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What has the world come to??!
Old 09-10-2013, 02:51 PM   #1
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What has the world come to??!

Here is my sentiment.

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?

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. 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.

Are there free institutions who lead *regular* folks? Many of the people cannot just pick up books and figure things out...
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Old 09-10-2013, 02:59 PM   #2
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No, you pretty much nailed it. The people on ER.org and Bogleheads are the cream of the middle/upper middle class investing crop. The rest of the world is SOL except for the very rich who can either pay someone to manage their money or can turn a billion into 300 million and still live well.

Welcome to the other 1%!
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Old 09-10-2013, 03:06 PM   #3
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I don't think the majority of the forum members here are an average, median income, average intelligent groups of folks.
It's certainly true that we have a lot of smart people here, but also a number of folks like me, who ensure that the mean IQ is closer to average.
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Old 09-10-2013, 03:06 PM   #4
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Well, the hapless joe sixpack can go to Suze Orman:

Suze Orman changes homebuying advice

"In today's economy, with interest rates still low, relatively speaking, and home prices leveling out, Orman says potential homebuyers no longer need to make a down payment of 20 percent. "I'm fine if you can get a mortgage with 10 percent down," says Orman."
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Old 09-10-2013, 03:12 PM   #5
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No, you pretty much nailed it. The people on ER.org and Bogleheads are the cream of the middle/upper middle class investing crop. The rest of the world is SOL except for the very rich who can either pay someone to manage their money or can turn a billion into 300 million and still live well.

Welcome to the other 1%!
+1

Not only do we have to figure out these things, but also during accumulation phase, both husband and wife had to work in many cases whereas that was less common in our parents' generations.* I guess some aspects of life have become a little more demanding during our lifetimes.


*In 1950, only 29.6% of the labor force was female, but by 2000 that had increased to 46.6%. http://www.bls.gov/opub/mlr/2002/05/art2full.pdf
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Old 09-10-2013, 03:13 PM   #6
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I think you have a valid point. The free institutions that lead regular folk are Vanguard, Fido, et al. I think that Money magazine and Kiplinger's also do a credible job as long as people read past some of the "hot" stock articles that appear now and then. The problem is that there are a handful of good players out there and then there are a bunch of scum-bags who take advantage of people's lack of knowledge. Target date funds make things simpler as well.

Some of what we do is optimizing - for example, take tax efficient placement. If someone had the appropriate AA in target date funds across taxable, tax-deferred and tax-free accounts, while it is a bit sub-optimal and not what i would want for myself because i'm a bit anal about things like that, it probably wouldn't jeopardize their retirement plans.

My insurance agent BIL argues that there are people like you describe who need steerage and hand-holding and that is what he does but there is obviously a cost to that since he needs to eat and has a mortgage to pay too. I concede that he has a point and as long as clients of folks like him get treated fairly then that's fine, but there are many bad apples out there.

I recently helped my BIL's family think through the best way forward for some money his 91 yo mom had in a variable annuity. The VA they were sold returned about 5.5%, net of fees over the last 10 years based on their single premium paid 10 years ago and the value today. While it is lower than the 7.3% Wellesley returned for 10 years by roughly the amount of the fees, it is a lot better than if they had done nothing and just kept in in the bank so one could argue that the person who sold them the VA did them right because s/he at least got them to do something.
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Old 09-10-2013, 03:20 PM   #7
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Well, the good news is that if it all falls apart, the E-R.org-ers are all going down together with the ship. I volunteer to help steer people toward the lifeboats. Women and children first!
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Old 09-10-2013, 03:21 PM   #8
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Well, the good news is that if it all falls apart, the E-R.org-ers are all going down together with the ship. I volunteer to help steer people toward the lifeboats. Women and children first!
Women in my boat, children in yours...
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Old 09-10-2013, 03:23 PM   #9
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2 points for you:

1.) LBYM, it solves a lot of issues!

2.) Save as much as possible in low cost mutual funds or ETFs.

I think most people here share these traits.

As far my parents generation I think a big difference was land/house prices were so much lower (and not just adjusted for inflation, I really think a dollar bought more) and interest rates were lower ignoring the Fed's meddling over the past 5-6 years. Also people bought things with cash. Financing was not the norm so they did not get into credit card debt, credit was not as commonly used as it is for everything today. People lived simpler lives, coming from the depression use it up, wear it out, make it do was an ingrained mode of living vs today's buy buy buy nonsense. Education costs were minimal, if I told you what i paid for an associates degree in Data Processing in 1968 to 1970 you'd cry!
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Old 09-10-2013, 03:24 PM   #10
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Women in my boat, children in yours...
Ha!!! You are an incorrigible dog, buddy!
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Old 09-10-2013, 03:33 PM   #11
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tmm99, I don't disagree with you in concept. It's true that today's world is more complicated (in MANY ways). However, the complication I see in today's retirement world is because we have so many choices and so many (from scrupulous to non-scrupulous) folks vying for a chunk of our investment stash.

In the most general terms, "retirement planning" isn't all that complicated if you don't insist on seeking the ultimate in return or want the vacation-home-on-the-Riviera after retiring from GM with 30 years in the Union.

In simplest terms folks (high-school drop-outs to PHDs) should be able to grasp the concept of:

1. saving some reasonable amount of every pay check (minimum 10%, up to 20% or more if comfortable)

2. avoiding revolving credit

3. investing in some reasonable mix of low-cost index funds (stocks/bonds from 20/80 to 80/20) for 30+ years (or less if it all works out).

4. shooting for a stash of approximately 25(+?) times expected yearly expenses (beyond SS and Pension, etc.)

5. (the most complicated thing - and arguably "optional") reasonable tax-avoidance/planning such as using IRAs, 401(k)s, etc.

We can (and do, here, heh, heh) complicate this almost infinitely (when to take SS, which low cost company to use (Schwab, FIDO, VNG, etc.), belt AND suspenders or seat of the pants, all stocks/bonds or some annuities, etc. etc. etc. and still more etc. etc.

My point isn't that folks are actually doing 1 - 5 (above) but that it is NOT rocket science to make reasonable preparations for retirement (until you get into the nitty gritty stuff which makes it "fun" for folks like "us" on the forum).

The fact that folks don't do these things ISN"T (IMO) because they are complicated or even difficult to understand OR that folks don't know or can't find out about them just about any place. No. It is because they take more discipline than most folks have.

All are free to quibble with my list, and I wouldn't doubt we could make it shorter or longer. Still, saving/investing isn't about having a lot of knowledge or expertise. It's about DOING it consistently (hence the concept of discipline). Of course, I could be wrong and YMMV.
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Old 09-10-2013, 03:39 PM   #12
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Every generation feels like the previous generation had it better. In some ways yes, but in other cases no. In the "old" days you only had a few funds to pick from and they probably had fairly high fees. Now you can pretty much slice and dice your investments anyway you want with competitive low fees.

I've had my nephews and neices ask me what they should do with their money and I usually just say "buy VG Wellington" and then forget about it. They could do worse. . .
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Old 09-10-2013, 03:48 PM   #13
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I don't think anything has changed. Folks are just being fooled by all the people telling them that it is complicated. It is not complicated.

My dad had books from Graham and Dodd about how to pick stocks. He had to buy individual bonds, too. All those index funds hadn't been invented yet. His broker was probably Merrill Lynch Pierce Fenner and Smith. He paid commissions through the nose.

Nowadays, you've got mutual funds that have no commissions. The TIAA-CREF line-up can be as simple as it was in the '50s. Otherwise, you've got so-called Target Retirement funds.

There is a whole bunch of crap that you don't need to know anything about. Like whole life insurance.
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Old 09-10-2013, 03:49 PM   #14
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Women in my boat, children in yours...
Hope you don't mind if I clamber aboard in falsies, high heels, lipstick and a wig.
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Old 09-10-2013, 03:54 PM   #15
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Here is my sentiment.

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. (
Yeah and because of the great depression, they all invested in bonds and other safe investments that shrunk in the l970s inflation. My Dad (CPA) often helped elderly neighbors and relatives with financial decisions and was very upset discovering this. One relative took trips to Europe (via liners) first class for a couple of decades cuz they were sooo set --- they ended up barely getting by by the 1980s.
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Old 09-10-2013, 04:06 PM   #16
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/snip/
I recently helped my BIL's family think through the best way forward for some money his 91 yo mom had in a variable annuity. The VA they were sold returned about 5.5%, net of fees over the last 10 years based on their single premium paid 10 years ago and the value today. While it is lower than the 7.3% Wellesley returned for 10 years by roughly the amount of the fees, it is a lot better than if they had done nothing and just kept in in the bank so one could argue that the person who sold them the VA did them right because s/he at least got them to do something.

This is true, and also the way you need to look at it at times....

Once with one of my sisters, I was reviewing her investments in her 401 and said 'all these funds have high fees, why did you choose them'.... she said, it was my FA... I said he was not doing her any favors.... she said 'yes he has. I would not have invested anything the last 10 years if he had not come around at work and talked me into investing'.... My thinking.... OK, point taken.....


As a side note, he did not put her in really bad investments that we sometimes here about.... she was in ones that were relatively good, just higher fees than I would like... but normal to the industry....
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Old 09-10-2013, 04:17 PM   #17
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I don't think anything has changed. Folks are just being fooled by all the people telling them that it is complicated. It is not complicated.

My dad had books from Graham and Dodd about how to pick stocks. He had to buy individual bonds, too. All those index funds hadn't been invented yet. His broker was probably Merrill Lynch Pierce Fenner and Smith. He paid commissions through the nose.

Nowadays, you've got mutual funds that have no commissions. The TIAA-CREF line-up can be as simple as it was in the '50s. Otherwise, you've got so-called Target Retirement funds.

There is a whole bunch of crap that you don't need to know anything about. Like whole life insurance.
I think your post says a lot. Too many sharks in the sea. I must say though your dad isn't an average Joe. I am talking about the run of the mill average folks who only vaguely know what mutual funds are, and they don't realize there are diffrent fees associated with different funds and they don't seem to grasp the concept when you try to explain it to them. Don't you know people like that? I know several.

I am thinking that some kind of sensible finance education mandatory in high schools might be of benefit. Do they do that now?? Like they have Home Economics??
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Old 09-10-2013, 04:19 PM   #18
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It's only as complicated as you want to make it. Basic rules are simple:

1) LBYM
2) Save as much as you can in a low cost index funds -- if you can't figure out how to create a balanced portfolio, you can always just buy target retirement funds and set it and forget it.

If you do those two things for your entire working career, you should be just fine. Everything else is gravy.
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Old 09-10-2013, 05:29 PM   #19
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It's only as complicated as you want to make it. Basic rules are simple:

1) LBYM
2) Save as much as you can in a low cost index funds -- if you can't figure out how to create a balanced portfolio, you can always just buy target retirement funds and set it and forget it.

If you do those two things for your entire working career, you should be just fine. Everything else is gravy.
I think you have a point, but if this were literally true, this board would have collapsed long ago.

We have busy perpetual threads on social security, Medicare, Obamacare, Obamacare subsidies, SWR, etc.

Just filing a 1040 for most of us takes a lot of care, plus usually some spending, even without professional help.

The only people who can hope to live similarly to our parents and grandparents generation are those who have public sector jobs and pensions. And who knows how much longer that will last.

Not that they would listen to me, but I considered trying to counsel my kids toward a public job, but then I realized that they would be heavily exposed if they had not developed the fast on your feet self reliant habits that one must have today in the competitive sphere.

Ha
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Old 09-10-2013, 05:44 PM   #20
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Ha, I don't know if that is absolutely true. My wife pulls in far more at a private job as a software engineer than she probably would in the public sector. The only downside to private employment is the 401K limits are too low. In the public sector you can put in 30 years and have a COLA pension that equals 70% of your highest 3 years or something like that. In the private sector you can max your 401K for 30 years and still end up not being able to buy a similar COLA'd annuity if the markets did not treat you well.

So you are forced to save even more in a taxable account, but this is exposed to creditors and didn't get to go in tax deferred so might not grow as large.

At the level where the public and private jobs pay the same, the public job is a no brainer, I will agree with that.
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