Author Topic: Vox: 401(k)s will be considered unthinkable 50 years from now  (Read 6581 times)

SwordGuy

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #50 on: April 18, 2019, 08:01:14 AM »
401Ks and Health Insurance need to be removed from the Employer's list of things to do.

The ONLY thing that employers should be involved in is to write a check to the 401K and Health Insurance provider the employee chose to use.

If they want to go shopping for the employee, that's a nice thing for them to do, but the employee should not be required to use the employer's choice.

ChickenStash

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #51 on: April 21, 2019, 03:50:28 PM »
Today I learned:

I should watch out for gangs of SS-age people healthy enough to break into my house and carry out all my stuff or spry enough to try stabbing me in the face but yet unable to get a job somewhere earning a modest living during their retirement.

I'm glad I stopped by for this public service announcement.

Montecarlo

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #52 on: April 21, 2019, 04:52:48 PM »
Today I learned:

I should watch out for gangs of SS-age people healthy enough to break into my house and carry out all my stuff or spry enough to try stabbing me in the face but yet unable to get a job somewhere earning a modest living during their retirement.

I'm glad I stopped by for this public service announcement.

Oh god, here we go again...

flipboard

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #53 on: April 22, 2019, 12:23:58 AM »
Listening to Freakonomics podcast has led me to realize that if we really want to improve things around us, we have to let go of “should” and accept people where they are. That means embracing and accepting human nature and finding a way to work with that instead of against it.

Human nature is to discount future outcomes and prioritize the present. People are naturally bad at delayed gratification and saving for the future. We are the lucky few who buck that trend, fell education or nature or upbringing or environment. Most people are not like us. We can tut-tut and say they should be better, which isn’t getting us that far, or we can instead look for ways to work with people. So nudges are great, such as auto signing up for 401k and auto contribution increases unless you opt out. Most people would be better off being forced into paying more into SS or being forced into a pensioner scheme.
That's exactly why most advanced countries have mandatory pension schemes. (Most places have moved to defined-contribution schemes a long time ago - defined benefit doesn't really work with changing demographics etc.)

I wonder whether the US will eventually go that way, but they aren't exactly moving very fast on fixing healthcare, so who knows how long it would take to fix retirement.

Just Joe

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #54 on: April 22, 2019, 07:26:46 AM »
Change comes in America at exactly the pace that exacts the maximum profits.

I have to imagine that there are very smart people behind the curtain that says delay change until 202X so we can extract all the profits.

The politicians are just running a distraction operation. They'll make the changes official later.

I figure its all very much like watching computer component prices. Right now 256GB micro-SD cards are $40. They have 400GB cards available on the market for $70 and back in the corporate lab there are probably card designs ready going up into the TB range. They won't introduce those until all the profits are extracted from the lower capacity storage cards. 

I hope someone comes along and disrupts healthcare evolution sort of like Tesla did with EVs. Healthcare is a RIGHT NOW problem that needs to be solved but instead we get to watch the GOP delay, delay, delay...

Enigma

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #55 on: April 22, 2019, 09:58:42 AM »
I really do not agree with the author on where he predicts the 401k plans to be in 50 years.

The retirement plan appears to be changing the market as well as the millennials.  I recall reading a few different articles explaining it is hard to keep millennials engaged or working for the same employer for an extended period of time.  The ability to port your retirement account from one employer to the next every few years seems more in line than staying with the same employer for 20+ years and then collecting a pension.  You can put more than 3x in the 401k than you could in an IRA.

It is also worth pointing out that the 401k plans replaced the pension plans not social security.  I would probably have suffered through the same job my entire life if I was stuck worrying about a pension instead of having the flexibility of a 401k.  Worrying myself to death if the company had any struggles putting my pension in jeopardy.

It seems to me the author is pushing towards removing all tax loopholes in the push to increase taxes and provide increased social security.  Social security wasn’t intended to be a universal benefit.  When it was passed it was above the life expectancy.  It wasn’t intended to be a reward for hard work.  It is an entitlement program.

Even reading the “Social Security 2100” that the author throws in at the end.  It is a massive increase in taxes paid by everyone.  Instead of 6.2% being paid by each the employee and the employer it is 7.4% (12.4% vs 14.8%).  Instead of the current caps on the SS the bill taxes wages above $400k.  Then they talk about a weird ‘Tax Cut’ but only for some beneficiaries/recipients.  I think they wanted to throw the word tax cut somewhere in the bill.

flipboard

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #56 on: April 22, 2019, 10:17:08 AM »
I really do not agree with the author on where he predicts the 401k plans to be in 50 years.

The retirement plan appears to be changing the market as well as the millennials.  I recall reading a few different articles explaining it is hard to keep millennials engaged or working for the same employer for an extended period of time.  The ability to port your retirement account from one employer to the next every few years seems more in line than staying with the same employer for 20+ years and then collecting a pension.  You can put more than 3x in the 401k than you could in an IRA.

It is also worth pointing out that the 401k plans replaced the pension plans not social security.  I would probably have suffered through the same job my entire life if I was stuck worrying about a pension instead of having the flexibility of a 401k.  Worrying myself to death if the company had any struggles putting my pension in jeopardy.
I don't get it - are US pension plans not portable? Every single pension plan I've seen elsewhere (defined-benefit) forces you to move the money when changing employer.

Enigma

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #57 on: April 22, 2019, 10:56:44 AM »
Pension plans used to be company specific.  You can still get a gov pension working for a gov agency like the army or post office.  But company pensions were provided as a benefit for being with the company for a set amount of time.  Usually 20 or 25 years.  Company pensions could become obsolete overnight if the company went under.  As the 401k has become popular the company provided pensions have become very uncommon.  It is also cheaper for companies to move to the 401k rather than keep people on their payrolls for life.

TheGrimSqueaker

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #58 on: April 22, 2019, 11:13:26 AM »
It's an interesting thing to think about: the creation of one or more mandatory investment funds, composed of publicly traded stocks and the like, that are funded from mandatory contributions from all taxpayers. These contributions would provide not only the operating capital to purchase stock but also the management and maintenance costs related to such a large account.

The details of managing those accounts would technically be a government decision. The ownership of the publicly traded companies would, for the first time, be *literally* public and collective.

As nifty as that might be as a social experiment, let's consider the impact on stock prices and the markets were it to happen. I would predict an upward surge in stock prices as managers purchase stock to create the fund portfolios. That's just too massive of an influx of money into the stock market (and/or the bond market) to do otherwise. I would also predict some profit-taking from existing stock and bond holders as the price of the securities inflates. Then of course there would be less influence available to the existing major stockholding firms and individuals-- which would most likely result in them using their money and political grease to prevent the Communization of the publicly traded corporations in which they invest.

In the United States, I would not predict that such a program could be put into place in the foreseeable future.

fredbear

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #59 on: April 22, 2019, 08:37:32 PM »
It's an interesting thing to think about: the creation of one or more mandatory investment funds, composed of publicly traded stocks and the like, that are funded from mandatory contributions from all taxpayers. These contributions would provide not only the operating capital to purchase stock but also the management and maintenance costs related to such a large account.

...

In the United States, I would not predict that such a program could be put into place in the foreseeable future.

Millions of federal workers who used to have a defined benefit plan are now covered by a contributory (and matched) plan such as you describe.  It strikes me that with adjustments to the contribution and match for lower income people, it would provide a desirable alternative to social security.  At last the money would be invested, unlike at present; and it would be used for actual economic expansion, unlike at present; and there would be a heritable account with your name on it, unlike at present.

JTColton

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #60 on: April 23, 2019, 03:11:55 AM »
Millions of federal workers who used to have a defined benefit plan are now covered by a contributory (and matched) plan such as you describe.  It strikes me that with adjustments to the contribution and match for lower income people, it would provide a desirable alternative to social security.  At last the money would be invested, unlike at present; and it would be used for actual economic expansion, unlike at present; and there would be a heritable account with your name on it, unlike at present.

They still have a defined benefit plan. The old CSRS was a bigger pension but the newer FERS is also a pension just smaller in addition to the TSP. One thing that also usually went along with a pension was some form of subsidized health care, which nowadays might be worth as much as the pension itself.


Boofinator

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #61 on: April 23, 2019, 06:48:06 AM »
They won't just lie down in the street and die, as much as you would like it. If it comes down to dying and stabbing you in the face, most of them will stab you in the face, because that's exactly what most of our evolution and history has been.

You were the one who stated that social security paid an order of magnitude less than UBI and therefore should be changed. I called you out on this obvious fallacy, but then you presented some edge cases. When I mentioned these are edge cases, maybe some should be fixed and others not, and that immigrants take risks when they move to different countries (yes your mother is technically not an immigrant, but was an ex-pat and then apparently lived here for decades without working), you suggest that I want them to lay down and die, and most of them will stab me in the face?? WTF?? If your mother wanted SS so bad, she could have gotten a fucking job like everyone else. Or she can try stabbing me in the face and see how well that works out.

MOD NOTE: Let's not do personal attacks.

Only on the MMM forum can you be personally threatened with being stabbed in the face, but you receive the moderator warning about violation of forum rules after your reply suggests somebody should have gotten a job.

TheGrimSqueaker

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #62 on: April 23, 2019, 07:24:44 AM »
It's an interesting thing to think about: the creation of one or more mandatory investment funds, composed of publicly traded stocks and the like, that are funded from mandatory contributions from all taxpayers. These contributions would provide not only the operating capital to purchase stock but also the management and maintenance costs related to such a large account.

...

In the United States, I would not predict that such a program could be put into place in the foreseeable future.

Millions of federal workers who used to have a defined benefit plan are now covered by a contributory (and matched) plan such as you describe.  It strikes me that with adjustments to the contribution and match for lower income people, it would provide a desirable alternative to social security.  At last the money would be invested, unlike at present; and it would be used for actual economic expansion, unlike at present; and there would be a heritable account with your name on it, unlike at present.

The invested money is far more likely to be used for fat executive bonuses than for economic expansion. I'll explain why.

When a person-- or an account manager-- buys stock, unless they're getting in on a public offering they aren't buying the stock directly from the company whose stock it is. They're buying it from another stockholder who happens to be selling. So, if you have WhizbangCorp stock that you bought at $50 per share, and you sell it to me for $100 per share, then the difference that's left to you after the various brokerage fees and capital gains tax is yours to keep. It doesn't affect the day to day operations of the company in any way. For the most part it doesn't affect the employees either, since there are strict laws prohibiting insider trading that are enforced rigorously on the little people. Executives who are offered stock options are the only ones who benefit from a rise in stock prices, because they can exercise their stock options and sell or take a profit. So the executive bonus program, featuring stock options, is not available to rank and file employees.

Fire-hosing extra money into the markets and requiring the purchase of stock or investment grade securities increases the price of those securities. It also means there's less money circulating for purchases, debt reduction, or the like. Unlike economists, we have to accept the fact that human beings are going to be the way they're going to be, so it's unreasonable to expect *all* the affected people, or even the majority, to curtail their spending when their effective income drops. They're more likely to continue spending but to make use of credit, thereby increasing their debt. The banks benefit from that, but nobody else does.

The current program for federal employees is a kind of a 401(k) matching program: not mandatory at all, but worth doing if you're Mustachian. It is heritable, but from a public policy perspective that can be a weakness. Money for plan administration, oversight, and legislation comes from the leftovers when assets are *not* passed on from one person to the next. That's the dirty little secret of pension plans.


YYK

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #63 on: April 23, 2019, 10:24:19 AM »
It's an interesting thing to think about: the creation of one or more mandatory investment funds, composed of publicly traded stocks and the like, that are funded from mandatory contributions from all taxpayers. These contributions would provide not only the operating capital to purchase stock but also the management and maintenance costs related to such a large account.

The details of managing those accounts would technically be a government decision. The ownership of the publicly traded companies would, for the first time, be *literally* public and collective.

As nifty as that might be as a social experiment, let's consider the impact on stock prices and the markets were it to happen. I would predict an upward surge in stock prices as managers purchase stock to create the fund portfolios. That's just too massive of an influx of money into the stock market (and/or the bond market) to do otherwise. I would also predict some profit-taking from existing stock and bond holders as the price of the securities inflates. Then of course there would be less influence available to the existing major stockholding firms and individuals-- which would most likely result in them using their money and political grease to prevent the Communization of the publicly traded corporations in which they invest.

In the United States, I would not predict that such a program could be put into place in the foreseeable future.

A similar thing known as a sovereign wealth fund exists in many places around the world, including the Alaska Permanent Fund, which is basically a stock and bond portfolio (with other equities, including private equity) run by the state that pays out an annual dividend to Alaskans. I think most funds of this type are funded by various taxes and not by individual contributions but it's a similar concept.

This article is more of a policy proposal but has some background on sovereign wealth funds:
https://www.peoplespolicyproject.org/projects/social-wealth-fund/

BFive55

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Re: Vox: 401(k)s will be considered unthinkable 50 years from now
« Reply #64 on: April 26, 2019, 03:01:20 PM »
I wish 457's and 401k's were more popular and were "better."

I am a public employee with a pension and a 457 option. My pension will be a minimum 50% but I can add 2% a year for an additional 20% max (70% total).

They take 7% of my salary and put it into the pension and then match it, I think two for one.

Personally I would prefer that I be required to put 7% of my salary into a 457 and they match it 2 for 1. Then for the next 5% they'd match it 1:1. That's very lucrative as a worker. For putting 12% of my salary into a 457 I'd get 19%, for a total of 31% of my salary.

That would cost more money now but it would completely eliminate the long term costs to my public employer and shift the burden to employees while also providing a safety net of mandatory contributions and two for one matches.