Author Topic: It will be hard for Millennials to retire...  (Read 6771 times)

COguy

  • 5 O'Clock Shadow
  • *
  • Posts: 99
  • Location: Longmont, Colorado
It will be hard for Millennials to retire...
« on: November 21, 2012, 01:11:04 PM »
http://www.huffingtonpost.com/robert-hiltonsmith/millennials-futures-more-_b_1619924.html

from the sounds of this article, it will be hard to make it to retirement if you are just starting out today...

Or, you could just read MMM and be fine no matter what happens

MrChanticleer

  • 5 O'Clock Shadow
  • *
  • Posts: 47
  • Location: Orange County, CA
Re: It will be hard for Millennials to retire...
« Reply #1 on: November 21, 2012, 03:04:16 PM »
This article's author seems like a "complainypants" to me. This article makes assumption after assumption, throwing in the occational "statistic" to scare people, such as:

Quote
fees for the average 401(k) plan can cost a two-earner, median-income household as much as $155,000 in fees and lost returns over a lifetime of saving for retirement.

So, it seems like the message of this article is: IRAs and 401k plans have fees, so millenials shouldn't even bother trying to save because "what's the point?" Apparantly defined benefit plans (aka the retirement "plan" that requires the least amount of personal responsibiliy) is the ONLY way young people will be able to retire.

Oh, and don't forget that any of us rogues who try to save anyway will
Quote
have [our] retirement nest eggs depressed by a lackluster stock market and frequent early withdrawals from [our] retirement accounts as a way to pay for stints of unemployment or unexpected medical bills.

This article definately belongs here on the shame and comedy board.

Jack

  • Magnum Stache
  • ******
  • Posts: 4734
  • Location: Atlanta, GA
Re: It will be hard for Millennials to retire...
« Reply #2 on: November 21, 2012, 03:40:21 PM »
So, it seems like the message of this article is: IRAs and 401k plans have fees, so millenials shouldn't even bother trying to save because "what's the point?"

Maybe the author was a complainypants, but he at least hinted at a good point: because the risks and costs of 401(k) plans are borne by the employee but the plan itself is chosen by the employer, there's no incentive to reduce expenses. I'm sure we all know how the funds available in most 401(k)s are inferior to (for example) Vanguard, and that's (in part) what the author really meant to complain about.


MrChanticleer

  • 5 O'Clock Shadow
  • *
  • Posts: 47
  • Location: Orange County, CA
Re: It will be hard for Millennials to retire...
« Reply #3 on: November 21, 2012, 04:12:32 PM »
Maybe the author was a complainypants, but he at least hinted at a good point: because the risks and costs of 401(k) plans are borne by the employee but the plan itself is chosen by the employer, there's no incentive to reduce expenses. I'm sure we all know how the funds available in most 401(k)s are inferior to (for example) Vanguard, and that's (in part) what the author really meant to complain about.

Yeah, I think you're right. The  high expense ratios and lack of employee control over fund selections are definately disadvantages of the 401k plan, but the author seems to take the position that these disadvantages are so great that the 401k is not even a viable option for a young people to use for retirement.

Jack

  • Magnum Stache
  • ******
  • Posts: 4734
  • Location: Atlanta, GA
Re: It will be hard for Millennials to retire...
« Reply #4 on: November 21, 2012, 04:43:25 PM »
I think the main thesis of the author was that Millennials are facing significant disadvantages compared to previous generations. For example, the baby boomers had Social Security, defined-benefit pension plans, a good economy most of the time, and life expectancy not much beyond retirement age, and a bunch of them still manage to be poor. Millennials might not have Social Security, are responsible for their own retirement plans, graduated into a shitty economy (which may also have significant challenges in the future due to peak oil and whatnot), and have to support themselves for 20+ years after reaching traditional retirement age.

Combine that with the author's other main thesis -- that, on average, people are too stupid to manage their own retirement -- and you end up with a lot of doom and gloom.

MrChanticleer

  • 5 O'Clock Shadow
  • *
  • Posts: 47
  • Location: Orange County, CA
Re: It will be hard for Millennials to retire...
« Reply #5 on: November 21, 2012, 05:05:39 PM »
As someone born in the mid-80's I'm pretty sure I fall into the "Millennials" group. All those disadvantages are the exact reasons why I'm trying harder to get rid of my debts and trying to live a mustachian lifestyle.

I think an important factor that the author neglects to mention is that as a millennials can see these challenges now and have time to plan accordingly.

Personally, I never expected to have those same advantages that my parents did. Even before the 2008 recession (which doesn't feel over to me) it was clear that pensions were largely a thing of the past and social security has been "on the rocks" for a while.

As you said (and the author alludes to) despite all the advantages my parent's generation had, they largely have nothing to show for it. My parents are the same way. My dad died in debt and my mother (an attorney making around six figures) is in her 50's with pretty much nothing saved for retirement and 28 years left on her mortgage. Because of this I know that I have to work that much harder and plan that much smarter. But the important advantage I do have is time (and MMM).

Jamesqf

  • Magnum Stache
  • ******
  • Posts: 4047
Re: It will be hard for Millennials to retire...
« Reply #6 on: November 21, 2012, 07:34:17 PM »
Maybe the author was a complainypants, but he at least hinted at a good point: because the risks and costs of 401(k) plans are borne by the employee but the plan itself is chosen by the employer, there's no incentive to reduce expenses.

But most millennials will work for many different employers over the course of their career, and (I believe) can roll the 401k from each into their own IRA whenever they change employers.  That IRA can be chosen to be low expense.

chucklesmcgee

  • Pencil Stache
  • ****
  • Posts: 613
Re: It will be hard for Millennials to retire...
« Reply #7 on: November 22, 2012, 11:57:34 PM »
the author seems to take the position that these disadvantages are so great that the 401k is not even a viable option for a young people to use for retirement.
Well, it's the Huffington Post, it's not the most neutral of publications.

One of the central theses of current liberal dogma is that people need the government to take care of them- not just the sick, disabled and poor, everyone. Tax advantaged plans are the blight of liberals as they're privately administered and keep the grubby hands of government off of people's stache. Liberals see any reliance on this as a direct threat to Social Security.

As a result, the author have a strong incentive to knock savings plans as being ineffective- "people aren't deciding to save enough! the value could fluctuate! fees!" to appeal to a big government solution. That something in this case is to create "a new type of retirement savings account, one that would give workers a safe, low-cost place to save for retirement and offer some protection against outliving one's retirement savings." Yeah, and I'd like a Ferrari that costs $1,000, goes 250 mph, gets 100mpg and has a five-star crash test rating.

Captain and Mrs Slow

  • Bristles
  • ***
  • Posts: 414
  • Age: 58
  • Location: Munich Germany
Re: It will be hard for Millennials to retire...
« Reply #8 on: November 23, 2012, 02:07:09 AM »

That something in this case is to create "a new type of retirement savings account, one that would give workers a safe, low-cost place to save for retirement and offer some protection against outliving one's retirement savings." Yeah, and I'd like a Ferrari that costs $1,000, goes 250 mph, gets 100mpg and has a five-star crash test rating.

Oh my Chuckles McGee you have a very short memory. It was George W Bush himself who offered this very plan, private accounts for SS (or am I wrong on this one). It seems in America today ideas are not longer considered liberal or conservative but GOP or Democratic. So you have this strange situation where a liberal president offers a very conservative solution (healthcare exchanges) and is shot down as socialized medicine. And a conservative president (the younger Bush) offers a liberal solution (Medicare Plan B socialized medicine if I've ever seen it) and it's widely panned by the Dems.

On the the article itself. Yes he is very correct the millennial's are going to have a very rough time of it. Us Babyboomers are going to ensure that. But I agree with most conservatives that bigger government isn't the solution. The answer is to look to the greatest generation for an example. Frugal living not bigger government is the answer.

But sadly that is unlikely to ever come into the equation.

chucklesmcgee

  • Pencil Stache
  • ****
  • Posts: 613
Re: It will be hard for Millennials to retire...
« Reply #9 on: November 23, 2012, 11:31:14 PM »

That something in this case is to create "a new type of retirement savings account, one that would give workers a safe, low-cost place to save for retirement and offer some protection against outliving one's retirement savings." Yeah, and I'd like a Ferrari that costs $1,000, goes 250 mph, gets 100mpg and has a five-star crash test rating.

Oh my Chuckles McGee you have a very short memory. It was George W Bush himself who offered this very plan, private accounts for SS (or am I wrong on this one).

W did offer private accounts for SS, but that's not what the author is calling for, considering he spends most of the article criticizing the volatility of the stock market and fees charged by fund companies. The author, as I can understand it, seems to be calling for some sort of mysterious account backed by the government with low fees and guaranteed returns well above inflation. How the government is capable of getting great returns on investments which never go down short of running up more of a deficit to keep making payouts is beyond me.

capital

  • Bristles
  • ***
  • Posts: 451
Re: It will be hard for Millennials to retire...
« Reply #10 on: November 26, 2012, 04:00:49 PM »
W did offer private accounts for SS, but that's not what the author is calling for, considering he spends most of the article criticizing the volatility of the stock market and fees charged by fund companies. The author, as I can understand it, seems to be calling for some sort of mysterious account backed by the government with low fees and guaranteed returns well above inflation. How the government is capable of getting great returns on investments which never go down short of running up more of a deficit to keep making payouts is beyond me.
The economy grows over time, and the government has taxing authority. Distribute, say, 6% of GDP to current retirees by taxing 6% of GDP, with the promise to future retirees they will get the same deal. Given GDP growth (and holding the proportion of retirees steady), 6% of GDP will be a larger amount of constant dollars in the future than it is now. That's basically how Social Security works. The numbers can be tweaked to account for demographic changes or to increase or decrease benefit payments. The country's demographics can also be changed via immigration, which the US and Canada are very good at compared to Europe or Asia. There is a currently a "Social Security Trust Fund" to account for anticipated demographic changes.

chucklesmcgee

  • Pencil Stache
  • ****
  • Posts: 613
Re: It will be hard for Millennials to retire...
« Reply #11 on: November 29, 2012, 01:56:32 PM »
W did offer private accounts for SS, but that's not what the author is calling for, considering he spends most of the article criticizing the volatility of the stock market and fees charged by fund companies. The author, as I can understand it, seems to be calling for some sort of mysterious account backed by the government with low fees and guaranteed returns well above inflation. How the government is capable of getting great returns on investments which never go down short of running up more of a deficit to keep making payouts is beyond me.
The economy grows over time, and the government has taxing authority. Distribute, say, 6% of GDP to current retirees by taxing 6% of GDP, with the promise to future retirees they will get the same deal. Given GDP growth (and holding the proportion of retirees steady), 6% of GDP will be a larger amount of constant dollars in the future than it is now. That's basically how Social Security works. The numbers can be tweaked to account for demographic changes or to increase or decrease benefit payments. The country's demographics can also be changed via immigration, which the US and Canada are very good at compared to Europe or Asia. There is a currently a "Social Security Trust Fund" to account for anticipated demographic changes.

That's more or less the premise of Social Security at its introduction and Social Security is fiscally insolvent. The proportion of retirees can't be expected to hold steady, both with a declining birth rate and longer life expectancy.  The trust fund you mentioned is "invested" in government debt, that is, the government's written an IOU to itself and returns in social security come from borrowing more to pay the interest. And anyways, the government's returns on social security are far less than returns in the open market. Point is the author's proposal for some sort of magical risk-free, high-interest, government-backed retirement fund is the stuff of fairy tales.


Captain and Mrs Slow

  • Bristles
  • ***
  • Posts: 414
  • Age: 58
  • Location: Munich Germany
Re: It will be hard for Millennials to retire...
« Reply #12 on: November 30, 2012, 04:29:50 AM »

That something in this case is to create "a new type of retirement savings account, one that would give workers a safe, low-cost place to save for retirement and offer some protection against outliving one's retirement savings." Yeah, and I'd like a Ferrari that costs $1,000, goes 250 mph, gets 100mpg and has a five-star crash test rating.

Oh my Chuckles McGee you have a very short memory. It was George W Bush himself who offered this very plan, private accounts for SS (or am I wrong on this one).

W did offer private accounts for SS, but that's not what the author is calling for, considering he spends most of the article criticizing the volatility of the stock market and fees charged by fund companies. The author, as I can understand it, seems to be calling for some sort of mysterious account backed by the government with low fees and guaranteed returns well above inflation. How the government is capable of getting great returns on investments which never go down short of running up more of a deficit to keep making payouts is beyond me.


Your correct didn't notice that!

Sorry about the long quote but on iPad and hard to edit