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Thread: 401Ks Are a Disaster

  1. #1
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    401Ks Are a Disaster

    Interesting article on social security vs 401K plans today.

    401Ks are a disaster: Column

    Nothing like a pretty good point leading to borderline retarded conclusions. Granted, this was written by an economist and a good rule of thumb is to never listen to an economist about money.

    Let's explore:

    We need an across the board increase in Social Security retirement benefits of 20% or more. We need it to happen right now, even if that means raising taxes on high incomes or removing the salary cap in Social Security taxes.... Recent and near-retirees, the first major cohort of the 401(k) era, do not have nearly enough in retirement savings to even come close to maintaining their current lifestyles.
    Ummm, f*ck you man. Let me get this straight, the baby boomer generation has spent all the surplus social security money, ran up the federal deficit, and not saved a dime for their retirement and they want ME to foot the bill for them to sit on their lazy a$$ all day? Yeah, f*ck you very much.

    I get that 401Ks are fairly worthless but so are pensions...and social security for that matter (the way it's used now). Pensions are a terrible idea because they basically rely upon the company funding the thing and predicting future need 30 years from now. Further, people just don't stay with one company much anymore; having a pension is extremely limiting in terms of a career move. The argument I hear from EVERYONE is that "With pensions you don't have to worry about the stock market crashing". Really? What do you think the pension is investing in? The only difference is that the pension will either go under and nobody gets anything or they adjust your benefits down which is just like having the stock market crash. Just ask US Airways pilots how awesome pensions can be.

    401Ks are not a whole lot better but at least it's transferable. The downside to 401k plans is that 401K was never enacted as a retirement plan. So it basically had had a series of patches ever sense and still is somewhat limited. Not to mention you are kinda forced to gamble with it.

    Social Security was actually a smart program at first. It was intended as a welfare program for old people to keep them off the streets or supplement a family taking care of them. Studies back then concluded that most old people either had enough retirement to live on their own or were moving in with their families. The goal was to make sure those living with their families could contribute a little bit so they don't suck the life out of a family. It was never intended as a retirement plan....kinda like 401Ks .

    Finally, 20% increase by removing the limit and raising taxes on the rich? I'm all for raising taxes on the rich but not for this purpose. For one, removing the limit basically ruins a medium sized business. 6.2% increase in taxes on them...ouch. Two, it would only generate about 50 billion of the 120 billion you'd need. You'd have to raise the taxes on the rich another 8%ish or something like that to make up the difference. I honestly think that is wasted money for the reasons explained at the beginning.

    He talks about student debt which is a huge problem but I'll save that for another time.

    Thoughts?

  2. #2
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    Wow. That is a really great conclusion...that we need to pony up FAST so the baby boomers can live well when they retire. Feeling a little self entitled are we?

    This does actually leave us with a big problem. People are working longer. A lot of the baby boomers are realizing that they are not going to have anything to live on so have decided to work until they die. That means that we have old people in jobs that frankly we need to fill with young people. Old people do not tend to be as innovative and are not as economically productive as younger ones. People get older and they slow down. That is just reality. The problem is that these tired old f*cks are sticking around in their jobs, so young people are not getting jobs, so they are pretty much screwed for life, stuck with massive student load debt on a degree that has basically expired because they could not get into a field where it was useful.

    The other 401K problem is the same demographics problem that is going to destroy every pension fund in the country. There are just too many baby boomers. As they start drawing down those 401Ks, it will be enough to drive the market down.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  3. #3
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    Quote Originally Posted by daewoo View Post
    Wow. That is a really great conclusion...that we need to pony up FAST so the baby boomers can live well when they retire. Feeling a little self entitled are we?
    And it's a little insulting to the people that have to pay for it. I just don't get why the baby boomers constantly think of ideas on how to screw the rest of us. Was this taught in grade school during the 50s and 60s? These are the same people that created the computer and internet but when it comes to leading a country their first thought is "loot it!". We need a generational theorist to comment here.

    Are Millennials the Screwed Generation? - Newsweek and The Daily Beast

    I saw this when researching the phrase "generational theorist". It asks if Millennials are screwed. The answer is YES. I'm not sure I'm young enough to understand how badly these guys are getting screwed but I'm not that old (or so I think) to not be hurt by the baby boomers. I'm constantly dealing with 22-25 year olds coming right out of college. They are basically floored when they find out they won't be getting the 3500k sq ft house, new Toyota Camry, and a 6 figure job right out of college. Instead, they either don't get a job or they get 40k-ish job with a 6 figure bill for college. Oops, guess someone forgot to mention that to them. And accountants got it easy. People always want to know how much money they have or don't have so we are always in demand. The rest of the business school majors go to grad school to postpone the inevitable. As an example, one of my wife's friends left a federal government job to go to grad school in engineering. Racked up a good 20-30k in debt and COULD NOT get a job. She ended up back at the exact same job for the federal government. Reality is going to be a hard lesson for the Millennials. The only question is, how will they respond? Will they realize that a massive federal government actually hurts instead of helps? Will they beg and plead for debt forgiveness and try to pass the buck to the next generation? We'll know in about 10-15 years.

    This does actually leave us with a big problem. People are working longer. A lot of the baby boomers are realizing that they are not going to have anything to live on so have decided to work until they die. That means that we have old people in jobs that frankly we need to fill with young people. Old people do not tend to be as innovative and are not as economically productive as younger ones. People get older and they slow down. That is just reality. The problem is that these tired old f*cks are sticking around in their jobs, so young people are not getting jobs, so they are pretty much screwed for life, stuck with massive student load debt on a degree that has basically expired because they could not get into a field where it was useful.
    So basically the baby boomers are evil geniuses? They take all the money for themselves, rack up debt for their kids, create policies that tank the economy, and enact laws so they can't get fired when it all comes back on them. I guess shipping them all to South Florida, building a fence, and drop shipping drugs every few days is a little inhumane. Any other ideas?

    The other 401K problem is the same demographics problem that is going to destroy every pension fund in the country. There are just too many baby boomers. As they start drawing down those 401Ks, it will be enough to drive the market down.
    Right. It's not like pensions are investing in something different. So when the pension fund tanks companies will be required to bulk it up which further slows the economy. Lucky for no one, drawing on the funds will lower the prices for them as well....meaning they will cry even more for social security benefits.

    I dunno, maybe they will die before drawing the funds.

  4. #4
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    Quote Originally Posted by Steeeeve View Post
    And it's a little insulting to the people that have to pay for it. I just don't get why the baby boomers constantly think of ideas on how to screw the rest of us. Was this taught in grade school during the 50s and 60s? These are the same people that created the computer and internet but when it comes to leading a country their first thought is "loot it!". We need a generational theorist to comment here.

    Are Millennials the Screwed Generation? - Newsweek and The Daily Beast

    I saw this when researching the phrase "generational theorist". It asks if Millennials are screwed. The answer is YES. I'm not sure I'm young enough to understand how badly these guys are getting screwed but I'm not that old (or so I think) to not be hurt by the baby boomers. I'm constantly dealing with 22-25 year olds coming right out of college. They are basically floored when they find out they won't be getting the 3500k sq ft house, new Toyota Camry, and a 6 figure job right out of college. Instead, they either don't get a job or they get 40k-ish job with a 6 figure bill for college. Oops, guess someone forgot to mention that to them. And accountants got it easy. People always want to know how much money they have or don't have so we are always in demand. The rest of the business school majors go to grad school to postpone the inevitable. As an example, one of my wife's friends left a federal government job to go to grad school in engineering. Racked up a good 20-30k in debt and COULD NOT get a job. She ended up back at the exact same job for the federal government. Reality is going to be a hard lesson for the Millennials. The only question is, how will they respond? Will they realize that a massive federal government actually hurts instead of helps? Will they beg and plead for debt forgiveness and try to pass the buck to the next generation? We'll know in about 10-15 years.
    As the baby boomers die off I think we will see some changes to the federal government and how things are done. It is the boomers who are keeping our military spending insanely high, keeping ag subsidies rolling, and keeping most of our corporate welfare in place. On the other hand, the younger generations seem far more comfortable with certain entitlement programs and more government control in some areas....I know millennials who actually identify themselves as socialists and do so quite comfortably.

    The problem is that we have managed to screw ourselves so horribly that you can make arguments in favor of MORE government and MORE government control that are fairly reasonable. The distribution of wealth in this country is absolutely unsustainable and the obvious entity to correct that would be the government. We talked in another thread about how pretty much everything is rigged in favor of the wealthy and the big companies. Government could fix that as well. The problem of course is that it was a massive federal government that CAUSED those problems.

    BUT, you look at the nations history and Laissez-faire economics did not work either.

    Personally I think we need to completely reform our political system. As things currently stand, our congress has basically been bought. The republicans have sold out completely. The democrats have mostly sold out. Kicking control back to the states on a lot (most) things is a good idea, but there are a huge number of things that the federal government needs to control like banking and financial regulation, environmental regulation, infrastructure, etc... So how do you end up with a government that is not going to just whore itself out to the highest bidder? I heard somebody a while back suggest that all elections should be funded with public money....XX number of dollars per candidate for senate elections, xx number of dollars per candidate for presidential elections, etc... That would take away the ability of folks like the Koch brothers to simply purchase politicians with campaign funds.

    However, just like I think we need to get used to/force the federal government to give some power back to the states, I think we need to also become more comfortable with the idea that we need the government taking a primary role in some areas of our economy. I'm sorry, but our telecommunications infrastructure and electrical grid are vital pieces of our national infrastructure and they need to be managed with the needs of nation considered first, not the profitability of the companies operating them. If that means that the government expands its "dig once" program to put in its own nationwide fiber optic network in place, GREAT. If that means that expand the whitespace initiative, resulting in free high speed voice and data nationwide, GREAT. If that means that all the telcos are driven out of business...well...what can I say...they had their chance....a chance that the taxpayer funded....and they put greed before utility. If the government decided to seize the assets of all the telcos and electrical utility companies in this country I would have no problem with that. They would be entirely justified in doing so and frankly I think it would be a wise move. If they want to do it otherwise, they need to institute SERIOUS regulations that mandate system upgrades and control consumer costs. Frankly they need to get the CBO to do an analysis of the different options and go with the one that makes the most economic sense. Then they need to lock the republicans out of the capital so they can pass it.

    Likewise the banking and financial industry. This is not 1804, we cant go back to the gold standard and it would absolutely ridiculous to try. That does not, however, mean that we have to sit back and let things run their course while people do stupid things that manage to crash out entire economy. When you have a federal reserve staffed almost entirely with former executives from major banks who, as soon as they leave the reserve, are given jobs with 7 figure salaries, you are going to have a screwed up economy. I am not sure that I would even want people with banking experience on the board. I know the counter argument is "you need experienced people because the system is so complex" but maybe it is time to recognize that if the system is that complex, it is probably broken.

    So basically the baby boomers are evil geniuses? They take all the money for themselves, rack up debt for their kids, create policies that tank the economy, and enact laws so they can't get fired when it all comes back on them. I guess shipping them all to South Florida, building a fence, and drop shipping drugs every few days is a little inhumane. Any other ideas?
    Not necessarily evil geniuses, but they have been labeled the "me" generation and it seems to fit. Basically what it boils down to is that they turned out to be a bunch of mildly retarded narcissists. They never saw a benefit package that they did not like (for themselves) and never saw a tax that they were willing to pay. It is extremely rare that you manage to find one with any political or economic knowledge and for the most part they simply were not bright enough, or didn't care enough, to figure out what was going on so when somebody told them "you can have your cake and eat it, too (supply side economics)" they went "GREAT" instead of looking at it critically.

    Ideas? Sure...point out that Medicare is a welfare program and shut it down for 10 or 15 years. The baby boomers basically did diddly squat to actually prepare for retirement. Most of them have minimal savings, not NEARLY enough to pay for their retirement even WITH medicare. Cut medicare and they XXXX through their savings in the first 4-5 years and most of them are dead within 10. Problem solved.

    Right. It's not like pensions are investing in something different. So when the pension fund tanks companies will be required to bulk it up which further slows the economy. Lucky for no one, drawing on the funds will lower the prices for them as well....meaning they will cry even more for social security benefits.

    I dunno, maybe they will die before drawing the funds.
    That is pretty much it. We are talking about TRILLIONS of dollars being drawn out of investment markets over the next several years. Pretty much every financial instrument out there will be taking a major hit over a sustained timeframe. 70% of private pension funds will fail as will 80% of state and municipal pension funds. This will result in the PBGC going broke. Federal pension funds are ALREADY broke. That is why they are requiring that the post office pre-fund their benefits for 75 years. The post office is literally paying for pension benefits for employees who have not even been BORN yet. It is because they are using the money to pay out current federal pension benefits. 2 problems with that plan...first, it is breaking the postal service. Second, they are basically turning the federal pension fund into a ponzi scheme. They are forcing the post office to pay in extra to cover current benefits for other federal employees, but even if they manage to survive that means there will be no money there when THEIR employees retire.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  5. #5
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    Quote Originally Posted by daewoo View Post
    As the baby boomers die off I think we will see some changes to the federal government and how things are done. It is the boomers who are keeping our military spending insanely high, keeping ag subsidies rolling, and keeping most of our corporate welfare in place. On the other hand, the younger generations seem far more comfortable with certain entitlement programs and more government control in some areas....I know millennials who actually identify themselves as socialists and do so quite comfortably.
    Yeah, also a lot more libertarians. Sadly, the millennials hurt themselves by looking like a bunch of pansies. But that's neither here nor there.

    The problem of course is that it was a massive federal government that CAUSED those problems.
    And that really is the problem. We gotta get away from saying "Government is bad". We need to be saying "massive federal government is bad".

    BUT, you look at the nations history and Laissez-faire economics did not work either.
    Anything to an extreme doesn't work. The problem with Laissez-faire and communism is actually the same. True Laissez-faire is just letting business run as they wish. This basically leads to a huge power grab as people inherently want power. You end up with huge monopolies and a few companies basically running everything at the massive expensive of everyone else. Socialism and Communism are roughly the same thing but instead of a company you have a government.

    For the most part, I believe economists are totally incompetent. You have one thought process that assumes every citizen is a complete XXXXX and without their superior minds they would surely have killed themselves by now. These economists believe government is there as a parent over the people and push for policies to reflect that. Here you get things like Keynesian economics and a federal reserve made up of the brilliant minds who predicted a good housing market 6 months after it started to fail. On the other side you have a thought process that assumes every citizen is meticulously evaluating every decision they make to ensure they are doing what is best for them in the short and long run. This leads to policies like supply-side economics and laissez-faire where you assume everyone is smart enough to see the downsides of a monopoly 20 years out.

    At the end of the day, if you look at data on US citizens you get roughly a 20-60-20 split. Twenty percent are complete XXXXXX or have some type of disability. Sixty percent are people around average intelligence who simply want to have a moderate house, family, and an 8 hour a day job where they can come home and watch all new episodes of "How I Met Your Mother". Twenty percent are above average intelligence who go to the best schools, great companies, work long hours, and contribute new things to society. Economists are in that 20 percent with half of them thinking everyone is like the bottom 20% and half thinking everyone is like the top 20%.

    Frankly, I have no problem with 80% of the population bumbling along through life. They are probably more important to a society than the top 20%.

    The point of this story is to point out that any policy you propose is going to have to appease the people that really just want you to not disturb their way of living. That's not an easy task when talking about 300 million people. It's better to start local and go up.

    Personally I think we need to completely reform our political system. As things currently stand, our congress has basically been bought. The republicans have sold out completely. The democrats have mostly sold out. Kicking control back to the states on a lot (most) things is a good idea, but there are a huge number of things that the federal government needs to control like banking and financial regulation, environmental regulation, infrastructure, etc... So how do you end up with a government that is not going to just whore itself out to the highest bidder? I heard somebody a while back suggest that all elections should be funded with public money....XX number of dollars per candidate for senate elections, xx number of dollars per candidate for presidential elections, etc... That would take away the ability of folks like the Koch brothers to simply purchase politicians with campaign funds.
    I don't think that's necessary. Further, it will never be enforceable. One of our most important freedoms is speech and you can't go around saying the Koch brothers can't speak a lot. People say money isn't speaking but in a way it is. If I had $10 billion right now I should be allowed to spend it all, if I wanted, on purchasing airtime to say how screwed up Congress is. That's speech. If you go around limiting how much you can spend to speak you are basically limiting speak.

    There is another way. Force a balanced budget (or do something like Switzerland does with the debt brake), limit the number of bills a congressman can submit in a term, limit congress session lengths (1 month a quarter?), and enforce the constitutional limits on power. People don't bribe people that can't do anything. If Congress is limited in what they can do the problem of being bought goes away. This is why Virginia is a well run state.

    However, just like I think we need to get used to/force the federal government to give some power back to the states, I think we need to also become more comfortable with the idea that we need the government taking a primary role in some areas of our economy. I'm sorry, but our telecommunications infrastructure and electrical grid are vital pieces of our national infrastructure and they need to be managed with the needs of nation considered first, not the profitability of the companies operating them. If that means that the government expands its "dig once" program to put in its own nationwide fiber optic network in place, GREAT. If that means that expand the whitespace initiative, resulting in free high speed voice and data nationwide, GREAT. If that means that all the telcos are driven out of business...well...what can I say...they had their chance....a chance that the taxpayer funded....and they put greed before utility. If the government decided to seize the assets of all the telcos and electrical utility companies in this country I would have no problem with that. They would be entirely justified in doing so and frankly I think it would be a wise move. If they want to do it otherwise, they need to institute SERIOUS regulations that mandate system upgrades and control consumer costs. Frankly they need to get the CBO to do an analysis of the different options and go with the one that makes the most economic sense. Then they need to lock the republicans out of the capital so they can pass it.
    You mention the Postal Service below. I'm probably the only libertarian out there that thinks the postal service should be mostly free to citizens and governments. Any mail that is not a package nor a solicitation of some kind nor from a company/NPO (aka mass mailing) should be free to mail. Government mailings, free. Mailing thank you note to grandma for the check she sent, free. B*tching out your congressman, free. NPO mailing out yearly report and asking for donations, charge. Why? Because the Postal Clause is about communication on an interstate level. If you look at the history of the clause it basically allowed the federal government to build the infrastructure to allow communication to everyone. There was no telephone, tv, radio, or internet at the time. Frankly this is an instance where, as Scalia would say, "you project what the founders were getting at". The federal government HAS the power to build infrastructure to allow communication. The first amendment came along and basically solidified that congress should be allowing the communication, not limiting it (Yup, FCC is mostly BS). The reasoning behind the Postal Clause is brilliant. The best way to avoid screwing the people is to let them know what's going on.

    Ideas? Sure...point out that Medicare is a welfare program and shut it down for 10 or 15 years. The baby boomers basically did diddly squat to actually prepare for retirement. Most of them have minimal savings, not NEARLY enough to pay for their retirement even WITH medicare. Cut medicare and they XXXX through their savings in the first 4-5 years and most of them are dead within 10. Problem solved.
    I'm guessing they are going to end up living off of their kids...once again screwing the Millenials.

    Second, they are basically turning the federal pension fund into a ponzi scheme.
    Pensions have operated like a ponzi scheme for some time. Guess what generation will probably get the bill?

  6. #6
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    Hey - This Baby Boomer doesn't want or need your money. I worked hard, saved and planned for these years and am enjoying my retirement. It's the greedy-a*s liberal boomers and their like-minded slacker friends who want more of other people's money. It's the unwashed, left-wing hippies who dropped out and became a cancer on society. It's Barack Obama, the mealy-lipped tax-and-spender and his comrades who are pushing the redistribution of wealth schemes.

    So keep your money and quit voting for big tax-and-spend Dumbocraps who are constantly on a hunt for OTHER PEOPLE'S MONEY. IMBECILES.
    “For the scientist who has lived by his faith in the power of reason, the story ends like a bad dream. He has scaled the mountains of ignorance; he is about to conquer the highest peak; as he pulls himself over the final rock, he is greeted by a band of theologians who have been sitting there for centuries.” - Robert Jastrow

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