walkitout (walkitout) wrote,
walkitout
walkitout

more retirement hand-wringing

This time, it's the don't-borrow-from-your-retirement crowd, with a refreshing dose of, geez, guys, sometimes ya just _have_ to.

http://www.boston.com/business/articles/2008/07/16/workers_break_retirement_piggy_bank_in_tight_times/

Some tragedy here; a woman borrowing when her daughter dies because she needs to take care of her grandkids. Tough stuff.

The last couple paragraphs are really wacky. After noting that retirement accounts are pretty much the last money standing post-SS reform and real pensions going away, a study by Hewitt Associates is quoted.

"four out five workers aren't socking away enough money into their 401(k) accounts to keep up their standard of living after retirement.

On average, employees are projected to replace just 85 percent of their income in retirement, compared with the 126 percent they would need when factoring in inflation, longer life spans and medical costs, the study by Hewitt found."

There are _so many weirdnesses about this_, it's hard to know exactly where to start. First, precisely when did it become de rigeur to say you have to replace all of your income when you retire? Much less _more_ than your income? The theory in the past was that you'd have no debt, and you'd be old so you wouldn't be eating as much, buying clothes as often, buying furniture _ever again_, etc. And maybe you'd downsize to a smaller residence so your utilities and etc. would be smaller. Blah blah blah. R. thinks the old advice was somewhere between 50% and 70%, which isn't that far off from my (completely unsupported) recollection.

Without digging through the study, it's hard to know what this factoring in inflation thing means. I figure if they're talking about replacing income, it's real-dollar income, not nominal -- but maybe they mean nominal and then all bets are off in terms of what 100%+ nominal replacement would mean in real dollars (but then, I _know_ people who went into the '70s with what seemed like a huge stack and came out of the '80s way ahead in nominal terms -- and abysmally behind in real terms). Then there's the longer life span/medical cost question. Having talked to some of my slightly older friends who are dealing with the dying-parent problem, I'm hearing a whole lot of, gee, in the end, after all that fighting over what would be a fair way to divvy up the inheritance among the siblings, it turned out it all got eaten up by doctor's bills. There's a real concern there -- but I'm kind of suspicious there isn't enough money in the world to adequately insulate anyone there.

Do I advocate dipping into retirement savings for anything? NO! Am I gonna get on someone's case if they decide they just hafta? Probably not. Their life.

But on the other hand, I really do think we ought to be seriously worrying a whole lot less about whether we can afford our "entitlement programs" like social security, and a whole lot more about how we feel about living in a world in which old people are so freaking poor they die from the heat, the cold, the starvation, etc. Because that's the way things _used_ to be.

ETA:

This brochure still includes an old estimate: 80-90% of preretirement income as a "quick estimate". Again, no discussion of real vs. nominal, altho they do discuss the inflation issue they take the lame-ass way out (3.5% even forever. We _wish_.).

I find it striking that everyone just sort of _assumes_ there's nothing that one can do about health care expenses except (a) buy insurance and (b) pay whatever insurance and/or Medicare/Medicaid doesn't cover. Having listened to my sister call 'round to a variety of doctor's office to inquire as to the cost of having a procedure done (mole removal, IIRC), there's obviously _some_ amount of shopping that can have an impact on costs. On the whole, however, it seems like the easiest way to keep the health care expenses down (after personal due diligence on the exercise and reasonable food selection front) is to decide up front and get whoever is holding your health care power of attorney and so forth on board with what you _do not_ want treatment for.

I realize it's kind of a shocking idea: hey, I'm not going to get tested for cancer X and if I get it, I don't want to treat it, other than palliative care (and you could extend this to all kinds of conditions, if you were so inclined). I still think it's an idea worth giving some serious thought to.

ETA2:

'Cause people are already winding up in the not-getting-treatment-zone, whether they plan to be there or not:

http://www.ama-assn.org/amednews/2008/07/21/gvl10721.htm
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