Xebedee

Govt. Health Warning:
(Attn. all positively-minded Brits and any wandering Americans)

Depressing, moody, bleedin miserable English-style grumble follows:

Am I the only one who is utterly bored sh!tless with the whole self-directed pension thing here? I mean, who the hell cares wether Nasdaq had a litter of 7 green kittens at last call? What does it mean when they say "Go long on small brown furry things and short on Chrymanthesums" ?????
The expression "a balanced portfolio" frankly makes me want to hurl and besides: isn't a portfolio something a Minister is without? Or is usually found in an artists studio ?????

Yeah, yeah, you have to do it. Its a game that everyone has to play (when in Rome - shag a wop) and its just common sense to start when you are young (I, personally, started in a bus shelter with Lorraine Ettle after the Pubs let out - and she was pretty common too ).

Social Security is imploding (we are told) and what the hell happens to my partial UK pension then, if the US one vanishes ??? Huh? Can I still get it?

Leggy Lorraine got it alright.

Basically, it all strikes me as being more than a bit money-mad. Everyone must be a fu(king investment expert and high-financier just to make the hurdle into retirement. Honestly, its the single topic of water-cooler conversation that is most likely for me to see if my head fits through the little hole in said jug and drown myself from sheer BOREDOM.

Yeah, that'll show 'em.

They say Soc Sec isn't a pension - well, that really seems like a blow-job as so many Americans use it as such. Whats wrong with giving the Govt. money and letting them provide you a proper decent Pension ????? Eh ?? One that doesn't run out.
Firms just don't offer pensions like they used to - its all 401K's, Rolloverandplaydead 403B's, Hyman Roth post-tax vanilla milkshakes or "RS232 cabbage-patch fortune-Rothmans pint of Double Diamond after-tax wheelie-bin fund" (which they only give you bleedin access to after 3 or 5 years *wink* ahem, most people quit, get fired or laid off in that time frame *wink*).

The first person who says:

You are in America now - grow up, get on with it and stop moaning - 2008 is different, etc, etc is going to get me banned for swearing.

Bluegrass Lass

Personally, I quite like a 401(k), etc, instead of Social Security. SS isn't so secure, as you know. Plus, they find any way possible to reduce the amount of money that they can pay you. I can have far, far more money at retirement with a 401k than I ever would with just SS income. You can't live off of SSI because the amount just isn't enough. Plus, with how SS has been raided by Congress, I don't want them managing money that I will need to retire. There is nothing that stops them (at this tiime) from using it as they will - entirely uncaring that they are fracking with people's futures.

Managing a 401k is pretty easy to me. I just select a few funds from the list that cover different types of stocks. Other than that, I don't move it around, and just check my quarterly balance. I do try to make sure that the funds I chose are 'balanced' - you can do a bit of research of what is meant by balanced. Essentially you just choose a couple of different types of funds and be done with it. I don't give it much thought other than that. Certainly not talking about it at the water cooler

ian-mstm

This reminds me of an amusing story.

Background: The Ontario Teachers' Pension Plan (OTPP) is jointly sponsored by the Government of Ontario (GO) and the Ontario Teachers' Federation (OTF).

Well... in 1996, the GO was having trouble meeting its financial commitments, and approached the OTF to see about dipping into the OTPP. The GO couldn't access the fund without OTF approval. The OTF declined, citing the GO's persistant inability to meet its financial obligations and so there could never be a guarantee that they would ever be able to repay the loan.

The loan amount they wanted? $8 Billion. It's interesting to note that the OTPP currently has about $108+ Billion in assets!

Ian

robin1234

I see the whole retirement income thing as being very similar to healthcare in America. Managing our 403b's and roth IRAs, we are forced to become amateur "experts" just as we are forced to self-diagnose on the Web, read America Family Physician etc, before we visit the doctor and suggest to him/her what medication or other regime we have researched... It is hard for those of us from an earlier generation and another country, who would perhaps rather trust the experts, bureaucrats and the "great and the good" with our cradle-to-grave welfare.

As for choosing funds, none of the choices are great just now. We just have to hope the markets recover in five years, ten years or whenever we plan to retire -- making us all (willing or unwilling) participants in the whole capitalist scam. But, as mere plan members, we get the crumbs from the table. The fund managers and other assorted crooks make the big bucks.

Michael

I don't know how much different it is in most other countries as compared to the US. In the 1950s and 1960s, almost all US companies and unions had very good retirement plans. However, the assumption was that only one in ten would live long enough to receive any benefits.

As life expentancy increased, it became apparent that the plans were very underfunded and there wasn't any guarantee that any benefits would be paid if the organizations went bankrupt or refused to pay the benefits. Union plans were by far the most underfunded. In 1974, the federal government set up the Retirement Benefits Guarantee Corporation to stop such sham practices requiring the plans to follow government mandated funding or to close the plans down and distribute all assets to particapants. Most plans were closed down and assets distributed and then many organizations restarted new plans with shared funding between the individuals and organizations. However, no longer were the retirement plans promising pie-in-the-sky retirement benefits.

The few plans that survived relatively intact were public service plans and the some large corporation plans (eg. Detroit Big Three, IBM, etc.). Public service plans could always increase taxes but large corporations are now paying the price for those plans (the Big Three currently have underfunding of 10s of billions of dollars).

As far as Social Security is concerned, in theory it is fully funded to 2044 and can easily be funded to 2100 by increasing the SS tax by less than 1%. However, even though it is funded, the government has spent the money on other government projects. As far as SS benefits are concerned, the benefits are comparable to what is paid by most western countries.

The big problem is that baby boomers are about to retire with a probable life expentancy of over 80 years. Within 20 years, there will only be approximately 2 workers for every person receiving benefits (in the 50s it was about 20-1). This puts a major burden on the few workers to pay the taxes to support the retirees. With the large increase in the number of retires, medical costs will rise dramatically since the majority of those costs are incured after an individual reaches 60. The same will occur with SS benefits.

Currently tax collections (federal, state, local, property, sales, excise, etc.) are approximately 30% of GDP. This is expected to rise well beyond 40% of GDP within 20 years to pay the benefits. Countries such as Denmark, Holland, Sweden, and France with current tax collections of about 50% of GDP can expect to increase that figure to well beyond 60% of GDP (double the current US tax rate).

I like most of you would like to retire on 100% (inflation adjusted) of my final salary but that is not a fact of life from any western country. The ability to pay promised benefits from government and company pension plans in the future is doubtful. Therefore I would rather work with 401K, IRA, and other such plans to try to assure my future.

Xebedee

Not ignoring the rest of your post, but rather focusing on one particular point, it seems a generally accepted myth that you should retire "in the manner you are accustomed to".

Sorry, but I just don't get this concept.

Maybe its me, but I simply don't imagine my retirement as being spent circumnavigating the globe, absailing down Everest blindfolded or even playing bloody golf.
It won't take that much money for me to sit in the car and watch the sea drinking tea from a thermos, going for a daily stroll down a country lane, have a couple of pints a day and weed the garden on the weekend.

You are supposed to slow down and enjoy your family when you retire, not fly hot air balloons over the North Pole. Its all a bleedin con set up by the fund companies to make money - seen the adverts on TV?

elfman

might want to consider factoring in an extra £5 or so a week - the Daily Telegraph isn't given away free y'know

Michael

Well, then I don't get your point. You talked about that you want a guaranteed retirement plan. You already have that through SS (if it remains solvent) which pays a comparable amount as most other western companies and isn't in any worse shape than plans from those countries. Any other plans are company sponsered and most of the gauranteed plans (guaranteed fixed amount at retirement) have disappeared from around the world. So what point were you trying to make in the original post?

I suspect you would also like a guaranteed fixed retirement from companies but most of those are vastly underfunded meaning they probably will not pay the expected amount. They do the same thing with those plans that you do with a 401K or IRA plan but if the investments are bad, the plans assets disappear.

At least if you control your own plan, you can decide whether you want safe investments (5% per year guaranteed) or risky investments. Whether a company takes a risky approach (possible higher benefits) or a safe approach (5% guaranteed), the end results end up the same being reduced benefits if the wrong approach is taken. You don't need to know anything about the market since the plan will tell you what is risky and what is not. You just make the choice that you are comfortable with and probably never change it.

It has been show that pension fund managers or mutual fund managers do no better than the average individual. 50% of those plans perform above the S&P 500 and 50% are below.

Xebedee

Ta.
Should be able to manage that.
It can line the budgie cage afterwards.

robin1234

Very true. And, now that local buses are completely free of charge in the UK to OAPs, actually you can spend your retirement travelling the globe (well, that part of the globe that's worth visiting.) You'll have to factor in your National Trust membership as well as the Delhi Telegraph. Plus, a few quid a year to your alma mater. Someone has to pay for that glossy magazine they keep sending you.

Steerpike

I finally broke down and signed up for a personal adviser with Schwab. yes, they get 0.0x% (I forget the number) but - every 3 months, they talk to me, re-balance my account, and keep me out of trouble. My problem is - I can pick a winner like anyone else, but ... also like many people ... I can't bear to sell stuff when it's no longer winning. So these guys charge a fee and manage the whole process for a reasonable fee.

Reasonable fee = more than I like to pay, but - after losing my shirt in 2001/2002, a lot less than I would probably lose otherwise. The older I get, the more willing I am to pay for services such as this ...

Steerpike

You obviously don't know Xebedee He's determined to be unhappy here and very eloquently and humorously gives reasons why. I actually enjoy all his posts ... for their style if not their content! Of all the moaners and groaners, Xebedee is the best to read! In fact, I think I'll Karma him on this one!

jumping doris

I have just been having this conversation with the OH.
His company have changed the people who do the 401k and that's about the limit of our joint knowledge.
We have had a whole forest of paperwork sent to us that is incomprehensible.

we now keep getting letters to say that OH hasn't mananged his 401k, made changes to his portfolio etc etc etc.

We haven't got a clue. How do you choose?
I have come to the conclusion that Americans learn this stuff in childhood.

Bill_S

Actually, I think most Americans' personal finances are in a frightful state. Fortunately, the missus and I aren't in that position. At the moment we have a variety of things in place: 401(k), 403(b), CDs, money market accounts, stocks, mutual funds. We're on the verge of hiring somebody to help us better plan for the next 20 years.

WRT your OH's 401(k), he must have selected some fund or funds when he enrolled. The plan undoubtedly has several funds to choose from, e.g. small cap stocks, blue chip stocks, bonds, real estate, "green" fund, "social conscience" fund, growth stock fund, etc. In that forest of paperwork will be data on the performance of all of these funds. I'm sure he has the ability to shift his contributions from one fund to another. You can check on how his funds are performing and move money around if necessary.

weazie

A bit like Europeans learn how to use taxis, buses and trains in childhood