Are any of y'all anti- 401K or IRA | TigerDroppings.com

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TheWiz
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Are any of y'all anti- 401K or IRA


I have an acquaintance that always posts info about how 401k plans and IRAs are basically big shams. Obviously he is a financial planner, but it is interesting to see his take on things. I haven't inquired, with him, what his alternatives are. I don't want to be bombarded by him, but I am curious. Here is the info he promotes:
LINK
LINK
LINK
PBS Article on 401K(s) as Failed Experiments


I'm curious to hear everyone's take on the subject. I'll hang up and listen.







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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
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 Online 

re: Are any of y'all anti- 401K or IRA


I hate 401K's. I mean who wants to be matched dollar for dollar up to 6% of contributions and have their money grow tax deferred for 30 years? That's a horrible deal all the way around. Oh and I also dislike IRA's. I prefer to be taxed heavily on my money instead of that shite growing tax deferred. I can't cut the government out of their fair share.





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TheWiz
LSU Fan
NOLA
Member since Aug 2007
7264 posts

re: Are any of y'all anti- 401K or IRA


Listen, I see it the same way. I just wanted to open this up for debate. I'm curious what his alternative retirement vehicles are, but like I said, I don't want to be inundated by his info either.


This post was edited on 5/3 at 9:22 am


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ZereauxSum
LSU Fan
Lot 23E
Member since Nov 2008
8432 posts

re: Are any of y'all anti- 401K or IRA


I clicked on the second link and saw this bullet point:

quote:

How to potentially get up to DOUBLE DIGIT RETURNS On Your Money, With ZERO Market Risk.


That's all I needed to see. Don't take financial advice from this dude.






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Teddy Ruxpin
LSU Fan
New Orleans, LA
Member since Oct 2006
18787 posts

re: Are any of y'all anti- 401K or IRA


If he says its a "sham" because people are failing to meet the balances needed to support them in retirement, then OK. If in addition, he thinks the stack is against someone being able to fully fund these vehicles to support their retirement, then OK.

But what is the alternative? Seems to me, if the above is true, its the most effective avenue we have so its either get fricked a little less or not utilize these vehicles and be super screwed.

I'll take less pain down the road, even if its supposedly gonna suck regardless.






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BennyAndTheInkJets
Arkansas Fan
NYC
Member since Nov 2010
3925 posts

re: Are any of y'all anti- 401K or IRA


I'm very curious to read these articles. Work will free up around 3 today so I will respond then. I do know the current policy discussions about taking off some of the tax deductibility but I want to read this.

Thanks for posting and I'll tell you if you're acquaintance is a fear mongerer or not IMO later.






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ZereauxSum
LSU Fan
Lot 23E
Member since Nov 2008
8432 posts

re: Are any of y'all anti- 401K or IRA


quote:

I'm curious what his alternative retirement vehicles are


By the looks of those links, I suspect canned goods, ammo, and gold. Possibly bitcoins, unless he advocates being totally off the grid.






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LSURussian
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Member since Feb 2005
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re: Are any of y'all anti- 401K or IRA


Look at the last link you provided. This is all I need to know about that article's author to understand what her goal really is:
quote:

Ghilarducci was Assistant Director of the AFL-CIO's Department of Employee Benefits.

Ghilarducci proposed mandatory participation in a government-run savings plan
She hates the idea of the average person having control over his own money.

No, thanks. I'll take my own money and be responsible for it any day over a government mandated plan that bureaucrats control.






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TheWiz
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Member since Aug 2007
7264 posts

re: Are any of y'all anti- 401K or IRA


quote:

Ghilarducci

Obviously she heavily favors pension plans.






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OnTheBrink
Alabama Fan
TN
Member since Mar 2012
3649 posts
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re: Are any of y'all anti- 401K or IRA


quote:

But what is the alternative?


This.






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Springfield XD
Member since Feb 2013
1782 posts

re: Are any of y'all anti- 401K or IRA


Could you maybe post another link to support your assertion? Four isn't enough.





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LSURussian
LSU Fan
Baton Rouge
Member since Feb 2005
81061 posts
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re: Are any of y'all anti- 401K or IRA


quote:

Obviously she heavily favors pension plans.
She heavily favors union and government control over all worker's retirement money. She's a closet communist.






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TheWiz
LSU Fan
NOLA
Member since Aug 2007
7264 posts

re: Are any of y'all anti- 401K or IRA


quote:

But what is the alternative?

This.


I know. And I guess that's the $$$ Million question. I assumed there was at least one individual on here that may have the same sentiments.






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TheWiz
LSU Fan
NOLA
Member since Aug 2007
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re: Are any of y'all anti- 401K or IRA


quote:

Could you maybe post another link to support your assertion?

Yeah, hold on a second.






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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
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re: Are any of y'all anti- 401K or IRA


quote:

Ghilarducci was Assistant Director of the AFL-CIO's Department of Employee Benefits.

Ghilarducci proposed mandatory participation in a government-run savings plan


OH MY GOD






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Springfield XD
Member since Feb 2013
1782 posts

re: Are any of y'all anti- 401K or IRA


My only complaint about 401k's is fund choice. I would rather have the option to drop my 401k contributions straight into my IRA/ROTH IRA. Would also need to raise the IRA contribution limit tot the sum of today's IRA and 401k limits. I think that would be $22k/year?

This would also negate the hassle of rolling your 401k when you change jobs.



This post was edited on 5/3 at 9:41 am


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Teddy Ruxpin
LSU Fan
New Orleans, LA
Member since Oct 2006
18787 posts

re: Are any of y'all anti- 401K or IRA


quote:

My only complaint about 401k's is fund choice.


No kidding. I'm lobbying my employer hard right now to make changes.






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Springfield XD
Member since Feb 2013
1782 posts

re: Are any of y'all anti- 401K or IRA


quote:

No kidding. I'm lobbying my employer hard right now to make changes.



Of course this will never happen. Employers get HUGE kickbacks from fund managers to drop all their (our, actually) money into them. No different than making you use a company cc for expenses.






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LSURussian
LSU Fan
Baton Rouge
Member since Feb 2005
81061 posts
 Online 

re: Are any of y'all anti- 401K or IRA


quote:

I would rather have the option to drop my 401k contributions straight into my IRA/ROTH IRA.
I like the idea but I'm not sure how that would work when it comes to the employer matching contributions.

Most companies would not want employees to have access to the company's contribution any time the employee felt like withdrawing it.






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TheWiz
LSU Fan
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Member since Aug 2007
7264 posts

re: Are any of y'all anti- 401K or IRA


Another of his spills:

This note will quickly illustrate what you're not being told. In most cases, you not being told isn't due to intentional misleading, but simply to not applying math to the situation.



Allow me to explain the "Lies of Averages". If you take the gross market returns (no fees) of the S&P 500 from 1980-2012, you'll find that the index has averaged 12.55%. This sounds great. You'll sit down with your advisor or you'll jump on a financial calculator and insert 12.55% for the average return and determine if you put $205 into your 401(k) you'll be a millionaire in 33 years! You'll think, "I'm all taken care of!"



The reality is far from the fiction. For the simplicity of math, I'll assume a starting balance of $10,000 and no additional contributions. The ending amount isn't the point...it's the principle that I'm want you to grasp.



I'll start out describing the perfect investment. The perfect investment is one that has no losses, no fees and no taxes. Today, want you to focus in on the losses and the fees part. We'll dig into taxes on a later date.



Using the perfect investment scenario, you sit down with your advisor and he shows you that the market has average 12.55% over 33 years and your $10,000 will grow to $494,767 because that is what the market has averaged. True, it did average 12.55%. But average and actual (you spend actual) are two different beasts when you deal with scenarios that you can have losses in.



Here is a quick illustration: Add 100% gain plus a 50% loss. What is the average? What can you spend?



Back to the prior example. The perfect investment at 12.55% average has your $10,000 growing to $494,767 in 33 years. However, the real ending value (factoring real gains and real losses) has you at $323,889! The losses cost you $170,878! Recall the conversation that you probably had with "your guy"..."Hang in there, the markets will come back, they always do, you just have to ride it out, don't bail out now...." This advice sounds great, but in real life it cost you $170,878! How many years of retirement income is that for you?



Now do you see what I mean when I say the "Lies of Averages"?



Let's apply fees to the "Lies of Averages". The average expense ratio in a 401(k) is about 3%. Some more and some a bit less. The more aggressive the fund, the higher the fees. Other plans have much higher fees (I've seen some 403(b) plans as high as 5%).



When applying the fee to the 12.55% gross average return of the S&P 500 you are left with 9.55% average. The perfect investment scenario (no losses) would have your $10,000 growing to $202,767. However, the real numbers have your $10,000 only growing to $129,402!



If you recall, at 12.55%, $205 per month for 33 years would have you at $1 million dollars! Add in the 3% fee and this number is reduced to $522,505 AND this doesn't even include accounting for the losses! The fees have cost you nearly $500,000! How many years of retirement is that? With six losses in 33 years for the S&P 500, this $522,505 would be around $260,000 after factoring in those losses!



Let's role play for a moment. You're 33 years old and you walk into a Wall Street advisor's office or you pull up the financial calculator on your online 401(k) account and you figure you want $1 million when you're 66. You see that the market has average 12.55% and you decide to put in $205 into your 401(k) plan or other retirement account. In your mind, you're all set and you rebuff any person's attempt to shed light onto your situation because you're convinced that "you're all set". Fast forward 33 years and you're 66. You've ridden the wave of ups and downs and you got the advice from everyone to "hold on, ride it out, the markets will rebound" and now you're 66 years old. You look at your account to see that you only have $260,000 in real money (that will be taxed at a yet-to-be-determined tax rate when you pull it out). A far cry from that $1 million your calculator told you that you'd have.



What do you do now? Back to work. You put off all of your dreams to age 66 only to find out what you were told isn't true and isn't a reality. According to the Census Bureau, of the people that started working at age 25 and are now turning 65, 1% is wealthy and 4% have enough put away for retirement. Of the remaining 96%, 29% are dead. That leaves 67% dependent on government (Social Security), family (their adult children), friends, charities and employment.



A bit of a side note, the IRA was created around 1974 and the 401(k) in 1980. People turning 65 today were about 25 when the IRA was created by ERISA in 1974...could the lack of financial security with today's crop of new retirees be a coincidence?



There are better options. Let's sit for 20-25 minutes and we can go over these options and you can decide for yourself if you want to pursue it further. I bet the old guy at Walmart or the elderly lady wiping down the tables at Wendy's (we've all seen them), didn't "plan" on being there when they were retired either.






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