Realistically: yes.

It's uncomfortable and nobody ever wants to hear it, and it's quick to get shouted down (especially in forums like HN where everyone is either wealthy or only "temporarily" poor), but if you can't afford to put $5500 into an IRA each year while also keeping your emergency fund topped up for 12 months' expenses while also still having enough extra for at least one little vacation that year -- then you're poor. Not middle class, but poor.

And, statistically speaking, if you're poor now, then you're likely to be poor for the rest of your life. America continues to run on the idea that that's not true, but that's a clever bit of marketing intended to keep people from realizing just how truly screwed they are.

This isn't to say that you're destitute or that it's impossible to live well at more modest means. Many people do.

Lol, by that measure 80%+ of the US is poor. The reality is much of that 80% of people are doing okay, and can survive a hiccup or two either by having enough money to expense themselves through it, unemployment or disability. If you’re in a high COL area I’d say that’s where you need to have a lot more money stashed. 12 months expenses isn’t reasonable for most people under 40.

> Lol, by that measure 80%+ of the US is poor.

Yep. Not really a laughing matter.

> Only 39% of Americans have enough savings to cover a $1,000 emergency

https://www.cnbc.com/2018/01/18/few-americans-have-enough-sa...

Relying on unemployment, disability, or having enough money (or, in most cases, credit) to "expense a hiccup or two" is not middle class. And people under 40 should have an easier time developing an emergency fund, because their expenses should be lower. People over 40 should have an easier time maintaining the emergency fund because it should be an investment account that they started before they were 30.

Your reply is a pretty good example of the amazing impact that political marketing has had on popular views towards wealth and poverty in this country. People have become entirely convinced that they aren't poor so long as they "can survive", that poverty is something that happens to the other people they hear about on the television.

$5500 a year, plus one vacation, plus building or maintaining an emergency fund, should amount to saving about $10,000 a year. The second-to-bottom, 15% tax bracket tops out at $37,950 for single people, and IRA contributions are 100% tax deductible, so you can safely gross up to $43,450 in that bracket. (edit: math.)

If it sounds difficult to squirrel away 25% gross annually in that bracket, that's because that's not the middle class bracket. It's the "poor" bracket.

First, your tax ignores payroll tax, and IRA contributions are pre-income-tax but post-payroll-tax. Just FYI. So taxes take a bigger bite than you’re portraying.

Second, where did you come up with this rationale that you’re poor unless X, Y, and Z?

It seems just as arbitrary to say that you’re not poor if you can put $2000 into an IRA, have a three month emergency fund, and take a week vacation.

Or let’s go the other way, why not: if you can’t put $30k per year into savings, have a three year emergency fund, and take eight weeks off per year, you’re not middle class, you’re poor.

See, we can all pull random numbers and standards out our ass!

In actuality, “poor” and “middle class” are actual defined terms with relatively well-defined meanings, none of which have anything to do with your bizarre markers of what constitutes different steps on the socioeconomic ladder.

IRA contributions for most people are above-the-line 1040 deductions, i.e., they count as a direct adjustment to your income regardless of how the rest of your taxes are structured (with exceptions for people who have employer IRA plans available or are self-employed or half a dozen other conditions, I am not a tax adviser, etc. etc.).

Okay, show me a non-arbitrary definition of "poor" and "middle class". Bonus points: show me the official definition that everyone agrees on. I'll wait.

Oh, and while you're doing that, let's also pause for a moment and reflect on whether you disagree that someone that can't save $10k per year is poor, or if you were just looking for an argument on the internet.

IRA contributions are subject to FICA taxes, as are employee contributions to 401k, etc. FICA taxes withheld from your paycheck regardless of your contributions, and there’s no credit to give some of it back to you on the 1040 because you made an IRA contribution.

As for definitions, here’s an official, non-arbitrary one for poverty that’s widely used. I’m sure you’ll just declare it arbitrary, which is fine, but my point is that you just came up with a random definition without anything to back it up or any reasoning as to why that’s the right threshold. Federal poverty guidelines aren’t perfect but they’re not a number out of a hat, which is what you’ve got.

https://aspe.hhs.gov/poverty-guidelines

You’re the one creating your own definitions and making assertions, accusing someone else of just looking for an argument seems disingenuous.

That source is absolutely wrong though - it originated from a report from Bankrate which only counted money in people’s savings (not checking) accounts. With rates under 1% for the past decade many people haven’t been even using a savings account.

That's a fair criticism. The Bankrate report was marketing material, based on a survey, and someone's answer would depend on what they considered a "savings account" to be. I don't have a savings account with my bank because, as you say, it's not worth it. I do have a small amount of savings in an investment account. Whether I'd consider that when asked about a savings account or not, I dunno.

However, the Fed has asked a different question intended to drill down into the same problem, and found that 47% of people responding would pay for a $400 emergency by borrowing money or selling something (https://www.theatlantic.com/magazine/archive/2016/05/my-secr..., also cites Bankrate though).

I'm unaware though of any studies finding that the majority of Americans have a significant amount of money (let's say a thousand or more) in a liquid asset of some kind. If you know of any, that would be some welcomed good news.

>>Lol, by that measure 80%+ of the US is poor.

No. It's not that most people can't save enough for retirement. It's just that they won't, due to a combination of bad habits and financial decisions.

It's a beautiful system where not only do the poor get to suffer, but their suffering allows the wealthy to luxuriate in perceived moral superiority.

This is silly and infantilizing. You can walk down any street in any of the many non-depressed area of the US and see a parade of bad financial decisions driving by in the form of newish $30k+ cars, along with a number of $50k+ pickup trucks, doubtless financed with debt. No one here is talking about people who can't afford food, he's talking about a much larger percentage of the population that makes an objectively large amount of money and still doesn't save nearly any of it.

People in the US are, on average, not nearly as frugal as they should be, and the sorry state of savings in this country is at least partly due to those habits. Even people with 6 figure take home salaries frequently are only a few months of savings away from financial ruin or tapping their retirement savings, if they lose their job. For them, it's a planning and discipline problem, not a problem of some evil system keeping them down.

It's way better than that: at the extremes the deep poverty of the poorest earns more money through usurious credit for the rich too.

I mean, it takes money to make money. It's also not required to max anything out. If you can only put $10 a week into retirement, put $10 a week into retirement, until you can put $15 a week.

I'm honestly not sure why your getting downvoted. Maybe the "takes money to make money" line? Otherwise that seems like reasonable advice. If you can't max out your IRA every year then that's just how it is but it's certainly a good idea to contribute what you can. Right? Could someone shed some light if I'm missing something?

Not missing anything. It's better to save the dollar you can now, even if it doesn't seem like much.

The 'good' news here is that Social Security isn't a terrible ROI at low incomes.

Right, if Social Security hasn't collapsed by the time you need it.

Social Security existence is based on the state ability to extract taxes, and voters rejecting candidates who want to dismantle it. 401k depends on stock market being up in the critical time you need it. If I were to bet what is more likely to collapse, it’s rather stock market.

> Social Security existence is based on the state ability to extract taxes, and voters rejecting candidates who want to dismantle it.

You need to watch the discussions around "entitlement reforms" that's being promoted currently. Voters can't reject candidates after the fact, who won't seek re-election after passing (or being the lightning-rod of) unpopular legislation, opting instead for cushy "jobs" in the industry they legislated in favor of against their consituents interests.

>>401k depends on stock market being up in the critical time you need it.

If your portfolio allocation is incorrect, sure. But by the time people get close to retirement, most of their investments should be in bonds, which are quite insulated from the ups and downs of the stock market.

What do you do when the stock market collapses as you start moving into bonds?

If you want to take an ultra-conservative approach, then 7 years from retirement, transfer 7 years worth of expected draws against your portfolio into bonds. If the market crashes the day before the "7 years from retirement" point, then wait 7 years to make that move into bonds and do it just when you retire.

If things are in such horrible shape that the market fails to recover over any given 7-year period of time, expect shotgun shells and canned food to be the new currency anyway.

That’s something you do by degrees over years. A couple years’ blip isn’t going to hurt that much.

Collecting a growing pot of tax revenue from a shrinking pool of workers will not be without challenges. Emigration seems likely, although I suppose the elderly majority can then vote in an exit visa scheme.