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[ducksoup]

I wasn't real sure where to put this...

Our Ridiculous Approach to Retirement
By TERESA GHILARDUCCI
Published: July 21, 2012

I WORK on retirement policy, so friends often want to talk about their own retirement plans and prospects. While I am happy to have these conversations, my friends usually walk away feeling worse — for good reason.

Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts. The specter of downward mobility in retirement is a looming reality for both middle- and higher-income workers. Almost half of middle-class workers, 49 percent, will be poor or near poor in retirement, living on a food budget of about $5 a day.

To maintain living standards into old age we need roughly 20 times our annual income in financial wealth. If you earn $100,000 at retirement, you need about $2 million beyond what you will receive from Social Security. If you have an income-producing partner and a paid-off house, you need less. This number is startling in light of the stone-cold fact that most people aged 50 to 64 have nothing or next to nothing in retirement accounts and thus will rely solely on Social Security.

If we manage to accept that our investments will likely not be enough, we usually enter another fantasy world — that of working longer. After all, people hear that 70 is the new 50, and a recent report from Boston College says that if people work until age 70, they will most likely have enough to retire on. Unfortunately, this ignores the reality that unemployment rates for those over 50 are increasing faster than for any other group and that displaced older workers face a higher risk of long-term unemployment than their younger counterparts. If those workers ever do get re-hired, it’s not without taking at least a 25 percent wage cut.

So it’s not surprising that denial dominates my dinner conversations, but it is irresponsible for Congress to deny that regardless of how much you throw 401(k) advertising, pension cuts, financial education and tax breaks at Americans, the retirement system simply defies human behavior. Basing a system on people’s voluntarily saving for 40 years and evaluating the relevant information for sound investment choices is like asking the family pet to dance on two legs.
Not yet convinced that failure is baked into the voluntary, self-directed, commercially run retirement plans system? Consider what would have to happen for it to work for you. First, figure out when you and your spouse will be laid off or be too sick to work. Second, figure out when you will die. Third, understand that you need to save 7 percent of every dollar you earn. (Didn’t start doing that when you were 25 and you are 55 now? Just save 30 percent of every dollar.) Fourth, earn at least 3 percent above inflation on your investments, every year. (Easy. Just find the best funds for the lowest price and have them optimally allocated.) Fifth, do not withdraw any funds when you lose your job, have a health problem, get divorced, buy a house or send a kid to college. Sixth, time your retirement account withdrawals so the last cent is spent the day you die.

It is now more than 30 years since the 401(k)/Individual Retirement Account model appeared on the scene. This do-it-yourself pension system has failed. It has failed because it expects individuals without investment expertise to reap the same results as professional investors and money managers. What results would you expect if you were asked to pull your own teeth or do your own electrical wiring?
http://www.nytimes.com/2012/07/22/opinion/sunday/our-ridiculous-approach-to-retirement.html?_r=4

There’s more to the article, I just copied some.  Seem right?  Seem wrong? 

[livewire]

What results would you expect if you were asked to pull your own teeth or do your own electrical wiring?

I've seen what happens after people do their own electrical wiring.  It's not pretty.   


I'll never be able to afford retirement, so I 'm not worried about it.  I will work until the day I die. 
When I have a good year, and I think I finally get ahead just a little bit, the damn government takes what I thought was mine, so I can't save it.

[eriemermaid]

Retirement??  Want to talk about retirement??  I can do that!   

[Flanders]

Seems the theme of the article is about how people are too stupid or lazy to take care of their own retirement and once again government should ride in on a white horse and save the day...

Where did personal responsibility go??  Seven cents on the dollar for a comfortable retirement???  That's very doable for virtually ANYONE.

As far as "professional money managers" go, please check their track records, it's not that impressive and with today's ETF's one can easily manage their own money with a little work and effort.

[excelsior]

This is an opinion piece, but the author’s conclusion that Individual Retirement Account (IRA) model requires you to be an investment expert is erroneous.
 
Most IRA funds have fund managers.   These fund managers are invest experts and are constantly making adjustments attempting to maximize their investor’s returns.

These funds’ performance are reviewed and rated by financial data providers such as Morningstar.  This information provides the individual the knowledge to easily choose a quality fund with manager that has a proven track record.

[blue2]

Fund experts?? like Bernie Madoff!

[excelsior]

Fund experts?? like Bernie Madoff!

Madoff owned Bernard L. Madoff Investment Securities.  This firm was a market maker that was running a Ponzi scheme. 

Bernard Madoff was not an IRA fund manager.