62% of Americans Have Under $1,000 in Savings, Survey Finds • Hacker News Board

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#251

Post by Avshalom » Thu, Oct 08, 2015, 7:55 PM UTC

brianclements wrote: post #29

So many people live paycheck to paycheck that saving is just this intangible concept that "wealthier" people do. No one they know saves, no one taught them to save growing up, and even if they tried, they probably couldn't. Cost of living has outmatched wage growth; it's a mess. On the personal responsibility side of it though, I'm willing to bet that over recent decades, another thing that has also inflated is many…

>, and even if they tried, they probably couldn't

For instance near as I can tell it takes like 10 grand to get into an index fund. Even if that didn't represent years of savings for most families there are so many things that 10 grand needs to be used for before [[2-5%/y return on investment over 20-30 year period IF the market doesn't crash shortly before you need to start drawing on it]] is a compelling proposition

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#252

Post by ChuckMcM » Thu, Oct 08, 2015, 7:58 PM UTC

johnward wrote: post #247

ChuckMcM wrote: post #93

Earlier quoted context omitted.

I don't know about the poster but my investment account gives me access to it as "cash" if I chose to exercise that option, the brokerage essentially loans me the money and briefly and then sells some of the stocks in a pre-arranged priority to cover that cost. The "real" life implementation of this is that my kid's college tuition is auto-deducted from that account, so if the cash on hand balance got to 0 it would l…

If you have a 401k you could potentially borrow against it if absolutely necessary. My plan allows 4% loans in which I pay myself the interest and a very small fee goes to the plan holder. I'm assuming the 6 months of living expenses is an extreme situation.

Well in 2009, during the real estate crash and subsequent Great Recession, people were out of work for a lot longer than 6 months. Of course financial planners don't really talk about those sorts of seismic events. That historically hasn't been an issue for engineers, but there are groups that are disproportionately affected (like older engineers).

Because I'm built the way I am I've always saved in the context of how long I could live on my savings with the goal of increasing that number until it reached infinity. That first level I call 'Raman level retirement' where you could live forever[1] off your savings if you ate only Ramen, up to the the point where you can live off your savings and keep your current lifestyle (which actually takes less income than most people thing), to actually living a more lavish lifestyle without day to day employment.

[1] Of course you intercept the life expectancy line at some point, and you have to build into your model ever increasing health care costs or a one time lump sum to emigrate somewhere that has a national health plan.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#253

Post by [deleted] » Thu, Oct 08, 2015, 7:59 PM UTC

patio11 wrote: post #5

There's a conversation to be had about many Americans living in precarious financial situations, but the reason why most Americans don't currently view their savings accounts as priorities is because in the current interest rate environment savings accounts and CDs are products with vanishingly little to recommend them. The APY my bank offers is one basis point . That's $1 per year for every $10k held in the account.…

[deleted]

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#254

Post by habosa » Thu, Oct 08, 2015, 8:03 PM UTC

There is a lot here about the interpretation of "savings account" and I agree that it is problematic. I have 10x as much in investment/checking as savings. However I don't think that fixing the semantic issues would change the overall issue: the distribution of wealth is even more skewed than the distribution of income. Most of this country would be utterly ruined if they got into a car crash and owed $10k to medical/repairs. And then there are people like most of HN (and me) who get paid ~$100k and save 20-60% of it and are not worried about that situation at all. It's not because we are better people or really that we deserve anything, we just have the right skills/opportunities at the right time. We are the few.

I was born into the wealthiest gender of the wealthiest race in the wealthiest nation and I happen to find working in one of the wealthiest industries to be not only easy but enjoyable. I have won the lottery. I have no idea what it would feel like to be at the other end of the spectrum, I just hope I don't forget how lucky I have been.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#255

Post by stevewilhelm » Thu, Oct 08, 2015, 8:04 PM UTC

zo1 wrote: post #148

ryandrake wrote: post #69

Earlier quoted context omitted.

Curious, not criticizing: What is your plan if you get sick or laid off, or for some other reason need a large amount of cash immediately? I always thought it was common advice to keep ~6mo living expenses in cash savings for emergencies.

Most of my savings is invested in index funds. Pretty much all of them allow you to withdraw the full amount in 3 days or so. Granted, do you have any idea what such a scenario might look like? Odds are, it can wait. Even large medical operations if you don't have medical insurance (where I live), simply require a modest deposit before they start the operation or expensive procedure. Though I do think they ask for so…

There is a difference between liquid and volatile. Index funds are definitely a liquid instrument, but they are very volatile.

For funds that you know you will need in the next six months to three years, it is recommended to keep the funds in a liquid and very stable investment.

Personally, I use a California (I live in CA) tax free short term bond fund.

What type of expenses do I keep in this kind of fund? Tax payments I know I already owe (capital gains from an IPO for example), child's college tuition payments, planned major house repairs / remodels, pending car purchases, and as others have mentioned six months of living expenses in case of layoff or other emergencies.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#256

Post by beambot » Thu, Oct 08, 2015, 8:04 PM UTC

Avshalom wrote: post #222

beambot wrote: post #181

Earlier quoted context omitted.

How does owning rental properties invalidate his message of "avoid rampant, unnecessary consumerism"? Certainly, not everyone can derive their retirement income from rentals (the numbers don't work out). But lucky for you: There are other forms of investment. BTW: I currently rent. It's the financially prudent thing to do in my situation, and I certainly don't begrudge my landlords for it -- they're the ones locked i…

If you work at say Target 40 hours a week, squeak in the occasional overtime and work on every holiday you take home about 12-15k a year after taxes that's about half of what MMM gets from rent. MMM hasn't come within ten grand of frugality in his life. It doesn't strictly invalidate his message but it's a grain of salt that should not be forgotten.

I get that he earns a lot from rent. But I still don't understand the animosity. Would you be equally up in arms if he just invested in municipal bonds -- the bonds that pay for your parks, roads, fire stations, police upgrades, and schools? There are reasonable tax-free bond funds (eg. PMF) that pay >6% annually.

I've read most of his posts. He harps on things like biking instead of buying a new car. Or "why spend $150/mo on a cellphone bill when you can use Google Fi for half that?" Using that latter example, that's a difference of $900/yr -- or 8% of your Target family's net annual income; enough to make a downpayment after just a few years.

To be honest: It seems like y'all are taking away the wrong message. The problems you see are legit, but directing your animosity at a guy providing free, online insights and advise seems misguided. YMMV.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#257

Post by UK-AL » Thu, Oct 08, 2015, 8:04 PM UTC

ryandrake wrote: post #245

rtkwe wrote: post #91

Earlier quoted context omitted.

Stocks are a pretty liquid asset in those cases. And for things where the need for money is sooner than a sale would go through it could be put on a Amex/credit card and paid at the end of the month. Totally guessing but they've also probably got a fair amount of money in a checking account as their 'cash on hand'.

But stocks are risky. Murphy's Law strikes and your stocks are all down 10% when you need the money the most. That doesn't sound like the way to go for an emergency fund.

You don't put that money in a stock market. And than it goes up by 10%. What's worse?

Either way you've lost money you could have had. Humans tend to be loss averse though.

In both situations you probably have liquid equivalents at hand

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#258

Post by Spooky23 » Thu, Oct 08, 2015, 8:08 PM UTC

refurb wrote: post #128

Spooky23 wrote: post #26

Earlier quoted context omitted.

If you need liquid savings, cash is king. I opened a savings account with my son a few weeks ago. In my day, those accounts paid 3-7%. There was a story of compounding interest to tell. Now, I feel like I'm teaching my kid to be a sucker.

But what was your real interest rate when they were paying 3-7% in interest? Back in the 1970's savings accounts were paying 15%+. However, inflation was double digits as well. You'd be lucky if your real interest rate was more than a few percent.

That's not what I'm talking about. I was yielding 5% interest on an ING Direct account in 2006 -- not exactly a crazy time for inflation.

If you look at historical retail interest rates, 3-5% rates were typical in ordinary times.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#259

Post by cheriot » Thu, Oct 08, 2015, 8:08 PM UTC

patio11 wrote: post #5

There's a conversation to be had about many Americans living in precarious financial situations, but the reason why most Americans don't currently view their savings accounts as priorities is because in the current interest rate environment savings accounts and CDs are products with vanishingly little to recommend them. The APY my bank offers is one basis point . That's $1 per year for every $10k held in the account.…

I've never wanted to downvote you before. I can relate to your complaint, but it's a distraction from the topic at hand.

If "savings account" excludes retirement and investment accounts then the article means nothing. If not, your assumption that a rate of return motivates the use of savings accounts is off.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#260

Post by tomsun » Thu, Oct 08, 2015, 8:09 PM UTC

patio11 wrote: post #5

There's a conversation to be had about many Americans living in precarious financial situations, but the reason why most Americans don't currently view their savings accounts as priorities is because in the current interest rate environment savings accounts and CDs are products with vanishingly little to recommend them. The APY my bank offers is one basis point . That's $1 per year for every $10k held in the account.…

I think a good way is to split your emergency fund with cash and credit. Sock 3 months of cash and get low interest LOC to cover whatever else comes up. That way you don't get opportunity cost of saving all your money into a low interest account.