Some of you guys might want to keep tabs on your 401Ks.

#27
#27
it also locks in the return. what happens if inflation goes to 6% a year? or 10% like it did in the early 80s?
 
#32
#32
There is no cap on the return? doesn't make much sense. you might want to look at the terms.

More of a private banker or money manager, but yes essentially an FA for ultra high net worth individuals and institutions.
 
#33
#33
droski said:
There is no cap on the return? doesn't make much sense. you might want to look at the terms.

More of a private banker or money manager, but yes essentially an FA for ultra high net worth individuals and institutions.
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Yeah no caps, but a lot of them do have caps.
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#34
#34
droski said:
variable annuities are horrible investments
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Awesome for the person selling them, but the person buying them, not so much. They are fine for a small % of your overall retirement plan, but if you get advice to buy one in your Trad or Roth IRA, then you need to run (not walk) out of that salesmans office
 
#35
#35
VolsNSkinsFan said:
Awesome for the person selling them, but the person buying them, not so much. They are fine for a small % of your overall retirement plan, but if you get advice to buy one in your Trad or Roth IRA, then you need to run (not walk) out of that salesmans office
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The 250/Droski debate on which investment is better really has nothing to do with the proposed government takeover of all retirement acounts.

Can we have any debate on that?? anyone?
 
#36
#36
VolsNSkinsFan said:
Awesome for the person selling them, but the person buying them, not so much. They are fine for a small % of your overall retirement plan, but if you get advice to buy one in your Trad or Roth IRA, then you need to run (not walk) out of that salesmans office
Click to expand...

Google Moshe milevsky
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#37
#37
gsvol said:
The main liberal objection to 401(k)s[/URL] seems to be that they let average Americans control their own investment decisions for retirement.
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Actually, it was research by libertarians like Thaler that figured out most people ARE too stupid to invest their own money.

The research by these libertarians led to the 2006 Pension Protection Act which set managed investment funds as the qualified default investment options for 401ks. Basically, anything you invest into your 401k is put into poorly managed glide-path mutual funds because the average American is too stupid to invest it intelligently. (Previously, it was a safe money market fund).

This was voted on by a majority Republican House, majority Republican Senate, signed by Republican George Bush in August 2006.


Those evil liberals! More likely, the "Average American" IS too stupid to invest intelligently, and "evil liberals", conservatives, and libertarians all agree on this point. Seems pretty tri-partisan to me.
 
#39
#39
the only reason why we are even having this debate is because of hte recent market crash. i'd be pretty pissed with a fixed 4% or whatever the govt is talking about. and then of course what happens if we don't get that 4%? Is the gov't on the hook for that trillions? bad idea. and let's face it the investments are bound to be political and the major pension funds screw up on a regular basis as well.
 
#40
#40
droski said:
the only reason why we are even having this debate is because of hte recent market crash.
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Markets crash, don't they? And as best as I can tell, they do so pretty randomly.*

Do you want peoples' retirements decided by blind luck (the year in which they retire)? Doesn't that get away from the meritocracy that a super-majority of Americans believe we are?


To your original point, most of Thaler's research on this area was started in the late 1990s. People, on average, just don't invest well.





Footnote:
*There are plenty of wild blogs and books which predicted the current financial crisis, and plenty that predicted the ones which never occurred in 2002, one in 1997, one in 1987, etc, etc, etc. Plenty the other direction, too (anyone remember Dow 100,000?).
 
#41
#41
it's not bad luck if people who are near retirement are fully invested in the stock market. it's stupidity. i don't care if the average individual can't do it properly. i don't want the govt controlling my investments. if people willingly select the public version than so be it. but if the public version screws up the taxpayers should not be on the hook for it.
 
#42
#42
droski said:
i don't care if the average individual can't do it properly.
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That's typically why the public option is the default option (for stupid people) and one can opt-out if they feel like it.




Just curious (this is an aside), do you think soon-to-be-retirees would have fared well if they were invested in corporate bonds, or government bonds (besides the US for a period of 9 months) instead of equities? For that matter, if you were about to retire, would you have invested in US bonds prior to the crisis given that Tbills were earning a negative real rate of return for a while?
When the s**t really hits the fan, there is almost no benefit of diversification anyway. Investments are correlated to 1 or -1.
 
#43
#43
if you invested in a wide group of corporates during hte market peak in 2007 you'd currently have a profit plus interest. you woudl have had an oh **** moment in march of 09 though. if you had invested in long US bonds you'd have a sizable profit (around 30% in march of 09) and a small profit with short US bonds. so yes everything non treasury dropped in the crisis, but it didn't drop by nearly as much as equities and recovered completely. in other words there are relative safe havens.
 
#44
#44
droski said:
if you invested in a wide group of corporates during hte market peak in 2007 you'd currently have a profit plus interest.
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We are getting way off topic now. Just curious, what index have you used? The Dow Corporate Bond Index is just now approaching the nominal value it reached in summer of 2005. In other words, 0% nominal return over the past five years (worse in real terms).
Same index using your date looks like about a 10% return...and this index closely tracks stock market returns during the crisis period (although tends to be negatively correlated in "good" times).


Ex-post, one can always find investments that performed well - the trick is being able to use it to predict. In extreme downturns the correlation of returns converge; the benefits of diversification are way overstated.
 
#45
#45
you said since the market crash. 2005 is 2 years before the market crash. look at the chart of BND (total bond market index fund). it's up since the crash. the correlation of returns may converge (though this is one of the few times in american history where all asset classes dropped, for instance real estate and bonds outperformed considerably during the dot com crash), but the riskiness of investments are not the same. diversification is a good thing, but i agree it's not our salvation. i'm not sure how having the govt in charge of this really solves the problem. particurally if i'm giving a fixed annuity by the govt and inflation goes crazy. or rates drop like crazy and now the govt is on the hook.
 
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#46
#46
shootermcgavin7 said:
Actually, it was research by libertarians like Thaler that figured out most people ARE too stupid to invest their own money.

The research by these libertarians led to the 2006 Pension Protection Act which set managed investment funds as the qualified default investment options for 401ks. Basically, anything you invest into your 401k is put into poorly managed glide-path mutual funds because the average American is too stupid to invest it intelligently. (Previously, it was a safe money market fund).

This was voted on by a majority Republican House, majority Republican Senate, signed by Republican George Bush in August 2006.


Those evil liberals! More likely, the "Average American" IS too stupid to invest intelligently, and "evil liberals", conservatives, and libertarians all agree on this point. Seems pretty tri-partisan to me.
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While your statement may be true there are a couple of factors.

1. Some people are smart enough.

2. For those who aren't savvy enough there are reputable firms who will manage your funds wisely and for a decent amount of fees.

That the average person is too stupid to manage their own funds is a given, we have certain proof of that by who we elected in the last election.

Do you think because there is a certain average that all persons should be denied the right to try and that the government should be charged with the responsibility of managing his funds?????

First off I've lost most confidence in government to manage anything although there are those in government who evidently think they should manage everything.

I will concede that our government isn't wrong to set some gudelines to regulate investors so that people aren't duped into investing in ponzi schemes etc.

We do have many laws and regulations in place, what is needed is proper enforcement but not a complete government takeover.

Do we not agree on that?
 
#47
#47
a simple look at the average gov't pension fund shoudl tell you all you need to know about gov't management of retirement assets. most are dramatically underfunded. we don't want ot multiply that already huge obligation times 100 or whatever.
 
#48
#48
droski said:
a simple look at the average gov't pension fund shoudl tell you all you need to know about gov't management of retirement assets. most are dramatically underfunded. we don't want ot multiply that already huge obligation times 100 or whatever.
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Check out the Illinois pension woes. It would be hilarious how screwed they are if not for the fact that the tax payer is the one who had to pay for it in the end.

History of Illinois state pension system woes
 
#49
#49
lumberjack4 said:
Check out the Illinois pension woes. It would be hilarious how screwed they are if not for the fact that the tax payer is the one who had to pay for it in the end.

History of Illinois state pension system woes
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What gripes me the most is that SS funds have been spent already meaning that younger people will have to pay enough extra to pay my generations retirement benefits even though there should be plenty of money there to pay those benefits from the money we payed in all our lives.

It wasn't what we were told and it makes me really and I do mean REALLY REALLY damned mad!!
 
#50
#50
I apologize for the long delay. Again, at this point in time my posts will be infrequent due to my schedule.

droski said:
you said since the market crash. 2005 is 2 years before the market crash. look at the chart of BND (total bond market index fund). it's up since the crash
Click to expand...


So the answer to my question is, yes, you are using a time-series of 4-5 years?


the correlation of returns may converge (though this is one of the few times in american history where all asset classes dropped, for instance real estate and bonds outperformed considerably during the dot com crash), but the riskiness of investments are not the same.
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They converse in crises, which by definition are rare events.
 
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