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Old 04-21-2013, 11:29 PM   #41
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Obviously we all think things have been fine as we've ended up in a situation where we have enough to ER, but there are many people for whom the existing system as been a complete failure for reasons including lack of financial knowledge, bad luck in investment choices, high fees (those probably existed in DB plans too), low wages or stupidity limiting the amount they contributed, borrowing from the accounts......
Well, for myself and I'm sure for many that post to this forum the 401K system worked just fine. I contributed the maximum, as did my wife. Choices were not the best low cost options ( Never had access to any Vanguard funds under the 401K's) but they were good enough to allow for ER at 52. I guess from a philosophy of life stand point - If people make poor choices , not contributing, contributing the lowest amount possible, borrowing from the fund not putting the effort to learn about different investment choices etc etc. Why blame the system for individual's poor choices? As someone said, "you can't fix stupid"
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Old 04-22-2013, 08:04 AM   #42
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Originally Posted by BTravlin View Post
My wife's options in her 403-b plan were also terrible. Almost all insurance companies. Luckily, they did offer American Century Funds and while not the best fund family it is pretty good overall and looked like a gold nugget sitting atop a heap of slugs compared to her other choices.

The school system she works for really needs to offer their employees a better range of options.
That sounds identical to a large population northeast Fl county program. American Century was introduced just a few years ago as the only option after ML was discontinued. And the lame teacher's union there has done nothing since dirt was invented to make the selections an issue. I know because I tried a number of times over the past 15 years to discuss the problem with them. Fortunately we are out of that now and rolled everything into an IRA that we control. Although it may be the only real game in the system, Am Cent was a good choice considering what might have been.

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Old 04-22-2013, 10:22 AM   #43
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Well, at the end of the day, the fees are going affect the ultimate payout. Either upfront, by impacting what the benefits are defined at initially, or on the back end, when the benefits can't actually get paid.

Ultimately, there is nothing magical about a DB plan. It's pretty much invested the same way as a person would individually, so those fees are going to reduce the available payout on the returns on what the company and employee contribute to the plan.
My comment was based on someone saying that the investment companies were ripping off employees... and I was showing that is not true....

First, the company does not have to offer a DB plan... but if they do, whatever they offer is known when you accept employment... if it is not what you want, then do not accept that job... but if you do, then as an employee you do not care what the finance company charges because your benefit is defined... if fees go down, it does not change your benefits at all....
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Old 04-22-2013, 12:28 PM   #44
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Well, for myself and I'm sure for many that post to this forum the 401K system worked just fine. I contributed the maximum, as did my wife. Choices were not the best low cost options ( Never had access to any Vanguard funds under the 401K's) but they were good enough to allow for ER at 52.
I agree, I took the same approach as you to my DC plans and I hope to ER soon. No doubt many on this board did the same. But most people are not in that situation and DC plans have not provided them with a nest egg for retirement and have therefore failed.

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I guess from a philosophy of life stand point - If people make poor choices , not contributing, contributing the lowest amount possible, borrowing from the fund not putting the effort to learn about different investment choices etc etc. Why blame the system for individual's poor choices? As someone said, "you can't fix stupid"
Poor choices and ignorance definitely factor into the failure of 401k type plans.......but tapping 401ks to pay bills etc might not be classed as a choice if it's your only option to pay for an operation or the mortgage. Bad investment choices are from lack of financial sense, but we can all get burned by down turns and high fees and poor investment options are out of the hands of the 401k participant. Finally many simply can't afford to contribute to a 401k, so while you can't fix stupid, you can at least try to fix the rather stupid retirement system in the US today.
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Old 04-22-2013, 01:04 PM   #45
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Not to get into an argument, or go back and forth on what is or is not true as I do not want to have this thread closed.... but your previous post did not even come close to saying what you said in this one...

One point I will make... who cares what the fees are in a DB plan... the fees are paid for by the company as the benefits are, by definition, defined... the finance firm can charge $1 per person or $1 mill per person... it does not change the benefit to the employee...

It would be clearer if you directed where your hate is as some of what you are saying does not make sense when it seems you are talking about something else... ie, fees for DB plans... stealing money, etc...
While this is technically true, what is being missed is the fees are charged against the funding of the account. So that DB plans with high fees will be more likely to be underfunded and hence carry higher risk of being taken over by the pension guarentee fund and therefore a possible reduction of benefits.
When the contract is, we will charge you x% on your DB plan with an agreement to lower fees on the non-qualified plan that the executives are in someone should care about those fees. Certainly at least the PBGC.
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Old 04-22-2013, 03:42 PM   #46
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While this is technically true, what is being missed is the fees are charged against the funding of the account. So that DB plans with high fees will be more likely to be underfunded and hence carry higher risk of being taken over by the pension guarentee fund and therefore a possible reduction of benefits.
When the contract is, we will charge you x% on your DB plan with an agreement to lower fees on the non-qualified plan that the executives are in someone should care about those fees. Certainly at least the PBGC.
The vast majority of DB plans have not been closed....


IMO, the vast majority of DB plans that have gone under were due to the company going under for some other reason than the DB plan...

Even if they go under, most people still get their pension as defined...


Sure, there are some people who will lose if this and that will happen.... but fees charged by investment companies are not a concern for the vast majority of DB participants....

As a side note... when you talk gvmt entities... it is usually the sky high promises made and the lack of funding these promises that is the problem...
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Old 04-23-2013, 10:01 PM   #47
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I watched it. Nothing new really. Discussed the hidden and high fees associated with most 401k plans and how much that eats into a persons returns. And that most Americans will be working for years to come because not enough has been saved.
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Old 04-23-2013, 10:17 PM   #48
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I watched it. Nothing new really. Discussed the hidden and high fees associated with most 401k plans and how much that eats into a persons returns. And that most Americans will be working for years to come because not enough has been saved.
I'm sure there was nothing new in the show for ER forum members. The frightening thing is that it might have been new information for many that watched and that most people with 401ks didn't watch and are still ignorant of those 2% fees they pay to active managers.
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Old 04-23-2013, 10:22 PM   #49
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I agree, I took the same approach as you to my DC plans and I hope to ER soon. No doubt many on this board did the same. But most people are not in that situation and DC plans have not provided them with a nest egg for retirement and have therefore failed.



Poor choices and ignorance definitely factor into the failure of 401k type plans.......but tapping 401ks to pay bills etc might not be classed as a choice if it's your only option to pay for an operation or the mortgage. Bad investment choices are from lack of financial sense, but we can all get burned by down turns and high fees and poor investment options are out of the hands of the 401k participant. Finally many simply can't afford to contribute to a 401k, so while you can't fix stupid, you can at least try to fix the rather stupid retirement system in the US today.
WADR, I think you are seeing instances where people have failed to prudently save for retirement as a failure of the system. There are many instance of folks of relatively modest means and income who saved regularly and have accumulated substantial wealth and can ER. To me these successes prove that the problem is the people, not the plans. Can plans be improved? Surely! But the means are there for those of even modest means who have the discipline to save regularly and invest prudently to build wealth beyond their dreams.
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Old 04-23-2013, 10:26 PM   #50
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I'm sure there was nothing new in the show for ER forum members. The frightening thing is that it might have been new information for many that watched and that most people with 401ks didn't watch and are still ignorant of those 2% fees they pay to active managers.
And we all know the importance of fees on returns is a deep dark secret that hasn't been well publicized over the years.
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Old 04-23-2013, 10:40 PM   #51
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WADR, I think you are seeing instances where people have failed to prudently save for retirement as a failure of the system. There are many instance of folks of relatively modest means and income who saved regularly and have accumulated substantial wealth and can ER. To me these successes prove that the problem is the people, not the plans. Can plans be improved? Surely! But the means are there for those of even modest means who have the discipline to save regularly and invest prudently to build wealth beyond their dreams.
And conversely people who do as they are advised can fail. The system is fine for us on here because it has worked. I applaud those of modest means who saved and succeeded, but there are plenty who saved and failed and more who just didn't or couldn't save enough and so the system has failed them. I like your optimism of looking at the successes, but we have as much to learn from the failures and need to modify the system to reduce the possibility of failure and increase the amount saved, and that should fall on both the employee and the employer.......so if we stick with the DC arrangements all plans should offer a minimum range of funds that must include low cost index funds, then you can add actively managed stuff for those dumb enough to buy it. The 401k plan should pay for a fiduciary advisor to consult with each employee and set up an investment plan. Finally there should be mandatory minimum employee and employer contributions.
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Old 04-23-2013, 10:52 PM   #52
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I watched it. Nothing new really. Discussed the hidden and high fees associated with most 401k plans and how much that eats into a persons returns. And that most Americans will be working for years to come because not enough has been saved.
I just watched it, too. These were my thoughts as well.

One thing I thought the show was going to discuss more (and it appeared for a moment they were heading that way) was those "life cycle funds" which are horrible IMHO when it comes to expense ratios. I don't know why anyone would invest in one of those.
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Old 04-24-2013, 02:31 AM   #53
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Sorry, thought the show was pretty much a waste of time. That 32 year old teacher is well on her way to a secure and comfortable retirement. Already had 120K saved for retirement on 70K salary. They should have emphasized how she was doing it right.
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Old 04-24-2013, 04:41 AM   #54
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I thought it was pretty good show. Obviously ain't nothing knew for the folks on this forum, but even a documentary like frontline reach many many times more people than this forum. I had some quibbles mainly about the glorifying the golden age of pension which never really existed. But really I thought it did it a good job, and if gets a few people to investigate their 401K fees, and either find lower fee alternative within their 401K or put pressure to find lower fee providers, than it is good thing.

I enjoyed watching the bank managers squirm trying to answer Jack Bogles points.
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Old 04-24-2013, 06:52 AM   #55
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I thought it was a pretty good and informative program. Can't say I learned much except how supposedly smart people take no interest in owning their retirement future because it is either too boring or too complicated or both. The program should be required veiwing for anyone signing up for their repsective 401K program.

I also enjoyed watching the guy from JP Morgan and the blonde gal from another another financial firm lie through thier teeth but you don't think they are going to bite the hand that feeds them, do you ?
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Old 04-24-2013, 07:59 AM   #56
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And conversely people who do as they are advised can fail. The system is fine for us on here because it has worked. I applaud those of modest means who saved and succeeded, but there are plenty who saved and failed and more who just didn't or couldn't save enough and so the system has failed them. I like your optimism of looking at the successes, but we have as much to learn from the failures and need to modify the system to reduce the possibility of failure and increase the amount saved, and that should fall on both the employee and the employer.......so if we stick with the DC arrangements all plans should offer a minimum range of funds that must include low cost index funds, then you can add actively managed stuff for those dumb enough to buy it. The 401k plan should pay for a fiduciary advisor to consult with each employee and set up an investment plan. Finally there should be mandatory minimum employee and employer contributions.
I would agree with many of the reforms you outlined (a requirement to include some low cost index funds, access to retirement planning resources, etc.). I couldn't support the idea of minimum employee and employer contributions - this is the USA, not the UK. Here, the unfortunate consequence of not saving for retirement is that you have to try to make do on SS - you make your bed and lie in it.
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Old 04-24-2013, 08:09 AM   #57
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I also enjoyed watching the guy from JP Morgan and the blonde gal from another another financial firm lie through thier teeth but you don't think they are going to bite the hand that feeds them, do you ?
Those interviews with the execs reminded me some of those interviews you see on "The Daily Show" when John Oliver or one of the other secondary characters interviews people in a satirical segment.
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Old 04-24-2013, 08:11 AM   #58
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One thing I thought the show was going to discuss more (and it appeared for a moment they were heading that way) was those "life cycle funds" which are horrible IMHO when it comes to expense ratios. I don't know why anyone would invest in one of those.

I dunno, I just checked ours in DH's Fidelity account: Pyramis Active Lifecycle 2020 Commingled Pool Class F:

Exp Ratio (net) 0.35%

And my Blackrock Lifepath Index 2025 in my 401(k): Annual Gross Expense Ratio 0.16%

Neither makes me too squeamish.
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Old 04-24-2013, 08:35 AM   #59
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Wow! I sure wouldn't want to be that gal from Prudential or that guy from JP Morgan this morning. Empty suits both. You're supposed to be an expert at advocating an actively managed approach to mutual funds? Very scary!

Ol' Jack Bogle is smilin' this mornin"!
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Old 04-24-2013, 08:39 AM   #60
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Was anyone else surprised that the big investment bank execs allowed themselves to be grilled like?
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