ridiculous approach to retirement??

[teejayevans]

Another one of those 401K/IRA do it yourself method has failed.
http://www.nytimes.com/2012/07/22/opinion/sunday/our-ridiculous-approach-to-retirement.html

Not sure what she means by this quote, funny, I didn't think it was that difficult?

Basing a system on people’s voluntarily saving for 40 years and evaluating the relevant information for sound investment choices is like asking the family pet to dance on two legs.

TJ

 

[haha]

Another one of those 401K/IRA do it yourself method has failed.
http://www.nytimes.com/2012/07/22/opinion/sunday/our-ridiculous-approach-to-retirement.html

Not sure what she means by this quote, funny, I didn't think it was that difficult?

TJ

Maybe she accurately realized that people like you (and most of us here) are unusual?

 

[braumeister]

Stuart the Salsa Dancing Dog - YouTube

 

[FUEGO]

This is a laughable article. The 401k/IRA has failed for some, but works great for many that use it. The truth of the matter is that some people like awesome stuff now (like big houses, sweet speed boats, and flashy cars) and don't want to spend any time thinking about or planning for their future. After all, it might take time out of their busy schedule and crimp their style.

I would also note that the author is also an active proponent of "reforming" our 401k and IRAs. I forget the details but her alternative was basically scrap those and have Guaranteed Retirement Accounts instead (some form of social security on steroids that gives a defined benefit backed by the government). From what I remember from her proposal, it would be a raw deal for most people seeking to ER, and add many years to our working careers to allow enough income in retirement to live comfortably.

 

[ERD50]

I did like this quote from the article though:

In my ad hoc retirement talks, I repeatedly hear about the “guy.” This is a for-profit investment adviser, often described as, “I have this guy who is pretty good, he always calls, doesn’t push me into investments.” When I ask how much the “guy” costs, or if the guy has fiduciary loyalty — to the client, not the firm — or if their investments do better than a standard low-fee benchmark, they inevitably don’t know.

As we've said before - once you know enough to know if your 'guy' (or 'gal') is 'pretty good' or not, you probably know enough to DIY, and save the expense and the likely under-performance as they chase yield or churn from one investment to another.


-ERD50

 

[LOL!]

So would a solution be that the only 401(k) plan available would be the Federal Thrift Savings Plan? And even so, perhaps the only fund one could invest in would be a Target Retirement Fund? And one would be forced to contribute 10%, 15%, or even 20% of salary to that plan.*

That way, the folks with "that guy" could not shoot themselves in the foot. I suspect that such a plan would not affect many people on this forum because the folks on this forum already save/invest at a higher percentage. They would just adjust their asset allocation to include this "chosen by the government" fund.

*Isn't the Australian Superannuitation plan something like this?

 

[Nords]

Basing a system on people’s voluntarily saving for 40 years and evaluating the relevant information for sound investment choices is like asking the family pet to dance on two legs.

Ironically, we managed to figure out how to ER-- but we've never bothered to learn how to dance on two legs...

 

[Alan]

So would a solution be that the only 401(k) plan available would be the Federal Thrift Savings Plan? And even so, perhaps the only fund one could invest in would be a Target Retirement Fund? And one would be forced to contribute 10%, 15%, or even 20% of salary to that plan.*

That way, the folks with "that guy" could not shoot themselves in the foot. I suspect that such a plan would not affect many people on this forum because the folks on this forum already save/invest at a higher percentage. They would just adjust their asset allocation to include this "chosen by the government" fund.

*Isn't the Australian Superannuitation plan something like this?

I believe the Australian system is something like you describe except that the employee is not required to make any contributions. The employer is required to contribute 9% (soon to go up to 12%) and the employee can make voluntary additional contributions if he wishes.

While staying in Sydney on a vacation in 1989 I chatted with a guy in the kitchen of a place we were staying. He said he worked for the Australian government and was a member of a team looking at private pension schemes around the world, including the US 401k. Interesting that 3 years later they came out with the superannuation plan. My brother has told me that his retirement plan mainly consists of making additional contributions since he moved there with his family in 1995. (He also plans to work until he drops)

Superannuation in Australia - Wikipedia, the free encyclopedia

Compulsory superannuation in combination with buoyant economic growth has turned Australia into a 'shareholder society', where most workers are now indirect investors in the stock market. Consequently, a lively personal investment marketplace has developed, and many Australians take an interest in investment topics.

 

[growing_older]

Unfortunately, the author isn't so much analyzing the data, as selecting the data she wants to present to argue for her idea of new universal government-bond required savings accounts as annuities to replace the current 401k. Because she's making a political case, it's hard to know how balanced, or not, her reasons are, much less what is the case for any alternatives. She's been publishing these ideas in many places for the last few years. This wasn't analysis. It was editorial.

The Australian system more resembles a compulsory 401k than the Ghilarducci plan. In Australia the investments are chosen from a large number of funds. In the Ghilarducci plan, the only available investment is a new class of government guaranteed inflation protected bonds.

 

[samclem]

This wasn't analysis. It was editorial.

+1. She has submitted proposals before (which were favored by some in government) that would eliminate 401Ks and IRAs in favor of a government-run system. No, thanks.
The NYT should be better than this--show us the numbers and back it up with some analysis.

 

[Danmar]

As we've said before - once you know enough to know if your 'guy' (or 'gal') is 'pretty good' or not, you probably know enough to DIY, and save the expense and the likely under-performance as they chase yield or churn from one investment to another.


-ERD50

+1 Never used one, never will.

 

[flyfishnevada]

This sound like an attempt to convince people to stop relying in themselves and begin relying on the government to take care of us. Investing yourself is bad, but the government can do better. I promise they won't take your money and spend it on social programs, defense spending and/or pet projects. Trust us.

 

[Notmuchlonger]

Let government protect you from yourself.

 

[mortal]

Lets not forget folks, they're talking about joe shmoe here, not members of E-R.org. I think you would do well to remember that we are the exception, not the rule. I come from a rural small town, and I have many friends that are downright good people. Not financially literate, but good people. Most of them will retire with social security as their main income.

I'd welcome some sort of government program that consolidated 401k/IRA contributions into one account, invested conservatively for the person's age, and made it super simple to save and retire.

What we currently have fails most Americans, and is therefore, not *working*.

 

[obgyn65]

I would welcome this idea also.

I'd welcome some sort of government program that consolidated 401k/IRA contributions into one account, invested conservatively for the person's age, and made it super simple to save and retire.

 

[BLS53]

So you guys don't like people retiring with only SS and pensions, and now you don't like mandated private accounts either.

Do you really think the bulk of the population has the inclination and aptitude to amass an investment portfolio on their own?

I'm far from stupid, and I don't understand half the stuff you discuss on here concerning investing.

And as for government mandated 401k's putting a crimp in your E-R plans. Guess you'll just have to earn more money, and step up your investment skills even further.

 

[RISP]

Haha.

These accounts would be required, professionally managed, come with a guaranteed rate of return and pay out annuities.

(emphasis by me)
Yeah, because that guarantees optimal results. /irony off
As a non-US citizen, I would give an arm and a leg for the retirement savings options you guys have.

 

[LOL!]

I'd welcome some sort of government program that consolidated 401k/IRA contributions into one account, invested conservatively for the person's age, and made it super simple to save and retire.

What we currently have fails most Americans, and is therefore, not *working*.

When I read this, I was reminded that there is already a precedent for exactly such a thing for college savings. Many states set up a simple "Invest for your child's college tuition" program. These were not the 529 plans where parents pick the investments but were things like the Texas Guaranteed Tuition Plan.

From the NYTimes in 2009: http://www.nytimes.com/2009/10/05/education/05college.html?pagewanted=all

But in the last year, the stock market slump and rising college costs have combined to drive all but two of the nation’s 18 such funds, known as prepaid college savings plans, into the red, jeopardizing those pledges.

Basically, the problem is the guarantee. The government cannot and should not guarantee anything. But it could mandate a simple, low-cost, way to invest for retirement like the TSP to everyone.

 

[teejayevans]

I would welcome this idea also.

I wouldn't.
We already have a REQUIRED program that annuitizes your contributions, is inflation adjusted, it's called social security. If we need more SS, we can just raise SS taxes and be done. Of course SS had it's own problems, problems that won't be solved by ANOTHER government program.
TJ

 

[skyvue]

+1. She has submitted proposals before (which were favored by some in government) that would eliminate 401Ks and IRAs in favor of a government-run system. No, thanks.
The NYT should be better than this--show us the numbers and back it up with some analysis.

People on this board (myself included) do not want this type of plan because we have the discipline to save on our own. However, I would arge that they plan she describes would be better off for the majority of Americans and perhaps our country in general. The "average" American has proven they lack the discipline to save for their own retirement and thus need somebody else to do it for them.

 

[teejayevans]

Do you really think the bulk of the population has the inclination and aptitude to amass an investment portfolio on their own?

I'm far from stupid, and I don't understand half the stuff you discuss on here concerning investing.

Which is why we need financial education in schools, should be a required course.

And as for government mandated 401k's putting a crimp in your E-R plans. Guess you'll just have to earn more money, and step up your investment skills even further.

Especially when the govt decides that it's in their best interest that your new retirement age is 67 or later.
TJ

 

[pb4uski]

While the system has failed for many people, it is because of their lack of discipline, not because the system is flawed. IMO the fact that you shouldn't cash out your 401k when you change jobs, raid it before retirement, etc are or should be well known to the general population given all the articles and help that is out in the public domain. I'd bet that if you designed a questionnaire that most people know it is not wise to do such things, but they do them anyway because they are weak.

If one has access to a 401k and saves and increases their savings over time and invest it a target date fund (hopefully low cost, or mix of bond/equity funds) then they will have a substantial retirement nestegg in their 50s and 60s. That is what many people on this board have done so it proves that it is possible.

In my mind the question becomes whether it is better to dumb down the system so people can't be stupid (say SS on steroids) or educate people better.

Perhaps an alternative might be to either outlaw or make some of the stupid things that people do harder. For example, require that a 401k be transferred to another 401k or IRA when one changes jobs, outlaw or increase the penalties for early withdrawals, require employers to provide at least some basic index low-cost investment options, etc.

 

[Texas Proud]

I find it interesting that there are many billions of people on this planet that do not even come close to the wealth we have here and they seem to be doing just fine... without any retirement plan....

AND, people have been living for many hundreds of years without any plan...

All these things are new... they did not exist when my mother was born...


I just do not think it is gvmt's job to make sure everybody is able to live like they did prior to retirement.... SS is there for basics... you can live OK with that level of income..

 

[Hamlet]

Bingo. I agree that we need a safety net to prevent the bulk of the population from ending up destitute in retirement.

I feel that SS handles this pretty well. We can discuss tinkering with it, but ultimately I don't see any reason to greatly expand it. I certainly don't want the government creating a separate forced annuity program. They have enough problems keeping the promises they have already made.

SS is generally enough to keep seniors out of brutal poverty. They may have a reduction in their standard of living if they haven't saved, but they will be able to pay rent in a basic place and get enough to eat.

I wouldn't.
We already have a REQUIRED program that annuitizes your contributions, is inflation adjusted, it's called social security. If we need more SS, we can just raise SS taxes and be done. Of course SS had it's own problems, problems that won't be solved by ANOTHER government program.
TJ

 

[timeasterday]

I find it interesting that there are many billions of people on this planet that do not even come close to the wealth we have here and they seem to be doing just fine... without any retirement plan....

I bet a lot of them live in a culture where the kids are responsible for supporting them in their old age. That's the only way my in-laws can be surviving right now.