Decent Read on Retirement Saving versus Spending Now

fortune11

New member
Decent read I thought worth sharing .. None of this is new, but  it is nicely put together . 
http://awealthofcommonsense.com/2018/02/now-then/



Now & Then
Posted February 25, 2018 by Ben Carlson

This week I came across this new cartoon from Randy Glassbergen:

"Explain to me again why enjoying life when I retire is more important than enjoying life now"

This is deep.

It perfectly encapsulates the conflict that occupies nearly every financial decision you make in your life (whether you want to admit it or not).

There are people that take this inner struggle to the extreme. There are those people who save nothing, live paycheck-to-paycheck and never plan ahead for their future financial well-being. And then there are those people who are frugal to a fault and never spend any money or enjoy themselves.

For the rest of us, we are constantly trying to strike a balance between enjoying life now and ensuring we have the resources to enjoy life later.

There is no ideal balance for everyone because we all have different goals, needs, resources, expectations, and desires. The hardest part about planning for your financial future is the simple fact that we don?t know what?s going to happen. No one has things all figured out because no one knows the various curve balls life is going to throw at them.

My thoughts about this have changed over the years. I?ve been a saver for as long as I can remember. So balance for me has been reminding myself that it?s okay to spend money now and enjoy myself. A life with a full bank account but no experiences or enjoyment is pointless.

Since there is no perfect way to figure out how much to save versus how much to spend for everyone, here?s how I think about this conundrum:

Spending priorities change over time. After I got married my wife and I wanted to travel as much as we could before having kids. Now that we do have children travel has taken a back seat to spending on things like time, experiences and activities for the kids. I also don?t want to miss out on a vacation with my kids just so my wife and I can retire a few years earlier.

Get the big things right and don?t worry about minor purchases. It?s not the minor spending decisions you need to worry about. Get the big things right and you don?t need to worry about the minutiae. How you plan for the huge purchases in your life (transportation, housing, etc.) will have a much larger impact on your finances than how much you spend on Starbucks or Chipotle.

The missing link in personal finance advice is making more money. Personal finance experts are constantly preaching the benefits of cutting back and saving more money. Very few ever discuss how important it is to improve your career prospects to increase your paycheck. This is obvious, but making more money makes it easier to achieve some sort of financial balance, assuming you?re able to keep your lifestyle inflation in check.

Your spouse?s views about money make a huge difference. If you?re not on the same page as your spouse philosophically in terms money, saving, and spending it will be very difficult to get your financial house in order. Your life will also involve a whole lot of stress.

Treat savings like a monthly bill. Automating your finances is probably one of the best things you can do to increase savings, and avoid unnecessary fees, late charges, and stress. I view savings as something like a bill payment I have to make each month (or week or quarter, etc.). Each account I have automatically pulls money from my checking account on a periodic basis so I know I?ll never be tempted to spend it in the first place. This is huge from a psychological standpoint to make saving less painful.

Guilt-free spending helps. Automating your savings allows you to avoid having to use willpower to force yourself to save. It also allows you to spend money without feeling guilty about it because you?re simply using what?s left over. This also allows you to spend more on those things that make you happy and cut back elsewhere on those things that aren?t a huge priority.

Save & enjoy. My strategy whenever I earn extra income or a bonus over the years has been to save a decent chunk but also carve out a piece to spend some of it now in an enjoyable way.

This still doesn?t answer the question of how much is enough in terms of saving for the future but there are no easy answers to this stuff.

The other consideration is that the best time to save and invest is when you?re young. The paradox here is the people who usually have the means to save (older people) don?t have as much time to allow compound interest to work in their advantage while the people who have the time to allow compound interest to work in their advantage (young people) usually don?t have the means.

I guess the best you can do is get to the point where you?re not stressing out about money all the time, whether that?s how much you?re spending now or how much you have saved for the future.

Maybe living a wealthy life is really about avoiding the stress most people feel about money.

As Nick Murray once said, ?No matter how much money you have, if you?re still worried, you aren?t wealthy.?
 
Good, read. I especially like and agree with the last sentence. ?No matter how much money you have, if you?re still worried, you aren?t wealthy.? If you live below your means, you never have to worry.
 
If I had a good idea what medical/insurance/meds will cost in the future I would be able to at least make an educated guess at the decade I'll be able to retire.  It's a complete wag with a conservative spin, so I'm assuming at this point I'll be working till I'm 65.  A strong stock market and a fair inheritance could move that up 10 years or more, again depending on the assumptions made.  We're set better than most I think, but have never, ever felt comfortable about the future.  We save a good amount every month but our burn rate is high as well.  Our industry is cyclical, feast or famine, and a layoff (or 2!) at our age could completely derail our plans and everything we've worked so hard for. 
 
Dae, focus on the burn rate.  You'll never retire if you don't tame the burn rate and chasing high incomes often increases your burn rate.

Most importantly, come retirement, or even lay off, you're not going to change 20 years of habits that you've adopted to compensate for very busy working professional lives with college bound children.  It's the little things that aren't little, dinner out, take out, prepared meals, blue apron, maid service, nanny help, and the weekly shipments from Amazon of the most recent, maybe that'll make it more manageable.

Run here, run there, we must buy something to entertain ourselves. Scurry, scurry, spend, starbucks for the road, another $25 itunes card down...  and the hamster wheel keeps turning. 

As a society, we engage in chronic retail therapy.  Sometimes it's $1 habits, sometimes it's $100.


 
https://www.iwillteachyoutoberich.com/blog/lol-at-this-avocado-toast-advice-from-a-millionaire/

6. Why don?t personal finance experts talk about earning more money? Answer: Because they don?t know how. They?re not financial experts, they?re journalists. That?s why they write about cutting back ? it?s all they know. They don?t know about Big Wins or how to automate your money. They will never tell you how to afford a $1,000 dream coat or $5,000 dream vacation (even though they take them themselves).

But they sure do know how to tell you what you SHOULDN?T do with your money. Here?s an article that goes into other cost-cutting strategies. According to them, you need to cut back:

No coffee
No taxis
No dinners out
No nights out
Cut back on one subscription service
No lunches out
No overseas travel
No weekends away
No bottled water
And, inexplicably, a random photo of two half-naked women (???)

According to them, if you do all of this?in 4 years, you?ll have enough for the $34,000 that millionaire guy got from his grandfather. Do these people look at themselves in the mirror when they write this stuff?

Hey guys, if you give up water and oxygen, you can also save money too. In fact, you?ll never need to spend another cent after implementing this strategy for approximately 2 minutes.
 
I'm trying to figure out what college expenses (all-in) will be in 15-20 years.  What are some good websites that forecast the rising costs of these expenses?  For my model, I've been assuming 5% increase a year, but that seems way too high for the long-term. 

That would mean, I'll need roughly $100K/year per kid set aside.  :-[
 
I'm actually not too concerned about college if my kids stick to a UC (or even a... gasp... CalState).

Yearly Montessori tuition cost as much so we've already put my kids through multiple college terms. :)
 
My personal opinion is that we may have seen the peak in healthcare costs already

Healthcare is the last frontier that hasn?t gone through the efficiency grinder yet . With a renewed focus on drug pricing and new upstarts like amazon trying to change things , I wouldn?t  be surprised if we start to see deflation in healthcare .
 
I invest in Healthcare REIT's that focus on senior housing, skilled nursing care facilities, medical office buildings, etc.

From demographics trend perspective, % of US population over the age 65:
2000:  12.4%
2010:  13%
2030:  19% (estimated)

Long-term demographics trend is favorable toward healthcare REIT's. Even today senior housing tend to have wait list unless if it was expensive.  However government policy that impacts senior housing and nursing homes is a risk.
 
HCP has been around for awhile if you want to take a dip in the senior property thing.  Don't know much about the company but my dad has invested in it for years and dividend has been pretty solid. 

NLY is also a very well known one with big paying dividend (10-12%), and has reliably been paying out many years. 

Stick to something with a good track record of recurring dividends.  These are both close to recent lows but I have no prediction on where they go from here, I don't invest in this sector personally.
 
These are all good choices . Just remember that you are buying them for the income / dividend as opposed to price appreciation . REITs stock prices come under presssure as interest rates go higher - this technical has been there in every rising rate cycle .
 
Great advice! I personally focus on:

Increasing income (my income now is 4x what it was 8 years ago)
Monthly expenses (low car payments, housing payments, low bills)
No waste (credit card interest, late fees, silly subscriptions, etc.)
Minimizing taxes (I paid some deductibles early last year to save a few thousand, use 529s for college, etc.)

Those are the biggest financial equations. If you do those four things right, you should have a huge "profit" every month that can go towards discretionary expenses (travel, entertainment, remodeling) and of course savings.

Savings don't have to just be for retirement. In fact there are many ways to save that will benefit you in the short-term as well.
 
paperboyNC said:
Great advice! I personally focus on:

Increasing income (my income now is 4x what it was 8 years ago)
Monthly expenses (low car payments, housing payments, low bills)
No waste (credit card interest, late fees, silly subscriptions, etc.)
Minimizing taxes (I paid some deductibles early last year to save a few thousand, use 529s for college, etc.)

Those are the biggest financial equations. If you do those four things right, you should have a huge "profit" every month that can go towards discretionary expenses (travel, entertainment, remodeling) and of course savings.

Savings don't have to just be for retirement. In fact there are many ways to save that will benefit you in the short-term as well.

A very reasonable approach overall.  Life is a balance.  Obviously it's important to plan for your own retirement (401k, roth IRA, etc), but it's also good to have some discretionary income to enjoy life too.  Everyone has different forms of enjoyment (some enjoy cars, some traveling all over the world, etc).

Find whatever makes you happy and go for it :)
 
nosuchreality said:
Dae, focus on the burn rate.  You'll never retire if you don't tame the burn rate and chasing high incomes often increases your burn rate.

Most importantly, come retirement, or even lay off, you're not going to change 20 years of habits that you've adopted to compensate for very busy working professional lives with college bound children.  It's the little things that aren't little, dinner out, take out, prepared meals, blue apron, maid service, nanny help, and the weekly shipments from Amazon of the most recent, maybe that'll make it more manageable.

Run here, run there, we must buy something to entertain ourselves. Scurry, scurry, spend, starbucks for the road, another $25 itunes card down...  and the hamster wheel keeps turning. 

As a society, we engage in chronic retail therapy.  Sometimes it's $1 habits, sometimes it's $100.
Clearly we've never met.  We're not bad with money; while I'm not saying we couldn't do better, for the most part we don't indulge in most of what you listed on even a monthly basis, unless you consider a $5 rotisserie chicken or food court meal from Costco once a week to be a real splurge.  Ok, you got me at Amazon, but it's worth it to only have to make it to Costco once a week for the perishables.   
We know our finances today inside and out and better than most, and we've stayed on top of it for 15 years. But I'm completely stymied by the challenge of planning for a retirement when there's a huge range of completely plausible outcomes between now and then.  What will the market do?  Will we actually get the social security we've been promised?  Will health care cost us $1000 a month or $4000?  I can envision a future where we struggle to get by and a future where we die with millions in the bank, and everything in between, and none of it would be far-fetched through the lens of history.
 
daedalus said:
nosuchreality said:
Dae, focus on the burn rate.  You'll never retire if you don't tame the burn rate and chasing high incomes often increases your burn rate.

Most importantly, come retirement, or even lay off, you're not going to change 20 years of habits that you've adopted to compensate for very busy working professional lives with college bound children.  It's the little things that aren't little, dinner out, take out, prepared meals, blue apron, maid service, nanny help, and the weekly shipments from Amazon of the most recent, maybe that'll make it more manageable.

Run here, run there, we must buy something to entertain ourselves. Scurry, scurry, spend, starbucks for the road, another $25 itunes card down...  and the hamster wheel keeps turning. 

As a society, we engage in chronic retail therapy.  Sometimes it's $1 habits, sometimes it's $100.
Clearly we've never met.  We're not bad with money; while I'm not saying we couldn't do better, for the most part we don't indulge in most of what you listed on even a monthly basis, unless you consider a $5 rotisserie chicken or food court meal from Costco once a week to be a real splurge.  Ok, you got me at Amazon, but it's worth it to only have to make it to Costco once a week for the perishables.   
We know our finances today inside and out and better than most, and we've stayed on top of it for 15 years. But I'm completely stymied by the challenge of planning for a retirement when there's a huge range of completely plausible outcomes between now and then.  What will the market do?  Will we actually get the social security we've been promised?  Will health care cost us $1000 a month or $4000?  I can envision a future where we struggle to get by and a future where we die with millions in the bank, and everything in between, and none of it would be far-fetched through the lens of history.

I'd say all we can really do is plan and hope for the best.

I do think we will all get some form of social security, just perhaps a somewhat reduced benefit compared to now (say, 75% of what we are currently projected to receive).

Historically, the stock market has returned close to 10% yearly.  Obviously no guarantee it'll continue to do that, but if you invest in both domestic and international index funds, then you can at least have some peace of mind that your future is tied to the entire global economy. 
 
Personally, I do not favor automated payments.  I use that hour of bill-paying to scrutinize our expenses and look for billing mistakes/fraud/etc.

 
As mentioned earlier I read Ramit Sethi.  In his book he offered two difference advice for left-brained neurotypicals vs right-brained artist wanna be's.

For example, say if you owe debt on a number of credit cards.  Advise for the logical person would be to consolidate debt and pay off cards with highest interest rate first.

However if you're the bellyfeel type then the advise is to pay off the card with lowest balance first, then followed by the next one.  This is referred to as the snowball effect as paying off the card is emotionally rewarding and will encourage you to pay off the next one.

Another example is cancelling monthly subscriptions in favor of "? la carte".  For example, cancelling monthly gym membership in favor of day passes, and cancelling cable TV in favor of paying per season/episode on Apple TV.  The reason is because if you pay a monthly subscription that's on auto pay, you don't see or feel the money going out.  But if you had to spend each and every time, then you become more aware of your expenses.

 
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