What do you think, smaller returns altering the landscape for the majority for years?

[gimmethesimplelife]

Shame on me, I am here in Austin, Texas, and am supposed to be on vacation.....and picked up a Time magazine in the lobby. Time had an article featuring the man who runs Pimco - didn't get the name. The jist of the article was quite sobering - 2% growth until at least 2022, and the wonderful returns those with 401K's got used to - a thing of the past, which according to Pimco is going to alter the financial and retirement landscape for the masses. What do you'all think? Alarmist, dead on, or somewhere in between? Rob

[awakenedsoul]

I know I read that Suze Orman says the housing market is going to be like this until 2020. She also says that 60% of people will be renting. By changing my lifestyle I've been able to spend far less. That's another approach people can take. Most people were overspending when the economy was good. I think people that bought expensive homes at the height of the market will be hit the hardest.

[try2bfrugal]

Shame on me, I am here in Austin, Texas, and am supposed to be on vacation.....and picked up a Time magazine in the lobby. Time had an article featuring the man who runs Pimco - didn't get the name. The jist of the article was quite sobering - 2% growth until at least 2022, and the wonderful returns those with 401K's got used to - a thing of the past, which according to Pimco is going to alter the financial and retirement landscape for the masses. What do you'all think? Alarmist, dead on, or somewhere in between? Rob

We budget for poor investment returns from now until we die so we are prepared for worst case. I think if we end up making more money than is in our retirement plan, figuring out how to spend it will be a nice problem to have. Otherwise, sustainable living ideas should allow us to have a nice life with low expenses. There are so many forums dedicated to increasing investment income and very few dedicated to lowering expenses, but expenses are the part of the budget people can control the most. Every $1K we cut in annual expenses means needing $30K less in retirement income.

[Rogar]

There are some probable speculations on future returns, but does anybody really know? There were only a few savvy people who predicted the big financial crisis that we seem to be still in the midst. I put some faith in the feds opinion that interest rates will remain low for a couple of years but with all the financial stimulus injecting money into the economy, even that is speculation. My retirement plan is doable if I can just keep up with inflation, which is why I like Ibonds, but also try to stay diverse and try to stay conservative.

There many things that seem to be in play that will change the way people think about their future financial security. Rising health care costs, uncertainty about the future of SS, extinctions of employer paid retirement benefits. I think the landscape of thought is changing. It will be interesting to see how the upcoming future retirees will balance the concept of future retirement and cutting back on living within a new set of means. I don't think the PIMCO forecast is alarmist, but then again did they predict the financial crisis as an indicator of their track record and does anyone really know?

[freein05]

I agree with Rogar no buddy knows what will happen with investments over the next few years. Housing prices have gotten so low in my area houses are now selling with in a few months of listing instead of years and the prices are rebounding. We live in a vacation home area so homes are a luxury.

[Rogar]

Housing prices have gotten so low in my area houses are now selling with in a few months of listing instead of years and the prices are rebounding. We live in a vacation home area so homes are a luxury.

I have a friend who has been picking up low priced home in my area every now and then, puts a little money and sweat equity into them, and makes a small profit in the sale. In the last few months there have been multiple offers on those he's been interested in and they may go within a few days of being listed and sell above the asking price. I suppose it depends on the area, but things may be changing.

[junkman]

The article was probably an interview with Bill Gross, and his estimate of future GDP at 2% is optimistic. You can count on living through a depression that matches that of your parents/grandparents due the fact that the US Gov't --with full complicity from taxpayers-- is borrowing $0.40 cents for every $1.00 dollar it spends. There was nothing alarmist about the article. It was merely a sober warning widely echoed by many responsible economists.

Charlie

[SteveinMN]

In the last few months there have been multiple offers on those he's been interested in and they may go within a few days of being listed and sell above the asking price. I suppose it depends on the area, but things may be changing.
Around here, houses under $100,000 in "move-in" condition and in good neighborhoods are seeing multiple offers, though nothing like the ridiculous bidding wars of the mid '00s and many still fall through because they don't appraise high enough or the mortgage application falls through.

It helps that lenders are finally working through the backlog of foreclosures and people are not fearing a flood of new properties hitting the market, oversupplying the market, and lowering prices further. But distressed properties still make up 25-35% of what's on the market. And lots of owners of higher-bracket homes still are sitting it out rather than listing their homes for months on end, with the resulting damage to their psyche and sale price.

I do think things are changing. But it will be years before we get back to anywhere near health for most homeowners.

[lhamo]

Money ran a similar interview with Gross in August 2010. Then he was predicting 4% average growth. Our retirement accounts have done considerably better than that in the past 2 years -- probably in the 10-15% range? I'm too lazy to go calculate.

I don't think it makes any sense to worry about it too much. I mean really, what can any of us do about bigger macroeconomic trends? As our retirement account balances go up, I do think about moving more money into bonds. It would probably be prudent to do so. If long-term rates are only going to be in the 2% range, then we just push back our retirement date a bit, reduce our SWR a bit, or figure we will need to do some part-time work while in early retirement.

Try to enjoy your vacation, Rob. The financial world will still be here when you get back.

lhamo