The Money Mustache Community
Around the Internet => Mustachianism Around the Web => Topic started by: dude on July 16, 2015, 09:49:02 AM
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Folks familiar with the retirement literature out there will recognize Alicia Munnell's name immediately:
http://www.bloomberg.com/news/articles/2015-07-16/how-a-harvard-economist-screwed-up-and-then-saved-her-retirement
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I thought the article was sort of sad. I didn't see how she "saved" her retirement. It talks about lifestyle changes they made, but neither her nor her husband plan to retire...sounds more like they saved themselves from bankruptcy.
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How can somebody who directs the Center for RETIREMENT Research be so messed up about their own finances? Boggles the mind....
She hadn't figured out retirement yet--more research needed to be done.
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^lol. +1
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She did not save her retirement, because she never retired. The concerning parts related to the cost of her lifestyle and her lack of knowledge regarding personal control.
- She is an economist, who associated with major aspects of public economics, but yet she never looked at her own personal budget.
- Cashing out the pension - it's a respectable choice as long as you reinvest the money. She cashed it out, treated it like a bonus, and spent it instead of transferring it to long-term investment.
She is coming out of this unscathed because she has a low physical activity job that can be performed at any age, plus there isn't a forced retirement clause at either her or her husband's main occupations. If she was forced into early retirement, it would have been catastrophic.
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How can somebody who directs the Center for RETIREMENT Research be so messed up about their own finances? Boggles the mind....
It might boggle my mind except I remember how long it took doctors and nurses to quit smoking. . . .
Reading through the linked article I get the feeling that the featured couple are working and enjoying their dream jobs and that it wouldn't surprise me if "retirement" just means shifting to part-time or freelancing. If that's the case I don't see anything wrong with that.
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she guesses she has a third in cash, a third in stocks, and a third in bonds
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Working longer is a solution to inadequate retirement savings that Munnell is passionate about. It helps you postpone taking Social Security so you get a far bigger monthly benefit, and it allows tax-deferred retirement savings to grow.
Savings isn't going to grow if it's that conservatively allocated...
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Savings isn't going to grow if it's that conservatively allocated...
This couple is 72 and 76. How much growth would they miss?
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She is coming out of this unscathed because she has a low physical activity job that can be performed at any age, plus there isn't a forced retirement clause at either her or her husband's main occupations. If she was forced into early retirement, it would have been catastrophic.
Exactly. She probably also has a job with a lot of flexibility that she enjoys hence she can continue to work without it getting annoying. Personally I'd prefer to have the option or ER.
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She had a house with 6 bedrooms that they didn't even use. She pulled money out of her pension, her 401k, AND her thrift savings plan-to pay for her lifestyle. Holy cow, someone get the retirement experts-oh....my-she is one.
For many people, that won't be enough, and Munnell says a lot needs to be done on the policy front. That's why she keeps working.
What exactly needs to be done. She had all the tools, accounts, and knowledge at her disposal and she still managed to eff everything up. There is no policy that can correct this unless you want Gov't Mommy figuring stuff out FOR you. I cannot comprehend.
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From the article:
Alicia Munnell, the director of Boston College's Center for Retirement Research, was a member of the president's Council of Economic Advisers for two years before joining Boston College as a professor of management sciences in 1997. Before the council, she was assistant secretary of the Treasury for economic policy for two years.
Tends to support those who don't trust the government to have smarter people than the general population....
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From the article:Alicia Munnell, the director of Boston College's Center for Retirement Research, was a member of the president's Council of Economic Advisers for two years before joining Boston College as a professor of management sciences in 1997. Before the council, she was assistant secretary of the Treasury for economic policy for two years.
Tends to support those who don't trust the government to have smarter people than the general population....
I don't follow. Her finances seem to be much better off than the general population's. She'll never come close to going hungry. She made some mistakes that probably 95% of people make and then changed course.
In general, people who work for the federal government do tend to be smarter than the general population. Yeah, there are a lot of idiots that work there--like any employer, but there are proportionally way more idiots that don't. The federal government tends to attract the best and brightest (eventually many move on to more lucrative careers, and a fresh crop rotates in), and has a lot of jobs that require advanced education and training (NASA, DARPA, NIH, CDC, NSF, AHRQ, NSA, NOAA, VA, etc). The payroll is full of scientists, engineers, physicians, lawyers, etc.
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Tends to support those who don't trust the government to have smarter people than the general population....
She made some mistakes that probably 95% of people make
Appears we agree.
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Munnell is really interesting; I've listened to interviews with her for years, and she's several times indicated that she herself has a hard time living by the principles that our society expects to create retirement stability. Cognitive research and hard data support this, as do all our anecdotal experience on this thread. Many many people do not behave intelligently or rationally when it comes to long term planning. Most humans aren't 'built' to do it well, and it takes a combo of personality traits, exposure, context, to make it easier for them to do it.
She's essentially a statistician whose data set is demographic info, household savings, and modeling retirement income streams. She mostly just crunches numbers about what people actually do, and then reports them.
She's also quite academically detached in the way she usually discusses policy. She has opinions about policy, but she usually frames them in terms of what she would recommend based on what society's expectations for average income security are...she'll phrase it in terms of "we [society] need to decide if the status quo is acceptable, and if not, here are some things that could be changed that would affect final numbers in such and such a way..."
So, it's not like she's out there constantly agitating for a giant welfare state, while doing a poor job of planning for herself. She mostly just reports that the data indicate that a very large chunk of people aren't doing well under the current system of retirement, regardless of how society deems they 'should' be doing. Her own struggles would be more disturbing if she were head of a big financial planning firm, IMO.
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That article is fascinating. It's almost like a "how to" screw it up. I notice that they have a paid off co-op and a paid off vacation house, so they aren't really bad off. With SS and a relatively short life expectancy, I have a feeling they're only working because they want to or they are scared not to.
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Tends to support those who don't trust the government to have smarter people than the general population....
She made some mistakes that probably 95% of people make
Appears we agree.
2 normal distributions can overlap with one having a higher median and mean. Complex entities can be compared in multiple dimensions.
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2 normal distributions can overlap with one having a higher median and mean. Complex entities can be compared in multiple dimensions.
I'll assume that's a way of saying you don't agree. ;)
But do you really want to defend this one person as well qualified to help set national financial policy? From the article:
Working longer is a solution to inadequate retirement savings that Munnell is passionate about.
...she asked a neighbor there whether she should take her benefits in a lump sum. He said yes, that she could invest it and make more money than if she left it in the defined-benefit plan. Wrong. She spent it all.
Another, smaller regret is moving money out of the government's thrift savings plan. She wanted to consolidate her accounts in one place to get a better feel for her asset allocation. "I'm not happy I did that," she says. "It has such low fees."
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2 normal distributions can overlap with one having a higher median and mean. Complex entities can be compared in multiple dimensions.
I'll assume that's a way of saying you don't agree. ;)
But do you really want to defend this one person as well qualified to help set national financial policy? From the article:
Working longer is a solution to inadequate retirement savings that Munnell is passionate about.
...she asked a neighbor there whether she should take her benefits in a lump sum. He said yes, that she could invest it and make more money than if she left it in the defined-benefit plan. Wrong. She spent it all.
Another, smaller regret is moving money out of the government's thrift savings plan. She wanted to consolidate her accounts in one place to get a better feel for her asset allocation. "I'm not happy I did that," she says. "It has such low fees."
I disagreed with the sentiment you seemed to be expressing that people in the federal government aren't smarter on average than the general population. I added the "on average"--assuming that's what you meant. I explained one reason why I thought your sentiment was incorrect. And why if this particular example isn't the best financial planner in the world, the logic behind my reasoning could still bear out. Nowhere did I say she would be my choice for some of the jobs she's had. I also said that there were definitely a lot of idiots in the government too--just like any other job. I don't think she falls into the idiot category, but she's not a shining star either. She made a few blunders (that are incredibly common), but is able to recognize they were blunders, change her behavior, and continue to have a very comfortable life with no financial problems. Maybe those blunders and lessons learned, and her ability to articulate them, give her better insight into the behaviors of typical Americans? Who knows. All I know about her is this one article.
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I disagreed with the sentiment you seemed to be expressing that people in the federal government aren't smarter on average than the general population. I added the "on average"--assuming that's what you meant. I explained one reason why I thought your sentiment was incorrect. And why if this particular example isn't the best financial planner in the world, the logic behind my reasoning could still bear out. Nowhere did I say she would be my choice for some of the jobs she's had. I also said that there were definitely a lot of idiots in the government too--just like any other job. I don't think she falls into the idiot category, but she's not a shining star either. She made a few blunders (that are incredibly common), but is able to recognize they were blunders, change her behavior, and continue to have a very comfortable life with no financial problems. Maybe those blunders and lessons learned, and her ability to articulate them, give her better insight into the behaviors of typical Americans? Who knows. All I know about her is this one article.
And in general I agree that the list you posted earlier ("NASA, DARPA, NIH, CDC, NSF, AHRQ, NSA, NOAA, VA") tends to include very smart people. I even know some. :)
But articles like this do tend to reinforce the notion that policy- and law-makers (the people I had in mind for the generic "the government" - somewhat different than the list above) aren't all paragons of intelligence. Whether one considers that a good or bad thing tends to depend on one's overall political views.
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I disagreed with the sentiment you seemed to be expressing that people in the federal government aren't smarter on average than the general population. I added the "on average"--assuming that's what you meant. I explained one reason why I thought your sentiment was incorrect. And why if this particular example isn't the best financial planner in the world, the logic behind my reasoning could still bear out. Nowhere did I say she would be my choice for some of the jobs she's had. I also said that there were definitely a lot of idiots in the government too--just like any other job. I don't think she falls into the idiot category, but she's not a shining star either. She made a few blunders (that are incredibly common), but is able to recognize they were blunders, change her behavior, and continue to have a very comfortable life with no financial problems. Maybe those blunders and lessons learned, and her ability to articulate them, give her better insight into the behaviors of typical Americans? Who knows. All I know about her is this one article.
And in general I agree that the list you posted earlier ("NASA, DARPA, NIH, CDC, NSF, AHRQ, NSA, NOAA, VA") tends to include very smart people. I even know some. :)
But articles like this do tend to reinforce the notion that policy- and law-makers (the people I had in mind for the generic "the government" - somewhat different than the list above) aren't all paragons of intelligence. Whether one considers that a good or bad thing tends to depend on one's overall political views.
It's obvious you're a very smart person and I frequently enjoy your contributions. But I sometimes have trouble following what your point is.
I've noticed in a few of these interactions that you setup a straw man. Whether it's "no Democrat is against same-sex marriage" or "all lawmakers are paragons of intelligence", they are obviously false on their face. And then you point to someone as a counter example to the straw man. But showing a counter example to the straw man (that no one believes) is not very useful. It doesn't prove the opposite of your straw man. If A->B, and NOT(A), that doesn't tell us anything about B. I can't think of any time where anyone has ever said that all lawmakers are geniuses. But I can think of plenty of times where lots of people (myself included) have said that certain ones are dolts. So that makes me feel like you might have some other point that I'm missing.
Any organization (government, corporation, church, family, etc) is made up of flawed people. Steve Jobs was an incredibly flawed person, yet is revered for what he was able to accomplish despite (or because of) his flaws. I think that on average leadership in the private sector is more intelligent than the general public. I also think that on average leadership in the public sector is more intelligent than the general public. I think both of those things are good. I think that all of those people are flawed. That's just the way humans are. And hopefully it helps those leaders be aware of and more understanding of the flaws of others they are leading. But it also means that all organizations, public and private, will be less than perfect.
I do think it's funny that you're pointing to a person who got a PhD in economics from Harvard and then had a very successful career afterwards as your example of a person who's not smarter than the average person. Given that this was posted in the "mustachianism around the web" area, my guess is the OP was highlighting her as an interesting example of someone who turned their personal finances in a more mustachian direction. But not everyone needs to read the same article the same way.
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There seems to be a real disconnect on this board (also exhibited in this thread) in terms of understanding the difference between raw intelligence, job mastery, and 'behavioral intelligence' (temperamental-type qualities).
Alicia Munnell is obviously pretty intelligent in terms of IQ...she has two advanced degrees in addition to her Bachelor's, and she's been able to master statistical concepts and do research based on those concepts, and publish said research. She also exhibits job mastery, in that she serves in a position of responsibility, and seems to meet her obligations pretty well or it's unlikely she would have been promoted so high.
BUT, what an amazing number of people on this board seem to misunderstand, in thread after thread after thread, is that those traits, in MANY (possibly most) people don't necessarily correlate with optimal financial behavior, which has a lot more to do with temperamental inclination and behavioral intelligence.
Let's just take the top half of the intelligence bell curve: that is a shit ton of relatively to very smart people in this world, many of them who excel at challenging, high-skill jobs, that STILL MAKE DUMBASS DECISIONS on a regular basis. And it ISN'T because they are too stupid to know better. People cheat on spouses and fuck up marriages; they drink too much, smoke too much, or sit on their asses too much for optimal health; they sell at the bottom of the market crash; they constantly respond emotionally to situations that require rational, mathematical thinking; they feel overwhelmed and busy and put off crucial decisions too long; they have external and internal pressures from family, upbringing, social context, etc. that skew their decisions (e.g., I'll save for kids college fund, even though I have no retirement fund), and on and on and on.
I don't know whether it is a preponderance of personality types that have congregated at this board or what, but sooooo many MMM forum participants seem to believe that people 'should' behave optimally assuming they are smart and have good information. And yet, society shows us OVER AND OVER that this is a fallacy. They do not, and they never will, because most people aren't wired that way.
Alicia Munnell is perfectly intelligent, as are most federal workers (most work in high-skill disciplines that require advanced degrees and complex skill-set mastery). Does that mean most of them are making optimal decisions in other areas of their lives? Not necessarily. Should we be shocked by this? NO.
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Well said.
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Is this a version of: the shoemakerr's children have no shoes?
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... I sometimes have trouble following what your point is.
Fair enough. Sometimes I'll intentionally use a Socratic approach, and sometimes I could simply be confused. ;)
I've noticed in a few of these interactions that you setup a straw man. Whether it's "no Democrat is against same-sex marriage" or "all lawmakers are paragons of intelligence", they are obviously false on their face. And then you point to someone as a counter example to the straw man. But showing a counter example to the straw man (that no one believes) is not very useful. It doesn't prove the opposite of your straw man. If A->B, and NOT(A), that doesn't tell us anything about B. I can't think of any time where anyone has ever said that all lawmakers are geniuses. But I can think of plenty of times where lots of people (myself included) have said that certain ones are dolts. So that makes me feel like you might have some other point that I'm missing.
There are times when I will point out something that goes against stereotypes established by one or the other major political parties. Setting up a straw man is then unnecessary - an already existing one can be used. :)
Many (most? some?) of those stereotypes do not hold up under close inspection. That doesn't mean everyone agrees on everything - but I see too much "those people are evil" (directed across the political aisle) for comfort. Just two examples: I don't think all liberals want to murder babies (as conservatives may say about abortion), and I don't think all conservatives want poor people to starve (as liberals may say about social programs).
In sum, my main point is often an attempt to have people think instead of reflexively react. For those already thinking all I can say is "congratulations, and keep up the good work."
Let's look at "all lawmakers are paragons of intelligence." Seems a stretch to infer the comment that the article "[t]ends to support those who don't trust the government to have smarter people than the general population...." implies "all lawmakers are paragons of intelligence". You did correctly infer that "lawmakers" was what "the government" implied, not (to take the first example from another post) the good people of NASA who are doing wonderful science without imposing a single law.
Any organization (government, corporation, church, family, etc) is made up of flawed people. Steve Jobs was an incredibly flawed person, yet is revered for what he was able to accomplish despite (or because of) his flaws. I think that on average leadership in the private sector is more intelligent than the general public. I also think that on average leadership in the public sector is more intelligent than the general public. I think both of those things are good. I think that all of those people are flawed. That's just the way humans are. And hopefully it helps those leaders be aware of and more understanding of the flaws of others they are leading. But it also means that all organizations, public and private, will be less than perfect.
True. Also, many (most? some?) top leaders (e.g., corporate executives in private; high-visibility elected officials in public) have more megalomania than the average person - it is what drives them to those positions.
I do think it's funny that you're pointing to a person who got a PhD in economics from Harvard and then had a very successful career afterwards as your example of a person who's not smarter than the average person. Given that this was posted in the "mustachianism around the web" area, my guess is the OP was highlighting her as an interesting example of someone who turned their personal finances in a more mustachian direction. But not everyone needs to read the same article the same way.
As wenchsenior noted, "raw intelligence, job mastery, and 'behavioral intelligence'" are not synonymous. And I see you agree also, so we're all on the same page there.
Your guess is as good as mine about the OP's intent. The "[w]orking longer is a solution to inadequate retirement savings..." line, however, seems about as anti-mustachian as one can get. Perhaps it's in the eye of the beholder. Anyway, thanks for the discussion.
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... I sometimes have trouble following what your point is.
Fair enough. Sometimes I'll intentionally use a Socratic approach, and sometimes I could simply be confused. ;)
I've noticed in a few of these interactions that you setup a straw man. Whether it's "no Democrat is against same-sex marriage" or "all lawmakers are paragons of intelligence", they are obviously false on their face. And then you point to someone as a counter example to the straw man. But showing a counter example to the straw man (that no one believes) is not very useful. It doesn't prove the opposite of your straw man. If A->B, and NOT(A), that doesn't tell us anything about B. I can't think of any time where anyone has ever said that all lawmakers are geniuses. But I can think of plenty of times where lots of people (myself included) have said that certain ones are dolts. So that makes me feel like you might have some other point that I'm missing.
There are times when I will point out something that goes against stereotypes established by one or the other major political parties. Setting up a straw man is then unnecessary - an already existing one can be used. :)
Many (most? some?) of those stereotypes do not hold up under close inspection. That doesn't mean everyone agrees on everything - but I see too much "those people are evil" (directed across the political aisle) for comfort. Just two examples: I don't think all liberals want to murder babies (as conservatives may say about abortion), and I don't think all conservatives want poor people to starve (as liberals may say about social programs).
In sum, my main point is often an attempt to have people think instead of reflexively react. For those already thinking all I can say is "congratulations, and keep up the good work."
Let's look at "all lawmakers are paragons of intelligence." Seems a stretch to infer the comment that the article "[t]ends to support those who don't trust the government to have smarter people than the general population...." implies "all lawmakers are paragons of intelligence". You did correctly infer that "lawmakers" was what "the government" implied, not (to take the first example from another post) the good people of NASA who are doing wonderful science without imposing a single law.
Any organization (government, corporation, church, family, etc) is made up of flawed people. Steve Jobs was an incredibly flawed person, yet is revered for what he was able to accomplish despite (or because of) his flaws. I think that on average leadership in the private sector is more intelligent than the general public. I also think that on average leadership in the public sector is more intelligent than the general public. I think both of those things are good. I think that all of those people are flawed. That's just the way humans are. And hopefully it helps those leaders be aware of and more understanding of the flaws of others they are leading. But it also means that all organizations, public and private, will be less than perfect.
True. Also, many (most? some?) top leaders (e.g., corporate executives in private; high-visibility elected officials in public) have more megalomania than the average person - it is what drives them to those positions.
I do think it's funny that you're pointing to a person who got a PhD in economics from Harvard and then had a very successful career afterwards as your example of a person who's not smarter than the average person. Given that this was posted in the "mustachianism around the web" area, my guess is the OP was highlighting her as an interesting example of someone who turned their personal finances in a more mustachian direction. But not everyone needs to read the same article the same way.
As wenchsenior noted, "raw intelligence, job mastery, and 'behavioral intelligence'" are not synonymous. And I see you agree also, so we're all on the same page there.
Your guess is as good as mine about the OP's intent. The "[w]orking longer is a solution to inadequate retirement savings..." line, however, seems about as anti-mustachian as one can get. Perhaps it's in the eye of the beholder. Anyway, thanks for the discussion.
Thanks for the explanation. I'll know how to interpret better next time.
The "all lawmakers are paragons of intelligence." was a paraphrasing of "law-makers (..) aren't all paragons of intelligence" from your quote. The full quote (which I quoted in response to you) is:
But articles like this do tend to reinforce the notion that policy- and law-makers (the people I had in mind for the generic "the government" - somewhat different than the list above) aren't all paragons of intelligence. Whether one considers that a good or bad thing tends to depend on one's overall political views.
I just didn't want you to think I'd made it up or intentionally twisted your words.
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This seems like an appropriate place to drop another expression of gratitude for this forum's status as a bastion of intelligent (and mature) discourse among the untamed wilds of the internet. As an interested spectator watching from the sidelines, thank you to all the participants in the discussion in this thread.
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The "all lawmakers are paragons of intelligence." was a paraphrasing of "law-makers (..) aren't all paragons of intelligence" from your quote. The full quote (which I quoted in response to you) is:
But articles like this do tend to reinforce the notion that policy- and law-makers (the people I had in mind for the generic "the government" - somewhat different than the list above) aren't all paragons of intelligence. Whether one considers that a good or bad thing tends to depend on one's overall political views.
I just didn't want you to think I'd made it up or intentionally twisted your words.
Good point! Memory is indeed the second thing to go....
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The "all lawmakers are paragons of intelligence." was a paraphrasing of "law-makers (..) aren't all paragons of intelligence" from your quote. The full quote (which I quoted in response to you) is:
But articles like this do tend to reinforce the notion that policy- and law-makers (the people I had in mind for the generic "the government" - somewhat different than the list above) aren't all paragons of intelligence. Whether one considers that a good or bad thing tends to depend on one's overall political views.
I just didn't want you to think I'd made it up or intentionally twisted your words.
Good point! Memory is indeed the second thing to go....
Too true! The third thing is... um.... er...
Oops!
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I disagreed with the sentiment you seemed to be expressing that people in the federal government aren't smarter on average than the general population. I added the "on average"--assuming that's what you meant. I explained one reason why I thought your sentiment was incorrect. And why if this particular example isn't the best financial planner in the world, the logic behind my reasoning could still bear out. Nowhere did I say she would be my choice for some of the jobs she's had. I also said that there were definitely a lot of idiots in the government too--just like any other job. I don't think she falls into the idiot category, but she's not a shining star either. She made a few blunders (that are incredibly common), but is able to recognize they were blunders, change her behavior, and continue to have a very comfortable life with no financial problems. Maybe those blunders and lessons learned, and her ability to articulate them, give her better insight into the behaviors of typical Americans? Who knows. All I know about her is this one article.
And in general I agree that the list you posted earlier ("NASA, DARPA, NIH, CDC, NSF, AHRQ, NSA, NOAA, VA") tends to include very smart people. I even know some. :)
But articles like this do tend to reinforce the notion that policy- and law-makers (the people I had in mind for the generic "the government" - somewhat different than the list above) aren't all paragons of intelligence. Whether one considers that a good or bad thing tends to depend on one's overall political views.
It's obvious you're a very smart person and I frequently enjoy your contributions. But I sometimes have trouble following what your point is.
I've noticed in a few of these interactions that you setup a straw man. Whether it's "no Democrat is against same-sex marriage" or "all lawmakers are paragons of intelligence", they are obviously false on their face. And then you point to someone as a counter example to the straw man. But showing a counter example to the straw man (that no one believes) is not very useful. It doesn't prove the opposite of your straw man. If A->B, and NOT(A), that doesn't tell us anything about B. I can't think of any time where anyone has ever said that all lawmakers are geniuses. But I can think of plenty of times where lots of people (myself included) have said that certain ones are dolts. So that makes me feel like you might have some other point that I'm missing.
Any organization (government, corporation, church, family, etc) is made up of flawed people. Steve Jobs was an incredibly flawed person, yet is revered for what he was able to accomplish despite (or because of) his flaws. I think that on average leadership in the private sector is more intelligent than the general public. I also think that on average leadership in the public sector is more intelligent than the general public. I think both of those things are good. I think that all of those people are flawed. That's just the way humans are. And hopefully it helps those leaders be aware of and more understanding of the flaws of others they are leading. But it also means that all organizations, public and private, will be less than perfect.
I do think it's funny that you're pointing to a person who got a PhD in economics from Harvard and then had a very successful career afterwards as your example of a person who's not smarter than the average person. Given that this was posted in the "mustachianism around the web" area, my guess is the OP was highlighting her as an interesting example of someone who turned their personal finances in a more mustachian direction. But not everyone needs to read the same article the same way.
I mostly posted it because it involved Munnell, who is a big name in the retirement policy world, and because of the article's title. I didn't think it properly belonged in the Wall of Shame category, so I posted it here. And for the record, forummm, I agree with pretty much everything you've said in this thread.
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The article begins with: "Just because you have a Ph.D. in economics doesn't mean you know how to invest for retirement." Yup.
Then it ends a list of her mistakes with: "Working longer is a solution to inadequate retirement savings that Munnell is passionate about."
SHUDDER ... No, no, no - I do not want to work until I drop dead at my desk, "still dreaming about that cruise down the Danube" - her words. I am planning on that cruise while I don't need a wheelchair to get me on the plane - thank you very much.
What I do not like is the slant of this article saying it is OK to make huge blunders in your financial affairs - as long as you are willing to keep working.
How about making sure the current generation understand what financial freedom means and what a healthy, worthwhile and soul satisfying endeavour that is?
This lady is sheltered from real life due to her social status, connections and a cushy government position - affording her illusions that would result in financial ruin for many of us. From where I sit, she is doing just fine - enjoying her status and work - two homes paid for, excellent health insurance, two person income. I'm guessing from the portfolio information in the article that all in all there is also a rather nice portfolio helped along by her son working for Goldman Sachs, not to mention enough cash to be comfortable in a crisis.
I don't know whether to say, "Poor dear" or call the center for "Retirement Illusion Control". I don't judge her, because I have made plenty of mistakes myself, but I will say I hope she understands what a charmed life she lives and how radically that differs from about 60% of the population.
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I don't know whether to say, "Poor dear" or call the center for "Retirement Illusion Control". I don't judge her, because I have made plenty of mistakes myself, but I will say I hope she understands what a charmed life she lives and how radically that differs from about 60% of the population.
Having listened to her discuss her research quite a few times, I would say that she does recognize the fortune of her own position that allows her to recover from mistakes, and readily work a long time because she has a job that isn't physically taxing and that she enjoys.
One of the things i've heard her repeatedly discuss is how people (naturally) tend to take SS as soon as it becomes available, sometimes to their extreme detriment if they live a long time. When asked how to fix SS, she will say that IF we decide to raise retirement age, we need to raise MINIMUM age at which people can draw SS, because most just draw as soon as they can. But she will then point out that doing so severely disadvantages people who have shorter life expectancy and those that do physically challenging jobs, so we need to decide what we value as a society, and then set up the rules in such a way as to better encourage the behavior that we have decided we want.
She also talks about pensions, and how poorly people deal with them: traditionally, men frequently took the biggest payout (no survivor benefit) or took the pension in a lump sum and then didn't know how to deal with it.
She also discusses the problems people have in properly managing their nest egg even when the actually accumulate one. She thinks that (ideally) annuitizing a lump sum would help protect more people from bad decision making with their nest egg, but that this would only work if there were gov't backed (not necessarily gov't run) insurance options with very safe investments. And also, as she says, people understandably hate annuities, because they hate the idea of giving over their lump sum in exchange for the bet that they will live a long time and get the benefit of doing so.
I don't think she has any illusions at ALL about what people are facing; she looks at these data all day every day. And she's a data cruncher rather than an advisor, but because she's an expert everyone who interviews her about her findings tends to ask, "what would she do" and I think she keeps falling back on suggesting people work longer not because she feels it is an objectively desirable solution for many people, but because it is the only possible solution for many people, given how poorly prepared they are to retire. Without major changes to SS, or additional new programs that might dramatically affect peoples' savings rates, which currently are not under discussion politically...the only thing she can suggest when asked what people should do is: 1) we [as a society] need to be better educated in the consequences of our decisions in this area, in an attempt to fight bad decision-making that we are all prone to; and 2) we need to work longer.
It's not that she doesn't see the flaws, it's that there are literally no other current options for people.
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I went to a talk by Munnell today, at a book fair. She talked about how we could fund SS through 2089 with a 2.6% increase in the tax (half paid by employer, half by employee), that we needed all employer 401k plans to be opt out rather than opt in, that people needed to think of their home as a retirement asset either by selling or having a reverse mortgage, and that people should work longer... she suggested 70. These were the solution to the retirement crisis. (May have been one more point I can't recall....yes, that some people should buy annuities.) There were only about 15 people there, so we all were able to ask questions. I said I thought educating people more about money...specifically telling people what percentage of saving would equate with what year of retirement... would also be important. She basically replied, "but people just won't save money...." In answer to other questions, she said long term care insurance was appropriate for about 20% of the middle income. Wealthy were better off self insuring and poor would use Medicaid. She also said the Pension Benefit Guarantee corp is in good shape.
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I confess. I mentioned Mr Money Mustache as a source of easy to understand information about these issues. The lady next to me quickly write me a note, "could you write down that website for me?" So I did, of course. :)
No one mentioned lifting the SS cap. I'm sorry I didn't think of that!
One person did ask something along the lines of, "why doesn't the government get the interest rates back up? Those of us who got out of stocks after the 2008 crash would be fine in retirement if we were getting good interest." Munnell gave a nice explanation of why it's better to gave a stronger economy with low interest rates....but the questioner was not happy with that answer.
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One person did ask something along the lines of, "why doesn't the government get the interest rates back up? Those of us who got out of stocks after the 2008 crash would be fine in retirement if we were getting good interest." Munnell gave a nice explanation of why it's better to gave a stronger economy with low interest rates....but the questioner was not happy with that answer.
The questioner probably wouldn't have been happier if Munnell had said "why do you want the government to make up for a choice you, as a responsible adult, made for yourself?"
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One person did ask something along the lines of, "why doesn't the government get the interest rates back up? Those of us who got out of stocks after the 2008 crash would be fine in retirement if we were getting good interest." Munnell gave a nice explanation of why it's better to gave a stronger economy with low interest rates....but the questioner was not happy with that answer.
The questioner probably wouldn't have been happier if Munnell had said "why do you want the government to make up for a choice you, as a responsible adult, made for yourself?"
See, if only Munnell were smarter than the average person, she would have been able to think of that come back. ;)
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I went to a talk by Munnell today, at a book fair. She talked about how we could fund SS through 2089 with a 2.6% increase in the tax (half paid by employer, half by employee), that we needed all employer 401k plans to be opt out rather than opt in, that people needed to think of their home as a retirement asset either by selling or having a reverse mortgage, and that people should work longer... she suggested 70. These were the solution to the retirement crisis. (May have been one more point I can't recall....yes, that some people should buy annuities.) There were only about 15 people there, so we all were able to ask questions. I said I thought educating people more about money...specifically telling people what percentage of saving would equate with what year of retirement... would also be important. She basically replied, "but people just won't save money...." In answer to other questions, she said long term care insurance was appropriate for about 20% of the middle income. Wealthy were better off self insuring and poor would use Medicaid. She also said the Pension Benefit Guarantee corp is in good shape.
I have heard her discuss those ideas, also. One thing I like is that she often frames the different options as follows: mathematically, we could do x, y, z, or some combo. But ideally we need to have a public and political discussion about which of these options we favor as a society. This is, of course, where politicians suck even more than usual at their jobs...
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See, if only Munnell were smarter than the average person, she would have been able to think of that come back. ;)
That's certainly possible. ;)
Also could be due to a mental blind spot obscuring ideas that more government involvement is not always better. That's based on the "but people just won't save money...." quote, perhaps implying that "people" can't be trusted to make the right decisions for themselves therefore the government must do it for them.
That doesn't mean a laissez faire pure libertarian approach is necessarily best. E.g., the idea of requiring opt-in vs. opt-out seems reasonable and not likely to be the first step down the slippery slope leading to pure communism. Of course, I could be wrong about that too. ;)
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See, if only Munnell were smarter than the average person, she would have been able to think of that come back. ;)
That's certainly possible. ;)
Also could be due to a mental blind spot obscuring ideas that more government involvement is not always better. That's based on the "but people just won't save money...." quote, perhaps implying that "people" can't be trusted to make the right decisions for themselves therefore the government must do it for them.
That doesn't mean a laissez faire pure libertarian approach is necessarily best. E.g., the idea of requiring opt-in vs. opt-out seems reasonable and not likely to be the first step down the slippery slope leading to pure communism. Of course, I could be wrong about that too. ;)
I interpret her saying that "people won't save" means "given how long healthy enough to earn money, large numbers of people just won't save enough and invest well enough to support a retirement that lasts as long as they will live". Do you agree or disagree with her assessment (as interpreted by me--or given your own interpretation)?
What's your preferred policy?
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I interpret her saying that "people won't save" means "given how long healthy enough to earn money, large numbers of people just won't save enough and invest well enough to support a retirement that lasts as long as they will live". Do you agree or disagree with her assessment (as interpreted by me--or given your own interpretation)?
Because she said "won't" (instead of "can't", "are not able to", etc.) it seems she means "choose not to".
What's your preferred policy?
Provide a safety net for those who through no fault of their own (prime example: young children) need assistance.
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I interpret her saying that "people won't save" means "given how long healthy enough to earn money, large numbers of people just won't save enough and invest well enough to support a retirement that lasts as long as they will live". Do you agree or disagree with her assessment (as interpreted by me--or given your own interpretation)?
Because she said "won't" (instead of "can't", "are not able to", etc.) it seems she means "choose not to".
What's your preferred policy?
Provide a safety net for those who through no fault of their own (prime example: young children) need assistance.
Do you agree that people choose not to? For whatever reason--lack of understanding, inability to understand, inablility to plan, stupidity, etc.
What's your least-sympathetic recipient of whatever safety net would be provided in your policy? Presumably young children would be the most sympathetic.
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Do you agree that people choose not to? For whatever reason--lack of understanding, inability to understand, inablility to plan, stupidity, etc.
Yes, I agree that "people" (meaning "some people") choose not to, and as you note the reasons can be many. Certainly there are others (and this gets to the question below) who "are unable to".
What's your least-sympathetic recipient of whatever safety net would be provided in your policy? Presumably young children would be the most sympathetic.
Now we're getting very subjective, e.g. not everyone would rank all possible recipients in the same sympathy order. As the saying goes, I know it when I see it (https://en.wikipedia.org/wiki/I_know_it_when_I_see_it). Off the top of my head...people with real but difficult-to-observe medical conditions that prevent gainful employment?
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Do you agree that people choose not to? For whatever reason--lack of understanding, inability to understand, inablility to plan, stupidity, etc.
Yes, I agree that "people" (meaning "some people") choose not to, and as you note the reasons can be many. Certainly there are others (and this gets to the question below) who "are unable to".
What's your least-sympathetic recipient of whatever safety net would be provided in your policy? Presumably young children would be the most sympathetic.
Now we're getting very subjective, e.g. not everyone would rank all possible recipients in the same sympathy order. As the saying goes, I know it when I see it (https://en.wikipedia.org/wiki/I_know_it_when_I_see_it). Off the top of my head...people with real but difficult-to-observe medical conditions that prevent gainful employment?
I see somewhat of a difference between physically unable to and mentally unable to. Take my brother or my parents. I think they are mentally unable to save. They just can't do it. Any money hits my brother's hands and it's gone. He doesn't understand numbers (he had a 28% interest car loan for a long time), he doesn't trust the stock market. He will never be able to save on his own. No amount of education I've tried to provide has had any effect. One way of putting it is that he has a very high discount rate. The same is true of a lot of people that you probably will never run into. Say someone in a bad neighborhood growing up who sees life as fleeting and no one grows up to be old enough to even need retirement money. They have a very high discount rate. No amount of saving seems to them to be worth it given the fleeting nature of life. And then there is the famous marshmallow experiment--where some kids were just innately able to save and others were innately unable to do so at that age.
Do you have any distinction of this nature in your thinking?
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Do you have any distinction of this nature in your thinking?
Distinction due to differences in the personal discount rate of healthy adults? No. That answer assumes there is no "bad with money but good with other mental skills" medical condition.
Turnabout being fair play, what is the most sympathetic person that would fall through whatever safety net would be provided in your policy? ;)
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Do you have any distinction of this nature in your thinking?
Distinction due to differences in the personal discount rate of healthy adults? No. That answer assumes there is no "bad with money but good with other mental skills" medical condition.
Turnabout being fair play, what is the most sympathetic person that would fall through whatever safety net would be provided in your policy? ;)
The more I think about it, the more I think the current SS system is a genius solution. I think that it makes pretty much everyone better off--even people like you and me who have the least to benefit from it.
It's relatively fair because everyone pays into it and you get back something relative to what you paid in. And no one is making any profit off the system, so the overhead is low. And it also provides disability and longevity and spousal insurance. So you don't need to worry about your or your spouse outliving your portfolio because the SS will stick with you.
People like you and me who understand numbers and are good at investing and disciplined enough to save and spend all our free time learning about how to optimize our finances and invest in low-cost funds and don't sell when the market tanks, etc, etc, etc, would probably (but not certainly) do better by being able to save that money ourselves and invest it ourselves. But we're the extreme minority.
People like pretty much everyone else who demonstrate an inability or unwillingness to save and invest as we do also benefit. They have the savings automatically done for them. There's no ability for them to screw up the investing or raid the funds early. And they get a good annuity when they're older.
And people like you and me also benefit from not having to see a bunch of impoverished elderly citizens lining the roads and hanging out under bridges. And we don't have to hear about how bad poverty in the elderly is, etc. SS+MC have essentially eliminated poverty in the elderly. It's amazing. And we also benefit from not having to worry about having to set aside enough financial resources to take care of our parents. I would not have the ability to FIRE if my parents had not been forced to pay into SS and MC their whole lives and there was some expectation that I would take care of them. They would have no money (as they do now) and unbounded future expenses. The direct financial benefit to me from not having to deal with this risk has got to be several hundred thousand dollars alone--or many additional years of working. And without SS+MC, it's a no-win situation. I could take the position you advocate the government have and say "Well Mom and Dad, you were profligate and undisciplined--you reap what you sowed". But then I would be paying with my conscience. Having SS+MC for my parents is an enormous relief. I just count down until they get old enough and then on their eligibility birthdays they are good to go.
I think all these benefits are well worth the cost of loss of some forced savings.
I think the SS Disability system (distinct and separate from the old-age SS Retirement system) needs an overhaul. It's turned into long-term unemployment, is capriciously administered, does not have a government advocate against fraud, and is a cash cow for attorneys who can work the system. It's the Disability system that is depleting the SS Trust Fund.
So my optimal policy would be SS+MC as they exist today. Plus fixing SS Disability. Plus reshaping MC so that it drives down the cost of care (complicated but doable if the political will is there) so that the system is sustainable long term. And I might have an optional augmented SS program where people could opt into adding extra SS withholding in exchange for extra SS payments during retirement. I discussed this previously: http://forum.mrmoneymustache.com/welcome-to-the-forum/democrats-want-to-expand-social-security/msg731037/#msg731037
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when she was around 50, Munnell began to wonder about how much she and her husband were spending and how much they might have to live on in retirement. This was after she worked in the Clinton administration
was a member of the president's Council of Economic Advisers for two years
She doesn't appear to understand even the basics of finance, investing, or microeconomics, and she's out setting policy for the rest of us?
If I wasn't an atheist, I'd be thinking "God help us all..."
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Do you have any distinction of this nature in your thinking?
Distinction due to differences in the personal discount rate of healthy adults? No. That answer assumes there is no "bad with money but good with other mental skills" medical condition.
Turnabout being fair play, what is the most sympathetic person that would fall through whatever safety net would be provided in your policy? ;)
The more I think about it, the more I think the current SS system is a genius solution. I think that it makes pretty much everyone better off--even people like you and me who have the least to benefit from it.
It's relatively fair because everyone pays into it and you get back something relative to what you paid in. And no one is making any profit off the system, so the overhead is low. And it also provides disability and longevity and spousal insurance. So you don't need to worry about your or your spouse outliving your portfolio because the SS will stick with you.
People like you and me who understand numbers and are good at investing and disciplined enough to save and spend all our free time learning about how to optimize our finances and invest in low-cost funds and don't sell when the market tanks, etc, etc, etc, would probably (but not certainly) do better by being able to save that money ourselves and invest it ourselves. But we're the extreme minority.
People like pretty much everyone else who demonstrate an inability or unwillingness to save and invest as we do also benefit. They have the savings automatically done for them. There's no ability for them to screw up the investing or raid the funds early. And they get a good annuity when they're older.
And people like you and me also benefit from not having to see a bunch of impoverished elderly citizens lining the roads and hanging out under bridges. And we don't have to hear about how bad poverty in the elderly is, etc. SS+MC have essentially eliminated poverty in the elderly. It's amazing. And we also benefit from not having to worry about having to set aside enough financial resources to take care of our parents. I would not have the ability to FIRE if my parents had not been forced to pay into SS and MC their whole lives and there was some expectation that I would take care of them. They would have no money (as they do now) and unbounded future expenses. The direct financial benefit to me from not having to deal with this risk has got to be several hundred thousand dollars alone--or many additional years of working. And without SS+MC, it's a no-win situation. I could take the position you advocate the government have and say "Well Mom and Dad, you were profligate and undisciplined--you reap what you sowed". But then I would be paying with my conscience. Having SS+MC for my parents is an enormous relief. I just count down until they get old enough and then on their eligibility birthdays they are good to go.
I think all these benefits are well worth the cost of loss of some forced savings.
I think the SS Disability system (distinct and separate from the old-age SS Retirement system) needs an overhaul. It's turned into long-term unemployment, is capriciously administered, does not have a government advocate against fraud, and is a cash cow for attorneys who can work the system. It's the Disability system that is depleting the SS Trust Fund.
So my optimal policy would be SS+MC as they exist today. Plus fixing SS Disability. Plus reshaping MC so that it drives down the cost of care (complicated but doable if the political will is there) so that the system is sustainable long term. And I might have an optional augmented SS program where people could opt into adding extra SS withholding in exchange for extra SS payments during retirement. I discussed this previously: http://forum.mrmoneymustache.com/welcome-to-the-forum/democrats-want-to-expand-social-security/msg731037/#msg731037
Once again, in complete agreement with forummm -- and especially the highlighted part.
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How can somebody who directs the Center for RETIREMENT Research be so messed up about their own finances? Boggles the mind....
It might boggle my mind except I remember how long it took doctors and nurses to quit smoking. . . .
Yup - the world is filled with people who give good advice but don't take it for themselves. Doctors who smoke, sports coaches (http://worldonline.media.clients.ellingtoncms.com/img/blogs/entry_img/2009/Aug/01/Mangino.jpg) who are incredibly unfit, drug enforcement officers (http://www.washingtonpost.com/local/crime/ex-fbi-agent-who-stole-heroin-sentenced-to-3-years-in-prison/2015/07/09/5bd82e8c-262c-11e5-aae2-6c4f59b050aa_story.html)who become addicted to drugs, retirement gurus who buy ridiculous homes (http://4.bp.blogspot.com/-Y5WUc6UqtRg/Tl8djbaBI5I/AAAAAAAAC1k/dmYSTrZe4Ys/s1600/dave-ramsey-mansion-house-nashville-tennessee.jpg)...
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retirement gurus who buy ridiculous homes (http://4.bp.blogspot.com/-Y5WUc6UqtRg/Tl8djbaBI5I/AAAAAAAAC1k/dmYSTrZe4Ys/s1600/dave-ramsey-mansion-house-nashville-tennessee.jpg)
I totally thought the house you linked to was going to be MMM's pad (he's a self-proclaimed "house slut," after all).
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retirement gurus who buy ridiculous homes (http://4.bp.blogspot.com/-Y5WUc6UqtRg/Tl8djbaBI5I/AAAAAAAAC1k/dmYSTrZe4Ys/s1600/dave-ramsey-mansion-house-nashville-tennessee.jpg)
I totally thought the house you linked to was going to be MMM's pad (he's a self-proclaimed "house slut," after all).
He sleeps around in a lot of houses? Sounds like a very restful retirement.
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Everything that worked out well for her is a perfect example of random good fortune. If you're lucky (which she has been) and you only screw it up halfway, you can still be ok or even great. Which she is. I'm not so bothered that a policy advisor doesn't have the best discipline and track record of personal financial decision making -- because among the cohort who are well disciplined, it is even harder to recognize where it was mostly luck. And yes, for all of us....plenty of luck.
At least she acknowledged some of it. "A buyer showed up."
The ideal set of advisors and examples would be a diverse set of people with varying backgrounds and differing degrees of luck.
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This is actually a good example of why some people (even very intelligent economists) can't be trusted to make smart decisions regarding their own personal finances. The folks in the MMM community are really in the minority in terms of being able to look at their own finances objectively, define a goal, and follow through with discipline.
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This is actually a good example of why some people (even very intelligent economists) can't be trusted to make smart decisions regarding their own personal finances. The folks in the MMM community are really in the minority in terms of being able to look at their own finances objectively, define a goal, and follow through with discipline.
This is a big reason why I think SS is pretty genius. It prevents even really smart people from screwing up too badly.
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This is actually a good example of why some people (even very intelligent economists) can't be trusted to make smart decisions regarding their own personal finances. The folks in the MMM community are really in the minority in terms of being able to look at their own finances objectively, define a goal, and follow through with discipline.
This is a big reason why I think SS is pretty genius. It prevents even really smart people from screwing up too badly.
Agreed. Every time someone floats the idea of 'privatizing' SS and allowing individuals to invest and manage their benefits I tell them I think it's a horrible idea. As bad as the government may be with managing some projects, as individuals we are collectively worse at managing our own long-term finances. With a 40 year time frame, anyone can retire a millionaire by 62 with nothing more than IRA contributions ... but do most people do that? heck no.
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Dave Ramsey isn't a retirement guy, and he doesn't preach minimalism to those who have no debt. He wants you to get out of debt and become rich. But then, spend away!
I can't believe I'm defending Dave Ramsey :(
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This is actually a good example of why some people (even very intelligent economists) can't be trusted to make smart decisions regarding their own personal finances. The folks in the MMM community are really in the minority in terms of being able to look at their own finances objectively, define a goal, and follow through with discipline.
This is a big reason why I think SS is pretty genius. It prevents even really smart people from screwing up too badly.
Agreed. Every time someone floats the idea of 'privatizing' SS and allowing individuals to invest and manage their benefits I tell them I think it's a horrible idea. As bad as the government may be with managing some projects, as individuals we are collectively worse at managing our own long-term finances. With a 40 year time frame, anyone can retire a millionaire by 62 with nothing more than IRA contributions ... but do most people do that? heck no.
I totally agree with you guys. Privatizing SS is insane idea, unless we want to return to the days of extreme poverty in the elderly.
As I said in my post earlier in the thread, there are a lot of people on this message board who practically break their own arms patting themselves on the back for how superior they are to the rest of humanity, which would be fine (I also like to pat my own back) except they don't seem to understand how unusual that aptitude is in the population at large; also, I seriously doubt everyone on this board makes optimal decisions in all the OTHER areas of their lives apart from finances. Because we are human and mostly pretty irrational.
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Dave Ramsey isn't a retirement guy, and he doesn't preach minimalism to those who have no debt. He wants you to get out of debt and become rich. But then, spend away!
I can't believe I'm defending Dave Ramsey :(
And defending him in the wrong thread :)
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Dave Ramsey isn't a retirement guy, and he doesn't preach minimalism to those who have no debt. He wants you to get out of debt and become rich. But then, spend away!
I can't believe I'm defending Dave Ramsey :(
I slipped that in there just to give myself a good chuckle. Perhaps DR's main message isn't retirement, but he certainly does spend a lot of time talking about retirement planning. As for his trophy-house, I think it's still a good example because I think it conflicts with the end of his 7-step program, where he says people can: "Build wealth, become insanely generous, and leave an inheritance for future generations. " 13,000+ft2, $5MM home isn't really good for any of those things.
Meh, it was just meant to be a light-hearted jab. Tkae it how you will...
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As I said in my post earlier in the thread, there are a lot of people on this message board who practically break their own arms patting themselves on the back for how superior they are to the rest of humanity, which would be fine (I also like to pat my own back) except they don't seem to understand how unusual that aptitude is in the population at large; also, I seriously doubt everyone on this board makes optimal decisions in all the OTHER areas of their lives apart from finances. Because we are human and mostly pretty irrational.
I think we all have a lot of reminders in our personal lives that most people are idiots with money:
http://forum.mrmoneymustache.com/antimustachian-wall-of-shame-and-comedy/relatives-who-just-don't-get-it/
And I agree about the selective areas of mastery. While I may be very good with money, I certainly have other areas where I have shortcomings or I've made very costly mistakes.
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Dave Ramsey isn't a retirement guy, and he doesn't preach minimalism to those who have no debt. He wants you to get out of debt and become rich. But then, spend away!
I can't believe I'm defending Dave Ramsey :(
And defending him in the wrong thread :)
My God! I'm all screwed up today.