Mr. Irwin does readers a disservice by mixing up some key terms repeatedly. He makes statements about investment advisers motivated by "high, frequently undisclosed commissions."... "The wolves, in this case, being investment advisers gunning for high commissions." Mousing over the "investment adviser" hyperlink, takes you to a NYT page about "financial planners."
Wrong, wrong, wrong. The NYT style guide needs to be updated to educate its business writers once and for all, about a couple terms with significance.
Most professionals who deal with individual investors hold one of two securities licenses. Some hold both but it's less common. These are license categories, not descriptive terms, and the distinction matters.
A Registered Representative, which most people refer to as a stockbroker, is paid by commission for selling securities and annuities. This category appears to be the subject of the piece's criticism, because it's a commission-based sales role that does not trigger strong fiduciary standards - yet.
An Investment Adviser is licensed to give advice about securities, and is paid by fees rather than commissions. Investment advisers are, by law, in a fiduciary role already; the Obama proposal probably adds nothing new. The only way an investment adviser is motivated by commissions is if they also hold a license as a Registered Representative, which is uncommon.
Financial planner could be anything...it's not a license. Budgets? Life coach? Annuities? Ask.
Wrong, wrong, wrong. The NYT style guide needs to be updated to educate its business writers once and for all, about a couple terms with significance.
Most professionals who deal with individual investors hold one of two securities licenses. Some hold both but it's less common. These are license categories, not descriptive terms, and the distinction matters.
A Registered Representative, which most people refer to as a stockbroker, is paid by commission for selling securities and annuities. This category appears to be the subject of the piece's criticism, because it's a commission-based sales role that does not trigger strong fiduciary standards - yet.
An Investment Adviser is licensed to give advice about securities, and is paid by fees rather than commissions. Investment advisers are, by law, in a fiduciary role already; the Obama proposal probably adds nothing new. The only way an investment adviser is motivated by commissions is if they also hold a license as a Registered Representative, which is uncommon.
Financial planner could be anything...it's not a license. Budgets? Life coach? Annuities? Ask.
10
It's typical of Obama that he takes with one hand and gives with another. He does not back strong unions and he is currently pushing two major trade agreements which will cause even more jobs to go abroad. But he is nonetheless determined to create a fiduciary relationship between workers and their " financial advisers." What "finances" do they have when they are unemployed or forced to take low-paying jobs? This is the sad result of the global economy and the trade agreements he is currently pushing. But by all means let us get all worked up over retirement accounts workers are too poor to fund.
19
First , my government tells me I must have health insurance. Now , they tell me I must save for retirement. What's next?
8
Who killed pensions? Who allowed companies to destroy them, and replace them with worker's freedom to save (or not), leaving so many to put off savings when they live paycheck to paycheck? Sounds like a Republican idea....
Worse, how much money has this plowed into companies (through stocks) that are then redirected by the CEO and Board to finance electing anti-union politicians who continue to destroy the middle class? It has been a downward spiral, and I suspect the substitution of 401ks (and 403bs) for pensions contributed to the process, helping the rich get richer, and the middle class get poorer.....
Worse, how much money has this plowed into companies (through stocks) that are then redirected by the CEO and Board to finance electing anti-union politicians who continue to destroy the middle class? It has been a downward spiral, and I suspect the substitution of 401ks (and 403bs) for pensions contributed to the process, helping the rich get richer, and the middle class get poorer.....
23
All companies should require employees to contribute at least 6% of their salary in low fee Vanguard mutual funds. These investments should be guaranteed by the government should the company go bankrupt.
I have both pension and 401K plans from my employer, but they recently cut the pension payout by 2/3rds. (I wasn't aware they could do this.) I don't know if there is anything to prevent them from cutting the pension further or even eliminating it.
Most professional money managers can't beat the market averages, so there's no reason to think the average employee can. Low cost indexed mutual funds that automatically become more conservative as you get closer to retirement age are the simplest, most reliable 401K investment strategy for most people.
I have both pension and 401K plans from my employer, but they recently cut the pension payout by 2/3rds. (I wasn't aware they could do this.) I don't know if there is anything to prevent them from cutting the pension further or even eliminating it.
Most professional money managers can't beat the market averages, so there's no reason to think the average employee can. Low cost indexed mutual funds that automatically become more conservative as you get closer to retirement age are the simplest, most reliable 401K investment strategy for most people.
3
Saving safely for retirement, in any form, has been destroyed by Janice Yellen's zero interest policy.
Inflation protected Treasury Bonds have negative returns.
Welcome Americans to the Casino of the Stock Market were you will be fleeced, sooner than later by Wall Street :-)
Inflation protected Treasury Bonds have negative returns.
Welcome Americans to the Casino of the Stock Market were you will be fleeced, sooner than later by Wall Street :-)
14
This is all well and good and long overdue; however, there are two very real issues. One is that the average American family can ill afford to save enough for retirement, especially if their companies are providing little or no match. While "forcing" them to save may be helpful down the road- not so much when they're trying to raise a family, buy a home and put kids through college. Chance are, they'll just end up borrowing more. Stagnant wages are killing the middle class and their ability to save. If we're going to 'force' it on employees, how about forcing a company match?
I was fortunate enough to have access to a 401K with a good company match for much of my career. While I'm no personal finance guru, I'm well read enough to know the 'do's and don'ts' associated with 401K and IRA accounts. A relatively conservative, diversified portfolio designed for long-term investing didn't prevent me from watching 20% of my retirement savings disappear overnight in the last crash. And nothing has been done to prevent that from happening again. Fortunately, I had some time to 'recover.' But let's be honest- this particular economic insecurity has little to do with 'sound investment advice.' My carefully crafted, low-cost, diversified portfolio didn't drop 20% overnight because there was a problem with the underlying values of the funds/companies invested in. That we are being forced to play the Wall Street game to earn anything at all for retirement is a disgrace.
I was fortunate enough to have access to a 401K with a good company match for much of my career. While I'm no personal finance guru, I'm well read enough to know the 'do's and don'ts' associated with 401K and IRA accounts. A relatively conservative, diversified portfolio designed for long-term investing didn't prevent me from watching 20% of my retirement savings disappear overnight in the last crash. And nothing has been done to prevent that from happening again. Fortunately, I had some time to 'recover.' But let's be honest- this particular economic insecurity has little to do with 'sound investment advice.' My carefully crafted, low-cost, diversified portfolio didn't drop 20% overnight because there was a problem with the underlying values of the funds/companies invested in. That we are being forced to play the Wall Street game to earn anything at all for retirement is a disgrace.
26
"My carefully crafted, low-cost, diversified portfolio didn't drop 20% overnight because there was a problem with the underlying values of the funds/companies invested in."
So why did it drop?
So why did it drop?
3
You pay for your employer match. There is no free lunch ! Lower salary. Lower other benefits. Lower stock price that impacts you in a myriad of other ways, such as fewer other employees so you work harder / lower quality of life. Whatever , however, no free lunch. Rather: how do you want to pay?
3
It would appear that virtually every fund- whether stock, bond, large cap, international, etc. dropped. Some more than others (thanks to diversification), yet overall a major loss for the year. Sure, it went up the next year. So I asked my 401K administrator to run an analysis that looked at the entire portfolio (which I monitor and adjust yearly of course) since I'd started seriously saving in the 80s. My return was about 3%. I also get outside financial advice as needed. Bottom line, there are too many variable that determine what your retirement balance will be when you need it... I'm sure as hell glad I was 70 years old when the bottom fell out last time. I've left that company and have rolled my 401K over- it will be interesting to see if I can do better with a different selection of funds than we had available from Fidelity. If I could earn 5% in a money market account, I'd be there!
5
Retirement plans based on the foundation of tax exemptions are a boon to the wealthier employee who is usually (but not always) more fiscally aware than most of the employees.
Plans like OASDI (a.k.a., Social Security) are better only because the money is taken up front and the individual has no real say to how the low cost program is run. Further that program uses very low risk investments over extended periods of time.
Financial Advisors love short term, high risk, frequently traded portfolios that usually fail to protect the principal let along generate a profit. Unfortunately, the people who sell IRA's and other retirement products tend to Financial Advisors who work on commission. Or those like the reliable Mr. Madoff.
It seems that Wall Street wants to protect the Madoff's from the big, mean, nasty government who spoil every party.
Plans like OASDI (a.k.a., Social Security) are better only because the money is taken up front and the individual has no real say to how the low cost program is run. Further that program uses very low risk investments over extended periods of time.
Financial Advisors love short term, high risk, frequently traded portfolios that usually fail to protect the principal let along generate a profit. Unfortunately, the people who sell IRA's and other retirement products tend to Financial Advisors who work on commission. Or those like the reliable Mr. Madoff.
It seems that Wall Street wants to protect the Madoff's from the big, mean, nasty government who spoil every party.
4
Contrary to the author's assertions, you cannot save people from themselves. You can spare them and safeguard them from unscrupulous entities that attempt to exploit them. However, you cannot save people from themselves.
2
Er...the author didn't make any such sweeping assertion. He did however (more or less) say:
"You can spare them and safeguard them from unscrupulous entities that attempt to exploit them."
"You can spare them and safeguard them from unscrupulous entities that attempt to exploit them."
4
He did actually "But the system may have a few more built-in safeguards to protect people from themselves." The last sentence in the article.
1
The total focus, in the retail department, of brokerage firms, is generating revenue from the next sale. Don't waste time in explaining or educating clients. Just place them in some sort of pre-package, fee-based account, and get on to the next sale.
That's why Wall Street fought the SEC's idea, four years ago, of requiring that all brokerage accounts be operated as fiduciaries--doing what's "Best" for the clients, not merely what was "Suitable". That would have required the firms to properly training and licensing their brokers, and actually taking responsibility for what they do.
There are some great brokers out there, who know what they are doing and actually do what is right for their clients. But, the firms are the ones that are pushing for more and more sales, rather than quality advice. The old-fashioned brokers are truly swimming against the tide.
http://thetruthoncommonsense.com
That's why Wall Street fought the SEC's idea, four years ago, of requiring that all brokerage accounts be operated as fiduciaries--doing what's "Best" for the clients, not merely what was "Suitable". That would have required the firms to properly training and licensing their brokers, and actually taking responsibility for what they do.
There are some great brokers out there, who know what they are doing and actually do what is right for their clients. But, the firms are the ones that are pushing for more and more sales, rather than quality advice. The old-fashioned brokers are truly swimming against the tide.
http://thetruthoncommonsense.com
4
I was CFO for a small bank in the '80's when a new HR person was brought on board, an alum of a then recently defunct money center bank you may remember, Continental Illinois National Bank. She very quickly recommended that we freeze our pension (defined benefit) plan and switch over to a 401k (defined) plan. "Look at how much money the company will save," said she enthusiastically. "Yeah, that's nice, but if the company is saving so much money, doesn't that mean that our employees will be losing it?" said I. "Hrumph," said she, "Let's go talk to our boss (Mr. CEO) and see what he thinks."
Mr. CEO liked the idea, of course, and it was implemented despite my warnings that our intelligent and insightful people would see red.
Long story short, our people did see through it and morale took a hit.
In my opinion the massive switchover to defined contribution plans is a disaster that has only begun to play itself out. To expect every single person to be knowledgeable enough to successfully negotiate ever more arcane and complicated capital markets is at best, naive, and, at worst, wicked.
Mr. CEO liked the idea, of course, and it was implemented despite my warnings that our intelligent and insightful people would see red.
Long story short, our people did see through it and morale took a hit.
In my opinion the massive switchover to defined contribution plans is a disaster that has only begun to play itself out. To expect every single person to be knowledgeable enough to successfully negotiate ever more arcane and complicated capital markets is at best, naive, and, at worst, wicked.
43
The girl only wanted some brownie points...LOL. Your CEO (and all the other CEO's) wasn't being irrational from his stand point because he had a fiduciary duty to above all protect the interests of shareholders. A lot of these pension plans were (are!) an albatross on corporate balance sheets not least because in many cases they'd been used as a backstop in wage negotiations. Exhibit A here is the auto industry with which I was connected. I fundamentally agree with your position on practical and moral grounds, 90% of employees are financially illiterate for god sake so they have to be babied, but it's not hard to understand why business as whole leaned on Republicans and the Reagan administration to push through these changes. You have the same dilemma with employee healthcare. Being in the healthcare business is a pain in the butt. Nothing would have made me happier than to transfer the whole thing over to government as part of the basic taxation system and establish universal coverage on the pattern of the highly regulated single payer/insurance hybrids that exist in France/Germany. It would have reduced costs, increased labor mobility and host of other good stuff but were stuck with it just as were stuck with these shaky defined contribution plans.
6
Nice to know that there are politicians who think they can save me from myself. I don't need to be rescued and I would not choose this group of hyperactive regulators as my protectors.
Isn't there something better for you to try to accomplish?
Isn't there something better for you to try to accomplish?
2
Phb
Quiet people....Ironman is here.
Quiet people....Ironman is here.
4
OK! I cannot invest money because I am not a financial wiz. If I give my money to invest with help from a so called financial wiz , he may not turn to be a wiz at all or a con making money for himself through fees. Either way I stand to lose.
1
You underestimate yourself. You can invest. Try ETFs of the stock market as a whole. They work. You don't have to. And look 5 - 10 - 20 years ahead!
1
The next big social crisis in America will be when millions of retirees outlive their retirement savings or lose it all to yet another stock market crash caused by crooks gaming the system. If the GOP succeeds in killing off Social Security, the crisis will come much sooner.
16
That scenario started at least 10 years ago.
2
I don’t see any mention of non-ERISA 403(b) plans, 401k-like plans available mainly to public education organizations. IRS changes in 2009 to 403(b) were touted as a modernization of the 403(b). The changes made the educational institution a fiduciary, where in the past they were just a conduit for the money to a variety of high fee insurance companies and a few low-cost providers. At that time many school systems pushed out the low-cost providers and chose one or two of the high fee insurance companies as their 403(b) plan. These decisions were often due to sweet-heart deals for administrators, old-boy network connections and financial ignorance. At my wife’s school she initially had Vanguard as an option, but in 2009 it was pushed out for AIG-Valic and ING based on the recommendation of an insurance consultant. At the roll out meeting I questioned the AIG rep about this and she said, "You people just don't get it. You have had 15 options for all these years. If you were in business and had a 401k, you would only have one option. You still have two good options. At VALIC, all we have is one option. We only have Vanguard..." I have never seen someone want to take back what she had said more than she did at that moment. What a smoking gun! It was as if the sky opened up and light was finally coming through years of darkness. My wife then asked why VALIC employees could have a true low-cost option, but she couldn't.
4
There would be a fat surplus in Social Security and most retirement funds if the had been allowed to invest in a market basket of the United States economy. Yes, the stock market goes up and down but never in its entire U.S. History has it lost money over a ten year period and vary rarely over a five year period.. From the mid-1800s to now the returns have been well over 6% a year compounded annually. Shame Democrats for not allowing this. Instead there are IOUs from the federal government in Social Security dis-Trust Funds.
4
To paraphrase what the Prez said in this regard, "If your business model relies on duping people, you shouldn't be in business." The Street and the financial firms against this move are admitting that, yes, their business model is based on conning people.
29
If one wants a solid retirment plan with medical benefits, the only way is to run for congress.
29
The Conservative Heritage Foundation proposed *mandatory* savings, and *compulsory* withdrawal from people's paychecks. How far they have come towards the "every man for himself" model these past years. This proposal must have been done back in the days when they also thought health insurance for all was a good idea. Their progress (backwards) has been quite remarkable these past two decades.
16
This article is ironic, since it is Obama and his self-serving Fed that have punished middle class savers during the past six years, in order to benefit the 1%.
5
RC
The middle class don't have any cash savings or very little. On the other hand they have benefitted enormously from the debt relief on mortgages, car loans, student loans, credit cards, revolving credit lines etc. which the Fed's low interest rates have provided. And those with 401k's and IRA's have also benefitted considerably. Get real.
The middle class don't have any cash savings or very little. On the other hand they have benefitted enormously from the debt relief on mortgages, car loans, student loans, credit cards, revolving credit lines etc. which the Fed's low interest rates have provided. And those with 401k's and IRA's have also benefitted considerably. Get real.
24
If you had a traditional 60% stocks - 40% bonds, past few years have been just fine. If you have an issue, it is probably because you didn't have a well structured portfolio. Might want to see an investment advisor about that.
2
RC, i consider myself middle class and i've done extraordinarily well over the past 6 years by putting all my retirement funds in stocks, with none of it in low-return bank accounts and CDs. That's what market risk is all about, and it's the Republicans who believe that the middle class can all be successful investors.
Establishing fiduciary standards is all very well and good but it still doesn't address the fact that millions of Americans simply don't make enough to save for retirement at all. If you only have $10 left by the time payday comes around and your gas tank is empty even a 2-4% contribution to an IRA or a 401k is just not realistic.
36
This type of victimization of workers is not very constructive.
If you only have $10 left by the time payday comes, you are living above your means. There are always ways to economize -- not all of them palatable but ... roommates, extra jobs, boarders, downsizing,
My parents, aunts, uncles etc. hoisted themselves from very poor to low-income working-class status in the 40s, 50s and 60s, to comfortably middle-class people who were able to help their kids (the first generation to do so) go to college, by living three generations under one roof, sharing cars, not making frivolous purchases, not having more than one or two kids at most (even my grandparents, married in 1925, had the brains to stop at one), etc. Some of them lived with parents till they were married in late 20s. Some continued to live with parents for a few years to save up. All made savings a priority.
And they didn't have any sort of public handouts upon which to fall -- no WIC, SNAP, TANF, EITC, child tax credit, Section 8, Medicaid, etc. -- whatsoever. Just one another and their own wits and self-discipline.
I am positive we could take any non-saver's budget and find a way for them to set aside money, if they really want to. Most people would rather play victim.
Furthermore, the first couple percentage points of a 401k contribution pretty much have little effect on take-home pay because of the offsetting reduction in income-tax withholding. For those who actually pay taxes, of course.
If you only have $10 left by the time payday comes, you are living above your means. There are always ways to economize -- not all of them palatable but ... roommates, extra jobs, boarders, downsizing,
My parents, aunts, uncles etc. hoisted themselves from very poor to low-income working-class status in the 40s, 50s and 60s, to comfortably middle-class people who were able to help their kids (the first generation to do so) go to college, by living three generations under one roof, sharing cars, not making frivolous purchases, not having more than one or two kids at most (even my grandparents, married in 1925, had the brains to stop at one), etc. Some of them lived with parents till they were married in late 20s. Some continued to live with parents for a few years to save up. All made savings a priority.
And they didn't have any sort of public handouts upon which to fall -- no WIC, SNAP, TANF, EITC, child tax credit, Section 8, Medicaid, etc. -- whatsoever. Just one another and their own wits and self-discipline.
I am positive we could take any non-saver's budget and find a way for them to set aside money, if they really want to. Most people would rather play victim.
Furthermore, the first couple percentage points of a 401k contribution pretty much have little effect on take-home pay because of the offsetting reduction in income-tax withholding. For those who actually pay taxes, of course.
5
@Bohemeinne
your " parents, aunts, uncles etc." were probably members of a union too, when union participation was much more prevalent.
So they were paid a good wage, with benefits that allowed them to buy a home, and send their kids to college too.
Union participation has dropped precipitously, with the Republican "war on unions". Then they complain that workers aren't taking "responsibility for their own lives".
your " parents, aunts, uncles etc." were probably members of a union too, when union participation was much more prevalent.
So they were paid a good wage, with benefits that allowed them to buy a home, and send their kids to college too.
Union participation has dropped precipitously, with the Republican "war on unions". Then they complain that workers aren't taking "responsibility for their own lives".
12
@Bohemienne: that is true for many middle class folks, who waste their income on electronic toys, smartphones and gadgets and big HDTVs, premium cable and eating out regularly in restaurants (instead of saving).
But honestly, you cannot say this to people living on the margins of society, perhaps at minimum wage jobs. If you earn $500 a week or less, after taxes you really don't have much AT ALL, and it is not realistic to think you will forgo food or gas for the car, in order to put money into retirement -- especially not in your 20s or 30s. Even single people at this income level live on the margins, and anyone with a child would be really struggling.
It isn't all "people with enormous families" either. There ARE people who have more children than they can support, but the AVERAGE US family is 2.1 kids and you can hardly say that "that's too many".
My grandparents lived through and struggled in the 1920s and 1930s. My mom was an only child (though not by choice) and Nana was a world-class scrimper and saver. Even so, my grandfather's business went bankrupt in the Depression and the family just barely got by. Nana ended up living on a $99 Social Security check and nothing more.
That your family did well is wonderful, but you can't extrapolate that out to EVERYONE.....people have different skills and different circumstances.
But honestly, you cannot say this to people living on the margins of society, perhaps at minimum wage jobs. If you earn $500 a week or less, after taxes you really don't have much AT ALL, and it is not realistic to think you will forgo food or gas for the car, in order to put money into retirement -- especially not in your 20s or 30s. Even single people at this income level live on the margins, and anyone with a child would be really struggling.
It isn't all "people with enormous families" either. There ARE people who have more children than they can support, but the AVERAGE US family is 2.1 kids and you can hardly say that "that's too many".
My grandparents lived through and struggled in the 1920s and 1930s. My mom was an only child (though not by choice) and Nana was a world-class scrimper and saver. Even so, my grandfather's business went bankrupt in the Depression and the family just barely got by. Nana ended up living on a $99 Social Security check and nothing more.
That your family did well is wonderful, but you can't extrapolate that out to EVERYONE.....people have different skills and different circumstances.
8
This is not paternalism. It is fair regulation of risky behavior, like speed limits and stop signs. This is part of an orderly, civilized society. Please avoid loaded words. Let's go for a neutral tone.
47
No, speed limits and stop signs are there to protect other people from you. These types of policies try to protect you from yourself. That's the definition of paternalism. A better analogy would be something like the ban on sugary sodas, which is often called paternalistic.
1
Schwab no load index fund as center of balanced portfolio.
No fees.
Done.
Everything else is dumb trust or gambling.
No fees.
Done.
Everything else is dumb trust or gambling.
3
On balance I agree with you for most people but you're still at the mercy of the vicissitudes of the market particularly so with index funds. What state were equity index funds in in March 2009?
2
Rather than a market-cap based index fund, I would look at equal weighting.
And you are wrong about the Schwab fund having no fees. All funds have fees. With EFTs, there is also the arbitrage profits of the Authorized Participants, which come from the investors in the fund, of course.
And you are wrong about the Schwab fund having no fees. All funds have fees. With EFTs, there is also the arbitrage profits of the Authorized Participants, which come from the investors in the fund, of course.
2
Better than managed funds.
Here's a crazy idea: Raise Social Security benefits enough that people WITHOUT 401K's and IRA's can still get by. How? Automaticaly index the cap on income subject to social security taxes. Then companies could DROP pension plans and substitute non-guaranteed retirement accounts without worrying that they would leave retirees destitute. These [retirement] plans should be designed to help seniors improve their living standards, not to help them just survive.
21
They pretty much do that today. Beyond that, you would need increase the amount paid into social security. Note that only half of those payment come directly from the worker's paycheck. The other half comes from the employer. By making employees more expensive, there's the consequence of suppressing employment.
What's also not well known is that workers who contribute on the lower ends of the range get more per dollar contributed. Those on the high end of the range get back much less per dollar contributed. So the payouts are also progressive.
In the end, people should be somewhat responsible for their own destiny. Those who save do better than those who do not. While there are many who cannot save anything, often that has to do with choices they've made. Having kids, living in more expensive areas than they should, spending more on non-essentials etc.
Just because people can do these things when they can't afford them doesn't make it a right.
What's also not well known is that workers who contribute on the lower ends of the range get more per dollar contributed. Those on the high end of the range get back much less per dollar contributed. So the payouts are also progressive.
In the end, people should be somewhat responsible for their own destiny. Those who save do better than those who do not. While there are many who cannot save anything, often that has to do with choices they've made. Having kids, living in more expensive areas than they should, spending more on non-essentials etc.
Just because people can do these things when they can't afford them doesn't make it a right.
7
We're both aiming for the same result, but I don't think you've factored human nature (and POLITICIANS) into the equation. The people you [correctly] describe as poor planners will end up with little but memories for their shortsightedness. But what then? You assume they'll just sit back and say "I should've saved more, like Matt did." I'm betting they'll say "Look at all the money Matt has. He can afford to give me some!" By making sure they have just enough to get by, you'll be protecting your own money. And remember: there will always be plenty of politicians ready to agree with these folks that it wasn't their fault!
3
A part of the great risk shift brought about by ronnie and his cohorts.
9
Once you understand the basics of stocks and bonds, and a few simple option strategies, financial advisers cannot really provide any additional benefit. The performance of your portfolio depends on what happens in the future, and no one can know that. Your reasoned opinion on which investments are good may turn out to be better than anyone else's. You don't have to pay yourself a fee, and you certainly have your own best interests at heart.
8
No doubt you have the time, inclination, temperament and genius to prevail at stock trading, Most people as a practical matter don't.
8
@John - I seldom trade. In fact, I still have quite a few stocks I bought 15 or 20 years ago. They're worth about ten times what I paid, and are paying a dividend of 15-20% on my original investment.
Holding is the way to make money, not trading.
Holding is the way to make money, not trading.
6
"Holding is the way to make money, not trading."
Exactly so but you appeared to be suggesting a variety of strategies that require the development of some competent financial acumen which most people don't have and are unlikely to acquire because they don't have inclination, intelligence, temperament or available time.
Exactly so but you appeared to be suggesting a variety of strategies that require the development of some competent financial acumen which most people don't have and are unlikely to acquire because they don't have inclination, intelligence, temperament or available time.
3
The several and various states, in addition to the Federal Justice Department, have long had more than sufficient tools to fix the biggest problems with 401k plans.
First, the companies themselves who provide these plans are in fact the holders of a 401k Trust. They already have a significant fiduciary responsibility to treat their employees money 'as a prudent man would treat his own'. When the officers and other appointed trustees place their employees funds with money managers that assume excess risk or take excess fees that is not the actions of a prudent man. Which is to say they are breaking the law, even if they do so out of ignorance (which is, as we know, no excuse).
There have been far to few arrests by State and Federal attorneys general for failure to provide fiduciary duty. What few actions have been taken have not been published widely enough to place a chill on the executives and boards of these companies that continue to use the 401k inappropriately.
The 401k has replaced the defined benefit pension plan because companies see it as a lower long term risk to their company profitability and even to their own personal liability. Perhaps this is true even if the fiduciary liability of a 401k was fully enforced, but mostly this is true today because the law enforcers who should be acting have long been sitting on their hands.
First, the companies themselves who provide these plans are in fact the holders of a 401k Trust. They already have a significant fiduciary responsibility to treat their employees money 'as a prudent man would treat his own'. When the officers and other appointed trustees place their employees funds with money managers that assume excess risk or take excess fees that is not the actions of a prudent man. Which is to say they are breaking the law, even if they do so out of ignorance (which is, as we know, no excuse).
There have been far to few arrests by State and Federal attorneys general for failure to provide fiduciary duty. What few actions have been taken have not been published widely enough to place a chill on the executives and boards of these companies that continue to use the 401k inappropriately.
The 401k has replaced the defined benefit pension plan because companies see it as a lower long term risk to their company profitability and even to their own personal liability. Perhaps this is true even if the fiduciary liability of a 401k was fully enforced, but mostly this is true today because the law enforcers who should be acting have long been sitting on their hands.
6
It's a mystery to me that everyone seems to think it's okay that we are all forced to invest in the stock market, because there is no other way to save money for retirement, because banks now pay virtually nothing in interest on savings accounts, even long term cds. It's a grand achievement of corporate government - that everyone is forced to invest in what is nothing more than a gambling scheme set up to provide capital to businesses.
73
What is stopping you from buying bond funds, commodities, and real estate?
Try as I might, my 'recommend' did not work. I hope it's because so many others may be recommending it at the same time that it caused a computer overload. You are expressing the same belief I've held for quite some time now, that the unprecedented low interest rates paid by banks are directly related to a scheme devised to push the 'market' to unprecedented heights in order to sucker in more people desperate for some kind of income from their savings, risk be damned. It looks as if the scheme is working.
6
It's not the corporate government,
The culprit is the Federal Reserve, headed by Ms Yellen, who was appointed by President Obama that is responsible that your bank pays you less interest than the rate of inflation
The culprit is the Federal Reserve, headed by Ms Yellen, who was appointed by President Obama that is responsible that your bank pays you less interest than the rate of inflation
While the temptation to mourn the loss of a past golden age is universal, it is worth remembering that the rapid decline in private sector pension plans is largely an unintended consequence of the 1974 ERISA regulations which prohibited pay as you go plans and otherwise made pension plans much more secure from the standpoint of employees and much more expensive for employers. Under the old system it was not uncommon to work your entire career expecting a pension and then not get it.
10
Yes there are wolves, but there are also very ignorant investors that are gambling vs. investing even with guidance. They are willing to take significant risks thinking they're well seasoned investors or Venture Capitalists without really understanding the process, the market or the risk (think of the many non-qualified investors involved in crowdfunding or throngs of retirees you see at the casinos). Seems like one more move to take away personal responsibility and put it on the shoulders of someone else through a broad brush regulation that doesn't get down to the nuances of how things work in the "real" world.
3
There are also guys who saved and invested all their lives, researched each investment carefully, and now have $20 million in their IRA. In our society, it's really up to each individual to do due diligence on each investment.
3
And if they are not up to it, and they end up with Bupkiss, let the devil take the rest?
3
The original intent of the 401K provision was to provide additional savings on top of Social Security and (defined) pension benefits. Not "in place of", but "in addition to".
That's not what happened. Companies dropped pension plains as a employee benefit and shifted to offering only 401K retirement plans. This was a "first step" in under-funding retirement for the US workforce.
Step two was capping the annual contribution based on the percentage of employees contributing to the plan and the ration of high paid to low paid contributors. The result was a savings rate too low to replace pension income at retirement.
"Step three" was a period of Bull market returns, such that 401K's looked like they actually could replace pension plans. Fast forward to 2002 and portfolios lost 50% of their value in the Dot Com crash. They came back to their 2002 value by 2007, then got knocked down 50% again.
So that 401k portfolio, in 2015, has had zero net gain since 2002. In fact since 2% was extracted in mutual funds fees, performance was negative net of fees.
I've paid the annual maximum into a 401K plan for my entire (professional) working career, managed my 401K responsibly, and it is not, according to the retirement planners on those mutual fund/401k websites, going to be enough, unless the stock market stays in Bull market returns for the next 10-15 years.
That's not what happened. Companies dropped pension plains as a employee benefit and shifted to offering only 401K retirement plans. This was a "first step" in under-funding retirement for the US workforce.
Step two was capping the annual contribution based on the percentage of employees contributing to the plan and the ration of high paid to low paid contributors. The result was a savings rate too low to replace pension income at retirement.
"Step three" was a period of Bull market returns, such that 401K's looked like they actually could replace pension plans. Fast forward to 2002 and portfolios lost 50% of their value in the Dot Com crash. They came back to their 2002 value by 2007, then got knocked down 50% again.
So that 401k portfolio, in 2015, has had zero net gain since 2002. In fact since 2% was extracted in mutual funds fees, performance was negative net of fees.
I've paid the annual maximum into a 401K plan for my entire (professional) working career, managed my 401K responsibly, and it is not, according to the retirement planners on those mutual fund/401k websites, going to be enough, unless the stock market stays in Bull market returns for the next 10-15 years.
82
Same here... When the savings rate went from 5% to 2% that essentially cooked me.
3
2% fees on a mutual fund is outrageous. Check out Vanguard. Many of their funds have fees less than a quarter of a percent.
1
Newspaper articles should focus on the facts - like these. For years were were fed visions of 7% returns in all sorts of articles including in the NYT. Let's get real and stick to the facts. Also, many people currently in retirement benefit from the "good old days and defined benefit pension plans" so young people do not see evidence of how bad things will be when they are required to choose between eye glasses for grandma and junior's braces.
5
The idea that you can't opt-out of an employer 401K plan is not something conservatives would stand for. Right? I mean, it's YOUR money. Right?
There are instances of companies, now defunct America West airlines comes to mind, that required as a condition of employment an employee contribution to the company stock plan every pay period.
When the airline went bankrupt in the early 1990s (they launched trans Pacific service to Japan on the eve of the first Gulf War!) the employees lost all of those forced contributions.
There are instances of companies, now defunct America West airlines comes to mind, that required as a condition of employment an employee contribution to the company stock plan every pay period.
When the airline went bankrupt in the early 1990s (they launched trans Pacific service to Japan on the eve of the first Gulf War!) the employees lost all of those forced contributions.
15
People lost a pile of money in Enron, too.
3
I've no idea whether your story about America West is true but I do know they were considered a model competitive player in a conservative applauded de-regulated airline industry. Competition was what it was all about. Remember? And I guess no individual lost money in the dot com bust..lol. And for your info. you own your 401k not your employer even if you don't have much idea of how to manage it. LOL
@Steve - What I find really interesting about Enron is how many people were involved in the fraud, and how they personally invested. For example, a large team worked on building a fake trading floor, knowing it was completely phony. Most of these people, nevertheless, invested their entire 401K in Enron stock. You have to wonder what they were thinking.
2
Couple of thoughts on this:
1) The concept of investment advisors having a fiduciary responsibility to the people they are investing for is seemingly a good thing. We all want our interests to take the front seat. However, the details of how this will be regulated could become destructive if they are too onerous.
2) My memory of the history behind company paid health care and pensions is that it goes back to WWII when there was a very high demand for labor. To avoid a wage spiral the govt imposed wage controls and then companies began offering medical and pensions as an alternative way of attracting and keeping help. In other words it was never because they were being nice guys. This practice carried over through the (mostly) boom times following the war.
3) We need to implement the obvious fixes to stabilize Social Security and to do whatever it takes to stabilize Medicare and Medicaid which will be more difficult.
1) The concept of investment advisors having a fiduciary responsibility to the people they are investing for is seemingly a good thing. We all want our interests to take the front seat. However, the details of how this will be regulated could become destructive if they are too onerous.
2) My memory of the history behind company paid health care and pensions is that it goes back to WWII when there was a very high demand for labor. To avoid a wage spiral the govt imposed wage controls and then companies began offering medical and pensions as an alternative way of attracting and keeping help. In other words it was never because they were being nice guys. This practice carried over through the (mostly) boom times following the war.
3) We need to implement the obvious fixes to stabilize Social Security and to do whatever it takes to stabilize Medicare and Medicaid which will be more difficult.
24
I'm willing to pay higher fees, but advisors need to be more transparent about explaining why they deserve it.
7
I agree that advisors/salespeople for tax deferred retirement investments should have a fiduciary obligation to their customers (and tax payers). But, wouldn't it also make sense to promote low fee, market tracking funds? I understand that few stock pickers do better than the market over long time periods.
9
As we have seen in the healthcare "reform" the winners are the very poor and the very rich everyone else in the middle gets screwed. The banks that run this country will go along with 401k reform.
Why would anyone want to digitize their life savings and hand it over to Wall St. Take your saving and buy precious metals, high quality art, collectables and antiques, and income producing property.
Let these words from Alan Greenspan inspire you.
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
Why would anyone want to digitize their life savings and hand it over to Wall St. Take your saving and buy precious metals, high quality art, collectables and antiques, and income producing property.
Let these words from Alan Greenspan inspire you.
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
7
See Great Depression!
Please do not use wolves as a metaphor for evil, greedy people. Only people actively seek to harm others & their environment for personal gain. Doing this harms wolves & those that support their existence.
34
The reality of course is that employers (aided by the Reagan administration as I recall) forced their employees into these defined contribution plans (401k's etc.) for the entirely rational reason that they didn't want the exposure of the traditional defined benefit pension programs on their books (although it was and is not unknown for corporations to remove funds from those defined benefit plans to bolster their own balance sheets). As an industrial executive at the time I was very much in favor. Overall the entire defined contribution approach has been a relative failure. The American disinclination to save is one reason but far more important is the fundamental nature of the market that has been created. You have a vast amount of money owned by a largely ignorant/passive group of consumers totally unequipped to make sensible investment decisions; and managed by financial toll keepers (of varying degrees of competence and probity) who extract tribute at every possible opportunity. It's not too strong a metaphor to say the system requires individuals to perform surgery (financial) upon themselves. It's a deeply flawed at bottom but unlikely to change so these modest improvements are desirable. It's better to light a candle than to curse the dark. Of course they are going to be strongly resisted by the toll keepers and their Republican allies in congress who so concerned about the middle class (ha ha).
89
Quite true. Put aside American exceptionalism for a moment and ask how do our peer countries handle this.
Irwin misstates the definition of "fiduciary standard" which is the core of the issue these rules will address. As it stands right now, financial advisors are held to a "suitability" standard. This is a very broad test of advice and recommendations which allows for wide discretion and potentiallly self interested outcomes by an advisor. The proposed fiduciary standard imposes a more specific test of what is in the best interest of the client. This inevitably raises the issue of cost as between,for example, two similar "suitable" products but with different cost to the client. A conflict of interest easy to hide and difficult for the advisor to ignore.
This is a legitamite issue which should be addressed but doing so will cause an upheaval in the retail advice business with consequences we can only imagine at this point. If advisors can not get paid for their services, there will be no advisors.
This is a legitamite issue which should be addressed but doing so will cause an upheaval in the retail advice business with consequences we can only imagine at this point. If advisors can not get paid for their services, there will be no advisors.
2
Actually, it is you who misstates the situation, although you express things in a way that represents the common understanding of most investors.
First, the correction. Brokers - people who have passed their Series 7 exam and are employed by financial institutions - are the ones subject to a 'suitability' standard - not Financial Advisors. True Financial Advisors - those who have passed their Series 65 - are subject to the much higher, and more appropriate, standard of 'fiduciary duty'.
Now for my qualification that you state things in such a way that actually conforms to most investor's common understanding. By that I mean that most investors think that the people they deal with at a brokerage or a bank are financial advisors, when in fact they are just common brokers. This misunderstanding is easy to have since these people are often referred by the bank or brokerage as 'Financial Consultants', or something similarly nebulous. Make no mistake though: these people are brokers.
But the two are not the same: they are not incented in the same way, they don't have the same qualifications, and they are not held to the same standards as regards investor interests.
As to your comment that people need to be paid, they will and they are. Financial Advisors exist and their services are needed and are paid for. Some actually do quite well, which is why they go to the trouble of passing their Series 65.
First, the correction. Brokers - people who have passed their Series 7 exam and are employed by financial institutions - are the ones subject to a 'suitability' standard - not Financial Advisors. True Financial Advisors - those who have passed their Series 65 - are subject to the much higher, and more appropriate, standard of 'fiduciary duty'.
Now for my qualification that you state things in such a way that actually conforms to most investor's common understanding. By that I mean that most investors think that the people they deal with at a brokerage or a bank are financial advisors, when in fact they are just common brokers. This misunderstanding is easy to have since these people are often referred by the bank or brokerage as 'Financial Consultants', or something similarly nebulous. Make no mistake though: these people are brokers.
But the two are not the same: they are not incented in the same way, they don't have the same qualifications, and they are not held to the same standards as regards investor interests.
As to your comment that people need to be paid, they will and they are. Financial Advisors exist and their services are needed and are paid for. Some actually do quite well, which is why they go to the trouble of passing their Series 65.
28
Andrew: Advisors can still be paid under the fiduciary standard. They just won't be free to put their clients in an S&P 500 index fund that pays the advisor 3% per year when an identical fund is available for 0.5% per year. Ideally, fees paid to advisors should be completely transparent and linked to how much risk-adjusted value the advisor adds to the portfolio.
31
I fully agree with Earl and the Philly Reader. The thing is that under a fiduciary standard, compensation schemes will have to change dramatically for "brokers" and I don't think you need a series 65 to call yourself a Financial Adviser if not a Financial Advisor. In any case, a requirement for full transparency would certainly help.
Workers who have been paid relatively little (and even seen their income fall) during the planned destruction of the middle class have very little retirement savings--if any.
Thus, many envy workers who have pensions. The pensions generally exist because these folks were state or federal employees and belonged to unions.
The envious folks now hope to strip pensions from any who have them. Why? Because they've been taught that the 1% are extra worthy, and should not have to pay a fairer share of taxes.
The only remaining way to obtain the money that our cities and rural areas desperately need is to impoverish the workers slightly above us in earnings, destroy the social safety net for everyone below us, demolish unions, and force everyone into 401Ks.
While everyday Americans attack one another, the 1% chuckle and collect earn-by-churn money on our tiny retirement savings.
Thus, many envy workers who have pensions. The pensions generally exist because these folks were state or federal employees and belonged to unions.
The envious folks now hope to strip pensions from any who have them. Why? Because they've been taught that the 1% are extra worthy, and should not have to pay a fairer share of taxes.
The only remaining way to obtain the money that our cities and rural areas desperately need is to impoverish the workers slightly above us in earnings, destroy the social safety net for everyone below us, demolish unions, and force everyone into 401Ks.
While everyday Americans attack one another, the 1% chuckle and collect earn-by-churn money on our tiny retirement savings.
83
Better yet, give people who open savings accounts in local banks and credit unions a higher interest rate than the "market" rate. This proposal still leaves OUR money in the wrong hands - gamblers on Wall Street - and is one more step to privatizing Social Security, which is the best social safety net system America has ever had. A healthier Local/National, not international, banking system that serves 99% of us is better. Sorry, President Obama, I do not agree with you on this proposal or forced IRA investments.
12
The almost zero interest savings accounts are what hurt the poor and lower middle class the most. I began depositing small amounts into a savings account from the very first job I held --a weekend and summer job when i was a high school student. My grandparents, from the lowest of the low middle class, were able to leave us kids fairly tidy little sums from their interest paying savings accounts alone. My IRA at the moment boasts spectacular returns, which really frightens me because I am positive that money will disappear before I need it. And the low to no interest on my credit union accounts is partly responsible for the increasing wealth of the 1 %.
17
paisana
And what rate of interest are you paying on your debt obligations? (mortgage, student loan, credit cards, car loans, revolving credit etc.) and is this cumulatively in dollar terms less or more than you'd be earning on your substantial cash savings assuming the ten year was at say 4% rather than it's current 2%? (This would make a typical 30 year fixed rate mortgage cost just over 6% rather than the current 3.8%) You may have a lot of cash saved but collectively the poor and middle class have little or none.
And what rate of interest are you paying on your debt obligations? (mortgage, student loan, credit cards, car loans, revolving credit etc.) and is this cumulatively in dollar terms less or more than you'd be earning on your substantial cash savings assuming the ten year was at say 4% rather than it's current 2%? (This would make a typical 30 year fixed rate mortgage cost just over 6% rather than the current 3.8%) You may have a lot of cash saved but collectively the poor and middle class have little or none.
Yes - I'm at that age where I'd like to start shifting my savings into safer places, but the extremely low rate of interest on money market accounts is a real deterrent. Remember when we used to get 4 and 5 and 6 percent interest? I remember those days, and I'd like to see them come back.
Research shows that opt out rather than opt in for 401k's works but it took until 2009 to take effect. Still, American savings rates are still inadequate for retirement regardless of whether it is a 401k or IRA. Second, compared to 35 years ago when one's usual (or only choice) for investing was a broker, I could count on one hand the number of brokers that were actually fiduciaries. Third, some recent surveys show over 70% of individuals still rely on "advisers" for investing decisions. This figure is fairly close to other surveys that show a similar percentage of the public are financially illiterate. The basis of the president's proposal to require an "adviser" to also be a fiduciary are correct. A super majority of individuals need that advice and it needs to be in the individual's best interest, not that of the adviser. Barring the implementation of the proposals (which will be fought tooth and nail by the financial services industry and their deep pocketed lobbyists), the best an individual can do is to educate themselves and further, question your "adviser" and find out if they really are a fiduciary. Before on line self directed investing became available, I always asked the broker if they were putting up their own personal money in the same investments they were recommending to me. The answers were always illuminating.
13
Another good summary Tom. I'd put the financial illiteracy figure on the basis of no data whatever (but a lifetime of observation) at over 90%. Even some of these characters I've come across who fancy themselves as online traders are clueless.
1
I think President Obama did a great thing for the general public including Republicans, particularly to those "not so rich but I'll vote for Republicans."
1% a year decrease from 401K or IRA account is huge from the nature of retirement funds. Another abuse by the financial industry is the new fee system based upon the asset size instead of annual return basis. Many sophisticated future retirees complain this everywhere in this country. They also fudge record of annual return with additional contribution, a new investment money by the future retirees.
This is one of the rent seeking activities that Larry Summers bluntly rebuked at the recent Hamilton Project on the framework titled, "New Machine Age Report". According to Summers, approximately $1 trillion dollar of income was shifted from the bottom 80% to top 1% since 1979.
1% a year decrease from 401K or IRA account is huge from the nature of retirement funds. Another abuse by the financial industry is the new fee system based upon the asset size instead of annual return basis. Many sophisticated future retirees complain this everywhere in this country. They also fudge record of annual return with additional contribution, a new investment money by the future retirees.
This is one of the rent seeking activities that Larry Summers bluntly rebuked at the recent Hamilton Project on the framework titled, "New Machine Age Report". According to Summers, approximately $1 trillion dollar of income was shifted from the bottom 80% to top 1% since 1979.
2
The move away from paternalistic pensions was not just a ploy by employers. During the 1970s and 1980s some employees, especially professionals, pushed for more flexibility to keep their 'pension' savings and change jobs before vesting. They also wanted more say in how the funds were invested.
It is also useful to remember that even in the 'good old days' many people never got a pension. And there were regular scandals about companies laying off people just before they vested, or reached retirement age.
It is also useful to remember that even in the 'good old days' many people never got a pension. And there were regular scandals about companies laying off people just before they vested, or reached retirement age.
22
The government doesn't understand that the cost of distribution is the main reason for the high costs of financial products in the retail channel, and that registered reps steer people into products whose expenses cover the cost of distribution--not necessarily because they want Americans to pay excessively for those products. Some are "venal," as Mr. Irwin says, but not too much more than in any other business.
Meanwhile, the financial services industry fails to appreciate that tax-deferred money is different from other retail money. (It's an accident that tax-deferred money is in the retail channel at all.) The government must try to ensure that tax-deferral on 401k and IRA assets achieves its intended public policy goal of helping Americans maximize their retirement savings and income. To that end, the DoL must try to protect IRA owners (just as it protects 401k account owners through ERISA) from any obstacle to that goal. High distribution costs represent a serious obstacle.
The words "advice" and "advisor," unfortunately, have been misused, to everyone's confusion. Most financial intermediaries are sales people; by presuming to call themselves advisors, they invite comparisons to true fiduciary advisors, and they inevitably fall short of the standard of conduct expected of true advisors. Eventually, Internet-mediated advice will solve this impasse; right now we're in a painful transition.
Meanwhile, the financial services industry fails to appreciate that tax-deferred money is different from other retail money. (It's an accident that tax-deferred money is in the retail channel at all.) The government must try to ensure that tax-deferral on 401k and IRA assets achieves its intended public policy goal of helping Americans maximize their retirement savings and income. To that end, the DoL must try to protect IRA owners (just as it protects 401k account owners through ERISA) from any obstacle to that goal. High distribution costs represent a serious obstacle.
The words "advice" and "advisor," unfortunately, have been misused, to everyone's confusion. Most financial intermediaries are sales people; by presuming to call themselves advisors, they invite comparisons to true fiduciary advisors, and they inevitably fall short of the standard of conduct expected of true advisors. Eventually, Internet-mediated advice will solve this impasse; right now we're in a painful transition.
4
Private retirement savings programs such as 401(k) and IRA accounts have three major flaws: 1) Most people do not have an adequate steady income throughout their working years to save enough for a comfortable retirement, 2) The uncertainty of lifespan can be countered only by relinquishing a portion of the funds to the annuity industry, and 3) Tax expenditures supporting these accounts are regressive, benefitting the wealthy more than the workers.
We do have a public program that successfully addresses these problems: Social Security. Instead of listening to the doomsayers who tell us Social Security is going broke (not true) and needs to be privatized, we should support an expansion of Social Security ensuring a reasonably comfortable retirement for all.
We do have a public program that successfully addresses these problems: Social Security. Instead of listening to the doomsayers who tell us Social Security is going broke (not true) and needs to be privatized, we should support an expansion of Social Security ensuring a reasonably comfortable retirement for all.
102
Once upon a time, companies were taxed and regulated in a way that encouraged them to pay their employees a living wage and provide them with a comfortable retirement. CEO salaries were also taxed at high rates and regulated to prevent the elite from using their power to exploit hard-working middle class people by keeping labor costs low and keeping profits for themselves.
I don't think I buy the idea that companies paid their workers well and provided a decent retirement out of the goodness of their little corporate hearts. I think it's the changes in taxes and regulations, along with union busting, that is impoverishing the middle class.
I don't think I buy the idea that companies paid their workers well and provided a decent retirement out of the goodness of their little corporate hearts. I think it's the changes in taxes and regulations, along with union busting, that is impoverishing the middle class.
75
These are certainly modest steps by the administration, but they are nonetheless important ones. Turning back the clock to the days when Americans had to worry far less about having enough for retirement because of defined benefit pension plans, regrettably, is likely impossible in this political climate. The Reagan administration played a pivotal role in destroying these plans, using the disingenuous "more freedom to control your retirement" rhetoric that not surprisingly later led many Republicans to see privatizing Social Security as a great idea (a great idea for whom?). With each passing year we're seeing more and more people retire without any job-related pension and they are doing so earlier than age 65 because they can't afford to wait that long. The next generation, which will have spent no time working outside the new age of inequality, will have it much worse. Many of these people would like to save more in their 401(k) accounts, but they aren't paid enough money in their jobs to do so because of how far the earning power of the middle class has fallen since 1980. Ensuring that financial advisers have a "fiduciary duty" to their clients is the least government can do for these vulnerable individuals. Their retirement prospects, frankly, look awfully bleak at present. They need more help than this.
25
"... the risk of saving too little or investing poorly," Prior to 2008, many were saving quite enough and investing just fine. The problem people found was not their lack of sophistication but unregulated markets that left even the most well-positioned 401k in shatters, and, for those closer in age to retirement, with little time to catch up and repair the damage. So please, spare us the guilt.
53
In Irwin's world, it's good business to provide generous retirement benefits (pension, health insurance, use of the corporate jet) for the CEO but paternalism to provide even minimal retirement benefits for the rank and file. In my former firm, we often joked that we paid associates the going rate: the minimum rate necessary to keep them from going. In a world where there's no place to go, the going rate has fallen below that of 20 years ago. I appreciate the argument for decoupling not only retirement but also health insurance from employment: to reduce the cost of and thereby encourage employment. But there's a high cost to decoupling paid by the rank and file, the cost imposed by the "wolves" as Irwin calls them. At least with group retirement benefits and group health insurance, the employee has an advocate and the strength in numbers to avoid the wolves. Alone, the employee is at the mercy of the wolves.
54
Sure it's easy to blame brokers and advisors, but really, when shareholders take a hit like this do the big guys ever feel pain?
Maybe go back to the drawing board and don't exclude the large donors from the list.