Listening to others talk about retirement plans (and all the mistakes made)

[Exterous]

The topic came up this weekend at a party. Despite it being a topic of interest of mine it went down the depressing rabbit hole pretty quickly. It was unfortunate to hear all the incorrect information being relayed. There were a couple of teachers there complaining about the pension system. They said they contributed 10% (its actually between 3.6% and 7% depending on employment date, selection and compensation), no one else contributed anything (the school kicks in a large chunk) and that they just got a refund of the money the state took to pay for other's retirement (the state started requiring contributions towards retirement health care which was found to be unconstitutional. That was what was refunded). Oddly enough the biggest reason to complain - unfunded liabilities - didn't come up at all.

Some coworkers of mine also got things wrong. Fidelity is the only provider (We can choose from several), the amount of the match and the vesting period.

Then there was the woman and man who said people "shouldn't be investing in stocks. Its all a scam."

There were some pretty strong opinions about topics from people I didn't know and many of the discussion participants were a one or more drinks in so I mainly held my tongue. Still it wasn't easy or encouraging.

 

[ImpulsE69]

They are right. Stocks are a scam, and 401k's are all a matter of timing. It's all gambling, people just like to pretend it isn't.

 

[Kaido]

I think it's a very individual thing. Personally, I don't have any faith in the government system taking care of me when I get older & have been planning accordingly because I don't want to live in a bind when I get old & can't work anymore. That's part of my motivation to do stuff like exercise, too...I've seen what happens to people who get old & haven't planned for the future, and are hunched over with no muscle support & are living tightly financially & so on. I mean, you can't control what aging-related afflictions & diseases you get as you get older, but there are situations for which you can work to prevent to the best of your ability, and not many people think about that kind of stuff, and you can't go around changing people, so it all boils back to it just kind of being an individual thing.

Side note, that's one of the things I've come to realize about the human condition as I've gotten older: it kind of boils down to victim vs. victor mentality. Everyone is a victim in some ways & not others, it's not like it's across the board or anything. But what I mean to say is that, for any given situation with a problem that needs to be solved, there are people who want to try & there are people who don't. And the people who are willing to try usually find great success simply because they were willing to try & stick with it until they found something that worked. Pre-existing tools can help accelerate success, but if someone is truly motivated to do something, they'll find a way regardless. Sometimes people just need to be woken up the fact that they need to work on something, like their 401k, or need a coach to help push them into success, like a knowledgeable & caring friend, but by & large, as George Carlin said, "you gotta wanna" do it. Otherwise you're going to be a very unhappy person trying to change other people & fight all of the ridiculous amounts of misinformation out there in the world, haha.

 

[Exterous]

They are right. Stocks are a scam, and 401k's are all a matter of timing. It's all gambling, people just like to pretend it isn't.

I know right? It's not like there is a long term trend or anything!

 

[Stopsignhank]

I gave a talk about the company 401K to all of our hourly workers at the production facility I work at. These are people who start at $10 an hour and the top wages are about $25 and hour. English is a second language for many of these people. At every meeting at least one person said that they did not want to invest in stocks because they did not want to lose money.

 

[vi edit]

I worked at an employer that basically forced you to auto-enroll in the 401k plan. You had to fill out a bunch of paperwork to opt out. People are stupid. Really really stupid. It's amazing that many of them have managed to live as long as they have without choking on a fork. Maybe blocking off 5% or so of their earnings, matching it, and sticking it into a indexed market fund until they can access it at 65 is the way to go.

 

[ImpulsE69]

I know right? It's not like there is a long term trend or anything!

It's always funny when people show this. If it was 'this' simple, then everyone would be millionaires, except, it doesn't work that way. There HAS to be losers. It's a gamble, no matter how many charts you put up trying to show that everyone would be rich if they'd invested before they were alive.

As someone who's been dabbling seriously for the last few years, I'm not saying you can't make money, but it takes a ton of time and research and any profits you do make can be lost in an instant. It isn't for the average person and it always makes me laugh when people condemn others for not jumping on the boat. 401k's sound amazing on the surface, unless the market tanks at the time of your retirement, which has happened multiple times in history, but no one likes to talk about that.

 

[dullard]

It's always funny when people show this. If it was 'this' simple, then everyone would be millionaires, except, it doesn't work that way. There HAS to be losers. It's a gamble, no matter how many charts you put up trying to show that everyone would be rich if they'd invested before they were alive.

As someone who's been dabbling seriously for the last few years, I'm not saying you can't make money, but it takes a ton of time and research and any profits you do make can be lost in an instant. It isn't for the average person and it always makes me laugh when people condemn others for not jumping on the boat. 401k's sound amazing on the surface, unless the market tanks at the time of your retirement, which has happened multiple times in history, but no one likes to talk about that.

1) No, this isn't a gamble (such as a pyramid scheme) where there have to be losers. Why? Gambles and pyramid schemes are zero-sum games where for every $1 someone wins, another person loses $1. But stocks have the benefit of NOT being zero-sum. Companies earn money and return that money to the players in the stock market. Thus, it is quite possible for EVERYONE to win.

Buy S&P500 regularly (or a similar broad-based index fund). As you get closer to retirement, add in more and more stable value funds. It is that simple. No more time or research is ever needed. You will win if you have a long enough time frame. The problem is that most people can't limit themselves. They roll in money when the market is peaking and they pull out money when the market tanks. They try to think that they can outsmart things with individual stocks or with market timing. They cannot. Because of people who think it needs to be complicated, most people do not do well in the stock market.

2) The market tanking at the time of your retirement should not be a problem at all if you follow the standard advice. You should be diversified into more and more stable value funds by that time so the tank is not that big of a consequence to you. And you still will likely live for 20 to 30 more years in which case there has always been a stock boom in that time frame. Sell your stable value funds at the start and let your stocks recover in that next boom.

 

[purbeast0]

Isn't the average credit card debt for families in the USA over like $10k? It doesn't surprise me that in a country where that is the case, that people also have no clue about retirement funds.

 

[s0me0nesmind1]

The topic came up this weekend at a party. Despite it being a topic of interest of mine it went down the depressing rabbit hole pretty quickly. It was unfortunate to hear all the incorrect information being relayed. There were a couple of teachers there complaining about the pension system. They said they contributed 10% (its actually between 3.6% and 7% depending on employment date, selection and compensation), no one else contributed anything (the school kicks in a large chunk) and that they just got a refund of the money the state took to pay for other's retirement (the state started requiring contributions towards retirement health care which was found to be unconstitutional. That was what was refunded). Oddly enough the biggest reason to complain - unfunded liabilities - didn't come up at all.

Some coworkers of mine also got things wrong. Fidelity is the only provider (We can choose from several), the amount of the match and the vesting period.

Then there was the woman and man who said people "shouldn't be investing in stocks. Its all a scam."

There were some pretty strong opinions about topics from people I didn't know and many of the discussion participants were a one or more drinks in so I mainly held my tongue. Still it wasn't easy or encouraging.

The American public - and not surprisingly our teachers that teach the public are fucking retarded when it comes to financial advice? Say it isn't so! I had no idea! People always complain how stupid our kids are - but let me assure you teachers aren't innocent either.

Yes, people are incompetent fools. It's as simple as socking away as much as possible in tax advantage accounts and simply not touching it. It isn't difficult, but plenty of people will make it as if it is.

 

[clamum]

It's always funny when people show this. If it was 'this' simple, then everyone would be millionaires, except, it doesn't work that way. There HAS to be losers. It's a gamble, no matter how many charts you put up trying to show that everyone would be rich if they'd invested before they were alive.

As someone who's been dabbling seriously for the last few years, I'm not saying you can't make money, but it takes a ton of time and research and any profits you do make can be lost in an instant. It isn't for the average person and it always makes me laugh when people condemn others for not jumping on the boat. 401k's sound amazing on the surface, unless the market tanks at the time of your retirement, which has happened multiple times in history, but no one likes to talk about that.

Yeah when stocks shit the bed during the "Great Recession" or whatever it was, during 2008-2009, my dad was just a few years from retiring. He said he lost A LOT of frickin money (and my parents have had a financial advisor and I assume his portfolio was somewhat spread out and not all aggressive), after contributing all of his life. He managed to get some back but he did lose quite a bit (I don't know details). But I'd guarantee if you asked him "do you regret contributing to a 401(k)?" he's say "no", it was still better than not doing so.

 

[s0me0nesmind1]

I worked at an employer that basically forced you to auto-enroll in the 401k plan. You had to fill out a bunch of paperwork to opt out. People are stupid. Really really stupid. It's amazing that many of them have managed to live as long as they have without choking on a fork. Maybe blocking off 5% or so of their earnings, matching it, and sticking it into a indexed market fund until they can access it at 65 is the way to go.

Well yeah, but they are everywhere... even in your forum!

They are right. Stocks are a scam, and 401k's are all a matter of timing. It's all gambling, people just like to pretend it isn't.

 

[Exterous]

It's always funny when people show this. If it was 'this' simple, then everyone would be millionaires, except, it doesn't work that way. There HAS to be losers. It's a gamble, no matter how many charts you put up trying to show that everyone would be rich if they'd invested before they were alive.

As someone who's been dabbling seriously for the last few years, I'm not saying you can't make money, but it takes a ton of time and research and any profits you do make can be lost in an instant. It isn't for the average person and it always makes me laugh when people condemn others for not jumping on the boat. 401k's sound amazing on the surface, unless the market tanks at the time of your retirement, which has happened multiple times in history, but no one likes to talk about that.

Er no - It can be that simple without everyone being millionaires because it also has to do with contributions, behavior and the fact that the market is not a zero sum game. And no it does not take a ton of time and research to do this. To optimize perhaps but a Target Date index fund will get you 80-90% of the way there and is completely set and forget. Takes about 30 minutes to setup and is well within the range of the average person.

Lots of people talk about what happens if the market tanks when you're close to retirement. Tons of articles on it and all the big players have people who you can talk to about it who have no commission sales structure. If you have all your $ in risky stocks during the crash then yes it will hurt. But thats a terrible idea. Even if you go with a 100% domestic stock index fund 75% of the time you'll have recovered your losses within a year. Does working a year longer suck? Of course. Is it a reason to not invest? Of course not. For the remaining 25% of the time you'll have been made whole in ~4 years. And if that is too much risk for you then don't have 100% of your retirement money in stocks right before you retire.

Isn't the average credit card debt for families in the USA over like $10k? It doesn't surprise me that in a country where that is the case, that people also have no clue about retirement funds.

Reporting is a bit fuzzy on that but the average debt among americans who have credit card debt is around $15-16k. 38% of Americans have credit card debt

The American public - and not surprisingly our teachers that teach the public are fucking retarded when it comes to financial advice? Say it isn't so! I had no idea! People always complain how stupid our kids are - but let me assure you teachers aren't innocent either.

Yes, people are incompetent fools. It's as simple as socking away as much as possible in tax advantage accounts and simply not touching it. It isn't difficult, but plenty of people will make it as if it is.

IIRC Thomas J. Stanley (Millionaire Next Door author) had a study that found teachers, engineers and generally technically minded professionals tended to do better with retirement. Doesn't mean everyone of course but they were better than average. Doctors and lawyers didn't do as well despite higher than average incomes - usually due to prolific spending

 

[thecoolnessrune]

Part of it is just hope. I put into my Retirement savings responsibly and hope it pans out. But I'm relatively young and the world will likely be nothing like it is now by the time I retire, if I can. My grandparents lost about 30% of their retirement savings during the recession. I think it was last year that they announced that they were now back level with what they had pre-recession (not counting inflation). It's not a gamble, but it's definitely a calculated Risk. And some people are simply going to lose.

 

[Exterous]

I think it was last year that they announced that they were now back level with what they had pre-recession (not counting inflation). It's not a gamble, but it's definitely a calculated Risk. And some people are simply going to lose.

With a 100% stock index fund they would have been made nearly whole in 2011 and would have been in positive territory in 2013. And thats just if they made no new contributions during the recession. If they did make any contributions they would have come out ahead even sooner. If they well and truly weren't made whole until last year then they made some really unfortunate decisions that would run contrary to unbiased advice. I've also seen instances where people say that and it turns out that they were made whole much sooner than they claim

 

[thecoolnessrune]

With a 100% stock index fund they would have been made nearly whole in 2011 and would have been in positive territory in 2013. And thats just if they made no new contributions during the recession. If they did make any contributions they would have come out ahead even sooner. If they well and truly weren't made whole until last year then they made some really unfortunate decisions that would run contrary to unbiased advice. I've also seen instances where people say that and it turns out that they were made whole much sooner than they claim

I highly doubt they had a 100% stock index fund. At over 70 years old in the recession, I'm sure they made relatively few decisions at all. They probably just waited it out with whatever adjustments they had from likely years ago. Likely what a lot of people did.

 

[jpiniero]

Ultimately it doesn't really matter. Anyone under 40 is not going to be able to retire.

With a 100% stock index fund they would have been made nearly whole in 2011 and would have been in positive territory in 2013.

And it took a historic pumping of the stock market to get there. If you have the means, the tax benefits make it worth gambling that valuations don't regress to the mean but yeah if you are making $10, $20 an hour I don't know if it is worth it.

 

[JTsyo]

Yeah when stocks shit the bed during the "Great Recession" or whatever it was, during 2008-2009, my dad was just a few years from retiring. He said he lost A LOT of frickin money (and my parents have had a financial advisor and I assume his portfolio was somewhat spread out and not all aggressive), after contributing all of his life. He managed to get some back but he did lose quite a bit (I don't know details). But I'd guarantee if you asked him "do you regret contributing to a 401(k)?" he's say "no", it was still better than not doing so.

Check out this case study on buying stocks only at the peak. You still come out alright just as long as you don't sell. Time in the market works out in the end.

 

[ImpulsE69]

Er no - It can be that simple without everyone being millionaires because it also has to do with contributions, behavior and the fact that the market is not a zero sum game. And no it does not take a ton of time and research to do this. To optimize perhaps but a Target Date index fund will get you 80-90% of the way there and is completely set and forget. Takes about 30 minutes to setup and is well within the range of the average person.

Lots of people talk about what happens if the market tanks when you're close to retirement. Tons of articles on it and all the big players have people who you can talk to about it who have no commission sales structure. If you have all your $ in risky stocks during the crash then yes it will hurt. But thats a terrible idea. Even if you go with a 100% domestic stock index fund 75% of the time you'll have recovered your losses within a year. Does working a year longer suck? Of course. Is it a reason to not invest? Of course not. For the remaining 25% of the time you'll have been made whole in ~4 years. And if that is too much risk for you then don't have 100% of your retirement money in stocks right before you retire.

Sorry, I switched back and forth on you. The first part I was referring to the market in general. I was only talking about 401k at the last part.

To clarify more, I am definitely not opposed to saving and investing, but it isn't an automatic win and it takes research, extra money, and a trust that if you have someone else handling it for you that they aren't f'ing you over. Most people can't afford one of those, let alone all 3. 401k's make it....somewhat easier....but no guarantee. As someone who used to be 'that average guy who didn't know anything about finances outside of don't spend more than you make' I can personally tell you people have no clue where the money is going in their 401k and have no idea if they are being charged crazy fees.

 

[s0me0nesmind1]

Part of it is just hope. I put into my Retirement savings responsibly and hope it pans out. But I'm relatively young and the world will likely be nothing like it is now by the time I retire, if I can. My grandparents lost about 30% of their retirement savings during the recession. I think it was last year that they announced that they were now back level with what they had pre-recession (not counting inflation). It's not a gamble, but it's definitely a calculated Risk. And some people are simply going to lose.

Understand this simple message: if the stock market isn't going up over time, you will have a fuckton more to worry about in life than retirement.

Does that make sense? Because it's entirely true. If you uunderstand that message hopefully you will generally be more comfortable with safe index fund investmenets.


Also, you're wrong. Not everyone has to lose. And if everyone were to invest in index funds and wait 30 years, no one would lose.

 

[thecoolnessrune]

Understand this simple message: if the stock market isn't going up over time, you will have a fuckton more to worry about in life than retirement.

Does that make sense? Because it's entirely true. If you uunderstand that message hopefully you will generally be more comfortable with safe index fund investmenets.


Also, you're wrong. Not everyone has to lose. And if everyone were to invest in index funds and wait 30 years, no one would lose.

Why do you talk like this? It's unnecessarily diminutive and all you're doing is being off-putting. We don't even disagree with each other. I didn't even say everyone has to lose. I said someone is going to lose. It's simple statistics. With all the years, all the money floating around, etc, some people are going to lose. It's going to be bad investments, bad timing, bad actors, etc. Your "what if" scenario is likely correct as well.

So you replied to bring forth this platitude, and say I was wrong about something I never said.

For someone who makes posts like these, you could be better at it.

 

[snoopy7548]

These will be the people who are going to complain about not being able to retire or having enough saved for retirement, though it's entirely their own fault. Best to just smile and nod. Mention it can look complicated but after doing some research you saw how easy it really is and you were able to get a solid grasp on everything, and maybe one or two of them will ask you for some advice. Half of those may actually follow through and take it.

(Personal) Finance is such an unnecessarily taboo topic in this country. It's not hard to understand at all, but nobody wants to talk about it. I think it has to do with pride. Everyone wants to show off their wealth but never discuss it.

 

[MagnusTheBrewer]

A huge part of the problem is the institutions themselves. They don't provide easy to understand numbers and have as many different plans as there are employers

 

[Insomniator]

Call it a scam, gambling, whatever you want. I have a feeling I'll be better off having maxed out my 401k every year for 30 years vs someone who spends so much they are 10k in credit card debt at all times.

LOL at the never being able to retire comment.

 

[Insomniator]

These will be the people who are going to complain about not being able to retire or having enough saved for retirement, though it's entirely their own fault. Best to just smile and nod. Mention it can look complicated but after doing some research you saw how easy it really is and you were able to get a solid grasp on everything, and maybe one or two of them will ask you for some advice. Half of those may actually follow through and take it.

(Personal) Finance is such an unnecessarily taboo topic in this country. It's not hard to understand at all, but nobody wants to talk about it. I think it has to do with pride. Everyone wants to show off their wealth but never discuss it.

Yes, people like to blame everyone else they can find instead of facing that they live beyond their own means.