jenk

Not yet convinced that failure is baked into the voluntary, self-directed, commercially run retirement plans system? Consider what would have to happen for it to work for you. First, figure out when you and your spouse will be laid off or be too sick to work. Second, figure out when you will die. Third, understand that you need to save 7 percent of every dollar you earn. (Didn’t start doing that when you were 25 and you are 55 now? Just save 30 percent of every dollar.) Fourth, earn at least 3 percent above inflation on your investments, every year. (Easy. Just find the best funds for the lowest price and have them optimally allocated.) Fifth, do not withdraw any funds when you lose your job, have a health problem, get divorced, buy a house or send a kid to college. Sixth, time your retirement account withdrawals so the last cent is spent the day you die.

As we all know, these abilities are not common for our species.
— from "Our Ridiculous Approach to Retirement" by Teresa Ghilarducci. There's also a special section on retirement.

I've mentioned my parents weren't the world's best money managers, my father in particular. I was vastly relieved to find that his pension, like his social security, had no lump-sum option and could not spent at once ... which is part of why he still HAD it, despite his drinking, spending sprees and eventual dementia. If my folks had had to save for themselves they would've been left with just social security.

I'm light-years ahead of my folks, but there's still plenty that could derail retirement savings. I have friends who've had to cash out their 401(k) due to unemployment or illness. And yes, not everyone lives long enough to retire. But it'd be nice to have the option.

The average middle class person alive today has more goodies than the kings and queens of times past. In fact, even during this time of economic retrenchment, most of us have a higher standard of living than 99 percent of all the humans who've ever walked the planet. In pointing this out, I don't mean to discount the suffering of those who've lost their jobs and homes. But I think it's helpful to keep our collective deprivations in perspective. Similarly, I like to remember that no matter how much our personal trials may test us, they are more bearable than, say, the tribulations of the generation that lived through the Great Depression and World War II. Keep this in mind, Sagittarius. As you wander in the limbo between the end of one chapter of your life story and the beginning of the next chapter, it'll really help to stay conscious of how blessed you are. Halloween costume suggestion: a saint tending to the needs of the dispossessed and underprivileged.

— Free Will Astrology

The Michael Jackson auction? Yeah, that auction. I figured it was over-the-top, I figured there was huge amounts of stuff that had no earthly purpose, I figured Hard Rock would buy stuff.

Then I saw this post. What blew my mind? Was:



Just think about this for a minute. Maybe you've written a poem lately. (I know several folks on my flist have written poems that are better than this one.)

But... would you commission your poem to be made into a faux-antique book of cast stone or resin or whatever-the-hell-that is? Just to have in your house?

( a few more examples, cut to save your sanity )

I know we all have the things we consider essential that others don't, but ... dude.

I wonder if the persons who broke down the doors at a Wal-Mart and trampled employees - including a 34-year-old man who died of his injuries - consider themselves murderers?

The NY Times quotes Detective Lt. Michael Fleming, who is in charge of the investigation for the Nassau police, as saying: “I’ve heard other people call this an accident, but it is not,” he said. “Certainly it was a foreseeable act.”

I think that's well said.

There are times when I think the Puritans weren't completely wrong in banning Christmas celebrations as unChristian.

Good God why on earth....

[Oregon's Janella Spears] fell victim to the "Nigerian scam," which is familiar to almost anyone who has ever had an e-mail account.
[...]
When Spears began to doubt the scam, she got letters from the President of Nigeria, FBI Director Mueller, and President Bush. Terrorists could get the money if she did not help, Bush’s letter said. Spears continued to send funds. All the letters were fake, of course.

She wiped out her husband’s retirement account, mortgaged the house and took a lien out on the family car. Both were already paid for. — KATU

How the what the who? I know everyone wants something for nothing, but oy oy oy.

I do note they started by asking for $100. I guess I could kind of see taking a risk on $100, when it's supposed to be to help get an inheritance from a long-lost grandfather.

And each successive payment would up the ante and make her feel more committed. But still....

For more than two years, Spears sent tens and hundreds of thousands of dollars. Everyone she knew, including law enforcement officials, her family and bank officials, told her to stop, that it was all a scam. She persisted.

Spears said she kept sending money because the scammers kept telling her that the next payment would be the last one, that the big money was inbound. Spears said she became obsessed with getting paid. — KATU

See also: Sunk Cost Fallacy: Once you've paid, you feel that walking away would be "wasting" the money.

Thing is, though, if you can't get the money back? You can't get the money back. The money is gone regardless.

...that I haven't read any of John Bogle's books. But I have the majority of my investments at the mutual fund company he founded, Vanguard. (So does he.) And I liked this interview with him in The New York Times.

He is armed with statistics showing that a vast majority of investors — including most professional investment managers — should not even bother trying to pick individual stocks. They are just not very good at it, he says. Better to invest in the broad market through index funds with low costs, allowing the shareholders, and not the investment managers, to profit when times are good. [...]

Yet for simple, straightforward reasons, he says that this is a very good time to put money into stocks — not for short-term trades, mind you, but as part of a diversified portfolio that you hold for many years.

He goes on to recommend holding bonds as well as stocks, both through low-cost index funds (rather like what I have) and to make the overall % of bonds roughly equal to your age.

His own holdings are invested entirely in Vanguard funds, in what he says is “probably” a 75 percent bond, 25 percent stock allocation — roughly in keeping with his age-based formula.

“I don’t really know the exact allocation,” he said last week in another interview. “I don’t check the portfolio more than once a year. It had been 70-30 bond to stock, but the stock market has been so bad lately, and the bond market has been pretty good, so the markets have rebalanced the portfolio for me. Of course, like any investor over the last year, I wish the portfolio had been even more conservative, but so it goes.”

vixyish should read today's Two Lumps. Nao.

Regarding the rich/middle/poor continuum, http://www.globalrichlist.com/ puts my personal income in the top 1% of income for the world's population. For contrast, I'm in the bottom 90% of US personal income....

Oh, and did you see the Obama tax-cut site? It shows how your taxes would be cut under Obama's plan vs McCain's if you earn under 250K/yr. If you tell it you earn more than $250K a year, it displays:


Of course, as The Washington Post displays, McCain's plan would offer tax cuts to all earners. Obama's plan also raises taxes on those earning above 600K/yr.

Regarding Washington state's lack of income tax, it does seem wonderfully subversive that money I put in savings or investments does not get taxed by the state.* It feeds my subversive soul that buying a cheaper house results in a lesser property tax, or that buying a cheaper TV/car/jacket (or not buying a new widget in the first place!) reduces the sales tax I pay.

But it means that state tax revenue swings wildly with the economy. And it's less progressive than an income tax.


*Where state=Washington state not "the state" or government in general. Money I put into my 401(k) gets taxed less by the feds *and* not at all by the state. Whee :)

Adapted from a quiz at Get Rich Slowly that was based on The Millionaire Next Door.

[Poll #1266859]


(I put the answers in the first comment. For contrast, Get Rich Slowly's answers are here - note I substituted a few questions from the first chapter of the book.)

From an interesting article on spending came this "what the what?" moment:

"Duncan Simester, a professor of marketing at M.I.T.’s Sloan School of Management, conducted experiments asking people to bid on certain items. Those in one group were told they could use only cash as payment — with access to an A.T.M. — while a second group could use their credit cards to pay. It turns out that the participants in the latter group bid significantly higher than those limited to cash."

The implication in the article is that plastic didn't seem real and cash does. Um, how about the fact that ATMs limit how much you can withdraw in a day to much less than my credit card limit? Or that if you've already withdrawn the limit you're stuck with what's in your pocket?

It could also be that cash (in the form of ATM limit+what's in the wallet) forms a practical spending limit, not just a budget one's decided on but could reconsider. "Not having any more money to spend" is a harder thing to argue with than "I don't want to spend that much."

Maybe they started bidding at a dollar, maybe they were bidding at low amounts, and so on. Maybe withdrawal limits weren't a factor. But it seemed weird to me.

(I do agree with the cautions on debit cards, and that thinking in terms of "I would have to work X hours to buy this shiny" can be useful....)