7 ms·

If people want to set up annuities that is totally welcome. But they shouldn't be tied to the employer. It should be a separate company that exists solely for t

If people want to set up annuities that is totally welcome. But they shouldn't be tied to the employer. It should be a separate company that exists solely for the purpose of paying the benefits at retirement. Depending on an employer for your retirement is, in the modern market, a proven bad idea. It's terrible what happened to your grandparents (to anyone else nearing retirement, take this as a cautionary tale and get your money in something safe). But hearkening back to the "glory" days of employer-paid pensions is not a viable solution.

pm24601 8y ago
> It should be a separate company that exists solely for the purpose of paying the benefits at retirement. Yes. S.O.C.I.A.L. S.E.C.U.R.I.T.Y. Look how well Americans will fight for and defend Social security benefits. We really should just force an expansion of Social Security like most civilized countries.
- theandrewbailey 8y ago
  1. "S.O.C.I.A.L. S.E.C.U.R.I.T.Y." isn't a separate company. It's a US government program. 2. Social Security isn't doing much better. It will be broke in ~15 years, paying out exactly as much as it takes in. https://www.cnn.com/2018/06/05/politics/social-security-benefit-cuts/index.html https://www.cnn.com/2018/06/05/politics/social-security-bene...
  - eropple 8y ago
    #1 - I think he knows that. Don't you? #2 - Social Security needs work, but it's not going to be "broke". It can't be "broke". It's a required expense by law. It will be funded from other sources. And, not all that long after it hits that break-even point, we'll start seeing the demographic adjustment--i.e., the Baby Boomers dying off in quantity--begin to adjust that back towards the other direction. As usual, when one finds oneself repeating things said by people who want to destroy institutions, one should look deeper into them for truth.
  - pm24601 8y ago
    Only fix needed to "unbreak" Social Security: Remove the income cap limit. ( https://www.fool.com/investing/2017/12/10/what-is-the-2018-maximum-social-security-tax.aspx https://www.fool.com/investing/2017/12/10/what-is-the-2018-m...) All income over $128K is does not have a social security tax on it. Remove the cap and there will be no problem.
  - lsc 8y ago
    social security isn't an investment program. When it started during the great depression, the money put in by workers was immediately paid out to retirees who hadn't contributed to the system. This is how it works today; working people pay in, and our parents or grandparents get that money. Any perceived financial trouble is because we've now got people living longer, and so we've got more retirees for the same number of workers. This... just means we need to raise taxes. I mean, really, I think it's silly to say we have a special tax for social security; my understanding is that the money goes into the general fund anyhow (and it's been running a surplus for some time now) We don't have a special tax for the army that you only have to pay on your first $128K/yr, why do we have that for social security?
  - chalst 8y ago
    Social security can't go broke, since the notion of social security funds is essentially an accounting mechanism. To use the terminology of https://www.reddit.com/r/mmt_economics/comments/7ciwqe/how_does_mmt_relate_to_social_security/dpr7lzj/ https://www.reddit.com/r/mmt_economics/comments/7ciwqe/how_d... if the "social security cookie jar" is empty and taxes marked for social security exceed payments, then it simply turns negative, as able to pay out as it was before.
- rayiner 8y ago
  The amount paid out by Social Security is pretty comparable to state pensions in Germany, and quite a bit more generous than in France or the U.K.
ghaff 8y ago
>"glory" days of employer-paid pensions Furthermore, the structure of most of those pensions was oriented around long-term (i.e. decades-long) employment at big, stable employers. Someone who moved around every few years would probably end up without much of a pension.
vageli 8y ago
> It's terrible what happened to your grandparents (to anyone else nearing retirement, take this as a cautionary tale and get your money in something safe). But hearkening back to the "glory" days of employer-paid pensions is not a viable solution. What is "something safe"? I was under the impression that 401ks are not really known as risky investments.
- dhd415 8y ago
  401(k)s are fundamentally about the tax treatment of a certain class of employer-affiliated individual retirement accounts. There's a reasonable range of securities that can be held within a 401(k) account (often at least partially at the account holder's discretion) and some of those securities are considerably more risky than others.
- tedmiston 8y ago
  401ks are investment vehicles or "buckets" that contain investments, rather than investments themselves, so a 401k's risk level depends entirely on the underlying assets (investments) that it holds. There is nothing inherently more safe about a 401k from an investment perspective compared to any other type of bucket. Within their 401k, most people hold a higher percentage of stocks (more to gain) earlier in their working life and transition to a higher percentage of bonds (more stability / safety) later in life as they approach retirement. Good concrete examples of what to hold are Vanguard's funds which are low cost and own the whole stock market because they're index-based. VTSAX for stocks and VBTLX for bonds. https://investor.vanguard.com/mutual-funds/profile/overview/VTSAX https://investor.vanguard.com/mutual-funds/profile/overview/... https://investor.vanguard.com/mutual-funds/profile/overview/VBTLX https://investor.vanguard.com/mutual-funds/profile/overview/... There are also target-date funds (also called target retirement date funds) which automate the transition from stock heavy to bond heavy based on a future retirement date, and you pay extra for this benefit, but BE CAREFUL as many of them charge significantly more fees than doing it yourself. Vanguard is one of the best (lowest fee), so for example, their TDFs have a 0.13–0.15% expense ratio while the two index funds above have ERs of 0.04% and 0.05% respectively. It is not uncommon for the more popular mutual fund providers to have radically higher expense ratios in the neighborhood of 1–2%+ (in addition to other more subtle fees). The difference might sound small but compounded over decades, the effect is massive. (There's a reason people working in finance are paid so well.)
mlthoughts2018 8y ago
I agree, and the same should be true for health insurance, gym memberships, etc. However, in a practical sense, your point doesn’t matter because all retirement plans accessible to the majority of people are employer-based. Most people only get access to 401(k) plans through an employer, and the only reason it’s worthwhile for them is for the employer match (asset growth won’t be meaningful, particularly compared with inflation). Often there are also vesting issues as well. I worked for a company once where if your tenure at the company was less than 4 years, the company got all of its contributions back. Many other employers offer no matching whatsoever, and in that case you really have to ask yourself whether it wouldn’t be better to instead pay taxes up front and just invest retail into some low-fee broad-market ETF on your own, rather than to trap money away behind penalties and tax complexity in a 401(k) where you’re not even getting a company match. So we are still equally reliant on employers as the facilitator of access to a retirement benefit. Functionally it’s truly not different than pensions, only the underlying financial instrument is different. You do point out that depending on an employer for retirement is a bad idea, but in the absence of greatly expanded social security and nationalized health care, depending on an employer who at least has the chance to use its scale to mitigate risk in the retirement instrument is about the best you can do. Expecting individuals with little or no access to meaningful financial planning services to manage the risk profile of their own retirement vehicle is ludicrously stupid by comparison. Individuals can be wiped out by unexpected legal bills, insurance technicalities, early death of a provider, etc. Infividuals are not the right level of entity to be juggling these risks. Instead it points to a moral failure on the part of corporations, forsaking loyal workers in favor of complex strategies to extract labor without being compelled to absorb the risk of retirement financial solvency.
- lsc 8y ago
  >Most people only get access to 401(k) plans through an employer, and the only reason it’s worthwhile for them is for the employer match (asset growth won’t be meaningful, particularly compared with inflation). It's tax deferred, too, which is pretty important. Even if you don't think asset growth is significant (and it usually is significant... it's just not guaranteed or predictable) In your peak earning years, you are making a bunch of money (hopefully) and therefore paying a bunch in taxes. In your retirement, well, maybe you'll be making a lot of money, in which case, paying taxes isn't such a big deal, or maybe you won't be making very much money at all, in which case, you won't have to pay very much in taxes on that money. At least if you are where I am, making good money (and paying good taxes) but don't have a huge amount stashed away, stashing pre-tax money has huge benefits over stashing post-tax money. (If you do stash post-tax money, check into the roth IRA; it means you won't pay taxes when you take it out. Of course, you can only directly contribute to a roth ira if you don't make much money... but the 'backdoor roth' is something to ask your tax professional about... and if you earn enough that you can't contribute to a roth ira, you should have a tax professional. I personally recommend the 'enrolled agent' credential) I think the only time you don't want to max out your tax-advantaged savings palan is if you aren't making enough money to max out your tax-advantaged plans and save enough short term money.

pm24601 8y ago

> It should be a separate company that exists solely for the purpose of paying the benefits at retirement. Yes. S.O.C.I.A.L. S.E.C.U.R.I.T.Y. Look how well Americans will fight for and defend Social security benefits. We really should just force an expansion of Social Security like most civilized countries.

theandrewbailey 8y ago
1. "S.O.C.I.A.L. S.E.C.U.R.I.T.Y." isn't a separate company. It's a US government program. 2. Social Security isn't doing much better. It will be broke in ~15 years, paying out exactly as much as it takes in. https://www.cnn.com/2018/06/05/politics/social-security-benefit-cuts/index.html https://www.cnn.com/2018/06/05/politics/social-security-bene...
- eropple 8y ago
  #1 - I think he knows that. Don't you? #2 - Social Security needs work, but it's not going to be "broke". It can't be "broke". It's a required expense by law. It will be funded from other sources. And, not all that long after it hits that break-even point, we'll start seeing the demographic adjustment--i.e., the Baby Boomers dying off in quantity--begin to adjust that back towards the other direction. As usual, when one finds oneself repeating things said by people who want to destroy institutions, one should look deeper into them for truth.
- pm24601 8y ago
  Only fix needed to "unbreak" Social Security: Remove the income cap limit. ( https://www.fool.com/investing/2017/12/10/what-is-the-2018-maximum-social-security-tax.aspx https://www.fool.com/investing/2017/12/10/what-is-the-2018-m...) All income over $128K is does not have a social security tax on it. Remove the cap and there will be no problem.
- lsc 8y ago
  social security isn't an investment program. When it started during the great depression, the money put in by workers was immediately paid out to retirees who hadn't contributed to the system. This is how it works today; working people pay in, and our parents or grandparents get that money. Any perceived financial trouble is because we've now got people living longer, and so we've got more retirees for the same number of workers. This... just means we need to raise taxes. I mean, really, I think it's silly to say we have a special tax for social security; my understanding is that the money goes into the general fund anyhow (and it's been running a surplus for some time now) We don't have a special tax for the army that you only have to pay on your first $128K/yr, why do we have that for social security?
- chalst 8y ago
  Social security can't go broke, since the notion of social security funds is essentially an accounting mechanism. To use the terminology of https://www.reddit.com/r/mmt_economics/comments/7ciwqe/how_does_mmt_relate_to_social_security/dpr7lzj/ https://www.reddit.com/r/mmt_economics/comments/7ciwqe/how_d... if the "social security cookie jar" is empty and taxes marked for social security exceed payments, then it simply turns negative, as able to pay out as it was before.
rayiner 8y ago
The amount paid out by Social Security is pretty comparable to state pensions in Germany, and quite a bit more generous than in France or the U.K.

ghaff 8y ago

>"glory" days of employer-paid pensions Furthermore, the structure of most of those pensions was oriented around long-term (i.e. decades-long) employment at big, stable employers. Someone who moved around every few years would probably end up without much of a pension.

vageli 8y ago

> It's terrible what happened to your grandparents (to anyone else nearing retirement, take this as a cautionary tale and get your money in something safe). But hearkening back to the "glory" days of employer-paid pensions is not a viable solution. What is "something safe"? I was under the impression that 401ks are not really known as risky investments.

dhd415 8y ago
401(k)s are fundamentally about the tax treatment of a certain class of employer-affiliated individual retirement accounts. There's a reasonable range of securities that can be held within a 401(k) account (often at least partially at the account holder's discretion) and some of those securities are considerably more risky than others.
tedmiston 8y ago
401ks are investment vehicles or "buckets" that contain investments, rather than investments themselves, so a 401k's risk level depends entirely on the underlying assets (investments) that it holds. There is nothing inherently more safe about a 401k from an investment perspective compared to any other type of bucket. Within their 401k, most people hold a higher percentage of stocks (more to gain) earlier in their working life and transition to a higher percentage of bonds (more stability / safety) later in life as they approach retirement. Good concrete examples of what to hold are Vanguard's funds which are low cost and own the whole stock market because they're index-based. VTSAX for stocks and VBTLX for bonds. https://investor.vanguard.com/mutual-funds/profile/overview/VTSAX https://investor.vanguard.com/mutual-funds/profile/overview/... https://investor.vanguard.com/mutual-funds/profile/overview/VBTLX https://investor.vanguard.com/mutual-funds/profile/overview/... There are also target-date funds (also called target retirement date funds) which automate the transition from stock heavy to bond heavy based on a future retirement date, and you pay extra for this benefit, but BE CAREFUL as many of them charge significantly more fees than doing it yourself. Vanguard is one of the best (lowest fee), so for example, their TDFs have a 0.13–0.15% expense ratio while the two index funds above have ERs of 0.04% and 0.05% respectively. It is not uncommon for the more popular mutual fund providers to have radically higher expense ratios in the neighborhood of 1–2%+ (in addition to other more subtle fees). The difference might sound small but compounded over decades, the effect is massive. (There's a reason people working in finance are paid so well.)

mlthoughts2018 8y ago

I agree, and the same should be true for health insurance, gym memberships, etc. However, in a practical sense, your point doesn’t matter because all retirement plans accessible to the majority of people are employer-based. Most people only get access to 401(k) plans through an employer, and the only reason it’s worthwhile for them is for the employer match (asset growth won’t be meaningful, particularly compared with inflation). Often there are also vesting issues as well. I worked for a company once where if your tenure at the company was less than 4 years, the company got all of its contributions back. Many other employers offer no matching whatsoever, and in that case you really have to ask yourself whether it wouldn’t be better to instead pay taxes up front and just invest retail into some low-fee broad-market ETF on your own, rather than to trap money away behind penalties and tax complexity in a 401(k) where you’re not even getting a company match. So we are still equally reliant on employers as the facilitator of access to a retirement benefit. Functionally it’s truly not different than pensions, only the underlying financial instrument is different. You do point out that depending on an employer for retirement is a bad idea, but in the absence of greatly expanded social security and nationalized health care, depending on an employer who at least has the chance to use its scale to mitigate risk in the retirement instrument is about the best you can do. Expecting individuals with little or no access to meaningful financial planning services to manage the risk profile of their own retirement vehicle is ludicrously stupid by comparison. Individuals can be wiped out by unexpected legal bills, insurance technicalities, early death of a provider, etc. Infividuals are not the right level of entity to be juggling these risks. Instead it points to a moral failure on the part of corporations, forsaking loyal workers in favor of complex strategies to extract labor without being compelled to absorb the risk of retirement financial solvency.

lsc 8y ago
>Most people only get access to 401(k) plans through an employer, and the only reason it’s worthwhile for them is for the employer match (asset growth won’t be meaningful, particularly compared with inflation). It's tax deferred, too, which is pretty important. Even if you don't think asset growth is significant (and it usually is significant... it's just not guaranteed or predictable) In your peak earning years, you are making a bunch of money (hopefully) and therefore paying a bunch in taxes. In your retirement, well, maybe you'll be making a lot of money, in which case, paying taxes isn't such a big deal, or maybe you won't be making very much money at all, in which case, you won't have to pay very much in taxes on that money. At least if you are where I am, making good money (and paying good taxes) but don't have a huge amount stashed away, stashing pre-tax money has huge benefits over stashing post-tax money. (If you do stash post-tax money, check into the roth IRA; it means you won't pay taxes when you take it out. Of course, you can only directly contribute to a roth ira if you don't make much money... but the 'backdoor roth' is something to ask your tax professional about... and if you earn enough that you can't contribute to a roth ira, you should have a tax professional. I personally recommend the 'enrolled agent' credential) I think the only time you don't want to max out your tax-advantaged savings palan is if you aren't making enough money to max out your tax-advantaged plans and save enough short term money.