Frontline: The Retirement Gamble

[raja]

The average American 401K holders pays $155,000 in fees -- several of which are hidden -- for investments that are no better, and usually worse, than cheap indexed funds . . . .

The Retirement Gamble http://www.pbs.org/wgbh/pages/frontl...rement-gamble/

Pass this one on to your non-economically savvy friends . . . they will get it.

[don]

Re: Frontline: The Retirement Gamble

The average American 401K holders pays $155,000 in fees -- several of which are hidden -- for investments that are no better, and usually worse, than cheap indexed funds . . . .

FIRE cannot create wealth, it can only transfer it.

[shiny!]

Re: Frontline: The Retirement Gamble

FIRE cannot create wealth, it can only transfer it.

Transfer it is right! I watched that show last night. Didn't take notes but IIRC 2% compound fees on "managed funds" earning an average of 7% will suck up 2/3 of the growth in the account over 50 years. Or something like that. It was mind boggling!

They recommended Vanguard funds or unmanaged index funds for IRAs and 401Ks.

No wonder FIRE hates for people to invest in gold.

[santafe2]

Re: Frontline: The Retirement Gamble

Transfer it is right! I watched that show last night. Didn't take notes but IIRC 2% compound fees on "managed funds" earning an average of 7% will suck up 2/3 of the growth in the account over 50 years. Or something like that. It was mind boggling!

They recommended Vanguard funds or unmanaged index funds for IRAs and 401Ks.

I may have misunderstood what Bogle was saying but it sounded like he was touting Vanguard as "only" charging 1% to not manage a fund. Why isn't that 1/10 of 1%? Again, maybe I heard him incorrectly but really, 1% to offer a financial algorithm that balances S&P 500 holdings?

[vt]

Re: Frontline: The Retirement Gamble

S&P 500 index funds lost 49% in the 2000-2002 bear market, and 55% in the 2007-2009 bear market. an advisor that charged 1% but avoided those big losses and used low cost ETFs (exchange traded funds) would be ideal if you could find one.

[Milton Kuo]

Re: Frontline: The Retirement Gamble

I may have misunderstood what Bogle was saying but it sounded like he was touting Vanguard as "only" charging 1% to not manage a fund. Why isn't that 1/10 of 1%? Again, maybe I heard him incorrectly but really, 1% to offer a financial algorithm that balances S&P 500 holdings?

I heard 1% in expenses, too. However, I looked up a Vanguard S&P 500 ETF (VFINX) and its expenses were 0.17%. Bogle probably misspoke.

[Milton Kuo]

Re: Frontline: The Retirement Gamble

S&P 500 index funds lost 49% in the 2000-2002 bear market, and 55% in the 2007-2009 bear market. an advisor that charged 1% but avoided those big losses and used low cost ETFs (exchange traded funds) would be ideal if you could find one.

That's the rub, isn't it, finding such a person? I suspect no more than 5% of all investment professionals are smart enough and honest enough to make the correct trades.

[wayiwalk]

Re: Frontline: The Retirement Gamble

I heard 1% in expenses, too. However, I looked up a Vanguard S&P 500 ETF (VFINX) and its expenses were 0.17%. Bogle probably misspoke.

I imagine there is a range for the fees depending how you access them. Where I work, we use Vanguard to manage the overall 401K plan. The Vanguard funds, such as their target retirement fund, accessed through the plan have fees on the order of 0.18%.

I've also experienced a case where they upgraded the fund used in the plan which lowered fees for essentially the same fund (a bonds-indexed for inflation fund).

Funds from outside of Vanguard have higher fees.

[don]

Re: Frontline: The Retirement Gamble

Vanguard is the fund most frequently cited here on the 'tulip, leading me to consider parking some short-term (1-2 years) cash with them. Any thoughts besides more physical?

[LazyBoy]

Re: Frontline: The Retirement Gamble

On the theme of lower fees, I recently found this site: https://www.wealthfront.com

Any have an opinion on them yet?

[charliebrown]

Re: Frontline: The Retirement Gamble

In a systematic crisis would vanguard short term trearury or treasury mm be safer than FDIC insured bank account?
I don't know the answer to that. Their insurance fund is really very small Although the FDIC can borrow from the treasury, would the treasury under all circumstances lend? And how much, If JPM goes down, how much would the FDIC have to cough up to cover the depositors?
The treasury i'm sure would lend FDIC cash but how much? 100B? 200B ... ? And then there is the dodd-frank bill which I think includes bail-ins for
systmatically important financial institutions.

Then there is contagion. How many institutions have giant accounts at JPM, pension funds, state treasuries, you little bank at the corner, that would
not fall under the FDIC umbrella no matter what.


I have been using vanguard for 20 years and they have given me a good shake. In the 2008 crisis thier bond funds did ok. Unlike some funds whoose investment grade corp funds were filled with not so investment grade paper. Brokerage fees are very affordable too. If you have 500K??? you get $2.00 commission trades, less and trades are still good. $7.00 per trade

Even though there fees are so low when I call on the phone for support, I have always gotten top notch response.

[santafe2]

Re: Frontline: The Retirement Gamble

Vanguard is the fund most frequently cited here on the 'tulip, leading me to consider parking some short-term (1-2 years) cash with them. Any thoughts besides more physical?

I'm investing in real estate. It's simple, personal and local. I really hate the US stock market and US bonds at this point. I think it's a good time to be hyper aware. Nothing looks easy or completely logical. I don't see an easy way out of this decade or the next one.

[shiny!]

Re: Frontline: The Retirement Gamble

I'm investing in real estate. It's simple, personal and local. I really hate the US stock market and US bonds at this point. I think it's a good time to be hyper aware. Nothing looks easy or completely logical. I don't see an easy way out of this decade or the next one.

Agree with you, except I don't think real estate is simple or a sure thing, either. Even if you own it 100% you still have to pay property taxes, and I have a sneaking suspicion that before this mess is done, inflation and cash-poor counties and states could drive up property taxes to unpayable levels. Except for California because of Prop. 13.

OMG, wouldn't it be ironic if people start moving back to California because of advantageous tax policies?

[Raz]

Re: Frontline: The Retirement Gamble

...OMG, wouldn't it be ironic if people start moving back to California because of advantageous tax policies?

My wife told me there's a bill in the California Legislature to allow non-citizens (Illegal Aliens) to serve on juries. Qualified elector clause out the window.
Yeah, that would certainly increase my confidence level for property rights in the state of California: even more "jackpot justice" from civil juries.

I've reached the point where I can believe anything when it comes to the California Legislature.

[don]

Re: Frontline: The Retirement Gamble

I'm investing in real estate. It's simple, personal and local. I really hate the US stock market and US bonds at this point. I think it's a good time to be hyper aware. Nothing looks easy or completely logical. I don't see an easy way out of this decade or the next one.

+1 Many of the old investment guides are defunct while many of the traditional investments are gone. Remember back when the cardboard box index was insightful. Things were rational back in the productive economy era, including investing. No so under FIRE. As far as investing in real estate, counting on appreciation may be a fool's errand as well, making the old prescription of breaking even while waiting for asset appreciation untenable. Everywhere you look investing is daunting.