Maybe old news but pretty sobering regardless !

[Khufu]

I don't think the 401k is failing most of these folks because they mis-manage the money(pick the wrong funds, investments, etc...). I think it is failing them because they lack the finanical discipline to actually contribute the proper amount. Some that do initially ruin their plan buy doing hardship withdrawals or constantly doing 401k loans.

Probably, but the reason that the 401k has failed doesn't really matter. What matters is that the 30 year experiment with the 401k failed to provide a generation with an adequate retirement. So, it should be replaced and my choice would be to increase SS since that program has been successful over nearly 80 years.

 

[GrayHare]

As to trusting the government, all I can say is that the SS trustees seem to be candid as to when the system runs short of money (2033) in the sense of payments being reduced by 25%.

Instead of knowingly setting the table for a SS cliff in 2033, the reduction should be phased in. For example, until/unless there is funding to fill the shortfall, reducing SS payments by 1 pecentage point each year beginning now will give everyone time to better adjust.

 

[growing_older]

Instead of knowingly setting the table for a SS cliff in 2033, the reduction should be phased in. For example, until/unless there is funding to fill the shortfall, reducing SS payments by 1 percentage point each year beginning now will give everyone time to better adjust.

I think this is the same as saying you favor a gradual phasing out of the social security system, starting immediately. Getting benefits down by 25% in 25 years, just matches the approximate decline from now to 2033. The system continues to fall increasingly short thereafter. People just tend to mention 2033 because of the "trust fund" accounting. Your 1% decline per year would have to continue well beyond 2033.

 

[pb4uski]

Probably, but the reason that the 401k has failed doesn't really matter. What matters is that the 30 year experiment with the 401k failed to provide a generation with an adequate retirement. So, it should be replaced and my choice would be to increase SS since that program has been successful over nearly 80 years.

I'm not sure that SS has been as successful as you think since it is on financial shaky ground according to its own actuaries.

I think it would be better to educate people to use 401k's the way they should be used (and many people on these boards are testimonials to the fact that the 401k can be very successful if properly used) than to expand the role of government and promote more dependency on government.

Let's face it, there were people who lived paycheck to paycheck and didn't save for the future when DB plans were prolific and today - it is just more important to do so today because that company provided pension isn't there anymore.

If the citizens are so stupid that they can't see the light then I think the republic is doomed. However, anecdotally, I think our children are doing better than our generation did in terms of saving for the future. DD has more than the average cited in the article saved and one nephew has had a Roth since he was 16, so there is some hope.

 

[nun]

What Nun says is not the full picture. Since ~1985 workers have been able to "contract out" of the UK equivalent of FICA. Instead of paying ~6.2% of their gross income to FICA they can pay half of that and invest the other in private retirement funds. At FRA they get a greatly reduced state pension.

DW's brother has done this for the last 25 years and it is working out pretty well for him. The UK also has an equivalent of IRA's, called ISA's, which also can be invested in equity and bond funds etc. At age 70 one must convert his/her tax deferred savings into an annuity unless they can prove sufficient other income sources above a certain level.

You used to be able to "contract out" of the "additional state pension" (which gave you additional state retirement benefit commensurate with your higher earnings) and instead put a percentage of your salary into a private or company pension plan. That option is now not available and from 2012 you have to contribute to the additional state pension if you earn enough. In the pension reform legislation it looks like this additional state pension will be abolished and a flat rate pension calculated on years on contributions rather than the value of your contributions will be adopted.

 

[nun]

First, while I have spent a lot of time in the UK and love it there, I'm glad that I don't live there. The new SS scheme you described seems to be a modern day version of Robin Hood - and state sponsored at that.

I agree with your conclusion. The scheme I describe is proposed by the Conservative dominated Government and is supported across the political parties. The reforms include a single flat rate pension; increase of the pension age up to 67 and equalizing the pension age for men and women. So high earners will get a smaller state pension, low earners will get bigger state pensions, but everyone will have to wait longer for them and if you are a woman you will have to wait even longer.

It seems like a good compromise to me and a practical solution to increase the income of those that need it most. It includes the principle of "From each according to his ability, to each according to his need" to satisfy the left, it satisfies the accountants and actuaries as it reduces the pensions bill through a flat rate payment started at a later age and it satisfies the right as it eliminates a lot of pensions bureaucracy and shrinks government.

 

[nun]

SS provides enough income for most people to live modestly in retirement. They may have to downsize into a small apartment or trailer if they haven't saved anything else or if they borrowed against their home equity.

However, they won't starve, and plenty of people in this country have it much worse than seniors living only on SS.

And if they don't have any bread they can eat cake.

 

[pb4uski]

.....It includes the principle of "From each according to his ability, to each according to his need" ....

Sounds to me like a kissing cousin of socialism.

 

[nun]

Sounds to me like a kissing cousin of socialism.

It does include some socialist principles, which are the aspects I, and the UK left, like. The UK pension reform also includes mandatory DC pension savings by the employee and the employer. My point was to show that UK's pension reform includes principles from the left and the right and it hopes to achieve a practical solution to the low level of retirement savings. The flat rate state pension redistributes state benefits from high earners to lower income people who generally have less private retirement savings. This makes pensions far simpler, removes a whole level of benefits claims (makes the right happy) and hopefully brings the lower income people out of poverty. Also mandatory DC savings is planned to give everyone in the UK an additional retirement account very similar to the US 401k.

Such a system is a good shot at giving people a secure retirement. The socialist parts of it and the Government mandate of saving for retirement would have a hard time passing in the US......but it is an approach that has the potential to solve the lack of retirement income problem.

 

[W2R]

[mod hat on]This thread is now closed.

Following the Community Rules, in future threads please remember to refrain from posts discussing political philosophy or announcing your own political philosophies to the forum. Thank you! [/mod hat off]

That's All Folks! (Best one on YouTube) - YouTube