The Democrat Thread

[Balta1701]

So pick the Vanguard S&P 500 index fund, pay like .2% in fees and enjoy a steady growth that matches the market. There's no rocket science involved. It takes some reading and research. Just like it takes some reading and research into buying a car, buying a home, having a kid etc. - things that will probably end up costing the same or more over the course of your lifetime than potential losses on your investments.

And, as we've noted...that leaves me deficient in retirement.

[StrangeSox]

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.

[Balta1701]

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!"

Actually, I'm pretty sure that there is a right to privacy somewhere that overlaps with the right to have a kid.

[Jenksismyhero]

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.

 

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.

 

And if you have a 401(k) and aren't happy with it you can change the allocation in most plans.

[StrangeSox]

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.

[StrangeSox]

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?"

 

And if you have a 401(k) and aren't happy with it you can change the allocation in most plans.

 

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).

 

[Jenksismyhero]

And, as we've noted...that leaves me deficient in retirement.

 

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.

[Jenksismyhero]

Actually, I'm pretty sure that there is a right to privacy somewhere that overlaps with the right to have a kid.

 

I'd love to read that case law.

[StrangeSox]

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.

[StrangeSox]

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?

[Balta1701]

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.

But for comparison, as of 2009, the S&P had lost money relative to inflation since the 1970's.

[Jenksismyhero]

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).

 

 

You're 30 something right? You have another 30 years. You can afford the risk. If the bottom drops out of the entire market, money is going to be useless anyway. And only people with guns will have power! Mwha ha ha!

[StrangeSox]

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.

[Jenksismyhero]

But for comparison, as of 2009, the S&P had lost money relative to inflation since the 1970's.

 

And what about in 2012/2013 when the market rose back to it's 2000ish level?

 

http://www.moneychimp.com/features/market_cagr.htm

 

If I invested $1 in 1970, including inflation, that dollar is now worth over $9. Even if that's a conservative estimate, it's long been the norm that a return is 6-7% annually, adjusted for inflation.

[Jenksismyhero]

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.

 

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.

[Balta1701]

And what about in 2012/2013 when the market rose back to it's 2000ish level?

 

http://www.moneychimp.com/features/market_cagr.htm

 

If I invested $1 in 1970, including inflation, that dollar is now worth over $9. Even if that's a conservative estimate, it's long been the norm that a return is 6-7% annually, adjusted for inflation.

If I invested $1 in 1999, that $1 is now worth $.73 after adjusting for inflation and assuming no fees.

[StrangeSox]

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.

[StrangeSox]

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.

[iamshack]

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.

 

And who will administer this program? The government? And who will they farm it out to? Oh yeah, the folks that currently run the 401k systems, who you both are claiming have absolutely no clue what they are doing.

 

What are your other options? Put it in a bank...oh wait, the bankers are all idiots and corrupted too!

 

So you can store it under your mattress, right? Nope, because neither of you would allow anyone to have a gun!

Edited February 6, 2013 by iamshack

[StrangeSox]

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.

[iamshack]

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.

My post was obviously in jest.

 

That being said, which massive government programs are run particularly well?

[StrangeSox]

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.

[StrangeSox]

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.

[StrangeSox]

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/

[iamshack]

Social Security and Medicare, both of which have substantially lower overhead than their private-sector counterparts.

They have a lower administration % perhaps, but how is that money invested? Where does it go? Does it just sit in an account somewhere?