The Democrat Thread

[Jenksismyhero]

I know the answer! You can keep it locked up in a safe asset like your house! Those don't decrease in value!

 

Or a bank! Those are always stable!

 

 

Clearly the answer is to just give people the same things - same houses, same cars, same clothes. That way we're all equal and if something bad happens to someone we have a ready supply of the same s*** to give them.

[iamshack]

(1) First, savings =/= investment. Planning out your long term debt =/= investment. You don't to be a Harvard business grad to understand that later in life, when you stop working, your income stream stops coming in and you need to be prepared.

 

And really, why the hell shouldn't your personal finance practices be the most important skill you have?? That's how you provide for yourself and your family. If this were a hunting/gathering society, wouldn't the most important skill be tied to your ability to obtain food and feed your family? When did that idea get lost? Oh, right, when government became the Great Provider of Everything.

 

(2) Buy annuities if you can't handle risk in the market but still want a steady rate of return. Open a money market account. There are lots of different ways to protect the money you've earned and be conservative with your investments. Anyone over 60 should be doing this anyway.

 

(3) This is true, but better personal finance practices and investment practices as you age limits the damage. At the end of the day everyone that lost their money in the recession, had they stuck with it, made it all back and then some.

 

Why is it the governments responsibility to pay for someones retirement? I just don't get that mindset. I get wanting to help people that have fallen on hard times. I don't get this "right" to be taken care of by the government no matter what your position is in life. I know that's your socialist dream and all, but I literally don't understand that way of thinking.

 

And I still don't see how $1200+ a month isn't sufficient for an old person (or twice that for an old married couple). You don't have kids to pay for, you shouldn't have debt (and even if you pay for a car or pay rent, how much could you possibly need?) Supplemental insurance can be pricey, I get that, but MOST health problems are covered by Medicare, so it's not like you're paying out of pocket costs for every health problem you have.

I was going to say the bolded as well...this is a survival skill that goes back to the beginning of time.

[Balta1701]

And I still don't see how $1200+ a month isn't sufficient for an old person (or twice that for an old married couple). You don't have kids to pay for, you shouldn't have debt (and even if you pay for a car or pay rent, how much could you possibly need?) Supplemental insurance can be pricey, I get that, but MOST health problems are covered by Medicare, so it's not like you're paying out of pocket costs for every health problem you have.

This is a great clause to throw in at the end of a discussion of why financial literacy and financial planning is the most important skill one should have. Because you're dramatically underestimating health care costs...to the point where someone could reasonably question your financial literacy.

 

Let's just look at Medicare itself's numbers:

Other categories of expense for people who have Medicare include premiums for Part B (which pays for doctors’ care and outpatient services), averaging just under $100 a month this year; premiums for Part D drug coverage, averaging about $30 a month; and premiums for supplemental coverage (which cover some but not all expenses not covered by Medicare), averaging about $177 a month.

 

For those who can’t afford supplemental coverage or who don’t have retiree insurance coverage, expenses can be quite substantial. Under Medicare, there’s an initial deductible for hospital care of $1,156, with an expected payment of $289 a day after a hospital stay exceeds 60 days (until the 90th day, when rates increase again). For outpatient and doctors’ services, the initial deductible is $140 and co-payments (your share of the bill) typically equal 20 percent of the amount billed.

 

And another number:

On average, people with Medicare coverage paid $38,688 for medical care in the last five years of life.

That $1200 a month would...on average, be 1/2 gone entirely due to medical problems.

 

And since it's an average...that means this happens:

One-quarter of older adults incurred out-of-pocket medical expenses that exceeded the total value of their assets during this five-year period.

 

Forty-three percent of older adults incurred expenses that exceeded their assets, excluding the value of their homes.

[StrangeSox]

1) We (the Western world) haven't been living in "hunter/gatherer" societies for a few thousand years now, but those societies and even many agrarian societies tended to be heavily egalitarian. Very few people actually provide for their family via investment income anyway. Most people provide for their family by selling their labor. Saying "that's how you provide for [your retirement]" is just a tautology. I'm asking why is that the current (and relatively recent) system, and should it be that way? What's the societal benefits of that? What are the costs and risks?

 

Saving a small portion of your yearly salary without investing it isn't going to result in that much savings. Take the median income, $50k, at %5 a year (which might be more than your typical family of four can reasonably afford to set aside). That's only $75,000 after 30 years of working. You don't have to be a Harvard business grad to realize that having money set aside in retirement is a good idea, and you don't have to be a Harvard business grad to realize that many people can't actually afford to set aside all that much. And that you need it to grow with compounding interest over time for it to amount to anything, which is an assumption the whole model is built on but isn't working out in actual practice very well.

 

2) But aren't there risks with annuities? Aren't there high fees? Why should we structure our retirement plans around a system that enables a huge amount of rent-seeking and little social good? And what if you just aren't that financially savvy? Should dumb people or people without a background in personal investment be left to suffer?

 

3) Again, this requires some level of financial investment savvy. Why should our retirements be so dependent on that? What good comes of it?

 

It's not the "governments" responsibility, it's society's. The government is a tool that can be used to accomplish social goals. It's particularly effective at this one and more reliable than charity or "lol, enjoy your cat food, grandma!" personal investment outcomes.

 

There are substantial healthcare costs for seniors that aren't covered by Medicare. Prescription drugs are particularly expensive (no negotiating prices!) and any form of routine care can wipe out savings quickly. Continuing to pay rent or upkeep on an old house is a significant expense. Even if you're living in a small, affordable apartment, that could easily take over half of your monthly income. Maintaining a car is expensive. Food is expensive. Yeah, you can get by, but you'd be grinding by very meagerly and things would be awfully tight. One unexpected expense could sink your budget and throw you back into debt.

 

 

 

 

 

 

[StrangeSox]

I was going to say the bolded as well...this is a survival skill that goes back to the beginning of time.

 

401(k) management isn't a survival skill that goes back farther than three decades. Aside from a relatively small number of investors, very few people have ever provided for their family based on financial investment management.

Edited February 6, 2013 by StrangeSox

[StrangeSox]

Clearly the answer is to just give people the same things - same houses, same cars, same clothes. That way we're all equal and if something bad happens to someone we have a ready supply of the same s*** to give them.

 

Or a modest increase in SS benefits so that you're not reliant on financial investments you made 20-30 years ago.

[iamshack]

1) We (the Western world) haven't been living in "hunter/gatherer" societies for a few thousand years now, but those societies and even many agrarian societies tended to be heavily egalitarian. Very few people actually provide for their family via investment income anyway. Most people provide for their family by selling their labor. Saying "that's how you provide for [your retirement]" is just a tautology. I'm asking why is that the current (and relatively recent) system, and should it be that way? What's the societal benefits of that? What are the costs and risks?

 

Saving a small portion of your yearly salary without investing it isn't going to result in that much savings. Take the median income, $50k, at %5 a year (which might be more than your typical family of four can reasonably afford to set aside). That's only $75,000 after 30 years of working. You don't have to be a Harvard business grad to realize that having money set aside in retirement is a good idea, and you don't have to be a Harvard business grad to realize that many people can't actually afford to set aside all that much. And that you need it to grow with compounding interest over time for it to amount to anything, which is an assumption the whole model is built on but isn't working out in actual practice very well.

 

2) But aren't there risks with annuities? Aren't there high fees? Why should we structure our retirement plans around a system that enables a huge amount of rent-seeking and little social good? And what if you just aren't that financially savvy? Should dumb people or people without a background in personal investment be left to suffer?

 

3) Again, this requires some level of financial investment savvy. Why should our retirements be so dependent on that? What good comes of it?

 

It's not the "governments" responsibility, it's society's. The government is a tool that can be used to accomplish social goals. It's particularly effective at this one and more reliable than charity or "lol, enjoy your cat food, grandma!" personal investment outcomes.

 

There are substantial healthcare costs for seniors that aren't covered by Medicare. Prescription drugs are particularly expensive (no negotiating prices!) and any form of routine care can wipe out savings quickly. Continuing to pay rent or upkeep on an old house is a significant expense. Even if you're living in a small, affordable apartment, that could easily take over half of your monthly income. Maintaining a car is expensive. Food is expensive. Yeah, you can get by, but you'd be grinding by very meagerly and things would be awfully tight. One unexpected expense could sink your budget and throw you back into debt.

And in the past, society, for the most part, accomplished this by directly caring for their elders. However, with medical advancements, this has become extremely burdensome, and in many cases, impossible for the younger family members.

 

We, as a society, have struggled to adjust to any other model for addressing the problem of caring for our elders. It's certainly a very imposing issue.

[iamshack]

401(k) management isn't a survival skill that goes back farther than three decades. Aside from a relatively small number of investors, very few people have ever provided for their family based on financial investment management.

Right, because you really thought I was referring literally to 401k management.

[StrangeSox]

I was. That was specifically my question--why should our retirements be tied so tightly to how well we can manage financial investments?

 

Any talk about "hunter-gatherers" or how pre-finance capitalism societies handled the elderly isn't relevant to that specific question.

[Balta1701]

Right, because you really thought I was referring literally to 401k management.

But now, that is literally the case.

 

When you could get a job with a pension, your ability to decide which stocks to trade, which mutual fund company was raping you with the largest fees, your ability to effectively predict the future was pretty irrelevant except as far as you were investing beyond your pension.

 

The pension plan, with people doing that work non-stop, were the ones managing the 401k. Effectively it was in the hands of people much closer to experts on the system.

 

We've basically replaced that with a system that requires everyone to have that level of expertise. If you don't, then that leaves you open to an incredibly vicious system.

[Jenksismyhero]

This is a great clause to throw in at the end of a discussion of why financial literacy and financial planning is the most important skill one should have. Because you're dramatically underestimating health care costs...to the point where someone could reasonably question your financial literacy.

 

Let's just look at Medicare itself's numbers:

 

 

And another number:

That $1200 a month would...on average, be 1/2 gone entirely due to medical problems.

 

And since it's an average...that means this happens:

 

The last 5 years of life being the key there, basically nursing home care, which you don't directly pay for. Either your SS or Medicaid pays for it (and you're provided everything you need). You don't need an extra 1500 bucks to play checkers in the home on weekends.

[iamshack]

I was. That was specifically my question--why should our retirements be tied so tightly to how well we can manage financial investments?

 

Any talk about "hunter-gatherers" or how pre-finance capitalism societies handled the elderly isn't relevant to that specific question.

Because that is what it takes for human beings to survive if they want to cease becoming wage-earners?

 

Why should anything we need to survive be tied to anything that is even moderately complex?

 

Why should I even be required to support myself when I am working? How am I expected to be some genius, able to provide for food, shelter and CLOTHING for myself? What the heck do you people expect of me?? I am just a helpless human being!

[Balta1701]

The last 5 years of life being the key there, basically nursing home care, which you don't directly pay for. Either your SS or Medicaid pays for it (and you're provided everything you need). You don't need an extra 1500 bucks to play checkers in the home on weekends.

Like I said, someone needs to give you a lesson in financial literacy, because you're in deep denial about how big health care costs are.

[StrangeSox]

I'll note that quite a few pension plans got hammered because of the supposedly safe investments rated "AAA" by the ratings agencies that were in actuality complete garbage. So even the experts, the people who do this stuff for a living day-in, day-out, get it wrong in big ways. Now we expect every individual sit down and actually understand wtf a prospectus is telling them, what different stock metrics mean, and how to make any sense out of this when the investment firms employ PhD mathematicians and engineers to figure this stuff out? How does that system make any damn sense for anyone not collecting account management fees?

 

We just switched 401(k)'s at my company. I've got about 15 options. The five Fidelity "Life Options" target date funds all have high fees and terrible ratings (one star). Most of the rest have three star, a few have four and one has five. I'm an engineer and I'm decent at math, but I don't have the ability to actually make an informed analysis of this stuff beyond "welp, morningstar likes it and it's low-fee, guess it's good??" Should I even be trusting what some ratings agency says given how poorly they've been shown to be lately? Should I pay someone money to manage this stuff (and hope they know what they're doing)?

 

Why not just have a more-robust SS system so you don't have all of this money being siphoned off the top and so much individual risk?

[StrangeSox]

Because that is what it takes for human beings to survive if they want to cease becoming wage-earners?

 

Again, you're back to a tautology. I'm asking why that's currently the system (it's only been that way for a few decades) and if it makes any sense for it to be that way. I don't agree that it does, and I don't see any net benefits that result from tying individual investment savvy to your ability to get by once you can no longer work.

 

 

Why should I even be required to support myself when I am working? How am I expected to be some genius, able to provide for food, shelter and CLOTHING for myself? What the heck do you people expect of me?? I am just a helpless human being!

 

Are you equating providing food, shelter and clothing to the same sorts of skills required to be a successful investor?

 

You and jenks have both said "it's how people provide for their families" or some stuff about "hunter-gatherers." Investment income is not how 99.99999% of people have ever provided for their families, and it's not how 99% of them provide for them now. It's an additional skill that you'd need to be able to pick up and do well with decades before you'll see the end results and hope there's no catastrophes outside of your control along the way.

 

Why? Why not just increase SS benefits and not put so much individual risk out there? What good comes of tying retirement to how well you invested your money over the past 30 years?

[Balta1701]

What good comes of tying retirement to how well you invested your money over the past 30 years?

The real answer, of course, is that wall street firms eat up 1/3 of an average 401K plan with fees...and that's good for the important people.

[StrangeSox]

Like I said, someone needs to give you a lesson in financial literacy, because you're in deep denial about how big health care costs are.

Jenks is not adequately anticipating health care costs and cost-of-living 30 years from now. Too bad, throw him to the wolves!

 

More seriously though, how well could someone starting work in 1975 anticipate modern COL expenses (which have steadily increased) and health care costs? Is it some mortal sin they should suffer for if they couldn't accurately project economic and financial conditions decades into the future?

[StrangeSox]

The real answer, of course, is that wall street firms eat up 1/3 of an average 401K plan with fees...and that's good for the important people.

Well duh, that's why they want to tap into the huge SS stream too.

[Jenksismyhero]

1) We (the Western world) haven't been living in "hunter/gatherer" societies for a few thousand years now, but those societies and even many agrarian societies tended to be heavily egalitarian. Very few people actually provide for their family via investment income anyway. Most people provide for their family by selling their labor. Saying "that's how you provide for [your retirement]" is just a tautology. I'm asking why is that the current (and relatively recent) system, and should it be that way? What's the societal benefits of that? What are the costs and risks?

 

Saving a small portion of your yearly salary without investing it isn't going to result in that much savings. Take the median income, $50k, at %5 a year (which might be more than your typical family of four can reasonably afford to set aside). That's only $75,000 after 30 years of working. You don't have to be a Harvard business grad to realize that having money set aside in retirement is a good idea, and you don't have to be a Harvard business grad to realize that many people can't actually afford to set aside all that much. And that you need it to grow with compounding interest over time for it to amount to anything, which is an assumption the whole model is built on but isn't working out in actual practice very well.

 

But it's the same principle - that for some reason our basic skill of survival is ignored simply because the Great Provider is there for us. Look, I've said it ten times now, I'm fine helping people out and I agree the collective group is in the best position to do that. But what your socialist dreams create is a society of GIMME GIMME GIMME, I have the RIGHT to that assistance. It's not a last resort, it's the first expectation. There's a huge societal detriment to that and we see it all the time in Chicago. Welfare is a failure. And every time we decide to chip away at personal responsibility (or familial responsibility) we just extend the problem.

 

2) But aren't there risks with annuities? Aren't there high fees? Why should we structure our retirement plans around a system that enables a huge amount of rent-seeking and little social good? And what if you just aren't that financially savvy? Should dumb people or people without a background in personal investment be left to suffer?

 

Not fixed annuities. Not CD's. You might not get that 6-7% yearly return, but you'll get more than 0. I think you're too stuck on this limited period of time where the market crapped out. Look at the overall trend of the stock market and it's being going up, up, up, even with some dips. I'm not aware of too many conservative, long-term investments that have failed.

 

And the bolded goes back to a debate a few weeks ago - these poor souls are the victims of their own stupidity. They can't do anything about it so society has the responsibility to help them out. I don't view people or the world that way.

 

3) Again, this requires some level of financial investment savvy. Why should our retirements be so dependent on that? What good comes of it?

 

Umm, less government dependence and more financial freedom?

 

 

 

[Jenksismyhero]

Like I said, someone needs to give you a lesson in financial literacy, because you're in deep denial about how big health care costs are.

 

Oh please Balta, teach me. Look, I deal with this crap all the time with my job. Medical care is expensive. I get that. But if you don't have the money, you're not left on the street to die. You're not kicked out of a nursing home. W

 

What we're talking about here isn't getting rid of a social safety net, it's adding to one for people that with a little bit of education and self-responsibility don't need.

[iamshack]

Again, you're back to a tautology. I'm asking why that's currently the system (it's only been that way for a few decades) and if it makes any sense for it to be that way. I don't agree that it does, and I don't see any net benefits that result from tying individual investment savvy to your ability to get by once you can no longer work.

 

 

 

 

Are you equating providing food, shelter and clothing to the same sorts of skills required to be a successful investor?

 

You and jenks have both said "it's how people provide for their families" or some stuff about "hunter-gatherers." Investment income is not how 99.99999% of people have ever provided for their families, and it's not how 99% of them provide for them now. It's an additional skill that you'd need to be able to pick up and do well with decades before you'll see the end results and hope there's no catastrophes outside of your control along the way.

 

Why? Why not just increase SS benefits and not put so much individual risk out there? What good comes of tying retirement to how well you invested your money over the past 30 years?

The main reason I utilize a 401k account is because my company matches up to 6% of my base salary that I put into it. If I was super paranoid, there is nothing saying I couldn't put the money straight into the bank, or invest it in any number of very safe investments. And yes, I could absolutely hire someone to do this for me, if I was not savvy enough to figure that out myself.

 

You guys are going to jump all over the recent banking and market scandals, but let's face it, if I was REALLY conservative, I could take my money into any bank or investment firm, and say "tell me how to invest this money along the ultra-conservative risk spectrum," and they would guide me towards those options. One doesn't have to buy stocks or mutual funds with their savings. And that doesn't require anyone to have any more common sense than it requires of someone to balance a monthly budget or determine how much house they can afford.

 

The reason many middle class workers are not prepared for retirement is because they do not have the discipline to properly save their money. Not because doing so is so incredibly complex that they don't have the requisite knowledge to do so.

[StrangeSox]

But it's the same principle - that for some reason our basic skill of survival is ignored simply because the Great Provider is there for us. Look, I've said it ten times now, I'm fine helping people out and I agree the collective group is in the best position to do that. But what your socialist dreams create is a society of GIMME GIMME GIMME, I have the RIGHT to that assistance. It's not a last resort, it's the first expectation. There's a huge societal detriment to that and we see it all the time in Chicago. Welfare is a failure. And every time we decide to chip away at personal responsibility (or familial responsibility) we just extend the problem.

 

Financial investment isn't a "basic skill of survival" anywhere before the late-20th century.

 

I don't think we should look to a social retirement scheme only as a last-resort. I think it should be a guaranteed thing for everyone. I don't see any social benefit to funneling such a huge chunk of our wealth to the financial sector and exposing people to so much individual risk.

 

 

 

Not fixed annuities. Not CD's. You might not get that 6-7% yearly return, but you'll get more than 0. I think you're too stuck on this limited period of time where the market crapped out. Look at the overall trend of the stock market and it's being going up, up, up, even with some dips. I'm not aware of too many conservative, long-term investments that have failed.

 

But you still have to go back to how much someone can invest. $50k average, 5% a year is a total investment of $75k. Even if that's growing at a percentage or two above inflation every year (it won't), it still doesn't amount to much in the end.

 

And the bolded goes back to a debate a few weeks ago - these poor souls are the victims of their own stupidity. They can't do anything about it so society has the responsibility to help them out. I don't view people or the world that way.

 

Some people are dumb. Some people aren't good with investing. Some people are smart but lose a bunch of money through no action of their own. Some people think they're making responsible, good investments but it turns out that they're wrong.

 

Why should people have to rely on being smart enough and financially capable of investing in order to provide a retirement?

 

Umm, less government dependence and more financial freedom?

 

Unless you get it wrong, then you're stuck with little or no financial freedom. And don't forget all of the money you turn over to management fees over the years!

 

[StrangeSox]

Oh please Balta, teach me. Look, I deal with this crap all the time with my job. Medical care is expensive. I get that. But if you don't have the money, you're not left on the street to die. You're not kicked out of a nursing home. W

 

What we're talking about here isn't getting rid of a social safety net, it's adding to one for people that with a little bit of education and self-responsibility don't need.

 

the only reason people don't have large retirement accounts is lack of education and responsibility?

[Jenksismyhero]

Again, you're back to a tautology. I'm asking why that's currently the system (it's only been that way for a few decades) and if it makes any sense for it to be that way. I don't agree that it does, and I don't see any net benefits that result from tying individual investment savvy to your ability to get by once you can no longer work.

 

 

 

 

Are you equating providing food, shelter and clothing to the same sorts of skills required to be a successful investor?

You and jenks have both said "it's how people provide for their families" or some stuff about "hunter-gatherers." Investment income is not how 99.99999% of people have ever provided for their families, and it's not how 99% of them provide for them now. It's an additional skill that you'd need to be able to pick up and do well with decades before you'll see the end results and hope there's no catastrophes outside of your control along the way.

 

Why? Why not just increase SS benefits and not put so much individual risk out there? What good comes of tying retirement to how well you invested your money over the past 30 years?

 

If 99% of people don't do it in the first place, why is it a problem? If SS has been the main retirement plan, why isn't the current level sufficient? I'm not seeing old people dying left and right because their SS checks aren't big enough.

[Jenksismyhero]

Financial investment isn't a "basic skill of survival" anywhere before the late-20th century.

 

I don't think we should look to a social retirement scheme only as a last-resort. I think it should be a guaranteed thing for everyone. I don't see any social benefit to funneling such a huge chunk of our wealth to the financial sector and exposing people to so much individual risk.

 

PERSONAL FINANCE is the basic skill of survival. Not really sure how you can dispute that in today's world.