ridiculous approach to retirement??

[flyfishnevada]

I don't think the article is discussing a plan where those of us on E-R.org get to go along our merry way, while the government takes over everyone elses retirement planning. That's the problem. SS is mandated no matter how responsible you are. This kind of stuff isn't about providing a safety net, it's about taking over. Those of us that choose to save, invest etc., would no longer have that freedom, or it would be curtailed so the masses could be secure. The government is not a cure for stupidity, laziness, or apathy. It breeds those qualities.

Like TJ says, if they would start educating people on the critical financial aspects of life instead of all the BS they are taught in school now, this wouldn't be a problem. Heck, it's not a problem now.

 

[Midpack]

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*.

I'd welcome a voluntary program, but it wouldn't work for the same reason that 401k's 'haven't worked' - which has little to do with investing. 401ks have worked just fine for people who've saved and used them as recommended by 401k admins, it doesn't have to be rocket science as Jack Bogle and many others have demonstrated for decades. I agree most people have not been successful with 401ks, but it's because a) they don't save/save enough and/or b) they think they're a lot smarter than they actually are and do all sorts of stupid things that ultimately have them buying high and selling low or crazy AA's. It's not because they couldn't do better, it's because they're not interested.

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?

Not trying to be flip, but what else should be mandated? Everything?

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.

And there's the core issue...

With all that said, it wouldn't surprise me at all if mandated private accounts became law one day. Wall St would undoubtedly get behind the idea...

 

[grasshopper]

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

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

Sure something else for the kids to sleep through.

 

[growing_older]

In the current system, in order to have a financially secure retirement, individuals must be responsible and do some saving. To help, they have 401k, IRA, 403b and other tax advantaged programs to make it easier. Yet still many (most?) just do not save enough and spend more than they should. Faced with the notion that they MUST be responsible, they still don't and overspend.

Imagine instead a sweeping government program that makes everyone no longer need to be responsible, they are forced to save enough to be slightly better off than Social Security alone. I expect that will quickly become the accepted standard and expectations will shift to spend all that remains - but rely on government programs to take care of everything. We will become even more rare than we already are.

I also cringe at the thought of the single point of failure if everyone's retirement savings is collected into one big program. A bad assumption or poor investment decision could wipe out everyone's savings.

 

[tapper]

I just searched through the United States Constitution and its amendments and I did not find any RIGHT to retirement.

Retirement should just be a privilege for those who choose to participate and therefore the government shouldn't be coming up with new ways of collecting our money.

I believe that a properly implemented social security system would only be used by the destitute and could probably be combined with the welfare system to streamline care for those in need.

 

[pb4uski]

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

Absolutely, positively YES.

Given what is broadly available in 401k's, tIRAs and Roth IRAs there is no fathomable reason that a middle income person cannot amass a nice retirement nestegg to supplement SS. As others have said, it isn't rocket science. If they just had a subscription to Money or another financial magazine that would do the trick as they all say the same things about how it is foolish to cash out a 401k when one changes jobs, use retirement savings for purposes other than retirement, etc. but people do it anyway because they are undisciplined

Now when they are screwed as they approach retirement they will whine about it, but it is simply the cumulative effect of their own bad decisions.

Unless we want a nanny-state (and I do not) to require retirement savings is dangerous direction to head. Once our children's generation see how their parents has screwed themselves and have been forced to work into their old age or live in poverty in their old age hopefully they will avoid making the same mistakes.

 

[haha]

I love these discussions. They ignore the true premise of democratic government in the current age. Government doesn't want to educate anyone, if they did we wouldn't have the school system we have. Government also has no desire for free citizens, rather it desires debt trapped servants. Modern democracy is an elaborate ruse to 1) buy votes with middle class dollars and 2)collect large "campaign contributions" from plutocrats who can be repaid at no cost to the political operatives by directing favors, favorable legislation and favorable subsidies etc.

The game is fixed from top to bottom. Both parties play similarly, they differ only in spin.

There is no interest in "the masses", other than as cover and justification for further incursions into whatever freedom we have left. There is also no interest in justice, or in improving society. The most casual look around will convince of this.

Ha

 

[pb4uski]

Ha-lways the optimist.....

 

[ShokWaveRider]

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.

Respectfully, I think you may have missed the point. She is not talking about the folk that use it to their advantage and manipulate their financials to ensure a reasonable retirement. She is referring to the 80%+ Majority who cannot and do not.

 

[ShokWaveRider]

I love these discussions. They ignore the true premise of democratic government in the current age. Government doesn't want to educate anyone, if they did we wouldn't have the school system we have. Government also has no desire for free citizens, rather it desires debt trapped servants. Modern democracy is an elaborate ruse to 1) buy votes with middle class dollars and 2)collect large "campaign contributions" from plutocrats who can be repaid at no cost to the political operatives by directing favors, favorable legislation and favorable subsidies etc.

The game is fixed from top to bottom. Both parties play similarly, they differ only in spin.

There is no interest in "the masses", other than as cover and justification for further incursions into whatever freedom we have left. There is also no interest in justice, or in improving society. The most casual look around will convince of this.

Ha

120% Agree!

 

[Texas Proud]

I love these discussions. They ignore the true premise of democratic government in the current age. Government doesn't want to educate anyone, if they did we wouldn't have the school system we have. Government also has no desire for free citizens, rather it desires debt trapped servants. Modern democracy is an elaborate ruse to 1) buy votes with middle class dollars and 2)collect large "campaign contributions" from plutocrats who can be repaid at no cost to the political operatives by directing favors, favorable legislation and favorable subsidies etc.

The game is fixed from top to bottom. Both parties play similarly, they differ only in spin.

There is no interest in "the masses", other than as cover and justification for further incursions into whatever freedom we have left. There is also no interest in justice, or in improving society. The most casual look around will convince of this.

Ha

This post brought up an old memory that had not surfaced for many years...

When I was in college, we had someone come to talk to a large group of people about life in the business world... he said something like "I love to hire people who have just gotten married, bought a house, and had kids... they are very motivated to work hard to keep their paycheck coming"...

This has been the normal way for a lot of business... work your employees as long and hard as you can, and hope they continue to buy stuff so they have to continue to work...

A viscious cycle....

 

[Midpack]

There are a lot of tangents in this thread aren't there.

Q: Are most people capable. A: Yes, if they'd do nothing more than invest 10% of their income in a balanced/target/life AA fund they'd do fine. Every 401k provider I ever worked with came into our facility once/year and basically told my employees to do just that.

Q: Are most people inclined. A: Nope. Not only do they overestimate their investing acumen and shoot themselves in the foot, they either don't save enough, don't save at all or "loot" their 401k account unnecessarily. Not saving is the root problem, not 401k's of investing knowledge per se.

In conclusion, most people (80% +/-?) don't make good use of 401k's, IRA's, etc. and therefore aren't/won't be prepared to retire. And they all vote, so don't be surprised if legislators mandate something. It would be consistent with Ha's views as well, I am sure the financial sector would've happy to throw campaign contributions to legislators who make sure Wall St benefits from all the mandated retirement accounts. I hope to God we don't get another paygo scheme when the demographics are already working against us...

 

[Independent]

Ghilarducci is worried that people making $100k won't have the self-discipline to save and won't be able to maintain their lifestyles in retirement. I don't know why that's the government's business.

Those people will get about $28k annually from SS. Maybe that will go down to $21k to keep SS solvent. That provides them enough to live indoors and eat. If they want more in retirement, they can decide to save without being forced.

Even if we introduced some mandatory saving scheme, people who don't want to save will offset that. They will look at the growing balance in their retirement accounts and simply borrow more to spend today - they will reason that, after all, they still have all that money in the mandatory savings.

 

[Independent]

Getting off my soapbox, once again I see an article that purports to say something about how people are or aren't prepared for retirement, but doesn't begin to do that.

People have low IRA/401k balances. Do they own their homes? Do they have defined benefit pension plans? Do they have other savings, rental properties, etc?

It seems straightforward to sit down with a sample of 62 year-olds and get the full picture - SS, DB, DC, house, other assets, etc. That picture should include how much money they really need to maintain the lifestyle they had when their kids were home (ie the time these gurus say they were supposed to be saving), did the kids leaving home reduce their spending target? People on this board routinely ridicule the 70-80% rule-of-thumb, what do people really need?

The BLS gets people to keep detailed records of their spending for its Consumer Expenditures Surveys, it shouldn't be any harder to find people who will share this retirement information.

I'd like to see the results of that study. Heck, I'd volunteer to be one of the interviewers. I think we'd learn a lot about how well people have or haven't planned.

(Okay, maybe that was just a different soapbox.)

 

[foxfirev5]

The ant and the grasshopper. It will never be any different. Same reason why some people choose not to pay their current bills. Never mind saving they can't even live paycheck to paycheck.
I'm no rocket scientist but I wouldn't trade my 401k for the pension my company eliminated years ago. Put the money away from day one, never miss the cash and live accordingly.
I know a number of people who make good money, spend every cent and lament their situation. They comment the 401k is useless yet they don't even contribute enough to get the max match from the employer. Max out the 401k , IRA, Roth etc diversify and you'll be fine. The system works.

 

[Midpack]

Is it worth remembering that many people in previous generations had mandated retirement accounts? They were known as pensions or defined benefit plans...

 

[BLS53]

It just seems ironic to me, given the criticism that SS and government pensions get on here, that the idea of mandated personal savings accounts, is equally offensive to some of you. Especially since the anti-nanny state, extreme fiscal conservatives, are the main ones spearheading these plans as part of SS reform.

On the subject of financial education in the schools. Yes, much needs to be done. Mainly in the area of personal budgeting, what it cost to raise a child, and the avoidance of predatory lending practices. If you really think you can teach the average teenager, who struggles with Algebra I, how to successfully invest in the stock market, you better think again.

Many of you come from careers requiring a strong mathematical background. That same ability lends itself well to investing. The bulk of the population doesn't have this ability, and is not likely to have it in the future.

The nanny state is fine when it benefits you. Just witness the several threads concerning how to use the "Medicaid" provision of the new health care act, to facilitate E-R.

 

[Midpack]

On the subject of financial education in the schools. Yes, much needs to be done. Mainly in the area of personal budgeting, what it cost to raise a child, and the avoidance of predatory lending practices. If you really think you can teach the average teenager, who struggles with Algebra I, how to successfully invest in the stock market, you better think again.

Many of you come from careers requiring a strong mathematical background. That same ability lends itself well to investing. The bulk of the population doesn't have this ability, and is not likely to have it in the future.

That's what all-in-one funds that rebalance automatically are for, you don't need to know anything except to leave them alone. Again, it begins with too many not saving (enough) from my 35 years watching employees manage their 401k's. All of them were smart enough, those who weren't building a nest egg lacked the simple discipline to save to begin with...they were "educated" annually or more often. The latest car, TV, iPhone was always a higher priority...

 

[BLS53]

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..

I believe anyone who spends a lifetime in the workforce, deserves a modest retirement. I don't care how that system is designed, or who administers it. But it should be a basic right.

 

[youbet]

I believe anyone who spends a lifetime in the workforce, deserves a modest retirement. I don't care how that system is designed, or who administers it. But it should be a basic right.

Does today's SS fulfill your desire for workers to be guaranteed a modest retirement? Or are you looking for something more?

 

[BLS53]

I just searched through the United States Constitution and its amendments and I did not find any RIGHT to retirement.

Retirement should just be a privilege for those who choose to participate and therefore the government shouldn't be coming up with new ways of collecting our money.

I believe that a properly implemented social security system would only be used by the destitute and could probably be combined with the welfare system to streamline care for those in need.

If you want the majority of seniors living on $674 a month, then that's the way to go.

Take away SS and replace it with a SSI type benefit, the social negatives are going to outweigh any fiscal problems that such a plan would solve.

 

[Animorph]

Don't most 401k's now have default contributions of 3% or so, invested into some semi-appropriate option? You have to opt out if you don't want to contribute. That seems like a reasonable approach, though a higher contribution and default Vanguard Target fund would be nice.

Heck, pensions didn't come with as many options and were mostly "mandatory". We could make the default options mandatory for the first 3 years of employment to get everyone started.

 

[NW-Bound]

Just as a voluntary Social Security system would have been a disaster, a voluntary retirement account plan is a disaster.

Hmm... I thought the current compulsory SS is getting in trouble. What was I missing?

My plan calls for a way out that would create guaranteed retirement accounts on top of Social Security. These accounts would be required, professionally managed, come with a guaranteed rate of return and pay out annuities.

I personally think a compulsory savings plan might work. Perhaps it could be done by overhauling the current SS. Maybe something like the Australian superannuation, but I do not know much about this yet.

But, but, but anytime I hear about guarantees, I shudder. Didn't we hear that with SS and with various private and public pension plans? What were the Greeks told by their government?

I am reminded of the song "Paroles, Paroles" by Dalida and Alain Delon, where a woman was sick of "sweet nothings" from her lover.

Encore des mots / Again, the words
Toujours des mots / Always the words
Les mêmes mots / Those same words
Rien que des mots / Nothing but words​

Sorry, but I just have to put a link of that song here for French speakers.

Dalida feat. Alain Delon - Paroles,Paroles - YouTube

 

[teejayevans]

On the subject of financial education in the schools. Yes, much needs to be done. Mainly in the area of personal budgeting, what it cost to raise a child, and the avoidance of predatory lending practices. If you really think you can teach the average teenager, who struggles with Algebra I, how to successfully invest in the stock market, you better think again.

Many of you come from careers requiring a strong mathematical background. That same ability lends itself well to investing. The bulk of the population doesn't have this ability, and is not likely to have it in the future.

You don't need strong math skills, you just need some discipline, and basic knowledge to understand that you can't get rich quick and how compound interest works (ie save as much as you can as early as you can). The latter should be easy enough to teach, the former...?!?
There was a study that found that people who bought mutual funds were getting much less than the historical returns of the funds they were buying, the reason was because everytime the market drop, they would pull out and get back in only after the market has gone back up.
TJ

 

[BLS53]

Does today's SS fulfill your desire for workers to be guaranteed a modest retirement? Or are you looking for something more?

Nope, not looking for more. I think the current SS system is fine on the recipient end. Just wish that the powers that be, would implement a reform plan to make it fiscally stable. If that involves personal savings accounts, so be it.

I cringe when I hear "retirement" and "welfare" mentioned together. When I grew up, welfare was for lazy 20 year old's, who found out the government would give them money for having babies. Nobody lambasted seniors for receiving SS, and it shouldn't be any different today either.

Except for a small inheritance, every cent I've gotten since age 18 has been from the federal government. I think I earned every bit of it. I plan to collect SS in 2 years too.

I guess in your eyes that makes me a ward of the nanny state.