America seems to be the land of entitlement where people adopt a sense of need and greed, rather then act to save now and for the future.

Hints on how to make math less fuzzy…

Paying off your house should be a priority, not having a mortgage and debt rather then equity … and so few will own their homes by retirement. It should make sense now, not just when you retire. (well, for thos who make their house a home that is…)

Saving does not have to be all about deprivation. Neither does living within your means. And it is never too late to start. Pay off the debt. Forget that the math is fuzzy as it always has been and always will and just act. Throwing your arms up and inaction isn’t going to solve future problems or make that math less fuzzy. Preparation is.

Wrap your credit cards in elastics and freeze them in a block of ice and don’t touch them until they are paid off and then only in dire need. Take the same $$ that was used to pay credit card and use it for savings et voila… you are now a saver and wiser to boot!

Budget. I know it is passée word, but it is about to come back in style

You can do it yourself but do remember financial planners are pie in the sky if not and… they take their hefty slice. Go for a nice basket of diversity with transparent fees.

PS owned my first house and started retirement savings in early 20′s. I am not rich, not wealthy by any stretch, as I am on a reduced pension and work only part time, but I am happily semi retired in mid 50′s and service no debt other then a small mortgage to be paid off before my other pensions kick in.

http://www.zerohedge.com/article/dylan-g rice-what-weimar-republic-popular-delusi ons-can-teach-us-about-japans-upcoming-h yperi

America is in a better position than most of Europe or East Asia, because of demographics, but the storm will impact us strongly. The real crisis across the developed world is demographics, something that ivory tower types like Krugman discuss almost never.

Japan’s GDP per worker has actually been growing faster than ours for many years. But meanwhile their workforce has been shrinking and herein lies the problem.

Within a decade, their worker-retiree ratio will be 1 to 1. This is absurd and requires massive benefit shrinkage or else there will be national collapse.

Much of Europe has a similar problem. What does this mean for us? The global glut of savings seen now will turn into a global shortage of savings. All those Japanese and Germans who upset us by saving so hard will be doing the opposite, drawing down their savings to fund their retirements. They aren’t engaged in some vicious mercantilist war. They just have very distorted population pyramids and they are sensibly saving for their retirements all at once and will then draw down their retirements all at once. This is the great global hurricane coming. What happened in 2008 was not so severe as what is coming. A global savings shortage will be the real economic storm.

Expect high interest rates. These times of very low interest rates are reflective of global savings abundance, a kind of one-shot demographic dividend. When these trends reverse, interest rates must shoot up. Bonds will be massacred. Growth will be hindered everywhere. With money in short supply, inflation can be expected and owning tangible things (such as a house with a low fixed-rate mortgage) will be very beneficial.

Low consumption in the future will be critical, so it is a good idea to get spending (houses, energy efficiency improvements, lasting furniture) out of the way now, in preparation for much lower spending in the future. Energy efficiency investments are a great way to spend now on guaranteed, untouchable income stream in the future. Low-debt stocks will be a good bet too. For a young person, investing now in valuable skills that will bring an income stream in the future is terrific. Parents and relatives, send everyone you know and love to engineering school, med school, grad school in the sciences, business and so on.

And especially, have several children now!! They represent a big cost now and a huge income stream for your family and America in the future.

SS could never work because there was no real way for the government to save SS taxes, it ends up affecting monetary polciy and growth for a society as a whole to try and save cash. The best we can do is make sure all infrastructure is pre-built before the boomers retire so that we don’t need construction workers and the excess labor can move to services for the elderly.

HOW? Not being stupid. We raised two kids in a 1,200sq ft. house in the burbs we bought when I first got out of school rather than buy a McMans when my salary went up. I commuted on the bus rather than driving every day. Vacations were camping trips to the National Parks. We said ‘no’ to the kids when the Iwannas started. We clothed the kids from T.J.Max and Ross instead of whatever overpriced trash merchant was the latest fad. We’ve never bought a new car, only ever good used. We never max our credit cards and always pay off the balance. If we can’t afford it and don’t genuinely need it, we don’t buy it. Oh, and ALL my investments are in Vanguard.

People in the U.S. used to know how to do that. Screw the ones that forgot.

This is a strong reason to rely on a 401k rather than a pension plan or Social Security. At least the ownership of those assets is clear. If *THAT* part of the system breaks down we have anarchy.

Forever. Or close enough so as to make no difference. Financially there isn’t much distinction between living 30 years into retirement (certainly plausible) and living forever. So you might as well plan for the latter.

“How much will it cost to live that long?”

Start with what you THINK it will cost, then add a 50% safety margin to account for what you didn’t expect. And hope that is enough.

How is this different from any engineering project? You think they try to figure out EXACTLY how many girders are needed to hold up that bridge for fifty years (not having any clue what conditions the bridge will actually face over that fifty year span)? Or do they make their best calculation and then bump the number by 50%?

IE… with the 9.5% annualized real return I’m forcasting for your portfolio (every year for the next 15) you will have a retirement of milk and honey so long as you both shall live.

Millions of seniors were sold that bill of goods and at least some of those would have actually saved more and spent less had they been advised to do so.

I’m on the Warren Buffett plan myself… work as long as I’m able to do and save like crazy irreguardless of age or wealth. If I die at my desk than I guess my family will make out like bandits…

…personally I hope my kids turn out like minded. I hate imposing on others for so much as a ride to the airport… let alone feeding, clothing, housing, and entertaining me for 20-30 years.

Perhaps it’s my youth talking and I’ll be singing a different tune when I’m 59 but to see all the protests in France over raising the retirement age from a totally unrealistic age of 60 to the somewhat unrealistic age of 62… I mean what planet are those people on?

Best hopes for more planning and less panicing.

I agree there is little we can do. As always I hope for the best and prepare for the worst. It means my glass is always half full … even when the champagne is flowing!

Dan Ariely has an alternative method to save that is getting mixed reviews:

http://danariely.com/2010/09/25/want-peo ple-to-save-force-them/

Look, you or I, as individuals, can meaningfully think about saving for retirement. That is because it is reasonable to assume that the world will continue on more or less the same course regardless of our individual decisions.

But we cannot save real goods and services, we can only save money (in whatever form you prefer: cash, gold, cows, you name it.) The claim made by money on future goods and services is a risky one contingent on many factors. But one thing is certain: we cannot buy more future goods and services than are produced, no matter how much money we have or in what form. Therefore, it is impossible for “Europe” to retire. If Europe’s future production does not meet future demand, then a “pension gap” will be the least of its worries.

You have made the category error of applying microeconomic thinking to a macroeconomic problem – “the fallacy of composition” is the learned term for this.

Individuals can reasonably answer many of the questions you raise. They can implement a plan to wholly pay off the mortgage before retirement. They can calculate when their kids will be in college, and make it clear that they see their responsibility ending there. They can estimate the cost of their lifestyle.

Still, the best you can hope to do is to aim conservatively for a target that already incorporates a large margin of safety. That way if you fall short, it will hopefully be a gap that can one way or another be bridged.

I’m strongly suspicious of retirement planners because they often don’t use sufficiently conservative estimates. I’d rather not wake up on my 60th birthday and realize that I’m only half way to what I will need.