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Old 01-11-2016, 07:32 PM
 
7,951 posts, read 5,055,599 times
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Quote:
Originally Posted by Arcothunder View Post
Pensions are great but truth be told over the long term of a 40-45 year career you'd have more saving 20% of your salary every week and investing in 401k, IRA, etc in the SP500
This was the promise of the 1980s and 1990s. But as has emerged as a theme in this thread, "generational luck" matters enormously as regards stock-market returns. If cumulative returns persist in being low, no amount of diligent savings will be sufficient.

Consider the "standard" 4% safe annual rate of capital-withdrawal, now in some circles reduced to 3% or even less; but call it 4% for the sake of discussion. Assume a 40% defined-benefit pension... paying 40% of one's salary in retirement, annually. For the portfolio to generate the same safe return as the pension, it needs to be 10 times as large as one's gross annual salary. This is readily attainable if we have say a 7% annual rate of return (money doubles roughly every 10 years, not accounting for taxes or inflation).

Now try the same calculation with 0% annual return - after taxes and inflation. This is a more realistic representation of cumulative progress thus far in the 21st century. At 20% savings rate, it would require 50 years to amass 10X of one's gross annual income.

Granted, these numbers are contrived. If the next 16 years of stock-market returns merely follow the previous 16 years, then we won't merely have uncomfortable retirements; we'll have an economic catastrophe. I am not, by any means, an unvarnished curmudgeon or a perma-bear. But it's crucial to realize that diligent savings alone are insufficient. We need for the market to work for us. And the market doesn't always work.
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Old 01-11-2016, 07:53 PM
 
Location: Los Angeles area
14,018 posts, read 17,756,785 times
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Quote:
Originally Posted by Arcothunder View Post
...................

Pensions are great but truth be told over the long term of a 40-45 year career you'd have more saving 20% of your salary every week and investing in 401k, IRA, etc in the SP500

That statement may well be true as a generalization, but the big difference is the peace of mind provided by the pension being guaranteed, as well as the peace of mind we have just in case we might live to an unusually old age.
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Old 01-11-2016, 08:00 PM
 
1,749 posts, read 3,989,785 times
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Quote:
Originally Posted by Arcothunder View Post
I know many IT workers who joined the public sector in their 30s and 40s for lifestyle reasons. They wanted a family or to spend time with the family. Or just grew tired of long hours and not much time off. When young maybe money seems more important but somewhere in the 30s maybe you think you'd rather do other things then be in the office days, nights and weekends.

Pensions are great but truth be told over the long term of a 40-45 year career you'd have more saving 20% of your salary every week and investing in 401k, IRA, etc in the SP500
False dichotomy........ 20% of jack ch-- is still jack ch--. My parents were able to raise us two and have a retirement because they didn't need to dip into their salary for retirement savings eg 75% pensions. Inflation adjusted, people today get paid enough to live, not enough to retire. That's indentured servitude until the day you die, OR a huge downgrade in quality of life. People will always choose to burn the candle today, as they should, when the choice is live like you were told you could and die miserly, or live miserly to end up dying miserly too.

The premise is that a private sector job pays enough to self fund 80% replacement of the money I make in the prime of my LIFE -- and by life I don't mean making enough to only afford to go to work and back; I mean life as in the pursuit of happiness, which most people equate to the ability to raise children, pursue avocations, travel, have retirement savings de-coupled from liquidity savings AND some form of property ownership to support their housing needs and the educational needs of the children. Under THAT definition of living, 2016 private salaries fail miserably to provide for, which is which DIY retirement is a non-starter. Dual income households then becomes a de facto requirement, and with that construct, up up and away goes the odds of people landing in insta-indigence as prior middle class earners, due to death, illness and divorce. This is why we need high teen B-funds in order to replace the bait and switch the 401ks are.

This National downgrade may seem like par for the course to the objective critic, but you can't have a Country with such delayed and looming dispossession and expect the few have's left not to have their affluent little lifestyles affected. This is why I care about this discussion; because even if I were to barely squeak by, the Country might not be worth living or retiring in. Since I have a toddler, and as the oldest of the millenials (1981) , I wish for the prognosis to improve, not merely wash my hands and stoically assert the ship has sailed and we're all going down to a "Social Security Retirement" quality of life, which is a euphemism for unapologetic poverty. I can count with my fingers, and wages have to go way the hell up before median households can afford to replace 70% of their working incomes by self-funding, never mind a household income even worth waking up in the morning for.

Either that or the cost of living has to come down way the hell down. Considering the migration patterns of the Country continue to choke the population, like sardines, in highly dense urban megacenters in order to facilitate petulant private industry that doesn't want to pay for training, doesn't want to pay for transportation, doesn't want to pay for anything that's of any value to the human beings that make up the Proletariat, then there's no way in hell cost of living amongst such competition for artificially set geographical resources (availability of housing and water being the prime drivers) can ever significantly decrease. So back to raising wages we go.

There's no free lunch. People can say "can't be done, globalism forbids it" all they want, but people don't die quietly and obediently. They torch the streets in discontent, and they take from the beneficiaries of that dynamic, violently. Read any book in historical anthropology, nothing new under the sun. It either comes out of the profits of industry, or the tax base by coercion. I rather it be the former and keep the Country suitable for living, aspiring and raising our replacements. The indigent senior prior-middle class failed-retiree wave is going to vote themselves some massive welfare and the working age folk are not going to be able to afford it. It's time for the Country to start defaulting on lopsided domestic-wage antagonistic trade policies to BRIC and developing nations. We need to bring that kind of wage generation back in house.
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Old 01-11-2016, 09:17 PM
 
33,046 posts, read 22,087,347 times
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Based on the attachment below, which someone posted in another thread, the obvious question is, how much do y'all expect the bottom two quintiles to save?
Attached Thumbnails
The ‘retirement crisis’ that isn’t-savingrate.jpg  
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Old 01-11-2016, 09:50 PM
 
1,749 posts, read 3,989,785 times
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Quote:
Originally Posted by freemkt View Post
Based on the attachment below, which someone posted in another thread, the obvious question is, how much do y'all expect the bottom two quintiles to save?
Not only that, but based on the concept of marginal utility, the graph would have to be transposed left to right in order to account for the fact that the lower quintiles have their top dollar closer to the cost of living line than the top 1%, and it is the lowest quintiles that needs closer to 100% income replacement in retirement due to said cost of living line, when compared to the 1%. A double whammy.

This is 1920 all over again, except we have no labor shortage. This Country needs to bring a notion of economic Nationalism back, for the sake of our progeny. Globalism is treasonous.
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Old 01-11-2016, 10:02 PM
 
Location: Living rent free in your head
31,121 posts, read 13,636,147 times
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Quote:
Originally Posted by freemkt View Post
Based on the attachment below, which someone posted in another thread, the obvious question is, how much do y'all expect the bottom two quintiles to save?
You probably shouldn't ask because the answer will be a resounding "they didn't plan well enough" they "lacked ambition" I'm sure some of these people have created macros so they don't need to type out the same BS 30 times a week
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Old 01-11-2016, 10:04 PM
 
Location: Living rent free in your head
31,121 posts, read 13,636,147 times
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Quote:
Originally Posted by hindsight2020 View Post
Not only that, but based on the concept of marginal utility, the graph would have to be transposed left to right in order to account for the fact that the lower quintiles have their top dollar closer to the cost of living line than the top 1%, and it is the lowest quintiles that needs closer to 100% income replacement in retirement due to said cost of living line, when compared to the 1%. A double whammy. This is 1920 all over again, except we have no labor shortage. This Country needs to bring a notion of economic Nationalism back, for the sake of our progeny. Globalism is treasonous.
THIS ^
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Old 01-12-2016, 01:09 AM
 
6,353 posts, read 5,168,799 times
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Quote:
Originally Posted by hindsight2020 View Post
False dichotomy........ 20% of jack ch-- is still jack ch--. My parents were able to raise us two and have a retirement because they didn't need to dip into their salary for retirement savings eg 75% pensions. Inflation adjusted, people today get paid enough to live, not enough to retire.
How nice for them. My dad never made over $12 an hour. He did get a pension, which I won't get, but I went to college and graduate school and make a very nice, top 3%, living.

I think my story is more typical than yours. The national income data certainly support that; while median incomes have stagnated, average incomes have risen because of the emergence of a mass upper middle class that barely existed in 1960. Drive around and look at all the expensive new houses and cars. Somebody has money and is buying them.
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Old 01-12-2016, 06:00 AM
 
29,809 posts, read 34,894,042 times
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Quote:
Originally Posted by Arcothunder View Post
I know many IT workers who joined the public sector in their 30s and 40s for lifestyle reasons. They wanted a family or to spend time with the family. Or just grew tired of long hours and not much time off. When young maybe money seems more important but somewhere in the 30s maybe you think you'd rather do other things then be in the office days, nights and weekends.

Pensions are great but truth be told over the long term of a 40-45 year career you'd have more saving 20% of your salary every week and investing in 401k, IRA, etc in the SP500
Not a fair comparison at all, totally apples and oranges. I don't know of any pension that between employee and employer contributions comes close to 20% of weekly raises If it comes close there is no SS contribution or benefit. The valid comparison and one that some folks implement is to contribute the equivalent of 20% of their weekly salary to a combination of employee, employer pension contributions and the balance in a 401/403. Combining those to a 20% savings/investing rate when compared with a pure personal 401/403 account is the comparison you want. Many have both pensions and work place savings accounts and retire with pensions and portfolio's. Depending on the pension plan they also have SS and that is the combined sweet spot. Works for me and many others in the forum as it provides a fixed income stream along with the liquidity of a portfolio.

What gets missed about the size of California pension benefits is that it for most of them it comes without SS benefits. Who is living fatter off the tax payer? A Californian with a 60K pension and no SS or a pensioner from another state with a 35K pension and a 25K SS benefit? The driving force in all of this isn't always the pension benefit formula as much as the salary the formula is applied to. Thus management will have higher pensions than custodians unless they make the same.

Also the vast majority of public sector employees don't work 40-50 years for the same employer and employers don't want them to and often offer buyouts as a younger worker lower on the scale is less expensive withing that budget as that budget probably isn't paying the pension. It is cheaper to retire a worker and let the pension fund pick up their cost and higher a younger worker with a lower salary and lower SS and pension contribution costs. Do a way with pensions and you need to factor in higher salaries when folks add 10-15 years to their working careers and higher SS contribution costs for their higher salaries. Also they are less healthy and they will probably add to health cost benefits etc etc. Consider governments in California having to contribute to the pension fund but not SS. End the pensions and they will now have SS contribution costs.
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Old 01-12-2016, 06:10 AM
 
29,809 posts, read 34,894,042 times
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Younger folks in here under 40 who want to cry a tale of woe about how much better we older boomers have it when compared to the younger folks today especially those under 30 need to remember:

We have children and grand children your age and their experiences are not necessarily yours so when you generalize and get back a You might want to consider that comparisons are being made and oh well you know
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