The Retirement Gamble

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PingSpike

Lifer
Feb 25, 2004
21,749
582
126
Dunno how many 401Ks offer Fidelity Spartan or Vanguard Admiral funds. I know that mine doesn't. All of the choices are high expense active funds. Not an index fund in the bunch.

That's why they say you should contribute up to your match and no more. Most people's employer 401Ks are just menu of different types of financial rapes you can select for yourself. But the match is basically extra money so you might as well snag it.
 

ichy

Diamond Member
Oct 5, 2006
6,940
8
81
I get tired of hearing how screwed our generation is. Just look around you and see how many people are spending lots of money on shit like unnecessarily expensive cars, pricey weddings, diamond engagement rings, dining out all the time, etc etc. People today are buying much more material shit than they did a few decades ago. Cut back on that and you should be able to sock away some money for retirement (assuming you didn't go $50,000 into debt for a degree in white guilt studies or underwater basket weaving.)
 

thestrangebrew1

Diamond Member
Dec 7, 2011
3,627
471
126
I get tired of hearing how screwed our generation is. Just look around you and see how many people are spending lots of money on shit like unnecessarily expensive cars, pricey weddings, diamond engagement rings, dining out all the time, etc etc. People today are buying much more material shit than they did a few decades ago. Cut back on that and you should be able to sock away some money for retirement (assuming you didn't go $50,000 into debt for a degree in white guilt studies or underwater basket weaving.)


It's getting worse. I'd say here at work, about 30% of our applicants are under the age of 25. I work for the welfare office.

I'm glad I found this thread. Some of the links are interesting and I need to do some reading up on my retirement and deferred comp stuff.
 

maddogchen

Diamond Member
Feb 17, 2004
8,903
2
76
reminded me to check my new 401k management fees.

"The plan incurs annual recordkeeping fees (e.g., legal, accounting, auditing, and recordkeeping) of up to $61.00 per participant account, deducted in equal quarterly amounts"

$61 dollars??? bastards!
 

CountZero

Golden Member
Jul 10, 2001
1,796
36
86
Really? Seems to me that if you educate yourself and start strong from the beginning (mid-20s), it's relatively simple.

I've seen some stat about some percentage of people that have less than $50k in retirement savings. I think it was over half. Pathetic. If you don't have that by the time you're 30-35ish, you've failed.

If you lead a relatively charmed life it is relatively simple of course. If you graduate college with little or no debt, get a $50k+ job that has a decent 401k plan preferably with matching, and in the intervening 8+ years have no financial issues like long term un/under-emplyoment or medical issue then yes you should have $50k. But life happens and many people won't have this blessed path despite their best efforts. Not to say people shouldn't be saving more than they are but to claim not having $50k by 30-35 is failure is the height of arrogance and ignorance.
 

child of wonder

Diamond Member
Aug 31, 2006
8,307
176
106
Really? Seems to me that if you educate yourself and start strong from the beginning (mid-20s), it's relatively simple.

I've seen some stat about some percentage of people that have less than $50k in retirement savings. I think it was over half. Pathetic. If you don't have that by the time you're 30-35ish, you've failed.

I'm 33 and don't have that much, however it's been by choice as my wife supported the family almost 100% while I went to college and I just did the same for her.

Now I'm putting in $1,750 a month and my wife $500. She'll be increasing her contribution to the max after she completes her final 2 years of school for a Bachelor's in Nursing. We're also going to begin maxxing out a Roth IRA for each of us as well.

Fail?
 

Jeff7

Lifer
Jan 4, 2001
41,596
19
81
...
You look at old generation pension schemes replaced with crap 401k accounts where unsavvy people now have to sit down and choose funds. Forget about it. They either haven't set up a 401k b/c they're broke or ignorant or if they did set it up, choose horribly into underperforming expensive funds.
...
Or you've got people with absolutely no finance or investment knowledge doing the shopping for a company's 401k plan. "Well, he [the sales rep for the fund management company] said that we were getting some very good rates."

The sales rep, whose company stands to earn kickbacks if he makes a sale, said that you were getting a really good deal? What a surprise.


Dunno how many 401Ks offer Fidelity Spartan or Vanguard Admiral funds. I know that mine doesn't. All of the choices are high expense active funds. Not an index fund in the bunch.
Same here. 1.36-1.89%, excluding the money market fund, which has been returning 0.00% since it was started in 2009.

And every quarterly statement also lists a "Fees" line item for a few dollars.



Fees are a big deal.
And to some, fees don't matter.
Costs matter just about everywhere else in the company.
401k fees? Well they're only around 1.5%. That's hardly anything.

Sure. Until you compare it to the 7% return you're likely to earn, long-term. Oh snap, now it's going to eat a bit over 21% of your bit of an annual return. And in exchange, the fund management company offers this to justify the cost: A performance guarantee of absolutely nothing whatsoever. "Our product costs a lot, and if it doesn't net you anything worthwhile, that sucks for you. There will be no repayments nor compensation of any sort if we fail, even year after year, to meet our own arbitrary performance benchmarks."







That's why they say you should contribute up to your match and no more. Most people's employer 401Ks are just menu of different types of financial rapes you can select for yourself. But the match is basically extra money so you might as well snag it.
What makes this decision more complicated (expensive 401k vs taxable account) is that the 401k still represents tax-sheltered space, and if you don't use your allotment each year, it's gone forever.



reminded me to check my new 401k management fees.

"The plan incurs annual recordkeeping fees (e.g., legal, accounting, auditing, and recordkeeping) of up to $61.00 per participant account, deducted in equal quarterly amounts"

$61 dollars??? bastards!
That's what your plan provider is charging you.
Your mutual funds held within the plan also have their own expenses.


Average expense ratio in my IRA: 0.20%.
Annual fees charged: $0.

I wish I could have something like that in my 401k. :\
Or just even one damn low-cost fund.




http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

Pretty interesting program from last night. I found it quite entertaining seeing those bank managers squirm and avoid answering what seemed like pretty straightforward questions.

I am having a hard time feeling sorry for the people though.
From the description of the book, Where Are the Customers' Yachts?:
"The title refers to a story about a visitor to New York who admired the yachts of the bankers and brokers. Naively, he asked where all the customers' yachts were? Of course, none of the customers could afford yachts, even though they dutifully followed the advice of their bankers and brokers."
 
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Exterous

Super Moderator
Jun 20, 2006
20,479
3,597
126
And to some, fees don't matter.
Costs matter just about everywhere else in the company.
401k fees? Well they're only around 1.5%. That's hardly anything.

Sure. Until you compare it to the 7% return you're likely to earn, long-term. Oh snap, now it's going to eat a bit over 21% of your bit of an annual return. And in exchange, the fund management company offers this to justify the cost: A performance guarantee of absolutely nothing whatsoever. "Our product costs a lot, and if it doesn't net you anything worthwhile, that sucks for you."

All for the privilege of (most likely) under performing the market
 

velillen

Platinum Member
Jul 12, 2006
2,120
1
81
Perfect example of a supercomputer speed trade was yesterday's fake tweet on White House explosion. The market tanked hard and recuperated in seconds based on ONE tweet. Bank computers with their trading algorithms acted immediately on the plunge and ride back up.

Thats the type of crap that scares me the most. Everything today moves to fing fast. THe second the word "bomb" pops up these computers sell and panic when its actually nothing. All that event proved is just how volatile the market really is. If a nothing event can cause that kind of reaction in seconds....how bad would it be if it really happened.




But thanks for all the links! I do need to read more. Its hard to figure it all out from what ive done looking wise so every link helps. Actually have some money i am trying to figure out where to put right now. I have 15% go straight to my "401k" (TSP), then i have a good amount in bonds (from the late 80's early 90s so interest rates are actually decent), then have my current "emergency savings" in a vanguard target retirement fund (since i plan to let it just grow and grow over the years, pretty much just a second retirement fund i actually have access too)
 

sportage

Lifer
Feb 1, 2008
11,492
3,161
136
YES, this was a very good and sobering program. And NO, people are not "stupid" about money/retirement. Not when the system is rigged to confuse, mislead, and downright cheat.
The 401k itself was a massive scam to put the employee in the boat of taking all the risk.
Do you really believe the 401k was developed for YOUR benefit???
Just look at the scare that happened earlier this week from a fake tweet, causing the market to dive bomb.
That was your retirement security dive bombing folks...

In this PBS documentary, even the so called experts were confused, and pretty much repeated their talking points in mush mouth statements.
In every case proposed to the experts, the bottom line reply was "it depends".
Depends? On what? The color of the sky? How deep is the ocean?

And since retirement investing totally relies on wall street and stock market, is anyone that shocked that all these people are in it for their own profit, and NEVER yours???
Are you really surprised?

I love how they sit you down, and go over your future retirement needs so you can make the right decisions. Only problem with that is, in every scenario the one thing that can never factor in is a crash like we had in 1929 and 2008.
They can never figure in the hard cold probabilty of another GW Bush elected president and spending your assessets like a drunken sailor on some pin headed social or war hawkish agenda.

That, kiddies, could never be figured into your personal retirement planning future.
And if that doesn't scare the shit out of you... it damn well should.

The chances of us baby boomers actually depending on any retirement plan, other than that beyond social security income, is... Well... I have a retirement plan bridge in Brooklyn up for sale.
Any takers?

In this PBS program, it was stated the government tried to introduce laws to force anyone in the banking system to legally act in your best interest. Legally bound.
The bank lobbies shot down any chance of that law ever seeing the light of day.
Do you really need any more evidence than THAT of your chances for successful financial retirement security ???

You could save and save and invest and invest for 50 years into your plan.
Sleep sound at night. Like a baby.
And all it would take is one more 2008 event to wipe you totally out.
Sure... Things recovered from that event, luckily for us.
But there are no guarantees of that happy ending repeating itself for the future.
 

Jeff7

Lifer
Jan 4, 2001
41,596
19
81
Thats the type of crap that scares me the most. Everything today moves to fing fast. THe second the word "bomb" pops up these computers sell and panic when its actually nothing. All that event proved is just how volatile the market really is. If a nothing event can cause that kind of reaction in seconds....how bad would it be if it really happened.
...
And it just sounds damn shady. They're making money off of what amounts to electrical noise on a signalling wire - or in some cases, it looks like they can even drive the noise, and then make money off of it.
I put it in another 401k thread - these companies are willing to spend quite a few millions of dollars a year for access to fiber links that will shave milliseconds off of their ping times between their systems and Wall Street's. Millions of dollars to save a few thousandths of a second. Yes, there is some huge money to be made in this shady trading method.


I might as well give it a shot and tell HR manager about this program, and hope she takes the time to watch it. There was virtually no concern about the impact of fees, or the cost of our financial planner/401k rep/insurance salesman (all three are the same person).




YES, this was a very good and sobering program. And NO, people are not "stupid" about money/retirement. Not when the system is rigged to confuse, mislead, and downright cheat.
The 401k itself was a massive scam to put the employee in the boat of taking all the risk.
Do you really believe the 401k was developed for YOUR benefit???
Just look at the scare that happened earlier this week from a fake tweet, causing the market to dive bomb.
That was your retirement security dive bombing folks...
And look at it from the fund industry's perspective: There was suddenly the possibility of managed pensions going away, effectively herding millions of people toward their industry, and these were mostly people who had little or no knowledge of investing outside of what they saw in advertisements from mutual fund companies, and who were fearful about their financial futures.
These people don't know what they need to buy, they don't know how to evaluate the product's quality, they don't know how to evaluate the product's performance, and they don't know how to determine how much it costs.
My god, the fund companies must have been holding parties and raves unlike anything anyone had ever seen before on this planet.


In this PBS documentary, even the so called experts were confused, and pretty much repeated their talking points in mush mouth statements.
In every case proposed to the experts, the bottom line reply was "it depends".
Depends? On what? The color of the sky? How deep is the ocean?
Toward the end of the show, with Michael Falcon (paraphrased):

"Should I, or should I not, use a financial advisor who is legally required to act in my best interests?"

Apparently, that is a very difficult and personal question.



And since retirement investing totally relies on wall street and stock market, is anyone that shocked that all these people are in it for their own profit, and NEVER yours???
Are you really surprised?

I love how they sit you down, and go over your future retirement needs so you can make the right decisions. Only problem with that is, in every scenario the one thing that can never factor in is a crash like we had in 1929 and 2008.
They can never figure in the hard cold probabilty of another GW Bush elected president and spending your assessets like a drunken sailor on some pin headed social or war hawkish agenda.
And how they'll invariably steer you toward the funds that are most profitable for them. If you're in a business, you probably have done your homework to find out which products are most profitable. Not which ones are best for the customer, but which ones are best for you and the business.

What does the customer need?
Whatever's in-stock or most-profitable.
...
Though even with those crashes, if you hang onto an investment long enough, they end up looking like blips, followed by recoveries. Hopefully that past performance does continue. Maybe it won't though. Damned uncertainty.



That, kiddies, could never be figured into your personal retirement planning future.
And if that doesn't scare the shit out of you... it damn well should.

The chances of us baby boomers actually depending on any retirement plan, other than that beyond social security income, is... Well... I have a retirement plan bridge in Brooklyn up for sale.
Any takers?

In this PBS program, it was stated the government tried to introduce laws to force anyone in the banking system to legally act in your best interest. Legally bound.
The bank lobbies shot down any chance of that law ever seeing the light of day.
Do you really need any more evidence than THAT of your chances for successful financial retirement security ???
"These laws are too restrictive, and will prevent us from acting in your best interests. They'll put us out of business, which will jeopardize your money! Write your representatives, and tell them to stop working to destroy your life savings, and your financial future!"


You could save and save and invest and invest for 50 years into your plan.
Sleep sound at night. Like a baby.
And all it would take is one more 2008 event to wipe you totally out.
Sure... Things recovered from that event, luckily for us.
But there are no guarantees of that happy ending repeating itself for the future.
Yeah...kind of a lousy set of options. Even the index fund approach, riding the market average, assumes that the US market's past performance (spanning quite a long time) will continue its general upward trend. Or maybe some facet of our pleasant little economic experiment will come apart.

And even then, I'm sure that those who already have very great wealth will not need to care very much. If the country's economy collapses, there are plenty of very nice tropical regions, where the cost of living is quite low.
Stock market crash just killed 80% of your net worth? 20% of $50M is still a lot of money.

Where are the customers' yachts? The bankers own them, too.
 
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stlc8tr

Golden Member
Jan 5, 2011
1,106
4
76
What makes this decision more complicated (expensive 401k vs taxable account) is that the 401k still represents tax-sheltered space, and if you don't use your allotment each year, it's gone forever.

Yeah, that's why I still max out my 401K. For now it's sitting as cash until I need to rebalance. Then I'll just bite the bullet and pick the least worst option.
 

Michael

Elite member
Nov 19, 1999
5,435
234
106
The program was a little on the sensationalist side (which is OK to draw attention to the fact that people do not pay attention).

Wall Street is not getting 2/3 of your retirement money. The 2% reduces your returns by 2/3 using their example of 7% to 5%, but the fund company just gets 2%. There is no real reason why you should be paying 2% fees on a mutual fund or ETF.

The two most common reasons are that a company does not offer low fee funds are due to bad choices by the company or because the fund company basically does not charge the company anything but only offers high fee funds. Very often the experienced financial people avoid serving on the investment committee the chooses the funds as there is personal liability.

For my companies, I always make sure that there are low cost index funds available for those that want to choose them.

As for pension funds, there is no guarantee that any private company will be around to fulfill the promises made and the pension fund could under perform as well and not have enough money to pay out as promised. There also were many companies that offered no pension fund. At least a 401(k) is much more widely offered.

Michael
 

jpiniero

Lifer
Oct 1, 2010
15,154
5,686
136
I think the stock market rally that's been going on since January is a direct result of people increasing their percentages in 401ks. That would explain why it's still been going up even though most company results are rather mediocre at best. Which only means the crash will be that much bigger.

I realize there might not be many good options out there, especially since interest rates are basically zero, but I think things would be better if people's 401ks weren't entirely in the stock market.
 

rcpratt

Lifer
Jul 2, 2009
10,433
110
116
I'm 33 and don't have that much, however it's been by choice as my wife supported the family almost 100% while I went to college and I just did the same for her.

Now I'm putting in $1,750 a month and my wife $500. She'll be increasing her contribution to the max after she completes her final 2 years of school for a Bachelor's in Nursing. We're also going to begin maxxing out a Roth IRA for each of us as well.

Fail?
Not sure where the "failing" comes in, but it sounds like you made a choice to put off contributing early in favor of some rather large contributions now that you are able. Most people couldn't simply contribute the $50k in two years. There are, obviously, other success paths.
 
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