Author Topic: Astounding 401k Ignorance  (Read 11273 times)

lcerrito

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Astounding 401k Ignorance
« on: October 14, 2016, 06:08:55 PM »
This has been a particularly revealing week at work, to say the least. HR invited a rep from Wells Fargo (who manages our company's 401k, unfortunately) to conduct a series of financial workshops. Over the past several days they've had age and gender targeted classes that employees could attend to learn about how to save for retirement. Why us women need gender specific retirement advice, I have no idea... but I digress. I didn't bother attending any of the classes since I figured it would be the usual generic advice and compounding interest examples. However, I am now regretting missing out on the entertainment that must have ensued during the Q&A portion!

My co-worker finished the class, and came briskly walking back to her desk all in a tizzy. She had finally just set up her 401k last week (age 27, still living with family, been at the company for three years), and had set her contribution to 12%. Since I'm known as the financial guru in our area, she asks "They just told me that they only match 4%! Isn't it bad for me to be contributing 12% if they are only matching 4%???" I steadied my facial expression and said, "No, in fact, you really ought to be contributing 15%, the max amount." The company mandated 15% max is BS, but that's a discussion for another thread... I tried to show her the calculations for the tax advantages, but based on her facial expressions I don't think she got it.

Another co-worker (age 32)  came out of the class  and announced, "Well, I'm never going to be able to retire." When pressed further, she just said she was relying on her "Golden Ticket" husband who was a teacher. Fingers crossed they never divorce, right?

Several other co-workers with furrowed faces just silently played with some strange sliding tool that they had given out. Frightening.


GrumpyPenguin

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Re: Astounding 401k Ignorance
« Reply #1 on: October 15, 2016, 07:47:53 AM »
"Wells Fargo -- Join us! We'll open 18 accounts for you!"

I ask folks what the expense ratio on their 401k investments are often, and I get glossy stares back.  I think J. Collin's Stock Series has an article about some 401ks that have expense ratios SO bad, that it might not be worth investing in them... or at least maxing out all other possible tax advantaged investments first.


jinga nation

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Re: Astounding 401k Ignorance
« Reply #2 on: October 15, 2016, 08:57:03 AM »
It's true. Folks at my work think putting just 10% in your 401 is amazing. I'd guess that half don't put any in, going by the ones I've talked to. Folks are too busy going on cruises and getting expensive housing to bother with retirement. Several have taken loans out on their 401's to finance large purchases.
Putting 10% in your 401(k) is better than zero. Also, some would willingly tithe 10% but couldn't be bothered to put equivalent in a retirement savings plan.

clarkfan1979

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Re: Astounding 401k Ignorance
« Reply #3 on: October 16, 2016, 02:44:32 AM »
Gender specific advice is probably based on the fact that women live longer.

ender

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Re: Astounding 401k Ignorance
« Reply #4 on: October 16, 2016, 09:31:08 AM »
This is always amusing for even an amateur Mustachian.

SeaEhm

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Re: Astounding 401k Ignorance
« Reply #5 on: October 16, 2016, 10:27:30 AM »
Yikes! Scary that someone believes that teachers have a golden ticket with their pension.  Hopefully her "golden ticket" is also setting up additional retirement accounts for him and her.


Yes, you should have attended the discussion to fuel your motivation even more.

I did the same thing and noticed that I was pretty much 10 years younger than the average attendee.  They talked about different percentages to save and the married lady (dual income) next to me said, "who could put 10% away?"  I just sat there and nodded while quickly diverting my attention back to the presenter.  10%?  They started talking about saving 2%, 5%, and 10%.  If we are starting at 2%, I know that they are tailoring their presentation to what they frequently come across.  Kind of scary to be honest because these people are all college educated.

I am probably the least MMM minded person here too.

tawyer

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Re: Astounding 401k Ignorance
« Reply #6 on: October 16, 2016, 01:07:49 PM »
Can't be sure what their motivation for gender-specific advice is, but I read somewhere that claimed that on average women are more bogle-headed investors than men...

marty998

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Re: Astounding 401k Ignorance
« Reply #7 on: October 16, 2016, 02:38:01 PM »
Can't be sure what their motivation for gender-specific advice is, but I read somewhere that claimed that on average women are more bogle-headed investors than men...

Gender specific advice is probably based on the fact that women live longer.

Also women (on average) have smaller balances due to....yes... the gender pay gap, as well as taking time out of the workforce to have children.

TheGrimSqueaker

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Re: Astounding 401k Ignorance
« Reply #8 on: October 16, 2016, 04:36:49 PM »
Can't be sure what their motivation for gender-specific advice is, but I read somewhere that claimed that on average women are more bogle-headed investors than men...

Living longer and earning less are statistically probable, for women, because of biology.

It's also more socially acceptable for women to be dumb about money, to marry money, and to rely on someone else to be a meal ticket. Total financial incompetence is not considered a serious problem in women, who are also more likely to be socialized to overspend on frippery. I'm not saying all female humans have this problem, but based on the original post the idiot content was high in that room so the company may have done well by targeting women and educating them.

ender

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Re: Astounding 401k Ignorance
« Reply #9 on: October 16, 2016, 07:21:32 PM »
Can't be sure what their motivation for gender-specific advice is, but I read somewhere that claimed that on average women are more bogle-headed investors than men...

Living longer and earning less are statistically probable, for women, because of biology.

It's also more socially acceptable for women to be dumb about money, to marry money, and to rely on someone else to be a meal ticket. Total financial incompetence is not considered a serious problem in women, who are also more likely to be socialized to overspend on frippery. I'm not saying all female humans have this problem, but based on the original post the idiot content was high in that room so the company may have done well by targeting women and educating them.

Speculating wildly, but I think it's probable women are more likely to be better investors because men are more prone to taking risks. Which in this case results in a lot of things other than "staying the course" in "boring investments."


teen persuasion

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Re: Astounding 401k Ignorance
« Reply #10 on: October 18, 2016, 07:35:42 AM »
Oh, I'd have been at those meetings, if only to play devil's advocate and ask lots of "innocent" questions.  Unfortunately, my employer doesn't offer any retirement account options at all.  I've asked, and was told the board shot it down.

"Wells Fargo -- Join us! We'll open 18 accounts for you!"

I ask folks what the expense ratio on their 401k investments are often, and I get glossy stares back.

Thanks for the WF reference - it might be just what I need to prod the Board to reconsider looking at the endowment fund's manager (and AA).  When I saw the mess of investments he had it in, and his fee, and watched the churning, I was aghast.  I brought it up to the interim director, but she just paused, blinked at me, and told me she "trusted him".  You could see she had no clue at all, so was happy to pass it off to a "professional" - they must know what they are doing, of course! 
The new director also knows of my concerns, and brought the fund manager in to a Board meeting for Q&A, but of course I couldn't attend the meeting to ask pointed questions, I was on duty.

Capsu78

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Re: Astounding 401k Ignorance
« Reply #11 on: October 18, 2016, 09:06:02 AM »
The "gender specific" talking points here:

http://www.msn.com/en-us/money/personalfinance/the-triple-whammy-facing-women-in-retirement/ar-AAj5rid?ocid=spartanntp

...although I personally view it as closer to "advertorial" designed to herd folks into investment seminars.  Life choices apply to both sexes.
« Last Edit: October 18, 2016, 09:38:47 AM by Capsu78 »

talltexan

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Re: Astounding 401k Ignorance
« Reply #12 on: October 18, 2016, 12:45:16 PM »
My employer paid for us to receive a "scanning" that would turn up red flags in retirement strategies. According to my scan, I am investing far too much in the company's stock. That would indeed be a problem if more than 8% of my net worth was in the 401(k) subject to the scan (i recently switched jobs). The contrarian part of me logged in and set my contributions to be 100% into company stock, but I recognize the folly in keeping that setting in place for very long.

ender

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Re: Astounding 401k Ignorance
« Reply #13 on: October 18, 2016, 02:29:50 PM »
My employer paid for us to receive a "scanning" that would turn up red flags in retirement strategies. According to my scan, I am investing far too much in the company's stock. That would indeed be a problem if more than 8% of my net worth was in the 401(k) subject to the scan (i recently switched jobs). The contrarian part of me logged in and set my contributions to be 100% into company stock, but I recognize the folly in keeping that setting in place for very long.

A previous employer instituted a rule at some point that you could only keep 20% of your 401k in company stock.

I shudder to think about how many people must be putting way more than that if they decided to impose a restriction.

TheGrimSqueaker

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Re: Astounding 401k Ignorance
« Reply #14 on: October 18, 2016, 02:47:17 PM »
My employer paid for us to receive a "scanning" that would turn up red flags in retirement strategies. According to my scan, I am investing far too much in the company's stock. That would indeed be a problem if more than 8% of my net worth was in the 401(k) subject to the scan (i recently switched jobs). The contrarian part of me logged in and set my contributions to be 100% into company stock, but I recognize the folly in keeping that setting in place for very long.

A previous employer instituted a rule at some point that you could only keep 20% of your 401k in company stock.

I shudder to think about how many people must be putting way more than that if they decided to impose a restriction.

A whole bunch of "little people" get screwed if significant amounts of their savings are in company stock and the bigwigs decide to commit stock fraud. Plenty of secretaries and janitors lost their life savings due to shenanigans at Enron and Bre-X.

frugalnacho

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Re: Astounding 401k Ignorance
« Reply #15 on: October 26, 2016, 07:26:23 AM »
My employer paid for us to receive a "scanning" that would turn up red flags in retirement strategies. According to my scan, I am investing far too much in the company's stock. That would indeed be a problem if more than 8% of my net worth was in the 401(k) subject to the scan (i recently switched jobs). The contrarian part of me logged in and set my contributions to be 100% into company stock, but I recognize the folly in keeping that setting in place for very long.

A previous employer instituted a rule at some point that you could only keep 20% of your 401k in company stock.

I shudder to think about how many people must be putting way more than that if they decided to impose a restriction.

My father.  He put 10% of his income straight into the company ESPP.  He also elected to put 1/3 of his 401k contributions (10% of income) into company stock.  Essentially 2/3 of his retirement was in company stock.  Actually the company stock outperformed his other 401k investments over the several year period he did this, so while he contributed 2/3 of his allocated investments into company stock he actually held closer to 3/4 or 4/5 of his savings in company stock.  Once I found out I straightened him out and got him more diversified and into some vanguard funds.  He still participates in the ESPP because it's a fantastic deal, but he holds very little of his net worth in it now.

MrsPete

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Re: Astounding 401k Ignorance
« Reply #16 on: October 26, 2016, 08:24:05 AM »
... Why us women need gender specific retirement advice, I have no idea... but I digress ...

Another co-worker (age 32)  came out of the class  and announced, "Well, I'm never going to be able to retire." When pressed further, she just said she was relying on her "Golden Ticket" husband who was a teacher. Fingers crossed they never divorce, right? ...
If I were planning such a program myself, I don't think I'd have specified it by gender, but it is true that women need to pay attention to retirement planning more than do men.  Even college-educated women tend to lean towards jobs that pay less (for example, social worker or teacher rather than engineer or accountant), so they tend to earn more.  Women tend to take more time off during their careers to care for newborn babies or sick relatives (which does make sense from both a just-gave-birth point of view and a makes-sense-to-give-up-the-lesser-paycheck point o view).  Women tend to live longer than men; thus, they're likely to need to support themselves over a longer time period.  Finally, all too many women -- even those who claim they are feminists! -- are all too quick to take a backseat in long-term planning and let hubby handle it all.  Yes, while the average American is ignoring his or her retirement planning, women are probably in worse shape overall.

As for teachers having a "golden ticket", that's questionable.  If this fellow is in his 30s, he's probably already put in enough years to say he will stick with it (3 out of 5 teachers leave within 5 years), and he's probably already vested.  Traditionally, our pension has been pretty good -- IF you manage to stay in the same state for an entire career.  Changing professions means walking away form the pension.  Leaving the profession early means drastically slashing the pension.  Moving to another state means starting all over.  No, the number of teachers who actually "max out" the pension is fairly small.  And ours is a profession in the midst of change.  When my students tell me they want to become teachers, I always talk to them about the direction we're headed, and I tell them, "Don't expect you can stay in a classroom just like mine for 30 years.  This job will look very, very different in another decade, and you certainly can't work a whole career in a room just like this one." 

As for people playing with their slidey-tool thingies, if I'd been in the room, I might've done the same thing.  From what you say, I suspect I might've found the discussion elementary and might've looked like I didn't care ... when the reality might've been that I already knew /had firm opinions on the subject matter

Yikes! Scary that someone believes that teachers have a golden ticket with their pension.  Hopefully her "golden ticket" is also setting up additional retirement accounts for him and her.
A person who has a full teacher pension AND a social security check AND a paid-for house AND some other savings is going to be in pretty comfortable shape.  I'd estimate 1/3 of my co-workers are on track for ALL those things to come together. 
« Last Edit: October 26, 2016, 08:25:43 AM by MrsPete »

talltexan

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Re: Astounding 401k Ignorance
« Reply #17 on: October 27, 2016, 08:39:51 AM »
When I was a teacher in Ohio, I was completely removed from the Social Security administration. Didn't pay into it, didn't accumulate any years/credit. I have heard that this happens in other states, too, such as Missouri.

Goldielocks

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Re: Astounding 401k Ignorance
« Reply #18 on: October 31, 2016, 07:23:05 PM »
Gender specific advice is probably based on the fact that women live longer.

I have also seen the women take over the class and not let guys get a word in edgewise.   And that was in an engineering company that was only 30% women staff.  The women were pretty well informed, and the guys who were clueless were short changed with no time to ask questions or dwell on the basics.

Conversely, some organizations, (in my distant past), the women were typically not the engineers, but admin support, and very deferential to the men in the room (with larger titles), so did not speak up at all, and seemed to assume that the class was not for them.

Those are two good reasons to split the genders, because you don't know until too late if you will end up with one of those classes (as the person hosting).

vivophoenix

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Re: Astounding 401k Ignorance
« Reply #19 on: November 01, 2016, 07:23:23 AM »
Gender specific advice is probably based on the fact that women live longer.

I have also seen the women take over the class and not let guys get a word in edgewise.   And that was in an engineering company that was only 30% women staff.  The women were pretty well informed, and the guys who were clueless were short changed with no time to ask questions or dwell on the basics.

Conversely, some organizations, (in my distant past), the women were typically not the engineers, but admin support, and very deferential to the men in the room (with larger titles), so did not speak up at all, and seemed to assume that the class was not for them.

Those are two good reasons to split the genders, because you don't know until too late if you will end up with one of those classes (as the person hosting).

eh this is more one data point. and could be the case for any demographic

id go with the fact that women live longer, make less more, and are more ignorant about finances.( based on actual surveys )

also they tend to get married and let the men handle retirement. ( ditto with the surveys)

MrsPete

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Re: Astounding 401k Ignorance
« Reply #20 on: November 01, 2016, 12:26:57 PM »
When I was a teacher in Ohio, I was completely removed from the Social Security administration. Didn't pay into it, didn't accumulate any years/credit. I have heard that this happens in other states, too, such as Missouri.
This isn't a universal truth for teachers.  In a handful of states, teachers don't pay into SS and can't collect ... in a greater number, we do pay into SS and can expect BOTH a SS check and a pension check. 

Talking about 401K ignorance, I read a story not long ago about a teacher who'd been "done wrong" by the government.  She taught in a state in which teachers DID pay into SS for maybe 10-12 years ... and then she moved to a state where teachers DON'T pay SS ... so when she reached 65 (or whatever age), she was shocked to learn that SS had recorded zeros for the 20-something years she'd taught in a no-SS state ... and she was able to collect essentially nothing from SS. 

The real issue, of course, isn't "SS cheated her"; rather, the real issue is, "Weren't you paying attention all those years?" 

talltexan

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Re: Astounding 401k Ignorance
« Reply #21 on: November 03, 2016, 08:01:27 AM »
She was enjoying spending that extra 4.6% (and perhaps earning slightly more from an employer who didn't have to pay that on her behalf)

nobody123

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Re: Astounding 401k Ignorance
« Reply #22 on: November 04, 2016, 08:51:11 AM »
We had a rep from our 401k provider in recently to have one-hour sessions to explain the 401k and give folks an opportunity to ask questions.  I went just to see who from my department showed up and what sort of questions would be asked.  After 45 minutes of some really basic information on compounding interest, the target date funds available in our plan, and how to use the calculator on their website to see if you're contributing enough for retirement, there was all of one question from the audience.  It related to taking a loan out against your 401k balance asked in a way where it seemed as though they were looking for validation of something they had already done.

I'm amazed at the overall ignorance that some of my coworkers have.  Some of them are in their mid 50s and have no idea how our 401k or pension plans work.


jinga nation

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Re: Astounding 401k Ignorance
« Reply #23 on: November 04, 2016, 11:54:54 AM »
I have co-workers who spend at least an hour everyday faffing on picks for the office NFL fantasy league. On the clock. Technically it is Gov Fraud, Waste and Abuse.

Same folks couldn't spend a tenth of that time on their company 401(K) plan through Vanguard. "It's too complicated!"

They look at NFL stats all day. Why can't you treat numbers-for-your-retirement the same as numbers-for-fantasy-football?

They also spend a lot of time looking at guns and ammo. Everyday.

Their weekly status reports show they're always busy, and then tell the boss they're backed up with work.

MgoSam

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Re: Astounding 401k Ignorance
« Reply #24 on: November 04, 2016, 12:45:51 PM »
^^^ I remember hearing Norm Chomsky talk about this. He mentioned that most people claim that politics is too complicated or they don't have time to listen to it, but he'll listen to sports talk shows and people will call in with all sort of intricate analysis that demonstrate that ordinary people do have the brainpower it's just they lack the concern/care to learn about the issues.

frugalnacho

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Re: Astounding 401k Ignorance
« Reply #25 on: November 04, 2016, 12:55:31 PM »
^^^ I remember hearing Norm Chomsky talk about this. He mentioned that most people claim that politics is too complicated or they don't have time to listen to it, but he'll listen to sports talk shows and people will call in with all sort of intricate analysis that demonstrate that ordinary people do have the brainpower it's just they lack the concern/care to learn about the issues.

I have been subjugated to hours and hours of sports talk radio from coworkers and friends, and despite the intricate analysis that nearly every caller has they don't have a fucking clue what they are talking about.  Just lots of verbal diarrhea spewing from their mouths with pseudo intellectual arguments behind it. It's exactly like politics.  I get the same thing from my coworkers when they are just sitting around bullshitting.  They each have everything figured out for the local pro sports team, and yet they all have wildly different conclusions and predictions.  It's quite amazing the confidence they each have in their own opinion.

jinga nation

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Re: Astounding 401k Ignorance
« Reply #26 on: November 04, 2016, 01:12:36 PM »
^^^ I remember hearing Norm Chomsky talk about this. He mentioned that most people claim that politics is too complicated or they don't have time to listen to it, but he'll listen to sports talk shows and people will call in with all sort of intricate analysis that demonstrate that ordinary people do have the brainpower it's just they lack the concern/care to learn about the issues.

I have been subjugated to hours and hours of sports talk radio from coworkers and friends, and despite the intricate analysis that nearly every caller has they don't have a fucking clue what they are talking about.  Just lots of verbal diarrhea spewing from their mouths with pseudo intellectual arguments behind it. It's exactly like politics.  I get the same thing from my coworkers when they are just sitting around bullshitting.  They each have everything figured out for the local pro sports team, and yet they all have wildly different conclusions and predictions.  It's quite amazing the confidence they each have in their own opinion.

Armchair QBs. Armchair politicians. Why can't they also be armchair investors?

frugalnacho

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Re: Astounding 401k Ignorance
« Reply #27 on: November 04, 2016, 01:15:52 PM »
^^^ I remember hearing Norm Chomsky talk about this. He mentioned that most people claim that politics is too complicated or they don't have time to listen to it, but he'll listen to sports talk shows and people will call in with all sort of intricate analysis that demonstrate that ordinary people do have the brainpower it's just they lack the concern/care to learn about the issues.

I have been subjugated to hours and hours of sports talk radio from coworkers and friends, and despite the intricate analysis that nearly every caller has they don't have a fucking clue what they are talking about.  Just lots of verbal diarrhea spewing from their mouths with pseudo intellectual arguments behind it. It's exactly like politics.  I get the same thing from my coworkers when they are just sitting around bullshitting.  They each have everything figured out for the local pro sports team, and yet they all have wildly different conclusions and predictions.  It's quite amazing the confidence they each have in their own opinion.

Armchair QBs. Armchair politicians. Why can't they also be armchair investors?

I have no idea.  It baffles me why you'd care more about a sports team than your own financial well being.  Actually it just baffles me why you'd care about a sports team.

StarBright

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Re: Astounding 401k Ignorance
« Reply #28 on: November 04, 2016, 01:27:43 PM »
Can't be sure what their motivation for gender-specific advice is, but I read somewhere that claimed that on average women are more bogle-headed investors than men...

Living longer and earning less are statistically probable, for women, because of biology.

It's also more socially acceptable for women to be dumb about money, to marry money, and to rely on someone else to be a meal ticket. Total financial incompetence is not considered a serious problem in women, who are also more likely to be socialized to overspend on frippery. I'm not saying all female humans have this problem, but based on the original post the idiot content was high in that room so the company may have done well by targeting women and educating them.

I do some light HR work in my job and noticed some of our female employees seemed to have questions (based on their body language) but never ASKED them during open enrollment. NOBODY asks questions during open enrollment. It is always dead silence. I held a women's 401k/benefits meeting this year and it was like floodgates had opened.

No one likes to look stupid and in a tech/engineering company women may already feel like they are at a disadvantage or are uncomfortable because of their gender/office culture. They did not want to be perceived as less competent than their male coworkers so they didn't ask questions. Holding a woman's only session was a positive experience for our employees and now we have more women enrolled in our 401k program than men.
« Last Edit: November 04, 2016, 01:30:42 PM by StarBright »

infogoon

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Re: Astounding 401k Ignorance
« Reply #29 on: November 04, 2016, 01:53:46 PM »
^^^ I remember hearing Norm Chomsky talk about this. He mentioned that most people claim that politics is too complicated or they don't have time to listen to it, but he'll listen to sports talk shows and people will call in with all sort of intricate analysis that demonstrate that ordinary people do have the brainpower it's just they lack the concern/care to learn about the issues.

“The Lottery, with its weekly pay-out of enormous prizes, was the one public event to which the proles paid serious attention. It was probable that there were some millions of proles for whom the Lottery was the principal if not the only reason for remaining alive. It was their delight, their folly, their anodyne, their intellectual stimulant. Where the Lottery was concerned, even people who could barely read and write seemed capable of intricate calculations and staggering feats of memory."

George Orwell, _1984_

MrRealEstate

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Re: Astounding 401k Ignorance
« Reply #30 on: November 04, 2016, 02:04:01 PM »
Someone was asking me about their retirement allocations this weekend and I asked what the expense ratios were...

"I think 1%."

I guess my facial expression changed pretty greatly because they quickly changed their answer to maybe half of 1%.