Karen Ferguson who was then, as she is now, the head of the Pension Rights Ins ute, warned in an op-ed published in the New York Times, “Rank-and-file workers have nothing to spare from their paychecks to put into a voluntary plan.”
But her voice, and that of other critics like economist Teresa Ghilarducci, who is now at the New School and described our upcoming retirement crisis as “an abyss” in 1994 congressional hearings, were drowned out by the money and power of the financial services industry, combined with their enablers in the personal finance media who proclaim even today that if we don’t have enough money set aside for retirement, it is all our own fault.
It’s not.
No one less than John Bogle, the founder of the Vanguard Group, might come forward to declare the American way of retirement savings “a train wreck” — but no matter. 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.
Assume that you are an employee with 35 years to retirement and a current 401(k) balance of $25,000. If returns on your investment in your account over the next 35 years average 7 percent, and fees and expenses reduce your average returns by 0.5 percent, your account balance will grow to $227,000 at retirement, even if there are no further contributions to the account. If fees and expenses are 1.5 percent, however, your account balance will grow to only $163,000. The 1 percent difference in fees and expenses would reduce your account balance at retirement by 28 percent.
Salaries for the majority of us are, when translated into constant dollars, falling. The median household is earning eight percent less income adjusted for inflation today than it did in 2000. In the first quarter of 2013, wages fell by the greatest amount ever recorded.
At the same time, costs of things we can’t do without continue to rise. College costs have tripled since the early 1980s. The amount of money students are borrowing to pay tuition bills is skyrocketing, and all but doubled from 2005 to 2012 to $1.1 trillion. Healthcare costs have also soared. The New York Times recently reported the cost of giving birth has tripled since 1996. At the same time, patients are increasingly responsible for ever greater amounts of their medical expenses: credit reporting agency Transunion recently claimed an astonishing 22 percent rise in out-of-pocket hospital expenses over the past year.
People find it all but impossible to save in this environment. Our national savings rate hovered around 10 percent in the late 1970s and early 1980s. Today, it is a little more than 2 percent. Just take a look at what happened when companies began to adopt automatic enrollment plans for 401(k)s, that is, forcing people to opt-out of retirement plans instead of filling out papers to join up. Yes, the number of people contributing to deferred contribution accounts – but so too did what industry insiders call “the leakage” rate – that is, people borrowing against or withdrawing the monies in their accounts (and if that money isn’t repaid, the consumers withdrawing it need to pay penalties for accessing it). That number is now close to 25 percent.
The truth is this: the concept of a do-it-yourself retirement was a fraud. It was a fraud because to expect people to save up enough money to see themselves through a 20- or 30-year retirement was a dubious proposition in the best of cir stances. It was a fraud because it allowed hustlers in the financial sector to prey on ordinary people with little knowledge of sophisticated financial instruments and schemes. And it was a fraud because the mainstream media, which increasingly relies on the advertising dollars of the personal finance industry, sold expensive lies to an unsuspecting public. When combined with stagnating salaries, rising expenses and a stock market that did not perform like Rumpelstilskin and spin straw into gold, do-it-yourself retirement was all but guaranteed to lead future generations of Americans to a financially insecure old age. And so it has.
http://www.salon.com/2013/08/06/big_...icans_partner/
... which is the real background behind why VRWC and financial industry wants to kill Social Security.
Americans could save. They don't. They get Cable or Satellite TV, Iphones and any other convenience or luxury item they can "afford". They "buy" cars every few year they cannot afford, and live in constant debt. They are stupid, and expect not to be held accountable for it. Live within your means, whatever those means are - or don't ever expect to retire.
If that same employee saved $200/month with the match and tax deduction or Credit, they would add another $750,000 to their balance for $1,000,000 total using those same assumptions. The average worker can find $200/month in the budget but it would take some sacrificing of modern conveniences.
The problem is a lack of useful employee education.
yes, always the fault of the Human-Americans, NEVER the fault of fraudulent, gouging Corporate-Americans
real household income has remained essentially flat since 1980
http://economistsview.typepad.com/ec...me-growth.html
Human-Americans, the 99%, are receiving less and less of wealth creation, while the 1% gets the vast majority of it, aka, World Champion Inequality.
========
"In March 2009, RL Polk released a study conducted between 2007 to 2008 which indicated that the median age of passenger cars in operation in the US increased to 9.4 years,"
http://en.wikipedia.org/wiki/Passeng..._United_States
internet and cell phones are effectively an indispensable now, and the service charges are MUCH MORE expensive than wirelines.
cable TV is horribly expensive because bundled packages where you have to pay for ty channels you never watch.
yes, Americans have too much debt,
but the financial industry loves and encourages that debt and the Bs of unsolicited credit cards mailed out, because the cc interest and bank overdrafts are how they make their $100Bs in profits.
Last edited by boutons_deux; 08-09-2013 at 02:17 PM.
porno GRAPHIC inequality
Just giving the people what they want.
yes, and 24/7 pervasive advertising knows how, scientifically, to create "want".
the financial sector, with plastic cards, payday loans, etc knows how sucker people into debt and the interest slavery.
My "sham" is doing quite well
So is mine!
I will probably use mine to buy a house at one point and pay myself the interest.
rofl same.
Being able to put 5% of my after-tax income at age 23 in a roth 401(k) plan while the company I work for matches it in a pre-tax traditional 401(k) plan gives me great tax diversification and makes it easier to retire at a young age.
The fact American wages are going down doesn't make 401(k) plans a fraud
My 401k now makes more money than I do.rofl same.
Being able to put 5% of my after-tax income at age 23 in a roth 401(k) plan while the company I work for matches it in a pre-tax traditional 401(k) plan gives me great tax diversification and makes it easier to retire at a young age.
The fact American wages are going down doesn't make 401(k) plans a fraud
If you're in your early 20's and work for a company that matches, max that "sham" out. You won't be disappointed.
If you work for a company that matches, idk why you wouldn't max that "sham" out regardless. It's free money
ditto...my 401k is like Sham-Wow.
Boutons.... What say you?
Those of us who normally disagree with each other, agree on this...
Assume that you are an employee with 35 years to retirement and a current 401(k) balance of $25,000. If returns on your investment in your account over the next 35 years average 7 percent, and fees and expenses reduce your average returns by 0.5 percent, your account balance will grow to $227,000 at retirement, even if there are no further contributions to the account. If fees and expenses are 1.5 percent, however, your account balance will grow to only $163,000.
So the basis of this article is that someone who contributes nothing to his 401(k) for 35 years will have a disappointing final balance?
America is a business. Case closed.
I think it is awesome that you guys are doing well with your 401k’s and savings plan..Most Americans work 40 years or more & retire broke relying on social security for their only income…All it takes is better education and a plan to reverse this trend…
As retirement guru Ed Slott says, “the government has a plan, their plan is to take your money, you need a plan as well”…
Credit Card companies are horrible. But...
The question is how to save people from their own stupidity.
Jump on those introductory offers with 60,000 pts for airline miles. Look up how far those points will get you for a vacation. Get the card, read the fine print, use it for 3 months and cancel and cut the plastic up. Huge discount for trips WITHOUT working for a company that flies you everywhere. Same with Hotels. Pay your bills and use them right back.
Kinda hypocritical people brag about their 401k and then call big companies giant parasitic organisms.
Feed that dog you hate...
this is this kind of cheat/fraud-theft-enabling laws and reg the financial industry pays its REPUG Congressional accomplices/hit men
House leaders have quietly scheduled a vote on a bill to short-circuit protections for 401Ks and other retirement benefits.
Say No to HR 2374, the Fraudulently Misnamed “Retail Investor Protection Act.”
The safeguards for such retirement plans have not been updated for almost 40 years. Originally, the rules were designed to protect managers of defined-benefit pensions from being exploited by unscrupulous advisors. But in today’s market many of us depend on 401K-type plans which we must manage ourselves. Unfortunately, current law allows many of the professionals to whom people must turn for investment advice to give self-serving recommendations that end up paying them more, while leaving retirees with less.
The Department of Labor, to its credit, is moving to update the rules so that all those giving advice on employee retirement savings actually have a legal obligation to act in a retiree's best interests. But industry opponents are determined to avoid this basic requirement. Their tactic is endless delay to kill any reform: first, they’re trying to keep the Department of Labor from even proposing new rules until the more industry-friendly Securities and Exchange Commission gets around to acting on related issues under its jurisdiction. On top of that, they’re putting additional barriers in the way of action by the SEC.
The net effect of this bill would be to give the financial industry a continued license to mislead. The consequences are huge: self-serving or just plain bad financial recommendations cost investors billions of dollars a year. Workers can easily lose 20 or 30 percent of their retirement savings (a six-figure amount for many) by following the wrong counsel.
Tell Congress to Look Outfor Those Who Are Saving to Take Care of Their Families, Not for Unscrupulous Financial“Advisors.”
Sent by Americans for Financial Reform
1629 K Street NW, 10th Floor, Washington, DC 20006 - (202) 466-3311
==================================
H.R. 2374, the so-called "Retail Investor Protection Act." The practical effect of this bill would be to prevent the Department of Labor from raising the legal standards for advice applying to retirement savings, including workers with 401k plans.
HR 2374 would allow financial services companies to put their own interests ahead of their clients' interests by steering investors into inappropriate and high-fee investments.
Self-serving investment recommendations eat into the savings that Americans have worked hard to set aside in order to support a secure retirement or pay for their children's college educations. These are your cons uents; these are the people you should be looking out for.
I strongly urge you to oppose this bill.
http://ourfinancialsecurity.org/
CAP Calls for Improved Consumer Protections to Prevent Retirement Fees from Draining the Middle Class
Washington D.C. — The corrosive effects of high 401(k) fees are costing millions of Americans tens of thousands of dollars, forcing them to work years longer before retirement, according to a new report released today by the Center for American Progress. The report’s authors, CAP economic experts Jennifer Erickson and David Madland, propose a common-sense solution that won’t cost the government a dime but will protect consumers by improving retirement fee disclosure.
“Every day, Americans are investing hard-earned dollars in retirement accounts that aren’t working for them. Confusing and hidden fees are eating away at their savings, forcing them to work longer and save more,” said Jennifer Erickson. “It’s time to step up our nation’s consumer protections around retirement savings and ensure that workers and employers are armed with the information they need to make better choices about their investment options.”
“Better labeling of retirement fees is a no-brainer,” said David Madland. “At no cost to taxpayers, we can save workers a lot of money and make it much more likely that they can retire.”
While private-sector workers are increasingly reliant on 401(k)s and Individual Retirement Accounts, or IRAs, for their retirement, most do not know what these plans are costing them. In fact, one seemingly small decision—such as choosing a retirement fund with high or low fees—could have a huge impact on a worker’s ability to retire.
To understand how fees affect an individual, the report’s authors detail the following examples:
- If a median-income worker saving 5 percent of her salary with a match from her employer selects a fund with fees of 1 percent versus a low-fee fund with a 0.25 percent fee, she will stand to lose approximately $100,000 over her lifetime. To make up the difference in her account by retirement, she would have to work more than three additional years.
- ?
- If a two-person, median-income household invested in a slightly higher-than-average fund with 1.3 percent fees, these high fees will strip away one-quarter of a million dollarsfrom its retirement savings.
- ?
- Over the course of her lifetime, a worker in a similar situation earning $75,000 at age 25 would pay more than $300,000 more in fees if she were invested in the fund with 1.3 percent fees, compared to if she were invested in the fund with 0.25 percent fees. In fact, to make up the shortfall in her account by the time she retires, her total contribution—including both employer and employee contributions—would have to increase by 25 percent. Even worse, since employer contributions generally top out at or below 5 percent, she would likely have to increase her individual contribution to her retirement from 5 percent of her salary to 7.5 percent—a jump of 50 percent in her personal retirement savings each year for her entire working life.
- ?
Many Americans are not aware of the fact that high fees are eating away at their retirement savings. But even if they were, tracking down the information to understand the fees on any given retirement account can be an unnecessarily complicated task to navigate. To help consumers make more-informed choices, Erickson and Madland call for all retirement funds to have a clear, understandable label that provides consumers with relevant, concise, and accessible information about fees. Improved fee disclosure could help individuals make better financial decisions—especially since data show that higher-cost funds do not necessarily perform better—and could also force a national conversation about how best to improve our retirement system.
http://www.americanprogress.org/pres...-middle-class/
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