Those 401Ks and pension funds

[shadowsource]

How much scorn will Cheyenne and Miles and WriterDom have for the Lucent workers who are no only getting fired in droves, but whose pension plans are also worthless because they were amassing Lucent stock and being compensated in part with more Lucent stock and options. You know, that cool '90s financing trick that all the tech corps. so loved? Sure, they screwed up by taking Lucent up on its offer to let them use part of their pay to buy stock at a discount; they really thought the AT&T family was safe. But they sure did work hard, and they sure will need that SS pittance. But I guess they should have worked for Intel instead. No, wait, Cisco. Shit, Sun.

OK, how is this their fault? How is this NOT an argument for the SS safe-slow system? How many millions of hard workers have this problem? How many of them will vote for Bush when they realize it's either that tax cut or their retirement pittance?

 

[April]

It's a common warning in the financial mags not to invest too much of your 401k or other retirement plan in copany stock. Yeah, it may seem like a smart thing to do when your company is riding high, but the risk of it biting you in the ass is too much. Haven't they ever heard of cyclical stocks? Or did they just think it wouldn't happen to them? Sad, really.

 

[shadowsource]

Thank you -

All I'm saying is that people - like me - who want to get fancy and speculate in the markets should do that with loose money and should take it seriously and carefully (buit screw us if we don't). But everyone should have a fundamental, civilized, conservative SS pool awaiting htem. We can all laugh if we don't need it. If we do, it will look very very nice, albeit too small for much of a life. Think of all those workers whose pension funds got raided by leveraged buyout managements in the 80s. Or those who suffer catastophic medical problems in their families. We need a safety net. And those who use it are not scum. There but for the grace of whatever go I.

 

[Shy Tall Guy]

Okay, I'll bite.

OK, how is this their fault?

They made the decision where to put their money. They are adults. No one forced them to put their money there. Most mature people agree that adults are responsible for the consequences of their decisions.

How is this NOT an argument for the SS safe-slow system?

How is it an argument for Social Security? People are too stupid to know where to put their money? Some people make mistakes, so all of us are too stupid to know where to put their money? The government knows what is best for us? the government is our mommy and should protect us from mistakes?

I think that viewpoint is insulting and flat out wrong.

How many millions of hard workers have this problem? How many of them will vote for Bush when they realize it's either that tax cut or their retirement pittance?

I have no idea - does it really matter? Is this the job of the government to be worried about this?

Answer: NO - the proper purpose of government is not to protect us from making mistakes, but to protect us from infringing on the rights of others. When you go beyond that you have gone down that slippery slope to socialism.

STG

 

[shadowsource]

Oh Christ -

You people want a Depression. You'll get one. Too bad the rest of us will be stuck in the back of the Model T, careening down the mountain with you. Your self-righteousness and lack of empathy is sickening.

No one ever helped you. You never made a mistake. Go read another Ayn Rand book - and don't skip the "good" parts.

 

[Shy Tall Guy]

Re: Oh Christ -

You people want a Depression. You'll get one.

Your evidence? Your argument? Your reasoning? Simply making an assertion doesn't make it so.

Your self-righteousness and lack of empathy is sickening.

Your arrogance and your self-righteousness are equally unappealing and a lot more apparent. To say that someone is responsible for the consequences of their own decisions is not apathetic - it is simply a fact.

No one ever helped you. You never made a mistake.

It happens all the time. What has not happened is my asking someone else to take responsiblity for my mistakes, nor have I demanded that people help me, and most importantly, I have never asked the government to take responsibility for how the vagaries of the economy affect me - except when it was due to their interference.

I've been around for a while. My parents and grandparents went through the depression. I have lived well below the poverty line for a number of years while supporting a wife and child, I have been homeless for short periods of time. I put myself through college, I learned a profession and I worked up through it, I am currently unemployed, and I currently have a 401k that has its value below what I have contributed into it - as have hundreds of millions of others, and I do not need the government to do anything but protect my natural rights and to quit interfering. I think I know what some people are going through right now.

Go read another Ayn Rand book - and don't skip the "good" parts.

Oh come now - surely you can do better than that.

STG

 

[registered "^^"]

Basically, 401K's suck.....the best pension plan is one you have control over daily and can buy and sell freely. You have to be able to buy and sell stocks fast, if you do not choose safe bonds. To put your life savings into a company you work for......tsk,tsk it didn't get you up the corporate ladder. Deversify.........



P.S. SSI was never meant to be a soul source of retirement income.

 

[Shy Tall Guy]

Basically, 401K's suck.....the best pension plan is one you have control over daily and can buy and sell freely. You have to be able to buy and sell stocks fast, if you do not choose safe bonds. To put your life savings into a company you work for......tsk,tsk it didn't get you up the corporate ladder. Deversify.........

If I understand what you are saying correctly, some people have mistaken impressions about what 401Ks are:

1) Not all 401Ks are funds where the contributors buy stock in the company they work for. In fact, I believe most do not - there may even be some regulation about that. None of the the 401Ks I contributed to invested a cent into the companies I worked for.

2) Most of the funds do allow the employee to control what funds to put their money into, allowing them to control the percentage of contributions to different funds, and to move money from one fund to another.

3) While many funds allow you to move money around on a daily basis (usually not minute to minute, but after the end of the trading day), I don't think it is a good idea to be day trading (minute to minute buying and selling) with your 401K money, even if you were able to. Most people don't have the time to be keeping up with the market and keep a regular day job at the same time.

I believe most people who have invested money in the company they work for are like me; they have stock options that they exercise. This is separate from the 401K and a totally different issue. Some people exercised their options and then hung onto the stock too long assuming the stock value would continue climbing. They should have diversified as soon as they could. Additionally, a number of them got into a lot of trouble by living beyond their means thinking they would always be worth what they were when the stock was at its highest value.

Yes I know quite a number of these people.

STG

 

[Cheyenne]

How much scorn will Cheyenne and Miles and WriterDom have for the Lucent workers who are no only getting fired in droves, but whose pension plans are also worthless because they were amassing Lucent stock and being compensated in part with more Lucent stock and options. You know, that cool '90s financing trick that all the tech corps. so loved? Sure, they screwed up by taking Lucent up on its offer to let them use part of their pay to buy stock at a discount; they really thought the AT&T family was safe. But they sure did work hard, and they sure will need that SS pittance. But I guess they should have worked for Intel instead. No, wait, Cisco. Shit, Sun.

OK, how is this their fault? How is this NOT an argument for the SS safe-slow system? How many millions of hard workers have this problem? How many of them will vote for Bush when they realize it's either that tax cut or their retirement pittance?

Okay, your free business lesson for the evening. You are mixing up basic financial terms- let me help define them for you.

Pension plans are defined benefit plans and are almost always covered by insurance so that the employees CAN'T lose their pension benefits. ERISA of 1974 created this scenario. Try reading here:
http://www.pbgc.gov/publications/YGPTEXT.HTM#plans

Defined benefit means exactly that, the end benefit value of the pension is guaranteed to the employee. Benefit payments upon retirement will not fluctuate with the stock market. A company's required contribution will change each year, however, depending on the funding level of the plan. The change in the pension expense is an expense to the company, not the employees.

401(k) plans are a creation of the IRS. 401(k) is a section code in IRS rules and regulations. A 401 (k) plan is a defined contribution plan. This means that the end value of the plan will fluctuate depending on the investments the particpant chooses. Yes, there are all kinds of guidelines for the plan administrators to follow. A variety of choices is required for employees to pick from. Various risk levels have to be identified by investment type and explained well to the employees. In the end, as others have pointed out above, it is the employee's responsibility to understand the investments and pick accordingly. A good financial planner will never tell you to keep all of your retirement funds in your company's stock inside your 401(k). That is foolish as you are risking everything- if your job goes because of poor company performance, so does your retirement savings. Diversification is critical.

By "using part of their pay to buy Lucent stock at a discount," I assume you are referring to some sort of employee stock purchase plan. These generally involve payroll deductions and periodic purchases at a discount (15% is common) of company stock for employees. If you are able to sell the same day you buy, you have an immediate 15% return on your money. These plans can be great, but you need to remember that you are investing in common stock. Owning a single stock is always more risky than having a balanced portfolio. If the employees bought company stock as just one piece of their total investment plan, their risk would have been diminished. It is still a good idea to periodically sell some of the stock purchased through employee stock purchase plans in order to better diversify.

None of the three financial items above have anything to do with our social security system, by the way.

And to answer your original question about my potential disdain for the Lucent employees:

They won't have lost a thing if they have a pension plan. However, I'm guessing you were really referring to a 401(k) defined contribution plan. If so, then it is their own fault if they did not read and understand what they were doing in choosing Lucent stock to be purchased inside their 401(k) account. If it is an employee stock purchase plan you are referring to, I have the same answer. It is their own fault if they did not diversify their holdings. If they aren't sophisticated enough to understand simple investment concepts, their money would have been better utilized in a bank account or a cd.

 

[Cheyenne]

Basically, 401K's suck.....the best pension plan is one you have control over daily and can buy and sell freely. You have to be able to buy and sell stocks fast, if you do not choose safe bonds. To put your life savings into a company you work for......tsk,tsk it didn't get you up the corporate ladder. Deversify.........

Please see my post above. You are also confused on the difference between pension (defined benefit) plans and 401(k) (defined contribution) plans.

What you are suggesting for a "pension" plan is not possible as you have no direct control over investments inside the plan at all as a participant. Buying and selling stocks fast would also not be highly recommended by most financial advisors for your 401(k) plan. These are long term investments, not day trader type accounts.

 

[miles]

shadow

Well, it just goes to show you that some people actually acquire a taste for their own foot.

I'm beginning to think ppman is trolling as shadow. Same m.o. =
b-o-r-i-n-g.

 

[Cheyenne]

Re: shadow

I'm beginning to think ppman is trolling as shadow. Same m.o. = b-o-r-i-n-g.

You love insulting p_p_ man, don't you?

 

[miles]

Shy-anne

Actually, I shouldn't have compared the two. PPman is very well informed and I respect him for discussing the facts surrounding the issues. I even like the little limey bastard.

 

[shadowsource]

Alright Cheyenne

Yes, I was conflating 401Ks and pension funds. Knowing the difference pretty well, but having neither, I must admit to sloppiness. I could rant about pension fund raiders but it wouldn't be germane. As you can tell, I feel strongly about the need for a safety net. Obviously that's a position that derives miniscule support here. I've been frenetically posting about this for two days while I was working hard at something else, partly because I've been really shocked at the vehemence with which you all oppose a program that has helped a lot of people. Obviously I won't convince anyone at Lit as to the wisdom of SS. I am surprised that you oppose it, given that you deal with these things in the RL. But I shouldn't let anything here surprise me, save perhaps the number of sexual conservatives, which will always astound me.

 

[Cheyenne]

Re: Alright Cheyenne

Yes, I was conflating 401Ks and pension funds. Knowing the difference pretty well, but having neither, I must admit to sloppiness. I could rant about pension fund raiders but it wouldn't be germane. As you can tell, I feel strongly about the need for a safety net. Obviously that's a position that derives miniscule support here. I've been frenetically posting about this for two days while I was working hard at something else, partly because I've been really shocked at the vehemence with which you all oppose a program that has helped a lot of people. Obviously I won't convince anyone at Lit as to the wisdom of SS. I am surprised that you oppose it, given that you deal with these things in the RL. But I shouldn't let anything here surprise me, save perhaps the number of sexual conservatives, which will always astound me.

Let's try point by point.

1) What does "conflating" 401 (k) with pension plans mean?

2) Did you READ anything I wrote about pension plans and how they work? Workers can NOT get hurt by anyone raiding pension plans. There is a huge difference between the set payments (defined benefits) made to participants in the plans and the funding mechanisms. The FUNDING side is where the "raiding" could take place. All this means is that based on actuarial calculations, the company has TOO much funding in the plan compared to the projected required payouts. The companies are essentially getting a refund of their own money when they are "raiding" the pension fund. This was something CPA's automatically pointed out to clients in the mid 1980's as something they should consider doing.

3)

I've been really shocked at the vehemence with which you all oppose a program that has helped a lot of people. Obviously I won't convince anyone at Lit as to the wisdom of SS. I am surprised that you oppose it, given that you deal with these things in the RL.

Now you're putting words in my mouth. I offer $100 to you if you find a single post in any thread on Lit in the last 17 months that I've been posting here where I have opposed SS at any level, much less with "vehemence." Lies won't help you support your position. Try this thread from the election debates last year to read my SUPPORT for SS:
http://www.literotica.com/forum/showthread.php?s=&threadid=16973&perpage=20&pagenumber=2

4) As I said in my post above, "none of the three financial items above have anything to do with our social security system, by the way." Trying to connect your concepts of what pension plans, 401(k) plans and stock purchase plans are with social security is difficult. All of them are in addition to basic SS, not instead of it.

 

[shadowsource]

Cheyenne -

I'm happy to hear that you appreciate Social Security. A lot of the problems in several threads derive from my shock (yes! shocked!) at finding such vehement opposition to it in 2001. I had expected to find more of a debate about how best to preserve it. I hope your friends forgive you for supporting communism. Sorry I misunderstood - you charged into a blistering wrangle and I assumed you were representing the opposition. I well understand the differences between a pathetic, bedrock survival plan like SS and the virtues of investing wisely - or simply with luck, as so many contemporary geniuses did until last year. I actually made bundles on your namesake - Cheyenne Software. Pace.

 

[KillerMuffin]

I exercise my employee stock purchase option with great diligence. They will buy an additional 15% up to 1800 a year on every dollar I blow on stock.

Of course, when Wallyhell crashes and burns, I'll be out a buncha bucks, but hey, when Wallyhell crashes and burns I'll be out a job with even bigger worries than what amounts to 1% of my net pay in stock options.

So far, I've made about 46 bucks on stock options. Not a lot to high rollers like the Lucent people, but to us schmoes down below, that's a lot for 6 months. I own exactly 3.423 shares of stock now. Had to sell some, needed and air conditioner. Makes me angry.

Stock ownership gives me more than just a way to save cash and get a return. It gives me ownership of the company. I OWN walmart. I work for myself. Okay, so I own a microbe of the company, but you know, I want that microbe to be successful, so I work harder and find ways to cut costs. Like not sticking one or two things in a bag and getting a new one. Employee owners are a great investment for Walmart to make. It creates a more responsible employee and it gives an employee a good benny that makes them feel appreciated and therefore will work harder, and it generates revenue.

It's money I can afford to lose and it's money that's not connected with savings, retirement, or pensions. Wallyhell has one very good pension type plan. After seven years, when you've become fully vested, you can quit and they'll hand you about 6,000 in severance pay. Not bad for a low rung job.

It's just all those mother fucking customers that keep showing up. If we could just get rid of them...

 

[Oliver Clozoff]

Admittedly, not my field of expertise, but nevertheless...

it would seem that anyone who would choose to sink the bulk of their retirement savings into something that depends on the success of any single company or corporation is acting awfully irresponsibly.

However, I don't know of a better long-term investment (and what is saving for retirement but a long-term investment?) than a widely diversified stock portfolio. Over the long run, there's not much more of a sure bet than the steady growth of the aggregate US economy. There hasn't been a 5 year period in the last 65 years in which a person investing for his retirement in a broad fund wouldn't have saved more than social security (as it currently exists) could currently provide for them.

There's already a national myth that social security is a kind of government sponsored 401k. I hear people frequently say things like "I'm paying into social security. There better be money left when I get old to collect it".

There absolutely should be a "safety net" to provide for those who cannot save enough for their own retirement, but it mystifies me how some people can argue the "riskiness" or "imprudence" of the nation as a whole investing its social security dollars in the broad markets when a similar investment by any single individual would be regarded as ideal (or even overly cautious or conservative).

The truth is that social security can't continue to exist as it currently does. When it was instituted the US life expectancy was 64 (any wonder the age of collection was set at 65? ) Today, life expectancy is in the mid-seventies and growing. Add to that the fact that rmy parents' age group, the "baby boomers" are about 10 years from becoming eligible and when they do, the US will have its largest number on the Welfare rolls ever (yes, SS is a welfare program).

Someone's gonna have fix SS, but it's become some sort of national birthright, as if the right to claim a check at 65 was written into the preamble of the Constitution.

Good luck to the politicians that will have to fix it.

 

[Unclebill]

Re: Cheyenne -

Originally posted by shadowsource
I'm happy to hear that you appreciate Social Security. A lot of the problems in several threads derive from my shock (yes! shocked!) at finding such vehement opposition to it in 2001. I had expected to find more of a debate about how best to preserve it. I hope your friends forgive you for supporting communism. Sorry I misunderstood - you charged into a blistering wrangle and I assumed you were representing the opposition. I well understand the differences between a pathetic, bedrock survival plan like SS and the virtues of investing wisely - or simply with luck, as so many contemporary geniuses did until last year. I actually made bundles on your namesake - Cheyenne Software. Pace.

Here's the basis of my opposition to it:

Pon·zi scheme (pön' z&egrave) n. An investment swindle in which high profits are promised from fictitious sources and early investors are paid off with funds raised from later ones. [After Charles Ponzi (1882?-1949), Italian-born speculator who organized such a scheme (1919-1920).]

There is no Social Security trust fund. Anyone who tells you that such a trust fund exists is lying. Social Security payments are made from FICA revenue receipts. Presently, there is a "surplus" (another lie) because the amount collected in FICA is greater than the benefits paid out. It is a lie because that "surplus" is just part of the general fund which funds the annual budget passed by Congress and the President. Any funds required beyond other revenue receipts are merely supplemented from the FICA receipts when those other funds are exhausted because there is no delineation of the different receipts. This is why the deficit spending has not occurred in recent years.

The problem with Social Security as well as every other Ponzi scheme is that as the number of payees rises and the number of payers into this fraudulent system diminishes as all current projections indicate, the payouts will eventually match and then exceed the FICA revenue collections.

At this point, the system collapses or the FICA taxes start increasing.

The system is a fraud and a private party who attempts to operate such a scheme is prosecuted for a criminal offense.

Now please explain how an act that is criminal if I perform it is legitimate and laudable when committed by politicians under color of authority.