He receives $1,200 from Social Security and a $600 a month pension from his last corporate job.
When the 2008 financial crisis hit, what little Palome had saved -- $90,000 -- took a beating
He then sold his New Jersey home for $180,000, kept what he needed to quickly pay off his credit card debt and divided the rest among his children so they’d have down payments for their own homes.
Ok, so he retired with $270,000 of assets plus $1,800 per month from private and public pensions. Buy a life annuity (as a 65 year old male) with the $270,000 and you're getting around $1,600 per month. That yields a total income of $3,400 a month or $40,800 a year, which is considerably above the national median income (around $28,000/year according to wikipedia).
As I see it, the problems here are entirely of his own making:
1. He gave away 2/3 of the wealth he should have been relying on during his retirement,
2. He gambled his remaining assets in the stock market rather than making investments suitable for his demographic (mostly bonds) or buying an annuity, and
3. He picked up expensive habits when he was younger -- he takes regular flights to visit relatives and occasional vacations.
(And I suppose I could add 4. He should have saved far more money before retiring -- but my point is that even at the point he retired he was in decent financial shape.)
The other way to look at this is a guy smart enough to rise to VP of Marketing at a major corporation and make in the low six figures isn't smart enough to manage his own retirement savings.
He's a VP of Marketing. Why is it that we expect him to know how to manage a retirement fund, even if it is his own?
The wide-spread end of the pensions system and the rise of 401(k)s is going to be a disaster as more and more Baby Boomers retire.
It's right there in the article: The median 401(k) balance for households headed by people aged 55 to 64 who had retirement accounts at work was $120,000 in 2011.
This is a fact. No matter how easy saving for retirement is, it's a fact that the majority of Americans have retirement savings that are utterly insufficient. I have no idea how this will play out.
> That mostly solves that problem, but leaves people like me that would like to handle retirement savings themselves a bit annoyed.
Ironic, because that's how I feel about speed limits: it's for the best overall but annoying to those that drive well... and you're from Germany where they have the Autobahn.
That said, my concern for my dim-witted but well meaning citizens makes me willing to bear this for the overall good.
The US has Social Security which is basically a state run retirement. The problem is that it's funded by the people currently working. This worked out great when there was a surplus of workers. Now that less people are working than are retiring, the social security funds are in danger of running out.
SS has a surplus designed to keep it solvent for the reasonable future. The real issue is a low cap on contributions when most economic growth in the last 30 years has been in the top 5%. Coupled by an ever growing disability burden that has nothing to do with retirement and who's growth is linked to states trying to shift burdends to the federal level.
Are parents in the US obligated to give their children downpayments on houses? Food, shelter, and education is looking after your kids. Giving them cash to buy houses is above and beyond, and I don't think he should have felt morally obligated to do so as your comment implies...
It varies. Some parents want to help their kids buy their first house. Some feel they should save for it on their own. Probably depends a lot on what their own parents did for them.
I may be wrong but I'm guessing he's not a parent.
For most parents a choice between yourself and your children is no choice. He's accepted a level of financial hardship to be, or at least feel like, a good parent. I see no issue with that.
I'm guessing that it was likely that he wouldn't have spelled out in detail his exact financial situation to them.
If you were his child all you'd probably have seen was that he sold his house and offered to help you get on the property ladder with some of the money he released. If that happens and you believe that he's got other savings then that's a very different situation to be presented with than the idea that you're messing up his retirement.
But even if that weren't the case it would surely be a failing on their part rather than on his?
It isn't quid pro quo but it shouldn't be martyrdom either. I think cutting your own throat for your kids teaches them something bad, not something healthy. (Yes, I am a parent, a very devoted one in fact.)
I wasn't speaking to that, it is of your interest as a parent to 'invest' into your child, be it time, knowledge etc... (honestly I never come here to read the articles, I touch the headline and gauge the article by its comments, so I 'maybe' offbase when declaring what I think.)
Regardless, you know as well as me - once you walk down that path no one knows it better then yourself.
Given the context of the discussion here, your remark sounds like you are defending the choice this guy made to shoot himself in the foot financially. That was what I was reacting to. I don't think it is ever a good thing to shoot yourself in the foot. You can invest in your children without undermining your own welfare. It does not sound like that is what this man did. He gave a lot of money to his kids and apparently now is (or feels) impoverished.
Context matters. By itself, I would agree with your sentiment. But in the context here, it sounds like you are saying "You should cut your own throat to 'invest' in your kids!" There are a lot of people who really believe things like that. I think it is very unhealthy for them as individuals and for the larger fabric of society.
Are you saying it's wise or smart to cripple your ability to retire by lavishing your children with your life's savings? That's what this guy seems to have done. And now his situation is a bit f'd up.
One of the things that most financial planners and guides will tell you is "save for yourself first." Worst case, your children can work, borrow, do a military enlistment, etc. to pay for college. There are a lot more ways and a lot more time to pay for college than there are to make up for insufficient retirement savings.
Many articles on retiring baby boomers have made the point that most of their assets are tied into their home, and in this case it seems like that was true as well. I wonder what the social and economic implications are of baby boomers needing to sell of their house to free up assets. Maybe generational homes will become common again? Maybe housing prices will become sane again?
The article mentions that he actually has enough money to live on, but works to get extra perks, like flights to visit his children. I suppose he is also a "protestant work ethic" kind of guy who can't stand not working.
One interesting comedy about retirement planning is a professional retirement money manager quoted in the article suggests saving 20 times your annual income before retiring.
If you're poor, you're not going to have the spare money to save.
If you're rich, the IRA contribution limits begin to hit. Hmm lets say 75K/yr * 20 years / $5K per year contribution limit that'll take 300 years to save the 20 years worth.
If you're in a career that's short term, its going to be difficult to save 20 years of annual income if no one over the age of 35 is hired into that kind of work or the average worker burns out in less than 10 years.
And the only purpose of the whole racket is so the medical industrial complex can simply confiscate it all anyway before you get to enjoy it.
Finally the article implies the guy likes going to work and only does it for extra beer money. And whats wrong with that, other than people who actually need the job to live can't get his?
> If you're rich, the IRA contribution limits begin to hit. Hmm lets say 75K/yr * 20 years / $5K per year contribution limit that'll take 300 years to save the 20 years worth.
The IRA limits only apply to money you save in an IRA. There is no requirement that your retirement savings be entirely in an IRA.
And if your IRA is a meaningful portion of your retirement savings, you aren't going to be able to retire.
Unfortunately, a lot of people that I've talked to who could quite easily save a lot more have been under the impression that maxing out their IRA contribution each year means that they're in good shape.
Indeed, Canada has pre-tax and post-tax savings accounts. They have separate limits and I'm sure various other countries (including the US) have similar systems.
I've never heard anyone say you can retire on an IRA alone. A full-funded IRA is a (almost) necessary but not sufficient condition to retire. You'll probably also want a 401k plus real estate.
Yes, your primary residence should not be thought of as an investment vehicle, but it's a good way to have your money ~keep pace with inflation and the mortgage is a bit of forced savings. After the kids move out you can downsize and you'll have the difference in cash.
Once you figure out a societal system where there's tons of money to going around and everyone can have a cushy retirement and fully paid medical expenses and never has to worry about anything, and where anyone can immigrate at will (excluding Monaco, Finland, Switzerland, etc that carefully guard their unique circumstances) please let me know.
He had a "low 6 figure" salary, ie. >= $100,000 per year, and over all that time he managed to save $90,000. So let's say he worked for 25 years and had no interest at all from his pension, that means he saved about $300 per month. Which (considering he was paying off his mortgage and putting his kids through college) is I guess a pretty respectable amount to save.
The six figure salary is also what he was making only at the peak of his career, so it's possible (probable) that for the majority of that 25+ year career he wasn't making as much.
Edit: Actually it seems I'm not really correct. The article clarifies this:
> His big break came in 1975 when he was recruited to The Cooper Cos. as vice president of marketing for the Oral-B dental-care business.
> The job gave him a high five-figure income and an executive’s life at age 39. He flew first class to Cooper offices in the U.S. and in England, Sweden and Germany. He helped win an endorsement for the Oral-B toothbrush from the U.S. Olympic Committee. He had a closet filled with business suits, and on weekends he played golf with other executives.
> So in 1980, when he was 44, he started a consulting company, with Cooper as his main client. He also did consulting for Sandoz Pharmaceuticals, Johnson & Johnson and others.
> In flush years, Palome had several clients and earned about $120,000. Though he saved for his kids’ college and helped his elderly parents, retirement wasn’t on his radar.
> “I never thought I’d live this long,” he said.
His wife also died in 1983 so he had to bear the full cost of raising his children. It seems that he chose to provide a good life for his kids over his own retirement, as far as I can tell. I know a lot of parents who made or are making the same selfless choice. This is a slightly different topic, but it's really unfortunate that for most middle class families having multiple kids is effectively deciding not to retire comfortably.
As a late 20something -- it's hard to predict the future; but truly, I could imagine my wife and I expatriating when we retire to somewhere where it's just cheaper to live.
I've been very fortunate to have spent more than my fair share of time traveling out of the US and there are so many amazing low key places with decent access to necessities. I really have started seeing this as a viable option down the road.
I keep reading about Uruguay, and how it's quickly becoming a target destination for a lot of retirees, assuming I were to be of retirement age today, I'm having trouble thinking of a reason NOT to do this.
You may find, say, rural Wisconsin to be cheaper than Uruguay, by the time you factor everything in. Including the cost of people visiting you. I could visit my grandmother in rural Wisconsin pretty easily compared to Uruguay.
Note that with modern transportation, you can pretty much be in the middle of nowhere while simultaneously being less than 90 minutes from downtown Chicago via medium speed train (or probably 3 hours away by traffic jam car...)
Its not like you'll have to give up modern medicine and go back to faith healing and leaches. One of the benefits of the health care bubble is you'll occasionally see a giant hospital in the middle of nowhere. There's a major Mayo Clinic facility in a rural county that has more cows than people up north, in a city that has fewer residents than my high school had students, next to seemingly infinite acres of recreational areas.
After you get past a certain age, you may also want
some help for yourself from your children.
The cost of a maid or other household help in many developing countries is low enough that you can get much much much better help there than you could possibly get from your adult kids with their own lives in the US. A really good live-in maid will run you $500 a month (a great salary for many people). They will cook all your meals three times a day, keep the house spotless, do all your laundry, run errands like buying groceries, etc. You can't find service like you can in Brazil without paying a pretty penny. The average cost of a retirement community in the US is $2750 a month, many times more expensive for probably far worse service, with one employee shared among many retired individuals.
I will always choose care from my children over professional care. Easy choice. Even a few hours of time with them will be much more enjoyable than days or weeks with a stranger, regardless of how wonderful the stranger happens to be.
Not everything can be reduced to dollars and cents.
Oh, it depends a lot on your family. For example, what if you had kids at twenty, and your kids had kids at twenty? By the time you retire, your grandchildren are in college. Maybe not a bad time to run off for a ten year Hawaiian vacation.
The connection between parent and mature children also varies a lot from family to family.
That's making a lot of assumptions about future lifestyle choices -- But point taken, I do suppose if my wife and I had kids now, that quickly changes the overall mindset of retirement.
Still though, I hardly consider it a selfish choice -- shit, I would have loved to have gone and visited the grandparents in some tropical destination as opposed to northern Idaho.
My in-laws did that, they moved to Brazil. (expatriating) Mostly it was the weather (they are in the northern part) and the lower cost of living.
I find these sorts of articles interesting in a morbid sort of way. I've been making out my 401k contribution for as long as I've been working, and was told back in the 80's that it would be worth millions by now. Uh, not so much :-). To its credit though it has come back from 2009 which was pretty horrible.
The scary thing about watching technologists age is when they stop learning. If they stop and figure "I'm there" and then start to coast. Never a good outcome on that as far as I can see.
Well I don't know if they "planned" it exactly but they bought a couple of apartments in a vacation spot which provide a rental income in Reales before they moved. Between that and my father-in-laws Navy retirement benefit they seem to do ok.
Opening and running a bed and breakfast is also a great option since it provides a steady stream of travelers, which mitigates the isolation you might feel from being in a foreign land.
Yes. A lot, but it's still extremely cheap and there are literally hundreds of miles of amazing coastline to retire cheaply to, many of which are within 1-4 hours of a major metropolitan city. São Luis (Maranhão), Fortaleza (Ceara), Recife & Olinda (Pernambuco), Salvador (Bahia) and Aracaju (Sergipe) all have amazing and cheap places nearby.
The major cities in the northeast leave a lot to be desired because they are often very poorly run because socialist political parties are in power[0]
A lot of the growth in the Northeast has been due to the Bolsa Família[1] conditional cash transfer program that redistributed wealth to poor across the country, but especially the northeast because many of Brazil's poor live there. It works in a way that doesn't undermine local economics but instead infuses cash at the lowest levels of society, generating economic activity in local communities and providing opportunities for individuals to scale to small businesses and small businesses to scale into larger ones. One of the biggest takeaways for me was that except for major capital expenditures like power plants, ~12 million people spending ~$13 will better allocate ~$156 million dollars than one fund manager investing $156 million dollars. On top of that, a $10 million investment in Brazil is likely to be half of that after graft and palm greasing.
Read up on the Bolsa Familia. IMHO it's really a model of how you institute a social program in a capitalistic way and the northeast is proof.
[0] nothing wrong with many ideas of socialism per se, but if you want socialism within your city/state/country, then you need to ruthlessly pursue capitalism with respect to other cities/states/countries that aren't yours so you can fund your social programs.
Mostly in the big city centers, and primarily the cost of housing. Inflation has been concerning, but if you are living in a place where US$500/month can be plenty (like northern/northeastern Brazil), 6% annual inflation doesn't mean much.
Ex-pat life sounds good, but is very isolating. Do you want to live your retirement years far away from most everyone you care about and that cares about you?
How about just leading a more moderate lifestyle in the States? Live in a town, not downtown. Keep a single car, and bike a lot. Live in a small house or condo. Etc.
It's really only isolating in Latin American countries if you don't speak the language or are a curmudgeon. Culturally there is more than enough in common with US lifestyles with respect to social activities, cultural customs and food that you won't feel nearly as isolated there as you would in Southeast Asia.
Friends and family, home you enjoy, local culture, not learning a new language; there are tons of different factors when talking about someone putting down roots.
That's what I took away as well. I know it's hard to believe when we're young and on top of the world, but the vast majority of us will make some mistakes and will face hardship and loss. I really hope I am able to maintain the positive, constructive attitude that this guy has.
Thank you for saying this. Some in this thread are being critical of the mistakes he made in planning his retirement. That may be, but he's owning it and working his tail off to continue to do what is important to him, namely see his children and remain independent. Much respect.
Ya I don't understand some of the comments in this thread. I didn't read this as a guy that was blindsided. I think there's some conscious choice at work here. He could see what his finances were going to be if gave his savings to his kids for down-payments and he chose to do it.
As far as I can tell, this dude made some choices, and is happily dealing with the consequences. He chose a consultancy over a pension, and has chose to give to his children over keeping for himself. And, (a) he notes that he doesn't have to work but choose to, and (b) any of his kids would be happy to support him.
From what I can tell, this is a media outlet looking for a juicy story about seniors festering in poverty where such a story doesn't really exist.
One entertaining part about retirement discussions is apparently young people think all old people are executives. Wikipedia "median household income" article claims $29056 for the USA in 2010 for "annual median equivalised disposable household income per adult".
The article says that he made $100k, and it sounds like he continued to live like he was after the money stopped. If he was living like someone who made $30k, the money would go farther.
Any middle/upper-middle class, healthy American-born person with a caring family, access to good education resources, opportunities to stay employed throughout their life, and a drive to work for the market can and should do that if they live in an area with a demand for new jobs and are lucky enough to stay away from any serious accidents, diseases, and pregnancies.
As someone who immigrated here as a refugee without a dollar to my name and a family to feed, I realize how much of a role pure chance and luck play in my successes thus far despite the obstacles.
At 64, when an 800 square foot manufactured home he’d seen in Plant City, a Tampa suburb, became available for $21,500, he purchased it with a credit card to amass frequent flier miles. He then sold his New Jersey home for $180,000, kept what he needed to quickly pay off his credit card debt and divided the rest among his children so they’d have down payments for their own homes.
Selling the house was smart, but dividing the rest and giving it to his children was a terrible move. Homes in the US are used a proxy savings accounts - sold at retirement or later to gain retirement funds, or used as a (hopefully) no-rent living space.
There are very few no rent homes. My rent has been about $325/month to the city in prop taxes for the last decade or so. They have held it constant by increasing all fees in an extortionate manner.
I am from Africa. My mom gets a pension for $30/month for the few years my father worked for the government before passing away. With $30 she can go buy one bag of rice, and maybe enough sugar for one month. MAYBE.
But no one cares. In Africa the retirement is your kids. You take care of your kids, and when they grow up, they take care of you. While this system is sure to keep many under poverty, I prefer it to one where someone who is 77 has to get to work just to ensure he can have the basics.
I respect the way elders think in America. That is they are independent, they help the youngsters as much as they can, and they are just significantly more active than older people where I am from. However I do think it is right for them to have to work past a certain age, especially when they have well-able relatives.
Sure, but that approach is also a root cause of overpopulation of the planet. Maybe you could even call it a kind of pyramid scheme, because everybody needs several children to support them (one is not enough, too risky). So obviously it is not sustainable in the long run.
For what is worth I have observed this phenomenon first hand. I am a college student and I work part time as a sales clerk at a store. I would say at least 20% of the staff consists of retirees. They are usually professionals who either worked for the government or a larger corporation. Everyone who I've gotten to know has some savings and doesn't strictly need to work, but doesn't have enough savings to live comfortably.
What is more interesting is that another 15% to 20% of my colleagues at this store are in their late forties to mid fifties. For various reasons they each decided to abandon their careers (found out they didn't believe in what they were doing, or decided to take time off to look after their kids and could never get back into the industry, etc...)
It is a bit of a specialized store so I am sure it is not the same distribution as in a Target or a Walmart. However it is also worth mentioning that aside from one or two people (who I am not sure about), everyone else has at least a bachelors degree or is in the process of getting one. There are maybe 15 college students out of a staff of about 60.
His math is wrong, and the journalist just put it in the title without doing any simple arithmetic.
He makes about $80 a day now, which is $400/week. In flush years, he used to make about $120K. At approximately 2000 work hours per year (in USA), that works out to about $60/hour.
So he makes in a week slightly less than his former daily wage. [updated this -- it said more previously. I can't do math either!]
It's amazing that even a financial publication like Bloomberg has innumerate journalists.
It's one example of a person affected by a variety of truly challenging events.
The financial crisis which affected retirement savings. The housing crisis which affected what was typically people's largest asset. Rising health-care costs. Baby-boomers entering retirement and the impact that'll have on Social Security. Lack of pensions, and dependence on 401k's. The jobless recovery.
It's easy to blame an individual for not having planned for the predicament he finds himself in, but it's also possible to see what he's going through as a sampling of unexpected or uncontrollable macro-economic factors, weighing on a much-larger sector of the population than just this one man, in a way that will ultimately have an effect on society as a whole.
It may not be news, but it's a nice reminder of how much the purchasing power of the middle class has fallen. He was unable to both support his own retirement and support his children (i.e., pay for their college, help with initial house downpayments, etc.). Granted, times are a lot tougher for him since his wife died, but that really only strengthens the point: the middle class is becoming more and more reliant on dual incomes. That is a terrible eventuality, as it makes divorce or separation even more devastating to families and their children.
I suspect many posters are thinking, "well, he shouldn't have tried to help his kids so much." And that is also exactly part of the point: he shouldn't have to choose between his own retirement and his kids.
Expectations can be managed. My strategy is flee to the developing world and learn some languages, make some friends, get used to being out of my own culture and familiar with other ways of living. I could beat myself up about office hours and mortgages back home to collect the dream, but it's just not worth it. You only live once.
I'm actually shocked that he can't earn better as an educator of some sort. Seems like a great way to spend your like is 1/3 of it learning, 1/3 of it applying what you've learned and learning more from experience and 1/3 of your life sharing what you've learned with those living the first 2/3's of their lives. If you were successful during the first 2/3's of your live, then teaching or sharing your success with others should be possible.
That's the route that my dad took, but it wasn't planned and he wasn't even aware to seek it out. He was a two-time CEO, and one of the companies he founded and took it to a moderate exit. However after he left the last company, he moved back home to Brazil, where he encountered ageism over and over again. Companies and recruiters basically told him "Look, you're the perfect candidate. Every company looking to compete internationally would love to have someone like you. However they want someone who has your experience but is 40 to at most 50 years old. My dad is 66. After struggling for a while and burning through a lot of his savings being told no over and over again because of his age, a friend of his put him in touch with Instituto Dom Cabral, probably Brazil's best business school, where he easily got a job as a professor doing managerial consulting advice to companies that pay for access to its professors.
Investments != savings... No one should have any money in stocks if they're within 10-20 years of retirement, and aren't investment professionals themselves.
The fact is, people (investors and those who sell investment 'products') got too used to successive bull markets, and took on too much risk. When the smart people sold, the dumb people (or those who have too much faith in their dumb brokers) lost big.
Take on risk when you're young, so if your position takes a hit, you have enough time to ride it out. When you've got a good amount, switch into low-risk investments, and when you're within a decade of retirement, put everything you're counting on into a bank account or GIC. Only play with what you're willing to lose...
Is the theme that old people without chronic illnesses tend to be more active?
Or a money manager thinks people should give him more money to manage?
Or if old people give money to money managers they should expect to lose 40% of it as per the star of the article?
Maybe the theme is people who have extreme ups and downs in their lives should plan during the ups for the downs?
There was some discussion about the star of the article being very unusual because he has assets and most old people don't. My experience with ancestors is they have assets until they become sick, then they lose all their assets that can be stripped from them until they qualify for free medical. Then they live on free medical and SS until the end. So I'm not surprised that old people tend not to have assets, thats kind of the point of a for-profit medical industrial complex.
This guy seems remarkably youthful for 77. A lot of people his age wouldn't be able to handle his jobs, or would not be able to convince an employer to give them a chance. Even a burger flipper has to be able to stand for hours at a time and have a decent short term memory.
When the 2008 financial crisis hit, what little Palome had saved -- $90,000 -- took a beating
He then sold his New Jersey home for $180,000, kept what he needed to quickly pay off his credit card debt and divided the rest among his children so they’d have down payments for their own homes.
Ok, so he retired with $270,000 of assets plus $1,800 per month from private and public pensions. Buy a life annuity (as a 65 year old male) with the $270,000 and you're getting around $1,600 per month. That yields a total income of $3,400 a month or $40,800 a year, which is considerably above the national median income (around $28,000/year according to wikipedia).
As I see it, the problems here are entirely of his own making:
1. He gave away 2/3 of the wealth he should have been relying on during his retirement,
2. He gambled his remaining assets in the stock market rather than making investments suitable for his demographic (mostly bonds) or buying an annuity, and
3. He picked up expensive habits when he was younger -- he takes regular flights to visit relatives and occasional vacations.
(And I suppose I could add 4. He should have saved far more money before retiring -- but my point is that even at the point he retired he was in decent financial shape.)