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Chapter 14. Retirement Mistakes. Sources of Retirement Income. Growing Doubts. WSJ , 5/10/2001. Building a Nest Egg. How much money do you have saved for retirement? Excludes pension plan benefits. WSJ , 5/10/2001. How much will $100K get you?. $100,000 (PV of Annuity) 8% 20 years

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chapter 14

Chapter 14

Retirement Mistakes

growing doubts
Growing Doubts

WSJ , 5/10/2001

building a nest egg
Building a Nest Egg

How much money do you have saved for retirement? Excludes pension

plan benefits. WSJ , 5/10/2001

how much will 100k get you
How much will $100K get you?
  • $100,000 (PV of Annuity)
  • 8%
  • 20 years
  • Monthly receipts?
    • $836
  • Annual receipts
    • $10,185
progress in planning
Progress in Planning

Where do you stand in planning and saving for retirement?

WSJ , 5/10/2001

debt burden growing 65
Debt Burden Growing – 65+
  • Carries no debt:
    • 2001 41.2%
    • 1992 65.5%
  • Amount of debt:
    • 2001 $23,000
    • 1992 $8,000
  • Bankruptcy filings:
    • 2001 82,200
    • 1992 23,890

Using equity to borrow

thomas hill 78 years old
Thomas Hill – 78 years old
  • Retired security aide
  • Ran up $19K in credit card bills
  • $48K in home and auto loans
  • Took job delivering newspapers
struggling with debt
Struggling with Debt

Percentage of people filing for bankruptcy by age 1991 vs. 2007

(WSJ, Sept. 13-14, 2008)

retirement worries
Retirement Worries

Surveyed adults said their biggest concerns about retirement

(WSJ, Sept. 13-14, 2008)

3 biggest pitfalls for retirement planning
3 Biggest Pitfalls for Retirement Planning
  • Start too late
  • Put away too little
  • Invest too conservatively
starting too late
Starting Too Late
  • Save $2,000 per year at 8%
  • Start at 25, retire at 65 -- $518K
  • Start at 45, retire at 65 -- $92K
  • I double checked these numbers!
when do people plan retirement
When do people plan retirement?
  • Of people 55 and older
    • 29% started in their 40s
    • 27% started in their 50s
  • Among all adults: start at age 32

Start planning (WSJ, Sept. 13-14, 2008)

on average a man and a woman who reach age 65 can expect to live to
On average, a man and a woman who reach age 65 can expect to live to:

Man

Woman

79

82

85

88

  • 79
  • 82
  • 85
  • 88

Life expectancy (WSJ, Sept. 13-14, 2008)

on average a man and a woman who reach age 65 can expect to live to15
On average, a man and a woman who reach age 65 can expect to live to:

Man

Woman

79

82

85**

88

  • 79
  • 82**
  • 85
  • 88

Life expectancy (WSJ, Sept. 13-14, 2008)

once they reach age 65 men and women have the following chances of reaching these ages
Once they reach age 65, men and women have the following chances of reaching these ages
  • Men
    • 49% chance of reaching age 86
    • 26% chance of reaching age 92
  • Women
    • 29% chance of reaching age 89
    • 23% chance of reaching age 95
  • At least one person in a marriage
    • 47% chance of reaching age 93
    • 26% chance of reaching age 97

Life expectancy (WSJ, Sept. 13-14, 2008)

savetoo little
SaveToo Little
  • Save for 40 years and earn 8%
  • Save $2,000 per year -- $518K
  • Save $1,000 per year -- $259K
workers with access to 401 k plans what don t participate
Workers with access to 401(k) plans, what % don’t participate?
  • 6%
  • 16%
  • 26%
  • 36%

401(k) (WSJ, Sept. 13-14, 2008)

workers with access to 401 k plans what don t participate19
Workers with access to 401(k) plans, what % don’t participate?
  • 6%
  • 16%
  • 26% ***
  • 36%

401(k) (WSJ, Sept. 13-14, 2008)

what is the maximum ss benefit one would receive in 2008 at full retirement age
What is the maximum SS benefit one would receive in 2008 at full retirement age?
  • $1,985 per month
  • $2,185 per month
  • $2,385 per month
  • $2,585 per month

Social Security (WSJ, Sept. 13-14, 2008)

what is the maximum ss benefit one would receive in 2008 at full retirement age21
What is the maximum SS benefit one would receive in 2008 at full retirement age?
  • $1,985 per month
  • $2,185 per month ***
  • $2,385 per month
  • $2,585 per month

Social Security (WSJ, Sept. 13-14, 2008)

when a woman outlines her husband her income and expenses fall by what
When a woman outlines her husband, her income and expenses fall by what %?

Income

Expenses

20%

30%

40%

50%

  • 20%
  • 30%
  • 40%
  • 50%

Social Security (WSJ, Sept. 13-14, 2008)

when a woman outlines her husband her income and expenses fall by what23
When a woman outlines her husband, her income and expenses fall by what %?

Income

Expenses

20%***

30%

40%

50%

  • 20%
  • 30%
  • 40%
  • 50%***

Social Security (WSJ, Sept. 13-14, 2008)

invest too conservatively
Invest Too Conservatively
  • Save $2K for 40 years
  • At 8% -- $518K
  • At 4% -- $190K
  • Less than half as much! Need stock!
incorrectly identify the recommended rate of withdrawal from nest egg as 7
Incorrectly Identify the recommended rate of withdrawal from nest egg as >7%? *
  • 39%
  • 49%
  • 59%
  • 69%

* While preserving principal

Money (WSJ, Sept. 13-14, 2008)

incorrectly identify the recommended rate of withdrawal from nest egg as 726
Incorrectly Identify the recommended rate of withdrawal from nest egg as >7%?
  • 39%
  • 49%
  • 59%
  • 69% **
  • 43% said 10% or more
  • Correct figure: 4%

Money (WSJ, Sept. 13-14, 2008)

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