Remember the 401-K?? and the investor class for the masses?

[SoCalDem]

Well, that worked out well, didn't it? Middle class workers gave up (not their choice) those boring old defined benefit pensions, but they were "promised" that they too could be rich..rich..rich I-tell-ya..

It had to appear better than sliced bread, to get MOST eligible people IN it.

Much like the charter school thing & vouchers, the rush to GET IN, created a vacuum that "proved" that there was no longer even any need for regular old boring pensions, and that would drive more and more companies into 401-k plans..

Companies were freed up from having to keep track of pension money and to account for the shenanigans that often occurred..so it was a win-win for companies.. give out 2% pay raises (if any) and then just plop in 2-4% into the 401-ks...knowing that as people get strapped for cash they often reduce their participation percentage or drop out altogether, letting the boss off the hook as well..


People all over the country with high school educations (many with less) that probably did not even teach them how to successfully balance a checkbook, were suddenly "investors"..

Don't understand it?.. well never fear, the cable TV people will hook you up with the likes of Jim Cramer & his cohorts..and the online folks will offer you their website casino hosts... um ...experts..

How could this plan possibly fail? :eyes:

For a while, many people did ride the bubble successfully (on paper..even Bernie Madoff sent out glowing statements), and some managed to pull their money out in time, by retiring at just the right moment in time, but for many many many more, all that money faithfully deducted every payday & matched (somewhat) by their employers...over all those years, was little more than a huge wad of "walking around casino money" for all the wall street hotshots. They were supposed to invest your money over the long haul, so you could retire with MORE than that stodgy old pension would have given you.

It's no surprise that the 401-k came along as the Boomers entered their prime earning years. Those were also the merger & acquisition years, so it made the 401-k seem like a fantastic way to avoid losing a pension as some companies merged & others flopped dead in their tracks.

Substitute "Health Insurance corporations & Pharma" for "Wall street" and we've got pretty much the same deal going on here, folks.. with a twist ..

the twist?

fines if you do not participate, unregulated cost increases if you do.

Corporations NEVER operate for the good of mankind.. They serve the bottom line...the BIG-investor class.

Our nation has a saddle on the Boomer Generation..and they've ridden us our whole lives (for optimum extraction of money).. This is the final act..

REAL health care will start after most of us are gone. Why? Economics

[xchrom]

1. Recommend

[ixion]

2. spot on... kicked and recommended

:applause:

[WCGreen]

3. Spot Om K&R

[Orrex]

4. When I started at a corporate job in financial services back in 1999

I was amazed at the frenzy with which they touted their 401k program. They made it sound as though anyone who didn't contribute 90% of their paycheck to the fund was a suicidal idiot.

I wasn't the most business-savvy guy in the world back then, but even I could spot a scam when I saw it. It was so freakishly cult-like that I declined to participate, even in spite of the twice-monthly reminders that I received in every paycheck.

Sure, in hindsight my motivation for opting out wasn't entirely solid, but when the bottom fell out I was gratified to see that I'd chosen correctly, whatever my initial reasoning...

[SoCalDem]

6. It had to appear better than sliced bread, to get MOST eligible people IN it.

Much like the charter school thing & vouchers, the rush to GET IN, created a vacuum that "proved" that there was no longer even any need for regular old boring pensions, and that would drive more and more companies into 401-k plans..

Companies were freed up from having to keep track of pension money and to account for the shenanigans that often occurred..so it was a win-win for companies.. give out 2% pay raises (if any) and then just plop in 2-4% into the 401-ks...knowing that as people get strapped for cash they often reduce their participation percentage or drop out altogether, letting the boss off the hook as well..


People all other the country with high school educations that probably did not even teach them how to successfully balance a checkbook, were suddenly "investors"..

Don't understand it?.. well never fear, the cable TV people will hook you up with the likes of Jim Cramer & his cohorts..and the online folks will offer you their website casino hosts... um ...experts..

How could this plan possibly fail? :eyes:

[SOS]

106. The hidden fees in 401Ks are an undisclosed swindle

There are 17 legal "fees" on these crooked plans which will eventually rip off about 30% of your hard-earned money.
The 401K is one of the biggest scams ever perpetrated on the American worker.

"The Hidden Fees in the 401 (k):

http://www.bloomberg.com/news/marketsmag/mm_0308_story3.html

[truedelphi]

34. Isn't part of the appeal of the 401 K plan the notion that

Those funds that you contribute remain tax free? Unless you pull them out of hte plan prematurely?

ANd that if instead you put the money in your pocket or in a savings account, you are taxed on that money?

pls let me know what you remember of these plans - I am not being snarky - I am curious.

[Orrex]

35. You're right--the contributed funds are tax-deferred

After a vesting period, the employer commonly matches a certain dollar-level of contribution, or possibly a percentage of gross income.

If you put the money in your pocket or a savings account, that money counts as income when it's tax time. And in a savings account, the interest is likewise taxable as income (unless you're investing in a tax-free instrument, such as a municipal fund or the like).

The downside is that you can lose your principal if the 401k is invested in instruments that take a really bad hit, as happened during the collapse of the housing bubble.

Imagine that when your 401k bought into a security, it was trading @ $40 per share. And then when the bubble burst, you were down to $20 a share, or a loss of half of your investment! Now, if you're young and can afford to wait for a market recovery, you might be able to recoup your losses. But if you were 58 or 62 when the bubble burst, you've suddenly lost a ton of invested principal with little chance to recover it prior to retirement.

In my particular case, the salary I was paid didn't allow me sufficient surplus to put anything aside in a 401k or otherwise, and I was conscious that the whole program was keyed to yield a great return for the company while being passed off as a great opportunity for the employees. It may have been the latter, but I wasn't convinced and--as it turns out--my suspicion was borne out.


Incidentally, a range of retirement vehicles allow tax-deferred investment and accrual of interest. Annuities and IRAs are two of the most well-known; if you're curious to learn more, you should check with a financial adviser!


Hope this helps!

[onlyadream]

61. It is gambling, and you need to be smart

..as you get older (in the 50's and 60's) you're supposed to move your funds into bonds that are safer than stocks.

[femrap]

67. But Bonds can be just as

risky as stocks if interest rates start to move.

What amazed me with many, many 401-Ks was they did NOT offer a Money Market Option which kept one's funds from risk. If the employee thought that the stock market was going to sink, there should be a Money Market Option for that employee.

I realize some 401Ks did offer that....but many did not, which to me says they were NOT performing their fiduciary responsibility.

[Statistical]

80. That is crazy.

Maybe I am lucky but every company I have worked for offered both a money market (usually 1% crap return) and a Treasury fund (buys govt debt) as low risk options.

If I ever worked for an employer which didn't offer that I would raise hell with HR dept.

Some funds don't call it a money market they simply call it cash. My new employer (changing jobs in January) has the cash fund setup as the default. If you make no elections by default your money goes into the cash/money market fund which currently is yielding 0.8%.

[A HERETIC I AM]

91. Often the low-risk option is referred to as a "Stable Value Fund"

which is set up in a similar fashion to a Money Market fund.

I find this;

What amazed me with many, many 401-Ks was they did NOT offer a Money Market Option which kept one's funds from risk.

to be a dubious claim at best.

What is your source for this claim? How do you know "many, many" plans of this type don't offer a Money Market fund?

Every 401(K) I've ever seen offered at least a Stable Value Fund, if not a "cash" option as the poster Statistical mentioned.

[onlyadream]

103. I thought they all offered money markets...

even tho, we have most of our money in the money markets and lost quite a bit.

[femrap]

110. This was in the early to mid '90's that I

saw 401Ks not offering a Money Market Account. Take State Farm Insurance for example.

They may now offer that investment option. But at the time many didn't offer....Why? The Investment Mutual Funds make no money on a Money Market Fund.

[Lydia Leftcoast]

63. People who were already retired also took big hits

I swim with a lot of retired people, so I heard the stories.

[Statistical]

64. What you are missing is a 401K is just a bucket.

You can invest your 401K money into an FDIC cash account or buy govt Treausry bonds.

Just because stocks are an option doesn't mean you have to take it.

Savings Account: post taxes + no employer match
Treasury Bond account or cash account in 401K: tax benefit + employer match.

So for the same no risk you get roughly 150% more money via reduced taxes and employer match.

Sure stocks in a 401K is risky but you likely can invest in stocks via your bank too.
It isn't the 401K that is risky it is stocks as an investment choice.

[truedelphi]

92. Thanks Orrex. n/t

[zoff]

65. Taxes are just one consideration.

RISK is the most important. Don't be blinded by promises of a golden retirement just because your IRA is growing tax-free. Whatever you invest in, you must remain informed, vigilant and proactive. IRAs, 401k's and all other tax-deferred accounts when fully invested in the equity markets assume inordinate levels of risk. You may want to consider AAA bonds (not bond mutual funds where you could still lose principal) or treasuries within a tax-deferred account if you are so risk-averse as to consider a simple savings account. This way you have the benefits of tax deferment AND a safe investment. I parrot Orrex in saying that a good financial adviser will give you a good education in money management and risk. (BTW, if I were still 30 and treasury bonds go to double-digit yields (10% +), I'd buy a boatload of them. I remember seeing an 18% Treasury bond maturing. That's a really good return.)

[truedelphi]

90. Thank you for all this information.

I have always felt that so much of the "retirement and financial" advice people hear is geared to taking the money away from them. Look at how some people heard that Madoff had gone broke and thought "Good thing none of my money is with him," only to find that whomever they had let manage their money had put it all into Madoff's funds.

Thanks again.

[zoff]

100. Always glad to share what I learned in Financial Services. YVW.

[jgraz]

5. All part of the 1-percenters' Ponzi Scheme.

[highplainsdem]

7. K&R

[amborin]

98. +10

[CaliforniaPeggy]

8. Excellent perspective!

K&R

[KoKo]

9. Good Points SoCal...something that's not much talked about

yet from experience, many of us can understand in hindsight.

[Statistical]

10. WTF does Bernie Madoff have to do with 401K.

You are aware Madoff ran a hedge fund. It is not possible or legal to place IRA, Roth IRA, 401K, Simple IRA or any other IRS tax deferred funds into a hedge fund.

[SoCalDem]

11. he sent out great looking statements ..I never said he was

involved in 401-ks..although money is quite "flow-y" :)

many people drooled over those wonderfully optimistic 401-k statements and actually counted on that balance always going up...like their house- value :rofl:

[Statistical]

12. My 401K is up substantially.

Anyone who started investing 20+ years ago is also up substantially.
Add in the tax benefits and company match and it is a no brainer.

401K doesn't have to equal stocks.
It is possible to have 100% of your 401K in bonds or even Treasuries.

If you company offers say 5% match and you don't take it you are just choosing to have a 5% paycut.

[SoCalDem]

13. My husband's company has an 8% max & they match 4%

better than nothing...

and many companies did not even start offering 401-ks 20 years ago..and some still do not..

the tax benefits are nice, but many people who do not have even a penny to spare in their budgets, cannot afford to participate..


many are not as fortunate as you and I .:(

My measly little defined benefit pension (10 yrs in the company) pays me $366.05 a month for as lonog as I live..and $289.76 a month to my husband if I die first.. at the end of my 10 yrs, my union dues were $26 a month, so in a very short time, I will have "extracted" every penny I paid in, and then some..

The "average" amount in 401-k plans is somewhere around $40K...not a lot to augment SS for most folks... better than a sharp stick in the eye, but not what it was cracked up to be either..

Merry Christmas:)

[Statistical]

15. $40K buys $240 a month annuity for life for investor + spouse.

Of course the goal would be to invest more.

My biggest problem with 401K
a) lack of education. company should be required (on company time) to provide 3rd party education
b) goal tracking. once a year 3rd party should sit down w/ employee and go over contributions, projected gains, and value at time of retirement so employees are less
c) since 401K replaced defined benefit plans (which costs employers about 5% of wages) the minimum plan should be 100% match up to 5% which would be similar cost.

A plan which employee puts in 5% and company matches that would after 30 years with average gain of only 8% (stock market average return for last 100 years is 10.5%) would be worth about 25x annual salary.

That is enough to purchase an annuity to replace 100% of salary/wages for life (plus life of spouse).

So there are problems w/ 401K (a,b,c above) but to say they are a scam or completely broke is a joke.
I am 10x more likely to receive income from my 401K than I am from SS.

[Hello_Kitty]

18. The tax benefits are great for boomers, not so great for subsequent generations.

Boomers started funding their IRAs and 401Ks when tax rates were higher than they are now. They'll be taking distribution under historically low taxes. Eventually taxes will go up again, just in time for Gen X/Y to be taking out the money they put in at a low tax rate at a higher one.

[SoCalDem]

20. Every generation gets screwed, at various times..the whole system sees to it

People with big money, usually always manage to hang onto it...at the expense of the masses who are not part of the "game"..

[Statistical]

38. Major reason why I recommend a Roth IRA over traditional one.

Many employers now also offer Roth 401K.

With Roth you get no tax break now but the money is never taxed at retirement. Grow your nest egg to $200K, $500K, $1mil and it is tax free income for life.

Also you can convert a traditional 401K or traditional IRA to Roth (by paying taxes).

Of course everyone's situation varies so consult a tax professional but I believe Roth is better platform in long run.

[femrap]

70. The taxes on the Middle and Working Classes

haven't changed....it was the taxes on the wealthy that were reduced. Raygun made the tax structure so that the Middle folks couldn't even qualify to do the "Long Form." I was an Investment Advisor at the time all these tax changes went into affect. I was agape at the time. He got rid of R & D Investment write-offs, Oil and Gas Investment, Real Estate Investment Partnerships....all the write-offs were for the extremely wealthy. No more interest write-off of credit cards nor sales tax. No, the Middle got it again....BOHICA.

Real Estate people used this Tax Structure to entice people to buy BIG mortgages so they qualified for the high interest write off....and this, imho, has helped lead us into the Real Estate Bubble.....poof!

Please...don't think that the Middle and Working Class Boomers got some great deal. They didn't. Seriously...think about it.

Only the Wealthy get the deals...the top 10%.

edit for clarity.

[DesertFlower]

30. exactly. nt

[PufPuf23]

46. About Madoff -- somewhat OT

The money lost by later investors went into pockets of Madoff and cohorts,

The cohorts include the early clients of Madoff -- early ins on the Ponzi (and probably those that had the capital to make the endeavour of critical mass -- that is where the $ went.

Why are they not identified and brought to justice?

[katkat]

14. yes it was a mess

But I rolled mine out into CDs as soon as I could, just like I took my pension in a lump sum (getting royally ripped off in the process compared to what it had been worth, but at least it was under my control.) And I didn't put it in Casino Wall Street.

I expect a modicum of financial sense from people.

[tonysam]

16. A big kick and recommend. n/t

[enid602]

17. 401K

I don´t know. I took a job with Honeywell in 1979. At the time, my boss really rode me to join the 401K. I wavered, but agreed, due to the insistence of my co-workers. After 23 years, the job ended. I had put about $50K of my own money in to it over the years, if you consider the tax effect, including the saver´s credit given at tax time. The balance is now 12 times that, and I´ve been living in Buenos Aires for the past 2 and 1/2 years on the interest. I´m only 55. In retrospect, I think the only thing wrong with these plans is that they are not mandatory. That, and of course the fact that they do NOT effectively give a tax benefit to lower wage earners (particularly those with dependents, earning EIC), so there´s no reason for them to contribute.

[SoCalDem]

19. Fantastic.. What a great retirement you have

but you are not the norm..


Planning to Retire
Most 401(k) Participants Have Very Small or Very Large Account Balances

By Emily Brandon
http://www.usnews.com/money/blogs/planning-to-retire/2009/1/13/most-401k-participants-have-very-small-or-very-large-account-balances.html
Posted: January 13, 2009

At the end of 2007, the average 401(k) account balance
was $65,454 and the median (mid-point) account balance was $18


At the end of 2007, the average 401(k) account balance was $65,454 and the median (mid-point) account balance was $18,942. But these numbers obscure the fact that most 401(k) participants have either very small account balances under $10,000 or very large nest eggs over $100,000.

Relatively few people have account balances between those two extremes. In fact, nearly three-quarters of 401(k) participants have account balances that are lower than $65,454 average account balance.

Percentage of 401(k) participants with account balances in specified ranges, 2007

Less than $10,000 39 percent

$10,000 to $20,000 12 percent

$20,000 to $30,000 8 percent

$30,000 to $40,000 6 percent

$40,000 to $50,000 4 percent

$50,000 to $60,000 4 percent

$60,000 to $70,000 3 percent

$70,000 to $80,000 2 percent

$80,000 to $90,000 2 percent

$90,000 to $100,000 2 percent

Over $100,000 19 percent

Note: Percentages do not total 100 percent due to rounding.

Source: Employee Benefit Research Institute and Investment Company Institute, 2007.

These numbers come from an Employee Benefit Research Institute and the Investment Company Institute analysis of 21.8 million participants in 56,232 employer-sponsored 401(k) plans using data reflecting account balances at the end of 2007. So, these amounts have likely decreased among all income levels since then.

To see the typical 401(k) balance broken down by age and income level check out this recently updated tool.

[enid602]

21. participants

But the figures you cite are for ALL participants, including very young ones. I, too was in one of those lower categories for much of my young professional life. You have to give consistently, not abuse the plan and be patient. At my age, there are two kinds of people; those who did participate, and those who did not.

[Trekologer]

105. Those numbers are not meaningful without knowing the age distribution

When you look at the data on the page linked from the linked page (http://www.usnews.com/usnews/biztech/articles/070810/10roth401k.age.htm) it shows that the average account balance goes up as the employee's age goes up and/or job tenure goes up. So while "nearly three-quarters of 401(k) participants have account balances that are lower than $65,454 average account balance" seems to suggest that 401(k) is a waste, the data shows that most of those 3/4 of participants are younger. The same set of statistics can be made to say just about anything depending on how you present them.

[Smarmie Doofus]

22. Kick. nt

[ljm2002]

23. Also those 401-Ks were a way to co-opt the middle class...

...and get us to buy what the overlords were selling: namely, that what's good for Wall Street is good for all of us, so don't go around questioning it or rocking the boat because *you* are invested too!

Yeah, that's worked out really well.

As usual, they want us to believe that it is the big corporations From Whom All Good Things Flow.

It's a crock. It's the big corporations from whom the sellouts emerge, and for whom eternal war is waged.

The Constitution has, indeed, become just a piece of paper. Remember the Constitution? The document that says only Congress can wage war? That Congress shall print our money? That enshrines the concept of habeus corpus? That Constitution? There are all sorts of things in the Constitution that have never been changed by amendment, and yet are simply not in effect today. Why is that?

I wish I knew.

[Greyhound]

24. Like any good pyramid scheme, the few that get in early and get out before the collapse

make out well and therefore will help to defend and preserve the system.

The fact that they conveniently ignore the fact that "their wealth" was built on the murder and theft from millions shows just how bankrupt they are.

"I've got mine; Fuck you" came into being during the reign of the Boomers.

(This is not a blanket condemnation of a generation, I merely point out that many of them are the architects of the greatest theft in the history of the world.)

[SoCalDem]

25. welll.. when the schemes came into fruition, boomers were not the ones "in charge"

for that matter, even now, many of the real movers & shakers are pre-boomers.. Damn the extension of the US lifespan :grr::rofl:

[Mudoria]

26. My 401k has recovered very nicely.

My employer matches up to 6% so it amounts to a decent amount over the course of time. I look at my 401k as a long term investment so I don't worry so much about the dips in wall Street over a short term. Defined pension benefit? If I was waiting for one of those I'd be waiting for hell to freeze over. I'm not sure why a company owes you a pension anyway. It's your responsibility to save money for retirement after all.

[SoCalDem]

27. how old are you?

If you are 40 or under, you will probably be okay...but be aware the future will not be rid of the schemers, and "paper wealth" can vanish in a heartbeat again..as it has many times in the last century:(

for people who are 60-something now, many of them did not even get INTO the 401-k thing until they were well into their 40's, so their "growth" timeframe was about 1/2 that of the ones who started their employed years with availability..

It;s true that everyone has responsibility for their own retirement, but most people do not choose to be unemployed, downsized or outsourced, and life has a way of derailing people along the way to retirement, no matter how well one plans:)

[KoKo]

112. You do realize that not all folks have employers reimbursing at that rate...

That many employers have stopped matching funds in 401-K's all together and that "Small Business Owners" have very different plans where the employers of the small business sets up a 401-K and doesn't contribute any matching funds but allows the employees to get tax breaks by putting in their own money (a lot of that money went down the tube last March...and some hasn't come back) ...but you are lucky and thank your stars you have that gift of matching up to 6% for you. You have time...but most of us weren't in the 401-K's until they did away with the pensions. That means BOOMERS...who got SHAFTED. Not all BOOMERS even had a pension and worked for nothing...then got the 401-K in late 40's or early 50's...so they don't have that LOOOOONG Time Line you are looking at for Retirement Savings. We have to rely on what SS took out of our paychecks since we were old enough to earn any income as part timers and on into the work force. So...if our SS Benefits go...we will be destitute..even with our savings that are only earning .01% these days.

[annabanana]

28. You are dead on the money with this SoCal

The boomers were sucked dry as they were being flogged.

[DesertFlower]

29. my husband has worked for an international

company for 40 years. he will get a hefty pension when he retires, but those hired in the last 10 years or so will have to depend on their 401k.

we started putting money into the 401k about 18 years ago. we liked the idea that it was tax deferred. about 6 years ago i felt uncomfortable about the stock market so we moved everything into "stable fund". we haven't lost a dime. in fact we continue to make a small amount of money.

2 years ago the compamy raised it's contribution from 4% to 10%.

many of hubby's co-workers had most of their money in stocks. they had hefty losses. many have had to postpone retiring.

when i made the decision to move everything out of stocks, hubby was apprehensive. now he thanks me every day.

[hayu_lol]

31. People tend to forget that the last stock bust came about...

from everyman investing in stocks. Boom lasted about 8 years--on paper at least. It all came to a screeching halt in '29.

Primary reason for 401Ks was pay raises for the workforce. Most companies quit with the raises and went for the 401 contribution. Saved them piles of money in paid-out unemployment benefits. Also kept the pay of employees down so that they couldn't draw on total pay for unemployment purposes.

The low pay for participating permanent part time jobs precluded participation by many workers.

401s for some have been a bonanza. A bust for others. But, 401s were a scam to start with.

[DesertFlower]

33. hubby used to get big raises.

the last few years he has been lucky to get 1%. that's because he's a top performer. most get nothing. we are pleased though that they raised their 401k contribution to 10%.

we consider ourselves very lucky. he's managed to avoid all the layoffs that have been going on for many years. he's 62. if he were let go tomorrow, we'd be just fine.

[EVDebs]

32. The myth of the 'populist' stock market

The myth of the populist stock market
http://www.csmonitor.com/2004/0108/p09s01-coop.html

"At the height of the boom, however, the bottom three-quarters of American households owned less than 15 percent of all stock. Barely a third of households hold more than $5,000 in stock. Most Americans have more debt on their credit cards than money in their mutual funds."

Thomas Frank wrote about it in One Market, Under God. Great read, I recommend it !

[winyanstaz]

36. K & R....thank you.....it needed to be said and you said it well.

[madrchsod]

37. i agree with you

i have absolutely nothing to live on but social security and if i can find a part time job i`ll be able to pay my medicare share and maybe supplemental insurance. i`m betting on my wife living longer than i will so at least she`ll have a chance. if i can`t find a part time job we are actually thinking of divorcing in a couple of years so my medical debts in the future won`t be passed on to her.

hell of a way to live.

[nicky187]

39. Corporate management decisions...

BOHICA ... bend over, here it comes again.

K&R

[BlueJac]

40. Just another joke on the working class

[EFerrari]

41. I can't think about this too long because I get chest pains

and hate going to the ER.

The next time I go to the ER, it will be on a gurney and I won't be feeling the ride. That's it. I'm done with this.

[Yupster]

42. You're right -- corporations operate to make a profit

for the owners. They don't operate as a way to pay employees money.

Pension plans make good sense for employees. But they don't make a lick of sense for thje business. That's why they were gotten rid of for the 401 k.

With a 401 k the person leaves the company, gets his 401 k to rollover into an IRA and a handshake. The company doesn't have to send out checks for years, process address changes, bank changes, divorces and deaths.

Workers didn't have a choice. We have 401 k's because they're better for the company.

[AllyCat]

43. I've stopped contributing.

Putting it in savings instead while I figure out where to go next. Scam artists. I feel so badly for my recently retired mother.

[TwentyFive]

44. Don'tcha love the douches who explain FREE MARKET economics to you?

These people talk like five year olds about the 'wonders' of the free market. They say, "There are no dishonest businessmen. The wonderful free market weeds them out because zillions and zillions of individual consumers make well informed decisions. Monopolies don't exist. No, I am not naive."

[PufPuf23]

45. Realistic perspective. Sad.

Best to you and yours; I was just telling my SO essentially the same thing moments ago.

We had a nice day today together and that is what is important when the world is cruel and insane.

[WinkyDink]

47. President Obama has no current ties to any Boomer; hence, he has no empathy (at the least).

[SoCalDem]

53. Yep.. his mother died before she was old enough to retire

and his mother in law has a president for a son in law..

[DallasNE]

48. While It Has Turned Out Worse Than I Expected

It was easy to see how it would end up. Initally the 401-k program created false demand for stocks because millions became first time owners of stocks. This bubble then made the tech bubble even worse because it started with a high floor. Those 401-k programs also have requirements for redemption and with those really starting to come due now it is creating artificial selling and excess stock in the market. Worse, the market was deregulated just at the time those regulations were most needed making all of those investments high risk without people recognizing the risk. I think the deregulation is what made this turn out worse than expected.

[SoCalDem]

49. It's no accident that all the deregulation was coupled with this little "invention"

Imagine being a "market-guru" and being told that BILLIONS of dollars would be flowing in EVERY FREAKING WEEK...like clockwork, and you would have it coming in for DECADES before it could be tapped. That's a whole career for someone in the market who was a 30-something.. It's no wonder there were so many mega-rich wunderkinds gracing the cover of magazines in the late 80's & through the 90's..

They were made rich by gambling, and cleverly crafted their plan so they would be retired themselves with ill-gotten bonuses built on fake numbers they created for themselves..and would be out & clear before the whole scheme collapsed.. although I think many of them thought it would go on forever :(

I also think that society changed too... think back .. Tv shows (the American Culture Kaleidoscope) were mostly about people that almost everyone could identify with.. The Bunkers lived like most people, Roseanne was definitely not about the upper crusties, ... going way back, The Honeymooners were poor..even the Ricardos lived in a cramped apartment, and their suburban house was like most middles'... The Cleavers were not rich, Marcus Welby ( a DOCTOR!) had his office in his house..not even a mansionesque house... The families we all saw on tv, the ones many people emulated, or at least saw as the norm, were pretty "Normal"..achievable ..

Then we got Dallas & Falconcrest & Dynasty & Lifestyles of the Rich & Famous.......and coincidentally, those shows came along at the very same time we were all bombarded with plastic credit cards. And every quarter those statements came out, showing how rich we were all getting.. Madison Avenue, Congress, & Wall Street pulled the wool over everyone's eyes

[KoKo]

54. +!...Society Changed....Marketing "Lifestyles of Rich & Famous" became

what was to capture the American Imagination. You too could be rich one day so why would you want support taxes for programs that help all the people when the government is taking away from you becoming richer. You too might leave over a MIL as an estate so the "Death Tax" is important to the person making $40,000 a year working at Wall Mart. :crazy:

Now we have "Reality Shows" with insane lives of the 15 MINUTES of FAMERS and lots of other kinky stuff that produces folks like "Ballon Boy's" parents. Exploitation.

Who knows what's coming next.

[SoCalDem]

55. The modern version of goldfish swallowing, pole sitting, dance marathons

of the depression..where everyone tried to get attention and possibly a few bucks..

the more things change, the more they stay the same

Happy New year Koko

[KoKo]

60. Ha...you remembered...

:evilgrin: A happy New Year to you, SoCal!

(and thanks for this post)

[SoCalDem]

62. luckily you did not change your new name, all that much

:)

[Tuesday Afternoon]

50. yes. K&R

bottom line and short term outlook.

[paparush]

51. I just noticed the Triceratops. One new monitor..STAT!

[SoCalDem]

52. I love subtle..not many people have "gotten" it

Score one for YOU!!

MC2U&HNY :hi:

[fasttense]

56. People forget that pensions originally were substitutes for earned wages.

A good pension plan was designed to lure good workers to corporations that could NOT afford hefty salaries. A worker EARNED the pension. It was NOT given to them for FREE. A good pension would keep an experienced and talented worker at a company that paid less.

Today's 401ks are designed to look good and sound magical but result in little. I have a defined pension, I retired at 45. I get enough money every year to support my husband and I in a nice middle class life style, I also get full medical coverage. How many 401's after 20 years could provide that kind of security? Heck the medical coverage alone could clean out an average 401.

But corporations have ensured that American labor today is almost worthless. Corporations today can outsource, downsize, hire illegally, use HB-1 Visa workers, ship off your job to an underpaid child or prison worker, the possibilities are endless, if you are a corporation. If you are an American worker your opportunities are very limited, unless a wealthy relative or parent can bankroll your training at a University or college, or you are a freaking genius. Most people do not have either of those options thats why the unemployment rate for 16 to 19 year olds is 26.7%.

The 401k was just another scam to convince workers to labor for less, and to make them think that their interests were the same as Wall Streets and the mega corporations. The truth is corporations would rather see you die in your old age then cut into their precious profits.

[SoCalDem]

59. I worked for 10 yrs in a place with a union.. only 10 years

my dues, at their HIGHEST were a measly $26 a month.. I get 366.05 guaranteed for life.. It;s not much, but hey.. it's kind of nice to have it deposited like clockwork every 1st of the month..If I die first, my husband gets 289 & change for the rest of HIS life..if he goes first, my pension automatically goes up to $428.

IF my union dues had been $26 a month for the entire years, I would have "paid in" $3,120.00 TOTAL.. in 10 months I will surpass that,,even at the somewhat reduced amount.

and all during those 10 years, we had free medical and I had good wages..

defined benefit pensions allowed people to PLAN, because they had 2 legs of the three-legged stool spelled out for them..they knew what they would get from the pension and what they would get from SS, so they could plan they savings & insurance needs accordingly.. the 401-k made your retirement dependent on your "mad skillz" as an investor,, and the rollercoaster ride that is wall street..common sense would tell you that as the largest generation ever started taking OUT, instead of puttin in..well you know the rest..

[A HERETIC I AM]

93. Do you understand that your $26.00/mo dues is NOT what funded your monthly payments?

The Union dues you paid during your ten year career with that firm is not what is funding your $366.05 payment, in fact, it had damned little to do with it. That payment is funded by an annuity your employer paid for.

If you think it is possible for $3120.00 in total dues payments to be stretched out for what could possibly be 40 or more years of monthly payments of over $350, you would be seriously mistaken.

I would love to see the math that makes you think it is the case.

[SoCalDem]

94. I know that.. but since my actual wages were very good and my benefits were super

those dues were what I paid in for the benefit of BEING in the union..without the union, I doubt the employer would have been very generous..

[A HERETIC I AM]

96. Then what was the purpose of saying this:

IF my union dues had been $26 a month for the entire years, I would have "paid in" $3,120.00 TOTAL.. in 10 months I will surpass that,,even at the somewhat reduced amount.

when one (the dues you paid) had absolutely NOTHING to do with the other (your monthly payment)?

Sure, you were a Union member and your contract required your employer to provide for a defined benefit pension. You made it sound as if your current monthly pension payment was a result of your dues. It wasn't. It was a result of the contract your company struck with the Union.

If anything, your dues go to paying for the monthly operating costs of your local, the salary of your Business rep(s)/Attorneys and likely a strike fund.

Your post was misleading, even if you didn't mean it to be so.

This thread is further evidence that too many people just simply do not properly understand the 401(K) and the concept of saving for retirement, full stop. There is an awful lot of misinformation, bad information and ...well....ignorance on this thread.

Defined benefit pension plans worked fine in the days when an individual went to work at a company at the age of 21, worked till they were 65 and then died by 70 or 75. The idea that people can somehow expect a 25 or 30 year retirement and a stream of payments from their employer till death doesn't work when life expectancy has shot up but retirement age has not.

Most large companies that have hundreds or thousands of employees simply can not afford the annual contributions required to fund annuities that pay benefits for retirees that live into their 90's. Not every single corporation in this country makes profits like Exxon or Goldman Sachs.

The 401(K) is a reasonable way to make up for this. It isn't the fault of the employer if an individual doesn't read the information provided when enrolling in these plans. Just because people want things to be easy and to receive a monthly stipend forever, doesn't mean it is financially viable.

You can't have your cake (a well paying job with benefits) and eat it (a completely funded retirement for 2 or more decades) too. Not unless Americans are willing to be taxed at a 50% or higher rate.

[RainDog]

68. Pensions were and are managed by professionals

it is idiotic to think that the majority of Americans have the time or inclination to become pension-fund managers in their "spare time." -- that spare time is eaten up by the second job anyway.

the whole scheme of removing pensions and "allowing" people to manage their own retirement funds was merely a give-away to Wall St. and a way to deny people safe options for retirement savings.

there are many hugely intelligent people, like, say, entire Universities full of professors, who have their retirement funds managed by professionals through pensions so that they can concentrate on the actual work in which they specialized.

they recognize the value of investment specialists. this is why Universities have such good benefit programs - they are part of an alliance that manages pensions for them when they pay into a pension plan.

these plans allow them to allocate funds as much or as little as they like and to invest on their own, obviously, as they would like outside of the funds. they can pay additional funds into their plans also, if they so desire.

that's what a real employer-employee pension fund looks like that works to the benefit of the person employed. the playing field is leveled for hiring on this issue since most major U's are part of such a pension fund scheme.

it's ridiculous to think that joe the pipe fitter should have to manage his own pension when joe the mathematician has a pension fund manager do that and get much better returns.

[CRH]

57. Spot on ... and a second twist, ...

the government has just decided you not only need mandatory insurance for corporate AMA care, they have also determined that type of health care for you.


What if I don't believe in corporate health care the AMA promotes and provides?

What if I don't believe in treating (suppressing) symptoms with drugs?

What if I don't believe in or want organ transplants?

What if my only need for health care would be an accident, which is more easily covered by other types of insurance?

What if I want to choose the type of health I pursue, i.e., natural holistic methods, and alternative applications?

Where is my right to not pursue unnatural life extending, possibly invasive, procedures?

Why should I be fined if I do not choose to use an unnatural type of health management?

Why should the government have the right to punish me for my believe in the 'natural order and process', of living and death?

What, does the government own the 'right of maintenance' of my body now?

I think the Obama administration has crossed the line insisting I must buy into corporate health care. Who the hell do they think they are? By what precedents can they assert their right over my personal choice of health maintenance? How is this different than telling a woman she can not plan her family, choose whether she has children, prevent having children? How does my not having mandated insurance for corporate drug peddling medical maintenance, put any other person in this society at risk?

The second twist is confiscating my individual rights to determine the form and amount of maintenance of my own body. People are worried about abortion rights, yet this is equally invasive of other inherent human rights. I hear nothing other than the economic argument of this legislation.

[B Calm]

58. The dirty secret they failed to tell you about your 401K, is that

the USA has an aging population with a high cost/high benefit workforce, a mature consumer base, the easy natural resources have been mined or exploited, and the soils in our bread basket called the Midwest are nutrient depleted and require significant intensive farming methods e.g.; pesticides and petrol chemical fertilizers to maintain yields, which also cause the highest levels of cancer on the planet. As far as Global industries are concerned, there are cheaper and more plentiful natural resources elsewhere to exploit, cheaper labor and younger developing consumer markets outside the US that present more attractive investment opportunities. Industry would prefer not to make any further investments into the USA, thus capital flight is inevitable (in spite of tax policies). So they invented 401K's and are using us as a Cash Cow to be milked and harvested and to funnel investment funds internationally.

The good times have come to an end, and no one dares tell you this, because it might cause a panic in the market.

[TxRider]

77. So how does that explain

International funds available to invest in 401k accounts?

[Statistical]

97. Stop busting up the wild consipracy theories with simple logic.

[treestar]

66. So what should people do for their retirement savings?

The idea was the stock market would rise so they would make the most of their investment. SS is notorious for not ending up paying that much, and not going to support a middle class lifestyle even for a middle class contributor.

Interest rates are so low that savings don't make much money.

[SoCalDem]

69. I know.. It just generally sucks.. The BEST advice I could give to young'uns is this

Live "poor" when you are young.. buy used cars for CASH..when they start costing you a lot..get another one..

Save save save save..work extra jobs while you are young & strong..save the money

put down as MUCH as you can afford on a house.. .. a house to LIVE in and to raise kids in (if you are so inclined) RESIST the temptation to always be trading-up in the housing market

PAY IT OFF ASAP..

If you have a home paid off by the time you are 50-55 , you CAN live off ss and maybe a piddly little part time job when you are retired..(gotta stay busy)

housing is the killer for people on SS..

and

buy a whole life insurance policy when you are young and healthy and it costs very little.. ( I know the anti-insurance people will bitch about this, but you will find yourself ill and older and unable to GET insurance, at some point in your life.. trust me on this..)

[treestar]

71. I have relatives who never left the tiny starter house

They had two kids and it was a three bedroom house. Little, nice yard, good basement they redid.

When the kids had grown and left, it really paid off for them. They ended up driving fancy cars and had a house at the beach!

[SoCalDem]

72. The smart ones land on their feet..and another advantage to a small house?

the kids can't WAIT to move out and be on their own:evilgrin:

[HughBeaumont]

82. Definitely not "Trading Up".

This house is all I will need for life. It's well built, has enough bedrooms for our small family, and best of all, my mortgage is less than what many pay for rent and is thankfully manageable to where I can envision the possibility of paying it off early. I'll be doing the "giving early to principal" thing starting this year, so I figure by 55 or less, this thing will be paid off and at the very least I won't be kicked out of my home if anything bad should happen. I have no car notes and plan on driving this 13-year old beater until it drops dead (which it's not even close to doing - good ol' US-made car). I like not having a long-term car payment.

I'm going to start stockpiling as much cash as I can from now on. Selling shit I don't need, not eating out, keeping the same wardrobe for years . . . 21st century America isn't stable at all. I got to start living smarter if I have any hope of having a fruitful future.

[SoCalDem]

85. Don't give up eating dinner out...totally

It's nice to go out once in a while, and hey.. use those Buy one-get one coupons & take a pal with you.. every time we eat dinner out, we come home with enough to have lunch and or dinner the next day:)

[librechik]

73. Try to pull your money out "in time"

you're told you can't or must pay a huge penalty. (at my workplace) I just had to stand and watch it all go away because I'm not 59.

[Statistical]

75. why not transfer from a stock (equity) fund to a money market or treasury fund?

A 401K is NOT STOCKS.

A 401K is simply a bucket.

Inside that 401K you can have:
stock/equity funds
corp bond funds
international funds
money market fund
treasury & other govt debt funds

so while you can't take money "out of the bucket" nothing prevents you from shifting into less risky assets or 100% cash inside the 401K.

Money is still inside the 401K it is just in a less risky from.

[librechik]

78. the 401K is with the Principal Fund--you are allowed to choose between

portfolio (mutual fund) options ranging from "conservative" to "risky" Money Markets or cds are not among the options. You are not allowed to remove the money. You can borrow from your fund, up to a certain amount (pay yourself back at interest--they get the interest) I finally put the remaining funds into the most conservative option which they said was guaranteed at 3%. Imagine my surprise the last 2 statements to still see my fund losing money. It all is determined by the employer, so I can't choose a different company unless I leave my job. Sick.

[Statistical]

81. Well that sucks. I guess I have been lucky and we need some 401K reform.

If it were up to me all 401K would have to comply with following
a) employer must provide 100% match up to 5% contribution (at a minimum)
b) annual investor education & goal confirmation (at employer time & cost)
c) all plans must offer both an FDIC insured "cash" option and a treasury bond fund option

The playing field should be leveled.

Even beter I would like to see some new "universal account" to replace the plethora of IRA, SIMPLE IRA, Roth IRA, 401K, 403b, etc.

Rather than the plan run by the company I could open a "URA" (Universal Retirement Account) anywhere choose and notify my employer who deposits my payroll deductions and matches into that account.

No need to roll over, or have multiple account. The investor could change brokerages if they don't like the options.

[SoCalDem]

83. URA = very good idea...and total control by the worker

and almost every bank these days has advisers on staff to help people understand these things..
But deliberate confusion does have its "benefits" to the ones who DO understand the sruff.. the more suckers they can reel in, the more THEY make..

[librechik]

84. my employer is so broke they cut out the 1-1 contribution at the beginning of the crisis

your plan sounds much better!

[SoCalDem]

86. My husband's company still matches up to 8% (with 4% for the boss)

so it;s 12% total.. we figure that the amount that the plan gagged up last fall, was roughly what the boss' contribution was for the duration we participated.. They were late to offer 401-ks.. Luckily my husband has also gotten nice raises all along and bonuses too.. even for last year (love his boss)..it;s $5k less than last year, but we were expecting NOTHING :)

[cyclezealot]

74. It had to appear better than sliced bread, to get MOST eligible people IN it.

From the OP's third sentence..^..
...Eligible..?... Never believed that from the get go... Switch eligible to gullible..

[SoCalDem]

76. Most people had no real choice.. the company just "ended" pensions

gave people the "payoff"..choose now.. pay taxes on what we just gave you, or "roll it over" into the wondrous "new shiny thing"..

[Statistical]

79. Why wouldn't you take free money

Say your firms offers 5% match and you are in 25% tax braket.

Between the match and tax savings you are up 125% on your contribution before any gain.

Why not open a 401K and set it up to put 100% of contributions into cash or treasuries?
Or considering those have very low returns look into a low risk corp bond fund yielding 6%-8%.

You aren't getting rich overnight but you have very little risk, no money in market and are picking up "free" money from your employer.

It isn't like your employer is going to give you 6.25% more pay (5% match + 25% tax deduct on contributions) by declining the 401K.

Now putting in the minimum to get max match from your employer and dumping it all into cash or low risk bonds isn't going to make you rich but at the end of the year you will have 10%+ of your paycheck saved.

[cyclezealot]

87. Been reading the papers of late.

The common approach now is all too often - the employer does not even do the 5% match.. You are on your own..

[Statistical]

88. Well in that instance I agree no reason to take 401K.

Personally I think IRA is better given you have more control over investment choices and can move to any broker you like.

So if my employer didn't provide a match then I would simply contribute to IRA.

[cyclezealot]

101. It's all hypothetical...

The reality is around 50% of the American people either fail or are unable to contribute due to lack of disposable income.. Think about it.. More and more Americans must buy their own health insurance or contribute greater parts of the premium... With an average work wage of about 22 dollars an hour how much money does that leave one for investment purposes. Particularly if the employer does not contribute ..

[amborin]

89. Video on how HCR will hurt Middle Class Workers:

http://www.afterdowningstreet.org/node/48738

[JFN1]

95. Yeah, the Boomers are just poor, helpless victims...n/t

[johnaries]

99. I'm still pissed off about Stock Options!

My company used Stock Options correctly. They used them as incentives.

It was a great idea. But because a few abused them, our government over-reacted.

But I'm used to that. My company has many stupid rules because a few abused them.

[backwoodsbob]

102. i love my 401(k)

guess that makes me an idiot but I'll take the 125% match from my company and console myself

[SoCalDem]

107. in theory, it's a good deal.. we are doing the max we can

but our "system" always seems to have a way of "skinning" segments of the population, right about the time they are ready to retire..

I realize that every year, every day, someone somewhere is retiring, but we are on a boom-bust cycle that's been going on, with regularity...for a long time now..and the ones who write the rules and control the money flow, always seem to be the ones who land on their feet..no matter what,.. while large swaths of the general public take it in the shorts....over and over..

I also know there are no "guarantees", but it's a very perilous path to retirement these days. All questions, and very few direct answers, and by the time one is 50-something, it's too late to change much.

About the safest thing a young person today, can do, is to make sure they have their primary residence paid off BEFORE they hit 55...just in case..

Even though SS is never going to be "enough", you will always have to live SOMEWHERE, so why not have that somewhere be your paid-off house (preferably in the name(s) of your heirs)? Paying the yearly taxes is infintely better than having to fork over 1/2 to 2/3 of your SS check (if it;s even enough for that) just to have a roof over your head.

[amborin]

104. kick (already rec'd)

[omega minimo]

108. Remember Boomers being double-dinged for Social Security by Reagan in the '80's?

[SoCalDem]

109. We were "told" that we were augmenting our grandparents' SS and PRE-PAYING

our own.. and it would have worked beautifully, IF the government had not gone on a 40 year stealing binge... but of course the boomers were not in charge of much of anything, and our youth and inexperience let us believe that we would actually have something waiting for us at the end of our careers.... generosity would pay off for us...

By the time the Boomer gen were in their mid forties & starting to figure things out, the oldsters were still pretty much in charge, and had blown most of our money,.,

If you look at the usual ages for people in high places within government, it's most likely to be people 50 or older..and the oldest boomers did not even get there until the 90's... and by then most of the damage was already done, or well into motion we cannot seem to stop..

Laws changed when we were in our 20's & 30's have wrecked this economy, and are next to impossible to change..

hang in there, young'uns.. when we exit, we will also exit with a bang, and y'all will have a big vacuum to fill, and jobs-a-plenty... it will be like a mini-rapture :evilgrin:.. I don't see many boomers living to a ripe old age.. It costs too much :(

[KoKo]

111. OMG...SoCal...Armageddon for US!

Good post...understand what you say...but it did strike me as "gallows humor." EXIT WITH A BANG! :rofl: if it wasn't so sad in many ways. Yet...a BANG it WILL BE!