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Old 10-15-2012, 01:57 PM   #61
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The goal is to make retirement saving automatic and easy. It takes actual effort to opt out.
I like that.
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Old 10-15-2012, 01:59 PM   #62
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People lament the loss of pension or DB plans, but that has been happening across the world, even in China, a large planned and centralized economy. They had to go through pension reforms in the 90s, which I have read was basically an abrogation of most promises that were made.

The result has been that the Chinese savings rate is reportedly as high as 50%, so high that it hampers domestic consumption and limits their economy's growth, as everybody tightens his belt and just produces for export. People are too scared to spend.

It ain't that easy!
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Old 10-15-2012, 02:05 PM   #63
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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.
If you left in the caveat at the start of my quoted sentence (about productivity, blah blah blah), then we are talking about the same thing.

During the 20th century, the standard of living increases due to industrialization and modernization. People did not even have to save that much. How we can maintain the same progress in the 21st century is the question.
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Old 10-15-2012, 02:40 PM   #64
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During the 20th century, the standard of living increases due to industrialization and modernization. People did not even have to save that much. How we can maintain the same progress in the 21st century is the question.
"Creative destruction" has long worked well in our economy. The problem is that today, much more of the the "destruction" comes from labor-intensive industries being replaced by much less labor-intensive industries.
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Old 10-15-2012, 05:08 PM   #65
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We just don't have enough jobs to accommodate a lot more people working until the day they die. (This is the same problem with raising the SS and Medicare eligibility age. We already don't have enough jobs for people UNDER 65-67, and we want to add more people to the pool of job seekers?)
But it's not as though there is a fixed number of jobs that get apportioned out to a pool of available workers. The situation is far more dynamic than that. When more workers compete in the marketplace, wages go down (supply/demand) and jobs that were previously priced out of existence become economically viable. And this occurs not only on an individual level, but among nations--all else being equal, when US labor costs go down we'll recapture jobs that have moved overseas and our economy will grow (at the expense of other national economies--just as theirs have grown at our expense for the last couple of decades).
Trying to limit the set of workers, especially if it drives up government expenditures (for higher SS payments, etc--money that must be withdrawn from the productive private economy), will destroy a nation's competitive position. Trying to support/ drive up wages by limiting the population of available workers (the guild system, etc) is impractical in today's global market for goods, services, and labor.
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Old 10-16-2012, 12:51 AM   #66
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Nest is an interesting idea. Not as good as TSP, but universally available and strongly encourages participation. With a $7000 limit on annual contributions it's more like an IRA than a 401k, but the goal seems to have been get people to do something, not provide a scheme that can be used to ER. The withdrawal options (like the fund choices) are restricted and kind of big-brotherish in limiting people's ability to do different than the experts suggest.

If this were proposed in addition to 401k, I would support it. If this were proposed to replace 401k I can see where it accomplishes some goals of getting people who don't do the right thing to at least do something, but it would be much worse than the current 401k plans for those people who were able to use 401k responsibly.

For planning purposes, I really want the rules to stay fixed or be optional or be grandfathered. A lot of the "improvements" that are being proposed could have adverse effects on my plans just as I'm close to retirement and less able to make adjustments.
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Old 10-16-2012, 05:54 AM   #67
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Nest is an interesting idea. Not as good as TSP, but universally available and strongly encourages participation. With a $7000 limit on annual contributions it's more like an IRA than a 401k, but the goal seems to have been get people to do something, not provide a scheme that can be used to ER. The withdrawal options (like the fund choices) are restricted and kind of big-brotherish in limiting people's ability to do different than the experts suggest.

If this were proposed in addition to 401k, I would support it. If this were proposed to replace 401k I can see where it accomplishes some goals of getting people who don't do the right thing to at least do something, but it would be much worse than the current 401k plans for those people who were able to use 401k responsibly.

For planning purposes, I really want the rules to stay fixed or be optional or be grandfathered. A lot of the "improvements" that are being proposed could have adverse effects on my plans just as I'm close to retirement and less able to make adjustments.
NEST reflects the more conservative approach to retirement investing and income in the UK. Most people with SIPPs (the existing UK equivalent of a 401k) buy an annuity when they want retirement income. However, NEST is just the fund that the Government is sponsoring so that everyone has access to a certain minimum scheme. Most companies have their own schemes with companies like Fidelity etc that have more flexibility and look more like the US 401k.

FYI the UK also has the Individual Savings Account (ISA). This is like a ROTH, but has no restrictions on when you can take the money out. You can put up to $15k/year away after tax, it grows tax free and you can get at the money without penalty or tax at anytime. It's there to encourage saving for things like house down payments., but is obviously also useful for retirement saving. UK banks, credit unions and brokers all offer ISAs and you can choose from investments ranging from the UK equivalent of CDs, Government bonds to mutual funds of every flavor.
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Old 10-16-2012, 09:11 AM   #68
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My GF got hired recently at a company that provides a 100% match of first 3%, and 50% of next 3%. She commented that they "force you" to have at least 6% taken out of your check for the 401k contribution without your "permission". Though she is a willing participant, I explained to her there probably is an opt out feature, but people can be incredibly stupid about money, and I am sure many did not sign up for it and foregoing "free money".

I read in another forum a few days ago, where a person was asking if they should take a job that pays $55,000 and provide a pension for the amount of about $33,000 after 25 years, which would mean he could retire at 49. The concern over taking the job? The $230 they take out of his check each month for his part of funding the pension. He said he was not comfortable with that as there was "a lot of things he could do with that money". Are people truly that dumb?
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Old 10-16-2012, 09:13 AM   #69
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Ah, the stories I could tell about bad human behavior..........
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Old 10-16-2012, 09:30 AM   #70
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The $230 they take out of his check each month for his part of funding the pension. He said he was not comfortable with that as there was "a lot of things he could do with that money". Are people truly that dumb?
$230? Hey, that's a couple of rounds of golf for the month ...

"Eat, drink, and be merry...."

Yes, people are truly that dumb, IMHO ...
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Old 10-16-2012, 10:13 AM   #71
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Ah, the stories I could tell about bad human behavior..........
I bet I would enjoy reading them, provided none of my mistakes from the past were part of it.
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Old 10-16-2012, 10:22 AM   #72
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Yes, people can be really dumb. But I think most are not so dumb to not learn if you have some examples of people living under a bridge to point to and say "Now, that may be you in 20 or 30 years".

People are also gullible to promises that they will be so well taken care of, no matter what the economic condition of their country, or the world for that matter. Hence, I guess that causes the drive to get them to save their own money to see for themselves how "things work". And that even happened in a communist country like China, as I reported.
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Old 10-16-2012, 10:22 AM   #73
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$230? Hey, that's a couple of rounds of golf for the month ...

"Eat, drink, and be merry...."

Yes, people are truly that dumb, IMHO ...
People waste that much on coffee at starbucks...

Indeed, 100% return on contributions up to 6% of income, how could you turn that down, even if you did nothing but put it in a stable value fund.
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Old 10-16-2012, 10:45 AM   #74
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It's interesting to consider how much obligation we have to protect people from themselves. I would suggest that in the US there are ample opportunities to save for one's own retirement. You don't have to only save using an official program like a 401k, IRA or 403b, yet people don't seem to do so. Even with tax advantages and free money matching programs, a surprisingly large number of people do not participate in these programs or participate only to a minimal amount that will not adequately fund their retirement.

So, if horses will not drink when led to water, what do we do?

Social Security is a safety net that prevent people who have a working history from being destitute and at least feeds them. Do we no longer consider that an adequate safety net? In my area, low income people get free cell phones. Has that become a necessity to be provided universally? Do we consider a "comfortable" retirement a necessity that should be provided even if people take no active steps themselves to provide for themselves?

I think we need to agree on what we are trying to accomplish before proposing programs, or else we will have no idea if those programs will accomplish our goals or not. If we cannot articulate the goals or cannot agree on them, then whatever programs are proposed are unlikely to accomplish what we want, since we do not know ourselves.

It also seems that people proposing these programs have some goals of their own in mind that do not necessarily compliment with the goals of providing retirement for everyone. Insurance lobby wants increased annuitization which is profitable. Financial salesmen want funds with fees to tap into for their livelihood. Politicians want votes and in some cases control and power.

Making TSP available to anyone unhappy with their current 401k (or lack thereof) or changing rules to require in-service rollovers to be allowed are the only 2 proposals I've heard that don't seem to be pushed by some special interest group, and they are rarely heard about since no one seems to be pushing too hard for them. Surely it would be possible to create some plans that encourage participation or even require it, while avoiding creating a windfall for some special interest groups (raise SS taxes by X and put that money in a low cost TSP fund) but no one seems to be pushing for anything that doesn't reward some special interest.

Tales like saving too little, spending too much on Scotland trips and finally noticing that the money was running out, seem less than compelling arguments for radical changes that makes me want to contribute to funding these people's bad choices. But a scheme that required them (and me) to save a little more might be workable - if anyone really wanted to help. Color me skeptical about the politics of this.
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Old 10-16-2012, 11:25 AM   #75
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I guess an issue could be made than everyone doesn't have access to a 401k, and many of the plans have high expenses and limited/poor investment choices and no matching contributions ( which be killer to me ).

Lower income folks would say they don't have the extra funds to fund a 401k if they have mortgage/kids to feed etc.

Some IRA rules never made sense. If you can afford to fund it, you lose the tax refund. If you qualify for the tax refund, you probably can't afford to fund it...
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Old 10-16-2012, 11:29 AM   #76
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Ah, the stories I could tell about bad human behavior..........
I've participated in many of those...
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Old 10-16-2012, 11:37 AM   #77
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We are still waiting to hear more...

I think even the mods would not say anything about topic drift in this case.
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Old 10-16-2012, 11:58 AM   #78
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I think we need to agree on what we are trying to accomplish before proposing programs, or else we will have no idea if those programs will accomplish our goals or not. If we cannot articulate the goals or cannot agree on them, then whatever programs are proposed are unlikely to accomplish what we want, since we do not know ourselves.
A basic goal should be to increase the retirement saving rate of the population.

Another goal might be to encourage people to save after tax too, so an investment account with no withdrawal restrictions where all gains are free of tax to encourage savings for major purchases and retirement like the UK ISA would also be an interesting step. I'd probably combine that with an increase in dividend and capital gains tax on amounts over the max that could be contributed to such an investment scheme.

Of course these might also reduce current tax revenue and take money out of the consumer economy.
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Old 10-16-2012, 12:27 PM   #79
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I bet I would enjoy reading them, provided none of my mistakes from the past were part of it.
Here's a recent one. A middle aged guy decides to cash in his SEP-IRA because he doesn't work at that job anymore. The funds are invested in low cost Dodge and Cox funds which are doing well. Most interesting is he has NO need for the money, and is aware of the big tax consequences, and still is going to do it. Perhaps he just came from a Rich Dad Poor Dad seminar?
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Old 10-16-2012, 12:41 PM   #80
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I can't imagine what he was in that dropped 70%, now THAT would be helpful info - maybe others could learn from it.
It sounds like he was taken in by one of our own people - the guy hawking Venezuelan Beaver Cheese futures.

Honestly, these stories are long on emotions, angst and "Oh, poor baby" comments, and very short on details on how he managed to snatch defeat from the jaws of victory (or at least the jaws of a tied game.)
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