StrangeSox

QUOTE (iamshack @ Feb 6, 2013 -> 05:01 PM) They have a lower administration % perhaps, but how is that money invested? Where does it go? Does it just sit in an account somewhere? It goes to current beneficiaries or to buy special treasuries when there is a surplus. It's not invested anywhere.

Here's an old article circa 2000 that covers a lot of the issues of privatizing SS which apply just as well to its expansion http://www.epi.org/publication/issuebriefs_ib145/

QUOTE (iamshack @ Feb 6, 2013 -> 04:55 PM) My post was obviously in jest. That being said, which massive government programs are run particularly well? Social Security and Medicare, both of which have substantially lower overhead than their private-sector counterparts.

QUOTE (iamshack @ Feb 6, 2013 -> 04:50 PM) What you both are saying is that the only way people are capable of saving or will bother to save is if it is a mandated government program which removes the money from their paychecks prior to them getting it. The only way to ensure that everyone has adequate retirement funding is to do this, yeah. As the article I posted mentioned, there are fixes and tweaks you can make with the 401k system like making it opt-out instead of opt-in that will increase participation. Actually, my new plan more or less does this--everyone was signed up with a default 3% unless they said otherwise. It's increased automatically 1% annually to a cap of 7%. But that doesn't fix the immediate problem that an awful lot of people are approaching retirement with inadequate retirement savings for whatever reason.

Who will administer this program? The Social Security Administration. Increased SS benefits wouldn't be farmed out to wall street, much as they'd love to start siphoning off of that money. Also not sure you've followed what I've said about guns.

QUOTE (Balta1701 @ Feb 6, 2013 -> 04:42 PM) If I invested $1 in 1999, that $1 is now worth $.73 after adjusting for inflation and assuming no fees. What you really need is a little script that can compute exactly what you'd get investing y1% of a salary of $x1 in 1970, $x2 in 1971, etc. to see what someone who started working 43 years ago would have now.

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 04:40 PM) So screw the ratings and invest in index funds that are highly diversified and aren't nearly as volatile. When the market is up, you make money. When it's down, you lose. And historically, it's always gone up over the long term. These aren't difficult concepts and if anything this stuff has gotten easier even in the last 5 years or so since I started looking into this stuff as a poor law student with a $13/hr part time job. I have exactly one index fund available. It's not your typical S&P 500 or DJ index, it's fees are moderate and it's rating is 2-star. what if you're wrong? What if all of these investment options are s***? I won't really find out for years, and by then, I'm already in a big hole.

I'm younger than 30 and my concern here isn't for my own personal retirement fund. My allocation is going towards those better-rated funds, but again, now I'm relying on a ratings agency's experts to tell me what's good. They did a pretty s*** job recently.

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 04:28 PM) Since the 70's that fund has earned over a 10% return. That's not some modest gain if you're reinvesting your earnings and adding contributions. There are several funds just like it. Accounting for inflation and long periods of negative or zero growth?

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 04:23 PM) He did, my mistake. My point remains. Last I checked the ability to have a kid isn't a right. If you can't adequately provide for one, you shouldn't have one. That's one of the basic problems we have in this country that gets ignored because "don't worry, the Great Provider will help you if you can't!" Or, instead of depriving the majority of Americans of the right to have children or having harsh financial results for doing so, maybe we should look to see why our system is so f***ed that a couple earning the national median wage who has a couple of kids ends up with little retirement income after working 30-40 years.

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 04:25 PM) It's my understanding that the 401(k) is a big tax advantage for a company - the more people that participate, and the more money that gets invested, the more they can deduct. They can deduct wages as an expense as well. If there's even more tax incentives than that, then we're back to "why not redirect those resources to a risk-free system?" To a handful of pre-selected choices. My new 401(k) is pretty s***ty, the average morningstar rating is probably 2-1/2 stars, only one is 5 star and only two are four star, and those are all small-cap or international (read: high-risk).

QUOTE (Balta1701 @ Feb 6, 2013 -> 04:23 PM) And, as we've noted...that leaves me deficient in retirement. The S&P 500 is right where it was at in August 2000. Now take inflation and management fees into account.

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 04:18 PM) I'm 100% behind idea #1. As to #2, how about you start by not having 4 kids? This goes back to the personal finance skills and responsibility point I was making. 10000 years ago if you couldn't provide enough food for your family, you either didn't do it, or you died. You didn't look to your neighbors and say "hey boss, I had 2 more kids than I could feed. Can you and everyone else pitch in so my kids can eat?" 10,000 years ago, yeah, you probably did because you lived in a small, egalitarian tribe that was probably largely related to you in some manner and in which resources were often pooled and shared. You sure as hell didn't have individuals within a community going off and "earning a living" only for their immediate family and f*** everyone else. Many societies in agrarian cultures functioned similarly. The sort of individualism you see nowadays is a relatively recent philosophy. People also popped out babies like crazy back then because mortality rates were significantly higher.

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 04:14 PM) Not true: Meaning 80% do, and each one of those people get MORE out of doing so because they get free money from their company for participating, on top of any gains their investments make. Wages would arguably higher if this retirement benefit were not there, not every place matches, many have long vesting periods and that still doesn't show a net gain over time compared to an alternative higher payroll tax (or eliminating the cap) and increased SS benefits.

So if I really, truly can't pick a mutual fund because I suck at it, should I be forced to have a s*** retirement or to pay exorbitant fees for someone else to hopefully do a better job at picking? I'm still not seeing any good reason for that to be the system beyond "well-off people can make some more money." It's not a net benefit for a majority of people.

No, it really isn't. He's asking why we should make tax expenditures to subsidize 401k's and IRA's instead of just providing better SS benefits with that same money.

401(k)'s and IRA's are tax-advantaged plans.

Yeah, but I think we can assume, based on your success and background, that you're a pretty intelligent guy. Certainly above-average. What about the majority who isn't as smart or doesn't have innate investing and risk-management understanding?

QUOTE (iamshack @ Feb 6, 2013 -> 03:47 PM) Perhaps it could be something that you have the option to opt-in or out of? No, that'd result in an underfunded, unreliable system.

QUOTE (iamshack @ Feb 6, 2013 -> 03:43 PM) It is not a part-time job. It takes a few minutes a week, if that. Most of the things that affect the stock market and other markets are all over the news and are almost impossible to escape. If you're not willing to spend 10 minutes a week on your future financial health, when I know you spend hours a week posting on Soxtalk, then I honestly have no sympathy for you. You are literally involved in a trading market everyday, right? Doesn't that give you a decent advantage in understanding the risks and information associated with investment that a vast majority of people don't have?

QUOTE (Balta1701 @ Feb 6, 2013 -> 03:42 PM) When has anyone attempted to stop you from doing so? If we eliminated the 401k entirely tomorrow, you'd still be able to do that. If payroll taxes were increased to pay for larger benefits, he would have a few percentage less to invest.

So it's a good idea because you have the prerequisite knowledge and income that most don't have to make the most of investment opportunities? I'm not sure that's a good social policy.

QUOTE (illinilaw08 @ Feb 6, 2013 -> 03:32 PM) 2) What about people that just don't make enough to put money aside for retirement? SS and Balta are correct that at $50k with a family of 4, even if you are saving for retirement, you aren't saving enough. At some point, those people will be out of the workforce, either due to being too expensive or due to health issues. $50k is also the median. Many make less than that.

QUOTE (iamshack @ Feb 6, 2013 -> 03:34 PM) Depends on what you define reasonable as. By it's very nature, investment involves risk. Otherwise, it would be called saving. No one can know exactly how things will turn out, but most folks with 401(k) accounts have the ability to watch the market daily, buy and sell their funds within a business day of making that decision, read reports and gauge risk tolerances, etc. It isn't as if you just put your money in there and then it's stuck there for all eternity. These websites offer quite a bit of research tools to educate you on what risk/reward tolerances you are comfortable with and how to act on those tolerances. So why is it a good idea to essentially require everyone to become well-versed in financial investments if they want a chance at a decent retirement instead of just having a system that provides a decent retirement after decades of work but still leaves open the option for anyone who wants to to invest?

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 03:21 PM) Currency and trade and dealing with money isn't a new concept. It's been around for thousands of years. Being responsible with that money (personal finance) is, at this point, a basic skill necessary to live in this society. The way currency is used these days is a somewhat recent phenomenon, but yes, that's a necessary skill. "dealing with money" isn't the same as active participation in finance capitalism, though, and "being responsible" with your monthly or yearly budget isn't the same thing as successful investing. "Being good at investing" is, right now, a skill that's necessary to have a decent retirement. I'm challenging the validity of that structure, and repeating back to me "that's how it works!" isn't really an answer. A $20k car comes with a lemon law and a warantee. An investment explicitly has no guarantees of the safety of your money or any future gains. Successfully investing for your retirement 20-40 years from know requires more than "reading comprehension" and trusting whatever institution you're investing in. You need to understand what the different options are, what they mean, what the information in a prospectus is telling you and how and why you might want to structure your investments. Unless you're will to pay substantial financial adviser fees, which of course is going to make it that much harder to have a decent retirement account at the end and you're relying on that person to do a decent job. If you're talking super-safe 'investments' like essentially-zero-growth savings or MM funds, then you're not going to have much money at the end anyway unless you're a high wage earner socking away a substantial %. A life supported solely by SS income is a very, very meager life. I believe we can do better than that as a society.