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Old 04-24-2013, 04:19 PM   #81
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Seems to me that the Hiltonsmith Report:
http://www.demos.org/sites/default/f...rain-Final.pdf
... was the heart of the discussion.
Paying a fee on the at risk assets and not profitability, is so completely alien that no logical argument can be made to justify the concept. Kind of like paying someone to roll the dice at a casino. The detailed fees shown in the report open doors to how the final costs bear no relationship to the actual earnings, and compounding tables show the net result that is never shown on any reports.
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Old 04-24-2013, 04:23 PM   #82
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Really enjoyed the show. I am worried that this is the next bubble to burst.

I feel there is a screaming need for a follow up program on different ways to get out of the traps people may find them self in.

Oh my! So glad to be completely self directed and to have found this forum.

Bob
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Old 04-24-2013, 05:03 PM   #83
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It is a little scary to hear those people planning to work into their 70's. Who knows if the jobs will be there, the employers will be willing to hire them, or if they will even be able to work? Although I am seeing more middle aged and older people scanning and bagging groceries.
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Old 04-24-2013, 05:25 PM   #84
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The statement that most people are clueless when it comes to their 401K programs could not be more true. I have been retired for the past eight years and have worked part time during tax seasons preparing individual income tax returns. When I see from someone's W-2 that they contribute to a 401 K program I tell them how smart they are to be saving for retirement. When I ask them what their 401K is invested in, I would say 95% of them have no idea. I have offered and have been taken up by a few to help them understand their respective plans and what MFs might make sense for their respective situations. By and large most people remain clueless by their own choice.
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Old 04-24-2013, 05:34 PM   #85
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Seems to me that the Hiltonsmith Report:
http://www.demos.org/sites/default/f...rain-Final.pdf
... was the heart of the discussion.
The Hiltonsmith agitprop is another rehash of Teresa Ghilarducci’s IRA collectivization scheme (she's a member of the same group). After she got shouted down, it looks like Demos.Org (a nonpartisan group, according to their literature) decided to roll out this paper that builds the case more gradually. But we still wind up at the same spot (see pages 13 and 14): Mandatory contributions, everyone puts their contributions in one big pot to be managed by the government, and payouts are made on a sliding scale based on need.
As the Hiltonsmith report says on page 3:
Quote:
This brief will show that the excessive fees of the 401(k)system are due to the inefficiencies of an individualized retirement system.

No, thanks. Social Security is our collectivized system. That's enough.

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Originally Posted by imoldernu View Post
Paying a fee on the at risk assets and not profitability, is so completely alien that no logical argument can be made to justify the concept.
Paying a fee based on results (say, above a suitable index) would likely be bad, too. It assumes managers can add value (highly questionable), and would encourage managers to make high volatility investments for the retirement accounts they manage. Example:
Manager A: Invests just like the index. His accounts always lag the index by .1% due to trading costs, so he gets paid nothing (though his clients make gains along with the market)
Manager B: Knows how to work the system. He puts all his clients in 5 types of highly speculative investments. At the end of the year, 80% have lost most of their money, but 20% have doubled their funds. He becomes rich.
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Old 04-24-2013, 05:35 PM   #86
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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.
Believe it or not, those funds have the LOWEST fees with our provider. My choice was driven primarily by the fees as I control the bulk of my funds in rollover vehicles at this time. I can "fix" my portfolio allocation with lower costs than trying to do it through my 401(k).
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Old 04-24-2013, 06:11 PM   #87
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Originally Posted by imoldernu View Post
Seems to me that the Hiltonsmith Report:
http://www.demos.org/sites/default/f...rain-Final.pdf
... was the heart of the discussion.
Paying a fee on the at risk assets and not profitability, is so completely alien that no logical argument can be made to justify the concept. Kind of like paying someone to roll the dice at a casino. The detailed fees shown in the report open doors to how the final costs bear no relationship to the actual earnings, and compounding tables show the net result that is never shown on any reports.
The fees are there, and so high, because:
1) The individual investors in retirement accounts don't understand the effect of fees, and are distracted by the shiny promos for the (expensive) managed funds.
2) The folks who choose the vendors for these accounts, and the mix of funds that go in them, are more interested in minimizing the cost to the business and getting a free lunch from the sales rep than they are in making informed choices that best serve their employees.

Every once in a while a really great HR person will step up to bat for the employees, and those lucky folks will get a plan that has great, cheap index funds in various categories. (We got Vanguard Institutional! I had effective fees under 0.1% every year in my 401K.) Really lucky folks will get automatic enrollment in an appropriate low cost target-date fund, and maybe even be offered a series of lunchtime presentations on investing for retirement from a Reliable Source (not a VUL salesman).
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Old 04-24-2013, 07:51 PM   #88
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It's too bad that there's no formal educational courses for personal finance in school. It's left up to the financially curious individual to figure it out on their own ... and too many aren't curious.
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Old 04-24-2013, 07:51 PM   #89
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I have one take away from this show: I am one lucky duck.
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Old 04-24-2013, 08:00 PM   #90
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It's too bad that there's no formal educational courses for personal finance in school. It's left up to the financially curious individual to figure it out on their own ... and too many aren't curious.
We call that survival of the fittest in Texas.
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Old 04-24-2013, 08:05 PM   #91
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Even tho Jack Bogle had only a few minutes of air-time, he was the star of the show.
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Old 04-24-2013, 08:26 PM   #92
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I enjoyed it. I thought it was great seeing the "big bank" retirement people squirm. I did wish that they had at least a short section on how to do it right. A novice might have been left with a feeling of doom and gloom, but no action steps. Perhaps they didn't want to venture into the "how to" business.
That's why I usually don't bother with Frontline any more...just leaves me depressed.
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Even tho Jack Bogle had only a few minutes of air-time, he was the star of the show.
That was the highlight for me... watching him kick butt, hehe. I hope I'm half as able when I get to be his age.
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Old 04-24-2013, 09:01 PM   #93
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The Hiltonsmith agitprop is another rehash of Teresa Ghilarducci’s IRA collectivization scheme (she's a member of the same group).

No, thanks. Social Security is our collectivized system. That's enough.
Exactly! This IRA grab talk worries me. We already have Social Security. Could the government please fix that first before they launch yet another program with people's private savings?

I am generally confident in my ER plan but there are two things that worry me.

1. Possibility of high inflation in the future

2. Possibility that those who have NOT saved and prepared for retirement will come after the assets of those, like me and most on this forum, who HAVE saved and prepared.
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Old 04-24-2013, 10:03 PM   #94
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Sorry, my first post must not have been clear...

These were people from the UK, Australia, and NZ asking me how THEY could invest in a US mutual fund to get the low fees... I had zero interest investing over there....

I told them you cannot without a US address.... one guy even asked if he could use mine!!!
It was clear, when I asked "why would you invest in the UK" it was a general "you" not specific. If I move to the UK I won't invest in UK funds for two reasons; 1) The IRS taxes gains in non-US funds in a nasty way and 2) I won't pay the high UK fund fees. So I'll continue to invest in US based Vanguard ETFs which is ok without a US address as long as you have an existing account.
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Old 04-24-2013, 10:07 PM   #95
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Really enjoyed the show. I am worried that this is the next bubble to burst.

I feel there is a screaming need for a follow up program on different ways to get out of the traps people may find them self in.

Oh my! So glad to be completely self directed and to have found this forum.

Bob
The people in the program were also self directed, unfortunately they had bad 401k choices and didn't educate themselves so were at the mercy of the retirement firms. The frightening thing is that companies and HR departments also don't understand the plans they provide to their employees.
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Old 04-24-2013, 10:26 PM   #96
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It's too bad that there's no formal educational courses for personal finance in school. It's left up to the financially curious individual to figure it out on their own ... and too many aren't curious.
+1
I was in academia and said this for 40 years. No one with any swing paid attention. On occasion when the time was right I would take an hour from regular class time for discussion and examples.

Cheers!
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Old 04-24-2013, 10:47 PM   #97
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I just watched the program and found it somewhat misleading. There are funds that make high yields and charge high fees - for me, although not for most here, the net gain is the most important thing.

There was one totally misleading calculation - how funds dropped due to 2% (I think) expense ratio - but they didn't calculate in the yield on investment, just the expense.

If you have $100k and 2% expense yes, it will cost you $2K a year - but if it yields 7% you net $5K. They left out that last bit.

All in all it didn't impress me, other than to confirm that I was odd because I was looking at Morningstar reports on the funds that were available through my 401K when I worked and finding most of them pathetic. I also told people to max out their 401K contributions but none of them (fairly highly paid IT people) felt they could afford it.

So outlier that I am, I lived on half my salary for years - quite comfortably, I must add - and was able to retire at 62. It's not really early but it was a big improvement over working any longer.

The duh factor is setting in.
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Old 04-24-2013, 11:07 PM   #98
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I just watched the program and found it somewhat misleading. There are funds that make high yields and charge high fees - for me, although not for most here, the net gain is the most important thing.
I have a bridge in Brooklyn I'd like to show you
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Old 04-24-2013, 11:08 PM   #99
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I just watched the program and found it somewhat misleading. There are funds that make high yields and charge high fees - for me, although not for most here, the net gain is the most important thing.

There was one totally misleading calculation - how funds dropped due to 2% (I think) expense ratio - but they didn't calculate in the yield on investment, just the expense.

If you have $100k and 2% expense yes, it will cost you $2K a year - but if it yields 7% you net $5K. They left out that last bit.

All in all it didn't impress me, other than to confirm that I was odd because I was looking at Morningstar reports on the funds that were available through my 401K when I worked and finding most of them pathetic. I also told people to max out their 401K contributions but none of them (fairly highly paid IT people) felt they could afford it.

So outlier that I am, I lived on half my salary for years - quite comfortably, I must add - and was able to retire at 62. It's not really early but it was a big improvement over working any longer.

The duh factor is setting in.
No, no, no.

the point is that there is little to zero evidence that the higher fee fund can generate returns any higher than lower fee index funds...you can get the exact same 7% yield for a fraction of the fee with index funds...so the added skim off the return is significantly greater, even if it is only "2%."

Why pay that extra money? If you could get the exact same towels for $20 or $200, which are you buying? Most people will shop around to save far less on most purchases but they buy funds with no shopping for price at all. and the extra cost comes out not once but every year for many years.
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Old 04-24-2013, 11:10 PM   #100
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No, no, no.

the point is that there is little to zero evidence that the higher fee fund can generate returns any higher than lower fee index funds...you can get the exact same 7% yield for a fraction of the fee with index funds...
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We've been down this road with Thinker, and he remains a true believer in the value of (certain well-picked expensive) managers. Leave him alone--entire industries are counting on him and his fellow believers!
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