5 ms·

So at ~7% it takes 10 years to double your money. So that gives one about 4 doublings in ones working career. So, a bad ten year stretch like 98-08 which provid

So at ~7% it takes 10 years to double your money. So that gives one about 4 doublings in ones working career. So, a bad ten year stretch like 98-08 which provided basically 0% over the decade makes a huge difference in ones ability to retire based solely on 401K/etc style returns and should be a strong argument in favor of defined benefit plans that basically pool the risk over a much longer horizon vs going it alone. I would have expected someone to create a retirement insurance pool type thing that returns something close to the long term average s&p returns. But if you go looking for such a thing, the returns are closer to 1/2 the s&p. Its really the kind of thing the government should backstop but... "socialism" even if the math works out. Which really pisses me off because its apparently ok to "socalize" the poor mgmt at $BIGCORP that gets a handout once a decade or so at the current rate after spending billions on stock by backs but not socialize individual retirement risk in a meaningful way.

getToTheChopin 4y ago
> I would have expected someone to create a retirement insurance pool type thing that returns something close to the long term average s&p returns This sounds like you're describing a defined benefit pension plan, or an government old age pension plan like Social Security (in the US) / Canada Pension Plan (in, well, Canada). As usual, higher risk begets higher reward. If you don't want to face the prospects of volatile returns, you'll likely need to accept a lower long-term average return in exchange for the predictability.
- StillBored 4y ago
  Traditional US pension plans are all but dead except for a small number of people basically grandfathered into systems. Social security doesn't have a way to "buy up" and invest more to get it to say match ones yearly income. So really every individual investor is on their own until they get to the point where they can sell the risk and buy an annuity (although those tend to be terrible too largely I guess because they want to make $$$$ and other reasons). So, in the US outside of Social security, which isn't a retirement plan, there isn't any option other than to hope you don't have to retire during a downturn, or that you have to go live in a box for a few years to avoid burning all your capital when its value temporary falls for a couple years. Because there isn't any way to recover except to go work at walmart as a door greeter. There have been a number of articles about this over the past decade or two, which boil down to, in the US you can do everything "right" but whether you can actually retire comes down to a bunch of lucky decisions and market timing. So basically its random, with some probably of "success" of landing into a bucket that actually allows you to retire even at 65 which is well into the "everyone is dying off" part of the morality curve. Work till you die is the official plan, but then people might start reconsidering their life choices when there isn't this "you will retire happy" carrot at the end.
  - orangecat 4y ago
    You can buy very safe investments like treasury bonds. Of course they won't give you the 8% risk-free returns you're looking for, but that's the point, nothing will.
deleted 4y ago
[deleted]
dangus 4y ago
You're missing the part where ~7% is already the average including the bear periods. During bull periods, the market increases by more than that average. Between 2009 and 2021, the S&P 500 went up by 13.8% per year. Between 2005 and 2022, the S&P 500 went up by 8.3% per year (which of course included some market crashes). > I would have expected someone to create a retirement insurance pool type thing that returns something close to the long term average s&p returns. Target date index funds are the way to go there: https://investor.vanguard.com/investment-products/mutual-funds/target-retirement-funds https://investor.vanguard.com/investment-products/mutual-fun...
- StillBored 4y ago
  Target date doesn't solve any of these problems except to shift the investments from higher return/higher risk to lower return lower risk as you approach the target date. It helps with the problem that the market crashes right before you retire but in exchange you lose a percent or so over the lifetime of the fund. And while vangard is industry leading WRT to the expense ratio, right there on their page they note that the industry average is almost half a percent just in expenses. Never mind the lower returns. And these days there really hasn't been anywhere to run since everything is so correlated. People close to retirement in those funds are going to be delaying retirement just like everyone else. -15% YOY with "safe" low risk/return investments really hurts. https://investor.vanguard.com/investment-products/mutual-funds/profile/vttvx#performance-fees https://investor.vanguard.com/investment-products/mutual-fun... The place I was at 15 years ago when I actually had money in a target date fund had a 1.5% expense ratio that was buried in a couple of different parts, fund expense ratio, and a underlying security expense ratio. And then on top of that the place I was at the "plan provider" or whatever they were called was scraping another .20% off of everything. There was a class action lawsuit, and the plan provider eventually lost. But, of the probably tens of thousands I lost vs just having my money in a IRA with vangard I think I got a check for something like $100.
  - dangus 4y ago
    I think what you're asking for is fundamentally against the basic principles of investment markets. You're asking for the long term returns on any given short term period. That's just not how investment works. You get the best gains by staying in it for a long time. You can't get that nice long-term average without bearing the risk yourself. Who is going to bear the risk for free? Remember that stocks are investments in actual companies that take months and years to turn inputs into outputs. If I give Boeing a billion dollars I don't just come pick up my new plane prototype tomorrow. Imagine giving venture money to a startup company like Slack and then demanding monthly repayment at the S&P 500 long term average from day one. Wouldn't my money be better used funding Slack's expansion rather than going back to my pocket and stunting growth? That's why you can't get good guaranteed returns, because money has to be put to use transforming inputs to outputs over time. > People close to retirement in those funds are going to be delaying retirement just like everyone else. Only if they have a short-term view of their money or their savings rate wasn't high enough in the first place. Don't forget that the fund you linked me had a 16.87% increase in 2020 and a 11.50% increase in 2020. Plus, your target date is 2 years from now. Your original comment wished for the government to step in and make a fund like this. That already happened in the form of social security and medicare. Both are funded by contributions made during working years, effectively a savings account. If you're wishing for a better rate of return, well, sorry, see my first point. Social Security and Medicare are structured as guaranteed annuities. Being alive means you get them.
anotherman554 4y ago
"So at ~7% it takes 10 years to double your money." No, it HAS taken 7% to double your money. Most experts don't necessarily expect stocks to return 7% per year in the future. Instead they think stock returns are related to the price to earnings ratio, which has looked more and more unfavorable in recent years. And even if you are basing your data merely on history, good luck designing an insurance that wouldn't have gone bankrupt during the great depression.

getToTheChopin 4y ago

> I would have expected someone to create a retirement insurance pool type thing that returns something close to the long term average s&p returns This sounds like you're describing a defined benefit pension plan, or an government old age pension plan like Social Security (in the US) / Canada Pension Plan (in, well, Canada). As usual, higher risk begets higher reward. If you don't want to face the prospects of volatile returns, you'll likely need to accept a lower long-term average return in exchange for the predictability.

StillBored 4y ago
Traditional US pension plans are all but dead except for a small number of people basically grandfathered into systems. Social security doesn't have a way to "buy up" and invest more to get it to say match ones yearly income. So really every individual investor is on their own until they get to the point where they can sell the risk and buy an annuity (although those tend to be terrible too largely I guess because they want to make $$$$ and other reasons). So, in the US outside of Social security, which isn't a retirement plan, there isn't any option other than to hope you don't have to retire during a downturn, or that you have to go live in a box for a few years to avoid burning all your capital when its value temporary falls for a couple years. Because there isn't any way to recover except to go work at walmart as a door greeter. There have been a number of articles about this over the past decade or two, which boil down to, in the US you can do everything "right" but whether you can actually retire comes down to a bunch of lucky decisions and market timing. So basically its random, with some probably of "success" of landing into a bucket that actually allows you to retire even at 65 which is well into the "everyone is dying off" part of the morality curve. Work till you die is the official plan, but then people might start reconsidering their life choices when there isn't this "you will retire happy" carrot at the end.
- orangecat 4y ago
  You can buy very safe investments like treasury bonds. Of course they won't give you the 8% risk-free returns you're looking for, but that's the point, nothing will.

deleted 4y ago

[deleted]

dangus 4y ago

You're missing the part where ~7% is already the average including the bear periods. During bull periods, the market increases by more than that average. Between 2009 and 2021, the S&P 500 went up by 13.8% per year. Between 2005 and 2022, the S&P 500 went up by 8.3% per year (which of course included some market crashes). > I would have expected someone to create a retirement insurance pool type thing that returns something close to the long term average s&p returns. Target date index funds are the way to go there: https://investor.vanguard.com/investment-products/mutual-funds/target-retirement-funds https://investor.vanguard.com/investment-products/mutual-fun...

StillBored 4y ago
Target date doesn't solve any of these problems except to shift the investments from higher return/higher risk to lower return lower risk as you approach the target date. It helps with the problem that the market crashes right before you retire but in exchange you lose a percent or so over the lifetime of the fund. And while vangard is industry leading WRT to the expense ratio, right there on their page they note that the industry average is almost half a percent just in expenses. Never mind the lower returns. And these days there really hasn't been anywhere to run since everything is so correlated. People close to retirement in those funds are going to be delaying retirement just like everyone else. -15% YOY with "safe" low risk/return investments really hurts. https://investor.vanguard.com/investment-products/mutual-funds/profile/vttvx#performance-fees https://investor.vanguard.com/investment-products/mutual-fun... The place I was at 15 years ago when I actually had money in a target date fund had a 1.5% expense ratio that was buried in a couple of different parts, fund expense ratio, and a underlying security expense ratio. And then on top of that the place I was at the "plan provider" or whatever they were called was scraping another .20% off of everything. There was a class action lawsuit, and the plan provider eventually lost. But, of the probably tens of thousands I lost vs just having my money in a IRA with vangard I think I got a check for something like $100.
- dangus 4y ago
  I think what you're asking for is fundamentally against the basic principles of investment markets. You're asking for the long term returns on any given short term period. That's just not how investment works. You get the best gains by staying in it for a long time. You can't get that nice long-term average without bearing the risk yourself. Who is going to bear the risk for free? Remember that stocks are investments in actual companies that take months and years to turn inputs into outputs. If I give Boeing a billion dollars I don't just come pick up my new plane prototype tomorrow. Imagine giving venture money to a startup company like Slack and then demanding monthly repayment at the S&P 500 long term average from day one. Wouldn't my money be better used funding Slack's expansion rather than going back to my pocket and stunting growth? That's why you can't get good guaranteed returns, because money has to be put to use transforming inputs to outputs over time. > People close to retirement in those funds are going to be delaying retirement just like everyone else. Only if they have a short-term view of their money or their savings rate wasn't high enough in the first place. Don't forget that the fund you linked me had a 16.87% increase in 2020 and a 11.50% increase in 2020. Plus, your target date is 2 years from now. Your original comment wished for the government to step in and make a fund like this. That already happened in the form of social security and medicare. Both are funded by contributions made during working years, effectively a savings account. If you're wishing for a better rate of return, well, sorry, see my first point. Social Security and Medicare are structured as guaranteed annuities. Being alive means you get them.

anotherman554 4y ago

"So at ~7% it takes 10 years to double your money." No, it HAS taken 7% to double your money. Most experts don't necessarily expect stocks to return 7% per year in the future. Instead they think stock returns are related to the price to earnings ratio, which has looked more and more unfavorable in recent years. And even if you are basing your data merely on history, good luck designing an insurance that wouldn't have gone bankrupt during the great depression.