its seems a general extrapolation of a purely free market economy where if you cant bootstrap yourself into the bottom of the investor class by the time you get old for whatever reason, you're essentially human trash
I always think of the remake of Little House on the Prairie series where Pa had to walk for 6 days to the nearest city to find work when the farm wasn't making it.
Not the same thing but sometimes you have to go where the work is.
"We saw in the 1980s a shift from pensions to 401(k)s; that was a raw deal for workers. These retirement plans were marketed as an instrument of financial freedom, but they were really transferring risk from the shoulder of the employers to the backs of the workers."
This is misleading. 401k's are considerably lower risk since they allow you to be diversified instead of putting all your eggs into one basket (ie a company retirement pension).
The problem is the amount of money going into a standard 401k is nowhere near the amount that went into a pension. You had pensions paying out amounts that would require a 401k account with $1MM+ in it. The standard company 401k match these days isn't even peanuts compared to that, and that's if the company even matches at all.
The other problem is that 401ks let you do dumb stuff pensions don't. Dumb stuff like pulling most of your funds in the 2008 crisis and holding it in cash to miss out on the rebound. Or investing in borderline scam products like variable annuities.
401ks are great if you're savvy. They are massively inefficient for society in that they require all the people who use them to understand investing.
This is really bad policy at a society level. People need real, unbiased investing guidance.
At what point does personal responsibility kick in? Every 401(k) I've been on has given the option of investing in funds that ramp down risk exposure as the fund's target retirement date comes closer.
Literally all you need to do is put your $1400/month in to a retirement account and not touch it. If you're upper middle class this is not hard to do (again I'm not talking about poor people here, but those with money who aren't saving).
Whenever our 401(k) report comes out at work I can tell that most people are not putting nearly the amount of money they should be into savings -- and this is a tech company so most everyone aside from interns are being generously compensated.
I think education is an important factor. I'm nearing 40, make a lot of money, but have no idea how to optimize my 401k. When I ask co-workers, they are more ignorant than me. I changed companies a few times and have tranches of cash in each of their 401ks.
Well if you don't mind me asking, what kind of annual returns are you generating? If you're in the 7-8% range you're probably about as "optimized" as you can be, assuming your 401(k) is only giving access to large index funds.
Another trick you can use is switch to a Roth 401(k). It means you'll be taxed on your savings today, but when you retire they'll be tax free. Now this is total speculation here, but I'm kind of assuming taxes will be pretty high in the coming decades as we try to keep social security going and pay down deficit spending, not too mention dealing with climate change fallout.
Also good for you on keeping all your money in the 401(k) accounts, some people cash them out when they change jobs which triggers penalities and taxes. If you can however, I would roll all your accounts in to one giant 401(k) so you can better keep track of what's going on.
I have no doubt that if the capping of 401k deductions goes through, Roth IRAs will be next. There is nothing stopping the government from deciding to tax Roth withdrawals down the road. They'll probably do it at a lower rate, like capital gains, but I fully expect it to happen.
I have like 20K in a 401K when I worked at Microsoft a long time ago. This is around the 2008 fiasco. I just converted everything to cash. I didn't do a rollover when I changed employers (I think there is some time limit which I have likely exceeded). I've been trying to figure out if I can make use of that cash. The confusion is that the plan I was in was for Microsoft employees. Can I still use their plan's investment options?? I also don't want to incur any tax implication ... literally the cash has been sitting there for years because I am too stupid to figure out all the details. It is just sad :(
> I didn't do a rollover when I changed employers (I think there is some time limit which I have likely exceeded).
There are several "timelimit" related aspects to 401k rollovers, neither would apply in your circumstance. You sound anxiety paralyzed like you made some "unfix-able past mistake" and there is zero reason for you to be.
> It is just sad :(
See my other comment about consolidating all of your legacy 401ks into a single robo-advisor (betterment/wealthfront/etc). It isn't hard, mainly consists of sending a few emails to HR departments and forwarding a few paper checks. Any robo-advisor will have a support team that will hold your hand through the process for free - they want to earn your business.
401k’s don’t have taxes and Microsoft employees don’t get secret better investment options than you do. Just move it into Betterment and forget about it.
Actually they do - the combined Microsoft 401k fund is large enough that they can reduce fees compared to normal places. I think most of the indexes I am invested in were at something like 0.05% costs. It's similar to the benefit of Vanguard Admirals shares.
This is at Fidelity, right? You can still use the exact same investment options as when you were a Microsoft employee, you just can't add to the account. The Microsoft 401k has some of the lowest fee investment options out there, so when I left MS and analyzed my options, I decided to leave my money in there instead of rolling it over. Do you have a NetBenefits account for the website? If not, you'll have to call Fidelity, but they should be able to sort you out pretty easily.
Thanks ... this is useful info. I was thinking I'll park the cash in a low-cost market tracking fund. I think markets are overvalued now but better to do this now than waste another decade :/
Roll all of your 401K's over into a single Roth IRA. I lost track of one for years until I went to work for another company that had a 401K with the same firm as my previous employer. It's easier to keep track of and mentally manage and last time I was in a 401K you are limited to a specific hand picked set of funds that may or may not be that great. Invest the Roth IRA 100% into index or age specific target retirement funds, off the top of my head there's a Vanguard 2040 or 2045 fund or equivalent at other mutual fund companies.
>>Roll all of your 401K's over into a single Roth IRA.
In the US, Roth contributions are made with "after-tax dollars", while 401K contributions are generally made with "pre-tax dollars", so if you rollover the 401K into a Roth, the IRS will see the rollover (aka "conversion") as a bump in your income and ask you to pay tax on the rollover amount, with the remainder/net going to the Roth IRA.
I still think a Roth conversion is a good idea for self-directed investments, but folks should be aware of the incoming tax bill.
It'll be more absolute dollar value of growth, but wouldn't be higher in percentage, and taxes are going to come out as some percentage of any money that was put in pre-tax at the time you withdraw.
If you didn't work the entire year or your income was otherwise variable (bonuses or whatever other reason) then it makes more sense than usual to do roth contributions, or rollovers/recharacterization from traditional to roth, in lower-income years. Assuming you can afford to, and want to maximize what you put into tax-advantaged accounts.
The annual contribution limits are also on dollar amount that goes into the account, so if you're maxing out then you can get more out of a roth ira/401k overall. Not all companies offer the choice of roth on their 401k plans, which is a little annoying.
Not sure if you actually want financial advice but here goes:
Buy a low cost diversified ETF. Take all your options, sort on management expense, and read the description. Not sure about your personal preferences and needs, but you're still young so you can be relatively risky. Buy 75% of the cheapest diversified stock fund and 25% of the cheapest diversified bond fund.
It doesn't have to be too complicated. You just have to not make very bad decisions (all stocks a year before retirement, or all cash for decades). And avoid high fees
If you want a simple answer, consolidate by rolling all your legacy 401k accounts into a robo-advisor that handles traditional IRA accounts (ie 401k).
A robo-advisor is a tech company in the financial space. They provide one-size-fits-all opinionated investment strategy (ie they do not let you pick individual stocks etc, you respect their overall portfolio strategy) that is not actively managed (ie they buy "the market" instead of individual stocks). As a result you will be diversified and you pay extremely low fees (many company 401k plan funds have horrible fees that completely take advantage of you).
Personally, I use betterment (https://www.betterment.com/). I approve of their investment portfolio strategy (https://www.betterment.com/portfolio/) and their fees are significantly below the fund choices I have in my company's 401k, so it is a good fit for me.
The one decision betterment does allow you to make (again the goal is simplicity), is your stock/bond allocation. Allocation strategy is a bit outside of the scope of this response, but to keep things simple I'll say anything from 70% stocks/30% bonds to 80/20 stocks/bonds is probably fine.
If you have further questions, or want a more "complicated" answer, feel free to email me directly (check my profile page). I'm an engineer, not a financial adviser, but I've been actively interested in personal finance for a long time now.
Seriously though, everyone has given very solid advice. As mentioned, the first thing you should do is consolidate all 401K accounts into a single IRA (or Roth IRA if you're hedging against much higher tax rates in the future).
Also, consider setting aside 10% of your IRA to play/learn/speculate with. By this I mean investing in funds or direct stocks in areas that you have an outside interest in (e.g. tech, clean energy, socially responsible, geographic region, etc). Due to your interests in this area outside of pure personal finance, you may be motivated to learn more about investing in general - which is always a good thing and will be more important as you begin to pull money out of your IRA during retirement.
Look at the returns for each of your 401's. Move your money from the poorly performing funds to the well performing funds. If your top-performing funds have about the same return, keep things diversified.
Another big problem is that 401Ks have a "longevity risk". Saving as an individual, you must save enough to handle the very remote possibility that you will live past age 100. A pension fund, on the other hand, can safely assume that on average pensioners will die long before that. So a responsible 401K holder must oversave.
> At what point does personal responsibility kick in? Every 401(k) I've been on has given the option of investing in funds that ramp down risk exposure as the fund's target retirement date comes closer.
There is no reason to assume that a target-date fund is actually any good. It's like any fund, there are good ones and there are really bad ones, and we're not even talking about whether the 401(k) account that holds the fund has its own problems (which an employee won't be able to avoid if they want to actually invest to the tax sheltered limit every year).
So the "personal responsibility" kicks in once you've educated yourself on all the ins and outs of the way the retirement system in the US can rip people off, intentionally on the part of those peddling bad products or as the result of poor decisions on the part of the investor. Something maybe half of the people out there are qualified to do, and somewhat less than 1% of the people out there are actually interested in doing.
We could fix all this with better policy (allowing everyone to do fee-free in-service rollovers of their 401ks and IRAs to the retirement funds federal workers use, which rely on low-cost index funds, might be one basis of a decent system) but we won't. Too many people are making money ripping other people off.
Maybe, I am misinformed, but aren't Federal pensions defined benefits plans? The contributions aren't invested in low-cost index funds. if this is the case, your comment about transferring doesn't make any sense.
But again, "you aren't talking about poor people here". Wanna take a look at the income distribution of the US and tell me what % of people you think can afford a $1400/month hit to their paycheck?
Considering the extremely poor state of private defined benefit pension funds, as well as taxpayer funded ones, I don't see how one can make the claim that 401k has too much freedom to do dumb things compared to defined benefit pensions.
Agency risk is always there when you hand over responsibility of something to someone, and it's especially acute with big pots of money. The best investment for retirement is to raise children who will raise grandchildren who all look after each other.
The secret to pensions is making contributions. Places like New York that legally require full contributions are doing fine (although that is not cheap to do). Places like Illinois who skip the bill or most companies post 1980 who steal the money are a different story.
> Considering the extremely poor state of private defined benefit pension funds
The poorly funded ones make the news, but there are many healthy ones that don't. It isn't agency risk that causes problems, it's a combination of increased longevity and low interest rates.
A big problem with 401Ks is predatory investment advice. "Advisors" channel money into high-fee funds and commissionable investments and often "churn" money to generate additional commissions. The Obama administration cracked down by instituting a "Fiduciary" standard for retirement funds, but Trump has delayed implementation of the rule twice.
Almost every state and local government agency is underfunded, many in the billions of dollars. The reasoning is that they can always just raise future taxes, which allows for huge agency risk of politicians buying union votes. The politician gets elected, the current union members get paid, and the future taxpayers and union members who aren't voting get shafted.
401ks aren't perfect, but it's better than the above system. There's a reason no one sells annuities even close to what the government offers in it's pension benefits. It's ridiculously costly without using funny numbers.
Sure individuals can make dumb decisions with their money, like try to time the market. But so can companies when it comes to managing pension funds. This includes not funding future liabilities, since you likely won't be the one responsible when the payments become due.
Note the lack of the word “retirement” in “social security”. It’s a safety net, not a retirement account. Says so right on the tin.
EDIT: and before anyone else gets an itchy downvote finger, go look it up. Here, I’ll quote from the SSA’s own page: “Based on social insurance principles, the program provides monthly benefits designed to replace, in part, the loss of income due to retirement, disability, or death.” (emphasis mine). It’s so the old and disabled don’t starve in the streets, not a retirement plan.
Absolutely! Social security was designed to help the elderly avoid being desperately poor. And has succeeded at that to a large extent. But a full fledged retirement program it is not.
I can start collecting that amount at 67, and will statistically die at 78.
So 11 years of benefits is $185k.
Meanwhile, if I make an average of $100k for just 12 years, then I will have paid that much into the system (15% contribution). And that's not even counting the massive amount of compounding that will have occurred as I've been contributing since I was 14 years old.
I know it's quite popular for the HN crowd to talk about raising taxes for things like universal health care, social programs, etc.
But when I actually do the numbers and look at how I'm already paying about 1/3 of my income to taxes, I'm beginning to see why many conservatives don't trust the government to be fair stewards of our money.
"The significance of the new social insurance program was that it sought to address the long-range problem of economic security for the aged through a contributory system in which the workers themselves contributed to their own future retirement benefit by making regular payments into a joint fund."
> Or investing in borderline scam products like variable annuities.
It's interesting that you say this, because many VAs have embedded put options that were very valuable post-crisis. The "scam" happens when someone invests 100% of their modest life-savings in a VA.
Ben Bernanke invests the majority of his retirement savings in annuities, it's really just like buying into a pension.
Pensions, 401(k)s, and most saving for retirement are not necessary. Just Roth IRA and compound interest.
All one needs to do is save an extra $450/mo after tax starting at age 22, put that into Vanguard VFIAX or similar for the next 40 years. That will give you a few million at retirement...tax free assuming the market continues to act how it has acted for the last 50 years. Combine it with social security and retirement will be manageable for most. Spend the rest of your salary on hookers/blow or iPhone game microtransactions, it doesn't matter.
The problem is the lack of financial education and ethic in the population.
Or some of the problem could be the $450 per month. At 22.
In indiana, that's a rent payment. A car payment. You might not even be done with school let alone getting a decent enough job to be able to afford this on top of your rent, transportation, and student loan debt. You are worse off if you didn't go to school or if you are working on a masters (or higher).
All the financial education in the world won't make these ends meet for most folks.
> They are massively inefficient for society in that they require all the people who use them to understand investing.
This is really bad policy at a society level.
I am so happy to meet someone who understands the concept of "society level".
Too often on the internet, I debate with people who's only concern is what benefits them or their cohort.
I find very few people think about "society" when talking policy.
Society allowed me to graduate with degrees in science and engineering without knowing the difference between a stock and a bond, and yet the same society gives me complete control over my retirement investments.
Luckily, investing is not very difficult to figure out on your own. I read the book "Investing for Dummies" and I thought it did a great job at teaching basic ideas, and basic ideas are enough for the majority of people.
If society expects us to manage our own investments, then it should also equip us with the tools to do it effectively. It should be a required topic at the high school level.
Pensions are inherently unsustainable because they guarantee returns. What investor in the world is ever able to guarantee returns, especially at the volume of clients that get served by pensions? It is likelier that the pension:
The cash payout part of a pension is, as you point out, just math. The problem is health care. If you retired in, say, 1980 with a pension that included health care, the company ended up paying out (on average) far, far more than they expected.
That is a fair point. I don't know how to handle healthcare because it is a good with almost infinite demand (who doesn't want to live longer or be healthier), and a finite supply (of doctors, nurses and other folks who can provide services to help us live longer healthier lives). What happens when you have demand with limited supply?
I am the sole signer on my 401k. Activist investors, short-term-thinking CEOs, state Republican parties, etc. can and routinely do choose to run pension funds into default. Heck, I trust my employer but I don’t trust it to be solvent in 40 years.
Pension funds are pretty safe if they are sector based instead of just individual companies.
Oh and obviously the government needs to guarantee them as a last resort. That way if a company doesn't hold up its end of the bargain it is not citizens that have to try to collect but the big bad Treasury wolf.
But government is considered evil in the US I know.
There is always people that bring up worries over some of the public sector pension schemes in the US and how it will affect a municipality. One example, IIRC, is in Chicago. Another typically revolves around policeman/fireman pensions in other cities and the cities not being able to actually pay them.
Is this a fault or mismanagement or the pension structure not working or both? And if the cities have to guarantee the pensions, what does that mean for taxpayers in those cities?
I don't think you understand pensions. Pensions are assets that a company has to maintain that are invested professionally (ie diversified investments). Yes pensions have disappeared or been reduced due to fraud or gross mismanagement, but the chances of that happening to a pension are a lot lower than your chances that the average person is adequately maintaining a 401k.
Another issue with 401ks is if you're like a lot of folks that have had the wonderful luck to work at smaller companies that don't have 401ks or hand out benefits of any sort. An individual IRA maxes out at $5,500/yr so if end up in an industry or at a job that doesn't offer a 401k, you can miss out on years of putting away that money in some sort of tax-deferred account.
Sounds like this book has an unfortunate bias of victim hood.
Lost your mortgage? Not your fault.
Didn’t save for retirement? Not your fault.
Only job prospect, after working and training and networking for your entire adult life, is moving boxes in an AMZN warehouse? Not your fault.
I prefer a more objective view, like Studs Terkel’s classic book, Working.
Finally, don’t get me wrong — I have neighbors in the described situation. I care about them. I’m just saying I’d enjoy reading an objective narrative about their hard, and unfortunate situation — something not clouded with the tone of victimization.
Perhaps you meant to write "bias of false victimhood". There is nothing biased about victimhood itself. Many people are really truly and objectively victims.
How did people lose their retirement investments in 2008? Most of the stories I've heard where people lost all of their retirement around 2008 involved doing things were considered fairly risky before 2008 hit. Were there people who lost all their retirement who were following typical retirement investment strategies?
Edit: And to be clear, I know the value of almost everyone's investments went down, but unless your money was all in a single company it seems that most diversified portfolios bounced back.
Many people put all of their money into paying the mortgage on a house. A reasonably sound investment. And then they found their mortgages to be underwater. Literally every dollar they had put in, was now worthless on paper. Those who did not buy into the sunk cost fallacy allowed their houses be reclaimed. Then they truly had nothing.
I bought a house in 2007. Ten years later it still is not worth what I owe on it. Sometimes the market doesn’t recover.
I’ve wanted to move somewhere else for at least five of those years. I finally have, and my options with the old house are either to rent it out (rent would not cover mortgage payment) or try to deal with the bank to avoid foreclosure, via short sale or deed in lieu. In any of those cases, now I have two problems.
I truly don't know what the theoretically better decision is. That wording was intended to poke fun at arrogant HNers who think that everything in the markets follows some trivial buzzword based rule-set.
Right. In the meantime, while working folks could keep their investments intact and have them grow back to pre-crash levels or higher, retired folks needed money to live on and were forced to remove some of their nest egg at the bottom. It takes much longer to recover in that situation.
> retired folks needed money to live on and were forced to remove some of their nest egg at the bottom
While I understand that people who are already retired can't just choose to keep working while their investments recover, I'm not aware of any retirement investing strategy that has you fully invested in stocks at the point you retire. The whole point of moving your retirement to safer investments around retirement age is so you don't have to take money out of stocks when there is a financial downturn.
I may be missing something, but you seem to be describing retirees with a very risky asset allocation. I'm not trying to minimize how devastating that was for people, but I am trying to understand what they were victims of. Were they victims of financial advisors recommending that type of asset allocation?
"How did people lose their retirement investments in 2008..following typical investment strategies?" Well, you can follow those strategies until fear takes over. I know of a graduate scholar that got scared, got her money out when you saw how her investment accounts went downwards. You keep the cash, fearing that if you invest again you will loose all. You see how the market goes up, but you do not believe on it again. Or the sunk cost fallacy...or risk aversion with an overestimation of risk.
The more financial AND emotional intelligence you have the less likely you are to fall into such life.
But let's have empathy because the majority of people have less financial intelligence and cold blod as the average hn reader. Let alone the chance of earning a very good salary for a few decades.
I'm not trying to downplay the plight of people who lost a lot of money in 2008 and I'm not trying to say "well it is their own fault" to trying to justify not feeling bad for them.
However, I think it is entirely reasonable to assume we will someday experience another similar event. If there was something about this event that caused some people who were following sound retirement investment strategies to lose all of their savings, I wanted to know about it. That is why I was asking.
Studs Turkel's book Working is for an America that is gone.
When this current bubble bursts, we will see the truth for all those who belive it's just not enough--what's the word--planning, or solid work ethic?
I was going to say we need a new Working book for the Sharing Economey, but I feel it would be pretty thin, and just say see "Chinese economy", or done other "they do it cheaper" country for more information.
It would be interesting to see a Studs Turkel type writing about a startup that produces absolutely nothing new, or a product that will be decimated by one of the monopolies.
I would like to read how a 1 percenter rationalizes their greedy, and narcissism though; while the safe, predictable, somewhat ethical country they grew up slides into chaos.
I read it years ago. He also profiled a lot of people with unglamorous jobs, like hotel doormen. As a teenager, I felt like reading that book taught me something I needed to understand about work and how even jobs that are considered desireable and financially rewarding can be complete drudgery to do over a period of years, let alone decades.
I think you're underestimating how hard these people have worked their whole lives.
The issue is not one of not working. It's one of lower class wages.
If you work your while life and do all the things society expects of you but still end up screwed. That's a systemic problem not a lazy person problem.
I know (lower middle class) people who went bankrupt in the Great Recession because they had 2 or more mortgages, obtained with a 5% down payment. To me, they took too big of a gamble, and lost.
I know others who stayed out of such gambles and survived the GR.
I know others who had to significantly downsize or live with family members because they lost their job and then spent their savings.
There is a steady stream of these articles describing this as a problem of older people. It isn't. This is about poor people. There are plenty of non-old people living our of RVs, or worse, chasing seasonal work wherever they can find it. An RV is a huge step up from a tent. This is one slightly more pathetic version of an increasingly common story: our modern economy isn't addressing poverty. Poor people of all ages are falling off the cliff. They need help. They don't need classes on writing resumes. They don't need tax breaks. They need cash and a place to live near a reasonable job.
Some of you are very out of touch. They're not saving for retirement because they can't. First, most of them were not even working jobs with 401k's available. Second, how the hell are you supposed to save when you don't even have enough money to pay your current rent, food, gas, medical expenses? I think some of you imagine everyone is making $80,000-$200,000 a year and they're just being irresponsible and not saving up money because they live beyond their means.
In fact, the number of people who don't have enough for retirement because of this reason is quite small. Most people are there because they or their family had a catastrophic medical event, job loss, and/or some massive loss of value in their home due to the depression (from which they've never recovered).
Leaving me with less than $22K before taxes. Please tell me you’re being sarcastic, and not as out of touch as parent post claims. Because if I were being sarcastic, I’d use the ridiculous numbers you came up with to make my intention clear.
I’m citing numbers for an individual. The median household income is almost $60k. The median household could easily retire with $1M. I’ll say it again, they are too lazy.
So we shouldn't start a family on 21k, but then you say that the median household income is 60k. That's because two married people making an income of 30k each before taxes gives 60k. So which is it don't start a family or do? Why should people with less opportunity not be allowed a family anyway? Even with your 60k median (basically a bit more than 21k each) is hardly enough to live on, saving for retirement is just out of the question. Your logic here is very flawed, without even getting into any other numbers/situations these theoretical people may go through. Take the average cost of health care, utilities, medical bills, dentist bills, rent, and food. Even if these people were to do no eating out and no entertainment, I think you would find that they would not have enough to save for retirement. Throwing the word lazy around is a "lazy" argument
What happens when you come down with an illness that leaves you with a $15,000 medical bill and a month out of work (so you probably lose your job)? Happens to people all the time.
Have you tried raising a family on $21,000 a year, even in a low-cost area? (not to mention an urban area, where such earnings are quite common)
I upvoted you, but to be fair to parent, nothing you said invalidates what they wrote. Parent made a statement, and it would seem that because they did not give the “why” you assumed that they’re being a scold. Maybe, maybe not, but the All Holy HN Guidelines suggest taking the charitable interpretation, and I’m going with that.
EDIT: and just as I hit “reply”, parent comes back with a response indicating that the charitable interpretation was wrong. sigh
> "For one thing, Amazon should pay its workers more and give them better working conditions. It’s laughable that the workers get a 15-minute break when they have to spend it walking to the break room. It’s completely insane."
Perhaps the rest of society should be more aware of the darkside(s) of the business models they are supporting?
Plenty of multi-nationals - Nike comes to mind - have been pressured into making changes to practices that were not socially acceptable.
Why isn't Amazon being held to the same measuring stick?
Editorial: Why is the public still so naive about the "hidden costs" of cheaper? Certainly, Walmart (for example) and its darkside would be fresh in the minds of the American public. Instead, it seems, the perception is Amazon is the saviour (from Walmart), when the new boss is really the same as the old boss (sans the glossy high tech paint job).
>> Why is the public still so naive about the "hidden costs" of cheaper?
Because it is not true. Apple products are considered luxury goods and the company is known for the horrendous treatment of their workers in Asia. And ALDI is a very cheap supermarket chain in Germany but pays and treats their employees better than some more expensive ones.
There might be a correlation but that means nothing for each individual purchase.
shouldn't you be quoting examples from within the same society? it seems a bit suss to quote a German budget chain acting reasonably responsibly towards its employees as a counter point to an American one. last time i looked labour laws were vastly different between the US and Germany...
Companies operating in the United States (like ALDI) are going to be subject to all the same labor laws as any other company operating in the United States.
(I believe ADLI is owned by the same parent company as Trader Joes.)
The Apple example is accurate. But it's also an outlier, and in the context of the discussion even worse.
Agreed. Aldi is a great outfit and gets more of my business because of that. It IS possible to live without Amazon. I don't think it's unreasonable for more people to consider trying a bit to consider that.
The reason ALDI pays employees really well is because the entire store is run with only a few employees at a time. A significant portion of the value you get from the store (cheap prices) is because their labor costs are low. I'd go as far to say that the real thing you are buying at ALDI is products that don't have a lot of labor waste built into the price. I've heard most places have 2 to 4 working at a time, but I've seen stores where a single employee is running everything.
Every employee I've seen there is working very hard the entire time. Before they added scanners, they were required to memorize the price of every item in the store. They pay more because they will not get the type of employee they need by paying less. While most of the people who are a good fit for ALDI like it there, you can find many reviews saying the work was too hard and that there was too much pressure.
If you look at retired RVers who have written about working at Amazon.com, you'll find many who felt that while the work was hard, it was good work and paid well (especially with holiday overtime) but you had to be willing (and physically capable) of doing hard work.
Like you say, the cost of each individual purchase from a company has little to do with how much they pay their employees. There is a much stronger correlation between employees who are doing hard things that add significant value and higher pay.
Nike now does regular audits of their factories to ensure compliance of good working condition requirements. They've improved since their factory fiascos in the 90s. Don't think they're perfect, but they seem to be trying.
Transparency and accountability are fundamental to Nike’s sustainable business approach. The Nike Manufacturing Map discloses the names, locations and demographic information about the workforce at the factories we contract to make our product, and holds us accountable for our chosen source base.
Because structural problems can not be solved on the individual level.
We will not end world hunger by eating less. We will not stop climate change by turning off the light more often. And we will not fix exploitative employment practices by voting with our wallet.
The cynic in my thinks that the "vote with your wallet" slogan has been coined by those who want to prevent better regulation.
All these things CAN be solved by passing laws and regulation and by building a society that supports and enforces those.
The cynic in my thinks that the "vote with your wallet" slogan has been coined by those who want to prevent better regulation.
Upvoted for that sentence alone. We have government because I can’t build a road by myself. I also can’t individually smack a company upside the head and tell them “cut it out, this isn’t the society I want to live in”.
I think the bigger idea is that there should be a broader system of international mutual aid. We can't drag down our own labor standards because someone else's is terrible. We need to help raise them up. Only international cooperation can prevent us from accelerating in a race to the bottom.
We as individuals CAN decide where we spend your money.
Two very different scenarios. You very different level of civic duty.
Could regulation help? Sure, Uncle Sam gets lucky from time to time :) But it is never as powerful as the market. Until the market says "screw Amazon" Amazon will continue to do what rewards it and its shareholders.
"I don't want to live in a society where people have to $thing, so let's ban $thing and punish the companies involved in it" is approximately the most destructive fallacy of our time. Making upper-middle-class the minimum allowable lifestyle doesn't give everyone an upper-middle-class standard of living. It just punishes those who don't already have it.
We're going to keep ratcheting up the minimum allowable job, housing, food, etc. until a tiny minority of liberal elites are congratulating each other for having eradicated exploitation and all the liberated victims of exploitation are unemployed, homeless, and starving.
I don't want to live in a society where people have to live in RVs and work in Amazon warehouses. But banning Amazon warehouses (or RVs) isn't going to help.
We need redistribution, retraining, a real social safety net, healthcare, etc. so that people actually have better options than exploitative employment situations. Then it isn't even necessary to ban them, because no one would want them anyway.
More destructive than, "oil companies can spill oil anywhere" (Nigeria) or "let's kill everyone from the 'wrong' ethnic group" (Rwanda) or "let's exploit orphans" (Ireland)?
Those things are clearly evil and clearly demand a response.
The "let's ban symptoms and coping mechanisms" bandwagon, on the other hand, gives citizens who are concerned about a situation the feeling that they're helping, disarming and distracting them from actually constructing a better world. The collective loss to society of the solutions that could be built but aren't is quite large.
Imagine if we had single-payer health care instead of more regulation on employer-employee relationships. Imagine if we had public housing instead of regulation stonewalling private development. Imagine if we actually built world-class public transportation systems instead of just starving out the parking. Etc, etc.
I think the whole ObamaCare fiasco is one of those things that the typical millennial liberals on HN have gotten entirely wrong.
For years, the mantra here has been that all those red state deplorables who were wary about government health care were voting against their own interests, and ignorant for not wanting it.
Trust us. We know better than you.
Well now we've seen what's happening. Premiums have skyrocketed for average workers and everyone has been moved to high deductible plans that pay for nothing.
My own insurance had gone from decent to worthless, and it costs twice as much. As a single guy who makes a high income, it's no big deal. For many of my coworkers who have a spouse and 3 kids, it has been devastating. And it's getting worse as more states drop plans.
Agree. But to be fair to ACA is was very ambitious legislation. It would be naive to expect any such thing to be even close to perfect out of the gate. It should be evolving. It is not. Given their oath this falls on both parties. They don't work for their parties as soldiers against the other party.
They. Work. For. Us.
I don't care who is in charge. I want results. Where is the fine tuning? Where is the sense that they work for us?
That being said, and not to get too off topic, but there isn't a healthcare system in the world that can support our collective dietary and lifestyle habits. Obama blew it becausr he failed to tie (personal) health to health. He failed to explain how there are things that can be prevented (e.g., Type 2 diabetes) that we all but refuse to address.
Furthermore, these preventable gateway diseases - again let's stick with diabetes - significantly increase the risk of cancer, Alzheimer's, etc.
Cost are increasing...as are waistlines and age. How are costs going to decline if more people are in need of more and more serious treatment? They fact that a fair amount is in fact preventable only makes the current disconnect even more confusing.
The problem with the ACA isn't that everyone can get coverage, the problem is that insurance companies are still involved. The idea of designing a solution where private companies are free to profit from the basic operations of a public service is bonkers. They add nothing of value, and will only push prices up. I could've told you from the start that the ACA was doomed to failure, and I come from a country that has socialised healthcare and has benefited from such a system.
Take health insurance companies out of the picture, and address price gouging by pharmaceutical companies, and you'll almost certainly see costs come down. I'm pleased to see there has been some momentum for single payer, so the US can scrap the ACA.
On a side note, ACA was similar to a plan proposed by Republicans back in the 90s:
Yes. But they also charge more because they can. Healthcare is not special. It's like any other limited resources. That is, increase demand and the price goes up.
On the other hand, lower demand and prices will fall.
As it is we're getting older and intentionally living a more unhealthy lifestyle, but expecting prices to fall?
No doubt there are vast disfunction in the current system. However, the biggest - literally - component of that system are the humam seeking / needing care. What's more unhealthy, those people or the insurance companies? I can't see the line between the diabetes dot or the smoking dot and the insurance companies.
> "Yes. But they also charge more because they can. Healthcare is not special. It's like any other limited resources. That is, increase demand and the price goes up."
If you're talking about pharmaceutical prices, there are ways around that. For example, drugs that are FDA approved and available elsewhere in the world for a lower price should be able to be legally imported and sold at that lower price. To give an example of how this could be implemented, there was a bill that was proposed to allow drugs from Canada to be imported and sold:
By increasing competition from imports, drug prices can come down. Also, allowing generics to come to market faster for the most commonly used drugs (i.e. cutting down the time for which a single pharmaceutical company has a monopoly on producing a drug) is another approach that can stop pharmaceutical companies from over-inflating drug prices in the US.
> "We need redistribution, retraining, a real social safety net, healthcare, etc. so that people actually have better options than exploitative employment situations. Then it isn't even necessary to ban them, because no one would want them anyway."
What we (aka The Market) needs is choices. We willingly got ourselves into this. We bought into the idea that cheaper (and disposable) is best - a la Walmart - and then rotted our communities from the inside out. The local mom & pops replaced by a browser and a UPS truck.
So while Widget X was/is less expensive we're still at the end of the year out of pocket for just as much, if not more, in order to yield all the intangibles the more expensive widget supported.
Yes the solution legislation? It might be. The question is will that help to solve the root problem, or simply create another gov program that creates long term dependency, instead of working towards an enabled citizenship; a society where better individual decisions matter.
It seems to me we've bought into the idea the price is the only thing that matters, and then we wonder why we're treated as human resources.
> "We will not end world hunger by eating less. We will not stop climate change by turning off the light more often. And we will not fix exploitative employment practices by voting with our wallet."
Voting with your wallet does work, it just works slowly, so it doesn't satisfy those who are waiting for revolution.
To give an example, let's say you choose to become a vegetarian. What difference does that make? The more vegetarian food you buy, the more profits go up for vegetarian options, the more options become available. It's a slow change as the impact is minimal at first, but look at what it's lead to. 50 years ago the idea of a food company specialising in vegetarian-only food would've probably seemed quaint, now it's normal. It's also normal to find multiple vegetarian options in restaurants, and even restaurants that specialise in vegetarian food. You may think of this as not noteworthy, but I'd suggest it only seems inconsequential as the change was so gradual.
Now imagine if all would-be vegetarians had continued to eat meat, but had lobbied the government to cut down on meat production, are we likely to have seen a quicker change?
This is spot on. I've been vegetarian for a long time. I have seen a drastic change in the availability of vegetarian options at restaurants and grocery stores. It makes it easier for someone who isn't vegetarian to choose to have a vegetarian meal.
All the people that bought the original Tesla Roadster paved the way for the Model 3. The people that originally created a market for energy efficient bulbs enabled economies of scale to allow those bulbs to become mainstream.
I wouldn't diminish the role of early adopters in shaping culture and the economy.
So Nike (and others) de-swearshop'ed itself because of legislation? More and more food companies are cleaning up their ingredients because of legislation?
We all know Uncle Sam's track record: great for wars and the MIC, subpar for just about everything else.
If people can give a shit about how Nike makes a pair of kicks, certainly Amazon can be held to the same standards.
Uncle Sam can't get the food pyramid right. It's not going to save us from the likes of Amazon. There's little evidence that it's up to the task. Ideally, yes. Realistically? Too doubtful.
Most of those are small acts in comparison with the power that the US government has, and one of those acts was linked to the MIC that GP mentioned (DARPA is part of the MIC).
Let's say you were in charge of government spending, would you be spending $584 billion a year on the military? Just think about how much good you could do for your country with 50% of that (the US would still have the biggest military budget even if cutting spending by half). Do you think the best you could do is a school lunch program and paying electric companies to extend the electric grid?
> Most of those are small acts in comparison with the power that the US government has, and one of those acts was linked to the MIC that GP mentioned (DARPA is part of the MIC).
Thanks. I take back that bullet point.
Still, you've shifted the argument. If we take the commenter I responded to seriously, then "food pyramid" must be an example of what they mean by a federal program being "subpar." The food pyramid is a failure-- citizens' tax money went to fund a program that delivered inaccurate and unhelpful information back to them.
In response, I enumerated a few federal projects that popped into my head which most reasonably people would deem successful.
So I think we both disagree with the commenter's assertion that everything other than military spending is subpar by the measure their own example suggests. Even in your own assertion about gov't spending, you rely on a well-respected agency-- the CBO-- whose success at their role gives further evidence against the commenter's assertion.
> "So I think we both disagree with the commenter's assertion that everything other than military spending is subpar by the measure their own example suggests."
I don't disagree with GP, but I don't live in the US, so all I have to go on is what I'm told in the media, which I'm aware is open to manipulation. However, what I can say, based on the statistics available, which have been backed up by official sources, is that military spending seems much too high, which is a sign that the US government does not seem to have its priorities in line with what the people want (on the assumption that most of the US population is anti-war). With that in mind, the services you receive for your tax dollars can be seen as subpar as your government is spending a high proportion of the money you gave them in taxes on services that you neither benefit from nor desire.
For what it's worth, I'm from the UK and the priorities of the current UK government is far from aligned with the general public (cuts to the health, cuts to education, tax breaks for corporations that are already engaging in massive tax avoidance, etc...) as well as government programs being hugely wasteful (this was an older example, but it does make me wonder how things managed to get this bad before it was stopped https://www.theguardian.com/society/2013/sep/18/nhs-records-... ). I just wanted to make it clear that I wasn't just criticising the US government, any country that has big issues surrounding wasting tax payer money is providing subpar services. There should be a way of making governments more accountable for their fiscal decisions, but I don't know how to best implement that. Suggestions welcome!
As for this list. Yes, nice. Thank you. But all in all small potatoes, if not terribly obvious.
Yes. They count. But these are light-weight things compared to climate change, globalization, and such. That's why the military reference matters. It's the one big budget thing Uncle Sam does well.
I find it hard to support Amazon in any way knowing how it treats its employees, both in the warehouses and at corporate. For it to span such different contexts suggests how systemic it really is.
It's interesting reading this because I also feel like I've been living a desperate, nomadic life.
There was a period of time in the past 2 years when I didn't have a home and stayed at various places on AirBnb while working remotely. The worst part was when I ran out of money because opportunities dried up on the work platform I was using. At the time I was in Russia with a dependent partner; we had gone there because of the low cost of living brought on by US sanctions. So I can relate to the feeling of being constantly forced to follow the money wherever it takes you. It's stressful and disorientating.
I don't understand how anyone in their 50s can sustain this lifestyle without going insane.
I drove by a closed Amazon.com warehouse in Kansas a few weeks ago. Next to it is a RV campground that is still operating. If you look around on RV websites you can find quite a few reviews from people who went there and other Amazon.com locations to work like this. Those reviews mostly paint a very different picture than what is described in the article.
For many of the Amazon.com camper/workers it was a way to do a lot of work in a few months to help support their retirement travel and the people who were actually doing it seemed to think the pay was pretty good--especially with the overtime.
From a Wired article [0] about one of the couples she talks about:
"Objects they couldn’t bear to part with—including Chuck’s letter from Ray Kroc, framed and hanging on the wall—went to one of Barb’s daughters for safekeeping. (Barb and Chuck each have three kids.)"
They have SIX adult children.
They should be living with family instead of trying to survive hand-to-mouth out of an RV.
I don't think anyone should have to live like this, and I'm not blaming anyone for being poor.
But I don't believe that purchasing, repairing, and fueling an RV so you can live paycheck to paycheck is easier or more affordable than sleeping on your (yes, possibly also poor) child's couch.
I get that there are people who are truly alone and have no other option - but the people with adult children seem to be indulging a stubborn desire to live independently, when what they should be doing is pooling resources.
I'm not saying it's right that there are people so poor that they have to live in multi-generational homes just to survive, but I also won't be shocked into sympathy for people trying to live like this when it's not their best available option.
I've seen plenty of older people refuse to move in with family when its time to, it always ends in disaster, and it's infuriating.
It wouldn't surprise me if a significant portion of these poor boomer nomads didn't actually have to live like this.
I have an aunt and uncle who do this, but they aren't desperate, they're retired. They travel around the country, visiting places they'd like to see, and taking seasonal jobs as something to do and to help defray expenses. They still own their own house, but they choose not to live there, renting it out to their kids / their kid's friends. They've worked as lighthouse keepers, Amazon warehouse pickers, and as bookkeeping/maintenance for a sugar-beet picking operation (they're a little old for field work). Currently they're wintering over at the Grand Canyon while working at the general store in an rv park.
The point is not all of these nomads are forced into it by desperation or financial necessity; some of them just want to spend their retirement traveling and don't mind a little work along the way.
I love this. Thank you for the link. Reminds me of what the Internet was going to be back in the early 2000s. Tell your aunt and uncle they have a new follower.
> The point is not all of these nomads are forced into it by desperation or financial necessity; some of them just want to spend their retirement traveling and don't mind a little work along the way.
I was about to post the same thing. Not everyone is in desperate need of affordable housing. YouTube is full of channels by RVers of all ages who simply want to travel and experience adventure on the road.
I hear you, but care must be taken not to dismiss the plight of these people simply because there are those who seek a similar situation by choice. Doing something because you want to versus doing it because you have to can make the same thing a pleasure or torture. Both perspectives are legitimate.
I'm currently looking for a suitable property to live off the grid, and move to more of a subsistence lifestyle (the usual stuff, veggies, few animals). But I realized that the exact same end state is pretty bleak if it's something you were born into.
Articles like these frighten me. In my thirties, I am deeply worried about retirement, if that ever comes, and surviving in my old age. So much can go wrong. Ever since I read David Raether's story[0] of going from half-a-million a year as a TV writer, to homeless living in a van, I've focused considerable effort to make sure I am never homeless.
I invest in a Roth IRA,
I own a home that I rent out,
I joined a church to build more ties in the community, and
I spend a lot of time staying out of debt, and building savings.
If you are in debt from credit cards, the single greatest thing you can do for your future is to get the hell out of that debt!
I think it's just a commodity. The price of unskilled labor rises and falls with the vagaries of the market, and anyone who relies on it too much gets burned like Alberta got burned when oil crashed.
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[ 3.0 ms ] story [ 133 ms ] threadNot the same thing but sometimes you have to go where the work is.
This is misleading. 401k's are considerably lower risk since they allow you to be diversified instead of putting all your eggs into one basket (ie a company retirement pension).
The problem is the amount of money going into a standard 401k is nowhere near the amount that went into a pension. You had pensions paying out amounts that would require a 401k account with $1MM+ in it. The standard company 401k match these days isn't even peanuts compared to that, and that's if the company even matches at all.
401ks are great if you're savvy. They are massively inefficient for society in that they require all the people who use them to understand investing.
This is really bad policy at a society level. People need real, unbiased investing guidance.
Literally all you need to do is put your $1400/month in to a retirement account and not touch it. If you're upper middle class this is not hard to do (again I'm not talking about poor people here, but those with money who aren't saving).
Whenever our 401(k) report comes out at work I can tell that most people are not putting nearly the amount of money they should be into savings -- and this is a tech company so most everyone aside from interns are being generously compensated.
Another trick you can use is switch to a Roth 401(k). It means you'll be taxed on your savings today, but when you retire they'll be tax free. Now this is total speculation here, but I'm kind of assuming taxes will be pretty high in the coming decades as we try to keep social security going and pay down deficit spending, not too mention dealing with climate change fallout.
Also good for you on keeping all your money in the 401(k) accounts, some people cash them out when they change jobs which triggers penalities and taxes. If you can however, I would roll all your accounts in to one giant 401(k) so you can better keep track of what's going on.
There are several "timelimit" related aspects to 401k rollovers, neither would apply in your circumstance. You sound anxiety paralyzed like you made some "unfix-able past mistake" and there is zero reason for you to be.
> It is just sad :(
See my other comment about consolidating all of your legacy 401ks into a single robo-advisor (betterment/wealthfront/etc). It isn't hard, mainly consists of sending a few emails to HR departments and forwarding a few paper checks. Any robo-advisor will have a support team that will hold your hand through the process for free - they want to earn your business.
In the US, Roth contributions are made with "after-tax dollars", while 401K contributions are generally made with "pre-tax dollars", so if you rollover the 401K into a Roth, the IRS will see the rollover (aka "conversion") as a bump in your income and ask you to pay tax on the rollover amount, with the remainder/net going to the Roth IRA.
I still think a Roth conversion is a good idea for self-directed investments, but folks should be aware of the incoming tax bill.
[1] https://www.investopedia.com/articles/retirement/09/roth-401...
My tax rate will be higher while I'm working and earning a salary than they will when I'm retired.
Also, by keeping the base amount higher (pre tax), won't I have more growth than compared to the after-tax amount?
If you didn't work the entire year or your income was otherwise variable (bonuses or whatever other reason) then it makes more sense than usual to do roth contributions, or rollovers/recharacterization from traditional to roth, in lower-income years. Assuming you can afford to, and want to maximize what you put into tax-advantaged accounts.
The annual contribution limits are also on dollar amount that goes into the account, so if you're maxing out then you can get more out of a roth ira/401k overall. Not all companies offer the choice of roth on their 401k plans, which is a little annoying.
Buy a low cost diversified ETF. Take all your options, sort on management expense, and read the description. Not sure about your personal preferences and needs, but you're still young so you can be relatively risky. Buy 75% of the cheapest diversified stock fund and 25% of the cheapest diversified bond fund.
It doesn't have to be too complicated. You just have to not make very bad decisions (all stocks a year before retirement, or all cash for decades). And avoid high fees
A robo-advisor is a tech company in the financial space. They provide one-size-fits-all opinionated investment strategy (ie they do not let you pick individual stocks etc, you respect their overall portfolio strategy) that is not actively managed (ie they buy "the market" instead of individual stocks). As a result you will be diversified and you pay extremely low fees (many company 401k plan funds have horrible fees that completely take advantage of you).
Personally, I use betterment (https://www.betterment.com/). I approve of their investment portfolio strategy (https://www.betterment.com/portfolio/) and their fees are significantly below the fund choices I have in my company's 401k, so it is a good fit for me.
The one decision betterment does allow you to make (again the goal is simplicity), is your stock/bond allocation. Allocation strategy is a bit outside of the scope of this response, but to keep things simple I'll say anything from 70% stocks/30% bonds to 80/20 stocks/bonds is probably fine.
If you have further questions, or want a more "complicated" answer, feel free to email me directly (check my profile page). I'm an engineer, not a financial adviser, but I've been actively interested in personal finance for a long time now.
Step 2: ???
Step 3: Profit!
Seriously though, everyone has given very solid advice. As mentioned, the first thing you should do is consolidate all 401K accounts into a single IRA (or Roth IRA if you're hedging against much higher tax rates in the future).
Also, consider setting aside 10% of your IRA to play/learn/speculate with. By this I mean investing in funds or direct stocks in areas that you have an outside interest in (e.g. tech, clean energy, socially responsible, geographic region, etc). Due to your interests in this area outside of pure personal finance, you may be motivated to learn more about investing in general - which is always a good thing and will be more important as you begin to pull money out of your IRA during retirement.
That only kicks in for people with IQs >= 120 and good mental self control. So basically never.
There is no reason to assume that a target-date fund is actually any good. It's like any fund, there are good ones and there are really bad ones, and we're not even talking about whether the 401(k) account that holds the fund has its own problems (which an employee won't be able to avoid if they want to actually invest to the tax sheltered limit every year).
So the "personal responsibility" kicks in once you've educated yourself on all the ins and outs of the way the retirement system in the US can rip people off, intentionally on the part of those peddling bad products or as the result of poor decisions on the part of the investor. Something maybe half of the people out there are qualified to do, and somewhat less than 1% of the people out there are actually interested in doing.
We could fix all this with better policy (allowing everyone to do fee-free in-service rollovers of their 401ks and IRAs to the retirement funds federal workers use, which rely on low-cost index funds, might be one basis of a decent system) but we won't. Too many people are making money ripping other people off.
Agency risk is always there when you hand over responsibility of something to someone, and it's especially acute with big pots of money. The best investment for retirement is to raise children who will raise grandchildren who all look after each other.
According to this New York is ranked 39th of 50.
Unfunded pension obligations, on a guaranteed-to-be-paid basis, are $321.07 billion, or 28 percent of personal income.
The poorly funded ones make the news, but there are many healthy ones that don't. It isn't agency risk that causes problems, it's a combination of increased longevity and low interest rates.
A big problem with 401Ks is predatory investment advice. "Advisors" channel money into high-fee funds and commissionable investments and often "churn" money to generate additional commissions. The Obama administration cracked down by instituting a "Fiduciary" standard for retirement funds, but Trump has delayed implementation of the rule twice.
401ks aren't perfect, but it's better than the above system. There's a reason no one sells annuities even close to what the government offers in it's pension benefits. It's ridiculously costly without using funny numbers.
EDIT: and before anyone else gets an itchy downvote finger, go look it up. Here, I’ll quote from the SSA’s own page: “Based on social insurance principles, the program provides monthly benefits designed to replace, in part, the loss of income due to retirement, disability, or death.” (emphasis mine). It’s so the old and disabled don’t starve in the streets, not a retirement plan.
The average monthly payment as of Jan 2017 is ~$1400/month: https://faq.ssa.gov/link/portal/34011/34019/Article/3736/Wha...
Depending on your cost of living that may help (maybe a little, maybe a lot) but it's not typically going to be a replacement for your own savings.
I can start collecting that amount at 67, and will statistically die at 78.
So 11 years of benefits is $185k.
Meanwhile, if I make an average of $100k for just 12 years, then I will have paid that much into the system (15% contribution). And that's not even counting the massive amount of compounding that will have occurred as I've been contributing since I was 14 years old.
I know it's quite popular for the HN crowd to talk about raising taxes for things like universal health care, social programs, etc.
But when I actually do the numbers and look at how I'm already paying about 1/3 of my income to taxes, I'm beginning to see why many conservatives don't trust the government to be fair stewards of our money.
from the SSA's own web site -- https://www.ssa.gov/history/briefhistory3.html
The key point is that one's benefits are tied to one's individual contributions.
It's interesting that you say this, because many VAs have embedded put options that were very valuable post-crisis. The "scam" happens when someone invests 100% of their modest life-savings in a VA.
Ben Bernanke invests the majority of his retirement savings in annuities, it's really just like buying into a pension.
All one needs to do is save an extra $450/mo after tax starting at age 22, put that into Vanguard VFIAX or similar for the next 40 years. That will give you a few million at retirement...tax free assuming the market continues to act how it has acted for the last 50 years. Combine it with social security and retirement will be manageable for most. Spend the rest of your salary on hookers/blow or iPhone game microtransactions, it doesn't matter.
The problem is the lack of financial education and ethic in the population.
In indiana, that's a rent payment. A car payment. You might not even be done with school let alone getting a decent enough job to be able to afford this on top of your rent, transportation, and student loan debt. You are worse off if you didn't go to school or if you are working on a masters (or higher).
All the financial education in the world won't make these ends meet for most folks.
Well, there's your problem
I am so happy to meet someone who understands the concept of "society level".
Too often on the internet, I debate with people who's only concern is what benefits them or their cohort.
I find very few people think about "society" when talking policy.
Luckily, investing is not very difficult to figure out on your own. I read the book "Investing for Dummies" and I thought it did a great job at teaching basic ideas, and basic ideas are enough for the majority of people.
If society expects us to manage our own investments, then it should also equip us with the tools to do it effectively. It should be a required topic at the high school level.
- gets rid of the obligation by selling it to someone else: https://www.forbes.com/sites/joannmuller/2012/06/01/gm-unloa...
- raises more capital or debt to fund the pension (or in the case of government pensions, raise taxes) and kick the can down the road: https://www.wsj.com/articles/gm-to-take-on-3-billion-in-debt...
- just lets bankruptcy kill the obligation: https://mobile.nytimes.com/2006/10/24/business/retirement/24...
Prices go up.
Oh and obviously the government needs to guarantee them as a last resort. That way if a company doesn't hold up its end of the bargain it is not citizens that have to try to collect but the big bad Treasury wolf.
But government is considered evil in the US I know.
There is always people that bring up worries over some of the public sector pension schemes in the US and how it will affect a municipality. One example, IIRC, is in Chicago. Another typically revolves around policeman/fireman pensions in other cities and the cities not being able to actually pay them.
Is this a fault or mismanagement or the pension structure not working or both? And if the cities have to guarantee the pensions, what does that mean for taxpayers in those cities?
Lost your mortgage? Not your fault.
Didn’t save for retirement? Not your fault.
Only job prospect, after working and training and networking for your entire adult life, is moving boxes in an AMZN warehouse? Not your fault.
I prefer a more objective view, like Studs Terkel’s classic book, Working.
Finally, don’t get me wrong — I have neighbors in the described situation. I care about them. I’m just saying I’d enjoy reading an objective narrative about their hard, and unfortunate situation — something not clouded with the tone of victimization.
Edit: And to be clear, I know the value of almost everyone's investments went down, but unless your money was all in a single company it seems that most diversified portfolios bounced back.
Wait, are you saying it was actually financially rational to do so? Wouldn't they be better off by waiting it out until it the market rebounded?
I'm not blaming anyone, just asking what would have been the theoretically better decision.
I’ve wanted to move somewhere else for at least five of those years. I finally have, and my options with the old house are either to rent it out (rent would not cover mortgage payment) or try to deal with the bank to avoid foreclosure, via short sale or deed in lieu. In any of those cases, now I have two problems.
While I understand that people who are already retired can't just choose to keep working while their investments recover, I'm not aware of any retirement investing strategy that has you fully invested in stocks at the point you retire. The whole point of moving your retirement to safer investments around retirement age is so you don't have to take money out of stocks when there is a financial downturn.
I may be missing something, but you seem to be describing retirees with a very risky asset allocation. I'm not trying to minimize how devastating that was for people, but I am trying to understand what they were victims of. Were they victims of financial advisors recommending that type of asset allocation?
These commenters and down-voters know how to pattern match “he said a person is not a victim” with the knee-jerk response of “you’re bad.”
They don’t know how to articulate a sensible argument to back up their reaction though.
The more financial AND emotional intelligence you have the less likely you are to fall into such life.
But let's have empathy because the majority of people have less financial intelligence and cold blod as the average hn reader. Let alone the chance of earning a very good salary for a few decades.
However, I think it is entirely reasonable to assume we will someday experience another similar event. If there was something about this event that caused some people who were following sound retirement investment strategies to lose all of their savings, I wanted to know about it. That is why I was asking.
When this current bubble bursts, we will see the truth for all those who belive it's just not enough--what's the word--planning, or solid work ethic?
I was going to say we need a new Working book for the Sharing Economey, but I feel it would be pretty thin, and just say see "Chinese economy", or done other "they do it cheaper" country for more information.
It would be interesting to see a Studs Turkel type writing about a startup that produces absolutely nothing new, or a product that will be decimated by one of the monopolies.
I would like to read how a 1 percenter rationalizes their greedy, and narcissism though; while the safe, predictable, somewhat ethical country they grew up slides into chaos.
I know many people who have jobs equal to or similar to Studs Working.
And, more importantly, his book did not describe a paradise. He profiled whores, for example.
I know (lower middle class) people who went bankrupt in the Great Recession because they had 2 or more mortgages, obtained with a 5% down payment. To me, they took too big of a gamble, and lost.
I know others who stayed out of such gambles and survived the GR.
I know others who had to significantly downsize or live with family members because they lost their job and then spent their savings.
https://www.google.com/amp/s/www.financialfixation.com/singl...
In fact, the number of people who don't have enough for retirement because of this reason is quite small. Most people are there because they or their family had a catastrophic medical event, job loss, and/or some massive loss of value in their home due to the depression (from which they've never recovered).
You also don’t need a 401k. You can do a traditional or Roth IRA.
Have you tried raising a family on $21,000 a year, even in a low-cost area? (not to mention an urban area, where such earnings are quite common)
Lazy? Wow.
No I have not. No one should even start a family on $21k. Again, poor choices if they do. I’m tired of the mentality of victim hood.
EDIT: and just as I hit “reply”, parent comes back with a response indicating that the charitable interpretation was wrong. sigh
Perhaps the rest of society should be more aware of the darkside(s) of the business models they are supporting?
Plenty of multi-nationals - Nike comes to mind - have been pressured into making changes to practices that were not socially acceptable.
Why isn't Amazon being held to the same measuring stick?
Editorial: Why is the public still so naive about the "hidden costs" of cheaper? Certainly, Walmart (for example) and its darkside would be fresh in the minds of the American public. Instead, it seems, the perception is Amazon is the saviour (from Walmart), when the new boss is really the same as the old boss (sans the glossy high tech paint job).
Because it is not true. Apple products are considered luxury goods and the company is known for the horrendous treatment of their workers in Asia. And ALDI is a very cheap supermarket chain in Germany but pays and treats their employees better than some more expensive ones.
There might be a correlation but that means nothing for each individual purchase.
Exactly.
(I believe ADLI is owned by the same parent company as Trader Joes.)
Labour laws in the US seem to boil down to "should have pulled yourself up by your bootstraps harder" .
Agreed. Aldi is a great outfit and gets more of my business because of that. It IS possible to live without Amazon. I don't think it's unreasonable for more people to consider trying a bit to consider that.
Every employee I've seen there is working very hard the entire time. Before they added scanners, they were required to memorize the price of every item in the store. They pay more because they will not get the type of employee they need by paying less. While most of the people who are a good fit for ALDI like it there, you can find many reviews saying the work was too hard and that there was too much pressure.
If you look at retired RVers who have written about working at Amazon.com, you'll find many who felt that while the work was hard, it was good work and paid well (especially with holiday overtime) but you had to be willing (and physically capable) of doing hard work.
Like you say, the cost of each individual purchase from a company has little to do with how much they pay their employees. There is a much stronger correlation between employees who are doing hard things that add significant value and higher pay.
Nikes outsources manufacture to contractors outside the US where countries with horrible labor practices and labor laws and enforcement.
https://about.nike.com/pages/transform-manufacturing
NIKE’S COMMITMENT TO TRANSPARENCY
Transparency and accountability are fundamental to Nike’s sustainable business approach. The Nike Manufacturing Map discloses the names, locations and demographic information about the workforce at the factories we contract to make our product, and holds us accountable for our chosen source base.
I never said Amazon's practices were hidden. The question is: Why don't most people care about Amazon's practices?
We will not end world hunger by eating less. We will not stop climate change by turning off the light more often. And we will not fix exploitative employment practices by voting with our wallet.
The cynic in my thinks that the "vote with your wallet" slogan has been coined by those who want to prevent better regulation.
All these things CAN be solved by passing laws and regulation and by building a society that supports and enforces those.
Upvoted for that sentence alone. We have government because I can’t build a road by myself. I also can’t individually smack a company upside the head and tell them “cut it out, this isn’t the society I want to live in”.
We as individuals CAN decide where we spend your money.
Two very different scenarios. You very different level of civic duty.
Could regulation help? Sure, Uncle Sam gets lucky from time to time :) But it is never as powerful as the market. Until the market says "screw Amazon" Amazon will continue to do what rewards it and its shareholders.
Yeah, but then most people just don't care.
I'm just really glad nobody is asking me to boycott slave-produced southern cotton if I really want slavery to go away.
Well, there ya go! :)
People don't care about where they spend their money. They don't care about their own people health. But the problem is Amazon, the ACA, etc.
If most people don't want to be held responsible for their own decisions, with what logic do they argue holding someone else responsible.
To be clear, there certainly are things gov / legislation can do. But that doesn't give individuals a free pass on their civic duties.
We're going to keep ratcheting up the minimum allowable job, housing, food, etc. until a tiny minority of liberal elites are congratulating each other for having eradicated exploitation and all the liberated victims of exploitation are unemployed, homeless, and starving.
I don't want to live in a society where people have to live in RVs and work in Amazon warehouses. But banning Amazon warehouses (or RVs) isn't going to help.
We need redistribution, retraining, a real social safety net, healthcare, etc. so that people actually have better options than exploitative employment situations. Then it isn't even necessary to ban them, because no one would want them anyway.
The "let's ban symptoms and coping mechanisms" bandwagon, on the other hand, gives citizens who are concerned about a situation the feeling that they're helping, disarming and distracting them from actually constructing a better world. The collective loss to society of the solutions that could be built but aren't is quite large.
Imagine if we had single-payer health care instead of more regulation on employer-employee relationships. Imagine if we had public housing instead of regulation stonewalling private development. Imagine if we actually built world-class public transportation systems instead of just starving out the parking. Etc, etc.
I think the whole ObamaCare fiasco is one of those things that the typical millennial liberals on HN have gotten entirely wrong.
For years, the mantra here has been that all those red state deplorables who were wary about government health care were voting against their own interests, and ignorant for not wanting it.
Trust us. We know better than you.
Well now we've seen what's happening. Premiums have skyrocketed for average workers and everyone has been moved to high deductible plans that pay for nothing.
My own insurance had gone from decent to worthless, and it costs twice as much. As a single guy who makes a high income, it's no big deal. For many of my coworkers who have a spouse and 3 kids, it has been devastating. And it's getting worse as more states drop plans.
They. Work. For. Us.
I don't care who is in charge. I want results. Where is the fine tuning? Where is the sense that they work for us?
That being said, and not to get too off topic, but there isn't a healthcare system in the world that can support our collective dietary and lifestyle habits. Obama blew it becausr he failed to tie (personal) health to health. He failed to explain how there are things that can be prevented (e.g., Type 2 diabetes) that we all but refuse to address.
Furthermore, these preventable gateway diseases - again let's stick with diabetes - significantly increase the risk of cancer, Alzheimer's, etc.
Cost are increasing...as are waistlines and age. How are costs going to decline if more people are in need of more and more serious treatment? They fact that a fair amount is in fact preventable only makes the current disconnect even more confusing.
Take health insurance companies out of the picture, and address price gouging by pharmaceutical companies, and you'll almost certainly see costs come down. I'm pleased to see there has been some momentum for single payer, so the US can scrap the ACA.
On a side note, ACA was similar to a plan proposed by Republicans back in the 90s:
http://www.politifact.com/punditfact/statements/2013/nov/15/...
On the other hand, lower demand and prices will fall.
As it is we're getting older and intentionally living a more unhealthy lifestyle, but expecting prices to fall?
No doubt there are vast disfunction in the current system. However, the biggest - literally - component of that system are the humam seeking / needing care. What's more unhealthy, those people or the insurance companies? I can't see the line between the diabetes dot or the smoking dot and the insurance companies.
If you're talking about pharmaceutical prices, there are ways around that. For example, drugs that are FDA approved and available elsewhere in the world for a lower price should be able to be legally imported and sold at that lower price. To give an example of how this could be implemented, there was a bill that was proposed to allow drugs from Canada to be imported and sold:
https://www.pharmamanufacturing.com/articles/2017/senators-p...
This bill was for the same drugs that legally available in the US, but sold at a cheaper price in Canada.
https://twitter.com/sensanders/status/819404681806016513?lan...
By increasing competition from imports, drug prices can come down. Also, allowing generics to come to market faster for the most commonly used drugs (i.e. cutting down the time for which a single pharmaceutical company has a monopoly on producing a drug) is another approach that can stop pharmaceutical companies from over-inflating drug prices in the US.
What we (aka The Market) needs is choices. We willingly got ourselves into this. We bought into the idea that cheaper (and disposable) is best - a la Walmart - and then rotted our communities from the inside out. The local mom & pops replaced by a browser and a UPS truck.
So while Widget X was/is less expensive we're still at the end of the year out of pocket for just as much, if not more, in order to yield all the intangibles the more expensive widget supported.
Yes the solution legislation? It might be. The question is will that help to solve the root problem, or simply create another gov program that creates long term dependency, instead of working towards an enabled citizenship; a society where better individual decisions matter.
It seems to me we've bought into the idea the price is the only thing that matters, and then we wonder why we're treated as human resources.
Voting with your wallet does work, it just works slowly, so it doesn't satisfy those who are waiting for revolution.
To give an example, let's say you choose to become a vegetarian. What difference does that make? The more vegetarian food you buy, the more profits go up for vegetarian options, the more options become available. It's a slow change as the impact is minimal at first, but look at what it's lead to. 50 years ago the idea of a food company specialising in vegetarian-only food would've probably seemed quaint, now it's normal. It's also normal to find multiple vegetarian options in restaurants, and even restaurants that specialise in vegetarian food. You may think of this as not noteworthy, but I'd suggest it only seems inconsequential as the change was so gradual.
Now imagine if all would-be vegetarians had continued to eat meat, but had lobbied the government to cut down on meat production, are we likely to have seen a quicker change?
All the people that bought the original Tesla Roadster paved the way for the Model 3. The people that originally created a market for energy efficient bulbs enabled economies of scale to allow those bulbs to become mainstream.
I wouldn't diminish the role of early adopters in shaping culture and the economy.
We all know Uncle Sam's track record: great for wars and the MIC, subpar for just about everything else.
If people can give a shit about how Nike makes a pair of kicks, certainly Amazon can be held to the same standards.
Uncle Sam can't get the food pyramid right. It's not going to save us from the likes of Amazon. There's little evidence that it's up to the task. Ideally, yes. Realistically? Too doubtful.
I'm not everyone does. What's Uncle Sam's track record on:
* rural electrification
* school lunch program
* DARPA's satellite positioning research
* law that started Amber Alert
* Microbead-Free Waters Act of 2015
(I'm curious myself about that last one.)
Let's say you were in charge of government spending, would you be spending $584 billion a year on the military? Just think about how much good you could do for your country with 50% of that (the US would still have the biggest military budget even if cutting spending by half). Do you think the best you could do is a school lunch program and paying electric companies to extend the electric grid?
https://upload.wikimedia.org/wikipedia/commons/e/e1/CBO_Info...
http://www.politifact.com/truth-o-meter/statements/2016/jan/...
Thanks. I take back that bullet point.
Still, you've shifted the argument. If we take the commenter I responded to seriously, then "food pyramid" must be an example of what they mean by a federal program being "subpar." The food pyramid is a failure-- citizens' tax money went to fund a program that delivered inaccurate and unhelpful information back to them.
In response, I enumerated a few federal projects that popped into my head which most reasonably people would deem successful.
So I think we both disagree with the commenter's assertion that everything other than military spending is subpar by the measure their own example suggests. Even in your own assertion about gov't spending, you rely on a well-respected agency-- the CBO-- whose success at their role gives further evidence against the commenter's assertion.
edit: clarification
I don't disagree with GP, but I don't live in the US, so all I have to go on is what I'm told in the media, which I'm aware is open to manipulation. However, what I can say, based on the statistics available, which have been backed up by official sources, is that military spending seems much too high, which is a sign that the US government does not seem to have its priorities in line with what the people want (on the assumption that most of the US population is anti-war). With that in mind, the services you receive for your tax dollars can be seen as subpar as your government is spending a high proportion of the money you gave them in taxes on services that you neither benefit from nor desire.
For what it's worth, I'm from the UK and the priorities of the current UK government is far from aligned with the general public (cuts to the health, cuts to education, tax breaks for corporations that are already engaging in massive tax avoidance, etc...) as well as government programs being hugely wasteful (this was an older example, but it does make me wonder how things managed to get this bad before it was stopped https://www.theguardian.com/society/2013/sep/18/nhs-records-... ). I just wanted to make it clear that I wasn't just criticising the US government, any country that has big issues surrounding wasting tax payer money is providing subpar services. There should be a way of making governments more accountable for their fiscal decisions, but I don't know how to best implement that. Suggestions welcome!
As for this list. Yes, nice. Thank you. But all in all small potatoes, if not terribly obvious.
Yes. They count. But these are light-weight things compared to climate change, globalization, and such. That's why the military reference matters. It's the one big budget thing Uncle Sam does well.
Is it even be possible to live a moral life?
If I didn't have aging parents to consider I'd go live in a cave, with a massive stack of book.
There was a period of time in the past 2 years when I didn't have a home and stayed at various places on AirBnb while working remotely. The worst part was when I ran out of money because opportunities dried up on the work platform I was using. At the time I was in Russia with a dependent partner; we had gone there because of the low cost of living brought on by US sanctions. So I can relate to the feeling of being constantly forced to follow the money wherever it takes you. It's stressful and disorientating.
I don't understand how anyone in their 50s can sustain this lifestyle without going insane.
For many of the Amazon.com camper/workers it was a way to do a lot of work in a few months to help support their retirement travel and the people who were actually doing it seemed to think the pay was pretty good--especially with the overtime.
"Objects they couldn’t bear to part with—including Chuck’s letter from Ray Kroc, framed and hanging on the wall—went to one of Barb’s daughters for safekeeping. (Barb and Chuck each have three kids.)"
They have SIX adult children.
They should be living with family instead of trying to survive hand-to-mouth out of an RV.
[0] https://www.wired.com/story/meet-camperforce-amazons-nomadic...
The tech industry is engineering these kind of labor conditions for their own profit. Try blaming them instead of the families of poor people.
But I don't believe that purchasing, repairing, and fueling an RV so you can live paycheck to paycheck is easier or more affordable than sleeping on your (yes, possibly also poor) child's couch.
I get that there are people who are truly alone and have no other option - but the people with adult children seem to be indulging a stubborn desire to live independently, when what they should be doing is pooling resources.
I'm not saying it's right that there are people so poor that they have to live in multi-generational homes just to survive, but I also won't be shocked into sympathy for people trying to live like this when it's not their best available option.
I've seen plenty of older people refuse to move in with family when its time to, it always ends in disaster, and it's infuriating.
It wouldn't surprise me if a significant portion of these poor boomer nomads didn't actually have to live like this.
The point is not all of these nomads are forced into it by desperation or financial necessity; some of them just want to spend their retirement traveling and don't mind a little work along the way.
My aunt and uncle have a blog detailing their travels if anyone is interested: https://whatsnewell.blogspot.com/
I was about to post the same thing. Not everyone is in desperate need of affordable housing. YouTube is full of channels by RVers of all ages who simply want to travel and experience adventure on the road.
I'm currently looking for a suitable property to live off the grid, and move to more of a subsistence lifestyle (the usual stuff, veggies, few animals). But I realized that the exact same end state is pretty bleak if it's something you were born into.
I invest in a Roth IRA, I own a home that I rent out, I joined a church to build more ties in the community, and I spend a lot of time staying out of debt, and building savings.
If you are in debt from credit cards, the single greatest thing you can do for your future is to get the hell out of that debt!
[0]. https://priceonomics.com/what-its-like-to-fail/
You effectively have to run your own pension fund to expect any much significant passive income after you retire.