> The pension would start twelve years later when I was sixty-five. What cost a dollar at the time I accepted the offer, would cost $1.44 when the checks began. Today, what cost a dollar in 1986 costs $2.10. The cumulative rate of inflation is 109.7 percent. The pension remains the same. It is not adjusted for inflation. In the meantime, medical insurance costs have soared. Today, I pay more than twice as much for a month of medical insurance as I paid in 1987 for a year of better coverage. My pension is worth half what it was. And I’m one of the lucky ones.
I'm glad you highlighted this paragraph, but I'd say it is much worse. Sure, the headline inflation rate may be 109%, but that is just for a limited basket of goods. Other things like RENT have gone up far more than that, many multiples.
Also, not sure how this person pays only "twice as much for a month of medical insurance" compared to 1987, my rate is up more like 500%. Almost everyone I asked pays 500% more per month for medical now than when my friends graduated (2001), plus the deductibles are higher ($5 or $10 --> $50 for basic visits; $5000k+ total annual.)
The author has phrased it awkwardly, but he's saying his insurance costs have increased more than 24x. He pays a monthly rate that is double his yearly rate in 1987, and had better insurance in 1987 to boot.
I think it's pretty hard to compare insurance from 1987 to insurance from today.
There's all sorts of treatments that simply didn't exist. And a lot of them are pretty expensive.
There's been huge medical inflation, I don't dispute that, but new, effective treatments are going to increase the cost of insurance outside of medical inflation.
Oh sure - to be clear, the "better insurance to boot" was just my paraphrasing of the author. I fully agree with the idea that it is hard to directly compare whether a particular insurance in 1987 is better or worse than a particular insurance in 2017, for just the reasons you stated.
I have no desire to gloat over someone's misfortune, but it would be useful to hear exactly how the subject of the article went from 401k/real-estate-income/savings to "I'm-broke". I know he had a heart attack, but there is some other vague reference to "spending too much" in Europe which honestly sounds like papering-over poor judgement.
We can't learn how to swerve around the potholes if we don't know where they are. Maybe McPherson fell down a particular hole like a bad lease or a partnership gone bad...I would like to know so I can avoid the same fate.
What I gathered was poor budgeting (oh, I've already spent $2k this month, well another $200 won't hurt), poor market timing (not much to do here, but do avoid panic selling), and poor management by others (while overseas, this is easier to avoid today with the relative ease of self-managed brokerage accounts).
In some other financial management threads some folks say "earn more, don't worry about budgeting" (that's an almost literal quote I've seen a few times). Ignore that advice. Budget, invest, and spend wisely. Examine what you really need (financially) and do your best to stick with it. Figure out your budget, stick to it, grow your capital each month (on average, some months will be negative because of a big purchase, but outside those outliers you should see more growth than shrinking).
Invest wisely. Don't buy (much) of a stock a friend or friend-of-a-friend tells you about unless you understand it well enough to judge it yourself. I'm focusing my investments within industries I have familiarity with and index funds, this has turned out well so far (a couple "throwaway" investments based on such tips, for relatively trivial amounts of money, one worked out decently, the other was a complete bust). Pay attention to who is managing your money if you're not doing it yourself. Stay on top of their reports. Do not ignore it for a long stretch of time (this burned me with a mutual fund that changed management and started doing terribly, changed again and recouped the losses but should've been worth so much more by now).
Plan your tax strategy. For salarymen, this means planning your retirement contributions and other things to maximize the tax benefit and yield the best per/year net income (including within retirement accounts). For contractors and business owners, this will be more complex and I can't speak to it.
Plan for emergencies, but you can only do so much here. This is partly offset by insurance (I've never been without health insurance, and with one necessary surgery in 2006, the insurance coverage saved me enough to cover all my premiums through 2011 or 2012; other surgeries and things since have put me in the positive through 2020 or later).
Take it for what the article is, a warning of what can happen. There's nothing to be done about Mr. McPherson's fate. He did some dumb moves but it's very possible for all of us to fall in a similar situation. Our current mind set is not what it will be in the future. It's very possible to fall into a previous unthinkable situation if we are not careful. I, for one, thought it was worth reading.
> I have no desire to gloat over someone's misfortune, but it would be useful to hear exactly how the subject of the article went from 401k/real-estate-income/savings to "I'm-broke". I know he had a heart attack, but there is some other vague reference to "spending too much" in Europe which honestly sounds like papering-over poor judgement.
We can't learn how to swerve around the potholes if we don't know where they are. Maybe McPherson fell down a particular hole like a bad lease or a partnership gone bad...I would like to know so I can avoid the same fate.
I have to agree, you can't downvote this into oblivion. The fact of the matter is if you have money and income you go poor by spending too much or being forced into a position which drains you of your money. You can't ignore this. But this article doesn't mention a single thing about it. There are plenty of rich people who don't die poor.
You can vouch for comments now (and I did for that one), it seems it wasn't downvoted to dead. It was born dead (check their history, didn't read the comments but enough dead posts to see they'd been shadowbanned).
This reminds me of the Andrew Carnegie Fortune. He was one of the riches man of his time but only left his family enough to be comfortable when he died but none of his descendants are rich. Even his brother's descendants, who were left a rich inheritance, are now having trouble financially.
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[ 3.0 ms ] story [ 64.8 ms ] threadhttp://www.iasc-culture.org/THR/THR_article_2014_Fall_McPher...
> The pension would start twelve years later when I was sixty-five. What cost a dollar at the time I accepted the offer, would cost $1.44 when the checks began. Today, what cost a dollar in 1986 costs $2.10. The cumulative rate of inflation is 109.7 percent. The pension remains the same. It is not adjusted for inflation. In the meantime, medical insurance costs have soared. Today, I pay more than twice as much for a month of medical insurance as I paid in 1987 for a year of better coverage. My pension is worth half what it was. And I’m one of the lucky ones.
Also, not sure how this person pays only "twice as much for a month of medical insurance" compared to 1987, my rate is up more like 500%. Almost everyone I asked pays 500% more per month for medical now than when my friends graduated (2001), plus the deductibles are higher ($5 or $10 --> $50 for basic visits; $5000k+ total annual.)
So 288x/year.
There's all sorts of treatments that simply didn't exist. And a lot of them are pretty expensive.
There's been huge medical inflation, I don't dispute that, but new, effective treatments are going to increase the cost of insurance outside of medical inflation.
We can't learn how to swerve around the potholes if we don't know where they are. Maybe McPherson fell down a particular hole like a bad lease or a partnership gone bad...I would like to know so I can avoid the same fate.
In some other financial management threads some folks say "earn more, don't worry about budgeting" (that's an almost literal quote I've seen a few times). Ignore that advice. Budget, invest, and spend wisely. Examine what you really need (financially) and do your best to stick with it. Figure out your budget, stick to it, grow your capital each month (on average, some months will be negative because of a big purchase, but outside those outliers you should see more growth than shrinking).
Invest wisely. Don't buy (much) of a stock a friend or friend-of-a-friend tells you about unless you understand it well enough to judge it yourself. I'm focusing my investments within industries I have familiarity with and index funds, this has turned out well so far (a couple "throwaway" investments based on such tips, for relatively trivial amounts of money, one worked out decently, the other was a complete bust). Pay attention to who is managing your money if you're not doing it yourself. Stay on top of their reports. Do not ignore it for a long stretch of time (this burned me with a mutual fund that changed management and started doing terribly, changed again and recouped the losses but should've been worth so much more by now).
Plan your tax strategy. For salarymen, this means planning your retirement contributions and other things to maximize the tax benefit and yield the best per/year net income (including within retirement accounts). For contractors and business owners, this will be more complex and I can't speak to it.
Plan for emergencies, but you can only do so much here. This is partly offset by insurance (I've never been without health insurance, and with one necessary surgery in 2006, the insurance coverage saved me enough to cover all my premiums through 2011 or 2012; other surgeries and things since have put me in the positive through 2020 or later).
> I have no desire to gloat over someone's misfortune, but it would be useful to hear exactly how the subject of the article went from 401k/real-estate-income/savings to "I'm-broke". I know he had a heart attack, but there is some other vague reference to "spending too much" in Europe which honestly sounds like papering-over poor judgement. We can't learn how to swerve around the potholes if we don't know where they are. Maybe McPherson fell down a particular hole like a bad lease or a partnership gone bad...I would like to know so I can avoid the same fate.
I have to agree, you can't downvote this into oblivion. The fact of the matter is if you have money and income you go poor by spending too much or being forced into a position which drains you of your money. You can't ignore this. But this article doesn't mention a single thing about it. There are plenty of rich people who don't die poor.
Here's a link to a Forbes' article on it. https://www.forbes.com/sites/chloesorvino/2014/07/08/whats-b...