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Unless you work for the government or a legacy union, the concept of a pension (one with defined benefits) no longer exists. Most people who worked can rely on

by pkaye 11y ago

Unless you work for the government or a legacy union, the concept of a pension (one with defined benefits) no longer exists. Most people who worked can rely on Social Security or Medicare but it doesn't fully cover your costs. The more common option is 401K where you basically have to save up and invest your own money tax deferred because employers hardly contribute much. In these cases, those make little income or are not well organized don't put anything much into their 401K. Then they reach their retirement age and find out they don't have enough to survive. Lastly there are those who did save into their 401K but lost a lot due to ill timing and the whims of the stock market.

alyandon 11y ago
I really love how my employer gets to define the options I have for investing the money in my 401k. I'm basically forced into investing my money in the volatile equities market if I want to have any hope of living comfortably in retirement. :-/
- toomuchtodo 11y ago
  Where would you prefer to invest your retirement funds if not equities?
  - bryanbuckley 11y ago
    treasuries, precious metals/commodities, bonds, real estate
    - toomuchtodo 11y ago
      Treasuries and bonds wouldn't provide anywhere near the return you'd need to grow your retirement assets to a level you could live off them, and metals/commodities/real estate are still fairly volatile.
      - bryanbuckley 11y ago
        didn't say they would. Simply that parent expressed dissatisfaction about only being able to invest in equities and you asking i.e. what in the world is the alternative? Asset allocation is key to control returns and volatility. Consider: http://portfoliocharts.com/portfolio/permanent-portfolio/ http://portfoliocharts.com/portfolio/permanent-portfolio/ and http://portfoliocharts.com/portfolio/total-stock-market/ http://portfoliocharts.com/portfolio/total-stock-market/
MrRadar 11y ago
This is correct. To add to this, like most things in the US 401k plans are not equally accessible to all workers. A 401k must be run through your employer so if your employer does not offer one your retirement savings plans will be much more difficult. There are also IRAs (Individual Retirement Accounts) which do not require an employer and work like 401ks for the most part but the contribution limit is much lower than a 401k plan ($5500 vs $18000 + employer match). If you don't have access to a 401k you'll almost certainly have to use a regular taxable brokerage account to supplement your IRA at much greater cost. Additionally, the quality of 401k plans varies from employer to employer. Some employers provide generous matches (I've heard of one that matched dollar for dollar up to the limit), most offer modest matches (up to 3% to 6% of your pre-tax pay) and some do not match at all. Some plans have very low fees (under 0.1% of assets annually) while others can have huge fees (over 1.5% of assets annually). To complicate this many HR departments (who contract for the 401k plans) do not understand how damaging high fees can be[0] and so choose 401k providers who shift the cost burden from the employer to employees (via high fees). Recent court cases have ruled that excessively high fee plans are actually illegal but it will likely take decades and many more court cases before they go away entirely. [0] https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-cost https://personal.vanguard.com/us/insights/investingtruths/in...

by pkaye 11y ago

alyandon 11y ago

I really love how my employer gets to define the options I have for investing the money in my 401k. I'm basically forced into investing my money in the volatile equities market if I want to have any hope of living comfortably in retirement. :-/

toomuchtodo 11y ago
Where would you prefer to invest your retirement funds if not equities?
- bryanbuckley 11y ago
  treasuries, precious metals/commodities, bonds, real estate
  - toomuchtodo 11y ago
    Treasuries and bonds wouldn't provide anywhere near the return you'd need to grow your retirement assets to a level you could live off them, and metals/commodities/real estate are still fairly volatile.
    - bryanbuckley 11y ago
      didn't say they would. Simply that parent expressed dissatisfaction about only being able to invest in equities and you asking i.e. what in the world is the alternative? Asset allocation is key to control returns and volatility. Consider: http://portfoliocharts.com/portfolio/permanent-portfolio/ http://portfoliocharts.com/portfolio/permanent-portfolio/ and http://portfoliocharts.com/portfolio/total-stock-market/ http://portfoliocharts.com/portfolio/total-stock-market/

MrRadar 11y ago

This is correct. To add to this, like most things in the US 401k plans are not equally accessible to all workers. A 401k must be run through your employer so if your employer does not offer one your retirement savings plans will be much more difficult. There are also IRAs (Individual Retirement Accounts) which do not require an employer and work like 401ks for the most part but the contribution limit is much lower than a 401k plan ($5500 vs $18000 + employer match). If you don't have access to a 401k you'll almost certainly have to use a regular taxable brokerage account to supplement your IRA at much greater cost. Additionally, the quality of 401k plans varies from employer to employer. Some employers provide generous matches (I've heard of one that matched dollar for dollar up to the limit), most offer modest matches (up to 3% to 6% of your pre-tax pay) and some do not match at all. Some plans have very low fees (under 0.1% of assets annually) while others can have huge fees (over 1.5% of assets annually). To complicate this many HR departments (who contract for the 401k plans) do not understand how damaging high fees can be[0] and so choose 401k providers who shift the cost burden from the employer to employees (via high fees). Recent court cases have ruled that excessively high fee plans are actually illegal but it will likely take decades and many more court cases before they go away entirely. [0] https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-cost https://personal.vanguard.com/us/insights/investingtruths/in...