I agree with what you are saying but I actually wonder if we should conclude that most people are not cut out to be investors. Probably most people would be better off with defined benefit plans like a beefed-up social security, pensions for all, or something similar. It is a tough job to go up against human psychology with masses of mostly uninterested people.
I agree with this. I don't think most people are cut out to be investors. The Cdn government is slowing starting to see it. In the last few years they've raised the CPP premiums. CPP is like American social security.
I completely agree with both of you.
In my grandfather's generation (both my grandparents were born in the 20s), union membership was very high. Most union jobs came with a pension, social security, and the general understanding by the population to have a paid off mortgage as they approached retirement. Commonly known as the three legged stool.
That was mostly on the way out with my parents generation (both parents born early 50s), with lobbyists convincing Congress to pass the 401K laws so big business could funnel the cost of providing retirement benefits to the employee rather than employer. Even with pensions being eliminated, there were still many corporate jobs that provided stable employment with lots of upward mobility.
By the time my generation got to the workforce (me and my siblings born in the 80s), not only were pensions and unions a thing of the past, but now just relying on a good job with built in promotions and raises is not a realistic option for a good majority of the population.
It is really sad when a government employee is outpacing MOST private sector employees in pay AND benefits. I have nothing against those who work for the gov't, but I think it is sad snapshot at the state of our country and our economy when the best available jobs (admittedly with a few exceptions) are government work.
Add up all those major societal shifts over the past 60 years coupled with the lack of mandatory financial education, and we now have a population with zero basic financial knowledge who is supposed to be able to create their own retirement plan, choose the right investments, understand safe withdrawal rates, understand markets go up and down (while being disciplined enough not to panic) and plan for huge future unknowns (healthcare and end of life care especially). The truth is most of our citizens couldn't explain basic compounding interest, and yet are responsible to plan and execute their entire retirement picture.
Some easy solutions (but ones that would never be passed due to people like me and all the sleazy financial salesman being out of a job) would be:
1. Social security combined with a defined benefit plan. Say like 10% to social security (reduced from 15.3%) and then start a separate defined benefit plan of another 10% that was invested in the TSP just like all our corrupt politicians get. 20% invested wisely over a person's working career should be satisfactory for a modest retirement.
2. Medicare for all. I haven't run the numbers to see what the current 2.9% would need to be increased to, but let's say 7.5% of all income/wages.
3. A flat tax on all earnings, income, wages, capital gains, etc. No special tax treatment, period. I'm sure we could figure out what that number needed to be, then we could set a "poverty line limit" so those at the bottom get exempted from income taxes at the federal and state levels. But no more welfare through the income tax system.
4. Still allow for IRAs with no maximum contributions. This would allow those us interested in FIRE to achieve our goals but would take the pressure off of the average Joe having to DIY his own retirement plan. Also do away with retirement savings being connected to employment at all. That way big business doesn't have people by the balls with the benefits they offer. Would be a more level playing field which I think would then create better working conditions for all (hopefully easing the feeling of being chained to a good job for benefits).
I realize most of this is but a mere pipe dream. Both Dems and Repubs alike are in the back pocket of big business and special interests. I never see that changing in my lifetime.
But just wanted to point out some potential options as I agree the average Joe just isn't going to pick up a Bogle book on investing and break years of terrible habits and emotional conditioning. Maybe the growing retirement crisis will change things, but it might be too late to make adjustments by the time people in their 30's and 40's get to retirement age.
And I know my personal experience is very anecdotal, but I only have one acquaintance (my younger brother) who will be adequately prepared for retirement. And that is out of a pretty wide social circle plus all the clients I have worked for presently and over the last decade. Even though talking finances is a taboo subject, it is impossible to avoid with your accountant to some degree :)