Author Topic: Two pioneers of the 401k system now consider it a failure for most Americans  (Read 17499 times)

wenchsenior

  • Magnum Stache
  • ******
  • Posts: 3791
On Point just had an interesting show interviewing two of the 'founders' of the 401k. Upon reviewing data of assets of Boomers getting ready to retire and overall savings rates of working Americans, they have decided that the 401K has not worked and they no longer support it being used as the default retirement vehicle for American workers. Some alternative options they discussed were to completely rework 401ks at the very least so that Americans can all invest in the federal TSP with incredibly low fees; or better yet, to come up with an investment vehicle that has a guaranteed rate of return (essentially, an annuity type situation accessible to all workers), which would serve to supplement Social Security.

http://www.wbur.org/onpoint/2017/01/04/401k-retirement-pension-problems

OurTown

  • Handlebar Stache
  • *****
  • Posts: 1372
  • Age: 54
  • Location: Tennessee
So the gist is that people aren't contributing enough?  Or that people have shitty investment choices in their 401(k)?  (The last one is often true). 

wenchsenior

  • Magnum Stache
  • ******
  • Posts: 3791
So the gist is that people aren't contributing enough?  Or that people have shitty investment choices in their 401(k)?  (The last one is often true).

Both.  They discussed the primary problems: 1) not enough people have access to a 401K; 2) quality of 401Ks offered and employer matches vary wildly; 3) fees for most 401ks are FAR too high; 4) people aren't good at managing long term risk as individuals and thus choose poor investment options; 5) people can't control long term risk as individuals and are subject to market fluctuations; 6) people don't contribute nearly enough...sometimes not even when they have access to a good 401k.

They did acknowledge that for a small set of American workers (usually those in the top 10% of income), 401ks often work fine. But they figure those people will be ok anyway.

big_slacker

  • Handlebar Stache
  • *****
  • Posts: 1350
So the gist is that people aren't contributing enough?  Or that people have shitty investment choices in their 401(k)?  (The last one is often true).

6) people don't contribute nearly enough...sometimes not even when they have access to a good 401k.

I work for a place that does 50% match up to max elective deferral ($18k) which BTW has no vesting schedule, it's yours immediately. Shockingly (or maybe not) there are TONS of people that don't have it maxed. And almost everyone in the building makes over 100k/yr so they should be able to afford the 18k. :(

prognastat

  • Pencil Stache
  • ****
  • Posts: 781
  • Location: Texas
Unfortunately some laws would need to be changed to make the 401k system work for most Americans.

First off it should be illegal for a person/company managing a 401k to not be a fiduciary. This would make it so companies can't give people shitty options to benefit themselves on fees etc and if it can be proven that they did not manage the money in the interest of the investor they would be open for legal recourse.

Second off it should be required to have a 401k option for any employee and require it to be opt out instead of opt in. Doesn't even have to be mandatory. Simple making it required to be opt out instead of in would mean most would not argue it and simply leave it withdrawing money.

In my opinion doing those two things would fix most of the big issues with it.
« Last Edit: January 05, 2017, 03:37:35 PM by prognastat »

wenchsenior

  • Magnum Stache
  • ******
  • Posts: 3791
Unfortunately some laws would need to be changed to make the 401k system work for most Americans.

First off it should be illegal for a person/company managing a 401k to not be a fiduciary. This would make it so companies can't give people shitty options to benefit themselves on fees etc and if it can be proven that they did not manage the money in the interest of the investor they would be open for legal recourse.

Second off it would be better to require it to be an opt out function instead of opt in. Doesn't even have to be mandatory. Simple making it required to be opt out instead of in would mean most would not argue it and simply leave it withdrawing money.

In my opinion doing those two things would fix most of the big issues with it.

I agree. However, it wouldn't help the approximately half of workers who don't have access to one. If we must stay with the private individual investment model (which I don't think is a great idea), opening the TSP to anyone who wants to use it would at least offer an outstanding 401k type vehicle to people.

prognastat

  • Pencil Stache
  • ****
  • Posts: 781
  • Location: Texas
Unfortunately some laws would need to be changed to make the 401k system work for most Americans.

First off it should be illegal for a person/company managing a 401k to not be a fiduciary. This would make it so companies can't give people shitty options to benefit themselves on fees etc and if it can be proven that they did not manage the money in the interest of the investor they would be open for legal recourse.

Second off it would be better to require it to be an opt out function instead of opt in. Doesn't even have to be mandatory. Simple making it required to be opt out instead of in would mean most would not argue it and simply leave it withdrawing money.

In my opinion doing those two things would fix most of the big issues with it.

I agree. However, it wouldn't help the approximately half of workers who don't have access to one. If we must stay with the private individual investment model (which I don't think is a great idea), opening the TSP to anyone who wants to use it would at least offer an outstanding 401k type vehicle to people.

Sorry that was my mistake. I was editing my response while you responded.

I agree it would either need to be mandatory to offer your employees a 401k option or have some kind of federal 401k option.

PlainsWalker

  • Stubble
  • **
  • Posts: 101
  • Age: 39
  • Location: Oklahoma City, OK
The Revenue Act of 1978 that introduced subsection 401k of the Internal Revenue Code was originally designed as a way to limit execs at companies from getting overly adventurous with income deferral plans. Then Ted Benna got inventive with his interpretation of subsection 401k and extended it out to all full time employees at The Johnson Companies. It's a bit of the tax code being used in a way it was never intended to be.

I think having employee retirement plans be managed by the company is detrimental to both the company and the employee. The company is on the hook for dealing with the complexities and cost of sponsoring the plan. Something many smaller companies aren't interested in tackling which puts them at a disadvantage to larger companies. And it forces employees into just the plan their employer selects or doesn't select.

I think having retirement plans be something the employee signs up for with a provider and then the company deposits the amount the employee wants along with any company match would be a better solution than what we have now. This would free the company from having to manage the risks associated with sponsoring a plan. While still allowing companies to compete with each other to acquire and retain talent. If companies are no longer sponsoring plans but just sending part of an employees paycheck to a plan the employee selects along with the company match. That makes the match the differentiating factor between companies.
« Last Edit: January 05, 2017, 04:13:10 PM by PlainsWalker »

moof

  • Pencil Stache
  • ****
  • Posts: 809
  • Location: Beaver Town Orygun
The general knowledge level of the stock market, mutual/index funds, and retirement are badly lacking in this country.

I would advocate requiring that all employees be automatically enrolled at a minimum of 5%, and that employer matching become untouchable until 55, or unless rolled over (and then still untouchable).

Your 401k should also come with an annual health report that provides either an estimated SWR at 55 and 65 based on current balance and contribution rate.  It has to be very simple so that people can see a 1:1 relationship with their savings and their retirement.  Folks from this board would all quibble over the details, but most folks need that sort over simplified view of things.

Basically it needs to be much more automatic, as well as simpler.  I am also totally for ethics reform to assure the fees that gouge way too many of the "little people" are driven down to Fidelity/Vanguard levels.

MilesTeg

  • Handlebar Stache
  • *****
  • Posts: 1363
Even with a fairly decent 401k (4% match, no vestment) and not terrible investment options (index funds including vanguard stuff and decent mutual funds for the most part) I still get raked over the coals on admin fees. The free structure is insane. 0.4% of the total balance annually (taken out with each deposit). This is, of course, on top of the investment fees (luckily vanguard has small fees!). If I wait till the typical retirement age to start drawing, they will be taking 10s of thousands of dollars a year from me. That's the kind of fee structure one can expect from having an actual CFP actively managing your investments for you, not a self service/automated system.

As always, the middlemen find a way to siphon value away from productive people.

Greenback Reproduction Specialist

  • Bristles
  • ***
  • Posts: 483
  • Location: Running barefoot thru Idaho mountains
I would advocate that the gov just stays out of it entirely..... Nothing they touch ends well and ends up costing everyone more money in the long run.

RangerOne

  • Pencil Stache
  • ****
  • Posts: 714
Start making financial literacy mandatory course in the last years of highschool and again in 2 and 4 year colleges. This kind of stuff needs to be repeated over and over again.

Since I have started working at a big company not once has anyone gone into detail on the best way to manage your 401k. There is reading material for sure that will tell you everything you need but if you don't seek it out yourself you would never know. They probably need a mix of employeer and government participation to prompt more regular professional assistance with making going 401k decisions.

Beyond that the other big detraction from the 401k is that if you don't work at a company as a full time employee odds are you will never be enrolled in one. IRAs exist but most people never get around to researching them or investing. One way to fix this problem would be to automatically open an IRA for a person with one of the major financial institutions the minute they start their first job. Make the IRA more like a 401k by offering competitive contribution limits. Then let employers simply offer to match contributions and maybe help pay fees. If they consolidate all working people into IRA's, made them like current 401k's, then keeping a good IRA rolling throughout your working life would be far easier and people would start contributions very early even if they are small.

The current 401k system is just too manual and only a subset of the population will ever be willing to do all that is necessary to maintain it properly. I also agree with others that at the very least they should hide pitfall options from people. Like they should make it hard and annoying to invest your whole 401k into a single company. My poor dad had his whole 401k in company stock in the 2008 crash and lost over half the value which was well over half a million dollars on top of a good pension. He should have been advised repeatedly and strongly not to do that and also to remove risk as he approached retirement. This lack of information lost him a lot of money. Fortunately for him it was not a critical component of retirement.

ltt

  • Pencil Stache
  • ****
  • Posts: 761
.....federal TSP.....does that mean the government manages it?  No thanks.

bacchi

  • Walrus Stache
  • *******
  • Posts: 7056
I would advocate that the gov just stays out of it entirely..... Nothing they touch ends well and ends up costing everyone more money in the long run.

There's one in every crowd.

thenextguy

  • Stubble
  • **
  • Posts: 205
.....federal TSP.....does that mean the government manages it?  No thanks.

The Federal TSP is a dream retirement plan. I wish they'd open it up to everyone.

wenchsenior

  • Magnum Stache
  • ******
  • Posts: 3791
.....federal TSP.....does that mean the government manages it?  No thanks.

The Federal TSP is a dream retirement plan. I wish they'd open it up to everyone.

Yes, it's incredibly low fee and efficient. It doesn't have a ton of options, but it has enough for your typical retirement needs and it would be a huge step up in comparison to most 401k plans.

little_brown_dog

  • Pencil Stache
  • ****
  • Posts: 912
They did acknowledge that for a small set of American workers (usually those in the top 10% of income), 401ks often work fine. But they figure those people will be ok anyway.

I think this is probably true. For example, my husband gets a great 6% salary match. If you are making >150k/yr (as many at his level and lucrative company are) that is a really nice chunk of free cash, and of course if you make that much there is really no excuse not to be saving the max. The fees are not terrible, and the fund choices are good….so it’s a win win. high incomes + high match + good 401k = awesome. So yay for us high earning families, we are sitting pretty with our great set up and generous match. The 401k system is a success for us even if we have to deal with fees.

Compare that to a family member whose employer offers no retirement plan at all, and his wife who earns no match on her employer’s 403b. Both of these people make lower wages given their industry/employers and therefore able to save less for retirement anyway, but they are hit with the additional blow of not having access to a fund and/or not receiving any match. In a way it’s like the people who really could use better retirement perks (the lower earners) are less likely to get them, while those of us in the catbird seat are more likely to benefit from perks which we don’t really need as much.

alsoknownasDean

  • Magnum Stache
  • ******
  • Posts: 2843
  • Age: 39
  • Location: Melbourne, Australia
The Revenue Act of 1978 that introduced subsection 401k of the Internal Revenue Code was originally designed as a way to limit execs at companies from getting overly adventurous with income deferral plans. Then Ted Benna got inventive with his interpretation of subsection 401k and extended it out to all full time employees at The Johnson Companies. It's a bit of the tax code being used in a way it was never intended to be.

I think having employee retirement plans be managed by the company is detrimental to both the company and the employee. The company is on the hook for dealing with the complexities and cost of sponsoring the plan. Something many smaller companies aren't interested in tackling which puts them at a disadvantage to larger companies. And it forces employees into just the plan their employer selects or doesn't select.

I think having retirement plans be something the employee signs up for with a provider and then the company deposits the amount the employee wants along with any company match would be a better solution than what we have now. This would free the company from having to manage the risks associated with sponsoring a plan. While still allowing companies to compete with each other to acquire and retain talent. If companies are no longer sponsoring plans but just sending part of an employees paycheck to a plan the employee selects along with the company match. That makes the match the differentiating factor between companies.

Yeah that's kinda how it works here in Australia. It seems to work well (and creates huge institutional investors). As you can (usually) change between funds, there's some competition.

Having it tied to the company seems really strange, especially in a time where people regularly change jobs.

gimp

  • Handlebar Stache
  • *****
  • Posts: 2344
1.

I have often said that the 401k, IRA, and similar programs are this lovely solution that helps precisely the wrong people.

The people who need a secure retirement most are the poor, the less educated, those with less self-control over spending. These people will contribute nearly nothing into their tax-advantaged retirement accounts.

The people who need it least are people like me, probably like you (dear reader); people who are reasonably frugal and plan long-term. Maxing out your 401k and IRA for forty years would almost certainly leave you with many millions of dollars (admittedly not adjusted for inflation). Despite that, we can probably save a bunch of money in taxable accounts, enough that if we plan to work for a long time (because some of us enjoy our work) we probably wouldn't even need the 401k, IRA, or even social security.

So it's an amazing win for the people who have the best skills at managing personal money; and it's a big loss for most people who suck at it.

2.

I have sometimes wondered -

One of the tell-tale signs of a ponzi scheme (bear with me, please) is that returns are too smooth; this might be in the form of returning the same percentage each year, or in the form of the up-and-down peaks not being nearly as jagged as the market as a whole.

However -

I wonder, if I had large cash reserves (ie, capital requirements like banks do), and I offered people a flat 3.5% (or some amount above a 30-year T-bond) return (and limited contributions to ensure the capital reserves were high enough) - and then simply invested their money into the broad market, took most of the gain above 3.5% to bolster the capital reserves, and used the capital reserves to pay out during down years (and to ensure everyone could still withdraw their principal) ...

One could probably mathematically succeed at offering this flat "annuity" (really, non-FDIC-insured investment). Just add a bunch of marketing spin on top, limit managed funds to ensure you can always pay out during a market crash, and have ignorant people wonder if you're a market genius.

But if you do all the above, cut out the marketing bullshit, and just run it as a government program offering maybe 100 basis points above a 30-year treasury, and call it fully insured supplementary retirement funds, you might actually do a bit of good in the world.

rpr

  • Pencil Stache
  • ****
  • Posts: 718
1.

I have often said that the 401k, IRA, and similar programs are this lovely solution that helps precisely the wrong people.

The people who need a secure retirement most are the poor, the less educated, those with less self-control over spending. These people will contribute nearly nothing into their tax-advantaged retirement accounts.

The people who need it least are people like me, probably like you (dear reader); people who are reasonably frugal and plan long-term. Maxing out your 401k and IRA for forty years would almost certainly leave you with many millions of dollars (admittedly not adjusted for inflation). Despite that, we can probably save a bunch of money in taxable accounts, enough that if we plan to work for a long time (because some of us enjoy our work) we probably wouldn't even need the 401k, IRA, or even social security.

So it's an amazing win for the people who have the best skills at managing personal money; and it's a big loss for most people who suck at it.

2.

I have sometimes wondered -

One of the tell-tale signs of a ponzi scheme (bear with me, please) is that returns are too smooth; this might be in the form of returning the same percentage each year, or in the form of the up-and-down peaks not being nearly as jagged as the market as a whole.

However -

I wonder, if I had large cash reserves (ie, capital requirements like banks do), and I offered people a flat 3.5% (or some amount above a 30-year T-bond) return (and limited contributions to ensure the capital reserves were high enough) - and then simply invested their money into the broad market, took most of the gain above 3.5% to bolster the capital reserves, and used the capital reserves to pay out during down years (and to ensure everyone could still withdraw their principal) ...

One could probably mathematically succeed at offering this flat "annuity" (really, non-FDIC-insured investment). Just add a bunch of marketing spin on top, limit managed funds to ensure you can always pay out during a market crash, and have ignorant people wonder if you're a market genius.

But if you do all the above, cut out the marketing bullshit, and just run it as a government program offering maybe 100 basis points above a 30-year treasury, and call it fully insured supplementary retirement funds, you might actually do a bit of good in the world.

I like this idea. In fact some of the Stable Value type funds do offer this sort of option. Another is that those with access to TIAA's Traditional Annuity get a 3+% guaranteed return.

Also, for people way at lower annual incomes (below 50K) Social Security  replaces a larger fraction (around 30-40%) of their income when working. It is only for people kinda in the middle -- those earning 50-100K, that haven't saved and are used to a lifestyle that requires that level of income that will be seeing a drastic income shortfall.

Monkey Uncle

  • Handlebar Stache
  • *****
  • Posts: 1740
  • Location: West-by-god-Virginia
I wonder, if I had large cash reserves (ie, capital requirements like banks do), and I offered people a flat 3.5% (or some amount above a 30-year T-bond) return (and limited contributions to ensure the capital reserves were high enough) - and then simply invested their money into the broad market, took most of the gain above 3.5% to bolster the capital reserves, and used the capital reserves to pay out during down years (and to ensure everyone could still withdraw their principal) ...

One could probably mathematically succeed at offering this flat "annuity" (really, non-FDIC-insured investment). Just add a bunch of marketing spin on top, limit managed funds to ensure you can always pay out during a market crash, and have ignorant people wonder if you're a market genius.

But if you do all the above, cut out the marketing bullshit, and just run it as a government program offering maybe 100 basis points above a 30-year treasury, and call it fully insured supplementary retirement funds, you might actually do a bit of good in the world.

You've basically described what pension funds do.  Many of them run into trouble by making bad assumptions about investment returns and longevity of the beneficiaries.  But I guess the difference between a pension fund and your idea is that you aren't proposing to guarantee the amount of the payout, but rather a fixed percentage on whatever the investor pays in.  It would be a really shitty deal for investors who know what they are doing, because they should be able to do better on their own than your guaranteed percentage.  But most investors don't know what they're doing, so maybe it would be a decent option for the masses.

RFAAOATB

  • Pencil Stache
  • ****
  • Posts: 654
Is there really a problem with companies not offering 401k or other pre tax retirement accounts?  What is the annual salary of those companies?  I would imagine they would be on the lower side.

If I was going to save a low for us but better than average 10 percent until retirement in a company without a pre tax I would have to be taking home more than $55,000 a year before I max out my ROTH IRA and have to think about what to do next without another tax advantaged account.

Which jobs pay more than $55,000 a year (after taxes so annual salary should be higher) and still don't offer a pre tax?

sokoloff

  • Handlebar Stache
  • *****
  • Posts: 1191
If I was going to save a low for us but better than average 10 percent until retirement in a company without a pre tax I would have to be taking home more than $55,000 a year before I max out my ROTH IRA and have to think about what to do next without another tax advantaged account.

Which jobs pay more than $55,000 a year (after taxes so annual salary should be higher) and still don't offer a pre tax?
When talking about savings rate, it is more typical to talk about the saving rate on the gross (pre-tax) amount.

401Ks are lucrative enough for financial companies that most companies do indeed provide access to them. Estimates that I've seen are over 80% of professional jobs offer 401K/403b.

MayDay

  • Magnum Stache
  • ******
  • Posts: 4953
Is there really a problem with companies not offering 401k or other pre tax retirement accounts?  What is the annual salary of those companies?  I would imagine they would be on the lower side.

If I was going to save a low for us but better than average 10 percent until retirement in a company without a pre tax I would have to be taking home more than $55,000 a year before I max out my ROTH IRA and have to think about what to do next without another tax advantaged account.

Which jobs pay more than $55,000 a year (after taxes so annual salary should be higher) and still don't offer a pre tax?

Small companies, basically.

My tiny company (7 employees, all making over 55k I am guessing) dies have a 401k. But I doubt most 7 employee companies do.  H worked for an engineering company (so high salaries) of 4-5 people with no 401k.

Fishindude

  • Magnum Stache
  • ******
  • Posts: 3075
Our company has a fiduciary committee made up of both owner manager and employees at to oversee the 401K.  We meet several times per year, discuss or make changes, review or change investment options, etc.

Those that "get it" have done quite well in the program, however we realized over time that many that needed this the most wouldn't sign up and / or didn't contribute enough, so we changed the plan so that everyone is auto enrolled at a level high enough to get company match and they have to physically "opt out" of the program if they choose not to participate.   

mbl

  • Bristles
  • ***
  • Posts: 331
So, the government now needs to step up their legislation of common sense.

If one looked at those Americans that don't have access to 401(k)s or 403(b), 457 et al....what percentage might have a Roth IRA or tIRA? 
Because these type of retirement accounts are available to anyone. 

I acknowledge that education must occur first for people to be 1. aware of what these accounts are 2. why they should be used. 3.  how to set them up and use them as well as other information outlining a basic understanding.

What percentage don't have the means to sufficiently support themselves aside from any retirement savings/investing or for that matter any savings at all?
What percentage have the ability to even understand what these are?  Basic comprehension skills.




minimalistgamer

  • Bristles
  • ***
  • Posts: 264
  • Location: United States of America
  • Gamer and minimalist.
    • Minimalist Gamer
I would advocate that the gov just stays out of it entirely..... Nothing they touch ends well and ends up costing everyone more money in the long run.

For what its worth, I completely agree with you.

I don't know why we keep looking towards the government to solve all our problems...I mean its not like the government has a great track record or anything...

MrsPete

  • Magnum Stache
  • ******
  • Posts: 3505
The key phase here is "for most Americans".  Nothing's wrong with the concept o 401Ks -- or other savings mechanisms.  The problem is that all too many people aren't bothering to plan or aren't following through with their plans.  It's similar to a diet; nothing's wrong with this or that diet plan -- it's just that people don't start /don't follow though with the plan.

The article says in its subtitle that 401Ks aren't working, and it's time to bring back pension plans.  That's not a be-all, end-all either.  Thing is, to really maximize a pension plan, you have to stay at the same company for a whole career -- that's a thing of the past too.
« Last Edit: January 06, 2017, 07:43:22 AM by MrsPete »

Greenback Reproduction Specialist

  • Bristles
  • ***
  • Posts: 483
  • Location: Running barefoot thru Idaho mountains
I would advocate that the gov just stays out of it entirely..... Nothing they touch ends well and ends up costing everyone more money in the long run.

For what its worth, I completely agree with you.

I don't know why we keep looking towards the government to solve all our problems...I mean its not like the government has a great track record or anything...

Thanks, glad I'm not the only one that feels this way.

« Last Edit: January 06, 2017, 08:15:07 AM by Greenback Reproduction Specialist »

NESailor

  • Bristles
  • ***
  • Posts: 257
I would advocate that the gov just stays out of it entirely..... Nothing they touch ends well and ends up costing everyone more money in the long run.

For what its worth, I completely agree with you.

I don't know why we keep looking towards the government to solve all our problems...I mean its not like the government has a great track record or anything...

Thanks, glad I'm not the only one that feels this way.

Unfortunately your feelings don't align with reality, no offense intended.  Numerous posters have pointed to the fact that most people (we're talking 100 million plus in this country alone) are financially illiterate.  Ideologically, it's fine to say: "they should just learn how to manage money".  But that's simply not going to happen.  It hasn't happened anywhere in the world, for the entirety of human existence, so offering "choices" is not going to help the people who admittedly need the help.  I also think it's fine to say it's their fault.  But the societal implications of leaving the majority of the population run their finances into the ground would also hurt those of us who are not financially illiterate.  I believe easily half the country WOULD go bankrupt if we took the government completely out of consumer protection and financial regulations.  That's just how stupid people are.  This has nothing to do with personal responsibility or any other conservative favorites.  It simply is what it is.  My n=1 is the manufacturing plant I run the finances for.  Out of the 500 people we employ...maybe 25 have even the slightest clue how to plan for retirement.  About half of our employees don't contribute enough to get the full match - which vests immediately.  This includes some above average earners...

Btw, the TSP is a stellar retirement plan - run by the government - and if you had access to it you'd be pretty stoked on how cheap it is. 

wenchsenior

  • Magnum Stache
  • ******
  • Posts: 3791
The key phase here is "for most Americans".  Nothing's wrong with the concept o 401Ks -- or other savings mechanisms.  The problem is that all too many people aren't bothering to plan or aren't following through with their plans.  It's similar to a diet; nothing's wrong with this or that diet plan -- it's just that people don't start /don't follow though with the plan.

The article says in its subtitle that 401Ks aren't working, and it's time to bring back pension plans. 
That's not a be-all, end-all either.  Thing is, to really maximize a pension plan, you have to stay at the same company for a whole career -- that's a thing of the past too.

That's a weird heading for the show. The general consensus on the show was that private pension plans like in Ye Olden Days are not really feasible anymore, either, and that the government should establish some nationwide standardized option for people to supplement Social Security. So any pension being discussed was more like a federal pension. But they also discussed the possibility of a standardized 401k type plan (like the TSP) being made available with, as some posters above mentioned, automatic enrollment with employment with effort required to opt out.

Fishindude

  • Magnum Stache
  • ******
  • Posts: 3075
I would advocate that the gov just stays out of it entirely..... Nothing they touch ends well and ends up costing everyone more money in the long run.

+1 for this

NoStacheOhio

  • Handlebar Stache
  • *****
  • Posts: 2136
  • Location: Cleveland
I would advocate that the gov just stays out of it entirely..... Nothing they touch ends well and ends up costing everyone more money in the long run.

For what its worth, I completely agree with you.

I don't know why we keep looking towards the government to solve all our problems...I mean its not like the government has a great track record or anything...

There has to be some kind of government involvement though, because you're dealing with pre-tax deductions.

Would eliminating individual 401k contributions (allow for matching/profit-sharing/401a/whatever) and upping the IRA limits work better?

Pooplips

  • Bristles
  • ***
  • Posts: 462
  • Age: 37
I would advocate that the gov just stays out of it entirely..... Nothing they touch ends well and ends up costing everyone more money in the long run.

For what its worth, I completely agree with you.

I don't know why we keep looking towards the government to solve all our problems...I mean its not like the government has a great track record or anything...

Thanks, glad I'm not the only one that feels this way.

Unfortunately your feelings don't align with reality, no offense intended.  Numerous posters have pointed to the fact that most people (we're talking 100 million plus in this country alone) are financially illiterate.  Ideologically, it's fine to say: "they should just learn how to manage money".  But that's simply not going to happen.  It hasn't happened anywhere in the world, for the entirety of human existence, so offering "choices" is not going to help the people who admittedly need the help.  I also think it's fine to say it's their fault.  But the societal implications of leaving the majority of the population run their finances into the ground would also hurt those of us who are not financially illiterate.  I believe easily half the country WOULD go bankrupt if we took the government completely out of consumer protection and financial regulations.  That's just how stupid people are.  This has nothing to do with personal responsibility or any other conservative favorites.  It simply is what it is.  My n=1 is the manufacturing plant I run the finances for.  Out of the 500 people we employ...maybe 25 have even the slightest clue how to plan for retirement.  About half of our employees don't contribute enough to get the full match - which vests immediately.  This includes some above average earners...

Btw, the TSP is a stellar retirement plan - run by the government - and if you had access to it you'd be pretty stoked on how cheap it is.

While I understand your empathy for stupid people, there are all kinds of reasons people choose not to save for retirement that have nothing to do with their level of stupidity.

The bolded statment really tells the story: Make them save so they don't try to loot me when they realize they made a bad choice.

+1 for keeping the gov out of it.

dogboyslim

  • Pencil Stache
  • ****
  • Posts: 526
...come up with an investment vehicle that has a guaranteed rate of return (essentially, an annuity type situation accessible to all workers), which would serve to supplement Social Security. ...

That there bolded part pretty much means the return is VERY low.

rpr

  • Pencil Stache
  • ****
  • Posts: 718
I would advocate that the gov just stays out of it entirely..... Nothing they touch ends well and ends up costing everyone more money in the long run.

+1 for this

I agree with the above but with the caveat below.

The government  should get rid of the 401k/IRA/TSP and all other similar retirement account deductions including pensions completely. Why should the government be involved in the business of retirement accounts and  giving tax breaks to people who save?



Midwest

  • Handlebar Stache
  • *****
  • Posts: 1358
I would advocate that the gov just stays out of it entirely..... Nothing they touch ends well and ends up costing everyone more money in the long run.

For what its worth, I completely agree with you.

I don't know why we keep looking towards the government to solve all our problems...I mean its not like the government has a great track record or anything...

+2.

We have social security for those that fail at saving.

Greenback Reproduction Specialist

  • Bristles
  • ***
  • Posts: 483
  • Location: Running barefoot thru Idaho mountains
Unfortunately your feelings don't align with reality, no offense intended.  Numerous posters have pointed to the fact that most people (we're talking 100 million plus in this country alone) are financially illiterate.  Ideologically, it's fine to say: "they should just learn how to manage money".  But that's simply not going to happen.  It hasn't happened anywhere in the world, for the entirety of human existence, so offering "choices" is not going to help the people who admittedly need the help.  I also think it's fine to say it's their fault. 
No offense taken, and I'm glad we can agree that is their fault if they make choices in their life that leave them financial SOL.

But the societal implications of leaving the majority of the population run their finances into the ground would also hurt those of us who are not financially illiterate.  I believe easily half the country WOULD go bankrupt if we took the government completely out of consumer protection and financial regulations.  That's just how stupid people are.  This has nothing to do with personal responsibility or any other conservative favorites.  It simply is what it is. 
This paragraph hits on why I have such a problem with gov getting involved in the first place. To me, what you are saying is, "people are stupid, so gov needs to force them to be smarter". Which begs the question, who are you to say that the decisions you make are the right ones for their life?

If half the country went bankrupt, it might be the best thing that ever happened for them. There is nothing that will change a person like hitting rock bottom. With the right guidance they could come out of it 10x better than before, stronger, wiser, etc.
« Last Edit: January 06, 2017, 12:02:24 PM by Greenback Reproduction Specialist »

Greenback Reproduction Specialist

  • Bristles
  • ***
  • Posts: 483
  • Location: Running barefoot thru Idaho mountains
Btw, the TSP is a stellar retirement plan - run by the government - and if you had access to it you'd be pretty stoked on how cheap it is. 

At what cost though? Maybe its cheaper, but I bet there is a novel of rules attached to participating. I don't know that I would give up freedom over my money just because its cheaper.... I will have to read up on the program though.

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4929
Unfortunately your feelings don't align with reality, no offense intended.  Numerous posters have pointed to the fact that most people (we're talking 100 million plus in this country alone) are financially illiterate.  Ideologically, it's fine to say: "they should just learn how to manage money".  But that's simply not going to happen.  It hasn't happened anywhere in the world, for the entirety of human existence, so offering "choices" is not going to help the people who admittedly need the help.  I also think it's fine to say it's their fault. 
No offense taken, and I'm glad we can agree that is their fault if they make choices in their life that leave them financial SOL.

But the societal implications of leaving the majority of the population run their finances into the ground would also hurt those of us who are not financially illiterate.  I believe easily half the country WOULD go bankrupt if we took the government completely out of consumer protection and financial regulations.  That's just how stupid people are.  This has nothing to do with personal responsibility or any other conservative favorites.  It simply is what it is. 
This paragraph hits on why I have such a problem with gov getting involved in the first place. To me, what you are saying is, "people are stupid, so gov needs to force them to be smarter". Which begs the question, who are you to say that the decisions you make are the right ones for their life?

If half the country went bankrupt, it might be the best thing that ever happened for them. There is nothing that will change a person like hitting rock bottom. With the right guidance they could come out of it 10x better than before, stronger, wiser, etc.
We tried that, it was called the Great Depression and people died.  They did not  come out of it 10x better than before, stronger, wiser, etc, they died.  That is why we have SS and Medicare.

prognastat

  • Pencil Stache
  • ****
  • Posts: 781
  • Location: Texas
Unfortunately your feelings don't align with reality, no offense intended.  Numerous posters have pointed to the fact that most people (we're talking 100 million plus in this country alone) are financially illiterate.  Ideologically, it's fine to say: "they should just learn how to manage money".  But that's simply not going to happen.  It hasn't happened anywhere in the world, for the entirety of human existence, so offering "choices" is not going to help the people who admittedly need the help.  I also think it's fine to say it's their fault. 
No offense taken, and I'm glad we can agree that is their fault if they make choices in their life that leave them financial SOL.

But the societal implications of leaving the majority of the population run their finances into the ground would also hurt those of us who are not financially illiterate.  I believe easily half the country WOULD go bankrupt if we took the government completely out of consumer protection and financial regulations.  That's just how stupid people are.  This has nothing to do with personal responsibility or any other conservative favorites.  It simply is what it is. 
This paragraph hits on why I have such a problem with gov getting involved in the first place. To me, what you are saying is, "people are stupid, so gov needs to force them to be smarter". Which begs the question, who are you to say that the decisions you make are the right ones for their life?

If half the country went bankrupt, it might be the best thing that ever happened for them. There is nothing that will change a person like hitting rock bottom. With the right guidance they could come out of it 10x better than before, stronger, wiser, etc.

It seems that's a rather big if that I doubt most people would have access to. Since you are opposed to the government offering the right guidance in any form and I seriously doubt there are enough people volunteering to assist people that hit rock bottom out of the goodness in their heart. This might work for some but leaves a large portion of people struggling at rock bottom.

Greenback Reproduction Specialist

  • Bristles
  • ***
  • Posts: 483
  • Location: Running barefoot thru Idaho mountains
We tried that, it was called the Great Depression and people died.  They did not  come out of it 10x better than before, stronger, wiser, etc, they died.  That is why we have SS and Medicare.
Some people probably died, that's called life.... even some people died during our last recession, what a concept.

I don't see it that way. Some of the toughest people I know came out of that era, they were stronger in life because of it, and so were their kids, and possibly their grand kids. The lessons learned in that era made the whole country stronger, we didn't stay down in the dumps forever, we learned and moved on.

SS and Medicare are safety nets yes, but how good they are, and how much of a price we will pay is still yet to be seen.

NESailor

  • Bristles
  • ***
  • Posts: 257
Btw, the TSP is a stellar retirement plan - run by the government - and if you had access to it you'd be pretty stoked on how cheap it is. 

At what cost though? Maybe its cheaper, but I bet there is a novel of rules attached to participating. I don't know that I would give up freedom over my money just because its cheaper.... I will have to read up on the program though.

I'm simplifying but it's basically a 401k with several index funds (target date and your regular equity, bond ones) with ridiculously low expense ratios (0.029%).  Nothing really novel about it except perhaps the fact that there aren't several layers of leeches..I mean investment advisors, trustees, recordkeepers, etc. sucking money out of your account in a variety of hard to understand fees.  You have to be a federal employee to participate.

prognastat

  • Pencil Stache
  • ****
  • Posts: 781
  • Location: Texas
We tried that, it was called the Great Depression and people died.  They did not  come out of it 10x better than before, stronger, wiser, etc, they died.  That is why we have SS and Medicare.
Some people probably died, that's called life.... even some people died during our last recession, what a concept.

I don't see it that way. Some of the toughest people I know came out of that era, they were stronger in life because of it, and so were their kids, and possibly their grand kids. The lessons learned in that era made the whole country stronger, we didn't stay down in the dumps forever, we learned and moved on.

SS and Medicare are safety nets yes, but how good they are, and how much of a price we will pay is still yet to be seen.

Ah the good old fuck em. I thought that according to you this would help people. Seems that facade is slipping a little.
« Last Edit: January 06, 2017, 02:42:20 PM by prognastat »

gimp

  • Handlebar Stache
  • *****
  • Posts: 2344
It's always important to remember that the only thing that stands between an angry mob, and the property and life of the well-off (us, basically), is about ten hot meals.

If you want to say "fuck 'em," do try to remember that people have guns (and failing that, torches and baseball bats) and if they see their children starve, they will eat you.

prognastat

  • Pencil Stache
  • ****
  • Posts: 781
  • Location: Texas
It's always important to remember that the only thing that stands between an angry mob, and the property and life of the well-off (us, basically), is about ten hot meals.

If you want to say "fuck 'em," do try to remember that people have guns (and failing that, torches and baseball bats) and if they see their children starve, they will eat you.

Yeah I'm sure the aristocrats in France heard the peasant's plight and reasonably told them "c'est la vie". And suddenly all was ok again.

Greenback Reproduction Specialist

  • Bristles
  • ***
  • Posts: 483
  • Location: Running barefoot thru Idaho mountains
It's cheaper because the government isn't running the program to try and make a profit. In theory, given similarly run organizations, the non-profit should always be cheaper than the for-profit.
Lol its cheaper because the gov takes money in taxes and it doesn't matter if they take it from you when you invest your money or when you earn money, no business can compete with that, they would have a monopoly on it if you let them.

Greenback Reproduction Specialist

  • Bristles
  • ***
  • Posts: 483
  • Location: Running barefoot thru Idaho mountains
We tried that, it was called the Great Depression and people died.  They did not  come out of it 10x better than before, stronger, wiser, etc, they died.  That is why we have SS and Medicare.
Some people probably died, that's called life.... even some people died during our last recession, what a concept.

I don't see it that way. Some of the toughest people I know came out of that era, they were stronger in life because of it, and so were their kids, and possibly their grand kids. The lessons learned in that era made the whole country stronger, we didn't stay down in the dumps forever, we learned and moved on.

SS and Medicare are safety nets yes, but how good they are, and how much of a price we will pay is still yet to be seen.

Ah the good old fuck em. I thought that according to you this would help people. Seems that facade is slipping a little.
That's not what I said, and that was not what I was implying, don't twist my words.

prognastat

  • Pencil Stache
  • ****
  • Posts: 781
  • Location: Texas
We tried that, it was called the Great Depression and people died.  They did not  come out of it 10x better than before, stronger, wiser, etc, they died.  That is why we have SS and Medicare.
Some people probably died, that's called life.... even some people died during our last recession, what a concept.

I don't see it that way. Some of the toughest people I know came out of that era, they were stronger in life because of it, and so were their kids, and possibly their grand kids. The lessons learned in that era made the whole country stronger, we didn't stay down in the dumps forever, we learned and moved on.

SS and Medicare are safety nets yes, but how good they are, and how much of a price we will pay is still yet to be seen.

Ah the good old fuck em. I thought that according to you this would help people. Seems that facade is slipping a little.
That's not what I said, and that was not what I was implying, don't twist my words.

"Some people probably died, that's called life"

Does not show much caring, does it? Maybe I read more in to it than you said, but it was not much more and shows quite a significant lack of regard for other people's experience.

Greenback Reproduction Specialist

  • Bristles
  • ***
  • Posts: 483
  • Location: Running barefoot thru Idaho mountains
We tried that, it was called the Great Depression and people died.  They did not  come out of it 10x better than before, stronger, wiser, etc, they died.  That is why we have SS and Medicare.
Some people probably died, that's called life.... even some people died during our last recession, what a concept.

I don't see it that way. Some of the toughest people I know came out of that era, they were stronger in life because of it, and so were their kids, and possibly their grand kids. The lessons learned in that era made the whole country stronger, we didn't stay down in the dumps forever, we learned and moved on.

SS and Medicare are safety nets yes, but how good they are, and how much of a price we will pay is still yet to be seen.

Ah the good old fuck em. I thought that according to you this would help people. Seems that facade is slipping a little.
That's not what I said, and that was not what I was implying, don't twist my words.

"Some people probably died, that's called life"

Does not show much caring, does it?
It is a fact, people die, no whimsical gov ferry program can stop it... Sorry, yea that's life, but I didn't say I like it or F them.