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PBS Frontline : The Retirement Gamble, sorta Must See (2 Viewers)

Chadstroma said:
It is not really a gamble over time downturns correct themselves. There is tons of data to support that over time even with the downturns in markets a well diversified portfolio will return a decent amount of return. The gamble is if you are old and trying to catch up because you did not prepare when you were younger and then take large losses that you don't have time to recover from. The closer you get to retirement the more your funds should be pulled out of the market and put in protective assets that don't return as much. The risk, or gamble as you want to focus on, is mitigated with time. If you don't have time then don't take the investment risk. The "gamble" is all on you. Be smart and invest and don't gamble.
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Tell that to the people who were just getting ready to move their funds to "safe" accounts in 2008.

 
James Daulton said:
Tell that to the people who were just getting ready to move their funds to "safe" accounts in 2008.
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It should be done gradually, over time so that there's no sudden shock if an adverse market event occurs. Ideally, should be done annually. % in bonds = age, so re-balance every year.

 
James Daulton said:
Tell that to the people who were just getting ready to move their funds to "safe" accounts in 2008.
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It ought to be a gradual migration. Not a one time thing. Again- it goes back to being a smart investor. If you are being a smart investor then you minimize risk. If not then you are gambling.

I gambled back in 2008 and lost. But I knew I was doing that gamble because I was young and could bounce back. I am bouncing back.

As I am about to enter my 40's, I will start to move some of my portfolio into bond funds in the next upcoming years and will gradually continue to do so.

If you think you do stocks and then one time move to bonds at 50 or 60 then you have no idea what the hell you are doing and need to work with an advisor to help you.

 
mquinnjr said:
It should be done gradually, over time so that there's no sudden shock if an adverse market event occurs. Ideally, should be done annually. % in bonds = age, so re-balance every year.
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How much of the country actually puts money away for retirement?  Of those that do, what % have the sophistication to make the type of adjustments you're talking about?  The fact is, for most of this country, even if you do put money away, it's essentially a high stakes gamble.

 
NewlyRetired said:
I expected a complete bloodbath today but so far it is not so bad.  The Dow has already clawed back to just down 2.2% now.

If the day can finish around 2-3% down, I think we will be ok.  Long day to go though so anything awful can still happen I guess.
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Stock market has dropped all the way down to... where it was four weeks ago. The entire European economy shifted overnight and you're just losing 20 days of paper gains, then maybe right back on track. Nothing to really worry about.

 
James Daulton said:
How much of the country actually puts money away for retirement?  Of those that do, what % have the sophistication to make the type of adjustments you're talking about?  The fact is, for most of this country, even if you do put money away, it's essentially a high stakes gamble.
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Exactly. And its easy for us to sit in here and deride those that aren't savvy. But it's daunting, there's risk involved, and outside of those with pensions, you are on your own. Great system. 

 
Grace Under Pressure said:
Exactly. And its easy for us to sit in here and deride those that aren't savvy. But it's daunting, there's risk involved, and outside of those with pensions, you are on your own. Great system. 
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So what sort of system would you propose that would help people who either aren't savvy enough to figure this stuff out, prioritize their short term happiness over long term security, or just don't care?

You're saying we subject our retirement funds to a system that could result in wild swings and loss of value. What is the alternative beyond all of us just sitting on a pile of money?

 
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James Daulton said:
How much of the country actually puts money away for retirement?  Of those that do, what % have the sophistication to make the type of adjustments you're talking about?  The fact is, for most of this country, even if you do put money away, it's essentially a high stakes gamble.
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People don't, but should at least try to do so. That's the point of this thread, demystifying the process of investing for retirement. In terms of sophistication, it's really not as complex as the investment community would lead you to believe. Not that there's not a purpose for them or that they dole out bad advice, that's not true either. The point of the thread is, if you are willing to invest time in understanding the process to budget to save, and allocate what you save correctly, it's not as complex or scary as many perceive it to be.

In terms of re-balancing, it's a fancy word for moving the portions of money you have invested in investment instruments (e.g., bonds, mutual funds, ETF's, etc.) around to match your goal asset allocation. When you're young, you have time to lose money and make it back up over time. Equities are the most volatile investment instrument, but have the most upside. You buy lots of equities when young. As you grow older, you've "made your money" in equities and it's time to shield that money in safer investments, like bonds. I'm 32 years old, so I have 32% of my retirement money in bond ETF's,a nd 68% in equity ETF's. When I turn 33, I need to re-balance, or re-calibrate my retirement money to match my target 33% of bonds and 67% of equities. To do that, I sell 1% of my equity allocation and with that 1% I buy 1% more of bonds. That is what I meant in a previous post by see-saw effect, over time I slowly but surely move away from equities and into bonds, as a hedge against adverse market events as I near retirement.

 
James Daulton said:
How much of the country actually puts money away for retirement?  Of those that do, what % have the sophistication to make the type of adjustments you're talking about?  The fact is, for most of this country, even if you do put money away, it's essentially a high stakes gamble.
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How many people get a good education? How many exercise regularly? How many eat healthy? How many go to the dentist twice a year?

I heard the other day only about 30% of Americans have any savings at all. 2/3 don't have more money in their accounts that their monthly cash flow. Are you going to tell me that that is too complicated? I certainly agree it is a damn gamble.

It really is not that complicated. If you don't care to put the time and effort in to invest wisely then there are a ton of people willing to get paid for doing it for you. It is up to the individual. Sure, a massive amount of people don't. So, they will be living off of social security and working a retail job until the day that they die.

 
Grace Under Pressure said:
Exactly. And its easy for us to sit in here and deride those that aren't savvy. But it's daunting, there's risk involved, and outside of those with pensions, you are on your own. Great system. 
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Pensions aren't the answer either. Whether public or private- do you have any idea how many pensions are under funded?

 
RUSF18 said:
So what sort of system would you propose that would help people who either aren't savvy enough to figure this stuff out, prioritize their short term happiness over long term security, or just don't care?

You're saying we subject our retirement funds to a system that could result in wild swings and loss of value. What is the alternative beyond all of us just sitting on a pile of money?
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Lot of older people i know are living off of a pension.  Maybe something like that?

 
RUSF18 said:
So what sort of system would you propose that would help people who either aren't savvy enough to figure this stuff out, prioritize their short term happiness over long term security, or just don't care?

You're saying we subject our retirement funds to a system that could result in wild swings and loss of value. What is the alternative beyond all of us just sitting on a pile of money?
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"Social Security Plus" for the former. I propose nothing for the latter. When I see the numbers Chad quotes above about those not participating, there's a lot of good people in those categories. I refuse to believe they're all stupid and lazy.

 
Or maybe just one big giant system sort of like social security where every job you ever have puts money in there for you.  One big giant pension where 403Bs, 401Ks, pensions, social security, and every and anything else is all rolled into one thing and individualized for each person that can be tracked over time.

 
Grace Under Pressure said:
"Social Security Plus" for the former. I propose nothing for the latter. When I see the numbers Chad quotes above about those not participating, there's a lot of good people in those categories. I refuse to believe they're all stupid and lazy.
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It's not so much that they're stupid or lazy.  Many are just prioritizing differently. Some of the smartest and hardest working people I know (in other areas) haven't planned for retirement and don't want to engage in a discussion about retirement planning. 

 
ghostguy123 said:
Lot of older people i know are living off of a pension.  Maybe something like that?
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Pensions are a dinosaur, they got killed off a long time ago in the private sector. Basically, in a pension the payout within an annuity was guaranteed for the employee based upon the employer calculation of the benefit as a fixed amount. To pay that amount, the employer hires actuaries to calculate the pension expense and reserve required to fund these payments. Employers invest these funds in the market to achieve plan asset returns, the same way individuals invest their own earnings in a 401k. However, the key difference is that in the event of a mortgage backed security crisis or Brexit market volatility, the employer owes you the fixed amount of the annuity based upon the pension plan calculation, and must make up (e.g. eat) shortfalls in their plan return assets, which are stock market driven. Pensions are expensive and risky for the above reason, so employers killed them off in lock step, especially after 2008. They upped 401k match percentages in many cases and shifted the market risk to the employee's 401k account, effectively throwing the grenade over the fence and saying, "you deal with it." 401k plans are the result of IRC tax changes (I think in the 1980's), when everyone had pension plans for the most part. Employers figured this out and basically did hand stands and said, "Kill the pensions immediately." And thus, the mutual fund industry and high fee funds were born to "serve the market" of 401k investors.

 
ghostguy123 said:
Or maybe just one big giant system sort of like social security where every job you ever have puts money in there for you.  One big giant pension where 403Bs, 401Ks, pensions, social security, and every and anything else is all rolled into one thing and individualized for each person that can be tracked over time.
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maybe we can just have the government manage our finances.  That'll work!

 
Grace Under Pressure said:
"Social Security Plus" for the former. I propose nothing for the latter. When I see the numbers Chad quotes above about those not participating, there's a lot of good people in those categories. I refuse to believe they're all stupid and lazy.
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You can be smart and hard working and still be irresponsible. The numbers say that there are a lot of irresponsible people out there. Sure, there are other people out there that just don't have the means. That is a different story. But there are massive amounts of people who just don't care.

I had a co-worker who left the company to go to the Army. She was asking me how to withdraw her 401k. I implored her to roll it over into an IRA and build it up. I explained everything to her. Her answer? "I'm young. It is only X amount of money. I just took the money the last job I had too" What are the chances she ends up close to retirement with little to show for it? Pretty good.

 
ghostguy123 said:
Or maybe just one big giant system sort of like social security where every job you ever have puts money in there for you.  One big giant pension where 403Bs, 401Ks, pensions, social security, and every and anything else is all rolled into one thing and individualized for each person that can be tracked over time.
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So..... social security.

 
FUBAR said:
It's not so much that they're stupid or lazy.  Many are just prioritizing differently. Some of the smartest and hardest working people I know (in other areas) haven't planned for retirement and don't want to engage in a discussion about retirement planning. 
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Not only that but you may be surprised how many times I have seen doctors, lawyers, and business men who make goobles of cash and have no savings. Heck, they even overdraw their accounts habitually. They aren't dumb and they aren't lazy. But they also don't have savings or retirements that they are funding.

 
Chadstroma said:
Not only that but you may be surprised how many times I have seen doctors, lawyers, and business men who make goobles of cash and have no savings. Heck, they even overdraw their accounts habitually. They aren't dumb and they aren't lazy. But they also don't have savings or retirements that they are funding.
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They should be much smarter with their money.  After all, we are all taught this stuff in middle school, high school, and college right?  Oh wait.

 
Chadstroma said:
You mean like the billion of other options right now that people can put money into low risk, low return accounts to add to their SS benefits?
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Sure, except they dont have the option to cash it out and blow it like idiots.

Imagine if people could take a lump sum of their social securith at age 40?

 
Chadstroma said:
FUBAR said:
It's not so much that they're stupid or lazy.  Many are just prioritizing differently. Some of the smartest and hardest working people I know (in other areas) haven't planned for retirement and don't want to engage in a discussion about retirement planning. 
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Not only that but you may be surprised how many times I have seen doctors, lawyers, and business men who make goobles of cash and have no savings. Heck, they even overdraw their accounts habitually. They aren't dumb and they aren't lazy. But they also don't have savings or retirements that they are funding
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right, it's all about priorities.

ghostguy123 said:
They should be much smarter with their money.  After all, we are all taught this stuff in middle school, high school, and college right?  Oh wait.
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My 13yo son was taught the basics in middle school last year.  As an elective course (wasn't elective for him :)  ) probably the best course he's ever taken. Too few schools do this, we're lucky to be in a district where they place an emphasis on real world skills.

 
ghostguy123 said:
Sure, except they dont have the option to cash it out and blow it like idiots.

Imagine if people could take a lump sum of their social securith at age 40?
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They're basically already taking a lump sum of their retirement benefits at age 40 by spending it today on unnecessary items.

 
RUSF18 said:
So what sort of system would you propose that would help people who either aren't savvy enough to figure this stuff out, prioritize their short term happiness over long term security, or just don't care?

You're saying we subject our retirement funds to a system that could result in wild swings and loss of value. What is the alternative beyond all of us just sitting on a pile of money?
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We should just make it legal to eat the poor. So many of society's problems solved almost instantly.

 
FUBAR said:
but my leased BMW is necessary!
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I know this is a joke, but i swear I have never seen so many Range Rovers, BMWs, and Mercedes vehicles on the road as of now.  And most seem to be new.  Right now I'm suckling off of a rental for my recalled Fit.  So free miles to save the miles on my cheap car.  

 
ghostguy123 said:
Or maybe just one big giant system sort of like social security where every job you ever have puts money in there for you.  One big giant pension where 403Bs, 401Ks, pensions, social security, and every and anything else is all rolled into one thing and individualized for each person that can be tracked over time.
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HOW WILL THE CORPORATIONS MAKE THEIR MONEY???

 
Chadstroma said:
I heard the other day only about 30% of Americans have any savings at all. 2/3 don't have more money in their accounts that their monthly cash flow.
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This stat always intrigues me.  Per the 2010 Census, 30% of Americans were younger than age 21.  Obviously we would not expect those people to have retirement savings.  When they say 30% of Americans have any retirement savings at all....does that mean 30% of working age people?  Or 30% of everyone, without factoring in that 30% of the population is 21 or younger?

 
ghostguy123 said:
Or maybe just one big giant system sort of like social security where every job you ever have puts money in there for you.  One big giant pension where 403Bs, 401Ks, pensions, social security, and every and anything else is all rolled into one thing and individualized for each person that can be tracked over time.
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This seems pretty similar to the concept of superannuation in Australia.  Australian employers are required to contribute 9.5% of an employee's salary to a superannuation fund to provide for their retirement.  I have only dealt with them a handful of times in my work so I am not entirely sure the ins-and-outs of the system.

 
i'd honestly prefer that my kids learned something else that I can't teach them myself.   maybe we can make the class an elective.  i'd rather my kiids can take the robotics or AI class instead.

 
Steve Tasker said:
This stat always intrigues me.  Per the 2010 Census, 30% of Americans were younger than age 21.  Obviously we would not expect those people to have retirement savings.  When they say 30% of Americans have any retirement savings at all....does that mean 30% of working age people?  Or 30% of everyone, without factoring in that 30% of the population is 21 or younger?
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 It wasn't 30% had retirement savings but any savings at all. I do believe the quote was adults. I am going to ask for a certain amount of leeway as it was something I heard on the radio while driving and wasn't completely focused on all being said.

 
NutterButter said:
i'd honestly prefer that my kids learned something else that I can't teach them myself.   maybe we can make the class an elective.  i'd rather my kiids can take the robotics or AI class instead.
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Fair point, and I can teach them this, but I can also teach history, math, and other subjects.  My kids learn better at school than they do from me.  It's 9 weeks out of school year, one hour a day. 

 
So has anyone pinned down how investors can capitalize on this impending and on-going American retirement crisis? All I can guess is to be in precious metals or foreign currencies because one likely end game is that our nanny-state Government will bail out these ill-prepared baby boomers and the dollar will be devalued. What else you got?

 
FUBAR said:
Fair point, and I can teach them this, but I can also teach history, math, and other subjects.  My kids learn better at school than they do from me.  It's 9 weeks out of school year, one hour a day. 
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It doesnt even have to be every year.  Maybe once in 8th grade and again in 10th and 12th.  Plus schools around here do electives for half the year, so that would be a total of a year and a half worth of a 50 minute class that would rank up there with the most important classes they ever take. 

 
FUBAR said:
Fair point, and I can teach them this, but I can also teach history, math, and other subjects.  My kids learn better at school than they do from me.  It's 9 weeks out of school year, one hour a day. 
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There's no way I can teach any of those subjects at a high school level at my current level of knowledge.  Personal finance otoh seems pretty straightforward to me.   The hard part to me is having the means and the self discipline to execute on it.  If you have a minimum wage job, you really don't need the part of the course having to do with investing b/c you ain't gonna have any money to invest.   And all the teaching in the world ain't going to help you if you don't have the self discipline to execute on it.   Plenty of people know what they should be doing, but if all they do is consume, then living off of credit card debt and failing to invest becomes a way of life.  Its analogous to the obesity problem we have in this country.   

 
pecorino said:
So has anyone pinned down how investors can capitalize on this impending and on-going American retirement crisis? All I can guess is to be in precious metals or foreign currencies because one likely end game is that our nanny-state Government will bail out these ill-prepared baby boomers and the dollar will be devalued. What else you got?
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As long as we keep SS solvent which shouldn't be a problem, I'm not concerned.  A lot of people are just going to have a pretty terrible retirement.   

 
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