401(k)s Will be Unthinkable in 50 Years

[Camerus]

The irony is that it's easier than ever for the little guy to acquire a very inexpensive and well diversified portfolio using the internet and index funds, a process that could be figured out with 5 hours max of research. The fact that in spite of the ease of this that people aren't doing it suggests that the policy of requiring individuals to fund their own retirements through research and disciplined saving probably won't work.

My wife's employer has mandatory 5.5% contributions matched by her employer. The money is then invested in an "all-in-one" basket of index funds managed by BlackRock, with a retirement date based on her age. The fund will gradually reduce its equity to bond ratio as the years go by and has a management fee of something like 0.22%. A set-up roughly like this might be a good policy for the future, though perhaps with slightly lower required employer matching.

[dps]

But 401k is a government program, well I guess regulation really,  that replaced private pensions, right? Maybe I don't understand how the left-right divide works in this case. I mean you seem to be saying that the government can do no wrong because there are no failed policies just irresponsible people.

It's not really supposed to replace pensions provided by employers, but rather to supplement them and provide something to people whose employers don't provide a pension plan.  Even before 401k was a thing, not every employer provided a pension plan, and a lot of the ones that were provided were either didn't provide much in the way of benefits, or required a long vesting period (IIRC, the law nowadays limits vesting periods, but that definitely wasn't true when 401k plans were first started), or both.  And given the number of pension plans that went bust, I don't think you can make a particularly convincing argument that a pension plan is a safer investment than a 401k.

The real reason people are, if anything, less prepared for retirement has a lot more to do with the stagnation of real wages in the last 40-some years, not anything to do with 401k's.

[derspiess]

If recognizing bad economic policy is "leftist" then I guess I'll go turn my libertarian card in.

It's not just about this issue.  From what I've noticed, you seem to have moved a bit leftward in recent years-- at least when it comes to issues you're vocal about.  Am I wrong?

[dps]

If recognizing bad economic policy is "leftist" then I guess I'll go turn my libertarian card in.

It's not just about this issue.  From what I've noticed, you seem to have moved a bit leftward in recent years-- at least when it comes to issues you're vocal about.  Am I wrong?

My perception is that he used to be more to the right than you, but that he no longer is.  But my perception may be faulty.

[DGuller]

I'm with you Speesh.  Keep fighting the good fight!

A 40k doesn't require rocket science.  All it requires is inactivity.

At some point you have to look at what actually happens, not at what's supposed to happen.  That applies to all ideologies, not just communism.  If many people do wind up with few savings, then I guess it's enough of a rocket science to them. 

Real people have all sorts of mental biases that make them do bad investment decisions, so designing a social policy around them not having those biases is indicative of not keeping your own political biases under control.

[Tamas]

At some point you have to look at what actually happens, not at what's supposed to happen. 

Which BTW I think is responsible for my drift from economical libertarianism - quite clearly a massive proportion of people lack the ability and inclination to operate a society based purely on voluntary agreements/contracts, and I am getting too old for waiting and hoping an experience to try and instill it on them would not end up in just cruel fascism. Because of course, as it was put here, "self-reliance" is too often just the excuse of the indifferent and the cruel, and they'd set up governance artifically helping themselves if ever given the chance.

Politically I still like to consider myself a classical liberal though, which is very neat if you want to be considered a member of the enemy tribe by each and every tribe.

[The Brain]

How big a societal problem is poor olds? Huge? Big? Just a number of individual tragedies?

[Malthus]

I'm with you Speesh.  Keep fighting the good fight!

A 40k doesn't require rocket science.  All it requires is inactivity.

At some point you have to look at what actually happens, not at what's supposed to happen.  That applies to all ideologies, not just communism.  If many people do wind up with few savings, then I guess it's enough of a rocket science to them. 

Real people have all sorts of mental biases that make them do bad investment decisions, so designing a social policy around them not having those biases is indicative of not keeping your own political biases under control.

I agree with this - a certain amount of socialism is simply necessary for society to function well. Retirement savings and healthcare are two areas in which it makes sense that the problems be handled at least in large part through public plans. The alternative is basically casting the old and the sick out to fend for themselves. The difficulty is always going to be how to avoid the costs of such plans increasing exponentially ...

[Tamas]

How big a societal problem is poor olds? Huge? Big? Just a number of individual tragedies?

It is going to be a problem the proportions of which we can't even fathom yet. The Boomers are retiring, and the generations after them are less populous and multi-generation living (and supporting) together is also a thing of the past. Well, it might be the future out of necessity as it used to be, but a lot of people will have it very bad I think.

[Valmy]

The alternative is basically casting the old and the sick out to fend for themselves.

Oh there are other alternatives. We create a program that is supposed to manage old age and it fails to do so for a huge proportion of the population...so then we create another expensive program to cover the people who failed in the first program.

multi-generation living (and supporting) together is also a thing of the past

I am a huge believer in this. I cannot imagine my extended family being as successful as we have been without all of us helping out. I think the nuclear family ideology is for suckers.

[Tamas]

I am a huge believer in this. I cannot imagine my extended family being as successful as we have been without all of us helping out. I think the nuclear family ideology is for suckers.

I agree, even though I will never have the chance to (re-)establish that due to having our families in two different countries than the one we live in.

[derspiess]

I think the nuclear family ideology is for suckers.

[Malthus]

Oh there are other alternatives. We create a program that is supposed to manage old age and it fails to do so for a huge proportion of the population...so then we create another expensive program to cover the people who failed in the first program.

Isn't a public program to cover people basically a socialist program?

[Valmy]

I think the nuclear family ideology is for suckers.

The whole "leave the house at 18 and everybody fend for yourselves! See you at Christmas!" deal I was told was how it was supposed to work when I was growing up. That might have worked fine in the 1960s or some shit but these days I think it just means everybody in your family will likely be deep in debt.

But that is just, like, my opinion man.

[Habbaku]

If recognizing bad economic policy is "leftist" then I guess I'll go turn my libertarian card in.

It's not just about this issue.  From what I've noticed, you seem to have moved a bit leftward in recent years-- at least when it comes to issues you're vocal about.  Am I wrong?

My perception is that he used to be more to the right than you, but that he no longer is.  But my perception may be faulty.

I would argue that my positions haven't really changed at all, but what is considered "right" these days includes a lot of things that I have always been against. It's only now that they come to the fore, so a perception bias is to be expected.

I look forward to hearing about the next government intervention in the marketplace and society is considered right-wing, though.