed technologically, it seems to have become increasingly difficult to survive.

A lot of this has to do with marginal value. The cost of basic survival has gone way down - but in the process, it's freed up a lot of disposable income, so people build bigger, better, and yet less efficient ways of doing things to soak up that extra money.

Health care's perhaps the biggest example. A hundred years ago, millions of children died in infancy from things like measles, whooping cough, polio, etc. Now this has been wiped out by vaccines that cost maybe a day's salary for a parent (and cost the manufacturer probably pennies to make). Same with antibiotics.

The money all gets spent on the other end of life. We now have the technology to keep patients who would've died within the hour alive for months in an ICU. That costs millions, and doesn't work all the time. But when it does - how can you put a price on that? What price is there on a father being able to see his kids grow up, or a grandparent being able to meet their grandchildren?

The same goes for many other areas. We can build 1200-square-feet houses pretty cheaply. But why bother, when there's some family that's willing to pay over $1M for that 5000-square-feet McMansion?

I think a lot of the problem is that American culture is so damned competitive. It's not enough to have enough - you also have to have more than the neighbors. There's really no end to this game - it will always be possible to have something slightly better, it's just that it becomes increasingly expensive the more you try to squeeze out.

What if you don't plan to retire? If you're making money doing something you love (in my case, web development), why would you ever need to retire? To rest? To do all the things you've always meant to do but didn't make time for when you were younger? To see the world?

I'd rather do that stuff while I'm young; learn a new language in my spare time now, start that band now, travel to foreign countries now - hell, I can do my work there if I need to. I think retiring makes sense for people slogging it out 40 hours a week at jobs they hate, but it doesn't make sense for those of us who actually find our work fulfilling.

That's fine. This article is aimed at the vast majority of office workers that live paycheck to paycheck, and have no idea what they're in for.

Web development may not be around in 20-40 years, certainly not in the way it's done today. That said, I'm sure that type of technical ability will be in demand, you may have to learn some new things.

Well, I think the internet will be around in 20-40 years, and if you're not constantly learning new skills then you're dead in the water anyways. I just don't see retirement as the goal.

I'm with you on this except I want to own the company, not work for it.I see nothing wrong with working until you die, it's the working for someone else till you die that bothers me

I don't really see that much of a difference. Working "for yourself" just means you deal with clients directly. You still have to work to make other people happy before you can be happy. They will only pay you as much as they need to, and collect the benefits your work brings them. True, working harder or better lets you have more enjoyable work or earn more. On the other hand, when working for others, working harder or better earns you promotions or allows you to change jobs or employers to more enjoyable or better paying. Where exactly is the difference?

What if you reach a point in your life where you are no longer able to work, for health reasons or otherwise?

Its great to save up but imagine you get a chronic illness or cancer and you have a 20% deductible on your insurance. Suddenly your life savings are gone or seriously reduced.

First some advice you should take: Check out Bob Brinker (http://www.bobbrinker.com/portfolio.asp)

I don't worry about retirement because when I was 19 years old and working in the valley I happened to catch his radio show when he said to pull out of the market. It saved me $20,000 that's still working for me today.

(The 10 year numbers might look low right now but keep in mind the Dow was DOWN 14% in that same time frame)

Second some advice that's based on my semi-educated opinion: 401(k) is a scam for anyone under 50. Yes your employer might match it but even the risky portfolio of a 401(k) is usually very conservative and the guy running it usually isn't the firm's star (no one ever got rich managing a 401(k) accounts). If you're over 50 and can't afford to lose the money than go with that but if you have some time I personally think it's better to take a little risk and hopefully get a bigger reward.

It's great that you were able to save $20,000 and miss out on a market decline, but why does this mean you no longer need to worry? If anything, you should take this "win" and continue to build upon it. For most people, there is no point where you've saved "enough" - more is always a good idea.

Second some advice that's based on my semi-educated opinion: 401(k) is a scam for anyone under 50.

This is why conventional advice is to only contribute as much to your 401(k) as to receive the employer's matching contribution, which is essentially free money. The rest of your retirement savings which you want to invest should go into an IRA, which allows you to control what exactly it is invested in.

I didn't say I stopped investing but I don't have to worry because even if I don't make any more than the return I'm making now (in the worst economy on record) I'll still be making more in interest than I should be taking out (if I use around the average amount that retired people need per year).

The big advantage of 401k is that it is a tax deferred account which can be a good amount depending on your tax bracket. Also they don't have to be limited to just a small number of funds, some companies also provide the option to invest on your own( if this is not an option at you company, have a chat with the person running the benefit plan) and if you leave you can roll it over to a rollover IRA at any broker you want. Finally, if your company does provide a match, that is money you are essentially throwing away for what is usually a very small percentage of your salary.

You have written down the generally promulgated wisdom. i.e. what you're being sold by Wall St and the Government.

However, if you actually need to withdraw any of these savings ahead of time, you're looking at a 10% penalty. And who's to say that taxes won't have risen on 'fat-cat' retirees in 10 or 20 years. Why not take the (known) risk now, pay your taxes and have risk-free savings now.

What about another market crash?

Can you invest in property, or in metals, in a 401K?

Can you avoid 2% mutual fund fees.

I posted elsewhere in the thread, but think very carefully before pumping a lot of money into a 401K. 20 years is a long time for the government to keep the value of money stable, or for Wall Street to not sucker you in a crash, or for fees to T Rowe Price to eat away your nest-egg.

If I had another opportunity, I'd sock 5% away in a 401K into Treasuries, and put the rest in cash and metals. There's a reason banks have vaults with gold, silver, platinum etc.

Answer this question: Do you trust Wall St and the government with your money for 30 years for the small benefit of maybe a 10% tax saving, or do you actually want to maintain the control of, and the value of that money, by paying regular taxes on it now.

This is bad advice. 401k matching is the easiest way to double your money, and tax deferral means ~30% more working for you now (when it matters, for compound growth). When you're young, the market being down just means you're getting more shares for your contribution.

You're right that 401k funds tend to suck, but most funds everywhere tend to suck (compared to market). The ones that don't, you probably don't have access to.

So just avoid the managed funds. Buy index, outperform most, and save the fees.

My grandmother is in her 90s and mentally she is at 100%. She gets around a little slower now.

That is a scary thought for some. She retired in her 50s!

So, maybe she should be working!

She has always been active in the community. Since retiring she has volunteered at the hospital, nursing homes and in the community 5 days a week.

Combine that with her great-grandchildren and she is working a busy schedule!

No doubt, one doesn't get to that age feeling fine without staying quite active mentally and physically.

Agreed - If I ever retire from paying work - I will still be working.

My plan is one mentioned on NPR several years ago: retire, but work part-time at a grocery store that has insurance benefits.

All these clever plans fall apart when everyone does them.

What are the barriers to entry to working part time in a grocery store? What makes you think you can compete with a teenager who wants that job?

fair enough. I'd still like to do some job that is more socially involved and keeps me standing up every day, and talking to people. We have a fairly wealthy guy in his sixties who decided to work as a manager just to have something to do every day. Along with that my similarly-aged pension-era parents are starting a business for the first time. My point is that retirement isn't a requirement for living your older years. If anything retirement is more of a nascent American concept.

I agree everyone can't do it, but it does seem to be pretty common already, so quite a few people are doing it. Go to a grocery store at, say, 10am on a weekday during the school year, and the cashiers are mostly old (at least around here).

Or migrate to countries that offer free health care.

There's no such thing as "free" - you mean healthcare paid for by their taxpayers. Who might not be keen on non-contributors showing up and using it...

Yes save that money and watch it disappear down the rat-hole the next time some Too-Big-To-Fail bank decides to raid whatever fund you've put it all in.

He's right, of course, that younger people need to save more because institutions are failing all around us. Too bad he neglects that second part...

I think globalization and internet will saturate http://en.wikipedia.org/wiki/American_dream

i don't understand what you're saying.

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