Beware of Financial Advice That Doesn’t Apply to You

Warning: I think I’m sounding a little snarkalicious today. I don’t mean to, but this subject is near and dear to my heart due to personal experience and to watching many of my loved ones struggle financially.

Okay, so I read an article on retirement this weekend that talked about how the fear of running out of money in retirement has been blown out of proportion. This article was written by a smart guy – a guy I admire who has done great things with his money.  But his advice isn’t sound financial advice for most of the population, and this is why.

Some of his reasons for thinking that fear of running out were overblown were as follows:

  • You’ll need less than you think
  • You’ll adapt to different income levels
  • You will find many ways to make money
  • You have plenty of safety nets

Let’s address these reasons one-by-one based on the lifestyle of most people.

You’ll Need Less Than You Think in Retirement

Check out these facts from a recent article about retirement savings:

According to a detailed report by the Employee Benefit Research Institute (EBRI), many people are in fact very likely to run out of money in retirement.

  • 83 percent of baby boomers in the lowest income quartile will run out of money in retirement
  • 47 percent of boomers in the second lowest quartile will run out
  • 28 percent of boomers in the second highest quartile will run out
  • 13 percent of boomers in the highest income quartile will run out

Apparently, most people will not need less than they think in retirement, or there wouldn’t be such a high number of people who will run out of money in retirement.

The facts state that people are not saving enough, and thus, they are at HUGE risk of running out of money in retirement. On this recent Frugal Farmer post, Brad from Maximize Your Money shared the truth about people and their (lack of) retirement savings.

  • More than a third of Americans have absolutely nothing saved toward retirement
  • The average 50-year-old only has $60,000 saved for retirement. That’s nowhere near where they should be by that age if they were on track with retirement goals.
  • Only 18% of American workers are “very confident” that they’ll have enough money for a comfortable retirement.

For most retirees, running out of money is a very valid fear and valid risk. Because they’re not saving enough, and because they’re spending more than they should (whether out of necessity our out of squander) they are indeed running out of money and this is a very real problem facing current and potential retirees.

The fact of the matter is that most people are not saving enough for retirement. They don’t have millions put away like the FI heros that we know and love do. Maybe it’s because they can’t put more away, or maybe it’s because they won’t put more away, but either way the end result is the same: They have less than they need during retirement. 

You’ll Adapt to Different Income Levels

This piggybacks off of section one, but people obviously are not adapting to their lower post-retirement income levels, because again, if they were they wouldn’t be running out of money.

People are underestimating what they’ll need in retirement, especially when it comes to medical expenses. This is one problem.

The other problem, in case you haven’t noticed, is that Americans have a spending problem. Many are stuck in the YOLO, instant gratification mindset that siphons money from one’s checking account the way the government siphons our tax dollars.

Simply put, most people (remember that 76 of Americans have less than $400 in savings) are not conditioned/trained/disciplined to live within their means. And as someone who’s been there, done that, I can tell you that it takes a boat load of discipline to learn to do so. It’s not easy. For us it took years of overcoming the emotional roots of why we were overspending, and it took years of discipline to overcome the habit of overspending. At this point spending less is a habit, but it’s a habit that took years to develop, and most people aren’t willing to put in the time it takes to overcome these hurdles and learn to adapt to living on less, or else we’d all be millionaires.

You’ll Find Many Ways to Make Money

Yeah, unless you haven’t trained yourself to think like an entrepreneur. Or unless medical problems prevent you from working in retirement. Or unless the economy crashes. Or unless you’re not motivated to do so.

There are many, many reasons why post-retirement folks can’t or won’t find even one way to make money in retirement. Good idea. Just not reality for most people.

You Have Plenty of Safety Nets

With minimal savings and underestimated expenses, there aren’t many safety nets that can help for the long term. The Affordable Care Act (one safety net the article mentioned) is a train wreck, and we’ll see if the revised plan does any better, but I’m not counting on it. Also, insurance was recommended as a safety net. Can one who is struggling to put food on the table in retirement afford to dole out extra cash each month for an insurance policy?

I’m not trying to be a Negative Nellie here. I thoroughly admire and respect those folks who have achieved FIRE and are kicking it big time with their money.

But the fact of the matter is that that isn’t “most people”. The statistics show that most people are in a heap of financial trouble with student loans, consumer debt and a lack of retirement savings. And we can’t aid their disillusion by telling them that their fears of not having enough in retirement are overblown.

A better option is to live by example, help them face up to their financial shortcomings and give them the tips they need to improve their situation. You can’t make a horse drink, but you can lead him to water. That’s a better option than leading him to a country club in the desert, denying him entrance and letting him die of dehydration.



26 comments on “Beware of Financial Advice That Doesn’t Apply to You

  1. Agreed! Everyone’s situation is different. It’s only beneficial to see what other people are doing so you can get new ideas and try to apply them to your situation. You can’t follow someone else’s early retirement plan verbatim; it’s just not going to work. Take everything with a grain of salt and see how it stands up to math!

  2. I’ve watched so many YouTube videos of people living in their cars or vans because they can’t afford a place to live AND food to eat, etc, on their Social Security. That’s fine if you’re the “roughing it” type. For most of us though, a daily hot shower and a comfy bed are more enticing. Good wake-up call article, Laurie. The guy that wrote that article needs to read YOUR article instead!

  3. You bring up a good point. On the one hand, I think it’s easy to write of financial advice we just don’t like, pretending our preferences are legitimate reasons to not make good financial choices. On the other hand, there is lots of advice speaking that truly doesn’t apply, but might be tempting because it sounds nice.

    I sometimes struggle with what advice to give as a blogger, because I know my audience is a combination of personal finance bloggers or readers who may tend toward one extreme, and real life people I know who may have entirely different struggles. Considering an author’s intended audience is one of the core tenants of understanding a written piece, and that’s so important when you think about taking financial advice!

    1. ” I think it’s easy to write of financial advice we just don’t like, pretending our preferences are legitimate reasons to not make good financial choices. On the other hand, there is lots of advice speaking that truly doesn’t apply, but might be tempting because it sounds nice.” EXCELLENT comment, Kalie!! It really does take balance. We have to be honest with ourselves. Not worry about retirement shortfall may be great advice for this guy, but for most other people it’s downright dangerous.

  4. There’s so much advice out there. And everyone has their own unique situation. For me, I try to decipher what fits for me and leave the rest behind. That said, it’s not always that easy to do, particularly if you are just happening upon the advice with no prior knowledge or experience.

    The scariest thing about retirement for me is the medical expenses. There are so many unknowns and the costs are sooo high, it would be hard to weather a huge medical emergency without a solid financial plan. So far, our insurance has been billed over $30,000 this year and the bills and expenses are still coming in…

    1. Wow – $30,000! I’ll bet you’re so glad you’ve got your financial act together!! I know that so many people take the easy route, as Kalie said, using it to excuse their bad financial behavior. We did that for years. We would compare ourselves to those doing worse than us, and then make excuses as to why we didn’t follow sound financial advice.

  5. Ha, I read that same article today and was thinking some of the same thoughts you had. Sort of a “Yeah, a lot of this tends to make sense, but I don’t apply to a majority of it.” And that’s with me being a PF/ER blogger i thought it didn’t fit much of my lifestyle, lol. Especially seeing the ACA mentioned and it being so up in the air, whether it actually gets replaced/repealed/fixed etc…

    I guess that’s why I don’t tend to write a lot of “advice” articles on my blog. Who knows who it applies to when it could just end up only applying to me. The only advice I stick by and try to get across to people is – track your spending, and then figure out your wants vs your needs and you can find a lot of places to free up money for saving. If nothing else it can highlight places in your spending that you thought were little drips and in fact they’re more like broken water mains.

    Nice article!

    1. Thanks, Mr. SSC! Advice is dangerous to give out. It’s taken some practice, but I’m slowly learning to be able to think a bit more before doling out advice that might be unrealistic. Course that’s hard to do when you’re opinionated. 🙂

  6. Our big goal is to hopefully payoff our mortgage in 5 years. The primary objective is to payoff our debt as much as possible before the next big stock market correction (repeat of 2000 or 2008, etc. with 30-40% loss).

    Living a debt-free lifestyle is the best personal safety net anybody can do. That’s what my wife & I think at least.

  7. I’m looking for the “snark” (from “snarkalicious”) and I don’t see it. Your post is perfectly respectful. You’re allowed to disagree with someone. And you’re right. For people who are already proactive about their retirement savings, this guy’s advice might be applicable. But the fact is most people are not proactive about their retirement – and it’s the concerns of those folks that you’re addressing. My husband recently read that when retired people “downsize” – they generally don’t spend less on their housing. They either pay in condo fees or they move to a smaller place closer to the city core – which is just as expensive as the big suburban house they’re leaving. It’s good to bust the myths about how inexpensive retirement automatically is. It will take intention in retirement just as it does beforehand.

    1. Thanks. 🙂 Glad it didn’t feel snarky to you. Wow on the article that DH read!! The “intention” part is SO important. I think it’s tough to face the music in that area, but the results from doing so are so awesome!

  8. I don’t think it’s snarky to disagree, especially when the advice from that article could lead a lot of people to trouble. You’ve illustrated exactly why it doesn’t apply to most readers, and erring on the side of caution could prevent them from disaster in retirement. So many seniors have to choose between the cost of their meds, their food, and their housing, and what safety nets do exist are being cut. Retirement costs can be a scary thing and people need to prepare while they can.

    1. “So many seniors have to choose between the cost of their meds……” This is exactly what I’m talking about, Gary. That is “most people” – at least in my world. This is why articles like that make me nervous.

  9. Thank you Laurie for writing a firm and truthful article. Like so many mentioned, I am concerned about the topic of Healthcare in our ” golden years”. I read a disturbing article today about the reality that Social Security is not keeping pace with Cost Of Living in the U.S. I know that no one should plan solely on SS for their retirement, but I fear many people are doing just that. There are so many factors that need to be considered as retirement approaches, I appreciate reading differing viewpoints.

    1. Yes! Great point, Anne. We are hoping for Social Security, but not counting on it as ANY part of our retirement plan. If we get it, it will be a bonus. I think firmness needs to be more prevalent in the PF blogging world. I know firmness helps us stay on track. It’s not fun all of the time, but it’s beneficial. 🙂

  10. Gosh, there is so much advice out there. Find what applies to you. Everyone has a unique situation. I read many different articles. If it does not exactly apply to me, I just look to see if there is any info that might. If not, it will be useful for someone else.

  11. Here’s my metaphor. I jumped off a diving board when I retired. I have good nose plugs and I’m an excellent swimmer. The pool is deep enough to not hit my head at the bottom but shallow enough to bounce back up to the surface without running out of air. I can still: have a heart attack, get a disease from the water, or get eaten by a shark if Sharknado 5 decides to come to town (and I don’t need to be in a pool for that to happen).

    We’re in good shape and I still worry a little. I don’t mind because I want the fear to keep me on my toes. Perhaps you feel like making a grand generalization like that writer did is not writing responsibly? And I would agree with you because pity the financially uninformed person who decides to read one piece of advice, and it’s that.

    1. Yes!! Your last couple of sentences said it all. There are so many – and we were “them” for years – that take that one piece of advice and use it to continue avoiding financial responsibility. Also, his situation does not apply to the majority, but instead to the minority. I hope the non-prepared see that. 🙁

  12. Remembering that my advice may not apply or that it may actually harm someone is a sobering thought for me since I do make recommendations of one sort or another.

    I can’t tell anyone to follow my path to early semi-retirement…it evolved from a lot of circumstances outside of my control. And so I try to keep most of my advice pretty simple and specific, like “dress weather-appropriate to reduce your heating/cooling bill.” I guess it’s not earth-shaking advice, but following it won’t devastate someone’s future either.

  13. I’d be tempted to snark myself given the reality that my parents and their generation live in – none of his assurances are realistic for many of them. The rest of us who know that doesn’t apply to us will see right through it but I wonder if confirmation bias will influence people who think they’ll be just fine, they’ll roll with the punches, they’ll pick up some work when they need the cash, and so on.

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