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Old 10-15-2012, 09:10 AM   #41
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I don't believe that we should protect people from own foolishness.
Not shouldn't, we couldn't!!! How far do we go?

If you want to "protect" people, we must sit down to define all the ways they can mess up. Then, we will see that the only sure protection is to put people in straightjackets!

Fine with me, as long as I am the guard. I also get to spank the people I think are "naughty".

And I may even be able to do it in a way that they, well, kind of like it.
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Old 10-15-2012, 09:25 AM   #42
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...some kind of low cost, index-based target fund should be the default...

-ERD50
Done
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Old 10-15-2012, 10:19 AM   #43
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Not shouldn't, we couldn't!!! How far do we go?

If you want to "protect" people, we must sit down to define all the ways they can mess up. Then, we will see that the only sure protection is to put people in straightjackets!

Fine with me, as long as I am the guard. I also get to spank the people I think are "naughty".
Some people just naturally don't want to take responsibility for themselves. They prefer to be "owned". Being free scares them.
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Old 10-15-2012, 10:28 AM   #44
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Yes that's the problem with them. To ignore the participant or justify the failure of the 401k because of the savers stupidity or bad luck is just sticking one's head in the sand. Laissez faire won't help people to better plan for retirement.
Just how far do you want to take this? We already (in the US) have social security and it's associated disability programs that provide a safety net for old age and some other situations. Are you suggesting that we need to provide more generous retirement guarantees beyond SS? We provide opportunity for people to invest and a slew of tax advantages to encourage IRA/401k/403b etc retirement savings. Not enough? You want mandatory savings to be added to this? What about people who don't work, should they get equivalent benefits?

There are lots of ways we could protect people from themselves, but they come with costs. How far do you want to take it? Pay more in SS benefits than we take in? Pay "tax credits" to people who don't earn enough money? Offer more incentives to low income people who do save for retirement? Several different tax advantaged plans that anyone can participate in?

You don't think this is enough and want additional "help" from the government to force people to save for retirement in addition to all the above? Please be specific about what you want. Take all the money and divide it equally also accomplishes your goal (maybe) but it's a terrible plan. Forcing "investment" in mediocre funds and restricting how participants can use their own money is not much better.

Now making a really good 401k alternative available to anyone who doesn't have or doesn't like their employer plan might be a good policy. Setting a base amount required to be in a well run target fund before participants can select other investments might be a workable policy, though questionable whether it actually helps achieve the goal of blissful retirements for all. Requiring in-service rollovers be allowed would be a policy that influences employers to improve their plans. Even requiring some kind of minimal contributions might be reasonable, though you'd have to be careful to allow for people who really need the funds for something more important.

It's a laudable goal to make better retirements available to all, but the details matter a great deal.
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Old 10-15-2012, 10:28 AM   #45
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Some people just naturally don't want to take responsibility for themselves. They prefer to be "owned". Being free scares them.
More like some people like to control other people.

My best friend is a Libertarian. I debate with him all the time, but have learned a lot from him. He has sent me many quotes, and here is an example. You would be surprised to learn that C.S. Lewis was a lay theologian, evidently a very enlightened one. I mulled over this quote, and found it so true when thinking of what and how the Taliban inflict their control on people.
Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience. – C. S. Lewis
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Old 10-15-2012, 10:33 AM   #46
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That's a great quote!
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Old 10-15-2012, 10:40 AM   #47
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As Yoda would say - Getting off topic, this thread is. Hmmm
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Old 10-15-2012, 10:49 AM   #48
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OK, back on the very specific topic of helping people with their retirement savings. I alluded earlier about the lack of "protection" in the withdrawal phase. Case in point follows.

My sister-in-law told me of this retired man who had a mistress, who talked him into withdrawing ALL of his retirement savings, and eloped with that cash, leaving his wife behind. The mistress then stole all of his money, and left him penniless in a motel room.

OMG! That's why I said we would also need a committee to oversee people's withdrawal and their spending, to protect against cases like this. No?
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Old 10-15-2012, 10:58 AM   #49
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Not sure where you read in my post that I want to impose on everyone not to buy equities. For the record, I am not imposing or even wishing to give anyone the impression that they must do anything with their 401k plans.

Do me a favor - can you show ANY post where I called myself "libertarian inclined" ?

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Originally Posted by RunningBum
It's your business if you don't want to buy equities, but wanting to impose that on everyone else is absurd, and laughable a post or two after calling yourself libertarian inclined.

If there were to be any restrictions, I could see it done with Target retirement funds, where you are required to hold an increasing amount of bonds or cash equivalents as you get older.
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Old 10-15-2012, 11:35 AM   #50
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Now making a really good 401k alternative available to anyone who doesn't have or doesn't like their employer plan might be a good policy. Setting a base amount required to be in a well run target fund before participants can select other investments might be a workable policy, though questionable whether it actually helps achieve the goal of blissful retirements for all. Requiring in-service rollovers be allowed would be a policy that influences employers to improve their plans. Even requiring some kind of minimal contributions might be reasonable, though you'd have to be careful to allow for people who really need the funds for something more important.

It's a laudable goal to make better retirements available to all, but the details matter a great deal.
The details of the reform are critical, but the UK has a pretty good model with NEST. Both employers and employees must contribute to a retirement plan that meets certain minimum standards.....unless the employee actively opts out. So the employee is not mandated to contribute. If they do contribute there are minimum contribution levels required, if you are low income those are a smaller %age of your salary than someone with higher earnings. A "target date fund" is also the default investment option, but the employee can get more sophisticated if they want.

NEST home | UK employer pension scheme | NEST pensions

This will get most working people in the UK contributing 5% of their salary and getting a 3% employer match to a tax deferred target date retirement account. Hopefully this, along with UK equivalent of SS, will provide for retirement income. There might be some philosophical issues with this, although the opt out provision should calm those, but the objective is to get all working people in the UK to do what many on this board do......regular saving into broad index funds with risk reducing as retirement age approaches.
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Old 10-15-2012, 11:54 AM   #51
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The details of the reform are critical, but the UK has a pretty good model with NEST. Both employers and employees must contribute to a retirement plan that meets certain minimum standards.....unless the employee actively opts out. So the employee is not mandated to contribute. If they do contribute there are minimum contribution levels required, if you are low income those are a smaller %age of your salary than someone with higher earnings. A "target date fund" is also the default investment option, but the employee can get more sophisticated if they want.

NEST home | UK employer pension scheme | NEST pensions

This will get most working people in the UK contributing 5% of their salary and getting a 3% employer match to a tax deferred target date retirement account. Hopefully this, along with UK equivalent of SS, will provide for retirement income. There might be some philosophical issues with this, although the opt out provision should calm those, but the objective is to get all working people in the UK to do what many on this board do......regular saving into broad index funds with risk reducing as retirement age approaches.
Is the 3% employer match mandated by the gov't? Do all employers, regardless of size, have the requirement of having a NEST plan with a 3% employer match?

How does the gov't remove the risk of investing in the default target fund? Target funds do lose money over periods of time. Certainly the gov't could not expect the individual to absorb these losses, especially just prior to retirement. Perhaps there is a guaranteed return supported with taxpayer pounds?
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Old 10-15-2012, 12:37 PM   #52
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Not sure where you read in my post that I want to impose on everyone not to buy equities. For the record, I am not imposing or even wishing to give anyone the impression that they must do anything with their 401k plans.

Do me a favor - can you show ANY post where I called myself "libertarian inclined" ?
Quote:
...with restricted and much safer options than equities.
I took this to mean all options would be restricted and must be safer than equities. If it's not, I don't see how it's different from probably every existing 401K plan.

I mistook Nun's libertarian post as one of yours. Sorry about that.
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Old 10-15-2012, 12:43 PM   #53
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Is the 3% employer match mandated by the gov't? Do all employers, regardless of size, have the requirement of having a NEST plan with a 3% employer match?
If the employee opts out the employer is off the hook as well. But if the employee does not opt out then the employer must pay at least the Government mandated minimum matching contribution. There have been worries about employers pressurizing employees to opt out so there has been a big public information campaign about it. All employers must offer a plan at least as good as NEST, and automatically enroll employees, big companies have their own schemes through places like Fidelity etc, but NEST is a way for small to medium businesses and the self employed to get easy access to a plan. NEST is a reaction to the low level of individual saving for retirement and a reaction to the burden that was being place on Government benefits. The small business community sees it as an unwanted extra tax, but both Labour and Conservative governments saw that the retirement saving numbers just didn't add up and this is the compromise they came up with, with the cost shared between employers and employees. The plan is generally seen as a good solution across party lines and with most of the population.

One thing I hate about NEST is it perpetuates the outrageous fees charged in the UK. The management fee of 0.3% is ok....but they will also take 1.8% of every contribution until initial set up costs are met. if they can get rid of that it will be fare less expensive than other UK schemes.

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How does the gov't remove the risk of investing in the default target fund? Target funds do lose money over periods of time. Certainly the gov't could not expect the individual to absorb these losses, especially just prior to retirement. Perhaps there is a guaranteed return supported with taxpayer pounds?
They don't. NEST is just like a 401k plan. You are free to move your money around (there's even a Sharia fund available) and free to loose or make money. But everyone starts out in a target date fund that follows these principles.

Managing your pot | Saving in NEST | NEST pensions

The goal is to get the majority of people to invest at least 8% of their salary over their working life. NEST is just a 401k that you have to actively opt out of and the associate pension reform has mandated that employers must offer a minimum level of retirement plan. Most UK employers offered plans already, but the employer mandate is the really revolutionary part of the legislation and that will go into effect under a Conservative Government. Companies in the UK have to comply with many employment regulations (like 5.6 weeks minimum paid vacation) that would seem very alien in the US and the retirement saving mandate is another one of those.
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Old 10-15-2012, 01:09 PM   #54
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It is really fun to "debate" what the government shouldd do for us, but it won't happen. One way or another the government funds will dry up, and the costs of living will go up, and all the pretty planners will be disappointed.

Ha
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Old 10-15-2012, 01:15 PM   #55
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I did not use use the words "impose", "all" or "must be". Read my post again - my position is more nuanced.

Apology accepted re: your libertarian comment.


Quote:
Originally Posted by RunningBum

I took this to mean all options would be restricted and must be safer than equities. If it's not, I don't see how it's different from probably every existing 401K plan.

I mistook Nun's libertarian post as one of yours. Sorry about that.
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Old 10-15-2012, 01:27 PM   #56
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NEST is just like a 401k plan.
Indeed, NEST does seem very similar to USA 401k plans. The biggest difference I'm noting is that in the UK ALL employers must offer the plan (regardless of size) and must contribute at least a 3% match. Here many employees do not have a 401k (or 403b) plan available to them, especially those working for very small employers.

Was there something like NEST already in place and this is just an update? Or is the UK just late in getting into the 401k-like program game which the USA has had for decades?
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Old 10-15-2012, 01:33 PM   #57
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One way or another the government funds will dry up

Ha

Damn. All my life it seems that just when I get to the head of the line and extend my cup for a ladle of that tasty gov't soup, the pot runs dry!
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Old 10-15-2012, 01:33 PM   #58
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It is really fun to "debate" what the government shouldd do for us, but it won't happen. One way or another the government funds will dry up, and the costs of living will go up, and all the pretty planners will be disappointed.

Ha
The truth of investing, or even just savings, is this. People hate uncertainties, and like to have some guarantees. So, they hope for a powerful or omnipotent entity like the government to protect them, but it cannot happen. I am not an economist, so the way I view this and explain below may be naive, but please humor me.

When we save (not even invest!) $1 instead of buying a dozen eggs or a bread stick to consume now, we are delaying that consumption until a later age, hoping to eat those eggs or bread when we are 80 year old.

But, what is there to guarantee that the $1 will buy the same amount of goods in the future? The eggs will have to come from the future chicken that somebody's grandchildren will raise, who also bake the bread for us from the wheat of the future.

However, what if there are not enough workers in the future to raise the chicken or to make bread? Or, the chicken feed will be more expensive due to higher cost of corn, which is caused by drought, higher cost of fuel for tractors, etc... There cannot be any guarantee, can it? How can any government be that powerful to overcome changes in weather, nature, various changing conditions, or just demography?

Some people may even think that if we all pile into gold, we could then preserve the buying power of our capital. Maybe that can work, I don't know, but only if done by individuals. If we mandate that all 401K's have to buy gold, the price of gold will certainly go up while we accumulate it, and everybody would feel really good. Then, when we get old and try to convert that gold into eggs and bread, but there are not enough youngsters or land to produce them for us, what would that do to the conversion rate of gold to eggs and bread?

Short of maintaining a society's productivity and having a certain ratio of workers to retirees, I do not see how we can maintain the same living standards, no matter how we invest or save.
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Old 10-15-2012, 01:48 PM   #59
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Was there something like NEST already in place and this is just an update? Or is the UK just late in getting into the 401k-like program game which the USA has had for decades?
Most employers offer DB plans and/or things like 401ks called SIPPs, Self Invested Personal Pensions. DB plans are becoming rare and many people were not taking up the SIPP plans offered, so the level of retirement saving in the UK was causing concern. So the new pension reform legislation mandates that all employers must offer a retirement plan that is at least as good as the one offered by the government sponsored NEST trust and that employees must actively opt out. The goal is to make retirement saving automatic and easy. It takes actual effort to opt out.
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Old 10-15-2012, 01:50 PM   #60
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I do not see how we can maintain the same living standards, no matter how we invest or save.
Living standards based on "savings" could be inferior to, the same as or superior to the living standard that could have been purchased at the time the purchase was delayed (the "money" was saved.) It depends completely on the resources available and the population sharing them at the time we chose to redeem our savings for goods and services.

But, I tend to agree with you that it appears that more people will be sharing fewer resources in the future and therefore living standards will be "lower." There will be little gov'ts can do to change this other than spread things around a bit.

We have become so indoctrinated to fiat money that most believe shortages of life's basics such as food, fresh water and other commodities can be corrected by simply buying more with freshly printed money. Sadly, if the crops fail running the printing presses won't fill the bins.
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