retirement concerns

[billryan]

   The Fed is keeping interest rates low so people spend their money, not save it. Deflation is exactly what the 30% of retirees with no saving want. We've had eight years of low interest with little inflation. That's the best these people can hope for.

[notes1]

the fed is trying to do a number of things. yes, they want consumers to spend more, because 70% of our economy is consumer spending.

they are also trying increase inflation. inflation would hopefully increase wages, thus giving folks more money to spend.

they are also trying to create a wealth effect. if folks feel wealthier, the hope is they will spend more.

I never said they were trying to increase savings, but that is exactly what is happening. the premise that higher interest rates causes inflation is wrong. it is the reverse.

I started this thread asking if retirees were being affected by low interest rates. I believe you mentioned that you were doing a little belt tightening. that is a common response. there are tens of millions of retiree doing the same, which is exactly the opposite of what the fed wants.

[Lucky Larry]

'sacrifice', delayed gratification, living below one's means, these are essential traits I have seen in most who are financially secure. I/m/o, it started around 30 years ago, where folks forgot the difference between wants and needs. just wanting something, meant one deserved it. this started the cycle of over spending, over borrowing and under savings, that I believe was the main reason for the financial turmoil the world finds itself in. it is all part of an entitlement society.

I know nothing about the texas pension system, but what little I know about texas, I would guess the following; the pension system is likely fully or mostly funded, it is a plan the tax payers can afford and those receiving those pensions, can count on receiving that money. that is vastly different than the more generous plans in states such as ILL and NJ, where pols gave away the store, in return for votes. and, if those who have under funded plans think that the federal gov is going bail them out, forget it. in a time when so many are in bad financial shape, any politician that suggests the taxpayers should bailout unrealistic/over generous plans for government workers would be hung or worse.

kudos to texas.

Texas Retirement System funding:
Educator- contributes 6% of salary by statue
District - contributes matching 6% of salary by statute
State - matches educator's salary but State contribution varies 6.66% to 6% but is subject to bi-annual legislative whim.
No Cost of Living Adjustment for retired teachers once retirement annuity is taken. Increases must be approved by State Legislature. For many recent retirees it is years between COLAs. Under funding occurs whenever the State fails to match its share, then the Leg. complains its better to reduce taxes and then try to cut benefits or increase participants %.

[notes1]

-approx. 92% of public employees receive a pension
-approx. 20% of private sector employees have a pension, mainly unionized workers
-the average age of retirement is 62
-7 of 10 americans plan on working during retirement
-average 401k employer contribution 4.5%

[royal flush]

best retirement plan-hit more royals, but seriously to many folks live beyond their means carrying to much debt too long especially on things which are consumed like leasing cars that they cant afford

[seemoreroyals]

Just got off the phone with my banker because I have 2 CD's coming due next week. They are 12 month CD's and they were kind enough to give us 1% on them last year. He told me that they had a line of credit with the federal govt for $80,000,000 that they could draw on any time they want at .8%. After about 5 minutes of small talk he agreed to renew these at 1% just as he did last year because I was a good customer of the bank. I also forgot to mention that this bank gives us a Greenberg Turkey every year for Christmas. Even though we had one rate hike earlier in the year and another possibly coming later this year there is still no relief in sight for people that had the foresight to save some of their money.

[case]

1% CD....oh my

[notes1]

i understand what the fed is doing. consumer spending is 70% of the economy, lower the rates and hopefully increase spending. but, everybody who needed to refinance their mortgage has had time to do so, everyone who kept their stocks has seen them recover, plus some.

if low rates are supposed to stimulate spending, why is the economy growing at such a dismal rate and today's retail sales numbers were bad. could it be the loss of a reliable, safe investment, that pays a 3-5% return, is starting to have a negative effect.

people are just not going to put all their money at risk, that would be unwise. and, there is no way to grow your money enough to make up the difference from earning less than half in interest, on the monies you have in safe investments. this is resulting in less spending and increase savings.

[billryan]

The consumer spending is seventy percent of the economy statement is very misunderstood if not completely wrong. That figure includes everyone's rent or mortgage payments, the government spending on Social Security,Medicare and Medicaid.
None of that is discretionary.

[notes1]

if one makes a commitment to a mortgage or rent, that is an outlay that the consumer must meet. and, the amount of that expense for housing, car payments or other large expenses, is certainly determined by the consumer.

if the government requires me to send them a portion of my income, that is a consumer expense.

it does not matter whether consumer spending is discretionary or not, it is spending.

the bigger point is this, the less one earns, whether from working or interest on their money, are major factors in whether consumers spend more or less.

obvious lesson for all, the more the people ask the government to do, the more things they ask the government to give them, the gov is only to happy to oblige. they get more money and more power. and, you have less to spend on what you think is important.