7 ms·
I no longer wonder about such things. The simple fact of the matter is that the system is designed to work against wage earners. It focuses on the benefit of ou
by virmundi 11y ago
I no longer wonder about such things. The simple fact of the matter is that the system is designed to work against wage earners. It focuses on the benefit of our corporate overlords.
For example, I use to work for a company as a wage earner. I left, moving my 401k into a self-directed IRA. Since the market has been bad lately, I remained in cash. I want to put that money somewhere else: property.
I would love to buy a building downtown (which is theoretically possible). I would convert the top floor, about 5k sq/ft, into a co-work office that charges $10/day. The first floor I would rent out to someone, like a grocer. Sadly, the system works against this dream.
First, I can't use the building directly if I purchased it with the IRA. I, as the IRA holder, cannot utilize any properties within the account directly. There goes the co-work. I can't put sweat equity in because that is an illegal contribution. There goes fixing the building without loosing money on labor. I can't directly take the checks and deposit them in the IRA. The law requires that all checks go directly to IRA holding company (who will take a percentage). Finally, I have to get a special IRA account that holds property. Trick is that there is almost no one that does that since they don't make a lot of money. The few that do, take a big chunk.
So I, as a lowly wage earner, can't tap my largest asset directly. I can only use my money to feed the pockets of others via stocks and bonds.
As the Simpson's sung, "It's the American way!"
- wlievens 11y agoIf you believ in property appreciation, you could by REIT stocks. Obviously not the same but maybe the closest you'll get.
- viraptor 11y agoIsn't the whole point of pensions to make sure people actually invest and retain the money until retirement? If you could invest it in anything you directly control, then you could easily get the whole sum out whenever you want (defeating the purpose of pensions). I don't see this specific point as having anything to do with corporate overlords. As a national program, it's better if your pension is delayed, rather than your investment completely failing and you becoming homeless and sick at 62.
- superuser2 11y agoI don't want to be rude, but this doesn't make much sense. Preferential tax treatment for retirement savings accounts was created with the the specific intention of encouraging people to save for retirement, in order to minimize the extent of poverty among senior citizens. It is a feature, not a bug, that these accounts make it difficult to speculate, because the speculation decisions of amateurs and even most professionals are provably, demonstrably worse in aggregate returns than buy-and-hold passive investment in the overall economy. If you want to speculate on real estate, you are free to do so. You just have to pay taxes on the money used to do so, so that the government can afford to rescue you from poverty if you fail. > Since the market has been bad lately, I remained in cash. For the record, buying at the top of the market and cashing out in downturns is the maximally wrong investment strategy. A random number generator would in general outperform this strategy, because at least some of the time it would do anything but that.
- makomk 11y ago> It is a feature, not a bug, that these accounts make it difficult to speculate Except that IRAs do let people invest their retirement savings in risky speculative investments like buy-to-let properties - they just have to give the IRA holding company a cut of they money in fees and pay someone else to deal with the repairs and maintenance, both of which have the effect of making their returns worse.
- HappyTypist 11y agoThe previous poster said it makes it difficult, not impossible. Forcing you to pay fees would be a disincentive and discourage people from speculation
- virmundi 11y agoThe issue is that I'm forced to speculate in the stock or bond markets rather than the property market. The companies providing investment IRAs are practically non existent. I've tried to find them. All I actually find was rumors if their existence.
- icebraining 11y agoThat doesn't seem like such a great example; when companies get a tax break, it's usually with restrictions on its use as well. That's the whole point of having a tax break: encouraging certain behaviors.
- forgetsusername 11y agoI love how you think leveraging your retirement savings to be a commercial landlord with zero experience is a good idea. That's a highly competitive market filled with deep pockets and thin margins.
- cylinder 11y agoWe are supposed to have collective bargaining; most don't. It's almost a foreign concept to any office worker in the US. Elsewhere, white collar unions (or at least enterprise agreements) are the norm.