401(k)s Will be Unthinkable in 50 Years

[crazy canuck]

The $1 million figure is thrown around a lot, but is mostly geared around a rather high standard of living in retirement. Most people making under $40,000/year before retirement definitely don't need the traditional $40,000+Social Security/year in retirement income, but significantly less. Accounting for Social Security payments as well, the number for a lot of middle-class retirees is significantly lower.

As always, "it depends".

Yeah, there was a minor scandal around here a few years back involving financial advisers pushing high cost mutual funds on low income earners when they really should have been paying down their credit card debt.  mutual fund RRSPs (our version of 401k) was the worst thing they could be doing because:


1) they were already paying little or no income tax so the tax advantages of the RRSP were not needed; and
2) the clawback of their government guaranteed payments triggered by their RRSP earnings meant that they would not be money ahead, especially when the management fees for the mutual funds were taken into account.

I think annuities are only worth it if you absolutely can't reach the savings goal.  Otherwise you are much better off building your own portfolio.

In an ideal situation, sure. But many don't have the acumen to do so, or might arrange their portfolio incorrectly. In addition, the likelihood they'll be able to manage their portfolio perfectly as they near end of life is unlikely, unless their heirs are doing the legwork for them. An annuity makes sense for plenty of people.

Agreed, again.  When I was younger I spent a bunch of time on my investments.  But back then the numbers were relatively small and so I could afford to be an amateur investor.  But the stakes became too high to continue that for too long and I didn't have the time to really learn what I needed to know.  Instead I sought out professional advice and was assisted in creating some fairly sophisticated investment strategies I would never have thought of myself and which others take care of.

My only regret is that I spent too many years thinking I could do it myself.  But I don't really have much to complain about. 

[Habbaku]

I'm happy to hear you made the correct call to go to a professional. Far too many either do it themselves, go to a huckster (like DG's experiment a while back, though I recall he walked away), or simply give up in frustration.

A proper CFP or investment professional can do wonders for most people.

[Monoriu]

Instead I sought out professional advice and was assisted in creating some fairly sophisticated investment strategies I would never have thought of myself and which others take care of.

Now I am curious.  Any general descriptions you want to share?

[mongers]

Instead I sought out professional advice and was assisted in creating some fairly sophisticated investment strategies I would never have thought of myself and which others take care of.

Now I am curious.  Any general descriptions you want to share?

You'll need to contact a professional in the UK, preferably Dorsetshire Integrity Heritage Wealth fund. Arrange a series of detailed Skype consultations, outline your assets, long term aims etc.

They'll undertake extensive research to find the best possible balance of investments, that'll match your needs. Then all you have to do is transfer your liquid assets to the company's offshore presence, preferably by wire transfer. Then sit back, relax and watch your investment grow well above the underlying stock market rate.   

[Habbaku]

I am the American affiliate for the DIHW, so let me know if you need a US-based wire transfer address.

[mongers]

I am the American affiliate for the DIHW, so let me know if you need a US-based wire transfer address.

This could be quite a good business.

[crazy canuck]

Instead I sought out professional advice and was assisted in creating some fairly sophisticated investment strategies I would never have thought of myself and which others take care of.

Now I am curious.  Any general descriptions you want to share?

On a publicly accessible forum? Nope.

I am the American affiliate for the DIHW, so let me know if you need a US-based wire transfer address.

[DGuller]

Annuities tend to be a pretty raw deal for the purchaser, but...

They're an insurance against outliving your savings.  Any insurance comes at a cost, but so is self-insuring a risk that can be easily diversified.  All that saved up principal that you're not drawing down, to make sure that you're not down to zero and still alive, is a raw deal for yourself (though a boon for your next of kin).

[Monoriu]

You'll need to contact a professional in the UK, preferably Dorsetshire Integrity Heritage Wealth fund. Arrange a series of detailed Skype consultations, outline your assets, long term aims etc.

They'll undertake extensive research to find the best possible balance of investments, that'll match your needs. Then all you have to do is transfer your liquid assets to the company's offshore presence, preferably by wire transfer. Then sit back, relax and watch your investment grow well above the underlying stock market rate.   

Joking aside, all the "financial planners", mainly bank salespeople, who tried to sell me stuff didn't even bother with understanding what my needs are, what my financial situation is, and what my goals are.  They skip all the steps and go straight to "let's buy this annuity or these mutual funds".  They are just product pushers.  So far I haven't met any financial planner who isn't an insurance salesman in disguise.  No matter what I say, all roads lead to the inevitable conclusion that I absolutely need an annuity. 

[Monoriu]

Annuities tend to be a pretty raw deal for the purchaser, but...

They're an insurance against outliving your savings.  Any insurance comes at a cost, but so is self-insuring a risk that can be easily diversified.  All that saved up principal that you're not drawing down, to make sure that you're not down to zero and still alive, is a raw deal for yourself (though a boon for your next of kin).

Annuities are inflexible and costly.  People who can self-insure should self-insure.  Only the narrow spectrum of people who absolutely can't meet their savings goals should consider annuities. 

[Habbaku]

Annuities tend to be a pretty raw deal for the purchaser, but...

They're an insurance against outliving your savings.  Any insurance comes at a cost, but so is self-insuring a risk that can be easily diversified.  All that saved up principal that you're not drawing down, to make sure that you're not down to zero and still alive, is a raw deal for yourself (though a boon for your next of kin).

I'm well aware of what annuities are.

[DGuller]

Annuities tend to be a pretty raw deal for the purchaser, but...

They're an insurance against outliving your savings.  Any insurance comes at a cost, but so is self-insuring a risk that can be easily diversified.  All that saved up principal that you're not drawing down, to make sure that you're not down to zero and still alive, is a raw deal for yourself (though a boon for your next of kin).

Annuities are inflexible and costly.  People who can self-insure should self-insure.  Only the narrow spectrum of people who absolutely can't meet their savings goals should consider annuities.

You cannot self-insure yourself against this efficiently, it's impossible unless you're terminally ill or very determined to commit suicide at a certain age.  Any healthy human being younger than 90 has a life expectancy of at least five years just before events causing their eventual death start unfolding.  That means that you'll be leaving 5 years of retirement spending plus a safety margin to your heirs if you self-insure.

[DGuller]

Annuities tend to be a pretty raw deal for the purchaser, but...

They're an insurance against outliving your savings.  Any insurance comes at a cost, but so is self-insuring a risk that can be easily diversified.  All that saved up principal that you're not drawing down, to make sure that you're not down to zero and still alive, is a raw deal for yourself (though a boon for your next of kin).

I'm well aware of what annuities are.

I was highlighting the fact that they're insurance, I was not focusing on explaining what they are.  Overall, any insurance product is a bad bet on an expected value basis, but it's stupid to make decision based solely on expected value basis when there is a material risk of ruin.

[Monoriu]

You cannot self-insure yourself against this efficiently, it's impossible unless you're terminally ill or very determined to commit suicide at a certain age.  Any healthy human being younger than 90 has a life expectancy of at least five years just before events causing their eventual death start unfolding.  That means that you'll be leaving 5 years of retirement spending plus a safety margin to your heirs if you self-insure.

I am very concerned with not having money in old age.  I am not really concerned about leaving money behind.  You talk as if leaving money behind is a really bad thing, and I just don't share it. 

[DGuller]

You cannot self-insure yourself against this efficiently, it's impossible unless you're terminally ill or very determined to commit suicide at a certain age.  Any healthy human being younger than 90 has a life expectancy of at least five years just before events causing their eventual death start unfolding.  That means that you'll be leaving 5 years of retirement spending plus a safety margin to your heirs if you self-insure.

I am very concerned with not having money in old age.  I am not really concerned about leaving money behind.  You talk as if leaving money behind is a really bad thing, and I just don't share it.

It's bad because you're not spending everything that you earned.  Money that is earned but not spent is money wasted.  If it's your desire to spend some of the money that you earned on your heirs, then that's not a problem, but if you're just concerned with your own material well-being or you have no heirs, then that's a waste.