Retirement: Savings Alone don't work

Democracy Forums ^ | August 16, 2011 | Truth

[aMorePerfectUnion]

“I feel a little cheated.”

You should also look in the mirror and note how naive you were to not learn about investing before you believed someone without verifying what they said.

The market owes you nothing. It doesn’t work that way.

All is not lost, you can live in Ecuador for less than $1,500/month - not to mention Belize, Panama and Uruguay. SS will almost cover your living expenses completely. Ecuador has national healthcare you can participate in for $65/mo as a resident.

[Lou L]

The subject article, written by me, is based on the personal experience I've had and witnessed. 25 years ago, my corp switched from pensions to 401ks. I was told - invest 15% of your salary, and you'll be a millionaire by 2011.

Any financial "promise" or forecast is always based on some kind of assumptions.

So you were "told" something, and automatically believed it? The one thing I've learned in my 2+ decades of investing, is that investment returns are based on "windows" of annual earning. Retire at the end of a bull cycle, and you may find your balances looking very well. Retire at the end of a bear cycle, and you will not fare as well.

Good returns are also based on have a sound portfolio re-balancing plan. You have to occasionally take your "winnings" off the table, and put those winnings into something less risky.

All that said, Social Security does not produce returns. It's a "plan" based on the future contributions of others to pay for the current "beneficiaries." In other words, it works like a Ponzi scheme. With a country whose birthrate is decreasing, and with an economy that doesn't appear to be growing any time soon, there are fewer and fewer people who can continue to pay into this program and support everyone else.

How can you possibly hang your hat on Social Security to act as the primary source for retirement for people, knowing this plan isn't viable in the long run?

[KingKongCobra]

“The subject article, written by me, is based on the personal experience I’ve had and witnessed. 25 years ago, my corp switched from pensions to 401ks. I was told - invest 15% of your salary, and you’ll be a millionaire by 2011. I invested, but I only have $400,000, which is not enough to retire on. I feel a little cheated. So do most of my co-workers and people of my age. I’m being meant to feel that I am a failure for not chosing my investments wisely, but every expert said back then - stocks are the best in the long run! “

Odd. I started my 401K in 1980. Closed it out last year at 800K. Today it’s about 1Mil. I guess I’m just a lot more aggressive. My 401K was always in high growth funds but now I sell naked puts on DOW stocks and any stock with weekly options. If one gets assigned, I switch to covered calls. My target is to make 12% per year. I’m doing much better than that. My SS check is 2500/mo. Mt IRA earns about $15,000/mo. In the last 3 months I made $14,000 selling options on a single stock.

I think a 401K can make you a millionaire.

[marktwain]

Your 401K has been invested six years longer than his. At the rates of return you are indicating, his might double in that long of a period.

[KingKongCobra]

Absolutely. My point was that the 401K is still the best option. He seemed to feel the 401K had let him down.

[Darth Reardon]

I can’t see renegging on the promises to our retirees

I'll probably catch heck for this, but I can see it. If they wanted the money to be there when they retired, they should not have let Congress spend it. Effectively, they ate their cake and now want to have it, too.

BTW, when I say "they", I actually include myself.

There is, IMO, no solution. If there is, I'm pretty certain there is no "fair" one. The screwing has already occurred, now it is simply getting close to time to determine who it happened to. I think it should be the generations that could have done something to stop it, and benefited the most from the spending.

Now, I know there are a lot of folks here who did try to stop it. It would suck if we got screwed along with the rest. But again, money's gone. I don't see how we can justify shirking the burden onto the next generations.

[eyedigress]

Dude if your young go 100% growth.

[Grumplestiltskin]

“Which brings up my initial point: you do, and should, work until you die. There is a matter of under what stress one wants to do that, but it is silly to believe it simply goes away, no matter how much one initially fools one’s self.”

“Work until you die”.

Yeah, that’s the ticket!

See how many Republicans and/or conservatives are gonna get elected under that philosophy!

Just laughin’...

[marktwain]

I can’t see renegging on the promises to our retirees, who paid into it for their parents decades and expect to receive the same from us.

Of course, a great deal depends on how you define "reneging on the promise". A promise made without the means to fulfill it is a fraud. Having said that, "Socialist Insecurity" can be kept solvent if we simply limit the increase to that of the actual cost of living in stead of wages. Socialist Insecurity has been going up and up and up for decades, to buy votes. Just keeping it level would keep it solvent. Worst case, we would cut it by a small percentage. Cut it only 10% and our problem is solved for decades, long enough to put a solid individual investment system in place, instead of the government Ponzi scheme that we now have.

I am very close to retiring. I would much rather have a solid 90% of what I was "promised" instead of nothing, which is what we will get if we crash the system.

[Gil4]

My intention is to work until I die.

My father is collection 2 pensions, my mother another, plus one or both collects SS. My father still works 4 months out of the year (Jan-Apr, tax season). At age 78, I don’t see him stopping until God makes him. He’s certainly not idle the other 8 months and he doesn’t need the paycheck, but just having something he is forced to keep up with helps keep him sharp.

Work until you die is a much better life philosophy than election platform.

[TruConservative]

Thanks again to all who commented. I am jealous of the guy with the million dollar 401k! But the average 401k of baby boomers is only $80k, so I’m doing well above average. Also - I agree that SS should never be a sole retirement or comfortable retirement program; I think it serves well as a minimal thing for the poor and a supplement for the rest of us.

One factual detail - the 15% overhead for 401k management comes from various sources: http://www.globalaging.org/pension/us/socialsec/myth.htm says “Administrative costs for Social Security are about 1 percent of benefits, compared with average administrative costs of 12 to 14 percent for private insurers.” I guess that they are specifically talking annuities. But I also watched an interview with Fred Schwed (”Where are the Customers Yachts?”) in which he made a strong case that those who handle our investment money make more than those who invest.

But again - I am a strong proponent of putting the maximum into 401ks! I advise it to everyone. I just think that whatever the salesman says that you will end up with, be cautious and assume you’ll only get half that much.

[marktwain]

401K management fees: Here is a Department of Labor source

A Look At 401(k) Plan Fees

http://www.dol.gov/ebsa/publications/401k_employee.html

An excerpt:

Mutual Funds - Mutual funds pool and invest the money of many people. Each investor owns shares in the mutual fund that represent a part of the mutual fund’s holdings. The portfolio of securities held by a mutual fund is managed by a professional investment adviser following a specific investment policy. In addition to investment management and administration fees, you may find these fees:

* Some mutual funds assess sales charges (see above for a discussion of sales charges). These charges may be paid when you invest in a fund (known as a front-end load) or when you sell shares (known as a back-end load, deferred sales charge or redemption fee). A front-end load is deducted up front and, therefore, reduces the amount of your initial investment. A back-end load is determined by how long you keep your investment. There are various types of back-end loads, including some which decrease and eventually disappear over time. A back-end load is paid when the shares are sold (i.e., if you decide to sell a fund share when a back-end load is in effect, you will be charged the load).

* Mutual funds also may charge what are known as Rule 12b-1 fees, which are ongoing fees paid out of fund assets. Rule 12b-1 fees may be used to pay commissions to brokers and other salespersons, to pay for advertising and other costs of promoting the fund to investors and to pay various service providers to a 401(k) plan pursuant to a bundled services arrangement. They are usually between 0.25 percent and 1 percent of assets annually.

* Some mutual funds may be advertised as “no-load” funds. This can mean that there is no front- or back-end load. However, there may be a small 12b-1 fee.

* Target date retirement funds, which are often mutual funds, are designed to make investing for retirement more convenient by automatically changing your investment mix or asset allocation over time. Different target date funds may charge different fees even if they have the same target date. If a target date fund invests in other mutual funds, fees may be charged by both the target date fund and the other funds.