Comments on: Survey Finds Many Workers Fail to Save Enough, Make Poor Investment Choices http://genxfinance.com/survey-finds-many-workers-fail-to-save-enough-make-poor-investment-choices/ Helping a unique generation achieve financial independence. Thu, 24 May 2012 01:09:21 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Jeremy http://genxfinance.com/survey-finds-many-workers-fail-to-save-enough-make-poor-investment-choices/comment-page-1/#comment-1563 Jeremy Fri, 09 Mar 2007 01:02:39 +0000 http://genxfinance.com/2007/03/08/survey-finds-many-workers-fail-to-save-enough-make-poor-investment-choices/#comment-1563 I agree that if the traditional pension is headed toward extinction there should be some sort of mandatory savings. I think a lot of people think that is what Social Security is but it isn't. I know there are some places that have some sort of mandatory retirement savings in place. My wife for example, works for the local government. While they still offer a defined contribution plan they also have a "defined benefit" plan that is mandatory to contribute to. Essentially you don't have a choice and 5% of your pay has to go into the account, which in effect is your pension when you retire. Of course the problem with this is that like Social Security these are pooled funds. So while you are contributing money each week into this account that money is in effect paying for current retirees benefits. So 20 or 30 years down the road you are relying on your benefits to be paid for by current employees... and you find yourself possibly facing another underfunded plan. If there was a mandatory contribution required I think it should be tied to that individual. Your money goes into an account in YOUR name, not just a pool for everyone. Of course it is no replacement for some of the benefits provided by a national system but at least it is fair. I agree that if the traditional pension is headed toward extinction there should be some sort of mandatory savings. I think a lot of people think that is what Social Security is but it isn’t.

I know there are some places that have some sort of mandatory retirement savings in place. My wife for example, works for the local government. While they still offer a defined contribution plan they also have a “defined benefit” plan that is mandatory to contribute to. Essentially you don’t have a choice and 5% of your pay has to go into the account, which in effect is your pension when you retire.

Of course the problem with this is that like Social Security these are pooled funds. So while you are contributing money each week into this account that money is in effect paying for current retirees benefits. So 20 or 30 years down the road you are relying on your benefits to be paid for by current employees… and you find yourself possibly facing another underfunded plan.

If there was a mandatory contribution required I think it should be tied to that individual. Your money goes into an account in YOUR name, not just a pool for everyone. Of course it is no replacement for some of the benefits provided by a national system but at least it is fair.

]]> By: Enough Wealth http://genxfinance.com/survey-finds-many-workers-fail-to-save-enough-make-poor-investment-choices/comment-page-1/#comment-1562 Enough Wealth Fri, 09 Mar 2007 00:03:09 +0000 http://genxfinance.com/2007/03/08/survey-finds-many-workers-fail-to-save-enough-make-poor-investment-choices/#comment-1562 We should remember that roughly half of "all workers" will have an IQ of less than 100 - so expecting them to take an active interest in asset allocation, rebalancing and so on is a big ask. Personally I think the US should move towards compulsory retirement savings like in Australia - we traded off some pay rises for a compulsory superannuation contribution by employers of 3% of gross salary back in the 80s. This was then slowly incremented over the following decade to it's current level of 9% of salary - which should provide an adequate retirement fund for employees who work full time from 20-65. This allows the government pension to be asset and means tested so it only goes to the most needy retirees (and is affordable to taxpayers). This sort of change would be a solution to the looming US social security funding crisis. One problem with the current Australian system is that the available retirement fund providers all tend to have a fairly conservative "default" asset allocation which is really only appropriate for older and/or risk-averse investors. A default asset allocation based on members age, that was set by the government and similar to the "target date" allocations would be of greater benefit most workers. Regards http://enoughwealth.com We should remember that roughly half of “all workers” will have an IQ of less than 100 – so expecting them to take an active interest in asset allocation, rebalancing and so on is a big ask.

Personally I think the US should move towards compulsory retirement savings like in Australia – we traded off some pay rises for a compulsory superannuation contribution by employers of 3% of gross salary back in the 80s. This was then slowly incremented over the following decade to it’s current level of 9% of salary – which should provide an adequate retirement fund for employees who work full time from 20-65. This allows the government pension to be asset and means tested so it only goes to the most needy retirees (and is affordable to taxpayers). This sort of change would be a solution to the looming US social security funding crisis.

One problem with the current Australian system is that the available retirement fund providers all tend to have a fairly conservative “default” asset allocation which is really only appropriate for older and/or risk-averse investors. A default asset allocation based on members age, that was set by the government and similar to the “target date” allocations would be of greater benefit most workers.

Regards
http://enoughwealth.com

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