I hardly ever go to the doctor, but since having kids, I’m not quite as healthy as I used to be. Children bring home bugs from school that they then pass on to me. These new kiddy-critters give my body fits for brief amounts of time. A couple months ago, a particularly nasty one really got a hold of me, so I begrudgingly made an appointment to see the general practitioner.
The truth is that I don’t mind doctor visits because I love to read. Doctor’s offices are usually filled with a treasure trove of magazines of all types. This past visit, I thought I really hit the magazine lottery when I spotted one about money. Better yet, it was their Special Retirement Issue! Wooo! Doctor, please make me wait an hour so I can read through this.
However, what I read made me feel even worse. There was an article that detailed three couples on the verge of retirement. All three seemed to be making some horrible decisions, but the author didn’t call them out. So now, I’m going to.
Case Study #1
The first couple were in their early 60s, lived in Waukesha, Wisconsin and were about to retire. The author made a big deal about how this couple had saved 13% of their $130,000 annual income every year. They have no debt and have a nest egg about 1.3 million. The couple is quoted in the article as saying, “We’re just not big spenders.”
My response: I can relate to this couple a bit because I actually lived near them for the past 6 years of my life. I’ll acknowledge that Wisconsin has high taxes, but other than that, the cost of living is low. Houses are cheap and the government services are good.
I think it is ridiculous that they only saved 13% of their money and then insinuate that they are thrifty. If you do the math, these people are plowing through almost $100,000 per year or $8000 per month with no mortgage. They are actually HUGE spenders.
Case Study #2
The next couple were also in their early 60s and lived in Seattle. Seattle is a bit more expensive than Wisconsin, but Washington has no state income tax. Together, this couple earned $210,000/year. Do you want to take a guess at how much this couple has saved? Wait for it. $1.6 million. This may sound like a lot, but I don’t think so. I have a couple relatives and friends who have saved aggressively and despite never making more than $130,000 in a year, have saved more than $2 million.
Another way to think about it is that this Seattle couple have saved a little under 8x their income. I’m 25 years younger than them and have almost 8x my income saved. I’m no Warren Buffett either.
The story went on to discuss how this couple talked to a financial adviser who warned them that ‘they would quickly burn through their entire nest egg if they retired now.’ Nice work Sherlock. The adviser said that they would need to postpone their retirement to their late 60s. The husband’s response was priceless; “Evidently $1.6 million doesn’t go as far as it used too.”
My response: What. A. Tool! Poor guy can’t live on almost $2 million, waaa waaa! I feel your pain. Wait, no I don’t!
What on earth are these people spending their money on? The 4% rule tells us that these folks could very safely spend $64,000/year in retirement, but apparently that isn’t nearly enough, even with a paid off home. This couple has clearly lost sight of what is important in life. Whatever they are blowing all of their money on, it’s not worth it. They are getting up in their years and the one thing money can’t buy more of is time.
Case Study #3
The final couple were in their late 60s and lived in Cleveland. These people had an entirely different problem. They had $5,000,000 saved up, but couldn’t bring themselves to retire because their lives were built around their jobs.
Although this story isn’t as bad as the previous two, it still doesn’t sit right with me. I admire this couple for finding happiness and meaning through their work, but it seems to me that they may have missed out on life. The author talked about how they worked crazy hours for years to build their business.
There is so much to see and do in the short time we’re allotted on our little green/blue sphere. I’m not even 40, but I know that I won’t be able to see much of it. The fact that these people haven’t found anything meaningful outside of their business makes me a bit sad.
Mainstream Money Media is Horrible
The thing that really chafes my hide is the money media in general. The average family doesn’t make $210,000 or even $130,000 per year. Normal folks are going to read these stories and be terrified. If a couple can’t retire with almost $2 million, the average person is going to think they can never retire.
Instead of the Retirement Issue, I’d like to see the Spending Issue or the Thrifty Issue. Profile the first two couples in this article and show all the crazy nonsense that they waste their money on. Then, show how easy retirement can be with a low consumption lifestyle. When that issue comes out, I’ll buy a subscription*.
*To read the stories for yourself, boogie on down to your local library and turn to page 87 of the March, 2013 edition of Money.
Join the 10s who have signed up already!
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*Only if your life is pretty bad to begin with.