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Comment by lewis500 | Hacker News Reader

This is horrible. A few years ago I realized my parents were way behind on savings and just incessantly nagged them until they got on a good plan. They kicked and screamed the whole time ("You're our son. You can't tell us what to do."), but it's turned out to be one of the best decision I ever made. Next year they are actually going to retire. I dunno what I'd do if they had to work at Wal-Mart just to make ends meet.

Recently, I made this visualization of how US social security benefits are calculated:

https://lewis500.github.io/socialsecurity

Before I made it I actually had no idea. I think I might have worked a little harder to earn money when I was younger if I'd understood.

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Would be nice if the birth year were adjustable.

I thought about that but it makes the visualization much more complicated and, moreover, would require forecasting wages way out into the future to be relevant to a millennial. If you had tried to do some wage forecast in 1970 you would've gotten things very wrong, so maybe the same is true today. One day I will add this feature but not soon.

Or even better, birth place!

If you're willing to risk jail time, it can be. :- )

How were they able to catch up in just three years?

By "a few years" I mean about ten or eleven years ago. Fortunately, that means they bought most of their stocks since 2008 and have gotten great returns. They were also fortunate to buy a house in a good neighborhood during the bottom of the slump, and to live in a cheap state. So they can sell their house and almost pay cash for a modest house a little further out from the city. Fortunately, the city has relatively low traffic so even in the country they can get to a great hospital within 20 minutes. The state also has basically no property tax for seniors, which I think is questionable policy but very good for them.

They aren't wealthy by any means, like the retirees out here in California who have a million dollars (or several). But between their stocks, the home equity, the two social security checks and a small pension my dad got from spending time at a job at the city government they'll be alright.

Good for them, but do you see how this is essentially a gamble? Had they done the same 5-6 earlier they'd have lost a lot in both investments and real estate in 2008.

Yep they are lucky. The stock market is a gamble in the short run. Even a home is a gamble sometimes. But to me what was important is that they started putting away a much larger share of their income; even negative returns are better than blowing your money on boats or SUV's or a timeshare or gold coins or alaska cruises or whatever stuff TV tells older people to buy. I think the main effect of the stock market doing well wasn't so much to give them returns as to make them super excited about investment; so they scrimped and saved a lot more because it was fun to see their numbers go up so fast. They also worked harder at their jobs (both are self employed) to make more money to put in their retirement fund.

It's also easy to shield yourself from massive losses through diversification. Vanguard even had someone talk them through selecting funds, even when they didn't have much money to invest. I also got them to pay off loans (cars, credit cards), which is the safest investment you can make for the returns.

I should also emphasize that, having started so late, stocks could never be their primary source of income. At a reasonable withdrawal rate I think they'll get about about $15-25k per year. Most of their income will still be from social security. But on a long enough time scale one of them will get senile or cancer or something, and we'll thank god for that big pile of money when it's time to hire help.

Recessions like 2008 are part of the normal ebb and flow of the markets, and we're likely heading into another one (though hopefully not quite so bad). 5-6 years earlier wouldn't have made a noticeable difference unless they were planning on retiring between 2008-2012ish, the markets have recovered after all.

Personally, if I see the stock market dip like that again I'm going to double down on my 401(k) contributions.

You should double down on your 401(k) contributions today to better your odds for a comfortable retirement.

I wouldn't let expected market returns impact the amount you feel is appropriate to save/invest today.

I already put a healthy amount into my 401(k), my employer matches $1.20 for every $1 up to 6% of my wages plus I usually get another 4% of my salary put in every April as a profit sharing bonus. I could put more in, but I’m trying to pay off debt and save for a house so that takes priority - even then I may invest in my brokerage account first to have semi-liquid assets available if something major happens and I need access to more money than I have in savings while not locking everything up in low APY hell.

Historically, timing the dips does not work out, but maybe if everyone is thinking that way the strategy could work.

If timing the dips would work consistently there wouldn't be any dips because everyone would take the risk free return until there is no risk free return left.

Of course not consistently. Just, if something becomes conventional wisdom in investing all of a sudden, there might be contrarian opportunities for a little while.

You are a great child.

Thanks for this! As a young guy I had absolutely no idea what social security checks entailed.

It’s going to get a lot worse.

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