More people forced into ER and early social security

[dex]

If the theory holds, we'll have to hit bottom, scuffle amongst ourselves economically and politically for a while, and make a lot of sweeping changes before things return to prosperity in (perhaps) a decade or so.

Nice post - pretty much what I think.

 

[nun]

Nobody stole the American worker’s ability to retire comfortably. Defined benefit plans were/are merely one vehicle for achieving financial independence (i.e. a comfortable retirement). Others remain available, even if they are (arguably) less effective. Ultimately, the American worker must take responsibility for his own retirement, not his Employer or the FED. If that means decreasing his SOL to increase after-tax retirement savings, then so be it.

I agree about taking responsibility, but many times the individual worker is at a disadvantage when negotiating with the employer because of the imbalance in resources and any argument for taking personal responsibility must also include encouragement for unions and collective bargaining. I agree with Adam Smith that we own our labor and I extend that to champion the ability of workers to organize to negotiate with the employer for fair wages, conditions and benefits.

I actually prefer 401k plans to DB plans because of the control they give to the employee, however, my problem is that when they replaced DB plans the result was an effective reduction of employees' pay. Wages were not increased to so that employees could fund their 401ks at the same level to be equivalent to the DB plan it was replacing. That's my beef.

 

[ziggy29]

I actually prefer 401k plans to DB plans because of the control they give to the employee, however, my problem is that when they replaced DB plans the result was an effective reduction of employees' pay. Wages were not increased to so that employees could fund their 401ks at the same level to be equivalent to the DB plan it was replacing. That's my beef.

Agreed. I have no problem with the "new rules" that say you are more or less solely responsible for your own retirement (aside from Social Security, anyway). For those who entered the working world with that expectation already in place, it won't be a difficult adjustment. For those who toiled for 10-20 years with a pension expectation which was yanked, on the other hand, it's much different. You can't retroactively go back and max out personal retirement savings (which you didn't expect to need with the pension), and you can't go back to your 20s and get a public sector or union job and "restore" your pension expectation.

I had a pension in my first job, but fortunately I never trusted it or Social Security would be there for me so I've been aggressively investing in my 401Ks and (later Roth IRAs) since my early 20s. That's the main reason FIRE is still in my grasp even after my first Megacorp canceled my pension. If I just trusted the pension would keep growing through 30+ years of service and didn't bother to save much for myself, I'd probably have to kiss FIRE dreams goodbye.

In reality, though, the replacement of pensions with 401Ks probably resulted in a net compensation cut for employees even with a company match.

 

[nun]

A

I had a pension in my first job, but fortunately I never trusted it or Social Security would be there for me so I've been aggressively investing in my 401Ks and (later Roth IRAs) since my early 20s. That's the main reason FIRE is still in my grasp even after my first Megacorp canceled my pension. If I just trusted the pension would keep growing through 30+ years of service and didn't bother to save much for myself, I'd probably have to kiss FIRE dreams goodbye.

In reality, though, the replacement of pensions with 401Ks probably resulted in a net compensation cut for employees even with a company match.

When UTC sold the division I worked for part of the deal was that they vested everyone in the pension plan, even if they didn't have the required 5 years in the plan. That was a condition that the president of our division fought for. As a result I have a small COLAed pension coming to me at 59.5

 

[MichaelB]

I am truly sorry if you, or anyone else, found my post to be disrespectful. It certainly was not my intention.

And I’m feeling my age in my bones and showing it in aggressive posts. You’ve done nothing wrong - apologies as well.

Here is one of the causes - public schools
./.
Bad schools produced bad teachers which produced worse students - repeat the cycle.

Agree. Big problem, getting worse.

If the theory holds, we'll have to hit bottom, scuffle amongst ourselves economically and politically for a while, and make a lot of sweeping changes before things return to prosperity in (perhaps) a decade or so

Interesting theory. I guess that means there’s hope for my grandchildren (but maybe not so much for my kids).

Maybe it is naïve to think that Employers (for the most part) treat Employees fairly, and that, when necessary, laws are generally enforced to prevent the type abuses mentioned above.

Not so much naive as dangerous. The problem is not the likelihood you choose poorly, it’s the consequence. Take the example I used above, replace pension with social security, and the same can happen to you. Rules are rules until they’re not, and promises can be broken. The lesson – make sure to take care of yourself.

 

[Gumby]

Fair enough.

To be fair, you have precisely the right outlook for someone just starting out in the work world -- don't rely on your employer or the government or anyone else to secure your financial future; you are in charge of your own destiny. As a consequence, I believe that you will be very successful in life and undoubtedly will retire early.

But I think I can say without fear of contradiction that it was a dramatically different world when most of us started working. (For someone 62 today, that could have been as early as about 1966). Among other things, we were all, individually and as a society, much more trusting of societal institutions like the government, the schools, the church and big business. Should we old guys have been less trusting and more skeptical? In hindsight, of course! But our expectations were shaped by the society in which we lived, and it was not unreasonable for us to believe that getting a pension was a matter of course and something upon which we could rely.

I do apologize for being so curt with you earlier.

 

[oilspill]

Retirement for the masses is a modern Western invention. The patent on this invention is about to expire as per the law of nature. It is impossible for 1 worker to support 1 idle non-worker indefinitely, but that is the situation the US finds itself in (154M labor force vs 310M population).

Retirement in the future will be for the privileged few, as it has been throughout history. Everyone else will work (or starve) until they die. This brings up an interesting question. If most people will be unable to retire tomorrow, are they correct to make no plans for it today? It would appear so - strange as it may seem.

 

[REWahoo]

Art, is that you?

 

[BTravlin]

Retirement for the masses is a modern Western invention. The patent on this invention is about to expire as per the law of nature. It is impossible for 1 worker to support 1 idle non-worker indefinitely, but that is the situation the US finds itself in (154M labor force vs 310M population).

Retirement in the future will be for the privileged few, as it has been throughout history. Everyone else will work (or starve) until they die. This brings up an interesting question. If most people will be unable to retire tomorrow, are they correct to make no plans for it today? It would appear so - strange as it may seem.

Could be but I'll go ahead and plan accordingly anyway because I don't intend on being one of the "most".

 

[ERD50]

Could be but I'll go ahead and plan accordingly anyway because I don't intend on being one of the "most".

+1

No matter how bad it gets, those who took more steps to prepare will do better than those who did not. I think we see evidence of that every day.

-ERD50

 

[harley]

That certainly sounds like a Raw deal. I have very little practical experience, but I generally feel like I have a pretty good grasp of the various theoretical concepts. In my mind, I didn’t consider that kind of manipulation to be possible - I assumed that there are/were protections in place to prevent that type of thing.

However, perhaps it is time that I appreciate the limitations of theoretical concepts. Maybe it is naïve to think that Employers (for the most part) treat Employees fairly, and that, when necessary, laws are generally enforced to prevent the type abuses mentioned above. Anyhow, thanks for taking the time to provide a more detailed explanation of your point of view.

To be fair, you have precisely the right outlook for someone just starting out in the work world -- don't rely on your employer or the government or anyone else to secure your financial future; you are in charge of your own destiny. As a consequence, I believe that you will be very successful in life and undoubtedly will retire early.

But I think I can say without fear of contradiction that it was a dramatically different world when most of us started working. (For someone 62 today, that could have been as early as about 1966). Among other things, we were all, individually and as a society, much more trusting of societal institutions like the government, the schools, the church and big business. Should we old guys have been less trusting and more skeptical? In hindsight, of course! But our expectations were shaped by the society in which we lived, and it was not unreasonable for us to believe that getting a pension was a matter of course and something upon which we could rely.

I do apologize for being so curt with you earlier.

It's interesting. I hadn't thought of this for a long time until I read these posts. But in my megacorp, which was broken up as a monopoly back in '83/84, we considered ourselves part of the company. There was a partially written partially implied contract. We would work our patooties off for the company and they would take care of certain financial obligations when we retired. After divestiture we entered a world of competition that was so new to us that they actually made us take training to make the point that the company didn't owe us a daggone thing. However, if we valued our postions we had best keep working those patooties off. And if we made it to retirement there'd be something there for us. Over the next 15-20 years the environment became very much an us vs. them situation, with them being the company. And when I retired it was at the end of the process MichaelB described, with the company freezing pensions for all employees and moving a huge chunk of the plan to the executive pool. I ended up taking a lump sum that was significantly smaller than what I would have gotten had I been eligible for retirement 5 years earlier. If I hadn't always been a LBYMer I wouldn't have been able to retire on what I got, and many of my friends and cow erkers will be working for many more years now than they had originally planned. Partially their own faults, I agree. But not having been there, you don't know what it was like before.

So I agree that you have the right attitude for someone starting out now. And I can pretty much guarantee that things will be very different when you are at the end of your career than they are now. Sorry I can't say exactly how. Never was that good at predicting. But it's like the line from That Thing You Do. Watch your money and you'll land on your feet. Good luck.

 

[nun]

+1

No matter how bad it gets, those who took more steps to prepare will do better than those who did not. I think we see evidence of that every day.

-ERD50

Which is why we need to make sure SS is protected. Some people on here might not actually need it, but what amazes me are the mass of people who parrot the popular mantra of "it won't be around when I retire" and then do nothing to save for retirement either because they don't make enough or spend too much. Everyone should make it known that they expect SS so that politicians will protect it as it's going to be the only thing for a lot of people. That will require sacrifice from everyone in taxes or delayed benefits, but the pain should be shared. I firmly believe that the US is capable of providing a decent retirement and expressions of return to the dark ages before the New Deal are frankly unamerican.

 

[Mysto]

I agree with nun. Recently I had a younger friend parrot the popular mantra on SS. It's a scam! It won't be there when I get there. I could do better with the money myself.

I asked him about his pension. He has none coming.
I asked him about his 401K. After some digging I found out it was very small.

The truth - it is not a scam or ponzi scheme (the only scam is the government spending the overages)

Most people heading into retirement have not saved and without SS couldn't survive - there is no reason to believe that will change - in fact views about SS change as people get closer to getting it.

If it was eliminated not only would it not be better invested by the majority of the populace (I was omnipotent when I was young too)- but based on the replacement of pension plans - employers would not pass on the difference - it would become company profits

If SS was eliminated the younger workforce would have a much tougher time finding work as the older populace would now be competing with more skills and perhaps some savings so they could work for less.

If SS was eliminated then a large part of the populace would be destitute (those that couldn't find or were unable to work) and we would have to provide for them through other social programs - the cost will not go away.

Finally - if projections are correct returns on investments will be smaller in the future and wage growth will slow or diminish making it harder to prepare for retirement.

The next generations should not try to eliminate SS but fight like hell to keep it. They will need it more than I will. Change it if necessary but some form is needed more than ever.

That's my three cents.

 

[wildcat]

Which is why we need to make sure SS is protected. Some people on here might not actually need it, but what amazes me are the mass of people who parrot the popular mantra of "it won't be around when I retire" and then do nothing to save for retirement either because they don't make enough or spend too much. Everyone should make it known that they expect SS so that politicians will protect it as it's going to be the only thing for a lot of people. That will require sacrifice from everyone in taxes or delayed benefits, but the pain should be shared. I firmly believe that the US is capable of providing a decent retirement and expressions of return to the dark ages before the New Deal are frankly unamerican.

I hear you and what you say sounds good on paper. I am in the younger crowd and I admit I say that sort of stuff to myself - not going to be there or will be in some very different, reduced form. The thought of SS not being around makes me expect to save that much more during my working years. Cautious but realistic approach IMO.

What reason do I have to believe otherwise? Are politicians really going to start making those hard choices when election results depend on it? It's also easier to just kick the can down the road. Are people really going to start doing what is best for the majority of the country? One thing I have realized from this board & others who have paid in SS over the years is that people will look out for themselves with respect to SS. We are a society of "as long as I get mine" in many respects. Whether it be bad or good, just saying.....

 

[Gumby]

If one were cynical, one might believe that pushing the meme "social security is a scam and will never be there for me" is done deliberately for the purposes of shaping expectations, so that people will be more willing to tolerate benefit cuts.

 

[harley]

I loves me a good conspiracy theory!

 

[Carnage]

As someone who is (relatively) younger, I can say my DW and I will continue to push the, "We paid into it, we want it" meme.

 

[ziggy29]

If SS was eliminated the younger workforce would have a much tougher time finding work as the older populace would now be competing with more skills and perhaps some savings so they could work for less.

This to me is part of the most powerful logical argument against raising the SS retirement age. But it's not just that the older workers would be in there with more skills and experience (which is often used by employers as a reason *not* to hire someone; too much experience means too much salary expectations in their mind, even if it's just a way to legitimize age discrimination). It's also that they'd still be in there *period*, competing for jobs instead of being able to retire and leave the job to someone else.

I understand the demographic arguments for raising the age and they make perfect sense in a vacuum with no unintended consequences. But without the jobs for these millions of extra people who would have to work, many of them would have to fall back on public assistance, and when you factor that in, how much have we saved and what are the add-on social costs of creating a large, impoverished underclass of "young old" who are too young to collect a retirement check and too old to get hired? Not to mention that even more people chasing an even smaller number of jobs would depress wages even further.

 

[travelover]

An easy trap to fall into when discussing this subject is to think the US (or the world) is just a whole lot of people just like us. The people that participate regularly on this forum are infinitely more financially astute, better educated and for the most part just plain luckier than the rest of the world.

 

[bubba]

I actually prefer 401k plans to DB plans because of the control they give to the employee, however, my problem is that when they replaced DB plans the result was an effective reduction of employees' pay. Wages were not increased to so that employees could fund their 401ks at the same level to be equivalent to the DB plan it was replacing. That's my beef.

I've been reading this thread with great interest, most especially since I heard last week no raises at w*rk for anyone next year. In my case, when the 401K replaced the DB and pay was effectively reduced as per Nun's analysis, I didn't fully realize for the first few years that my pay was being reduced. I was very young and retirement was forever away. Then the stock market was flying and the 401K was up, up, up every time you checked the balance, it just didn't register (call me naive).

Then the stock market wiped out several years of contributions and growth. The timeline for retirement gets extended to make the funds last longer. In the meantime, I'm getting older and at some point it's difficult if not impossible to change jobs/careers and start all over so you try to deal, and hope your health holds out.

 

[ziggy29]

especially since I heard last week no raises at w*rk for anyone next year.

Same here. See also 2008, 2009.....

 

[Stevewc]

First I should point out I have not read the entire thread so may have missed where someone covered my point. It might even be random but heavy on my mind?
I think that the baby boomers have paid in plenty money to support SS.
Our congress critters have spent the money on other programs and basically wasted our funds. The system needs to be a lock box of some sort to be retirement funds only. No going into the SS fund for other BS programs. After all SS money is paid out each year the rest is wasted on other BS stuff. We would not be in the terrible shape we are in if the congress critters had kept their dirty paws out of the fund. Actually there is no fund. It is robbed each and ever year.
Just my .02
Steve

PS. I have written my congress idiots about this subject several times. Maybe you should write yours.

 

[Gumby]

The system needs to be a lock box of some sort to be retirement funds only.

Not to make light of your concern, but what would you have them do with all the dollar bills that pile up in this "lock box"? If you or I were a fiduciary for a trust, we would owe an obligation to the beneficiary of the trust to invest the money prudently. Social security works the same way; the money is invested in special United States government obligations, which have always been viewed as the touchstone of prudent investing. In fact, for social security to remain solvent, it relies on the interest paid on these special notes.

Here is a link that makes the mechanism clearer.

Social Security Trust Fund - Wikipedia, the free encyclopedia

Now, you and I may legitimately gripe that the obligation of the federal government to repay those social security "special notes", when added to all the other government obligations, is too large. But the solution to that problem lies in fiscal discipline throughout the government. The mechanism for funding social security is not the actual problem and changing it to a warehouse-sized "lock box" full of dollar bills is not the solution.

 

[Stevewc]

It appears you have taken this a step further than my understanding goes. If there is such a fund that is kept then the treasury bonds sound good to me. My understanding is that there really is no fund at all. I heard President G.W. Bush (not to get political) make a statement on TV that after the retirees were paid each year, any left over money was used for other programs and such. These are surely not his exact words but close.
Steve
PS. I will read the link and try to learn more. Thanks
PSS. This probably part of the speech (Below) I referred to, its in your link:


On February 2, 2005, President George W. Bush made Social Security a prominent theme of his State of the Union Address. One consequence was increased public attention to the nature of the Social Security Trust Fund. Unlike a typical private pension plan, the Social Security Trust Fund does not hold any marketable assets to secure workers' paid-in contributions. Instead, it holds non-negotiable United States Treasury bonds and U.S. securities backed "by the full faith and credit of the government". The Office of Management and Budget has described the distinction as follows:

These [Trust Fund] balances are available to finance future benefit payments and other Trust Fund expenditures – but only in a bookkeeping sense.... They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large Trust Fund balances, therefore, does not, by itself, have any impact on the Government’s ability to pay benefits. (from FY 2000 Budget, Analytical Perspectives, p. 337)
​

Not to make light of your concern, but what would you have them do with all the dollar bills that pile up in this "lock box"? If you or I were a fiduciary for a trust, we would owe an obligation to the beneficiary of the trust to invest the money prudently. Social security works the same way; the money is invested in special United States government obligations, which have always been viewed as the touchstone of prudent investing. In fact, for social security to remain solvent, it relies on the interest paid on these special notes.

Here is a link that makes the mechanism clearer.

Social Security Trust Fund - Wikipedia, the free encyclopedia

Now, you and I may legitimately gripe that the obligation of the federal government to repay those social security "special notes", when added to all the other government obligations, is too large. But the solution to that problem lies in fiscal discipline throughout the government. The mechanism for funding social security is not the actual problem and changing it to a warehouse-sized "lock box" full of dollar bills is not the solution.

 

[Escort Rider]

Back to the original thread subject (people being forced by their circumstances to take Social Securtiy retirement benefits at age 62), only one poster has alluded to the one conceivable upside to this. The downsides are obvious - the individuals involved will have lower benefits for life and it puts more financial strain on Soc. Sec. in the short term. But in the long term, it will ease strain on the system as all those people who took benefits at 62 reach their break-even age. Not much to cheer about, admittedly. But it is an upside.