Dow 30,000

[SEIOWA CLONE]

No, I think you are right on. As someone else pointed out, if our economy continues at a growth rate of only 2%, and inflation remains at 2%, then the Fed will keep interest rates <2.5%. This creates a situation that all the banks, hedge funds, & wealthy can borrow cheap money and the only decent returns are in equity markets. Keeps the markets inflating. Doesn't do much for the middle/working class with the exception of 401k accounts.

This and the Trump tax cut factored right into it. Many corporations took their tax cut, and started buying back their own stock. Thereby inflating the prices of that stock even higher. Good for the CEO types who receives hefty bonus checks based on the price of the stock.
The problem is the they corporations are not expanding and producing more, they are not hiring more workers or increasing their wages.

84% of all stocks are owned by the wealthiest 10% of Americans, so the rest of us are not getting any benefit except in your 401K. I would say that since many of us, cannot pull that money out at any time without paying a huge penalty, for most of us, its current price really does not help us out a whole lot.

https://www.politifact.com/californ...-khanna/what-percentage-americans-own-stocks/

 

[CYme]

You have to have some extra cash to invest first. Where does that cash come from when you live paycheck-to-paycheck?

Avocado toast and Starbucks.

 

[SEIOWA CLONE]

A few years ago even a hint at raising the rates caused the market to drop like a rock.

Remember when the car companies started to handle their own financing with lower interest rates? It started out at about 5.9% and then another company would offer 4.9% etc. Whenever they tried to stop people stopped buying.

After 9/11 they all started doing 0% interest loans for a while

I got a 3 years 0% interest car loan in 1986, those rates have been there before.

 

[Althetuna]

Considering how well-funded most pension funds are relative to their notional obligations, you might not be coming out quite as far ahead as you seem to think.

If anything...

If your pension fund does better than expected... you get nothing extra.

If your pension fund does worse than expected... it is not like you magically get what you were promised from money that does not exist... you just take a haircut, like somebody in a defined-contributions plan, or hope somebody bails you out.

That is, your situation is all downside risk with no upsides.

At least a defined-contributions plan is honest with you either way. You are riding the market either way no matter what -- you might as well be aware of that.

You have zero clue. None.

 

[CycloneErik]

I got a 3 years 0% interest car loan in 1986, those rates have been there before.

THEY HAD CASH IN 1986!!!!!

 

[SEIOWA CLONE]

I think you call that an "off-the-books asset" in accounting terms.

You are still depending on your state or the federal government to bail you out, depending on which exact pension fund you are participating in. That could work out fine for you, but considering public finance in this country is awash in red ink and both parties are practically and ideologically committed to making it worse, there is going to be a reckoning at some point.

I do not know if I would want to be the one stuck holding the bag when that happens.

Its long been the dream of Republicans to move their state workers away from a defined benefits package and into a 401K system. Many states have laws working their way though legislatures right now. In Iowa this past spring a bill was passed that limits the rate of property taxes increases by towns and cities. IPERS which before had been in a different fund, was now thrown in the general budget. A motion was made to exempt IPERS but did not pass. This legislation will put many towns and schools into a Finacle straight jacket. By law IPERS payments are set at a certain percent. So towns and schools will have to decide, raise property taxes or not pave streets and other projects.

Within 5 years, cities and schools will be begging the legislature to change the current system, that is when the 401K option will be implemented for all new hires. Sounds good on paper, but what happens in 15 years, without new hires paying into the system it will soon be running negative deficits. So does the state lower the payout rate for retired teachers, city workers and police, or raise taxes to cover the shortfall?

 

[Sigmapolis]

Its long been the dream of Republicans to move their state workers away from a defined benefits package and into a 401K system. Many states have laws working their way though legislatures right now. In Iowa this past spring a bill was passed that limits the rate of property taxes increases by towns and cities. IPERS which before had been in a different fund, was now thrown in the general budget. I motion was made to exempt IPERS but did not pass. This legislation will put many towns and schools into a Finacle straight jacket. By law IPERS payments are set at a certain percent. So towns and schools will have to decide, raise property taxes or not pave streets and other projects.

Within 5 years, cities and schools will be begging the legislature to change the current system, that is when the 401K option will be implemented for all new hires. Sounds good on paper, but what happens in 15 years, without new hires paying into the system it will soon be running negative deficits. So does the state lower the payout rate for retired teachers, city workers and police, or raise taxes to cover the shortfall?

You can tell a similiar story at the federal level where Medicare, Medicaid, subsidies under ACA, Social Security, and interest compounding on the debt are going to suck everything up, leaving nothing for defense or other discretionary spending. Much of discretionary spending is long-term investments in R&D and infrastructure, too, which might have a long-term societal return to them, unlike grandma's Social Security check and end-of-life care.

 

[Sigmapolis]

You have zero clue. None.

Ain't nothin' magical about a pension, my friend.

My grandfather worked for one of the predecessors for Enron.

Guess how much his pension helped him in retirement.

The slings and arrows of the market and public finance find you one way or another.

 

[dmclone]

I'll take a 401k every day of the week. My employer can't touch my 401k but they had no problems cutting about 10k/year from my pension this year. You know pensions are a dying breed when the pension companies start cutting pensions.

 

[isuno1fan]

Another person here lucky enough to still have a pension in place.

Pension, 401k,

I'll take a 401k every day of the week. My employer can't touch my 401k but they had no problems cutting about 10k/year from my pension this year. You know pensions are a dying breed when the pension companies start cutting pensions.

This is why you should lump sum your pension if allowed. Luckily mine allows it.

 

[dmclone]

Another person here lucky enough to still have a pension in place.

Pension, 401k,


This is why you should lump sum your pension if allowed. Luckily mine allows it.

Ours just hit certain people. People with 20+ years but not retired. So pretty much 45-60 year olds that can't afford to leave.

 

[deadeyededric]

I'll take a 401k every day of the week. My employer can't touch my 401k but they had no problems cutting about 10k/year from my pension this year. You know pensions are a dying breed when the pension companies start cutting pensions.

Your union must suck!

 

[Cyched]

You have to have some extra cash to invest first. Where does that cash come from when you live paycheck-to-paycheck?

You're absolutely right. But the trend among the brokers since the Internet and index fund revolution began has gradually been getting more friendly to the average Joe. I know Schwab has had low minimums for a while, and I think the other traditional brokers are following suit. Especially now with the onset of apps like Stash, and robo advisors, I think this trend will continue. I don't use a robo advisor, but I'm pretty sure Betterment doesn't have a minimum account investment.

I don't disagree with what you said, another aspect is that the people living paycheck to paycheck are more likely to not have access to a 401k or other tax-advantaged account. My point is just that anything that allows more regular people to have access to the market is fine by me.

 

[aeroclone]

You're absolutely right. But the trend among the brokers since the Internet and index fund revolution began has gradually been getting more friendly to the average Joe. I know Schwab has had low minimums for a while, and I think the other traditional brokers are following suit. Especially now with the onset of apps like Stash, and robo advisors, I think this trend will continue. I don't use a robo advisor, but I'm pretty sure Betterment doesn't have a minimum account investment.

I don't disagree with what you said, another aspect is that the people living paycheck to paycheck are more likely to not have access to a 401k or other tax-advantaged account. My point is just that anything that allows more regular people to have access to the market is fine by me.

Fidelity has introduced a couple zero rate index funds as well. No fees, no loads, and no minimum investment. Barriers to entry for investing have never been lower.

 

[NWICY]

Most government pension funds will get bailed out by Mr. & Mrs. Taxpayer (whether they like it or not) if the bottom falls out. There may be some corner cutting on the benefit but the vast majority of the deficit will be made up on the other end.

Yep this, last time it took a big down turn taxpayers bailed out IPERS.

 

[Knownothing]

I am not knocking 401k at all and have one myself. But there is growing inequality between how well the wealthy can take advantage of an increasing equity market and how much the typical worker can.

So what. The main point is that we can take advantage of it. So what if rich people make more if I’m making more as well. Good for everyone

 

[scyclonekid]

You only live once have fun!! Can’t take that money with you when die, jimlad??

 

[SEIOWA CLONE]

So what. The main point is that we can take advantage of it. So what if rich people make more if I’m making more as well. Good for everyone

Because of the fact that the wealthy have theirs invested in stocks that they can easily turn into dollars. While yours is in a 401K, and if you pull the money out, you will lose a third to half of it in taxes.
So right now it looks great on paper, but until you can draw it out without a huge tax hit, its just paper. Nothing more, and nothing less.

 

[Althetuna]

Ain't nothin' magical about a pension, my friend.

My grandfather worked for one of the predecessors for Enron.

Guess how much his pension helped him in retirement.

The slings and arrows of the market and public finance find you one way or another.

Of course the overall economy affects the value of pension funds. The pension I'm vested in is managed by its members (not a company and not the government) but it is regulated and insured by the Pension Benefit Gurantee Corporation.

So when the great recession hit the PBGC notified the fund adminstrators action needed to be taken because the ratio of fund assets to liabilities fell below a certain ratio.

The members of the pension fund voted to forgo one years penesion credit to improve the health of the fund. It's not about never losing value. Just like any other investment vehicle, it's about good management.

My problem with your post was the assertion that definded-benefit plans have all down-side risk. That's obviously not true.

Why are companies moving away from defined-benefit plans? It's to reduce their risk, putting it on the individual.

Now what do definded-benefit plans provide that definded-contributions don't.

1. The most important aspect is they provide protection against very old age by spreading the risk across a large group of people.

2. Professional management at lower costs than individual plans per capita.

3. As an institutional investor, access to investments individuals do not have.

4. Automatic savings which cannot be accessed by its members.

Yes, we're hearing about issues with pension plans but we're starting to hear about a soon to be a much larger problem; people with little or no retirement money.

And don't trick yourself into believing large portions of the population without retirement is an individual problem. Millenials and Gen Z'ers will be paying for it....like just about every other problem.

 

[Althetuna]

I'll take a 401k every day of the week. My employer can't touch my 401k but they had no problems cutting about 10k/year from my pension this year. You know pensions are a dying breed when the pension companies start cutting pensions.

But they can and frequently do provide their matching funds in non-voting, company stock.