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(Forbes)   This just in: If you're relying solely on your 401k and SS for your retirement, you're screwed   (forbes.com) divider line 249
    More: Obvious, real estate investment trusts, retirement, interest rate risk, Betamax, structured product  
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4761 clicks; posted to Business » on 18 Jul 2013 at 9:45 AM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



249 Comments   (+0 »)
   
View Voting Results: Smartest and Funniest
 
2013-07-18 08:46:15 AM  
Article summary: low interest rates result in low bond yields.


we are faced with more, expensive choices on out-of-pocket health care, a college tuition explosion and inflation-ravaged salaries.

Inflation doesn't work that way. They're just flat out paying less.
 
2013-07-18 08:55:27 AM  
if we are screwed anyway, let's get rid of Social Security then.
 
2013-07-18 09:02:07 AM  
Almost makes the destruction of pensions look like a bad idea, doesn't it?
 
2013-07-18 09:02:47 AM  
I plan on dying in the salt mine.
 
2013-07-18 09:48:17 AM  
Thanks Bernake for keeping interest rates under 1%!
 
2013-07-18 09:49:39 AM  
1/3 to rent
1/3 to taxes
1/3 to retirement

where is food in this equation?
 
2013-07-18 09:51:21 AM  
If you're relying on SS for your retirement, you're going to be a very poor moran.
 
2013-07-18 09:52:51 AM  

brainscab: 1/3 to rent
1/3 to taxes
1/3 to retirement

where is food in this equation?


0bummer will cancel elections and be named dictator for life and issue everyone EBT cards and 0bongo phones.  He will force mass abortions and mass membership in trade unions.  Welcome to the United Bolshevik States of America!!
 
2013-07-18 09:54:33 AM  
This just in: if you're relying on retirement, you're screwed.
 
2013-07-18 09:54:48 AM  

SlothB77: if we are screwed anyway, let's get rid of Social Security then.


newsletter please!
 
2013-07-18 09:55:26 AM  

FarkedOver: brainscab: 1/3 to rent
1/3 to taxes
1/3 to retirement

where is food in this equation?

0bummer will cancel elections and be named dictator for life and issue everyone EBT cards and 0bongo phones.  He will force mass abortions and mass membership in trade unions.  Welcome to the United Bolshevik States of America!!


You forgot the forced gay marriage to an illegal alien. History's greatest monster.
 
2013-07-18 09:55:52 AM  

buzzcut73: FarkedOver: brainscab: 1/3 to rent
1/3 to taxes
1/3 to retirement

where is food in this equation?

0bummer will cancel elections and be named dictator for life and issue everyone EBT cards and 0bongo phones.  He will force mass abortions and mass membership in trade unions.  Welcome to the United Bolshevik States of America!!

You forgot the forced gay marriage to an illegal alien. History's greatest monster.


FEMA CAMPS!
 
2013-07-18 09:57:54 AM  
No big deal, I'll just take out a reverse mortgage.
 
2013-07-18 09:58:43 AM  

SlothB77: if we are screwed anyway, let's get rid of Social Security then.


RaiderFanMikeP: SlothB77: if we are screwed anyway, let's get rid of Social Security then.

newsletter please!


Can we end the fed too!?
 
2013-07-18 09:59:26 AM  
It's one of the worst times to retire in recent history.

What does this sentence even mean?
 
2013-07-18 10:00:01 AM  
I plan on funding my retirement through an esoteric brand of law called "squater's rights"
 
2013-07-18 10:00:10 AM  

sigdiamond2000: It's one of the worst times to retire in recent history.

What does this sentence even mean?


It means get back to work!
 
2013-07-18 10:00:25 AM  
So my investment in porn entertainment is a good diversification?

//Seriously, though, you should never invest in free stuff.
 
2013-07-18 10:01:38 AM  

sigdiamond2000: It's one of the worst times to retire in recent history.

What does this sentence even mean?


It means that after gutting the entire social structure, the boomers are whining again that they have to face the consequences now.
 
2013-07-18 10:02:25 AM  
401k + Social Security + part time job + cat food + living in part of town where I carry a gun = RETIREMENT!
 
2013-07-18 10:02:50 AM  

pkellmey: So my investment in porn entertainment is a good diversification?

//Seriously, though, you should never invest in free stuff.


Only if it's interracial.
 
2013-07-18 10:03:24 AM  

FarkedOver: sigdiamond2000: It's one of the worst times to retire in recent history.

What does this sentence even mean?

It means get back to work!


Funnied because a Farker telling another Farker to get back to work at 10AM on a weekday is just the height of hilarity.
 
2013-07-18 10:05:42 AM  

FarkedOver: SlothB77: if we are screwed anyway, let's get rid of Social Security then.

RaiderFanMikeP: SlothB77: if we are screwed anyway, let's get rid of Social Security then.

newsletter please!

Can we end the fed too!?


A real brain trust right here.
 
2013-07-18 10:06:19 AM  

Arkanaut: FarkedOver: sigdiamond2000: It's one of the worst times to retire in recent history.

What does this sentence even mean?

It means get back to work!

Funnied because a Farker telling another Farker to get back to work at 10AM on a weekday is just the height of hilarity.


I wasn't telling him to get back to work, I was merely pointing out that, that is what the sentence meant.
 
2013-07-18 10:06:56 AM  

impaler: A real brain trust right here.


Well, I wasn't serious.  Those two jabronies probably were.
 
2013-07-18 10:07:38 AM  
Too lazy to find the Nick Cage "you don't say?" picture but it is exactly what comes to mind.  Was considering investing in beach property to partly enjoy and partly rent for vacations.  Other ideas?
 
2013-07-18 10:08:08 AM  
This is why you should marry younger than you. You retire while they still work.
 
2013-07-18 10:08:55 AM  

RoyHobbs22: Too lazy to find the Nick Cage "you don't say?" picture but it is exactly what comes to mind.  Was considering investing in beach property to partly enjoy and partly rent for vacations.  Other ideas?


Join a radical leftist group and incite workers revolution?
 
2013-07-18 10:09:49 AM  
I'm planning on whoring myself out to college age women when I reach retirement age.
 
2013-07-18 10:10:04 AM  

SlothB77: if we are screwed anyway, let's get rid of Social Security then.


Things are bad.  Let's make them worse!
 
hej
2013-07-18 10:11:59 AM  
So for the financial rubes here, if dumping money into a 401k isn't good enough, what is?
 
2013-07-18 10:12:09 AM  
Hmmm, low inflation yields low returns..... ya dont say.

Though I wonder why tuition increases factor into your ability to retire.....  I know when I retire I will not be going back to school to be that one guy that always sits in the front row asking the most assinine questions in a 100 level class.
 
2013-07-18 10:12:31 AM  

hej: So for the financial rubes here, if dumping money into a 401k isn't good enough, what is?


GOLDLINE! GLENN BECK!
 
2013-07-18 10:15:24 AM  

hej: So for the financial rubes here, if dumping money into a 401k isn't good enough, what is?


You might want to begin your solicitation of advice by something other than implying that those that will be providing it are 'financial rubes'.

My advice to you, besides pulling your head from between your butt cheeks, is to learn to cook... or develop a taste for cat food (they have it in lots of varieties).
 
2013-07-18 10:15:24 AM  
I honestly don't know how anyone that's firmly in the "middle class" can ever hope to retire.

I was working for a company that contributes a total of 0.9% to their employees' 401k's.  So if you make $40k/yr, they're going to contribute exactly $30/mo to your retirement account.  Gosh thanks!  And they didn't pay very well, so it was extremely hard to put away much on your own.  I changed jobs about a year ago, and while there were a few reasons to jump ship, the fantastic benefits at my new company were a huge draw.

Even if you max out your 401k, right now you'll just watch your investments get eaten by inflation if you choose the "safe" options.

If you're young (<40), get into 100% stocks right now.  Diversify by putting a chunk in small caps, a chunk in mid caps, a chunk in large caps and another chunk overseas.  Find funds with as low fees as possible, and have faith that the market will beat bond interest over the next 20+ years.  Our retirement accounts are up ~18% YTD.  Of course, we have bad years too, but the overall average has been pretty good.

If you're closer to retirement (~50's) and you haven't already socked away a big pile of cash, it seems pretty dire.  About all you can do to prepare for retirement is get your expenses and expectations whittled down to the bone so that you can live on the pittance Social Security is likely to give you.
 
2013-07-18 10:16:17 AM  

Aarontology: Almost makes the destruction of pensions look like a bad idea, doesn't it?


Pensions are a crap idea anyway.  I would much rather have a slightly higher salary upfront and be responsible for my own savings.

Great_Milenko: SlothB77: if we are screwed anyway, let's get rid of Social Security then.

Things are bad.  Let's make them worse!



Same thing with social security.

Also, I am baffled by people who rely on either of these for retirement.  Seriously, people have been saying how dumb these programs are for years now.  It's nice to be ideological every once in a while, but you would bet your starvation on it?  It's like ND Tyson said about science.  "It's true no matter what people think or say" Same thing with social security.  It's a fundamentaly bad system no matter what people think.  Don't rely on it and start saving now in an IRA or regular ol' taxable account (once you've maxed your IRA contributions).
 
hej
2013-07-18 10:16:35 AM  

NostroZ: hej: So for the financial rubes here, if dumping money into a 401k isn't good enough, what is?

You might want to begin your solicitation of advice by something other than implying that those that will be providing it are 'financial rubes'.

My advice to you, besides pulling your head from between your butt cheeks, is to learn to cook... or develop a taste for cat food (they have it in lots of varieties).


No, I was implying that the advice was for the rubes (i.e. me), not coming from it.

And I am learning to cook.
 
hej
2013-07-18 10:17:12 AM  

hej: NostroZ: hej: So for the financial rubes here, if dumping money into a 401k isn't good enough, what is?

You might want to begin your solicitation of advice by something other than implying that those that will be providing it are 'financial rubes'.

My advice to you, besides pulling your head from between your butt cheeks, is to learn to cook... or develop a taste for cat food (they have it in lots of varieties).

No, I was implying that the advice was for the rubes (i.e. me), not coming from it.

And I am learning to cook.


it=them
 
2013-07-18 10:17:46 AM  
This just in: if you think as a non 1% you are going to ever be allowed to retire, think again.
 
2013-07-18 10:18:11 AM  

hej: So for the financial rubes here, if dumping money into a 401k isn't good enough, what is?


A 401k and an IRA.... followed by a 401k and an IRA and a non sheltered portfolio, followed by golddigging.
 
2013-07-18 10:20:44 AM  

brainscab: 1/3 to rent
1/3 to taxes
1/3 to retirement

where is food in this equation?


Hmmm... If your tax rate is 33% after socking away 33% for retirement, your rent is too high. Solved.

/'Twas a lie, I know.
 
2013-07-18 10:22:53 AM  

Aarontology: Almost makes the destruction of pensions look like a bad idea, doesn't it?


Yea, I know I for one would prefer to put all my eggs in one basket in the hopes that a company not only continues to exist 30-60 years from now but is still profitable and doesn't try to bully their way out of pension obligations.

/Seems to be working out well for soooo many of our elderly already...
 
2013-07-18 10:23:57 AM  
It could be depleted even faster if inflation and interest rates rise as they did from the 1960s to the early 1980s

This needs to be more fleshed out.  If they made no money on savings because of low interest rates, then they would make more money if (and when) interest rates rise.
 
2013-07-18 10:24:47 AM  

hej: No, I was implying that the advice was for the rubes (i.e. me), not coming from it.


Oh, my bad, self-deprecation is so rare online, it caught me off-guard.

Well... learning to cook is a good start, you've got the idea down... lower your expenses as much as you can.  Make your own coffee / eggs.  Find hobbies that are free (biking, hiking, city architecture, botany, etc.).

Second, you want to increase your ability to earn an income.  Learn a trade that you can do when you are old.  Anything that does not require heavy physical labor and you can be a simple clerk at (old people are often discriminated against, so you'll have to have a lower totem pole job in your old age, despite your years of experience).

Finally, your investments.  Your family, make sure they are not dicks and will forget about you in your old age.  If you know they will be dicks, connect them not throwing you in a dilapidated nursing home as a contingent in your will.  As far as where to sock away your money, just make sure you're not paying high 4b1 fees or other 'management' fees above .5% on any fund.  The rest, I'm sure other Farkers will help you with (diversification, local & foreign index funds, proper mix for your age, etc.)
 
2013-07-18 10:25:21 AM  
I'm funding my retirement through Kickstarter!

/no, actually i plan on working till i expire
 
2013-07-18 10:27:01 AM  
The rate of inflation for the past 80 years has averaged about 5%.  So in order to really retire, or have a shot at it, you'll need to get a rate of return greater than 5% on your investments.  I've known people who knew how to super inflate their Universal Life Insurance policies and pull it off.  I knew people in Primerica who claimed 10 to 12% rates of return.  New York Life only promised me 8% and said that it was realistic.

Banks aren't great at investing, given that a CD is less than 3%.  So you'll actually lose money compared to inflation.  A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options (also, if you need your money from a 401k before retirement you get hit with double taxes and double penalties).

Stuffing your money under your mattress or in a coffee can means you don't lose money, but you also don't gain interest.

Social Security has a negative rate of return.  We're supposed to pay into it today so we can retire on it, but we get less money back than we pay in.  We'd be better off with ANY other form of retirement planning.  Hell, I'd be better off taking the money I pay into Social Security, taking it to the casino and playing roulette with it. At least that way I could possibly see some gain with it.
 
2013-07-18 10:27:04 AM  

Saiga410: I wonder why tuition increases factor into your ability to retire


Many parents either help with tuition costs or pay them outright. The money they spend on tuition is money they are not saving for retirement.

Even if they don't help with tuition, higher student loan payments means their adult children will, at best, not be helping them too much financially and, at worst, will be coming home to ask for financial assistance.

My parents sure are glad I got that scholarship right now. Mom's been retired since her mid-40s and Dad's planning on making his exit at 61. If I had taken the help they offered, they'd be in a much different situation.
 
2013-07-18 10:27:45 AM  

Saiga410: Hmmm, low inflation yields low returns..... ya dont say.

Though I wonder why tuition increases factor into your ability to retire.....  I know when I retire I will not be going back to school to be that one guy that always sits in the front row asking the most assinine questions in a 100 level class.


Yeah, there was all kinds of shiat wrong with TFA. Not only am I not paying my grandkids' tuition, but I'm not retaining this 5 bedroom house much longer. Nor do I expect to spend like I did while in my peak earning years. The kids are gone and with them their expenses. Bonds are worthless in the Japan-style deflation we're likely to be locked in for the foreseeable future, so I don't own any and don't envision ever doing so. The keys to a successful retirement are the same as always: get out of debt as quickly as possible, then invest that same amount in IRAs, 401(k)s and other investment vehicles over the life of your working career.
 
2013-07-18 10:31:59 AM  

Great Janitor: A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options


I'm not convinced you know what a 401k or an employer match is....

Great Janitor: Stuffing your money under your mattress or in a coffee can means you don't lose money


Wait, I thought I was losing money to inflation in my 401k. How am I not losing money to inflation in my coffee can?
 
2013-07-18 10:32:23 AM  

RoyHobbs22: Was considering investing in beach property to partly enjoy and partly rent for vacations.


NotSureIfSerious.jpg

/Rich farmland (i.e. flyover country) is likely a significantly better property investment.
 
2013-07-18 10:34:06 AM  

Great Janitor: A 3% matching 401k still doesn't work due to inflation


[notsureifserious.jpg]
 
2013-07-18 10:35:22 AM  

thurstonxhowell: Great Janitor: A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options

I'm not convinced you know what a 401k or an employer match is....


Inflation is 5%, so any program that doesn't match increase at 5% or more is losing value

Great Janitor: Stuffing your money under your mattress or in a coffee can means you don't lose money

Wait, I thought I was losing money to inflation in my 401k. How am I not losing money to inflation in my coffee can?


Grrr...I messed up that one.  You don't gain interest, but you also don't lose money the way you would through Social Security, making it slightly better than Social Security.
 
2013-07-18 10:35:25 AM  

digistil: RoyHobbs22: Was considering investing in beach property to partly enjoy and partly rent for vacations.

NotSureIfSerious.jpg

/Rich farmland (i.e. flyover country) is likely a significantly better property investment.


Farmland is in a bubble.
 
2013-07-18 10:37:08 AM  

thurstonxhowell: Great Janitor: Stuffing your money under your mattress or in a coffee can means you don't lose money

Wait, I thought I was losing money to inflation in my 401k. How am I not losing money to inflation in my coffee can?


Because your 401K is only earning money in the market (on top of any employer contributions) while your money in a coffee can is not losing value because ... well, it involves Quantum Mechanics so I don't think you would understand.
 
2013-07-18 10:38:00 AM  
Great Janitor:
Banks aren't great at investing, given that a CD is less than 3%.  So you'll actually lose money compared to inflation.  A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options (also, if you need your money from a 401k before retirement you get hit with double taxes and double penalties).

If you put in 6%, and your employer puts in a match of 3%, then 9% is going into the 401K. That's a 50% boost.
The returns would have to be pretty low for inflation to eat that up I think
 
2013-07-18 10:44:10 AM  
Look after I took a couple of economics courses I realized that the only way to even have a moderate amount of wealth for retirement is to become a rent seeker. That is why I'm in favor of licenses, unions, and high barriers to entry into professions and business. The game is rigged, the only way to win is to cheat.
 
2013-07-18 10:44:30 AM  

hej: So for the financial rubes here, if dumping money into a 401k isn't good enough, what is?


I don't understand the question. A 401(k) is just a way to the masses to invest money tax free. So are IRAs. So are pensions. The difference is that your employer might contribute to your 401(k), which is part of your total salary package. If it's offered then take it.

In a pension system the employer is fully responsible for investing the money and making sure you get it at retirement. The difference between the two is who's on the hook if insufficient money was invested while the employee was working for the employer. In a 401(k), it's the employee's problem. In a pension it's the employer's problem. That's why there are no pensions anymore. Pensions that still exist have managers who worry over where they're going to find investments that make enough return to pay everyone who is supposed to be receiving benefits.

An IRA isn't in effect much different from a 401(k) but your employer probably won't contribute to it. It's something you can do if you've maxed out your 401(k) contributions and want (and can afford) to save even more. Or, you can open one after you leave your job and the old employer makes your 401(k) money available for rollover. That's what I did.

The question is, what investments are *in* the fund? Basically what this article is fussing about is the fact that there's no easy way to get a high return anymore unless you are investing in business that are big in Brazil and India. But then, when was it ever easy? People talk about the early '80s and the 5% rate on their savings accounts as if that was a good thing, but loan interest rates and inflation were also terrifyingly high at the time. People biatch about inflation, but if you found a newspaper from Clinton's second term (which is now some 15 years ago) and looked at the sale flyers in it and compared prices, you might be surprised at how close they are to today's prices. Returns nowadays are low because they don't need to be high, and that's because prices for consumer goods (not including healthcare and college tuition) aren't rising that fast.

The kind of price inflation you see nowadays in college tuition and health care? Those kinds of price increases applied to EVERYTHING in the '70s. Like how the price of postage went up 33% in eight months in 1981......
 
2013-07-18 10:49:56 AM  

hej: So for the financial rubes here, if dumping money into a 401k isn't good enough, what is?


One way is by getting into a horrific car accident - a closed head injury is a plus - and then saving away the lawsuit winnings.
 
2013-07-18 10:52:09 AM  
you're supposed to own everything you need when you retire.  I'll own my house at 60, i'll presumably trade in my power image car, for a mid-90s beige crown vic, i'll cancel internet and start getting not-newspapers, i'll eat bland food and drink cheap whiskey, and i'll take up gardening as a hobby.

retirement is cheap.
 
2013-07-18 10:52:13 AM  

plcow: Aarontology: Almost makes the destruction of pensions look like a bad idea, doesn't it?

Pensions are a crap idea anyway.  I would much rather have a slightly higher salary upfront and be responsible for my own savings.

Great_Milenko: SlothB77: if we are screwed anyway, let's get rid of Social Security then.

Things are bad.  Let's make them worse!


Same thing with social security.

Also, I am baffled by people who rely on either of these for retirement.  Seriously, people have been saying how dumb these programs are for years now.  It's nice to be ideological every once in a while, but you would bet your starvation on it?  It's like ND Tyson said about science.  "It's true no matter what people think or say" Same thing with social security.  It's a fundamentaly bad system no matter what people think.  Don't rely on it and start saving now in an IRA or regular ol' taxable account (once you've maxed your IRA contributions).


Social Security, currently can pay 70% of promised obligations forever.

It's not in that bad of shape.
 
2013-07-18 10:56:28 AM  
Most people seem to only rely on SS, 401k is gravy for a lot of them.
 
2013-07-18 10:58:17 AM  
I am stuck at step two of my reirement plan.  Step one is taking out a very large insurance policy on the wife.  But for set two, I for the life of me cannot meet up with a morally unscrupulous individiual on all of my train travel....  anyone have any ideas?   I was thinking going to Craigslist, is this a bad idea?
 
2013-07-18 10:58:31 AM  
And I'm still fully participating

Great Janitor: I've known people who knew how to super inflate their Universal Life Insurance policies and pull it off.


If I only get through a single point in this thread, here it is. For the love of god, please do not allow anyone you care about to buy one of these idiotic policies. You may have one or know someone who does. It may have had a lot of money in it - great. It would have had a lot more if they'd invested that same money in a different savings vehicle.
 
2013-07-18 11:05:51 AM  

mcreadyblue: Social Security, currently can pay 70% of promised obligations forever.

It's not in that bad of shape.


When they means test SS everyone eligible will get 100% forever.
 
2013-07-18 11:06:44 AM  

Great Janitor: Inflation is 5%, so any program that doesn't match increase at 5% or more is losing value


Get yourself some professional financial help immediately!

Let's say that your company matches 50% of your contribution up to 6%, for a total company contribution of 3%, which is common.  So if you make $10,000 you'll put $600 of it into your 401k.  Your company will put in $300.  You invested $600 and you have $900 immediately.  That's a 50% return instantly!  And a 401k is just a tax-advantaged investment account.  So, you invest all that money.  So you put that $900 into stocks or bonds or whatever and it makes whatever gains it makes (hopefully outpacing inflation).

My advice to Farkers starting out (and remember what you paid for it) is to invest for retirement in this order (i.e.  As you have more to invest, work your way down the list):

1)  Contribute enough to your company 401k to get the maximum employer match.  Do this no matter what.  That match is free money!  If your company offers a Roth 401k (somewhat rare), you'll probably want to go with that.
2)  If you are financiallly disciplined enough to know that you'll follow through, put any additional retirement money into a Roth IRA.  You pay taxes on money you invest into a Roth retirement account up-front and the withdrawals/gains are not taxed when you retire.  For most people, this will save you a ton of money in taxes in the long run.  Additionally, IRAs give you a bit of flexibility that 401k's don't.
3)  If the Roth IRA gets maxed out, then increase your 401k contribution until you get to the max there.
4)  If you're maxing out both the IRA and the 401k, then you should really be getting advice from the guy you pay to haul around your wheelbarrows of money and not some guy on Fark.  But the next step is to open a taxable brokerage account somewhere.
 
2013-07-18 11:07:32 AM  

Aarontology: Almost makes the destruction of pensions look like a bad idea, doesn't it?


This, Wall Street talked us into losing any sense of value for work. We had to put our money all in the hands of the Olympian "risk-takers" right? Well, what is more risky than devoting your entire life to working for a wage without any guarantee that your lifetime of labor will result in anything but an impoverished old-age?
 
2013-07-18 11:08:00 AM  
Millenials are screwed.
Student loans and high housing prices are going to leave them paying off debt and renting for most of their prime earning years, unable to build any savings.
 
2013-07-18 11:13:15 AM  

pdieten: hej: So for the financial rubes here, if dumping money into a 401k isn't good enough, what is?

I don't understand the question. A 401(k) is just a way to the masses to invest money tax free. So are IRAs. So are pensions. The difference is that your employer might contribute to your 401(k), which is part of your total salary package. If it's offered then take it.

In a pension system the employer is fully responsible for investing the money and making sure you get it at retirement. The difference between the two is who's on the hook if insufficient money was invested while the employee was working for the employer. In a 401(k), it's the employee's problem. In a pension it's the employer's problem. That's why there are no pensions anymore. Pensions that still exist have managers who worry over where they're going to find investments that make enough return to pay everyone who is supposed to be receiving benefits.

An IRA isn't in effect much different from a 401(k) but your employer probably won't contribute to it. It's something you can do if you've maxed out your 401(k) contributions and want (and can afford) to save even more. Or, you can open one after you leave your job and the old employer makes your 401(k) money available for rollover. That's what I did.

The question is, what investments are *in* the fund? Basically what this article is fussing about is the fact that there's no easy way to get a high return anymore unless you are investing in business that are big in Brazil and India. But then, when was it ever easy? People talk about the early '80s and the 5% rate on their savings accounts as if that was a good thing, but loan interest rates and inflation were also terrifyingly high at the time. People biatch about inflation, but if you found a newspaper from Clinton's second term (which is now some 15 years ago) and looked at the sale flyers in it and compared prices, you might be surprised at how close they are to today's prices. Returns nowadays are low because they don't need to be high, and that's because prices for consumer goods (not including healthcare and college tuition) aren't rising that fast.

The kind of price inflation you see nowadays in college tuition and health care? Those kinds of price increases applied to EVERYTHING in the '70s. Like how the price of postage went up 33% in eight months in 1981......


Housing prices seem to have gone up a tad bit in the last 15 years.

And bacon.
 
2013-07-18 11:15:38 AM  

gshepnyc: Aarontology: Almost makes the destruction of pensions look like a bad idea, doesn't it?

This, Wall Street talked us into losing any sense of value for work. We had to put our money all in the hands of the Olympian "risk-takers" right? Well, what is more risky than devoting your entire life to working for a wage without any guarantee that your lifetime of labor will result in anything but an impoverished old-age?


Pensions are shackles.  You don't dare leave the company until you're vested in the pension so you have to accept crap raises and poor treatment and can't take advantage of a lucrative opportunity at another company.  However, if you get laid off before you're vested, you have nothing!  Also, if the company goes bust a year or two before you want to retire, or even worse, a year or two after, you could lose a big part or even all of your retirement!

With a 401k, you own your retirement money.  You can invest it however conservatively or aggressively you feel suits you.  If you leave your company, that money is still yours and since your company has nothing to do with it once it's in your account, it's not at risk if your employer pulls an Enron.  Also, assuming your company provides a reasonable match, you'll end up with more money in the long-run that you would with a pension.
 
2013-07-18 11:16:36 AM  
NostroZ: ... Make your own coffee / eggs.

Mammals can't make eggs.

/not sure about the coffee part
 
2013-07-18 11:19:39 AM  

E5bie: Great Janitor:
Banks aren't great at investing, given that a CD is less than 3%.  So you'll actually lose money compared to inflation.  A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options (also, if you need your money from a 401k before retirement you get hit with double taxes and double penalties).

If you put in 6%, and your employer puts in a match of 3%, then 9% is going into the 401K. That's a 50% boost.
The returns would have to be pretty low for inflation to eat that up I think


But watch that 3% match get eaten by the 401K manager's fees (Fidelity takes 1%) and expense ratios on their funds (2%).

Seriously, the fees and default disbursement for my employer's 401K managed by Fidelity is that way.
 
2013-07-18 11:20:30 AM  

Sergeant Grumbles: Millenials are screwed.
Student loans and high housing prices are going to leave them paying off debt and renting for most of their prime earning years, unable to build any savings.


This. It should eventually fix itself, but the people caught in the transition will likely get hosed. And those people are looking like the millennials.
 
2013-07-18 11:22:17 AM  

Stone Meadow: mcreadyblue: Social Security, currently can pay 70% of promised obligations forever.

It's not in that bad of shape.

When they means test SS everyone eligible will get 100% forever.


There will never be a means test for SS.

Excluding the millionaires in California whose only asset is their 2 bedroom/1 bath crap shack worth $1.2 million with a Prop 13 tax basis of $50k will be politically undoable.
 
2013-07-18 11:24:05 AM  

AngryDragon: sigdiamond2000: It's one of the worst times to retire in recent history.

What does this sentence even mean?

It means that after gutting the entire social structure, the boomers are whining again that they have to face the consequences now.


Nah, we Boomers are in much better shape than you Gen-alphabetsoupers. Not as good as our Greatest Gen parents, but hey...they will all die off in their 80s and 90s while many of us Boomers will live twice as long, so I guess there's a trade off.
 
2013-07-18 11:26:43 AM  

Parkanzky: gshepnyc: Aarontology: Almost makes the destruction of pensions look like a bad idea, doesn't it?

This, Wall Street talked us into losing any sense of value for work. We had to put our money all in the hands of the Olympian "risk-takers" right? Well, what is more risky than devoting your entire life to working for a wage without any guarantee that your lifetime of labor will result in anything but an impoverished old-age?

Pensions are shackles.  You don't dare leave the company until you're vested in the pension so you have to accept crap raises and poor treatment and can't take advantage of a lucrative opportunity at another company.  However, if you get laid off before you're vested, you have nothing!  Also, if the company goes bust a year or two before you want to retire, or even worse, a year or two after, you could lose a big part or even all of your retirement!

With a 401k, you own your retirement money.  You can invest it however conservatively or aggressively you feel suits you.  If you leave your company, that money is still yours and since your company has nothing to do with it once it's in your account, it's not at risk if your employer pulls an Enron.  Also, assuming your company provides a reasonable match, you'll end up with more money in the long-run that you would with a pension.


Pension vesting has been lowered to 5 years or less*. The days of 20 year vestments are gone.

*5 years ain't gonna pay much money
 
2013-07-18 11:28:11 AM  

mcreadyblue: There will never be a means test for SS.


Never?

szwordsmithdotcom.files.wordpress.com

But even if I am wrong, the solution to SS's woes is obvious: remove the caps and unearned income exclusion.
 
2013-07-18 11:29:06 AM  

Chagrin: E5bie: Great Janitor:
Banks aren't great at investing, given that a CD is less than 3%.  So you'll actually lose money compared to inflation.  A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options (also, if you need your money from a 401k before retirement you get hit with double taxes and double penalties).

If you put in 6%, and your employer puts in a match of 3%, then 9% is going into the 401K. That's a 50% boost.
The returns would have to be pretty low for inflation to eat that up I think

But watch that 3% match get eaten by the 401K manager's fees (Fidelity takes 1%) and expense ratios on their funds (2%).

Seriously, the fees and default disbursement for my employer's 401K managed by Fidelity is that way.


Yeah, there should be a law against fleecing 401(k)s with management fees.  I'm lucky.  The funds I hold have a total expense ratio of 0.08% and the brokerage is still making money.
 
2013-07-18 11:29:37 AM  

Great Janitor: Social Security has a negative rate of return.  We're supposed to pay into it today so we can retire on it, but we get less money back than we pay in.  We'd be better off with ANY other form of retirement planning.  Hell, I'd be better off taking the money I pay into Social Security, taking it to the casino and playing roulette with it. At least that way I could possibly see some gain with it.


SS isn't a retirement account. It's retirement insurance. If you die early, there is no left over money in an unused account. If you don't die fast enough, you still get paid after a retirement account would have been gone.
 
2013-07-18 11:30:15 AM  

Johnson: NostroZ: ... Make your own coffee / eggs.

Mammals can't make eggs.

/not sure about the coffee part


Platysuses
 
2013-07-18 11:30:47 AM  

Aarontology: Almost makes the destruction of pensions look like a bad idea, doesn't it?


I see that the pension funds in Detroit are suing to keep the city from declaring bankruptcy.  I would rather have a self managed fund than depend on a city or company to still be in existence and fiscally sound 30 years from now.
 
2013-07-18 11:32:24 AM  

Chagrin: E5bie: Great Janitor:
Banks aren't great at investing, given that a CD is less than 3%.  So you'll actually lose money compared to inflation.  A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options (also, if you need your money from a 401k before retirement you get hit with double taxes and double penalties).

If you put in 6%, and your employer puts in a match of 3%, then 9% is going into the 401K. That's a 50% boost.
The returns would have to be pretty low for inflation to eat that up I think

But watch that 3% match get eaten by the 401K manager's fees (Fidelity takes 1%) and expense ratios on their funds (2%).

Seriously, the fees and default disbursement for my employer's 401K managed by Fidelity is that way.


That depends on two things.

1.  401k manager fee:  The average is 0.78% (yes, that is too high in my opinion, but it's not 1%).
2.  2% expense ratio is ridiculous.  Choose better funds.  I'm a big believer in Vanguard Indexes rather than hoping some fund manger his the jackpot and beats the market.  0.17% is the expense ratio of VFINX which my 401k offers.

So the fees are significantly less than what you're proposing IF you do it right.  The average stock fund expense is 1.44% - highway robbery.
 
2013-07-18 11:36:21 AM  
OMG, you mean I have to be responsible for my own finances!? I have to plan for my own retirement, and live life within my means?

/Seriously, people, it aint that complicated.
 
2013-07-18 11:37:23 AM  

Great Janitor: thurstonxhowell: Great Janitor: A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options

I'm not convinced you know what a 401k or an employer match is....

Inflation is 5%, so any program that doesn't match increase at 5% or more is losing value

Great Janitor: Stuffing your money under your mattress or in a coffee can means you don't lose money

Wait, I thought I was losing money to inflation in my 401k. How am I not losing money to inflation in my coffee can?

Grrr...I messed up that one.  You don't gain interest, but you also don't lose money the way you would through Social Security, making it slightly better than Social Security.


A company match is typically somewhere between a 75%-100% ROI on your investment.  That doesn't beat 5%?!  And where are you seeing inflation at 5%?  We almost had a deflationary year last year, and even relatively high inflation is still only around 3.5%.
 
2013-07-18 11:37:45 AM  

Chagrin: E5bie: Great Janitor:
Banks aren't great at investing, given that a CD is less than 3%.  So you'll actually lose money compared to inflation.  A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options (also, if you need your money from a 401k before retirement you get hit with double taxes and double penalties).

If you put in 6%, and your employer puts in a match of 3%, then 9% is going into the 401K. That's a 50% boost.
The returns would have to be pretty low for inflation to eat that up I think

But watch that 3% match get eaten by the 401K manager's fees (Fidelity takes 1%) and expense ratios on their funds (2%).

Seriously, the fees and default disbursement for my employer's 401K managed by Fidelity is that way.


All of your fund options have 2% expense ratios?  That's ridiculous.

I have one fund that has an expense ratio over 1%.  It's an international fund and I expect it to have higher expenses.  All the rest have expenses under a couple tenths of a percent.  Most are ~0.1%.  This is with Fidelity and I don't pay Fidelity anything to manage my 401k.

Are you with a small company?  Both my current and previous employers use Fidelity for 401ks.  My previous company (very small, a couple hundred employees and low revenue) 401k choices generally had higher expense ratios than the options I have at my current employer (bigger company with thousands of employees and billions in annual revenue).

Please, don't tell people not to invest in their 401k's.  First, they really are a good deal.  The company match is one big advantage, but the tax savings is another huge plus.

If you start early, you'll accumulate a really nice chunk of change in 10 or 20 years.

Second, the alternative for most people is not to save at all...
 
2013-07-18 11:39:28 AM  

Stone Meadow: mcreadyblue: There will never be a means test for SS.

Never?

[szwordsmithdotcom.files.wordpress.com image 640x612]

But even if I am wrong, the solution to SS's woes is obvious: remove the caps and unearned income exclusion.


As long as the benefit continues to scale up, I have no problem removing the income cap.  Unearned income is a different matter.  If I save on top of what they take from me in SS, why should I be penalized because I was responsible with my money?

The problem is that over 30 years the money the government takes from me in SS could make for a fairly stable retirement.  About $800K worth at historical returns.  If I save outside of that, you're telling me that I just have to start giving up almost a million dollars because I was responsible?

How about no.
 
2013-07-18 11:42:01 AM  

mcreadyblue: pdieten:


Housing prices seem to have gone up a tad bit in the last 15 years.

And bacon.


So how many people buy a new house after they retire? This is why you're supposed to buy a house when you're young and working, so for the price of property taxes and maintenance you have someplace to live after you retire. Or sell it so you can afford a few years of rent in the senior home.

And chances are if you're retired then your doctor told you to lower your bacon consumption because it's bad for your heart condition. I tell you, getting old is hell.
 
2013-07-18 11:45:46 AM  

Johnsnownw: OMG, you mean I have to be responsible for my own finances!? I have to plan for my own retirement, and live life within my means?

/Seriously, people, it aint that complicated.


It kind of is. they really should have it as part of high school curriculum. Most people I know have not done all that well when it comes to retirement planning. and I work at a fortune 500.
 
2013-07-18 11:46:12 AM  

Chagrin: E5bie: Great Janitor:
Banks aren't great at investing, given that a CD is less than 3%.  So you'll actually lose money compared to inflation.  A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options (also, if you need your money from a 401k before retirement you get hit with double taxes and double penalties).

If you put in 6%, and your employer puts in a match of 3%, then 9% is going into the 401K. That's a 50% boost.
The returns would have to be pretty low for inflation to eat that up I think

But watch that 3% match get eaten by the 401K manager's fees (Fidelity takes 1%) and expense ratios on their funds (2%).

Seriously, the fees and default disbursement for my employer's 401K managed by Fidelity is that way.


Do you not get that the match is relative to your salary, not you contribution?  If you invest 6% and your company match is 3%, then that's an instant 50% return.  Even if your fees are 3%, you've still made well over 40% just by putting money into the 401(k).  I happen to have a Fidelity 401(k).  All of my fees are below 1%, and one is below 0.1%.  Outside of the recession, my returns have been very positive.
 
2013-07-18 11:47:54 AM  

Fish in a Barrel: Do you not get that the match is relative to your salary, not you contribution?


The thought that there may be adults who don't get that frightens me a bit.
 
2013-07-18 11:48:21 AM  
What is this "retirement" you speak of?

//I'm farked, but I'm ok with that.
 
2013-07-18 11:49:21 AM  

Stone Meadow: the solution to SS's woes is obvious: remove the caps and unearned income exclusion.


I can't understand why this has not been explored more in the press.
 
2013-07-18 11:50:57 AM  

Parkanzky: I honestly don't know how anyone that's firmly in the "middle class" can ever hope to retire.

I was working for a company that contributes a total of 0.9% to their employees' 401k's.  So if you make $40k/yr, they're going to contribute exactly $30/mo to your retirement account.  Gosh thanks!  And they didn't pay very well, so it was extremely hard to put away much on your own.  I changed jobs about a year ago, and while there were a few reasons to jump ship, the fantastic benefits at my new company were a huge draw.

Even if you max out your 401k, right now you'll just watch your investments get eaten by inflation if you choose the "safe" options.

If you're young (<40), get into 100% stocks right now.  Diversify by putting a chunk in small caps, a chunk in mid caps, a chunk in large caps and another chunk overseas.  Find funds with as low fees as possible, and have faith that the market will beat bond interest over the next 20+ years.  Our retirement accounts are up ~18% YTD.  Of course, we have bad years too, but the overall average has been pretty good.

If you're closer to retirement (~50's) and you haven't already socked away a big pile of cash, it seems pretty dire.  About all you can do to prepare for retirement is get your expenses and expectations whittled down to the bone so that you can live on the pittance Social Security is likely to give you.


or move to Belize/Bali
 
2013-07-18 11:51:59 AM  

hungryhungryhorus: Aarontology: Almost makes the destruction of pensions look like a bad idea, doesn't it?

Yea, I know I for one would prefer to put all my eggs in one basket in the hopes that a company not only continues to exist 30-60 years from now but is still profitable and doesn't try to bully their way out of pension obligations.

/Seems to be working out well for soooo many of our elderly already...


isn't it working well in germany?
 
2013-07-18 11:55:07 AM  

Slaves2Darkness: Look after I took a couple of economics courses I realized that the only way to even have a moderate amount of wealth for retirement is to become a rent seeker. That is why I'm in favor of licenses, unions, and high barriers to entry into professions and business. The game is rigged, the only way to win is to cheat.


Welcome to the world of real estate appraising, come take our classes and get a real estate appraisal education.  and when your done you can spend the rest of your time trying to find someone to be an apprentice under.

/a hint
//you won't
///Thank god I got mine and I'm the youngest appraiser in my area by 30 years, woot.
 
2013-07-18 11:55:39 AM  

Johnsnownw: OMG, you mean I have to be responsible for my own finances!? I have to plan for my own retirement, and live life within my means?

/Seriously, people, it aint that complicated.


History disagrees with you.
 
2013-07-18 11:59:15 AM  

AngryDragon: Stone Meadow: mcreadyblue: There will never be a means test for SS.

Never?

[szwordsmithdotcom.files.wordpress.com image 640x612]

But even if I am wrong, the solution to SS's woes is obvious: remove the caps and unearned income exclusion.

As long as the benefit continues to scale up, I have no problem removing the income cap.  Unearned income is a different matter.  If I save on top of what they take from me in SS, why should I be penalized because I was responsible with my money?

The problem is that over 30 years the money the government takes from me in SS could make for a fairly stable retirement.  About $800K worth at historical returns.  If I save outside of that, you're telling me that I just have to start giving up almost a million dollars because I was responsible?

How about no.


It's called income redistribution. Fairly standard feature of advanced economies. It's how we keep the poor from suffering.
 
2013-07-18 12:01:36 PM  

Parkanzky: gshepnyc: Aarontology: Almost makes the destruction of pensions look like a bad idea, doesn't it?

This, Wall Street talked us into losing any sense of value for work. We had to put our money all in the hands of the Olympian "risk-takers" right? Well, what is more risky than devoting your entire life to working for a wage without any guarantee that your lifetime of labor will result in anything but an impoverished old-age?

Pensions are shackles.  You don't dare leave the company until you're vested in the pension so you have to accept crap raises and poor treatment and can't take advantage of a lucrative opportunity at another company.  However, if you get laid off before you're vested, you have nothing!  Also, if the company goes bust a year or two before you want to retire, or even worse, a year or two after, you could lose a big part or even all of your retirement!

With a 401k, you own your retirement money.  You can invest it however conservatively or aggressively you feel suits you.  If you leave your company, that money is still yours and since your company has nothing to do with it once it's in your account, it's not at risk if your employer pulls an Enron.  Also, assuming your company provides a reasonable match, you'll end up with more money in the long-run that you would with a pension.


I'll remember to tell this to my uncle who lost all his money in 2008 in the stock market.

That job with a pension was a shackle, you did a good job taking the one with the 401k.
 
2013-07-18 12:01:43 PM  

AngryDragon: As long as the benefit continues to scale up, I have no problem removing the income cap.  Unearned income is a different matter.  If I save on top of what they take from me in SS, why should I be penalized because I was responsible with my money?

The problem is that over 30 years the money the government takes from me in SS could make for a fairly stable retirement.  About $800K worth at historical returns.  If I save outside of that, you're telling me that I just have to start giving up almost a million dollars because I was responsible?

How about no.


I take your point, but at the end of the day it's like complaining that unearned income is taxed at all. Nobody wants to means test SS. Nobody wants to pay into it. Everybody wants to collect 100% of their calculated entitlement. Those three goals are mutually incompatible in any kind of reasonable long run, so something is going to have to give. I think it will be on the taxation side, as poor voters outnumber wealthy ones, and will demand continued benefits.
 
2013-07-18 12:02:16 PM  

Tyrone Slothrop: Johnsnownw: OMG, you mean I have to be responsible for my own finances!? I have to plan for my own retirement, and live life within my means?

/Seriously, people, it aint that complicated.

History disagrees with you.


If you are not responsible for your own finances, then who is?  I sure hope it is not the Goverment we have to place all of our eggs.
 
2013-07-18 12:05:02 PM  

JolobinSmokin: I'll remember to tell this to my uncle who lost all his money in 2008 in the stock market.

That job with a pension was a shackle, you did a good job taking the one with the 401k.


Was he near retirement with near 100% vestment in stocks? You're not supposed to do that.

Did he freak out when the market crashed, and sold all of his stocks? You're not supposed to do that either.
 
2013-07-18 12:05:13 PM  

pdieten: AngryDragon: Stone Meadow: mcreadyblue: There will never be a means test for SS.

Never?

[szwordsmithdotcom.files.wordpress.com image 640x612]

But even if I am wrong, the solution to SS's woes is obvious: remove the caps and unearned income exclusion.

As long as the benefit continues to scale up, I have no problem removing the income cap.  Unearned income is a different matter.  If I save on top of what they take from me in SS, why should I be penalized because I was responsible with my money?

The problem is that over 30 years the money the government takes from me in SS could make for a fairly stable retirement.  About $800K worth at historical returns.  If I save outside of that, you're telling me that I just have to start giving up almost a million dollars because I was responsible?

How about no.

It's called income redistribution. Fairly standard feature of advanced economies. It's how we keep the poor from suffering.


I hate hitting Add Comment too early....

Your complaint reminds me of people who see that prisoners get free room and board and healthcare courtesy of the taxpayers and wonder why they should bother to stay out of jail when they could live for free. If you'd ever actually been to jail you'd know why.

Even if you're getting free money from the government from income redistribution, being poor sucks so hard that it's worth working harder to avoid it. So unless you want to start seeing "Lucky Ducky" comics, you might be better off appreciating the fact that you have enough income that you can have some of it redistributed away.
 
2013-07-18 12:06:54 PM  

AngryDragon: The problem is that over 30 years the money the government takes from me in SS could make for a fairly stable retirement


That money you put into SS does not go back to you.  It goes to current retirees first and if any is left over, it ends up being spent in the general fund.  When it comes to your retirement, the money you get will be from current year tax revenue.  Overall, this money is not really invested, but spent.
 
2013-07-18 12:07:43 PM  
Don't be a drama llama, subby. How much money am I really going to need in retirement? I'll have all of my debt paid off, plus a STAR rebate on my property tax. $2000/mo from SS plus another $2000 from my 403b. Considering that's more money than I take home today and I'm doing just fine, I think I'll be able to get by when I have no mortgage payment.
 
2013-07-18 12:08:39 PM  

Sergeant Grumbles: Millenials are screwed.
Student loans and high housing prices are going to leave them paying off debt and renting for most of their prime earning years, unable to build any savings.


Define "Millennials".

Because I just graduated college and it's student loans yes, but housing prices no, since right when I buy a house is the same time when all the Baby Boomers die and drop millions of houses onto debt-saddled Millennials which sends the price screaming through the floor.

Now my cousins who are all about 10 years older than me, they're boned.  They got hit with both and lost their shirts.  But my cohort is going to be doing ok (not great, but ok), as long as they didn't do something stupid like take out $200K in student loans for an Art History degree (and if you honestly thought that was a good idea, you're an idiot).
 
2013-07-18 12:09:02 PM  

impaler: Was he near retirement with near 100% vestment in stocks? You're not supposed to do that.

Did he freak out when the market crashed, and sold all of his stocks? You're not supposed to do that either.


You really shouldn't have to be a savvy investor, nor have to pay one, just to retire.
 
2013-07-18 12:09:10 PM  

JolobinSmokin: I'll remember to tell this to my uncle who lost all his money in 2008 in the stock market.


How did he lose all of it?  The overall drop in stocks was roughly 50%, and the markets have earned that back.
 
2013-07-18 12:10:34 PM  

Stone Meadow: AngryDragon: As long as the benefit continues to scale up, I have no problem removing the income cap.  Unearned income is a different matter.  If I save on top of what they take from me in SS, why should I be penalized because I was responsible with my money?

The problem is that over 30 years the money the government takes from me in SS could make for a fairly stable retirement.  About $800K worth at historical returns.  If I save outside of that, you're telling me that I just have to start giving up almost a million dollars because I was responsible?

How about no.

I take your point, but at the end of the day it's like complaining that unearned income is taxed at all. Nobody wants to means test SS. Nobody wants to pay into it. Everybody wants to collect 100% of their calculated entitlement. Those three goals are mutually incompatible in any kind of reasonable long run, so something is going to have to give. I think it will be on the taxation side, as poor voters outnumber wealthy ones, and will demand continued benefits.


And here in lies why my goal is to get completely around paying into social security by the time I am 40.  0
 
2013-07-18 12:10:40 PM  

pdieten: being poor sucks so hard that it's worth working harder to avoid it


So long as we are very firm against those that work hard to pretend to be poor so they can cash in on the system.  In this regard, we would be well served to keep these programs under close scrutiny.
 
2013-07-18 12:11:27 PM  

Mad Scientist: If you're relying on SS for your retirement, you're going to be a very poor moran.


nocturnal001: Most people seem to only rely on SS, 401k is gravy for a lot of them.


A little of A, a little of B.  There are  millions of seniors with nothing but SS income (and another million or so non-seniors with nothing but SSDI disability).  It doesn't come recommended if you can avoid it. That said they aren't, 99% of the time, starving and homeless.  They end up in crappy ultra-low-cost small towns (there are plenty of towns where such retirees are the typical resident), eating tuna sandwiches, watching Matlock, going to church, and waiting to die.  It's amazing how little many grannies have to spend.

Suck, suck, suck? Sure. OMG worst thing ever? Not really.
 
2013-07-18 12:11:39 PM  
My retirement plan is foolproof. I'm one step ahead of this stupid recession by simply not having kids. I cannot overstate how rewarding this decision has been. I can do whatever the fark I want all the time; I still have plenty of friends and hobbies; I make double payments every month and will have my mortgage paid off by the time I'm 35; I will spend my children's college tuition on a Porsche.

Go ahead, haters. Do what you do.
 
2013-07-18 12:13:51 PM  

meyerkev: Now my cousins who are all about 10 years older than me, they're boned.


Sounds genx  and if they have done their homework correctly they should be fine.  GenXers need to buy stocks as the boomers divest and then when the millenials finally get around to heavy investing in  about 15-20 years, profit.  I see another stock market surge like we had in the 80's sometime in the 2020-30's.
 
2013-07-18 12:16:06 PM  

meyerkev: Because I just graduated college and it's student loans yes, but housing prices no, since right when I buy a house is the same time when all the Baby Boomers die and drop millions of houses onto debt-saddled Millennials which sends the price screaming through the floor.


I would like to think that will happen, but I have my doubts. I can see prices never decreasing appreciably, or whole neighborhoods bought up by investors/developers and turned into rentals.
 
2013-07-18 12:18:15 PM  
A Fark financial thread is like when you're 12 years old, and you invite all your dork friends over to play D&D, and somehow the conversation turns to sex.
 
2013-07-18 12:20:19 PM  

Johnson: NostroZ: ... Make your own coffee / eggs.

Mammals can't make eggs.

/not sure about the coffee part


www.biologycorner.com
 
2013-07-18 12:20:59 PM  

impaler: Article summary: low interest rates result in low bond yields.


I made 11% aggregate on junk bond funds over the last 18 months.   AAA rated bonds aren't going to make any money.   High risk bonds have to pay high rates to get anyone to buy them.
 
2013-07-18 12:24:42 PM  

Fish in a Barrel: Chagrin: E5bie: Great Janitor:
Banks aren't great at investing, given that a CD is less than 3%.  So you'll actually lose money compared to inflation.  A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options (also, if you need your money from a 401k before retirement you get hit with double taxes and double penalties).

If you put in 6%, and your employer puts in a match of 3%, then 9% is going into the 401K. That's a 50% boost.
The returns would have to be pretty low for inflation to eat that up I think

But watch that 3% match get eaten by the 401K manager's fees (Fidelity takes 1%) and expense ratios on their funds (2%).

Seriously, the fees and default disbursement for my employer's 401K managed by Fidelity is that way.

Do you not get that the match is relative to your salary, not you contribution?  If you invest 6% and your company match is 3%, then that's an instant 50% return.  Even if your fees are 3%, you've still made well over 40% just by putting money into the 401(k).  I happen to have a Fidelity 401(k).  All of my fees are below 1%, and one is below 0.1%.  Outside of the recession, my returns have been very positive.


Please post the funds with less than 0.1% fees.
 
2013-07-18 12:26:06 PM  
BE AFRAID!

GIVE US YOUR MONEY!

WE WILL KEEP IT SAFE!

FOR A NOMINAL FEE!
 
2013-07-18 12:26:50 PM  

NostroZ: Finally, your investments. Your family, make sure they are not dicks and will forget about you in your old age. If you know they will be dicks, connect them not throwing you in a dilapidated nursing home as a contingent in your will. As far as where to sock away your money, just make sure you're not paying high 4b1 fees or other 'management' fees above .5% on any fund. The rest, I'm sure other Farkers will help you with (diversification, local & foreign index funds, proper mix for your age, etc.)


Chagrin: But watch that 3% match get eaten by the 401K manager's fees (Fidelity takes 1%) and expense ratios on their funds (2%).

Seriously, the fees and default disbursement for my employer's 401K managed by Fidelity is that way.


AngryDragon: Yeah, there should be a law against fleecing 401(k)s with management fees. I'm lucky. The funds I hold have a total expense ratio of 0.08% and the brokerage is still making money.


Rapmaster2000: That depends on two things.

1. 401k manager fee: The average is 0.78% (yes, that is too high in my opinion, but it's not 1%).
2. 2% expense ratio is ridiculous. Choose better funds. I'm a big believer in Vanguard Indexes rather than hoping some fund manger his the jackpot and beats the market. 0.17% is the expense ratio of VFINX which my 401k offers.

So the fees are significantly less than what you're proposing IF you do it right. The average stock fund expense is 1.44% - highway robbery.


This is the conversation I want in on.  There was a discussion similar to this a few months back that got me to look harder at my fund investments (Fidelity for sake of conversation).  So I tried to find funds with low fees, but the only ones I could find (granted i have access to 500+ so hard to look at everyone of them) were index funds (i have a vangaurd index at something like .07-.08).  All the other managed funds are around 0.7-0.85.  Choose a few of those in different markets(large cap, discovery, low priced, real estate, utilities, yada-yada) and also had dividends that were reinvested( DRIPS?).

Don't you take into account the performance of the fund vs. fees?  Example: index fund avg return is 8% with 0.08% fees vs. managed fung avg return of 15% with 1% fees.  isn't the managed fund the better option?

Also, would like to hear what managed fund are out there for >0.15% fees
 
2013-07-18 12:27:13 PM  

HeadLever: pdieten: being poor sucks so hard that it's worth working harder to avoid it

So long as we are very firm against those that work hard to pretend to be poor so they can cash in on the system.  In this regard, we would be well served to keep these programs under close scrutiny.


This is true. However, enforcement mechanisms also cost money (the auditors don't work for free.) You would want to be sure that the enforcement doesn't end up costing more than it saves in prevented fraud.
 
2013-07-18 12:27:32 PM  

pdieten: Even if you're getting free money from the government from income redistribution, being poor sucks so hard that it's worth working harder to avoid it.


The American worker has shown no problems working harder and being more productive.   They're just seeing any fruits of their labor in terms of living wages since the American public laughably and gullibly bought into "trickle down" economics sold to them by Wall Street

encrypted-tbn2.gstatic.com.
 
2013-07-18 12:29:23 PM  

Hyjamon: managed fung avg return of 15% with 1% fees


Trading in lucrative unicorn futures, presumably.
 
2013-07-18 12:31:51 PM  

mcreadyblue: Please post the funds with less than 0.1% fees.


FUSVX
 
2013-07-18 12:33:20 PM  

hej: So for the financial rubes here, if dumping money into a 401k isn't good enough, what is?


It's not really that it's not good enough, rather that working for less than half of one's natural life and getting first world medical care in an environment when everyone is trying to do the same is going to require a savings rate that's well above what most people will tolerate.

mcreadyblue: Fish in a Barrel: Chagrin: E5bie: Great Janitor:
Banks aren't great at investing, given that a CD is less than 3%.  So you'll actually lose money compared to inflation.  A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options (also, if you need your money from a 401k before retirement you get hit with double taxes and double penalties).

If you put in 6%, and your employer puts in a match of 3%, then 9% is going into the 401K. That's a 50% boost.
The returns would have to be pretty low for inflation to eat that up I think

But watch that 3% match get eaten by the 401K manager's fees (Fidelity takes 1%) and expense ratios on their funds (2%).

Seriously, the fees and default disbursement for my employer's 401K managed by Fidelity is that way.

Do you not get that the match is relative to your salary, not you contribution?  If you invest 6% and your company match is 3%, then that's an instant 50% return.  Even if your fees are 3%, you've still made well over 40% just by putting money into the 401(k).  I happen to have a Fidelity 401(k).  All of my fees are below 1%, and one is below 0.1%.  Outside of the recession, my returns have been very positive.

Please post the funds with less than 0.1% fees.


Both Fidelity and Vanguard offer a flagship S&P 500 index fund with fees under .1% for the biggest holders (many 401(k) plans qualify for that fee structure) even if the account is under the normal minimum).  If one works for the federal government, several of the TSP plans are in that neighborhood (it's the lowest cost plan I know of).
 
2013-07-18 12:34:24 PM  
I'm self employed so no 401K for me, I have an IRA that I max every year, some jumbo CD's and saving accounts.  I probably won't ever buy stocks(atm, but this could change in the next two years) and I have no plan on retiring other than what I'm about to describe.

I'm a real estate appraiser so I have a low stress job that I can do until the end of time that pays $4-500 an appraisal and I do between 15-20 appraisals a week with very very low over head ( which when I'm older I'll probably take the low stress route and do about 7 or so a week myself and my apprentices will do the rest and I'll just split the fee with them.

Most ppl who want to become an appraiser in the old days were men who after they retired from their jobs became one, so I'm about 30 years younger then all my peers.

I also am set to become the president of a large charitable foundation that will pay me an annual salary of $60,000 a year for one meeting a month.  I may also inherit a few million from an uncle(he's not actually my uncle, he was married to my coont of an aunt and they've been divorced for several years but we are really close so it's not really an inheritance and more of a, you're responislbe type person please carry on my legacy type deal) of mine with no kids or wife and I'm an only child and the only one in the family.  Both of my parents are dead so it's just the two of us.

Even if all that pans out, I'll still appraise houses and continue to make over six figures a year for the next 30-40 years since i'm only 34 right now, so with all that I'm hopefully set plus my wife is doing all that stuff everyone is talking about with her 401k IRA and employer matching.

But I have cousins who are brick layers and other lower skilled jobs that I really feel sorry for, their only hope is to retire with social security and to really work until they drop dead.

I need to have another kid so me and my wife won't be so lonely when we get older.

I'm not saying my way is any better than anyone else and I know I can do much better and plan to in the next two years (hopefully with stock purchases and stuff I don't really know anything about), but I don't feel as worried as some people should because even if nothing I've been told pans out, I'll still be a real estate appraiser and can do that well into my 80's like an old teacher of mine has done just not as often or work as hard as I do now.

I'm very blessed for a guy with a liberal arts degree from North Eastern Oklahoma A & M.  Go Golden Norsemen!
 
2013-07-18 12:36:26 PM  

mcreadyblue: Johnson: NostroZ: ... Make your own coffee / eggs.

Mammals can't make eggs.

/not sure about the coffee part


[platypus.jpg]

yeah but can they make coffee?
 
2013-07-18 12:37:13 PM  

Hyjamon: NostroZ: Finally, your investments. Your family, make sure they are not dicks and will forget about you in your old age. If you know they will be dicks, connect them not throwing you in a dilapidated nursing home as a contingent in your will. As far as where to sock away your money, just make sure you're not paying high 4b1 fees or other 'management' fees above .5% on any fund. The rest, I'm sure other Farkers will help you with (diversification, local & foreign index funds, proper mix for your age, etc.)

Chagrin: But watch that 3% match get eaten by the 401K manager's fees (Fidelity takes 1%) and expense ratios on their funds (2%).

Seriously, the fees and default disbursement for my employer's 401K managed by Fidelity is that way.

AngryDragon: Yeah, there should be a law against fleecing 401(k)s with management fees. I'm lucky. The funds I hold have a total expense ratio of 0.08% and the brokerage is still making money.

Rapmaster2000: That depends on two things.

1. 401k manager fee: The average is 0.78% (yes, that is too high in my opinion, but it's not 1%).
2. 2% expense ratio is ridiculous. Choose better funds. I'm a big believer in Vanguard Indexes rather than hoping some fund manger his the jackpot and beats the market. 0.17% is the expense ratio of VFINX which my 401k offers.

So the fees are significantly less than what you're proposing IF you do it right. The average stock fund expense is 1.44% - highway robbery.

This is the conversation I want in on.  There was a discussion similar to this a few months back that got me to look harder at my fund investments (Fidelity for sake of conversation).  So I tried to find funds with low fees, but the only ones I could find (granted i have access to 500+ so hard to look at everyone of them) were index funds (i have a vangaurd index at something like .07-.08).  All the other managed funds are around 0.7-0.85.  Choose a few of those in different markets(large cap, discovery, low priced, real estate, utilities, yad ...


I don't believe there's ever been a study that found a long term difference (aside from higher costs) in the performance of active vs passive funds.  The dirty secret of fund management is that nearly everyone closet indexes (meaning they decide to hold say GE within 1% of the S&P 500) because if one doesn't they're exceedingly likely to get fired rather quickly when they have even a modest performance differential.
 
2013-07-18 12:37:34 PM  

Johnson: mcreadyblue: Johnson: NostroZ: ... Make your own coffee / eggs.

Mammals can't make eggs.

/not sure about the coffee part

[platypus.jpg]

yeah but can they make coffee?


Yes.

fc09.deviantart.net
 
2013-07-18 12:38:09 PM  

Hyjamon: This is the conversation I want in on. There was a discussion similar to this a few months back that got me to look harder at my fund investments (Fidelity for sake of conversation). So I tried to find funds with low fees, but the only ones I could find (granted i have access to 500+ so hard to look at everyone of them) were index funds (i have a vangaurd index at something like .07-.08). All the other managed funds are around 0.7-0.85. Choose a few of those in different markets(large cap, discovery, low priced, real estate, utilities, yada-yada) and also had dividends that were reinvested( DRIPS?).

Don't you take into account the performance of the fund vs. fees? Example: index fund avg return is 8% with 0.08% fees vs. managed fung avg return of 15% with 1% fees. isn't the managed fund the better option?


"Past performance does not guarantee future results"

In theory over the long term nobody can outguess the market, so performance of all funds will revert to the mean, which is the index.

In practice some fund managers are very good at their jobs and earn their fees.

Studies generally indicate that 401k buyers make better long-term returns in index funds.

Your call.
 
2013-07-18 12:38:22 PM  
So strengthen SS.
 
2013-07-18 12:39:25 PM  

pdieten: You would want to be sure that the enforcement doesn't end up costing more than it saves in prevented fraud.


Very true, but for many of these programs, you do have a positive ROI.
 
2013-07-18 12:42:17 PM  

InmanRoshi: since the American public laughably and gullibly bought into "trickle down" economics sold to them by Wall Street


Trickle down is not the only thing that is holding us back.  It is also the free trade aspect of the new global economy.  In general terms, you are not going to be able to compete with China or India when your labor cost is 5 times as much.  That puts tremendous pressure on wages and it will continue until these countries can catch up.
 
2013-07-18 12:42:33 PM  

mcreadyblue: Please post the funds with less than 0.1% fees.


VINIX  0.04%
VBTIX 0.07%
VMCIX 0.08%
VSCIX 0.08%

And close is:

VTSNX 0.12%
 
2013-07-18 12:43:33 PM  
Own index funds - make sure no load and less than 0.2% expense ratio. Cover the risk by investing in small, large, international etc index funds. Every six months, rebalance them. They will outperform inflation and over time will outperform any other investment.

Or you can bet on black.
 
2013-07-18 12:46:05 PM  

InmanRoshi: pdieten: Even if you're getting free money from the government from income redistribution, being poor sucks so hard that it's worth working harder to avoid it.

The American worker has shown no problems working harder and being more productive.   They're just seeing any fruits of their labor in terms of living wages since the American public laughably and gullibly bought into "trickle down" economics sold to them by Wall Street

[encrypted-tbn2.gstatic.com image 457x202].


Starting in the 1930s the American labor market was heavily regulated, and until the late 1960s it had no practical overseas competition.

Middle class strength of the mid 20th century was an accident of economic history. We will return to the world's historical mean: a few elites, a small-to-moderately sized professional class, and everyone else will be scraping by on leftovers.
 
2013-07-18 12:46:38 PM  

mcreadyblue: Please post the funds with less than 0.1% fees.


If you've got the $10k minimum, Vanguard Admirals like VTSAX or VFIAX.

If you're willing to consider ETFs instead of traditional funds, there are several commission-free ETFs under 0.1% (although there's a bit of uncertain cost in the bid-ask spread for ETFs... negligible for heavily-traded ETFs).  TD Ameritrade has VTI (total stock) and IVV (S&P 500) for .05%/.07% respectively with no commission.  Or, if you open a Schwab account, their in-house ETFs like SCHB/SCHX for 0.4%.
 
2013-07-18 12:48:18 PM  

Great Janitor: A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options (also, if you need your money from a 401k before retirement you get hit with double taxes and double penalties).


Jesus Christ.  Someone's giving you really bad investment advice.

If you need money from your 401k, you can actually do a loan instead of a withdrawal for up to $50K or 50% of your 401k total, whichever's lower, and it gets repaid through your paycheck deduction.  No penalty, but some double taxes (some say for the interest portion only, not the principal portion).
 
2013-07-18 12:50:56 PM  

pdieten: Your complaint reminds me of people who see that prisoners get free room and board and healthcare courtesy of the taxpayers and wonder why they should bother to stay out of jail when they could live for free. If you'd ever actually been to jail you'd know why.

Even if you're getting free money from the government from income redistribution, being poor sucks so hard that it's worth working harder to avoid it. So unless you want to start seeing "Lucky Ducky" comics, you might be better off appreciating the fact that you have enough income that you can have some of it redistributed away.


Uh...no.

My complaint is that I earned that money, through my work, for decades.  Long hours, missed weekends and vacations, sometimes multiple jobs, saving every penny busting my ass to make sure I wouldn't end up in the worst-case retirement scenario.  Being poor does suck hard, I've been there.  Now after working for 30 years someone is going to come along and say "you have enough, someone else needs it, sorry".  I'm not some 1%er.  I'm just a guy being responsible for myself.  I have two words for anyone believing that what I sweated for is fair game for "redistribution"...

FARK YOU.
 
2013-07-18 12:54:06 PM  
Some of you already know this, but here is the blueprint for retirement savings:

Lazy Portfolios

Pretty much echos what the more knowledgeable here have been saying.
 
2013-07-18 12:57:24 PM  

AngryDragon: FARK YOU.


No, fark you. If you don't want to participate in society then go live in Somalia or something. This bullshiat where people like you pretend that the job you're able to go to and are healthy enough to work at just fell out of your own ass one day is completely retarded.

Your job, your health, your education, everything right down to the fact that you're able to go get a drink when you need it without having to worry it will leave you dying of the runs over the course of the next week comes down to the fact that you are participating in a society. If you're going to accept those benefits then you should accept some of the costs as well.

If you think you can go kill your own food with your bootstraps and catch rainwater in the boots, go farking do it and quit your goddamn whining.
 
2013-07-18 12:59:03 PM  

pdieten: Starting in the 1930s the American labor market was heavily regulated, and until the late 1960s it had no practical overseas competition.

Middle class strength of the mid 20th century was an accident of economic history. We will return to the world's historical mean: a few elites, a small-to-moderately sized professional class, and everyone else will be scraping by on leftovers.


Which basically proves that the American Dream really amounts to nothing more than magical Unicorn Farts.      No matter how "hard" you work, the ownership class will dispose of you as soon as it's marginally cost effective to do so.   Eventually the workers won't have enough wages to create demand to feed the system.     The big industry fish will start eating up all the smaller fish through mergers and acquisitions to try to grab up as much share as they can of an ever decreasing market.    Capitalsim won't be able to be supported by it's own weight (It wouldn't have been able to support it's own weight in 2008 if the Fed and Taxpayers hadn't bailed it out to keep the entire house of cards from falling).

But by all means, let's put all our chips on that roulette wheel table.
 
2013-07-18 01:01:45 PM  

AngryDragon: pdieten: Your complaint reminds me of people who see that prisoners get free room and board and healthcare courtesy of the taxpayers and wonder why they should bother to stay out of jail when they could live for free. If you'd ever actually been to jail you'd know why.

Even if you're getting free money from the government from income redistribution, being poor sucks so hard that it's worth working harder to avoid it. So unless you want to start seeing "Lucky Ducky" comics, you might be better off appreciating the fact that you have enough income that you can have some of it redistributed away.

Uh...no.

My complaint is that I earned that money, through my work, for decades.  Long hours, missed weekends and vacations, sometimes multiple jobs, saving every penny busting my ass to make sure I wouldn't end up in the worst-case retirement scenario.  Being poor does suck hard, I've been there.  Now after working for 30 years someone is going to come along and say "you have enough, someone else needs it, sorry".  I'm not some 1%er.  I'm just a guy being responsible for myself.  I have two words for anyone believing that what I sweated for is fair game for "redistribution"...

FARK YOU.


I hate to break it to you, but the 1% feel exactly like this too. Seriously, it's precisely the same mindset.

Everyone thinks they work hard for their money. Most people think they don't have enough. You're going to pay the tax rate that the law says is correct for your income level. The tax tables are just numbers and they don't care that much about how you earned the money. It's all about the dollar amount.
 
2013-07-18 01:04:40 PM  

AngryDragon: My complaint is that I earned that money, through my work, for decades. Long hours, missed weekends and vacations, sometimes multiple jobs, saving every penny busting my ass to make sure I wouldn't end up in the worst-case retirement scenario. Being poor does suck hard, I've been there. Now after working for 30 years someone is going to come along and say "you have enough, someone else needs it, sorry". I'm not some 1%er. I'm just a guy being responsible for myself. I have two words for anyone believing that what I sweated for is fair game for "redistribution"...

FARK YOU.

AngryDragon: My complaint is that I earned that money, through my work, for decades. Long hours, missed weekends and vacations, sometimes multiple jobs, saving every penny busting my ass to make sure I wouldn't end up in the worst-case retirement scenario. Being poor does suck hard, I've been there. Now after working for 30 years someone is going to come along and say "you have enough, someone else needs it, sorry". I'm not some 1%er. I'm just a guy being responsible for myself. I have two words for anyone believing that what I sweated for is fair game for "redistribution"...

FARK YOU.


I love it when someone thinks they're a special little snowflake because they got up and went to work in the morning like everyone else.  Newsflash:  You're going to take out much more from Medicare and SSN than you ever put into it.  Mostly due to advancements in lifespan and medicine, for which you can thank publicly funded research institutions and education.
 
2013-07-18 01:05:44 PM  

Hyjamon: Don't you take into account the performance of the fund vs. fees? Example: index fund avg return is 8% with 0.08% fees vs. managed fung avg return of 15% with 1% fees. isn't the managed fund the better option?


The problem with this is, the market average beats managed funds over the long-term.  That is even before you subtract fees.  Some people made out like bandits on Magellan in the 80s and that really set the stage for thinking that market beating results were repeatable.  Unfortunately (for investors, but fortunately for fund managers), this is not the case.  You're much better off in the indexed average.

Slow and low.  Don't try to beat the market, just try to match it.  I have a little fun in my IRA with individual stocks, but I don't expect to beat the market.  If anything, I keep an eye on not losing to it.
 
2013-07-18 01:08:37 PM  

Fish in a Barrel: JolobinSmokin: I'll remember to tell this to my uncle who lost all his money in 2008 in the stock market.

How did he lose all of it?  The overall drop in stocks was roughly 50%, and the markets have earned that back.


He didn't, but this guy wants to really drive the point home that control of your finances should be taken from you for your own good.
 
2013-07-18 01:09:17 PM  

Hyjamon: Also, would like to hear what managed fund are out there for >0.15% fees


I forgot to respond to this.  Vanguard basically created the model on low fee funds, but now some firms like Schwab, Etrade, and Fidelity have gotten onboard.

Here's a chart of 70 funds and their fees.

http://money.cnn.com/magazines/moneymag/bestfunds/index.html
 
2013-07-18 01:14:56 PM  

skozlaw: AngryDragon: FARK YOU.

No, fark you. If you don't want to participate in society then go live in Somalia or something. This bullshiat where people like you pretend that the job you're able to go to and are healthy enough to work at just fell out of your own ass one day is completely retarded.

Your job, your health, your education, everything right down to the fact that you're able to go get a drink when you need it without having to worry it will leave you dying of the runs over the course of the next week comes down to the fact that you are participating in a society. If you're going to accept those benefits then you should accept some of the costs as well.

If you think you can go kill your own food with your bootstraps and catch rainwater in the boots, go farking do it and quit your goddamn whining.


I pay my taxes.  Happily.  I have no kids in school, yet I pay property taxes without complaining.  Federal taxes, state taxes , local taxes, sales taxes, capital gains taxes, use taxes, medicare taxes.  I have no problem paying any of those and "participating in society".  When it comes to retirement?  Hands off.  I have already contributed, probably more than my share.  Anyone who wants to take my retirement can EABOD.
 
2013-07-18 01:16:35 PM  

InmanRoshi: pdieten: Starting in the 1930s the American labor market was heavily regulated, and until the late 1960s it had no practical overseas competition.

Middle class strength of the mid 20th century was an accident of economic history. We will return to the world's historical mean: a few elites, a small-to-moderately sized professional class, and everyone else will be scraping by on leftovers.

Which basically proves that the American Dream really amounts to nothing more than magical Unicorn Farts.      No matter how "hard" you work, the ownership class will dispose of you as soon as it's marginally cost effective to do so.   Eventually the workers won't have enough wages to create demand to feed the system.     The big industry fish will start eating up all the smaller fish through mergers and acquisitions to try to grab up as much share as they can of an ever decreasing market.    Capitalsim won't be able to be supported by it's own weight (It wouldn't have been able to support it's own weight in 2008 if the Fed and Taxpayers hadn't bailed it out to keep the entire house of cards from falling).

But by all means, let's put all our chips on that roulette wheel table.


The American Dream isn't just unicorn farts. But most people aren't going to reach their dreams. If you start with parents who care about you, a decent public school, a lot of internal drive, the ability to impress people who can pull you up, and a bit (well, actually a lot) of luck, you still have a pretty good chance.

But the days of having a job pulling levers in a factory and also being able to raise a family in a nice house and take vacations every year? That's gone forever. Trouble is we have a god awful lot of people in this country who aren't (or don't want to be) any good at anything except pulling levers.
 
2013-07-18 01:18:41 PM  

Chagrin: E5bie: Great Janitor:
Banks aren't great at investing, given that a CD is less than 3%.  So you'll actually lose money compared to inflation.  A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options (also, if you need your money from a 401k before retirement you get hit with double taxes and double penalties).

If you put in 6%, and your employer puts in a match of 3%, then 9% is going into the 401K. That's a 50% boost.
The returns would have to be pretty low for inflation to eat that up I think

But watch that 3% match get eaten by the 401K manager's fees (Fidelity takes 1%) and expense ratios on their funds (2%).

Seriously, the fees and default disbursement for my employer's 401K managed by Fidelity is that way.


It was at precisely this moment that I finally understood how completely incompetent the American people are at the concept of "percentage".

You make $50,000 (round number for convenience). You put in 6% and your company matches 3%. You say "But watch that 3% match get eaten by the 401K manager's fees (Fidelity takes 1%) and expense ratios on their funds (2%)." but those fees are not charged as a percent of your income, they're a percent of your account. So you contribute $3,000, your company tosses in $1,500 and your 401k balance is $4,500. Now Fidelity takes 1% and the fund takes 2% of that, for a total of $135. Grand total is $4,365 on your investment of $3,000.

If you need me to walk through that more slowly, I'm available for tutoring lessons.
 
2013-07-18 01:22:34 PM  

AngryDragon: I'm not some 1%er.


Then stop crying about adding unearned income to SS contributions, because it will likely not affect you.

Unless you vote Republican, they would probably tie it to only the first $100k of unearned income instead waving the first $100k. Because that would "punish success," or something stupid like that.
 
2013-07-18 01:22:42 PM  

InmanRoshi: Newsflash: You're going to take out much more from Medicare and SSN than you ever put into it.


Not necessarily.  As a general statistical average, yes.  However, there are always exceptions to this.
 
2013-07-18 01:25:19 PM  

AngryDragon: Anyone who wants to take my retirement can EABOD.


Yea, right. And why shouldn't I be allowed to collect welfare just because I work?

Your argument is absurdly inane and reflects an absolute and complete lack of understanding of both the historical basis for and function of the Social Security system.
 
2013-07-18 01:27:06 PM  

AngryDragon: skozlaw: AngryDragon: FARK YOU.

No, fark you. If you don't want to participate in society then go live in Somalia or something. This bullshiat where people like you pretend that the job you're able to go to and are healthy enough to work at just fell out of your own ass one day is completely retarded.

Your job, your health, your education, everything right down to the fact that you're able to go get a drink when you need it without having to worry it will leave you dying of the runs over the course of the next week comes down to the fact that you are participating in a society. If you're going to accept those benefits then you should accept some of the costs as well.

If you think you can go kill your own food with your bootstraps and catch rainwater in the boots, go farking do it and quit your goddamn whining.

I pay my taxes.  Happily.  I have no kids in school, yet I pay property taxes without complaining.  Federal taxes, state taxes , local taxes, sales taxes, capital gains taxes, use taxes, medicare taxes.  I have no problem paying any of those and "participating in society".  When it comes to retirement?  Hands off.  I have already contributed, probably more than my share.  Anyone who wants to take my retirement can EABOD.


Hmm, I think I see the problem. The people I know who talk like this are the ones who are trying to buy themselves a 30 year life of idle leisure starting at about age 45 or 50 or so. Well, good luck with all that. You know what they say about the best laid plans of mice and men.....
 
2013-07-18 01:28:20 PM  

NostroZ: 401k + Social Security + part time job + cat food + living in part of town where I carry a gun = RETIREMENT!


Don't be silly. Cat food is way too expensive.
 
2013-07-18 01:30:34 PM  

pdieten: Hmm, I think I see the problem. The people I know who talk like this are the ones who are trying to buy themselves a 30 year life of idle leisure starting at about age 45 or 50 or so. Well, good luck with all that. You know what they say about the best laid plans of mice and men.....


Incorrect.  My target retirement age is 65.  How does working for 30+ years have you retiring at 45?  Starting at 15?
 
2013-07-18 01:31:17 PM  

Rapmaster2000: Hyjamon: Don't you take into account the performance of the fund vs. fees? Example: index fund avg return is 8% with 0.08% fees vs. managed fung avg return of 15% with 1% fees. isn't the managed fund the better option?

The problem with this is, the market average beats managed funds over the long-term.  That is even before you subtract fees.  Some people made out like bandits on Magellan in the 80s and that really set the stage for thinking that market beating results were repeatable.  Unfortunately (for investors, but fortunately for fund managers), this is not the case.  You're much better off in the indexed average.

Slow and low.  Don't try to beat the market, just try to match it.  I have a little fun in my IRA with individual stocks, but I don't expect to beat the market.  If anything, I keep an eye on not losing to it.


Thanks for the advice and link.  I am basically doing this now.  75% of my investments are in a 50% stock fund(FASMX), 70% stock fund( FASGX) and a target retirement date fund.  The other 25% are spread among 10 other funds where I am just picking some I think are worthy and watching how they do in the next year.  In essence, trying to learn to invest by having some skin in the game.  At the moment I like dividend funds since I feel like I am making gains when they pay out (I know one should value capital appreciation on its own vs. value gained from dividends) but it makes me feel better.  My 50% did the best in the past few years since it is heavy on bonds, but now with the market loosening up, I am trying to get more into stock-heavy plans.

I feel I am doing ok at 34 yrs old with ~90k in my 401k so far.  My 401k benefits at my job are pretty good, I contribute 6% and my employer contributes 10% (yes 6% and 10%, not a typo).  Also opened at Roth IRA this year to start socking extra into (mostly as a college fund for the noobie in my family).  I just need to get to $2,500 faster in the Roth so it can be invested in something to start growing.
 
2013-07-18 01:33:44 PM  

Parkanzky: I honestly don't know how anyone that's firmly in the "middle class" can ever hope to retire.

I was working for a company that contributes a total of 0.9% to their employees' 401k's.  So if you make $40k/yr, they're going to contribute exactly $30/mo to your retirement account.



Mine put in %15 into 'Profit Sharing'

That adds up
 
2013-07-18 01:33:46 PM  

impaler: AngryDragon: I'm not some 1%er.

Then stop crying about adding unearned income to SS contributions, because it will likely not affect you.

Unless you vote Republican, they would probably tie it to only the first $100k of unearned income instead waving the first $100k. Because that would "punish success," or something stupid like that.


You realize that a 100k return is only 8% on a 1.2M portfolio right?  And that 1.2M is the recommended retirement minimum for median income in the US.  You're not talking about the wealthy here.
 
2013-07-18 01:34:24 PM  

Sergeant Grumbles: Millenials are screwed.
Student loans and high housing prices are going to leave them paying off debt and renting for most of their prime earning years, unable to build any savings.


millenial here!

college debt paid off, have a house, can currently make the mortgage but the hard to enter professional market with low-ball salaries is what's making life difficult.
 
2013-07-18 01:34:30 PM  

InmanRoshi: AngryDragon: My complaint is that I earned that money, through my work, for decades. Long hours, missed weekends and vacations, sometimes multiple jobs, saving every penny busting my ass to make sure I wouldn't end up in the worst-case retirement scenario. Being poor does suck hard, I've been there. Now after working for 30 years someone is going to come along and say "you have enough, someone else needs it, sorry". I'm not some 1%er. I'm just a guy being responsible for myself. I have two words for anyone believing that what I sweated for is fair game for "redistribution"...

FARK YOU.
AngryDragon: My complaint is that I earned that money, through my work, for decades. Long hours, missed weekends and vacations, sometimes multiple jobs, saving every penny busting my ass to make sure I wouldn't end up in the worst-case retirement scenario. Being poor does suck hard, I've been there. Now after working for 30 years someone is going to come along and say "you have enough, someone else needs it, sorry". I'm not some 1%er. I'm just a guy being responsible for myself. I have two words for anyone believing that what I sweated for is fair game for "redistribution"...

FARK YOU.

I love it when someone thinks they're a special little snowflake because they got up and went to work in the morning like everyone else.  Newsflash:  You're going to take out much more from Medicare and SSN than you ever put into it.  Mostly due to advancements in lifespan and medicine, for which you can thank publicly funded research institutions and education.


Most of what you said here is wrong. When you look at the NPV of SS with any reasonable interest it is negative. You might take out significantly more in nominal dollars, but you will be taking out less in real dollars.

Life expectancy at age 65 has increased about 5 years since 1950, not a huge jump and this has caused adjustments to payouts (delayed or reduced) resulting in an even lower NPV for most people.
 
2013-07-18 01:38:02 PM  

AngryDragon: You realize that a 100k return is only 8% on a 1.2M portfolio right?  And that 1.2M is the recommended retirement minimum for median income in the US.  You're not talking about the wealthy here.


You realize capital gains is taxed AFTER you sell? If you have a stock that doubles, you don't pay income tax on that until you sell the stock.

Also, your example is untouched by a tax that doesn't affect the first 100k, so what's your point?
 
2013-07-18 01:38:06 PM  

AngryDragon: pdieten: Hmm, I think I see the problem. The people I know who talk like this are the ones who are trying to buy themselves a 30 year life of idle leisure starting at about age 45 or 50 or so. Well, good luck with all that. You know what they say about the best laid plans of mice and men.....

Incorrect.  My target retirement age is 65.  How does working for 30+ years have you retiring at 45?  Starting at 15?


It happens. Of course, people like that tend to look for something to do on a part-time basis after they retire from whatever they were doing for 15 hours a day to earn money before then.
 
2013-07-18 01:42:29 PM  

Girion47: college debt paid off, have a house, can currently make the mortgage but the hard to enter professional market with low-ball salaries is what's making life difficult.


How did you manage the debt and the house with such low-ball salaries? Those are making every step difficult.
 
2013-07-18 01:44:22 PM  

AngryDragon: Stone Meadow: mcreadyblue: There will never be a means test for SS.

Never?

[szwordsmithdotcom.files.wordpress.com image 640x612]

But even if I am wrong, the solution to SS's woes is obvious: remove the caps and unearned income exclusion.

As long as the benefit continues to scale up, I have no problem removing the income cap.  Unearned income is a different matter.  If I save on top of what they take from me in SS, why should I be penalized because I was responsible with my money?

The problem is that over 30 years the money the government takes from me in SS could make for a fairly stable retirement.  About $800K worth at historical returns.  If I save outside of that, you're telling me that I just have to start giving up almost a million dollars because I was responsible?

How about no.


Ahhh. Someone else who's run the numbers. Mine was close to $900k.

And on average you get back about $300k
 
2013-07-18 01:51:45 PM  

CujoQuarrel: Ahhh. Someone else who's run the numbers. Mine was close to $900k.

And on average you get back about $300k


It's insurance, not investment.
Do you calculate the ROI on your health insurance? Car insurance? Homeowner's insurance?
I'll bet you could make a lot of more money if you pulled your money out of those worthless.... unless something bad were to happen... amirite?
 
2013-07-18 01:51:50 PM  

fortheloveofgod: hej: So for the financial rubes here, if dumping money into a 401k isn't good enough, what is?

One way is by getting into a horrific car accident - a closed head injury is a plus - and then saving away the lawsuit winnings.


Now, Mr. Love, if you will just sign the durable power of attorney I have prepared...
 
2013-07-18 01:52:10 PM  

Hyjamon: Rapmaster2000: Hyjamon: Don't you take into account the performance of the fund vs. fees? Example: index fund avg return is 8% with 0.08% fees vs. managed fung avg return of 15% with 1% fees. isn't the managed fund the better option?

The problem with this is, the market average beats managed funds over the long-term.  That is even before you subtract fees.  Some people made out like bandits on Magellan in the 80s and that really set the stage for thinking that market beating results were repeatable.  Unfortunately (for investors, but fortunately for fund managers), this is not the case.  You're much better off in the indexed average.

Slow and low.  Don't try to beat the market, just try to match it.  I have a little fun in my IRA with individual stocks, but I don't expect to beat the market.  If anything, I keep an eye on not losing to it.

Thanks for the advice and link.  I am basically doing this now.  75% of my investments are in a 50% stock fund(FASMX), 70% stock fund( FASGX) and a target retirement date fund.  The other 25% are spread among 10 other funds where I am just picking some I think are worthy and watching how they do in the next year.  In essence, trying to learn to invest by having some skin in the game.  At the moment I like dividend funds since I feel like I am making gains when they pay out (I know one should value capital appreciation on its own vs. value gained from dividends) but it makes me feel better.  My 50% did the best in the past few years since it is heavy on bonds, but now with the market loosening up, I am trying to get more into stock-heavy plans.

I feel I am doing ok at 34 yrs old with ~90k in my 401k so far.  My 401k benefits at my job are pretty good, I contribute 6% and my employer contributes 10% (yes 6% and 10%, not a typo).  Also opened at Roth IRA this year to start socking extra into (mostly as a college fund for the noobie in my family).  I just need to get to $2,500 faster in the Roth so it can be invested in something ...


Sounds good.  I think you can probably be a little higher risk than that at your age.  I wouldn't worry about throttling back into bonds until you're 45.  That said, I am an pretty high risk investor so I understand most people aren't comfortable with that.

BTW, 10% is an incredible employer contribution.  I would just verify that those are actual contributions and not a matching % up to 10%.  I only get 4.5% matching.

You may want to look into 529 Plans for the kid, or Coverdell plans if you qualify.  I see you're in GA as am I.  For the Georgia 529, you don't pay any taxes on 529 plan earnings for both in-state AND out-of-state tuition.  There are also tax deductions available.  I think that might be a better option.
 
2013-07-18 01:55:36 PM  

InmanRoshi: AngryDragon: My complaint is that I earned that money, through my work, for decades. Long hours, missed weekends and vacations, sometimes multiple jobs, saving every penny busting my ass to make sure I wouldn't end up in the worst-case retirement scenario. Being poor does suck hard, I've been there. Now after working for 30 years someone is going to come along and say "you have enough, someone else needs it, sorry". I'm not some 1%er. I'm just a guy being responsible for myself. I have two words for anyone believing that what I sweated for is fair game for "redistribution"...

FARK YOU.
AngryDragon: My complaint is that I earned that money, through my work, for decades. Long hours, missed weekends and vacations, sometimes multiple jobs, saving every penny busting my ass to make sure I wouldn't end up in the worst-case retirement scenario. Being poor does suck hard, I've been there. Now after working for 30 years someone is going to come along and say "you have enough, someone else needs it, sorry". I'm not some 1%er. I'm just a guy being responsible for myself. I have two words for anyone believing that what I sweated for is fair game for "redistribution"...

FARK YOU.

I love it when someone thinks they're a special little snowflake because they got up and went to work in the morning like everyone else.  Newsflash:  You're going to take out much more from Medicare and SSN than you ever put into it.  Mostly due to advancements in lifespan and medicine, for which you can thank publicly funded research institutions and education.


I am with AngryDragon on this one.  If you think you are entitled to what I create with my own hands, and I think I am entitled to what I create with my own hands, then we are at odds, and it will come out in favor of whoever is smarter, works harder, and has better negotiating power as between me and the federal government.  I can guarantee you that I will come out on top of that discussion without breaking any rules of the game or laws.

I look at a cost benefit analysis of what I pay vs what I receive when it comes to taxes. Right now, I pay WAY more in taxes than the benefit I receive.  And that is based on my value assessment, and I couldn't care less about yours.  Obviously the lower class receive way more than they pay, so they will feel differently.  Now, since I am in that situation, I have a number of options available in order to level the playing field.  Those are what I spend about 1-2 hours on a day.  It sucks for you, because instead of continuing my research and business investments in energy (my area of expertise) I have to spend those hours reducing my tax burden.  It's always a balance of my time, weighing spending time on contibuting to society vs reducing tax burden.  The way I see it, society is suffering because of it.  And so am I.  It's a lose/lose situation and one that will have the US looking like India in the next 100 years.
 
2013-07-18 02:02:11 PM  

plcow: Those are what I spend about 1-2 hours on a day.  It sucks for you, because instead of continuing my research and business investments in energy (my area of expertise) I have to spend those hours reducing my tax burden.  It's always a balance of my time, weighing spending time on contibuting to society vs reducing tax burden.  The way I see it, society is suffering because of it


Protip:
1) Society isn't suffering because of your anal obsession with reduced tax burden, you are.

2) Stop spending 2 hours a day figuring how to screw the tax man, and spend it being more profitable. You will come out with more money. Sure you may tick up a couple points in the "effective tax rate" category, but your income increase will go up more.
 
2013-07-18 02:04:43 PM  

plcow: It's always a balance of my time, weighing spending time on contibuting to society vs reducing tax burden. The way I see it, society is suffering because of it. And so am I. It's a lose/lose situation and one that will have the US looking like India in the next 100 years.


I think if we're going to me making comparisons like this, it would help to note that India is NOT a high tax state (lower than US) and that much of its problems arise from its high-degree of local government control leading to rent-seeking behaviors and low public servant pay leading to a heavy reliance on bribery.

The situations really aren't comparable.

BTW, I'm a bit confused as to what you guys are arguing about.  Are you upset about paying taxes on SS distributions or 401k distributions?
 
2013-07-18 02:16:07 PM  

plcow: If you think you are entitled to what I create with my own hands, and I think I am entitled to what I create with my own hands, then we are at odds, and it will come out in favor of whoever is smarter, works harder, and has better negotiating power as between me and the federal government.  I can guarantee you that I will come out on top of that discussion without breaking any rules of the game or laws.


images.wikia.com

This country already has a disproportionally regressive tax system (when you add up payroll tax, sales tax, income tax, etc - not just income tax only).  If you think dollar-based instead of percentage-based, yes, you do pay out more than you take in.  But by the same token, people of "lower class" see that they are paying out to society at a higher percentage than what those better off are paying, and generally have to work harder to have basic needs.
 
2013-07-18 02:19:03 PM  

Rapmaster2000: plcow: It's always a balance of my time, weighing spending time on contibuting to society vs reducing tax burden. The way I see it, society is suffering because of it. And so am I. It's a lose/lose situation and one that will have the US looking like India in the next 100 years.

I think if we're going to me making comparisons like this, it would help to note that India is NOT a high tax state (lower than US) and that much of its problems arise from its high-degree of local government control leading to rent-seeking behaviors and low public servant pay leading to a heavy reliance on bribery.

The situations really aren't comparable.

BTW, I'm a bit confused as to what you guys are arguing about.  Are you upset about paying taxes on SS distributions or 401k distributions?


My rant started with this comment:

"So unless you want to start seeing "Lucky Ducky" comics, you might be better off appreciating the fact that you have enough income that you can have some of it redistributed away."

I took offense to the idea that someone else had the right to "redistribute" my hard earned cash.
 
2013-07-18 02:20:15 PM  

HeadLever: InmanRoshi: Newsflash: You're going to take out much more from Medicare and SSN than you ever put into it.

Not necessarily.  As a general statistical average, yes.  However, there are always exceptions to this.


Medicare yes. I'd bet most people take out more than they put in eventually.

For SS get your statement as to how much you've put in each year. Get a list of the how much that money would have earned if it had been invested (here's a historic table  http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histret.h t ml

Interpolate the rest till your retirement age using some reasonable return and about 12% of your income..

Last time I checked an average male got about $290k back from SS and a female $310k from SS

Even with the disaster that was 2008 I'm going to put in about 3x what I can expect to get out.
 
2013-07-18 02:22:16 PM  
An article written by a baby boomer lamenting the current retirement challenges. How adorable.
 
2013-07-18 02:23:41 PM  

Sergeant Grumbles: Girion47: college debt paid off, have a house, can currently make the mortgage but the hard to enter professional market with low-ball salaries is what's making life difficult.

How did you manage the debt and the house with such low-ball salaries? Those are making every step difficult.


Focused on paying down debt hardcore while jumping companies when the opportunity presented itself.

My definition of lowball meant, low for the field I'm in and years experience that I have, it's not low for the average income nationwide.
 
2013-07-18 02:23:49 PM  

AngryDragon: Rapmaster2000: plcow: It's always a balance of my time, weighing spending time on contibuting to society vs reducing tax burden. The way I see it, society is suffering because of it. And so am I. It's a lose/lose situation and one that will have the US looking like India in the next 100 years.

I think if we're going to me making comparisons like this, it would help to note that India is NOT a high tax state (lower than US) and that much of its problems arise from its high-degree of local government control leading to rent-seeking behaviors and low public servant pay leading to a heavy reliance on bribery.

The situations really aren't comparable.

BTW, I'm a bit confused as to what you guys are arguing about.  Are you upset about paying taxes on SS distributions or 401k distributions?

My rant started with this comment:

"So unless you want to start seeing "Lucky Ducky" comics, you might be better off appreciating the fact that you have enough income that you can have some of it redistributed away."

I took offense to the idea that someone else had the right to "redistribute" my hard earned cash.


OK, but that's rather vague.  401k distributions are taxed by definition as they are tax-deferred.

Note:  someone has the right to redistribute your hard-earned cash because Americans have voted for it - from income taxes all the way down to property, gas, and ad-valorem taxes.  If you don't like it, you've got to change the system or leave.  I'm not trying to be flippant here.  Those are your two options.
 
2013-07-18 02:24:26 PM  

Rapmaster2000: Sounds good. I think you can probably be a little higher risk than that at your age. I wouldn't worry about throttling back into bonds until you're 45. That said, I am an pretty high risk investor so I understand most people aren't comfortable with that.

BTW, 10% is an incredible employer contribution. I would just verify that those are actual contributions and not a matching % up to 10%. I only get 4.5% matching.

You may want to look into 529 Plans for the kid, or Coverdell plans if you qualify. I see you're in GA as am I. For the Georgia 529, you don't pay any taxes on 529 plan earnings for both in-state AND out-of-state tuition. There are also tax deductions available. I think that might be a better option.


Yea, it is a 10% contribution.  Even if I lower my contribution say to 3%, employer still contributes 10% (state employee).

We looked at 529's and we are hedging our bets against the possibility of our child getting scholarships. HOPE, or possibly not choosing college.  That is why we went with the Roth.  Also, the Roth seemed to have more flexibility if we needed to pull from it for some unforeseen issue.  Also, how portable are 529's?  If we moved to a different state for example.

Glad to hear I can be more aggressive.  once the market turned down in 2008, I started looking more into the stock market and I know being so young I will see some more boom and bust cycles before I reach retirement.  I will probably change a good bit of investments next year.  I made a few "round-a-bouts" in the past months with my initial foray into changing investments, I am on a watch list with fidelity for a few funds.  Never knew that about funds, but that I what I am trying to do, learn.
 
2013-07-18 02:29:51 PM  
Rapmaster2000:
Note:  someone has the right to redistribute your hard-earned cash because Americans have voted for it - from income taxes all the way down to property, gas, and ad-valorem taxes.  If you don't like it, you've got to change the system or leave.  I'm not trying to be flippant here.  Those are your two options.

I'm OK with how my taxes are allocated now and I'm OK with the fact that I'll get about a third of what I ever put into Social Security.  I've reconciled myself to that fact.  What I took issue with is that the other poster suggested that even more should be taken.  If they appear to start voting for that, then I will definitely make myself heard.
 
2013-07-18 02:30:12 PM  

Fish in a Barrel: mcreadyblue: Please post the funds with less than 0.1% fees.

FUSVX


Thx...I see Apple is their number 1 investment.
 
2013-07-18 02:33:00 PM  
Hyjamon:

We looked at 529's and we are hedging our bets against the possibility of our child getting scholarships. HOPE, or possibly not choosing college.  That is why we went with the Roth.  Also, the Roth seemed to have more flexibility if we needed to pull from it for some unforeseen issue.

I like this thinking.

Also, how portable are 529's?  If we moved to a different state for example.
.

Not really sure.  I haven't reproduced yet, but the plan is that I will be investigating these things in a year or so.
 
2013-07-18 02:33:36 PM  

AngryDragon: Rapmaster2000: plcow: It's always a balance of my time, weighing spending time on contibuting to society vs reducing tax burden. The way I see it, society is suffering because of it. And so am I. It's a lose/lose situation and one that will have the US looking like India in the next 100 years.

I think if we're going to me making comparisons like this, it would help to note that India is NOT a high tax state (lower than US) and that much of its problems arise from its high-degree of local government control leading to rent-seeking behaviors and low public servant pay leading to a heavy reliance on bribery.

The situations really aren't comparable.

BTW, I'm a bit confused as to what you guys are arguing about.  Are you upset about paying taxes on SS distributions or 401k distributions?

My rant started with this comment:

"So unless you want to start seeing "Lucky Ducky" comics, you might be better off appreciating the fact that you have enough income that you can have some of it redistributed away."

I took offense to the idea that someone else had the right to "redistribute" my hard earned cash.


Yeah, and you kind of missed the point. I interpreted your complaint as that you didn't want to pay Social Security tax on income and then have means testing that would prevent you from collecting it. Nobody is entitled to get their Social Security money back. You're paying an insurance premium when you pay social security tax. Insurance works by collecting from many and paying out to few, otherwise the business model doesn't work. Income redistribution happens when you get back less than you pay in, because the long-lived poor collect more than they paid in. Means testing SS, which we don't currently do, would increase the amount of redistribution. But nobody is going to take your personal retirement savings away, if that's what you're talking about now. That belongs to you.
 
2013-07-18 02:34:37 PM  

Aarontology: Almost makes the destruction of pensions look like a bad idea, doesn't it?


Not when liberals are pushing pension payouts to 90% of salary or more, after 30 years and underfunded by using unreasonable growth projections. CALPers is all one needs to look at to understand why pensions don't work.
 
2013-07-18 02:36:32 PM  

The Banana Thug: Great Janitor: A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options (also, if you need your money from a 401k before retirement you get hit with double taxes and double penalties).

Jesus Christ.  Someone's giving you really bad investment advice.

If you need money from your 401k, you can actually do a loan instead of a withdrawal for up to $50K or 50% of your 401k total, whichever's lower, and it gets repaid through your paycheck deduction.  No penalty, but some double taxes (some say for the interest portion only, not the principal portion).


If you quite or lose your job you must immediately repay your 401k loan or it becomes a taxable event like a withdrawal.
 
2013-07-18 02:37:16 PM  
beanie babies and collector plates is all i need
 
2013-07-18 02:40:59 PM  

Hyjamon: Rapmaster2000: Sounds good. I think you can probably be a little higher risk than that at your age. I wouldn't worry about throttling back into bonds until you're 45. That said, I am an pretty high risk investor so I understand most people aren't comfortable with that.

BTW, 10% is an incredible employer contribution. I would just verify that those are actual contributions and not a matching % up to 10%. I only get 4.5% matching.

You may want to look into 529 Plans for the kid, or Coverdell plans if you qualify. I see you're in GA as am I. For the Georgia 529, you don't pay any taxes on 529 plan earnings for both in-state AND out-of-state tuition. There are also tax deductions available. I think that might be a better option.

Yea, it is a 10% contribution.  Even if I lower my contribution say to 3%, employer still contributes 10% (state employee).

We looked at 529's and we are hedging our bets against the possibility of our child getting scholarships. HOPE, or possibly not choosing college.  That is why we went with the Roth.  Also, the Roth seemed to have more flexibility if we needed to pull from it for some unforeseen issue.  Also, how portable are 529's?  If we moved to a different state for example.

Glad to hear I can be more aggressive.  once the market turned down in 2008, I started looking more into the stock market and I know being so young I will see some more boom and bust cycles before I reach retirement.  I will probably change a good bit of investments next year.  I made a few "round-a-bouts" in the past months with my initial foray into changing investments, I am on a watch list with fidelity for a few funds.  Never knew that about funds, but that I what I am trying to do, learn.


I hope you know the State can take their contributions back and give you an IOU redeemable at a future date.
 
2013-07-18 02:44:53 PM  
Good thing we eliminated those pension plans everyone used to have!
 
2013-07-18 02:48:36 PM  

pdieten: Yeah, and you kind of missed the point. I interpreted your complaint as that you didn't want to pay Social Security tax on income and then have means testing that would prevent you from collecting it. Nobody is entitled to get their Social Security money back. You're paying an insurance premium when you pay social security tax. Insurance works by collecting from many and paying out to few, otherwise the business model doesn't work. Income redistribution happens when you get back less than you pay in, because the long-lived poor collect more than they paid in. Means testing SS, which we don't currently do, would increase the amount of redistribution. But nobody is going to take your personal retirement savings away, if that's what you're talking about now. That belongs to you.


No, I got your point quite well.  After paying into social security for 30+ years AND saving privately for retirement, you are telling me that if I save enough that my benefit should be reduced or forfeit..  I would already have to live to 115 to get out of SS what I contributed (plus interest).  It's not my fault that the government has screwed up the SS Trust.   At what point does fairness to an individual's labor get coopted by the general public?  It's ludicrous.  SS is supposed to be insurance, that's correct.  But EVERYONE is supposed to collect on it in some form or another.  That was the deal.  Retirement, survivor benefits, disability, available to every citizen.

If that is the case then I shouldn't be forced to play.  I will happily give up my SS benefit for life, surrendering everything that I've paid in so far, if I can just opt out.  I can easily provide for myself by adding my SS deduction to my investments.  Again, I have no problem with removing the income cap to help make the system healthier.  But if I contribute, I better damn well get a benefit back when the time comes.  Otherwise it really IS a Ponzi scheme.
 
2013-07-18 02:48:48 PM  
1/3 to rent
1/3 to taxes
1/3 to retirement


Where are these taxes you speak of? Not for me, thanks.
 
2013-07-18 03:03:16 PM  

mcreadyblue: Hyjamon: Rapmaster2000: Sounds good. I think you can probably be a little higher risk than that at your age. I wouldn't worry about throttling back into bonds until you're 45. That said, I am an pretty high risk investor so I understand most people aren't comfortable with that.

BTW, 10% is an incredible employer contribution. I would just verify that those are actual contributions and not a matching % up to 10%. I only get 4.5% matching.

You may want to look into 529 Plans for the kid, or Coverdell plans if you qualify. I see you're in GA as am I. For the Georgia 529, you don't pay any taxes on 529 plan earnings for both in-state AND out-of-state tuition. There are also tax deductions available. I think that might be a better option.

Yea, it is a 10% contribution.  Even if I lower my contribution say to 3%, employer still contributes 10% (state employee).

We looked at 529's and we are hedging our bets against the possibility of our child getting scholarships. HOPE, or possibly not choosing college.  That is why we went with the Roth.  Also, the Roth seemed to have more flexibility if we needed to pull from it for some unforeseen issue.  Also, how portable are 529's?  If we moved to a different state for example.

Glad to hear I can be more aggressive.  once the market turned down in 2008, I started looking more into the stock market and I know being so young I will see some more boom and bust cycles before I reach retirement.  I will probably change a good bit of investments next year.  I made a few "round-a-bouts" in the past months with my initial foray into changing investments, I am on a watch list with fidelity for a few funds.  Never knew that about funds, but that I what I am trying to do, learn.

I hope you know the State can take their contributions back and give you an IOU redeemable at a future date.


Something about this sounds fishy to me.  I don't know how they would do that or how that could hold up in court, sounds like breach of contract.  Please enlighten me (note this is not a pension, but a 401k) on how they can ask for the money they paid me back.  I can see if they erroneously over-paid me and ask for the overage back, but I find it hard for them to take what was correctly paid to me back.

Also, with none of us getting pay raises for 5+ years, if they were to pull a stunt like that, the brain drain from GA would be incredible.
 
2013-07-18 03:07:08 PM  

AngryDragon: pdieten: Yeah, and you kind of missed the point. I interpreted your complaint as that you didn't want to pay Social Security tax on income and then have means testing that would prevent you from collecting it. Nobody is entitled to get their Social Security money back. You're paying an insurance premium when you pay social security tax. Insurance works by collecting from many and paying out to few, otherwise the business model doesn't work. Income redistribution happens when you get back less than you pay in, because the long-lived poor collect more than they paid in. Means testing SS, which we don't currently do, would increase the amount of redistribution. But nobody is going to take your personal retirement savings away, if that's what you're talking about now. That belongs to you.

No, I got your point quite well.  After paying into social security for 30+ years AND saving privately for retirement, you are telling me that if I save enough that my benefit should be reduced or forfeit..  I would already have to live to 115 to get out of SS what I contributed (plus interest).  It's not my fault that the government has screwed up the SS Trust.   At what point does fairness to an individual's labor get coopted by the general public?  It's ludicrous.  SS is supposed to be insurance, that's correct.  But EVERYONE is supposed to collect on it in some form or another.  That was the deal.  Retirement, survivor benefits, disability, available to every citizen.

If that is the case then I shouldn't be forced to play.  I will happily give up my SS benefit for life, surrendering everything that I've paid in so far, if I can just opt out.  I can easily provide for myself by adding my SS deduction to my investments.  Again, I have no problem with removing the income cap to help make the system healthier.  But if I contribute, I better damn well get a benefit back when the time comes.  Otherwise it really IS a Ponzi scheme.


I think you don't understand how Social Security works. Second time: You are entitled to NOTHING from Social Security. That is not your money. It does not belong to you in any way. If you die before the age you can start to collect, neither you nor your estate gets any of it. And you don't get to opt out of the system for the exact same reason that you're not allowed to just "opt out" of Obamacare. The model doesn't work if everyone doesn't participate. Have you thought about what happens if you lose your savings? Could happen very easily, and then you would pass the means test and collect Social Security. What if you had opted out? Then what?

How it works is: As the law stands today, if you contribute during your working lifetime, you get money when you reach the age of distribution. That is the beginning and end of your "entitlement" as of today. It could be changed. You may or may not get a benefit depending on how the law is written at the time you try to collect.

Incidentally, a Ponzi scheme is illegal because at some point the new income will end and there won't be any money to pay back investors. The US government cannot by definition run a Ponzi scheme because we assume it will continue to exist in perpetuity and always be able to collect new income to pay out. The trust fund has absolutely nothing to do with anything. That's just where they stick the excess collected funds that they don't have to pay out immediately. If there is no trust fund, then the distributions are made from current collected funds. Maybe it's less than what the statement had said 20 years prior. Oh well.
 
2013-07-18 03:07:25 PM  

mcreadyblue: Hyjamon: Rapmaster2000: Sounds good. I think you can probably be a little higher risk than that at your age. I wouldn't worry about throttling back into bonds until you're 45. That said, I am an pretty high risk investor so I understand most people aren't comfortable with that.

BTW, 10% is an incredible employer contribution. I would just verify that those are actual contributions and not a matching % up to 10%. I only get 4.5% matching.

You may want to look into 529 Plans for the kid, or Coverdell plans if you qualify. I see you're in GA as am I. For the Georgia 529, you don't pay any taxes on 529 plan earnings for both in-state AND out-of-state tuition. There are also tax deductions available. I think that might be a better option.

Yea, it is a 10% contribution.  Even if I lower my contribution say to 3%, employer still contributes 10% (state employee).

We looked at 529's and we are hedging our bets against the possibility of our child getting scholarships. HOPE, or possibly not choosing college.  That is why we went with the Roth.  Also, the Roth seemed to have more flexibility if we needed to pull from it for some unforeseen issue.  Also, how portable are 529's?  If we moved to a different state for example.

Glad to hear I can be more aggressive.  once the market turned down in 2008, I started looking more into the stock market and I know being so young I will see some more boom and bust cycles before I reach retirement.  I will probably change a good bit of investments next year.  I made a few "round-a-bouts" in the past months with my initial foray into changing investments, I am on a watch list with fidelity for a few funds.  Never knew that about funds, but that I what I am trying to do, learn.

I hope you know the State can take their contributions back and give you an IOU redeemable at a future date.


Quick google search gave me this: Wiki - Under Federal Law an employer can take back all or part of the matching money they put into an employees account if the worker fails to stay on the job for a certain number of years.

This sounds like taking it back before a vesting period of time is met.  My plan has no vesting period.
 
2013-07-18 03:09:45 PM  
Some of the Farkers in this thread seem to have a head for this sort of thing, so I'll ask:

About 10 years ago, I stashed a very small amount of money (that I wouldn't miss) in mutual funds that eventually became HILGX and HEIIX (Hennessey Cornerstone Large Growth and Equity & Income Institutional Class, respectively). Now, it works out to be about $1,500 total between the two funds, give or take. Not a real significant amount, but there's a comma in there, so it's worth taking a look at. Are these funds any good? Should I be thinking about consolidating that money into one or the other, or letting it ride? Is this such a pithy amount that it doesn't make much of a difference?

I don't have disposable income to throw into them (been reinvesting the dividends, but that's the only activity). We're squirreling money away into an emergency fund and to pay off the mortgage in the next few years, and don't want to put that money at risk (i.e., this isn't farkaround money like the initial investment).

/Meeting the company match on the Vanguard 401k.
 
2013-07-18 03:12:30 PM  

Rapmaster2000: Are you upset about paying taxes on SS distributions or 401k distributions?


Honestly, everything.

We're losing a third of our incomes (or more.  A lot more if you count the pre-paycheck payroll taxes).   Then we get farked to the tune of 9-10% of what's left through sales tax. Any actual property we manage to acquire gets us farked by property taxes. Any money that we hang onto to avoid the last 2 gets us farked by capital gains taxes which run at just a little less than a third or so.

And since the Democrats are basically stealing every idea from Europe whether it's good or bad (and not all of them are bad), and theRepublicans are eating their own young so they can't fight it effectively:

* Once we get single-payer, we'll be getting farked to the tune of another 15-20% in direct taxes since the poors won't becontributing a dime.
* At some point, we'll get a wealth tax, meaning that whatever we earn and manage to hide away, we can't keep.

So right now, we're keeping little more than  half of every dollar we make (and the moderately rich people are probably closer to a third (Of course, the super-super rich people are at about two-thirds and this is a problem)).  And once the state pensions blow up, along with SS and Medi*, we'll be at 70% income taxes for everyone.

I wouldn't mind this (yes, I'd still biatch, but biatching is what we do) if I could actually see benefits from all this.  But I can't.  Broken, undersized infrastructure that hasn't been upgraded since the 1960's and a combination of environmentalism, NIMBYISM, and corruption preventing any upgrades, crushing deficits because of promises made by my grandparents on my behalf, and historically low military spending as a percentage of GDP are combining to screw everyone.

If most of this stuff was "For all, by all", I could go with it.  Give every major city a New-York-style (ie: non-bus) mass transit system so I don't CARE about downtown traffic, coupled with a fantastic Detroit-style suburban road network and reasonably high-speed rail to pickup the suburban commuters (Hint: If rush-hour traffic is faster than the mass transit, you have failed.  Looking at you, Caltrain vs. 101),  I'm game.  Run FANTASTIC High-speed rail on the 3-4 regions that have sufficient density and close-enough cities to justify the massive expenditure?  Let's talk.  Throw Google Fiber into every corner of the country?  I'm there.  Back off on the crazy zoning laws in the major cities so we can get some affordable housing and I'm not blowing $2500/month on a 1BR to get working plumbing and good enough electrical systems to drive a microwave and a tv at the same time? (Note: I can't afford that, so I don't have those things)  Done.

But it's not.  It's massive inefficient (since the bureaucrats have to take their cut) wealth transfers designed to create a permanent welfare class combined with crony capitalism to make the rich guys richer.

You want the middle class to come back?  Make it pay to work again.
 
2013-07-18 03:26:35 PM  

Parkanzky: I honestly don't know how anyone that's firmly in the "middle class" can ever hope to retire.


Maybe if the government let us keep what we earned, rather than contribute into a program which gains no interest, cant be withdrawn early, barely keeps up with inflation and offers no array of growth options, you might have a better shot at retiring.

The fact that so many people *Need* social security is because they are forced into it and cant afford anything else.  Classic example of being thankful for something you have no choice but to be a part of.
 
2013-07-18 03:28:20 PM  
meyerkev:

But it's not.  It's massive inefficient (since the bureaucrats have to take their cut) wealth transfers designed to create a permanent welfare class combined with crony capitalism to make the rich guys richer.

This is where the all-too-frequent paranoia comes into these arguments.  Government is not buying votes with a permanent underclass.  It's paranoid and obnoxious to presuppose that there is this whole class of takers below you preferring to live in poverty due to stupidity and sloth, and a maniacal class of puppet-masters orchestrating it all from above.

You want the middle class to come back? Make it pay to work again.

You can go ahead and defer additional earnings because of higher tax rates if you'd like.   I won't.

You're committing the Randian fallacy of assuming that whatever work you perform is so far outside of the common man that your foregoing it will lead to it not being done at all.  Fortunately for society, one out of five people can do pretty much any job with the right amount of training.  To make a specific example, Jamie Dimon is not a precious snowflake.

To summarize all of what I'm trying to say and give you some advice - stop reading Zerohedge.  That is, unless you want to keep throwing money into gold while waiting for the imminent hyper-mega-flation which is happening any day now.  Any.day.now.
 
2013-07-18 03:34:56 PM  

o5iiawah: Parkanzky: I honestly don't know how anyone that's firmly in the "middle class" can ever hope to retire.

Maybe if the government let us keep what we earned, rather than contribute into a program which gains no interest, cant be withdrawn early, barely keeps up with inflation and offers no array of growth options, you might have a better shot at retiring.

The fact that so many people *Need* social security is because they are forced into it and cant afford anything else.  Classic example of being thankful for something you have no choice but to be a part of.


Oh yay. Another one who doesn't understand the difference between Social Security and a retirement fund. That's just awesome. Would it really be too much to ask to go out and learn what Social Security is *for* before you go spouting your ignorance all over the Internet?
 
2013-07-18 03:38:14 PM  

Lawnchair: Mad Scientist: If you're relying on SS for your retirement, you're going to be a very poor moran.

nocturnal001: Most people seem to only rely on SS, 401k is gravy for a lot of them.

A little of A, a little of B.  There are  millions of seniors with nothing but SS income (and another 8.5 million or so non-seniors with nothing but SSDI disability).  It doesn't come recommended if you can avoid it. That said they aren't, 99% of the time, starving and homeless.  They end up in crappy ultra-low-cost small towns (there are plenty of towns where such retirees are the typical resident), eating tuna sandwiches, watching Matlock, going to church, and waiting to die.  It's amazing how little many grannies have to spend.

Suck, suck, suck? Sure. OMG worst thing ever? Not really.


FTFY
 
2013-07-18 03:39:02 PM  
To everyone whining about taxes, suck it up.

I like being in a country that has taxes, as the places without them tend to be shiatholes. Granted there are a few exceptions, but they have other sources of government revenue.

If it were up to me, I'd let you never pay taxes again, and pay back, with interest, every cent you've paid in. The caveat would be that you no longer has access to anything taxes pay for. Would anyone take that deal?
 
2013-07-18 03:39:56 PM  

Stone Meadow: mcreadyblue: Social Security, currently can pay 70% of promised obligations forever.

It's not in that bad of shape.

When they means test SS everyone eligible will get 100% forever.


Screw those who save. The ant and the grasshopper is only a story afterall.
 
2013-07-18 03:44:26 PM  

Sergeant Grumbles: CujoQuarrel: Ahhh. Someone else who's run the numbers. Mine was close to $900k.

And on average you get back about $300k

It's insurance, not investment.
Do you calculate the ROI on your health insurance? Car insurance? Homeowner's insurance?
I'll bet you could make a lot of more money if you pulled your money out of those worthless.... unless something bad were to happen... amirite?


First of all, you don't collect insurance unless the trigger event happens.  With SS you do. So no, it's not insurance.  And yes I do calculate ROI on insurance, everybody does.  And when I run an assessment of SS the answer is quite simple.  To the extent that it is "insurance" I would rather be self insured.
 
2013-07-18 03:44:38 PM  

Hyjamon: We looked at 529's and we are hedging our bets against the possibility of our child getting scholarships. HOPE, or possibly not choosing college.  That is why we went with the Roth.  Also, the Roth seemed to have more flexibility if we needed to pull from it for some unforeseen issue.  Also, how portable are 529's?  If we moved to a different state for example.


There's a notable downside to 529s compared to what you're doing with IRA/401k/403b/etc.  Besides the possibility that the kid just isn't college material.

That is, when the offspring go to college, you will fill out the FAFSA.  You list parental assets on it.  Those assets include any 529 savings (which is perfectly reasonable... the whole point of them was saving for college).  However, and this is key, FAFSA assets don't include your retirement savings in qualified retirement-tagged accounts (IRAs, 401ks, etc).  They also don't include the equity/value of your primary residence.

This is what some really, really clever cookies with some inherited wealth do.  Maximize retirement savings like mad any chance you get.  Max 401k + IRA = ~$21,000 per year for each spouse.  Pay off the house in there, too.

If you're lucky, when the kid turns 18, you can have a racked up a near-million-dollar retirement account, have a nice paid-off house...  and according to the FAFSA you're utterly penniless.  Even better, take a few years off work when the kid turns 17.  As far as the FAFSA is concerned,  you're penniless and in poverty.    This means... need-based aid.

BTW - This also ties to another major reason to consider IRAs/401ks over taxable accounts.  That is, if you're sued or have to file bankruptcy, your retirement accounts are protected by the courts more often than not.
 
2013-07-18 03:45:06 PM  

MyRandomName: Stone Meadow: mcreadyblue: Social Security, currently can pay 70% of promised obligations forever.

It's not in that bad of shape.

When they means test SS everyone eligible will get 100% forever.

Screw those who save. The ant and the grasshopper is only a story afterall.


Yes.  Nothing screws people more than deductions for mortgage interest, property taxes, retirement plan contributions, educational savings deductions, and muni bond deductions.

You're much better off renting your entire life, spending all of your earnings, and living like a king off of SS at 67.
 
2013-07-18 03:51:01 PM  

InmanRoshi: pdieten: Even if you're getting free money from the government from income redistribution, being poor sucks so hard that it's worth working harder to avoid it.

The American worker has shown no problems working harder and being more productive.   They're just seeing any fruits of their labor in terms of living wages since the American public laughably and gullibly bought into "trickle down" economics sold to them by Wall Street

.


There was a boom in computational devices in the late 70s to early 80s. Labor capital is not responsible for productivity gains. If you took a graph arou d the time of the boom in manufacturing you would see the same divergence. Your graph is farking idiotic.

Productivity goes to many areas including costs of goods. It has never been 1 to 1 with labor. Look at the scales on the axis. Hate this farking graph.
 
2013-07-18 03:52:21 PM  

Rapmaster2000: You want the middle class to come back? Make it pay to work again.

You can go ahead and defer additional earnings because of higher tax rates if you'd like.   I won't.


If you read that link, the basic problem is that you're not deferring additional earnings, you're losing tens of thousands of dollars in benefits.

www.zerohedge.com

Now here in SV, you'd have to be crazy to work less.  Rent on a functional apartment is approaching $2000/month, so being at $50K is poverty, and $70K is roommate/paycheck-to-paycheck time.

But if you're in the midwest, where $55K a year is totally survivable, and only serious professionals or really, really good union jobs can break $60K, yeah, you're way better off working at Walmart and abusing welfare.  And you'll teach your kids that abusing welfare is better than actually working.  And THAT's the problem.  The utter inability to break out of poverty, combined with a culture that teaches that living on the welfare is better than not working.  (And remember, that chart doesn't include SSI.  With SSI, we're off to the races.)

/And yes, I wish that the exchange rate between "Money I spend"/"Stuff I get" was better, but the above is the real problem, especially once we get even higher taxes and wealth taxes.
 
2013-07-18 03:55:57 PM  

haywatchthis: beanie babies and collector plates is all i need


great, I can supply you all you will ever need in exchange for your eggs and some coffee.
 
2013-07-18 03:57:36 PM  

meyerkev: So right now, we're keeping little more than  half of every dollar we make (and the moderately rich people are probably closer to a third (Of course, the super-super rich people are at about two-thirds and this is a problem)).  And once the state pensions blow up, along with SS and Medi*, we'll be at 70% income taxes for everyone.


growlersoftware.com
 
2013-07-18 03:59:34 PM  

Rapmaster2000: To summarize all of what I'm trying to say and give you some advice - stop reading Zerohedge.


I second that advice.
 
2013-07-18 04:01:07 PM  

Lawnchair: If you're lucky, when the kid turns 18, you can have a racked up a near-million-dollar retirement account, have a nice paid-off house...  and according to the FAFSA you're utterly penniless.  Even better, take a few years off work when the kid turns 17.  As far as the FAFSA is concerned,  you're penniless and in poverty.    This means... need-based aid.


I ended up doing something similar inadvertently.

Freshman year, I got screwed.  Divorced Parents combined for about $100K (and we had to fill out another form that counts both parents), so I got boned.
Sophomore year, the FAFSA only counts one parent in the divorce.  And she got unemployed, and I hadn't started making money off the internships.  So we filled out the little "Change in income" form, and got a full 100% grants ride.
Junior year, Mom had a job again, but we got to use LAST year, so once again we got a mostly full ride (the mostly coming from my income from CS internships).
And then senior semester, I was only part-time and Mom was unemployed again, so once again, a mostly full ride.

I ended up escaping college with $15K in loans, where going in I had expected to end up with $50K.
 
2013-07-18 04:08:55 PM  

robertus: Some of the Farkers in this thread seem to have a head for this sort of thing, so I'll ask:

About 10 years ago, I stashed a very small amount of money (that I wouldn't miss) in mutual funds that eventually became HILGX and HEIIX (Hennessey Cornerstone Large Growth and Equity & Income Institutional Class, respectively). Now, it works out to be about $1,500 total between the two funds, give or take. Not a real significant amount, but there's a comma in there, so it's worth taking a look at. Are these funds any good? Should I be thinking about consolidating that money into one or the other, or letting it ride? Is this such a pithy amount that it doesn't make much of a difference?

I don't have disposable income to throw into them (been reinvesting the dividends, but that's the only activity). We're squirreling money away into an emergency fund and to pay off the mortgage in the next few years, and don't want to put that money at risk (i.e., this isn't farkaround money like the initial investment).

/Meeting the company match on the Vanguard 401k.


I assume this is in a taxable account, and not an IRA.  It sounds like you don't want to take risk on that $1500 because you'll need it within a short-term time frame.  If so, sell your shares and put it in an FDIC insured bank account or bank CD.  No point taking market risk if you're going to need that money soon, say within five years or so.

If you're looking for a long-term investment, go with boring-ass index funds.

If you chart the performance of HILGX compared to the plain vanilla Vanguard Total Stock Market index fund (VTSMX) or ETF (VTI), you'll see there isn't a great deal of difference.  You've been paying a 0.98% expense ratio vs VTSMX's expense ratio of 0.17%, and VTI's expense ratio of 0.05%.  That's not much, but every little bit in your pocket helps.

I'm not a big fan of balanced funds because I prefer a bit more control over my portfolio's asset allocation, but the same argument holds for HEIIX, which has a portfolio of about 60% stocks, 35% bonds, and 5% cash, with an expense ratio of 1.08%.  Compare its performance to Vanguard Wellington (VWELX), which has a similar stock/bond ratio and an expense ratio of 0.25%.

If you don't need that $1500 soon, you could just let it ride.  You might have to take a long-term capital gains haircut by selling, and paying higher expense ratios on holdings of $1500 going forward isn't going to kill you.  I'd put any new investment money into cheap-ass Vanguard funds, or the equivalent (Fidelity Spartan funds, etc.).

If you want to know more, check out the "Bogleheads" books on investing and retirement planning.  Bogleheads.org has a good financial wiki, and very helpful forums.  Also check out early-retirement.org
 
2013-07-18 04:09:08 PM  

Aarontology: Almost makes the destruction of pensions look like a bad idea, doesn't it?


I don't know about you, but I'd prefer to own my retirement assets instead of rely on the promise of my company that the money will be there when I retire.
 
2013-07-18 04:10:37 PM  

robertus: Some of the Farkers in this thread seem to have a head for this sort of thing, so I'll ask:

About 10 years ago, I stashed a very small amount of money (that I wouldn't miss) in mutual funds that eventually became HILGX and HEIIX (Hennessey Cornerstone Large Growth and Equity & Income Institutional Class, respectively). Now, it works out to be about $1,500 total between the two funds, give or take. Not a real significant amount, but there's a comma in there, so it's worth taking a look at. Are these funds any good? Should I be thinking about consolidating that money into one or the other, or letting it ride? Is this such a pithy amount that it doesn't make much of a difference?

I don't have disposable income to throw into them (been reinvesting the dividends, but that's the only activity). We're squirreling money away into an emergency fund and to pay off the mortgage in the next few years, and don't want to put that money at risk (i.e., this isn't farkaround money like the initial investment).

/Meeting the company match on the Vanguard 401k.



I had a little money in Hennessy Cornerstone Growth several years ago.  I wasn't impressed.  Looking at the funds you own, their performance against their benchmarks isn't favorable with the fees you're paying.  Now I have a GED in economics, mind you, but I think you'd be better in an index fund.  As far as actively managed funds go, I've been a big fan of Oakmark (OAKMX, OAKIX) for over 10 years
 
2013-07-18 04:11:42 PM  

impaler: Rapmaster2000: To summarize all of what I'm trying to say and give you some advice - stop reading Zerohedge.

I second that advice.


I normally don't, but it was just the first version of that chart I found.  I'd seen the chart before and did a search for "The Welfare Cliff" and it was the first result.

/Having read a couple of the other articles, it actually reminds me of something I might have written during my teenage rebellion phase where I went: "My mother is an utter hippy so I should end up as this contrary libertarian conservative"
 
2013-07-18 04:12:25 PM  

meyerkev: yeah, you're way better off working at Walmart and abusing welfare.  And you'll teach your kids that abusing welfare is better than actually working


If they're working, how are they abusing welfare?

Also, how does that $29,000 job compare to the $69,000 when the kid hits 18 (and 12 for the child care tax credit)?

As for the yellow "child care" component, I'm not sure all what that entails in that graph (it's shown as over $15,000).

The 'child care' tax credit is capped at $6000 for two children, and you only get it by putting kids in child care when you work, and the kids have to be 12 and younger. Not sure how that is going to stop someone from working when you can't get it without working.
 
2013-07-18 04:14:28 PM  

meyerkev: Lawnchair: If you're lucky, when the kid turns 18, you can have a racked up a near-million-dollar retirement account, have a nice paid-off house...  and according to the FAFSA you're utterly penniless.  Even better, take a few years off work when the kid turns 17.  As far as the FAFSA is concerned,  you're penniless and in poverty.    This means... need-based aid.

I ended up doing something similar inadvertently.

Freshman year, I got screwed.  Divorced Parents combined for about $100K (and we had to fill out another form that counts both parents), so I got boned.
Sophomore year, the FAFSA only counts one parent in the divorce.  And she got unemployed, and I hadn't started making money off the internships.  So we filled out the little "Change in income" form, and got a full 100% grants ride.
Junior year, Mom had a job again, but we got to use LAST year, so once again we got a mostly full ride (the mostly coming from my income from CS internships).
And then senior semester, I was only part-time and Mom was unemployed again, so once again, a mostly full ride.

I ended up escaping college with $15K in loans, where going in I had expected to end up with $50K.


Is this the same person who was angry at taxes a few replies up-thread?

"I wouldn't mind this (yes, I'd still biatch, but biatching is what we do) if I could actually see benefits from all this "

no comment.  I think you were arguing efficiency of taxes, but you may have just started a flame war.
 
2013-07-18 04:18:21 PM  

meyerkev: Rapmaster2000: You want the middle class to come back? Make it pay to work again.

You can go ahead and defer additional earnings because of higher tax rates if you'd like.   I won't.

If you read that link, the basic problem is that you're not deferring additional earnings, you're losing tens of thousands of dollars in benefits.

[www.zerohedge.com image 600x449]

Now here in SV, you'd have to be crazy to work less.  Rent on a functional apartment is approaching $2000/month, so being at $50K is poverty, and $70K is roommate/paycheck-to-paycheck time.

But if you're in the midwest, where $55K a year is totally survivable, and only serious professionals or really, really good union jobs can break $60K, yeah, you're way better off working at Walmart and abusing welfare.  And you'll teach your kids that abusing welfare is better than actually working.  And THAT's the problem.  The utter inability to break out of poverty, combined with a culture that teaches that living on the welfare is better than not working.  (And remember, that chart doesn't include SSI.  With SSI, we're off to the races.)

/And yes, I wish that the exchange rate between "Money I spend"/"Stuff I get" was better, but the above is the real problem, especially once we get even higher taxes and wealth taxes.


A single mom is better off making $29,000 with $1,000,000 in benefits than making $29,000 with $57,000 in benefits.  They're both about as likely to occur.

FYI, you can save yourself the trouble and just grab the Tom Ridge Pennsylvania slides from The American Enterprise Institute:  http://www.aei.org/files/2012/07/11/-alexander-presentation_100635322 7 8.pdf

I love this one:

www.zerohedge.com


You need to adjust your bullshiat detector.  Especially when it's the kind of bullshiat you like to hear.

1.  That number above, 66,000,000, includes everyone - including children.
2.  A wealth producer means "someone who is employed in a private sector job".  It doesn't include people on retirement who are drawing a salary from savings and paying taxes.  Apparently, a dollar invested isn't "producing any wealth."  That sounds kinda liberal.
3.  Garbage in garbage out.

There is no "welfare crisis" in America.  That siren wail is 50 years old and it's been due to destroy America any day now since then.  Any.day.now.
 
2013-07-18 04:26:08 PM  
I'm glad I invested in Glen Beck gold and Franklin mint plates. Screw all you poor people!
 
2013-07-18 04:26:25 PM  

Hyjamon: mcreadyblue: Hyjamon: Rapmaster2000: Sounds good. I think you can probably be a little higher risk than that at your age. I wouldn't worry about throttling back into bonds until you're 45. That said, I am an pretty high risk investor so I understand most people aren't comfortable with that.

BTW, 10% is an incredible employer contribution. I would just verify that those are actual contributions and not a matching % up to 10%. I only get 4.5% matching.

You may want to look into 529 Plans for the kid, or Coverdell plans if you qualify. I see you're in GA as am I. For the Georgia 529, you don't pay any taxes on 529 plan earnings for both in-state AND out-of-state tuition. There are also tax deductions available. I think that might be a better option.

Yea, it is a 10% contribution.  Even if I lower my contribution say to 3%, employer still contributes 10% (state employee).

We looked at 529's and we are hedging our bets against the possibility of our child getting scholarships. HOPE, or possibly not choosing college.  That is why we went with the Roth.  Also, the Roth seemed to have more flexibility if we needed to pull from it for some unforeseen issue.  Also, how portable are 529's?  If we moved to a different state for example.

Glad to hear I can be more aggressive.  once the market turned down in 2008, I started looking more into the stock market and I know being so young I will see some more boom and bust cycles before I reach retirement.  I will probably change a good bit of investments next year.  I made a few "round-a-bouts" in the past months with my initial foray into changing investments, I am on a watch list with fidelity for a few funds.  Never knew that about funds, but that I what I am trying to do, learn.

I hope you know the State can take their contributions back and give you an IOU redeemable at a future date.

Something about this sounds fishy to me.  I don't know how they would do that or how that could hold up in court, sounds like breach of contract.  Please enlighten me (note this is not a pension, but a 401k) on how they can ask for the money they paid me back.  I can see if they erroneously over-paid me and ask for the overage back, but I find it hard for them to take what was correctly paid to me back.

Also, with none of us getting pay raises for 5+ years, if they were to pull a stunt like that, the brain drain from GA would be incredible.


California paid with IOUs a few years ago.

Also, City of Detroit just declared bankruptcy.

Unless the money is in your account, it's not really yours.
 
2013-07-18 04:28:50 PM  

Rapmaster2000: A single mom is better off making $29,000 with $1,000,000 in benefits than making $29,000 with $57,000 in benefits.  They're both about as likely to occur.

FYI, you can save yourself the trouble and just grab the Tom Ridge Pennsylvania slides from The American Enterprise Institute:  http://www.aei.org/files/2012/07/11/-alexander-presentation_100635322 7 8.pdf


And back to that yellow "child care" line that is $15,000 big. Apparently it just stops at around $43,000. If it's referring to the child care tax credit, it doesn't end at $43,000, it just never goes below 20% after $43,000. Even then, it's at most 35% of what you pay for child care, so to get the max $6000, you need to spend over $17,000 in child care.
 
2013-07-18 04:33:02 PM  

mcreadyblue: Hyjamon: mcreadyblue: Hyjamon: Rapmaster2000: Sounds good. I think you can probably be a little higher risk than that at your age. I wouldn't worry about throttling back into bonds until you're 45. That said, I am an pretty high risk investor so I understand most people aren't comfortable with that.

BTW, 10% is an incredible employer contribution. I would just verify that those are actual contributions and not a matching % up to 10%. I only get 4.5% matching.

You may want to look into 529 Plans for the kid, or Coverdell plans if you qualify. I see you're in GA as am I. For the Georgia 529, you don't pay any taxes on 529 plan earnings for both in-state AND out-of-state tuition. There are also tax deductions available. I think that might be a better option.

Yea, it is a 10% contribution.  Even if I lower my contribution say to 3%, employer still contributes 10% (state employee).

We looked at 529's and we are hedging our bets against the possibility of our child getting scholarships. HOPE, or possibly not choosing college.  That is why we went with the Roth.  Also, the Roth seemed to have more flexibility if we needed to pull from it for some unforeseen issue.  Also, how portable are 529's?  If we moved to a different state for example.

Glad to hear I can be more aggressive.  once the market turned down in 2008, I started looking more into the stock market and I know being so young I will see some more boom and bust cycles before I reach retirement.  I will probably change a good bit of investments next year.  I made a few "round-a-bouts" in the past months with my initial foray into changing investments, I am on a watch list with fidelity for a few funds.  Never knew that about funds, but that I what I am trying to do, learn.

I hope you know the State can take their contributions back and give you an IOU redeemable at a future date.

Something about this sounds fishy to me.  I don't know how they would do that or how that could hold up in court, sounds like breach of contract.  Please enlighten me (note this is not a pension, but a 401k) on how they can ask for the money they paid me back.  I can see if they erroneously over-paid me and ask for the overage back, but I find it hard for them to take what was correctly paid to me back.

Also, with none of us getting pay raises for 5+ years, if they were to pull a stunt like that, the brain drain from GA would be incredible.

California paid with IOUs a few years ago.

Also, City of Detroit just declared bankruptcy.

Unless the money is in your account, it's not really yours.


If its a true 401k you are indeed golden! 401k can survive your own bankruptcy.
 
2013-07-18 04:34:57 PM  

Sergeant Grumbles: CujoQuarrel: Ahhh. Someone else who's run the numbers. Mine was close to $900k.

And on average you get back about $300k

It's insurance, not investment.
Do you calculate the ROI on your health insurance? Car insurance? Homeowner's insurance?
I'll bet you could make a lot of more money if you pulled your money out of those worthless.... unless something bad were to happen... amirite?


Under ACA the ROI on I surance is 80% according to the bill. The ROI in his example is 30% nobody would buy insurance at that ROI.
 
2013-07-18 04:34:57 PM  

impaler: Rapmaster2000: A single mom is better off making $29,000 with $1,000,000 in benefits than making $29,000 with $57,000 in benefits.  They're both about as likely to occur.

FYI, you can save yourself the trouble and just grab the Tom Ridge Pennsylvania slides from The American Enterprise Institute:  http://www.aei.org/files/2012/07/11/-alexander-presentation_100635322 7 8.pdf

And back to that yellow "child care" line that is $15,000 big. Apparently it just stops at around $43,000. If it's referring to the child care tax credit, it doesn't end at $43,000, it just never goes below 20% after $43,000. Even then, it's at most 35% of what you pay for child care, so to get the max $6000, you need to spend over $17,000 in child care.


These things are always what a hypothetical welfare genius gets by gaming the system to its level of maximum efficiency.   The idea being that the poor middle class is oppressed and could be living like kings if only they'd quit work.  But you and I soldier on because we're honorable and just and continue to slave away when we could be Kings of the Trailer Park.  Also, something about Shaneequas and Cadillacs.

It's an emotional appeal, so of course it succeeds.
 
2013-07-18 04:59:00 PM  

AngryDragon: Rapmaster2000: plcow: It's always a balance of my time, weighing spending time on contibuting to society vs reducing tax burden. The way I see it, society is suffering because of it. And so am I. It's a lose/lose situation and one that will have the US looking like India in the next 100 years.

I think if we're going to me making comparisons like this, it would help to note that India is NOT a high tax state (lower than US) and that much of its problems arise from its high-degree of local government control leading to rent-seeking behaviors and low public servant pay leading to a heavy reliance on bribery.

The situations really aren't comparable.

BTW, I'm a bit confused as to what you guys are arguing about.  Are you upset about paying taxes on SS distributions or 401k distributions?

My rant started with this comment:

"So unless you want to start seeing "Lucky Ducky" comics, you might be better off appreciating the fact that you have enough income that you can have some of it redistributed away."

I took offense to the idea that someone else had the right to "redistribute" my hard earned cash.


You are on fark during work hours. Unless you goal is to make people laugh, you might want to refrain from using terms like "hard earned".

There are few things more hilarious than someone spending hours during the work day on an internet site complaining about taxes taking the fruits of their "hard work".
 
2013-07-18 05:01:27 PM  

Mcavity: Johnsnownw: OMG, you mean I have to be responsible for my own finances!? I have to plan for my own retirement, and live life within my means?

/Seriously, people, it aint that complicated.

It kind of is. they really should have it as part of high school curriculum. Most people I know have not done all that well when it comes to retirement planning. and I work at a fortune 500.


Yes, but is it because their retirement plan consisted of not thinking about it until they were middle age? Or possibly doing things or purchasing things they wanted, rather than needed?

Also, I thought everyone had to take econ classes in College...
 
2013-07-18 05:05:13 PM  

groppet: This is why you should marry younger than you. You retire while they still work.


I thought that was why we have the Social Security system. I retire, you younger people work. And pay me.

/ I didn't earn it, I don't need it, but if they miss one payment, I'll raise hell!
 
2013-07-18 05:06:10 PM  

Parthenogenetic: <long, well-thought-out and easily understood response> If you don't need that $1500 soon, you could just let it ride.  You might have to take a long-term capital gains haircut by selling, and paying higher expense ratios on holdings of $1500 going forward isn't going to kill you.  I'd put any new investment money into cheap-ass Vanguard funds, or the equivalent (Fidelity Spartan funds, etc.).

 
Groovy, thanks for the advice. Sounds like the play is let it ride. This was basically however much farkaround money I had a decade ago. Had a twinge of responsibility, did a little research (morningstar, yahoo finance, honest-to-god paper prospectus forms), and wound up throwing it in an AFBA 5-Star account. Barring catastrophe, I won't need to tap into it short term.

When the time's right to start investing new money, I'll do other research and look around. Won't be for a couple of years most likely.


 
2013-07-18 05:08:42 PM  

GoldSpider: Aarontology: Almost makes the destruction of pensions look like a bad idea, doesn't it?

I don't know about you, but I'd prefer to own my retirement assets instead of rely on the promise of my company that the money will be there when I retire.


On the one hand, I completely agree with the premise. On the other hand, an awful lot of people are, shall we say, not in a good position to be in charge of managing their own retirement assets. Let's just say that the switch from pensions to 401k plans has had winners and losers.
 
2013-07-18 05:14:20 PM  

pdieten: GoldSpider: Aarontology: Almost makes the destruction of pensions look like a bad idea, doesn't it?

I don't know about you, but I'd prefer to own my retirement assets instead of rely on the promise of my company that the money will be there when I retire.

On the one hand, I completely agree with the premise. On the other hand, an awful lot of people are, shall we say, not in a good position to be in charge of managing their own retirement assets. Let's just say that the switch from pensions to 401k plans has had winners and losers.


What do you mean I shouldn't put my whole investment portfolio into TULIP, the returns are going to be amazing.
 
2013-07-18 05:19:07 PM  
"A 3% matching 401k still doesn't work due to inflation, which is why I've always turned down 401k options "

I see people are migrating over from the Politics tab to the Business tab.  Please go back and stay away from those of us who know how math and money works.
 
2013-07-18 06:21:15 PM  

pdieten: Oh yay. Another one who doesn't understand the difference between Social Security and a retirement fund. That's just awesome. Would it really be too much to ask to go out and learn what Social Security is *for* before you go spouting your ignorance all over the Internet?


I know exactly what it is.  Its "retirement insurance" which was brought upon a bunch of people who werent demanding it, paid for on the backs of a generation which had not yet existed.

If it were offered side-by-side any other financial product at a bank, not a single soul would sign up for it.  it costs the same as what any reputable financial adviser would suggest if you wanted a comfortable retirement.
 
2013-07-18 06:28:55 PM  
No prob, I have enough cash to have retirement houses all over the country.

http://www.boxdepot.us
 
2013-07-18 06:31:37 PM  
My plan is to take, take, take from the system to punish the hell out of this twisted society.
Beyond that, my retirement plan is a bottle of bourbon and a cheap Walmart shotgun.
 
2013-07-18 06:43:09 PM  

robertus: Parthenogenetic: <long, well-thought-out and easily understood response> If you don't need that $1500 soon, you could just let it ride.  You might have to take a long-term capital gains haircut by selling, and paying higher expense ratios on holdings of $1500 going forward isn't going to kill you.  I'd put any new investment money into cheap-ass Vanguard funds, or the equivalent (Fidelity Spartan funds, etc.).
 
Groovy, thanks for the advice. Sounds like the play is let it ride. This was basically however much farkaround money I had a decade ago. Had a twinge of responsibility, did a little research (morningstar, yahoo finance, honest-to-god paper prospectus forms), and wound up throwing it in an AFBA 5-Star account. Barring catastrophe, I won't need to tap into it short term.

When the time's right to start investing new money, I'll do other research and look around. Won't be for a couple of years most likely.


You're welcome.

Warning: I am not a financial services professional.  I am self-educated about personal finance, and a random anonymous guy on the Internet.  Do not trust me, or anyone else, to give you sound financial advice without doing your own due diligence.

Don't waste time researching stocks.  Spend that time and energy educating yourself about the principles of personal finance.

Check out those forums (fora?) and the Boglehead books in my original post.

For a basic primer, this is a good choice:

ecx.images-amazon.com

http://www.amazon.com/The-Elements-Investing-Lessons-Investor/dp/111 84 84878

Read this, then move up from there.

It sounds like you've gotten a grasp on the first, and hardest step of investing: not spending everything you earn so that you have something to invest.  Most people can't do that.
 
2013-07-18 10:06:01 PM  

Parthenogenetic: robertus: Parthenogenetic: <long, well-thought-out and easily understood response> If you don't need that $1500 soon, you could just let it ride.  You might have to take a long-term capital gains haircut by selling, and paying higher expense ratios on holdings of $1500 going forward isn't going to kill you.  I'd put any new investment money into cheap-ass Vanguard funds, or the equivalent (Fidelity Spartan funds, etc.).

Groovy, thanks for the advice. Sounds like the play is let it ride. This was basically however much farkaround money I had a decade ago. Had a twinge of responsibility, did a little research (morningstar, yahoo finance, honest-to-god paper prospectus forms), and wound up throwing it in an AFBA 5-Star account. Barring catastrophe, I won't need to tap into it short term.

When the time's right to start investing new money, I'll do other research and look around. Won't be for a couple of years most likely.

You're welcome.

Warning: I am not a financial services professional.  I am self-educated about personal finance, and a random anonymous guy on the Internet.  Do not trust me, or anyone else, to give you sound financial advice without doing your own due diligence.


Well, I mean, obviously, yes.

I have a couple of years of self-imposed hard times before I can start throwing pocket money into long-term investments - have to meet our short-term goals (pay down mortgage) before stashing stuff away for 20-30 years from now. You know, besides the 401(k). Figure to use that time doing the due (particularly once we get closer to our short-term goal).

In the meantime, we can pretty much let that already-invested money sit. It may not be min/maxed as tightly as it could be, but it's also not like these are egregiously bad funds that are costing more than they're bringing in (like the 401k at my previous employer). I knew that before I asked, but it's nice to get a little validation from total strangers on the internet.

/Already cut out the really frivolous expenses.
//Wife gets her Masters in the spring. Then, it's game on.
 
2013-07-18 10:23:42 PM  

plcow: Sergeant Grumbles: CujoQuarrel: Ahhh. Someone else who's run the numbers. Mine was close to $900k.

And on average you get back about $300k

It's insurance, not investment.
Do you calculate the ROI on your health insurance? Car insurance? Homeowner's insurance?
I'll bet you could make a lot of more money if you pulled your money out of those worthless.... unless something bad were to happen... amirite?

First of all, you don't collect insurance unless the trigger event happens.  With SS you do. So no, it's not insurance.  And yes I do calculate ROI on insurance, everybody does.  And when I run an assessment of SS the answer is quite simple.  To the extent that it is "insurance" I would rather be self insured.


The trigger event is getting to your 65th birthday.  Not everyone lives that long.  At it's heart, it is nothing more than welfare for old people.  Back when it started barely anybody lived long enough to collect, and those who did make it didn't stick around very long to collect much.

We did this because it would be a disgusting mark of shame on our country if our elderly couldn't afford food or housing.  Nobody wants to see this on America's streets:

www.visualphotos.com

They just needed to candy coat it by having everyone get some payments out of it, so we can all feel "invested" in the system and keep it going.
 
2013-07-18 11:30:35 PM  

robertus: Parthenogenetic: robertus: Parthenogenetic: <long, well-thought-out and easily understood response> If you don't need that $1500 soon, you could just let it ride.  You might have to take a long-term capital gains haircut by selling, and paying higher expense ratios on holdings of $1500 going forward isn't going to kill you.  I'd put any new investment money into cheap-ass Vanguard funds, or the equivalent (Fidelity Spartan funds, etc.).

Groovy, thanks for the advice. Sounds like the play is let it ride. This was basically however much farkaround money I had a decade ago. Had a twinge of responsibility, did a little research (morningstar, yahoo finance, honest-to-god paper prospectus forms), and wound up throwing it in an AFBA 5-Star account. Barring catastrophe, I won't need to tap into it short term.

When the time's right to start investing new money, I'll do other research and look around. Won't be for a couple of years most likely.

You're welcome.

Warning: I am not a financial services professional.  I am self-educated about personal finance, and a random anonymous guy on the Internet.  Do not trust me, or anyone else, to give you sound financial advice without doing your own due diligence.

Well, I mean, obviously, yes.

I have a couple of years of self-imposed hard times before I can start throwing pocket money into long-term investments - have to meet our short-term goals (pay down mortgage) before stashing stuff away for 20-30 years from now. You know, besides the 401(k). Figure to use that time doing the due (particularly once we get closer to our short-term goal).

In the meantime, we can pretty much let that already-invested money sit. It may not be min/maxed as tightly as it could be, but it's also not like these are egregiously bad funds that are costing more than they're bringing in (like the 401k at my previous employer). I knew that before I asked, but it's nice to get a little validation from total strangers on the internet.

/Already cut out the really frivolous expenses.
//Wife gets her Masters in the spring. Then, it's game on.


Paying down your mortgage instead of investing is not wise in this market. If you recently bought or refinanced, your rate your rate is lower than the rate of return you would get in an index fund.

If you spent that last two years over paying your mortgage, you forwent the ~12% annual return of the SP500 to avoid paying the
 
2013-07-18 11:31:54 PM  
It is not hard.  Follow the Jack Bogle way, invest in low cost index funds and let it ride.  All you have to do is adjust the asset allocation between the 3 or 4 funds you hold every year or so.  So long as you are investing enough and start early, you will be good to go.
 
2013-07-18 11:45:59 PM  

max_pooper: Paying down your mortgage instead of investing is not wise in this market. If you recently bought or refinanced, your rate your rate is lower than the rate of return you would get in an index fund.


I dig what you're saying, but that's not us. We're in a situation where we want to move in the next 4-5 years, and I'm working off an 80/20 loan. The interest rate on the 80 isn't bad, but the rate on the 20 stinks on ice (~9%) and we're underwater (conveniently, by about the amount on the 20). So the plan is to pay off the 20 ASAP and see where that leaves us. If it were just the 80, we'd be golden.

Right now, with the wife doing freelance (finishing her degree) and me being the only set income, we're basically dead in the water. We're getting by, but not by so much that we'd want to put money out of arm's reach. Once she's finished up in the spring, we can set about it in earnest.
 
2013-07-18 11:49:58 PM  
Reality check before I spend money on one of those Advisor people.

I'm a laborer who sometimes rakes in 80K a year.  My girlfriend of 15 years is a professor who routinely rakes in 90K a year.  Each of us has over 100K in retirement and have equal equity in a mostly-paid-for $600K estate.  We share a 7-year old child and we're not married.  So she's a single mother with a live-in (deadbeat, if need be) boyfriend.  What's the best way to milk this system?  Can she quit work and still make 90k?  Would it behoove us to sell out, shelter our cash and move into gov't housing?
 
2013-07-18 11:57:19 PM  

emonk: Reality check before I spend money on one of those Advisor people.

I'm a laborer who sometimes rakes in 80K a year.  My girlfriend of 15 years is a professor who routinely rakes in 90K a year.  Each of us has over 100K in retirement and have equal equity in a mostly-paid-for $600K estate.  We share a 7-year old child and we're not married.  So she's a single mother with a live-in (deadbeat, if need be) boyfriend.  What's the best way to milk this system?  Can she quit work and still make 90k?  Would it behoove us to sell out, shelter our cash and move into gov't housing?


Yes.

You can have all this and Cadillacs when you go on welfare. Frankly, you are a fool for not having done so already.
 
2013-07-19 12:03:59 AM  

Republican Catchphrase Cargo Cult: emonk: Reality check before I spend money on one of those Advisor people.

I'm a laborer who sometimes rakes in 80K a year.  My girlfriend of 15 years is a professor who routinely rakes in 90K a year.  Each of us has over 100K in retirement and have equal equity in a mostly-paid-for $600K estate.  We share a 7-year old child and we're not married.  So she's a single mother with a live-in (deadbeat, if need be) boyfriend.  What's the best way to milk this system?  Can she quit work and still make 90k?  Would it behoove us to sell out, shelter our cash and move into gov't housing?

Yes.

You can have all this and Cadillacs when you go on welfare. Frankly, you are a fool for not having done so already.


Might be tough convincing her that an Escalade is better than her Infiniti or my Cayenne ...
 
2013-07-19 12:46:07 AM  

emonk: I'm a laborer who sometimes rakes in 80K a year. My girlfriend of 15 years is a professor who routinely rakes in 90K a year. Each of us has over 100K in retirement and have equal equity in a mostly-paid-for $600K estate. We share a 7-year old child and we're not married. So she's a single mother with a live-in (deadbeat, if need be) boyfriend. What's the best way to milk this system? Can she quit work and still make 90k? Would it behoove us to sell out, shelter our cash and move into gov't housing?


You're going to need more kids to get the big bucks and some Section 8 housing, so you might be in for some fun.
And are either of you minorities? If you're black or hispanic, you can get your welfare check payable in flat screen TVs, and your EBT or SNAP card is eligible to buy alcohol and cigarettes. It does, however, emit a high pitch squeal when scanned that is detectable only by white people, so they may come and judge you.
 
2013-07-19 09:28:34 AM  

Bonzo_1116: plcow: Sergeant Grumbles: CujoQuarrel: Ahhh. Someone else who's run the numbers. Mine was close to $900k.

And on average you get back about $300k

It's insurance, not investment.
Do you calculate the ROI on your health insurance? Car insurance? Homeowner's insurance?
I'll bet you could make a lot of more money if you pulled your money out of those worthless.... unless something bad were to happen... amirite?

First of all, you don't collect insurance unless the trigger event happens.  With SS you do. So no, it's not insurance.  And yes I do calculate ROI on insurance, everybody does.  And when I run an assessment of SS the answer is quite simple.  To the extent that it is "insurance" I would rather be self insured.

The trigger event is getting to your 65th birthday.  Not everyone lives that long.  At it's heart, it is nothing more than welfare for old people.  Back when it started barely anybody lived long enough to collect, and those who did make it didn't stick around very long to collect much.

We did this because it would be a disgusting mark of shame on our country if our elderly couldn't afford food or housing.  Nobody wants to see this on America's streets:

[www.visualphotos.com image 700x487]

They just needed to candy coat it by having everyone get some payments out of it, so we can all feel "invested" in the system and keep it going.


Best explanation of it I have seen or heard of.  And point well taken.  I feel much better contributing to a system with that goal than I do a system with a stated objective of helping me retire.  I don't need nor want help from the government with that.
 
2013-07-19 09:32:26 AM  

mcreadyblue: pdieten: hej: So for the financial rubes here, if dumping money into a 401k isn't good enough, what is?

I don't understand the question. A 401(k) is just a way to the masses to invest money tax free. So are IRAs. So are pensions. The difference is that your employer might contribute to your 401(k), which is part of your total salary package. If it's offered then take it.

In a pension system the employer is fully responsible for investing the money and making sure you get it at retirement. The difference between the two is who's on the hook if insufficient money was invested while the employee was working for the employer. In a 401(k), it's the employee's problem. In a pension it's the employer's problem. That's why there are no pensions anymore. Pensions that still exist have managers who worry over where they're going to find investments that make enough return to pay everyone who is supposed to be receiving benefits.

An IRA isn't in effect much different from a 401(k) but your employer probably won't contribute to it. It's something you can do if you've maxed out your 401(k) contributions and want (and can afford) to save even more. Or, you can open one after you leave your job and the old employer makes your 401(k) money available for rollover. That's what I did.

The question is, what investments are *in* the fund? Basically what this article is fussing about is the fact that there's no easy way to get a high return anymore unless you are investing in business that are big in Brazil and India. But then, when was it ever easy? People talk about the early '80s and the 5% rate on their savings accounts as if that was a good thing, but loan interest rates and inflation were also terrifyingly high at the time. People biatch about inflation, but if you found a newspaper from Clinton's second term (which is now some 15 years ago) and looked at the sale flyers in it and compared prices, you might be surprised at how close they are to today's prices. Returns nowadays ...


GAS prices have tripled+ in the last 10 years.....
 
2013-07-19 09:40:53 AM  

Parkanzky: gshepnyc: Aarontology: Almost makes the destruction of pensions look like a bad idea, doesn't it?

This, Wall Street talked us into losing any sense of value for work. We had to put our money all in the hands of the Olympian "risk-takers" right? Well, what is more risky than devoting your entire life to working for a wage without any guarantee that your lifetime of labor will result in anything but an impoverished old-age?

Pensions are shackles.  You don't dare leave the company until you're vested in the pension so you have to accept crap raises and poor treatment and can't take advantage of a lucrative opportunity at another company.  However, if you get laid off before you're vested, you have nothing!  Also, if the company goes bust a year or two before you want to retire, or even worse, a year or two after, you could lose a big part or even all of your retirement!

With a 401k, you own your retirement money.  You can invest it however conservatively or aggressively you feel suits you.  If you leave your company, that money is still yours and since your company has nothing to do with it once it's in your account, it's not at risk if your employer pulls an Enron.  Also, assuming your company provides a reasonable match, you'll end up with more money in the long-run that you would with a pension.


Yah, this is the bullshiat theory MY ex crap company tried to sell us when they screwed us by doing away with our defined pension and replacing it with an 'enhanced' 401k.  So what that basically said was, 'so the experts who manage pension funds for a living can't make it work anymore, so HERE you broom pushers and button pushers, we're sure YOU'LL make out like fat rats trying to do it!'  You know damned well that if the company was trying to change it, it was benefitting the company, not you.  (btw we had a defined benefit pension AND a decent 401k with decent match beforehand.  They simply did away with the pension and added just a fraction more to the 401k match.  Thanks a $^$&& lot.)
 
2013-07-19 11:41:16 AM  

CujoQuarrel: NostroZ: 401k + Social Security + part time job + cat food + living in part of town where I carry a gun = RETIREMENT!

Don't be silly. Cat food is way too expensive.


ecx.images-amazon.com
$29.49 for a case of 24 on Amazon

All natural beef, extra vitamins & minerals added (what value!) In addition, it is already in an easy to swallow pate for those old teeth.
A can a day, plus bread to spread it on (lunch/dinner), maybe some a cup of tea and a hard boiled egg (breakfast)... comes to about $2 a day.

When one gets sick of the beef pate, there's 20 other flavors to choose from... Cat food is not dog food... there's a lot more variety and flavor to it (those damn carnivorous pampered pets).
www.naturalvalue.com
 
2013-07-19 12:05:39 PM  

dinwv: Yah, this is the bullshiat theory MY ex crap company tried to sell us when they screwed us by doing away with our defined pension and replacing it with an 'enhanced' 401k. So what that basically said was, 'so the experts who manage pension funds for a living can't make it work anymore, so HERE you broom pushers and button pushers, we're sure YOU'LL make out like fat rats trying to do it!' You know damned well that if the company was trying to change it, it was benefitting the company, not you. (btw we had a defined benefit pension AND a decent 401k with decent match beforehand. They simply did away with the pension and added just a fraction more to the 401k match. Thanks a $^$&& lot.)


Your company may have screwed you, but I'm more happy with my 401k's than I would be under a pension system.  I have had three employment stints during my real "career."

The first was for a couple years.  If I had a pension, I'm sure I would have forfeited it leaving for job #2.  Instead, I have the money from my 401k and it's grown a lot over the past several years.

The 2nd, I had for five years.  That company had really terrible benefits, so I doubt I'd have been vested at all in a pension at year five, but even if I had it would have been for a tiny amount.  Instead, I managed to put a pretty significant amount of money together in the 401k, which I still have.

Now, I've been at job #3 for 15 months.  I make a lot more money here than I did at job #2, their 401k match is phenomenal and the market has been great, so my 401k here is huge considering how long I've been contributing.  I'm fully-vested and could take that money with me if some lunatic offered me a 25% raise tomorrow to go somewhere else.  If we had a pension here, I'd leave again with nothing.

But different people prefer different things and it's probably also somewhat industry specific.  It's common in my field (and geographical area) to move around a lot early in your career.  Lots of people would be getting no employer benefit for their retirement for the early part of their careers (when it matters most).

It's not as common as it used to be for somebody to get a job, put in their 30 or 35 years with the same company and leave with their gold watch and pension checks.
 
2013-07-19 01:28:46 PM  
My retirement plan is a bottle of loudmouth and a shotgun shell.
 
2013-07-19 07:14:30 PM  
I've always thought that Sarah Palin got one thing right.  She predicted "death panels" as a result of Obamacare.  Only she got that part wrong.  Death panels will eventually happen as a result of the retirement crisis.  Those with the means to retire will retire in comfort.  Everyone else will be offered a government program of squalid life in poverty in subsidized housing or...death.

Honestly, I am for the death panels and since I will have no money to retire, well, just turn me into Friskies.
 
2013-07-19 07:47:17 PM  

hej: So for the financial rubes here, if dumping money into a 401k isn't good enough, what is?


Being born into a family with money and political influence so you can get a job in senior mangement in a multinational company.

Or being born into a family with money and political influence and going into politics until you die screaming in impotent rage at how the clouds keep moving across the sky.
 
2013-07-19 09:22:00 PM  

Ashelth: hej: So for the financial rubes here, if dumping money into a 401k isn't good enough, what is?

Being born into a family with money and political influence so you can get a job in senior mangement in a multinational company.

Or being born into a family with money and political influence and going into politics until you die screaming in impotent rage at how the clouds keep moving across the sky.


And some actually serious ways:

Or hitting it REALLY REALLY lucky as a founder of a software startup (Not an employee.  Being an employee is a sucker's bet.  .25% of a $1 Billion dollar exit after 5 years is $2.5 million.  You'll keep $1.5 Million after taxes if you're lucky (or $300K/year) and the founders will have $150 Million.  And there are very, very few billion dollar exits.  It's the equivalent of playing the lottery, except tickets cost $40-100K/year in reduced salary and bennies and the big prize is $300K/year).

Or arbitrage.  Find a job that scales with COL, spend your career in NYC making $100K for breathing (and more for actually being useful) in some morally questionable business, and then retire to your little cottage on the North Carolina coast with a multi-million dollar nest egg.

/Though the new rich people seem to be people who founded successful companies.  The software startup guys tend to be doing better than the owner of "Bob's Auto Mart", but Bob's usually doing alright.
 
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