Monday, July 27, 2009

Getting A Grip on Retirement Planning

You KNOW I'm gonna sympathize with Rose Bloom who was profiled recently by the Los Angeles Times.

Rose is 53 years old, a single parent to two adult children, who is just now realizing that she has to save more than the $12,000+ she currently has in retirement accounts. She plans to work forever, but she has diabetes and heart issues. (Now do you see why Grace can relate?)

The good news is that she has a decent salary (almost $95,000 a year). Even better, she will have a pension plus Social Security when she retires. But the bad news is that she lives in California. That means her job may be in jeopardy, she can't afford a home, and the cost of living is high.

Rose is just three years older than I was when I finally buckled down to saving for retirement. I'm a bit blown away by the financial planner's numbers--somehow I just don't see her saving $500,000 over the next ten to fifteen years nor am I sure that her savings will earn a 7.5% average.

BUT, that pension is going to make up for a whole lot of savings mistakes.


DogAteMyFinances said...

Sure, if that California pension exists in a few years. I can't even imagine retiring like that. I'm stressed out just thinking about it.

Revanche said...

And that's why I'm in a perpetually cash-hoarding frame of mind. Can you imagine?

"Forever" really isn't that long when you've got diabetes AND heart problems. *sigh*

Sharon said...

I long as the pension is still there. I would love to know how she can add another 480,000 to her savings in 10 years! Unfortunately, the financial advisors didn't tell all of us how she is going to do it!

Bucksome said...

I read the same story yesterday and had a different reaction.

Rose makes a large salary and she's made several poor choices. It's a good lesson about what happens when someone gives to the detriment of one's self.

Florence said...

It would be interesting to have a follow up article a year from now to see if she followed through.

Miss M said...

I hope she is able to change the tide, with that big of an income she should be able to save more and get out of debt quickly. I wonder if having a pension makes people less likely to save? She doesn't seem in that bad of shape.

Anonymous said...

Don't be so quick to dis Cal-PERS. It's been around a long time and isn't going bankrupt anytime soon. With that in mind, her pension and Social Security will replace 70% of her income, even if she doesn't save a dime. That is $5,000 a month, which can go pretty far if she moves to a cheaper part of California, Arizona, Utah, Texas, etc. Her biggest worry is to make sure she has decent health insurance to handle her health issues.

Shevy said...

She definitely hasn't saved much. I was a single parent with 3 kids (now married with a 4th) and I've saved over $20,000 even with taking out $7,200 a decade ago for the down payment on the condo I sold 2 years ago.

And I did that making *way* less than $95,000. When I first started saving for retirement I was making $1,000/month.

And I'm *never* going to be able to save $500,000 in my lifetime (I should live to 120) even with interest, even if I "never" retire.

But I figure we can manage on much less than we currently make once we retire.

Anonymous said...

I paid off debts totaling around $30,000 in 2 years and 3 months with a GROSS annual salary of $41,000. It was not easy, I used the Dave Ramsey method, literally ate beans and rice (lost 40 lbs). I'm now pushing 62, have $6,000 in emergency fund. I'm planning to claim Social Security when I'm 66, but work til I'm 70 (if I can). There is no "pay back" SS penalty at normal retirement age. From now to age 70, I will save almost all my net earnings. If I have to retire at 66, I'll have saved $104,000...if I'm able to go until 70, living on my SS income only, I'll have an 8-year savings total of $312,000. I don't think I'll live past 80 (one never knows) and I should be OK. Since I've been at my current job only 10 years, my company pension will only total about $30,000 and I got a buyout from my previous company in the amount of $32,000. I put that in a 401(k) and it has, by way of interest, grown to nearly $50,000 in 10 years.

I stopped buying things, including books, DVDs, etc. and borrowed those items from the library. I haven't done without ANYTHING I NEEDED.

Did I mention until I decided to get out of debt that I spent every penny I earned?

You can do it.

Grace. said...

I stand in awe of folks like Anonymous. You've paid off more debt than I have on a lesser salary and in a much shorter time.