Quotehttps://www.vox.com/2019/3/27/18174385/retirement-savings-401-k
How much money do you have saved in your 401(k)? In 50 years, no one will ask. Even better, no one will have to provide the usual answer: way too little. Our 40-year experiment with 401(k)s — tax-favored investment accounts for retirement sponsored by employers — will be seen as an unfortunate interregnum, a massive waste of taxpayer dollars to bolster the retirement security of the rich while undermining the retirement security of the rest.
Added to the tax code with little foresight in 1978, Section 401(k) cannibalized America's public-private framework of retirement security. Prior to the regulatory authorization of 401(k)s in the early 1980s, employers couldn't legally provide tax-favored vehicles for retirement savings in which workers themselves controlled and directed the funds.
Instead, the pension plans that were the norm among medium and large firms — offered by roughly 4 in 5 such employers — were called "defined-benefit plans": basically a private form of Social Security where employers made most of the contributions, handled the investments, and paid out the benefits at retirement based on a formula that was legally binding.
Today, vanishingly few private employers provide a defined-benefit plan, and they're mostly legacy offerings covering older workers. If a recently hired worker has a plan at work — and more than a third of workers still aren't offered any plan — it's a 401(k). Three numbers and a letter spell the future of American retirement security.
And that's a problem. There's a reason, it turns out, why employers didn't hand retirement planning off to workers: 401(k)s are terrible at ensuring that those who need to save for retirement do. Indeed, over the same period in which 401(k)s expanded, the share of working-age households at risk of being financially unprepared at age 65 jumped from 31 percent (in 1983) to more than 53 percent (in 2010). Indeed, the terribleness of 401(k)s helped spark a new field of behavioral economics, which showed that voluntary plans in which people manage their own investments defy everything we know about how the brain works.
Traditional pension plans force people to save and protect them against investment mistakes, market risks, and the possibility of outliving their savings, not to mention predatory financial institutions. 401(k)s don't, and, lo and behold, most people don't put enough in them, make serious investment errors, and fall prey to heavy fees that crush long-term returns. Worse, because 401(k)s can be tapped into (with a penalty) before retirement and are transferred to workers when they lose or change jobs, middle-class workers often use them as rainy-day fund when times are tough, further beggaring retirement security.
Granted, 401(k)s work well for one group — the group who needs them least. For the affluent, 401(k)s are a lucrative way to manage retirement investments. They are also a great way to build up an estate and delay paying taxes. (Traditional defined-benefit plans didn't become part of workers' estates; like Social Security, they promised benefits for the remainder of a workers' lives, pooling the "risk" of living longer — and potentially running out of money — across all those covered by the plan.)
Because they are subsidized through delayed taxes, 401(k)s are worth the most to households in the highest tax brackets. Moreover, higher-income workers are also more likely to be offered a plan, to have their contributions matched by their employers, and, of course, to have the financial freedom to put money in them. As a result, nearly 70 percent of the $190 billion in tax breaks for retirement and income security accrue to the top 20 percent.
To be sure, 401(k)s have served one purpose. Corporate America's eager embrace of them showed that employers can't or won't play the role they once did. But we now know that individual risk management isn't a workable alternative to corporate risk-pooling.
The obvious solution is a strengthened Social Security system, and fortunately measures to boost Social Security's benefits are back on the national agenda (and enjoy overwhelming public support). John Larson, a Democratic representative from my home state of Connecticut, has 200 House co-sponsors for his "Social Security 2100 Act," which would boost benefits and raise revenues to ensure the program's solvency through, yes, 2100.
If 401(k)s were necessary to get such sensible measures a second look, then they deserve our grudging respect — at their funeral.
I broadly agree with the article. Expecting a massive cohort to knowledgeably plan for their retirement when they know nothing about how to direct their investments, and whose employers are often just as clueless, is a recipe for failure. Unsurprisingly, we're seeing a large portion of the Boomers and Gen-Xers who are going to be sorely prepared for retirement when combined with what they'll have from Social Security.
A bailout in the next 20-30 years seems highly likely, in my opinion.
This was my concern for Social Security privatization schemes. Ultimately too many people would be left with nothing and we would be politically forced to swoop in and rescue them anyway similar to this probable bailout.
Retirement is dead.
I empty my pension funds at every opportunity I get knowing my generation will be working till we drop anyway.
Quote from: Tyr on April 04, 2019, 02:34:35 PM
Retirement is dead.
I empty my pension funds at every opportunity I get knowing my generation will be working till we drop anyway.
Well...you certainly will be if you empty your pension fund every chance you get :hmm:
BOOM
Quote from: Valmy on April 04, 2019, 02:38:09 PM
Well...you certainly will be if you empty your pension fund every chance you get :hmm:
Tyr believes in and implements self fulfilling prophecies.
Quote from: Tyr on April 04, 2019, 02:34:35 PM
Retirement is dead.
I empty my pension funds at every opportunity I get knowing my generation will be working till we drop anyway.
Jesus Christ, I hope you're not serious.
You're basically stating that a forest fire will start soon, then going off and lighting it yourself.
Quote from: derspiess on April 04, 2019, 02:39:56 PM
BOOM
We all know you think there's nothing wrong whatsoever. Got yours, right?
Quote from: Habbaku on April 04, 2019, 02:41:39 PM
Quote from: Tyr on April 04, 2019, 02:34:35 PM
Retirement is dead.
I empty my pension funds at every opportunity I get knowing my generation will be working till we drop anyway.
Jesus Christ, I hope you're not serious.
You're basically stating that a forest fire will start soon, then going off and lighting it yourself.
Stating that a forest fire will start soon. So better gather my wood and go build a house elsewhere.
:wacko:
Quote from: Habbaku on April 04, 2019, 02:41:58 PM
Quote from: derspiess on April 04, 2019, 02:39:56 PM
BOOM
We all know you think there's nothing wrong whatsoever. Got yours, right?
Some of us still believe in personal responsibility :mellow:
If you'd speak in more than monosyllables, some of us might believe that.
I believe in personal responsibility quite a bit. I also believe in a personal responsibility to have a system that isn't guaranteed to screw over 2/3rds of the country by throwing them to the wolves and screaming "personal responsibility!" as the reason to ignore their ills.
Do you think the current system is tenable? What changes would you make, if any? Or would you just like to BOOM more?
Quote from: derspiess on April 04, 2019, 03:18:52 PM
Some of us still believe in personal responsibility :mellow:
Was there no personal responsibility back before 401(k)s?
Company pensions aren't personally responsible enough, I guess.
Let's devolve personal responsibility even further and make kids fend for themselves out of the womb, too.
Quote from: Habbaku on April 04, 2019, 03:22:36 PM
I also believe in a personal responsibility to have a system that isn't guaranteed to screw over 2/3rds of the country
This is pretty histrionic. Nothing about 401ks is guaranteed to screw over anyone.
Quote from: Tyr on April 04, 2019, 02:42:50 PM
So better gather my wood and go build a house elsewhere.
I have been gathering my wood every day. :smarty:
:hmm:
Quote from: Habbaku on April 04, 2019, 03:22:36 PM
If you'd speak in more than monosyllables, some of us might believe that.
I believe in personal responsibility quite a bit. I also believe in a personal responsibility to have a system that isn't guaranteed to screw over 2/3rds of the country by throwing them to the wolves and screaming "personal responsibility!" as the reason to ignore their ills.
Do you think the current system is tenable? What changes would you make, if any? Or would you just like to BOOM more?
You used to be libertarian. When was it you crossed over to the left? Was it Trump that caused it?
If someone wanted to alter the 401k law to make it impossible to touch the money before retirement or borrow against the money, and make it mandatory to max out your contribution up to the match, I could go along with that.
Quote from: derspiess on April 04, 2019, 05:59:49 PM
Quote from: Habbaku on April 04, 2019, 03:22:36 PM
If you'd speak in more than monosyllables, some of us might believe that.
I believe in personal responsibility quite a bit. I also believe in a personal responsibility to have a system that isn't guaranteed to screw over 2/3rds of the country by throwing them to the wolves and screaming "personal responsibility!" as the reason to ignore their ills.
Do you think the current system is tenable? What changes would you make, if any? Or would you just like to BOOM more?
You used to be libertarian. When was it you crossed over to the left? Was it Trump that caused it?
He grew up.
I agree with the article. As a social policy, 401k is a disaster. If the government has any business involving itself in retirement planning, then the purpose of it is to provide social insurance against poverty in retirement. Social insurance must cover all the citizens almost by definition, including the ones that are poor, lacking in financial education, or lacking in personal responsibility. Creating a system that benefits the most those that need it the least, and sets up many traps for those who need it the most, is not good policy-making. When you take into account the fact that 401k made it easier to get rid of real pension plans, then this bad policy becomes a tragically bad policy.
Quote from: derspiess on April 04, 2019, 05:59:49 PM
Quote from: Habbaku on April 04, 2019, 03:22:36 PM
If you'd speak in more than monosyllables, some of us might believe that.
I believe in personal responsibility quite a bit. I also believe in a personal responsibility to have a system that isn't guaranteed to screw over 2/3rds of the country by throwing them to the wolves and screaming "personal responsibility!" as the reason to ignore their ills.
Do you think the current system is tenable? What changes would you make, if any? Or would you just like to BOOM more?
You used to be libertarian. When was it you crossed over to the left? Was it Trump that caused it?
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.
Quote from: derspiess on April 04, 2019, 05:59:49 PM
Quote from: Habbaku on April 04, 2019, 03:22:36 PM
If you'd speak in more than monosyllables, some of us might believe that.
I believe in personal responsibility quite a bit. I also believe in a personal responsibility to have a system that isn't guaranteed to screw over 2/3rds of the country by throwing them to the wolves and screaming "personal responsibility!" as the reason to ignore their ills.
Do you think the current system is tenable? What changes would you make, if any? Or would you just like to BOOM more?
You used to be libertarian. When was it you crossed over to the left? Was it Trump that caused it?
I like how you don't actually answer the questions. I'll answer yours. I'm still "libertarian" in ideology, but unlike many of the "personal responsibility" zealots, I recognize bad policy when I see it.
I'm actually open to ideas that would take advantage of market economics--401(k)s do that in a way, but the outcomes have been employers washing their hands and an entire generation not saving money for anything resembling a retirement.
This is partly due to Social Security being perceived as a retirement safety net, but the reality is that its average payout is not enough to care for the least who never really earned much through their work lives anyway, and so will see a reduction in their income to something that is unsustainable.
If recognizing bad economic policy is "leftist" then I guess I'll go turn my libertarian card in. Let me know what your alternative is, unless you really think the status quo is A-OK.
Quote from: Valmy on April 04, 2019, 07:43:17 PM
Quote from: derspiess on April 04, 2019, 05:59:49 PM
Quote from: Habbaku on April 04, 2019, 03:22:36 PM
If you'd speak in more than monosyllables, some of us might believe that.
I believe in personal responsibility quite a bit. I also believe in a personal responsibility to have a system that isn't guaranteed to screw over 2/3rds of the country by throwing them to the wolves and screaming "personal responsibility!" as the reason to ignore their ills.
Do you think the current system is tenable? What changes would you make, if any? Or would you just like to BOOM more?
You used to be libertarian. When was it you crossed over to the left? Was it Trump that caused it?
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.
And that's the problem with the "personal responsibility" zealots. The 401(k) plans are an accident of the tax code that encourage companies to do away with traditional pensions because of the tax advantages that companies reap from establishing 401(k)s. There is
nothing libertarian about a 401(k), at its root.
Uggh, the "personal responsibility" response is such a weak cop out.
Look, if your policy for how to deal with some problem is to wish that all humans exercised greater personal responsibility, then you don't have a policy, you have an excuse for not doing anything.
I think it's more a euphemism than a cop-out. What they're really saying is let 'em rot.
I'm with you Speesh. Keep fighting the good fight!
A 40k doesn't require rocket science. All it requires is inactivity.
I don't understand why people blame 401k for the disappearance of defined benefit pensions. HK doesn't have 401k, and guess what, all the defined benefit pensions have disappeared, including government ones.
They have recently started a private pension scheme in the UK where there's a minimum contribution that's going to increase gradually (1% now, going to 5% or something soon) that your employer must match.
It is probably a good idea and I wouldn't mind that you can't access it until you are just about retirement age but... when you do want to access it, they basically won't let you. I mean they will let you, but most of it will remain with the account-provider. IIRC if you opt for a pension, the overall payment you can expect from it it befor you croak will also be miniscule compared to the lump sum. Which is appaling. At the end of it, if I was forced to put the same % into long-term savings, I'd be much better off at the end of it, I think, taking that money and buying me some pay-me-monthly-till-I-die scheme.
So yeah the system is all noble intentions and better than nothing but seems to be quite well made for pretty nice profits for those running it.
But then of course a normal state pension system is just a society-wide pyramid scheme. Works great while there are new people joining paying into it, falls apart when the trend turns.
And Tyr: save for your old age FFS. It will be miserable enough without starvation and squalor.
You guys are missing a big point here...
In an era of high inflation, saving for retirement becomes considerably more challenging. You need to aggressively invest, and taxes make that considerably more challenging (if inflation is 10% and your tax rate 33%, you have to get a 15% return just to tread water).
If stocks and bonds are the primary investment vehicle and if low cost diversified funds aren't available, the problem is exacerbated. "Buy and hold" becomes a much more difficult strategy which results in significant tax costs, diversifying is quite expensive, and investors would be pushed into higher risk stocks due to their more favorable tax treatment.
The point here is that - due to government policy relating to inflation and taxes - a broadly defined middle class (not the super wealthy but with the ability to save) was facing particular challenges in saving for retirement.
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.
Quote from: Valmy on April 04, 2019, 07:43:17 PM
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.
Quote from: Habbaku on April 04, 2019, 07:55:36 PM
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?
Quote from: derspiess on April 05, 2019, 08:02:56 AM
Quote from: Habbaku on April 04, 2019, 07:55:36 PM
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.
Quote from: Admiral Yi on April 05, 2019, 01:07:41 AM
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.
Quote from: DGuller on April 05, 2019, 08:11:18 AM
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. ^_^
How big a societal problem is poor olds? Huge? Big? Just a number of individual tragedies?
Quote from: DGuller on April 05, 2019, 08:11:18 AM
Quote from: Admiral Yi on April 05, 2019, 01:07:41 AM
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 ...
Quote from: The Brain on April 05, 2019, 08:20:57 AM
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.
Quote from: Malthus on April 05, 2019, 08:31:00 AM
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.
Quotemulti-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.
Quote from: Valmy on April 05, 2019, 08:34:18 AM
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.
Quote from: Valmy on April 05, 2019, 08:34:18 AM
I think the nuclear family ideology is for suckers.
:huh:
Quote from: Valmy on April 05, 2019, 08:34:18 AM
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?
Quote from: derspiess on April 05, 2019, 08:48:56 AM
Quote from: Valmy on April 05, 2019, 08:34:18 AM
I think the nuclear family ideology is for suckers.
:huh:
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.
Quote from: dps on April 05, 2019, 08:08:05 AM
Quote from: derspiess on April 05, 2019, 08:02:56 AM
Quote from: Habbaku on April 04, 2019, 07:55:36 PM
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.
Quote from: Malthus on April 05, 2019, 08:55:53 AM
Quote from: Valmy on April 05, 2019, 08:34:18 AM
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?
My point was that faulty programs tend to result in additional programs because politicians have to promise to fix problems. Actually having a massive elderly homeless problem is generally not something that a democratic society can functionally maintain before the old people vote in people to fix it.
So if you don't get out ahead of that, it is likely to end up costing your more down the road. Penny wise, pound foolish and all that.
Quote from: Valmy on April 05, 2019, 09:00:53 AM
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.
I think that has changed a lot since I was young.
Nowadays, people on average have less kids, and the expectation - at least among people I know - is that the parents will save a wack of cash to get their kids through to their first job, paying for stuff like university, assuming of course the parents can save cash; plus at least in major cities, rent is so steep that kids live with their parents until they have an independent income (and sometimes for longer!).
Though that could well be an upper-middle-class thing, I don't know. After all, without it, your kid's chances of staying in the upper middle class go down.
Quote from: Valmy on April 05, 2019, 09:03:59 AM
My point was that faulty programs tend to result in additional programs because politicians have to promise to fix problems. Actually having a massive elderly homeless problem is generally not something that a democratic society can functionally maintain before the old people vote in people to fix it.
So if you don't get out ahead of that, it is likely to end up costing your more down the road. Penny wise, pound foolish and all that.
Yup.
Quote from: Valmy on April 05, 2019, 09:00:53 AM
Quote from: derspiess on April 05, 2019, 08:48:56 AM
Quote from: Valmy on April 05, 2019, 08:34:18 AM
I think the nuclear family ideology is for suckers.
:huh:
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.
So that's what a nuclear family means to you?
Quote from: derspiess on April 05, 2019, 09:09:25 AM
Quote from: Valmy on April 05, 2019, 09:00:53 AM
Quote from: derspiess on April 05, 2019, 08:48:56 AM
Quote from: Valmy on April 05, 2019, 08:34:18 AM
I think the nuclear family ideology is for suckers.
:huh:
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.
So that's what a nuclear family means to you?
Yep. Parents and kids.
Quote from: Valmy on April 05, 2019, 09:51:12 AM
Quote from: derspiess on April 05, 2019, 09:09:25 AM
Quote from: Valmy on April 05, 2019, 09:00:53 AM
Quote from: derspiess on April 05, 2019, 08:48:56 AM
Quote from: Valmy on April 05, 2019, 08:34:18 AM
I think the nuclear family ideology is for suckers.
:huh:
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.
So that's what a nuclear family means to you?
Yep. Parents and kids.
Sure. I wasn't aware that pushing the 18-year olds out on their own was part of that deal, though.
It has given us some very important pornos.
:lol:
How do you judge the relative importance of a porno? :hmm:
Quote from: Eddie Teach on April 05, 2019, 10:37:24 AM
How do you judge the relative importance of a porno? :hmm:
It's more an art than a science, granted.
Quote from: derspiess on April 05, 2019, 09:55:21 AM
Sure. I wasn't aware that pushing the 18-year olds out on their own was part of that deal, though.
I don't want to get into semantics :P
I think I was just trying to communicate that the extended family should look after each other. Multi-generational households, that sort of thing. You know, the old ways we thought we didn't need anymore.
I come from a family where it was more or less expected that you move out in late teens and start living your own life. The parents gave some support, but nothing serious.
My wife on the other hand is farmer stock and in her family they take care of each other, very few siblings for a few generations has made it possible for my wife and her brother to both receive a small farm each with a house. Her brother moved out in his early twenties and this opportunity of cheap living and a workoholic character has made him somewhat rich. All the time supported with lots of help from the parents.
For my part it made it economically possible to re-enter university in my late twenties and get a degree. Now we are rather well off, although not wealthy.
We plan on following my wife's family traditions, we are saving for our two kids and, when time comes, I hope that we can set them up with houses or at least lessen their mortgages.
I don't plan on living in a multi-generational household, that sounds horrible for everyone involved.
Quote from: Malthus on April 05, 2019, 08:31:00 AM
Quote from: DGuller on April 05, 2019, 08:11:18 AM
Quote from: Admiral Yi on April 05, 2019, 01:07:41 AM
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 ...
That's why we have Social Security.
And don't tell me that retired people can't live on Social Security alone. The trick is to own your home and have the mortgage paid off before you retire. My mom lived on her own for may years on Social Security. Could she have done that if she had had to pay rent or a mortgage? Probably not. But without having to pay for housing--most people's biggest monthly expense--you can live ok on just an SS check.
Quote from: dps on April 05, 2019, 12:16:42 PM
That's why we have Social Security.
And don't tell me that retired people can't live on Social Security alone. The trick is to own your home and have the mortgage paid off before you retire. My mom lived on her own for may years on Social Security. Could she have done that if she had had to pay rent or a mortgage? Probably not. But without having to pay for housing--most people's biggest monthly expense--you can live ok on just an SS check.
In the city I live in, anyone who has the financial means to own a home mortgage-free probably doesn't have to worry about money to live on after retirement too much! :lol:
Quote from: Malthus on April 05, 2019, 12:37:39 PM
Quote from: dps on April 05, 2019, 12:16:42 PM
That's why we have Social Security.
And don't tell me that retired people can't live on Social Security alone. The trick is to own your home and have the mortgage paid off before you retire. My mom lived on her own for may years on Social Security. Could she have done that if she had had to pay rent or a mortgage? Probably not. But without having to pay for housing--most people's biggest monthly expense--you can live ok on just an SS check.
In the city I live in, anyone who has the financial means to own a home mortgage-free probably doesn't have to worry about money to live on after retirement too much! :lol:
That's why suburbs exist.
And retired people don't need to live where the jobs are.
Quote from: DGuller on April 05, 2019, 08:11:18 AM
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.
No, it's not rocket science to them. People like Squeeze loot their retirement accounts not because the investment options are perplexing, or because the mechanical steps are confusing, but because they prefer to spend the money now.
I agree that some people will make poor choices, which is why upstream I said if you want to change the law to make the money inaccessible until retirement, I'd be in favor.
But no seems very interested in that idea, I suspect because a lot of the people who oppose 401ks do so not because they can be looted, but because they don't provide the same gold plated retirements of the Labor defined benefit plans of the golden age of Big Labor.
Quote from: Eddie Teach on April 05, 2019, 02:28:56 PM
And retired people don't need to live where the jobs are.
Yeah, but not really relevant if you want to follow my advice and have the mortgage paid off before your retire.
You can sell it and move somewhere cheaper.
Quote from: Admiral Yi on April 05, 2019, 03:27:57 PM
I agree that some people will make poor choices, which is why upstream I said if you want to change the law to make the money inaccessible until retirement, I'd be in favor.
It may very well be possible that simply making them loot proof may be all it takes to course correct. That would be an easy fix
Quote from: dps on April 05, 2019, 07:09:48 PM
Quote from: Eddie Teach on April 05, 2019, 02:28:56 PM
And retired people don't need to live where the jobs are.
Yeah, but not really relevant if you want to follow my advice and have the mortgage paid off before your retire.
Property taxes though...
Quote from: Valmy on April 06, 2019, 12:02:18 AM
It may very well be possible that simply making them loot proof may be all it takes to course correct. That would be an easy fix
Centrist!
There is nothing to loot if you don't invest enough in the first place. Yes, you can make an argument that people are rationally choosing consumption now over consumption later, but that's again substituting ideology over understanding of how people actually function.
A far more realistic explanation is that they don't understand how much consumption later they're foregoing by consumption now, or that they're simply paralyzed by the complexity of decisions they have to make, and make no decisions. The fact that people's 401k contributions seem to depend a lot on what defaults the company sets blows a huge hole in the theory that they're making rational decisions with their 401k.
Quote from: Valmy on April 06, 2019, 12:02:32 AM
Quote from: dps on April 05, 2019, 07:09:48 PM
Quote from: Eddie Teach on April 05, 2019, 02:28:56 PM
And retired people don't need to live where the jobs are.
Yeah, but not really relevant if you want to follow my advice and have the mortgage paid off before your retire.
Property taxes though...
Lots of places give senior citizens some sort of exemption or deduction from property taxes.
Quote from: DGuller on April 06, 2019, 03:15:51 AM
There is nothing to loot if you don't invest enough in the first place. Yes, you can make an argument that people are rationally choosing consumption now over consumption later, but that's again substituting ideology over understanding of how people actually function.
A far more realistic explanation is that they don't understand how much consumption later they're foregoing by consumption now, or that they're simply paralyzed by the complexity of decisions they have to make, and make no decisions. The fact that people's 401k contributions seem to depend a lot on what defaults the company sets blows a huge hole in the theory that they're making rational decisions with their 401k.
Who in the world are you talking to? :huh:
Quote from: dps on April 06, 2019, 10:18:13 AM
Quote from: Valmy on April 06, 2019, 12:02:32 AM
Quote from: dps on April 05, 2019, 07:09:48 PM
Quote from: Eddie Teach on April 05, 2019, 02:28:56 PM
And retired people don't need to live where the jobs are.
Yeah, but not really relevant if you want to follow my advice and have the mortgage paid off before your retire.
Property taxes though...
Lots of places give senior citizens some sort of exemption or deduction from property taxes.
Yes...I guess I should know that since that turned out to be an unexpected bonus of living in a multi-generational home.
Quote from: Admiral Yi on April 06, 2019, 02:49:07 PM
Quote from: DGuller on April 06, 2019, 03:15:51 AM
There is nothing to loot if you don't invest enough in the first place. Yes, you can make an argument that people are rationally choosing consumption now over consumption later, but that's again substituting ideology over understanding of how people actually function.
A far more realistic explanation is that they don't understand how much consumption later they're foregoing by consumption now, or that they're simply paralyzed by the complexity of decisions they have to make, and make no decisions. The fact that people's 401k contributions seem to depend a lot on what defaults the company sets blows a huge hole in the theory that they're making rational decisions with their 401k.
Who in the world are you talking to? :huh:
No one now.
As opposed to not understanding basic financial management, the fatal mistake is in thinking that as long as they belong to some group, "they'll be fine". They'll be fine is really euphemism that other people in the group won't watch them suffer. As long as I belong to these social groups, be they my nation, my race, my family, my neighbourhood, my social circle, and I make meaningful contributions, maintain reasonable relations with others, I'll be helped when I need it.
This faith is misplaced. Because in the age of capitalism, it is very possible to do it on your own. Difficult, maybe. Possible, yes. The folks who plan retirement on their own don't have much incentive to do the reciprocal thing. The political method only works if there is sufficient political support, and there isn't.
This is interesting and probably quite true, because even though I've been saving since my 20s I still feel like I should have planned to have more. And financial pundits constantly say you need up to a million or maybe a bit less, depending on your retirement plans. I think that's a bit high of a predictor of need but what it does show is that most people can't save that much. With kids, mortgages, other bills it's hard enough to save, never mind saving that much.
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".
The general rule of thumb is you need $25 in savings for every $1 that you want to spend every year. Or the 4% rule. So if you want to spend $40,000 a year, you need $1 million in savings.
I think with bond yields at historic lows, 4% may not be as secure as it once was. I think 3.5% may be a better bet. Because you don't want to be wrong on these things.
I've seen that "1 million is not enough" line thrown around a lot and just figured it was a financial industry pitch line.
Quote from: Admiral Yi on April 08, 2019, 08:55:35 PM
I've seen that "1 million is not enough" line thrown around a lot and just figured it was a financial industry pitch line.
If you want to spend more than $40,000 per year in retirement, then $1 million is not enough.
Quote from: Monoriu on April 08, 2019, 08:56:52 PM
If you want to spend more than $40,000 per year in retirement, then $1 million is not enough.
I'm the one who taught you about the rule of 25 you doofus.
Quote from: Admiral Yi on April 08, 2019, 09:01:09 PM
Quote from: Monoriu on April 08, 2019, 08:56:52 PM
If you want to spend more than $40,000 per year in retirement, then $1 million is not enough.
I'm the one who taught you about the rule of 25 you doofus.
No, I read about it here :P
http://www.early-retirement.org/forums/f28/
Quote from: Monoriu on April 08, 2019, 08:56:52 PM
Quote from: Admiral Yi on April 08, 2019, 08:55:35 PM
I've seen that "1 million is not enough" line thrown around a lot and just figured it was a financial industry pitch line.
If you want to spend more than $40,000 per year in retirement, then $1 million is not enough.
That's not necessarily true, though. The most common result of adhering to the 4% rule has been to leave behind a significant nest egg to the heirs. Spending could go slightly up (to, say, 4.5-5%) and not radically alter that.
Quote from: Habbaku on April 08, 2019, 10:55:39 PM
That's not necessarily true, though. The most common result of adhering to the 4% rule has been to leave behind a significant nest egg to the heirs. Spending could go slightly up (to, say, 4.5-5%) and not radically alter that.
The perfect result is to spend the last dollars in my last day and die in comfort. But life isn't perfect and there are far too many unknowns. So given that the estimate is going to be far from precise, leaving money behind is a much better outcome than dying in destitution. As I said, it is better to be on the safe side.
"So my grandfather died penniless."
"Wow, that's awful."
"No, it was perfect timing."
Quote from: Monoriu on April 08, 2019, 11:05:19 PM
Quote from: Habbaku on April 08, 2019, 10:55:39 PM
That's not necessarily true, though. The most common result of adhering to the 4% rule has been to leave behind a significant nest egg to the heirs. Spending could go slightly up (to, say, 4.5-5%) and not radically alter that.
The perfect result is to spend the last dollars in my last day and die in comfort. But life isn't perfect and there are far too many unknowns. So given that the estimate is going to be far from precise, leaving money behind is a much better outcome than dying in destitution. As I said, it is better to be on the safe side.
If only there were a financial product that could use the law of large numbers to insure you against spending too much or too little...
Annuities tend to be a pretty raw deal for the purchaser, but...
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.
Quote from: Monoriu on April 09, 2019, 08:10:08 AM
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.
[CdM]
Whatever, the world going to crash and burn in the flames of Trump's dying ego.
[/CdM]
Quote from: Monoriu on April 09, 2019, 08:10:08 AM
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.
Quote from: mongers on April 09, 2019, 08:28:45 AM
Quote from: Monoriu on April 09, 2019, 08:10:08 AM
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.
[CdM]
Whatever, the world going to crash and burn in the flames of Trump's dying ego.
[/CdM]
[Tyr]
I'll never retire, so might as well make sure I'll never retire.
[/Tyr]
Quote from: mongers on April 09, 2019, 08:28:45 AM
Quote from: Monoriu on April 09, 2019, 08:10:08 AM
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.
[CdM]
Whatever, the world going to crash and burn in the flames of Trump's dying ego.
[/CdM]
We're a year and a half behind schedule. :(
Quote from: Habbaku on April 08, 2019, 08:26:28 PM
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.
Quote from: Habbaku on April 09, 2019, 08:51:02 AM
Quote from: Monoriu on April 09, 2019, 08:10:08 AM
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. :)
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.
Quote from: crazy canuck on April 09, 2019, 11:43:46 AM
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?
Quote from: Monoriu on April 09, 2019, 02:13:53 PM
Quote from: crazy canuck on April 09, 2019, 11:43:46 AM
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. :bowler:
I am the American affiliate for the DIHW, so let me know if you need a US-based wire transfer address.
Quote from: Habbaku on April 09, 2019, 03:26:38 PM
I am the American affiliate for the DIHW, so let me know if you need a US-based wire transfer address.
:D
This could be quite a good business.
Quote from: Monoriu on April 09, 2019, 02:13:53 PM
Quote from: crazy canuck on April 09, 2019, 11:43:46 AM
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.
Quote from: Habbaku on April 09, 2019, 03:26:38 PM
I am the American affiliate for the DIHW, so let me know if you need a US-based wire transfer address.
:D
Quote from: Habbaku on April 09, 2019, 07:46:21 AM
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).
Quote from: mongers on April 09, 2019, 03:19:20 PM
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. :bowler:
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.
Quote from: DGuller on April 09, 2019, 06:10:44 PM
Quote from: Habbaku on April 09, 2019, 07:46:21 AM
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.
Quote from: DGuller on April 09, 2019, 06:10:44 PM
Quote from: Habbaku on April 09, 2019, 07:46:21 AM
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.
Quote from: Monoriu on April 09, 2019, 08:08:37 PM
Quote from: DGuller on April 09, 2019, 06:10:44 PM
Quote from: Habbaku on April 09, 2019, 07:46:21 AM
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.
Quote from: Habbaku on April 09, 2019, 08:30:03 PM
Quote from: DGuller on April 09, 2019, 06:10:44 PM
Quote from: Habbaku on April 09, 2019, 07:46:21 AM
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.
Quote from: DGuller on April 09, 2019, 09:02:48 PM
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.
Quote from: Monoriu on April 09, 2019, 09:13:58 PM
Quote from: DGuller on April 09, 2019, 09:02:48 PM
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.
Quote from: DGuller on April 09, 2019, 09:22:17 PM
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.
I agree that not spending everything I earn is a waste. But as I said there is no perfect solution. Something has to give. Out of all undesirable outcomes, including living in destitution in old age, having to depend on an insurance company, and leaving some money behind, I think leaving money behind is the least painful of all options.
God forbid you leave something behind to an heir or a charity of your choosing. :huh:
Finding an heir will be one of the most important tasks later in my life :bowler:
Quote from: Monoriu on April 09, 2019, 09:49:21 PM
Finding an heir will be one of the most important tasks later in my life :bowler:
Look between your thighs.
Oh and someone else's too.
A few years ago I was summoned to my bank for a financial planning session.
Two people entered the room. The female assistant announced that expert would give me a thorough analysis of the international situation. The expert proceeded to name drop Putin, Obama, Xi, and produced lots of conspiracy theories on how they were plotting against each other. It was sort of like the poor men's international section of this week's newspaper.
After about 20 minutes of his babbling that had nothing to do with my financial situation, the assistant announced that the analysis had been successfully completed. To no one's surprise, her conclusion was that I should buy an annuity. They weren't surprised when I rejected the suggestion. The expert then handed me a piece of A4 paper with some basic information on a high yield bond fund. He said I put too much money in stocks, and needed to put some into bonds. I then told him that I had an account in another bank, and there I parked my bonds. It didn't change his recommendation at all. I then spent the next few minutes telling them why it was a bad idea to put half of my money in that particular bond fund, including high fees, some of the companies didn't sound like they would be around for long, etc.
The end.
Truly a masterpiece.
Quote from: Monoriu on April 10, 2019, 08:30:05 AM
A few years ago I was summoned to my bank
:hmm:
Since when do banks get to summon people? Bitches work for me, not the other way around.
In communist China, banks own you.
Quote from: Caliga on April 10, 2019, 09:51:46 AM
Quote from: Monoriu on April 10, 2019, 08:30:05 AM
A few years ago I was summoned to my bank
:hmm:
Since when do banks get to summon people? Bitches work for me, not the other way around.
Once in a while they call me and say they want a meeting. All banks want to sell annuities and funds these days. Sometimes I say yes, sometimes I say no. I say yes because sometimes I do want to see if they have any good ideas (99% of the time they don't). Sometimes they lure me in with gifts (silver coins, cakes. They love handing out cakes). If they give me free cakes I feel honour bound to go.
Mono wants to have his cake and invest it too.
I once bought some bonds from the bank. They asked me to go to their office. After signing the papers they admitted that it could be done through the phone. They just wanted to see my face.
The relationship between my banks and I get very interesting sometimes.
Quote from: Monoriu on April 10, 2019, 10:00:36 AM
If they give me free cakes I feel honour bound to go.
:lol: That's awesome.
I so want to visit China soon.
You can purchase an annuity in the US - no free cakes though.
Quote from: Habbaku on April 09, 2019, 12:31:56 PM
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.
How do you go about finding a real professional for something like that? Preferably without exhorbitant fees or gross abuse of trust? Asking for a friend.
I would recommend looking for a fee-only CFP in your area. There will be plenty of them, most will be capable of working on an hourly-rate basis, or be able to build a financial plan for you at a flat rate. If they are an accredited CFP, then you usually have nothing to worry about, as there are severe legal regulations governing their activities.
This depends on your definition of exorbitant fees, of course. :P
I seldom hear about a fee-based financial planner in Hong Kong. The few available seem to cater to expats exclusively. Nowadays nobody calls himself insurance agent anymore. They all changed their name to financial planner a few years ago.
Quote from: Habbaku on April 08, 2019, 08:26:28 PM
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, I don't buy into needing that much to retire, I think it's more of a figure that advisors can point to as a goal. And as you say, it depends on circumstances for people. Certainly most average working folks can't save that kind of money with kids, college loans and college payments for kids, mortgages and other daily bills. I started saving in my 20s once I got a decent job in my career field. I could never have saved a million or anything close to that but have felt reasonably good about what I did save. But being retired I worry about not having enough over the long term. When I retired I still had a small mortgage which I intended to pay off as soon as possible, mainly with savings/IRA. But I'm working part time at my former company, probably until the big projects are done, so that works out well. Then I'll get a small pension from my company when I stop working. Unfortunately, shortly after I applied for the pension I started working again, and since I was working at the same place I couldn't get the pension. If I had applied for the pension earlier I could have gotten it then gone back to work with no issues. Heh, just bad timing on my part and not realizing the rules.
The 4% rule isn't designed to produce the most efficient portfolios. It is to make sure that the money won't run out even if the worst case scenario hits you the day after you retire (e.g. 1929 style stock market crash and great depression in subsequent years).
Quote from: Monoriu on April 15, 2019, 06:56:28 AM
The 4% rule isn't designed to produce the most efficient portfolios. It is to make sure that the money won't run out even if the worst case scenario hits you the day after you retire (e.g. 1929 style stock market crash and great depression in subsequent years).
Excessive conservatism in most things is a flaw, since resources are not unlimited.
It is only a matter of time before the next financial crisis hits. It may happen tomorrow. I don't think making sure that the retirement portfolio is financial crisis proof counts as excessive conservatism. After all, once you pull the plug and resign from your job, there is (usually) no going back.
Mono, an ultra-conservative portfolio isn't necessary to ensure that one doesn't run out of money.
A podcast I listen to recently did a thought-experiment wherein the hypothetical investor started with a nest-egg of $1 mil. split into roughly 60/40 stocks and bonds, and only assuming the portfolio was invested in a broad S&P 500 index and "all bonds" index to avoid getting too gritty. He began the portfolio just before the Dot Com Bubble bursting in order to avoid biasing against unreasonable expectations with stocks.
In order to prove his point, he then followed the portfolio to the modern day, withdrawing $40,000 each year from the portfolio. He ended the experiment in today's terms with a principal of $900,000 remaining in the portfolio. Even with two of the worst shocks in US stock history (and accounting for the rough corrections in a few spots as well), the principal was essentially only reduced by 10% in a 19 year period.
The reason the strategy worked is because of proper portfolio management--IE, selling stocks after years of high stock returns, selling bonds in years of high bond returns, and always keeping a reserve of cash at a variable level of 10-15% of the portfolio (IE, 2-4 years of expenses) to ensure against the need to sell assets at depressed prices.
In short: DG is right. Excess conservatism here will end up costing you a lot, and sheltering you from very little. Unless you think the world market is going to experience something doubly as bad as the 2007-2008 meltdown, the 4% rule is foolish as long as you have a good portfolio manager caring for your assets.
It really shows that this forum has become basically middle-aged that a thread about retirement investments has been so active. :P
:D I think I'm still one of the youngest here. I like to help the elderly.
Quote from: Habbaku on April 15, 2019, 11:11:59 AM
Mono, an ultra-conservative portfolio isn't necessary to ensure that one doesn't run out of money.
A podcast I listen to recently did a thought-experiment wherein the hypothetical investor started with a nest-egg of $1 mil. split into roughly 60/40 stocks and bonds, and only assuming the portfolio was invested in a broad S&P 500 index and "all bonds" index to avoid getting too gritty. He began the portfolio just before the Dot Com Bubble bursting in order to avoid biasing against unreasonable expectations with stocks.
In order to prove his point, he then followed the portfolio to the modern day, withdrawing $40,000 each year from the portfolio. He ended the experiment in today's terms with a principal of $900,000 remaining in the portfolio. Even with two of the worst shocks in US stock history (and accounting for the rough corrections in a few spots as well), the principal was essentially only reduced by 10% in a 19 year period.
The reason the strategy worked is because of proper portfolio management--IE, selling stocks after years of high stock returns, selling bonds in years of high bond returns, and always keeping a reserve of cash at a variable level of 10-15% of the portfolio (IE, 2-4 years of expenses) to ensure against the need to sell assets at depressed prices.
In short: DG is right. Excess conservatism here will end up costing you a lot, and sheltering you from very little. Unless you think the world market is going to experience something doubly as bad as the 2007-2008 meltdown, the 4% rule is foolish as long as you have a good portfolio manager caring for your assets.
Yeah but times are fat for us. Rerun that thought experiment with the german stock market in 1930.
If you're banking on the 4% rule saving you from the effects of a German-style collapse, I've got a bridge to sell you.
Did you have a point, other than that a cataclysm would take us all down regardless of planning? Was anyone not aware of that?
Quote from: Habbaku on April 15, 2019, 11:22:15 AM
If you're banking on the 4% rule saving you from the effects of a German-style collapse, I've got a bridge to sell you.
Did you have a point, other than that a cataclysm would take us all down regardless of planning?
Yep, sorry you aren't astute enough to pick up on it.
QuoteWas anyone not aware of that?
Chill out. Not every post is an attack on what you posted.
Zing. Got me. Sorry I can't match your massive intellectual achievements.
Quote from: Habbaku on April 15, 2019, 11:36:26 AM
Zing. Got me. Sorry I can't match your massive intellectual achievements.
You probably can't, but that is off topic.
On this topic, a retirement portfolio split 60/40 stocks/bonds is still 100% in financial assets. It is not especially well diversified. It is subject to shocks that will sink you regardless of whether you follow a 4% rule.
So wise.
Quote from: alfred russel on April 15, 2019, 11:40:56 AM
Quote from: Habbaku on April 15, 2019, 11:36:26 AM
Zing. Got me. Sorry I can't match your massive intellectual achievements.
You probably can't, but that is off topic.
Have you noticed that lately you have gone full Dorsey?
Quote from: crazy canuck on April 15, 2019, 12:19:24 PM
Quote from: alfred russel on April 15, 2019, 11:40:56 AM
Quote from: Habbaku on April 15, 2019, 11:36:26 AM
Zing. Got me. Sorry I can't match your massive intellectual achievements.
You probably can't, but that is off topic.
Have you noticed that lately you have gone full Dorsey?
Takes two to tango, and habbaku invited me to dance.
Quote from: alfred russel on April 15, 2019, 11:19:42 AM
Yeah but times are fat for us. Rerun that thought experiment with the german stock market in 1930.
Portfolio goes up
Nazis take power and expropriate Jewish assets
I flee the country as a refugee
With hindsight my porfolio choice was completely meaningless.
Of all the things to argue about, investment strategies? /smh
Hey Habbs, what was the podcast?
Phil Ferguson, episode 300:
https://www.spreaker.com/user/8084919/300-ERtQBb
He covers financial stuff in the opening half of the show and typically interviews various (non-financial) people during the second half. I usually skip the second part unless there's someone really good on, but the financial topics he covers are usually insightful.
Quote from: Habbaku on April 15, 2019, 11:11:59 AM
Mono, an ultra-conservative portfolio isn't necessary to ensure that one doesn't run out of money.
A podcast I listen to recently did a thought-experiment wherein the hypothetical investor started with a nest-egg of $1 mil. split into roughly 60/40 stocks and bonds, and only assuming the portfolio was invested in a broad S&P 500 index and "all bonds" index to avoid getting too gritty. He began the portfolio just before the Dot Com Bubble bursting in order to avoid biasing against unreasonable expectations with stocks.
In order to prove his point, he then followed the portfolio to the modern day, withdrawing $40,000 each year from the portfolio. He ended the experiment in today's terms with a principal of $900,000 remaining in the portfolio. Even with two of the worst shocks in US stock history (and accounting for the rough corrections in a few spots as well), the principal was essentially only reduced by 10% in a 19 year period.
The reason the strategy worked is because of proper portfolio management--IE, selling stocks after years of high stock returns, selling bonds in years of high bond returns, and always keeping a reserve of cash at a variable level of 10-15% of the portfolio (IE, 2-4 years of expenses) to ensure against the need to sell assets at depressed prices.
In short: DG is right. Excess conservatism here will end up costing you a lot, and sheltering you from very little. Unless you think the world market is going to experience something doubly as bad as the 2007-2008 meltdown, the 4% rule is foolish as long as you have a good portfolio manager caring for your assets.
The whole point of going financially independent is not to count on somebody. I don't want to count on my family or the government. I don't see why I should shift responsibility of my financial well-being to someone even less reliable, like portfolio managers. It has been more than 10 years since the 2008 financial crisis. I sometimes still see people camped outside banks. The people (who were once rich enough that the banks assign portfolio managers to them and) who listened to their portfolio managers, put 100% of their assets into one single risky structured product, lost everything, and demanded their money back. I am not talking about shady operations. These are big huge international banks, and this is the kind of advice they give. No, these people aren't remotely trustworthy. And no, nobody cared about these campers.
https://en.wikipedia.org/wiki/Accumulator_(structured_product)
Quote from: The Larch on April 15, 2019, 11:16:02 AM
It really shows that this forum has become basically middle-aged that a thread about retirement investments has been so active. :P
One of my conversation starters when I was in primary/grade school was retirement. It didn't work very well :blush:
Quote from: Habbaku on April 15, 2019, 04:03:11 PM
Phil Ferguson, episode 300:
https://www.spreaker.com/user/8084919/300-ERtQBb
He covers financial stuff in the opening half of the show and typically interviews various (non-financial) people during the second half. I usually skip the second part unless there's someone really good on, but the financial topics he covers are usually insightful.
Thanks!
Quote from: Monoriu on April 15, 2019, 05:24:43 PM
The whole point of going financially independent is not to count on somebody. I don't want to count on my family or the government. I don't see why I should shift responsibility of my financial well-being to someone even less reliable, like portfolio managers. It has been more than 10 years since the 2008 financial crisis. I sometimes still see people camped outside banks. The people (who were once rich enough that the banks assign portfolio managers to them and) who listened to their portfolio managers, put 100% of their assets into one single risky structured product, lost everything, and demanded their money back. I am not talking about shady operations. These are big huge international banks, and this is the kind of advice they give. No, these people aren't remotely trustworthy. And no, nobody cared about these campers.
There is literally zero in my posts that would suggest that I am encouraging you to run off to a portfolio manager who thinks burying 100% of your assets into a single security or derivative is a good idea.
My encouragement is and always will be to go to a fiduciary who is legally and ethically obligated to serve your interests. Trusting a huge, international bank without researching what legal obligations they have to you is usually a bad idea. I don't have any idea what sort of protections might exist in Hong Kong, but it doesn't sound like there are many from what you're saying.
There are no protections whatsoever. The banks insist that they don't provide any financial advice to me when they tell me to put all my money into this and that product. What you describe doesn't seem to exist here.
Yikes.
Well, I don't think there's anything to stop you from utilizing a CFP that's from the USA or Canada. :unsure:
Quote from: Habbaku on April 15, 2019, 08:21:08 PM
Yikes.
Well, I don't think there's anything to stop you from utilizing a CFP that's from the USA or Canada. :unsure:
I don't think it works. Totally different environment. Different tax regimes, different investment regulations, different laws. No Social Security here.
My recommendation was that you leave Hong Kong. :P
Quote from: Habbaku on April 15, 2019, 08:28:58 PM
My recommendation was that you leave Hong Kong. :P
That's the craziest reason to leave my job I have ever heard :P
That is everyone's recommendation that has read your posts on the place.
Quote from: Eddie Teach on April 15, 2019, 09:32:03 PM
That is everyone's recommendation that has read your posts on the place.
They are wrong. Tax rate here is 15% max. No sales tax, no pay roll tax, no unemployment insurance, etc etc :contract: