Among the most reliable genres of economic / financial journalism is the "Americans aren't saving enough for retirement" boilerplate piece. Nothing is easier to write. Cite the low rate of personal savings.
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Estimate what a person is likely to need to live in retirement for x years. Mention that relying on Social Security is really dicey to prepare people for the reality that it's disappearing in the next decade or two. Get a graphic of a piggy bank with a red arrow pointing down.
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Go to lunch.

The underlying fallacy of this argument is that there is something meaningful most Americans could be doing that they simply aren't prudent or smart enough to do, that the path to a financially secure retirement is there and most of us are just too dumb to tread it. Sure, anecdotal evidence is pretty easy to find; some people take on a lot of debt relative to their income and some people who could be financially secure spend frivolously on stupid things. Too often, though, those anecdotes become the argument, like during the housing crisis when lazy homeowners who just didn't feel like repaying their mortgages became the accepted explanation for a collapse designed and engineered by an unregulated industry allowed to let their wildest fantasies play out in reality.

Understanding why Americans save so little for retirement comes back, as so many things economic do, to stagnant wages. People who don't make much money are barely meeting expenses, especially in a system engineered to throw large financial obligations at them in random intervals (big medical bills, educational expenses, the car you have to own because public transit sucks, etc). The bigger problem, and one that not just the very poor experience, is that if you save 10 or 20 percent of your income and your income isn't very high, you rapidly realize how little that accomplishes. It is not hard to see why a lot of people conclude that the money is better spent now than saved in a financial system they do not understand (God only knows, the 90% of us who are financially unsophisticated think, what a 403b is going to be worth in 30 or 40 years) for a future that may never come.

If your annual income is under six figures and you're not getting some kind of generous retirement plan benefit from your employer – and the overwhelming majority of Americans fail to meet those conditions – there is an outstanding chance that whatever you manage to save isn't going to be "enough." You can save as diligently as you want and still retire poor.
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Ten percent of a shitty income is shit. Twenty percent of Not Much is Not Much.

Talk to people in the industry, or get a financial planner three beers in, and they will tell you that the problem with most Americans' retirement saving is that he or she simply doesn't make enough money. You can only cut back so many expenses. You can only scrimp so much. You can only tell people not to spend any money on anything ever so many times. Eventually the math wins and you must confront the reality that even if it's possible (and generally it isn't) for people to raise kids, pay for affordable housing, and meet other expenses on 90% of their after-tax income, saving that 10% doesn't really amount to shit in the long run. The only way to make that look like it will work is to work until age 75 or 80 (reducing the number of years one must live off savings in the model) or to assume some ridiculous, pie-sky rate of return that will never happen.

The definition of a system that does not work is one in which an individual can follow every one of the rules and still come out a loser. Save 10% annually of a median income in this country (about $43,000) for ten years and, congratulations, you have $43,000. Do it for your whole working life at that salary (which will never go up, because of course it won't) and you have maybe $150,000. How long is that going to last in your retirement given what things are likely to cost in 2045 or whenever.
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Now consider that half the country earns less than that and do the math again. It just doesn't work. Rather than focusing on the handful of people who spend like idiots, let's talk about the reality that following every single rule of prudent retirement and financial planning is not going to allow most of us to retire until we're ready to drop. With the extinction of defined benefit retirement plans, our savings are tied to our earnings and our earnings aren't moving. It'll be an interesting time to be alive when everyone figures that out.

91 thoughts on “TEN PERCENT OF CRAP”

  • Social security is not going anywhere. It has plenty of assets and income to pay full benefits for 20 years.. and then 80% after that….

    Yet it suffers from the same 10% of crap problem. Wages have not increased in 10-20 years, so your SS benefit is smaller than you need. And the money coming in through fica is less going forward than needed.

    We need higher wages! Well, not me because I am retired and I worked for German banks so I got a pension. ..but you kids!

  • Jeff Berman says:

    If you save X dollars per year (say, on 1 January you contribute X dollars into your 401k), and you earn a yearly rate of I on your investments, then after N years of investing you will have

    P = X*[(1 + I)^(N+1) – 1]/I dollars

    For example, suppose X = $4000, I = .07 (7%), and N = 30 (years). Your 401K account would be worth just over $408K. Not a king's ransom, for sure, but I would say non-trivial.

    Further, if you can earn 4% on that money in retirement then those savings would provide income of about $2K/month for 30 years.

    My $0.02.

  • I've actually heard a conservative friend of mine sincerely argue that the stagnation of wages is OK because we're capturing those same benefits in our 401(k) accounts—you know, those that half of American workers don't have access to and whose custodians often provide options with above-market expense ratios that might not even include index funds.

    There's a reason why so many of these "financial independence" blowhards intent on retiring at age 40 emphasize living in deprivation rather than on earning high incomes.

    I do take exception, however, to your notion that a person saving 10% of her salary over 10 years will only have one year's salary after 10 years. You have to invest that money yourself in a 401(k) or IRA rather than let it sit in a bank that will reap those gains themselves by lending your cash while paying you 0.01% for your trouble. Assuming a modest 4% growth net of inflation, the $4,300 annual investment over 10 years would be worth $60,056 in today's dollars. Over 30 years, the amount will have the purchasing power of $264,758 as opposed to the $129,000 you posit under your assumption. This isn't to say that the system isn't rigged (it is!), but that your best bet is to take advantage of compounding games as early as possible (a daunting challenge in the face of stagnant wages and crushing student debt) with low-cost index funds in tax-sheltered accounts.

  • " people to raise kids"

    Well I've found the fix for the system right here.

    Stop doing this. The rate on return is terrible.

  • 4%? What? Where? Interest rates aren’t anywhere near that.

    And why are we standing for a system that depends on gambling correctly to avoid privation in old age?

    Liberals are dumb af sometimes.

  • @ Jeff Berman

    The problem with the 401(k) solution is that 7% rates of returns can be damned hard in some economic environments. Maybe in the 1990s, when the economy was rip-roaring with tech sector improvements. Now? You'll be lucky to squeak by with 5% average per year, and lots of roller-coaster market action in between. Benchmark rates have already been reduced after the 2008-09 recession, and sometimes even the reduced rates are too rosy by half.

    Ed's other point is also well taken, and it's a contributing reason for crappy returns, which becomes a vicious cycle; Little consumer spending money means no excess money for investment. Little consumer spending money also means a depressed consumer goods, products, and services sector, which also means bad profit margins for two-thirds of the economy (which is driven by consumer spending). This means poor investment returns for any company whose stocks depend on their customer base, which also means poor returns, and the companies take it out on their employees by not increasing their wages, especially if the government lets them by not raising the minimum wage to a living wage level… thus perpetuating the cycle.

  • To are Red: You're not going to find a bank paying 4% interest (though my credit union pays 3.04% for checking as opposed to the 0.01% that Bank of America pays for savings); banks are for storing money, you need to invest the money. The best way to invest money that you intend to use for retirement is to buy low-cost index funds that represent the entire economy: this is akin to betting on the casino rather than betting on any one gambler's hand on a blackjack table.

  • Just wondering where the above estimates of growth come in at 7% and 4%? This is an estimate that is notoriously not susceptible to prediction.
    And let us not discuss volatility, or the likelihood that any of us understand hedging.

  • @ Mo

    A lot of people tend to use 7% because those were the long-term historical returns of the stock market. Historically in the stock markets, there is huge volatility in short time frames: if you invest money and take it out a year later, you may have made 30% or you may have lost 50%. If you keep that money invested for 10 or more years, much of the volatily risk is mitigated, and again, HISTORICALLY, you would expect to make about 7% a year net of inflation.

    Of coure, past returns are not indicative of future performance. I use the 4% figure because that reflects my personal lower expectations in the future because of these underlying issues, and Jack Bogle seems to agree. I strongly recommend that anyone who has questions about investing refer to Bogle's "Little Book of Common-Sense Investing." He is the inventor of index funds, that give the common worker their best shake at making money in the market. Index funds have built-in diversification (e.g. if you buy a share of a S&P500 index fund, you own a slice of 500 companies representing about 80% of the US economy). and just as importantly, they minimize costs by charging a lot less per year than mutual funds that attempt to beat the market, but statistically fail to do so consistently.

  • A 6% or 7% rate is fundamentally correct

    Pre-inflation S&P return for 30 year periods from
    1960-1989: 10.30 (5.07% after inflation)
    1970-1999: 13.78 (8.24%)
    1980-2009: 11.29 (7.52%)

    While I don't agree with the methodology of the 401K or a zero interest rate consumption economy the reality is that the stock market "works". There is a risk that you're an unlucky one that is looking to retire just as an inevitable crash hits and will have to try to ride it out, but the solution to that is easy — no more GOP presidents.

  • @Chicagojon:

    My guess is that with more GOP Presidents (and Congresses), for which the white people of this country seem to have a masochistic preference for recently, we'll be looking at 1960-1989 return rates again when stagflation rears its ugly head through the Next War In The Mideast To Prop Up Oil Prices and Make Vlad Putin Happy.

  • Several years ago, I opened a new account at a broker who said that fees would be 2.5% of the transaction. My first trade showed a 5% fee so I called the broker. After brushing aside his attempt to tell me that 5% IS 2.5%, I observed that any investment would have to go up 10% to break even and could you do something about those fees, he said "I could reduce the fees for some people but that's just helping out a client." So, investors at my level are not considered clients.

    Add to that, Goldman Sachs admitting to placing two plays on the same stock – one which would profit from an up move and one to profit from a down move – and then AFTER THE MOVE deciding which mutual fund to assign the initial investment to, and you've got another problem: the deck is stacked.

  • Consider something like S&P 500 index funds, which have averaged around 9% over the last 10 years

  • @xulon

    That reiterates the importance of low-cost investing. Most people don't bat an eye at 2%/year fees. but if you assume 7% annual returns, congratulations! That 2% fee, compounding over 30 years, consumed 45% of your investment returns!

  • bananadiameter says:

    When I was struggling, I read every money management book I could find to try to find out what I was not doing that I could be doing. Subsequent to that, I loathe the Finish Rich/David Bach plan and his stupid Latte Factor and anyone else that even hints at a similar idea. They all assume that you make enough money to "waste" some of it; when you're budgeted to the penny and already not buying a latte once a month, much less daily, they are no help whatsoever and only served to make me feel guilty, undeserving, and helpless.

    Then I found All Your Worth by Elizabeth Warren and her daughter, written in 2006, pre-Senator/TARP Oversight, and using what she found through her research of bankruptcy and middle-class personal finance issues as a professor. This book actually has helpful information and is written with people who don't have a lot of money to start with in mind. I cannot recommend this book highly enough. I'm not paid to promote it, I just found it so very useful – I can date the start of my financial turnaround to reading this book – so now I want everyone to read it.

    Also looking forward to checking out @Bob's suggestion of "Little Book of Common Sense Investing" now that I have something I can invest.

  • What percentage of people earning $40k and below understand one word of any of the above comments?

  • @bananadiameter
    That "latte factor" shit drives me crazy. Your TOP TWO living expenses are housing and transportation (assuming you don't have a student loan). How is skipping the daily latte going to make up for the 30% of your income that's going to rent or a mortgage? I always look at things in terms of cash flow. Like, the tax cut saves me $1,000 per year, but when you realize that's only $83 a month, it's fucking worthless. It's barely enough to buy more groceries. The people who believe you can move out of poverty by pinching pennies are people who lived when things actually cost a penny.

  • @Tim

    What, the economic fact that economic crashes and depressions are much more likely when income disparities are high, like they are right now, and people can't invest when they have to use the money for, you know, using it to eat and such, are "complainy-pants"?

    Hit a nerve, did we? A little sensitive, aren't you? What are you – one of them snowflakes? Go back to RedState, where you won't hear such complaints, because the denizens there are too dumb to know when they've been fleeced.

  • @Judie:

    We can boil it down still further.

    Fk retirements. People have no good jobs. People have no money to spend on retirement, or anything else for the future. They can only spend for today. Rich people took all the money we could use for the future and aren't gonna give it up without a long, hard fight, because they think it's their birthright to be rich. That's why we can't have nice things.

  • @Judie

    Most people don't understand these concepts regardless of their income level. There's a dearth of financial literacy education, but there's also a dearth of simple math education among all Americans. The crux of the matter is still that people lack the disposable income to be able to save for retirement; however, many who do still forego these savings at great long-run costs, which has long-lasting consequences.

    One of the sobering anecdotes is the story of two individuals: Person A is a 25-year-old who invests $5,000/year in the first ten years of her career then stops contributing. Person B is a 35-year-old who begins saving money and stashes $5,000/year for the next thirty years. If you assume 7% annual returns, when they reach age 65, person A will have $602,000 saved for retirement after investing a total of $50,000 over 10 years. Person B, who invested $150,000 over 30 years will have $546,000. It is impossible to hammer enough the point that time in the market is by far the single largest determinant of financial success, and the fact that so few young people save anything for retirement is going to be catastrophic in the future.

    Of course, this is all mute if there's nuclear war.

  • @Lizzie It's the DOL credit union. Alas, you need to work there or be related to/live with a member to be eligible to enroll. There's a plus side to having a bunch of BLS dorks in the credit union board! I chanced into it and have not found any that offer rates as good.

  • @Bob thanks for the response. Oh well. Figures that the DOL has a good interest rate! Hope it stays that way!

  • Benny Lava says:

    Hey Tim,

    Doesn't Mr. MM basically state his techinques are for people making over 40k a year already? Like this isn't for Joe Schmoe making 25k a year.

  • @Ekim

    First question: did you read the blog I linked to that addresses these concerns or did you just reply? -10 points from Hufflepuff if you replied without reading like a typical internet roll.

    Second: should young people engage on their careers and retirement planning with the presupposition that "everything is terrible all the time always" or that if they invest consistently from a fund they do not spend, that there will be a very high likelihood of a 7% return on that money given the history and trajectory of the world economy?

    Yes, investing requires optimism. It requires persistence, it requires you to believe that money given to US companies for the furtherance of their businesses will come back to you in the form of increased share price and dividends. This is the fundamental concept underpinning our economy, and however imperfect you may consider it, there is still demonstrable evidence that investing in broad ETFs is a sound financial strategy.

    If you don't believe these things, you occupy a terrifically sad world view with which no serious person should engage.

    "people can't invest when they have to use the money for, you know, using it to eat and such"

    Bullshit. Read the blog, allow your mind to be changed, re-evaluate your preconceptions. If there is 1 example of a child-producing family living a rewarding, anti-consumerist lifestyle on $35-40,000 of passive retirement income, then we should all strive to reduce our spending to those levels. 2k calories per day x 30 x 4 mouths can be INSANELY affordable if you're putting in the work to plan ahead and have the self-discipline to stick to a conservative food budget.

    As a child who was raised on WIC and grew up in a family that rotated the same 21 meals in order to optimize cost and ensure we weren't spending more than we could afford, I have no sympathy for people who want to claim that they simply could not save a single penny without leaving their children hungry.

    As soon as you divorce yourself of your Caligulan delusions, you can get back to the business of frugality and resetting your hedonic adaptations back to a responsible level.

    Look, I'm not saying everyone in America is going to become a famous YouTuber, but if that platform is creating millionaires who put on makeup in front of a TV camera for a living, it's pretty ridiculous to say that the deck is rigged.

    Also, I'm not sure anyone is seriously recommending a 10% savings rate for any income level…the entire post by Ed was set upon this false premise that his great grandfather's retirement advice is still en vogue, and it's not advice I've heard elsewhere in the modern era.

    Save half your money and if that cuts into your expenses, cut your expenses, and if you cannot…make more.

    “Every morning in Africa, a gazelle wakes up, it knows it must outrun the fastest lion or it will be killed. Every morning in Africa, a lion wakes up. It knows it must run faster than the slowest gazelle, or it will starve. It doesn't matter whether you're the lion or a gazelle-when the sun comes up, you'd better be running.”

  • @Benny Lava – who is seriously considering the retirement woes of a person making $25k who isn't spending every waking moment working to increase their earnings?

    What financial planner would recommend that someone remain in a $25k/year career when college is basically free and you could take an immediate $5k pay jump by signing up to be a reservist in the military?

    My future spouse makes about that much, incidentally, so let's not play this, "you just don't know anyone that poor," game because I sleep next to someone in a $12/hr job every night.

  • HoosierPoli says:

    When people are plowing their savings into stocks, not because the underlying asset is worth holding, but because they're expecting the asset to increase in value, that'S a recipe for disaster.

    The reason the stock market has gone up is that people have been plowing their retirement savings into it because it has gone up. P/E ratios be damned, I can either eat cat food or dump tax-advantaged earnings into a massive ponzi scheme.

    The only reason to put money into US equities at this point is to take a long position on SS privatization, which will supercharge the ponzi scheme for another decade. If that's the bet you want to make, make the bet, but it's not an "investment". It's a gamble.

  • Looking at the latest SS earnings statement that I need (2010) I made just over $600K in 45 years (1964–2010). When I "retired" from Verizon in 2006 I had approximately $125K between personal savings ($20K), 401k ($65K), Verizon lumpsum retirement payout ($20K) and another $20K+/- from the GTFO bonus ($2K/yr for the 7 years completed) and vacation buyback.

    I moved from the Boston area to Oswego, NY and bought a house that was pretty much unihhabitable, moved in and finished gutting it. I lived without any heat except a couple of small space heaters*; no plumbing except a toilet that sat in what is now an understairs storage closet–the toilet had to heated with a 100w bulb so to not freeze on below-10-degree nights and the water had to be shut off most nights;no kitchen and skwerlz in the attic which had had it's privacy disturbed by being opened to the 2nd floor with the removal of it's plaster and lath. That was a fairly short term thing–2 or 2-1/2 years. Over the last 10-1/2 years I have substantially replaced the walls, ceilings and mechanicals. The process has taken far longer than it should have due to lack of funds and physical infirmity but it is livable (at least by my admittedly lax standard) and I have a grumpy but wide asleep doggie on the front porch who is my only concern as far as providing care and comfort for someone who has no opposable digits.

    Nowadays, I'm "Livin Large" on the money the gummint sends me and sliding a little closer to total insovency every month.

    My point is not that I'm a smart person for having done what I've done. My point is that without doing what I've done–paying others rent or paying people to do the work I've done myself would have gone through my money at least as fast and would have left me in about the same position I'm in now–but about 8 years sooner.

    How anyone can save money on even $40K (Gross, I assume) unless they live alone and like a hermit is beyond my understanding. If you're working in a metro area that has good, reasonably priced public mass transit you won't need a car but you still need to rent and if it's within walking distance of a light rail or subway system (or really good bus service) you're prolly paying at least $1k or better a month for housing or living with other people.

    I don't know from lattes, I buy my coffee in 30.5 ozcans @ Aldi for $5.29–it tastes fine. I drink PBR @ $1.50–2.50/#er while almost everyone I know drinks ridiculously pricey cocktails and wines or one of the up to 30 brews available in the local pubs, bars and function venues. My meds are paid for by the VA as is everything else except my bus fare and the stuff at the caf and the gift shop.

    And then, of course, there's telecabmunitainment. Almost nobody I know pays less than $100/month for cable, cell and internet–most pay more to a LOT more. I have never had cable in this house and I've done without a landline since 2012 and without internet since 2013 or early 2014. Spectrum finally got a deal from the gummint I think. They just offered me and a number of other people I know a $14..99/month internet hook-up–I might have to dig in for that one.

    If you've got no background in how the markets actually work you're basically the sweet, sweet filling in the capitalist sandwich. I put my money in a very slow growing but very safe investment vehicle–I paid almost NO fees. When I cashed out, I had not lost any money through the 2008–2009 meltdown. I think if you have money and know how to invest and somebody doesn't just steal your money–well, maybe that's a good idea. The average person doesn't know much about how the markets work and they don't have a lot of money. So, it sucks to be average, at least in that regard.


    * For the days when it was below freezing–in the house–I had a 135KBtu propane construction "torpedo" heater that could make the entire first floor livable about the time you needed to open some windows so as not to die.

  • @HoosierPoli

    Investing in the stock market definitely has risks, and can be seen as a gamble. The problem is that by choosing not to play, you're almost certainly condemning yourself to be screwed. The inflation rate already exceeds the sorry excuse for interest that most banks pay in interest.

    I do think the rise of index funds does kind of create a moral hazard, as passive investing forces billions of dollars into companies for no virtue other than their size or industry sector, but as long as there are people who naïvely think they can beat the market making their own picks (this includes actively managed mutual funds), we should be OK. And if there's one thing that is constant in this country, it's people's unjustified confidence in outsmarting everyone else.

  • Benny Lava says:

    "college is basically free"

    Lol at the troll! Sorry I thought for a second you were making honest arguments.

  • Wow. Every one of you assholes is defending a financial system that is designed to reward sociopathic middlemen and, unless you’re born into wealth, was never designed to include you. Quit fucking defending it. I’m seeing comment after comment of, “Just do ____ and you’ll be fine! Or are you too stupid to figure that out?!”

    Where is college basically free? And it’s nice that you live in an area in which there are actual jobs available to people that pay over $25k. I live in a small rural town in Appalachia in which $12/hr is considered a *good* wage. People don’t have benefits, unions basically don’t exist, and people work their asses off just to scrape by. Not everyone can be in the military, either. What if you’re disabled? What if you’re too old? What if you have to care for an ailing family member? What if they simply don’t want to die for a cause they don’t believe in? There are lots of reasons why it’s not an option for people that are none of your goddamn business. It doesn’t mean that they’re subhuman, you elitist fucking pricks.

    Get your heads out of your asses. The point is, you can’t stop spending your way into the black. Eventually, you need revenue. The bullshit voodoo economics talking points really *have* thoroughly infected American culture to the point that even so-called liberals are repeating them. We are fucked in the dark.

  • Duke of Clay says:

    "Mention that relying on Social Security is really dicey to prepare people for the reality that it's disappearing in the next decade or two."

    I think this is one of the most enduring myths of our time. When I got my first job in the early 1970s, it was common knowledge that SS was "disappearing in the next decade or two." There may be some bumps in the road ahead, but I've come to believe the powers that be can never let SS "disappear."

    Otherwise, your comments are spot on.

  • Personal story time: I’ve hinted around this before, but in the past year I left my job in DC and fled to rural KY. The internet is good enough here to work from home, and housing is super cheap. I went from pissing away 1.3K a month on a mediocre single bedroom apartment with an hour commute to looking at 2 bedroom homes at 70kish.
    I’m my experience, cities are a financial death spirals unless you have housing costs locked down by already owning a home. I took a $16K pay cut, but my take home is actually higher now.

    Second item: Between my student loans, car loans, housing, etc., I made peace a long time ago that I simply can’t afford to have a family. I can’t be the only one. The party of “family values” has seen to that.

  • Benny Lava says:

    Safety Man it wasn't always that way. But housing costs in big cities the world over have skyrocketed. Once upon a time downtown condos and apartments were cheap.

  • Jeff Berman says:

    I enjoy reading the comments on this site because they are interesting and the serious comment/troll ratio is remarkably high.

    In the example I presented, the 7% return on investments is, historically, quite conservative (for a 30 year time frame). And, for those of you voicing concerns about fees and expenses, the Vanguard funds are very low cost funds (I am not a Vanguard employee) – I know they can be in the 0.07% range.

    I agree that the return you can expect depends very much on your time-frame. If you need your $$ within the next few years then it probably is unrealistic to hope for 7%. However, if your horizon is significantly longer than that then, statistically, you should be able to achieve >= 7% return (that is not 7% above inflation, btw).

    And, yes, if you are unlucky you might be retiring just as the market tanks, in which case you might not have time to recover. But, as you all know, there is always a risk/reward balancing act. As Einstein is supposed to have said: compounding interest is the most powerful force in the universe.

  • "As soon as you divorce yourself of your Caligulan delusions"

    Fuck you.

    "when college is basically free"

    Fuuuuuuuuuuuuuuuuuuuck you.

  • Steve Holt! says:


    He must mean selling bathtub meth and renting out your tool shed as an AirBnb to all those "tourists" flocking to the Bumfuck NC Tater Festi

  • Rosies Dad says:

    Putting whatever you can into an S&P 500 Index (I like Vanguard because their funds have incredibly low expense rates, hence you keep more of your earnings) for decades will get you a greater return on investment than basically anyone else will get you. Plow the dividends back in as well. Let compounding work for you. Over the past decades, the S&P 500 has yielded better than 7% which means that your money doubles every 10 years. This was the basis of Warren Buffet's million dollar challenge and AFAIK, he hasn't paid out to anyone.

  • @Tim "when college is basically free!" "just join the military!"

    ohhhhhh, i see you're an idiot.

  • The title of the post is "Ten Percent of Crap". Some how the comment section devolved into investment theory without the universal caveat:

    "Past Performance Is Not Indicative Of Future Results"

  • The building industry is 'unregulated?

    The NAHB reports that on average, government regulations account for 24.3% of the final price of a new single-family home. Over the 5-year period ending 2016 the cost of regulation in the price of a new home rose more than twice as fast as the average American’s ability to pay for it. that's 'unregulated'?

    As for the housing market's 'collapse designed and engineered by an … industry allowed to let their wildest fantasies play out in reality', I'd remind you that it was Bill Clinton, with a compliant Freddie and Fannie having his back and Dod and Frank having his mouth, who started that tumble by, in 1995, turning the 1977 Community Reinvestment Act into an aggressive program that basically forced banks to lend money to "underserved" communities https://www.investors.com/politics/editorials/sorry-hillary-you-and-bill-not-tax-cuts-caused-the-financial-crisis/.

  • The community reinvestment act was not the cause of the crash. It applied only to savings and loans and addressed reclining in minority areas. It was the commercial banks that used the alchemy of CMOs to turn crappy loans into AAA debt.

    Then they got crazy and gave out NINJA loans, falsified incomes and fake home appraisal prices. At the end, they snuck unqualified loans into FEMA pools in an attempt to pass on their mistakes. Only a portion of this fraud was ever caught.

    The big banks paid many billions for their crimes, but funny, no one went to jail.

  • @Kevin
    I agree with you to the extent that, once the dam was broken, flooding occurred. But what broke the dam was 1] Clinton's use of the adapted CRA to apply pressure on banks to provide loans to the 'unworthy'. It must be said that the Bush era did not turn its back on this approach. And 2] pols like Frank and Dodds pointing out how a bit of water never hurt anybody, particularly with Freddie and Fannie guaranteeing the overflow.

    That wasn't the point of my original comment, though; I merely wanted to remind folks that, contrary to Ed's claim, the real estate business is controlled, as is Construction with Banking one of the most controlled. The FT, for example, reports that a recent poll … in financial services found that institutions spend up to 10 per cent of their annual revenue – note: revenue!, dealing with a patchwork of divergent regulations with a “conservative” $780bn figure spent only on implementing different sets of rules across different countries.

  • I would venture that in some housing markets people are spending 50% of their income on mortgage/rent.

    I am fortunate to make 5-6 times the median income. On a recent LA layover I took a look at the real estate prices. It quickly turned into “Ohio Appreciation Day”.

    The equivalent of my 3-bedroom townhouse in Columbus runs at least half a million in SoCal. And that’s someplace way out like Ontario, not anywhere fancy. Mind you SoCal is cheaper than the Bay Area. Seattle is just as bad.

    When the price of anything else goes up we call it “inflation”. When the price of housing goes up we call it “a strong housing market”.

  • "The NAHB reports that on average, government regulations account for 24.3% of the final price of a new single-family home."

    The RCC reports that its reputation has been besmirched by HATERZ.

    You're too fucking precious for words. What an asshole.

    For anyone who ever thought Crappstain had anything of value to add to a discussion:

    And the resident randroid spake thusly:
    "I need to make a correction. I have never pretended that I intend to do anything but comment on the absurdity of the progressive delusion. Hence, I don’t think I have ever attempted or proffered solutions."
    A little unintentional birthday gift to me @ 9:55 AM on 10/25/17.
    So you admit to being nothing but a fucking troll.

    Lyin' sack-o-shit gonna be a lyin' sack-o-shit.

  • Yes, college is free if you use the military as a means to raise funds. That =\= killing babies, it means technical job skills, healthcare, leadership networking, and usually a free degree if not multiple.

    There is no guaranteed equality of outcome, but the opportunity is there for anyone. That's not counting the number of scholarship/grant options available through other means.

    Some people prefer a narrative where systematic injustice has stacked the deck. Get a free library card for fuck sake and figure out your life.

  • @Tim "Yes, college is free if you use the military as a means to raise funds."

    Free? Committing yourself to be available to go be sent to a bullshit war hardly seems to be free.

  • The military paid for my college and trained me in a marketable skill. All they required was that I go overseas and almost get my butt shot off. Your mileage may vary.

  • @ Tim

    I went through MEPS at Fort Meade, and was declined. Military service is not a financial magic wand for the youngins.

    @Major Kong

    I was paying 1/2 my income in rent when I lived in the Baltimore/ DC corridor. Strangely enough, whenever I got a new job or a raise my housing costs rose to match.

  • I don't know why anybody would put their "nest egg" (should they actually be able to save anything in the first place) into a stock market that seems to regularly crash about every ten years or so. Also, assumptions about working into one's seventies kind of run up against my experience of being "too old" to be hired for just about anything in my early fifties.

  • @democommie

    Way to argue, calumniate sources without offering any of your own.

    If I thought it'd do any good, I'd award you a D-, just for running true to form.

  • I can't read an article like this (on the mark as it may be) without thinking of the sheer amounts of crap Americans feel the need to buy these days. Almost everything is cheaper, and what's considered essential to quality of life has exploded into a mound of molded plastic and circuit boards.

    I'd like to see an apples-to-apples comparison of lifestyle vs. salary. Knowing that mounds of material crap doesn't make happiness occur, and with the impression that the salary plateau probably has much to do with the rest of the world achieving what we did 75 years ago, maybe part of what's needed is an attitude adjustment.

  • negative 1 says:

    @Tim — The Montgomery GI Bill caps at $66K, which isn't really a full-time education at a lot of places, which brings us to the problem with your analysis:

    Student debt.

    Most workers are coming out of college owing tons of money. If your only solution is 'join the army', we're going to have one fucking huge army. Also, don't you think that will mean the cap on the GI bill would then be cut? Or would the GOP all of a sudden discover a love of taxes?

    Millenials (and the younger half of Gen X) have come out of college owing money and unable to find good jobs. So they've had to defer HUGE portions of student debt, and hence watch 'the magic of compounding' work against them. So, for the beginnings of their career, and when it matters MOST to start saving, they're up against it from jump. Then, during the next big economic transition, when they're supposed to be buying houses, they now have absolutely no wealth to put down so they borrow the whole thing. Housing costs are now creeping up on 50% of income for most families with kids (source: HUD).

    So yeah, they're fucked. Can everyone point to something that someone once bought that was a bad idea? Sure. But what is the fucking value in sitting around your one-bedroom apartment never going out or buying a goddamn thing just to be able to live the same way with no job when you're 70? Sounds like a recipe for misery.

  • @negative 1: "…the Montgomery GI Bill…"


    ^free college

    My recommendation has never been "join the Army."

    Join the Guard/Reserves. Join the Navy, Air Force, Coast Guard, Marine Corps, Merchant Marines…lots of options that don't require you to go somewhere hot and sandy with a rifle in your hands.

    At this point, the military is getting more benefit from offering education in the service to their personnel, so the odds of doing school part time while serving are higher than they were 10 years ago. That said, it would take a cold day in hell for elected reps to repeal the GI bill, that is political kryptonite.

    As far as student debt is concerned, there is the false promise of a degree being proffered to high schoolers, but this phenomenon of unemployable grads isn't a 2018 thing, it's a "last 20 years," thing.

    A degree is simply not a must-have in order to end up in a career field where you're able to max out your 401k anymore.

    "when they're supposed to be buying houses"

    According to whom? https://www.marketwatch.com/story/why-it-makes-more-sense-to-rent-than-buy-2018-01-11

    "But what is the fucking value in sitting around your one-bedroom apartment never going out or buying a goddamn thing just to be able to live the same way with no job when you're 70? Sounds like a recipe for misery."


    Frugality is not the point. Develop hobbies and passions that use your body and your mind for cheap or free. I'll skip the list of free things you can do that don't involve sitting alone in a 1 bedroom apartment.

  • @Rosies Dad:
    Mr Buffet won his bet last December, when an index fund he bought 10 years ago made almost 3 times as much as a competing managed fund.

    The profits, a million dollars, were given to charity.

  • The problem with telling people of ordinary means to save 10% of their earnings for retirement is that they also have to save to have an operating buffer. Most of them are just one rent check or car repair from being deep in hock to a payday lender or out on the street or possibly both. Odds are they are trying to save 10% of their earnings so that they can weather the next crisis. If you are making a lot more money than most, you can buy your way out of trouble, but if you are getting typical US wages and putting aside 10% for retirement, you are going to be faced with the prospect of having no car and losing your job or not being able to afford medical treatment or, you can go down the list, or digging into your "retirement" savings.

    It isn't about market returns or investment fees or splurging on avocado toast. It's about people making too little money and having no social safety net.

    P.S. Sometimes the moralizing gets tiring. A friend of mine had a daughter who had a serious lung problem and needed a lung transplant. One friend of mine suggested he shouldn't have taken her to Disneyland back when the doctors were sure she had a year to live, then he would have been able to afford the $300K operation.

  • "Way to argue, calumniate sources without offering any of your own."

    Way to be a lying fuckbag, specializing in deflection.

    "If I thought it'd do any good, I'd award you a D-, just for running true to form.".

    If I thought it would do any good, I wouldn't just do this:

    And the resident randroid spake thusly:

    "I need to make a correction. I have never pretended that I intend to do anything but comment on the absurdity of the progressive delusion. Hence, I don’t think I have ever attempted or proffered solutions."

    A little unintentional birthday gift to me @ 9:55 AM on 10/25/17.

    So you admit to being nothing but a fucking troll.

    Lyin' sack-o-shit gonna be a lyin' sack-o-shit.

  • @Tim

    The National Guard and Reserves are doing a lot of overseas deployments these days. I retired from the ANG years ago but I keep in touch with people from my old unit.

    They’re spending a lot of time in hot, sandy places. It’s tough on the part timers and their employers to be gone that much.

    The Guard was not intended to be used the way it’s being used.

    I don’t steer people away from the military, but they need to know what they’re signing on for.

  • @Democommie, yes, I received a 100% free college education by virtue of my military service and at this moment hold a full GI Bill benefit that would pay for an additional 36 months of in-state tuition plus housing allowance during my full-time enrollment plus a per-semester book allowance if I elected to go back to graduate school.

    I did 6 years on the active duty and left the service in 2012. I was debt-free and had a sizable savings in the government's 401k program called the Thrift Savings Program by the time I became a civilian.

    I recognize that some are physically restricted from the active duty, but certainly not enough to account for the current shitshow we see with people being in debt. While I was in, the work was hard and the hours long, and for many of my peers it was also uniquely dangerous compared to a comparable civilian career.

    As far as I'm concerned, military service is as close to a "cheat code" for escaping your 20's in good financial position as exists in our country.

  • "As far as I'm concerned, military service is as close to a "cheat code" for escaping your 20's in good financial position as exists in our country."

    How is that not a big problem? Despite my peace-lovin' commie 'tude, I DO respect a lot of military (and former military– hi MK, kd!) folks. But kids (and I have two in their twenties) should not have to risk having their asses shot of in service of the Empire in order to get a decent education and have some expectation of finding work that can provide the means for decent housing, food, medical care, etc. I FEEL LIKE I'M TAKING CRAZY PILLS!!

  • Ah, Tim. An acolyte of Mr. Mustache. Whose advice sounds really, really good until you learn he was a tech bro who became a millionaire and then decided he wanted to lead the "simple life" and teach everyone else how to be frugal, blah, blah, blah.

    Also, I don't think it's particularly sustainable to recommend that everyone who wants to go to college should just sign up for the military in the guard or active forces. And just so's you know, being in the National Guard troops is no guarantee of safety. Do a little studying up on the 200/515th Coast Artillery of the New Mexico National Guard.

  • If you want to get really angry read this: https://www.financialsamurai.com/how-much-should-one-have-in-their-401k-at-different-ages/

    My wife and I are very lucky. The only thing we spend money on is travel. I grew up middle class and she grew up lower middle class. Her mom kept the thermostat at 55 degrees. I had to buy groceries in my twenties with my credit card because I had no money in the bank to cover them. It took me years to pay off a $5,000 credit card balance.

    I work for a nonprofit and my wife is a public school teacher. I'm 45 and she's 42. We make a combined income of $160K. My employer gives me an EIGHT PERCENT match on my 403b (!). My wife may have a pension … I say "may" because she is a Chicago Public Schools teacher and who knows if they'll try to take that away from her somehow. The current value of her pension amounts to about $1,000 per month when she turns 65. It will continue to grow as long as she stays in CPS. I have two small pensions from previous jobs that will amount to about $800/month when I'm 65. We currently have about $650K invested. We have no debts other than the remaining $100K on the mortgage for the condo we live in that I bought 13 years ago. No college loans and no kids. Our 2001 Toyota is paid off. We each contribute the max to our tax-deferred defined contribution plans ($36K total) and Roths ($11K total) and we also invest an additional $10K cash per year.

    We are lucky. We are ahead of most of my friends. Many of my friends have nothing. According to Mr. Financial Samurai, we are still behind.

    My sister is 42 years old makes $30K per year. She barely scrapes by and she works harder than I do and has a more advanced degree that she owes $100K on. She's totally screwed and I assume we will need to carry her when she gets older.

  • Since I happen to be doing well financially that must mean that everyone else is too.

    If they’re not, obviously it means that they’re just not as savvy as me since everyone has 100% total control over what happens to them.

    (Please set snark detectors to ON)

  • @ Tim:

    I hope you'll forgive me for calling you a lying sack-of-shit (oh, I'm kidding, I'm kidding). I have your word on that, though? Right? Oh, but could you humor us and tell us how you managed to complete a degree and still have–after they've payed 100% of your school expenses for an undergrad degree–enough to go for another undergrad degree or a masters.

    I mean I can see it if you were in an orderly room with too much staffing so your boss would just say, "Hey there, Tim, why'nt you go on back to your dorm room and study for your tests and such. We go it, here and GOD knows you need to get that degree so you can knock the dust off of your boots and leave all of LOOOOOOZERS who are doomed to poverty in your rearview..,".

    OTOH, I can totes see where your fellow troops might not be thrilled that the smartest guy in the room is getting time off to study.

    I was kidding, btw, about not thinking you're a lying sack of shit. I was kidding about giving a fuck what you think of that.

    Go get a job with Crappstain, you two have a lot to talk about if you don't murder each other to get a leg up.

  • @Tim

    "A degree is simply not a must-have in order to end up in a career field where you're able to max out your 401k anymore."

    I'd put up the expected future income of college grads vs non-college grads, but what's the point. At this point you're being willfully dishonest. You and I both know that the trades won't support that many more skilled workers, new housing starts are still low (and increasingly done by unskilled work) and that 'an electrician can earn 100K!' isn't the same as systemic economic trends for work with an education and without. And by the way, trade school isn't cheap anymore either.

    "Frugality is not the point. Develop hobbies and passions that use your body and your mind for cheap or free. I'll skip the list of free things you can do that don't involve sitting alone in a 1 bedroom apartment."

    'Take up origami instead, you'll like it as a broke old person too!' isn't really a rebuttal. But you kind of already know that.

    I know that you're the only smart one and the whole of everyone going to college and borrowing their entire future wealth is a 'dumb move' not a desperate one in a monopsony hiring environment. However, since everyone still does it the chances are the current economic environment is pushing them in this direction, not that everyone is somehow ignorant of your stupid blog post and if only the read mustache.com or whatever all of the US income and wealth problems could be solved. But, like I said, it's not tough — as people owe more student loans, they are having a hard time saving. Which would be expected, as they are paying down debt immediately after entering a monopsony job market in a static wage economy. You joining the guard and taking up crocheting when your friends were going out to dinner isn't a rebuttal of that, either.

  • @Benny Lava:

    Not being a parent or a college student I was not really aware of that particular bit of nonsense. I do know that, as Maj. Kong pointed out, both the Nat'l Guard and the Reserves (of all branches are being used as combat troops in an offshore environment sans any sort of declaration of war for, what, 25 or more fucking years?

    And after a deployment of six months to a year, the NG and Reserve troops return to their home base get released from active duty and off the Pentagon's payroll. The equipment is expensive (as are "expendables" like a Tomahawk*) but the labor is prolly a good deal cheaper than Xe's mercs.

    *You say "ordnance", I say tuhmotto

  • @ negative 1:

    I am limited in my response due to recent carpal tunnel surgery. I cannot applaud but I am waving my hands hard enough to create a bit of a wave on my libation.

  • Dear Ed:

    Somebody's spam filters aren't working (aside from my comments, I mean); lotta crap in 4 outta 5 comments between this and my last one.

  • Apparently, the US Federal Minumum Wage is $7.25 / hr.

    If you work 2000 hr / yr (40hr/ wk, 50wk per year) you make $14,500. Easy to save $4,000/year for your retirement.

  • All of these boxes can be combined with any other color or be wrapped with contrasting ribbons for a classy touch. While you can spend a small fortune on a watch, this isn't necessary if you just want a reliable and attractive timepiece. Do not risk dealing with a company that has no insurance documents and qualifications as this is taking a risk. Thunderous applause rained down from the stands when he scored the fifth, sixth and eighth goals. In response, Kenya were only able to po

  • I was curious about this oddly chosen intervals from Chicagojon

    Pre-inflation S&P return for 30 year periods from
    1960-1989: 10.30 (5.07% after inflation)
    1970-1999: 13.78 (8.24%)
    1980-2009: 11.29 (7.52%)


    They had a certain smell about them. What happened in 1960, 1970, and 1980 ? Go take a look.

    What happened in October 1990? the month before they took their sample? These look like arbitrary 20 year intervals, but shift the intervals by ten years and all your figures get worse. Pick a wider window and the all get worse. To have averaged this rate over this 60 year interval you would have had to divest entirely in 1959, 1969, and 1979. That would be a pretty prescient investor.

    How about we pick, oh, I don't know, 1936, well after the recovery from the great recession, but before a war broke out, a pretty typical year 307. and how about 50 years later. just a pick for time interval. 534. Yup. went up. pre-inflation that is. What percent rate of return is that? 3.5% ?

  • @ Moops 2:

    I'm not good at statistics or investing. Except for a chance encounter in a bar 20 years ago I would prolly be dead by now; I would almost certainly be homeless.

    As regards saving v debt v keeping up with our competineighbors.

    Boomers (of which I'm one) grew up being told that there was an endless supply of swimming pools in every yard, new cars every three years* and anything else we wanted as long as we were willing to work hard and BUY the fuck out of MurKKKa.

    Obvious bullshit is not always obvious. So, a lot of people I know followed the best advice** they could find and wound up losing sizable chunks of personal equity in the, what, $6T, financial rape of 2008.

    If you don't have a decent wad of cash to work with and some market savvy, you're bait fish.

    * I used to be in the power transmission components biz (gears, belts, bearings, etc.) and there was a calculator for rating bearings and other parts that was called the B10 Life. By plugging in various figures you could determine how much load at what speed a bearing could handle and still make it to 3K hours of use. Most U.S. auto manufacturers used to design around that figure and cars kindasorta fell apart starting around the 3 year mark unless they were owned by people whose hobby was monitoring systems and maintaining same–almost nobody.

    ** Listening to the likes of Suzy Ormond and all of the other TV hucksters.

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