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Old 05-16-2011, 11:03 AM   #21
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Interesting idea, but do you think the gov't would be a good steward of those funds and that you could count on getting back it back via increased monthly payments?
Yes, I think obligations of the US government are at least as safe as other securities. But if it gets to the point that not all obligations can be met, there will be a lot of retirees with a lot of votes, to make sure that SS obligations are near the front of the line.
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Old 05-16-2011, 11:13 AM   #22
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I think you're saying that people used to have SS plus a DB pension and they could just spend their monthly checks.
Now, even those who were prudent and saved will have SS plus a 401k, and they have no idea how to convert those assets into monthly income.

I think there will be a lot of inefficiencies. People will pay financial advisers 200 basis points to do stuff that they could have done by themselves (with a little help from the experts here ). Some will just roll the money into CDs. Some will be too conservative, others to liberal, with withdrawals. Some will run out an be left with just SS.

But, in the DB pension days, a lot of people got burned by inflation that they didn't plan for and ended up in much worse shape than expected. So that wasn't a sure thing either.

I'm thinking most will avoid the poor house because they will adjust spending when they see the balance going down - it usually takes years and people will have time to figure that much out. But, people like us will still be frustrated that they weren't more efficient.
I just wanted to point out the general lack of financial knowledge and its potential consequences. Even the prudent ones haven't saved enough and have generally made bad decisions. The folks on this forum are right at the tail end of the bell curve as we enjoy talking about this stuff and have 401k/IRA balances 5 or 10 times that of the average retire and can come up with multiple approaches to fund a 4% SWR, and might actually succeed.

Arguments can be made for both DC and DB approaches, but I'm staggered by how little people understand about their finances which leaves them ill prepared to manage their DC plans or evaluate the advice of a financial planner. This is one of the most important aspects of life, yet many are afraid of it and prefer to ignore the issues or pay 2% a year to have someone with CFP after their name do some generic planning. The consequences of this ignorance have been highlighted by the recent down turn and once withdrawals start it will surely get worse. Remember the 401k generation is just starting to retire. It will be interesting (or maybe that should be frightening) to see how the baby boomers manage their money in the income phase.
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Old 05-16-2011, 11:16 AM   #23
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It would provide a straightforward way for people to avoid being cheated by insurance companies
And increase the likelihood of being 'cheated' by the government.

I put 'cheated' in quotes, because that isn't really the right word. But what you have with SS and Medicare is an unenforceable promise to receive certain benefits. The government can change that promise at it's sole discretion. It has in the past, and almost certainly will again in the near future.

I wouldn't swap a fixed pile of cash for any government benefit unless it had the power of an enforceable contract behind it.
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Old 05-16-2011, 11:20 AM   #24
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I just wanted to point out the general lack of financial knowledge and its potential consequences.
I think the consequences are: 1) People working far longer than they ever expected 2) People leaning heavily on family for support 3) People drastically cutting their expenditures to manage with the meager SS benefits they'll get

We're seeing this already. I know I am.
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Old 05-16-2011, 12:33 PM   #25
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I wish I could be as optimistic as you. Unfortunately polls about the unpreparedness of people for retirement and my personal experience of my friends lack of planning and financial knowledge won't let me agree with you, much as I want to.

As some people say "you can't fix stupid".....


I have an aunt (that I have only seen one in my life) who went through her whole life's savings and the insurance money she got when her husband died in less than three years... seems that she had all of her money in a bank checking account and just wrote checks... never thought about it at all until the account got to zero (I think she had over $300K to begin)...

So, I do share some of your concern... but look at my first sentence and let me know what can be done about it...
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Old 05-16-2011, 01:00 PM   #26
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Of course. I'd like the SS system to be extended by allowing people to increase their SS benefits by paying extra into the system, perhaps by rolling their 401k accounts into SS. It would provide a straightforward way for people to avoid being cheated by insurance companies, and by infusing some cash, it could delay the day when the SS system runs into fiscal problems.
That's a horrible idea. Since when is the govt good at running a retirement disbursal plan?
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Old 05-16-2011, 01:02 PM   #27
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I just wanted to point out the general lack of financial knowledge and its potential consequences. Even the prudent ones haven't saved enough and have generally made bad decisions. The folks on this forum are right at the tail end of the bell curve as we enjoy talking about this stuff and have 401k/IRA balances 5 or 10 times that of the average retire and can come up with multiple approaches to fund a 4% SWR, and might actually succeed.

Arguments can be made for both DC and DB approaches, but I'm staggered by how little people understand about their finances which leaves them ill prepared to manage their DC plans or evaluate the advice of a financial planner. This is one of the most important aspects of life, yet many are afraid of it and prefer to ignore the issues or pay 2% a year to have someone with CFP after their name do some generic planning. The consequences of this ignorance have been highlighted by the recent down turn and once withdrawals start it will surely get worse. Remember the 401k generation is just starting to retire. It will be interesting (or maybe that should be frightening) to see how the baby boomers manage their money in the income phase.
You seem pretty fired up about it, why not start a blog or do free retirement counseling or something?
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Old 05-16-2011, 01:06 PM   #28
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Yes, I think obligations of the US government are at least as safe as other securities. But if it gets to the point that not all obligations can be met, there will be a lot of retirees with a lot of votes, to make sure that SS obligations are near the front of the line.
That hasn't worked to this point, why would it work in the future? I have been working for over 30 years and I am still under 50 and know I am going to get the shaft. It's easy for those collecting to armchair quarterback the system because there's no risk to their payments......
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Old 05-16-2011, 01:21 PM   #29
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... But, people like us will still be frustrated that they weren't more efficient.
I don't want to seem callous, but it's not like there is no information out there about this stuff. It's been all over the news for years now. Suzy has become rich telling people about it. So I think that this is sort of financial 'natural selection'.

I have stopped worrying about everyone else. They are going to keep on doing what they want to anyways.

3 rules seemed to have gotten me and dw where we are today:
LBYM
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Our kids still call us cheap, but now they see the rationale.
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Old 05-16-2011, 01:22 PM   #30
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You seem pretty fired up about it, why not start a blog or do free retirement counseling or something?
Do you mean fired or FIREd?

I think this board give me enough opportunity to express myself.....maybe a bit too much. There are plenty of good blogs about investing and retirement by far more qualified people than me so I don't need to add to those.

The advice I've given to my friends when the subject comes up over beers is usually met with derision as I'm a bit out of the ordinary. It's easy for me to live on a small fraction of my income and save a large %age as I'm single, have no kids and will soon have no mortgage. My friends find it hard to believe I'll soon have no debt when they are taking on more to send their kids to college. They are also alpha seekers and firmly believe that paying 1.5% fees on a mutual fund is a good thing.....my 50/50 indexing strategy doesn't excite them. This is why I'm pessimistic.
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Old 05-16-2011, 03:32 PM   #31
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Interesting idea, but do you think the gov't would be a good steward of those funds and that you could count on getting back it back via increased monthly payments?
We call that the "Thrift Savings Plan".

I'll have to get back to you in a couple decades on the second part, but so far so good...
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Old 05-16-2011, 03:44 PM   #32
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Nearly everyone I know - in real life - has an "I'm going to work forever" plan for non-retirement. I'm on the younger end of the boomer span (born in 1958) and most of my friends are all boomers who actively resist any mention of growing older and slower. They don't believe they're going to retire, so they've made only basic financial planning.

It's not that they can't come up with a financial plan for retirement - they're certainly educated and intelligent enough to figure out what they need to do. Heck, I figured it out and most of them have more education than I have. It's almost as if they've convinced themselves that they're just going to work for the rest of their lives, so why bother with all that retirement planning stuff.

It's puzzling to me. But it doesn't worry me.

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Old 05-16-2011, 03:50 PM   #33
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Nearly everyone I know - in real life - has an "I'm going to work forever" plan for non-retirement. I'm on the younger end of the boomer span (born in 1958) and most of my friends are all boomers who actively resist any mention of growing older and slower. They don't believe they're going to retire, so they've made only basic financial planning.

I can more understand that for people who are older and have been working a long time. You've been working 30+ years, it's something you're used to, so you picture continuing working.

Young people though (my age), who have been working a few years, and have a plan to work forever, just make me scratch my head. You really want to work for the next 40 years?

Most just don't think about it, but even when asked, young people with no plans to try to retire early, but planning on working forever.. ugh. I don't get it.
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Old 05-16-2011, 06:00 PM   #34
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There are times on this forum when I think I really grew up in a different world than everyone else here and so did my DH.

When I was kid my grandmother shuttled around among her children to live. She had very little money and would spend a month here then a month with another kid and so on. When she stayed with us, she slept with me. And it didn't seem strange and she wasn't unhappy.

Among my parents and my husband's parents and their siblings it all is pretty much the same. They earned modest incomes but retired with a paid off house. They made had a couple of hundred thousand dollars saved (some had more and some less). They drew SS and maybe had a few very small pensions or take RMDs from IRAs. Living on $20,000 a year or so is fine.

It was just a given that retired people were "on a fixed income" (mostly SS) and had to watch money and couldn't spend a lot. And they are fine.

I see plenty of people doing fine with SS, a paid for modest house and a couple of hundred thousand dollars for extras.
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Old 05-16-2011, 06:03 PM   #35
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I just wanted to point out the general lack of financial knowledge and its potential consequences. Even the prudent ones haven't saved enough and have generally made bad decisions. The folks on this forum are right at the tail end of the bell curve as we enjoy talking about this stuff and have 401k/IRA balances 5 or 10 times that of the average retire and can come up with multiple approaches to fund a 4% SWR, and might actually succeed.

Arguments can be made for both DC and DB approaches, but I'm staggered by how little people understand about their finances which leaves them ill prepared to manage their DC plans or evaluate the advice of a financial planner. This is one of the most important aspects of life, yet many are afraid of it and prefer to ignore the issues or pay 2% a year to have someone with CFP after their name do some generic planning. The consequences of this ignorance have been highlighted by the recent down turn and once withdrawals start it will surely get worse. Remember the 401k generation is just starting to retire. It will be interesting (or maybe that should be frightening) to see how the baby boomers manage their money in the income phase.
Having seen multiple family member make mistakes with their retirements what I have seen with bad choices is:
#1 - downgrade housing (sell House move to apartment then eventually a cheaper apartment) my father is presently living in a one bedroom apartment for $550 per month. If he had to he would move into a studio for about $100 per month less. You turn the heat to 60 in the winter and use an occasional fan in the summer. You go to bed at sunset and wake up at dawn to avoid using lights.

#2 - Social Security provides a decent safety net for many. The average Social Security per their website claim for 2011 is $1,167 per month. The average income to be eligible for food stamps is $1,800 monthly income for single $2,428 for a couple to receive a $200 benefit for a single and $367 month for a couple. (I pick NY for no particular reason)

Therefore an average retiring couple could expect a $1,177 SS and a spouse SS benefit of $589 and could then purchase an inflation annuity with their meager life savings of $100,000 for $300 per month that couple would have $2,433 per month of income to live on (includes value of food stamps) with virtually no taxes, no money in the bank and many members on this board live on less than that.

Whether the US can continue to pay for this is another question but I think in the end this is how many retirees with little or no money handle their retirement when the realization hits them that this is all they can afford. Not what I want but not so bad as to be unlivable.

http://www.otda.state.ny.us/programs...s/#eligibility
http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/13/~/average-monthly-social-security-benefit-for-a-retired-worke
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Old 05-16-2011, 07:25 PM   #36
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Of course. I'd like the SS system to be extended by allowing people to increase their SS benefits by paying extra into the system, perhaps by rolling their 401k accounts into SS. It would provide a straightforward way for people to avoid being cheated by insurance companies,
I'm doing this today. I'm spending down 401k while I'm deferring SS in order to increase my benefit. I also own TIPS, which is another way of using the gov't instead of private.

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... and by infusing some cash, it could delay the day when the SS system runs into fiscal problems.
Ouch.
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Old 05-16-2011, 07:29 PM   #37
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I'm doing this today. I'm spending down 401k while I'm deferring SS in order to increase my benefit. I also own TIPS, which is another way of using the gov't instead of private.
You have made the assumption though that your "extra" SS payments won't be cut back in the quest to hunt down "the rich"

SS caps and means testing are all options still available.
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Old 05-16-2011, 07:36 PM   #38
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You have made the assumption though that your "extra" SS payments won't be cut back in the quest to hunt down "the rich"

SS caps and means testing are all options still available.
Odd, I just posted on that topic in another thread. I think that "rich" is more likely to be measured via non-SS assets and income, rather than by SS income. (In fact, I think the techies are smart enough to not penalize people for higher SS benefits that are solely the result of deferring SS, they'll use PIA instead of monthly benefit.) So I think this approach actually improves my position in a means-tested world.
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Old 05-16-2011, 08:22 PM   #39
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There are times on this forum when I think I really grew up in a different world than everyone else here and so did my DH.

They drew SS and maybe had a few very small pensions or take RMDs from IRAs. Living on $20,000 a year or so is fine.

It was just a given that retired people were "on a fixed income" (mostly SS) and had to watch money and couldn't spend a lot. And they are fine.

I see plenty of people doing fine with SS, a paid for modest house and a couple of hundred thousand dollars for extras.
ERing is about the combination of LBYM and saving and investing, so you have a few "soul mates" here. It's frighteningly rare to find that combination which is why this forum might just become extinct. With everyone having to work until they drop ERers will become anachronisms.
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Old 05-16-2011, 09:46 PM   #40
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Of course. I'd like the SS system to be extended by allowing people to increase their SS benefits by paying extra into the system, perhaps by rolling their 401k accounts into SS. It would provide a straightforward way for people to avoid being cheated by insurance companies, and by infusing some cash, it could delay the day when the SS system runs into fiscal problems.
I would rather see the opposite take place.. Offer me the chance to come out from under SS & never have to pay into it again.. I would jump at the chance. Keep what I have paid already for the last 15 years as a severance.. Good bye US Govt - Hello FIRE!
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