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Old 03-15-2015, 08:36 AM   #41
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The thing I wonder about with 401k's is how many of them will be orphaned (i.e. forgotten) by the young that may have put in a few $K in each while they went from job to job. These will have substantial balances after 30 years but will the young remember where they were? Or is this even an issue? My 20-year old son has a few $K from a retail job he left last year, default invested in a lifecycle fund at T. Rowe Price. I guess the answer is to get him to set up a rollover IRA at Vanguard etc. and consolidate all his little 401k's there over time but how many people will do that, really?
I also was thinking this before I read your comment. And another problem when this happens - each of those 'accounts' will have maybe just $5k or so. Each of those $5k account balances will be added up to come to an "average" 401k account balance in a future study, and feed further alarmist headlines of "The average 401k balance has just $10,000! No way anyone can retire with just $10,000!".
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Old 03-15-2015, 08:52 AM   #42
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That is a better problem than in the past where traditional pension plans were ineligible to be rolled over and many were forgotten about. I have 2 small pensions from companies I left 25 and 30 years ago and can easily see why some folks don't keep in touch with old employers so they can collect future pensions.
Some of us are money-grubbers and never forget. I have one $10K/year pension coming in from a company that was sold in 2006 (I stayed on with the acquiring company but the DB plan was terminated) and made sure when I left that I knew where the pension people were. After I retired last year I contacted the Prudential, where I'd worked at a sub until 1995 and found that yes, I was entitled to a pension. It's $1K/month if I wait till 65, which I plan to do. I can't imagine leaving any savings behind at a previous employer. It's my money and if I'm not there neither is my money.

One more comment on FaceBook: I am VERY careful about which pages I "Like" because I can see that when sponsored (i.e. paid) posts show up in my feed, they tell me which of my contacts likes Chico's, Wal-Mart, etc. Sorry, but I'm not going to shill for businesses for free. Even creepier: an acquaintance died 2 years ago and her family kept her FB page open and they sometimes post things on her birthday and tell her they miss her, etc. Occasionally I get sponsored ads headed by "(Name of deceased friend) likes Wal-Mart."
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Old 03-16-2015, 08:57 AM   #43
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What I have noticed among people I work with is that 401k is more expensive that it should be, so many look for advice and learn "get the free money. At least put in up to the match" What they take away from this is more like "as long as you save the 3% or 4% to get the match you will be fine" which is not true at all.
+1 That's actually the message I took away when 401ks were rolling into the workplace. I was definitely late to the game when it came to putting more than the 5% requirement for a match into my own 401k, because I didn't do the math myself to figure out future projections. I felt pretty darned smug, in fact, that I was saving for retirement. And I consider myself pretty smart and a number-oriented person!

What saved my behind was spending the last 20 years at a company with a fairly decent old fashioned defined benefit pension, so that in combination with the 401k and other savings (where about 30% of my income is now going), will allow me to retire in the next 4-5 years. Later than I'd like, but well ahead of "normal".
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Old 03-16-2015, 09:34 AM   #44
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I won't read the report because they will glean numbers that will support their hypothesis.


It's pretty tough to go out and NOT spend money when there is NOTHING but a constant barrage of advertisements telling you to GO BUY THIS NOW!!! KEEP UP WITH THE JONES'!!!" It starts younger and younger and never stops. When the message is always to SPEND, SPEND, SPEND...then there will be no savings. We are seeing that now.
That is why I consider the TV remote, and now the DVR, the most important retirement tools out there. I've never watched ads. Now I just fast forward through them. But in the old(er) days I would switch to another show when the commercials came on. So I have been relatively unaffected by the advertising industry. I must admit, though, it did piss DW and DD off royally. But it was worth it in the long run.
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Old 03-16-2015, 10:13 AM   #45
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That's actually the message I took away when 401ks were rolling into the workplace. I was definitely late to the game when it came to putting more than the 5% requirement for a match into my own 401k, because I didn't do the math myself to figure out future projections. I felt pretty darned smug, in fact, that I was saving for retirement. And I consider myself pretty smart and a number-oriented person!
I wouldn't feel too bad about starting slow in the 401k's. I did that too, but my pay was low, I was paying off college loans, and I was paying extra to my mortgage. Given all that I am happy I even saved enough to get a match. After the college loans were off the books, I put more towards the mortgage and retirement. In the past 4 years with the mortgage put to bed, well...
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Old 03-16-2015, 10:30 AM   #46
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I wouldn't feel too bad about starting slow in the 401k's. I did that too, but my pay was low, I was paying off college loans, and I was paying extra to my mortgage. Given all that I am happy I even saved enough to get a match. After the college loans were off the books, I put more towards the mortgage and retirement. In the past 4 years with the mortgage put to bed, well...
Same here...I didn't even start investing in my 401k at work until the last two weeks of 1997, at the age of 27. At that point, I had only been a full time employee, and eligible to invest in the 401k, since February 1994. At the time, our company match was only 1%. So, in the grand scheme of things, maybe I didn't miss out on much.

And, like you, my pay wasn't all that high back then either, so I wouldn't have been able to max it out. I don't think I started hitting the federal limit with my 401k until 2005
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Old 03-16-2015, 10:53 AM   #47
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My dad is near 80 and in just the past year his body told him he can't work anymore. It has broken his spirit quite a bit.
A woman in our church said her husband kept dragging himself to work every morning when he had terminal cancer even though he felt awful (and probably wasn't very productive) because they needed the income and the health insurance. No matter how much you love your work, you can't assume you can continue it indefinitely.
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Old 03-16-2015, 10:58 AM   #48
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I once saw a man like that, although I don't think he needed the money or the insurance. I think he was simply in denial and thought that his cancer was beatable.
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Old 03-16-2015, 12:02 PM   #49
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I agree that financial literacy is overall pretty low in the US. And I also agree with the poster that said it is confusing by design to keep the services of FAs, tax specialists, and brokers in business as well as to give various special interests their payday with the various tax incentives, loopholes, etc.

It wasn't that long ago that I finally started paying attention to my own retirement and I was well into my 40s. Oh I have always, since Day 1 of working post-college, contributed to a 401K "at least up the match" and up until 2008 was invested mostly in stock funds. But that was certainly just a happy accident. My own financial illiteracy has cost me a lot. Most of the funds I was invested in were actively managed, had high ERs, were duplicative, not broadly diversified across asset classes, etc. I sold my stock funds at rock bottom - doing exactly the opposite of what you should do in times of crisis. I really think that I represent a huge number of people that never embraced learning about investing, and quite frankly, find it intimidating. I would get my 401K quarterly statements, glance at them, and toss them in the shred bin. The various percentages, ERs, graphs, blah, blah, just made my eyes glaze over. When I finally decided to get my crap together and figure out what I was invested in and how to forge a retirement plan moving forward, what I came to realize is that it can be stupidly simple to get a good plan in place - but you have to first learn a CRAP LOAD of industry jargon and terms to figure that out. Oh, once you become familiar with all the terms (equities, expense ratios, PEs, short term, intermediate, long term bonds, value stocks, roths, tiras, asset allocation, roth conversions, annuities, CDs, RMDs, etc, etc. etc.) and all the rules (contribution limits, withdraw ages, tax consequeces) you are well on your way. But I maintain that some folks just LIKE investing and following their money and reading about what is going on in the markets and the world of finance. But I think most people don't. It's kind of like math homework to me. Not fun. Just a necessary evil.

My point, I guess, is that yes, education of the masses is needed. And we could maybe simplify it some as well.

I'm in the great state of Virginia, where recently our Board of Education has added a new requirement for high school graduation. Students who enter 9th grade in 2011-2012 and beyond must successfully complete a 1-credit course in Economics and Personal Finance.

From the state course description:

"Students learn how to navigate the financial decisions they must face and to make informed decisions related to career exploration, budgeting, banking, credit, insurance, spending, taxes, saving, investing, buying/leasing a vehicle, living independently, and inheritance. Development of financial literacy skills and an understanding of economic principles provide the basis for responsible citizenship and career success. In addition to developing personal finance skills, students also study basic occupational skills and concepts in preparation for entry-level employment in the field of finance. The course incorporates all economic and financial literacy objectives included in the Code of Virginia §22.1-200-03B. This semester course is a graduation requirement beginning with the class of 2015."

Also, you can believe I have already been teaching my kids about LBYM and investing early.
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Old 03-16-2015, 12:15 PM   #50
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I'm in the great state Commonwealth of Virginia
Must not be a native.
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Old 03-16-2015, 12:18 PM   #51
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of course most people can't afford to retire - not really a news flash


there will and might already be an entire generation that's destitute at SSNRA


the rest of us will pay for this through tax-funded relief efforts
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Old 03-16-2015, 12:22 PM   #52
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recently our Board of Education has added a new requirement for high school graduation. Students who enter 9th grade in 2011-2012 and beyond must successfully complete a 1-credit course in Economics and Personal Finance.

From the state course description:

"Students learn how to navigate the financial decisions they must face and to make informed decisions related to career exploration, budgeting, banking, credit, insurance, spending, taxes, saving, investing, buying/leasing a vehicle, living independently, and inheritance. Development of financial literacy skills and an understanding of economic principles provide the basis for responsible citizenship and career success. In addition to developing personal finance skills, students also study basic occupational skills and concepts in preparation for entry-level employment in the field of finance. The course incorporates all economic and financial literacy objectives included in the Code of Virginia §22.1-200-03B. This semester course is a graduation requirement beginning with the class of 2015."
I'm curious to see what the actual curriculum teaches. I've been reading all the posts about the kids needing basic financial education and I've been thinking that teaching it wrong might be worse than not teaching it at all. Some of it is just basic math, so should be safe. I wonder if they'll teach the kids how to determine if getting loans for, say, a 4 year art history degree at an expensive private college is a worthwhile investment? Or if they'll just keep pushing a college degree at all costs. I don't have much faith in the education system, I guess.
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Old 03-16-2015, 12:25 PM   #53
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I thought we were not impacted much by advertising over the years but the more I read about sustainable living and true happiness the more I realize we were sucked into a lot of it - we just may have been a bit more impervious that some of our peers.

The first thing I did when we decided to downshift was replace most of the disposable products in the house with something washable / rechargeable or otherwise resuseable. Another thing I realized is that on the entertainment front most of the really fun things we do locally are free or very low cost through the library, civic and social clubs, parks, beaches, public gardens, art and science museums, the local planetarium, bike trails, tide pools, nonprofit and public supported cultural activities, gold panning rivers and meetups - all activities without huge advertising budgets so we had to seek them out compared to passive events with in your face advertising everywhere like restaurants, plays and concerts.
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Old 03-16-2015, 12:44 PM   #54
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Wow! You all just shook out a memory!

Back in 5th grade, we were learning percents. I don't know why I remember this, but it is now plain as day. Mrs. V., our most excellent math teacher was at the helm. Here's how it went:

Kid 1: "Mom and dad showed me my savings book. I think I understand it now. Thanks Mrs. V.! I'm going to put all my money in savings!"

Kid2 (me, little Joe): "I have savings bonds. I looked on the back and there's this neat chart of percents. I think mine is better than yours, Kid 1. All my money is going into savings bonds. Nah, nah, nah, nah."

Mrs. V.: "Kids! You don't want to do that! Never put all your money one place. And besides, you want to INVEST in the stock market. That's more interesting. Next month we'll start graphing it for fun."

Honestly, I remember this as plain as day. We did start graphing the DOW, and it was depressing as heck. We hadn't learned negative numbers yet, but it was obvious what was happening. Savings bonds looked much better to me.

Here's a case where a great teacher went off script and gave us some life lessons. Sure, the market was entering a huge bear period (70s), but that lesson somehow stuck in the back of my head. We need more teachers with this kind of life experience and freedom.

Mrs. V. was an aunt of one of our students. She was a bit older and must have had more life experience. Her advice was one of the many little nudges in teaching that change lives.
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Old 03-16-2015, 12:59 PM   #55
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What a wonderful memory, Joe! She sounds like a terrific teacher.
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Old 03-16-2015, 01:05 PM   #56
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One variety of financial literacy courses is constructed as a simulation of real life. Choose your profession. Choose how to pay for education. Develop a budget after graduation given typical rent in your area, what type of car you choose to buy, the cost of repaying any student loans, typical entry-level salaries for your chosen profession... Oh, yeah- and taxes. I used to watch my son play SimCity and loved how it clearly showed the implications of tradeoffs. Tax too little? Not enough services or infrastructure and people move out. Tax too much? People move to cheaper areas. Personal finances are like that, too, and you need something more than a textbook to realize it.
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Old 03-16-2015, 01:15 PM   #57
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What a wonderful memory, Joe! She sounds like a terrific teacher.
Yes, and also a big part of why I went into numbers (engineering) as a career. She helped push me along faster than I wanted to go.

This whole thing also shakes out something else about literacy.

Each time we went to the bank with mom and dad and had our passbook stamped, we could see the interest accruing, right there in ribbon ink black. Today, it is probably on a PDF online that's never looked at.

Similarly, when I got Savings Bonds as gifts, I'd examine the back. There was that neat little chart on there. Nothing like that today. All this on-line stuff is not as tangible and I think may be leading to a bit of illiteracy, if not at least laissez-faire attitude.
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Old 03-16-2015, 01:46 PM   #58
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It's also a bit of a generational thing I think. For the most part I think our parents guide us on a path to financial literacy. They are usually the ones that help you figure out how to open your first savings account, write a check, finance your first auto loan, etc. My parents generation (they are in their 70s) have pensions (generous federal pensions!). When they started work, 401Ks and IRAs were not the norm for funding retirement. So when I first started working, my parents I think assumed that I would get a company pension and this just wasn't something talked about or learned about at home.

I think younger generations may be learning about self-funding their retirement because their own parents are living that experience. Well, that's the theory any way.
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Old 03-16-2015, 01:56 PM   #59
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Financial literacy is something that has always seemed sorely neglected to me. I recently started volunteering with Junior Achievers. Last week I did the first of 5 weekly sessions with 26 2nd graders at a nearby elementary school following a curriculum/lesson plan JA provided. The kids absolutely eat this stuff up. If it continues to go as well as the first lesson did, I will be doing this for a long time.
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Old 03-16-2015, 01:58 PM   #60
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I'm curious to see what the actual curriculum teaches. I've been reading all the posts about the kids needing basic financial education and I've been thinking that teaching it wrong might be worse than not teaching it at all. Some of it is just basic math, so should be safe. I wonder if they'll teach the kids how to determine if getting loans for, say, a 4 year art history degree at an expensive private college is a worthwhile investment? Or if they'll just keep pushing a college degree at all costs. I don't have much faith in the education system, I guess.
Well, my kid will take it next year - so I'll report back.

I did look up what "competencies" the curriculum attempts to cover and there was this:

"Demonstrate knowledge that many factors affect income. Demonstration should include
- examining the market value of a worker’s skills and knowledge
- identifying the impact of human capital on production costs
- explaining the relationship between a person’s own human capital and the resulting income potential
- describing how changes in supply and demand for goods and services affect income."

So perhaps they do address that art history degree.

Actually I thought the list of what they will teach was pretty good.

CTE Resource Center - Verso - Economics and Personal Finance SOL Correlation by Task
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