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Old 09-29-2013, 10:50 PM
Status: "Based" (set 19 days ago)
 
Location: Metro Detroit, Michigan
26,199 posts, read 21,252,575 times
Reputation: 25487

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Quote:
Originally Posted by budgetlord View Post
This is also true. The economy seems to be stabilizing, but the question is recovering to what? Times were good because we were essentially the only game in town. The rest of the world has caught up. Just gotta find a new strategy.
America has found a new strategy. You make less (if employed), you buy more on the credit card, you pay off your debts incrementally while paying a great deal more in interest, and the corporations thank you for propelling them to new heights of profitability. Oh yea, and you should treat your children very nice... They will be supporting you in retirement Shees, they have pensions in China. Those are a hop, skip and a step from going extinct in this country!
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Old 09-30-2013, 01:43 PM
 
Location: Vallejo
19,633 posts, read 21,851,194 times
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Quote:
Originally Posted by andywire View Post
America has found a new strategy. You make less (if employed), you buy more on the credit card, you pay off your debts incrementally while paying a great deal more in interest, and the corporations thank you for propelling them to new heights of profitability. Oh yea, and you should treat your children very nice... They will be supporting you in retirement Shees, they have pensions in China. Those are a hop, skip and a step from going extinct in this country!
The sooner the better. Pensions were a terrible idea to begin with. 401k/403b is much better. The money is actually put aside and invested rather than a vague promise of paying out a stipend. Most of the municipal debt crisis is because governments decided not to fund pensions. At least in California, you have reforms now. It's a bad deal for the employees who end up funding most of the pension costs out of their paychecks. In the PERS litigation I've done, they're usually taking a 6-10% cut in pay to fund the employer's pension liability. Going forward, that fixes the problem. As a pragmatist, fixed is fixed... It was bargained, so I can't feel too bad for the employees. Shaft of a deal for them, but realistically the only solution since governments weren't going to find the funds to actually make good on its obligations hiding under a rock. Retroactively, it's still a huge mess.

I'm fine with this new strategy. Now, if we could just get rid of social security I'd really be happy. Now, if I could just opt out of social security. I mean, I do what I can. I take some as owners draw on capital which isn't subject to SE taxes, max out my SEP contributions, deduct everything I possibly can as a business expense. It helps. It means more money in a solvent account that I can invest and earn more than 0-3.68% (with considerable inflation risk and zero diversification).

If people want to run up their credit cards and rely on their kids, well, that's no different than today. Social security will pay out about 2/3rds of what it's paying out now by the time we retire, and we'll probably be retiring later. I'd count more on like half. They might be paying out 2/3rds, but they'll adjust the wealth-transfer mechanism to pay out for lower-income workers and less for higher-income workers. I mean, I do a decent job of hiding as much income as I can from social security, but I can't get it down low enough to avoid the wealth-transfer mechanism.
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Old 10-02-2013, 04:01 PM
 
7,280 posts, read 10,438,133 times
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The economy is getting better, unless you sit there all day worrying about it or believing your economy is tied to the government economy.

Instead, concentrate on your own economy and make it better, stop worrying about some indicator(s) that means nothing.

People can go out and create their own recovery (if it dipped) or sit around waiting for someone to tell them the economy is better. If you wait, by the time someone tells you the economy is better, they are in line ahead of you.
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Old 10-03-2013, 03:02 AM
 
4,764 posts, read 3,542,640 times
Reputation: 3038
Quote:
Originally Posted by Malloric View Post
The sooner the better. Pensions were a terrible idea to begin with. 401k/403b is much better. The money is actually put aside and invested rather than a vague promise of paying out a stipend. Most of the municipal debt crisis is because governments decided not to fund pensions. At least in California, you have reforms now. It's a bad deal for the employees who end up funding most of the pension costs out of their paychecks. In the PERS litigation I've done, they're usually taking a 6-10% cut in pay to fund the employer's pension liability. Going forward, that fixes the problem. As a pragmatist, fixed is fixed... It was bargained, so I can't feel too bad for the employees. Shaft of a deal for them, but realistically the only solution since governments weren't going to find the funds to actually make good on its obligations hiding under a rock. Retroactively, it's still a huge mess.

...
I believe that is an oversimplification and an apples-to-oranges comparison as well. The problem with pensions was clearly due to inappropriate investment modeling. Had they assumed realistic rates of return and made contributions and projections (and promises) accordingly, there would have been no problem. Pension funds that acted responsibly are doing just fine now. You cant blame annuities for the managing parties ineptitude. Annuities work, they just need to be funded at appropriate levels.

Another big difference is that with a 401K the vast burden of responsibility lies with the employees contributions. The employer contribution is generally from 0-6%. Relatively minor compared to the contribution that employers previously made into pension funds. So, while pension funds were sold as a combination of "deferred income" and employer contributions, a 401K is mainly a personal savings vehicle with a minor employer component. Apples and oranges!

The next problem with pensions was transparency and accountability. That is not a problem inherent to pensions, rather a failure to communicate their true nature effectively and hold those in the decision making roles to any defined set of realistic standards. And let's not ignore that executives routinely pulled from pension funds to enhance the bottom line and that enhanced their incentives.

The problem with 401Ks is entirely different. Since they are totally voluntary, and the 401K savings rate in this country is not exactly robust, they are only going to work for a certain segment of employees.

I understand why employers want out of the pension business. It costs them money. But, what of all that "deferred compensation"? With the demise of pensions, it appears it simply went "poof"! And that represents a sizable cut in pay for anyone who previously enjoyed that benefit. They may just not have realized it yet.
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