401(k)s a sham?

[shanendoah]

Very short article on Salon about 401(k)s being a sham. In fact, I'm hesitant to call it an article. Let's instead call it an opinion piece.

I say this because while there are quotes in the piece, there aren't any facts. It is more of the fear mongering that our media in the US is so known for. 
At the same time, I still think there are some valid points. When we switched from employer or union funded retirement to self funded retirement, we had to know it was going to create issues for those working in lower paid positions. I was young at the time the switch happened (like 10 years old young), so I have no idea if wages went up when employers switched from pensions to 401(k)s on the theory that employees would then put those "extra" wages into their retirement or not, but one of the reasons unions were formed and pensions were around to begin with was that we (the societal we) KNOW that our lower paid workers generally can't save for retirement. Their costs of living simply eat up the extra. I do know that when I worked at the health care organization and they decided to stop the defined benefit plan, we did NOT get a corresponding raise.
Funnily enough, my state agrees with this. As a professional employee of my state, I get to choose my retirement plan. I chose the 403(b) instead of the defined benefit plan because I know I like to job hop every 3-5 years, and you have to be with the state a certain numbers (10 or 15, can't remember which) to fully vest. However, our classified (hourly/union staff) do not have the option. They are automatically enrolled in the defined benefit (pension) plan and have some options for contributing their own money to retirement funds, but they don't have to. Whereas, in the 403(b) plan, based on my age, the state automatically takes 7.5% from my paycheck (they match that 1 for 1) to put into my retirement fund. So while I can't actually reduce the amount I'm contributing, making it not quite voluntary, I'm still contributing my own funds, because the state believes that as pro staff, I know enough to figure out what the best plan for me is, and that if I choose the 403(b), then I can afford the contributions. For lower paid staff, they assume the opposite.

And here's the thing, we (as in those of us here at YM) know this is an issue. When we talk about company benefits here, we all talk about retirement plan matches. We take that into account in our total income. And we obviously prefer companies/organizations that are willing to contribute more of their money, therefor requiring less of our money, to our retirement.

Do I think it's right that we should assume people don't know enough to plan for their own retirement? No and yes. No because I think people really are smart. Yes because our current educational system is in no way set up to help teach people this very necessary skill. The truth is, high school students don't come out of school knowing how to balance their checkbook, let alone create a budget, figure out planning for retirement, etc. I took a home ec class in 7th grade, and we did have to learn to balance a check book in that class, but that was also rural MT in the 80s. I'm not even certain the Home Economics classes exist anymore. (For the record, we also had a Future Homemakers of America club.)

The problem right now is that we think everyone should be saving for retirement while still paying a significant portion of our workforce less than a living wage. And employers will continue to pay as little as they can get away with for as long as they can, because technically, their fiduciary responsibilities are NOT to their employees but to their shareholders. So their legal mandate is to make more money for those who are already wealthy while paying those who are not as little as they can get away with.

And then, of course, we always get down to timing. In late 90s, very early 00s, no one who was retiring on 401(k) dollars was complaining. But then we hit the crash, and it decimated these accounts. More importantly, it decimated these accounts right before the largest generation in our nation's history was about to retire. There are more Baby Boomers than there were in generations before AND they are living longer (yay modern medicine). So is the real crisis here really the retirement plans, or is that we're about to have more "retired" people than ever before who will spend longer than any generation before retired?


(At this point, I think this post might be longer than the original piece I linked to.)

[TheHaitian]

My wife works for UMASS University / State of Massachusetts.

As state employee she is obligated to pick one of the following:
- ORP : other retirement plan . You pick your investments, allocations, etc.
- State pension plan

Either way she contributes/
-9% of her salary up to $30,000
- 11% of anything over $30,000. In her case she makes $40,000, so 11% of $10,000

Also the state just has something where for just this year they will allow employees that were in the ORP plan to transfer into the state plan. We opted to stay with the ORP plan.

On top of that you also have access to a:
- 403b
- 457

The university/states contributes 5% to the ORP plan.

I think if someone in my wife position (working for the Uni/Sate I mean) being forced to contribute ~9% of their salaries plus get an additional 5% match... Stay there for the next 30-40 years they should be pretty set.

Give or Take that is 14-15% of your gross salary (including match) that you would be contributing each year.

This to say I think the people in charge in the state of Massachusetts thought about it and took the necessary steps.

With employees contributing 2/3 and employers 1/3... Everyone has some skin in the game

[ArchietheDragon]

workers that can't save should just plan on working longer or moving in with their kids.  not a new concept.

[The Walk of the Penguin Mich]

However, our classified (hourly/union staff) do not have the option. They are automatically enrolled in the defined benefit (pension) plan and have some options for contributing their own money to retirement funds, but they don't have to.


Yep, I ran into this problem when I left TX.  Not only that, I know more than one person who was scrambling to remain with the university to get their 20 years in and it's a sickening position to be in.  

When I left, I had contributed 50% to the pension (6%).  However, when I left in 2000 after 14 years of being employed there, my pension would have been squat (~$400) to I pulled my contributions out, losing 50% and dumped them into an IRA.  Right now, they are on track to replace about $1000/mo income in another 12 years or so.  Had I been faculty, I would have received the university's contribution too, and be in better shape today.

When I went to KY, everyone is under a 403b.  I remember our lab dishwasher coming up to me in a panic.  Contributing 5% (to their 10%) was mandatory and she had absolutely no idea what to do or how to invest it.  At the time, I had no idea either and just told her to do what I did and it in a Target fund for her potential retirement date.  However, for those who did not understand, the university DID  provide financial advisors (at their cost) from both TIAA-Cref and Fidelity.  I did consult with one when I was looking at the numbers from my pension contributions to see if I was factoring things in correctly.  I was.  Later, I just schooled myself on investments.

[Tiny]

A train wreck for you and me is a gravy train for the financial services sector. And in the United States, they are the only group that matters.

This bothers me. Let's face it, pensions were/are nice - but really how many of the past generation actually HAD a pension? We all know someone who benefited from one - but I suspect we also knew a handful of people (who had jobs) who didn't have a pension.

The opinion that the financial service sector and government is getting rich by people NOT paying attention to their money, seems to me,to say that people are too stuipid to take care of their own moeny.

I'm kinda personally insulted when someone insinuates that.

FWIW: I can pull out a personal experience: brother with a really nice pension AND access to a 401(k). When the 401(k) option was offered - ie he could contribute to it, he did. The other guys in his 'crew' no so much. Why bother? there's a pension. Fast forward 25 years - and at 50 my brother could retire - the combination of pension/health care/401K/other savings made it possible. The other guys from his 'crew' relying on just the pension - stuck working OR retiring with a dramatically lower level of income.

And this from the brother who I'm not sure can actually do math...

[Lizard Queen]

Dec 18, 2014 12:30:07 GMT -5 Tiny said:

A train wreck for you and me is a gravy train for the financial services sector. And in the United States, they are the only group that matters.

This bothers me. Let's face it, pensions were/are nice - but really how many of the past generation actually HAD a pension? We all know someone who benefited from one - but I suspect we also knew a handful of people (who had jobs) who didn't have a pension.

The opinion that the financial service sector and government is getting rich by people NOT paying attention to their money, seems to me,to say that people are too stuipid to take care of their own moeny.

I'm kinda personally insulted when someone insinuates that.

FWIW: I can pull out a personal experience: brother with a really nice pension AND access to a 401(k). When the 401(k) option was offered - ie he could contribute to it, he did. The other guys in his 'crew' no so much. Why bother? there's a pension. Fast forward 25 years - and at 50 my brother could retire - the combination of pension/health care/401K/other savings made it possible. The other guys from his 'crew' relying on just the pension - stuck working OR retiring with a dramatically lower level of income.

And this from the brother who I'm not sure can actually do math...

We are on a money board.  Of course, I would expect 99.99% of us to be able to figure this out.  

On the other hand, my brother is great at math.  However, he's also got ADD.  He's 46 and is just now thinking that my idea of setting aside $100/month so that he can pay his property taxes on time is a good idea.  (Owns his home outright due to an inheritance.  He's paying child support for 3, and his paychecks afterward are pretty small.)  Some people just don't have the self-control to save, despite their intelligence and ability to understand investing.  Others feel like they can't possibly understand it even though they could.  They just have a mental block when it comes to math, which would extend to investing.

[HoneyBBQ]

He's talking about people 65 retiring at a loss of comfort compared to previous generations... most people 65 and older didn't have 401k as their main retirement vehicle. They had pensions and relied on social security and money under the mattress.

And yes, you have to watch fees. What else is so objectionable?

401's are definitely something for the middle class. The problem is the middle class is shrinking. People making 35k a year aren't going to be able to save for retirement, as pointed out by Archie. People earning 7 figures are year aren't going to bother squirreling away 18k or whatever. It's the people in the middle that need to save in the 401s... and they AREN'T that's the problem. They are shopping at Pottery Barn and Macy's and keeping up with the Jones's. They are the ones not doing their part.

[Deleted]

Dec 18, 2014 12:51:16 GMT -5 HoneyBBQ said:

He's talking about people 65 retiring at a loss of comfort compared to previous generations... most people 65 and older didn't have 401k as their main retirement vehicle. They had pensions and relied on social security and money under the mattress.

And yes, you have to watch fees. What else is so objectionable?

401's are definitely something for the middle class. The problem is the middle class is shrinking. People making 35k a year aren't going to be able to save for retirement, as pointed out by Archie. People earning 7 figures are year aren't going to bother squirreling away 18k or whatever. It's the people in the middle that need to save in the 401s... and they AREN'T that's the problem. They are shopping at Pottery Barn and Macy's and keeping up with the Jones's. They are the ones not doing their part.

Hey!  Yes we can!  Maybe not maxing things out, but I love my 401K. 

[myrrh]

I have to say I agree with part of the article - that there are jobs with some incredibly bad retirement plans out there and there is no way for an employee to get a better plan except to appeal to HR (which usually doesn't work due to lack of understanding and/or plans run by a "buddy"), or get another job. The easy fix for this would be to raise the limits for Traditional and Roth IRAs. Why Congress doesn't do this is beyond me (except that Congress lately isn't known for doing much).

I also have to say the lack of financial education in this country is mindboggling. Even though I grew up in a household with two parents with master's degrees and my mom was investing at least part of her salary, it did not get translated to me. I understood that you pay off credit cards every month and you should contribute to retirement accounts but I didn't understand asset allocations or the implications of fees. I was invested in a technology fund in my 20's (late 90's and early 2000's) because I was told young people should invest in "high risk" funds.  And I would say I probably learned more than the average bear!

The question of falling real salaries and whether the poor can "afford" to invest for retirement is a subject I will stay away from, except to say that studies have shown that salary is really not much of a factor in how much is in worker's  retirement plans, and if financial education in high school were taken seriously, I believe participation would go way up.

[flamingo]

I definitely think financial education is necessary. I work with people who have master's degrees and not a bit of financial sense. My 3 staff members make around 40k and we live in a HCOLA. They all believe that because they are so underpaid, there is no way they can contribute to their 401ks. (they aren't truly underpaid btw) This behavior is reinforced by their parents not saving and hoping that their pensions will remain funded and carry them through. And I agree with HoneyBBQ that part of the problem is people trying to KUWTJ instead of funding there retirement. I've had staff members say, well, if I needed new winter boots, so therefore I can't fund my 401k. It's mind-boggling to me. But then, I've had a 401k since I was 22, even though at the time I could only put something like $20/paycheck in it.

[The Walk of the Penguin Mich]

The opinion that the financial service sector and government is getting rich by people NOT paying attention to their money, seems to me,to say that people are too stuipid to take care of their own moeny.


I think that this bothers me too.  When I had a pension and did not need to invest myself, I never bothered learning anything about investments.  When my pension changed to a 403b, I started learning fast.  Kind of along the same lines as paying for a couple bounced checks....you learn very quickly what not to do!

[phil5185]

And employers will continue to pay as little as they can get away with for as long as they can, because technically, their fiduciary responsibilities are NOT to their employees but to their shareholders. So their legal mandate is to make more money for those who are already wealthy while paying those who are not as little as they can get away with.

But FIRST an employer must build a workforce of skilled, competent, loyal workers and know how to retain them so that there IS some earnings to distribute to the shareholders.   (There may be some small businesses that don't get this - but for 'real' corporations that is HR 101).

In late 90s, very early 00s, no one who was retiring on 401(k) dollars was complaining. But then we hit the crash, and it decimated these accounts. More importantly, it decimated these accounts right before the largest generation in our nation's history was about to retire.

That's when I retired - like you say, no complaints, about a million in 401k dollars.  But the 'crash' didn't do much decimating, my fund is now way bigger than it was 15 yrs ago. Like Jack Bogle said a few days ago - 'don't do something, just stand there'. Too many people are not able to tolerate 'fluctuation', get used to it, that is what markets do.

[HoneyBBQ]

Dec 18, 2014 12:55:29 GMT -5 minnesotapaintlady said:

Dec 18, 2014 12:51:16 GMT -5 HoneyBBQ said:

He's talking about people 65 retiring at a loss of comfort compared to previous generations... most people 65 and older didn't have 401k as their main retirement vehicle. They had pensions and relied on social security and money under the mattress.

And yes, you have to watch fees. What else is so objectionable?

401's are definitely something for the middle class. The problem is the middle class is shrinking. People making 35k a year aren't going to be able to save for retirement, as pointed out by Archie. People earning 7 figures are year aren't going to bother squirreling away 18k or whatever. It's the people in the middle that need to save in the 401s... and they AREN'T that's the problem. They are shopping at Pottery Barn and Macy's and keeping up with the Jones's. They are the ones not doing their part.

Hey!  Yes we can!  Maybe not maxing things out, but I love my 401K. 

Sorry, yes, that was more what I meant. Hard to save 18k if you make 35k. Apologies.

[yogiii]

Dec 18, 2014 13:24:39 GMT -5 HoneyBBQ said:

Dec 18, 2014 12:55:29 GMT -5 minnesotapaintlady said:

Hey!  Yes we can!  Maybe not maxing things out, but I love my 401K. 

Sorry, yes, that was more what I meant. Hard to save 18k if you make 35k. Apologies.

Are you challenging MPL?  Because if anyone can do it, I think it would be her.

[HoneyBBQ]

Dec 18, 2014 13:26:29 GMT -5 yogiii said:

Dec 18, 2014 13:24:39 GMT -5 HoneyBBQ said:

Sorry, yes, that was more what I meant. Hard to save 18k if you make 35k. Apologies.

Are you challenging MPL?  Because if anyone can do it, I think it would be her.

I dunno. Does she have a 4x4 Jeep I can race her in?

[phil5185]

A train wreck for you and me is a gravy train for the financial services sector. And in the United States, they are the only group that matters.


This bothers me.

Me too. The guy jumps from percentages to discrete numbers when it's convenient for him.
At one point he says that the national retirement accounts are $20T.  And later he says that those horrible financial guys get $80B/yr. Ok, that's 0.4%. Seems fair? If I had to manage someone's accounts, I might want 0.8% or maybe a whole 1%.

[Deleted]

Dec 18, 2014 13:27:44 GMT -5 HoneyBBQ said:

Dec 18, 2014 13:26:29 GMT -5 yogiii said:

Are you challenging MPL?  Because if anyone can do it, I think it would be her.

I dunno. Does she have a 4x4 Jeep I can race her in?

Nope.  4 wheeler or horse is all I got to put up against the Jeep.

[HoneyBBQ]

Dec 18, 2014 13:33:42 GMT -5 minnesotapaintlady said:

Dec 18, 2014 13:27:44 GMT -5 HoneyBBQ said:

I dunno. Does she have a 4x4 Jeep I can race her in?

Nope.  4 wheeler or horse is all I got to put up against the Jeep.

My koi fish eat horses like yours for breakfast.

[Tiny]

Dec 18, 2014 12:44:44 GMT -5 Lizard Queen said:

Dec 18, 2014 12:30:07 GMT -5 Tiny said:

This bothers me. Let's face it, pensions were/are nice - but really how many of the past generation actually HAD a pension? We all know someone who benefited from one - but I suspect we also knew a handful of people (who had jobs) who didn't have a pension.

The opinion that the financial service sector and government is getting rich by people NOT paying attention to their money, seems to me,to say that people are too stuipid to take care of their own moeny.

I'm kinda personally insulted when someone insinuates that.

FWIW: I can pull out a personal experience: brother with a really nice pension AND access to a 401(k). When the 401(k) option was offered - ie he could contribute to it, he did. The other guys in his 'crew' no so much. Why bother? there's a pension. Fast forward 25 years - and at 50 my brother could retire - the combination of pension/health care/401K/other savings made it possible. The other guys from his 'crew' relying on just the pension - stuck working OR retiring with a dramatically lower level of income.

And this from the brother who I'm not sure can actually do math...

We are on a money board.  Of course, I would expect 99.99% of us to be able to figure this out.  

On the other hand, my brother is great at math.  However, he's also got ADD.  He's 46 and is just now thinking that my idea of setting aside $100/month so that he can pay his property taxes on time is a good idea.  (Owns his home outright due to an inheritance.  He's paying child support for 3, and his paychecks afterward are pretty small.)  Some people just don't have the self-control to save, despite their intelligence and ability to understand investing.  Others feel like they can't possibly understand it even though they could.  They just have a mental block when it comes to math, which would extend to investing.

I guess I was going to the point that just because some % of the employed don't have the ability to 'save' when they have access to an employer sponsered retirement plan doesn't mean that the problem is 100% with the plan.

I realize that even with a 401(K) an employee might opt to have 100% of their saved money in a money market fund/account (ie a basic savings account or  CD) because they are afraid to loose money OR they might have 100% of their money in their employers stock because 'hey! my employer is always going to make money!'

This doesn't mean that 401(k)'s are bad or are somehow taking advantage of the average worker (which is what the article seems to imply).

[chapeau]

Dec 18, 2014 12:51:16 GMT -5 HoneyBBQ said:

People making 35k a year aren't going to be able to save for retirement, as pointed out by Archie.

I make $36,000.43 (weird percentage raises). I am 40 years old and have a 2 year old. Between my contribution and my employer's (very generous) match, I save 18.5% of my salary -- which isn't all that much, because see how much I make -- and some days it sucks. But I do it (and so do others, right MPL?)

[TheHaitian]

Dec 18, 2014 12:51:16 GMT -5 HoneyBBQ said:

 It's the people in the middle that need to save in the 401s... and they AREN'T that's the problem. They are shopping at Pottery Barn and Macy's and keeping up with the Jones's. They are the ones not doing their part.

Hey now.... I take offense to that.

[Deleted]

Dec 18, 2014 13:47:45 GMT -5 chapeau said:

Dec 18, 2014 12:51:16 GMT -5 HoneyBBQ said:

People making 35k a year aren't going to be able to save for retirement, as pointed out by Archie.

I make $36,000.43 (weird percentage raises). I am 40 years old and have a 2 year old. Between my contribution and my employer's (very generous) match, I save 18.5% of my salary -- which isn't all that much, because see how much I make -- and some days it sucks. But I do it (and so do others, right MPL?)

Even without maxing you can still be doing fine because you don't need to save as much to replace your income and SS will cover a larger percentage of it than if you were higher income. 

I do agree that a lot of people have a million excuses why they can't save in their 401K which means many aren't benefiting from it, but a lot of those reasons are BS even for the lower income folks.  I've all but given up on a friend of mine at work.   Love the guy and he really is smart, but sometimes I just want to hit him upside the head with a brick. 

[Abby Normal]

I hate articles like this.  First, just because you have access to one, doesn't mean it's like magic beans.

Second, it just give those who aren't saving, or aren't saving much, another excuse not too. 

We have an employee that came in the other day to sign up for the 401K (finally).  He's worked for us for 15 years, and is now 62.  He went to an "investment guy" to talk about retirement and started to panic.  The guy asked him why he was not in the employer plan and to go sign up  immediately.

His comment was " I guess I should have started sooner".  

mmm- yeah.   Someone like him is going to see this article and it will convince them not to save.  The author isn't doing anyone any favors.

[siralynn]

Dec 18, 2014 12:30:07 GMT -5 Tiny said:

A train wreck for you and me is a gravy train for the financial services sector. And in the United States, they are the only group that matters.

The opinion that the financial service sector and government is getting rich by people NOT paying attention to their money, seems to me,to say that people are too stuipid to take care of their own moeny.

I think we absolutely need better financial education so that people can be better stewards of their own money. However, I think there's also a lot of shady behavior by the financial services sector. For example, my own company switched our 401(k) "default" investments a couple of years ago to actively managed "target date" funds. And they sent us a giant pile of documentation about how good of a change it was for us. Which was a bunch of bullshit. And if you already had your 401(k) set to something else, they still defaulted your new contributions into this new fund, and you had to actively log in and correct it.

Employees with some financial knowledge could easily see "target date fund" and think they were in a good situation, because it's pretty common advice for new investors to go with that type of investment. But there's a huge difference between a target date fund at Vanguard and the crap my company tried to put us in. If you dug through all the nonsense they sent us, you could finally get the info that the fees were now up above 1% - almost four times what they had been on the previous default investments. I wonder how many people at the company were savvy enough to realize that and basically go back in and opt-out of the shitty fund (that the executives probably got some sort of kick-back for).

[HoneyBBQ]

Dec 18, 2014 13:47:45 GMT -5 chapeau said:

Dec 18, 2014 12:51:16 GMT -5 HoneyBBQ said:

People making 35k a year aren't going to be able to save for retirement, as pointed out by Archie.

I make $36,000.43 (weird percentage raises). I am 40 years old and have a 2 year old. Between my contribution and my employer's (very generous) match, I save 18.5% of my salary -- which isn't all that much, because see how much I make -- and some days it sucks. But I do it (and so do others, right MPL?)

Sorry, I meant a full contribution. I think saving 18% is fantastic!! Wealthy barber says you only need to save 10%, so you're doing great.

[HoneyBBQ]

Dec 18, 2014 14:07:54 GMT -5 Abby Normal said:

I hate articles like this.  First, just because you have access to one, doesn't mean it's like magic beans.

Second, it just give those who aren't saving, or aren't saving much, another excuse not too. 

We have an employee that came in the other day to sign up for the 401K (finally).  He's worked for us for 15 years, and is now 62.  He went to an "investment guy" to talk about retirement and started to panic.  The guy asked him why he was not in the employer plan and to go sign up  immediately.

His comment was " I guess I should have started sooner".  

mmm- yeah.   Someone like him is going to see this article and it will convince them not to save.  The author isn't doing anyone any favors.

62?? 

[Lizard Queen]

Dec 18, 2014 14:48:03 GMT -5 siralynn said:

Dec 18, 2014 12:30:07 GMT -5 Tiny said:

The opinion that the financial service sector and government is getting rich by people NOT paying attention to their money, seems to me,to say that people are too stuipid to take care of their own moeny.

I think we absolutely need better financial education so that people can be better stewards of their own money. However, I think there's also a lot of shady behavior by the financial services sector. For example, my own company switched our 401(k) "default" investments a couple of years ago to actively managed "target date" funds. And they sent us a giant pile of documentation about how good of a change it was for us. Which was a bunch of bullshit. And if you already had your 401(k) set to something else, they still defaulted your new contributions into this new fund, and you had to actively log in and correct it.

Employees with some financial knowledge could easily see "target date fund" and think they were in a good situation, because it's pretty common advice for new investors to go with that type of investment. But there's a huge difference between a target date fund at Vanguard and the crap my company tried to put us in. If you dug through all the nonsense they sent us, you could finally get the info that the fees were now up above 1% - almost four times what they had been on the previous default investments. I wonder how many people at the company were savvy enough to realize that and basically go back in and opt-out of the shitty fund (that the executives probably got some sort of kick-back for).

Shit, before they had to more explicitly disclose fees, my 401k funds' fees were mostly 4+%.

[resolution]

I disagree with a lot of what he said, but I do agree that there are some deliberately complicated annuities that are being sold by shady financial advisors specifically to rip off the elderly. Something changes for a lot of people when they age, and they become more trusting. I believe any financial product being sold as a retirement investment should be required to clearly disclose the fees and how the salesperson is being paid.

Example: Some older relatives of mine brought over some paperwork for a variable annuity someone was trying to sell them. Their financial guy promised there were no fees, but I found a ton of them buried in the fine print. They already had two pensions, two social securities, and one annuity. This guy was trying to get them to drain everything that they had in reserve to buy another annuity, leaving them with nothing if they needed a lump sum for an emergency.

[HoneyBBQ]

Dec 18, 2014 13:52:07 GMT -5 TheHaitian said:

Dec 18, 2014 12:51:16 GMT -5 HoneyBBQ said:

 It's the people in the middle that need to save in the 401s... and they AREN'T that's the problem. They are shopping at Pottery Barn and Macy's and keeping up with the Jones's. They are the ones not doing their part.

Hey now.... I take offense to that.

Well.... you do fit the bill, don't you?  You are struggling with DW (maybe not so much any more?) to get on the same page and save more right?

I'm not saying there's anything right or wrong about it, but you ARE pretty solidly mid-upper class and you DO shop at Pottery Barn... right?  

[Lizard Queen]

Dec 18, 2014 13:46:20 GMT -5 Tiny said:

Dec 18, 2014 12:44:44 GMT -5 Lizard Queen said:

We are on a money board.  Of course, I would expect 99.99% of us to be able to figure this out.  

On the other hand, my brother is great at math.  However, he's also got ADD.  He's 46 and is just now thinking that my idea of setting aside $100/month so that he can pay his property taxes on time is a good idea.  (Owns his home outright due to an inheritance.  He's paying child support for 3, and his paychecks afterward are pretty small.)  Some people just don't have the self-control to save, despite their intelligence and ability to understand investing.  Others feel like they can't possibly understand it even though they could.  They just have a mental block when it comes to math, which would extend to investing.

I guess I was going to the point that just because some % of the employed don't have the ability to 'save' when they have access to an employer sponsered retirement plan doesn't mean that the problem is 100% with the plan.

I realize that even with a 401(K) an employee might opt to have 100% of their saved money in a money market fund/account (ie a basic savings account or  CD) because they are afraid to loose money OR they might have 100% of their money in their employers stock because 'hey! my employer is always going to make money!'

This doesn't mean that 401(k)'s are bad or are somehow taking advantage of the average worker (which is what the article seems to imply).

I see your point about ability to save.

As far as 401k's taking advantage, yes and no.  They were not intended to replace pensions at first.  A bunch of well-compensated people wanted to have a tax shelter in which they could save for retirement, so the 401k was born for them.  The average worker got taken for a ride when the 401k replaced their pension, yet they didn't get additional pay to put into the 401k.  Matches tend to be pathetic.  7.5% would be awesome!  The most I ever got was 4%.