Retirement Plans

[MTAtech]

In general they seem to favor fiscal liberalism and Keynesianism, shun austerity, want to use the law to raise wages forcibly, or even implement this concept of a required "living wage," favor most types of spending increases, are pro-welfare want government and/or the Fed to use policy to achieve full employment, and in some cases will outright argue that we need higher inflation.

Inflation harms savers.

Inflation harms savers but deflation makes it hard to save.

In this crisis, Keynesian economics has won; austerity in a liquidity crisis has proven to be a disaster everywhere it was used. Remember, austerity is part of Keynesian economics, but only when inflation is high.

Also, please don't get caught in mirror thinking. Conservatives want to cut spending and shrink government so they think liberals want to increase spend for the sake of increasing spending, regardless of what it is. In actuality, liberals want government to do certain things, like provide essential health care; the size of government per se isn’t the objective.

The Fed has a duel charge to control inflation while also encouraging full employment. Have a problem, take it up with Congress.

 

[rabbitcaebannog]

Please don't spin. The source you gave said the reason 401ks were so bad is that people lost 2 trillion dollars in 07/08. The source ignored all of that has been gained back since then. The source purposely did not acknowledge that and let the claim of loss be an important factor in calling 401ks a failure. The source you gave is inept - there are even comments on the sources story that call it inept - why can't you?

PS. Your source provided the average balance of those with one brokerage (the Vanguard Group) mine suggested 401ks as in a general term. Yours claimed they lost in 08 and would never recover, mine said that the levels reported in 2012 were NEVER HIGHER.

Lol, perhaps you should go back and re-read your source. He was poking fun at the headlines that reported (and I will quote) "One of the headline grabbing stories making the rounds today was that the average 401(k) balance, as reported by Fidelity, rose by 12% to an all time high of $77,300 in 2012 from $69,000 the year before." Did you see the part where he stated, "the assumption that one's entire retirement can be prefunded with some $77K is disturbing." He wasn't very complimentary about that figure and the real irony is Moyer gave a higher figure so I'm not sure what your complaining about to me. The bottom line from both articles is this is bad news.

 

[Neomalthusian]

Inflation harms savers but deflation makes it hard to save.

Why, because it's too tempting to buy things when prices fall? ZIRP and inflation make it hard to save, as ordinary folks chase riskier investments to keep their returns in the black.

In this crisis, Keynesian economics has won; austerity in a liquidity crisis has proven to be a disaster everywhere it was used. Remember, austerity is part of Keynesian economics, but only when inflation is high.

Keynesian policy's best defense is that it's an effective emergency intervention that can be reversed in better times. But we don't reverse it in better times. We keep on the accelerator.

Also, please don't get caught in mirror thinking. Conservatives want to cut spending and shrink government so they think liberals want to increase spend for the sake of increasing spending, regardless of what it is. In actuality, liberals want government to do certain things, like provide essential health care; the size of government per se isn’t the objective.

Some liberals focus on the social outcomes, others on macroeconomic indicators, and others on worthless politics and spin.

The Fed has a duel charge to control inflation while also encouraging full employment. Have a problem, take it up with Congress.

Haha, one could say "take it up with Congress" any time anyone has any problem with Federal Government. I would take it up with Congress if I could. Obviously I disagree with Humphrey-Hawkins.

 

[MTAtech]

Inflation harms savers but deflation makes it hard to save.

Why, because it's too tempting to buy things when prices fall? ZIRP and inflation make it hard to save, as ordinary folks chase riskier investments to keep their returns in the black.

No. In deflation, not only do prices fall but so do wages. What doesn't fall? Debt payments. Thus, your income falls but you still have to make the same mortgage payment to the bank on a house that has lost value. Since most people's assets are in their home, the problem should be obvious.

It's just as bad for businesses, who must make the same debt payments but whose prices for their products fall.

In addition, in depressed economies, people don't buy as they expect prices to fall more. That depresses the economy more.

 

[JoeTheEconomist]

... in fact I'd like the government to just leave me alone.

So you have put your money is a single place that is subject to the maximum exposure to tax increases? These things are good for older Americans as a way to catch-up on savings, but I rarely find that they are effective ways to save for younger Americans.

 

[JoeTheEconomist]

A lot of things people "know" just aint so.

If we made no changes at all to Social Security it would continue to make payments at the current level for about 20 years, meaning there is no immediate crisis facing the program. Modest adjustments, will make certain we could increase benefits for those who need it most. After that, it still is able to pay 3/4 of what it now pays.

Of those adjustments could be increasing the income subject to SSA. I have raising the income amount and lowering the rate.

This is factually false. And it goes back to a point that I made earlier. People read misguided junk in the media and then repeat it to a point where it is believed.

You are wrong in two different parts. First, the Trustees do not provide predictions. They provide likely outcomes given a good economy with generous economic assumptions. There are no guarantees. Separately, the Trustees have said that the system could be continued to be financed for 20 years. It is funded with about 3 1/2 years of assets. According to the Trustees, see page 66, the system lost about a trillion dollars last year (by the most conservative estimates). If you use FASB, it would be 3 trillion. The idea that modest adjustments would fix that is laughable.

The Trustees have provided this information as a warning of a financial crisis, and you have repositioned it to a strength of the system.

 

[Vern]

In general they seem to favor fiscal liberalism and Keynesianism, shun austerity, want to use the law to raise wages forcibly, or even implement this concept of a required "living wage," favor most types of spending increases, are pro-welfare want government and/or the Fed to use policy to achieve full employment, and in some cases will outright argue that we need higher inflation.

Inflation harms savers.

Recessions hurt everybody and increase deficits. So policies to reduce deficits and maintain growth are good right? (and I didn't have to post partisan hyperbole to make my point)

 

[CalGun]

Again with the spin; sadly I must assume you have no interest in truth or reality you just want to promote your liberal agenda. Your source said 401ks were terrible and one of the reasons' so was the huge loss in 2007, but this has been corrected twice now. Either you are obstinent or ignorant and neither is worth talking with.

Lol, perhaps you should go back and re-read your source. He was poking fun at the headlines that reported (and I will quote) "One of the headline grabbing stories making the rounds today was that the average 401(k) balance, as reported by Fidelity, rose by 12% to an all time high of $77,300 in 2012 from $69,000 the year before." Did you see the part where he stated, "the assumption that one's entire retirement can be prefunded with some $77K is disturbing." He wasn't very complimentary about that figure and the real irony is Moyer gave a higher figure so I'm not sure what your complaining about to me. The bottom line from both articles is this is bad news.

 

[CalGun]

No they are the funds I have that were not invested and lost in private business over the years. I don't know why you'd think them ineffective for younger Americans - they are truly most effective because any income earned is tax deferred.

So you have put your money is a single place that is subject to the maximum exposure to tax increases? These things are good for older Americans as a way to catch-up on savings, but I rarely find that they are effective ways to save for younger Americans.

 

[rabbitcaebannog]

Again with the spin; sadly I must assume you have no interest in truth or reality you just want to promote your liberal agenda. Your source said 401ks were terrible and one of the reasons' so was the huge loss in 2007, but this has been corrected twice now. Either you are obstinent or ignorant and neither is worth talking with.

:lamo You didn't read your own link.

 

[JoeTheEconomist]

No they are the funds I have that were not invested and lost in private business over the years. I don't know why you'd think them ineffective for younger Americans - they are truly most effective because any income earned is tax deferred.

The idea that the account is tax deferred is over-stated. Whether the tax is collected now or later doesn't change the impact unless the tax rate changes. Today with 43% of Americans having zero tax liabilities, you are a bloody idiot to defer the tax to a time when you may actually incur a tax. As I pointed out most cases that I have seen the saver ends up with a larger tax liability, particularly if it is subject to estate taxes (where marginal tax rates hit 90%+). Investment advisors sell these things based on the tax-deferred status rather than whether the accounts make sense.

The larger problem is fees, and there is a lot of variety in that area. Here is a piece that I wrote on the subject for PM.

It's Not Too Early For Millennials to Save For Retirement - PolicyMic

 

[CalGun]

Of course, but if you can lower your effective rate by dumping 12-15% into a 401k you would be a fool not too.

The idea that the account is tax deferred is over-stated. Whether the tax is collected now or later doesn't change the impact unless the tax rate changes. Today with 43% of Americans having zero tax liabilities, you are a bloody idiot to defer the tax to a time when you may actually incur a tax. As I pointed out most cases that I have seen the saver ends up with a larger tax liability, particularly if it is subject to estate taxes (where marginal tax rates hit 90%+). Investment advisors sell these things based on the tax-deferred status rather than whether the accounts make sense.

The larger problem is fees, and there is a lot of variety in that area. Here is a piece that I wrote on the subject for PM.

It's Not Too Early For Millennials to Save For Retirement - PolicyMic

 

[JoeTheEconomist]

Of course, but if you can lower your effective rate by dumping 12-15% into a 401k you would be a fool not too.

This takes you back to the question of what your tax rate will be. Lowering your effective rate today by increasing it tomorrow is foolish. If your 401K plan charges 2% in gross fees, you lose the entire employer match - that is foolish too.

 

[ludin]

This takes you back to the question of what your tax rate will be. Lowering your effective rate today by increasing it tomorrow is foolish. If your 401K plan charges 2% in gross fees, you lose the entire employer match - that is foolish too.

you don't know if taxes will be higher tomorrow. this is an assumption that can't be made. it is the same assumption that get speculators in major trouble.
The typical large growth mutual fund earns on average 12-15% a year. why would i care if i lose 2% on the year vs gaining 10-13%? this can go higher of course.
last year i earned 15% this year i am set to earn almost 30%. who cares if i have to pay a 2% fee.

also with any non-tax deferred account you pay taxes 2 times.

1. when you pay your withholdings.
2. you pay tax on any earnings that you withdraw. you can pull your principle with no problem but any thing outside your principle you will have to pay 15% on.

with a 401k you are only taxed on the distribution money that you take out.
In theory it is a good idea to have a mix of tax dffered and if you qualify roth funds or some other similar type of investment.

you don't lose your employer matching. as there is a thing called compound interest. the only reason i lose money in a 401k is
if the market takes a slump.

i am not going to lose 15% per year over a 2% fee that is foolish.

 

[MTAtech]

This is factually false. And it goes back to a point that I made earlier. People read misguided junk in the media and then repeat it to a point where it is believed.

You are wrong in two different parts. First, the Trustees do not provide predictions. They provide likely outcomes given a good economy with generous economic assumptions. There are no guarantees. Separately, the Trustees have said that the system could be continued to be financed for 20 years. It is funded with about 3 1/2 years of assets. According to the Trustees, see page 66, the system lost about a trillion dollars last year (by the most conservative estimates). If you use FASB, it would be 3 trillion. The idea that modest adjustments would fix that is laughable.

The Trustees have provided this information as a warning of a financial crisis, and you have repositioned it to a strength of the system.

According to the 2013 trustees report,

In 2012, Social Security’s cost continued to exceed the program’s tax income and also continued to exceed its non-interest income, a trend that the Trustees project to continue throughout the short-range period and beyond. The 2012 deficit of tax income relative to cost was $169 billion, and the projected 2013 deficit is $79 billion. The size of the 2012 deficit is largely due to a temporary reduction in the Social Security payroll tax for 2011 and 2012.
...
The Trustees project that the combined reserves of the OASI and DI Trust Funds will increase for the next several years, growing from $2,732 billion at the beginning of 2013 to $2,922 billion at the beginning of 2021. Reserves increase through 2020 because annual cost is less than total income for 2013 through 2020. At the same time, however, the ratio of reserves to cost declines, from 330 percent of annual cost for 2013 to 218 percent of annual cost for 2021. Beginning in 2021, annual cost exceeds total income, and therefore reserves begin to decline, reaching $2,866 billion at the beginning of 2023. Excluding interest earned on trust fund reserves from the comparison, annual cost exceeds non-interest income in 2013, as it has since 2010, and remains higher throughout the remainder of the short-range period. The ratio of reserves to cost declines to 204 percent at the beginning of 2022.

 

[ludin]

social security wouldn't have an issue if people were saving for their own social security. right now social security is setup as a ponzi scheme and it is collapsing on itself.
when it first started there were 23 people paying in to every 1 person taking out. now? it is like 1.5-2 people paying in for every 1 person taking out.

like all ponzi scheme they never can support themselves in the long term that is why a change must happen in order to keep it alive.

 

[MTAtech]

y
...
The typical large growth mutual fund earns on average 12-15% a year. why would i care if i lose 2% on the year vs gaining 10-13%? this can go higher of course.
...

That depends upon your measured time horizon. The 20th Century average return was about 10%. However, during the 1970s, an investor would have had no positive returns and mostly negative. Most of the 20th Century gains have been since 1982. The below chart is from The Economist.

 

[MTAtech]

social security wouldn't have an issue if people were saving for their own social security. right now social security is setup as a ponzi scheme and it is collapsing on itself.
when it first started there were 23 people paying in to every 1 person taking out. now? it is like 1.5-2 people paying in for every 1 person taking out.

like all ponzi scheme they never can support themselves in the long term that is why a change must happen in order to keep it alive.

Is Social Security a Ponzi scheme?

What makes a Ponzi scheme a Ponzi scheme is that it’s a giant fraud. People think they’re investing in postal stamps. Their money is actually being invested in nothing. In Social Security, conversely, it’s perfectly clear what is going on. Every year, Social Security’s actuaries release an insanely detailed report on the system’s finances, its balance of payments, the potential problems it could face, and so on. You can read their report here. In a Ponzi scheme, the finances are a secret, and that’s central to the enterprise. In Social Security, they are, as a matter of law, public.

Indeed, Social Security has a much more obvious financing structure than, well, almost anything else in the government. Consider how the Pentagon gets funded. It has no dedicated funding of its own. No one knows exactly how it will be paid for, or at what level, 20 years from now. Instead, every year, there’s a budget. Every year -- at least recently -- that budget calls for more spending than the government is taking in in taxes. So we just borrow the extra money.

Social Security, by contrast, has its own dedicated funding source. It is currently running surpluses, though it won’t be doing so for very much longer. Those surpluses are invested in U.S. Treasuries, which are widely considered the world’s safest investment. As I’ll explain in a moment, it needs adjustments to remain actuarially sound in the future. But compared to almost everything else in the federal government, its path to financial stability is clear.

 

[sangha]

The idea that the account is tax deferred is over-stated. Whether the tax is collected now or later doesn't change the impact unless the tax rate changes.

This alone reveals that you don't know what you're talking about. Being able to invest money that otherwise would have been spent on paying taxes is a huge benefit, if done wisely.

 

[CalGun]

Fail, if you lower your effective rate today and then multiply on what it grows and is worth for tomorrow it is definitely worth the risk, well of course it could be bad if the confiscatory liberals want to take from your success to give to the low life's that didn't bother to even try.

This takes you back to the question of what your tax rate will be. Lowering your effective rate today by increasing it tomorrow is foolish. If your 401K plan charges 2% in gross fees, you lose the entire employer match - that is foolish too.

 

[ludin]

That depends upon your measured time horizon. The 20th Century average return was about 10%. However, during the 1970s, an investor would have had no positive returns and mostly negative. Most of the 20th Century gains have been since 1982. The below chart is from The Economist.

Right but most mutual fund investments are in for the long term. IE in 2008 or so i lost about 40% of my investment along with most other people. in 2009-2011 i earn that back and then some.

So i am not worried about short term loss as i am about long term gain. i know that the market is going to go up and down, I am in it for the long haul. more so at least another 30+ years. so if i lose 10% here but gain 20% the next year then i am doing well.

as for SS it is dependant on more people paying in than paying out. it doesn't matter if they release financials or not. the mony that SS pays out is dependent on more people paying in. while the money is invested in US treasuries those interest rates are horrible. SS is not funding itself and is starting to pay out more than it pays in.

it would have been much worse if the baby boomer generation hadn't had to delay retirement due to the recession.

we need a new SS system where you are actually contributing to your own SS rather than someone elses. What is worse is that the government is promising me returns that it can't make. that is what a ponzi scheme does.

it requires more people paying in than paying out to cover the returns that it can't hope to repay.

 

[dad2three2001]

social security wouldn't have an issue if people were saving for their own social security. right now social security is setup as a ponzi scheme and it is collapsing on itself.
when it first started there were 23 people paying in to every 1 person taking out. now? it is like 1.5-2 people paying in for every 1 person taking out.

like all ponzi scheme they never can support themselves in the long term that is why a change must happen in order to keep it alive.

It's called INSURANCE. Germany has been using it since 1880's. Weird how it keeps 50% of seniors out of poverty AND pre SS we had MASSIVE senior poverty!

Easy fix to SS (though even if NO FIX is brought it still will fund 70%+ of ALL monies promised), lift the cap. SS/Medicare have had dozens of changes throughout the years. It just taking getting rid of TP/GOP to fix it!

 

[dad2three2001]

Fail, if you lower your effective rate today and then multiply on what it grows and is worth for tomorrow it is definitely worth the risk, well of course it could be bad if the confiscatory liberals want to take from your success to give to the low life's that didn't bother to even try.

Funny how Chile tried Uncle Militie's 'privatization' of SS and it failed miserably (like the rest of his Chile experiment)

http://www.nytimes.com/2005/01/27/business/worldbusiness/27pension.html?_r=0

 

[ludin]

It's called INSURANCE. Germany has been using it since 1880's. Weird how it keeps 50% of seniors out of poverty AND pre SS we had MASSIVE senior poverty!

Easy fix to SS (though even if NO FIX is brought it still will fund 70%+ of ALL monies promised), lift the cap. SS/Medicare have had dozens of changes throughout the years. It just taking getting rid of TP/GOP to fix it!

here comes the liberal non-sense.

yes if you were one of the first people to get social security you made out like a bandit.

look up ida may fuller ol wait i did. She was one of the first people to retire and collect SS. she paid 3 years of payroll taxes into ss for a grand total of 22.45. she received until she died a total benefit of 22k. please someone tell me where i can get that kind of return on my money.

now the fund is drying up. they want to extend the retirement age. they want to decrease the amount of benefits that people get.
why? because the system us non-sustaining.

lol fund 70% you want to only get 70% of something you paid into? no i doubt it.

we would be better off with a private SS system with a government matching up to 500k.
part of the overall tax reformation.

Funny how Chile tried Uncle Militie's 'privatization' of SS and it failed miserably (like the rest of his Chile experiment)

ok 1 that article is like 8 years old.

why not use something more up-to-date?
http://news.investors.com/ibd-editorials/122710-557939-the-chilean-model.htm

sorry chiles model is doing very well just as singapores private cash and ss system.

 

[CalGun]

This fails on the same level as the other poster on this thread that claimed 401ks were a failure because they lost money in the 08/09 market; and they fail because they don't recognize that what went down - went back up. It will go down again and up again / just like global warming (maybe you can relate if I put it in ultra liberal terms?)

Its intriguing how the left wants to note the failure of these systems, but doesn't want to note the failure of public employee defined benefit plans that are bankrupting cities and counties, they are seriously impacting taxes, the amount of police / fire protection, education and will impact health care the same way once the liberals have their way.

We have advanced as a people into the age of "the computer" and its reasonable now to maintain individual retirement accounts and not depend on the nannygovernment for every little thing; its time we "progress" one can hope - for change.

Funny how Chile tried Uncle Militie's 'privatization' of SS and it failed miserably (like the rest of his Chile experiment)

http://www.nytimes.com/2005/01/27/business/worldbusiness/27pension.html?_r=0