6 ms·

But 401Ks were sold as "you taking care of yourself" because "you" controlled your retirement, not some pension fund. What's your alternative for retirement sa

by jfruh 15y ago

But 401Ks were sold as "you taking care of yourself" because "you" controlled your retirement, not some pension fund. What's your alternative for retirement savings? The mattress?

onemoreact 15y ago
Spend less and Save more. If you save ~18-20% starting in your early 20's you can stop caring what the stock market does. Basically plan for 4.5% ROI and deal with it. If you happen to be able to retire at 50 great, if not your still going to be ok. Don't go to an expensive school and get someone else to pay for grad school. Also don't skip out on insurance because cheap does not mean good. PS: An Indian friend of mine saved 20k over a year while making 42k and living in an expensive area. He had no car, never eatout, and had a lot of roommates, but he wanted to save up for his sisters dowery. You can still splurge a lot more than that and still build a nest egg quickly.
- carbocation 15y ago
  Wasn't the ROI of the S&P 500 over the past decade roughly 0?
  - onemoreact 15y ago
    Only if you ignore dividends.
- rprospero 15y ago
  Where are you getting the 4.5% ROI? It's obviously not the stock market, if you're not caring what the market is doing. Is it in bonds? Several cities and states are looking at defaulting on those. Even if they're corporate bonds, you're right back to being tied into the stock market again. Perhaps you have it all in CDs. Probably a 20 year Cd if you're getting 4.5%. Fifteen years from now, the bank elects a new president whose new investment strategy is Beanie Babies. There months later, the bank goes under and you're praying that the FDIC steps in to bail you out. If you're getting any ROI, there's risk involved and you can get wiped out the same way that the boomers did.
  - justincormack 15y ago
    Well the 30 year treasury is yielding 3.5%. Nominal. So you are not getting 4.5% in anything risk free. But as a long term return in shares, historically that has been the case. Whether it will be looking forward is another question.
- jonnathanson 15y ago
  Your friend's approach is all well and good if you're single, living with a bunch of roommates, and have no financial obligations other than to yourself. What happens when you get older, marry, and have a kid or two?
  - khafra 15y ago
    There's little financial difference between having children and buying Lambourghinis. The cultural difference is that only one of these is blameworthy if you get into financial trouble later. Perhaps both of them should be.
    - yannis 15y ago
      Maybe better neuter yourself? This is the most selfish statement in this thread.
      - khafra 15y ago
        Thanks for the demonstration of the mindset I'm talking about. Some people want children, other people want pets, other people want houses, other people want cars, other people want jewelry. All of these things cost money, none of them are charitable, but it's somehow less ok to get in financial trouble over them, the further you move toward the end of that list. Why?
    - tsunamifury 15y ago
      Your parents took that risk so you could have life. It seems extrodinarily arogant to belittle them for it.
      - khafra 15y ago
        My parents didn't have kids until they could afford them. They were in their mid-30s when I was born. If I'd been raised in poverty because they had kids at 18 and dropped out of college, I would be entirely within my rights to question their judgement.
- lionhearted 15y ago
  Extremely good comment, just a minor important point here - > Basically plan for 4.5% ROI Warren Buffet notes that a nation's ROI overall basically can't exceed its GDP growth for an extended period of time. So if your country has a 1% to 3% growth rate and you're investing in an unsophisticated way, then 4.5% might be optimistic. (It's still a thoroughly good idea to do the rest of your comment. I'd save most of my income even if my ROI was -10%, because money is more useful in large quantities, especially when you break certain thresholds like "can take 2-3 years off work when it's a good time to do so" and "can mix cash and and labor when joining a company to get a big equity stake" and "can buy tools and gifts without even looking at the cost if there's a productivity benefit" - cash is more useful/leverageable in large numbers than small for most middle class-ish people.)
  - rayiner 15y ago
    1-3% is real GDP growth rate, net of inflation. With inflation at 2-3%, then planning for 4.5% growth, not adjusted for inflation, is not unreasonable.
- jpdoctor 15y ago
  > Spend less and Save more. What?! Be frugal and spend beneath our means?! This man is a subversive. He and his kind should be hunted down and silenced.
Kadrith 15y ago
Where I work the organization matches up to 4% for retirement accounts (403b) and puts an additional 2% of your pay each year into a pension. If you work here for 3 or more years you get the pension when retiring. Things could still happen, but if I was within a few years of retirement I would have taken most of it out of stocks.
illumin8 15y ago
Too many people thought if you had a 401k it didn't matter because "stocks always go up." Too many people thought if you bought a house it didn't matter because "housing always goes up." You have to take responsibility for your own investment decisions. This means not buying a McMansion and trying to keep up with the Joneses. This means not buying multiple huge SUVs and living in the suburbs and spending thousands on gas every year. This means not trusting some financial planner when they tell you that you should put 100% of your retirement in the stock market. People need to think for themselves and take charge of their own financial future. The greatest generation did this - they grew up during the great depression and they understood that you had to save and not trust Wall Street. They understood that housing doesn't always go up. Their kids partied at Woodstock and forgot everything their parents told them.
- michaelchisari 15y ago
  This means not buying a McMansion and trying to keep up with the Joneses. This means not buying multiple huge SUVs and living in the suburbs and spending thousands on gas every year. Are we really so positive that everyone who is hurting in this economy made these kinds of irresponsible financial decisions?
  - illumin8 15y ago
    A good many of them did. If you think housing is an investment and leveraged yourself to the hilt in 2005, you probably got what you deserved.
    - michaelchisari 15y ago
      The problem is, economics is a group activity. While many people were irresponsible, the effects of their irresponsibility have been felt throughout the economy. And some (banks) were definitely more irresponsible than others (homeowners), by virtue of the amount of power they wielded.
- jfruh 15y ago
  The greatest generation did this - they grew up during the great depression and they understood that you had to save and not trust Wall Street. The Greatest Generation benefitted both from social security and from the defined-benefit pension plans their unions won for them. Edited to add: Also, many got to go to college for free on the GI Bill, and so entered the professional workforce without the debt burden that their children and grandchildren would face. Makes it easier to save.
typicalrunt 15y ago
401Ks and defined contribution plans were sold that way because it is cheaper for the company (as opposed to defined-benefit plans). But the majority of people don't have any financial literacy... just look at the amount of people in debt. That's why, although "taking care of yourself" is correct, it's just not feasible for most people. Most people don't know about proper investment vehicles, inflation, dividends, tax shelters, etc. It's like giving someone this mysterious "gun thing" to store their bullets in, and then acting surprised when they shoot themselves.

by jfruh 15y ago

But 401Ks were sold as "you taking care of yourself" because "you" controlled your retirement, not some pension fund. What's your alternative for retirement savings? The mattress?

onemoreact 15y ago

Spend less and Save more. If you save ~18-20% starting in your early 20's you can stop caring what the stock market does. Basically plan for 4.5% ROI and deal with it. If you happen to be able to retire at 50 great, if not your still going to be ok. Don't go to an expensive school and get someone else to pay for grad school. Also don't skip out on insurance because cheap does not mean good. PS: An Indian friend of mine saved 20k over a year while making 42k and living in an expensive area. He had no car, never eatout, and had a lot of roommates, but he wanted to save up for his sisters dowery. You can still splurge a lot more than that and still build a nest egg quickly.

carbocation 15y ago
Wasn't the ROI of the S&P 500 over the past decade roughly 0?
- onemoreact 15y ago
  Only if you ignore dividends.
rprospero 15y ago
Where are you getting the 4.5% ROI? It's obviously not the stock market, if you're not caring what the market is doing. Is it in bonds? Several cities and states are looking at defaulting on those. Even if they're corporate bonds, you're right back to being tied into the stock market again. Perhaps you have it all in CDs. Probably a 20 year Cd if you're getting 4.5%. Fifteen years from now, the bank elects a new president whose new investment strategy is Beanie Babies. There months later, the bank goes under and you're praying that the FDIC steps in to bail you out. If you're getting any ROI, there's risk involved and you can get wiped out the same way that the boomers did.
- justincormack 15y ago
  Well the 30 year treasury is yielding 3.5%. Nominal. So you are not getting 4.5% in anything risk free. But as a long term return in shares, historically that has been the case. Whether it will be looking forward is another question.
jonnathanson 15y ago
Your friend's approach is all well and good if you're single, living with a bunch of roommates, and have no financial obligations other than to yourself. What happens when you get older, marry, and have a kid or two?
- khafra 15y ago
  There's little financial difference between having children and buying Lambourghinis. The cultural difference is that only one of these is blameworthy if you get into financial trouble later. Perhaps both of them should be.
  - yannis 15y ago
    Maybe better neuter yourself? This is the most selfish statement in this thread.
    - khafra 15y ago
      Thanks for the demonstration of the mindset I'm talking about. Some people want children, other people want pets, other people want houses, other people want cars, other people want jewelry. All of these things cost money, none of them are charitable, but it's somehow less ok to get in financial trouble over them, the further you move toward the end of that list. Why?
  - tsunamifury 15y ago
    Your parents took that risk so you could have life. It seems extrodinarily arogant to belittle them for it.
    - khafra 15y ago
      My parents didn't have kids until they could afford them. They were in their mid-30s when I was born. If I'd been raised in poverty because they had kids at 18 and dropped out of college, I would be entirely within my rights to question their judgement.
lionhearted 15y ago
Extremely good comment, just a minor important point here - > Basically plan for 4.5% ROI Warren Buffet notes that a nation's ROI overall basically can't exceed its GDP growth for an extended period of time. So if your country has a 1% to 3% growth rate and you're investing in an unsophisticated way, then 4.5% might be optimistic. (It's still a thoroughly good idea to do the rest of your comment. I'd save most of my income even if my ROI was -10%, because money is more useful in large quantities, especially when you break certain thresholds like "can take 2-3 years off work when it's a good time to do so" and "can mix cash and and labor when joining a company to get a big equity stake" and "can buy tools and gifts without even looking at the cost if there's a productivity benefit" - cash is more useful/leverageable in large numbers than small for most middle class-ish people.)
- rayiner 15y ago
  1-3% is real GDP growth rate, net of inflation. With inflation at 2-3%, then planning for 4.5% growth, not adjusted for inflation, is not unreasonable.
jpdoctor 15y ago
> Spend less and Save more. What?! Be frugal and spend beneath our means?! This man is a subversive. He and his kind should be hunted down and silenced.

Kadrith 15y ago

Where I work the organization matches up to 4% for retirement accounts (403b) and puts an additional 2% of your pay each year into a pension. If you work here for 3 or more years you get the pension when retiring. Things could still happen, but if I was within a few years of retirement I would have taken most of it out of stocks.

illumin8 15y ago

Too many people thought if you had a 401k it didn't matter because "stocks always go up." Too many people thought if you bought a house it didn't matter because "housing always goes up." You have to take responsibility for your own investment decisions. This means not buying a McMansion and trying to keep up with the Joneses. This means not buying multiple huge SUVs and living in the suburbs and spending thousands on gas every year. This means not trusting some financial planner when they tell you that you should put 100% of your retirement in the stock market. People need to think for themselves and take charge of their own financial future. The greatest generation did this - they grew up during the great depression and they understood that you had to save and not trust Wall Street. They understood that housing doesn't always go up. Their kids partied at Woodstock and forgot everything their parents told them.

michaelchisari 15y ago
This means not buying a McMansion and trying to keep up with the Joneses. This means not buying multiple huge SUVs and living in the suburbs and spending thousands on gas every year. Are we really so positive that everyone who is hurting in this economy made these kinds of irresponsible financial decisions?
- illumin8 15y ago
  A good many of them did. If you think housing is an investment and leveraged yourself to the hilt in 2005, you probably got what you deserved.
  - michaelchisari 15y ago
    The problem is, economics is a group activity. While many people were irresponsible, the effects of their irresponsibility have been felt throughout the economy. And some (banks) were definitely more irresponsible than others (homeowners), by virtue of the amount of power they wielded.
jfruh 15y ago
The greatest generation did this - they grew up during the great depression and they understood that you had to save and not trust Wall Street. The Greatest Generation benefitted both from social security and from the defined-benefit pension plans their unions won for them. Edited to add: Also, many got to go to college for free on the GI Bill, and so entered the professional workforce without the debt burden that their children and grandchildren would face. Makes it easier to save.

typicalrunt 15y ago

401Ks and defined contribution plans were sold that way because it is cheaper for the company (as opposed to defined-benefit plans). But the majority of people don't have any financial literacy... just look at the amount of people in debt. That's why, although "taking care of yourself" is correct, it's just not feasible for most people. Most people don't know about proper investment vehicles, inflation, dividends, tax shelters, etc. It's like giving someone this mysterious "gun thing" to store their bullets in, and then acting surprised when they shoot themselves.