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Old 09-12-2013, 05:28 AM   #61
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Frankly, I didn't blame them much. As I got to know some of them, I learned most came from backgrounds with no luxury at all, and the gadgets and cars were the first nice things anybody in their family had ever owned.

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That's about where I came from, and at age 24-25 I was just thrilled that I could afford my own apartment, a 4-year-old car that was paid for and didn't need to be up on jack stands every other week with me under it, and some money in the bank. It had a lot to do with why I bought an airplane and spent most of my discretionary income on that for the next two years.

Retirement was so far over the horizon I didn't give it a thought.
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Old 09-12-2013, 06:42 AM   #62
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Interesting thread!
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Originally Posted by tmm99 View Post
Compared to when my parents were my age, I think the finance every John and Jane have to deal with nowadays is much more complicated. In the old days, you went to work, did your work, got paid, saved a little money, and got your company pension and social security after you reached your retirement. (I know I am simplifying things, but you probably didn't need a high IQ to navigate to old age as much as we do now....) I know people invested money too, but not to the extent we do now. In this modern day and age, everyone needs to know a lot about finance. They cannot just go to work, and get paid and go their married ways. They have to think about a whole lot more about where to put money (401K, Roth IRA, Traditional IRA, bond, equities, this and that) to make sure they have money in the retirement years. I see a lot of people who post here are engineer types, and some finance, some entrepreneurs. I am in the IT field myself, and I don't consider myself stupid (well, only some of the time) but this finance stuff is very complicated and these are things I have to read books on or read blogs or come to forums like this for to learn. There is so much to know and digest. It's not just investing per se, but how about healthcare? How about Social security?
A few thoughts. Life has always become more complicated for successive generations. The idyllic period you describe above would have seemed "very complicated" for someone living 100 years earlier. The rate of change seems to come more and more rapidly, and that may continue.

OTOH, the physical challenges of everyday life have become far less demanding with generations as well. Life was more physically tough for 99% of the population years ago too. Obesity was nearly unheard of long ago, everyone worked too hard and food was scarcer.

Progress takes many forms...

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The thing is (I don't mean to sound snooty at all), I don't think the majority of the forum members here are an average, median income, average intelligent groups of folks. So I get that people here can navigate through this "do it yourself" finance world definitely much better than average.
It is an above average group, but not an investing elite by any means. What differentiates this group is not IQ as much, but they've figured out it's not as complicated as most people think ironically. Successful investing is not rocket science, the methodology is pretty easy - you certainly don't have to be an engineer or the like, though it helps. There are plenty of very smart people who are bewildered by investing for a variety of reasons. And I know some pretty simple folks who have done very well investing for themselves without a lot of study. They worked at it while their friends looked for an easy way out, a silver bullet.

And still more who never figure out you have to spend less than you make to have any chance at all - how much education does it take to grasp that? Almost none...

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But how do people who haven't graduated from high school, or don't have an average IQ supposed to navigate through all this c*rap?? I have a college degree, and this stuff is still pretty hard for me, because there are so many moving parts to consdier! I really wonder how someone with less knowledge/education deal with this. I am originally from Japan, and majority of the people there do not have to deal with all these choices we deal with in the US.
The less educated have always led more challenging lives I'd imagine, and it's probably gotten more difficult as you suggest. Many would say more/better education is essential - but that's another thread.
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Old 09-12-2013, 08:21 AM   #63
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Most of the increased complexity is due to the Great Risk Shift described in a book of that title by Jacob Hacker. Over the past 30 years or so many kinds of risk have been moved from employers to employees, e.g. retirement funding, tenure of employment, cost of health insurance and availability of coverage, cost of substitutes for inadequate public education, etc. To say nothing of declining real wages for the lower half of wage earners. To take just one example Blue Cross Blue Shield was started as an insurance program by the hospitals themselves. They charged everyone the same premium and didn't attempt to segment risk by excluding pre-existing conditions. Over time health insurance providers were permitted to segment risk by excluding sick people increasing their profits no doubt but failing in their primary mission to provide access to health care.

So across the board the deck has been stacked against workers as a whole. Sure there will always be some people who manage to succeed, but that doesn't change the basic facts.
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Old 09-12-2013, 08:23 AM   #64
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I had no idea everyone in the public sector gets a $140K pension.
Dang! I need to ask them to refigure my govt pension. It doesn't amount to 20% of these numbers!!!
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Old 09-12-2013, 08:28 AM   #65
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While supposedly withdrawing your original comment, you again imply that many public sector retirees draw outlandishly high pensions. Most of us didn't make as much as Bronske, McGovern or Hull when we were working, let alone after retirement. In fact, the article says these three are getting more in pension than Seattle's current fire chief is getting in salary. I'm a public sector retiree, and I'm fed up with hearing the fable of widespread six-figure public pensions repeated over and over as if it were an indisputable fact. Now you know better, and I hope next time you have occasion to mention the topic, you'll at least be more specific and not paint with such a broad brush.
There are many people on this site whose pension and retirement package from MegaCorp are far superior to what those working in the public sector get.

One can 'prove' anything by cherry picking examples.

Oh, keep in mind that most public employees pay into their pension, anywhere from 6-14% from what I have read. So some of that payout is simply a return of their own money and the earnings on that money.
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Old 09-12-2013, 09:23 AM   #66
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I can point to many people who have worked for 20 years and do not have $20,000 in their 401K. The person with the government pension of even $30,000 per year is in MUCH better shape.

If you are making $40,000 a year in the private sector, how can you contribute $17,500 to your 401K?

The outliers are the people in the private industry who are making $150K plus a year and max their 401K, Roth, and save in a taxable account. You can compare these people to the people who have $140,000 a year government pensions.

For the vast majority who don't know how to save or who make so little that it is incredibly hard to save a meaningful amount, the public sector pension wins hands down.

We have to compare apples to apples here.
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Old 09-12-2013, 09:41 AM   #67
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Just to avoid some of the bickering and offer a glimmer of hope, Colorado now requires financial literacy as part of the curriculum starting at 3rd grade. My daughters' school adopted it last year (a year early) and my then-3rd grader had an amazing experience. They created a "mini society" that included a currency. The kids had to participate in a couple bartering sessions to understand why we use money. They had to earn money in various jobs, some of which you had to apply for (my daughter became the banker). They then had to come up with a product idea, do a market survey to understand demand, produce a finished product with a specified budget, figure out how to price it, buy storefront space (with price differentials based on location in the gym), and sell their product. My daughter learned a ton and it was a nice way to introduce the idea of entrepreneurship.
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Old 09-12-2013, 10:28 AM   #68
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The less educated have always led more challenging lives I'd imagine, and it's probably gotten more difficult as you suggest. Many would say more/better education is essential - but that's another thread.
Very True. Like my old Grand Pappy used to say when asked if he had bought a lottery ticket, "Government lotteries are a tax on people who didn't study their math."

Of course, I know many very smart people who buy lottery tickets, but at least they know they are paying a voluntary tax.
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Old 09-12-2013, 10:33 AM   #69
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What sets the posters (and lurkers) on this board apart from the rest of the population isn't so much their incredible mental prowess/financial acumen as their ability to see that they have a personal future out there that needs to be planned for. We have people on the board who can't bring themselves to invest in those incredibly risky things called equities, and we have people who have difficulty investing in anything less risky than microcaps, and most of us are somewhere in between. The similarity between these people isn't in their ability to read and react to the financial winds, but to see that they are going to need to provide for themselves when they can't (or decide not to) work any more. Saving 20% of your salary and stuffing it in a shoebox, while unsophisticated, is much better preparation for retirement than saving 5% of your salary, investing in a sophisticated portfolio of hedge funds, and running up credit card debts. The shoebox guy is probably lurking on this board, while the sophisticated guy is on the BMW board.

We come together on this forum to share ideas about where to live, how to live, how to live efficiently, how to support ourselves, how to enrich our lives in retirement. I don't think we do that because we're smarter on average than other groups, but because we're paying attention and trying to plan for that phase of our lives. We're all gratification postponers. Okay, maybe smarter-than-the-average-bear gratification postponers.
+1 Well said.
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Old 09-12-2013, 10:39 AM   #70
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Just to avoid some of the bickering and offer a glimmer of hope, Colorado now requires financial literacy as part of the curriculum starting at 3rd grade. My daughters' school adopted it last year (a year early) and my then-3rd grader had an amazing experience. They created a "mini society" that included a currency. The kids had to participate in a couple bartering sessions to understand why we use money.
This sounds like a good idea to me.

Those who want the schools to do more teaching of this-or-that, need to also tell us what should be dropped to make room for the new material.

In my experience, we had well intentioned people who wanted to add the following to the subjects taught in middle school: swimming, gun safety, animal protection, personal safety, and good manners. These are only the ones I can remember at the moment. Not one offered any suggestions as to what to drop to make room for these new curriculum. I can assure you that whatever is dropped also has a constituency who thinks it's to important to be dropped.

Anyway, back to the subject at hand. Even the most basic savings habits have got to be better than the financial planning done by 50% of the American public. Our non American friends might want to chime in here concerning how things are done in other countries. One of the biggest reasons for continuing SS, IMHO, is that without it we would have a huge increase in older welfare recipients.
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Old 09-12-2013, 10:57 AM   #71
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I wonder... If we could go back in time 30-40 years and talk to people getting ready to retire would they think financial investing & AA was complicated back then? Were they just blindly going into retirement because that is what you did at age 65 and you trusted that your savings, pension & SS would always be there and keep up with inflation. They did not have EXCEL spreadsheets or other tools (i.e. FIRECal) to help them run various best & worst case scenarios.

Now stepping on soapbox..These people were America's greatest generation having been brought up during the Great Depression and living thru WWII as young adults. I can not even imagine what that would have been like to live during those times. Every generation after that (including me) has been on a path of being spoiled and a sense of entitlement. Stepping off soapbox ...

I love my parents but I did not learn the value of the "dollar" and saving for the future from them. My Grandfather thought me the value of saving and building wealth over time. Making your money work for you. He was not a collage graduate or have a above average IQ. He just understood the value of hard work, discipline & saving. Ironically because he lived during the Great Depression & WWII he did not spend any extra money on travel or hobbies when he retired at 60 and died at 90. He was always scared that he could loose it all at anytime. I think this is very common for people who lived during those times..

I totally agree with the OP that it has gotten very complex to manage your finances to ensure you will have enough to retire. The technology & information age has really change things for the good & bad and it's hard to know if the information you get is real and who to trust. So many financial options & vehicles to choose from which is good, but it makes it more complicated. I'm willing to bet that people in the financial world had more integrity 30-40 years ago and were really looking after their clients best interest, so maybe this is why it was not complicated back then. Not so much now. Most people now are only looking after their best interest so you have to constantly verify, trust and then verify again. This takes a lot of time & energy.

Sorry for rambling... Bottom-line. I do not think you have to have a collage education or above average IQ to reach FIRE. Education on developing good work ethics & how money works need to happen early in life. Need to allow kids to fail in life. Teach them it is okay to fail and it is how your recover from failure is what really matters in the long run.....
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Old 09-12-2013, 01:13 PM   #72
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This sounds like a good idea to me.

Those who want the schools to do more teaching of this-or-that, need to also tell us what should be dropped to make room for the new material. (snip)
ISTM that financial literacy topics could (and should) be included in a standard math curriculum. For example, at some point the students are going to be taught about exponents. Why not do this in the form of, say, calculating future value instead of random problems asking what is this number raised to that power, without ever being shown how the ability to make such calculations will be useful to them in the future?
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Old 09-12-2013, 02:30 PM   #73
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ISTM that financial literacy topics could (and should) be included in a standard math curriculum. For example, at some point the students are going to be taught about exponents. Why not do this in the form of, say, calculating future value instead of random problems asking what is this number raised to that power, without ever being shown how the ability to make such calculations will be useful to them in the future?
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Old 09-12-2013, 02:50 PM   #74
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Fairer, certainly...perhaps even a little off in the other direction. I don't want to minimize the value of a defined benefit pension, which many public employees receive and I think most private sector workers don't. The fact that I have a pension is what makes it possible for me to retire at all, as I didn't start saving seriously for retirement until about five years before I pulled the plug. I doubt that many private sector workers would have been able to retire at 57 in spite of having procrastinated for so long.

It's just a sore point with me that so many people seem to think many if not most public employees receive outrageously high pension benefits, which just isn't the case. I think generally the pension is proportional to pay--high earners get big pensions, modest earners get small ones. I do agree (with the author of the article, and I think the majority here on ER) that "spiking" is an abuse that should be eliminated from pension systems.
I think we have arrived at a point in this back and forth that is closer to my personal beliefs. I would add that when somebody gets a wildly lucrative pension in the private sector, most people are less angered because it was a company spending its own profits as opposed to a government spending those same peoples tax dollars. Even though the lucrative private pension might contribute to higher prices for their goods or services, people are usually free to not use and not pay for those products. It is harder to legally withhold money from the government when you disagree with how the government is spending the money. I think this kind of thing along with the fact that private pensions are almost a historical footnote is why people have such a problem with public pensions.

Both kinds of pensions should have been based on reality and should have been more sustainable. We should never have had the "work 20 or 30 years and then retire on almost your full salary with almost free medical care" kind of pension. e.g. My mother in law paid $7 a month for coverage prior to medicare. That same policy for just my wife was almost $700 on the ehealthinsurance site 2 years ago when I looked. I don't think plans, that were this generous, were ever sustainable. Unless, of course, you believe this planet can support continual heavy population growth forever.

In the private sector, when we reached a point where the numbers failed to work and began to hamper domestic companies as they competed with foreign companies, private pensions began quickly changing and then dying/closing to keep up with the changing situation. Public pensions have also been effected by budget issues, but not as many or as much, yet. Now governments are having much greater trouble balancing budgets. It seems that public pensions are getting more attention then ever before. Since many private workers already had their pensions taken or reduced, there is not a lot of sympathy from this crowd. Too me it seems to be more of a "now it's your turn kind of mentality."

Full disclosure: both my wife and I have private pensions that are not that bad. They are a step or two below what auto-workers had years ago, but no longer provide any medical benefits in the future (PPACA killed that, or gave the company the excuse to kill it). Our pension plans have been closed to new employees for years. Like many plans they earn most of their benefit in the last few year before your full retirement age. (age credits, years of service credits, etc) My company just took steps to insure that the surge near the end isn't going to happen for any more people. Since I am leaving soon, it doesn't change anything for me.
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Old 09-12-2013, 02:59 PM   #75
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I think part of it is that a few news stories about exceptional out-of-the-ordinary pensions create a mental "anchor point" and that creates the perception, ignoring the reality, that all public service pensions are lavish six-figure ones.
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+1, it's the same with welfare cheat stories or outlandish spending by famous people or investment bankers gone wild, etc. Outrageous is memorable. Normal and reasonable are not.
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Old 09-12-2013, 03:03 PM   #76
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I think some people forget that public sector pensions have a contribution factor from the employee, the same as the rest of us contribute a percentage to SS, so I see public sector pensions much more like SS than the private sector pensions. DH has a frozen noncola private sector pension that he did not contribute to and whose calculation did not grow once the plan was frozen--that plus SS will cover our expenses and the defined contribution plan that replaced the pension some 20 years ago turned out to be a darned good thing for him. Unlike people receiving most private sector pensions, most of the public sector folks are not going to receive SS.

(I know people are going "well duh" but I have to remind myself of this every once in a while )
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Old 09-12-2013, 03:05 PM   #77
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This sounds like a good idea to me.

Those who want the schools to do more teaching of this-or-that, need to also tell us what should be dropped to make room for the new material.
Study hall. My son's school had financial classes in both middle and high school. They were elective type classes. They were not elective for my son. We made them mandatory.
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Old 09-12-2013, 03:21 PM   #78
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I think some people forget that public sector pensions have a contribution factor from the employee, the same as the rest of us contribute a percentage to SS, so I see public sector pensions much more like SS than the private sector pensions. DH has a frozen noncola private sector pension that he did not contribute to and whose calculation did not grow once the plan was frozen--that plus SS will cover our expenses and the defined contribution plan that replaced the pension some 20 years ago turned out to be a darned good thing for him. Unlike people receiving most private sector pensions, most of the public sector folks are not going to receive SS.

(I know people are going "well duh" but I have to remind myself of this every once in a while )
Both SS and Public Pensions have a contribution factor from the employee.

I read an article a few years ago that compared SS to public pension. The link below is a different article, but it seemed to reach the same conclusion. i.e. they are similar but the average public pension is far better than the equiv workers SS.

Social Security Benefits vs. Public Pensions « CIV FI
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Old 09-12-2013, 03:25 PM   #79
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I disagree with the OP. Making a living and LBYM and saving and investing for retirement have been easy for anyone in the USA the last 100 years. Many of the people today who think they are working hard are in fact hardly working at all. Whether you are brilliantly intelligent or slightly below average intelligence you have to learn your craft and keep learning though out your life. IMO people who have not been back to school every few years to increase what they know about their chosen field or even to learn a new field are slacking off. Too bad for them when they are not competitive in the workplace. Most people do not have the discipline to LBYM. Too bad for them. Asset allocation and investment selection can be tough and even important after you have amassed quite a bit. However, early in saving and investing all you have to do is pick out some low expense funds and aggressively sock money away in them and stay the course while they grow. Too bad for the people who do not have the discipline to do this. It is definitely not rocket science. Hell, even this goober figured it out pretty easily long ago.
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Old 09-12-2013, 03:47 PM   #80
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If you work about 30 years, you get to collect around $1800 a month in SS payments at age 62. That is like a pension of $21,600.

Are public pensions that low?
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