Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 07-10-2015, 12:40 AM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,326
We're the outliers. It isn't a small minority in vans down by the river who haven't prepared for retirement. It seems to be the majority of Americans approaching retirement age.

It will probably be more reasonable to eventually legislate some type of enforced retirement savings or resurrect DB plans than it will be to try to change human nature. Most people just aren't wired to plan for 40 years into the future.
__________________

__________________
Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)
daylatedollarshort is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-10-2015, 06:35 AM   #22
Recycles dryer sheets
 
Join Date: Feb 2009
Location: Cville
Posts: 399
Doesn't it come down to DB is guaranteed (to some extent) and DC is not. With a DC the outcome will be better for some and worse for some. I must disclose my DW and I are both retired Army, and DW took a second DB retirement from the county school system. My current employer offers 401K and we have IRAs we funded several years ago.


My advice to anyone with a lump sum and no DB would be to fix some income with an immediate annuity and invest the rest for remainder of your income needs. With an annuity you can make your own DB COLA adjusted, dual lifespan, what ever you want. So while we NEED to be kind and understand the position of those with a DC that are hurting, the options were there for them in the contribution phase and plan for the draw level.


When you allow people to take individual control of anything (retirement, health care, who they marry) some will do better than the pack, some about the same and some will trail. In the Army, we had to do ratings of our charges such that there were ahead of the pack, with the pack and trailing the pack. That is the real world facts. We get in trouble when we give people choice then complain about the choices they make.
__________________

__________________
RetireBy90 is offline   Reply With Quote
Old 07-10-2015, 08:16 AM   #23
Recycles dryer sheets
 
Join Date: Oct 2013
Posts: 156
In my personal social circle of family and friends, I don't know of any household that has retired without a DB pension + SS. The fact that all the major employers in my area offer pensions is certainly a factor. What I find worrisome is the fact that in a number of cases, the retiree households spend their pension + SS checks and have very little savings. They are annuity rich enough to go new car shopping, but struggle to come up with 20% to put down on a new home (downsizing/moving.) Does anyone else see this sort of behavior?


Edit to add -- They do have home equity, but that is hard to get at.

My megacorp froze their DB plan some years back. I've always viewed it as a cost savings measure. The company took a look around, and decided that offering a DB pension wasn't helping them recruit talent. Also, the accountants love DC plans because the vesting is done at the end of the year so no need to "worry" about having to make extra contributions in the future if the markets don't cooperate. IMHO it is a giant risk shift and we don't have enough data yet to know how the shift to DC plans will play out.
__________________
NoiseBoy is offline   Reply With Quote
Old 07-10-2015, 08:45 AM   #24
Thinks s/he gets paid by the post
Big_Hitter's Avatar
 
Join Date: May 2013
Location: In the fairway
Posts: 4,097
Quote:
Originally Posted by NoiseBoy View Post
IMHO it is a giant risk shift and we don't have enough data yet to know how the shift to DC plans will play out.
The authors of that paper may disagree with you.
__________________
Swing hard, look up
Big_Hitter is offline   Reply With Quote
Old 07-10-2015, 09:29 AM   #25
Full time employment: Posting here.
 
Join Date: Nov 2009
Posts: 510
Quote:
Originally Posted by daylatedollarshort View Post
We're the outliers. It isn't a small minority in vans down by the river who haven't prepared for retirement. It seems to be the majority of Americans approaching retirement age.

It will probably be more reasonable to eventually legislate some type of enforced retirement savings or resurrect DB plans than it will be to try to change human nature. Most people just aren't wired to plan for 40 years into the future.
Quote:
Originally Posted by RetireBy90 View Post
Doesn't it come down to DB is guaranteed (to some extent) and DC is not. With a DC the outcome will be better for some and worse for some. I must disclose my DW and I are both retired Army, and DW took a second DB retirement from the county school system. My current employer offers 401K and we have IRAs we funded several years ago.


My advice to anyone with a lump sum and no DB would be to fix some income with an immediate annuity and invest the rest for remainder of your income needs. With an annuity you can make your own DB COLA adjusted, dual lifespan, what ever you want. So while we NEED to be kind and understand the position of those with a DC that are hurting, the options were there for them in the contribution phase and plan for the draw level.


When you allow people to take individual control of anything (retirement, health care, who they marry) some will do better than the pack, some about the same and some will trail. In the Army, we had to do ratings of our charges such that there were ahead of the pack, with the pack and trailing the pack. That is the real world facts. We get in trouble when we give people choice then complain about the choices they make.
Be careful what you wish for - Federal Govt. regulations paint with a broad brush. "Everyone" will be subject to that legislation. Would most likely lose everything gained with IRAs and ROTHs as a DB replacement in an effort to pay for those that have chosen to ignore saving for retirement. I don't imagine those with nice Govt. pensions would like to be subjected to legislated DB plans of the Federal Govts. doing to be implemented for all U.S. workers. That could be a possibility.

In my earlier post, I mentioned that some on DB plans lost their retirement programs when their companies went bankrupt. This scenario still takes place today. You also lost your DB benefits in the past if you did not meet the minimum vesting time (nothing was given to an employee who left the company or was fired before meeting that time frame). There were people who were fired as they approached vesting in the past (could have been +/- 10 years - company choice). The Federal Govt. stepped in and shortened the time frame to try to get around that scenario. The Federal Govt. also ate (still does) a lot of DB plans of bankrupt companies. IRA and ROTH became the way out for businesses/Feds.

As for annuities - no financial advisor worth his salt would recommend putting all your retirement investments in them. Most people have more than enough annuity style retirement income in the form of Social Security.

It is a given that something will most likely be legislated into law. It would be my hope that 401Ks, IRAs and ROTHs remain as they are currently, as they work. What needs to happen IMHO, is that employees need to be mandated to contribute to a 401K that is National in scope (like your SS is now) to eliminate all the bad plans businesses select for your retirement (choices, fees, security). This should be a mandated minimum % of one's salary. Employers (optional) matching should be mandated to be placed in employees natl. account, and not in their own stock. The funds should not be available for borrowing except in extreme emergencies - determined by process. Retirement funds of this type would be managed like a guaranteed investment account.

You should also be allowed to contribute (B4 tax) to your Natl. 401K, (B4 and after tax) IRA, and (after tax) ROTHs at levels above that mandated minimum. These additional retirement funds should be allowed to be managed by employee (investment options) and borrowed against under certain conditions.

Retirement income should not be taxed at ordinary income levels if taken in annuity style payments over the retiree's lifetime (but "should not" have to annuitize retirement funds - optional). We do favored tax status now with qualified dividends and capital gains for the wealthy.

All monies should be the property of the contributors and their heirs - to be paid out and not forfeited to the govt. upon one's death.

Huge incentive for people to save for retirement, and still give the government tax revenue. Might even go as far as to suggest this replace Social Security, but this would make the Federal government nervous - losing future forfeited revenue streams
__________________
fritz is offline   Reply With Quote
Old 07-10-2015, 01:14 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,326
Quote:
Originally Posted by fritz View Post
Be careful what you wish for - Federal Govt. regulations paint with a broad brush. "Everyone" will be subject to that legislation. Would most likely lose everything gained with IRAs and ROTHs as a DB replacement in an effort to pay for those that have chosen to ignore saving for retirement. I don't imagine those with nice Govt. pensions would like to be subjected to legislated DB plans of the Federal Govts. doing to be implemented for all U.S. workers. That could be a possibility.
I am not really wishing for anything. I have just had time to read books on behavioral economics lately and I think it is more realistic that changes will be made to enforce more retirement savings in some way because otherwise many people, maybe most, won't do it on their own.

I see crazy financial stuff going on in regards to savings / spending / huge student loans / unaffordable homes and lifestyles / no retirement savings with former co-workers, neighbors and friends who I thought would have had the income and education to know better. I don't really understand it but it is what it is.
__________________
Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)
daylatedollarshort is online now   Reply With Quote
Old 07-10-2015, 02:03 PM   #27
Thinks s/he gets paid by the post
Big_Hitter's Avatar
 
Join Date: May 2013
Location: In the fairway
Posts: 4,097
Quote:
Originally Posted by fritz View Post

What needs to happen IMHO, is that employees need to be mandated to contribute to a 401K that is National in scope (like your SS is now) to eliminate all the bad plans businesses select for your retirement (choices, fees, security). This should be a mandated minimum % of one's salary. Employers (optional) matching should be mandated to be placed in employees natl. account, and not in their own stock. The funds should not be available for borrowing except in extreme emergencies - determined by process. Retirement funds of this type would be managed like a guaranteed investment account.
I'm guessing there will be some form of reactionary legislation (like most, if not all US pension legislation has been) regarding mandatory savings (or superannualtion) plans with mandatory annuity payouts once a fixed age is obtained. It will probably happen in a few more years when the number of destitute boomers over age 65 gets large enough. This is just MHO.
__________________
Swing hard, look up
Big_Hitter is offline   Reply With Quote
Old 07-10-2015, 02:37 PM   #28
Recycles dryer sheets
Greencheese's Avatar
 
Join Date: Oct 2013
Posts: 261
A solution that may work could include a cash balance pension plan that I've seen several employers go with. Require something like 3% of an employees salary to go into a cash balance that is untouchable until 60 (or whatever retirement is in the future) and require the employer must pay something like 1-2% over year end treasury levels interest on it. Even if the employee quits the employer must pay interest on the balance they contributed until it is cashed out. Should the company go bankrupt then the government would pay treasury yield interest on that specific balance's behalf. Then upon retirement the money can only be cashed out into an annuity purchased off the market.

This way people can still save for their own retirement via IRAs and 401Ks but at least the fools who save nothing could have a little something in addition to SS and its fully funded the entire time without any government "magic" funding acts. I'm sure there would be problems with this but hey, couldn't be any more of a mess than SS right?
__________________
Greencheese is offline   Reply With Quote
Old 07-10-2015, 05:06 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Quote:
Originally Posted by Greencheese View Post
A solution that may work could include a cash balance pension plan that I've seen several employers go with. Require something like 3% of an employees salary to go into a cash balance that is untouchable until 60 (or whatever retirement is in the future) and require the employer must pay something like 1-2% over year end treasury levels interest on it. Even if the employee quits the employer must pay interest on the balance they contributed until it is cashed out. Should the company go bankrupt then the government would pay treasury yield interest on that specific balance's behalf.
I can't see why we would deliberately continue with the idea that employers should be involved with paying anything to retirees, maintaining their accounts, or anything to do with the accumulation of their retirement savings. It's just an extra level of costs and it has companies involved in something that's not their core business. Pay people and let them invest their money.

We have a national system that forces employees to make contributions and keeps retirees from becoming destitute and keeps them off pubic assistance--it is Social Security. That's enough.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 07-10-2015, 05:40 PM   #30
Full time employment: Posting here.
 
Join Date: Nov 2009
Posts: 510
Quote:
Originally Posted by samclem View Post
I can't see why we would deliberately continue with the idea that employers should be involved with paying anything to retirees, maintaining their accounts, or anything to do with the accumulation of their retirement savings. It's just an extra level of costs and it has companies involved in something that's not their core business. Pay people and let them invest their money.

We have a national system that forces employees to make contributions and keeps retirees from becoming destitute and keeps them off pubic assistance--it is Social Security. That's enough.

I suggested that it still be an optional scenario - this is how it is now. I did suggest that it not be funneled by the company into their own stock if they offer it, but rather the contribution be secured by placing it into the employees retirement plan (also not controlled by the company).

As for annuities - not a big fan, but this should be optional as the fees associated with them are for the most part excessive and the plans are difficult at best to understand. I suggested that the employee have the option of annuitizing or taking equal payments over predicted lifespan. I would also suggest that retirement income have special tax treatment on payouts for further pushing people to save for retirement (make it an offer they can't refuse). Mentioned that we do this now with wealthier folks income in the form of qualified dividends and capital gains favored tax treatment.

As for SS - don't care for the program and would like to see it replaced with something like I've suggested - more of a DC plan where you could opt for increasing your retirement savings at tax deferred status. If something likethis were implemented with features similar to the above - people would be forced to save, but the end result would not be lost like it is now with SS. You would still have the choice to gamble with it and annuitize...
__________________
fritz is offline   Reply With Quote
Old 07-10-2015, 05:56 PM   #31
Moderator
Walt34's Avatar
 
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 16,539
Quote:
Originally Posted by NoiseBoy View Post
They are annuity rich enough to go new car shopping, but struggle to come up with 20% to put down on a new home (downsizing/moving.) Does anyone else see this sort of behavior?
Yes, with people both retired and not retired. DW and I look at each other and wonder "What are they thinking?"

Quote:
Originally Posted by daylatedollarshort View Post
I see crazy financial stuff going on in regards to savings / spending / huge student loans / unaffordable homes and lifestyles / no retirement savings with former co-workers, neighbors and friends who I thought would have had the income and education to know better. I don't really understand it but it is what it is.
We see that going on too and don't understand the behavior either. Likewise I have been reading a lot of financial behavior books like Predictably Irrational. In a sort of academic sense I sort of understand why people do that but I really don't "get it". But this is a guy who, when I lost a paycheck in the mid '70's and it was going to take six weeks to get a replacement, it wasn't a big deal because I had that much in savings and more even though the inside of my apartment was bare. Other people raised eyebrows at that.
__________________
I heard the call to do nothing. So I answered it.
Walt34 is offline   Reply With Quote
Old 07-10-2015, 06:14 PM   #32
Thinks s/he gets paid by the post
mpeirce's Avatar
 
Join Date: Feb 2012
Location: Columbus area
Posts: 1,587
Quote:
Originally Posted by samclem View Post
Pay people and let them invest their money.

We have a national system that forces employees to make contributions and keeps retirees from becoming destitute and keeps them off pubic assistance--it is Social Security. That's enough.
+1

Exactly. A basic safety net so old folks aren't going hunger, but beyond that let people make their own choices.

If someone wants to spend all of their income when they are younger, then that's their business.
__________________
mpeirce is online now   Reply With Quote
Old 07-10-2015, 07:00 PM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,406
Quote:
Originally Posted by daylatedollarshort View Post
...It will probably be more reasonable to eventually legislate some type of enforced retirement savings or resurrect DB plans than it will be to try to change human nature. Most people just aren't wired to plan for 40 years into the future.
They may just have to learn the hard way. Most people are not dumb and pick it up pretty quick.

Consider China. In 1990, their government realized that there was no way that they could deliver on the pension promise, and told the people so. Ever since, the Chinese are scared, and have been saving as much as 1/2 of their income.

“Now they’re saying, ‘Gee, no one is going to take care of me when I get old,’ so they’re funding their own retirement.” —Nelson Mark

See: Chinese Consumers Cling to Saving, Suppressing Spending - Bloomberg Business.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 07-10-2015, 11:41 PM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,326
Quote:
Originally Posted by mpeirce View Post
+1

Exactly. A basic safety net so old folks aren't going hunger, but beyond that let people make their own choices.

If someone wants to spend all of their income when they are younger, then that's their business.
I hope it is enough. I have read average SS benefits are $13K a year. We're budgeting $5K a person just for retirement healthcare. $8K leftover is less than most cost estimates I've seen for personal expenses for even a college student lifestyle in the U.S. Maybe with other safety net programs like food stamps and section 8 that would be enough to get by in some areas of the country.
__________________
Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)
daylatedollarshort is online now   Reply With Quote
Old 07-11-2015, 02:48 AM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,427
If your income was only $13k a year you would qualify for Medicaid so your healthcare cost would be much less than $5k a year.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 07-11-2015, 04:06 AM   #36
Thinks s/he gets paid by the post
 
Join Date: Feb 2014
Posts: 1,050
Quote:
Originally Posted by pb4uski View Post
If your income was only $13k a year you would qualify for Medicaid so your healthcare cost would be much less than $5k a year.
Actually only if you are <65 would you qualify, but you would qualify for Medicare at >=65. Also at 13K you could might qualify for the Part B ($104.90) Medicare reimbursement depending on your state. (Some states have an income and resource test for this.)
__________________
jim584672 is offline   Reply With Quote
Old 07-11-2015, 07:12 AM   #37
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,427
Either way, if your only resource was $13k/year of SS your annual healthcare cost would likely be a lot less than $5k a year as suggested in DLDS' post.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 07-11-2015, 09:02 AM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Quote:
Originally Posted by daylatedollarshort View Post
I hope it is enough. I have read average SS benefits are $13K a year.
Some data from SSA: The average retired worker gets $1,334.21/mo (almost $16K per year). Also, the average spouse of a retired worker gets $679.20/mo (over $8k per year). So the average retired couple probably gets somewhere between $24K and $32k from SS per year, depending on whether it was a one or two income couple.
It's not luxury, but in most parts of the country it's enough to get by, especially if the house is paid off.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 07-11-2015, 12:14 PM   #39
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,326
Quote:
Originally Posted by pb4uski View Post
Either way, if your only resource was $13k/year of SS your annual healthcare cost would likely be a lot less than $5k a year as suggested in DLDS' post.
I was using numbers extracted from posts here and the Fidelity estimates ($220K for a retired couple). We're not on Medicare yet so I hope I am budgeting too much for premiums, deductibles, hearing aids, dental and vision care, etc. We have relatives with serious illnesses and Medicare that seem to spend more than the $5k out of pocket.

Added -

I just looked at the CES and over 65 households spent on average $2,805 per person ($4,769 household / 1.7 people per household) in 2011 dollars for health expenditures ($2,965 in 2015 dollars).

Average benefit $1,220 a month per SSA here, $14,628 annual.

$14,628 - $2,965 = $11,553 leftover, per retiree, for everything else.
__________________
Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)
daylatedollarshort is online now   Reply With Quote
Old 07-11-2015, 12:40 PM   #40
Full time employment: Posting here.
 
Join Date: Apr 2015
Posts: 903
Quote:
Originally Posted by daylatedollarshort View Post
We're not on Medicare yet so I hope I am budgeting too much for premiums, deductibles, hearing aids, dental and vision care, etc. We have relatives with serious illnesses and Medicare that seem to spend more than the $5k out of pocket.
Those relatives likely have greater income/means than $13K per year then.

Afaik, $13K is already poverty level so someone making only that qualifies for more benefits such as food stamps, section 8 housing, etc. There's also the benefit of not having to pay federal and state income taxes. My grandmother's combined pension + SS was around $13K and iirc, her out of pocket for medical expenses was pretty low (pretty much just subsidized Part B premiums). I think her prescription co-pay was just $4-5 or something.
__________________

__________________
hnzw_rui is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
a thread's subject color - read/not read veremchuka Forum Admin 12 02-19-2011 08:46 PM
Really a good read here. Quite good today Friedman NYtimes. newguy88 Other topics 86 12-10-2007 05:26 PM
From poverty to private plane twaddle FIRE and Money 4 08-11-2007 03:42 PM
Scott Burns: Stave off old-age poverty Nords FIRE and Money 29 05-05-2006 10:42 PM
Book report: The End of Poverty Nords Other topics 11 10-24-2005 10:20 AM

 

 
All times are GMT -6. The time now is 05:19 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.