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Guest Post: Who's Living Large in Retirement?

Tyler Durden's picture


Submitted by Dennis Miller, via Casey Research,

Who fares better in retirement, pensioners or folks who saved up their own respective nest eggs? If you look at the numbers, you might be surprised to learn who's really "living large" after retirement.

Regardless of how you made your money, what determines if you're rich when you retire? Frankly, it isn't how much money you made, but how much you accumulated that counts. So who are the real rich people?

Retirees generally fall into one of four groups: folks who retired from the private sector with a 401(k), IRA or a lump sum payout in lieu of a private pension; those with a government pension; self-employed folks who saved their own respective nest eggs; and finally, those scraping by on Social Security alone.

The U.S. Census Bureau reports that in 2010 the top 10% had a median net worth of $1,864,000. If you're worth that much or more, 95% of the population thinks you're rich. But are you?

When my wife and I were first married we had a negative net worth. No silver spoons for us! By our late 50s we were successfully self-employed and in the top income tax bracket. And yet, once we paid federal and state income taxes, plus Social Security and Medicare, about 50% of our gross income went to taxes. We raised a family with what was left.

Once the children left the nest, we were in the race to the retirement finish line. For us, like most folks, that's when we really began to accumulate wealth for retirement. Here was our challenge.

For a self-employed person to end up in the top 5%, with a net worth of $1,864,000, he would have to earn a spare $3,728,000 before taxes. Now that sure sounds rich, but is it?

Assuming this person lives in a paid for home worth $564,000, that leaves $1,300,000 in his portfolio for retirement. And let's assume he and his spouse receive $35,000 a year in combined Social Security payments.

Today the best rate for a FDIC-insured CD is 1.1%. If the entire portfolio was in CDs, it would pay $14,300 in interest. Add that to their $35,000 in Social Security and they earn just under $50,000. Remember, 95% of the population thinks they're rich. Their retirement income is likely no more than 40% of what they earned when working.

And the winner is...

Firefighters in Contra Costa County, CA have a state law protected pension; many receive over $100,000 annually. (Their department is also closing four stations to make budget.) I have several friends who retired from the government who've received a large increase the last couple of years, bumping their pensions to well over 80% of their former salaries. Many regularly risked their lives, and I don't begrudge them a dime.

But it would take a self-employed person $2 million in earnings to net $1 million, which could fund an $11,000 pension. It would take just over $9 million for a person in the private sector to fund the pension equal to a Contra Costa County firefighter.

So who is living large?

Those who are fortunate enough to have sound government pensions are living very well compared with those in the private sector.

So what do I tell baby boomers in the private sector? First get out of debt. The quicker you can start accumulating wealth, the better. If you have any type of tax-deferred retirement plan like a 401(k) or an IRA, strive to maximize your contributions.

Once you have maximized tax-deferred accumulation, move on to the next phase. Start accumulating wealth long before your nest is empty. Even saving just $20/week beginning at age 50, with a modest 4% growth rate, will turn into $31,573 by the time you are 70. Through the magic of compounding, $20,800 saved over 20 years will earn $10,773 on top. Start the process and watch it grow; it will make you want to save more.

Don't rush out and join the fire department. Whether you are in the government or private sector, the combination of tax-deferred retirement income, savings and prudent investing, and most importantly—having an easy to use plan that you’ll actually follow—is what will help you enjoy your "golden years."

In our Money Forever letter we recently developed a monthly income plan using some of the safest dividend stocks on the market. The plan is easy to follow, doesn’t require an extensive background in investing or even that you start with a lot of money; you just need a willingness to learn and a desire for reliable monthly income. Click here to find out more.


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Wed, 02/20/2013 - 20:23 | 3261692 TuesdayBen
TuesdayBen's picture

John Boehner isn't the clown who is raping you lately.

Wed, 02/20/2013 - 20:36 | 3261734 shovelhead
shovelhead's picture

I believe it's Nancy's turn with the strap-on this week...

Wed, 02/20/2013 - 20:59 | 3261789 knukles
knukles's picture


it's real

Wed, 02/20/2013 - 23:59 | 3262214 Teamtc321
Teamtc321's picture

Yes but I think even Nancy's strap on would go limp hanging off that fucking nasty pile of wrinkled flesh.

Wed, 02/20/2013 - 20:18 | 3261682 JR
JR's picture

On the list of Congressional priorities one item would hardly make the top five: serving the taxpayers.

And the postal service's Saturday delivery standoff now entering its 24th year of on-and-off contention shows just how completely irresponsible members of Congress are when it comes to representing the people who pay the bills.

Wrote Bloomberg February 7: “The U.S. Postal Service, demonstrating the depth of its financial abyss, set up a possible showdown with Congress by saying it will stop mail service on Saturdays regardless of whether lawmakers approve.”

Well, it’s all a political ruse, folks.

While I stood in line at the post office this week, a customer asked the clerk if Saturday service was going to be discontinued.  The clerk said that the postal service has been threatening to end Saturday service routinely for 24 years when it wants money and always throws it up to Congress who has always delivered.  Then Congress grand stands on how it will help local communities retain Saturday delivery and through the back door it gives the incredibly wasteful postal service another big helping hand.

And the postal workers continue to get their raises and benefits and bailouts and just keep on going business as usual. It’s a monopoly. And the people continue to pay.

As you can see, it's the public employees that are in one of those top Congressional priorities, not the tax payers.

And then Obama proposes a minimum wage of $9.00 an hour, or $18,720 annually, to accommodate Bernanke in knocking down the buying power of the average SS retired worker's monthly benefit that was about $1,230 at the beginning of 2012.  

Obma says that he is not a socialist. To propose an increase in the minimum wage at a time when there is widespread unemployment and a downturn in small business volume is the act of a socialist.

FYI, USPS Chief Operating Officer Megan Brennan earned $225,308 in 2011, but brought in a total of $358,996, and Chief Information Officer Ellis Burgoyne earned $220,846 but brought in $508,688.

Top 300 salaries in HQ; Number in group - 300; Average Salary - $151,210; Average years of service – 22; Vice Presidents – 28 - $189.000 – 25 years; District Managers – 49 - $163,135 – 32 years; Plant Managers – 57 - $143,101 – 29;  Combined list 415 - $152,428 – 25 years

The average of the 645,950 total workforce, including benefits, is $74,789.

Thu, 02/21/2013 - 01:26 | 3262349 Henry Hub
Henry Hub's picture

***To propose an increase in the minimum wage at a time when there is widespread unemployment and a downturn in small business volume is the act of a socialist.***

So the minimum wage increase by $1.75 an hour is the act of a socialist but CEO Brian Moynihan of Bank of America getting a pay package worth $7.5 million last year, six times as large as the year before is wonderful capitalism and positive for the economy even though this TBTF bank got millions in tax payer money. Lets get fucking real here!

Wed, 02/20/2013 - 20:30 | 3261714 shovelhead
shovelhead's picture

Hell, I got you all beat.

I'm starting a retiree farm. They's be da new fieldhands.

"Fuck yer bunions...git to pickin or y'all be hungry tonight."

Maggie's Green Acres Retirement Farm.

Kinda catchy, no?

Wed, 02/20/2013 - 22:33 | 3261997 hooligan2009
hooligan2009's picture

(images of pooper scooper attchments to zimmer frames with an oxygen supply come to mind..but hey..i bet a lot would do it just to be sociable and get outdoors)

Wed, 02/20/2013 - 20:33 | 3261727 unununium
unununium's picture

Repeat after me.  Teachers and Firefighters are the enemy.

They must be stiffed, not the Bondholders!

I guess ZH is now pwned media.

Wed, 02/20/2013 - 20:44 | 3261757 shovelhead
shovelhead's picture

If it makes you feel better...

They both are going to get screwed.

Mathematics is the boogeyman. Both were sold a bag of shit promises.

Wed, 02/20/2013 - 22:27 | 3261876 Anusocracy
Anusocracy's picture

Teachers and fire fighters wouldn't be a problem if they worked in the private sector.

Government is the enemy. It has been for thousands of years.

If you haven't learned that, then you are clueless.

Wed, 02/20/2013 - 20:46 | 3261760 bxy
bxy's picture

Max out your retirement plan?????  That's your ingenious advice?????  Forget the fact that the market is a propped up, manipulated scam based on nothing........forget about fees, market volitility, etc.  It is a TAX DEFERRED acount........There are NO tax savings.  With these deficits where do you think you deferring these taxes to.......Just defer everything!  You should be a politician.  How about inflation?  Where do you think that is headed???

Forget all of this..........Let's say you dodge all these bullets ans accumulate a nest egg.....Let's say 1 million dollars.  How much are you gonna live on from that?  $30-40,000.  Where can you safely put your nest egg????  At what risk free rate????  Or play the stock market???  What will volitility look like in 10-20 years?  How about taxes??  What will your health be like?  How about your family's health???  What about emergencies???

It is people listening to jack-asses like this is why retirement  has become a privilege.

Wed, 02/20/2013 - 22:38 | 3262007 hooligan2009
hooligan2009's picture

you got a million bucks and twenty years to live thats 50,000 a year right there..excluding any investment return you get on the diminishing 1 million...ever notice how annuity rates are c. 5%?

100% of your money going down by 5% of the original a year with no investment return...the annuity companies keep the entire investment return on your capital and give you a toaster for signing up.

everywhere you look, the financial and tax "system" is designed to lower your living standard to the lowest level possible just because "yes we can".


Wed, 02/20/2013 - 20:56 | 3261784 besnook
besnook's picture

i'll take the blame for not learning the lesson sitting in front of my face. i majored in a subject that taught risk and reward were directly related but, as i got older, it became clear that risk and reward are inversely related. i have several high school educated now retired .gov worker friends who have retired with a millionaire's income. i have several other college educated retired .gov worker friends who have retired on a 1%er multimillionaire's income. none of my friends who worked in private industry can match their retirement incomes except for the few who took advantage of the stock market early in their careers or worked for the same growing company for their entire working history. even they have millions earning dividends at 3% or so making them wealthier by multiples on paper but with similar incomes as the no risk group of .gov workers. then there are the few guys like me who have done well but have laid every penny on the line for years to get where we are, employing many along the way, going broke more than once in many cases and some of us still struggling to even come close to what a teacher receives for retirement.

it is time to invert the curve and reward risk and punish the risk averse with a lifetime of work. raise the social security tax and retirement age to 75 for .gov workers and employees and get rid of fixed retirements for .gov workers. set up a group health insurance pool for all self employed and small business owners and their employees featuring a lump sum payment option for lifetime coverage so i could pay 100000 dollars and retire at 55 with no health worries until medicare eligibility at 75. if you have no balls then you have to work.

Wed, 02/20/2013 - 21:48 | 3261890 MisterMousePotato
MisterMousePotato's picture

Why is it I can only increase the green up triangle by one? This post deserves a 300 million.

Wed, 02/20/2013 - 23:43 | 3262184 willwork4food
willwork4food's picture

Agreed. I've been self employed for years and invested and lost a shitload of my "retirement" money from the sleazes on WS. We have to play by the rules; pay for licensing, insurance, labor and have go to bed praying we don't fuck up a customer's job or accidentally step on her cat and get sued.

All this and the current race to the bottom from other bottom dwellers giving material and labor away has really made me wonder why the hell I became self employed at all sometimes. At least I can set my own hours within reason.

Thu, 02/21/2013 - 07:42 | 3262578 MyBrothersKeeper
MyBrothersKeeper's picture

Yes, as the saying goes, you get to set which 16 hrs of the day you choose to work

Thu, 02/21/2013 - 07:41 | 3262576 MyBrothersKeeper
MyBrothersKeeper's picture

The govt wants to much so they are considering limiting the deuctability of 401k's like they did in the 80's.....I am 100% serious about this.  Hey, they have to keep those public sector voting blocks in line somehow.  Your idea makes too much sense and is too capitalistic.  It might take a Greece like collapse for people to wake up

Wed, 02/20/2013 - 21:01 | 3261795 Homerpalooza
Homerpalooza's picture

If you've ever lived in DC, the number of dual retiree's making $250k pensions of O-7's or GS-13's is staggering. Hundreds of thousands.

Military Pensions are the damn best in the world. They make firefighters blush. But there are millions of them.

Getting pissed about fire fighters is just buying into the Rush Limbaugh "anger" of the day.

Wed, 02/20/2013 - 21:48 | 3261888 Anusocracy
Anusocracy's picture

It's ALL government workers.

Always has been.

Wed, 02/20/2013 - 23:48 | 3262195 willwork4food
willwork4food's picture

"Military pensions are the best".

Yup. If you don't mind blowing people away, or giving orders to bomb civilians, there is definitely money in trashing what's left of your Karma.

Wed, 02/20/2013 - 21:02 | 3261799 dolph9
dolph9's picture

Shall I point out the obvious for the millionth time?

1)  There is no such things as "retirement."  Never was, never will be.  It was all a marketing ploy.  Either you work your entire life, or you shack up with someone who is working, or you are rich and can live off passive income (good luck with that these days).

There is no "light at the end of the tunnel."  You don't magically become a multimillionaire at the age of 65, and get to golf and travel the world forever, and live for another 100 years and feel like you are 22 years old.

Very few people achieve this.  More than likely, you will relentlessly impoverish yourself through spending.  Your kids will move away and forget about you (unless they have to support you, and they very well may end up hating that).  Your friends will get all sorts of illnesses, and then die.  You will need medication just to get a boner.  Your joints will wear away and it will take you forever to do things and get anywhere.  You will watch the young and middle aged either attempt to take over your failed institutions, or flee.  You will eventually get to the point where you can't tell night from day and don't remember your own name, you will be pissing and pooping over yourself, and if your kids aren't cleaning your mess, it will be a poorly paid ghetto health assistant.

Sounds great, doesn't it!  Sign me up!

2)  If you have any money, whatsoever, in a "retirement account" that money is going to disappear.  It's not yours.  It's been repackaged and reprocessed and re-re-hypothecated.

Oh, and investments don't grow forever at some magical rate until the end of time.  Investments crash all the time.  Nothing, absolutely nothing, is guaranteed.  You can watch your millions grow in your retirement account, then all of a sudden a new government decides you can't withdraw, and when you do withdraw, it's taxed at 50%.

Yeah, that planning worked out really well, didn't it!

Wed, 02/20/2013 - 22:07 | 3261938 Zer0head
Zer0head's picture

submitted by Dennis Miller LOL good one ZH


In our Money Forever letter we recently developed a monthly income plan using some of the safest dividend stocks on the market. The plan is easy to follow, doesn’t require an extensive background in investing or even that you start with a lot of money; you just need a willingness to learn and a desire for reliable monthly income.


Wed, 02/20/2013 - 23:06 | 3262074 Room 101
Room 101's picture

This advice is so 20th century.  401(K)?  If there is a match, maybe.  Otherwise, it's just a juicy target.

Thu, 02/21/2013 - 00:24 | 3262260 malek
malek's picture

I'd say if there is a 50+% match then MAYBE. Otherwise no fucking way.

Are there still companies out there that give a 50+% match?

Thu, 02/21/2013 - 20:56 | 3265452 Absinthe Minded
Absinthe Minded's picture

Our private company got bought out by Owens Corning and they will match 100% up to 8% of income. Health benefits suck though, can't have everything.

Wed, 02/20/2013 - 23:24 | 3262094 Floodmaster
Floodmaster's picture

18 year old who joins the Military can retire at 38, assuming that they receive a pension until 85,a soldier pension worth $1,200,000 or more. Economists should add a "m" to FIRE economy.

Thu, 02/21/2013 - 00:03 | 3262223 DollarMenu
DollarMenu's picture

20 years of that kind of life - how many deployments in there?

How about all those drugs/meds they force feed you while on deployment?

Of those who get that far, how many will make it to 40, 2 years after the proposed retirement?

Wed, 02/20/2013 - 23:59 | 3262213 Gamma735
Gamma735's picture

Californians screwed themselves.

Thu, 02/21/2013 - 00:43 | 3262290 Kirk2NCC1701
Kirk2NCC1701's picture

To minimize the property taxes, do some obvious things like living out in the country, with own H2O well, so you're not paying for town water or sewer.  Less obvious things are having the exterior look cosmetically shabby to reduce the appraised value, but have it totally sound and luxurious inside.  In Italy you will see tons of houses with 'unfinished' exterior for exactly this reason.

Ditto for the yard, to reduce curb appeal to the tax appraiser.  Or find out which month he's coming by and time the look accordingly.  If you are over 65, you will likely qualify for tax relief.  Every bit helps.

Thu, 02/21/2013 - 01:00 | 3262308 Kirk2NCC1701
Kirk2NCC1701's picture

Last night Steve Colbert did a spoof on some billionaire (Rodney Lockwood), who wants to buy Detroit's Belle Isle (between Detroit and Canada) for $1 Billion, and turn it into a tax-free sanctuary for billionaires and millionaires, by having it declared some quasi sovereign territory as a "Commonwealth" of the US.  For the very, very rich -- not the run-of-the-mill Libertarians.

/Whoopee, $1B for City of Detroit coffers.  So much for Chile... Simon Black will be 'pissed' it this goes through.  These guys can make a quick getaway via Canada if need be.  But if the Gov then revokes the rights, they won't have to go far to find more gold than in Fort Knox or at the Fed./ sarc.  ;-)

Thu, 02/21/2013 - 02:39 | 3262431 ItsDanger
ItsDanger's picture

There are plenty of other jobs more dangerous than fire fighters.  Getting those pension incomes for 25+ yrs is insane.  Exhibit A for Greek like debt problems.

Thu, 02/21/2013 - 04:11 | 3262489 dunce
dunce's picture

I have run into a couple of retirees that were previously small business men that had no pension and were about wiped out in 2008 and 9. They had sold the business and could not go back and start over. my brother in law retired after 20 years in the military back in the seventies and because of cost of living increases in S.S. and his military pay gets a multiple of his last active duty pay check.

Thu, 02/21/2013 - 05:21 | 3262518 mrdenis
mrdenis's picture

My sister in law was a teacher for a nice district in Northern N.J 1st grade paid 118K just retired with 80K pension with full bennies ,I figured it would take about 2.5 mil in savings to get that .They say they can't afford to live in N.J anymore the taxes are too high ! I told her to enjor her checks while they can because they are a endangered speciecs ....they just movied to Sarasota FL 

Thu, 02/21/2013 - 07:03 | 3262561 uncle_vito
uncle_vito's picture

Pensioners still live paycheck to paycheck and they will leave no legacy of wealth to their kids.   Also if the city goes broke, the pension money stops or gets greatly reduced.

Thu, 02/21/2013 - 07:04 | 3262562 MyBrothersKeeper
MyBrothersKeeper's picture

Teachers are told by unions they are underpaid blah blah blah. Public sector pensions are the biggest racket going.  People talk about CEO pay.  Well at least the company is making or providing something at a profit and not leaching off taxpayers. It's unbelievable what many in public sector make on top of much better benefits. They are being told the squeezing is do to 2008 and a one time thing....and now their pension are solvent for decades. Wrong.  It is just the beginning.  You can vote for big government because it provides these out of whack pay/benefits, but once the private sector is bled dry (ie tax base can't support public spending) those pensions will be "adjusted" again...and again. Remember states...except for 2...have balanced budget laws.  As I have said many times, the window for a big jump in GDP/growth is small and the US is missing it due to government stupidity (or design).  As things worsen in Japan, Europe, etc it will be too late once America wakes up (which is not likely under this admin for sure) and we will be dragged back into recession.

Thu, 02/21/2013 - 10:06 | 3262943 mjk0259
mjk0259's picture

Calculations of retirement income from a certain amount normally include principal drawdown.


The cost of unsubsidized medical insurance is enough to consume any savings for most people. It's the free medical insurance that most government retirees get that really makes the difference. Not many  of them are not getting $100K pensions.

Thu, 02/21/2013 - 11:16 | 3263231 10PastMidnight
10PastMidnight's picture

none of it will matter when the dance is over, it will be over for everyone who uses money to buy anything and i think that covers the board currently for most citizens. your pension it are belong to us, the inflation nation. "would you like your retirement in one lump sum or over time? i'll take it all now, i'd like to buy a sandwhich on the way home."

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