StrangeSox

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 03:23 PM) So you don't think that there's a segment of our population called "suckers" that buy into crap like subprime loans, bad auto loans, overpriced goods at specific stores (instead of shopping at other places), etc etc.? Sure there's gullible people. Why should we expose their retirement finances to the hucksters as well? How much money has the financial sector "suckered" people out of?

We've been running this 401k/IRA primary retirement source for one generation who's just starting to retire now. It doesn't appear that those who have been investing are making enough money on their investments. And many people simply don't make very much, so even if they are contributing 5% of their tight budget, it won't be all that much in the end.

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 02:48 PM) True, but I think you could make the argument that if you're one of those students the last 2-3 years you made a terrible mistake despite knowing exactly what you were getting yourself into. Law schools are subprime lenders. You should know what you're signing up for. It's not something totally fraudulent, it's just making a terrible decision. Except they were deliberately misleading in their representation of graduate employment rates. And it's been something that's been culturally reinforced for generations as a good idea and still widely is.

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 02:48 PM) I think it's common sense, but I don't have time (or the desire really) to look for some study about it. I'm not going to trust 'common sense' that just happens to support the conclusions you've already come to.

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 02:42 PM) It's a learned skill that's a basic need. A hunger/gatherer 10000 years ago wasn't born with the skill, he had to learn it. There were thousands of generations of evolution to develop abilities to hunt and gather, though. That doesn't apply to financial investing, with it's incredibly complex and numeric-centric nature and the need to assess risk and results years and decades into the future. That's not something humans are particularly well adapted to naturally. I don't see any evidence that long-term successful financial investment is a skill that's readily available to a bare majority of the people or even a substantial minority. We've been doing this for about one generation now, and it's turning out very poorly. Well, not for wall street, but for most others. No, it doesn't come down to that. It comes down to "there's no good reason to make everyone's retirement hinge on their ability to succeed at financial investing, especially since it's a new phenomenon and early results aren't very promising."

The collapse of the world's banking systems would have done wonders for IRA's and 401(k)'s. (I'm still torn on that one given how the people who caused this mess got to keep and increase their personal fortunes and are apparently immune from criminal prosecution now)

QUOTE (Balta1701 @ Feb 6, 2013 -> 02:31 PM) Obviously not every degree is the same, but there's still a very large premium associated with extra education, in terms of both the availability of employment and wages. It's shrunk as college costs have screamed up, but it's still quite big. That's not true for a lot of the middle- and lower-tier law schools these days. Of course, they've actively lied to students about graduation employment rates, but the courts said that students should have been able to figure out that they were lying on their own and that they're not liable for the misrepresentation. edit: for a stark example, entering some middle-tier law school in 2006 would have been a great, responsible decision to take on tens of thousands of dollars in debt in exchange for a future career in law. Now when that person graduates in 2009, they're not going to be able to find s***. Probably still can't 3-4 years later. But they've still got huge debt obligations hovering over them.

QUOTE (Soxbadger @ Feb 6, 2013 -> 02:19 PM) Id have to see some textual support to really suggest that thoughts and actions are the same. My general recollection of the Old Testament is that God was worried about actions, not thought crime. Coveting your neighbor's smokin' ass was a sin, no?

QUOTE (Iwritecode @ Feb 6, 2013 -> 01:52 PM) That's exactly what somebody else told me a few days ago. I don't see how you separate the two things. Isn't the very definition of being a homosexual engaging in homosexual acts? Can you really consider yourself to be a homosexual if you only engage in heterosexual acts? You can be gay but abstinent.

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 02:13 PM) If 99% of people don't do it in the first place, why is it a problem? If SS has been the main retirement plan, why isn't the current level sufficient? I'm not seeing old people dying left and right because their SS checks aren't big enough. It wasn't the main retirement plan. We've had a couple of generations with pensions. Before that, in the gilded age, things were pretty damn ugly for a lot of people. Going back father to pre-industrial eras doesn't provide many meaningful comparisons imo.

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 02:20 PM) Absolutely. The people we're talking about here don't understand money and finances. They spend too much. They buy s*** they can't afford. They over extend themselves. They're the idiots that think buying a 250k home with a 5 year arm is a good decision because they can pay for it right now. Or a lower monthly payment on a car but for a longer term with high interest is the right decision. And they make those mistakes for 60 years. Can you give me some citations and data for this? Or is this just your "gut feel" of personal finances in this country? Are people over-extending themselves because wages have stagnated for decades (where is this money going? finance sector!) but COL rises? What would happen to our consumer-driven economy if people drastically started cutting back on demand? For a while, an investment in a college degree was a good investment and great planning. Especially something like a law degree. Today, and especially since the last 4-5 years? You could be coming out of school with a mortgage-sized debt and no job to show for it and few prospects if any.

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 02:17 PM) PERSONAL FINANCE is the basic skill of survival. Not really sure how you can dispute that in today's world. PERSONAL FINANCE is a relatively recent "skill of survival" for humans and isn't relevant to many people still today (subsistence living in much of the developing world). It's not some innate skill that humans have. Financial investment is even newer and less widespread of a "basic skill of survival." And we go right back to asking "why should this be a 'basic skill of survival'?"

QUOTE (iamshack @ Feb 6, 2013 -> 02:08 PM) The main reason I utilize a 401k account is because my company matches up to 6% of my base salary that I put into it. If I was super paranoid, there is nothing saying I couldn't put the money straight into the bank, or invest it in any number of very safe investments. And yes, I could absolutely hire someone to do this for me, if I was not savvy enough to figure that out myself. You guys are going to jump all over the recent banking and market scandals, but let's face it, if I was REALLY conservative, I could take my money into any bank or investment firm, and say "tell me how to invest this money along the ultra-conservative risk spectrum," and they would guide me towards those options. One doesn't have to buy stocks or mutual funds with their savings. And that doesn't require anyone to have any more common sense than it requires of someone to balance a monthly budget or determine how much house they can afford. You make a pretty good salary and can afford to set aside a decent chunk of money. The average household making $50k can't do that. So now you're paying money to someone to manage your accounts. What if they get it wrong? Why is it better to be having them siphon money from your investments instead of a better guaranteed retirement fund? Saving alone won't cut it, you need growth. Growth entails risk, and even "safe" investments can go bad. Yes, I'm going to jump all over the recent (and continuing) economic collapse that came directly from the financial investment sector. And the one before that (tech bubble), and the S&L scandal and numerous other financial setbacks we've had.

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 02:05 PM) Oh please Balta, teach me. Look, I deal with this crap all the time with my job. Medical care is expensive. I get that. But if you don't have the money, you're not left on the street to die. You're not kicked out of a nursing home. W What we're talking about here isn't getting rid of a social safety net, it's adding to one for people that with a little bit of education and self-responsibility don't need. the only reason people don't have large retirement accounts is lack of education and responsibility?

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 02:03 PM) But it's the same principle - that for some reason our basic skill of survival is ignored simply because the Great Provider is there for us. Look, I've said it ten times now, I'm fine helping people out and I agree the collective group is in the best position to do that. But what your socialist dreams create is a society of GIMME GIMME GIMME, I have the RIGHT to that assistance. It's not a last resort, it's the first expectation. There's a huge societal detriment to that and we see it all the time in Chicago. Welfare is a failure. And every time we decide to chip away at personal responsibility (or familial responsibility) we just extend the problem. Financial investment isn't a "basic skill of survival" anywhere before the late-20th century. I don't think we should look to a social retirement scheme only as a last-resort. I think it should be a guaranteed thing for everyone. I don't see any social benefit to funneling such a huge chunk of our wealth to the financial sector and exposing people to so much individual risk. But you still have to go back to how much someone can invest. $50k average, 5% a year is a total investment of $75k. Even if that's growing at a percentage or two above inflation every year (it won't), it still doesn't amount to much in the end. Some people are dumb. Some people aren't good with investing. Some people are smart but lose a bunch of money through no action of their own. Some people think they're making responsible, good investments but it turns out that they're wrong. Why should people have to rely on being smart enough and financially capable of investing in order to provide a retirement? Unless you get it wrong, then you're stuck with little or no financial freedom. And don't forget all of the money you turn over to management fees over the years!

QUOTE (Balta1701 @ Feb 6, 2013 -> 02:02 PM) The real answer, of course, is that wall street firms eat up 1/3 of an average 401K plan with fees...and that's good for the important people. Well duh, that's why they want to tap into the huge SS stream too.

QUOTE (Balta1701 @ Feb 6, 2013 -> 01:54 PM) Like I said, someone needs to give you a lesson in financial literacy, because you're in deep denial about how big health care costs are. Jenks is not adequately anticipating health care costs and cost-of-living 30 years from now. Too bad, throw him to the wolves! More seriously though, how well could someone starting work in 1975 anticipate modern COL expenses (which have steadily increased) and health care costs? Is it some mortal sin they should suffer for if they couldn't accurately project economic and financial conditions decades into the future?

QUOTE (iamshack @ Feb 6, 2013 -> 01:53 PM) Because that is what it takes for human beings to survive if they want to cease becoming wage-earners? Again, you're back to a tautology. I'm asking why that's currently the system (it's only been that way for a few decades) and if it makes any sense for it to be that way. I don't agree that it does, and I don't see any net benefits that result from tying individual investment savvy to your ability to get by once you can no longer work. Are you equating providing food, shelter and clothing to the same sorts of skills required to be a successful investor? You and jenks have both said "it's how people provide for their families" or some stuff about "hunter-gatherers." Investment income is not how 99.99999% of people have ever provided for their families, and it's not how 99% of them provide for them now. It's an additional skill that you'd need to be able to pick up and do well with decades before you'll see the end results and hope there's no catastrophes outside of your control along the way. Why? Why not just increase SS benefits and not put so much individual risk out there? What good comes of tying retirement to how well you invested your money over the past 30 years?

I'll note that quite a few pension plans got hammered because of the supposedly safe investments rated "AAA" by the ratings agencies that were in actuality complete garbage. So even the experts, the people who do this stuff for a living day-in, day-out, get it wrong in big ways. Now we expect every individual sit down and actually understand wtf a prospectus is telling them, what different stock metrics mean, and how to make any sense out of this when the investment firms employ PhD mathematicians and engineers to figure this stuff out? How does that system make any damn sense for anyone not collecting account management fees? We just switched 401(k)'s at my company. I've got about 15 options. The five Fidelity "Life Options" target date funds all have high fees and terrible ratings (one star). Most of the rest have three star, a few have four and one has five. I'm an engineer and I'm decent at math, but I don't have the ability to actually make an informed analysis of this stuff beyond "welp, morningstar likes it and it's low-fee, guess it's good??" Should I even be trusting what some ratings agency says given how poorly they've been shown to be lately? Should I pay someone money to manage this stuff (and hope they know what they're doing)? Why not just have a more-robust SS system so you don't have all of this money being siphoned off the top and so much individual risk?

I was. That was specifically my question--why should our retirements be tied so tightly to how well we can manage financial investments? Any talk about "hunter-gatherers" or how pre-finance capitalism societies handled the elderly isn't relevant to that specific question.

QUOTE (Jenksismyb**** @ Feb 6, 2013 -> 01:13 PM) Clearly the answer is to just give people the same things - same houses, same cars, same clothes. That way we're all equal and if something bad happens to someone we have a ready supply of the same s*** to give them. Or a modest increase in SS benefits so that you're not reliant on financial investments you made 20-30 years ago.

QUOTE (iamshack @ Feb 6, 2013 -> 01:23 PM) I was going to say the bolded as well...this is a survival skill that goes back to the beginning of time. 401(k) management isn't a survival skill that goes back farther than three decades. Aside from a relatively small number of investors, very few people have ever provided for their family based on financial investment management.

1) We (the Western world) haven't been living in "hunter/gatherer" societies for a few thousand years now, but those societies and even many agrarian societies tended to be heavily egalitarian. Very few people actually provide for their family via investment income anyway. Most people provide for their family by selling their labor. Saying "that's how you provide for [your retirement]" is just a tautology. I'm asking why is that the current (and relatively recent) system, and should it be that way? What's the societal benefits of that? What are the costs and risks? Saving a small portion of your yearly salary without investing it isn't going to result in that much savings. Take the median income, $50k, at %5 a year (which might be more than your typical family of four can reasonably afford to set aside). That's only $75,000 after 30 years of working. You don't have to be a Harvard business grad to realize that having money set aside in retirement is a good idea, and you don't have to be a Harvard business grad to realize that many people can't actually afford to set aside all that much. And that you need it to grow with compounding interest over time for it to amount to anything, which is an assumption the whole model is built on but isn't working out in actual practice very well. 2) But aren't there risks with annuities? Aren't there high fees? Why should we structure our retirement plans around a system that enables a huge amount of rent-seeking and little social good? And what if you just aren't that financially savvy? Should dumb people or people without a background in personal investment be left to suffer? 3) Again, this requires some level of financial investment savvy. Why should our retirements be so dependent on that? What good comes of it? It's not the "governments" responsibility, it's society's. The government is a tool that can be used to accomplish social goals. It's particularly effective at this one and more reliable than charity or "lol, enjoy your cat food, grandma!" personal investment outcomes. There are substantial healthcare costs for seniors that aren't covered by Medicare. Prescription drugs are particularly expensive (no negotiating prices!) and any form of routine care can wipe out savings quickly. Continuing to pay rent or upkeep on an old house is a significant expense. Even if you're living in a small, affordable apartment, that could easily take over half of your monthly income. Maintaining a car is expensive. Food is expensive. Yeah, you can get by, but you'd be grinding by very meagerly and things would be awfully tight. One unexpected expense could sink your budget and throw you back into debt.

Three things, first one most important. 1) Why should your ability to retire be tied to your financial investing aptitude (and ability to set aside current earnings for investment)? Why should we prize that as the most important skill someone could have, and why should we funnel so much of our economy towards the financial sector? 2) "safe" investments can turn to s***, too. That's why the 2008 collapse was so bad. 3) Even if you aren't near retirement when the investments take a s***, it could still mean a "lost decade" that destroys any sort of annual compounding projections. You could be stuck with a 401(k) plan with s***ty high-fee options with terrible returns. You can have no 401(k) option at all.

I don't identify as a Democrat but would as a socialist. You've expressed a "live and let live" attitude wrt to your beliefs in the past and I respect that. But I think you're an outlier in that regard, so when most people start expressing strong conservative religious beliefs, it's not a bad assumption to believe that they'd like to see those beliefs put into law. No, I don't think a church should be forced to hold the ceremonies if they don't want to.