/Detroit

[Jenksismyhero]

The problem with underfunded 401k's leaving people with no retirement security is going to make the problem of underfunded pension plans look like a walk in the park.

 

Is that even possible? My 401(k) gets contributions from me and my employer every 2 weeks. They don't promise me that they'll contribute money in the future when I retire.

[StrangeSox]

The problem with underfunded 401k's leaving people with no retirement security is going to make the problem of underfunded pension plans look like a walk in the park.

 

e.g.

 

http://www.ebri.org/pdf/briefspdf/EBRI_IB_..._Update-092.pdf

 

[StrangeSox]

Is that even possible? My 401(k) gets contributions from me and my employer every 2 weeks. They don't promise me that they'll contribute money in the future when I retire.

 

Underfunded in the sense that you're going to have to work until you're dead. Underfunded from the perspective of the person who hopes to one day retire.

[EvilMonkey]

Underfunded in the sense that you're going to have to work until you're dead. Underfunded from the perspective of the person who hopes to one day retire.

Then contribute more. You can't expect to contribute $3k a year and retire with $60K a year pension benefits. It just doesn't work unless you have other suckers, I mean workers, paying for your defined benefits.

[Jenksismyhero]

Hate to derail, but there are basic account management fees that you get charged regardless of what funds you're in. If you're with someone like Vanguard, they're minimal. Fidelity, ok. A smaller firm might charge as much as 3% of your account balance annually.

 

http://money.usnews.com/money/blogs/planni...probably-paying

 

edit: the frontline episode and linked website a few posts back details this pretty thoroughly.

 

I assumed people knew that the better firms have incredibly low fees. 10k in the Vanguard 500 and you're not being charged 1.25% like in the frontline piece, you're charged .05% And you should never have trading fees that might double those costs (as was claimed) because you shouldn't be day-trading your retirement account.

 

I mean, I'm glad frontline is trying to educate people. I thought that was investment 101 type stuff.

[StrangeSox]

I assumed people knew that the better firms have incredibly low fees. 10k in the Vanguard 500 and you're not being charged 1.25% like in the frontline piece, you're charged .05% And you should never have trading fees that might double those costs (as was claimed) because you shouldn't be day-trading your retirement account.

 

I mean, I'm glad frontline is trying to educate people. I thought that was investment 101 type stuff.

 

You don't have a choice in what investment management company your employer offers with their 401k. That 0.05% is also the fund management fee, not your account management fee. The old 401k plan the company I work for offered charged every account 2.5% of their annual average balance every year on top of whatever fees your funds charged.

[southsider2k5]

There is also the IRA choice, and not contributing to a 401k, or minimal contributions to maximize the company match, which incidentally is usually about 3% of total wages for a max.

[StrangeSox]

Then contribute more. You can't expect to contribute $3k a year and retire with $60K a year pension benefits. It just doesn't work unless you have other suckers, I mean workers, paying for your defined benefits.

 

Regardless of whether or not people should have invested more money during their working years, the reality is what Balta pointed out: there's a huge wave of retirement age workers coming with little or no retirement savings. Whose fault that is and whether or not the whole "everyone individually invest in stocks and bonds" 401k experiment was a good idea for the average worker doesn't change the reality that millions are facing.

[Jenksismyhero]

You don't have a choice in what investment management company your employer offers with their 401k. That 0.05% is also the fund management fee, not your account management fee. The old 401k plan the company I work for offered charged every account 2.5% of their annual average balance every year on top of whatever fees your funds charged.

 

Well that's true, your lack of choice does suck. But your employer must be getting some kind of deal with that company if they choose to work with them. Maybe that allows them to match at a higher percent?

[EvilMonkey]

Regardless of whether or not people should have invested more money during their working years, the reality is what Balta pointed out: there's a huge wave of retirement age workers coming with little or no retirement savings. Whose fault that is and whether or not the whole "everyone individually invest in stocks and bonds" 401k experiment was a good idea for the average worker doesn't change the reality that millions are facing.

This isn't rocket science. My father who barely finished high school has managed to control his 401k, IRA and some stock purchases to give himself a comfortable retirement. he isn't computer literate and had no idea what most of these things were 20 years ago or so, but knew it was important to plan ahead and did what he could to do so. Maybe a little bit of the ant and the grasshopper here, but if you didn't plan good enough for yourself, not my problem.

[RockRaines]

Well that's true, your lack of choice does suck. But your employer must be getting some kind of deal with that company if they choose to work with them. Maybe that allows them to match at a higher percent?

You can still go out and get your own 401k plan, and if its underfunded its because you didnt put enough away to retire. Pensions make zero sense to me, we will pay you because you worked for X amount of years? A wealthy retirement isnt a right.

[Balta1701]

This isn't rocket science. My father who barely finished high school has managed to control his 401k, IRA and some stock purchases to give himself a comfortable retirement. he isn't computer literate and had no idea what most of these things were 20 years ago or so, but knew it was important to plan ahead and did what he could to do so. Maybe a little bit of the ant and the grasshopper here, but if you didn't plan good enough for yourself, not my problem.

You may say it's not rocket science, but the actual data about 401k's say that it may as well be.

According to a report by the Congressional Research Service, 38 percent of 401(k) participants age 55 to 64 have 80 percent or more of their 401(k) assets in stocks — even though many experts say it is unwise to invest heavily in stocks so close to retirement age because a large chunk of one’s savings could quickly evaporate in a market downturn.

40% of the people with 401k's are making a basic, obvious, enormous mistake that will, when the next bubble popping occurs, lead to their savings being hammered right before retirement.

 

They won't be out on the street.

[RockRaines]

You may say it's not rocket science, but the actual data about 401k's say that it may as well be.

40% of the people with 401k's are making a basic, obvious, enormous mistake that will, when the next bubble popping occurs, lead to their savings being hammered right before retirement.

 

They won't be out on the street.

Because people find it harder these days to actually save their own money instead of banking on these stupid ideas called pensions. Its not rocket science to manage a 401k, s*** put your money in a bank account that yields a return and you dont do anything.

[Balta1701]

Because people find it harder these days to actually save their own money instead of banking on these stupid ideas called pensions. Its not rocket science to manage a 401k, s*** put your money in a bank account that yields a return and you dont do anything.

And yet 40% of people less than 10 years from retirement, people who should be counting on these things, have >80% of their money in high-risk stocks. And that's from the already-filtered group of people who actually can get 401k's.

 

Saying it louder that people who make mistakes are dumb doesn't make it a good program.

[Jenksismyhero]

You can still go out and get your own 401k plan, and if its underfunded its because you didnt put enough away to retire. Pensions make zero sense to me, we will pay you because you worked for X amount of years? A wealthy retirement isnt a right.

 

You could, but you'd also be losing out on your employer match. I can see SS' point that the fees can be bulls*** and you have no choice in the matter.

 

But I agree, wealthy retirement isn't a right. You shouldn't need 50-60k a year when you're retired. Teachers in Chicago b**** about their salaries and then they end up making 3/4 of their salary for life. Politicians and union bosses work a day and get a six figure pension for life. It's a stupid system.

[Jenksismyhero]

And yet 40% of people less than 10 years from retirement, people who should be counting on these things, have >80% of their money in high-risk stocks. And that's from the already-filtered group of people who actually can get 401k's.

 

Saying it louder that people who make mistakes are dumb doesn't make it a good program.

 

It also doesn't mean that society has to bail those people out for being stupid either.

[Balta1701]

It also doesn't mean that society has to bail those people out for being stupid either.

No, the fact that you're talking about millions of voters is what means that will happen.

[southsider2k5]

You can still go out and get your own 401k plan, and if its underfunded its because you didnt put enough away to retire. Pensions make zero sense to me, we will pay you because you worked for X amount of years? A wealthy retirement isnt a right.

 

Looking across the steel and automotive industries the weakness of a pension plan is obvious. It is only going to work when you have a company that is growing so that the number of people putting in is always higher than people taking out. The problem is no company or municipality can make the guarantee that they will always have an increasing pool of payers. Once the curve starts to diminish the system collapses. It is true for the City of Detroit, Bethlehem Steel or General Motors. The history of the industrialized world is one of technologies being replaced by new technologies, which leads to the liquidation of the former leaders after they have been replaced. Basing retirement funding on the assumption that the company you are working for is going to be around for 50 years is just historically ignorant.

 

Just for kicks, here is the original Dow Jones when it first tracked 30 stocks in 1928.

 

Allied Chemical General Railway Signal * Sears Roebuck & Company

American Can Goodrich * Standard Oil (NJ) *

American Smelting International Harvester Texas Company

American Sugar International Nickel * Texas Gulf Sulphur *

American Tobacco B Mack Truck Union Carbide *

Atlantic Refining * Nash Motors * U.S. Steel

Bethlehem Steel * North American * Victor Talking Machine *

Chrysler * Paramount Publix (formerly Paramount Famous Lasky) Westinghouse Electric *

General Electric Company Postum Incorporated * Woolworth

General Motors Corporation Radio Corporation * Wright Aeronautical *

 

 

[Jenksismyhero]

No, the fact that you're talking about millions of voters is what means that will happen.

 

The Democrat's bread and butter: create dependents and promise them more.

[StrangeSox]

The Democrat's bread and butter: create dependents and promise them more.

Nobody on social security or medicare ever votes Republican

[Jenksismyhero]

Nobody on social security or medicare ever votes Republican

 

And Democrats never accept tax breaks, deductions or credits.

[Balta1701]

The Democrat's bread and butter: create dependents and promise them more.

Are you kidding? These are elderly voters, mostly white. They're going to be the only people the Republican Party has as voters pretty rapidly. If the Democrats could get this group to start voting for us in larger margins over the next decade we'll run away with every election. The Republicans will do everything in their power to keep that group happy. The bailout of the people whose 401k's let them down will be a huge, bipartisan undertaking.

[RockRaines]

You could, but you'd also be losing out on your employer match. I can see SS' point that the fees can be bulls*** and you have no choice in the matter.

 

But I agree, wealthy retirement isn't a right. You shouldn't need 50-60k a year when you're retired. Teachers in Chicago b**** about their salaries and then they end up making 3/4 of their salary for life. Politicians and union bosses work a day and get a six figure pension for life. It's a stupid system.

Employer match isnt a standard thing, in fact I've only seen it twice my entire career. It's a value-add of working for that company.

[RockRaines]

And yet 40% of people less than 10 years from retirement, people who should be counting on these things, have >80% of their money in high-risk stocks. And that's from the already-filtered group of people who actually can get 401k's.

 

Saying it louder that people who make mistakes are dumb doesn't make it a good program.

The assumption that everyone is smart isnt something that should be taken into consideration. A good portion of us will die before we ever reach retirement age. Once again, retirement is a luxury and a choice, not a right.

[Balta1701]

The assumption that everyone is smart isnt something that should be taken into consideration. A good portion of us will die before we ever reach retirement age. Once again, retirement is a luxury and a choice, not a right.

It absolutely is at a national policy level.