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Here's a great rule-of-thumb that I've gotten by with: Never ever compare the cost of your standard of living to someone else's. You just don't have enough information to do an accurate comparison.

My in-laws buy a lot of stupid stuff (IMHO) that saps their spending money. Do you think they're going to stop buying stupid little knick-knacks when they're retired? Probably not. Should they? Probably. But humans have a hard time changing their behavior.

So what this woman is proposing is to work with and solve the problems we have, not try to magically wish them away or pretend that we can easily change the behavior of the 400mil Americans overnight, and I tend to agree with her that it's a good idea.

> You don't need 'investment expertise'. You put your money in a Vanguard index fund, and you don't pull it out until you're done working. With a savings rate of even 10%, you're golden by traditional retirement age.

It actually does take much more investment expertise than the average American has to know what a Vanguard Fund is, to know that it's a safe bet etc.

I would argue that is a basic failure of parenting and education, not a financial failure.

Why aren't basic finance classes taught in grade schools anymore? How hard is it for parents to teach their kids to save 10% of their income, and to put it into an IRA?

Edit: Before anyone points it out, I know the IRA is a relatively young investment vehicle (the 70's). Swap IRA for any sane long-term savings and retirement plan.

The idea that people should have to speculate in stocks to tread water, index fund or not, is absurd and historically abnormal. I also happen think that dumping money into a stock index fund will be a good way to lose over the next 10 years. It's been a really bad idea for many long historical periods.

It should be possible to buy CDs at a few points above inflation. This was the historical norm. People shouldn't have to "invest" at all to preserve and modestly grow the value of their earnings. The vast majority of people have no business owning stocks or bonds. The only reason you can't get a decent interest rate is the crazy monetary policy of the last 40 years.

Crazy? Seems like a smart move for shareholders to ask for a government policy that increases stock prices at the expense of other investment vehicles.

It's funny how most (all?) government policies result in a wealth transfer. If it's not directly buying goods and services from a corporation on behalf of the people, it's a policy to encourage the people to spend on one thing instead of another. There's nothing inherently wrong with that, but it's good to notice who stands to gain.

>It's been a really bad idea for many long historical periods.

Name a historical period of longer than 15 years in which the market as a whole has lost money relative to inflation. That didn't even happen across the Great Depression.

Are you serious? Look at any inflation adjusted chart of the US equities market and there are obviously multiple such periods.

http://www.angelfire.com/or/truthfinder/index14.html

http://www.dogsofthedow.com/dow1925cpilog.htm

Furthermore, market history did not begin in 1910 in the United States. Stock markets go back hundreds of years in many countries. A global long-view perspective is worth a lot more than 90 years of US data. And from that perspective "stocks for the long haul" have very often been a bad idea.

Your chart shows a flat spot of 16 years across the 80s, and another one of about 25 years measured from the very peak of the market in 29.. So you're right, though that figure isn't impressively different.

The figure I was remembering was actually about a 60/40 balanced stock+bonds fund like VBINX, which is what I'd recommend to anyone anyway.

".. to know that it's a safe bet etc ..."

Nothing is without risk. This is, perhaps, the first financial investment lesson we should teach our children.

Agreed. However, betting that over the course of your lifetime, the entire market (as represented by an index fund) will trend upwards seems like one of the safest bets around. And conversely, sticking your money in a savings account entails risk as well: you risk having your money decrease in value as inflation occurs, since you get paid much less interest than the rate of inflation. The question then becomes "which investment has the best combination of risk and reward?".

Dont use credit money. Never lend on interest. Go, teach your kids now.

Very much back of the napkin here:

30 year US Treasurys are currently ~2.7%. Assuming someone saves 10% of their pre-tax income each month between the ages of 25 and 55, at that interest rate, they can look forward to 5 times their average annual income to sustain them through their last 20+ years of life. That's a 75% cut in income. Stocks are theoretically higher yield, but as others have argued, normal people shouldn't have to worry about stocks, and more importantly, there's a justified fear of market crash, which could be... appreciably lower return than Treasurys.

While I agree, I don't think of things you can find and verify with a dozen sources in an hour online as 'expertise'.

Fantasizing, man? Now listen the real story. I survived 2 currency crashes, when savings of the whole 2 generations of the family were effectively nullified overnight. The euro is now damn close to such crash, and the US dollar as well. From my exp and from the good advice of my granny, I can only tell you to invest into good tools, safety matches, soap and food stash. Everything else is just fiction.

Well, the retirement savings are somehow (directly or indirectly) invested into a stock market, so they are safe from inflation, or even complete currency crash. When inflation is high, you even benefit, because people's consuming activity increases as there is little they could do to save money which is being burnt with inflation, so they spend, improving the bottom line of the companies they buy stuff from - and stocks of which you have. Or they buy stock directly, increasing real price of stock directly by increasing demand.

That is valid even in the case of extreme inflation - like 1923 Germany. People suffered, but stocks didn't.

Only exception from that rule was the 70s oil shock, but that wasn't a real crisis (economy itself was doing just fine, only the oil became expensive for purely external political reasons).

Go tell this deep observation to the people whose pensions were invested into Freddy and Mac ponzi thing.

Any pension was lost? Yes stock market collapsed and so the savings on some funds which invested into stocks. But now they have nearly completely recovered, and 3 years which have passed is too low for a planning horizon for pensions. Last 10 years have been turbulent for stocks, with market (and overall economy) performing well below long-term average, and yet, dividends included, index funds post a modest profit over 10-year period, inflation-adjusted (in part that was because the inflation was low).

Out of curiosity, which currency crashes were these? I would not have my money in the bank if I was in Greece today, but I have most of my savings in stocks anyway, globally distributed...so it doesn't really matter.

The Soviet rouble, and the Latvian rouble before the LVL currency established. Just curious, will you still have access to your stocks if the Internet collapses?

I'll still technically own them, but I'll have to access my broker (which is located in my own country) by some other means, i.e. telephone, mail or physically showing up at their office. About 50% of my stocks are owned through a very large fund, which mainly operates by mail anyway. I guess the stock exchanges themselves will at least attempt to stay open in such a scenario; it will probably be chaos but the stock market is at the basic level just a list of orders, which could in principle be sorted manually. Or at least without an internet connection. But you'll still own your stocks as long as there is a paper trail _somewhere_, worst-case you might not be able to sell them for a while.

If the internet became unavailable for a long time, it would be a very interesting situation regardless...during a calamity like that, you might be better off having all your money in real estate or other physical goods.

We used to have real pensions from companies, too. It used to be that, by working for a company, part of your benefit was that they'd pay four your retirement. Of course, this is bad for the bottom line, so they cut that.

This was definitely a bad thing for the economy. A lot of people will stay on the job they hate, having a lot of idea what else to do, just not to lose the pension.

> To be fair, those were considered reasonable expectations until the last few decades

Ahistorical nonsense. "People USED to save! That's why people used to generally end up desperately poor when they were elderly, and also is why the US implemented Social Security."

>My advice to everyone: spend less. You're chucking great gobs of money at things that don't make you happy; just STOP DOING THAT and you will have enough to retire on by the time you're 50.

I'm glad to see a comment on Hacker News in which the author describes how amazingly thrifty he is and how irresponsible and shortsighted and stupid everyone else in the world is. It's been ages since anyone has posted anything along those lines and really helps our discussion of large-scale social issues.

You have to buy cheap houses and used cars; we're not talking about dumpster diving and knitting your own socks here.

I'm hardly a model of thrift.

I think at an older age, when you are more likely to have health problems, 31k is probably not enough.

Sum up the premiums on your insurance, as well as the maximum out-of-pocket expenses on that insurance, and you have a good estimate for your maximum medical expenses in a year; you should get a number that comfortably fits in a 31k budget. Insurance exists to make medical costs predictable and budgetable.

...but anybody who thinks that health insurance provides any such guarantee (in the US) has never dealt with serious medical problems.

Hence why I said "good estimate" rather than "absolute maximum". However, the kinds of problems that health insurance won't buffer for you will generally screw you whether you have 31k/year or 131k/year.

>Sum up the premiums on your insurance

Nah, sum up the premiums on what your insurance would cost at retirement age.

> To be fair, those were considered reasonable expectations until the last few decades.

Meh, until the last few decades, people just invested in a bunch of kids they hoped would take care of them in their old age.