PBS FRONTLINE - "The Retirement Gamble" 4/23

[nun]

Quote:

Originally Posted by Malcolm2 1. I don't have time to review my plan. Make time, it's important. 2. I want a sure thing for my retirement, someone owes that to me. No sure thing, like everything in life, you need to work at it. Nobody, in your generation or future, owes you a retirement. 3. I hope Social Security keeps me afloat. SS was never intended to be a sole source of retirement income, don't expect it to be in the future. Do not expect the government, or other people, to provide you an income if you chose not to save. I noticed most of the people profiled with problems lived in nice houses with big screen TV's, one was typing away on a $1300 MacBook - umm...

with you on 1 & 2, but you start to loose me on 3. People obviously pay for their SS insurance and it provides diversity in a portfolio. I expect it to be around for a long long time.

[explanade]

If Vanguard funds are offered as a 401k choice, is it a guarantee that there are no hidden fees? Can Vanguard also have paid the administrator?

When you hear that trillions will be extracted by the financial services industry from 401k accounts, you wonder how big a boondoggle private accounts for social security would have been.

[samclem]

Quote:

Originally Posted by explanade When you hear that trillions will be extracted by the financial services industry from 401k accounts, you wonder how big a boondoggle private accounts for social security would have been.

There's this: Every bit of the siphoning off would have been discoverable, the participant can shop smartly to minimize those costs, and the dollars remaining would be the personal property of the person who contributed them. With government benefits, there's absolutely no claim to ownership. When the time comes and we need the money, we'll get whatever the folks in power decide to give us. Visibility on the dollars that get siphoned off to other accounts/uses? I guess you find out when a change is made.

The "basic collective benefit" of SS does have merit, primarily as a foundation that allows all of us who chose to do so the freedom to move beyond it.

[explanade]

Because most people are doing a good job of picking investments in their 401k now?

So they would be wise about choosing low-cost index funds versus the sea of actively-managed instruments which are marketed heavily to them, along with "financial advisors" pushing them towards these vehicles?

[keegs]

Even for those who have the wherewithal to put some money aside, I think some just make poor financial decisions, whether about risk, either too much or too little, decisions based on fear and emotion, pulling out at market bottom, jumping on the bandwagon when the markets up.

I'm not sure the main thrust was to suggest more government regulation but rather changes to what is essentially an ad-hoc arrangement of government incentives into something that produces better outcomes.

If what I just said was already suggested..my apologies for not reading through the thread.

[gerntz]

Quote:

Originally Posted by nun with you on 1 & 2, but you start to loose me on 3. People obviously pay for their SS insurance and it provides diversity in a portfolio. I expect it to be around for a long long time.

Actually, we don't pay for SS, at least sufficiently, or it wouldn't be in danger of needing to reduce benefits and/or increase its tax rates down the road. Per usual, pols overpromised. I don't expect it to go away either, but it's not completely sound as is. The earlier you got/get in, and the less you put in, the better the deal for you personally.

[veremchuka]

Allan Roth's column "Retirement Gamble:" a critical review - CBS News

[mickeyd]

Quote:

Originally Posted by veremchuka Allan Roth's column "Retirement Gamble:" a critical review - CBS News

Thanks for that.

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I do need to point out, Frontline, that you neglected to include a very critical segment in your documentary -- the vital role that active managers play. Seriously, who do you think keeps markets efficient and allows us indexers to profit? Without the expensive active managers, indexing wouldn't work.

Is his statement re: "expensive active mangers" true? Are they actually good for us indexers?

[sengsational]

Quote:

Originally Posted by mickeyd Is his statement re: "expensive active mangers" true? Are they actually good for us indexers?

A straw-man, I think.
I would say that some people need to pay close attention to "the fundimentals" of each publicly traded asset "out there", or the indexers would indeed be in trouble. But that's not a realistic scenario. We don't need high-dollar Wall Street types to look at a P/E ratio and snap-up an undervalued stock, we have Fred the day-trader in his basement that will take over if the Wall Streeter quits.

[samclem]

Quote:

Originally Posted by mickeyd Is his statement re: "expensive active mangers" true? Are they actually good for us indexers?

Yes, they are. But that goes for every analyst that tries to find bargain stocks--including those who work for pension funds, insurance companies, etc. Without these guys keeping prices efficient, indexing absolutely would not work.
Occasionally there are articles published indicating that indexing has become >too< popular, so that prices are getting out of whack. I don't think we're at all close to that point, and if indexing ever does account for a vast majority of the market, the stock-pickers will be rewarded with some well-earned bucks.

[traineeinvestor]

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Originally Posted by Texas Proud One of the things that I find interesting is that there is a lot of complaint on fees of US based funds... I would like to point out that even or high cost funds are 'cheap' compared to funds in other countries... when I was in the UK, there were people who kept asking me how they could invest in these funds because they were so much less than what they had.... I would think that this would be the same across the EU... Not trying to defend the high fees, just pointing out that it is all relative...

This is why I have more of my equity allocation in individual equities than in funds - there are very few genuinely low cost funds available to me out here (and most of the ones which are available are synthetic).

[clifp]

Quote:

Originally Posted by samclem The ERs have to be disclosed and the fees/turnover of funds are very clearly displayed in the prospectus and online. The illustration showing the effects of fees for each $10K invested couldn't be clearer. This illustration and other language in the prospectus is included due to mandates from DC, so don't be so sure legislation can't change things. And, despite the very clear portrayal provided, many people don't pay it much attention. I think in this regard (giving info on costs) there's little to be gained by mandating more or making it still simpler. The "consumers" aren't paying attention to the info. I don't think they'd pay attention to car mileage ratings, either, if they believed the car model with the most chrome would drop a $100 bill out of the tailpipe each morning.

This week I attended the first (and possibly the last) 401K committee meeting for the medium sized non profit I am on the board of directors.

Our adviser, a large bank who handles are nearly 8 digit investment portfolio, provided us with options of different 401K providers. The four choices all had average ER for the mutual funds ranging from 1.3% to 1.48% including a few with decent choices like American funds. Conspicuous by their absence was an option to use Vanguard as 401K provider.

However, it is pretty clear that customers, the organizations employees don't really care. Attempts to provide to retirement seminars have resulted in low to no attendance. The bank had geared up to provide detailed answers about cost that new 401K disclosure on expenses were expected to generate.

In organization with just over 50 employees and almost 30 participants in the 401K (we provide a 5% match) not a single employee had a single question.

Who ever made up the saying about horse and water, obviously was really talking about retirement saving and the US public. :-(.

[Texas Proud]

Quote:

Originally Posted by clifp This week I attended the first (and possibly the last) 401K committee meeting for the medium sized non profit I am on the board of directors. Our adviser, a large bank who handles are nearly 8 digit investment portfolio, provided us with options of different 401K providers. The four choices all had average ER for the mutual funds ranging from 1.3% to 1.48% including a few with decent choices like American funds. Conspicuous by their absence was an option to use Vanguard as 401K provider. However, it is pretty clear that customers, the organizations employees don't really care. Attempts to provide to retirement seminars have resulted in low to no attendance. The bank had geared up to provide detailed answers about cost that new 401K disclosure on expenses were expected to generate. In organization with just over 50 employees and almost 30 participants in the 401K (we provide a 5% match) not a single employee had a single question. Who ever made up the saying about horse and water, obviously was really talking about retirement saving and the US public. :-(.

Vanguard is not that interested in small plans.... I work at a small company and I choose our provider a few years ago.... Vanguard would not even talk to us at all...

We went with Fidelity's pre-packaged plan and were able to pick from a group of about 600 funds... there were many funds that had expense ratios of less than .20%.... we do have to pay $40 for each participant and fees for the tests and tax returns.... but not too bad....

[Malcolm2]

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Originally Posted by nun with you on 1 & 2, but you start to loose me on 3. People obviously pay for their SS insurance and it provides diversity in a portfolio. I expect it to be around for a long long time.

Of course it will be around. It will just provide much less than people think it should. There will also be increasing pressure to means test it. SS is an entitlement, not a personal investment, and can be changed by the government at any time. Due to obvious demographics, the current 20 something can not be expected to pay enough SS taxes to provide benefits to all the baby boomers that failed to save. Just won't work.
If someone has that as their main retirement plan they are headed for disaster and disappointment!

[Rustward]

This show was just an attempt to depict the 401K in a poor light.

HiltonSmith, the 31 year old "economist" who can't seem to understand why his 401K does not go up: "ROBERT HILTONSMITH, Economist: I have a 401(k). I save in it. It hasn’t seemed to go up. It’s awful. I kept checking the statement and I’d be, like, “Why does this thing never go up? This is weird.” I mean, the stock market I knew was up and down but I was, like, “I still should be seeing some returns.”"

This 401K was, "like", started SINCE 2008. Now, if he invested in MM or stable value funds, I can see how this could happen, but there is no way a diversified portfolio would have lost money between 2008 and 2013.

Crystal Mendez, 32 year old school teacher with savings of $115K. In reality, she is doing pretty well. She says she is worried and stressed.

Mark and Laura Featherston, 54 and 48. He is unemployed. The article says their portfolio went down in 2008. Who's portfolio did not go down in 2008? They must have made some gross mistake like investing in the wrong things, or selling at the bottom. Then they bought an annuity. Then Mark lost his job and when they tried to cash out of the annuity, they learned about the surrender charges.

Quotes from the Featherstons: "LAURA FEATHERSTON: —not only have you now lost half of your 401(k), but your house is not worth anything anymore, either. So anything that you thought you were going to have there is gone. And now half of your 401(k) is gone.

MARK FEATHERSTON: You know, if it took 13 years to accumulate $80,000 and one year to lose half of that, and then try to get that back in another 13 years, and only be at the $80,000 that you were 13 years ago?"

Are there any 401K success stories? I think there are a lot of those right here. Why didn't Frontline present any of those? They are trying to show how dangerous the 401K is. This is a thinly veiled attempt to convince us that we are too stupid to manage our 401K's and this money should be managed by the government.

Here is a link to a transcript of the broadcast: Transcript | The Retirement Gamble | FRONTLINE | PBS

Teresa Ghilarducci, who was on the show, advocates converting the 401K to a government run program administered by the Social Security Administration. From wikipedia Teresa Ghilarducci - Wikipedia, the free encyclopedia
"In her book When I'm Sixty-Four: The Plot against Pensions and the Plan to Save Them, Ghilarducci proposed mandatory participation in a government-run savings plan to which each worker and his employer would supplement his Social Security pension by contributing 2.5 percent each of her or his salary.[4][5][8][9][10][11] The plan would be administered by the Social Security Administration, but would be separate from Social Security records. In turn, a refundable tax credit of $600 would go to each participant, regardless of his contributions. The account would have a guaranteed interest rate equal to the government's official inflation rate plus three percent.[2]
Videos of lectures given by her and interviews with her can be found on YouTube."

This is even better. Listen to her describe how this would work: 401(k) Foe Teresa Ghilarducci, the Most Dangerous Woman in America - Capital Commerce (usnews.com)


Shame, shame, shame on Frontline.

[mpeirce]

Quote:

Originally Posted by Rustward This show was just an attempt to depict the 401K in a poor light. ... Shame, shame, shame on Frontline.

+1

Just another skirmish in the low intensity war against those of us who think we know best how to handle our own affairs.

[pb4uski]

Quote:

Originally Posted by Malcolm2 ..... 1. I don't have time to review my plan. Make time, it's important. 2. I want a sure thing for my retirement, someone owes that to me. No sure thing, like everything in life, you need to work at it. Nobody, in your generation or future, owes you a retirement. 3. I hope Social Security keeps me afloat. SS was never intended to be a sole source of retirement income, don't expect it to be in the future. Do not expect the government, or other people, to provide you an income if you chose not to save. I noticed most of the people profiled with problems lived in nice houses with big screen TV's, one was typing away on a $1300 MacBook - umm........

Quote:

Originally Posted by nun with you on 1 & 2, but you start to loose me on 3. People obviously pay for their SS insurance and it provides diversity in a portfolio. I expect it to be around for a long long time.

+1 Malcolm2

Nun, the point on 3 was that SS is not intended to be a SOLE source of retirement income - it was intended to keep retirees from being in the poor-house. How long have we been hearing of the 3 legged stool of retirement savings (SS, pensions and personal savings)?

While the pensions leg of the stool has largely been replaced by DC plans, the fact remains that SS was never intended to be the sole source of retirement income.

[walkinwood]

Vanguard's blog has an interesting response to the frontline piece. They make some very good points.
The 401(k) debate | Vanguard Blog

[clifp]

Quote:

Originally Posted by walkinwood Vanguard's blog has an interesting response to the frontline piece. They make some very good points. The 401(k) debate | Vanguard Blog

The Vanguard guy nails it IMO. God knows there are problems with our retirement system, but #1 is people don't like to save money. "I can't be broke I still have limits on my credit card, and checks in my checkbook."

#2 the good old of retirement never really existed and recent changes allowing company to nudge employees into making smarter choices are big step in the right direction. If the impact of fee disclosure has been to see a reduction of fees that is very good thing also.

[timo2]

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Originally Posted by JoeWras The more I read this thread, the more depressed I get about the state of our society. Kind of like watching Frontline. Depressing.

That's why I quit watching frontline so much: I see reality every day, why have reality perfectly portrayed on TV. For the same reason, I can't watch the show 'madmen'. It's too realistic and reminds me of the bad old days.