At 77 He Prepares Burgers, Earning in a Week His Former Hourly Wage
bloomberg.com
bloomberg.com
When the 2008 financial crisis hit, what little Palome had saved -- $90,000 -- took a beating
He then sold his New Jersey home for $180,000, kept what he needed to quickly pay off his credit card debt and divided the rest among his children so they’d have down payments for their own homes.
Ok, so he retired with $270,000 of assets plus $1,800 per month from private and public pensions. Buy a life annuity (as a 65 year old male) with the $270,000 and you're getting around $1,600 per month. That yields a total income of $3,400 a month or $40,800 a year, which is considerably above the national median income (around $28,000/year according to wikipedia).
As I see it, the problems here are entirely of his own making:
1. He gave away 2/3 of the wealth he should have been relying on during his retirement,
2. He gambled his remaining assets in the stock market rather than making investments suitable for his demographic (mostly bonds) or buying an annuity, and
3. He picked up expensive habits when he was younger -- he takes regular flights to visit relatives and occasional vacations.
(And I suppose I could add 4. He should have saved far more money before retiring -- but my point is that even at the point he retired he was in decent financial shape.)
For most parents a choice between yourself and your children is no choice. He's accepted a level of financial hardship to be, or at least feel like, a good parent. I see no issue with that.
Regardless, you know as well as me - once you walk down that path no one knows it better then yourself.
Context matters. By itself, I would agree with your sentiment. But in the context here, it sounds like you are saying "You should cut your own throat to 'invest' in your kids!" There are a lot of people who really believe things like that. I think it is very unhealthy for them as individuals and for the larger fabric of society.
You're right; but I am a child, and there's no way I would let my parents help me buy a house if it meant that they couldn't retire comfortably.
If you were his child all you'd probably have seen was that he sold his house and offered to help you get on the property ladder with some of the money he released. If that happens and you believe that he's got other savings then that's a very different situation to be presented with than the idea that you're messing up his retirement.
But even if that weren't the case it would surely be a failing on their part rather than on his?
He's a VP of Marketing. Why is it that we expect him to know how to manage a retirement fund, even if it is his own?
The wide-spread end of the pensions system and the rise of 401(k)s is going to be a disaster as more and more Baby Boomers retire.
I'm not American and I still know what to do:
1. Do montly investments in a few cheap ETFs (S&P 500, Emerging Markets, MSCI World) within your 401k
2. Once you get closer to retirement, roll most of the money over to more secure asset classes like bonds
3. done
This is a fact. No matter how easy saving for retirement is, it's a fact that the majority of Americans have retirement savings that are utterly insufficient. I have no idea how this will play out.
That mostly solves that problem, but leaves people like me that would like to handle retirement savings themselves a bit annoyed.
Ironic, because that's how I feel about speed limits: it's for the best overall but annoying to those that drive well... and you're from Germany where they have the Autobahn.
That said, my concern for my dim-witted but well meaning citizens makes me willing to bear this for the overall good.
If you're poor, you're not going to have the spare money to save.
If you're rich, the IRA contribution limits begin to hit. Hmm lets say 75K/yr * 20 years / $5K per year contribution limit that'll take 300 years to save the 20 years worth.
If you're in a career that's short term, its going to be difficult to save 20 years of annual income if no one over the age of 35 is hired into that kind of work or the average worker burns out in less than 10 years.
And the only purpose of the whole racket is so the medical industrial complex can simply confiscate it all anyway before you get to enjoy it.
Finally the article implies the guy likes going to work and only does it for extra beer money. And whats wrong with that, other than people who actually need the job to live can't get his?
The IRA limits only apply to money you save in an IRA. There is no requirement that your retirement savings be entirely in an IRA.
Unfortunately, a lot of people that I've talked to who could quite easily save a lot more have been under the impression that maxing out their IRA contribution each year means that they're in good shape.
1) You need an IRA to retire.
2) You need 20 years income in the bank to retire.
Its fun to watch those two memes fight.
Yes, your primary residence should not be thought of as an investment vehicle, but it's a good way to have your money ~keep pace with inflation and the mortgage is a bit of forced savings. After the kids move out you can downsize and you'll have the difference in cash.
Once you figure out a societal system where there's tons of money to going around and everyone can have a cushy retirement and fully paid medical expenses and never has to worry about anything, and where anyone can immigrate at will (excluding Monaco, Finland, Switzerland, etc that carefully guard their unique circumstances) please let me know.
Edit: Actually it seems I'm not really correct. The article clarifies this:
> His big break came in 1975 when he was recruited to The Cooper Cos. as vice president of marketing for the Oral-B dental-care business.
> The job gave him a high five-figure income and an executive’s life at age 39. He flew first class to Cooper offices in the U.S. and in England, Sweden and Germany. He helped win an endorsement for the Oral-B toothbrush from the U.S. Olympic Committee. He had a closet filled with business suits, and on weekends he played golf with other executives.
> So in 1980, when he was 44, he started a consulting company, with Cooper as his main client. He also did consulting for Sandoz Pharmaceuticals, Johnson & Johnson and others.
> In flush years, Palome had several clients and earned about $120,000. Though he saved for his kids’ college and helped his elderly parents, retirement wasn’t on his radar.
> “I never thought I’d live this long,” he said.
His wife also died in 1983 so he had to bear the full cost of raising his children. It seems that he chose to provide a good life for his kids over his own retirement, as far as I can tell. I know a lot of parents who made or are making the same selfless choice. This is a slightly different topic, but it's really unfortunate that for most middle class families having multiple kids is effectively deciding not to retire comfortably.
Also: who works for only 25 years? You'd have to graduate (very late) with 30 and retire (very early) with 55?
I've been very fortunate to have spent more than my fair share of time traveling out of the US and there are so many amazing low key places with decent access to necessities. I really have started seeing this as a viable option down the road.
I keep reading about Uruguay, and how it's quickly becoming a target destination for a lot of retirees, assuming I were to be of retirement age today, I'm having trouble thinking of a reason NOT to do this.
Family? Helping your children with their kids instead of selfishly running away to some tropical destination?
After you get past a certain age, you may also want some help for yourself from your children.
Still though, I hardly consider it a selfish choice -- shit, I would have loved to have gone and visited the grandparents in some tropical destination as opposed to northern Idaho.
The connection between parent and mature children also varies a lot from family to family.
After you get past a certain age, you may also want
some help for yourself from your children.
Not everything can be reduced to dollars and cents.
Note that with modern transportation, you can pretty much be in the middle of nowhere while simultaneously being less than 90 minutes from downtown Chicago via medium speed train (or probably 3 hours away by traffic jam car...)
Its not like you'll have to give up modern medicine and go back to faith healing and leaches. One of the benefits of the health care bubble is you'll occasionally see a giant hospital in the middle of nowhere. There's a major Mayo Clinic facility in a rural county that has more cows than people up north, in a city that has fewer residents than my high school had students, next to seemingly infinite acres of recreational areas.
How about just leading a more moderate lifestyle in the States? Live in a town, not downtown. Keep a single car, and bike a lot. Live in a small house or condo. Etc.
I find these sorts of articles interesting in a morbid sort of way. I've been making out my 401k contribution for as long as I've been working, and was told back in the 80's that it would be worth millions by now. Uh, not so much :-). To its credit though it has come back from 2009 which was pretty horrible.
The scary thing about watching technologists age is when they stop learning. If they stop and figure "I'm there" and then start to coast. Never a good outcome on that as far as I can see.
The major cities in the northeast leave a lot to be desired because they are often very poorly run because socialist political parties are in power[0]
A lot of the growth in the Northeast has been due to the Bolsa Família[1] conditional cash transfer program that redistributed wealth to poor across the country, but especially the northeast because many of Brazil's poor live there. It works in a way that doesn't undermine local economics but instead infuses cash at the lowest levels of society, generating economic activity in local communities and providing opportunities for individuals to scale to small businesses and small businesses to scale into larger ones. One of the biggest takeaways for me was that except for major capital expenditures like power plants, ~12 million people spending ~$13 will better allocate ~$156 million dollars than one fund manager investing $156 million dollars. On top of that, a $10 million investment in Brazil is likely to be half of that after graft and palm greasing.
Read up on the Bolsa Familia. IMHO it's really a model of how you institute a social program in a capitalistic way and the northeast is proof.
[0] nothing wrong with many ideas of socialism per se, but if you want socialism within your city/state/country, then you need to ruthlessly pursue capitalism with respect to other cities/states/countries that aren't yours so you can fund your social programs.
For a lot of people their ego wouldn't be able to handle the step down in status.
This guy took care of his family and now he's taking care of himself.
From what I can tell, this is a media outlet looking for a juicy story about seniors festering in poverty where such a story doesn't really exist.
10x income is a sliding scale - anyone can and should do that.
As someone who immigrated here as a refugee without a dollar to my name and a family to feed, I realize how much of a role pure chance and luck play in my successes thus far despite the obstacles.
Selling the house was smart, but dividing the rest and giving it to his children was a terrible move. Homes in the US are used a proxy savings accounts - sold at retirement or later to gain retirement funds, or used as a (hopefully) no-rent living space.
But no one cares. In Africa the retirement is your kids. You take care of your kids, and when they grow up, they take care of you. While this system is sure to keep many under poverty, I prefer it to one where someone who is 77 has to get to work just to ensure he can have the basics.
I respect the way elders think in America. That is they are independent, they help the youngsters as much as they can, and they are just significantly more active than older people where I am from. However I do think it is right for them to have to work past a certain age, especially when they have well-able relatives.
It's social security. I take care of my own, and I am not around, my extended family should, if not, my neighbors should, so on and so forth.
All I am saying people should take care of their parents if they are old and cannot afford the basics.
What is more interesting is that another 15% to 20% of my colleagues at this store are in their late forties to mid fifties. For various reasons they each decided to abandon their careers (found out they didn't believe in what they were doing, or decided to take time off to look after their kids and could never get back into the industry, etc...)
It is a bit of a specialized store so I am sure it is not the same distribution as in a Target or a Walmart. However it is also worth mentioning that aside from one or two people (who I am not sure about), everyone else has at least a bachelors degree or is in the process of getting one. There are maybe 15 college students out of a staff of about 60.
He makes about $80 a day now, which is $400/week. In flush years, he used to make about $120K. At approximately 2000 work hours per year (in USA), that works out to about $60/hour.
So he makes in a week slightly less than his former daily wage. [updated this -- it said more previously. I can't do math either!]
It's amazing that even a financial publication like Bloomberg has innumerate journalists.
The financial crisis which affected retirement savings. The housing crisis which affected what was typically people's largest asset. Rising health-care costs. Baby-boomers entering retirement and the impact that'll have on Social Security. Lack of pensions, and dependence on 401k's. The jobless recovery.
It's easy to blame an individual for not having planned for the predicament he finds himself in, but it's also possible to see what he's going through as a sampling of unexpected or uncontrollable macro-economic factors, weighing on a much-larger sector of the population than just this one man, in a way that will ultimately have an effect on society as a whole.
> The median 401(k) balance for households headed by people aged 55 to 64 who had retirement accounts at work was $120,000 in 2011
The 77 year old highlighted is just an easy way to personalize the larger statistics.
I suspect many posters are thinking, "well, he shouldn't have tried to help his kids so much." And that is also exactly part of the point: he shouldn't have to choose between his own retirement and his kids.
This is a fairly ugly thing. I'm not sure what I would do if I lost my health or my skills fell too far out of date for me to catch up.
And I'm one of the lucky ones. I have actual earning power. Most of my cohorts do not.
I can't imagine this ending well.
Why not?
That's the route that my dad took, but it wasn't planned and he wasn't even aware to seek it out. He was a two-time CEO, and one of the companies he founded and took it to a moderate exit. However after he left the last company, he moved back home to Brazil, where he encountered ageism over and over again. Companies and recruiters basically told him "Look, you're the perfect candidate. Every company looking to compete internationally would love to have someone like you. However they want someone who has your experience but is 40 to at most 50 years old. My dad is 66. After struggling for a while and burning through a lot of his savings being told no over and over again because of his age, a friend of his put him in touch with Instituto Dom Cabral, probably Brazil's best business school, where he easily got a job as a professor doing managerial consulting advice to companies that pay for access to its professors.
The fact is, people (investors and those who sell investment 'products') got too used to successive bull markets, and took on too much risk. When the smart people sold, the dumb people (or those who have too much faith in their dumb brokers) lost big.
Take on risk when you're young, so if your position takes a hit, you have enough time to ride it out. When you've got a good amount, switch into low-risk investments, and when you're within a decade of retirement, put everything you're counting on into a bank account or GIC. Only play with what you're willing to lose...
Is the theme that old people without chronic illnesses tend to be more active?
Or a money manager thinks people should give him more money to manage?
Or if old people give money to money managers they should expect to lose 40% of it as per the star of the article?
Maybe the theme is people who have extreme ups and downs in their lives should plan during the ups for the downs?
There was some discussion about the star of the article being very unusual because he has assets and most old people don't. My experience with ancestors is they have assets until they become sick, then they lose all their assets that can be stripped from them until they qualify for free medical. Then they live on free medical and SS until the end. So I'm not surprised that old people tend not to have assets, thats kind of the point of a for-profit medical industrial complex.
Couple that with having been out of the field for many years...
make your money in the US. Retire to Bangladesh/Philippines.