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Old 10-13-2009, 10:29 PM   #41
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Sure if you put little or no money in them there will be little to show at the end!
One has to have a liveable wage to begin with. My wife and I were associated with an industry that continued to go to the employees for survival. When I retired in '08, my hourly rate had decreased to what it was in '89.
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Old 10-13-2009, 11:01 PM   #42
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One has to have a liveable wage to begin with. My wife and I were associated with an industry that continued to go to the employees for survival. When I retired in '08, my hourly rate had decreased to what it was in '89.
If the business was close enough to being unprofitable that wage concessions were needed (and workers agreed to them), it's likely that any pension plan would have been cut, too, if it had existed. It sounds like what you describe isn't a problem with 401(k)s, it's a symptom of a business under heavy competitive pressure (or in a dying field). No type of retirement plan can protect workers from that.
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Old 10-14-2009, 07:44 AM   #43
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I, for one, am quite happy I started working just as 401ks replaced pensions. Maxing them out from 1983-2006 (and rolling them into stocks in IRAs) is the main reason I was able to retire at 48. I only had 4 jobs in my career (not bad for a programmer), but that would have chopped up any pension I would have earned (had they been offered) down to peanuts compared to the dividends from my IRAs.
Like you I've had several jobs and have done well maxing out my 401ks and rolling them over into IRAs. The 401k was sold to America on it's flexibility, but it was mainly a way for companies to transfer the cost of retirement saving onto the employee. We all ended up taking an effective pay cut and it was even worse for the people who either couldn't afford, or were too short sighted, to contribute to their 401ks. For most people I think the 401k has been a disaster.

Overall the level of workplace benefits has steadily declined since the introduction of the 401k and the recession and an over reaction to the abuses seen in the auto industry have made things even worse. I began my career in the UK where benefits were good, 4 weeks vacation, company pension plan, of course NHS health care and it was an adjustment to come to the US 20 years ago and work in private industry with 401ks, health premiums and an almost identical net tax rate. I now work in state government and I recently compared the benefits to those of a large defence contractor and there was no comparison

State Defence contractor
Vacation 4 weeks 2 weeks
Health $80/month HSA, $24/month with large deductibles.
Retirement 6% match 3% match

The State also has 403b and 457 savings options not available with the defence company and at 55 with 10 years of service you can retire from the state with full medical coverage for the same monthly premium.

I'm lucky it that I have a few options in ER, but increasingly I worry about the stability of the US in which case I'll return to the UK
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Old 10-14-2009, 08:53 AM   #44
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..............State...... Defence contractor
Vacation 4 weeks 2 weeks
Health $80/month HSA, $24/month with large deductibles.
Retirement 6% match 3% match

The State also has 403b and 457 savings options not available with the defence company and at 55 with 10 years of service you can retire from the state with full medical coverage for the same monthly premium.
I think this might be one reason many in the US doubt that more government workers will be effective in reducing the overhead costs of our health system.
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A non-contributory 401k plan or an equivalent increase in salary would have been fair.
"Fair" is whatever the two parties (employer and employee) agree upon, right? The market determines what is "fair."
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Old 10-14-2009, 09:02 AM   #45
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I think this might be one reason many in the US doubt that more government workers will be effective in reducing the overhead costs of our health system.

...and yet countries with reasonable benefits, rather than the poor benefits that are the norm in the US, have lower health care overheads and costs. The benefits I have should be the norm, the pendulum has swung too far and the middle class is quickly becoming poor because of stagnating salaries, diminishing benefits and the rising costs of college and health care. The 401k might not need to be retired, it might just become extinct because no one can afford to save for retirement and they'll just have to work until they die. The improvement of benefits should be supported by all who work.
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Old 10-14-2009, 09:14 AM   #46
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I think this might be one reason many in the US doubt that more government workers will be effective in reducing the overhead costs of our health system.

"Fair" is whatever the two parties (employer and employee) agree upon, right? The market determines what is "fair."
Oh no this could get nasty

I don't think markets have any concept of moral concepts like fairness, which is one of their weaknesses, many might see it as a strength.

A negotiation should be between parties of equal power. In the auto industry the Unions got ridiculous benefits because the management was weak. But the situation is usually that unions are weak or non existant so there's no negotiation - a company can just impose a reduction in benefits. This is just as bad as the the decline of the middle class will destroy America's economic engine. The lack of buying power of the US middle class that started in the 1980s was hidden by borrowing and credit until last year. Now we need to redistribute wealth back to the middle class if we are going to see growth again.
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Old 10-14-2009, 09:21 AM   #47
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Now we need to redistribute wealth back to the middle class if we are going to see growth again.
Got it. I think you'll be happy with the changes we're making.
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Old 10-14-2009, 09:26 AM   #48
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Now we need to redistribute wealth back to the middle class if we are going to see growth again.
Note my prior post where I mention my experience with the online calculator. It is the middle class which will have the highest effective marginal "tax" rates of all with these health care reform proposals, due to the rapid phase-out of government health insurance subsidies smack-dab in the middle of the middle class income range. Yes, that technically only applies to those who don't have employer-based insurance, but I see this as a convenient excuse for private sector employers to abolish their health insurance just like so many have already done with pensions.

How that translates to "redistributing" wealth back to the middle class is beyond me, frankly.
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Old 10-14-2009, 09:27 AM   #49
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Got it. I think you'll be happy with the changes we're making.
Good reply, but I'm a socialist living in the US so I don't think I'll ever be truly happy here....This is how I often feel....
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Old 10-14-2009, 09:54 AM   #50
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It is the middle class which will have the highest effective marginal "tax" rates of all with these health care reform proposals, due to the rapid phase-out of government health insurance subsidies smack-dab in the middle of the middle class income range.
[moderator edit]

The mandatory health care premiums are not a tax. They are a, um, well, you know. As it's not a tax, I'm trying to figure out who will administer the penalty that will be levied upon those who don't get the insurance. I guess it will be another new government agency (cha ching!). Well, at least nun tells me that their employees will have great benefits.
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Old 10-14-2009, 10:14 AM   #51
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Impossible.
Well, at least nun tells me that their employees will have great benefits.
As everyone should........
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Old 10-14-2009, 10:46 AM   #52
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Note my prior post where I mention my experience with the online calculator. It is the middle class which will have the highest effective marginal "tax" rates of all with these health care reform proposals, due to the rapid phase-out of government health insurance subsidies smack-dab in the middle of the middle class income range. Yes, that technically only applies to those who don't have employer-based insurance, but I see this as a convenient excuse for private sector employers to abolish their health insurance just like so many have already done with pensions.

How that translates to "redistributing" wealth back to the middle class is beyond me, frankly.
I think that "tax" is a serious misnomer in this case. A tax is money that the gov't takes away from you. A subsidy is money that the gov't gives you.

If the topic is incentives (which is what you are talking about in the "Political issues" post), then losing a subsidy could have the same impact on the incentive to work as an income tax. However, if the topic is "redistribution", people getting subsidies seem to be on the receiveing end of the transfer.
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Old 10-14-2009, 10:50 AM   #53
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I think that "tax" is a serious misnomer in this case. A tax is money that the gov't takes away from you. A subsidy is money that the gov't gives you.
That's why I deliberately put the word "tax" in quotes. Technically it may not be a tax but in terms of taking more money out of your paycheck for each extra dollar you earn, it still quacks like a duck.
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Old 10-15-2009, 09:47 AM   #54
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I suppose I should use your phrase and say that it quacks like a duck, but it doesn't walk like a duck.

If you are interested in the incentive to work, than any needs-based subsidy has a phase-out range, and if you are in that range losing the subsidy is like a tax (it quacks like a duck).

However, if you are interested in "redistributing" income (the last sentence in your post #48), than any needs-based subsidy shifts income into the group that gets the subsidy. In this sense, it is the exact opposite of a tax (it doesn't walk like a duck).

For example, the median income for a family of 4 is about $70,000. At your age (44) this results in a subsidy of $2,268. Unless this family pays more than $2,268 in additional taxes due to the Baucus plan, they are money ahead. Income has been "redistributed toward them".
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Old 10-15-2009, 11:21 AM   #55
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For example, the median income for a family of 4 is about $70,000. At your age (44) this results in a subsidy of $2,268. Unless this family pays more than $2,268 in additional taxes due to the Baucus plan, they are money ahead. Income has been "redistributed toward them".
Even as individuals as we selfishly try to determine "what's in this for me", we'll have to keep our eyes on ALL costs and who they get shifted to. For example, many of the taxes associated with the Baucus plan are levied against medical device mfgrs and pharmaceutical companies. Of course, that money will ultimately come from consumers. And, I'm sure there are similarly shifted costs in the present system. Also there are bigger questions of US productivity that still affect us as individuals (and shareholders). Again, that could favor Baucus (or whatever thing emerges the present negotiation) or maybe not. So, just looking at who gets what in the direct taxation/subsidy game won't tell a person if he comes out ahead.
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Old 10-16-2009, 07:04 PM   #56
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There are problems in the article, but I personally think (and its only my opinion) that its in the right direction...... If it serves as a wake up call to start people questioning thier investment and retirement strategies its a really good article....

For too long the vast majority of people place rediculous trust in commisssion based sales people or poor corporate managment with thier entire lifes savings....to me that in its self is just crazy......No1 rule presrve capital.....No 2 rule ...be well informed what your putting your money into to mitigate or have knowledge of the risk........

401k and Superannuation/pensions do have huge potential downfalls.
1. Most underperform the market significantly and charge hefty fees for doing so...
2. Most decline significantly in market downturns and have massive reductions in dividends or distributions during downturns
3. Most are poorly diversified and at risk of scontroling parties not paying in, going broke etc
4. They have govt legislation risk where you can begin a path or strategy ten years ago, be 1 month from implementation and get your entire strategy wiped out by a change in govt legislation

I personally think they are a fantastic product for two groups of people. The really switched on cookies who know how to set them up rpoperly and design reciprical strategies in conjunction with them, and for the complete financially inept who as long as they are tucking some money wawy somewhere are doing OK.

Personally high dividend fundamentally sound shares are hard to beat....You can choose when, and what to buy, you can trade in and out at will.

You can diversify, they keep paying very well during downturns or changes of sentiment inthe market....

Im not at all saying 401K's are dead or dying , and they have there time and place.... but most people would find it more profitable and more flexible to invest directly into the shares bonds or other investments...... and it is worth the time to learn....

Assuming everyone in this forum is in here because they are on the way to retiring early or want to , I cant see how any single on of you could entrust your entire investment protfolio to a 401K......one wrong move, one bit of fraud, and your on the way to belated retirement and 20 more years working for a dollar.

Even if you disagree entirely with the article, its worth considering the risk a 100% 401K retirement strategy places you in....
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Old 10-17-2009, 06:07 AM   #57
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I really like my 401K plan, the TSP. I'm sure it's more secure than non gov't 401K plans tho. At least I'd like to think so...
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My own observations
Old 10-17-2009, 07:06 AM   #58
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My own observations

I have basically come to the conclusion that there are two types of people in the world when it comes to saving/investing/planning. The first is the sort of folks who visit and post here. I am pretty much of the conclusion that no matter what retirment savings vehicles that were out there, no matter what the rules, no matter what the tax incentives, the folks here would do what is ever necessary, (curb current consumption, put money in the "bank", etc.) and end up reasonably well off in retirement. I think the LBYM mentality and the realization that you need to dealy gratifcation now is far more important and significant than the retirement plan vehicles or options.

The second group of folks are basically about 80-90% of the people who I deal with every day on an personal and professional basis. Most are nice decent people, but they just don't really understand the consequences of their financioal decisions. These are the folks who when they go to buy a new automobile, don't care about the price--they just make a deal that allows them to keep the same monthly payment htey have had for years; these are the same people who put no money down on a home purchase and get an interest only mortgage, and are not upside down on their house; these are the folks who make the minimum monthly payments on their creidt cards and end up paying (with interest) $400 for a $50 toaster. Obviously I could go on--you all know the same people I do.

I am big proponent of individual freedom, but over the years, I have come to the conclusion that some folks are not able to handle this freedom. It may be becaue they lack an education, self control/discipline, whatever, but I do think that the most people are not capable of independently handling their finances on a day to day basis, much less are capable for planning for retirement (probably the "single" biggest expense they will have to cover). I don't know the precise answer, but I do think the 401-k focus has been a failure for most people (again-this is not the fault of the approach, but a failing of the people). I think that most folks want a more paternalistic approach to the thier lives and to society (look who is in the White House and who is in Congress--they are not a bunch of libertarians), and want someone (the government, their employer, etc.) to "take care of them".

I think in the end, that while much of the time article contains many inaccuracies or less than a complete reporting of the facts, it does reflect the reality of most people in this country. Left to their own devices, they will not save what is necessary to ensure their future financial security. One way or another, those who have saved enough to be finanically independent, the taxpayers, or those who are still working, are going to pay for the behvaior for the poor financial management of the majority of the people in this country.
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Old 10-17-2009, 09:34 AM   #59
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I'm not quite as pessimistic as stephenandrew. Maybe because I worked with a bunch of analytical types and that skewed my sample. But here's a Gallup poll with some numbers:

Quote:
Forty-three percent of American credit-card holders say they always pay off the full balance on their cards each month and another 17% say they usually pay their full balances each month. On the other hand, 25% acknowledge that they usually leave a balance and 12% say they usually pay only the minimum amount due each month (1% pay less than the minimum).
Nearly One-Third of Credit-Card Owners Hold High Balances

I think our current postion on retirement is pretty good - everybody has to participate in SS, lots of people have some payroll-deduct saving option, after that, you're on your own. SS provides a safety net for people who can't or won't save. If you want a better lifestyle, you have to save for it yourself. So I'm not looking for more gov't mandates. In particular, I don't like add-on mandatory savings plans like Ghilarducci's.
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Old 10-17-2009, 10:54 AM   #60
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I think our current postion on retirement is pretty good - everybody has to participate in SS, lots of people have some payroll-deduct saving option, after that, you're on your own. SS provides a safety net for people who can't or won't save. If you want a better lifestyle, you have to save for it yourself. So I'm not looking for more gov't mandates. In particular, I don't like add-on mandatory savings plans like Ghilarducci's.
Yes. A low-level safety net to keep older folks fed and off the streets who could not or would not save for retirement.
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